Issuer Direct (US:ISDR)2022-11-06 15:55Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $5.3 million, a 3% decrease from $5.5 million in Q3 2021 [8] - Gross margin improved to 77% from 75% in the prior year [5][13] - Operating income decreased to $800,000 in Q3 2022 from $1 million in Q3 2021 [16] - Net income for Q3 2022 was $700,000 or $0.19 per diluted share, down from $1 million or $0.27 per diluted share in Q3 2021 [20] - EBITDA for Q3 2022 was $952,000 or 18% of revenue, compared to $1.6 million or 30% of revenue in Q3 2021 [21] Business Line Data and Key Metrics Changes - ACCESSWIRE revenue grew 6% year-over-year, contributing to overall revenue despite a decline in other areas [5][10] - Communication revenue accounted for 66% of total revenue in Q3 2022, down from 67% in the prior year [11] - Compliance revenue increased by 1% for both Q3 and the first nine months of 2022 compared to the same periods in 2021 [11] Market Data and Key Metrics Changes - Deferred revenue increased to $3.4 million as of September 30, 2022, up 11% from $3.1 million at the end of 2021 [24] - The company maintained a streak of 31 consecutive quarters of positive cash flow from operations [25][34] Company Strategy and Development Direction - The acquisition of Newswire is aimed at enhancing the company's scale in press release distribution and expanding its product offerings [7][36] - The company aspires to achieve a 5% market share in the news distribution market by 2023, with the acquisition expected to accelerate this goal [38][40] - The integration of Newswire is expected to provide cost savings and enhance revenue opportunities through new product offerings [42][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the events and webcasting business, with revenue shifts impacting quarterly results [26] - The company remains optimistic about growth in its core products, particularly in press release distribution, despite recent volume declines [27][29] - Management expects combined operations with Newswire to achieve a growth rate of 20% to 22% going forward [48] Other Important Information - The total transaction value for the Newswire acquisition is $43.9 million, funded through a combination of cash and stock [51] - The company plans to integrate Newswire's products and services to enhance its offerings in the communications and compliance space [62] Q&A Session Summary Question: What were Newswire's revenues in 2021 and its growth rate in 2022? - Newswire generated $10.1 million in revenues in 2021 and is expected to grow by approximately 25% in 2022 [47] Question: What is the expected growth rate for the combined business? - The combined operation growth is expected to be between 20% to 22% going forward [48] Question: What is the margin profile of the acquired business? - The margin profile is expected to be similar to the company's existing margins, with good EBITDA and gross margins [50] Question: How is the acquisition being funded? - The acquisition is funded through $18 million in cash, a $22 million seller's note, and the issuance of common shares [51] Question: Will the acquisition be accretive immediately? - The acquisition is expected to be accretive in the first full quarter after closing, with significant benefits anticipated in Q1 [55]