ACCESS Newswire - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 showed modest top-line growth with total revenue of $5.83M, up 1% year over year and up 3% sequentially; GAAP results were impacted by a $14.15M non-cash tradename impairment tied to the rebrand, while non-GAAP EPS was $0.21.
• The company sold its compliance business for $12.5M on Feb 28, 2025; proceeds reduced bank debt to about $3.3M, sharpening focus on the higher-growth communications subscription model and positioning for margin improvement.
• Subscriptions now represent approximately 50% of Q4 revenue vs ~30% in the prior year, with ARR and customer counts rising; management guided to gross margin expansion of 2–4 percentage points over the next 12 months and long-term EBITDA margins of 22–23%.
• Versus S&P Global consensus, Q4 non-GAAP EPS of $0.21 missed $0.23 and revenue of $5.83M missed $7.38M; the narrative pivot centers on subscription mix-shift, AI-enabled efficiencies, and debt reduction as stock-reaction catalysts going forward [Values retrieved from S&P Global].

What Went Well and What Went Wrong

What Went Well

• Subscription momentum and mix-shift: “Our subscription business now accounts for approximately 50% of our overall revenues for the quarter compared to just 30% in the prior year”. Subscription customers increased to 1,124 and ARR rose to 10,735 (units as presented).
• Margin and cash flow progress (non-GAAP): Q4 EBITDA of $770K (13% of revenue) and adjusted EBITDA of $871K (15% of revenue); operating cash flow from continuing operations improved to $353K vs $(236)K in Q4 2023.
• Strategic focus and deleveraging: Sale of the compliance business for $12.5M with ~$12M applied to debt, reducing bank debt to ~$3.3M and enabling a pure-play communications subscription strategy.

What Went Wrong

• GAAP loss driven by impairment: Operating loss of $(14.32)M in Q4 2024 primarily due to a $14.15M impairment of the Newswire tradename tied to the rebrand; GAAP net loss from continuing operations was $(10.95)M, $(2.85) diluted per share.
• Full-year decline and volume headwinds: FY 2024 revenue fell 6% to $23.06M, largely from lower volume in the formerly branded Newswire business; gross margin dipped to 76% from 77%.
• Miss vs consensus: Q4 revenue ($5.83M) and non-GAAP EPS ($0.21) missed S&P Global consensus of $7.38M and $0.23, respectively, likely reflecting legacy volume pressure and impairment-related noise in GAAP optics [Values retrieved from S&P Global].

Transcript

Michael Creet (Senior News Desk Editor)

Ladies and gentlemen, thank you for standing by and welcome to the ACCESS Newswire's fourth quarter and year-ended 2024 earnings conference call. My name is Michael Creet, and I am not only excited to be your host for today's call, but I'm also proud to be going on my ninth year here at ACCESS Newswire as a senior news desk editor. Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of Section 21(e) of the Securities Exchange Act of 1934 as amended and are subject to the safe harbor created thereby. Actual results may differ materially due to a variety of risks, uncertainties, and other factors.

For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this afternoon and filed with the SEC on Form 8-K, as well as the company's reports filed periodically with the SEC, including our annual report on Form 10-K for the year ended December 31, 2024. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. We will also be discussing the recent sale of our compliance business and urge you to read the Form 8-K filed with the SEC on March 6, 2025, regarding the transaction and review the pro forma financial statements contained therein. Finally, during the course of today's call, we will refer to certain non-GAAP financial measures.

Management believes the presentation of non-GAAP information provides useful supplementary data concerning our ongoing operations and is provided for informational purposes only. Reconciliation of the non-GAAP to GAAP financial measures and certain additional information are also included in today's press release. With that said, it is my pleasure to introduce the company's Founder and Chief Executive Officer, Brian Balbirnie, and our Chief Financial Officer, Steve Knerr. Brian.

Brian Balbirnie (President and CEO)

Thanks, Michael. A pleasure to have you do this for us today. I also wanted to thank you for representing our brand, taking care of our customers the way you do. Your editorial prowess embodies everything we stand for. It's that perfection that keeps our customer coming back. Keep up the good work. I don't care what the team says. Your golf game's amazing. All joking aside, good morning, everyone. This is a treat. For the first time in 12 years, we're doing our earnings conference call pre-market on a Tuesday, something we plan to continue to do going forward. Thank you for joining us today to discuss our fourth quarter 2024 and year-end results. Our press release, which is accessible in our newsroom, was released pre-market this morning and provides key takeaways on our performance for the quarter and 12-month period ended December 31.

By the way, the new newsroom product that we released is also a recent upgrade to our subscription. On your reference for today's call, it is on your screen. You can visit newsroom.accessnewswire.com for reference during today's call. Despite the 1% increase in revenues for the quarter, we've continued to make substantial progress in our transition we have spoken about for the last few months. This recurring revenue model of communications-focused subscriptions is growing and becoming sticky in our install base. For the three-month ended 12/31, new subscriptions sold averaged $12,000 in Q4, while on our way to get to the $14,000 guided by the end of the year. Additionally, our subscription business now accounts for approximately 50% of our overall revenues for the quarter, compared to just 30% in the prior year. Let's not get ahead of ourselves today on the call. I'm excited, as you can tell.

There is a lot to talk about. We are going to get to Steven in just a second. As a reminder, though, today's prepared remarks, earnings, and annual report reflect the discontinued operations of our compliance business that we sold on February 28. GAAP accounting requires us to classify the assets as held for sale, and as such, all reported financials are in a go-forward business of our communications product lines. We have spent a good bit of time discussing the possibilities of this in prior calls, and we are pleased to have closed the transaction with Siris and Equiniti on February 28, 2024.

The proceeds of the sale were applied to the debt on our balance sheet, thus reducing the debt by 78% or $12 million to just $3.3 million, a balance we are confident we can manage and pay down at a sensible pace along with investing in our business and top-line growth, resulting in a debt-free, growing, profitable enterprise. Later in the call, we will discuss the additional KPIs we are tracking for this business in the quarter going forward. As we round out our go-to-market offerings for 2025, we are going to continue to focus on retaining as well as selling our subscription platforms to our current install base and new prospects globally. Our rebrand to ACCESS Newswire has afforded us the ability to have a cleaner go-to-market strategy and a set of value-based subscriptions for both public relations and investor relations professionals under one single platform.

There's a lot to talk about today, so I'll turn the call over to Steve to cover the quarter and year-end results. Steve.

Steve Knerr (CFO)

Thank you, Brian. Good morning, everyone. As Brian mentioned, 2025 has been a very busy and productive year for us so far. I can say that I am very excited for this next chapter of the company, more so than I have been in my 11 and a half years here. There is plenty to talk about for 2025. First, we have to recap the finish of 2024 for what is now ACCESS Newswire. As Brian noted, and as you will see in our 10K once it is filed later today, our compliance business is reported as discontinued operations. We actively began the process of marketing the sale of our compliance business prior to year-end.

Thus, according to GAAP, we are required to classify those assets as held for sale, which also requires them to be reported as discontinued operations on the balance sheet and statements of operations and cash flows. As a result, we will focus the conversation today and in our 10K on the continuing operations of the communications business that Brian described earlier. Revenue for the fourth quarter of 2024 was $5.8 million, a $64,000 or 1% increase over Q4 of 2023. For the full year of 2024, total revenue was $23.1 million, a 6% decrease from the full year of 2023. The decrease in revenue is primarily related to a decrease in revenue from our formerly branded newswire business due to lower volume. Revenue from our investor relations webcasting and websites was also down slightly for the full year.

Gross margin percentage for Q4 2024 was 75%, which is consistent with Q4 2023. For the full year ended December 31, 2024, gross margin percentage was 76% compared to 77% for 2023. The reason for the decrease in gross margin percentage was due to the decline in revenue as cost of revenues for both periods were consistent. Operating expenses for Q4 2024 increased $13.3 million compared to Q4 2023 and increased $12.1 million compared to the full year of 2023. However, these increases were primarily due to an impairment loss of $14.15 million associated with the newswire trade name. As a result of our rebrand to ACCESS Newswire, management determined the remaining life of the trade name was only five years compared to the original useful life of 15 years. Absent the impairment, operating expenses decreased $900,000 and $2 million for those same periods, respectively.

The decrease is due to lower corporate and sales and marketing department headcount, stock compensation, advertising expense, and one-time non-recurring expenses, including acquisition and integration expenses. As we move forward with only our communications business, we will be aggressively reviewing costs to ensure we are operating in the most cost-efficient manner. One thing that is important to keep in mind as you review the historical results of the continuing operations is that they include all corporate overheads, sales and marketing, and shared costs between the compliance and communications businesses. As for GAAP, any allocated expenses are to remain in continuing operations. Discontinued operations only includes those costs that are directly related to the compliance business, which is mostly in cost of revenue.

As part of the sale of the compliance business, we entered into a TSA with the buyer to continue performing certain services to support the operations of the purchased assets. Thus, there are some shared costs that will continue for a short period of time until all of the services are transitioned to the buyer. These include certain accounting, IT, operating, and facility expenses. Moving back to the income statement, on a GAAP basis, we reported a net loss from continuing operations of $10.9 million or $2.85 per diluted share during Q4 of 2024, compared to a net loss from continuing operations of $1.5 million or $0.40 per diluted share during Q4 of 2023.

For the full year of 2024, net loss from continuing operations was $13.3 million or $3.47 per diluted share, compared to a net loss from continuing operations of $3.4 million or $0.90 per diluted share for the full year of 2023. The increase in the loss from continuing operations for both periods is primarily due to the impairment loss I noted earlier. Looking to some non-GAAP metrics, non-GAAP net income from continuing operations was $819,000 or $0.21 per diluted share and $791,000, also $0.21 per diluted share for Q4 and the full year of 2024, respectively. Compared to a non-GAAP loss from continuing operations of $275,000 or $0.07 per diluted share during Q4 2023, the non-GAAP income from continuing operations of $538,000 or $0.14 per diluted share for the full year of 2023.

We generated EBITDA of $770,000 or 13% of revenue and $840,000 or 4% of revenue for Q4 and the full year of 2024, respectively, compared to EBITDA of negative $834,000 or negative 14% of revenue and negative $342,000 or negative 1% of revenue during the same periods of 2023. Adjusted EBITDA was $871,000 or 15% of revenue and $1.9 million or 8% of revenue for Q4 and the full year of 2024, compared to adjusted EBITDA of negative $27,000 or just under 1% of revenue and $2 million or 8% of revenue for the same periods of 2023. 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, remained relatively consistent as of December 31, 2024, as it was at December 31, 2023.

With the transition to our new monthly subscriptions, we will expect this number to decrease going forward. We ended the quarter with $4.1 million of cash on hand compared to $5.7 million at the end of 2023. A significant portion of this cash was used for debt repayments. Cash provided by continuing operations was $353,000 and $400,000 for Q4 and the full year of 2024, compared to net cash used by continuing operations of $236,000 and $741,000 for the same periods of the prior year. The increase is due to lower expenses and increased operational efficiencies. With that, I will now turn it back over to Brian, who will talk a little more about our go-forward operations, subscriptions, new offerings, and other exciting things to come. Brian?

Brian Balbirnie (President and CEO)

Thank you, Steve. I know there's a lot going on in our financials for the quarter and year-end, as well as today's prepared remarks. The compliance business had revenues from customers either in subscription form or not, as well as expenses attributable to the cost of delivering those offerings. These impacts have recast our entire financial presentation, as we mentioned previously. We believe that once we report Q1 2025 results, we will be through most of all the accounting treatments necessary to finish the discontinued operations, goodwill as well as bad debt cleanup as a result of the compliance and go-forward business. Moving forward, we are emerging a very focused, lean communications business led by our subscription platform and our fast-growing news distribution brand.

Our new name, our new strategy, and compelling go-to-market plans are setting us up to emerge in 2025 as a leader in the space, illustrating growth in our customer counts, revenues, gross margins, and earnings power, as well as continued cash flow from operations. As Steve said, we are extremely excited to be headed in this direction and know that we have a bit more work to do, both internally and with our products, as well as shrewd investments in our business to continue this growth and more in 2025. To address this, we have a very clear capital allocation strategy. We are investing with a focus on expanding our omnichannel capabilities that fulfills our customer-first strategy of "We Love You More." This is supported by research and recent transactions in the market.

We firmly believe to maximize shareholder value, we have to invest for growth in our product, industry verticals, and further our brand development. This investment over the next year, along with our commitment to pay down debt at a faster pace than the amortization calls for, is what our focus is going to be this year. Opportunistically, we will keep a careful watch on the overall market cap and share price, and if necessary, deploy capital at a later point to repurchase shares. Our main focus is returning the business to a high-growth, debt-free enterprise. The share price will correct itself on these fundamental principles if the stakeholders understand the business, the strategy, and the market. It's my job to discuss these things with everyone, and we will do this so much cleaner going forward without the compliance business.

When we think about investment, I think it's important to point out to you what our product portfolio consists of on a go-forward basis. This will be helpful to our stakeholders to understand our offerings and market opportunity. These are the highest-margin products from our combined portfolio prior to this disposal of our compliance business: news distribution, media monitoring, media database, pitching, corporate newsrooms, PR optimizer, investor relations websites, quarterly earnings calls, event platforms for investor meetings and annual meetings, and our incident management system or whistleblower services. These 10 products are part of what we refer to today as ACCESS PR, ACCESS IR, and our all-ACCESS subscription models. Customers can also purchase some of these products on a pay-as-you-go way, whereby they can try the services, and we will convert them into subscriptions at a later date for a long-term ARR value.

We anticipate over the next couple of years, we will drive the majority of our revenues from recurring subscriptions. Our goal is to reach 75% by the end of next year, ultimately ending up close to the 80/20 rule thereafter. That said, at the end of 2024, about half or $12 million of our overall revenues came from our subscription business. In order to achieve this goal, we will continue to commercialize and invest in our product platform, as we discussed earlier, their features, and our brand. In the opening remarks, I commented on the ARR increases we saw in Q4. I would like to further break down what made up these results. To end the year, we ended up with 12,349 customers compared to 11,924, a 4% increase over the prior year, also an increase over the prior quarter.

We had 71 net new subscriptions sold in the fourth quarter. We ended the year with 92% retention in our subscription business compared to the prior quarter. During the quarter, we began to see customer subscriber mix begin to change, whereas previously we saw 30% of the customer subscriptions coming from new, we're now seeing 70% of our new subscriptions in Q4 come from new customers. This is a good pivot for us as we begin to scale our subscription model. We still continue to believe that the market is interested in our IR and PR subscription products, that we still have a long horizon in our product roadmap and both features and functionality to come. This will result in further stickiness and uplifts in our ARR.

These planned upgrades, as well as feature additions, will help us get to what we were guided last year, whereas we believe the ACCESS subscription plan can grow to $14,000 a year and beyond. With that said, we will be looking to move many of our smaller spend customers to auto-renewing value price plans. These plans will help us further drive insights to recurring from reoccurring sales, another metric we believe at some point will be beneficial to our stakeholders. Speaking of driving further value to our customers and our platform, I think every day we hear some story about what's going on with AI, and we get it. AI is at the forefront of most industries, innovating the way in which things get done. For us, we want to be deliberate and thoughtful in three distinct ways. One, product innovation.

An example would be with our own customer stories, whereby we provide the right tonality measurements, tools that give our customers the option to improve messaging, tone, and enhance their copy with supported SEO validation and channel targeting. Second, internal efficiencies. How can we use AI to filter the tens of thousands of articles that come into us each quarter? It is a speed-to-wire concept that we have, meaning can we generate automations that AI will allow our editorial teams to quickly verify content, contacts, and compliance in seconds rather than minutes? We can handle scale and distribution to tens of thousands of distribution points. This gives us the agility and the newswire volume flywheel, whereby we can handle growth at a more fixed cost scale, improving gross margins and ultimately providing scale to further earnings power. Lastly, product parity.

We won't ignore the competitive landscape, and we always need to ensure that our product has the parity in the market feature sets that are equal to everybody else's. Knowing that, our focus on innovation and efficiencies is paramount this year. This is where we believe all parties, customers, employees, and stakeholders will benefit from our award-winning product mix. If I were to reflect on the quarter for just a minute, the activities included extensive work on our rebrand, our preliminary work, and asset sale of our compliance business. Completing these two initiatives were of paramount importance to our go-forward strategy. Perhaps only negative in all this work is that being a small company, these undertakings took up so much of our time and focus for our leadership team.

However, this culminates with a sense of excitement to move forward and beyond these initiatives towards our number one goal of our customer and top-line revenue growth. In closing, last quarter, we talked about industry volumes, and I'm happy to report that we've maintained our market position of approximately 20% of news volumes. We do anticipate early in 2025, we will be coming back to you to tell you the advancements here and be overtaking the number three position and continue to be the fastest-growing news distribution platform over the past four years. I can't believe it, but it's almost the end of the quarter, so I can't wait to be back here again talking to you on May 13th for our Q1 earnings. As always, it was nice spending time with you today and discussing the results of our fourth quarter.

Operator, can we please go ahead with the Q&A portion of the call?

Operator (participant)

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, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we pull for any questions. Your first question is coming from Mike Grondahl with Northland Securities. Please pose your question. Your line is live.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Hey, good morning, Brian and Steve. Clearly, a lot going on the last six months. What would you characterize as really your top two or three priorities for 2025?

Brian Balbirnie (President and CEO)

Good morning, Mike. Yeah, there has been a lot going on for the last several months. You're absolutely right. Look, I think that we used to say this in prior years, and it served us well when we were focused in this manner. The top priority for us from a growth perspective is net new customers, is continuing to build our brand, to put ourselves in a position to grow customer numbers, both folks using our platform and subscribing to our platform is our number one focus as a company. The second really is more of a financial focus of Steve and myself is to really challenge the management teams and ourselves to continue to push the envelope on our capital allocation strategy to generate additional cash from operations that we can then accelerate debt repayment while investing in the business. That is number two.

Number three is really the product platform and roadmap, where we're headed, what we're building, listening to our customer, and continuing to theme out this "We Love You More" concept to our customer base globally, get their feedback, iterate our platforms, continually make them better. Our dev and product teams are very excited about some new feature enhancements that are very audacious that they want to push out to the end of this year that will really innovate and separate us from a competitive landscape perspective. Those are the three.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Got it. And then kind of as a follow-up, a two-part question, you listed out 10 products to help you drive the subscription mix higher. What two or three products really are going to help the most with that effort? And then secondly, how would you describe your go-to-market strategy to drive that subscription mix higher?

Brian Balbirnie (President and CEO)

Yeah, I think it's important to point out, and what we wanted to do today because of all the noise of compliance and the change of our business strategy and our go-to-market is to really highlight those products individually so folks understood what the drivers are. I think the number one product for us still and likely will be for several years is going to be our news distribution element. We believe we've got a very compelling architecture, customer journey platform, and omnichannel system that can help us drive growth there. I said in the closing remarks there that we're really close to the third largest newswire. We don't have aspirations to be the third. We want to be number two and fight our way to number one at some point in volumes. That is the driving reason.

To be fair, one of the reasons why we rebranded ourselves is ACCESS Newswire. Folks know us as that brand. We're in the dateline of tens of thousands of articles that go out every single quarter with our name on it. That is the driver. It's kind of the hook to bring the customer into us, and it is our job then to sell them these ecosystems or platforms, if you will, both for IR and PR. I think that as everybody knows, we come from a background of investor relations and compliance and the whole bit. To be fair, the total addressable market for us in the public relations side and the marketing PR side of the business is infinitely larger, and we've really got to focus there. That is why we separated those products in different subscriptions.

We believe that the ACCESS PR subscription product will be kind of the second culmination of volume and growth for us. That includes distribution, monitoring, database, and pitching. We'll add elements to that as time goes on, but that's really going to be the number two driver for us.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Got it. How would you describe your go-to-market strategy today?

Brian Balbirnie (President and CEO)

Yeah, I think it's not really much different, but the audience members may be, right? It's the one platform, the one check, the one contact is extremely important to the market. When we examine the point solution providers, they're all grappling trying to figure out ways to add more solutions to their platform to keep their customers sticky. If we examine the quadrant of folks that we compete with most, they still have fragmented platforms. That efficiency gain is really a top one or two for our customer decision-making process. The second, I think, to be fair, in the SMB kind of small microcap spaces, price is a driver. We've done really good at bringing efficiencies out of our systems and cost controlling to be able to deliver a solution at or below what the incumbent is today and provide a significant amount of value to that.

I think the underpinning of some of this is, and we've talked about this in prior calls, as we built scale in the system and fixed cost to deliver, this is now becoming more of a subscription product that allows a customer to kind of unlock the value of everything, use the entire platform for a fixed fee. That is something that's never been done in the market before. There's always been incremental charges for press releases, incremental charges for pitching and monitoring, changes, support. It goes on and on. Again, back to this one kind of ecosystem, customers are now recognizing the fact that we have not only kind of turned the industry upside down in some ways with this platform fixed price, but also giving them more tools than they can get from any single platform.

There's a bunch going on there, and the sales team has a lot more, obviously, but those are good highlights, Mike.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Okay. Lastly, the press release talks about gross margin and adjusted EBITDA margin expansion, improving those. Do you have any medium-term goals there, what that financial profile could look like or might look like?

Brian Balbirnie (President and CEO)

Yeah, I think, look, with some of the automations we talked about today from a product roadmap perspective, we're going to gain further efficiencies in headcount by using some of these AI natural language processing systems. By doing that, it enables us to probably increase 20% in scale of volume without additional headcount. Everybody knows editorial is a headcount; it's a cost of goods. We think gross margins can grow in the category, probably 2-4% over the next 12 months. Blended gross margins on news distribution only are likely 78%. We can climb into the low 80s with blended gross margins, probably high 70s and touching 80 here within the next 12 months. That's naturally just going to fall to the bottom line.

As we model out the business and think about returning to high teens and 20s EBITDA, we want to push this thing into the kind of 22-23% range long term. We feel that scale will help us. Obviously, customer growth is the most important top driver, as we talked about. This cost containment of automation will help us be able to free up gross margin relief as well as EBITDA results at the end of the day.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Got it. Okay. Hey, thank you.

Brian Balbirnie (President and CEO)

Thank you, Mike.

Steve Knerr (CFO)

Once again, if you do have any questions or comments, please press star one on your phone at this time. Please hold just a moment. There are no questions in queue at this time. I would now like to turn the floor over to Brian Balbirnie for any closing remarks.

Brian Balbirnie (President and CEO)

Thank you, Kelly, and thank you again to everyone who joined the call today. We look forward to speaking with you in mid-May on our first quarterly call. Our 10K should be filed this afternoon after market close. Once reviewed, we welcome time to spend with our shareholders and prospective investors who have recently learned about our story. I hope the progress that we've been making in our business and the attention to our capital allocation is well received, and shareholders clearly see the model of cash flows from operations where we believe we will generate approximately $4 million this year before tax impacts. We are confident that top-line growth will continue and our newswire volumes will also continue to climb. Until next time, take care.

Operator (participant)

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.