I originally met the CEO (Brian Balbirnie) about 5 years ago at a conference. I was impressed with his work ethic and how much focus was on the future of the company. I didn’t hurt that he owned over 20% of the company at the time. I’ve followed the company since then waiting for a decent entry point on the stock. I took an initial position during the covid sell-off.
There is a good overview of the company at CleverInvesting. Check it out here. I swear I have (some) original ideas, but sometimes someone else already has an idea that’s worth investigating.
As you can see from the 5 year price chart, ISDR has essentially performed in line with the S&P 500.
The company has built out the Platform and Technology side of the business gradually and now it is the primary driver for earnings in the short and long term.
The services side of the business has seen top line slowly decline, though gross margins have been maintained. I would expect the services side to decline at a pace of 3-5% per year until it eventually troughs out.
Platform and Tech has more than doubled in quarterly revenue in the last 5 years with the combination of organic growth, migration of customers from services to platform and acquisitions.
I believe that along with Covid there are some temporary items that are suppressing earnings or otherwise preventing the shares from re-rating at a higher multiple on a trailing twelve month basis:
- expanding sales team (gradually)
- some development expenses used to integrate acquisitions
- build out of new headquarters in 2018/19
- lumpiness in services revenue decline masks the growth in the platform business
- dividend cut a few years ago
Why I am long
- my understanding is that Accesswire can get about 80% of the reach as the major players at 1/3 the cost
- the company has a net cash balance of almost 16mil to weather the storm as well as potential acquisitions
- they have demonstrated that they can run the business well through a lockdown and will likely run a small loss or profit in the near term
- the company pivoted very quickly to get something quite useful out in time for virtual conferences, i think this speaks to how well they work as a team and adapt on the fly
- they issued 800k shares at $15.50 and then bought back a little over 200k at $12.25 from a fund that wanted out of the stock – oppo
- the company announced an increase to the share buyback recently
There are obviously risks associated with ISDR. I can think of a few that would lead to a gradual decline in share price, but nothing that I think would cause share prices to crash.
- Covid-19 lockdowns continue or are reinstated
- Accesswire never gains traction
- Services decline accelerates
- Acquisition of a sub-optimal business
Given how aligned the CEO is with the business and share price performance, I think ISDR is worth an initial position.
*the author is long ISDR at time of writin.