U.S. markets close in 1 hour 19 minutes

Edited Transcript of ISDR earnings conference call or presentation 31-Oct-19 8:30pm GMT

Q3 2019 Issuer Direct Corp Earnings Call

Cary Nov 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Issuer Direct Corp earnings conference call or presentation Thursday, October 31, 2019 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Brian R. Balbirnie

Issuer Direct Corporation - Founder, President, CEO & Director

* Steven Knerr

Issuer Direct Corporation - CFO

================================================================================

Conference Call Participants

================================================================================

* Brock Erwin

* Eric S. Weinstein

Invesco Private Capital, Inc. - Founding Partner

* Michael John Grondahl

Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen, and welcome to your Issuer Direct Third Quarter 2019 Earnings Call. (Operator Instructions) At this time, it is my pleasure to turn the floor over to Brian Balbirnie. Sir, the floor is yours.

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [2]

--------------------------------------------------------------------------------

Thank you, operator. Welcome, everyone, and thank you for joining us today. At the market close, we issued a press release announcing our results for the third quarter 2019. A copy of the press release is now available on our Investor Relations section of our website, and on ACCESSWIRE's newsroom, for your reference during today's call.

This quarter was another solid showing for Issuer Direct, both in our financial performance, subscriptions and platform maturity, but also in activities and momentum we're building for the future. New subscriptions were up 47% sequentially, generating 56 net new platform subscriptions for the quarter compared to 38 last quarter and 33 in Q3 of last year. This is a key performance indicator we will continue to provide you on these calls. Also in due time, we will look at splitting this out public versus private when these become more material to the overall performance. Both our public and private company business continues to see strong signs of activity and growth on a year-over-year basis.

As we will talk about today, ARPUs have come down on a sequential basis, but we're not alarmed by this result. It's directly tied to the geographic regions, product mixes and assertiveness in areas we want to grow.

We reported slightly over $4 million in total revenue for the third quarter, which represents a 23% increase over Q3 of last year, similar to Q2 of this year, something Steve will expand upon here in a couple of minutes.

Something else that is vital to update you on today. Last quarter, we announced the industry-wide changes in Newswire business referred to as investor commentary. We were explicit about the impacts of this business could have on our overall performance. As an example, in Q2, we made up the $407,000 shortfall in new business to have a flat quarter. In Q3 of this year, we're happy to report the same. We made up an additional $356,000 in commentary losses on a year-over-year basis. And when you look at the noncommentary news business, our platform flourished, seeing a 67% increase in revenues year-over-year. And last quarter was 34%.

If you also remove the additional revenues from customers from FSCwire, a very encouraging sign for us and a sign in the industry that our news product is a formidable alternative. As we messaged last year, our platform business continues to grow as a percentage of total overall revenues, which I will let Steve talk about here shortly in detail.

Our goals this year remain unchanged. We see our Platform and Technology business reaching 70% of our overall revenues, driven by our subscription business and news platform. We've moved slightly closer this quarter to 67%.

Lastly, after Steve's remarks, I will share with you some additional Q3 operational updates on the business and going forward.

Steve, at this point, I'll turn it over to you for a deeper dive into the financial results.

--------------------------------------------------------------------------------

Steven Knerr, Issuer Direct Corporation - CFO [3]

--------------------------------------------------------------------------------

Thank you, Brian, and Happy Halloween, everyone. As Brian mentioned, we are pleased with the progress we made this quarter. Overall revenue grew 23% compared to the same quarter of last year, and subscription sales of Platform id. increased by 47% compared to last quarter. We continue to learn more about our customers we acquired through our last 2 acquisitions of the VirtualWebcaster (sic) [VisualWebcaster] platform and FSCwire and hope to continue to make progress and increase the offerings we are able to provide them. We also continue to expand our Newswire distribution capabilities, got back on the path of double-digit revenue growth with our Newswire offering. Despite the setback of the industry-wide loss of investment commentary business. All of this while preparing to move our corporate headquarters to downtown Raleigh, which the team is very excited about now that we are here and settled.

Diving into the results for the quarter. As I mentioned, total revenue increased 23% or $764,000 to $4,019,000 for the third quarter of 2019 compared to $3,255,000 for the same period of 2018. Revenue for the 9 months ended September 30, 2019, totaled $12,336,000, an increase of 17% or $1,752,000 compared to revenue of $10,584,000 for the first 3 quarters of 2018.

Leading the growth was revenue from our Platform and Technology revenue stream, which increased $627,000 or 30%, and $1,675,000 or 26% during the 3 and 9 months ended September 30, 2019, compared to the same periods of the prior year. Platform and Technology revenue increased to 67% and 65% of our total revenue for the 3 and 9 months ended September 30, 2019, compared to 64% and 60% for the same period of 2018. The growth in Platform and Technology revenue came from both our recent acquisitions as well as organic growth from Platform id. subscriptions and our ACCESSWIRE offering. The increase in revenue attributed to these acquisitions of VWP and FSCwire totaled $359,000 and $1,336,000 during the 3 and 9 months ended September 30, 2019, respectively.

Additionally, we generated increased revenue from subscriptions of Platform id. to be entered into 56 net new subscriptions during the quarter to annualized contract value of $334,000. This brings our total net new subscriptions for 2019 to 114, and our overall total as of September 30 to 219 subscriptions, the annual contract value of just under $1.9 million.

During the quarter, ACCESSWIRE revenue increased 14% compared to the third quarter of last year, and on a year-to-date basis, ACCESSWIRE revenue increased 8%. These increases are despite the industry-wide loss of the investment commentary business we spoke about during last quarter's call. Investment commentary revenue represented $356,000 and $1,219,000 during the 3 and 9 months ended September 30, 2018. Removing the impact of this revenue, as well as the acquisition of FSCwire, ACCESSWIRE revenue has grown 67% and 39% during the 3 and 9 months ended September 30, 2019, compared to the same periods of the prior year. Partially offsetting the increases in Platform and Technology revenue I just spoke about, is a decrease in revenue from our shareholder outreach offering, which are typically tied in with our ARS customers.

Services revenue increased $137,000 or 12% to $1,307,000 for the third quarter of 2019 and $77,000 or 2% to $4,298,000 for the 9 months ended September 30, 2019, compared to the same periods of the prior year. The increase is primarily the result of the acquisition of VWP and FSCwire, which contributed additional services revenue of $135,000 and $434,000 during the 3 and 9 months ended September 30, 2019, respectively. This was partially offset by the continued decline in revenue from our AR services as customers continue to elect to leave the service or transition to digital fulfillment.

For the 9 months ended September 30, 2019, we also generated less revenue from our transfer agent services due to a decline in corporate transactions, directives or actions, which are difficult to predict as they are controlled by our customers, and the conditions of the market tend to fluctuate from quarter-to-quarter.

Switching gears to gross margin. Our overall gross margin percentage was 70% for the third quarter of 2019 and 69% for the first 9 months of 2019 compared to 70% and 71% for the same periods of the prior year.

Cost of revenue increased $241,000 or 25% during the third quarter, and $742,000, also 25% for the first 9 months of 2019 compared to the same periods of the prior year. Majority of this increase is due to an increase in newswire costs due to our expanded distribution and capabilities and costs associated with delivering revenue of VWP.

As a result of this increase in cost, Platform and Technology gross margin percentage decreased to 74% for the 3 and 9 months ended September 30, 2019, compared to 77% and 79% for the same period of 2018. Gross margin percentage from our services revenue stream was 60% and 61% for the 3 and 9 months ended September 30, 2019, compared to 57% and 60% for the same periods of the prior year.

Moving down to operating expenses. We had an increase in operating expenses of $462,000 or 21% during the third quarter of 2019 and $1,582,000 or 24% for the first 9 months of 2019. For the 3 months ended September 30, 2019, the increase is primarily related to an increase in head count, mostly to our sales organization and corporate team, as we position ourselves for growth.

Additionally, operating expenses increased due to G&A expenses associated with the acquisition of VWP, bad debt expense and cost to move our corporate offices. We also experienced increased amortization costs associated with the acquisition of VWP. The increase for the 9 months ended September 30, 2019, is related to the same reasons, including an increase of $550,000 in bad debt expense, which is primarily associated with fully reserving the AR balances of 2 investment commentary customers.

For GAAP purposes, we recorded net income of $200,000, or $0.05 per diluted share for the third quarter of 2019 as compared to net income of $86,000 or $0.02 per diluted share for the same period of 2018. For the 9 months ended September 30, 2019, net income was $617,000 or $0.16 per diluted share compared to net income of $772,000 or $0.23 per diluted share during the first 9 months of 2018. The decrease in earnings per share for the 9 months ended September 30, 2019, was due in part to lower net income as well as the increase in shares outstanding due to the secondary offering completed in August 2018.

Looking at some non-GAAP metrics. Total EBITDA for the third quarter of 2019 was $610,000 or 15% of revenue compared to $473,000, also 15% of revenue during the same period of the prior year. For the first 9 months of 2019, total EBITDA was $1,718,000 or 14% of revenue compared to $2,063,000 or 19% of revenue during the first 9 months of 2018. EBITDA results were directly impacted by the loss of the investment commentary business, with the decline in revenue and the increase in bad debt expense noted earlier.

Non-GAAP net income for the third quarter of 2019 was $438,000 or $0.11 per diluted share compared to $411,000, also $0.11 per diluted share during the third quarter of 2018. For the first 9 months of 2019, non-GAAP net income was $1,433,000 or $0.37 per diluted share compared to $1,531,000 or $0.47 per diluted share during the first 9 months of 2018.

We continue to generate positive cash flows from operations as we generated an additional $1,160,000 during the third quarter of 2019, double the $564,000 generated during Q3 of 2018.

On the balance sheet, our deferred revenue balance increased to $1,566,000, 25% increase since year-end, a direct result of the additional licenses of Platform id. I mentioned earlier as well as increase in press release packages for which the revenue is deferred until the releases are used.

In conclusion, we are excited to continue this momentum through the end of the year and throughout 2020 and beyond. Brian will now talk further about our conference software business and the recent hirings made to our sales team, specifically around the Newswire. We are hopeful these hirings, coupled with our increased distribution and continued development of Platform id. will bring further organic growth. With that, I will turn it back to Brian.

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [4]

--------------------------------------------------------------------------------

Thanks, Steve. A reflection of what we both just talked about here today. The third quarter was extremely busy for us. I'd like to highlight a few higher-level points again.

We grew our subscription business for the second straight quarter. Our news product is now being delivered to millions of additional desktops, with the addition of TD Ameritrade, Business Insider and many others. The momentum in our conference business is continuing as expected. We ended the quarter with 5 new sales executives. Year-over-year, revenues were up 23%. We repurchased just under $250,000 through our buyback directives during the period. And we continue to generate positive cash flows from operations, completed our corporate office relocation and increased GAAP earnings from $0.02 to $0.05 on a year-over-year basis.

Continuing this momentum quarter-after-quarter is extremely important and absolutely is becoming contagious internally. And it's something we, as employees, are excited about and continue to work hard to build upon even more. Our platform business is seeing good signs of growth, but I can't say it enough, in order to keep the momentum and further expand our platform strategy, new customer acquisition is extremely important as well as cross-selling efforts to our current book of business. Cross-selling will continue to improve in the coming quarters, and we have realigned some additional sales folks with the acquisition of these 5 new professionals to specifically focus on this objective.

We ended the quarter with 1,394 publicly traded customers compared to 1,335 during the same period last year, and 997 privately held customers compared to 809 during the same period of last year. Our news products saw a final go-live distribution with TD Ameritrade, Business Insider, and many others, as previously discussed during the quarter. This is a big part of the reason we're seeing the beginning of a market acceptance, revenue growth and momentum, both internally and in the market. I'm so very glad that we're positioned exactly where we are right now. The market is going to continue to evolve, and incumbents are beginning to shift and adapt and be put on their heels. As many of you know, we're playing the long game here and feel confident in our news offerings, and it continues to get better and better each year.

We will continue to update you on distribution progress as each becomes material and live for our customers. These investments, regardless of cost, are paramount to our overall business and future growth of our news product offering and our Platform ID communications.

Our conference business software is another area, our product lineup, where we're seeing some push. At the end of Q3, we have completed a total of 9 conferences this year, and 13 more have been signed and/or will be completed in the next few months. Our goal was to have 20 events signed and/or delivered by year's end. So we're happy to report we exceeded this goal.

As we move upstream, the capital markets and corporate access space, these events will begin to grow even more significantly for us, as they tend to be bought by customers with multiple events per year. Our pipeline looks strong, and we are encouraged with this product adjacency.

The next logical step is to find resources to help keep the momentum moving. This is an area we are focused on in Q4 and something we will talk about -- we talked about in our last call and being the third phase of this product. When the year is complete, we expect to earn approximately $300,000 in total revenue from our conference business.

In summary, this is a business we believe that will be significant for us in 2020 and beyond and ties directly into the strategy of bringing the issuer and investor closer together.

Sales and marketing did a great job this quarter, getting us back on track in platform subscriptions. As you may recall, the first half of the year, we sold 58 net new subscriptions of our platform, carrying a $414,000 annual contract value, an ARPU of approximately $7,000.

And just Q3 was a great quarter. We saw 56 net new subscriptions with a $334,000 annual contract value. This reduces ARPU to approximately $6,000 for the quarter. But again, as we have said, client growth is extremely important to us right now, and we are experimenting with smaller platforms and strategic battleground regions.

As we have said, our sales organization has grown, and adding to this head count is vital to achieve our client growth objectives. It also gives us a much needed horsepower in the verticals and regions we're focused. We're very optimistic that these new sales numbers will have an impact on our sales organization in the coming quarters. 3 of the 5 have significant industry experience and will be managing territories and books of business, whereas others will be hunting for opportunities and using the networks and experiences to build the brand of our platform. This 38% increase in our sales head count is an investment we're making in the business, and believe our cash flows from operations, coupled with our growth makes us the perfect time. We're looking forward to updating you next quarter on these metrics.

In closing, we are very pleased with the performance in the third quarter, specifically the customers that are purchasing our platforms, the rate of revenue replenishment in our news product, and the continued investment we're making in the business, both in our product and our employee base, which will put us in a position to further grow and scale the business. We have enjoyed speaking with you today, and I look forward to your questions and visiting with you again soon. Operator, could we please begin the Q&A portion of the call?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question comes from Mike Grondahl with Northland Securities.

--------------------------------------------------------------------------------

Michael John Grondahl, Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst [2]

--------------------------------------------------------------------------------

Congrats on getting TD Ameritrade live. Could you kind of talk about how that's gone and what you think you can build on there, going forward?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [3]

--------------------------------------------------------------------------------

Yes. It's a momentum, that's a great point, what we started. TD Canada has been live for over a year. TD thinkorswim went live a few months ago. Now the TD Ameritrade entire platform is live. We believe that, that momentum, coupled with interactive brokers, e-trade and some of the other things that we're doing in financial platform, give us the credibility to be able to see Schwab and Merrill begin to take notice and a couple of other platforms that we're focused on. So I think there's definitely a momentum grab there. When you think about the millions of traders on TD Ameritrade in North America and even around the world, we're capturing some significant eyeballs. So both our customer end result, meaning the interactions they get from their articles, the number of individuals that are engaging with those articles, are starting to grow as a result of having these platforms. And so not only do we get the credibility from the distribution networks and downstream partners, we're also getting it from our customers and seeing their satisfaction grow upon it. So that's been good news for us as well.

--------------------------------------------------------------------------------

Michael John Grondahl, Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst [4]

--------------------------------------------------------------------------------

Got it. And in terms of the 5 sales people, how do you think they ramp-up, how should we think about that over the next year?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [5]

--------------------------------------------------------------------------------

Yes, like we talked about a little bit here and in the press release that we announced today, 3 of the 5 have significant industry experience. And as much as we love to go to battle with our competition, we're going to be respectful of every period of time at which they need to work out of their noncompetes. And so that's a couple few months, 3 to 6 months, and cases for these 3 individuals. So we'd expect that as they begin to think and learn and understand who Issuer Direct and ACCESSWIRE is, the very industry experience and their market understanding is going to enable them to be successful, shorter term, than folks without experience, obviously. But we're not planning or budgeting or forecasting any of their books of business to be a part of Issuer Direct in the short term. We expect, though, however, that relationships at the end of the day, will yield those results, and we believe that by mid-next year, we're going to start to see a lot of that momentum significantly happen for us in our Newswire product and in our communications platform.

--------------------------------------------------------------------------------

Michael John Grondahl, Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst [6]

--------------------------------------------------------------------------------

Got it. Was there any investor commentary revenue in 3Q '19?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [7]

--------------------------------------------------------------------------------

There was not. No.

--------------------------------------------------------------------------------

Michael John Grondahl, Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst [8]

--------------------------------------------------------------------------------

0, okay. And do you have the number for 3Q '18?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [9]

--------------------------------------------------------------------------------

3Q '18 on total revenue?

--------------------------------------------------------------------------------

Michael John Grondahl, Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst [10]

--------------------------------------------------------------------------------

Investor commentary revenue.

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [11]

--------------------------------------------------------------------------------

$356,000.

--------------------------------------------------------------------------------

Michael John Grondahl, Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst [12]

--------------------------------------------------------------------------------

Okay, that was that number, okay.

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [13]

--------------------------------------------------------------------------------

$407 million in the prior quarter.

--------------------------------------------------------------------------------

Michael John Grondahl, Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst [14]

--------------------------------------------------------------------------------

Got it. In terms of the conference management module, did -- how many have you done year-to-date? And did you say what revenue year-to-date that generated?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [15]

--------------------------------------------------------------------------------

Yes. So there's -- the way that the professional conference organizer suites work, as you typically enter into agreements for delivery in the future, sometimes it's out 3, 6, 9 months. So as of last week, we have delivered 9 solutions in total. We've got mid-teens more to go that are already signed and ready to go. On an annual basis, this year, we'll see about $300,000 of revenue from the events that will be completed, and then there's additional revenue, I guess, you'd think about it as potential backlog for us for next year that's signed. And again, these are events that -- and most of the folks listening on today's call, I think, know the story, and this is a mid-market bank, nonbank conference business. We haven't yet gotten into the point where we're at the larger banks and some of the broader events. So that's only going to continue to grow our momentum because today, we're selling single conferences, meaning 1 or 2 a year. When we start to get into some of the corporate access world, you're going to be looking at 10 to 20 to 30 events a year.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

And our next question comes from Brock Erwin with CleverInvesting.

--------------------------------------------------------------------------------

Brock Erwin, [17]

--------------------------------------------------------------------------------

Great work on what -- it sounds like you guys earned back all the loss of the commentary business this quarter. I think is that -- that's what you said, right?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [18]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

Brock Erwin, [19]

--------------------------------------------------------------------------------

Good job. So just thinking about ACCESSWIRE, in the future, is that something that you guys might break out separately, revenue from that business in the filings?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [20]

--------------------------------------------------------------------------------

That's a great question, Brock. I mean it's been a conversation, internally. It's been a conversation, externally, from shareholders asking that question. We want to look at ARPU averages on types of customers, right, public and private. We want to look at the impacts of our platform business in the public or private setting. We want to definitely examine our ACCESSWIRE news business. We do it internally. As we get into, I guess, consolidating our platform business a little more, then the answer would be, yes, short term, I'd probably caution that, that wouldn't be until next year. But it's something we definitely are looking at doing.

--------------------------------------------------------------------------------

Brock Erwin, [21]

--------------------------------------------------------------------------------

Okay. And so thinking about where that growth is coming from, because that's the part of your business, I think, that's really growing fast, especially if you subtract out the commentary loss. So I'm just curious, if you think about typical customers or the new customers you're acquiring, like what do they typically look like? Because I believe you have 2 different pricing models, like you can pay per release or a flat fee. And so I'm just wondering like how -- what do those customers look like? What's the typical use case?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [22]

--------------------------------------------------------------------------------

Yes, it's -- you're right, it's a hybrid, if you will, right? There's a pay-go model, pay-as-you-go. These are private companies, perhaps, are smaller public companies that just need to pay for an individual release. It's a budget thing. It's getting into telling their story better before they migrate into a full subscription. And that business is profitable for us. It's good for us. It accounts for a good percentage of our ACCESSWIRE revenue. But as everybody knows, our focus has been to convert and move our clients into a full, unlimited subscription. And so that really does take hold in the public and private company since. I wouldn't suggest that our private company business is overshadowing our public company business yet. Still, we're a public company-focused organization, and that's a great thing. But I think to get to the critical mass, to your point, how do you really accelerate this Newswire product and how do you move it into, say, $5 million, $5.5 million, $6 million business a year into $25 million or $50 million a year? And as much as I'd love the public company space, and I think I've said this in presentations, it's probably unlikely that that's to occur. It's going to occur in the private company side, and that will be probably be continue the mixture of pay-as-you-go services and a subscription platform.

--------------------------------------------------------------------------------

Brock Erwin, [23]

--------------------------------------------------------------------------------

Okay. So you mentioned, though, that the public company customers is probably limited. But given like the -- your competitors and how big the market is, I mean, are a lot of their customers -- I mean, I guess, what do their customers look like? Is it similar to yours or different?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [24]

--------------------------------------------------------------------------------

It is similar, right? It's just a critical mass difference is that's the only differentiation. Their product mix -- or client mix, rather, is exactly like ours with the types of public and private companies. You're just dealing with organizations that have been around for 60-plus years and built news brand loyalty out there that have tens of thousands of customers that both are public and private. But yes, the mix is the same.

--------------------------------------------------------------------------------

Brock Erwin, [25]

--------------------------------------------------------------------------------

Got it. All right. And then one more question, if you don't mind. It's about some of the accounting. So I was looking back at your CapEx for capitalized software. And going back to 2017 and even 2016, there was about $1 million in each of those years spent for internal software. And then the year after that, 2018, there wasn't any. So I'm wondering if that's just an accounting decision. Or is that something that investment in that software is no longer needed? Like what's the reason for no longer capitalizing those costs?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [26]

--------------------------------------------------------------------------------

Yes, you're right. Those couple of years, we went into significant build of intellectual property for our regulatory platform that dealt with in line XBRL, the traditional XBRL, and that's an important asset to us. The rendering engine that we have on our regulatory product is used in our ACCESSWIRE news product, and that intellectual property is valuable to us. So we made decisions to capitalize that software. Those weren't the only items. There are other things. Today, as those products are commercialized and being used by our customers and by our operations teams. It's about maintenance now, bug fixes and small updates that we have a standard accounting viewpoint, a business viewpoint that we won't capitalize those items. So we don't anticipate to see any additional capitalization in our software. That being said, if regulatory agencies change reporting requirements then we may see some additional capitalization as necessary. But it's our viewpoint today that, that won't occur.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from Eric Weinstein with Chancellor Capital.

--------------------------------------------------------------------------------

Eric S. Weinstein, Invesco Private Capital, Inc. - Founding Partner [28]

--------------------------------------------------------------------------------

It's great to see the organic growth. Clearly, ACCESSWIRE is accelerating but the platform business as well. Maybe you could talk a little bit more about what's clicking? You talked about distribution. But is it beyond that as well? Are you selling things differently? Have you figured how to bundle things differently on the platform side? Or is platform sort of riding the coattails of ACCESSWIRE? You've also talked about success in different pockets, private and maybe other geographies. Obviously, there's a -- you have a new sales head that's been in place for a little while. If you could just help me understand a little bit better what's clicking and what to extrapolate from going forward?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [29]

--------------------------------------------------------------------------------

Thank you, Eric. I think that to use the term clicking, you're right, I think the team is starting to gel and consolidate their messaging with marketing assistance on this platform first engagement that we've talked about for 18 to 24 months. They lead in that regard. There's no doubt that newswires is top of mind when they do that. The majority of all platforms to date in this quarter were as a result of our communications product offering, which, typically, from a public company side is news, the events, right? What we're doing today, this earnings event, and then all of the IR components that go to your website and targeting. So that's been the bigger focus. I think there's been a significant amount, more training process, salesforce pipeline management. And when you start to run that for a couple of quarters, you really start to clean up your pipeline and really see what the forecasting could look like. And I think that's made a big impact on where our focus is for our organization. We've built an onboarding team around that. So client satisfaction is an all-time high because we're able to onboard clients, train them and teach them and love them and show them how to use our platform much quicker than we ever had before. So then you start to get referrals and agencies and IR firms starting to understand and be a part of this. So I think that there's a lot of components there. I wish I could just point to one, but I think it's just -- it's a multitude.

--------------------------------------------------------------------------------

Eric S. Weinstein, Invesco Private Capital, Inc. - Founding Partner [30]

--------------------------------------------------------------------------------

Great. And then just one quick question. Bad debt has been coming down from recent quarters. And I'm not sure if that was investment commentary-related or not, but should that be coming out?

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [31]

--------------------------------------------------------------------------------

It was out in the quarter, you're right. Some of it was related to investor commentary business. Thankfully, that's behind us now, both in a bad debt situation and that type of revenue in totality. I think our collections efforts, our AR practices, the way we're selling, how we're collecting is getting much, much better. The result obviously is the cash flow we generated during the quarter is a big contributor to that. So I don't think you're going to anticipate seeing any investor opinion, bad debt write-offs or anything else there. That's all well behind us.

--------------------------------------------------------------------------------

Eric S. Weinstein, Invesco Private Capital, Inc. - Founding Partner [32]

--------------------------------------------------------------------------------

Great. And then lastly, assuming the growth continues, I'm not sure how much more you plan on investing in the sales force. How should we think about EBITDA margins going forward? We've talked a lot about this to great many folks. I think we've been clear about the fact that this year, we're investing in our organization and our people and our practices and our platform, and then our distribution. And we'll sacrifice short-term EBITDA for long term. And we've said that when we believe the distribution is at a point where we've got a tipping opportunity, right, an inflection point, we're going to invest heavy. I think that the growth is going to be able to help us balance this out. We've got enough infrastructure in place and distribution agreements in place that as we scale that business, we're not going to see any incremental charges, absent of the investment in our sales organization. So we're going to see EBITDA numbers maintain and grow again, which is a good thing for us in an organization. And I think that that's what folks should look for going forward.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

And there appear to be no further questions at this time. I'll turn it back over to Brian and Steve for any closing remarks.

--------------------------------------------------------------------------------

Brian R. Balbirnie, Issuer Direct Corporation - Founder, President, CEO & Director [34]

--------------------------------------------------------------------------------

Christie, thank you very much. Mike, Brock, Eric, thank you for the questions today and to everybody else. I hope you have a happy and safe Halloween. Be safe out there. The kids are our future, so we need to depend upon them. Have a great day. Thank you.