Q2 2021 Issuer Direct Corp Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the issuer Direct Corporation second quarter 2021earnings conference call today's call will be conducted by the company's founder and Chief Executive Officer, Brian and Bell Bernie and its Chief Financial Officer, Steve nor before I turn the call over to Mr. Brian All Bernie I'd like.
And to read you the company's abbreviated the Safe Harbor statements I'd like to remind you that statements made in this conference call concerning future revenues results from operations financial position markets economic conditions product releases partnerships and any other statements that may be construed as a prediction of future performance.
Or events are forward looking statements, which may involve known and unknown risks and uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information.
The useful supplementary data concerning the company's ongoing operations and is provided for informational purposes, only with that said Mr of all Bernie.
Thank you operator, and good afternoon, everyone and thank you for joining us today to discuss the company's second quarter results and the market close we issued a press release announcing our results for the quarter and.
And during today's call, we will be referencing these results as well as discussed and the second half of the year.
For your convenience and reference a copy of the press release is now available and our new newsroom.
And newsroom dot issuer direct dot com, a new prototype of free we will discuss further and a few minutes.
We're thrilled with the quarterly results, we have carried the momentum of the last several quarters of consecutive growth into and through the second quarter.
And we will be talking about today.
Q2 revenues were up 17% over the prior year and first half 2021 revenues now have grown 20% over the first half of last year total revenues for Q2, 2021 where $5 million 720000, compared to just 4 million and 883000 and Q2 of last year.
Total revenues now for the first half of this year and totaled 10 million and 700000 and Steve will talk more about this in detail and a few minutes.
Changing gears to customers on a year over year basis, our total customer count grew 31% per the quarter from 2867 to 3007 hundred 54, our private customers grew 52% again this quarter totaling 2115 versus just 1300.90 and the prior year.
We were also impressed with our public company growth of over 10% of 639 from 2577 and the prior year and of <unk>.
Prior call, we talked briefly about the trends, we thought was interesting and our pipeline for the number of public companies subscribing to and using our platform and solutions.
Q2 illustrative of this perfectly something we will monitor and the back half of the year as the public company markets appear to be very attractive still both and financing ipos and M&A transactions with that said the growth and are small and private midsized businesses is amazing fueled by our newswire offerings of trends, we feel strongly will continue for years to come.
Other customers are well underway to our 2022 customer goal of 5000 and.
We have a lot to discuss today not only record revenues customer accounts and earnings but also some new products that we've launched and the last couple of days and where we think we will end up with the back half of the year I'll turn it over to Steve.
Thank you, Brian and good afternoon, everyone as Brian mentioned, we are extremely pleased with the results of the second quarter and to be able to announce our second consecutive record quarter in terms of overall revenue growth of our communications and compliance businesses are performing well. However, we continue the focus on the growth of the communications business, mostly related to the continued success of our newswire business and.
Additional subscriptions of platform at the <unk>.
With the continued investments, we're making and our product development and sales and marketing teams were aiming for more of record quarters to come.
I'll now highlight some of the financial results, we achieved during the second quarter and first 6 months of 2021.
Total revenue for the second quarter of 2021, and $5.720000 and increase of $836000 or 17% compared to just over $4 million $884000 and the second quarter of 2020.
For the 6 months ended June 32021, total revenue was 10 million and $700000. The increase of 1.8 million from 20% from the first half of 2020.
The increase was due to the double digit increases in both of our communications and compliance revenue streams.
And I will first start with the communications business, which increased $496000 or 16% and $1 million $275000 or 24% during the 3 and 6 months ended June 32021, compared to the same periods of the prior year.
During the second quarter of 2021 communications revenue accounted for 61% of our total revenue and 63% for the first 6 months of of 2021.
And the prior year communications revenue was 62% and 61% of total revenue respectively.
The increase in revenue was driven by our access wire branded newswire, which not only drove Standalone press release revenue, but also new subscriptions of platform I'd.
<unk> revenue increased 30% and 34% for the second quarter and first half of 2020, 1 compared to the same periods of 2022, 2 and increase in volume customer count and revenue per lease as we continue the benefit from our E Commerce platform.
We also continue to generate increased revenue from licenses of platform I'd day during the.
Second quarter, we signed 36, new contracts with annual contract value of our ACB of $340000, bringing our overall contracts of 400, III with and ACB of just over $3.3 million.
This compares to 341 contracts within the <unk> of approximately $2.7 million at the beginning of 2020, 1 and <unk>.
The flex and increase in average revenue per contract, which is $8280 as of June 30 of 2021 compared to $7850 as of December 31, 2020.
On the compliance side, both the capital markets and corporate transactions spark and the increase in revenue from both print and proxy fulfillment services as well as transfer agent services.
As a result compliance revenue grew $340000 or 18% and $525000 or 15% during the 3 and 6 months ended June 30 of 2021 compared to the same periods of 2020.
Due to the reliance of the markets and timing of certain projects revenue from these services tends to fluctuate from quarter to quarter.
Changing gears the gross margin, our overall gross margin increased 20% or $718000 and 25% or 1 million of $541000. During the 3 and 6 months ended June 30 of 2021 compared to the same periods of the prior year.
Gross margin percentage was 74% for the second quarter of 'twenty, 'twenty, 1 and 73% for the first half of 2020, 1 compared to 72% and 71% for the same periods of last year.
Gross margin from our communications business was flat for the quarter at 75% and increased 1% from the first half of 2021% to 74% of <unk>.
93% and the prior year.
Gross margin percentage from our compliance business improved from 68% during Q2, 2020, and 66% from the first half of 2020, the 72% for both the second quarter and first half of 2021.
The increase and compliance margin is due to the increase and transfer agent revenue on a relatively fixed cost base as well as the decrease in amortization of the compliant software and lower fulfillment costs associated with our legacy <unk> business.
Moving down to operating income, we posted operating income of $1.361 million for the second quarter of 2021 compared to $1 million $1000. During the second quarter of 2020.
For the 6 months ended June 32021, operating income increased 66% the $2.70000 from just over $1.3 million during the first half of 2020.
The increase was primarily attributable to the aforementioned increases and gross margin, partially offset by an increase in operating expenses.
And 2 continued investment and our sales and marketing product development and corporate teams.
Sales and marketing costs increased 27% for the second quarter and 24% from the first half of 2021 compared to the same periods of 2020 due to the increased headcount commissions and digital marketing costs.
Product development costs increased 55% for the quarter and 41% for the first half of 2021 compared to the same periods of the prior year. This increase was also due to the increase in head count and our development team we have.
Also capitalized $161000 of costs related to the development of our newsroom products, which Brian will go into more detailed out in the few minutes.
On a GAAP basis. During Q2.2021, we generated net income of $1 million of $106000 or 29 cents per diluted share compared to $772000 or 21 per diluted share during Q2 of 2020.
Net income was 1 million and $651000 or <unk> 43 per diluted share for the first half of 2020, 1 compared to net income of $998000 for 26 cents per diluted share for the first half of 2020.
Looking at the non-GAAP metrics EBITDA for the second quarter of 2021 was $1.641000, or 29% of revenue compared to 1.9 and $354000 or 28% of revenue during Q2 of the prior year.
For the first half of 2021, EBITDA was $2 million $633000 or 25% of revenue compared to 1 million and $976000 or 22% of revenue during the first half of 2020.
Non-GAAP net income was 1 million of $185000. The 31 per diluted share for Q2, 2021 compared to $974000 or 26 per diluted share from Q2.2020.
And for the first half of 2021, non-GAAP net income increased to $1.872000 from 49 per diluted share compared to $1.372 million of 36 per diluted share during the first half of 2020.
Switching over to the balance sheet and cash flow statement, our deferred revenue balance which is revenue. We expect the recognized primarily over the next 12 months increased the 2 million and $699000 as of June 32021, compared to $2 million $212000 as of December 31, 2020 and increase of 22%.
On the cash flow statement, our cash flow from operations for Q2, 2021 declined to $812000 from 1 million and $477000. During Q2, 2020. However remained flat for the first half of 2021 and $2.081 million compared to $2.79000 and the prior year deep.
The decrease in Q2 was primarily related to the timing of collections as well as the amount and timing of tax payments made during 2021 as compared to 2020, we.
And we expect to see increases and cash flow from operations and the back half of 2021.
With the investments we have been making other products development teams and sales and marketing combined with the growth and customer accounts and the base of platform subscriptions, we have built.
Excited to see what the remainder of 2021 and beyond will bring for us we.
We will continue to execute our strategy and goal to continue generating year over year revenue EBITDA and cash flow growth.
I'll now hand, it back over to Brian who will provide some updates on the business new products and everything else. We have planned for the remainder of the year.
Ryan.
Thank you, Steve it's gratifying to deliver record results again this period like the first quarter Q2 resulted in record revenues earnings and customer hands.
We are very appreciative of our teams' continued hard work this quarter and equally thankful to our long standing customers and to our new customers. This quarter. Thank you. We look forward to working with you and supporting your communications compliance needs.
Continuing the momentum is important right now as we continue to accelerate our business released new products and demonstrates strong signs of average revenue per customers, increasing and our platform subscription business.
Our team remains excited about our continued growth, which we're seeing and our financial results and and our pipeline of product development and client success team.
And I am honored to see our accomplishments, but as most of you know from past quarters and.
And also conference presentations and those results are in the rearview mirror and were driving faster towards sustained growth and of scale and our business.
Steve touched on new subscriptions sold for the quarter of few minutes ago and.
Ending the quarter with 403, resulting in an average revenue per subscription of $8280 interesting hammer or the average revenue per customer continued to climb new deals in Q2 average 9500 per subscription.
Over the past 12 months, we have been removing unlimited terms towards subscriptions and giving customers only what they need. This is the met with equal value by the majority of our clients. However.
However, we do understand that certain markets unlimited is a sought after and option and therefore, we will work our way through those agreements. We see this as the short term matter and something we're not concerned with our shareholders know our views and long term thinking about our business.
Our Bruce of growing higher than guided last quarter from what we expected at the end of the ended the year to the 8 thousands now 8000 and 280 for June 30, we should expect year and our crew range is now closer to the 9000 number and our platform I'd business.
We say this because of a few leading indicators first we continue to see demand and our communications products and combination.
And secondly, the result of in line X BRL being made of requirement by the SEC for physical file of June 15th or later.
Both of these will drive further value and our customer of expense.
And as we begin to market, our newsroom suite into our private customers, we're going to see average spends increase and that customer group as well and they typically spend less and our core platform public customers.
The close my thoughts on unlimited comments, a minute ago, our new subscriptions sold thus far over the last 6 months should illustrate some opportunities late in the contract here for added revenues and exactly what we spoke about last quarter as usage based billing as we move our entire subscription businesses buy and provide product innovation to our growing customer base, we will see ARPA of expansion grew upwards of 12%.
<unk>, 15% over the next 12 months as a result of this alone.
Moving along and the business our compliance business performed well again this quarter, where we saw continued AGM and stock transfer businesses achieve better than anticipated results from a very active capital market period.
We will continue to watch the second half of the year, but at this point still feel positive and so long as the capital markets Ipos and transactions business continue we will see growth over prior years.
Our communications business continues to grow both on the year over year basis, but also sequentially led by our newswire offerings and complete platform subscription business. This is the part of our business, where we have focused virtually our entire R&D budget and half of our product teams in the lab innovating and optimizing our applications every day.
Over the last quarter, we had spoken about the strategic communications product that we would be able to share with you and the coming quarter the <unk>.
Elements have led us to releasing just a few days ago and collection of applications that we are now calling our newsroom suite.
And do it yourself corporate newsroom builder brand asset manager and contact management and the true.
<unk> of our products will be made available to current customers first.
The beginning of $249, a month or and a prepaid annual subscription basis of 2000 and $388. This is a natural and under our communication subscription business and will help us drive annual reoccurring revenues and customer stickiness.
Our product and development teams did a great job of building the suite of products and a relatively short period of time.
And they have already been working on some of amazing features and advancements that we plan to release each quarter to our customers. We see this product set as a way to increase our individual customer and of private customer segment.
By up to 50% or greater.
And so that is exciting to both of our employees and shareholders. It is also exciting equally exciting solution for our customers and as we extend the storytelling process to more of a brand building.
The building initiative.
And our passion is doing what we do each day and that is helping our customers talent build and delivery of their brands to you our audience.
Our news from St has been designed to be elegant simple and easy to use as a content management system. It provides our customers the ability to lead to let our technology add the articles and real time, but also give them. The time placed of other coverage from the media to highlight to their audiences. Our asset manager allows users to easily upload corporate brand assets.
Deciding what is made public and what to keep internally for storytellers, then elegantly embedded into our collaboration and real time drafting editor for easy inclusion into the press release from our platform.
Speaking of press releases from our platform. Our newswire business continues to show strong signs of growth as Steve said, increasing 30% for the second quarter compared to last year coupling that with our strong customer growth and new products. We just spoke about we continue to believe these customer accounts and revenues will continue to grow this year, giving us a transformed our model that fits every cut.
We believe the scale of this business can increase even more next year as we continue to invest and a feature our platform and most importantly, our team.
Lastly, I want to thank everyone, who is involved and our exit of giving virtual Investor Conference last month, we learned a lot and this endeavor, we fulfilled our pledge, 1% commitment by raising awareness and general about investor education, and advocacy dominated the small amount of money to both organizations called as you sow and the national and download for financial Education hosted 50 companies and.
And several panelists and a 3 day event.
Thank you to those who took part of this event, we look forward to seeing you and many other is next year when we do this again.
And our exit of giving initiative is now a small part of it of very evolving ESG program, where build the here and issuer direct.
Yes.
In closing I'm happy to reported on June 11th 2 New Independent Board members were elected to the company's board of directors, bringing the total to 6 the first Ms Martie Bella and marketing veteran with over 25 Years' experience, we look forward to having Marty onboard and helping us and our sales and marketing initiatives since we build our brand and our new products and the coming here.
And Gram range of Neurocrine and capital partners are for a firm who has been a long standing shareholder of issuer direct for several years Martino.
Marty will also serve as the company's compensation Committee member and Graham has become and additional audit Committee member.
Welcome Marty welcome Graham.
And as always a pleasure spending time with you talking about the results and where we're headed thank you all for listening today, operator could we please open up the call for questions.
Yes. Thank you the floor is now open for questions. If you do have a question. Please press star 1 and your telephone keypad at this time, if you're using a speaker phone and we ask that while posing your question you pick up your handset to provide the best sound quality.
Again, ladies and gentlemen, if you do have a question or comment. Please press star 1 and your telephone keypad at this time.
1 moment, while we poll for questions.
We will take our first question from Mike Grondahl with Northland Securities. Please go ahead Sir.
Okay, Thanks, Brian and Steve and congratulations on another nice quarter.
Ill.
Brian if you could give a little bit more insight hit kind of the customer funnel and <unk>.
And of your outreach and.
And the private company side, I think you said, 52% growth the private company.
Just help us understand better how youre driving that growth.
Yes.
Thanks, Mike I appreciate the question.
Our sales team is divided into 3 quadrants there is a.
And account management team, obviously, managing our book of business and our clients a business development team that is the territory based and.
Our sales development resources, SDR, and Thats, where were seeing the biggest opportunity for growth and as you think about.
Head count growing and the rate that it had from 24 to 33 and sales and marketing.
Had a heavy emphasis on both inbound and outbound so that includes as what we've talked about and prior quarters about our e-commerce initiatives and our digital strategy and how we're driving customers through the journey to learn about who access wire is what our platform I'd products can benefit them the.
And the majority of these private customers, obviously are looking to tell their stories and build their brands by using excess fire. So the sales development team that we have invested heavily and over the last year is where were seeing the biggest.
Area of opportunity for us as we continue to invest in that area. We think that we can continue to get 30% of our stronger growth.
And of our newswire business.
That's great and what percentage of those.
New private companies are using excess wire I mean is it.
Most of them 70% of them.
Yes, I would say literally 90 plus percent of them are using access wire and then there are some debt use.
A more broad platform that may be.
And feed our part of the.
A list of broader platform, our and IR initiatives, because theyre thinking about complying to go public at some point.
And then secondly.
Could you walk us through I mean I per.
Personally don't issue press releases or anything but could you walk us through maybe of real life example of this.
Somebody using year, new use news room product and how that would work just so we can kind of understand that real world application.
Yes.
And as for Super easy and elegant to use customers.
Let's take an example of a brand new customer debt visit the XY dot com for the first time they are driven there by some marketing campaign, they can register creating accounts.
Pick their distribution of.
Add of newsroom and brand asset manager and the contact manager suite of subscription to this.
The minute they complete the registration and payment information they land on the dashboard there given of tours to show them, how easy it is to use the product.
Assuming they have the story to tell our press release ready.
Within 3 clicks of a couple of buttons theyre able to draft the release submitted the editorial.
And that press release automatically gets set and Q2 of peer on their newsroom thats pre made for them and the content management system. The minute. The press release goes live to the market, whether it's public and private.
The customer the newsroom comes to life and that you are al is that embedded into their corporate website. The typically.
And gestures of content would go to for example of US newsroom Dot issuer direct dot com and I want to go see all of the news for the company I want to subscribe and get the contact information.
To see the brand assets, meaning headshots presentations product images and the whole debt. So it's a very set it and forget it application customers can create their custom newsroom and the brand assets and under 30 minutes taken draft. The press releases and seconds. If they have the copy and the content ready and then as they build the journalists.
And media relationships and assuming that their brand is extended for coverage to the media. They can add those articles and content that may show up and business insider and other publications and their local community that they can also add to their newsroom. Each article that's added by the press release or some coverage from the media.
Automatically distributed 2 of custom database that they built inside of the newsroom part of the contact manager to give them the ability to follow up the book meetings and follow up appointments and of PR World. It's much like IR day, we do follow up on earnings events. We can follow up quarterly of month to month with strategic investors and outreach to the market and the non deal roadshow.
Capacity.
And the PR World there is not much different and there's different vernacular they want to reach all of the right media personalities of the right time, either kind of planned before a story of our newest break or right. After the do interviews.
We feel that the custom newsroom and the content management system and we built helps extend beyond the traditional storytelling process that we've had for years into more of a brand building process, giving customers the ability to build their brand and strengthen the relationships with the constituents that they have.
Got it and lastly.
I think you said $2.49 of 1.
I guess, the repeat the pricing and how that compares to your competition.
Yes.
And so at <unk> Dot O version product so its price very competitive and at our month to month kind of and MRO rate of 249, if customers decide to prepay to get the discount.
And it drops 20% and changed the 199, a month, which is almost $2400 of year, giving them the ability to prepay to get debt to discount and so our hope is is take that.
Our business into the private company.
Segment that we've got these smbs to really begin to cross sell the majority of those private customers spent much less than a couple of thousand dollars a year and press releases. So our hope is to increase the average revenue per customer significantly by the added part of our newsrooms, but customers can still subscribe and and MRI model right and we bill.
Leave that and some cases with marketing, we're going to give away 30 days to try it given the opportunity to learn the benefits of the platform and what it can do for them.
Great. Thank you guys.
Thank you Mike.
We will take our next question from Walter Ramsey with Walrus partners. Please go ahead.
Well, Brian and congratulations.
Cook and right along I would have to say the.
The company's operating margin and the second quarter from what I can see anyway of kind of at the high end of the the range and I like the longer term range that the company normally does do you think you can make.
And maintain that or is that just.
And just kind of a.
And then you might have the give a little back with all of the hiring and other spending and thats coming up.
Yes look I think our hiring processes of very well planned and the model that we built here the strategically placed out throughout the year, We've got added head count and sales and marketing to come as well as we continue to build scale. We've got operational adds as we need it for production reasons to fulfill client success and to.
Keep customers happy.
We've been I think we're good Walter I think as we build scale you know that a lot of this business falls to the bottom line and we firmly believe that we're at a point now of of focusing in and optimize and critical mass. So that we can continue to see operating margins.
Eagle to what you're seeing and the first half and the back half of this year and then continue to grow next year.
Alright, okay.
And then last quarter.
And of alluding to the fact that some of your new customers are turning out to be bigger companies and you've seen and in the past has that trend continued or what do you think about.
Getting into the what the bigger public companies.
It has it hasnt to base it has in IPO customers right as these of the clients that the.
Our exiting into becoming a public list the company, we're getting more and more of those every day, which is a good indicator for us, but I think as we all know the markets are good and when that activity is there we tend to benefit from that like everybody else does.
The second half of it is bye bye.
And by a nursery and our sales team, we are beginning to climb upstream to the mid and large cap customers and.
And so.
Single digit double digit billion and.
And greater public companies have begun using our platform and the first half of this year.
There is obviously some work that we need to continue to do to invest in those areas to be more successful than we are today, but we're happy with the progress we're making there it's ahead of where we anticipated as being.
And the news business, particularly if there is a lot of of Sop too.
Vernacular needed and security debt larger public companies are concerned about so we're meeting those needs as an organization, we need to do that and we're prepared to do that and we're on target to meet that by the end of the year and as far as I know there is only 1 of the newswire out there that has the sop to type 2.
Audit report so I think we put ourselves in good company. We begin to continue to have customers inbound wanting to talk to us about our product platform that are and the large and mega cap space and large mutual fund space, which is fantastic for us.
And again ahead of what our projections and thoughts were so yes, I think it does continue and it's still doing well.
So it's nice to and then just 1 last thing.
The platform product and you've got maybe.
It's like 25%.
Your public company and you've got 600 public companies, let's say and 400.
The platform ideas. So I don't know if you have private customers for that or not but just in general you're beginning to kind of saturate the potential or is that just kind of keep cranking.
No I think I think of continuous because.
To your prior question and what we just talked about as we grow up through the market cap sizes as everybody knows.
The current shareholders and pass both listening to our call and ones that may be new.
We predominantly been a small microcap.
The focus business, where we tend to do well and so to your point those those results. We're getting today are coming from that segment, but as we move up these customers are looking to licensed platforms there.
And they're looking to find synergy and product to put together.
The closing remarks.
Thank you tear and very much and and what day is always a busy earnings day I want to thank you for listening with afford the following up with you again soon as a reminder, we will be presenting of the Canaccord 41st annual growth Conference. Here next week August 12th at 12, 30 and will be available from 1 on 1 meetings that day and the day before with the for a day visiting with you again.
Take care.
Ladies and gentlemen, this does conclude today's teleconference. We thank you again for your participation you may disconnect. Your lines at this time and have a great day.
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