Operator: Good day, and welcome to the Issuer Direct Second Quarter 2016 Earnings Call. [Operator Instructions]

It is now my pleasure to turn the program over to Mr. Steve Knerr. You may begin, sir.

Steven Knerr: Thank you, and good afternoon, everyone. Before we begin, I need to read the following safe harbor statement. Statements or comments made on this conference call may be forward-looking statements that include financial projections or other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. Our actual results may differ significantly from those projected or suggested in any forward-looking statement due to a variety of factors, which are discussed in detail in our recent SEC filings.

Further, we will discuss both GAAP and non-GAAP financial information on this call. We believe the presentation of non-GAAP information provides you with useful supplementary data concerning the company's ongoing operations and is an appropriate way for you to evaluate the company's performance. Non-GAAP results are, however, provided for informational purposes only. Please refer to the press release and related tables for GAAP information and the reconciliation of GAAP to non-GAAP information. We also posted to our website, in our Investors Relations tab description as well as reconciliation of GAAP measures to which we will refer on this call.

I would like to begin by going over financial highlights and then turn it over to Brian for his operational review and outlook for the remainder of 2016, followed by a questions-and-answers session.

This is a solid quarter for Issuer Direct, and we continue to make meaningful progress. Q2 financial highlights with prior year quarter comparisons are as follows: We achieved revenue of $3.1 million, which represents a 1% increase over the same period in the prior year. Gross margin percentage expanded to 74% compared to 71%. The company's GAAP earnings per share was $0.12 per diluted share compared to $0.03 per diluted share. EBITDA margin expanded to 28% from 18%. Non-GAAP net income was $577,000 or $0.20 per diluted share as compared to $536,000 or $0.23 per diluted share. The decrease in non-GAAP EPS despite an increase in non-GAAP income is a result of more shares outstanding due to the final conversion of the Red Oak note into 418,000 shares of the company's common stock in August 2015.

Once again, we continued our trend of generating positive cash flows from operations, increasing our cash balance over the prior quarter as we generated $1 million of cash flow from operations.

On July 12, the Board of Directors announced an increase in our quarterly cash dividend of $0.05 per share, making it the fourth consecutive quarter for paying dividends.

Highlights for the 6 months ended June 30, 2016, prior year period comparisons are as follows: We achieved revenue of $6.4 million compared to $6.2 million, excluding [ph] a onetime benefit of $316,000 in Q1 2016, which I will discuss in more detail. Revenue for the 6 months ended June 30, 2016, would have been $6.1 million.

Gross margin expanded to 75% from 71%. Company's GAAP earnings per share was $0.29 per diluted share compared to $0.13 per diluted share.

EBITDA margin expanded to 29% from 19%. Non-GAAP net income was $1.1 million or $0.38 per diluted share compared to $1 million or $0.42 per diluted share. Again, the decrease to non-GAAP EPS was due to the increased share count, as I mentioned earlier.

Revenue increased 1% to $3.1 million during the 3-month period ended June 30, 2016, and 4% to $6.4 million during the 6-month period ended June 30, 2016. Included [ph] in revenue during the 6 months ended June 30, 2016, is a onetime benefit of approximately $316,000 related to reversal of an accrual for unused postage credit related to ARS clients acquired in the PrecisionIR acquisition.

Including this reversal, revenue would have been $6.1 million or down 1% compared to the same period of 2015.

Disclosure management revenue decreased 11% and 13% during the 3- and 6-month ended June 30, 2016, respectively, compared to the same period in 2015. The company continues to face pricing pressure in the EDGAR and XBRL markets. However, on a year-to-date basis, the decline in those markets was partially offset by strong performance in our transfer agent services. We performed work on more corporate directives and actions during the year as compared to the prior year.

Shareholder communication revenue decreased 9% and 2% during the 3- and 6-month period ended June 30, 2016, respectively, compared to the same period of the prior year. The decrease is primarily related to the decline of our hard copy ARS services as companies transition to electronic delivery or elect to leave the service altogether. In addition, customers have migrated from ARS to our new Investor Network platform resulting in a shift of revenue to our platform and technology revenue stream.

Second quarter proves to be another success for our press release business, which continues to grow, increasing 73% and 64% during the 3- and 6-month period ended June 30, 2016, respectively, compared to the same period of 2015. This marks the third consecutive quarterly increase of the press release business and is an area in which we will continue to pursue future growth.

Additionally, our proxy printing and distribution services grew due to an increase in the number of projects as a result of new clients that we cross sold from our transfer agent business during the year.

It's also important to mention that included in revenue for the 6-month period ended June 30, 2016, is a benefit of $316,000 related to the reversal of the accrual for unused postage I mentioned earlier.

We also delivered another strong quarter from our platform and technology business, as revenue grew 99% and 94% for the 3- and 6-month periods ended June 30, 2016, respectively, compared to the same periods in the prior year. The primary reason for the increase was due to migrating electronic ARS customers to our Investor Network platform.

Additionally, we had an increase in iProxy platform subscription, which was a direct benefit from our stock transfer client growth as well as growth across our other platforms, including transfer agent, iR DIRECT and in our new cloud-based products of Blueprint and Classify. In a few minutes, Brian will discuss further his outlook for our cloud-based products.

Gross margin was 74% and 75% for the 3 and 6 months ended June 30, 2016, respectively, as compared to 71% for both periods of the prior year. The increase in gross margin percentage was due to our successful and ongoing transformation of the business to a cloud-first engagement, resulting in increased revenues in our higher-margin press release business and platform and technology products.

Operating expenses declined slightly during both the 3 and 6 months ended June 30, 2016. Savings in consulting and professional fee expenses were offset by an increase in headcount of our sales team as we grow both our press release and platform and technology businesses. As a result in the increase in gross margin and decreased operating expenses, EBITDA for the 3 and 6 months ended June 30, 2016, improved to 28% and 29% of revenue, respectively, compared to 18% and 19% for the same periods of 2015.

For GAAP purposes, we reported net income of $357,000 or $0.12 per diluted share for the 3-month period ended June 30, 2016, as compared to net income of $65,000 or $0.03 per diluted share for the same period of 2015.

For the 6-month period ended June 30, 2016, net income was $850,000 or $0.29 per diluted share compared to net income of $302,000 or $0.13 per diluted share.

Generating positive cash flow from operations remains a key focus of ours, as we generated $1 million during the second quarter of 2016 compared to $837,000 during the second quarter of 2015. We also increased our cash balance to $5 million as of June 30, 2016, compared to $4.2 million as of December 31, 2015.

During the second quarter of 2016, we continued our investment in product development and capitalized an additional $260,000 of software development costs related to our cloud-based products, Blueprint, Classify and Investor Network, bringing our total investment to $786,000 for the year. We anticipate we will continue to invest in these products as well as our press release business throughout the remainder of 2016.

I will now turn it over to Brian who will discuss some of our operational highlights for the second quarter and further planned activities for the second half of 2016.

Brian Balbirnie: Thank you, and good afternoon, everyone. As Steve just pointed out, our second quarter picked right up where we left off in the first quarter. Not only did we deliver margin expansion, we also grew our top line year-over-year revenues and sequentially grew in the areas we expected: platforms and technology and our Accesswire and news business.

In the past, we spoke about our planned systematic transition from being a traditional print and mail IR products business to a cloud-centric engagement focused on higher-margin platforms and newswire products. This transition is well underway and is the sole reason for us being back on track to seeing sequential growth and expansion in our profitability, thus creating sustainable shareholder value.

As many of you know, we are excited about our newswire business. During the first quarter of this year, we increased revenues 12% sequentially over the Q4 last year. And in the second quarter this year, we increased business 18% over Q1 of this year. On a year-over-year basis, Q2 grew by 73%. This was achieved on virtually the same number of clients, 855, as the first quarter.

Because of Accesswire's brand, our core Issuer Direct business was able to effectively cross-sell our solutions, either leading with or adding on the Accesswire news distribution circuits. For the first time since last year, we were able to see an increase in the number of clients that have added more than 1 service or subscription. This translates into 550 clients or 58% of our Issuer Direct core clients are now purchasing 2 or more services, up from 51% in the first quarter of this year and 37% from Q2 of 2015.

Our Accesswire direct clients continue to grow, as our lower-margin reseller business contracts. This has been something we have spoken about for several quarters. And as a result, the second quarter margins from our Accesswire brand increased to 83%, up from 79% in the first quarter and 70% all of last year.

We're just beginning to hit our stride in the news business, and we continue to add distribution, improve and enhance our analytics and continue to expand our teams with key hires.

Speaking of new hires. I'm happy to report that a 15-year newswire veteran has joined our organization. Al will serve as the Vice President of Sales for Accesswire. Both he and James Michael, our Vice President of Sales for Issuer Direct, will work together to bring the Accesswire news brand and platforms to markets both here in North America as well as Europe, where we're focused on expanding our distribution and partnerships.

As a result of our client and margin expansion, we are reinvesting in our news platform, so that we can continue these trends. One of the areas of investment, as we've mentioned last quarter, is in Accesswire being a fixture for the investor conference and trade show circuits. We remain committed to utilizing these venues to promote the brand where and when possible as well as support the conferences where our partners and clients depend on exposure and engagement. We are also seeing an increase in the engagement from our analytics platform for Accesswire, a trend that we have been watching closely for the past couple of quarters.

Our upgrade from last quarter is beginning to drive increases in traffic linking, shareholder engagement and throughput to our clients messaging to the markets. I understand from an investor viewpoint that we all should expect to hear about earnings and margin and client growth. But to see our clients' engagement increase enforces what we're building here, and there's nothing better than to satisfy customer who will then spread the word about our brand.

However, we clearly understand that there's a lot of work to be done and continue our disruption in the markets. One area specifically is distribution, where we continue to work to expand our partner network and syndication to a broader audience. Accomplishing this will result in increased client stickiness and further margin expansion.

Another area that we are exploring is market commentary. We conducted small market tests in Q2 and will continue to test throughput for the remaining of the year. We believe that there are many significant opportunities to enhance our brand awareness and increase the value to our clients with the delivery of relevant market news, such as earnings calls announcements and analysis on daily earnings events. It is also a great source of news analytics, which we believe could be a competitive differentiator in our sales approach.

Lastly, being a public company ourselves, we are acutely aware of the pitch tone to our investors not only on calls like this, but also in our written press releases, presentations and outbound public company messaging. Basically, what words should I use that resonate well with the industry and the investment community? Having a database built from natural language translation would be an interesting measurement to analyze our written statement against others and our peer group, suggest replacements and rank clients' pitch tone with what and how the market reacts.

This is something new we intend to bring to market by the end of this year. Clients would be able to select a platform option that will automatically analyze their message for a small fee per document, a unique offering that we believe will be cost effective for our clients and differentiate us in the marketplace.

Within our shareholder communications platform business is our Classify offering, a subscription-based targeting outreach dataset. When we first released Classify to the market just a little over a quarter ago, we expected to see the smaller-cap, publicly traded companies embrace the platform because of our price points. What we discovered is price is not the primary driver behind the buying decision here but rather the quality of data and the raw need for it that drive their demand. At present, there are limited alternatives that measure up to the capabilities of our solution. Based on our clients' response, we are continuing to invest in the product, adding more record features, including institutional ownership and sell-side research reports. And we expect that this will result in a baseline increase in subscription fees going forward, Q3 and beyond.

Additionally, Classify has been the driving conversation to have used in our renewals for our legacy and report outreach business. Moving clients from that hard copy delivery of annual reports to a platform-first tool has been our focus.

In short, while our offerings were passive and shareholder-outreach based of yesterday; today, we are a nimble, targeted communications platform that helps decrease the churn of our legacy business by giving clients the opportunity to take advantage of Classify for a period of time, a trial. This dramatically changes the conversation with our ADR banks, larger-cap clients and even the smaller-cap clients are prospective targets.

Our disclosure platform business, Blueprint, has had some significant wins in the second quarter. Not only did we win clients like the London Stock Exchange and Coca-Cola FEMSA, the largest Coca-Cola bottler in the world, we also made significant progress with both our foreign filers and in the domestic small-cap space here in the United States.

We are pleased with the progress that we are making with Blueprint. Unlike our Accesswire news business, we understand that there are areas that we can do better. Multiyear subscription licensing agreements take time to close, and therefore, sales cycles tend to be longer than what we would like. But this is typical within the industry. And now that a majority of the clients are pursuing a cloud-based system to drive their businesses, we feel confident in Blueprint's success this year.

Part of the sales cycle change in Blueprint is the addition of iXBRL, an inline HTML SEC standard that is planned to be phased into filing requirements. Today, this is a voluntary filing option for corporate issuers with a final rule requirement beginning in 2020. Our Blueprint platform is built to handle inline HTML but extend naturally the XBRL process. We intend to be part of the early adopters this year, not only for us but our clients. Beginning with our annual report for 2016, we will begin voluntarily filing our annual and quarterly reports in this new standard.

The advantages of inline XBRL are meant for reporting issuers. Single-source document creation and tagging right within one platform is what clients are demanding, not only from an efficiency standpoint but also the accuracy of numerical flow-through values from financial statements to narrative disclosures. Our cloud-based tagging and HTML offering system delivers this. But the reality is most all EDGAR XBRL platforms will at some point deliver this capability. Where our strategy is different lays within our platform, not just for some SEC filings but overall corporate disclosure messaging. Our taxonomy linking and cash tagging methodologies will extend across our entire platform from quarterly reports and earnings releases to shareholder alerts and social delivery of announcement from our Accesswire news platform. That's for the corporate issuer.

For shareholders, we're looking at ways to build hooks into our platform to allow investors the ability to leverage our taxonomies and search this technology to compare and analyze companies within seconds. This advancement will be delivered from our Investor Network application.

In our earnings release today, we talked a bit about our key performance indicators. In total, we do work with over 1,800 companies: 855 with Accesswire and 952 with Issuer Direct. As we've mentioned in the past, we are focused on client count numbers and believe that next year that we can get into a more granular information on subscriber numbers in our entire cloud-based platform. We believe this will be a strong forward-looking metric for investors to track.

In closing, at the end of the second quarter, we began our initial app promotion of Investor Network. During this event, the Investor Network app reached the top 12 of the finance category for free app downloads, accumulating over 25,000 downloads and 16,000 users in a 4-day period. This soft launch validates our belief that there's a clear opportunity in the market for a unique dataset, social interaction and transparency of the investment community all wrapped up into one. We will continue to nurture this platform as we integrate more feature sets throughout the remainder of this year that could include such things as unlimited trading for a flat fee or a member-only content area for videos and commentary directly from companies and analysts. The benefit of analytics is the driving force behind these initiatives. And our ability to understand trends, buying patterns and industry movements can later translate into data subscription options for our corporate issuer clients.

As we further commercialize our platform business, we will be using the DMS term less and less and the platform itself takes precedence over the term, disclosure of that management system. The DMS name has served us well, and I suppose it will forever be remembered for coining the disclosure management phrase. But we've outgrown it, and the use of the platform just fits us, platform ID. To go along with platform ID, we may utilize something that was suggested to me by a shareholder recently, some very catchy slogan. He said, "We've got your BAC." B-A-C, no K: Blueprint, Accesswire and Classify. In a business where clients need to depend upon our platform, people and price, having one's back is truly what we do. Thank you, Myles [ph].

And with that, I'd like to turn the call back to the operator.

Operator: [Operator Instructions] And we can take our first question from Mark Lanier with Pegasus Capital.

Mark Lanier: Would you update us on the metrics of the sales force, comparing where you stand now with perhaps 6 months or a year ago and also talk about what your plans are over the next 6 months to drive distribution both by sales force increases and extensions of partnering efforts?

Brian Balbirnie: Thank you, Mark. Currently, today, at the end of Q2 period, our sales force, just on the direct sales model, both our account executives and strategic account managers, were 15 individuals, focused both here in North America and in Europe. As we end the back half of 2016, we expect 3 to 4 additional individuals be added to that direct sales force. Where we're going to see the bigger gains for us in our sales and marketing push at the back half of this year is in our Accesswire news brand. With the mention of Al, as we talked about today, we're going to go ahead and add additional forces both in the field and here in the office, perhaps doubling that force to a total of 7 or 8 individuals as well. So our hope is, quite honestly, the chicken and the egg. It's good quality client distribution -- good quality clients rather and distribution go hand in hand. And so we're focused on them both and have current negotiations going on with distribution partners to expand upon our current reach as we time our sales folks and new hires.

Operator: And we can take our next question from Scott Reed [ph] with Vision Financial Strategies.

Unknown Analyst: So I have 2 questions, actually. First of which, it seems like you're adding a number of products to your platform, such as the document review, and that's new to me. That sounds like a really value-added and could be a real driver for sales for you in the future. But could you comment particularly on whether you see that as a way to differentiate yourself from the competition or whether you guys are sort of unique in being able to provide this level of services and/or versus just trying to keep up with competition like Donnelley?

Brian Balbirnie: Yes. No, that's a great question. R.R. Donnelley, Workiva, there's a couple of solutions in the market from a cloud perspective disclosure that have for years had a product in the market. And we remain focused on meeting the demands of the market similar to which they have but really extending the platform to our entire product set and suite. So whereas R.R. Donnelley and Workiva both deliver best-of-breed disclosure platform products, they tend to not be focused on moving that data from one component and/or disclosure document to another. And that's really what our platform is focused on, is extending the earnings data out of an 8-K, earnings press release and moving it throughout the rest of the platform for shareholder engagement and disclosure as well as regulatory. That separates us. That platform focus has been part of our strategy for years, and that's what we tend to do well in the markets.

Unknown Analyst: Great. The next question, you mentioned that you have about 1,800 customers with about 850 in Accesswire and 952 in Issuer Direct, which would seem to imply that these are pretty much-- there's not much crossover between the 2 groups. And I just want you to comment on -- at the same time, you're saying that you are having more customers buy more products from you at any one time. Could you comment on the trajectory you see within the cross-selling opportunities and how you expect to continue to extend those?

Brian Balbirnie: Yes. I think the good focus for us over the next 3 to 6 months in our Accesswire news business is really extending the IR platforms of Issuer Direct. Where we will see good cross-selling initiatives headed by Al and the team is extending our newsroom data feeds and our market data products as a subscription sale model to go along with Accesswire. Where we see Accesswire in reverse from an Issuer Direct side that we anticipate more cross-selling activities is in our agency and practitioner models. A lot of Issuer Direct clients and value-added partners have integrated our platforms, and that investor relations earnings call webcast system tends to be a natural extension of what Accesswire brings. And so those are the 2 areas of focus from a sales world, folks will tend to call that low-hanging fruit. And we see good anticipated growth based on our pipeline on those 2 areas. So I would look for increases both in Issuer Direct and Accesswire clients in the back half of the year. I think the good news for us is we've maintained our core Accesswire clients from a revenue perspective and have begun to increase because of the shift of the type of client that we've got. So I expect now as that shift is coming to near its end from a reseller perspective, we'll start to see the ramp up of clients. And as everybody knows in this market and as we're enjoying success of the newswire business is -- this is one of our largest segments of our business today as far as growth.

Operator: We can take the next question from Myles Jennings [ph], a private investor.

Unknown Attendee: I'd like to ask a question about 2 areas. The first is your XBRL database and the second is your mention of offering limited trading at a fixed cost. And as the database goes, I assume that you've captured a lot of data of natural releases for corporations. And I'd like to get a better feel for what you have available in this database, for instance, the number of companies included in the database, the number of years covered, how successful it is now and the search function. And last, regarding that database, how would you expect to monetize this database with shareholders? And my second question is just a follow-up on something you mentioned, which was regarding this limited trading, could you be a little more specific about what that is? I assume it's not whale oil.

Brian Balbirnie: No. It is not. I'll do the -- answer the first question for you on XBRL, Myles [ph]. You're right, much like many of the folks in the market, since inception of XBRL going back several years, we have been harvesting each one of those taxonomy link bases for every corporate issuer that files today and beyond, right? So we're looking at foreign filers and converting some of their documents as well to build that XBRL repository or engine. So as we roll out our iXBRL solutions to our clients, they're going to be able to do a little bit of peer review side by side. Not uncommon to what some of the folks in the market have. It's a product set that you've got to be able to provide, that comparative tools for us. And I think you alluded a little bit to this form a how do you monetize it. It's to look at ways to give the investing community, rather than the corporate issuer community, a look into that dataset. And all of the data that we're providing our corporate issuer clients today, we have been housing for years and analyzing. And so part of our bigger initiatives over the next 12 to 24 months is to really roll out product sets that are geared towards the investment community and that investor -- that home investor, right, the retail, Joe and pro type of individual that we're focused on. And so we see XBRL being a big part of that as a result of our advancements in Blueprint and some other things that we're doing for market data and news distribution analytics. So that will be the biggest focus. Your second question is -- it's something that is interesting to us and this, call it, limited trading, right -- or unlimited trading, rather, is a way for an individual to subscribe to an investor network platform. They would give way for them to trade securities, like any other brokerage account, for an unlimited flat fee per month. And we have built the hooks and the partnerships in order for this to be accomplished, and it's something that we're evaluating for a back end of the year release on a limited basis. But it's truly unlimited.

Operator: [Operator Instructions] At this time, gentlemen, there are no additional phone questions.

Brian Balbirnie: Thank you, and I'd like to thank everyone for attending today's call. And as always, we look forward to talking with you again in our next earnings call. Meanwhile, if you have any questions, Steve and I both would be happy to speak with you at any time.

Steven Knerr: Enjoy the rest of your day. Thank you.

Operator: Thank you for your participation. This does conclude today's program. You may disconnect at any time.