Blueprint
Issuer Direct Reports Second Quarter Financial Results
Total Revenue Increases 10% while Platform and Technology Revenue
Increases 19% Year Over Year to 59% of Total Revenue
MORRISVILLE, NC / ACCESSWIRE / August 2, 2018 / Issuer
Direct Corporation (NYSE American: ISDR) (the "Company"),
an industry-leading communications and compliance
company, today reported its operating results for the three months
ended June 30, 2018. The Company will host an investor conference
call today at 4:30 PM Eastern Time to discuss its operating
results.
Second Quarter 2018 and Recent Highlights:
●
Total revenue
was $3,799,000, a 10% increase from $3,443,000 in Q2 2017 and an 8%
increase from $3,530,000 in Q1 2018.
●
Platform and
Technology revenue increased 19% from Q2 2017 and 11% from Q1
2018.
●
Overall gross
margin was 73%, compared to 74% in Q2 2017 and 71% in Q1
2018.
●
Platform and
Technology gross margin was 81%, down from 85% in Q2 2017 and up
from 79% in Q1 2018.
●
GAAP earnings
per diluted share was $0.12 compared to $0.16 in Q2 2017 and $0.10
in Q1 2018.
●
The Company
generated cash flows from operations of $1,052,000 compared to
$810,000 in Q2 2017 and $537,000 in Q1 2018.
●
On July 3, 2018,
the Company completed the acquisition of Filing Services Canada
Inc.
●
On July 10,
2018, the Company's Board of Directors declared a quarterly cash
dividend of $0.05 per share, marking the twelfth straight quarter
of paying dividends.
Customer Count Metrics:
●
The Company had
1,996 Platform and Technology customers during Q2 2018, compared to
1,854 during Q2 2017 and 1,845 during Q1 2018.
●
The Company had
567 Services customers during Q2 2018, compared to 550 during Q2
2017 and 571 during Q1 2018.
Brian
Balbirnie, CEO of Issuer Direct, commented, "We had a solid second
quarter. Platform and Technology revenue grew 19% year over year,
to 59% of total revenue and EBITDA increased to $935,000 for the
quarter, and to $1.6 million year-to-date, or an increase of 11%
from the first half of 2017. On the balance sheet, cash grew to
$6.8 million and deferred revenue increased 44% since year-end to
$1.3 million. We are growing our pipeline in our Platform and
Technology business organically and are now also focused on
cross-selling to the approximately 300 new customers we added from
our recent acquisition of FSCwire."
Mr.
Balbirnie continued, "Looking ahead to the second half of the year,
we are focused on making the acquisition of FSCwire a success by
not only seamlessly integrating its customers with our ACCESSWIRE
business but also providing its customers the opportunity to
utilize Issuer Direct’s other core solutions. We are also
dedicated to growing our Platform and Technology business while
capitalizing on our wider newswire distribution to grow it further.
Finally, we continue to pursue growing our overall client count and
generating additional earnings growth."
Financial Results for the Second Quarter Ended June 30,
2018:
Total revenue for the second quarter of 2018 was $3,799,000
compared to $3,443,000 for the same period of 2017, an increase of
$356,000, or 10%. Revenue from customers obtained from our recent
acquisition of Interwest Transfer Company, Inc.
(“Interwest”) was approximately $381,000 during the
second quarter of 2018, of which $51,000 came from additional
subscriptions to our platform or services cross sold to those
customers.
Platform
and Technology revenue increased $356,000 or 19%, during the second
quarter of 2018, as compared to the second quarter of 2017. The
increase is due to an increase in revenue from our ACCESSWIRE®
offering, as we continue to penetrate the newswire market. We also
achieved revenue growth due to the addition of Interwest customers
as well as from increased subscriptions of Platform id. As a percentage of overall
revenue, Platform & Technology revenue increased to 59% of
total revenue for the three months ended June 30, 2018, compared to
55% for the same period of 2017. It is important to note, due to a
newly adopted accounting principle, $186,000 of revenue related to
the electronic dissemination of a customer’s annual report
that was previously reported as Service revenue has been
reclassified as Platform and Technology revenue for the three
months ended June 30, 2017.
Services
revenue was unchanged at $1,553,000 during the second quarter of
2018, as compared to the same period of 2017. Revenue from our
transfer agent services increased, not only as a result of the
acquisition of Interwest, but also due to an increase in corporate
directives and actions of our legacy Issuer Direct transfer agent
customers. These increases were offset by continued customer
attrition in our legacy ARS business as companies elect to leave
the service or transition to our electronic delivery alternative
(reflected as Platform and Technology revenue). Additionally,
revenue from our print and proxy distribution services decreased
due to one-time projects in the second quarter of 2017 that
didn’t occur during the second quarter of 2018. Revenue from
these services tends to fluctuate based on the needs of our
customers and is difficult to predict.
Gross
margin for the second quarter of 2018 was $2,769,000, or 73% of
revenue, compared to $2,534,000, or 74% of revenue, in the second
quarter of 2017. The decrease in gross margin percentage is
primarily due to an increase in amortization of capitalized
software associated with Platform id. of $116,000.
Operating
income was $595,000 for the three months ended June 30, 2018, as
compared to operating income of $733,000 during the same period of
the prior year. Despite the increase in gross margin dollars noted
above, the decrease in operating income is primarily attributable
to increases in general and administrative expenses, sales and
marketing expenses and product development expenses. General and
administrative expenses increased due to an increase in personnel
expenses as well as acquisition expenses associated with the
acquisition of Filing Services Canada Inc. Sales and marketing
expenses increased due an increase in headcount of 20% over the
same quarter of the prior year, in an effort to increase revenue
growth in 2018 and beyond. This was partially offset by a decrease
in tradeshow expenses. Product development expenses increased as a
result of less capitalization of costs and increased maintenance
costs required to support Platform id. During both the
three months ended June 30, 2018 and 2017, the Company recorded
income tax expense of $224,000. The higher effective tax rate for
the three months ended June 30, 2018, was due to additional expense
associated with a tax shortfall associated with stock-based
compensation, partially offset by a lower statutory
rate.
On a
GAAP basis, we generated net income of $366,000, or $0.12 per
diluted share, during the three months ended June 30, 2018,
compared to $493,000, or $0.16 per diluted share, during the same
period of 2017.
Second quarter EBITDA was $935,000, or 25% of revenue, compared to
$901,000, or 26% of revenue, during the second quarter of 2017.
Non-GAAP net income was $663,000, or $0.21 per diluted share,
compared to $590,000, or $0.20 per diluted share, during the second
quarter of 2017. The Non-GAAP results exclude amortization of
intangible assets, stock-based compensation, integration and
acquisition costs, unusual, non-recurring gains and losses, the
impact of discrete items impacting income tax expense and tax
impact of adjustments. Please refer to the tables below for the
calculation of EBITDA and the reconciliation of GAAP income and
earnings per share to Non-GAAP income and earnings per
share.
Financial Results for the Six Months Ended June 30,
2018:
Total revenue was $7,329,000 for the six months ended June 30,
2018, compared to $6,298,000 for the same period of 2017, an
increase of $1,031,000, or 16%. Revenue from customers obtained
from our recent acquisition of Interwest was approximately $799,000
during the first six months of 2018, of which $95,000 came from
additional subscriptions to our platform or services cross sold to
those customers.
Platform
and Technology revenue increased $767,000 or 22%, during the six
months ended June 30, 2018, as compared to the same period of the
prior year. As noted earlier, the increase is due to an increase in
revenue from our ACCESSWIRE offering, the addition of Interwest
customers, as well as, increased subscriptions of Platform
id. As a
percentage of overall revenue, Platform & Technology revenue
increased to 58% of total revenue for the six months ended June 30,
2018, compared to 50% for the same period of 2017. It is important
to note, due to a newly adopted accounting principle, $393,000 of
revenue related to the electronic dissemination of a
customer’s annual report that was previously reported as
Service revenue has been reclassified as Platform and Technology
revenue for the six months ended June 30, 2017.
Services
revenue increased $264,000, or 9% during the six months ended June
30, 2018, as compared to the same period of 2017. The increase is
due to an increase in revenue of our transfer agent services due to
the acquisition of Interwest, as well as, an increase in corporate
directives and actions of our legacy Issuer Direct transfer agent
customers. These increases were partially offset by declining
revenue of our legacy ARS business, as well as, a decline in
revenue from our compliance services as the market for these
services commoditizes and we continue to experience pricing
pressure and or customers elect to utilize our cloud-based
platform.
Gross
margin for the six months ended June 30, 2018 was $5,278,000, or
72% of total revenue, compared to $4,643,000, or 74% of revenue, in
the same period of 2017. The decrease in gross margin percentage is
primarily due to an increase in amortization of capitalized
software associated with Platform id. of $255,000.
Operating
income was $910,000 for the six months ended June 30, 2018, as
compared to operating income of $1,107,000 during the same period
of the prior year. The decrease in operating income is due to the
increase in general and administrative expenses, sales and
marketing expenses and product development expenses explained for
the three months ended June 30, 2018. During the six months ended
June 30, 2018 and 2017, the Company recorded income tax expense of
$214,000 and $264,000, respectively, resulting in a 24% effective
rate during both periods. Even though the statutory rate was higher
for the six months ended June 30, 2017, this was offset by an
excess tax benefit associated with stock-based
compensation.
On a
GAAP basis, we generated net income of $686,000, or $0.22 per
diluted share, during the six months ended June 30, 2018, compared
to $817,000, or $0.27 per diluted share, during the same period of
2017.
EBITDA for the six months ended June 30, 2018 was $1,590,000, or
22% of revenue, compared to $1,429,000, or 26% of revenue during
the same period of 2017. Non-GAAP net income was $1,121,000, or
$0.36 per diluted share, compared to $995,000, or $0.33 per diluted
share, during the same period of the prior year. The Non-GAAP
results exclude amortization of intangible assets, stock-based
compensation, integration and acquisition costs, unusual,
non-recurring gains and losses, the impact of discrete items
impacting income tax expense and tax impact of adjustments. Please
refer to the tables below for the calculation of EBITDA and the
reconciliation of GAAP income and earnings per share to Non-GAAP
income and earnings per share.
Non-GAAP Information
Certain
Non-GAAP financial measures are included in this press release. In
the calculation of these measures, the Company generally excludes
certain items, such as amortization and impairment of acquired
intangibles, non-cash stock-based compensation charges and unusual,
non-recurring gains and losses. The Company believes that excluding
such items provides investors and management with a representation
of the Company's core operating performance and with information
useful in assessing its prospects for the future and underlying
trends in the Company's operating expenditures and continuing
operations. Management uses such Non-GAAP measures to evaluate
financial results and manage operations. The release and the
attachments to this release provide a reconciliation of each of the
Non-GAAP measures referred to in this release to the most directly
comparable GAAP measure. The Non-GAAP financial measures are not
meant to be considered a substitute for the corresponding GAAP
financial statements and investors should evaluate them carefully.
These Non-GAAP financial measures may differ materially from the
Non-GAAP financial measures used by other companies.
CALCULATION OF EBITDA
($ in ‘000’s)
|
Three Months
ended June 30,
|
|
|
|
|
|
|
|
|
|
Net
income:
|
$366
|
$493
|
Adjustments:
|
|
|
Depreciation and
amortization
|
340
|
185
|
Interest expense
(income)
|
5
|
(1)
|
Income tax
expense
|
224
|
224
|
EBITDA:
|
$935
|
$901
|
|
Six Months
ended June 30,
|
|
|
|
|
|
|
|
|
|
Net
income:
|
$686
|
$817
|
Adjustments:
|
|
|
Depreciation and
amortization
|
680
|
350
|
Interest expense
(income)
|
10
|
(2)
|
Income tax
expense
|
214
|
264
|
EBITDA:
|
$1,590
|
$1,429
|
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP
MEASURES
($ in ‘000’s, except per share amounts)
|
Three Months
ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income:
|
$366
|
$0.12
|
$493
|
$0.16
|
Adjustments:
|
|
|
|
|
Amortization of
intangible assets (1)
|
125
|
0.04
|
83
|
0.03
|
Stock-based
compensation (2)
|
144
|
0.04
|
114
|
0.04
|
Integration and
acquisition costs (3)
|
41
|
0.01
|
—
|
—
|
Unusual,
non-recurring loss (4)
|
—
|
—
|
18
|
0.01
|
Tax impact of
adjustments (5)
|
(65)
|
(0.02)
|
(73)
|
(0.02)
|
Impact of discrete
items impacting income tax expense (6)
|
52
|
0.02
|
(45)
|
(0.02)
|
Non-GAAP net income
(7):
|
$663
|
$0.21
|
$590
|
$0.20
|
|
Six Months ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income:
|
$686
|
$0.22
|
$817
|
$0.27
|
Adjustments:
|
|
|
|
|
Amortization of
intangible assets (1)
|
250
|
0.08
|
166
|
0.05
|
Stock-based
compensation (2)
|
286
|
0.09
|
260
|
0.09
|
Integration and
acquisition costs (3)
|
41
|
0.02
|
—
|
—
|
Unusual,
non-recurring loss (4)
|
—
|
—
|
28
|
0.01
|
Tax impact of
adjustments (5)
|
(121)
|
(0.04)
|
(154)
|
(0.05)
|
Impact of discrete
items impacting income tax expense (6)
|
(21)
|
(0.01)
|
(122)
|
(0.04)
|
Non-GAAP net
income(7)::
|
$1,121
|
$0.36
|
$995
|
$0.33
|
1)
The adjustments
represent the amortization of intangible assets related to acquired
assets and companies.
2)
The adjustments
represent stock-based compensation expense related to awards of
stock options, restricted stock units or common stock in exchange
for services. Although the Company expects to continue to award
stock to employees or in exchange for services, the amount of
stock-based compensation is excluded as it is subject to change as
a result of one-time or non-recurring projects.
3)
The adjustments
represent legal and accounting fees and other non-recurring costs
in connection with the acquisition of Filing Services Canada
Inc.
4)
The adjustment
removes gains or losses during the period that are unusual,
non-recurring or infrequent in nature and don’t relate to the
core business of the Company. For the three and six months ended
June 30, 2017, these losses include a loss on the change in fair
value of stock received, in lieu of cash, related to the settlement
of a receivable.
5)
This adjustment
gives effect to the tax impact of all non-GAAP adjustments at the
current Federal rate of 21% for the three and six months ended June
30, 2018 and 34% for the three and six months ended June 30,
2017.
6)
The adjustment
eliminates discrete items impacting income tax expense. For the
three and six months ended June 30, 2018 and 2017, the discrete
items relate to either the shortfall or excess stock-based
compensation expense or benefit recognized in income tax expense
during the period.
7)
Non-GAAP net income
for the three and six months ended June 30, 2018, reflects the
calculation of income tax computed using the current federal
statutory rate of 21%. Had the federal statutory rate remained at
34% for 2018, non-GAAP net income for the three and six months
ended June 30, 2018, would have been lower by approximately
$77,000, or $0.02 per diluted share, and $117,000, or $0.04 per
diluted share, respectively.
Conference Call Information
To
participate in this event, dial approximately 5 to 10 minutes
before the beginning of the call.
International:
201-689-8040
LiveWebcast:
http://www.investorcalendar.com/event/35666
Conference Call Replay Information
The
replay will be available beginning approximately 1 hour after the
completion of the live event, ending at midnight eastern on August
16, 2018.
International:
919-882-2331
Web
replay:
http://www.issuerdirect.com/earnings-calls-and-scripts/
About Issuer Direct Corporation
Issuer
Direct® is an
industry-leading communications and compliance company
focusing on the needs of corporate issuers. Issuer Direct's
principal platform, Platform id., empowers users by
thoughtfully integrating the most relevant tools, technologies, and
services, thus eliminating the complexity associated with producing
and distributing financial and business communications.
Headquartered in RTP, NC, Issuer Direct serves more than 2,500
public and private companies in more than 18 countries. For more
information, please visit www.issuerdirect.com.
Learn
more about Issuer Direct today: Investor Tear
Sheet.
Forward-Looking Statements
This
press release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (which Sections were adopted as part of the
Private Securities Litigation Reform Act of 1995). Statements
preceded by, followed by or that otherwise include the words
"believe," "anticipate," "estimate," "expect," "intend," "plan,"
"project," "prospects," "outlook," and similar words or
expressions, or future or conditional verbs, such as "will,"
"should," "would," "may," and "could," are generally
forward-looking in nature and not historical facts. These
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the Company's
actual results, performance, or achievements to be materially
different from any anticipated results, performance, or
achievements. The Company disclaims any intention to, and
undertakes no obligation to, revise any forward-looking statements,
whether as a result of new information, a future event, or
otherwise. For additional risks and uncertainties that could impact
the Company's forward-looking statements, please see the Company's
Annual Report on Form 10-K/A for the year ended December 31, 2017,
including but not limited to the discussion under "Risk Factors"
therein, which the Company will file with the SEC and which may be
viewed at http://www.sec.gov/.
For Further Information:
Issuer
Direct Corporation
Brian
R. Balbirnie
(919)-481-4000
brian.balbirnie@issuerdirect.com
Hayden
IR
Brett
Maas
(646)-536-7331
brett@haydenir.com
Hayden
IR
James
Carbonara
(646)-755-7412
james@haydenir.com
SOURCE: Issuer Direct Corporation
ISSUER DIRECT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share and per share amounts)
|
|
|
|
|
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$6,834
|
$4,917
|
Accounts
receivable (net of allowance for doubtful accounts of $428 and
$425, respectively)
|
1,642
|
1,275
|
Income tax
receivable
|
534
|
725
|
Other current
assets
|
189
|
193
|
Total current
assets
|
9,199
|
7,110
|
Capitalized
software (net of accumulated amortization of $898 and $497,
respectively)
|
2,348
|
2,749
|
Fixed assets
(net of accumulated amortization of $417 and $388,
respectively)
|
155
|
145
|
Other long-term
assets
|
17
|
18
|
Goodwill
|
4,070
|
4,070
|
Intangible
assets (net of accumulated amortization of $3,949 and $3,699,
respectively)
|
2,608
|
2,858
|
Total assets
|
$18,397
|
$16,950
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$356
|
$666
|
Accrued
expenses
|
653
|
613
|
Current portion
of note payable (See Note 3)
|
288
|
288
|
Income taxes
payable
|
68
|
65
|
Deferred
revenue
|
1,273
|
887
|
Total current
liabilities
|
2,638
|
2,519
|
Note payable
– long-term (net of discount of $57 and $70, respectively)
(See Note 3)
|
583
|
570
|
Deferred income
tax liability
|
565
|
573
|
Other long-term
liabilities
|
56
|
77
|
Total liabilities
|
3,842
|
3,739
|
Commitments and
contingencies
|
|
|
Stockholders'
equity:
|
|
|
Preferred stock,
$0.001 par value, 1,000,000 shares authorized, no shares issued and
outstanding as of June 30, 2018 and December 31, 2017,
respectively.
|
—
|
—
|
Common stock
$0.001 par value, 20,000,000 shares authorized, 3,103,370 and
3,014,494 shares issued and outstanding as of June 30, 2018 and
December 31, 2017, respectively.
|
3
|
3
|
Additional
paid-in capital
|
11,396
|
10,400
|
Other
accumulated comprehensive income
|
1
|
34
|
Retained
earnings
|
3,155
|
2,774
|
Total stockholders' equity
|
14,555
|
13,211
|
Total liabilities and stockholders’ equity
|
$18,397
|
$16,950
|
ISSUER DIRECT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in
thousands, except share and per share amounts)
|
For the Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$3,799
|
$3,443
|
$7,329
|
$6,298
|
Cost of
revenues
|
1,030
|
909
|
2,051
|
1,655
|
Gross
profit
|
2,769
|
2,534
|
5,278
|
4,643
|
Operating costs and
expenses:
|
|
|
|
|
General and
administrative
|
948
|
855
|
1,952
|
1,767
|
Sales and marketing
expenses
|
799
|
714
|
1,549
|
1,307
|
Product
development
|
285
|
129
|
583
|
254
|
Depreciation and
amortization
|
142
|
103
|
284
|
208
|
Total operating
costs and expenses
|
2,174
|
1,801
|
4,368
|
3,536
|
Operating
income
|
595
|
733
|
910
|
1,107
|
Other income
(expense):
|
|
|
|
|
Other
expense
|
—
|
(17)
|
—
|
(28)
|
Interest income
(expense), net
|
(5)
|
1
|
(10)
|
2
|
Total other
expense
|
(5)
|
(16)
|
(10)
|
(26)
|
Net income before
income taxes
|
590
|
717
|
900
|
1,081
|
Income tax
expense
|
224
|
224
|
214
|
264
|
Net
income
|
$366
|
$493
|
$686
|
$817
|
Income per share
– basic
|
$0.12
|
$0.17
|
$0.22
|
$0.28
|
Income per share
– fully diluted
|
$0.12
|
$0.16
|
$0.22
|
$0.27
|
Weighted average
number of common shares outstanding – basic
|
3,074
|
2,940
|
3,055
|
2,920
|
Weighted average
number of common shares outstanding – fully
diluted
|
3,137
|
3,021
|
3,123
|
3,002
|
ISSUER DIRECT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in
thousands)
|
For the Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$366
|
$493
|
$686
|
$817
|
Foreign currency
translation adjustment
|
(76)
|
27
|
(33)
|
34
|
Comprehensive
income
|
$290
|
$520
|
$653
|
$851
|
ISSUER DIRECT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in
thousands)
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
Net
income
|
$686
|
$817
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
680
|
350
|
Bad debt
expense
|
93
|
87
|
Deferred income
taxes
|
(17)
|
(5)
|
Non-cash
interest expense (See Note 3)
|
13
|
—
|
Stock-based
compensation expense
|
286
|
260
|
Changes in
operating assets and liabilities:
|
|
|
Decrease
(increase) in accounts receivable
|
(467)
|
(116)
|
Decrease
(increase) in deposits and prepaid assets
|
194
|
(171)
|
Increase
(decrease) in accounts payable
|
(304)
|
293
|
Increase
(decrease) in accrued expenses
|
31
|
(255)
|
Increase
(decrease) in deferred revenue
|
394
|
197
|
Net cash
provided by operating activities
|
1,589
|
1,457
|
|
|
|
Cash flows from investing activities:
|
|
|
Capitalized
software
|
—
|
(624)
|
Purchase of
fixed assets
|
(39)
|
(6)
|
Net cash used in
investing activities
|
(39)
|
(630)
|
|
|
|
Cash flows from financing activities:
|
|
|
Proceeds from
exercise of stock options, net of income taxes
|
709
|
214
|
Payment of
dividends
|
(305)
|
(291)
|
Net cash
provided by (used in) financing activities
|
404
|
(77)
|
|
|
|
Net change in
cash
|
1,954
|
750
|
Cash –
beginning
|
4,917
|
5,339
|
Currency
translation adjustment
|
(37)
|
36
|
Cash –
ending
|
$6,834
|
$6,125
|
|
|
|
Supplemental disclosures:
|
|
|
Cash paid for
income taxes
|
$31
|
$437
|
Non-cash
activities:
|
|
|
Stock-based
compensation - capitalized software
|
$—
|
$56
|