Q4 2021 Issuer Direct Corp Earnings Call
Good afternoon. Thank you for standing by and welcome to the issuer direct Corporation fourth quarter and year end 2021 earnings conference call.
Today's call will be conducted by the company's founder and Chief Executive Officer, Brian Lawlor, Bernie, It's Chief Financial Officer, Tim Insomniac, and VP of Finance and controller, Steve Knerr.
Before I turn the call over to Mr. Brian bought Ernie.
I'd like to read you the company's abbreviated Safe Harbor statement 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 uncertainties.
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 that the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only.
With that said.
Mr Ball Bernie.
Thank you operator, good afternoon, everyone and thank you for joining us today to discuss the company's fourth quarter and year end 2021 results.
Just a few minutes ago, we issued a press release announcing our results for the quarter and full year.
A copy of which is available on our newsroom for reference during today's call.
I am very pleased with our fourth quarter results.
Which capped off an incredible year for issuer direct specifically fourth quarter revenues were up 21% year over year, which also drove increases in gross margins net income and EBITDA.
As a result, we were able to deliver a record year in revenues of 21.883 million up 18% from $18 526000 last year.
We also ended the quarter with a total customer count of 3667 up 14% from 3226 last year.
And we were virtually spot onto our goals of 500 platform Ids subscriptions ending the year with 497 Dilip.
Delivering 99, new subscriptions in the quarter, which also was a record number for us and lastly, axis wire was up 40% over the prior year quarter in revenues.
Before I turn the call over to Steve for his prepared remarks on the quarter I want to introduce you to Tim <unk>, our new Chief Financial Officer.
I also want to thank Steve for his passion dedication and hard work over the years, Steve We look forward to your continued service as the new VP of finance and controller fresh air attacks.
With that Tim.
Thank you, Brian and good afternoon, everyone I'm excited to join the issuer direct team and I look forward to working with Brian Steve and the rest of the organization to drive key initiatives over the coming years before I turn the call over to Steve to walk through the details I wanted to point out some highlights for the fourth quarter and year ending 2021.
As stated in the earnings release today, we achieved record revenues EBITDA and cash flows from operations throughout 2021 revenue for the fourth quarter of 2021 increased $974000 or 21% compared to Q4 of 2020 for the full year, ending 2021 revenue increased $3 4 million or 18.
<unk> compared to 2020.
Looking at some non-GAAP metrics EBIT for the fourth quarter of 2021 was $987000 or 70% of revenue compared to $745 or 16% of revenue during Q4 2020.
For the full year of 2021, EBIT was $5 million $252000 or 24% of revenue compared to $4 million $122000 or 22% of revenue during 2020.
non-GAAP net income was $894000 or 23 cents per diluted share for Q4 2021.
Compared to $682000 or <unk> 18 per diluted share during Q4 2020.
For the full year of 2021, non-GAAP net income was $3 million $671000 or <unk> 96 per diluted share compared to just over $3 million or <unk> 80 per diluted share during 2020.
From a cash flow perspective, we continue to generate positive cash flow from operations as we generated over $1 4 million during the quarter compared to 986000 in the prior year. This brings our total cash flow from operations of $4 7 million for 2021 compared to $4 4 million during the prior year I will now turn the call.
Over to Steve to walk through the details for the fourth quarter and full year ending December 31 2021.
Thank you Tim and good afternoon, everyone before I jump into the results I want to welcome Tim to the issuer direct team.
So we've built some solid growth over the last couple of years I know there's more to come.
Forward to working with you on some of these initiatives and getting the company ready for the success. We know we can achieve.
Brian and Tim alluded to the record revenue we have for both the fourth quarter and full year of 2021 now I will provide a few more details on the results the.
The increase in revenue was due to double digit increases in both our communications and compliance revenue streams.
The fourth quarter of 2021 communications revenue was $3 $675000, an increase of $583000 or 19% compared to Q4 2020 for the full year communications revenue added just about $14 million, an increase of $2 2 million or 18% compared to 2020 as.
As in previous quarters. The increase in revenue was driven by our axis wire branded newswire, which drove a standalone press release revenue and also new subscriptions of platform I'd.
<unk> revenue increased over 40% and 35% for the fourth quarter and full year of 2021, respectively compared to the same periods of 2020. This increase was due to an increase in both volume and revenue per release. So as a result of hard work from the sales team, eliminating our unlimited press release plans and selling packages of releases.
<unk> sales team has also done a great job combining the sales press release packages with other products, we offer specifically our websites user product data seats for the fourth quarter, we signed 99, new contracts with annual contract value or <unk> $638000.
Our overall contracts of 497 with the ECB of over $4 $1 million.
This compares to 341 contracts with an <unk> of approximately $2 7 million at the beginning of 2021 and reflects an increase in average revenue per contract which is $8286.
December 31, 2021 compared to $7850 as of December 31, 2020.
Over half of the new subscriptions for the fourth quarter were sold to existing customers, who were only purchasing one product or service from us previously.
During the fourth quarter and full year of 2021 communications revenue accounted for 64% of our total revenue compared to 65% and 64% of total revenue during the same periods of the prior year.
The decrease in communications revenue as a percentage of overall revenue for the fourth quarter was partially due to lower revenue from our webcasting and events products as well as higher than expected increases in compliance revenue due to market activity.
Appliance revenue increased $391000 or 24% to $1 2 million or 18% during the fourth quarter and full year of 2021 as compared to the same periods of 2020, both the capital markets and corporate transactions continued to fuel an increase in revenue from both print and proxy fulfillment services as well as transfer agent services.
Due to the reliance on markets and timing of certain projects revenue from these services tend to fluctuate from quarter to quarter.
Switching to gross margin our overall gross margin increased 26% were $868000 and 23% for over $3 million during the fourth quarter and year ended December 31 2021.
There to the same periods of the prior year.
Overall gross margin percentage was 73% for the fourth quarter of 2021, 74% for the full year of 2021 compared to 70% and 71% for the same periods of last year.
Gross margin from our communications business increased to 77% for the quarter and 76% for the full year compared to 73% for the comparable periods of the prior year to.
The increase was due partly to product mix as a higher percentage of communications revenue came from our press release business compared to lower margin webcasting business as well as scale and price increases in our newswire business.
Gross margin percentage from our compliance business improved to 68% and 70% for Q4 2021 and full year of 2021.
Compared to 64% to 66% for the comparable periods of the prior year. The increase in compliance margins is due to the increase in transfer agent revenue on a relatively fixed cost base as well as decrease in amortization of our compliance software.
Moving down the P&L to operating income our operating income was $698000 for the fourth quarter of 2021 compared to $369000 during the fourth quarter of 2020.
For the full year of 2021 operating income increased 39% to $3 million $743000 from $2 million $694000 during 2020 the.
The increase in operating income was due to an increase in gross margin I just spoke about partially offset by an increase in operating expenses due to continued investments primarily in our sales and marketing and product development teams.
Sales and marketing costs increased 46% during the fourth quarter and 33% for the year due to increased salaries higher sales commissions and increased spend on digital marketing.
Product development cost increased 34% for the quarter and 48% for the year compared to the same periods of the prior year also due to an increase in head count and our development team.
Our GAAP basis for the fourth quarter of 2021, and we generated net income of $616000 or <unk> 16 per diluted share compared to $319000 were <unk> <unk> per diluted share during the fourth quarter of 2020.
Net income was $3 million $291000 or <unk> 86 per diluted share for the full year of 2021 compared to net income of $2 million $106000 or <unk> 56 per diluted share for 2020 include.
Included in net income for the full year of 2021 is a benefit of $366000 related to filing for the employee retention credits under the cares Act.
One last thing I want to highlight on the balance sheet, our deferred revenue balance increased 40% to $3 $86000 as of December 31, 2021, compared to $2 million $212000 at the end of the prior year.
This represents revenue we generally expect to recognize over the next 12 months is a good indicator of the growth built in the business and yet to come.
Overall was a great conclusion to the year and motivates us to keep the momentum going into 2022.
Thank you for participating in the call today I will now hand, it back over to Brian who will provide some updates on the business a few of our plants to keep the success going for 2022.
Ryan.
Thank you guys I feel like we were just youre talking about 2019 results at the onset of Covid in March of 2020, thankfully in the two years customers revenues earnings and product advancements olive continue their upward trajectory.
Something that we are becoming accustomed to learning from and carrying forward with us for what we expect will be another record year in 2022.
We could not have done it without a hardworking teams, who we will be celebrating here beginning March 21, and our annual employee appreciation week.
Today I'd like to spend some time talking to you about what's ahead for this year and beyond.
With both Tim and Steve's commentary you do not need me to reiterate any of their prepared remarks.
Last month marked our 16th year of operations I guess, what they say is true time flies when you're having fun.
Been asked by many of them.
Am I still having fun, I mean, who would not be having the time of their life when they get to wake up every day live out of Dream work with amazing people win and retain great customers and have equally this passion to shareholders joining us on this journey.
There are a lot of Kpis one can look at but this is a very measurable indicators and as to look yourself in the mirror to reaffirm this journey that you're on the journey that drives you to get up at five am and given your all every day.
<unk> group and our results show it so let's get right into what's ahead for us this year and beyond.
Our platform has undergone some significant improvements last year and heading into 2022, we are planning to do even more largely our teams are focused on creating the very best experiences for our customers that gets us closer to our ultimate vision of reinventing how brand share tell and inspire their audiences. We will continue to do this by paying particular attention to the customer journey.
Listening to their needs and understanding when and where to invest both in our platform and beyond.
Earlier last year, we launched taxes by two point out which is a real time collaboration suite. The platform will continue to advance as we learn more about what our customers want and need and the storytelling process.
We feel that finding workflow nuances and creating efficient ways to accomplish those nuances is where value is created for us and were rebuild significant competitive advantages we.
We built the newswire based on the better faster cheaper model not too dissimilar from how we built our compliance business today and for years to come we're gearing up to refine this message to be the most innovative communications platform in the market led by our newswire solution that brings solutions to real life use for our customers.
We also updated our investor relations virtual events, and webcasting products and brought to market. Our newsroom suite last year, a product that is young in its lifecycle and continues to get better and better each quarter.
This year will be even busier with new product innovations beginning with a new virtual events do it yourself system, which is set to launch next week a robust virtual events design suite intended to meet what we believe will be the norm and now what is called hybrid events for years to come.
Let's use an annual meeting as an example over the last two years thousands of companies had no choice, but to embrace virtual technologies by hiring skilled companies and technologies to produce these complex events today peripheral components are very similar to just put a zoom meeting is for most of US. Therefore, we took the very best of our own coding and our solutions knowledge and technology.
And voting and integrations and put them together to build a competitive entry point product that will give customers. The features customization and the ability to upgrade to a white glove fully managed solution should they need it.
The best thing about this advancement is customers can create their events have lives landing page Urls phone numbers and producer links and be second away from hosting their hybrid annual meeting conference or any other type of event for both onsite and virtual as a requirement.
As most of you know access layer has been one of the fastest growing newswires in North America, delivering over 35% growth year over year. When you compare 2021 to the prior year. We have also been working to expand our global distribution footprint and offering that we have our sights set on our European markets will be first coming mid year, followed by Asia Pacific and South America late in 2010.
Two.
These expanded indirect contact relationships will allow us to improve our international press release offerings expand our customer reaches and also gives us a seat at the table with larger global brands the.
The strong signs of growth in excess fire or something that we have messaged. The last couple of years and something we believe we can continue to achieve here this year and beyond average first time customer deal sizes are consistent with prior quarters, and we're seeing positive pipeline indicators in the mid to large cap segments, many of which have predominant brand recognition.
We will always had some prevailing thoughts as we demonstrate the capabilities of these larger brands. We will begin to see the results an influx of new interest. Some of this is because of our partnerships with groups like IHS IPO and others different direct results of our sales organization.
Are the areas that we're seeing the indicators specifically around the core IR and PR products, our newswire webcasting and IR web site.
In summary, our communications business led by Axis buyer is where we're experiencing the majority of our customer growth and in total customers grew 14% over the prior year to 3667 customers as I had mentioned earlier, we anticipate customer accounts in 2022 will grow another 20%, reaching as high as 45 and our customers by the end of 2020.
Me too.
Our platform business has also done well for the quarter and year almost reaching the 500 goal. We set out in Q1 of last year's guidance, adding another 99 in the quarter, resulting in a total of 497 platform subscriptions for 2021.
The 90 942 were to new customers with average contract values of 8900, whereas the 57 renewals where customers moving from page ago <unk> limited our average contract size is a 4600.
Moving forward beginning with Q1 2022, we will be releasing total customers as we have done today and add to that our new kpis. They will illustrate the total number of customers that are subscribing to our products not just platform I'd.
We are changing this kpis because it is more reflective of our business on a go forward basis.
Additionally, as we go through the year, we will continue to find additional kpis, such as retention and customer lifetime values.
Moving along to some other items as we spoke about in our last quarterly call. We mentioned that we've been working towards completing our sock to type two controls on it an investment that we thought was important to both our customers and our business. We are pleased to have completed this out at the end at the end of last year and are able to represent to our customers' current and future that our stock to type two audit reporting guidelines.
We will continue this year and beyond.
This was done in pursuit of our customer first approach and operational excellence that we are driven to deliver each and every customer from the world's largest brands like Sherwin Williams, synchrony, and Columbia sportswear and Madonna all the way to emerging markets public companies and private businesses all over the world. We feel confident we have a platform that fits any type or size of.
A business.
So as a company we have been working hard to improve our external facing initiatives specifically surrounding E S T and dei.
We have a new investor website coming in the next handful of weeks that will set forth, our environmental social and governance approaches as well as our diversity equity and inclusion commitments two very important areas for us to represent to the market.
<unk>. This is something that we pride ourselves on and it's something that we're working towards being more outward and leading for a market cap size that we are even though we are a small operating company. It is our goal to represent to the market like a larger enterprise would we retain and recruit by leading in this way and moving customers by showing these threats.
In closing our team remains excited about the business our customers and our continued growth, which we're seeing in our financial results and in our pipeline are product development at our client success teams.
Before we get to the Q&A portion of the call I would like to provide an update on our capital allocation strategy. As we have said in the past we need to invest in our business continue to repurchase our shares when and where prudent and lastly, earmark capital to use when we find assets that we believe can be transformational to the business. This has not changed and during the quarter, we incurred approximately $250000 of cost.
Related to strategic corporate projects, including merger and acquisition related expenses. These expenses are necessary to evaluate opportunities for us as we believe that can have an impact on our business our customers and continue to build the shareholder value.
This is something that we expect will continue in 2022 and something we look forward to providing updates to you each quarter when applicable.
We also have continued to invest in our people and our platform throughout the year and we'll continue to do so this year and lastly, just this week as a board we approved a new $5 million stock repurchase plan, which we intend to fund from free cash generated from our operations. We have done this in the past and are committed to continuing to do this going forward.
Again I'd like to thank our teams once again for their hard work and dedication to our customer first approach as always we appreciate your listening today operator could we please open the call for questions.
Floor is now opened for questions. If you have any questions or comments. Please indicate so by pressing star one on your Touchtone phone pressing star two and removed from the queue should your question to be answered and lastly, what posing your question. Please pickup your handset up listening on speaker phone to provide optimum sound quality. Please.
Please hold while we poll for questions.
Once again Thats star one to get a question or comment.
Okay. The first question is coming from Mike Grondahl from Northland Securities. Your line is live.
Hey, guys. This is Luke on for Mike.
Congrats on a nice quarter to finish out the year here.
I don't know if I missed it on the call, but did you guys mentioned the.
Sales team headcount and all I think you guys had mentioned last quarter.
29, and then growing to 34 to 36 somewhere in that range throughout 2022.
Any update there.
Yeah, Hey look nice to hear nice to hear from you. We have added head count at the back end of the year. Starting this year. We've added three new additional we've got plans to continue to add more to that initiative. Both in our sales both strategic account field sales folks with industry experience as well as.
Younger STR type individuals in our sales team.
Additional marketing head count has also been added content writers and more strategic focused individuals and our marketing team. So we're still continuing down that path and we'll continue to do that the remaining part of the year as well.
Great. Thanks, and then.
Touching on that IHS Markit partnership.
You had been getting any customer feedback on this partnership and kind of how that's been performing.
And I think customer interest is more appropriate there I think did I address sales team members or their IP.
Our product sets and our teams have been working together jointly to go into opportunities and build pipeline.
I'm not sure yet that there's there's enough feedback yet in that look to create a good feedback loop where.
We're starting to win deals we've got a lot of pipeline is starting to come as a result of it.
As you can imagine in an organization like theirs and ours.
Hearing up sales organizations with collateral training and joint meetings takes time and a lot of their customers as with our customers. When you began looking at contracts Youre talking six months to eight months ahead before your renewal periods, when you're making decisions to find another vendor. So teams continue to work we're optimistic that we'll start to see.
Opportunities there, we talk to really nice brands on a weekly basis.
I think we'll continue to make additional headway and as a result of some of those early wins and our other larger cap wins, we're starting to get a lot of inbound interest from others. So I think it's complementary between that and what our sales team is doing independently.
Okay got it and then just lastly here.
I know you touched on this at the end of the call, but just as far as the M&A fronts.
Certain type of parameters, you're looking for here.
As far as M&A goes on kind of what the appetite is here going into 2022.
Yeah. So as we said before at a lot of conferences that we've done in presentations on past earnings calls, we're going to look for product sets that are very complementary to our communications business, which will plug in immediately with our newsroom newswire products as well as the complementary on the public company side to our IR website business and webcasting businesses. So so typically.
And in the marketplace that we serve there is tends to be five or six products that large companies and small companies buying we believe we have an ecosystem that can handle both there are some assets there that we would like to have media database of more analytic based platforms that we feel can drive further value to our business and as we've touched on and as we've touched on for many.
Orders, we continue to spend time in that area and we want to find the right assets to make the most sense for the business not only for our customers, but also our shareholders.
Got it great well, thanks for taking the time to answer the questions and congrats again on a strong end of the year.
Thank you Luc I appreciate it as always.
Once again, if there are any remaining questions or comments. Please indicate so now by pressing star one on your Touchtone phone.
Once again Thats Star one if you have a question or comment.
Okay. We have no further questions in queue I'd like to turn it back to management for any closing remarks.
Thank you John as always I. Appreciate it. We also appreciate everyone's time today I know the markets are busy and look forward to visiting with you at some of the upcoming conferences early this year and our next earnings call, yes that even means in person at some of these investor conferences have a great evening. Thank you.
Thank you. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Thanks Scott.
Youre very welcome.
Yes.