What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 69 added, 55 removed, 166 unchanged (43% of the section changed)

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Brand Asset Manager - a customizable library of images, video and press kits, which can be shared both privately and publicly, as well as integrated into the ACCESSWIRE editor for easy access of customers’ high- resolution images.

Brand Asset Manager is one of the first media file managers built into the press release creation process.

All assets are tagged to give our customers analytics for both views and downloads.

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This system delivers secure notifications and basic incident workflow management processes that align with a company’s corporate governance whistleblower policy.

As a supported and subsidized bundle product of the New York Stock Exchange (“NYSE”) offerings, we are introduced to new initial public offering (“IPO”) customers and other larger cap customers listed on the NYSE.

As a supported and subsidized bundle product of the New York Stock Exchange (“NYSE”) offerings, we are introduced to new IPO customers and other larger cap customers listed on the NYSE.

Since 2014, we have been a named NYSE subsidy provider of this Whistleblower solution.

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This was accomplished by integrating our shareholder outreach module, Investor Network, into and with Platform id.

Most of the customers subscribing to this module today are historical PrecisionIR (“PIR”) - Annual Report Service (“ARS”) users, as well as new customers purchasing the entire Platform id.

Most of the customers subscribing to this module today are historical PrecisionIR - Annual Report Service (“ARS”) users, as well as new customers purchasing the entire Platform id.

subscription.

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Results of Operations

Comparison of results of operations for the three months ended March 31, 2022 and 2021 (in 000’s):

Comparison of results of operations for the three and six months ended June 30, 2022 and 2021:

Three months ended

Six months ended

Revenue Streams

Communications

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Gross margin %

Total revenue increased by $308,000, or 6%, to $5,288,000 during the three months ended March 31, 2022, as compared to $4,980,000 for the same period in 2021.

The increase is attributable to an increase in revenue in both our Communications business and Compliance businesses.

Communications revenue increased $196,000, or 6%, to $3,383,000 for the three months ended March 31, 2022, as compared to $3,187,000 for the same period of 2021.

The increase in revenue is primarily due to an increase in revenue from our ACCESSWIRE product, which increased 16% during the first quarter of 2022 compared to the first quarter of 2021, primarily as a result of higher volume.

We also generated increased revenue from our investor relations websites and news feeds.

These increases were partially offset by a decrease in revenue from our events and webcasting business due to lower demand for events compared to the first quarter of 2021, the timing of some events being pushed to the second quarter and lower teleconference revenue.

Communications revenue remained 64% of total revenue during the three months ended March 31, 2022, as compared to the same period of 2021.

Compliance revenue increased $112,000, or 6%, during the three months ended March 31, 2022, as compared to the same period of 2021.

The increase was due primarily to an increase in revenue from print and proxy fulfilment services due to increased projects associated with annual meetings and special transactions, partially offset by a decrease in revenue from our transfer agent services due to less corporate actions and a decline from our legacy ARS business due to customer attrition.

Total revenue increased by $87,000, or 2%, to $5,807,000 during the three-month period ended June 30, 2022, as compared to $5,720,000 during the same period of 2021.

Total revenue increased by $395,000, or 4%, to $11,095,000 during the six-month period ended June 30, 2022, compared to $10,700,000 during the same period of 2021.

The increases were primarily driven by an increase in revenue from our Communications revenue stream.

Communications revenue increased $181,000, or 5%, and $377,000, or 6%, during the three and six-month periods ended June 30, 2022, respectively, as compared to the same periods of 2021.

The increase in revenue is due primarily to an increase in revenue from our ACCESSWIRE news brand.

ACCESSWIRE revenue for the three and six months ended June 30, 2022, increased approximately 16% for both periods, compared to the same periods of the prior year.

We also generated increased revenue from our investor relations websites and news feed product lines.

These increases were partially offset by a decrease in revenue from our events and webcasting business due to lower demand for events compared to the prior year as well as lower teleconference revenue.

Communications revenue increased to 64% of total revenue during the three and six months ended June 30, 2022, as compared to 61% and 63% during the same periods of the prior year.

Compliance revenue decreased $94,000, or 4% during the three -month period ended June 30, 2022 and remained flat during the six-month period ended June 30, 2022, as compared to the same periods of 2021.

The decrease in revenue is primarily related to a decrease in revenue from our transfer agent services due to less corporate actions and directives during the period.

We also experienced a decline in revenue from disclosure services as well as our legacy ARS business due to customer attrition.

These decreases were partially offset by an increase in revenue from print and proxy fulfillment services due to increased projects associated with annual meetings and special transactions.

For the six-month period ended June 30, 2022, an increase in revenue from print and proxy fulfillment services was partially offset by declines in our transfer agents and legacy ARS services noted earlier.

No customers accounted for more than 10% of the revenues during the three and six-month periods ended June 30, 2022, or 2021.

Deferred Revenue

As of March 31, 2022, our deferred revenue balance was $3,422,000, which we expect to recognize over the next twelve months, compared to $3,086,000 at December 31, 2021, an increase of 11%.

At June 30, 2022, our deferred revenue balance was $3,481,000, which we expect to recognize over the next twelve months, compared to $3,086,000 at December 31, 2021, an increase of 13%.

Deferred revenue primarily consists of advance billings for subscriptions of our cloud-based products and pre-paid packages of our news distribution product, as well as advance billings for annual service contracts.

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Communications cost of revenues consists primarily of direct labor costs, newswire distribution costs, teleconferencing costs and third-party licensing costs.

Compliance and other costs of revenue consists primarily of direct labor costs, warehousing, logistics, print production materials, postage, and amortization of capitalized software costs related to our disclosure software.

Cost of revenues decreased by $162,000, or 12%, during the three months ended March 31, 2022, as compared to the same period of 2021.

Overall gross margin increased $470,000, or 13%, during the three months ended March 31, 2022, compared to the same period of 2021.

As a result, overall gross margin percentage increased to 77% during the three months ended March 31, 2022, as compared to 72% during the same period of 2021.

Cost of revenues associated with our Communications revenue decreased $112,000, or 13%, during the three months ended March 31, 2022 as compared to the same period of 2021.

This decrease is primarily due to lower teleconferencing costs as well as variable costs associated with our events and webcasting business.

Gross margin percentage associated with our Communications revenue was 78% for the three months ended March 31, 2022 compared to 73% for the same period of 2021.

The increase in gross margin percentage is associated with an increase in press release revenue as a percentage of total Communications revenue, combined with the impact of lower teleconferencing costs noted above.

Cost of revenues associated with our Compliance revenue decreased $50,000, or 10%, during the three months ended March 31, 2022 as compared to the same period of 2021.

The decrease is due to lower amortization of capitalized software associated with our disclosure software, which became fully amortized in 2021.

This decrease was partially offset by higher print, postage and fulfillment costs associated with increased print and proxy fulfillment revenue.

As a result, gross margin percentage associated with our Compliance revenue increased to 75% for the three months ended March 31, 2022, compared to 71% for the same period of 2021.

General and administrative

Compliance cost of revenue consists primarily of direct labor costs, warehousing, logistics, print production materials, postage, and amortization of capitalized software costs related to our disclosure software.

Overall cost of revenues decreased by $116,000, or 8%, and $278,000, or 10%, during the three and six-month periods ended June 30, 2022, respectively, as compared to the same periods of 2021.

Overall gross margin increased $203,000, or 5%, and $673,000, or 9%, during the three and six-month periods ended June 30, 2022, respectively, as compared to the same periods of the prior year.

Overall gross margin percentages increased to 77% during both the three and six months ended June 30, 2022, respectively, compared to 74% and 73% during the same periods of 2022.

Cost of revenues associated with Communications revenue decreased $120,000, or 14%, and $232,000, or 13% during the three and six-month periods ended June, 30, 2022, respectively, as compared to the same periods of 2021.

The decrease is primarily due to lower teleconferencing costs as well as lower distribution costs associated with our press release business.

Gross margin percentage from Communications revenue was 80% and 79% during the three and six-month periods ended June 30, 2022, respectively, as compared to 75% and 74% during the same periods of 2021.

The increase in gross margin percentage is associated with the decrease in costs noted above along with an increase in ACCESSWIRE revenue as a percentage of total Communications revenue.

Cost of revenue associated with our Compliance revenue remained flat for the three-month period ended June 30, 2022 as compared to the same period of 2021 and decreased $47,000, or 4%, during the six-month period ended June 30, 2022 as compared to the same period of 2021.

Gross margins from our Compliance revenue were 71% and 73% during the three and six-month periods ended June 30, 2022, respectively, as compared to 72% for both the same periods of 2021.

The decrease in gross margin percentage for the three-month period ended June 30, 2022 was due to a higher percentage of revenue coming from our lower margin print and proxy fulfillment services.

Operating Expenses

General and Administrative Expense

General and administrative expenses consist primarily of salaries, bonuses, stock-based compensation, insurance, fees for professional services, general corporate expenses (including bad debt expense) and facility and equipment expenses.

General and administrative expenses were $1,683,000 for the three months ended March 31, 2022, an increase of $279,000 or 20%, as compared to the same period of 2021.

The increase is primarily due to one-time executive recruiting fees of approximately $90,000, an increase in stock compensation expense of $86,000 and an increase in bad debt expense.

As a percentage of revenue, General and administrative expenses were 32% for the three months ended March 31, 2022, as compared to 28% for the same period of 2021.

Sales and marketing

General and administrative expenses were $1,563,000 and $3,246,000 during the three and six months ended June 30, 2022, an increase of $302,000, or 24%, and $581,000, or 22%, compared to the same periods of 2021.

The increase is driven by stock compensation expense as well as higher corporate costs associated with investments for future growth.

Additionally, for the six-month period ended June 30, 2022, the increase is due to one-time executive recruiting fee.

As a percentage of revenue, general and administrative expenses were 27% and 29% for the three and six-month periods ended June 30, 2022, respectively, compared to 22% and 25% for the same periods of 2021.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses, tradeshow expenses and other marketing expenses.

Sales and marketing expenses were $1,264,000 for the three months ended March 31, 2022, an increase of $190,000, or 18%, as compared to the same period of 2021.

This increase is directly related to our investment in our sales and marketing initiatives with an increase in headcount and costs associated with our digital marketing strategy.

As a percentage of revenue, Sales and marketing expenses were 24% for the three months ended March 31, 2022, as compared to 22% for the same period of 2021.

Product development

Sales and marketing expenses were $1,371,000 and $2,635,000 for the three and six-month periods ended June 30, 2022, respectively, an increase of $161,000, or 13%, and $351,000, or 15%, compared to the same periods ended June 30, 2021.

These increases are directly related to our investment in our sales and marketing initiatives with an increase in headcount, advertising and digital marketing spend.

As a percentage of revenue, sales and marketing expenses were 24% during both the three and six-month periods ended June 30, 2022, respectively, compared to 21% for both the same periods of the prior year.

Product Development Expenses

Product development expenses consist primarily of salaries, stock-based compensation, bonuses and licenses to develop new products and technology to complement and/or enhance Platform id .

Product development costs increased $26,000, or 10%, to $275,000 during the three months ended March 31, 2022, as compared to 2021.

The increase is due to an increase in headcount within the development team.

As a percentage of revenue, Product development expenses were 5% for the three months ended March 31, 2022 and 2021.

We recognized income tax expense of $174,000 for the three-month period ended March 31, 2022, compared to income tax expense of $163,000 during the same period of 2021.

For the three-month periods ended March 31, 2022 and 2021, the variance between our effective tax rate and the U.S.

statutory rate of 21% is primarily attributable to state income tax, partially offset by a benefit related to the Foreign Derived Intangible Income (“FDII”) deduction as well as foreign rate differentials for the three-month period ended March 31, 2021.

Product development expenses decreased $42,000, or 16%, and $16,000, or 3%, during the three and six-month periods ended June 30, 2022, compared to the same periods in 2021.

The decrease is due to fewer consultants used on development projects during the three-month period ended June 30, 2022.

During the three and six- month periods ended June 30, 2021, we capitalized $161,000 of costs related to the development of our newsroom product, which launched in July 2021.

No costs were capitalized during the three and six months ended June 30, 2022.

As a percentage of revenue, product development expenses were 4% for both the three and six-month periods ended June 30, 2022, respectively, compared to 4% and 5% during the same periods of 2021.

Depreciation and Amortization

Depreciation and amortization expenses decreased $5,000, or 3%, and $11,000, or 4%, during the three and six-month periods ended June 30, 2022, respectively, as compared to the same periods of 2021.

Interest income

Interest income represents interest income on deposit and money market accounts.

The increase in interest income during the three and six months ended June 30, 2022, as compared to the same periods of the prior year, is due to an increase in interest rates associated with the deposit and money market accounts.

Income tax expense

We recognized income tax expense of $327,000 and $501,000 during the three and six-month periods ended June 30, 2022, respectively, compared to $256,000 and $419,000 during the same periods of 2021.

The increase in income tax expense during the periods is due to an increase in our estimated effective tax rate for 2022.

For the three and six-month period ended June 30, 2022, the variance between the Company’s effective tax rate and the U.S.

statutory rate of 21% is primarily attributable to state income taxes and expense related to Global Intangible Low-Taxed Income inclusion, partially offset by foreign tax credits.

Liquidity and Capital Resources

As of March 31, 2022, we had $24,271,000 in cash and cash equivalents and $3,950,000 in net accounts receivable.

Current liabilities as of March 31, 2022, totaled $6,324,000 including our accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.

On March 31, 2022, our current assets exceeded our current liabilities by $22,776,000.

Effective October 3, 2021, we renewed our unsecured Line of Credit, which changed the interest rate from LIBOR plus 1.75% to SOFR (Secured Overnight Financing Rate) plus 1.75%.

As of June 30, 2022, we had $21,458,000 in cash and cash equivalents and $3,484,000 in net accounts receivable.

Current liabilities at June 30, 2022, totaled $6,048,000 including our accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.

At June 30, 2022, our current assets exceeded our current liabilities by $20,017,000.

Effective October 3, 2021, the Company renewed its unsecured Line of Credit, which changed the interest rate from LIBOR plus 1.75% to SOFR (Secured Overnight Financing Rate) plus 1.75%.

The amount of funds available for borrowing remained $3,000,000 and the term remained two years.

As of March 31, 2022, the interest rate was 1.91% and we did not owe any amounts on the Line of Credit.

Disclosure about Off-Balance Sheet Arrangements

We do not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.

As of June 30, 2022, the interest rate was 2.84% and the Company did not owe any amounts on the Line of Credit.

The following statements and certain statements made elsewhere in this document are based upon current expectations.

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While it is unknown how long current conditions resulting from the COVID-19 pandemic will last, including whether a worldwide resurgence will occur, variants of the virus will become more impactful or vaccines will be completely effective, we could experience a material disruption of our employees and operations, a decline in revenue, a decline in value of our assets, deterioration of our customer base and the inability of our customers to pay for subscriptions or services provided.

To date, we have seen both positive and negative impacts to our business.

Physical, in-person conferences have been delayed and in the past there have been delays in transactions processed by the Depository Trust Company and banks and brokers in our transfer agent business.

However, our ability to pivot and enhance our product offering with our virtual products generated increased revenue over the past two years.

To date, we have seen both positive and negative impacts to our business, however, our ability to pivot and enhance our product offering with our virtual products has generated increased revenue over the past two years.

Despite the short-term increase in revenue, the concentrations of our customer base within middle, small and micro-cap customers make it reasonably possible that we are vulnerable to the risk of a near-term negative impact related to the COVID-19 pandemic if a substantial portion of these customers are forced to scale back or cease operations.

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and are unable at this time to predict the continued impact that COVID-19 will have on our business, financial position, and operating results in future periods due to numerous uncertainties.

Overall, the demand for our platforms and services continues to be stable in a majority of the segments we serve.

The success of our Communications offering has been led by our ACCESSWIRE branded newswire, for which we believe we will continue to see increased demand throughout 2022 and beyond.

Overall, despite many uncertainties in the market regarding the economic outlook and the future of the COVID-19 pandemic, the demand for our platforms and services continues to be stable in a majority of the segments we serve.

The success of our Communications offering has been led by our ACCESSWIRE branded newswire, for which we believe we will continue to see stable to increased demand throughout 2022 and beyond.

Although we experienced a decline in demand for our webcasting and events business since 2020, we believe we are well-positioned in this market with our ability to hold both in-person and virtual events using both our conference software and webcasting products.

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Generating cash flows from operations.

We believe there is significant demand for our products around the world, led by our ACCESSWIRE newswire brand, as companies seek to find better platforms and tools to disseminate and communicate their messages in a more efficient and collaborative way.

We believe there is demand for our products around the world, led by our ACCESSWIRE newswire brand, as companies seek to find better platforms and tools to disseminate and communicate their messages in a more efficient and collaborative way.

We have invested and will continue to invest in our product sets, platforms and intellectual property development via internal development and acquisitions.

Acquisitions remain a core part of our strategy and we believe acquisitions are key to enhancing our overall offerings in the market and are necessary to keep our competitive advantages and facilitate the next round of growth that management believes it can achieve.

If we are successful in this effort, we believe we can further increase our market share and revenues per user as we move forward.

If we are successful in this effort, we believe we can further increase our market share as we move forward.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis