·

Revenue - Total revenue was $ 8,619,000, a 63% increase from $ 5,288,000 in Q1 2022 and a 21% increase from $7,139,000 in Q4 2022. Communications revenue increased 94% from Q1 2022 and 18% from Q4 2022. The increase is primarily due to an increase in revenue generated by Newswire, which was acquired on November 1, 2022, as well as an increase in revenue from ACCESSWIRE due to an increase in average revenue per release. Communications revenue was 76% of total revenue for Q1 2023, compared to 64% for Q1 2022 and 78% for Q4 2022. Revenue from our Compliance business increased 8% from Q1 2022 and 30% from Q4 2022. The increase in Compliance revenue is primarily related to an increase in revenue from our transfer agent services due to an increase in corporation actions and directives as well as an increase in print and proxy fulfillment services due to larger transactions and an increase in the number of projects.

·

Gross Margin - Gross margin for Q1 2023 was $6,790,000, or 79% of revenue, compared to $4,056,000, or 77% of revenue, during Q1 2022 and $ 5,263,000, or 74%, in Q4 2022. Communications gross margin was 79%, compared to 78% in Q1 2022 and 74% in Q4 2022.

·

Operating Income - Operating income was $581,000 for Q1 2023, as compared to $688,000 during Q1 2022. The decrease in operating income, despite the increase in gross margin, is primarily due to additional costs of operating Newswire as well as additional amortization expense attributed to intangible assets acquired from the Newswire acquisition. Additionally, we had increases in one-time transaction expenses, stock compensation expense and employee-related costs, all of which are expenses associated with our continued investments for future growth.

·

Net Income (Loss) - On a GAAP basis, net loss was $(144,000), or $(0.04) per diluted share during Q1 2023, compared to net income of $ $516,000, or $0.13 per diluted share during Q1 2022. In addition to the reasons for the decrease in operating income, net income (loss) was also negatively impacted by interest expense associated with the debt incurred to finance the Newswire acquisition, change in fair value of our interest rate swap and a one-time cost to extinguish our note payable associated with the Newswire acquisition.

·

Operating Cash Flows - Cash flows from operations for Q1 2023 were $272,000 compared to $548,000 in Q1 2022.

·

Non-GAAP Measures – Q1 2023 EBITDA was $782,000, or 9% of revenue, compared to $850,000 or 16% of revenue, during Q1 2022. Adjusted EBITDA was $1,888,000, or 22% of revenue, for Q1 2023 compared to $1,140,000, or 22%, for Q1 2022. Non-GAAP net income for Q1 2023 was $1,271,000, or $0.33 per diluted share, compared to $830,000, or $0.22 per diluted share, during Q1 2022. Adjusted free-cash flow was $739,000 for Q1 2023 compared to $603,000 for Q1 2022.

·

As of March 31, 2023 we had 10,052 customers who had an active contract during the past twelve months, compared to 7,813 as of March 31, 2022. March 31, 2023 included 2, 262 customers from Newswire.

·

During the quarter, the Company had 1,001 active customers subscribing to our products, compared to 964 customers during the same period last year. The Company defines a subscription as any customer who enters into a contract for a minimum of one year for one or more products.

Net income (loss):

Adjustments:

Depreciation and amortization

Interest expense (income)

Income tax expense (benefit)

EBITDA:

Acquisition and integration expenses (1)

Other non-recurring expenses (2)

Stock-based compensation expense (3)

Adjusted EBITDA:

(1)

This adjustment gives effect to one-time corporate projects, including acquisition and integration expenses, incurred during the periods.

(2)

For the three months ended March 31, 2023, this adjustment gives effect to a payment of $370,000 related to the early termination of the note payable associated with the Newswire acquisition and a $165,000 loss related to the change in fair value of our interest rate swap. For the three months ended March 31, 2022, this adjustment gives effect to a one-time executive recruiting fee of $90,000.

(3)

The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services. Although we expect to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.

Net income (loss):

Adjustments:

Amortization of intangible assets (1)

Stock-based compensation (2)

Other unusual items (3)

Tax impact of adjustments (4)

Non-GAAP net income:

1)

The adjustments represent the amortization of intangible assets related to acquired assets and companies.

2)

The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units or common stock in exchange for services. Although the Company expects to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.

3)

For the three months ended March 31, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and integration expenses of $234,000, $370,000 related to the early termination of the note payable associated with the Newswire acquisition, and $165,000 loss related to the change in fair value of our interest rate swap. For the three months ended March 31, 2022, this adjustment gives effect to one-time corporate projects, including acquisition and integration expenses of $16,000 and a one-time executive recruiting fee of $90,000.

4)

This adjustment gives effect to the tax impact of all non-GAAP adjustments at the current Federal rate of 21%.

Net cash provided by operating activities

Payments for purchase of fixed assets and capitalized software

Free cash flow

Cash paid for acquisition and integration items(1)

Cash paid for other unusual items(2)

Adjusted free cash flow

1)

This adjustment gives effect to one-time corporate projects, including acquisition and integration expenses, paid during the periods.

2)

For the three months ended March 31, 2023, this adjustment is primarily related to a one-time payment of $370,000 related to the early termination of the note payable associated with the Newswire acquisition. For the three months ended March 31, 2022, this adjustment gives effect to payment of a one-time executive recruiting fee of $60,000.

Date:

May 11, 2023

Time:

4:30 p.m. eastern time

Toll & Toll Free:

973-528-0002 | 877-545-0320

Access Code:

470124

Live Webcast:

https://www.webcaster4.com/Webcast/Page/1/48324

Toll & Toll Free:

919-882-2331| 877-481-4010

Passcode:

48324

Webcast Replay & Transcript

http://www.issuerdirect.com/earnings-calls-and-scripts/

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable (net of allowance for doubtful accounts of $858 and $745, respectively)

Income tax receivable

Other current assets

Total current assets

Capitalized software (net of accumulated amortization of $3,379 and $3,364, respectively)

Fixed assets (net of accumulated depreciation of $646 and $610, respectively)

Right-of-use asset – leases

Other long-term assets

Goodwill

Intangible assets (net of accumulated amortization of $7,507 and $6,821, respectively)

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Income taxes payable

Current portion of long-term debt

Deferred revenue

Total current liabilities

Long-term debt (net of debt discount of $80 and $0, respectively)

Deferred income tax liability

Lease liabilities – long-term

Other long-term liabilities

Total liabilities

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.

Common stock $0.001 par value, 20,000,000 shares authorized, 3,791,020 shares issued and outstanding as of March 31, 2023 and December 31, 2022.

Additional paid-in capital

Other accumulated comprehensive loss

Retained earnings

Total stockholders' equity

Total liabilities and stockholders’ equity

Revenues

Cost of revenues

Gross profit

Operating costs and expenses:

General and administrative

Sales and marketing

Product development

Depreciation and amortization

Total operating costs and expenses

Operating income

Interest income (expense), net

Other expense

(Loss) income before taxes

Income tax (benefit) expense

Net (loss) income

(Loss) income per share – basic

(Loss) income per share – fully diluted

Weighted average number of common shares outstanding – basic

Weighted average number of common shares outstanding – fully diluted

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Bad debt expense

Deferred income taxes

Stock-based compensation expense

Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable

Decrease (increase) in other assets

Increase (decrease) in accounts payable

Increase (decrease) in accrued expenses and other liabilities

Increase (decrease) in deferred revenue

Net cash provided by operating activities

Cash flows from investing activities:

Purchase of acquired business, net of cash received (See Note 3)

Purchase of fixed assets

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Exercise of stock options

Payment for stock repurchase and retirement

Payment of note payable

Proceeds from issuance of term loan

Payments for capitalized debt issuance costs

Net cash used in financing activities

Net change in cash and cash equivalents

Cash and cash equivalents – beginning

Currency translation adjustment

Cash and cash equivalents – ending

Supplemental disclosures:

Cash paid for income taxes

Cash paid for interest