Issuer Direct Corporation (NYSE:ISDR) Q3 2020 Results Conference Call October 29, 2020 4:30 PM ET Company Participants Brian Balbirnie - Founder and Chief Executive Officer Steve Knerr - Chief Financial Officer Conference Call Participants Mike Grondahl - Northland Securities Operator Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation’s Third Quarter 2020 Earnings Conference Call. Today’s call will be conducted by the Company’s Founder and Chief Executive Officer, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ——————— ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: _____________ to _____________ ISSUER DIRECT CORPORATION (Exact name of registrant as specified in its charter) ——————— (State or Other Jurisdictio ...

Issuer Direct Corporation (NYSE:ISDR) Q2 2020 Earnings Conference Call July 30, 2020 4:30 PM ET Company Participants Brian Balbirnie - Founder and Chief Executive Officer Steve Knerr - Chief Financial Officer Conference Call Participants Brock Erwin - CleverInvesting Luke Horton - Northland Securities Ian Cassel - MicroClub Eric Weinstein - Chancellor Capital Operator Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation Second Quarter 2020 Earnings Conference Call. T ...

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ——————— For the quarterly period ended: June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: _____________ to _____________ ISSUER DIRECT CORPORATION (Exact name of registrant as specified in its charter) ——————— Delaware 1-10185 26-1331503 (Sta ...

```markdown PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements.) Presents Issuer Direct's unaudited consolidated financial statements, including balance sheets, income, equity, cash flows, and notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202020%20%28Unaudited%29%20and%20December%2031%2C%202019) Details Issuer Direct's financial position, including assets, liabilities, and equity, as of March 31, 2020, and December 31, 2019 Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019 | Metric | March 31, 2020 (Unaudited, in thousands) | December 31, 2019 (in thousands) | Change (vs. Dec 31, 2019) | | :-------------------------------- | :--------------------------------------- | :------------------------------- | :------------------------ | | Total Assets | $32,574 | $32,390 | +$184 | | Cash and cash equivalents | $16,197 | $15,766 | +$431 | | Accounts receivable (net) | $2,172 | $2,051 | +$121 | | Total current assets | $18,610 | $18,006 | +$604 | | Total liabilities | $6,366 | $6,290 | +$76 | | Total stockholders' equity | $26,208 | $26,100 | +$108 | [Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Presents revenues, costs, and net income for the three months ended March 31, 2020, and 2019 Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | YoY Change | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | | Revenues | $4,016 | $4,179 | -$163 (-3.9%) | | Cost of revenues | $1,253 | $1,302 | -$49 (-3.8%) | | Gross profit | $2,763 | $2,877 | -$114 (-4.0%) | | Operating income | $248 | $147 | +$101 (+68.7%) | | Income before income taxes | $306 | $218 | +$88 (+40.4%) | | Net income | $226 | $205 | +$21 (+10.2%) | | Income per share – basic | $0.06 | $0.05 | +$0.01 | | Income per share – fully diluted | $0.06 | $0.05 | +$0.01 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Reports net income and other comprehensive income components for Q1 2020 and Q1 2019 Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | YoY Change | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | | Net income | $226 | $205 | +$21 | | Foreign currency translation adjustment | $40 | -$3 | +$43 | | Comprehensive income | $266 | $202 | +$64 | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Consolidated%20Statement%20of%20Stockholders%27%20Equity%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Outlines changes in stockholders' equity, including net income, currency adjustments, and stock repurchases for Q1 2020 - Total stockholders' equity increased from **$26,100 thousand** at December 31, 2019, to **$26,208 thousand** at March 31, 2020[21](index=21&type=chunk) - Key movements include **$226 thousand** in net income, **$40 thousand** from foreign currency translation, and a **$203 thousand** reduction from stock repurchase and retirement[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Summarizes cash flows from operating, investing, and financing activities for Q1 2020 and Q1 2019 Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 | Metric | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | YoY Change | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | | Net cash provided by operating activities | $602 | $536 | +$66 | | Net cash used in investing activities | $0 | -$2,794 | +$2,794 | | Net cash used in financing activities | -$203 | $0 | -$203 | | Net change in cash | $399 | -$2,258 | +$2,657 | | Cash – ending | $16,197 | $14,961 | +$1,236 | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Provides detailed notes on accounting policies, acquisitions, equity, taxes, leases, revenue, line of credit, and subsequent events [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) Explains the preparation basis for interim consolidated financial statements, adhering to Form 10-Q and Regulation S-X - The unaudited interim consolidated financial statements are prepared in accordance with Form 10-Q and Article 10 of Regulation S-X[27](index=27&type=chunk) - Management believes they include all normal recurring adjustments necessary for a fair presentation[27](index=27&type=chunk) - Interim results are not necessarily indicative of results for the entire year and should be read in conjunction with the 2019 audited financial statements[27](index=27&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines key accounting policies for revenue, capitalized development costs, and goodwill impairment (ASU 2017-04) - Revenue is primarily derived from cloud-based product subscriptions and compliance/other services, recognized over the contract period for subscriptions/stand-ready obligations or upon event completion for per-project services[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - Costs incurred to develop cloud-based platform products are capitalized when the preliminary project phase is complete and probable of completion/use, then amortized over their estimated useful life. No such costs were capitalized in Q1 2020 or Q1 2019[43](index=43&type=chunk) - The company adopted ASU 2017-04, simplifying the goodwill impairment test by eliminating Step 2, effective for fiscal years beginning after December 15, 2019[53](index=53&type=chunk) [Note 3: Recent Acquisitions](index=13&type=section&id=Note%203%3A%20Recent%20Acquisitions) Details the January 2019 acquisition of the VisualWebcaster Platform from Onstream Media for $2,788,000 cash - On January 3, 2019, the company acquired the VisualWebcaster Platform (VWP) from Onstream Media Corporation for a cash payment of **$2,788,000**[54](index=54&type=chunk)[57](index=57&type=chunk) Identified Intangible Assets from VWP Acquisition (in 000's) | Asset | Value | | :-------------------- | :---- | | Customer relationships | $865 | | Technology | $497 | | Non-compete agreement | $69 | | Goodwill | $1,344 | | **Total** | **$2,775** | [Note 4: Equity](index=15&type=section&id=Note%204%3A%20Equity) Covers remaining shares under the 2014 Equity Incentive Plan, stock compensation, and the expanded share repurchase program - As of March 31, 2020, **38,583 shares** remain to be granted under the 2014 Equity Incentive Plan[59](index=59&type=chunk) - Stock-based compensation expense for the three months ended March 31, 2020, was **$45,000**[21](index=21&type=chunk) - The share repurchase program was increased to **$2,000,000** on March 16, 2020. As of March 31, 2020, **97,870 shares** were repurchased at an aggregate cost of **$972,000**[62](index=62&type=chunk)[63](index=63&type=chunk) [Note 5: Income taxes](index=16&type=section&id=Note%205%3A%20Income%20taxes) Discusses income tax expense for Q1 2020 and Q1 2019, highlighting variances from the U.S. statutory rate - Income tax expense for Q1 2020 was **$80,000**, compared to **$13,000** in Q1 2019[64](index=64&type=chunk) - The variance from the U.S. statutory rate (**21%**) in Q1 2020 is primarily due to state income tax[64](index=64&type=chunk) - In Q1 2019, the variance was primarily due to excess stock-based compensation tax benefits (**$35,000**) and tax credits, offset by state income taxes[64](index=64&type=chunk) [Note 6: Leases](index=16&type=section&id=Note%206%3A%20Leases) Details the new corporate headquarters lease, resulting ROU asset, lease liability, and lease expenses - A new corporate headquarters lease in Raleigh, NC, commenced October 2, 2019, resulting in a **$2,596,000** Right-of-Use (ROU) asset and corresponding lease liability[65](index=65&type=chunk) - Total lease liabilities were **$2,610,000** as of March 31, 2020[69](index=69&type=chunk) Lease Expense (in 000's) | Lease Expense | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Operating lease expense | $87 | $41 | | Variable lease expense | $32 | $42 | | **Total Rent expense** | **$119** | **$83** | [Note 7: Revenue](index=17&type=section&id=Note%207%3A%20Revenue) Disaggregates revenue by Platform and Technology versus Services, noting no single customer exceeds 10% of revenue Revenue Disaggregated by Stream (in 000's) | Revenue Streams | 2020 | % of Total | 2019 | % of Total | | :-------------------- | :----- | :--------- | :----- | :--------- | | Platform and Technology | $2,685 | 66.9% | $2,665 | 63.8% | | Services | $1,331 | 33.1% | $1,514 | 36.2% | | **Total** | **$4,016** | **100.0%** | **$4,179** | **100.0%** | - No single customer accounted for more than 10% of operating revenues during the three-month periods ended March 31, 2020 or 2019[71](index=71&type=chunk) [Note 8: Line of Credit](index=17&type=section&id=Note%208%3A%20Line%20of%20Credit) Describes the renewed $3,000,000 line of credit, its interest rate, and its undrawn status as of March 31, 2020 - The company renewed its **$3,000,000** line of credit on October 3, 2019, extending the term to two years[72](index=72&type=chunk) - The interest rate is LIBOR plus **1.75%** (**2.74%** as of March 31, 2020)[72](index=72&type=chunk) - No amounts were owed on the line of credit as of March 31, 2020[72](index=72&type=chunk) [Note 9: Subsequent Events](index=18&type=section&id=Note%209%3A%20Subsequent%20Events) Addresses COVID-19 impact, goodwill review, and the company's Paycheck Protection Program loan decision - The COVID-19 pandemic, declared a Public Health Emergency in January 2020 and a pandemic in March 2020, has led to temporary office closures and is expected to have an adverse impact on economies and financial markets[73](index=73&type=chunk) - The company performed a qualitative and quantitative review of goodwill and intangible assets as of March 31, 2020, determining no impairment, but will re-evaluate at the end of Q2 2020 due to pandemic uncertainty[73](index=73&type=chunk) - The company entered into a **$1,025,000** Paycheck Protection Program (PPP) loan on April 16, 2020, but returned all funds on April 28, 2020, after re-evaluating certification requirements[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Analyzes Issuer Direct's Q1 2020 financial condition, platform strategy, COVID-19 impacts, and strategic initiatives [Overview](index=19&type=section&id=Overview) Introduces Issuer Direct as a communications and compliance technology provider, its customer base, and initial COVID-19 impact - Issuer Direct is a premier provider of communications and compliance technology solutions, primarily through its cloud-based Platform id[79](index=79&type=chunk) - The company serves a diverse customer base including corporate issuers, private companies, investment banks, IR/PR firms, and the accounting/legal communities[80](index=80&type=chunk) - The COVID-19 pandemic has led to temporary office closures and remote work, with potential for material disruption, revenue decline, asset value decline, and customer payment issues, though no material impact was seen by Q1 2020 other than remote work[82](index=82&type=chunk) [Platform and Technology](index=21&type=section&id=Platform%20and%20Technology) Discusses Platform and Technology revenue growth, platform-first strategy, and new virtual meeting products due to COVID-19 - Platform and Technology revenue grew to **67%** of total revenue in Q1 2020 (from **64%** in Q1 2019), driven by increased Platform id. subscriptions and a focus on a platform-first engagement strategy[85](index=85&type=chunk) - The company developed a new Virtual Annual Meeting product and upgraded conference software for fully virtual events in response to COVID-19 business limitations[86](index=86&type=chunk) - Platform id. aims to provide a single, secure, cloud-based platform for all investor relations, communications, and compliance needs[88](index=88&type=chunk) [Communications Modules](index=23&type=section&id=Communications%20Modules) Details performance and strategic developments of ACCESSWIRE, PCO, Investor Network, Webcasting, and IR Content modules [ACCESSWIRE](index=23&type=section&id=ACCESSWIRE) Highlights ACCESSWIRE's 1% Q1 2020 revenue growth, or 36% excluding the lost investment commentary business - ACCESSWIRE revenue grew **1%** in Q1 2020 (YoY), and **36%** when excluding the impact of the lost investment commentary business, which accounted for approximately **$335,000** of revenue in Q1 2019[90](index=90&type=chunk) [Professional Conference Organizer (PCO) Module](index=23&type=section&id=Professional%20Conference%20Organizer%20%28PCO%29%20Module) Addresses conference cancellations due to COVID-19 and the company's upgrade for fully virtual events - A significant portion of conferences scheduled to use the PCO software in Q1 and Q2 2020 were cancelled or delayed due to the coronavirus pandemic[94](index=94&type=chunk) - The company upgraded its conference software to allow fully virtual conferences with one-on-one meetings, audio, video, and share features to address these impacts[94](index=94&type=chunk) [Investor Network](index=23&type=section&id=Investor%20Network) Focuses on Investor Network integration into Platform id. for digital distribution and ARS user migration - The Investor Network module is being integrated into Platform id. to refine digital distribution of customer messages to the investment community, with a focus on migrating historical Annual Report Service (ARS) users to this new digital subscription business[95](index=95&type=chunk) [Webcasting](index=23&type=section&id=Webcasting) Explains VWP acquisition's expansion of webcasting capabilities and increased demand due to the coronavirus outbreak - The VisualWebcaster Platform (VWP) acquisition enables hosting thousands of additional webcasts annually, diversifying from earnings events to corporate meetings, training sessions, and town halls[98](index=98&type=chunk) - Demand for the webcasting product has increased due to the coronavirus outbreak, as many companies are holding virtual meetings[98](index=98&type=chunk) [Investor Relations Content](index=25&type=section&id=Investor%20Relations%20Content) Describes the IR content network's data feeds and its integration into Platform id. for automatic content linking - The investor relations content network provides a robust series of data feeds (news, stock, fundamentals, regulatory filings) for creating a company's IR website tab[99](index=99&type=chunk) - Its integration into Platform id. allows automatic linking of public distribution content to corporate websites and data feed partners[99](index=99&type=chunk) [Compliance Modules](index=25&type=section&id=Compliance%20Modules) Covers Platform id.'s disclosure, whistleblower, stock transfer, and proxy modules, including virtual meeting upgrades - Platform id.'s disclosure reporting module offers document conversion, editing, and filing to the SEC's EDGAR system, providing higher margins than legacy disclosure conversion services[100](index=100&type=chunk) - The whistleblower module delivers secure notifications and incident workflow management, supported and subsidized by NYSE offerings[101](index=101&type=chunk) - The cloud-based stock transfer module provides customers with real-time access to shareholder information, stock ledgers, and the ability to issue new shares[102](index=102&type=chunk) - The proxy module, a real-time voting platform, has been upgraded to support virtual annual general meetings using webcasting technology[103](index=103&type=chunk) [Services](index=25&type=section&id=Services) Discusses expected decline in Services revenue as the company shifts to cloud-based subscriptions, accelerated by coronavirus - The company expects continued decreases in Services revenue as it focuses on its cloud-based subscription business[104](index=104&type=chunk) - Services include SEC document conversion/XBRL tagging, SEDAR filings, telecommunications, and print/fulfillment of stock certificates, proxy materials, or annual reports[104](index=104&type=chunk) - Demand is shifting from traditional printed, service-based engagements to digital distribution, voting, and transfer of records, a trend accelerated by the coronavirus outbreak[107](index=107&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Analyzes Q1 2020 financial performance, including revenues, costs, gross margin, operating expenses, interest, and net income - Total operating costs and expenses decreased by **$215,000 (8%)** to **$2,515,000** in Q1 2020 (YoY)[15](index=15&type=chunk) [Revenues](index=27&type=section&id=Revenues) Details the 4% decrease in total revenue for Q1 2020, driven by Services decline, offset by Platform and Technology growth - Total revenue decreased by **$163,000 (4%)** to **$4,016,000** in Q1 2020 (YoY), primarily due to a decrease in Services revenue[109](index=109&type=chunk) - Platform and Technology revenue increased **$20,000 (1%)** to **$2,685,000**, now representing **67%** of total revenue[110](index=110&type=chunk) - Services revenue decreased **$183,000 (12%)** to **$1,331,000**, mainly due to declines in transfer agent services and print/proxy distribution, partially offset by increased webcasting services[111](index=111&type=chunk) - ACCESSWIRE revenue grew **36%** in Q1 2020 (YoY) when excluding the investment commentary business, which accounted for approximately **$335,000** of revenue in Q1 2019[110](index=110&type=chunk) [Revenue Backlog](index=29&type=section&id=Revenue%20Backlog) Reports deferred revenue at March 31, 2020, and December 31, 2019, mostly recognized within twelve months - Deferred revenue was **$1,879,000** at March 31, 2020, up from **$1,812,000** at December 31, 2019, with the majority expected to be recognized within the next twelve months[114](index=114&type=chunk) [Cost of Revenues and Gross Margin](index=29&type=section&id=Cost%20of%20Revenues%20and%20Gross%20Margin) Examines the 4% decrease in cost of revenues and the maintained 69% overall gross margin percentage in Q1 2020 - Cost of revenues decreased by **$49,000 (4%)** in Q1 2020 (YoY), maintaining an overall gross margin percentage of **69%**[115](index=115&type=chunk) - Platform and Technology gross margin percentage slightly decreased to **74%** (from **75%**) due to increased newswire distribution costs[116](index=116&type=chunk) - Services gross margin percentage decreased to **57%** (from **58%**) due to lower transfer agent revenue on relatively fixed costs[117](index=117&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20Expenses) Breaks down changes in G&A, sales & marketing, product development, and depreciation & amortization expenses [General and Administrative Expense](index=29&type=section&id=General%20and%20Administrative%20Expense) Details the 11% decrease in G&A expenses due to reduced bad debt provision and acquisition-related fees - General and administrative expenses decreased by **$145,000 (11%)** to **$1,216,000** in Q1 2020 (YoY), primarily due to a **$131,000** decrease in bad debt provision and the absence of **$112,000** in VWP acquisition-related professional fees from Q1 2019[118](index=118&type=chunk) - As a percentage of revenue, general and administrative expenses decreased to **30%** in Q1 2020 from **33%** in Q1 2019[119](index=119&type=chunk) [Sales and Marketing Expenses](index=29&type=section&id=Sales%20and%20Marketing%20Expenses) Explains the 9% increase in sales and marketing expenses driven by personnel and digital marketing, offset by lower tradeshow costs - Sales and marketing expenses increased by **$76,000 (9%)** to **$896,000** in Q1 2020 (YoY), driven by increased personnel costs and digital marketing, partially offset by decreased tradeshow expenses due to the coronavirus[120](index=120&type=chunk) - As a percentage of revenue, sales and marketing expenses increased to **22%** in Q1 2020 from **20%** in Q1 2019[121](index=121&type=chunk) [Product Development Expenses](index=29&type=section&id=Product%20Development%20Expenses) Reports a 42% decrease in product development expenses primarily due to a reduction in development team headcount - Product development expenses decreased by **$143,000 (42%)** to **$194,000** in Q1 2020 (YoY), primarily due to a reduction in development team headcount[122](index=122&type=chunk) - As a percentage of revenue, product development expenses decreased to **5%** in Q1 2020 from **8%** in Q1 2019[123](index=123&type=chunk) [Depreciation and Amortization](index=29&type=section&id=Depreciation%20and%20Amortization) Notes a slight 1% decrease in depreciation and amortization expenses for Q1 2020 compared to the prior year - Depreciation and amortization expenses decreased slightly by **$3,000 (1%)** in Q1 2020 (YoY)[124](index=124&type=chunk) [Interest income, net](index=31&type=section&id=Interest%20income%2C%20net) Reports a decrease in net interest income for Q1 2020 compared to Q1 2019 - Net interest income decreased to **$58,000** in Q1 2020 from **$71,000** in Q1 2019[15](index=15&type=chunk)[126](index=126&type=chunk) [Income tax (benefit) expense](index=31&type=section&id=Income%20tax%20%28benefit%29%20expense) Discusses the increase in income tax expense for Q1 2020, primarily due to state income taxes - Income tax expense increased to **$80,000** in Q1 2020 from **$13,000** in Q1 2019[127](index=127&type=chunk) - The variance from the U.S. statutory rate (**21%**) is primarily due to state income taxes in Q1 2020, and excess stock-based compensation tax benefits in Q1 2019[127](index=127&type=chunk) [Net Income](index=31&type=section&id=Net%20Income) Highlights the increase in net income for Q1 2020, attributed to maintained gross margin and reduced operating expenses - Net income increased to **$226,000** in Q1 2020 from **$205,000** in Q1 2019[128](index=128&type=chunk) - This improvement was achieved despite a revenue decrease, attributed to maintained gross margin percentage and reduced operating expenses (bad debt, acquisition costs, lower development headcount)[129](index=129&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's financial liquidity, including cash, current asset-to-liability ratio, and undrawn line of credit - As of March 31, 2020, the company had **$16,197,000** in cash and cash equivalents[130](index=130&type=chunk) - Current assets exceeded current liabilities by **$14,607,000**[130](index=130&type=chunk) - The company's **$3,000,000** line of credit was renewed for two years and remained undrawn as of March 31, 2020[131](index=131&type=chunk) [2020 Outlook](index=31&type=section&id=2020%20Outlook) Outlines COVID-19 impact on 2020 outlook, shifting demand, and key strategic initiatives for growth - The 2020 outlook is significantly impacted by the COVID-19 pandemic, leading to remote work and potential adverse effects on financial position, operations, and cash flows[133](index=133&type=chunk) - Demand for platforms remains stable, but physical conference software and transfer agent services are declining, while webcasting demand is increasing, prompting new virtual meeting products[134](index=134&type=chunk)[135](index=135&type=chunk) - Key strategic initiatives for 2020 include expanding Platform and Technology products, pursuing strategic acquisitions, growing the customer base, expanding newswire distribution, developing the Insight and Analytics module, and generating profitable sustainable growth and cash flows from operations[138](index=138&type=chunk)[139](index=139&type=chunk)[142](index=142&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of material off-balance sheet arrangements affecting the company's financial condition or operations - The company has no material off-balance sheet arrangements that are reasonably likely to affect its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources[140](index=140&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) States that disclosures regarding quantitative and qualitative market risk are not applicable for the reporting period - This item is marked as 'Not applicable'[141](index=141&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures.) Confirms effectiveness of disclosure controls and absence of material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[141](index=141&type=chunk) - There were no material changes in internal control over financial reporting during the period covered by this report[142](index=142&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings.) States the company is not involved in any material litigation or aware of any threatened legal proceedings - The company is not a party to any litigation that might result in a material adverse effect to its business[144](index=144&type=chunk) - The company is not aware of any such threatened or pending litigation[144](index=144&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors.) Reports no material changes to risk factors, except for the newly identified potential adverse impact of the coronavirus outbreak - No material changes to risk factors previously disclosed in the most recent Form 10-K filing, except as set forth below[145](index=145&type=chunk) - The recent coronavirus outbreak could harm the company's business and results of operations due to travel restrictions, quarantines, business closures, and significant uncertainty in global financial markets[146](index=146&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) Indicates no unregistered sales of equity securities or use of proceeds to report for the period - None[147](index=147&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) States there were no defaults upon senior securities to report for the period - None[148](index=148&type=chunk) [Item 4. Mine Safety Disclosure](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosure.) States that the mine safety disclosure item is not applicable to the company - Not applicable[149](index=149&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information.) Indicates no other information was required to be reported for the period - None[150](index=150&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits.) Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL documents - Includes certifications of Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[152](index=152&type=chunk) - Includes XBRL Instance Document and various XBRL Taxonomy Extension Documents[152](index=152&type=chunk) [Signatures](index=36&type=section&id=Signatures) Confirms the report's signing by the Chief Executive Officer and Chief Financial Officer on April 30, 2020 - The report is signed by Brian R. Balbirnie, Chief Executive Officer, and Steven Knerr, Chief Financial Officer[155](index=155&type=chunk) - The signing date is April 30, 2020[155](index=155&type=chunk) ```

Issuer Direct Corporation (NYSE:ISDR) Q4 2019 Earnings Conference Call February 27, 2020 4:30 PM ET Company Participants Brian Balbirnie - Founder & CEO Steve Knerr - CFO Conference Call Participants Mike Grondahl - Northland Securities Brock Erwin - CleverInvesting Operator Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation Fourth Quarter and Year Ended 2019 Earnings Conference Call. Today's call will be conducted by the Company's Founder and Chief Executive Offic ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-K ——————— ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Year Ended: December 31, 2019 ——————— ISSUER DIRECT CORPORATION (Name of small business issuer in its charter) ——————— (State or Other Jurisdiction of Delaware 1-10185 26-1331503 (Commission File Number) (I.R.S. Employer Identification No.) One Glenwood Avenue, Suite 1001, Raleigh, NC 27603 (Address of Principal Executive O ...

PART I - FINANCIAL INFORMATION Presents unaudited consolidated financial statements and management's discussion and analysis for Issuer Direct Corporation [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements%2E) Presents unaudited consolidated financial statements, including balance sheets, income, equity, and cash flows, with notes on accounting policies, acquisitions, and taxes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and equity at specific points in time **Consolidated Balance Sheet Highlights (in thousands):** | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :-------------------------- | :----------- | :----------- | :----- | | Total Assets | $30,089 | $28,952 | +$1,137 | | Cash & Cash Equivalents | $15,807 | $17,222 | -$1,415 | | Accounts Receivable (net) | $2,054 | $1,593 | +$461 | | Goodwill | $6,051 | $5,032 | +$1,019 | | Intangible Assets (net) | $3,984 | $2,802 | +$1,182 | | Total Liabilities | $3,670 | $3,289 | +$381 | | Deferred Revenue | $1,566 | $1,249 | +$317 | | Total Stockholders' Equity | $26,419 | $25,663 | +$756 | [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income over specific interim periods **Consolidated Statements of Operations (in thousands, except per share amounts):** | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | YoY Change (%) | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Revenues | $4,019 | $3,255 | 23.5% | $12,336 | $10,584 | 16.5% | | Gross profit | $2,797 | $2,274 | 23.0% | $8,562 | $7,552 | 13.4% | | Operating income | $180 | $119 | 51.3% | $457 | $1,029 | -55.6% | | Net income | $200 | $86 | 132.6% | $617 | $772 | -20.2% | | Basic EPS | $0.05 | $0.02 | 150.0% | $0.16 | $0.24 | -33.3% | | Diluted EPS | $0.05 | $0.02 | 150.0% | $0.16 | $0.23 | -30.4% | [Unaudited Consolidated Statements of Comprehensive Income](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) Reports net income and other comprehensive income items, such as foreign currency translation adjustments **Consolidated Statements of Comprehensive Income (in thousands):** | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $200 | $86 | $617 | $772 | | Foreign currency translation adjustment | $(7) | $(10) | $(20) | $(43) | | Comprehensive income | $193 | $76 | $597 | $729 | [Unaudited Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Outlines changes in equity components, including net income, stock-based compensation, and share repurchases - Total stockholders' equity increased by **$756,000** from December 31, 2018, to September 30, 2019, primarily due to **net income ($617,000 for nine months)** and **stock-based compensation ($396,000 for nine months)**, partially offset by a **$236,000 share repurchase**[19](index=19&type=chunk)[11](index=11&type=chunk)[21](index=21&type=chunk) **Stockholders' Equity Changes (in thousands):** | Metric | Dec 31, 2018 | Sep 30, 2019 | Change | | :-------------------------- | :----------- | :----------- | :----- | | Total Stockholders' Equity | $25,663 | $26,419 | +$756 | | Retained Earnings | $3,151 | $3,768 | +$617 | | Additional Paid-in Capital | $22,525 | $22,684 | +$159 | | Common Stock Shares Outstanding | 3,829,572 | 3,837,588 | +8,016 | [Unaudited Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities **Consolidated Statements of Cash Flows (in thousands):** | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | YoY Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :--------- | | Net cash provided by operating activities | $1,955 | $2,153 | -$198 | | Net cash used in investing activities | $(3,110) | $(1,192) | -$1,918 | | Net cash provided by (used in) financing activities | $(236) | $13,610 | -$13,846 | | Net change in cash | $(1,391) | $14,571 | -$15,962 | | Cash – ending | $15,807 | $19,444 | -$3,637 | - The significant increase in cash used in investing activities was primarily due to the **$2.788 million purchase of the VisualWebcaster Platform in 2019**, compared to the **$1.123 million acquisition of Filing Services Canada, Inc. in 2018**[21](index=21&type=chunk)[53](index=53&type=chunk)[59](index=59&type=chunk) - The shift in financing activities from a large inflow in 2018 to an outflow in 2019 was mainly due to **proceeds from a $13.323 million secondary stock offering in 2018** and a **$236,000 payment for stock repurchase and retirement in 2019**[21](index=21&type=chunk)[148](index=148&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Provides context for financial statements, detailing accounting policies, recent acquisitions, equity changes, income taxes, and lease accounting standards [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) Explains the preparation of interim financial statements in accordance with Form 10-Q and Regulation S-X - The unaudited interim consolidated financial statements are prepared in accordance with Form 10-Q and Article 10 of Regulation S-X, including all normal recurring adjustments necessary for fair presentation, with certain information and footnote disclosures condensed or omitted[23](index=23&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Details the accounting principles for revenue recognition, lease accounting, and other material financial items - Revenue is primarily from cloud-based product subscriptions and compliance/other services, recognized over contract periods for subscriptions and upon event completion for per-event services[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - The company adopted ASC Topic 842, Leases, on January 1, 2019, recognizing ROU assets and lease liabilities on the balance sheet for leases with terms longer than 12 months[50](index=50&type=chunk)[52](index=52&type=chunk) **Balance Sheet Impact of ASC 842 Adoption (Jan 1, 2019, in 000's):** | Metric | Amount | | :---------------- | :----- | | ROU asset | $102 | | Lease liability | $135 | | Deferred rent | $(33) | [Note 3: Recent Acquisitions](index=14&type=section&id=Note%203%3A%20Recent%20Acquisitions) Provides details on the acquisitions of Visual Webcaster Platform (VWP) and Filing Services Canada Inc. (FSCwire) - Acquired Visual Webcaster Platform (VWP) on January 3, 2019, for **$2.788 million cash**, adding over **120 customers** and strengthening webcasting offerings[53](index=53&type=chunk)[103](index=103&type=chunk) **VWP Acquisition Intangible Assets (in 000's):** | Asset | Value | | :-------------------------- | :----- | | Customer relationships | $1,190 | | Technology | $497 | | Non-compete agreement | $69 | | Goodwill | $1,019 | | Total | $2,775 | - Acquired Filing Services Canada Inc. (FSCwire) on July 3, 2018, for **$1.14 million cash** and **3,402 shares of restricted common stock ($62,000 fair value)**, enhancing global news distribution[59](index=59&type=chunk)[61](index=61&type=chunk) **FSCwire Acquisition Intangible Assets (in 000's):** | Asset | Value | | :-------------------------- | :----- | | Customer relationships | $311 | | Distribution partner relationships | $153 | | Goodwill | $962 | | Total | $1,426 | [Note 4: Equity](index=16&type=section&id=Note%204%3A%20Equity) Discusses changes in equity, including stock incentive plans and the share repurchase program - As of September 30, 2019, **23,500 shares** remain to be granted under the 2014 Equity Incentive Plan, with **$115,000 of unrecognized stock compensation**[64](index=64&type=chunk)[65](index=65&type=chunk) - The Company repurchased **24,980 shares for $236,000** under a **$1,000,000 share repurchase program** announced on August 7, 2019[67](index=67&type=chunk) [Note 5: Income taxes](index=17&type=section&id=Note%205%3A%20Income%20taxes) Presents the company's income tax expense and the factors influencing its effective tax rate **Income Tax Expense (in thousands):** | Period | 2019 | 2018 | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $59 | $32 | | Nine Months Ended Sep 30 | $105 | $246 | - For the nine months ended September 30, 2019, the variance from the **21% U.S. statutory rate** was primarily due to a **$24,000 stock-based compensation tax benefit**, return to provision adjustment, and tax credits, offset by state income taxes[68](index=68&type=chunk) [Note 6: Leases](index=17&type=section&id=Note%206%3A%20Leases) Details the impact of ASC Topic 842 adoption on ROU assets, lease liabilities, and lease expenses - As of September 30, 2019, ROU assets totaled **$104,000** and lease liabilities totaled **$108,000**, following the adoption of Topic 842[73](index=73&type=chunk) **Lease Expense (in thousands):** | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease expense | $41 | $29 | $124 | $88 | | Variable lease expense | $41 | $29 | $120 | $96 | | Total Rent expense | $82 | $58 | $244 | $184 | - A new lease for corporate headquarters in Raleigh, NC, commencing October 2, 2019, has minimum lease payments of **$2.997 million** through December 31, 2027[75](index=75&type=chunk) [Note 7: Revenue](index=18&type=section&id=Note%207%3A%20Revenue) Disaggregates revenue by stream (Platform & Technology, Services) and geographic region **Revenue Streams (in thousands):** | Revenue Streams | 3 Months Ended Sep 30, 2019 | % of Total | 3 Months Ended Sep 30, 2018 | % of Total | 9 Months Ended Sep 30, 2019 | % of Total | 9 Months Ended Sep 30, 2018 | % of Total | | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :--------- | :-------------------------- | :--------- | :-------------------------- | :--------- | | Platform and Technology | $2,712 | 67.5% | $2,085 | 64.1% | $8,038 | 65.2% | $6,363 | 60.1% | | Services | $1,307 | 32.5% | $1,170 | 35.9% | $4,298 | 34.8% | $4,221 | 39.9% | | Total | $4,019 | 100.0% | $3,255 | 100.0% | $12,336 | 100.0% | $10,584 | 100.0% | **Geographic Revenue (in thousands):** | Geographic region | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America | $3,908 | $3,078 | $11,928 | $10,000 | | Europe | $111 | $177 | $408 | $584 | | Total revenues | $4,019 | $3,255 | $12,336 | $10,584 | [Note 8: Line of Credit](index=19&type=section&id=Note%208%3A%20Line%20of%20Credit) Describes the company's revolving line of credit, including its terms and current utilization - The Line of Credit was renewed on October 4, 2018, increasing available funds from **$2.5 million to $3.0 million** and reducing the interest rate from **LIBOR + 2.50% to LIBOR + 1.75%**[79](index=79&type=chunk) - As of September 30, 2019, no amounts were owed on the Line of Credit[79](index=79&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%2E) Analyzes Issuer Direct's financial performance, liquidity, capital resources, and strategic outlook, emphasizing the shift to a cloud-based subscription model [Overview](index=20&type=section&id=Overview) Introduces Issuer Direct's business model, its cloud-based platform, and strategic focus on subscription revenue - Issuer Direct provides communications and compliance technology solutions via its Platform id.™ to a diverse customer base including corporate issuers, private companies, investment banks, and professional firms[85](index=85&type=chunk)[86](index=86&type=chunk) - The company is transitioning to a cloud-based subscription business, with Platform and Technology revenue increasing to **65% of total revenue** for the first nine months of 2019, up from **60% in 2018**[89](index=89&type=chunk) - Future investments will focus on current and additional Platform id. offerings to establish an ecosystem bringing issuers and investors closer, including understanding shareholder composition[90](index=90&type=chunk) [Platform id. Modules](index=22&type=section&id=Platform%20id.%20Modules) The core cloud-based Platform id. offers integrated modules for shareholder communications and compliance needs [Communications Modules](index=22&type=section&id=Communications%20Modules) Details modules like ACCESSWIRE, Professional Conference Organizer, and webcasting for investor communications - ACCESSWIRE news business grew **67% during Q3 2019** (excluding investment commentary business), despite the industry-wide loss of investment commentary content which previously generated significant revenue[96](index=96&type=chunk)[115](index=115&type=chunk) - The new Professional Conference Organizer (PCO) Module, released in late 2018, is a cloud-based platform and mobile app for managing investor conferences, integrating with other Platform id. communication tools[97](index=97&type=chunk)[98](index=98&type=chunk) - The acquisition of VWP significantly strengthened the webcasting product, adding over **120 customers** and expanding capabilities beyond earnings events to include corporate meetings and training sessions[103](index=103&type=chunk) [Compliance Modules](index=24&type=section&id=Compliance%20Modules) Describes modules for disclosure reporting (EDGAR, SEDAR, iXBRL) and stock transfer services - The Disclosure Reporting module supports document conversion, editing, and filing to SEC EDGAR and SEDAR, including newly mandated Inline XBRL (iXBRL) and IFRS taxonomies[106](index=106&type=chunk)[107](index=107&type=chunk) - The Stock Transfer module provides real-time access to shareholder information, stock ledgers, and reporting, enabling customers to manage capitalization tables and issue new shares from a cloud-based system[109](index=109&type=chunk) [Services](index=24&type=section&id=Services) Discusses traditional service offerings and the anticipated decline due to the shift towards digital subscriptions - The company expects decreases in Services revenue due to the focus on cloud-based subscriptions and customer attrition from legacy Annual Report Service (ARS) to digital fulfillment[111](index=111&type=chunk)[112](index=112&type=chunk) - Services include SEC document conversion, XBRL tagging, telecommunications, and print/fulfillment of stock certificates, proxy materials, or annual reports[111](index=111&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Revenue increased due to acquisitions, with Platform & Technology growth; operating expenses rose, leading to a nine-month net income decline [Revenues](index=25&type=section&id=Revenues) Analyzes total revenue growth, highlighting contributions from Platform & Technology, Services, and acquisitions **Revenue Performance (in thousands):** | Revenue (in thousands) | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | YoY Change (%) | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Total Revenue | $4,019 | $3,255 | 23.5% | $12,336 | $10,584 | 16.5% | | Platform & Technology | $2,712 | $2,085 | 30.1% | $8,038 | $6,363 | 26.3% | | Services | $1,307 | $1,170 | 11.7% | $4,298 | $4,221 | 1.8% | - Acquisitions of VWP and FSCwire contributed **$494,000** and **$1,477,000** to total revenue for the three and nine months ended September 30, 2019, respectively[114](index=114&type=chunk) - ACCESSWIRE revenue (excluding investment commentary business) increased **67%** and **39%** for the three and nine months ended September 30, 2019, respectively[115](index=115&type=chunk) [Revenue Backlog](index=26&type=section&id=Revenue%20Backlog) Reports on deferred revenue, new contract values, and total Platform id. subscriptions **Deferred Revenue (in thousands):** | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :-------------------------- | :----------- | :----------- | :----- | | Deferred Revenue | $1,566 | $1,249 | +$317 | - During the nine months ended September 30, 2019, the company entered into new contracts with **114 net new or existing customers**, representing an annualized contract value of **$748,000**[118](index=118&type=chunk) - Total Platform id. subscriptions reached **219** with an annual contract value of **$1,873,000** as of September 30, 2019[118](index=118&type=chunk) [Cost of Revenues and Gross Margin](index=26&type=section&id=Cost%20of%20Revenues%20and%20Gross%20Margin) Examines changes in cost of revenues and gross margin percentages across different revenue streams **Cost of Revenues and Gross Margin Performance (in thousands):** | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | YoY Change (%) | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Cost of Revenues | $1,222 | $981 | 24.6% | $3,774 | $3,032 | 24.5% | | Gross Profit | $2,797 | $2,274 | 23.0% | $8,562 | $7,552 | 13.4% | | Gross Margin % (Total) | 70% | 70% | 0 pp | 69% | 71% | -2 pp | | P&T Gross Margin % | 74% | 77% | -3 pp | 74% | 79% | -5 pp | | Services Gross Margin % | 60% | 57% | +3 pp | 61% | 60% | +1 pp | [Operating Expenses](index=26&type=section&id=Operating%20Expenses) Details trends in general and administrative, sales and marketing, product development, and depreciation expenses **Operating Expenses (in thousands):** | Operating Expenses | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | YoY Change (%) | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | General and administrative | $1,229 | $944 | 30.2% | $3,912 | $2,896 | 35.1% | | Sales and marketing expenses | $871 | $723 | 20.5% | $2,566 | $2,272 | 13.0% | | Product development | $288 | $333 | -13.6% | $968 | $916 | 5.7% | | Depreciation and amortization | $229 | $155 | 47.7% | $659 | $439 | 50.1% | - General and administrative expenses for the nine months ended September 30, 2019, included a **$550,000 increase in bad debt provision**, primarily for investment commentary newswire customers[122](index=122&type=chunk) - Depreciation and amortization increased significantly due to the amortization of intangible assets acquired in the VWP and FSCwire acquisitions[128](index=128&type=chunk) [Interest income (expense), net](index=27&type=section&id=Interest%20income%20(expense),%20net) Covers interest income from deposits and non-cash interest expense related to acquisitions - Net interest income (expense) includes interest income on deposits and money market accounts, partially offset by non-cash interest expense related to the Interwest acquisition[129](index=129&type=chunk) [Income tax (benefit) expense](index=27&type=section&id=Income%20tax%20(benefit)%20expense) Presents income tax expense and factors influencing the effective tax rate for the reporting periods **Income Tax Expense (in thousands):** | Period | 2019 | 2018 | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $59 | $32 | | Nine Months Ended Sep 30 | $105 | $246 | - For the nine months ended September 30, 2019, the variance from the **21% U.S. statutory rate** was primarily due to a **$24,000 stock-based compensation tax benefit**, return to provision adjustment, and tax credits, offset by state income taxes[130](index=130&type=chunk) [Net Income](index=27&type=section&id=Net%20Income) Analyzes the drivers behind changes in net income for the three and nine-month periods **Net Income (in thousands):** | Period | 2019 | 2018 | YoY Change (%) | | :-------------------------- | :----- | :----- | :------------- | | Three Months Ended Sep 30 | $200 | $86 | 132.6% | | Nine Months Ended Sep 30 | $617 | $772 | -20.2% | - The nine-month net income decline was primarily due to increased operating expenses, including bad debt and acquisition-related costs, and higher depreciation and amortization, offsetting revenue and gross margin growth[132](index=132&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's cash position, working capital, and available credit facilities **Liquidity Position (in thousands, as of Sep 30, 2019):** | Metric | Amount | | :-------------------------- | :----- | | Cash and cash equivalents | $15,807 | | Net accounts receivable | $2,054 | | Total current assets | $18,171 | | Total current liabilities | $2,958 | | Working Capital | $15,213 | - The Line of Credit was renewed, increasing available borrowing to **$3.0 million** with a reduced interest rate (**LIBOR + 1.75%**), and no amounts were owed as of September 30, 2019[134](index=134&type=chunk)[135](index=135&type=chunk) [2019 Outlook](index=28&type=section&id=2019%20Outlook) Outlines strategic initiatives and expectations for continued growth and transition to subscription models - The company anticipates stable demand for its platforms, with a continued shift from traditional service-based engagements to cloud-based subscription models and digital distribution[137](index=137&type=chunk) - Key strategic initiatives for the remainder of 2019 include expanding Platform and Technology business development, pursuing strategic acquisitions, growing the customer base, migrating acquired businesses to the current platform, expanding newswire distribution, investing in technology advancements, developing the Insight and Analytics module, and generating profitable, sustainable growth and cash flows[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [Off-Balance Sheet Arrangements](index=28&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of material off-balance sheet arrangements impacting financial condition - The company has no off-balance sheet arrangements that are material to its financial condition or results of operations[141](index=141&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk%2E) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company - This item is not applicable to the company[142](index=142&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES.](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures%2E) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, and there have been no material changes in internal control over financial reporting during the period - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[142](index=142&type=chunk) - There were no material changes in internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q[143](index=143&type=chunk) PART II – OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, and other relevant information [ITEM 1. LEGAL PROCEEDINGS.](index=30&type=section&id=Item%201.%20Legal%20Proceedings%2E) The company is not currently a party to any material litigation, nor is it aware of any threatened or pending litigation that could have a material adverse effect on its business - The company is not a party to any material litigation and is unaware of any threatened or pending litigation that might result in a material adverse effect to its business[146](index=146&type=chunk) [ITEM 1A. RISK FACTORS.](index=30&type=section&id=Item%201A.%20Risk%20Factors%2E) There have been no material changes to the company's risk factors as previously disclosed in its most recent Form 10-K filing - There have been no material changes to the company's risk factors as previously disclosed in its most recent Form 10-K filing[147](index=147&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%2E) Details the share repurchase program initiated in August 2019, including shares repurchased and aggregate cost **Share Repurchase Program (as of Sep 30, 2019):** | Metric | Value | | :-------------------------- | :----- | | Total Number of Shares Repurchased | 24,980 | | Average Price Paid Per Share | $9.41 | | Aggregate Cost | $236,000 | | Maximum Dollar Value Remaining | $764,000 | [ITEM 3. DEFAULTS UPON SENIOR SECURITIES.](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities%2E) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[149](index=149&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURE.](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosure%2E) This item is not applicable to the company - This item is not applicable to the company[150](index=150&type=chunk) [ITEM 5. OTHER INFORMATION.](index=30&type=section&id=Item%205.%20Other%20Information%2E) The company has no other information to disclose under this item - There is no other information to disclose[151](index=151&type=chunk) [ITEM 6. EXHIBITS.](index=30&type=section&id=Item%206.%20Exhibits%2E) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and various XBRL taxonomy documents - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as well as various XBRL taxonomy documents (Instance, Schema, Calculation, Label, Presentation, and Definition Linkbase Documents)[153](index=153&type=chunk) [Signatures](index=32&type=section&id=Signatures) The report is duly signed on behalf of Issuer Direct Corporation by its Chief Executive Officer, Brian R. Balbirnie, and Chief Financial Officer, Steven Knerr, as of October 31, 2019 - The report was signed by Brian R. Balbirnie, Chief Executive Officer, and Steven Knerr, Chief Financial Officer, on October 31, 2019[157](index=157&type=chunk)

Issuer Direct Corporation (NYSE:ISDR) Q2 2019 Earnings Conference Call August 1, 2019 4:30 PM ET Company Participants Brian Balbirnie - Founder and CEO Steven Knerr - CFO Conference Call Participants Operator Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation's Second Quarter 2019 Earnings Conference Call. Today's call will be conducted by the Company's Founder and Chief Executive Officer, Brian Balbirnie; and its Chief Financial Officer, Steven Knerr. Before I tur ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— FORM 10-Q ——————— ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: _____________ to _____________ ISSUER DIRECT CORPORATION (Exact name of registrant as specified in its charter) ——————— Delaware 1-10185 26-1331503 (Sta ...