Q2 2024 Issuer Direct Corp Earnings Call
Thanks for watching, and don't forget to like, share, and subscribe to our channel.
Preston Burnett: Thank you for standing by, and welcome to the Issuer Direct Corporation second quarter 2024 earnings conference call. My name is Preston Burnett, and I am the Director of Operations here at Issuer Direct. I've been with Issuer Direct for almost 17 years, leading an amazing team of editors, compliance professionals, and customer experience rock stars. Like my fellow employees doing this in previous quarters, having me on this call is our way of ensuring our shareholders get to know all of us here at our company.
Preston Burnett: Ladies and gentlemen, thank you for standing by and welcome to the Issuer Direct Corporation second quarter 2024 earnings conference call. My name is Preston Burnett and I am the Director of Operations here at Issuer Direct.
Preston Burnett: I've been with Issuer Direct for almost 17 years, leading an amazing team of editors, compliance professionals, and customer experience rock stars.
Preston Burnett: Like my fellow employees doing this in previous quarters, having myself on this call is our way of ensuring our shareholders get to know all of us here at our company.
Preston Burnett: Over the years at Issuer Direct, I've had the privilege of witnessing our transformation from a privately owned firm to our current status. What began as a company offering Edgar filing services has evolved into one of the select few global newswires, distributing news worldwide to top media outlets. I'm amazed to see how our company has evolved and even more excited to see where we'll be going in the future. With that said, it is my pleasure to introduce the company's founder and chief executive officer, Brian Balbirnie, as well as our chief financial officer, Steve Knerr.
Preston Burnett: Over the years at Issuer Direct, I've had the privilege of witnessing our transformation from a privately owned firm to our current status.
Preston Burnett: What began as a company offering edger filing services has evolved into one of the select few global news wires Distributing news worldwide to top media outlets I'm amazed to see how our company has evolved and even more excited to see where we'll be going in the future
Speaker Change: With that said, it is my pleasure to introduce the company's founder and Chief Executive Officer, Brian Balbirnie, as well as our Chief Financial Officer, Steve Knerr. Before I turn the call over to Mr. Balbirnie, I'd like to read you the company's abbreviated Safe Harbor Statement.
Preston Burnett: Before I turn the call over to Mr. Balbirnie, 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 predictions of future performance or events are forward-looking statements, which may involve known and unknown risks, uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. Thank you.
Speaker Change: 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 prediction of future performance or events are forward-looking statements.
Speaker Change: which may involve known and unknown risks.
Speaker Change: Uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements.
Preston Burnett: Non-GAAP results will also be discussed on the call. The company believes 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, Brian.
Brian Balbirnie: non-GAAP results will also be discussed on the call. The company believes 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, Brian ?
Brian Balbirnie: Thank you, Preston. I can't express how grateful we are for you, your dedication, and continued growth here at Issuer Direct. As a fellow employee and shareholder, I am honored to do this with you every day. In retrospect, I don't think there has been a department, product, or process that we have built that you have not been a part of. I'm very impressed with your passion, growth, and where you're headed here at the company. Thank you, Pete.
Brian Balbirnie: Thank you, Preston. I can't express how grateful we are to you, your dedication, and continued growth here at Issuer Direct. As a fellow employee and shareholder, I am honored to do this with you every day.
Pete: In retrospect, I don't think there has been a department, product, or process that we have built that you have not been a part of. Very impressed with your passion, growth, and where you're headed here at the company. Thank you, Pete. With that said, greetings everyone, and thank you for joining us today to discuss the company's second quarter 2024 results.
Brian Balbirnie: With that said, greetings, everyone, and thank you for joining us today to discuss the company's second quarter 2024 results. Our press release, which is accessible in Andrews Room, has just been released and provides key takeaways about our performance for the quarter and first half of 2024. I know top-line reviews don't show it, but there's a lot to be excited about here.
Brian Balbirnie: Our press release, which is accessible at Andrew's Room, has just been released and provides key takeaways about our performance for the quarter and first half of 2024.
Brian Balbirnie: Our new board of directors has been extremely helpful right out of the gate, helping management and market positioning, long-term strategy, and prompt decision-making, which in a fast-changing market and industry is exactly what we need to be moving the company forward. Joe Staples is an amazing B2B marketing executive with well over 20 years in the SaaS industry. We could not be more excited about Joe and what he is already doing to make an impact on the business.
Speaker Change: I know top-line reviews don't show it, but there's a lot to be excited about here. Our new board of directors has been extremely helpful right out of the gate, helping management and market positioning, long-term strategy, and prompt decision-making, which in a fast-changing market and industry is exactly what we need to be moving the company forward.
Speaker Change: Joe Staples is an amazing B2B marketing executive with well over 20 years in the SaaS industry. We could not be more excited about Joe and what he's already doing to have an impact on the business.
Brian Balbirnie: West Pollard is no stranger to direct, having served as a CFO several years ago and was part of our first news distribution acquisition of Axis Park. Graham Rayne will remain on the board and be the chairperson of the audit committee.
Speaker Change: Wes Pollard is no stranger to Issuer Direct, having served as their CFO several years ago and was part of our first news distribution acquisition of Access Fire.
Brian Balbirnie: I will resume the post of the company's chairman. As a four-person board, we will look to expand at some point by the end of the year or in time for next year's annual meeting, seeking other candidates that have extensive experience in our industry. I want to thank our shareholders who have been confident in our management team, the business, and our product platform and where we're headed. The second half of the year is going to be packed full of great things as we position the business in many ways, as we've talked about to you previously.
Speaker Change: Graham Rain will remain on the board and be the chairperson of the audit committee. I will resume the post of the company's chairman. As a four-person board, we will look to expand at some point by the end of the year or in time for next year's annual meeting, seeking other candidates that have an extensive experience in our industry.
Speaker Change: I want to thank our shareholders who have been confident in our management team, the business and our product platform and where we're headed. The second half of the year is going to be packed full of great things as we position the business in many ways, what we've talked about to you previously.
Brian Balbirnie: Last quarter, we talked about leading indicators in the industry, volumes, and how they were impacting the business. In the narrative, we talked about what we're doing to correct, insulate, and regain our growth trajectory. As a result of several things we will discuss later, we are happy to share with you that our combined news distribution brands showed nice signs of recovery in the quarter, volumes were up, and on a year-over-year basis, revenues grew 12% and 3% sequentially.
Speaker Change: Last quarter, we did talk about leading indicators in the industry, volumes, and how it was impacting the business. In the narrative, we talked about what we're doing to correct, insulate, and regain our growth trajectory.
Speaker Change: As a result of several things we will discuss later, we are happy to share with you our combined news distribution brands showed nice signs of recovery in the quarter, volumes were up, and on a year-over-year basis, revenues grew 12% and 3% sequentially.
Brian Balbirnie: This result solidifies what we did to correct and insulate our position in the market. Average price did move 15% higher as well for the quarter, coming from upmarket customers, large contracts, and strategically positioned distribution add-ons. Customer Accounts were also up 19% over the prior year and 2% sequentially, coming in at $12,388. Later in the call, we'll talk about where the growth is coming from and how our customers spend in the second half. Look in the future. There's a lot more to talk about today, so I'll turn the call over to Steve to cover the quarterly highlights.
Speaker Change: This result solidifies what we did to correct and insulate our position in the market. Average price did move 15% higher as well for the quarter, coming from upmarket customers, large contracts, and strategically positioned distribution add-ons.
Speaker Change: Customer accounts were also up 19% over the prior year and 2% sequentially coming in at 12,388. Later in the call we'll talk about where the growth is coming from and how our customer spans in the second half look in the future.
Speaker Change: There's a lot more to talk about today, so I'll turn the call over to Steve to cover the quarterly highlights.
Steve Knerr: Thank you, Brian, and good afternoon, everyone. As Brian mentioned, we are encouraged by the rebound in access to our volume in the second quarter, with revenue increasing 17% over the first quarter. I will now highlight some of the other results we achieved during the second quarter and first half of 2024. Total revenue was $7.7 million and $14.6 million for the second quarter and first six months of 2024, respectively, which was a decrease of $2 million, or 20%, and $3.6 million, also 20%, compared to the same periods of 2023.
Steve Knerr: Thank you, Brian , and good afternoon, everyone. As Brian mentioned, we are encouraged by the rebound in the access to our volume in the second quarter, with revenue increasing 17% over the first quarter.
Steve Knerr: For the three months ended June 30th, 2024, the decrease is attributable to a decrease in revenue from our compliance revenue stream. However, for the six months ended June 30th, 2024, the decrease in revenue is attributable to both our compliance and communications revenue streams. Our communications business was flat for Q2 2024 compared to Q2 2023. However, for the first half of 2024, communications revenue decreased $1.1 million, or 9%, compared to the first half of 2023.
Steve Knerr: I will now highlight some of the other results we achieved during the second quarter and first half of 2024.
Steve Knerr: Total revenue was $7.7 million and $14.6 million for the second quarter and first six months of 2024, respectively, which was a decrease of $2 million, or 20%, and $3.6 million, also 20%, compared to the same periods of 2023.
Steve Knerr: For the three months end of June 30, 2024, the decrease is attributable to a decrease in revenue from our compliance revenue stream. However, for the six months end of June 30, 2020, the decrease in revenue is attributable to both our compliance and communications revenue streams.
Steve Knerr: Our communications business was flat for Q2 2024 compared to Q2 2023.
Steve Knerr: For the first half of 2024, communications revenue decreased $1.1 million, or 9% compared to the first half of 2023. The decrease for the first half of the year was primarily related to a decrease in volume in our Newswire news distribution brand.
Steve Knerr: The decrease for the first half of the year was primarily related to a decrease in volume in our Newswire news distribution. Additionally, we had a decrease in our webcasting and events business due to a large conference that occurred in the first quarter of last year but did not occur this year. As noted earlier, volumes from our Access Wired News Distribution brand were lower comparably year-over-year for the first quarter and were flat year-over-year for the second quarter.
Steve Knerr: Additionally, we had a decrease in our web testing and events business due to a large conference that occurred in the first quarter of last year, but did not occur this year.
Steve Knerr: As noted earlier, volumes from our AccessWire news distribution brand were lower comparably year-over-year for the first quarter and were flat year-over-year for the second quarter.
Steve Knerr: Communications revenue represented 77% and 78% of total revenue during the 3 and 6 months ended June 30, 2024, respectively, as compared to 62% and 68% for the same periods of 2023. Compliance revenue decreased $2 million, or 53%, and $2.5 million, or 44%, during the second quarter and first half of 2024, respectively, compared to the same periods of 2023. The decrease was primarily related to a decrease in revenue from print and proxy fulfillment services due to a few one-time significant transactions which occurred during the three and six months ended June 30, 2023, but did not occur in the current year.
Steve Knerr: Communications revenue represented 77% and 78% of total revenue during the 3 and 6 months ended June 30, 2024, respectively, as compared to 62% and 68% for the same periods of 2023.
Steve Knerr: Compliance revenue decreased $2 million, or 53%, and $2.5 million, or 44%, during the second quarter and first half of 2024, respectively, compared to the same periods of 2023.
Steve Knerr: The decrease was primarily related to a decrease in revenue from Print and Proxy Fulfillment Services due to a few one-time significant transactions which occurred during the three and six months ended June 30, 2023, however did not occur in the current year.
Steve Knerr: Additionally, we experienced a decrease in revenue from our transfer agent services due to a decrease in corporate actions and directives during the period. However, revenue from these two services tends to fluctuate from quarter to quarter because they are project-based and dependent on market activity.
Steve Knerr: Additionally, we experienced a decrease in revenue from our transfer agent services due to a decrease in corporate actions and directives during the period. Revenue from these two services tends to fluctuate from quarter to quarter because they are project based and dependent on market activity.
Steve Knerr: Switching over to gross margins, our overall gross margin was $5.9 million and $11.1 million for Q2 and the first half of 2024, respectively. This is a decrease of 1.4 million, or 19%, and 3 million, or 21%, for the second quarter and six months of 2024, compared to the same periods of the prior year. However, rose margin percentages were relatively consistent at 77% and 76% for the 3 and 6-month energy energies in 30 and 24, compared to 76% and 77% for the same period as 2020-3.
Speaker Change: Switching over to gross margins, our overall gross margin was 5.9 million and 11.1 million for Q2 and the first half is 2024 respectively.
Speaker Change: This is a decrease of 1.4 million, or 19%, and 3 million, or 21%, for the second quarter and six months of 2024, compared to the same periods of the prior year.
Speaker Change: However, rose margin percentage is relatively consistent at 77% and 76% for the three and six months energy in 30 and 20 and 24, compared to 76% and 77% for the same period as 2023.
Steve Knerr: Chris Marger from our communications business increased to 78% and 77% for the 3 and 6 months ending in 30 at 204 or to 76% and 77% for the same period of the prior year. This is primarily attributable to the optimization of our editorial staff in slightly lower distribution. Risk Margin Percentage from our compliance business decreased to 74% for both the three and six months ended June 30, 2024, compared to 76% and 77% for the same periods in 2023.
Speaker Change: Gross margin from our communications business increased to 78% and 77% for the three and six months ended June 30, 2024, compared to 76% and 77% for the same periods of the prior year. This was primarily attributable to optimization of our editorial staff and slightly lower distribution costs.
Speaker Change: Risk Margin Percentage from our compliance business decreased to 74% for both the 3 and 6 months ended June 30, 2024, compared to 76% and 77% during the same periods of 2023.
Steve Knerr: This decrease is primarily due to lower margins on smaller print and proxy fulfillment projects and lower transfer agent revenues. Moving to operating income, we posted operating income of $334,000 and $282,000 for the three and six months ended in 30 and 20, 24, respectively. Compared to operating income of $1.7 million and $2.3 million for the same period of 20, 23. The decrease in operating income is primarily due to the decline in revenue, specifically from the one-time significant print and proxy projects in the prior year.
Speaker Change: This decrease is primarily due to lower margins on smaller print and proxy fulfillment projects and lower transfer agent revenue.
Speaker Change: Moving to operating income, we posted an operating income of $334,000 and $282,000 for the three and six months energy in 30 and 20, 24 respectively. Compared to operating income of $1.7 million and $2.3 million for the same period of 20, 23.
Speaker Change: The decrease in operating income is primarily due to the decline in revenue, specifically from the one-time significant print and proxy projects in the prior year.
Steve Knerr: Operating expenses were flat for Q2 2024 compared to Q2 2023 and decreased $916,000, or 8%, for the first half of 2024 compared to 2023. The decrease in G&A expenses of $623,000, or 14%, was primarily the result of a benefit related to the reversal of previously recognized stock compensation expense associated with the resignation of an executive officer, as well as lower non-recurring transaction and integration costs. Sales and marketing costs decreased due to lower headcount and a reduction in sales commissions.
Speaker Change: Operating expenses were flat for Q2 2024 compared to Q2 2023 and decreased $916,000 or 8% for the first half of 2024 compared to 2023.
Speaker Change: The decrease in G&A expenses of $623,000, or 14%, was primarily the result of a benefit related to the reversal of previously recognized stock compensation expense associated with the resignation of an executive officer, as well as lower non-recurring transaction and integration expenses.
Speaker Change: Sales and marketing costs decreased due to lower headcount and a reduction in sales commissions.
Steve Knerr: On a gap basis, we reported net income of $7,000 during Q2 of 2024, compared to net income of $1.4 million, or $0.36 per diluted share during Q2 of 2023. In the first half of 2024, we reported a net loss of $132,000, or $0.03 per diluted share, compared to net income of $1.2 million, or $0.32 per diluted share during the prior year, with being to some non-get metrics, we generated EBDA of $1.1 million, or 15% of revenue, and $2 million, or $14% of revenue for Q2 and the first half is 2024, or to EBDA of $2.9 million, or 30% of revenue, and $3.6 million, or 20% of revenue, during the same period of 2023.
Speaker Change: On a gap basis, we reported net income of $7,000 during Q2 of 2024, compared to net income of $1.4 million, or $0.36 per diluted share during Q2 of 2023.
Speaker Change: For the first half of 2024, we reported a net loss of $132,000, or $0.03 per diluted share compared to net income of $1.2 million, or $0.32 per diluted share during the prior year.
Speaker Change: Looking at some non-GATT metrics, we generate EBITDA of $1.1 million with 15% of revenue and $2 million with 14% of revenue for Q2 and the first half of 2024.
Speaker Change: for the EBITDA of $2.9 million, or 30% of revenue, and $3.6 million, or 20% of revenue, growing the same periods of 2020-3.
Steve Knerr: Adjusted EBITDA was $1.5 million, or 19% of revenue, and $2.2 million, or 15% of revenue, for the second quarter and first half of 2024, compared to $3 million, or 31% of revenue, and $4.9 million, or 27% of revenue, for the same periods of 2023. Non-GAAP Net Income was $847,000, or $0.22 per diluted share, and $1.2 million, or $0.31 per diluted share, for the second quarter and first half of 2024, compared to $2 million, and $0.53 per diluted share, and $3.3 million, or $0.87 per diluted share, for the same periods of 2023.
Speaker Change: Adjusted EBITDA was $1.5 million, or 19% of revenue, and $2.2 million, or 15% of revenue for the second quarter and first half of 2024, compared to $3 million, or 31% of revenue, and $4.9 million, or 27% of revenue for the same periods of 2023.
Speaker Change: non-GAAP Net Income was $847,000, or $0.22 per diluted share, $1.2 million, or $0.31 per diluted share for the second quarter and first half of 2024.
Speaker Change: compared to $2 million and $0.53 per diluted share and $3.3 million or $0.87 per diluted share for the same periods of 2023.
Steve Knerr: Switching over to the balance sheet and cash flow statement, our deferred revenue balance, which is revenue we expect to recognize primarily over the next 12 months, increased 1% to $5.5 million as of June 30, 2024. In the cash flow statement, we experienced negative cash flow from operations of $190,000 for the second quarter, and generated cash flow from operations of $796,000 for the first half of 2024, compared to $1.7 million and $2 million for the same period of 2023. The decline year-over-year is primarily due to the one-time significant print and proxy projects in the prior year, as well as the timing of CERN payments, which were required in the second quarter of 2024.
Speaker Change: Switching over to the balance sheet in cash flow statement, or deferred revenue balance, which is revenue we expect to recognize primarily over the next 12 months, increase 1% to 5.5 million dollars as of June 30, 2024.
Speaker Change: and the cash flow statement we experienced negative cash flow from operations of $190,000 for the second quarter. Generating cash flow from operations of $796,000 for the first half of 2024 compared to $1.7 million and 2 million for the same period of 2023.
Speaker Change: The decline year-over-year is primarily due to the one-time significant print and proxy projects in the prior year, as well as the timing of CERN payments, which were required in the second quarter of 2024.
Brian Balbirnie: I will now turn it back over to Brian, who will provide some more details on our business, things we are excited about, as well as other updates on customers, volumes, and everything else we have planned for the second half of the year. Brian? Thank you, Steve.
Speaker Change: I will now turn it back over to Brian , who will provide some more details on our business, things we are excited about, as well as other updates on customers, volumes, and everything else we have planned for the second half of the year. Brian ?
Brian Balbirnie: Thank you, Steve. At the beginning of the call, we spoke about customer account growth for the quarter, where we're seeing brands like BlackBerry, David's Bridal, and several other large enterprises beginning to use our communications platform, which helped our customers subscribing to our platform to $10,057 annually compared to $8,523 last year's same period. That's an 18% year over year growth in our subscription business. Now, to put this in context, when we began selling what was then Platform ID subscriptions a couple of years ago, we were averaging $6,000 a customer. This ARR has moved essentially $1,000 a year higher, and like we guided a couple quarters ago, this number should level out at around $14,000 a year by Q3 2025.
Brian Balbirnie: Thank you, Steve. At the beginning of the call, we spoke about customer account growth for the quarter, where we're seeing brands like BlackBerry, David's Bridal, and several other large enterprises beginning to use our communications platform.
Speaker Change: which helped our customers subscribing to our platform to $10,057 annually compared to $8,523 last year's same period. That's an 18% year-over-year growth in our subscription business.
Speaker Change: Now to put this in context when we began selling what was platform ID subscriptions a couple of years back, we were averaging $6,000 a customer.
Brian Balbirnie: This ARR has moved essentially $1,000 a year higher, and like we guided a couple quarters ago, this number should level out at around $14,000 a year by Q3 2025.
Brian Balbirnie: We have some exciting things to share with you next quarter on this, where we will be moving our metrics to MRR, churn rate, net dollar retention, and other critical metrics we are focused on as we round out our pivot to a subscription-first business. Speaking of... We ended the quarter with 1032 customers subscribing to our platform, up 2% year over year. However, I will guide you on where we're headed.
Speaker Change: We have some exciting things to share with you next quarter on this, where we will be moving our metrics to MRR, turn right, net dollar retention and other critical metrics we are focused on as we round out our pivot to a subscription for a business.
Brian Balbirnie: Speaking of subscriptions, we ended the quarter with 1,032 customers subscribing to our platform, up 2% year-over-year. However, I will guide you on where we're headed. At the beginning of Q3, we launched a pilot, and in about a month of selling, we have added 100 of these new subscriptions.
Brian Balbirnie: At the beginning of Q3, we launched a pilot, and in about a month of selling, we added a hundred of these new subscriptions. There were a majority of customers, current customers, that increased their spends and began subscribing to our new MRR offerings, opposed to the bundled lumpy utilization business that we've discussed in prior calls. There's a lot more here I want to talk about.
Speaker Change: There were a majority of customers, current customers, that increased their spends and began subscribing to our new MRR offerings opposed to the bundled lumpy utilization business that we've discussed in prior calls.
Brian Balbirnie: But the pilot has given us the data points we needed to begin this full shift. So we might need some popcorn next quarter on our call, where we will be disclosing so much of what we're doing in the future, including who we'll be going forward. Also, because of the success, we have created a new organization, the company. This new customer experience team will be responsible for onboarding, training, supporting, and learning about our new customer needs, reporting back to our newly created product teams to build details on product improvements and to help drive our product growth.
Speaker Change: There's a lot more here I want to talk about, but the pilot has given us the data points we needed to begin this full shift this quarter. So we might need some popcorn next quarter on our call, where we will be disclosing so much of what we're doing in the future, including who we'll be going forward.
Speaker Change: Also, because of this success, we have created a new organization in the company. This new customer experience team will be responsible for onboarding, training, supporting and learnings about our new customer needs.
Speaker Change: Reporting back to our newly created product teams to build details on product improvements and to help drive our product roadmap.
Brian Balbirnie: Even though we have built these two new organizations in SK2, it is important to illustrate that we're still committed to cost containment and driving further leverage in our business. In the back half of the year, we will see approximately $400,000 of savings per quarter.
Speaker Change: Even though we have built these two new organizations since Q2, it is important to illustrate that we're still committed to cost containment and driving further leverage in our business.
Speaker Change: In the back half of the year, we will see approximately $400,000 of savings per quarter. Our management team is also focused on finding further savings in our organization of approximately $300,000 to $500,000 by further streamlining our systems, vendors, and headcount alignment by the end of the year.
Brian Balbirnie: Our management team is also focused on finding further savings in our organization of approximately $300,000 to $500,000 by further streamlining our systems, vendors, and headcount alignment by the end of the year. What began for us in 2006 has served us well. This compliance and regulatory business has been very much a part of our DNA and has grown and matured, but it's time to set it free. Not to try to be nostalgic, but it's time to move our brand, our future, and our focus on our highly scalable communications platform.
Speaker Change: What began for us in 2006 has served us wealth. This compliance and regulatory business has been very much a part of our DNA and has grown matured, but it's time to set it free. That's a try to be nostalgic, but it's time to move our brand, our future, and our focus of our highly scalable communications platform business.
Brian Balbirnie: I've said it briefly in prior quarters and in our prepared presentations, so this won't be a shock for most everyone. We are beginning the process to establish a timeline to sell the compliance business. There are a lot of details to figure out, as well as accounting treatment to work through.
Speaker Change: I've said it briefly in prior quarters and in our prepared presentations, so this won't be a shock for most everyone.
Speaker Change: We are beginning the process to establish a timeline to sell the compliance business. There's a lot of details to figure out as well as accounting treatments to work through. But ultimately, you're trying to put us in a position by the end of the year as to be a fully public relations and investor relations communication technology company.
Brian Balbirnie: But ultimately, we are trying to put us in a position by the end of the year to be a fully public relations and investor relations communication technology company. This focus will provide us with the ability to scale, further leverage from improved gross margins, develop a streamlined, efficient business process around one platform and one team, and a new monthly recurring revenue. With the proper execution, this will also allow their shareholders to see market cap appreciation, whereby we will be valued based on our fundamental KPIs as well as industry comps that will be directly aligned with the renewed focus that we'll have. It is mutually understood that today's ISTR is undervalued.
Speaker Change: This focus will provide us the ability to scale, further leverage from improved gross margins, develop a streamlined, efficient business process around one platform and one team, and a new monthly reoccurring revenue model. With the proper execution, this will also afford our shareholders to see market cap appreciation.
Speaker Change: We're by we will be value based on our fundamental KPIs as well as industry comes that will be directly aligned with the renewed focus that we'll have.
Brian Balbirnie: Debt on the balance sheet, seasonal lumpy revenues, and many other factors go into what investors ultimately pin as a company's value. Going forward, we believe investors will derive value in our common shares based on the growth, earnings power, and execution of our clear KPIs we intend to set forth. Like in the past, when those targets got hit, the market kept aligned. Going forward, these targets will get hit again, and we will all bet on it.
Speaker Change: It is mutually understood that today's ISDR is undervalued. Debt on the balance sheet, seasonal lumpy revenues, and many other factors go into what investors ultimately pin as a company's value.
Speaker Change: Going forward, we believe investors will derive value in our common shares based on the growth, earnings, power, and execution of our clear KPIs we intend to set forth. Like in the past, when those targets got hit, the market kept aligned, going forward, these targets will get hit again, and we will all benefit from that.
Brian Balbirnie: I would like to speak briefly about our commercial banking relationship. We initially entered into a $20 million term loan, which was set to mature and be paid in full by December 2028. As of the end of Q2, we had approximately $18 million in balance.
Speaker Change: I would like to speak briefly about our commercial banking relationship. We initially entered into a $20 million term loan, which was set to mature and to be paid in full by December 2028. As of the end of Q2, we had approximately $18 million balance.
Brian Balbirnie: Management believes it will be able to exit a portion of the compliance business, thus paving the way for the company to be debt-free almost two years earlier than originally planned. Based on this, and the transition of the business to a full subscription, the company entered into an amendment of the term loan to modify the covenants, giving the business a bit more headroom in its fixed charge and leverage ratio. This is great news for the company and its shareholders, and we will be able to unlock the value of the asset in a meaningful way. Steve highlighted revenues and comparative periods thoroughly, however, I'd like to address a couple things. One, the decrease in overall revenues for the quarter was well-messaged to everyone last year and thus driving the decrease in one-time projects that were baked into our forecast this year, as well as the annual number.
Speaker Change: Management believes it will be able to exit a portion of the compliance business, thus paving a way for the company to be debt-free almost two years earlier than originally planned.
Speaker Change: Based on this and the transition of the business to a false subscription, the company entered into an amendment of the term loan to modify the coveted, giving the business a bit more headroom in its fixed charging leverage ratios. This is great news for the business and it's shareholders and we will be able to unlock the value of the asset in a meaningful way.
Brian Balbirnie: This should not come as a surprise to any of you, but we're working to make sure that we build another string of consecutive quarters. Moving our business to an MRR model will help bad debt, age receivables, and customer credit. So, like any other business doing a full SAS pivot, this will help us in the long run. And lastly, it would have been nice to continue the streak, but honestly, having done it for almost 10 years, we're setting our sights long-term, have our objectives, and know what we need.
Brian Balbirnie: In summary, we can see why the management team and board are happy with where the business is headed. We have increased customers, news distribution volumes, and PR revenue. Subscription customers and added new MRR subscriptions and strengthened our banking relationship. We have a plan we're working on to become debt-free almost two years earlier than originally planned. As always, it was nice spending time with you today and discussing the results for our second quarter. Operator, please go ahead with the Q&A portion of the call. The floor is now open.
Speaker Change: In summary, we can see why the management team and board are happy where the business is headed we increased customers news distribution volumes MTR revenues subscription customers and added new MRI subscriptions and strengthen our banking relationships. We have a plan we're working on to become debt free almost two years earlier than originally planned.
Speaker Change: As always it was a nice spending time with you today and discussing the results for our second quarter. Operator. Please go ahead with the Q&A portion of the call.
Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while asking your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a few moments while we poll for questions. Once again, if you would like to ask a question, please press star 1 at this time to enter the queue.
Speaker Change: Certainly the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question. Please pickup your handset with listing on a speaker phone to provide optimum sound corny. Please hold just a few moments wildly poll for questions.
Speaker Change: Once again, if you would like to ask a question. Please press star one at this time to enter the queue. Please hold them on that while we poll for any questions.
Operator: Please hold a moment while we poll for any questions. There appear to be no questions in queue at this time. Oh, hold on one moment. We do have one question from Brock Irwin with Clever Investing. Please pose your question. Your line will be live.
Speaker Change: There appear to be no questions in queue at this time.
Speaker Change: We do have one question from Brock Erwin with Cleburne. Please pose your question your line will be life.
Speaker Change: Yeah.
Brock Erwin: Hey, guys I'm, sorry, not in the past you know you've been pretty thoughtful about capital allocation you know.
Brock Irwin: Hey guys, in the past, you've been pretty thoughtful about capital allocation, you know, when to raise money, when to buy back shares, maybe when to take on some debt. So just, you know, given the stock is trading at such a low value now, I'm wondering if you aren't seriously considering buying back shares at this price.
Brock Erwin: When to raise money went to buy back shares.
Speaker Change: Maybe willing to take on some debt.
Brock Erwin: So just you know given the stock is trading at such a low value now I'm wondering if you arent seriously considering buying back shares at this price.
Speaker Change: Hey, Brian Nice to talk to you again.
Brian Balbirnie: Hey Brock, nice to talk to you again. That's a good question. And I think something we've discussed openly in investor presentations and likely other past quarterly calls. I would tell you our main objective today is to continue to get back to generating cash the way we used to in the past, continue to service our debt and pay full attention to our ratios there to meet bank requirements. If that continues, and we generate excessive cash as we plan, we would likely seriously consider, at these levels, or when that time happens, if the levels are the same, looking at a repurchase program.
Brian Balbirnie: That's a good question and I think something we have discussed openly in our investor presentations and likely.
Speaker Change: Other past quarterly calls.
Speaker Change: I would tell you. Our main objective today is to continue to get back to generating cash the way we had in the past continue to service our debt and pay full attention to our ratios.
Speaker Change: There to meet bank covenants.
Speaker Change: If that continues.
Speaker Change: And we generate excess cash that we plan, we would likely seriously consider at these levels or when that time happens at the levels at the same to look at a repurchase program.
Brian Balbirnie: Like we've done in the past, we've bought back several million dollars of stock in years past and retired shares in years past. And so that's, you know, and many folks know, as a significant shareholder, that's a benefit to all of us. And we surely want to do it. Any potential disposal of part of our compliance business may result in a portion of repayment of debt and stock repurchase. Those are things that are open to discussion based on, you know, what the values end up being for those assets at the right time. But definitely something the board has discussed in the past and is looking forward to.
Speaker Change: Like we've done in the past, we bought back several million dollars of stock in years past and and retire chairs in years past and so that's you know in many folks know has a significant channel that's a benefit to all of us.
Speaker Change: And we surely want to do it.
Speaker Change: Any potential.
Speaker Change: Those are all part of our compliance business May result, in a portion of repayment of debt and a stock repurchase.
Speaker Change: Those are things that are open to discussing based on you know what the values end up being for those assets at the right time, but definitely something the board has discussed in the past and is looking at.
Speaker Change: Okay. It sounds like and there are some bank covenants and obviously you need to comply with all of that stuff, but I mean.
Brock Irwin: Okay, it sounds like there are some bank covenants, and obviously, you need to comply with all that stuff, but I mean, I don't know what your targets are for, you know, cash generation, but it seems like, you know, even just a little buyback program could be nice. What are your thoughts on that?
Speaker Change: I don't know what your targets are for cash.
Speaker Change: Cash generation, but.
Speaker Change: It seems like you know, even just a little buyback program could.
Speaker Change: Could be nice.
Speaker Change: What are your thoughts on that.
Speaker Change: Hi.
Speaker Change: I don't disagree with that right okay.
Brian Balbirnie: I don't disagree with you, right? It's toxic.
Speaker Change: Okay. The topic, you know what I mean.
Speaker Change: I think I think I kind of told you exactly what I can say to you.
Brian Balbirnie: You know, I think I kind of told you exactly what I could say to you. I appreciate your comment about it, and I don't necessarily disagree, right? I think being fair to our shareholders and the business and our customers and employees equally across the board is, like I said, our main objective is to service that debt, continue to grow the business, and invest in the areas that we can.
Speaker Change: I appreciate the comment about it and I don't necessarily disagree right I think to be fair to our shareholders and the business and our customers and employees equally all across the board.
Speaker Change: And it's like I said, our main objective is to service that debt continue to grow the business and invest in the areas that we can and so I view capital allocation as you know kind of a multi pronged approach and repurchasing shares is one of them, it's a great way to do it.
Brian Balbirnie: And so I view capital allocation as, you know, kind of a multi-pronged approach, and repurchasing shares is one of them. It's a great way to do it. It has proved successful in the past for us. We've helped many shareholders in the past move blocks of shares to other new shareholders as we continue to evolve the story.
Speaker Change: It has proved a well in the past for US we have helped many fur holders in the past move blocks of shares to other new shareholders.
Speaker Change: As we continue to evolve the story so.
Brian Balbirnie: So I guess that, you know, kind of the ending comment, if we can, we will, if that's a fair statement. Okay. I appreciate it. Thanks, Brian. Thank you, Brian. Talk to you soon.
Speaker Change: I guess the kind of the <unk>.
Speaker Change: Comment if we can we will and if that's a fair statement.
Speaker Change: Okay Alright.
Speaker Change: Alright appreciate it thanks, Brian thank.
Speaker Change: Thank you Brett talk to you soon.
Speaker Change: Your next question is coming from Mike Grondahl with Northland Securities. Please pose your question your line of sight.
Mike Grondahl: Your next question is coming from Mike Grondahl with Northland Securities. Please post your question; your line is live.
Luke Horton: Hey guys, this is Luke on for Mike. They look Hey, I actually just got disconnected there at the end, so apologies if this is a repeat at all, but I was just going to say it's great to see the bounce back in volumes, especially from last quarter's comments about kind of expecting it to be flat throughout the year. So I was just wondering if this was kind of directly due to just elevated distribution across the market and what competitors were up to, or if this was specific to Issuer Direct and the new product suite and sales hires, and just trying to get a sense of if there was some more market share gain here during the quarter.
Speaker Change: Hey, guys. This is Luke on for Mike.
Rick: Hey, Rick.
Brian Balbirnie: Definitely more market-short gain, as has been attributable to volume increases, which result in revenue increases, and it's likely ahead of what we planned. You're right.
Speaker Change: I actually just got disconnected there at the end so apologies. If this is a repeat at all but.
Luke: I was just going to say, it's great to see the bounce back in the body.
Speaker Change: I'm, especially from last quarter's comments about kind of expecting it to be flat throughout the year.
Speaker Change: I was just wondering if this was kind of directly due to elevated distribution across the market and competitors are up to or if this is specific to two issuer direct in.
Speaker Change: The new products suite and sales hires and just trying to get a sense of if there was some more market share gains during the quarter.
Speaker Change: Yeah, that's definitely more market share gain has been attributable to volume increases which resulted in revenue increases in it like we are ahead of what we planned youre right. We talked about last quarter. How we believe for the next couple of quarters it would be light.
Brian Balbirnie: We talked about last quarter, and how we believe for the next couple of quarters, it would be light. I will tell you, your comment's correct, and I don't know that I could share and articulate the percentages of how the impact came from each, right? New sales leadership, and new sales teams are definitely making an impact, right? That's a fair statement.
Speaker Change: I will tell you Youre your comments correct and I don't know that I could share and articulate the percentages of how the impact came from each right sales new sales leadership.
Rick: New sales teams is definitely making an impact right. That's a fair statement.
Brian Balbirnie: The brand access wire is very strong in the market, and the inbound activity that we're getting, specifically inbound activity on very large accounts, is now coming in at a rate that we've never seen before, so that's helping drive price, as I highlighted in the call today. So, the indicators are very good. The platform, media suite, things like what you mentioned, are probably a smaller contribution compared to the others we just mentioned.
Rick: The brand Axis wire is very strong in the market and the inbound activity that we're getting specifically inbound activity on very large accounts is now coming in at a rate that we've never seen before so that's helping drive price as I highlighted in the call today. So the indicators are very good.
Brian Balbirnie: I'd say that it's so early on in its evolution here that, you know, probably in the back half of the year, that will have its next level of impact on us, which would be even better from a volume perspective. Volume did grow, right? We said that we would like to get to, you know, close to, you know, high teens percentages at the end of the year and into 20% next year. We're going to, we're going to exceed that. We're ahead of pace. And what we're doing, we've seen some industries slow down and other competitors, and we're the benefactors of some of that, winning some large accounts. And so they're
Speaker Change: The platform media suite things of of what you mentioned is it's probably a smaller contribution compared to the others. We just mentioned I would say that that's so early on in its evolution here that probably in the back half of the year that will have its next level of impact to us which would be even better from a volume perspective.
Speaker Change: Volume to grow right, we said that we would like to get to.
Speaker Change: Close to high teens percentages at the end of the year and into 20% next year, we're going to we're going to exceed that we're ahead of pace and what we're doing we've had seen some industry slowdown and other competitors and where the benefactors of some of that winning some large accounts and so they're all really good indicators for us something that we continue.
Speaker Change: To monitor on a daily basis.
Speaker Change: And we're not seeing that change right now and you know since Q2 ended.
Speaker Change: Okay got it and then just touching on pricing there I think you'd mentioned that was up 15%.
Luke Horton: Okay, I got it. And then, yeah.
Speaker Change: Quarter I was just wondering kind of the mix between is that selling into existing customers or is that mainly due to onboarding. These newer.
Speaker Change: Larger customers.
Brian Balbirnie: It's a combination. Yeah, new connectivity is definitely higher in price points, so we're able to take the price where possible, right? We still want to provide value to our clients, and we still want to be perceived as the highest quality newswire with the best distribution at the best price. So we don't want to sacrifice those initiatives, all those pricing, the power of the current contracts, and the last quarters of higher than prior quarters, but we are seeing some benefits of distribution add-ons and creativity and add-on services to our distribution, which our customers are now buying more broadly in North America So we're starting to see some of that happen.
Luke: The combination yeah Luke.
Speaker Change: It's definitely higher and price points that we're able to take price where possible right. We still want to provide value to our client and we still want to be perceived as the highest quality newswire with the best distribution at the best price. So we don't want to sacrifice those.
Luke: Although the pricing power of the current contracts in the last quarter were higher than prior quarters.
Luke: But we are seeing some benefactors of distribution add ons and creativity and add on services.
Luke: Distributions to our customers that are now buying more broadly in North America and Asia Pac.
Luke: Europe, and then targeted other regions of the world. So we're starting to see some of that happen as well.
Luke Horton: Okay, I got it. And then just one more here, just on the comments about the compliance business and looking to sell that. Is that something you guys are in the process of now? Is there interest out there from buyers? Are you guys... Any sort of valuation metrics that you guys are hoping to get for it, or are you kind of holding out till you get the right number? How are you thinking about the process? Yeah,
Speaker Change: Okay got it and then just one more here just on the comments about.
Luke: Compliance business and looking to sell that is that.
Speaker Change: Something you guys are in the process now is there interest out there from buyers are you guys.
Speaker Change: Any sort of valuation metrics that you guys are hoping to get for it or are you kind of.
Luke: Holding out until you get the right number or how are you thinking about the process in that.
Brian Balbirnie: Yeah, we've not begun a process, right? We've made a decision as a board that we need to move ahead with this. We obviously had to focus on getting the quarter done and behind us.
Speaker Change: Yeah, we've not begun a process right. We made a decision as a board that we need to move ahead with this.
Speaker Change: We obviously had to focus on getting the quarter done and behind us.
Brian Balbirnie: You know, we've got to unpack a lot of what the impacts that could be to the business, both from a discontinued operations kind of perspective from an accounting treatment, as I mentioned on the call, as well as what the process and how long it would be to exit that business, and what the shared services agreement would be to do so to sell to a buyer that will still need to be involved. And then, ultimately, what the valuation is, right?
Luke: We've got to unpack a lot of what the impacts could that could be to the business.
Luke: Bulk.
Luke: Discontinued operations kind of.
Luke: Perspective from an accounting treatment as I mentioned on the call as well as what the process and how long would be to exit that business. What the shared services agreement would be to do it to sell to a buyer that will still need to be involved in.
Brian Balbirnie: What is the market willing to pay? We're going to canvas the market, and we're going to talk to a few key folks that we believe could be interested. Whether we hire a bank or not is undetermined at this stage. But it is a close community of people, so I think we should be relatively able to do this efficiently and quickly in less than a 6-month period. So the goal is to, if it has a market value of what we believe that we should be able to end the year with a transaction being completed or even before that.
Luke: And then ultimately what the valuation is right what is the market willing to pay we're gonna, Kansas the market and we're going to talk to a few key folks that we believe could have interest.
Luke: Whether we hire a banker that is undetermined at this stage, but it is a closed community of people. So I think we can be relatively able.
Luke: But to do this efficiently and quickly.
Luke: You know in in less than a six month period.
Luke: So the goal is to if it if it has a market value of what we believe that we should be able to end the year with a transaction being completed or before that.
Speaker Change: Got it okay.
Luke Horton: Okay, that makes sense. Well, thank you guys for taking the questions and congrats on the quarter. Really nice to see the sequential improvement from 1Q.
Speaker Change: Well. Thank you guys for taking the questions and congrats on the quarter really nice to see the sequential improvement from <unk>.
Brook: Thank you Brook.
Speaker Change: Once again, if you do have any questions or comments. Please press star one on your phone at this time.
Operator: Once again, if you do have any questions or comments, please press star 1 on your phone at this time. We have a follow-up question from Brock Irwin with Clever Investing. Please pose your question. Your line is live.
Speaker Change: We have a follow up question from Brock Erwin with clever investing please pose your question. Your line is live.
Speaker Change: Your line is live.
Brock Erwin: Sorry, I was on mute.
Brock Irwin: Sorry, I was on mute. I was just curious if you could give us an update on AIMI, the AI content generation tool you launched, and if there's any metrics you could share on that product, that'd be great.
Brock Erwin: I was just curious if you could give an update for us on Amy the AI content generation.
Brock Erwin: Hugh you launched and if there's any metrics you could share on that product that'd be great.
Brian Balbirnie: Yeah, Amy is currently in production with customers in two areas. One as a press release drafting tool to enhance content, to write content however the customer so chooses. About 20% of our customers are actively using Amy actively to do so, which to be fair, in market statistics we're seeing from the competitors on our competitive shopping, is about average in the industry. There is a little bit of reluctancy in PR firms to use some of the automated AI engine products. So, look, I'm fine with that. I believe that it is something to grow on.
Speaker Change: Yeah. Amy is currently in production with customers in two areas one as a press release.
Speaker Change: Dropping tool to enhance content to write content that wherever the customer so chooses a lot about <unk>.
Speaker Change: 20% of our customers are using Amy actively.
Speaker Change: To do so which to be fair and market statistics, we're seeing from the competitors on our competitive shopping it's about average in the industry.
Speaker Change: There is a little bit of <unk>.
Brock Erwin: Reluctant C in the PR firms to use some of the the automated AI engine products.
Speaker Change: So look I'm fine with that I believe that that something to grow on now the area that we do see Amy having as the biggest opportunity is.
Brian Balbirnie: Now, the area that we do see Amy having the biggest opportunity is, one, currently in production, and two, I'll discuss with you something as a product roadmap idea, is that in the pitching product of our media suite, customers can take a pitch from Amy and send it to the journalists in our database by selecting key journalists and writers that they want to reach out to their community or industry and let Amy automatically write, schedule, and send the pitch. That is being used at a higher frequency than anything else from an AI tool perspective.
Speaker Change: One currently in production in two I'll discuss with you something as a product roadmap idea.
Speaker Change: Is that in the pitching product of our media suite customers can take.
Brock Erwin: A pitch from Amy and send it to the journalists in our database by selecting key journalists and writers that they want to reach out into the community our industry.
Amy: Amy automatically right schedule and send the pitch to them.
Brian Balbirnie: And then the product roadmap idea is, by the end of the year, to have Amy pre-write social posts for our customers based on the press release and automatically schedule them as a service add-on. So, we're looking at introducing levels of our subscription product, and that would be one area that our AI infrastructure will help drive revenue. And I say that to you only because it was clear at the very beginning of launch that Amy was a zero revenue-driven technology initiative that we had.
Speaker Change: That is being used at a higher frequency than anything else from an AI perspective, and then the product roadmap idea is by the end of the year is to have Amy pretty rights those proposed for our customers based on the press release to auto schedule them as a as a service add on.
Speaker Change: So we're looking at introducing levels of our subscription product and that would be one area that our AI infrastructure will help drive revenue and I say that to you only because it was clear at the very beginning of launch that Amy was a zero revenue driven technology initiative that we had significant amount of cost not as much in place be capitalized to begin to.
Brian Balbirnie: A significant amount of cost, not much of which we capitalized, to begin to roll it out. So, we've got to now get utilization, get customer patterns of use and interest, and then start to exploit those opportunities to generate subscription revenue. And that's what we're intending to do by the end of the year.
Speaker Change: Roll it out so we've got to now get utilization.
Speaker Change: Get customer patterns of abuse.
Speaker Change: And interest and then start to exploit those opportunities to generate subscription revenue and that's what we're intending to do by the end of the year.
Speaker Change: Got it makes sense. Thanks, Hey, one other thing I was curious about is you mentioned the slowdown that the industry as a whole is kind of going over for the.
Brock Irwin: Got it. It makes sense. Thanks.
Speaker Change: The news distribution I was just wondering if.
Brock Irwin: Hey, one other thing I was curious about is, you mentioned the slowdown that the industry as a whole is kind of going over for the news distribution. I was just wondering if Um, you could maybe elaborate a little bit about what you feel is causing that. Um, is it customer behavior is changing? Are, you know, uh, companies deciding to distribute their news less often or maybe on social media more, or do you have any idea of maybe what's going on in the industry, uh, to kind of explain, you know, the shift and, and maybe do you think it's temporary in nature? Obviously it's a guess, but.
Speaker Change: You could maybe elaborate a little bit about what you feel is causing that is it.
Speaker Change: Customer behavior is changing are you now.
Speaker Change: He is deciding to distribute their news less often or maybe on social media more or.
Speaker Change: Do you have any idea of maybe what's going on in the industry.
Speaker Change: Kind of explain you know this shift and and maybe do you think it's temporary in nature, obviously, it's a guess but.
Speaker Change: It would be great.
Brian Balbirnie: Yeah, I'll give you my educated guess about that. You know, the PR slowdown has a couple of things to do with it. Capital markets drive a lot of this on the public company side. When capital markets are constrained and capital is not flowing as easily, there is not as much M&A. There's not as much activity in businesses. Initiatives to invest in, promote, and produce new platform services and technologies, and hiring tend to slow down the flow of press releases. And that is a historical, factual item.
Speaker Change: [laughter], Yeah, I'll give you my educated guess about that.
Speaker Change: The slowdown is it has a contribution of a couple of things couple of markets drive a lot of it is on the public company side when capital markets are constrained and the capital is not flowing as easily theres not as much M&A, there's not as much activity in businesses initiative to invest and promote and produce new platform services and technologies and hiring 10.
Speaker Change: The slowdown the flow of press release that said that is the that is the historical factual item. If you go back and look at these volumes and 20 years every time, there is some economic uncertainty or slowdowns of markets or capital constraints.
Brian Balbirnie: If you go back and look at news volumes in 20 years, every time there's some economic uncertainty or slowdowns of markets or capital constraints, that tends to slow down. So that is temporary. It does return.
Brian Balbirnie: It always has. So, we're not concerned about that one bit. The private company side of the business, I would tell you likely they're producing less content now than they have historically. But they're not doing it in a replacement way, meaning they're not using social media or any other brand awareness or retargeting or ads to try and reach broader markets. They just have less to talk about.
Speaker Change: Constraints that tends to slow down so that is temporary it does return it always has returned.
Speaker Change: Concerned about that one bit.
Speaker Change: The private company side of the business I would tell you likely theyre producing less content now than they have historically, they're not doing it in a replacement way, meaning they're not using social media or any other brand awareness or re targeting or AD to try and reach a broader market. They just have less to talk about the PR.
Brian Balbirnie: The PR firms that we work with, some of the largest in the world, say that their customer budgets have decreased over the last 18 months as a result of PR, public relations, right, if I use that acronym correctly. And they expect that to return as well. Historically, Gartner's Burton Taylor says that the industry has grown at about an 8% CAGR for the better part of the last 10 years. But it is probably at zero.
Speaker Change: Firms that we work with some of the largest in the world to say that the customer budgets have decreased over the last 18 months as a result of P. R. Public relations right, if I use that acronym correctly to you.
Speaker Change: And they expect that to return as well.
Speaker Change: Historically Gartner Burton Taylor says that the industry is growing at about an 8% CAGR for the better part of the last 10 years. It is probably at zero now.
Brian Balbirnie: It's not going to grow. It's not going to grow. It's not going to grow. It's not going to grow. It's not going to grow. It's not going to grow. It's not going to grow. It's not going to grow. It's not going to grow. It's not going to grow.
Brian Balbirnie: We are seeing growth. So that means the industry competitors, the incumbents, are moving down in volume in the market, and we're moving up. And so we're satisfied with that. We'll continue to take market share from them, and when markets return to healthy growth, we'll then have our fair percentage of the new customers coming in. Okay, I appreciate it. Thanks for your thoughts.
Speaker Change: We're seeing growth so that means the industry competitors incumbents are moving down in volume in the market and we're moving up and.
Speaker Change: And so we're satisfied with that we will continue to take market share from them and when markets return to healthy growth would then have our fair percentage of the new customers coming into the market as well.
Speaker Change: Okay. Appreciate it thanks for the your thoughts.
Speaker Change: Okay.
Speaker Change: Kelly or Danny is there any further questions that we have today from our shareholders are interested parties in the call.
Brian Balbirnie: ...
Speaker Change: Yes, you do have another question from Cabot Ashplant. Please pose your question your line is live.
Operator: Kelly or Jenny, are there any further questions that we have today from our shareholders or interested parties on the call?
Operator: Yes, you do have another question from Cabot Esplante. Please pose your question. Your line is live.
Cabot Ashplant: How's it going Brian Thanks for taking the call here I just wanted to congratulate each quarter.
Cabot Esplante: How's it going, Brian? Thanks for taking the call here. I just want to congratulate you. I'm really happy to see this bounce back and growth here. I just was wondering if you could provide some more color on the pilot so far. I was just wondering if you could provide us with what that conversion time is and when you pitch that to the customers for when they convert to the ARR-based model. And then, if you could just provide some color on what the long-run gross margins you see in that pivot are.
Cabot Ashplant: Really good to see this bounce back in growth here I. Just was wondering if you could provide some more color on our on the pilot. So far I was just wondering if you could provide us with you know what that conversion time is when you pitch that to the customers for when they convert to the E. R. R. Based model and then if you could just provide some color on what the law.
Speaker Change: Long run gross margins you see in that pivot are.
Cabot Ashplant: Yeah.
Brian Balbirnie: And I'm going to split that question into two, and I appreciate the question. I'm going to split it into two parts.
Speaker Change: I'm going to split that question into two and I. Appreciate the question I split it into two parts. The first part of that with a little humor. If you don't mind I'm going to say that we'll wait for the details on what that is with a little bit of popcorn next quarter as I said in the call I wanted to give our sales and marketing opportunities to really shine through what that product looks like and to be fair to everybody I don't want our competition to understand.
Brian Balbirnie: And the first part, with a little humor, if you don't mind, I'm going to say that we'll wait for the details on what that is with a little bit of popcorn next quarter, as I said in the call. I want to give our sales and marketing opportunities to really shine through on what that product looks like. And to be fair to everybody, I don't want our competition to understand what we're doing before we have to.
Brian Balbirnie: So I'm being very thoughtful there; if you can all allow me a little bit of latitude on that, From a direct part of your question about how many calls it takes to close and the timeline it takes to close, moving an MQL and SQL into a close one opportunity, we're seeing about 50 percent of these calls happen with a one-call close, keeping in mind that the majority of them are new or current customers.
Speaker Change: We're doing before it before we have to so I'm being very thoughtful there. If he can all allow me a little bit of latitude in that.
Speaker Change: From a from a direct part of your question.
Speaker Change: About how.
Speaker Change: How many calls it takes to close in the timeline it takes to close moving and MTO L. A SQL into a closed one opportunity we're seeing about 50% of these calls happen with a one call close keeping in mind that these majority of them are new costs. Our current customers rather so the current customers are buying a pattern of press releases lets say another products from.
Brian Balbirnie: So, current customers are buying a pattern of press releases, let's say, and other products from us, not in a subscription way that is billed on utilization or bought in a bundle, which, as we've talked about in the past, has been a very difficult thing for us to forecast and handle and manage. So, this subscription element removes all those barriers. So, the customer recognizes the value, right? We recognize the opportunity for smooth revenue patterns, smooth cash flows, and the typical MRR model that everybody would understand clearly. About 80% of the gross margin on the product.
Speaker Change: Non of subscription way that are build on utilization or bought in the bundle, which as we've talked about in the past there has been a very difficult thing for us to forecast and handle and manage.
Speaker Change: So this.
Speaker Change: Scripps in element removed all those barriers so the customer recognizes the value right. We recognize the opportunity for you know exclude revenue patterns move cash flows and the typical MRI you know MRI model that everybody would understand clearly.
Speaker Change: About 80% gross margin in the product.
Brian Balbirnie: And so we'll get some leverage out of that as we add different things to it. And to be honest, the product teams and the marketing teams have already established what the 1st, 2nd, 3rd, and 4th product add-on will be over the next 12 months. So they're ready and market proven to be able to add additional products that we already have into this suite. So we're looking to see something substantial. This is going to be a game changer for the industry. And to be fair, it's the next quarter where we get to talk about it in detail and show it to our customers and our shareholders. All right. Awesome. Thanks, Brian. Thank you, sir.
Speaker Change: And so we will get some leverage out of that as we add different things onto it and to be honest.
Speaker Change: Our teams their marketing teams have already established what the first second third and fourth product data will be over the next 12 months, so they're ready and market proven to be able to add on additional products that we already have into the suite.
Speaker Change: So we're looking to see something substantial. This this is going to be a game changer for the industry and to be fair. It's next quarter, when we get to talk about it in detail and show it to our customers and our shareholders either on the next call.
Brian Balbirnie: Alright awesome. Thanks, Brian.
Cabot Esplante: All right, awesome. Thanks, Brian.
Speaker Change: Sure.
Speaker Change: Thank you very much.
Speaker Change: Appears to be the end of our question and answer session. At this time I would now like to turn the floor over to Brian <unk> for any closing remarks.
Speaker Change: Jenny. Thank you both of you and Kelly today for assisting us.
Brian Balbirnie: Jenny, thank you both to you and Kelly today for assisting us with our call. To our shareholders and interested folks that took the time to participate today, thank you for the hour plus opportunity. We look forward to doing follow-up calls with you. As always, you know how to reach us, and within the next 15 to 20 minutes, a 10-Q will be filed on Edgar. You'll be able to read the full disclosure of everything we talked about today. Thank you so much. Have a good night!
Brian Balbirnie: With our call to our shareholders and interested folks that took the time to participate today. Thank you for the hour plus the opportunity. We look forward to doing follow up calls with you.
Brian Balbirnie: Always you know how to reach us and within the next 15 to 20 minutes or 10-Q will be filed on Edgar you'll be able to read the full disclosure of everything we talked about today. Thank you. So much have a good day.
Speaker Change: Thank you very much. This does conclude today's conference you may now disconnect. Your phone lines at this time and have a wonderful day. Thank you feel participation.
Brian Balbirnie: John.