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ISSUER DIRECT CORP (ISDR)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $7.54M, up 6% year over year and flat sequentially; gross margin held at 74%, while Adjusted EBITDA rose to $1.07M (14% of revenue) versus $1.02M (14%) in Q4 2022 .
  • GAAP EPS was -$0.19 (net loss of $0.73M) versus -$0.03 in Q4 2022 and $0.07 in Q3 2023; operating loss of $0.11M reflected higher bad debt and amortization tied to Newswire; other expense included a $0.40M loss from the interest rate swap .
  • Communications was 75% of revenue; ACCESSWIRE offset Newswire softness sequentially; Compliance grew 20% YoY and 27% QoQ on larger print/proxy projects and transfer agent activity .
  • Management launched Media Suite into ACCESSWIRE/Newswire, expects ARR growth and eventual Communications gross margin uplift (80%+) as volume builds, and is focused on cash accumulation/investment over buybacks near term .

What Went Well and What Went Wrong

What Went Well

  • Media Suite launched on schedule; early pipeline building with “about a dozen” subscribers and hundreds of prospects; price tiers from $6,750 to enterprise $18,000+ support ARR transition and margin expansion over time .
  • “Adjusted EBITDA was up 5% to $1.1 million from $1 million last year,” with subscriptions up to 1,053 (from 1,002), and average price per release “held steady,” supporting stable unit economics in news distribution .
  • Compliance revenue strength: +20% YoY and +27% QoQ on larger print/proxy projects and higher transfer agent activity, diversifying revenue mix into year-end .

What Went Wrong

  • GAAP net loss of $0.73M and operating loss of $0.11M, driven by increased bad debt and amortization of Newswire intangibles; other expense included a $0.40M loss on change in fair value of interest rate swap .
  • Communications revenue down 7% QoQ (despite +2% YoY), primarily from lower Newswire revenue; Communications gross margin dipped 1pt QoQ to 74% .
  • Adjusted free cash flow fell to $0.69M from $2.00M in Q4 2022 as operating cash flow moderated and non-recurring items normalized, highlighting tighter cash conversion in Q4 .

Financial Results

MetricQ4 2022Q2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$7.14 $9.65 $7.57 $7.54
Gross Profit ($USD Millions)$5.26 $7.32 $5.77 $5.57
Gross Margin %74% 76% 76% 74%
Operating Income (Loss) ($USD Millions)$0.04 $1.75 $0.59 -$0.11
Net Income (Loss) ($USD Millions)-$0.11 $1.36 $0.27 -$0.73
Diluted EPS ($USD)-$0.03 $0.36 $0.07 -$0.19
Non-GAAP / Cash MetricsQ4 2022Q2 2023Q3 2023Q4 2023
EBITDA ($USD Millions)$0.59; 8% margin $2.86; 30% margin $1.50; 20% margin $0.23; 3% margin
Adjusted EBITDA ($USD Millions)$1.02; 14% margin $3.02; 31% margin $1.76; 23% margin $1.07; 14% margin
Non-GAAP Net Income ($USD Millions)$0.67; $0.18 EPS $2.03; $0.53 EPS $1.02; $0.27 EPS $0.58; $0.15 EPS
Operating Cash Flow ($USD Millions)$0.99 $1.73 $0.29 $0.77
Free Cash Flow ($USD Millions)$0.98 $1.57 $0.11 $0.61
Adjusted Free Cash Flow ($USD Millions)$2.00 $1.77 $0.13 $0.69

Segment and mix KPIs

Segment / MixQ4 2022Q2 2023Q3 2023Q4 2023
Communications % of Total Revenue78% 62% 80% 75%
Communications Gross Margin %74% 76% 75% 74%
Compliance Revenue YoY Change %—+76% -17% +20%
Compliance Revenue QoQ Change %—+81% vs Q1 -60% vs Q2 +27% vs Q3

Subscriptions and customer KPIs

KPIQ4 2022Q2 2023Q3 2023Q4 2023
Subscriptions (count)1,002 1,015 1,050 1,053
Average Spend per Subscriber ($)$8,641 $8,523 $9,447 $9,489
Active Customers (TTM)8,218 10,449 12,171 11,924

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue growth2024 narrativeNoneManagement “optimistic… continued double-digit growth” on YoY basis; no formal ranges provided Narrative only (no numeric guidance)
Communications gross marginMulti-yearNoneMedia Suite ARR expected to lift Communications GM to “80+%” as volume contribution grows Narrative only
Capital allocation (buybacks/dividends)2024NoneAccumulate cash and invest for growth; will monitor share price, no buyback plan currently Maintained prudent stance
Segment-specific2024NoneCompliance likely softer absent one-time projects; IR business expected high single- to low double-digit growth Narrative only

No formal numeric guidance ranges (revenue, margins, OpEx, tax, etc.) were provided in Q4 materials .

Earnings Call Themes & Trends

TopicQ2 2023 (Prior-2)Q3 2023 (Prior-1)Q4 2023 (Current)Trend
AI/technology initiativesAImee launched; capitalized ~$0.17M; integrating into pitching/monitoring; media database curation team formed Continued AI integration (“Almee”); capitalized $0.15M Q3 and $0.32M YTD; AI baked into offerings without add-on pricing Media Suite live; ARR pricing tiers; AI integrated across storytelling/pitching/monitoring; early subscriber wins Strengthening execution
Communications segment performanceNews distribution +14% YoY and +15% QoQ; GM ~80% product-level; sequential revenue mix shift Communications 80% of revenue; ACCESSWIRE +9% QoQ; Canada softness emerging Communications 75% of revenue; YoY +2% but -7% QoQ on Newswire; ACCESSWIRE offset Mixed near term, constructive LT
Compliance segment+76% YoY; +81% QoQ on print/proxy and transfer agent -17% YoY; -60% QoQ on seasonality and fewer projects +20% YoY; +27% QoQ on larger projects and TA activity Volatile, project-driven
Regional/macroU.S. stable; industry volumes turning up; ARR strategy Canada activity slowing industry-wide Canada credit write-down of $0.3M; tightening credit terms Cautious in Canada
R&D/product cadencePipeline maturing (media DB/pitching/monitoring) Media Suite variants and AI integration planned Iterating features over new product launches; aim for premium product by year-end Iterative build-out

Management Commentary

  • “Total revenue was up 6% year over year to $7.5 million… Adjusted EBITDA was up 5% to $1.1 million… our subscription business also grew 5% for the quarter” .
  • “Our communications business grew to 73% of revenues in 2023… driven by our news distribution business… Media Suite will be an enabling solution… allow our continued growth in the PR communications space” .
  • “We ended the quarter with 1,053 customers subscribing… average spend of $9,489… mid-90% retention… confident… will see further improvement… as we commercialize our new Media Suite” .
  • “Short term… we likely won’t see a significant impact to gross margins… Once it… contributes enough to revenue… we’ll start to see gross margins climb… product is an 80-plus percent gross margin” .
  • “We’re likely going to continue to accumulate cash and invest in the business for growth… keep covenants… opportunistically looking at share buybacks… no plan today” .

Q&A Highlights

  • Media Suite go-to-market: Direct campaigns to prospects and targeted installed-base marketing; enterprise sales hires with 10+ years experience; pipeline building as expected .
  • Margin impact: Media Suite initially immaterial to consolidated GM; as ARR scales, Communications GM should rise given 80%+ product economics .
  • Product cadence: Focus on iterating Media Suite features versus many new products; aim for premium positioning by year-end; possible surprise product later .
  • Capital allocation: Near-term priority is cash accumulation and growth investments; buybacks monitored but unplanned currently .

Estimates Context

  • S&P Global Wall Street consensus estimates for ISDR were unavailable; comparisons to consensus (Revenue, EPS, EBITDA) cannot be provided at this time [SpgiEstimatesError: Missing CIQ mapping for ticker 'ISDR' in spgi_ciq_company_map].
  • Given the lack of consensus data, investors should anchor on reported actuals and management commentary for near-term expectations .

Key Takeaways for Investors

  • The quarter was fundamentally stable: revenue flat QoQ and +6% YoY; Adjusted EBITDA held 14% margin despite higher bad debt and amortization on Newswire intangibles .
  • Mix matters: sequential Communications softness (Newswire) offset by ACCESSWIRE; Compliance strength from project timing drove QoQ lift; expect volatility in Compliance into 2024 .
  • ARR transition is the narrative: Media Suite is live with early traction; as ARR scales, Communications margins should structurally expand; monitor subscriber additions and ASPs through 2024 .
  • Cash generation continued (33rd consecutive quarter of positive operating cash flow), though adjusted FCF normalized; management prioritizes reinvestment over buybacks near term .
  • Watch Canada credit risk and collections discipline given the $0.3M write-down; steps taken to tighten terms and prepayments .
  • Without formal guidance, track leading KPIs: subscriptions (count and average spend), Communications % of revenue, and Media Suite pipeline conversion as the core stock catalysts .
  • Strategic positioning: growing market share in news distribution; broader PR/IR suite and AI integration should enhance competitive moat and price leverage over time .