What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 74 added, 67 removed, 168 unchanged (46% of the section changed)

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Our corporate headquarters are located at One Glenwood Ave., Suite 1001, Raleigh, North Carolina, 27603.

We announce material financial information to our investors using our investor relations website, SEC filings, investor events, news and earnings releases, public conference calls, webcasts and social media.

We announce material financial information to our investors using our investor relations website (www.issuerdirect.com), SEC filings, investor events, news and earnings releases, public conference calls, webcasts and social media.

We use these channels to communicate with our investors and the public about our company, our products and services and other related matters.

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efficiently and effectively helps our customers manage their events when seeking to distribute their messaging to key constituents, investors, markets and regulatory systems around the globe.

consists of several related but distinct Communications and Compliance modules that companies utilize every quarter.

consists of several related but distinct Communications and Compliance modules that our customers utilize every quarter.

We disclose our revenues in the following two main categories:

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Over the next several years, we expect the Communications portion of our business to increase, both in terms of overall revenue and as compared to the Compliance portion of our business.

Therefore, we plan to continue to invest in our Platform id.

communications offerings as well as additional offerings that we intend to incorporate into our Communications product lineup.

Therefore, we plan to continue to invest in offerings we intend to incorporate into our Communications product lineup.

Within most of our target markets, customers require several individual services and/or software providers to meet their investor relations and communications needs.

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We work with a diverse customer base, which includes not only corporate issuers and private companies, but also investment banks, professional firms, such as investor relations and public relations firms, as well as the accounting and legal communities.

Our customers and their service providers utilize Platform id .

and related solutions from document creation all the way to dissemination to regulatory bodies, news outlets, financial platforms, and our customers’ shareholders.

Private companies primarily use our news distribution and webcasting products and services to disseminate their message globally.

’s intelligent subscription platform guides thousands of customers through the process of communicating their message to a large audience.

Our customers and their service providers utilize our platform and related solutions from document creation all the way to dissemination to regulatory bodies, news outlets, financial platforms, and our customers’ shareholders.

Private companies primarily use our news distribution, newsroom and webcasting products and services to disseminate their message globally.

We also work with several select stock exchanges by making available certain parts of our platform under agreements to integrate our offerings within their products.

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We believe these enhancements have helped lead to an increase in ACCESSWIRE revenues and customers each year compared to the prior year, a trend we expect to continue over the next several years.

We have also been able to maintain high gross margins while providing our customers flexible pricing, with options to pay per release or enter longer-term subscriptions for a designated package of releases.

We have also been able to maintain high gross margins while providing our customers flexible pricing, with options to pay per release or enter longer-term agreements for a designated package of releases.

Like other newswires globally, ACCESSWIRE is dependent upon several key partners for its news distribution.

Disruption in any of our partnerships could have a materially adverse impact on ACCESSWIRE and our overall business.

A natural expansion to our ACCESSWIRE and investor relations website business is a corporate Newsroom, which we began developing last year and brought to market during the middle of the third quarter of 2021.

A natural expansion to our ACCESSWIRE and investor relations website business is our corporate Newsroom, which we brought to market during the middle of the third quarter of 2021.

This product offering can be an add-on to any customer’s ACCESSWIRE or Platform id.

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Our webcasting and events business is comprised of our earnings call webcasting solutions and our virtual meeting and events software (such as annual meetings, deal/non-deal road shows, analyst days and shareholder days).

The demand for these products with a virtual component was at an all-time high for us in 2020 in large part due to the COVID-19 pandemic.

The demand for these products with a virtual component was at an all-time high for us in 2020, largely due to the COVID-19 pandemic.

The industry overall has begun to see a reduction in the number of virtual events, specifically annual meetings and deal/non-deal roadshows, as customers are relying on internal enterprise solutions or are returning to pre-pandemic travel and in-person meetings, reducing the need for a virtual component.

This has contributed to a decline in demand for our virtual components since the prior year.

Traditional earnings calls and webcasts are a highly competitive market with the majority of the business being driven from practitioners in investor relations and communications firms.

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During the first half of 2021, we released the first version of this real-time engagement and analytics dashboard to our customers subscribing to Platform id.

Our VisualWebcaster Platform (“VWP”) is a leading cloud-based webcast, webinar and virtual meeting platform that delivers live and on-demand streaming of events to audiences of all sizes.

Our VisualWebcaster Platform (“VWP”) is a cloud-based webcast, webinar and virtual meeting platform that delivers live and on-demand streaming of events to audiences of all sizes.

VWP allows customers to create, produce and deliver events, which we feel has significantly strengthened our webcasting product and Platform id.

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a platform of choice for investment banks, issuers and investors.

However, similar to our virtual events business, the transition of conferences back to in-person events has had an impact on our conference events software subscription business, as in-person events have either been smaller or delayed due to pandemic concerns.

Investor Relations Websites

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Our Inline XBRL (Inline Extensible Business Reporting Language or “iXBRL”) product now includes upgrades that meet mandated SEC disclosure requirements which became effective last year.

These requirements began impacting most of our customers on June 15, 2021, however, we had a number of customers previously file using our iXBRL upgrades.

These requirements began impacting most of our customers on June 15, 2021, however, we had a number of customers previously file using our iXBRL product.

Whistleblower Hotline

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Results of Operations

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

Comparison of results of operations for the three and nine months ended September 30, 2022 and 2021:

Three months ended

Six months ended

Nine months ended

September 30,

Revenue Streams

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Gross margin %

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.

Total revenue decreased by $185,000, or 3%, to $5,280,000 during the three-month period ended September 30, 2022, as compared to $5,465,000 during the same period of 2021.

Total revenue increased by $210,000, or 1%, to $16,375,000 during the nine-month period ended September 30, 2022, compared to $16,165,000 during the same period of 2021.

Communications revenue decreased $199,000, or 5%, and increased $178,000, or 2%, during the three and nine-month periods ended September 30, 2022, respectively, as compared to the same periods of 2021.

The decrease in revenue for the three-month period ended September 30, 2022, is attributed to a decrease in revenue from our webcasting and events revenue stream, partially due to less demand for our virtual products as conferences and meetings began to move back to in-person events, as well as timing of some events being pushed into the fourth quarter of 2022.

This decrease was partially offset by an increase in revenue from our ACCESSWIRE news brand.

ACCESSWIRE revenue for the three-month period ended September 30, 2022, increased approximately 6%, compared to the same period 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.

The increase in revenue for the nine months ended September 30, 2022 is due to a 13% increase in revenue from ACCESSWIRE as well as increased revenue from 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 the aforementioned reasons.

Communications revenue was 66% and 65% of total revenue during the three and nine months ended September 30, 2022, respectively, as compared to 67% and 64% during the same periods of the prior year.

Compliance revenue increased $14,000, or 1% and $32,000 or also 1% during the three and nine-month periods ended September 30, 2022, respectively, as compared to the same periods of 2021.

The increase in revenue is due primarily to an increase in revenue from print and proxy fulfillment services due to larger transactions during the periods.

Revenue from our transfer agent services also increased for the three month-period ended September 30, 2022 due to an increase in subscription fees, however, continues to remain lower on a year-to-date basis.

The increase in revenue from proxy fulfillment services was also partially offset by declines in disclosure services and software revenue and our legacy ARS services due to customer attrition.

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

Deferred Revenue

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%.

At September 30, 2022, our deferred revenue balance was $3,429,000, which we expect to recognize over the next twelve months, compared to $3,086,000 at December 31, 2021, an increase of 11%.

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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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.

Overall cost of revenues decreased by $143,000, or 11%, and $421,000, or 10%, during the three and nine-month periods ended September 30, 2022, respectively, as compared to the same periods of 2021.

Overall gross margin decreased $42,000, or 1%, and increased $631,000, or 5%, during the three and nine-month periods ended September 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 nine months ended September 30, 2022, respectively, compared to 75% and 74% during the same periods of 2021.

Cost of revenues associated with Communications revenue remained flat during the three-month period ended September 30, 2022, and decreased $229,000, or 9% during the nine months ended September 30, 2022, as compared to the same periods of 2021.

The decrease for the nine-month period ended September 30, 2022, is primarily due to lower teleconferencing costs and other costs associated with our events and webcasting business.

Gross margin percentages from Communications revenue was 77% and 78% during the three and nine-month periods ended September 30, 2022, respectively, as compared to 78% and 75% during the same periods of 2021.

The decrease in gross margin percentage for the three-month period ended September 30, 2022 is due to the decrease in revenue from our webcasting and events business, partially offset by an increase in ACCESSWIRE revenue as a percentage of total Communications revenue.

The increase in gross margin percentage during the nine-month period ended September 30, 2022 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 revenues associated with our Compliance revenue decreased $146,000, or 26% and $192,000, or 11% during the three and nine-month periods ended September 30, 2022, respectively, as compared to the same periods of 2021.

The decrease in Compliance cost of revenues is due to lower amortization expense associated with our disclosure software offset by an increase in print and postage costs associated with the increase in revenue from print and proxy and fulfillment services.

Gross margins percentages from our Compliance revenue were 77% and 74% during the three and nine-month periods ended September 30, 2022, respectively, as compared to 69% and 71% for the same periods of 2021.

The increase in gross margin percentage during both periods is primarily due to lower amortization expenses associated with our disclosure software, partially offset by an increase in postage and print and proxy fulfillment costs.

Operating Expenses

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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 $1,563,000 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.

General and administrative expenses were $1,657,000 and $4,903,000 during the three and nine months ended September 30, 2022, respectively, an increase of $399,000, or 32%, and $980,000, or 25%, respectively, compared to the same periods of 2021.

The increase is primarily driven by stock compensation expense, employee-related costs, recruiting fees and insurance expense associated with investments for future growth.

As a percentage of revenue, general and administrative expenses were 31% and 30% for the three and nine-month periods ended September 30, 2022, respectively, compared to 23% and 24% 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 $1,371,000 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.

Sales and marketing expenses were $1,231,000 and $3,866,000 for the three and nine-month periods ended September 30, 2022, respectively, a decrease of $118,000, or 9%, and an increase of $233,000, or 6%, compared to the same periods of the prior year.

The decrease during the three-month period ended September 30, 2022 is due to a decrease in commission expense, partially offset by an increase in advertising and digital marketing spend.

The increase during the nine-month period is directly related to our investment in our sales and marketing initiatives with an increase in headcount, advertising, digital marketing spend and system enhancements, partially offset by a decrease in commission expense.

As a percentage of revenue, sales and marketing expenses were 23% and 24% during the three and nine-month periods ended September 30, 2022, respectively, compared to 25% and 22% for the same periods of 2021.

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 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.

Product development expenses decreased $128,000, or 34%, and $144,000 or 16%, during the three and nine-month periods ended September 30, 2022, respectively, compared to the same periods in 2021.

The decrease is primarily due to fewer consultants used on development projects during the three and nine-month periods ended September 30, 2022.

During the three and nine-month periods ended September 30, 2021, we capitalized $54,000 and $161,000 of costs related to the development of our newsroom product, respectively, which launched in July 2021.

No costs were capitalized during the three and nine months ended September 30, 2022.

As a percentage of revenue, product development expenses were 5% and 4% for the three and nine-month periods ended September 30, 2022, respectively, compared to 7% 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.

Depreciation and amortization expenses decreased $7,000, or 5%, and $18,000, or 4%, during the three and nine-month periods ended September 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.

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

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

Other income for the three and nine months ended September 30, 2021, primarily represents a benefit of $366,000 related to the employee retention credit enacted under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

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.

We recognized income tax expense of $180,000 and $681,000 for the three and nine-month periods ended September 30, 2022, respectively, compared to $319,000 and $738,000 during the same periods of 2021.

The decrease in income tax expense compared to the prior year is primarily related to a decrease in pre-tax income.

For the three and nine-month periods ended September 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 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.

As of September 30, 2022, we had $21,812,000 in cash and cash equivalents and $3,062,000 in net accounts receivable.

Current liabilities at September 30, 2022, totaled $5,956,000 including our accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.

At September 30, 2022, our current assets exceeded our current liabilities by $20,010,000.

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

As of September 30, 2022, the interest rate was 4.22% 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, 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.

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.

Despite our ability to pivot and enhance our product offering, 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, 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.

COVID-19’s continuing impacts, the current military conflict in Ukraine, instability in global energy markets, global inflation and rapidly increasing interest rates have contributed to significant global economic uncertainty, disrupted global trade and supply chains, adversely impacted many industries and contributed to significant declines and volatility in financial markets.

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.

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We believe this allows us to not only deliver attractive solutions to the market but may also lead us into new opportunities during this changing and challenging environment.

The COVID-19 pandemic has caused shifts in demands for these products, and we are uncertain at this time if these shifts will continue and cannot make any assurances at this time that our products will be accepted by customers in the long-term.

The COVID-19 pandemic and global economic downturn has caused shifts in demands for these products, and we are uncertain at this time if these shifts will continue and cannot make any assurances at this time that our products will be accepted by customers in the long-term.

The transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth.

We will also continue to focus on the following key strategic initiatives during the remainder of 2022:

We will also continue to focus on the following key strategic initiatives during the remainder of 2022 and into 2023:

Expanding our Communications products and adapting to this changing industry,

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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