Issuer Direct (ISDR) - 2019 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents unaudited financials, management's discussion, market risk, and internal controls Item 1. Financial Statements Unaudited Q1 2019 financials show assets at $30.1M, revenues at $4.2M, and net income at $205K Consolidated Balance Sheets As of March 31, 2019, total assets increased to $30.1 million, driven by acquisitions, while liabilities and equity also saw increases Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $14,961 | $17,222 | | Goodwill | $6,051 | $5,032 | | Intangible assets, net | $4,367 | $2,802 | | Total Assets | $30,115 | $28,952 | | Liabilities & Equity | | | | Total current liabilities | $3,338 | $2,600 | | Total liabilities | $4,113 | $3,289 | | Total stockholders' equity | $26,002 | $25,663 | | Total Liabilities and Stockholders' Equity | $30,115 | $28,952 | Consolidated Statements of Income For Q1 2019, revenues grew 18% to $4.18 million, but net income decreased 36% to $205,000 due to higher operating costs Consolidated Income Statement Summary (in thousands) | Metric | Q1 2019 | Q1 2018 | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $4,179 | $3,530 | +18.4% | | Gross Profit | $2,877 | $2,509 | +14.7% | | Operating Income | $147 | $315 | -53.3% | | Net Income | $205 | $320 | -35.9% | | Diluted EPS | $0.05 | $0.10 | -50.0% | Consolidated Statements of Cash Flows Q1 2019 saw stable operating cash flow but a significant increase in cash used for investing activities, primarily due to an acquisition Consolidated Cash Flow Summary (in thousands) | Cash Flow Category | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $536 | $537 | | Net cash used in investing activities | ($2,794) | ($25) | | Net cash provided by financing activities | $0 | $8 | | Net change in cash | ($2,258) | $520 | - The primary use of cash in investing activities was the $2.788 million purchase of the VisualWebcaster Platform[23] Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, the January 2019 VisualWebcaster Platform acquisition, and the adoption of the new lease accounting standard - The company separates its revenue into two streams: Platform and Technology (subscriptions, press releases, webcasts) and Services (compliance, printing, distribution)[30] - On January 3, 2019, the company acquired the VisualWebcaster Platform (VWP) for a cash payment of $2,788,000. The acquisition resulted in preliminary goodwill of $1,019,000 and intangible assets of $1,756,000[51][53][54] - The company adopted the new lease accounting standard, Topic 842, on January 1, 2019, resulting in the recognition of Right-of-Use (ROU) assets and lease liabilities on the balance sheet[49][50] Revenue by Stream (in thousands) | Revenue Stream | Q1 2019 | % of Total | Q1 2018 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Platform and Technology | $2,665 | 63.8% | $2,032 | 57.6% | | Services | $1,514 | 36.2% | $1,498 | 42.4% | | Total | $4,179 | 100.0% | $3,530 | 100.0% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategic shift to cloud-based subscription model, driving 18% revenue growth, and net income decline Overview and Business Strategy Issuer Direct is transitioning to a subscription-based, cloud-first platform model, with Platform and Technology revenue growing to 64% of total revenue - The company's core strategy is a 'platform first' engagement, transitioning customers from legacy services to its cloud-based subscription platform, Platform id[83] - Platform and Technology revenue has grown to represent 64% of total revenue in Q1 2019, up from 56% for the full year 2017, highlighting the success of the strategic shift[83] - The acquisition of the VisualWebcaster Platform (VWP) in January 2019 significantly strengthened the company's webcasting product and added over 120 customers[97] - The company expects revenues from its legacy 'Services' business (e.g., document conversion, printing) to decrease as it focuses on the higher-margin platform business[104] Results of Operations Q1 2019 total revenue grew 18% to $4.2 million, driven by acquisitions, but net income decreased 36% due to rising operating expenses Revenue and Gross Margin by Stream (in thousands) | Revenue Stream | Q1 2019 Revenue | Q1 2018 Revenue | Q1 2019 Gross Margin % | Q1 2018 Gross Margin % | | :--- | :--- | :--- | :--- | :--- | | Platform and Technology | $2,665 | $2,032 | 75% | 79% | | Services | $1,514 | $1,498 | 58% | 60% | | Total | $4,179 | $3,530 | 69% | 71% | - Total revenue increased by $649,000 (18%), with revenues from the VWP and FSCwire acquisitions accounting for $627,000 of this growth[108] - General and administrative expenses increased by 36% ($357,000), primarily due to a $181,000 increase in the bad debt provision and $112,000 in professional fees associated with recent acquisitions[117] Liquidity and Capital Resources The company maintains a strong liquidity position with $15.0 million in cash and an undrawn $3.0 million line of credit - As of March 31, 2019, the company had $14,961,000 in cash and cash equivalents[128] - The company's working capital (current assets minus current liabilities) was $14,220,000 at the end of the quarter[128] - The company has a $3,000,000 line of credit, which was renewed in October 2018 with a reduced interest rate. No amounts were owed on the line of credit as of March 31, 2019[129] 2019 Outlook For 2019, management will focus on strategic initiatives for long-term growth, including transitioning to a subscription model - The company will continue its transition to a subscription model, which is considered key for long-term sustainable growth[132] - Key strategic initiatives for 2019 include: - Expanding the Platform and Technology sales team - Growing through strategic acquisitions - Expanding the customer base - Investing in technology advancements and upgrades[133][134] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company - The company states that this item is not applicable[136] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[136] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[137] PART II – OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, and required exhibits Item 1. Legal Proceedings The company is not a party to any material litigation, nor is it aware of any threatened or pending litigation - As of the filing date, the company is not involved in any material legal proceedings[139] Item 1A. Risk Factors There have been no material changes to the company's risk factors as disclosed in its most recent Annual Report on Form 10-K - No material changes to risk factors have occurred since the last 10-K filing[140] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[141] Item 6. Exhibits This section lists the exhibits filed with the report, including CEO and CFO certifications and XBRL data files - Exhibits filed include Sarbanes-Oxley Act certifications (302 and 906) and XBRL interactive data files[146]