Issuer Direct (ISDR) - 2024 Q4 - Annual Report

Part I Item 1. Description of Business ACCESS Newswire Inc., formerly Issuer Direct Corporation, provides PR and IR communication platforms, focusing on subscription services for B2B companies, and recently divested its Compliance business to enhance focus on its core platform - The company changed its name from Issuer Direct Corporation to ACCESS Newswire Inc., effective January 27, 2025, as part of a major rebranding initiative[24][26][53] - The company's core business is a customer platform for Public Relations (PR) and Investor Relations (IR), offering products like Press Release Distribution, Media Monitoring, Database and Pitching, IR Websites, and Event technologies[28][29] - As of December 31, 2024, the company had 1,124 subscriptions generating an annual recurring revenue (ARR) of approximately $12 million[30] - In Q4 2024, the company began marketing its Compliance business for sale, which was finalized on February 28, 2025. The assets, revenue, and expenses of this business are now classified as discontinued operations[31] Customer and Employee Data (2023-2024) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Customers | 12,349 | 11,924 | | Sales & Marketing Personnel | 27 | 35 | | Total Employees & Contractors | 113 | N/A | - The company's growth strategy focuses on expanding its customer base, increasing revenue from existing customers, growing internationally (currently 12% of revenue), innovating the platform, and pursuing selective acquisitions[55][56][57][58][59] Item 1A. Risk Factors The company faces intense competition, integration challenges, reliance on press release distribution, risks from the Compliance business sale, key personnel dependency, cybersecurity threats, technological changes, and Credit Agreement obligations - The company operates in a highly competitive environment, facing pressure on pricing and market share from competitors with greater resources and name recognition[77][79] - The historical Communications revenue stream, which saw growth from 13% to 55% between 2016-2023, decreased by 7% in 2024, indicating past performance is not a reliable indicator of future results[83] - The sale of the Compliance business on February 28, 2025, for $12.5 million involved using the entire $12 million closing cash to reduce debt, meaning the company received no immediate cash from the transaction. There is a risk the remaining business may not replace the lost revenue and cash flow[90][91] - A substantial portion of business is derived from the press release distribution brands (ACCESS Newswire), which depend on key distribution partners and technology. Any disruption could materially impact the business[87] - The company's obligations under its Credit Agreement are secured by a first priority security interest in substantially all assets. Failure to comply with financial covenants could lead to an event of default, allowing the creditor to accelerate repayment and enforce its security interests[116][117][118] - The company has not declared quarterly dividends since the third quarter of 2018 and states there can be no assurances that dividends will be paid in the future[126] Item 1B. Unresolved Staff Comments The company reports that it has no unresolved staff comments - None[133] Item 1C. Cybersecurity The company integrates cybersecurity risk management into its overall strategy, with oversight from the CTO, CEO, and Board, and has not experienced material impacts from incidents to date - The company's cybersecurity processes are managed by information technology security professionals who work with the CTO and CEO to assess, detect, and respond to threats[134][135] - The Board of Directors is responsible for oversight of cybersecurity risk, receiving regular reports from the CTO or CEO at least annually[141] - Risks from previous cybersecurity incidents have not materially affected, and are not reasonably likely to materially affect, the company's business, strategy, or financial condition[138] Item 2. Property The company's headquarters are in Raleigh, North Carolina, occupying 9,766 square feet of leased office space with a lease expiring December 31, 2027 - The company leases 9,766 square feet of office space for its headquarters in Raleigh, North Carolina, with the lease expiring on December 31, 2027[143] Item 3. Legal Proceedings The company is not currently a party to any material litigation or aware of any threatened legal proceedings that would materially impact its business - The company is not currently party to any material legal proceedings[144] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[145] Part II Item 5. Market for Common Equity and Related Stockholder Matters As of December 31, 2024, the company had 3,838,743 outstanding common shares held by approximately 150 registered holders, with no dividends paid in 2023 or 2024 and no guarantee of future payments - As of December 31, 2024, there were 3,838,743 shares of common stock outstanding held by approximately 150 registered holders of record[147] - The company did not pay any dividends during the years ended December 31, 2024 and 2023. The declaration of future dividends is at the discretion of the Board of Directors[148] Item 6. Select Financial Data Selected financial data for continuing operations shows a 6% revenue decrease in 2024, leading to a $16.3 million operating loss and a $13.3 million net loss, primarily due to a $14.15 million intangible asset impairment charge Summary of Operations from Continuing Operations (in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | $23,057 | $24,522 | | Gross margin | $17,440 | $18,915 | | Impairment loss on intangible assets | $14,150 | $— | | Operating loss | $(16,319) | $(2,739) | | Loss from continuing operations | $(13,281) | $(3,441) | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 6% revenue decline to a 15% decrease in the Newswire business, with a $14.15 million impairment charge contributing to a $13.3 million net loss from continuing operations, while non-GAAP Adjusted EBITDA was $1.9 million Comparison of Operations (Continuing Operations, in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | $23,057 | $24,522 | | Gross Margin | $17,440 (76%) | $18,915 (77%) | | Total operating expenses | $33,759 | $21,654 | | Impairment loss on intangible assets | $14,150 | $— | | Operating loss | $(16,319) | $(2,739) | | Net loss from continuing operations | $(13,281) | $(3,441) | - Total revenue decreased by 6% in 2024, primarily due to a 15% decrease in revenue from the previously branded Newswire business[157] - A $14.15 million impairment charge was recorded for Newswire trademarks in 2024. This was due to the company's rebranding to ACCESS Newswire, which shortened the useful life of the Newswire trademarks from 15 to 5 years[167] - As of Dec 31, 2024, current liabilities from continuing operations exceeded current assets by $2.788 million. The company expects to resolve this negative working capital with the proceeds from the sale of its Compliance business in February 2025[172] Non-GAAP Adjusted EBITDA Reconciliation (in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Net loss from continuing operations | $(13,281) | $(3,441) | | Adjustments: | | | | Impairment loss on intangible assets | 14,150 | — | | Depreciation and amortization | 2,928 | 2,788 | | Interest expense, net | 1,107 | 1,249 | | Income tax benefit | (4,064) | (938) | | Other non-recurring & stock-based comp | 1,055 | 2,347 | | Adjusted EBITDA | $1,895 | $2,005 | Non-GAAP Net Income Reconciliation (in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Net loss from continuing operations | $(13,281) | $(3,441) | | Adjustments (Impairment, Amortization, etc.) | 17,764 | 4,906 | | Tax impact of adjustments & discrete items | (3,692) | (927) | | Non-GAAP net income | $791 | $538 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company believes it faces no material market risk regarding its cash and cash equivalents, which totaled $4.1 million at year-end 2024, and held no marketable securities - The company does not believe it faces material market risk with respect to its cash or cash equivalents, which totaled $4,103,000 at December 31, 2024[202] Item 8. Financial Statements and Supplementary Data The company's consolidated financial statements and the independent registered public accountants' report are included in Item 15, beginning on page F-1 - The required financial statements are set forth in Item 15 of the Annual Report, beginning on Page F-1[203][204] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[205] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with the company exempt from external attestation as a smaller reporting company - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[208] - The company's registered public accounting firm did not provide an attestation report on internal control over financial reporting, as permitted by SEC rules for smaller reporting companies[207] - Management concluded that internal control over financial reporting was effective as of December 31, 2024, based on the COSO 2013 framework[211] Item 9B. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in the fourth quarter of 2024[213] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[214] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement, with the company having adopted a Code of Conduct and Insider Trading Policy - Required information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting of stockholders[215] - The company has adopted a Code of Conduct applicable to all officers, directors, and employees, which is available on its website[216] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2025 Proxy Statement, to be filed within 120 days after fiscal year-end - Required information is incorporated by reference from the 2025 Proxy Statement[218] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership by beneficial owners and management, including equity compensation plans, is incorporated by reference from the company's 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[219] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the company's 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[220] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services, including pre-approval policies, is incorporated by reference from the company's 2025 Proxy Statement - Required information is incorporated by reference from the 2025 Proxy Statement[221] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists financial statements and exhibits filed with the Form 10-K, including corporate documents, material contracts, and officer certifications, indicating their filing status - The financial statements listed in the index on page F-1 are filed as part of this Form 10-K[223] - Exhibits filed include material agreements such as the Credit Agreement with Pinnacle Bank, the Asset Purchase Agreement with Equiniti, and officer certifications[224][225] Financial Statements and Supplementary Data Audited consolidated financial statements for 2024 and 2023 are presented with an unqualified auditor's opinion, detailing a $10.8 million net loss in 2024, driven by an impairment charge and loss from continuing operations, and providing notes on discontinued operations and subsequent events - The independent auditor, Cherry Bekaert LLP, issued an unqualified opinion on the consolidated financial statements[235] - Critical Audit Matters identified by the auditor include: Revenue from Contracts with Customers, Collectability of Accounts Receivable, and Goodwill and Intangible Assets Impairment Assessment[239] Consolidated Financial Highlights (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $50,638 | $65,152 | | Total Liabilities | $25,412 | $29,732 | | Total Stockholders' Equity | $25,226 | $35,420 | | Net (Loss) Income | $(10,793) | $766 | | Net Cash from Operating Activities | $3,160 | $3,060 | - On February 28, 2025, the company sold its Compliance business. The assets and liabilities of this business are classified as held-for-sale and its results are reported as discontinued operations[303][304][305] - An impairment charge of $14,150,000 was recognized in 2024 related to Newswire trademarks due to a reduction in their estimated useful life from 15 to 5 years following the company's rebranding[312] - As a subsequent event, on February 28, 2025, the company used $12,000,000 from the asset sale to pay down its Term Loan with Pinnacle Bank, reducing the principal balance to $3,333,333[361][362][364]