What changed in ACCESS Newswire Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of ACCESS Newswire Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+152 added−461 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-02)
Top changes in ACCESS Newswire Inc.'s 2023 10-K
152 paragraphs added · 461 removed · 107 edited across 2 sections
- Item 7. Management's Discussion & Analysis+80 / −267 · 53 edited
- Item 1. Business+72 / −194 · 54 edited
Item 1. Business
Business — how the company describes what it does
54 edited+18 added−140 removed43 unchanged
Item 1. Business
Business — how the company describes what it does
54 edited+18 added−140 removed43 unchanged
2022 filing
2023 filing
Biggest changeDisruption in any of our partnerships could have a materially adverse impact on ACCESSWIRE and our overall business. Newsroom A natural expansion to our ACCESSWIRE and investor relations website business is our corporate Newsroom, which we brought to market during the third quarter of 2021. This product offering can be an add-on to any customer’s ACCESSWIRE or Communications subscription account.
Biggest changeMedia Room A natural addition to our ACCESSWIRE and investor relations website business is our corporate Media Room. This product offering can be an add-on to any customer’s ACCESSWIRE or Communications subscription account. The Media Room suite includes a custom newsroom page builder, a brand asset manager and contact manager.
Insurance We maintain both a general business liability, cyber-security and an errors and omissions policies specific to our industry and operations. We believe that our insurance policies provide adequate coverage for all reasonable risks associated with operating our business. Additionally, we maintain a Directors and Officers insurance policy, which is standard for our industry and size.
Insurance We maintain a general business liability, cyber-security and an errors and omissions policies specific to our industry and operations. We believe that our insurance policies provide adequate coverage for all reasonable risks associated with operating our business. Additionally, we maintain a Directors and Officers insurance policy, which is standard for our industry and size.
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.
Therefore, we plan to continue to invest in offerings we intend to incorporate into and complement our Communications product lineup. Within most of our target markets, customers require several individual services and/or software providers to meet their communications and investor relations needs.
While we typically focus on accretive acquisition opportunities, we will also evaluate technology acquisitions that we believe would be strategic to our overall business. Specifically, we will look for communications products and businesses that have recurring revenues, customers and technologies that will further enhance our overall market position.
While we typically focus on accretive acquisition opportunities, we will also evaluate technology acquisitions that we believe would be strategic to our overall long-term business. Specifically, we will look for communications products and businesses that have recurring revenues, customers and technologies that will further enhance our overall market position.
Our focus areas in creating a working environment that draws out the best in our employees and allows them to fulfil their potential and support our goals are as follows: · Attract, identify, develop and retain high-performing employees across all areas. · Develop and support the growth of management and leadership. · Enable the development of a high-performance culture in which staff performance can be supported, rewarded, enhanced and managed effectively. · Foster a values-based culture focused on diversity, equity, inclusion, well-being, and positive staff engagement. · Develop a total reward approach which is valued by staff and facilitates company objectives. · Provide excellent core human resources, professional development and health and safety services across all departments to enable the effective operation of the Company.
Our efforts in creating a working environment that draws out the best in our employees and allows them to fulfil their potential and support our goals focus on the following:: ● Attract, identify, develop and retain high-performing employees across all areas. ● Develop and support the growth of management and leadership. ● Enable the development of a high-performance culture in which staff performance can be supported, rewarded, enhanced and managed effectively. ● Foster a values-based culture focused on diversity, equity, inclusion, well-being, and positive staff engagement. ● Develop a total reward approach which is valued by staff and facilitates company objectives. ● Provide excellent core human resources, professional development and health and safety services across all departments to enable the effective operation of the Company.
Our acquisition of Newswire provides us the opportunity to offer MAP and our media database platform to existing ACCESSWIRE customers. MAP is a media and marketing communications utility that converts customers’ owned media into earned media opportunities to accelerate business growth.
Our acquisition of Newswire provides us the opportunity to offer PRO and our media database platform to existing ACCESSWIRE customers. PRO is a media and marketing communications utility that converts customers’ owned media into earned media opportunities to accelerate business growth.
All our human resource initiatives are supported by key performance indicators to monitor their effectiveness and gain insight into gaps that can be addressed quickly and ensure our overall human resource strategy is adapted as required and maintained to a high degree. 11 Table of Contents Facilities Our headquarters are located in Raleigh, North Carolina.
All of our human resource initiatives are supported by key performance indicators to monitor their effectiveness and gain insight into gaps that can be addressed quickly and ensure our overall human resource strategy is adapted as required and maintained to a high degree. Facilities Our headquarters are located in Raleigh, North Carolina.
However, there are positions where we have strong competition in hiring, such as research and development and qualified sales individuals with communications industry experience. 10 Table of Contents Customers Our customers include a wide variety of public and private companies, mutual funds, law firms, brokerage firms, investment banks, individuals, and other institutions.
However, there are positions where we have strong competition in hiring, such as research and development and qualified sales individuals with communications industry experience. Customers Our customers include a wide variety of public and private companies, mutual funds, law firms, brokerage firms, investment banks, individuals, and other institutions.
We did not have any customers during the year ended December 31, 2022 that accounted for more than 10% of our revenue or more than 10% of our year end accounts receivable balance as of December 31, 2022.
We did not have any customers during the year ended December 31, 2023 that accounted for more than 10% of our revenue or more than 10% of our year end accounts receivable balance as of December 31, 2023.
Sales and Marketing During 2022, we continued to strengthen our brands in the market by working aggressively to expand our customer footprint and continue to cross sell to increase average revenue per customer.
Sales and Marketing During 2023, we continued to strengthen our brands in the market by working aggressively to expand our customer footprint and continue to cross sell to increase average revenue per customer.
Identification of high-performing talent is linked to succession planning and development of the future-workforce is embedded in employee professional development plans. We attempt to set clear standards with respect to generating an open and transparent working environment in which everyone has a voice.
Identification of high-performing talent is linked to succession planning and development of the future-workforce is embedded in employee professional development plans. 11 Table of Contents We attempt to set clear standards with respect to generating an open and transparent working environment in which everyone has a voice.
We have also been able to maintain high gross margins while providing our customer flexible pricing, with options to pay per release or enter longer-term agreements for a designated package of releases. 5 Table of Contents Like other newswires globally, ACCESSWIRE is dependent upon several key partners for its news distribution.
We have also been able to maintain high gross margins while providing our customer flexible pricing, with options to pay per release or enter longer-term agreements for a designated package of releases. 5 Table of Contents Like other newswires globally, ACCESSWIRE and Newswire are dependent upon several key partners for its news distribution.
The MAP Market Builder provides integrated media and marketing communications programs aimed to increase site traffic, qualified leads and lowering cost of acquisition for new accounts. The media database platform offers customers access to over a million journalists, broadcasters, and other publishers to target and compose their customized campaign to disseminate to a specific audience.
PRO provides integrated media and marketing communications programs aimed to increase site traffic, qualified leads and lowering cost of acquisition for new accounts. The media database platform offers customers access to over a million journalists, broadcasters, and other publishers to target and compose their customized campaign to disseminate to a specific audience.
We believe we are positioned to be the communications platform of choice as a cost-effective alternative to both small regional providers and global providers. We also believe we benefit from our location in Raleigh, North Carolina, as we can hire and retain sales, customer service or production personnel in the area at a reasonable cost.
We believe we are positioned to be one of the communications platforms of choice as a cost-effective alternative to both small regional providers and global providers. We also believe we benefit from our location in Raleigh, North Carolina, as we can hire and retain customer service or production personnel in the area at a reasonable cost.
The database also allows customers access to recently published articles by the media contacts to find relevant points to include their messages. Acquisition Strategy We will continue to evaluate complimentary verticals and businesses that we can integrate into our communications platform.
The database also allows customers access to recently published articles by the media contacts to find relevant points to include their messages. 9 Table of Contents Acquisition Strategy We will continue to evaluate complimentary verticals and businesses that we can integrate into our communications platform.
As such, we disclose or revenue in the following two main categories: (i) Communications and (ii) Compliance.
As such, we disclose our revenue in the following two main categories: (i) Communications and (ii) Compliance.
Set forth below is an infographic depicting the products included in each of these two main categories we provide today: Over the next several years, we expect the Communications portion of our business to continue to increase, both in terms of overall revenue and as compared to the Compliance portion of our business as it has done in the past.
Set forth below is an infographic depicting the products included in each of these two main categories we provide today: In the future, we expect the Communications portion of our business to continue to increase, both in terms of overall revenue and as compared to the Compliance portion of our business.
Through its Media Advantage Platform (“MAP”), Newswire automates media and marketing communications for large and small businesses seeking to deliver the right message to the right audience at the right time for the right purpose.
Through its PR Optimizer (”PRO”) offering, formally Media Advantage Platform, Newswire automates media and marketing communications for large and small businesses seeking to deliver the right message to the right audience at the right time for the right purpose.
This software, which is also available as a native mobile app, offers organizers, issuers and investors the ability to register, request and approve one-on-one meetings, manage schedules, perform event promotion and sponsorship, print attendee badges and manage lodging.
Professional Conference and Events Software Our professional conference and events software is a subscription offering we currently license to investor conference organizers. This software, which is also available as a native mobile app, offers organizers, issuers and investors the ability to register, request and approve one-on-one meetings, manage schedules, perform event promotion and sponsorship, print attendee badges and manage lodging.
Management has been focused on offsetting the risks relating to competition as well as the seasonality by introducing our cloud-based subscription platform, with higher margins, clear competitive advantages, higher customer stickiness and scalability to withstand market and pricing pressures.
The success of our products and services are generally based on price, quality, and the ability to service customer demands. Management has been focused on offsetting the risks relating to competition as well as the seasonality by introducing our cloud-based subscription platform, with higher margins, clear competitive advantages, higher customer stickiness and scalability to withstand market and pricing pressures.
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 prior years.
Since the end of the pandemic, the industry overall has seen 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.
Newswire is a media technology company that provides customers press release distribution, media databases, media monitoring, and newsrooms for greater brand awareness through earned media, increased online visibility through greater search engine optimization recognition, and more sales inquiries through targeted digital marketing campaigns.
Acquisition of iNewswire.com LLC On November 1, 2022, we acquired iNewswire.com LLC (“Newswire”). Newswire is a media technology company that provides customers press release distribution, media databases, media monitoring, and newsrooms for greater brand awareness through earned media, increased online visibility through greater search engine optimization recognition, and more sales inquiries through targeted digital marketing campaigns.
The demands for many of our services historically have been cyclical and reliant on capital market activity. Over the past few years, we have been offering subscriptions which combine both compliance software and service in one annual contract. We believe this offering affords us the ability to reduce our revenue seasonality and provide a new baseline of recurring annualized revenue.
The demands for many of our services historically have been cyclical and reliant on capital market activity. Over the past few years, we have been offering subscriptions which combine both compliance software and service in one annual contract.
We are currently in the process of integrating the ACCESSWIRE and Newswire news distribution platforms into one system that will give our customers all of the benefits of both systems combined into one. These products are sold as the leading part of our Communications subscription, as well as individually to customers around the globe and are further described below.
Our ACCESSWIRE and Newswire news distribution platforms have been integrated into one dissemination platform that will give our customers all the distribution benefits of our global distribution footprint. These products are sold as the leading part of our Communications subscription, as well as individually to customers around the globe and are further described below.
Our platform incorporates other elements of the earnings event, including earnings date/call announcement, earnings press release and SEC Form 8-K filings. There are a handful of our competitors that can offer this integrated full-service solution today, however, we believe our real-time event setup and integrated approach offers a more effective way to manage the process.
There are a handful of our competitors that can offer this integrated full-service solution today, however, we believe our real-time event setup and integrated approach offers a more effective way to manage the process.
We operate our filing agent business and transfer agent business under the supervision and regulations of the SEC. Our transfer agency business, Direct Transfer, LLC, is registered with the SEC and is subject to SEC regulations relating to, among other things, annual reporting, examination, internal controls, tax reporting and escheatment services.
Our transfer agency business, Direct Transfer, LLC, is registered with the SEC and is subject to SEC regulations relating to, among other things, annual reporting, examination, internal controls, tax reporting and escheatment services. Our transfer agency is currently approved to handle the securities of NYSE, NASDAQ and OTC Markets.
We ended 2022 with a multi-tier organization of sales personnel, consisting of Business Development Managers and Customer Service Managers. We believe this approach is the most efficient and effective way to reach new customers and grow our current install base. The total compensation packages for these teams are heavily weighted with commission compensation to incent sales and retention.
We ended 2023 with a multi-tier organization of sales personnel, consisting of Business Development Managers, Customer Service Managers and strategic agency and reseller executives. We believe this approach is the most efficient and effective way to reach new customers and grow our current install base.
Human Capital and Culture As of December 31, 2022, we employed 137 employees and independent contractors, none of which are represented by a union. Our employees work in our corporate offices in North Carolina or their home offices throughout North America. The increase in headcount over the prior year us primarily related to the acquisition of Newswire.
Human Capital and Culture As of December 31, 2023, we employed 136 employees and independent contractors, none of which are represented by a union. Our employees work in our corporate offices in North Carolina or their home offices throughout the world.
Most of the customers subscribing to this module today are historical PrecisionIR (“PIR”) – Annual Report Service (“ARS”) users, as well as new customers purchasing the entire platform subscription.
This was accomplished by integrating our shareholder outreach module, Investor Network, into and with our Compliance offerings. Most of the customers subscribing to this module today are historical PrecisionIR (“PIR”) – Annual Report Service (“ARS”) users, as well as new customers purchasing the entire platform subscription.
Our transfer agency is currently approved to handle the securities of NYSE, NASDAQ and OTC Markets. Our objective is to assist corporate issuers with these regulations, communication and compliance of rules imposed by regulatory bodies. The majority of our business involves the distribution of content, either electronically or on paper, to governing bodies and shareholders alike.
Our objective is to assist corporate issuers with these regulations, communication and compliance of rules imposed by regulatory bodies. The majority of our business involves the distribution of content, either electronically or on paper, to governing bodies and shareholders alike. We are recognized under these regulations to disseminate, communicate and or solicit on behalf of our customers, the issuers.
We believe ACCESSWIRE is becoming a competitive alternative in the newswire industry because we have been able to use our technological advancements to allow customers to self-edit releases or use our editorial staff as desired to edit releases. We continue to expand our distribution points, improve our targeting and enhance our analytics reporting.
The ACCESSWIRE product offering focuses on press release distribution for both private and public companies globally. We believe ACCESSWIRE is becoming a competitive alternative in the newswire industry because we have been able to use our technological advancements to allow customers to self-edit releases or use our editorial staff as desired to edit releases.
According to a survey from TekGroup, a majority of journalists and media professionals indicated the importance of newsrooms that include digital media, press kits and video.
Our Media Room suite addresses the needs of our customers looking to build connections with media, journalists, customers and if applicable the investment community. According to a survey from TekGroup, a majority of journalists and media professionals indicated the importance of newsrooms that include digital media, press kits and video.
We believe this software helps make our platform a platform of choice for investment banks, issuers and investors. Investor Relations Websites Our investor relations content network is another component of our Communications offering, which is used to create the investor relations’ tab of a company’s website.
Investor Relations Websites Our investor relations content network is another component of our Communications offering, which is used to create the investor relations’ tab of a company’s website.
Recently, we have been working on upgrading the incident response and management component of the workflow, which is expected to be completed in 2023. 7 Table of Contents Stock Transfer Module A valued subscription add-on in our Compliance offering is the ability for our customers to gain access to real-time information about their shareholders, stock ledgers and reports and to issue new shares from our cloud-based stock transfer module.
Stock Transfer Module A valued subscription module in our Compliance offering is the ability for our customers to gain access to real-time information about their shareholders, stock ledgers and reports and to issue new shares from our cloud-based stock transfer module.
We believe this transaction strengthens our entire communications portfolio and combined with our ACCESSWIRE business, grows our press release distribution business to now be one of North America's largest press release distribution platforms. The acquisition almost doubles our press release customer base and combines what we believe are qualified people and strong distribution, technology and brands.
We believe Newswire strengthens our entire communications portfolio and combined with our ACCESSWIRE business, grows our press release distribution business to now be one of North America’s largest press release distribution platforms.
Although we believe a virtual component to an annual meeting is both a benefit to all shareholders and a corporate governance advantage, there can be no assurances this product has longevity in the market.
Although we believe a virtual component to an annual meeting is both a benefit to all shareholders and a corporate governance advantage, there can be no assurances this product has longevity in the market. 8 Table of Contents Shareholder Distribution Over the past few years, we have worked on refining the model of digital distribution of our customers’ message to the investment community and beyond.
Our Inline XBRL (Inline Extensible Business Reporting Language or “iXBRL”) product now includes upgrades that meet newly mandated SEC disclosure requirements which became effective in 2021. Whistleblower Hotline Our whistleblower hotline is an add-on product within our platform. This system delivers secure notifications and basic incident workflow management processes that align with a company’s corporate governance whistleblower policy.
Whistleblower Hotline Our whistleblower hotline is an add-on product within our platform. This system delivers secure notifications and basic incident workflow management processes that align with a company’s corporate governance whistleblower policy.
This total includes spending on social media solutions, media monitoring, press release targeting and distribution, and investor relations platforms globally. A key driver of growth in our industry is the introduction of new innovative technologies and solutions. We believe our technology and workflow automation solutions will help us gain market share within the industry.
Industry Overview According to a 2022 Burton-Taylor Media Intelligence report, the global communications technology market is more than $5.5 billion in annual revenue. This total includes spending on social media solutions, media monitoring, press release targeting and distribution, and investor relations platforms globally. A key driver of growth in our industry is the introduction of new innovative technologies and solutions.
In 2020, NYSE renewed and extended the initial subsidy term to four years from two years, whereby the first two years are provided under subsidy and the added two years are at our standard subscription rates.
In 2020, NYSE renewed and extended the initial subsidy term to four years from two years, whereby the first two years are provided under subsidy and the added two years are at our standard subscription rates. Recently, we have been working on upgrading the incident response and management component of the workflow, which is expected to be deployed this year.
Our solution incorporates shareholder and guest registration, voting integration, real-time statistics on attendance, audio video and presentation features as well as fully managed meeting managers and inspector of elections.
This module has been incorporated within our webcasting offering to enable our customers the ability to conduct their annual meetings in-person or fully virtual. Our solution incorporates shareholder and guest registration, voting integration, real-time statistics on attendance, audio video and presentation features as well as fully managed meeting managers and inspector of elections.
Our strategy of selling our cloud-based offerings via our platform to all customers under a subscription agreement should benefit us by moving away from selling individual solutions within highly commoditized markets that are experiencing pricing pressures. 8 Table of Contents New Offerings During 2023 and going forward, we plan to continue to innovate, improve and build new applications into and with our platform, with the objective of developing integrated application solutions that are typically not offered by our competitors.
Our strategy of selling our cloud-based offerings via our platform to all customers under a subscription agreement should benefit us by moving away from selling individual solutions within highly commoditized markets that are experiencing pricing pressures.
Newswire customers will benefit from the global footprint ACCESSWIRE has built over the last seven years, whereas Issuer Direct's customers will have access to Newswire's brand-new media database platform, analytics, as well as its MAP. Lastly, we believe the acquisition will also result in meaningful operational synergies in the combined company.
Newswire customers also benefit from the global footprint ACCESSWIRE has built over the last nine years, whereas Issuer Direct’s customers will have access to Newswire’s media database platform, pitching and monitoring capabilities, as well as its PRO offering.
We also offer an e-commerce element to our ACCESSWIRE product, whereby customers can self-select their distribution, register, and then upload their press release for editorial review in minutes. We believe these enhancements have helped increase ACCESSWIRE revenues each year compared to the prior year, a trend we expect to continue over the next several years.
We continue to expand our distribution points, improve our targeting and enhance our analytics reporting. We also offer an e-commerce element to our ACCESSWIRE product, whereby customers can self-select their distribution, register, and then upload their press release for editorial review in minutes.
Our marketing organization has been focused on both new customer acquisition as well as campaigns to educate current customers on the advantages of using our platform.
Our marketing organization has been focused on both new customer acquisition as well as campaigns to educate current customers on the advantages of using our platform. Additionally, our marketing team has expanded their focus on investor conferences, strategic partnerships and private company marketing activities in order to continue to scale our business long term.
As we expand our platform, it is vital for us to have solutions that service both our core public companies but also a growing segment of private customers.
The platform architecture gives us the ability to host thousands of webcasts each year, expanding and diversifying our webcast business from our historical earnings-based events to include any type of virtual event. As we expand our platform, it is vital for us to have solutions that service both our core public companies but also a growing segment of private customers.
All members of the sales team have quotas. As of December 31, 2022, we employed 40 full-time equivalent sales and marketing personnel compared to 30 as of December 31, 2021. The increase is driven by additional sales and marketing personnel associated with Newswire.
The total compensation packages for these teams are heavily weighted with commission compensation to incent sales and retention. All members of the sales team have quotas. As of December 31, 2023, we employed 35 full-time equivalent sales and marketing personnel compared to 40 as of December 31, 2022.
Customers have the ability to deliver their stories automatically or time based. Engagement and delivery reports are also available to customers directly from their dashboard. Webcasting & Events 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).
This also allows our customers to have one media platform to manage all their assets, brands and outreach. 6 Table of Contents Webcasting & Events 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).
In the United States, corporate issuers are subject to regulation under both federal and state laws, which often require public disclosure and regulatory filings. At the federal level, the SEC regulates the securities industry, along with the Financial Industry Regulatory Authority, or FINRA, formally known as NASD, and NYSE market regulations, various stock exchanges, and other self-regulatory organizations (“SRO”).
At the federal level, the SEC regulates the securities industry, along with the Financial Industry Regulatory Authority, or FINRA, formally known as NASD, and NYSE market regulations, various stock exchanges, and other self-regulatory organizations (“SRO”). 12 Table of Contents We operate our filing agent business and transfer agent business under the supervision and regulations of the SEC.
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. We estimate there are approximately 5,000 companies in North America conducting earnings events each quarter that include a teleconference, webcast or both as part of their events.
We estimate there are approximately 5,000 companies in North America conducting earnings events each quarter that include a teleconference, webcast or both as part of their events. Our platform incorporates other elements of the earnings event, including earnings date/call announcement, earnings press release and SEC Form 8-K filings.
ACCESSWIRE Our existing press release offering, which is marketed under the brand ACCESSWIRE , is a news dissemination and media outreach service. The ACCESSWIRE product offering focuses on press release distribution for both private and public companies globally.
We believe the PRO product offering provides the most effective and efficient integrated media and content communication program available in the market today. ACCESSWIRE Our existing press release offering, which is marketed under the brand ACCESSWIRE , is a news dissemination and media outreach service.
For the year ended December 31, 2022, we worked with 8,218 customers, compared to 8,045 for the year ended December 31, 2021. This amount includes 1,196 customers from Newswire for the months of November and December.
For the year ended December 31, 2023, we worked with 11,924 customers, compared to 8,218 for the year ended December 31, 2022. The increase in customers is primarily related to an increase in Newswire customers as the 2022 amount only included November and December compared to a full year for 2023.
During the first half of 2021, we released the first version of this real-time engagement and analytics dashboard to our customers. 6 Table of Contents 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.
Our Webcasting Platform is a cloud-based webcast, webinar and virtual meeting platform that delivers live and on-demand streaming of events to audiences of all sizes. Our solution allows customers to create, produce and deliver events, which we feel has significantly strengthened our webcasting product and Communications offering.
Competition Despite some significant consolidation in recent years, the communications and compliance industries remain both highly fragmented and extremely competitive. The success of our products and services are generally based on price, quality, and the ability to service customer demands.
We believe this offering affords us the ability to reduce our revenue seasonality and provide a new baseline of recurring annualized revenue. 10 Table of Contents Competition Despite some significant consolidation in recent years, the communications and compliance industries remain both highly fragmented and extremely competitive.
As such, companies can produce content for public distribution and it is automatically linked to their corporate website, distributed to targeted groups and placed into our data feed partners. Compliance Our Compliance offerings consist of our disclosure software for financial reporting, stock transfer services, and related annual meeting, print and shareholder distribution services.
As such, companies can produce content for public distribution and it is automatically linked to their corporate website, distributed to targeted groups and placed into our data feed partners. 7 Table of Contents During 2023 we released significant upgrades to our investor relations website, that included ADA Compliance (Americans with Disabilities Act) which ensures that people with disabilities have the same access to all areas of a business's premises.
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Acquisition of iNewswire.com LLC On November 1, 2022, we acquired all of the issued and outstanding membership interests of iNewswire.com LLC, a Delaware limited liability company (“Newswire”).
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Through the PRO offering, we provide content and media communications services that provide customers the opportunity to optimize their content and increase their media visibility, therefore building their brand awareness and engaging a larger audience. With the flexibility of these offerings, customers have the ability to choose between support with content optimization, increased media visibility, or both for optimal results.
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Through the MAP product, Newswire provides a media and marketing communications utility that converts customers’ owned media into earned media opportunities to accelerate business growth. The MAP Market Builder provides integrated media and marketing communications programs aimed to increase site traffic, qualified leads and lowering cost of acquisition for new accounts.
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We believe these enhancements have helped increase ACCESSWIRE revenues each year compared to the prior year, a trend we expect to continue over the next several years.
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The Newsroom suite includes a custom newsroom page builder, a brand asset manager and contact manager. Our Newsroom suite addresses the needs of our customers looking to build connections with media, journalists, customers and if applicable the investment community.
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Disruption in any of our partnerships could have a materially adverse impact on our overall business. Media Suite As part of the iNewswire acquisition, we acquired certain assets that with further development resulted in our ability to release a subscription add-on to our Newswire and ACCESSWIRE brands, which we call Media Suite.
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We believe our Newsroom suite accomplishes this by including the following three components: Newsroom page – a custom URL, self-publishing system for customers that automatically adds ACCESSWIRE news to their newsroom and allows them the ability to add any other mention, article or post from the web to their newsroom.
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Media Suite includes three new products: Media Database, Media Pitching, and Media Monitoring, all of which are further described below. The Media Suite offering provides communication professionals with the opportunity to build their story, incorporate artificial intelligence (AI) if desired, effectively pitch the media, and monitor their internal brand as well as their competitors.
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Customers can self-manage this platform to customize colors, font, logo, images, social integration, and contact and customer URLs. Brand Asset Manager – a customizable library of images, video and press kits, which can be shared both privately and publicly, as well as integrated into the ACCESSWIRE editor for easy access of customers’ high- resolution images.
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This is all accomplished with a blend of human curation and an advanced AI engine that ultimately serves as the foundation of an easy-to-use workflow we branded as our Media Suite.
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All assets are tagged to give our customers analytics for both views and downloads. Subsequent versions of this feature will allow for greater analytics as engagement occurs with our customers’ assets. Contact Manager – a technology that allows our customers to provide their audiences the ability to quickly subscribe to alerts or notifications of a particular brand.
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Media Suite is a recurring subscription product, with three subscription options available: Media Suite Starter, Media Suite Plus, and Media Suite Enterprise, each providing different combinations of our solutions to help our customers reach their goals. Media Database – Our media database is based on the idea that pitching the media should be a targeted endeavor.
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VWP allows customers to create, produce and deliver events, which we feel has significantly strengthened our webcasting product and Communications offering. The VWP technology gives us the ability to host thousands of webcasts each year, expanding and diversifying our webcast business from our historical earnings-based events to include any type of virtual event.
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Our dataset includes only the journalists that are actively writing and publishing articles. We built this component in reverse, looking at the tens of millions of articles published annually and sorted articles by industry, publication and journalist, then human curated the most accurate data of each contact and made them available within our media database.
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Professional Conference and Events Software Our professional conference and events software is a subscription offering we currently license to investor conference organizers, which in the aggregate we believe held an estimated 1,000 plus events a year prior to 2020.
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Additionally, within the interface we made it easy to see each article published by every journalist a user may want to connect with, making Media Suite a compelling combination of the right features and intelligence between database, pitching, and monitoring.
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This number significantly decreased in 2020 and is expected to remain at decreased levels in the near future, however in-person events began to increase throughout 2022.
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Media Pitching – Pitching is a critical part of the Media Suite because it allows the user to contact and connect the most active journalists in their industry.
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This module has been incorporated within our webcasting offering to enable our customers the ability to conduct their annual meetings in-person or fully virtual, which has often been required since the COVID-19 pandemic.
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Media Suite not only gives you the professionals to pitch, it also offers AIMee, our AI writing and recommendation engine, to enhance your message, write a new message and highlight engageable content to help bring your pitch to the forefront.
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Shareholder Distribution Over the past few years, we have worked on refining the model of digital distribution of our customers’ message to the investment community and beyond. This was accomplished by integrating our shareholder outreach module, Investor Network, into and with our Compliance offerings.
Added
Media Monitoring – a brand Monitoring solution is extremely important, and every company should consider monitoring not only their brands, but their products, executives and competitors mentioned in all mediums – print, broadcast media and television, web, radio, video, blogs and social media.
Removed
Additionally, our marketing team has expanded their focus on investor conferences, strategic partnerships and private company marketing activities in order to continue to scale our business long term. 9 Table of Contents Cybersecurity In all our offerings, quality, support, and scalability as well as the need to preserve the confidential content of our customers are of utmost importance and part of our core values.
Added
Our monitoring solution offers many of these mediums and we will continue to undergo expansion in each of these mediums with a goal of being a comprehensive media monitoring solution by the end of 2024. Our media monitoring solution ties together our journalist contacts and mention analytics into and with a customer’s dashboard of daily activity.
Removed
We continue to maintain agreements with security software and hardware providers and consulting firms to identify, address and create policies and plans which enable us to mitigate our cybersecurity and information vulnerabilities on both a short-term and long-term basis.
Added
We believe our Media Room suite accomplishes this by making it a part of our new Media Suite, giving us a further competitive advantage in the market.
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
53 edited+27 added−214 removed40 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
53 edited+27 added−214 removed40 unchanged
2022 filing
2023 filing
Biggest changeThe financial results presented below for 2022 have been affected by the acquisition of Newswire in November 2022: Comparison of results of operations for the years ended December 31, 2022 and 2021 (in 000’s): Percentage of Revenue (1) 2022 2021 2022 2021 Revenue: Communications revenue $ 16,115 $ 14,058 69 % 64 % Compliance revenue 7,399 7,825 31 % 36 % Total revenue 23,514 21,883 100 % 100 % Cost of revenue: Communications cost of revenue 3,735 3,401 23 % 24 % Compliance cost of revenue 1,949 2,347 26 % 30 % Total cost of revenue 5,684 5,748 24 % 26 % Gross Margin: Communications gross margin 12,380 10,657 77 % 76 % Compliance gross margin 5,450 5,478 74 % 70 % Total gross margin 17,830 16,135 76 % 74 % Operating Expenses: General and administrative 6,963 5,821 30 % 27 % Sales and marketing 5,922 4,893 25 % 22 % Product development 1,306 1,075 6 % 5 % Depreciation and amortization 970 603 4 % 3 % Total expenses 15,161 12,392 64 % 57 % Operating income 2,669 3,743 11 % 17 % Interest income (expense), net (11 ) 3 0 % 0 % Other income — 366 0 % 2 % Income before income taxes 2,658 4,112 11 % 19 % Income tax provision 724 821 3 % 4 % Net income $ 1,934 $ 3,291 8 % 15 % (1) Percentage of revenue is calculated as the relevant revenue, expense, income amount divided by total revenue, except for communications and compliance cost of revenue and communications and compliance gross margin, which are divided by the related component of revenue. 23 Table of Contents Revenues Total revenue increased by $1,631,000, or 7%, to $23,514,000 during the year ended December 31, 2022, as compared to $21,883,000 in 2021.
Biggest changeThe financial results presented below for 2023 have been affected by the acquisition of Newswire in November 2022: Comparison of results of operations for the years ended December 31, 2023 and 2022 (in 000’s): Percentage of Revenue (1) 2023 2022 2023 2022 Revenue: Communications revenue $ 24,224 $ 16,115 73 % 69 % Compliance revenue 9,154 7,399 27 % 31 % Total revenue 33,378 23,514 100 % 100 % Cost of revenue: Communications cost of revenue 5,801 3,735 24 % 23 % Compliance cost of revenue 2,128 1,949 23 % 26 % Total cost of revenue 7,929 5,684 24 % 24 % Gross Margin: Communications gross margin 18,423 12,380 76 % 77 % Compliance gross margin 7,026 5,450 77 % 74 % Total gross margin 25,449 17,830 76 % 76 % Operating Expenses: General and administrative 8,935 6,963 27 % 30 % Sales and marketing 8,251 5,922 25 % 25 % Product development 2,551 1,306 8 % 6 % Depreciation and amortization 2,896 970 9 % 4 % Total operating expenses 22,633 15,161 68 % 64 % Operating income 2,816 2,669 8 % 11 % Interest expense, net (1,116 ) (11 ) (3 )% 0 % Other expense (391 ) — (1 )% 0 % Income before income taxes 1,309 2,658 4 % 11 % Income tax provision 543 724 2 % 3 % Net income $ 766 $ 1,934 2 % 8 % (1) Percentage of revenue is calculated as the relevant revenue, expense, income amount divided by total revenue, except for communications and compliance cost of revenue and communications and compliance gross margin, which are divided by the related component of revenue. 26 Table of Contents Revenues Total revenue increased by $9,864,000, or 42%, to $33,378,000 during the year ended December 31, 2023, as compared to $23,514,000 in 2022.
Cost of Revenues Communications cost of revenues consists primarily of direct labor costs, newswire distribution costs, teleconferencing costs and third-party licensing costs. 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.
Cost of Revenues Communications cost of revenues consists primarily of direct labor costs, newswire distribution costs, teleconferencing costs and third-party licensing costs. Compliance cost of revenues consists primarily of direct labor costs, warehousing, logistics, print production materials, postage, and amortization of capitalized software costs related to our disclosure software.
MAP subscription contracts contain two performance obligations of which the first is a series of distinct services that include, but are not limited to, developing specific media plans and creating content to be distributed and the second performance obligation being access to the MAP platform along with distribution of press releases, ongoing support and assessment of performance as a stand-ready obligation.
PRO subscription contracts contain two performance obligations of which the first is a series of distinct services that include, but are not limited to, developing specific media plans, and creating content to be distributed and the second performance obligation being access to the PRO platform along with distribution of press releases, ongoing support, and assessment of performance as a stand-ready obligation.
Results of Operations The following table presents certain amounts included in our consolidated statements of income, the relative percentage that those amounts represent to revenue, and the change in those amounts from fiscal year 2022 compared to 2021. This information should be read together with the consolidated financial statements and accompanying notes.
Results of Operations The following table presents certain amounts included in our consolidated statements of income, the relative percentage that those amounts represent to revenue, and the change in those amounts from fiscal year 2023 compared to 2022. This information should be read together with the consolidated financial statements and accompanying notes.
As a percentage of revenue, General and administrative expenses were 30% for the year ended December 31, 2022, as compared to 27% for 2021. Sales and Marketing Expenses Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses and other marketing expenses.
As a percentage of revenue, General and administrative expenses were 27% for the year ended December 31, 2023, as compared to 30% for 2022. Sales and Marketing Expenses Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses and other marketing expenses.
These statements are forward looking and are subject to factors that could cause actual results to differ materially from those suggested here, including, without limitation, demand for and acceptance of our services, new developments, competition and general economic or market conditions, particularly in the domestic and international capital markets.
Outlook The following statements are forward looking and are subject to factors that could cause actual results to differ materially from those suggested here, including, without limitation, demand for and acceptance of our services, new developments, competition and general economic or market conditions, particularly in the domestic and international capital markets.
The Company separates revenue from its contracts into two revenue streams: i) Communications and ii) Compliance. Performance obligations of Communications contracts include providing subscriptions to certain modules or the entire Platform id. Communications module, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings, or other events on a per event basis.
The Company separates revenue from its contracts into two revenue streams: i) Communications and ii) Compliance. Performance obligations of Communications contracts include providing subscriptions to certain modules or our entire Communications platform, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings, or other events on a per event basis.
The Company believes recognizing revenue for subscriptions and stand ready obligations using a time-based measure of progress, best reflects the Company’s performance in satisfying the obligations. For bundled contracts, revenue is allocated to each performance obligation based on its relative standalone selling price.
The Company believes recognizing revenue for subscriptions and stand ready obligations using a time-based measure of progress, best reflects the Company’s performance in satisfying the obligations. 34 Table of Contents For bundled contracts, revenue is allocated to each performance obligation based on its relative standalone selling price.
The client relationships (5-10 years), customer lists (3 years), distribution partner relationships (10 years), non-compete agreements (5 years) and software and technology (3-7 years) are amortized over their estimated useful lives. 30 Table of Contents Lease Accounting The Company determines if an arrangement is a lease at inception.
The client relationships (5-10 years), customer lists (3 years), distribution partner relationships (10 years), non-compete agreements (5 years) and software and technology (3-7 years) are amortized over their estimated useful lives. Lease Accounting The Company determines if an arrangement is a lease at inception.
As a percentage of revenue, sales and marketing expenses were 25% for the year ended December 31, 2022 compared to 22% for 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 tour platform .
As a percentage of revenue, sales and marketing expenses were 25% for both the year ended December 31, 2023 and 2022. 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 tour platform .
For the year ended December 31, 2022, the discrete items relate to a return to provision adjustment as well as additional tax expense resulting from stock-based compensation recorded in income tax for the period.
(5) This adjustment eliminates discrete items impacting income tax expense. For the year ended December 31, 2022, the discrete items relate to a return to provision adjustment as well as additional tax expense resulting from stock-based compensation recorded in income tax for the period.
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 markets we serve.
Overall, despite many uncertainties in the market regarding the economic outlook, the demand for our platforms and services continues to be stable in a majority of the markets we serve.
For the Newswire acquisition the Company determined the trademark was considered a definite lived asset which will be amortized over a period of 15 years. The goodwill and intangible assets are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified.
For the Newswire acquisition (see Note 4), the Company determined the trademarks acquired were considered a definite lived asset which will be amortized over a period of 15 years. The goodwill and intangible assets are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified.
The Company’s contracts include either a subscription to the entire platform or certain modules within the platform, or an agreement to perform services, or any combination thereof, and often contain multiple subscriptions and services.
The Company's contracts include either a subscription to its entire platform, certain modules within the platform or to its Press Release Optimizer Plan (“PRO”), or an agreement to perform services, or any combination thereof, and often contain multiple subscriptions and services.
Performance obligations of Compliance contracts include providing subscriptions to its cloud-based Platform id. Compliance module, Whistleblower module or other stand-ready obligations to deliver services and annual report printing and distribution. Additionally, services are provided on a per project basis. Set up fees for disclosure services are considered a separate performance obligation and are satisfied upfront.
Performance obligations of Compliance contracts include providing subscriptions to certain Compliance modules or other stand-ready obligations to deliver services and annual report printing and distribution. Additionally, services are provided on a per project basis. Set up fees for disclosure services are considered a separate performance obligation and are satisfied upfront.
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 2023 and beyond.
The success of our Communications offering has been led by our ACCESSWIRE branded newswire, which is now complemented by the Newswire business, and we believe we will continue to see stable to increased demand for our combined newswire business throughout 2024 and beyond.
This resulted in an increase in gross margin percentage from our Compliance business, which was 74% for the year ended December 31, 2022, compared to 70% for 2021. 24 Table of Contents General and Administrative Expenses General and administrative expenses consist primarily of salaries, stock-based compensation, insurance, fees for professional services, general corporate expenses (including bad debt expense) and facility and equipment expenses.
Gross margin percentage from our Compliance business was 77% for the year ended December 31, 2023, compared to 74% for 2022. 27 Table of Contents General and Administrative Expenses General and administrative expenses consist primarily of salaries, stock-based compensation, insurance, fees for professional services, general corporate expenses (including bad debt expense) and facility and equipment expenses.
Market factors like COVID-19, 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.
Market factors like the current military conflicts in Ukraine and Israel, instability in global energy markets, global inflation and the increase of interest rates have contributed to significant global economic uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets.
(3) For the year ended December 31, 2022, this adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the period of $263,000, one-time executive recruiting fee of $90,000 and termination benefits paid of $49,000.
For the year ended December 31, 2022, this adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the period of $263,000, one-time executive recruiting fee of $90,000 and termination benefits paid of $49,000. (4) This adjustment gives effect to the tax impact of all non-GAAP adjustments at the current Federal tax rate of 21%.
For the year ended December 31, 2021, this adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses incurred during the period. (2) For the year ended December 31, 2022, this adjustment relates to $49,000 of termination benefits and $60,000 paid for executive recruiting expenses during the period.
(2) For the year ended December 31, 2023, this adjustment gives effect to a one-time payment of $370,000 related to the early payment of the Seller Note. For the year ended December 31, 2022, this adjustment relates to $49,000 of termination benefits and $60,000 paid for executive recruiting expenses during the period.
Liquidity and Capital Resources As of December 31, 2022, we had $4,832,000 in cash and cash equivalents and $2,978,000 in net accounts receivable. Current liabilities as of December 31, 2022, totaled $31,191,000 including our note payable, accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.
Liquidity and Capital Resources As of December 31, 2023, we had $5,714,000 in cash and cash equivalents and $4,368,000 in net accounts receivable. Current liabilities as of December 31, 2023, totaled $12,650,000 including the current portion of our long-term debt, accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.
These increases were partially offset by a decrease in events and webcasting revenue due to less demand for our virtual products as conference and meetings began to move back to in-person events during the year. Communications revenue represented 69% of total revenue during the year compared to 64% in the prior year.
These increases were partially offset by a decrease in revenue from our events and webcasting business, primarily due to less virtual events, conferences and annual meetings. Communications revenue represented 73% of total revenue during the year compared to 69% in the prior year.
For service contracts that include stand ready obligations, revenue is recognized evenly over the contract period. For all other services delivered on a per project or event basis, the revenue is recognized at the completion of the event.
For all other services delivered on a per project or event basis, the revenue is recognized at the completion of the event.
Cost of revenues decreased by $64,000, or 1%, during the year ended December 31, 2022, as compared to the same period of 2021. Overall gross margin increased $1,695,000, or 11%, during the year ended December 31, 2022, compared to 2021.
Cost of revenues increased by $2,245,000, or 39%, during the year ended December 31, 2023, as compared to the same period of 2022. Overall gross margin increased $7,619,000, or 43%, during the year ended December 31, 2023, compared to 2022.
The increase is partially related to revenue attributed to the acquisition of Newswire on November 1, 2022 and an increase in ACCESSWIRE revenue partially offset by a decrease in Compliance revenue. Communications revenue increased $2,057,000, or 15%, to $16,115,000 for the year ended December 31, 2022, as compared to $14,058,000 during 2021.
The increase is primarily related to revenue attributed to the acquisition of Newswire on November 1, 2022 and an increase in Compliance revenue. Communications revenue increased $8,109,000, or 50%, to $24,224,000 for the year ended December 31, 2023, as compared to $16,115,000 during 2022.
Sales and marketing expenses were $5,922,000 for the year ended December 31, 2022, an increase of $1,029,000, or 21%, as compared to the prior year. This increase is primarily due to incremental costs associated with operating the Newswire business as well as our continued investment in advertising, digital marketing spend, and system enhancements, partially offset by sales commissions.
Sales and marketing expenses were $8,251,000 for the year ended December 31, 2022, an increase of $2,329,000, or 39%, as compared to $5,922,000 in the prior year. This increase is primarily due to incremental costs associated with operating the Newswire business.
Although we expect to continue to award stock 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. 27 Table of Contents A reconciliation of net income to adjusted net income for the years ended December 31, 2022 and 2021 is presented in the following table (in 000’s): Year Ended December 31, 2022 2021 Amount Per diluted share Amount Per diluted share Net income: $ 1,934 $ 0.52 $ 3,291 $ 0.86 Adjustments: Amortization of intangible assets (1) 816 0.22 459 0.12 Stock-based compensation expense (2) 763 0.20 333 0.09 Other unusual items (3) 402 0.11 (118 ) (0.03 ) Tax impact of adjustments (4) (416 ) (0.11 ) (142 ) (0.04 ) Impact of discrete items impacting income tax expense (5) 49 0.01 (152 ) (0.04 ) Non-GAAP net income: $ 3,548 $ 0.95 $ 3,671 $ 0.96 Weighted average number of common shares outstanding – diluted 3,740 3,820 (1) The adjustments represent the amortization of intangible assets related to acquired assets and companies.
A reconciliation of net income to adjusted net income for the years ended December 31, 2023 and 2022 is presented in the following table (in 000’s): Year Ended December 31, 2023 2022 Amount Per diluted share Amount Per diluted share Net income: $ 766 $ 0.20 $ 1,934 $ 0.52 Adjustments: Amortization of intangible assets (1) 2,741 0.72 816 0.22 Stock-based compensation expense (2) 1,365 0.35 763 0.20 Other unusual items (3) 982 0.26 402 0.11 Tax impact of adjustments (4) (1,068 ) (0.28 ) (416 ) (0.11 ) Impact of discrete items impacting income tax expense (5) 103 0.03 49 0.01 Non-GAAP net income: $ 4,889 $ 1.28 $ 3,548 $ 0.95 Weighted average number of common shares outstanding – diluted 3,816 3,740 32 Table of Contents (1) The adjustments represent the amortization of intangible assets related to acquired assets and companies.
We will also continue to focus on the following key strategic initiatives during 2023: ● Expanding our Communications products and adapting to this changing industry, ● Evaluating and completing acquisitions in areas of strategic focus, ● Expanding our Communications sales and marketing teams and digital marketing strategy, ● Expanding customer base, ● Expanding our newswire distribution, ● Investing in technology advancements and upgrades, ● Generating profitable sustainable growth ● Generating cash flows from operations.
We will also continue to focus on the following key strategic initiatives during 2024: ● Expanding our Communications products and adapting to this changing industry, ● Evaluating and completing acquisitions in areas of strategic focus, ● Expanding our Communications sales and marketing teams and digital marketing strategy, ● Expanding customer base, ● Expanding our newswire distribution, ● Investing in technology advancements and upgrades, ● Generating profitable sustainable growth ● Generating cash flows from operations. 33 Table of Contents We believe there is demand for our products around the world, led by our ACCESSWIRE and Newswire brands, as companies seek to find better platforms and tools to disseminate and communicate their messages in a more efficient and collaborative way.
A reconciliation of net income to adjusted EBITDA for the years ended December 31, 2022 and 2021 is presented in the following table (in 000’s): Year Ended December 31, 2022 2021 Amount Amount Net income: $ 1,934 $ 3,291 Adjustments: Acquisition and/or integration costs (1) 263 248 Other non-recurring expenses (2) 139 (366 ) Stock-based compensation expense (3) 763 333 Depreciation and amortization 1,033 1,143 Interest expense (income), net 11 (3 ) Income tax expense, net 724 821 Adjusted EBITDA: $ 4,867 $ 5,467 (1) This adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the periods.
These measures are defined differently by different companies, and accordingly, such measures may not be comparable to similarly titled measures of other companies, and have important limitations as an analytical tool. 31 Table of Contents A reconciliation of net income to adjusted EBITDA for the years ended December 31, 2023 and 2022 is presented in the following table (in 000’s): Year Ended December 31, 2023 2022 Amount Amount Net income: $ 766 $ 1,934 Adjustments: Depreciation and amortization 2,956 1,033 Interest expense, net 1,116 11 Income tax expense 543 724 EBITDA 5,381 3,702 Acquisition and/or integration costs (1) 546 263 Other non-recurring expenses (2) 436 139 Stock-based compensation expense (3) 1,365 763 Adjusted EBITDA: $ 7,728 $ 4,867 (1) This adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the periods.
Free cash flow and adjusted free cash flow do not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs.
Free cash flow and adjusted free cash flow do not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs. Our calculation of free cash flow and adjusted free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as a comparative measure.
By eliminating potential differences in results of operations between periods caused by factors such as acquisition-related expenses and other items as described below, we believe adjusted EBITDA and adjusted net income can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated.
By eliminating potential differences in results of operations between periods caused by factors such as acquisition-related expenses and other items as described below, we believe adjusted EBITDA and adjusted net income can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated. 30 Table of Contents Management uses free cash flow, which is defined as net cash flows provided by operating activities less payments for purchases of fixed assets and capitalized software, in reviewing the financial performance and cash generation by our various business groups and evaluating cash levels.
Product development expenses increased $231,000, or 21%, to $1,306,000 during the year ended December 31, 2022, as compared to 2021. This increase is directly attributed to incremental costs associated with operating the Newswire business offset by a decrease in fewer consultants used on development projects in 2022.
Product development expenses increased $1,245,000, or 95%, to $2,551,000 during the year ended December 31, 2023, as compared to $1,306,000 in 2022. This increase is directly attributed to incremental costs associated with operating the Newswire business as well as hiring our new Chief Technology Officer.
Given the economic consequences of the COVID-19 pandemic and recent economic downturn, additional attention has been paid to the financial viability of its customers. The Company generally writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection.
The Company generally writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection.
The increase is partially related to additional revenue from our acquisition of Newswire as noted above, which is all included in Communications revenue. Revenue from our ACCESSWIRE newswire brand increased 11% from the prior year, due to an increase in average price per release. We also generated increased revenue from licenses of our investor relations websites and data feeds.
The increase is primarily related to additional revenue from our acquisition of Newswire as noted above, which is all included in Communications revenue. Revenue from our ACCESSWIRE newswire brand increased 10% from the prior year.
Adjusted EBITDA and adjusted net income are non-GAAP financial measures and should not be considered as a substitute for analysis of our results as reported under US GAAP. These measures are defined differently by different companies, and accordingly, such measures may not be comparable to similarly titled measures of other companies, and have important limitations as an analytical tool.
Adjusted EBITDA and adjusted net income are non-GAAP financial measures and should not be considered as a substitute for analysis of our results as reported under US GAAP.
If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group.
If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group. 35 Table of Contents Business Combinations, Goodwill, and Intangible Assets The authoritative guidance for business combinations specifies the criteria for recognizing and reporting intangible assets apart from goodwill.
Income Taxes We recorded income tax expense of $724,000 during the year ended December 31, 2022, compared to $821,000 during the year ended December 31, 2021. The decrease in income tax expense is attributable to lower pre-tax income for the year ended December 31, 2022.
There was no other expense during the year ended December 31, 2022. Income Taxes We recorded income tax expense of $543,000 during the year ended December 31, 2023, compared to $724,000 during the year ended December 31, 2022.
Our calculation of free cash flow and adjusted free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as a comparative measure. 26 Table of Contents For the years ended December 31, 2022 and 2021, free cash flow and adjusted free cash flow were as follows: Year Ended December 31, 2022 2021 Net cash provided by operating activities (US GAAP) $ 4,019 $ 4,731 Payments for purchase of fixed assets and capitalized software (66 ) (277 ) Free cash flow (Non-GAAP) 3,953 4,454 Cash paid for acquisition and integration related items (1) 1,060 248 Cash paid for other unusual items (2) 109 30 Adjusted free cash flow (Non-GAAP) $ 5,122 $ 4,732 (1) For the year ended December 31, 2022, this adjustment relates to payments for representation and warranty insurance of $500,000, payments of $325,000 related to Newswire opening balance sheet costs that were not recouped until Q1 2023 and payments for one-time corporate projects, including acquisition and integration expenses, of $235,000.
For the years ended December 31, 2023 and 2022, free cash flow and adjusted free cash flow were as follows: Year Ended December 31, 2023 2022 Net cash provided by operating activities (US GAAP) $ 3,060 $ 4,019 Payments for purchase of fixed assets and capitalized software (503 ) (66 ) Free cash flow (Non-GAAP) 2,557 3,953 Cash paid for acquisition and integration related items (1) 373 1,060 Cash paid for other unusual items (2) 395 109 Adjusted free cash flow (Non-GAAP) $ 3,325 $ 5,122 (1) For the year ended December 31, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, paid during the period.
As a result, overall gross margin percentage increased to 76% during the year ended December 31, 2022, as compared to 74% during the prior year. Cost of revenues associated with Communications revenues increased $334,000, or 10%, as compared to the prior year primarily due to an increase in costs associated with operating the Newswire business.
The increase in cost of revenues and gross margin were primarily the result of the acquisition of Newswire in November 2022. Overall gross margin percentage remained flat at 76% during the year ended December 31, 2023, as compared to the prior year.
As of December 31, 2022, the interest rate was 5.81% and we did not owe any amounts on the Line of Credit. Disclosure about Off-Balance Sheet Arrangements We do not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.
Disclosure about Off-Balance Sheet Arrangements We do not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.
(3) The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services.
For the year ended December 31, 2022, this adjustment gives effect to a one-time executive recruiting fee of $90,000 and termination benefits of $49,000. (3) The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services.
Gross margin percentage associated with our Communications revenues was 77% for the year ended December 31, 2022, compared to 76% for 2021. The increase in gross margin percentage is primarily attributable to an increase in revenue from our high margin ACCESSWIRE business as a percentage of overall Communications revenue.
Gross margin percentage associated with our Communications revenues was 76% for the year ended December 31, 2023, compared to 77% for 2022. Cost of revenues associated with our Compliance revenues increased $179,000, or 9%, as compared to the prior year.
Revenue Backlog As of December 31, 2022, our deferred revenue balance was $5,405,000, which we expect to recognize over the next twelve months, compared to $3,086,000 at December 31, 2021, an increase of 75%.
Deferred Revenue As of December 31, 2023, our deferred revenue balance was $5,412,000, which we expect to recognize over the next twelve months, compared to $5,405,000 as of December 31, 2022. Deferred revenue primarily consists of advance billings for packages of our news distribution products as well as advance billings for subscriptions of our cloud-based products and annual service contracts.
As a percentage of revenue, product development expenses increased to 6% for the year ended December 31, 2022, as compared to 5% for 2021. Depreciation and Amortization Expenses During the year ended December 31, 2022, depreciation and amortization expenses increased by $367,000 or 61%, to $970,000, as compared to $603,000 during 2021.
During the year ended December 31, 2023, we capitalized $478,000 of costs related to the development of our new artificial intelligence and media database products. No costs were capitalized during the year ended December 31, 2022. As a percentage of revenue, product development expenses increased to 8% for the year ended December 31, 2023, as compared to 6% for 2022.
Cost of revenues associated with our Compliance revenues decreased $398,000, or 17%, as compared to the prior year. The decrease in Compliance cost of revenues is due to lower amortization expense associated with our disclosure software partially offset by an increase in print and postage costs associated with the increase in revenues from print and proxy fulfillment services.
The increase in Compliance cost of revenues is primarily the result of an increase in print and postage costs associated with the increase in revenues from print and proxy fulfillment services.
The difference in our effective tax rate of 27% and the statutory rate of 21% is primarily attributable to state income taxes, foreign taxes and the impact of stock-based compensation. 25 Table of Contents For the year ended December 31, 2021, the difference between our effective tax rate of 20% and the federal statutory rate of 21% was related to the effect of an equity-based compensation benefit, return to provision adjustment arising from a Sec. 986 loss from previously taxed earnings and profits resulting from the liquidation of Issuer Direct Ltd., Foreign Derived Intangible Income deductions, and foreign tax differentials, partially offset by state income taxes.
For the year ended December 31, 2022, the difference between our effective tax rate of 27% and the federal statutory rate of 21% was primarily attributable to state income taxes, foreign taxes and the impact of stock-based compensation.
Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. Fair Value Measurements Accounting Standards Codification (“ASC”) Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease 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. 28 Table of Contents The transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth.
We believe the transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth.
This increase is primarily driven by incremental expenses associated with operating the Newswire business , stock compensation expense, employee-related costs, recruiting fees and insurance expense associated with investments for future growth as well as an increase in bad debt expense.
General and administrative expenses were $8,935,000 for the year ended December 31, 2023, an increase of $1,972,000 or 28%, as compared to the prior year. The increase is primarily driven by additional expenses associated with costs to operate Newswire, employee-related costs, stock compensation expense, one-time transaction costs and bad debt expense, partially offset by a reduction in executive recruiting fees.
These decreases were partially offset by an increase in revenue from our print and proxy fulfilment services, due to larger transactions and an increase in projects during the year.
The increase is primarily related to an increase in revenue from our print and proxy fulfillment services due to a few significant transactions which occurred during the year, as well as an increase in revenue from our transfer agent services due to an increase in corporate actions and directives during the year.
For the year ended December 31, 2021, this adjustment gives effect to a benefit of $366,000, associated with employee retention credits related to the CARES Act, partially offset by one-time corporate projects, including merger and acquisition expenses, incurred during the period.
(3) For the year ended December 31, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $546,000 and a $370,000 payment related to the early extinguishment of our Seller Note, $45,000 of one-time, non-recurring expenses as well as a loss on the change in fair value of our interest rate swap of $21,000.
Compliance revenue decreased $426,000, or 5%, to $7,399,000 for the year ended December 31, 2022, as compared to $7,825,000 during 2021. The decrease in revenue is primarily related to decreases in revenue from our transfer agent business, disclosure reporting and legacy ARS services.
Compliance revenue increased $1,755,000, or 24%, to $9,154,000 for the year ended December 31, 2023, as compared to $7,399,000 during 2022.
General and administrative expenses were $6,963,000 for the year ended December 31, 2022, an increase of $1,142,000 or 20%, as compared to the prior year.
Depreciation and Amortization Expenses During the year ended December 31, 2023, depreciation and amortization expenses increased by $1,926,000 or 199%, to $2,896,000, as compared to $970,000 during 2022. The increase is due to additional amortization of intangible assets related to the Newswire acquisition.
Removed
The decrease in transfer agent revenue is primarily due to a decrease in market activity and corporation actions and directives for the year. The decrease in disclosure reporting and legacy ARS services is primarily due to customer attrition.
Added
Cost of revenues associated with Communications revenues increased $2,066,000, or 55%, as compared to the prior year primarily due to an increase in costs associated with operating the Newswire business as well as an increase in distribution costs associated with ACCESSWIRE as we continue to expand our distribution.
Removed
The increase is primarily due to the addition of deferred revenue associated with the acquisition of Newswire as well as an increase in subscriptions over the prior year. 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.
Added
Interest Expense, net We recognized interest expense of $1,284,000 during the year ended December 31, 2023, related to our new, long-term credit agreement, interest rate swap agreement, as well as our settled $22,000,000 note payable associated with the acquisition of Newswire “Seller Note”.
Removed
During the year ended December 31, 2021, we capitalized $215,000 of costs related to the development of our newsroom product, which launched in the third quarter of 2021. No costs were capitalized during the year ended December 31, 2022.
Added
Interest expense, net was partially offset by interest income of $168,000 for the year ended December 31, 2023, from deposit and money market accounts.
Removed
The increase is due to additional amortization of intangible assets related to the Newswire acquisition. Interest Income (Expense), net Interest income (expense), net, represents accrued interest of $220,000 attributed to the note assumed with the acquisition of Newswire, partially offset by interest income on deposit and money market accounts.
Added
Interest expense, net for the year ended December 31, 2022, represents accrued interest associated with the Seller note offset by interest income associated with deposit and money market accounts. 28 Table of Contents Other expense Other expense represents $370,000 paid to extinguish the Seller Note as well as a loss on the change in fair value of our interest rate swap agreement.
Removed
Other Income For the year ended December 31, 2021, other income 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”).
Added
The difference in our effective tax rate of 41.5% and the statutory rate of 21% is primarily attributable to state income taxes, the impact of stock-based compensation as well as additional tax expense associated with the purchase accounting related to the acquisition of Newswire.
Removed
As of December 31, 2022, our current liabilities exceeded our current assets by $21,771,000. While our current liabilities exceed current assets, we believe we will be able to refinance the note payable attributed to the Newswire acquisition before maturity due to our historical ability to generate cash as well as benefit from the addition of Newswire operations.
Added
As of December 31, 2023, our current liabilities exceeded our current assets by $1,146,000. On March 20, 2023 (the “Closing Date”), the Company entered into a $25 million credit agreement (the “Credit Agreement”) with Pinnacle Bank (“Pinnacle”).
Removed
We are actively involved in refinancing discussions at the time of this filing. Effective October 3, 2021, we renewed our unsecured Line of Credit, which changed the interest rate from LIBOR plus 1.75% to SOFR (Secured Overnight Financing Rate) plus 1.75%. The amount of funds available for borrowing remained $3,000,000 and the term remained two years.
Added
The Credit Agreement provides for the following: (i) term loan facility in an aggregate principal amount of $20 million (the “Term Loan”), and (ii) revolving letter of credit in an up to aggregate principal amount of $5 million (the “Revolving LOC”), subject to an 85% limit based on the current eligible accounts receivable (as defined in the Credit Agreement).
Removed
Management uses free cash flow, which is defined as net cash flows provided by operating activities less payments for purchases of fixed assets and capitalized software, in reviewing the financial performance and cash generation by our various business groups and evaluating cash levels.
Added
Pursuant to the terms of the Credit Agreement, the per annum interest rate of the Term Loan is variable based on the one-month secured overnight financing rate (“SOFR”) plus 2.35%, subject to a minimum SOFR of 2.00%.
Removed
For the three months and full year ended December 31, 2021, this amount represents executive recruiting expenses paid during the period.
Added
However, the Term Loan issued on the Closing Date has a per annum interest rate of 6.217%, which was fixed with respect to the entire principal amount as a result of an interest rate swap agreement entered into between the Company and Pinnacle on the Closing Date in accordance with the terms of the Credit Agreement.
Removed
The decrease in free cash flow for fiscal year 2022 compared to the prior fiscal year was primarily due to an increase in cash paid attributed to acquisition and integration items, partially offset by less payments made related to capitalized software in 2022 compared to 2021. Free cash flow and adjusted free cash flow are non-GAAP financial measures.
Added
The Company began making monthly interest-only payments on the Term Loan on April 1, 2023. Beginning on January 1, 2024, the Company will make monthly principal payments of $333,333 plus interest payments on the Term Loan until the maturity date of December 28, 2028.
Removed
(2) For the year ended December 31, 2022, this adjustment gives effect to a one-time executive recruiting fee of $90,000 and termination benefits of $49,000. For the year ended December 31, 2021, this adjustment gives effect to a benefit of $366,000 associated with employee retention credits related to the CARES Act.
Added
The proceeds of the Term Loan along with certain cash on hand of the Company were used to repay in its entirety the one-year Secured Promissory Note (the “Secured Note”) issued to Lead Capital, LLC in connection with the Company’s November 1, 2022 acquisition of iNewswire.com LLC for a lump sum payment of $22,880,000.
Removed
(4) This adjustment gives effect to the tax impact of all non-GAAP adjustments at the current Federal tax rate of 21%. (5) This adjustment eliminates discrete items impacting income tax expense.
Added
In order to settle the Secured Note on March 20, 2023, the Company paid $370,000 to the Seller, with the Seller agreeing to forgive $440,000 of interest which would have otherwise been due. The $370,000 payment is recorded in Other expense, net on the Consolidated statements of operations.
Removed
For the year ended December 31, 2021, the discrete items relate to a return to provision adjustment arising from a SEC. 986 loss from previously taxed earnings and profits resulting from the liquidation of a foreign subsidiary and an excess stock-based compensation benefit recognized in income tax during the period.
Added
The Company currently has no plans to utilize the Revolving LOC but may do so in the future. If the Company does utilize any funds under the Revolving LOC, the funds will bear interest at a per annum rate equal to the then current SOFR plus 2.05%.
Removed
Outlook The following statements and certain statements made elsewhere in this document are based upon current expectations.
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