Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) today reported
preliminary financial results for the second quarter 2022.
“I am pleased with our Q2 financial results in this inflationary
and soft economy. Our corporate channel continued to drive our
growth with a 17% increase over Q2 2021 and has a robust pipeline
of enterprise opportunities for the second half of 2022. In
addition, the Company continued to produce excellent margins and
continued to make progress in attaining the authority to operate
from the Veterans Administration which is expected in Q3.” said
Scott Turicchi, CEO of Consensus.
SECOND QUARTER 2022
HIGHLIGHTS
Q2 2022 GAAP quarterly revenues increased by $5.4 million or
6.1% to $93.2 million compared with $87.8 million for Q2 2021. Our
growth was primarily due to an increase of $7.2 million or 17.1% in
our corporate business (inclusive of $2.6 million due to the Summit
acquisition); partially offset by a decline of $1.8 million or 3.9%
in our SoHo business ($1.0 million or 1.7% on a Fx neutral
basis).
GAAP net income from continuing operations decreased to $22.3
million in Q2 2022 compared to $38.9 million for Q2 2021. The
decrease is primarily related to the interest expense associated
with the 2026 and 2028 notes, additional costs as a standalone
publicly traded company and increased headcount; partially offset
by higher revenues.
GAAP earnings per diluted share from continuing operations (1)
decreased to $1.11 in Q2 2022 compared to $2.04 for Q2 2021. The
decrease is primarily related to the items discussed above.
Adjusted EBITDA (3) for Q2 2022 of $50.3 million is favorable
compared to Q2 2021 pro forma adjusted EBITDA (5) of $50.0 million.
Adjusted non-GAAP earnings per diluted share (2)(3) for the quarter
increased to $1.45 or 6.6% compared to pro forma Adjusted non-GAAP
earnings per diluted share (2)(3) of $1.36 for Q2 2021.
Consensus ended the quarter with $76.3 million in cash and cash
equivalents after cash outlays related to interest expense payments
of $26.5 million (occurring in Q2 and Q4), share repurchases of
$7.6 million and other significant payments of ~$20 million.
Key financial results from continuing operations for Q2 2022
versus Q2 2021 are set forth in the following table.
Reconciliations of Adjusted non-GAAP net income, earnings per
diluted share, Adjusted EBITDA and Pro Forma results from
operations are to their nearest comparable GAAP financial measures
accompany this press release.
(Unaudited, in thousands except per
share amounts and percentages)
Continuing Operations
Pro Forma (4)
Q2 2022
Q2 2021
Q2 2021
% Change
Revenues
$
93,163
$
87,842
$
87,842
6.1
%
GAAP net income
$
22,274
$
38,854
GAAP net income per diluted share
(1)
$
1.11
$
2.04
Adjusted Non-GAAP net income
(2)
$
29,006
$
41,175
$
26,982
7.5
%
Adjusted Non-GAAP income per diluted
share (2)(3)
$
1.45
$
2.07
$
1.36
6.6
%
Adjusted EBITDA (3)
$
50,303
$
54,851
$
50,017
0.6
%
Adjusted EBITDA margin (3)
54.0
%
62.4
%
56.9
%
Non-Consensus assets are classified as discontinued operations
in our financial statements for the prior period. Results in this
press release represent continuing operations, and where
appropriate, results from discontinued operations have been
disclosed.
REAFFIRMS 2022 GUIDANCE
For 2022 full year guidance, the Company estimates revenues
between $375 million and $385 million, Adjusted EBITDA between $201
million and $207 million and Adjusted non-GAAP earnings per diluted
share of between $5.36 and $5.50, excluding share-based
compensation, amortization of acquired intangibles and the impact
of unanticipated items, in the case of adjusted non-GAAP net
income, net of tax. The non-GAAP effective tax rate for 2022 is
expected to be between 19.5% and 21.5%. Full year guidance is
provided on a non-GAAP basis only because certain information
necessary to calculate the most comparable GAAP measures are
unavailable due to the uncertainty and inherent difficulty of
predicting the occurrence and the future financial statement impact
of certain items. Therefore, as a result of the uncertainty and
variability of the nature and amount of future adjustments, which
could be significant, we are unable to provide a reconciliation of
these measures without unreasonable effort.
Notes:
(1)
The estimated GAAP effective tax rates
were approximately 26.3% for Q2 2022 and 24.3% for Q2 2021. The
estimated pro forma Adjusted non-GAAP effective tax rate was
approximately 24.0% for Q2 2021. The estimated non-GAAP effective
tax rates were approximately 21.2% for Q2 2022 and 22.2% for Q2
2021. The estimated pro forma Adjusted non-GAAP effective tax rate
was approximately 24.0% for Q2 2021.
(2)
Adjusted non-GAAP net income and Adjusted
non-GAAP earnings per diluted share excludes certain non-GAAP
items, as defined in the accompanying reconciliation of GAAP to
Adjusted non-GAAP Financial Measures, for the three months ended
June 30, 2022 and 2021. Such exclusions totaled $0.34 and $0.12 per
diluted share, respectively. Pro forma Adjusted non-GAAP earnings
per diluted share excludes certain pro forma items, as defined in
footnote (4) below. Such exclusions totaled $(0.59) per diluted
share for three months ended June 30, 2021. Adjusted non-GAAP net
income and Adjusted non-GAAP earnings per diluted share are not
meant as a substitute for GAAP, but are presented solely for
informational purposes.
(3)
Adjusted EBITDA is defined as earnings
before interest; other income, net; income tax expense;
depreciation and amortization; and other items used to reconcile
EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of
GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA
amounts are not meant as a substitute for GAAP, but is presented
solely for informational purposes.
(4)
The % change is a comparison of Q2 2022
actual results versus Q2 2021 pro forma. Q2 2021 pro forma
adjustments represent incremental costs incurred as a standalone
public company, incremental interest expense related to the debt of
$805 million and the effects of pro forma adjustments at the
applicable statutory tax rates.
(5)
See Net Income to Adjusted EBITDA
Reconciliation for the components of pro forma adjusted EBITDA.
About Consensus Cloud Solutions
Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) is a global
leader of digital cloud transmission and interoperability
solutions. The company leverages its 25-year technology heritage to
provide secure solutions that transform simple digital documents
into actionable information, including advanced healthcare
standards HL7 and FHIR for secure data exchange. Consensus offers
eFax Corporate (TM), a leading global cloud faxing solution;
Consensus Signal for automatic real-time healthcare communications;
Consensus Clarity, a Natural Language Processing and Artificial
Intelligence solution; Consensus Unite and Consensus Harmony
interoperability solutions; and jsign (TM) for secure digital
signatures built on blockchain. For more information about
Consensus, visit consensus.com and follow @ConsensusCS on Twitter
to learn more.
“Safe Harbor” Statement Under the Private Securities
Litigation Reform Act of 1995: Certain statements in this press
release are “forward-looking statements” within the meaning of The
Private Securities Litigation Reform Act of 1995, including those
contained in Scott Turicchi’s quote and the “Business Outlook”
portion regarding the Company’s expected fiscal 2022 financial
performance and statements regarding the Company’s share buyback
program. These forward-looking statements are based on management’s
current expectations or beliefs and are subject to numerous
assumptions, risks and uncertainties that could cause actual
results to differ materially from those described in the
forward-looking statements. These factors and uncertainties
include, among other items: the Company’s ability to grow fax
revenues, profitability and cash flows; the Company’s ability to
identify, close and successfully transition acquisitions;
subscriber growth and retention; variability of the Company’s
revenue based on changing conditions in particular industries and
the economy generally; protection of the Company’s proprietary
technology or infringement by the Company of intellectual property
of others; the risk of adverse changes in the U.S. or international
regulatory environments, including but not limited to the
imposition or increase of taxes or regulatory-related fees; general
economic and political conditions, including political tensions and
war (such as the ongoing conflict in Ukraine);and the numerous
other factors set forth in Consensus’ filings with the Securities
and Exchange Commission (“SEC”). For a more detailed description of
the risk factors and uncertainties affecting Consensus, refer to
the 2021 Annual Report on Form 10-K filed by Consensus on April 15,
2022 and the other reports filed by Consensus from time-to-time
with the SEC, each of which is available at www.sec.gov. The
forward-looking statements provided in this press release,
including those contained in Scott Turicchi’s quote and in the
“Business Outlook” portion regarding the Company’s expected fiscal
2022 financial performance are based on limited information
available to the Company at this time, which is subject to change.
Although management’s expectations may change after the date of
this press release, the Company undertakes no obligation to revise
or update these statements.
About non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with GAAP, we use the
following Adjusted non-GAAP financial measures: Adjusted non-GAAP
net income, Adjusted non-GAAP earnings per diluted share, Adjusted
EBITDA and free cash flow. The presentation of this financial
information is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP.
We use these Adjusted non-GAAP financial measures for financial
and operational decision-making and as a means to evaluate
period-to-period comparisons. Our management believes that these
Adjusted non-GAAP financial measures provide meaningful
supplemental information regarding our performance and liquidity by
excluding certain expenses and expenditures that may not be
indicative of our recurring core business operating results. We
believe that both management and investors benefit from referring
to these Adjusted non-GAAP financial measures in assessing our
performance and when planning, forecasting, and analyzing future
periods. These Adjusted non-GAAP financial measures also facilitate
management’s internal comparisons to our historical performance and
liquidity. We believe these Adjusted non-GAAP financial measures
are useful to investors both because (1) they allow for greater
transparency with respect to key metrics used by management in its
financial and operational decision-making and (2) they are used by
our institutional investors and the analyst community to help them
analyze the health of our business.
For more information on these Adjusted non-GAAP financial
measures, please see the appropriate GAAP to Adjusted non-GAAP
reconciliation tables included within the attached Exhibit to this
Release.
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED, IN THOUSANDS
EXCEPT SHARE AND PER SHARE DATA)
June 30, 2022
December 31,
2021
ASSETS
Cash and cash equivalents
$
76,292
$
66,778
Accounts receivable, net of allowances of
$4,372 and $4,743, respectively
29,926
24,829
Prepaid expenses and other current
assets
4,910
4,650
Total current assets
111,128
96,257
Property and equipment, net
42,610
33,849
Operating lease right-of-use assets
7,762
7,233
Intangibles, net
51,922
43,549
Goodwill
347,855
339,209
Deferred income taxes
41,592
41,842
Other assets
1,151
873
TOTAL ASSETS
$
604,020
$
562,812
LIABILITIES AND STOCKHOLDERS’
DEFICIT
Accounts payable and accrued expenses
$
39,509
$
40,206
Income taxes payable, current
5,199
5,227
Deferred revenue, current
30,606
24,370
Operating lease liabilities, current
2,422
2,421
Due to Former Parent
4,434
5,739
Total current liabilities
82,170
77,963
Long-term debt
792,916
792,040
Deferred revenue, non-current
134
184
Operating lease liabilities,
non-current
14,483
14,108
Liability for uncertain tax positions
6,253
4,795
Deferred income taxes
6,176
6,027
Other long-term liabilities
1,105
360
TOTAL LIABILITIES
903,237
895,477
Commitments and contingencies
Common stock, $0.01 par value. Authorized
120,000,000; total issued is 20,015,838 and 19,978,580 shares and
total outstanding is 19,826,724 and 19,978,580 shares at June 30,
2022 and December 31, 2021, respectively.
200
200
Additional paid-in capital
11,913
2,878
Treasury stock, at cost (189,114 and zero
shares at June 30, 2022 and December 31, 2021, respectively).
(7,596
)
—
Accumulated deficit
(280,416
)
(318,886
)
Accumulated other comprehensive loss
(23,318
)
(16,857
)
TOTAL STOCKHOLDERS’ DEFICIT
(299,217
)
(332,665
)
TOTAL LIABILITIES AND STOCKHOLDERS’
DEFICIT
$
604,020
$
562,812
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS
EXCEPT SHARE AND PER SHARE DATA)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Revenues
$
93,163
$
87,842
$
184,088
$
174,462
Cost of revenues (1)
15,587
14,554
30,692
28,524
Gross profit
77,576
73,288
153,396
145,938
Operating expenses:
Sales and marketing (1)
16,394
13,681
32,224
26,916
Research, development and engineering
(1)
2,741
1,940
5,077
3,616
General and administrative (1)
17,450
5,976
36,256
12,025
Total operating expenses
36,585
21,597
73,557
42,557
Income from operations
40,991
51,691
79,839
103,381
Interest expense
(12,359
)
(254
)
(25,632
)
(480
)
Other income (expense), net
1,577
(97
)
1,750
281
Income before income taxes
30,209
51,340
55,957
103,182
Income tax expense
7,935
12,486
14,978
25,094
Income from continuing operations
22,274
38,854
40,979
78,088
Income from discontinued operations, net
of income taxes (1)
—
(11,337
)
—
(3,210
)
Net income
$
22,274
$
27,517
$
40,979
$
74,878
Net income per common share from
continuing operations:
Basic
$
1.12
$
1.95
$
2.05
$
3.92
Diluted
$
1.11
$
1.95
$
2.04
$
3.92
Net income per common share from
discontinued operations:
Basic
$
—
$
(0.57
)
$
—
$
(0.16
)
Diluted
$
—
$
(0.57
)
$
—
$
(0.16
)
Net income per common share:
Basic
$
1.12
$
1.38
$
2.05
$
3.76
Diluted
$
1.11
$
1.38
$
2.04
$
3.76
Weighted average shares outstanding:
Basic
19,928,316
19,902,924
19,924,864
19,902,924
Diluted
19,965,204
19,902,924
19,985,275
19,902,924
(1) Includes share-based compensation
expense as follows:
Cost of revenues
$
216
$
49
$
439
$
99
Sales and marketing
270
93
543
188
Research, development and engineering
340
99
696
201
General and administrative
3,955
140
8,316
276
Income from discontinued operations, net
of income taxes
—
1,048
—
2,156
Total
$
4,781
$
1,429
$
9,994
$
2,920
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED, IN
THOUSANDS)
Six Months Ended June
30,
2022
2021 (1)
Cash flows from operating activities:
Net income
$
40,979
$
74,878
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
7,564
32,662
Amortization of financing costs and
discounts
901
—
Non-cash operating lease costs
787
3,749
Share-based compensation
9,994
2,920
Provision for doubtful accounts
3,262
3,194
Deferred income taxes, net
(2,435
)
(4,289
)
Gain on sale of businesses
—
(2,802
)
Goodwill impairment on business
—
32,629
Other
—
1,508
Changes in operating assets and
liabilities:
Accounts receivable
(7,351
)
(6,271
)
Prepaid expenses and other current
assets
(37
)
(4,401
)
Other assets
(279
)
1,592
Accounts payable and accrued expenses
(1,857
)
2,318
Income taxes payable
60
(6,027
)
Deferred revenue
1,409
(1,128
)
Operating lease liabilities
(939
)
(4,205
)
Liability for uncertain tax positions
1,458
(4,008
)
Other liabilities
(1,310
)
4,298
Net cash provided by operating
activities
52,206
126,617
Cash flows from investing activities:
Purchases of property and equipment
(13,744
)
(19,474
)
Acquisition of businesses, net of cash
received
(14,355
)
(67,342
)
Proceeds from sale of businesses, net of
cash divested
—
6,033
Purchases of intangible assets
(1,000
)
—
Net cash used in investing activities
(29,099
)
(80,783
)
Cash flows from financing activities:
Debt issuance costs
(232
)
—
Issuance of common stock under employee
stock purchase plan
631
—
Repurchase of common stock
(7,596
)
—
Shares withheld related to net share
settlement
(1,590
)
—
Deferred payments for acquisitions
—
(6,339
)
Contribution from Former Parent
—
25,443
Other
—
(290
)
Net cash (used in) provided by financing
activities
(8,787
)
18,814
Effect of exchange rate changes on cash
and cash equivalents
(4,806
)
(234
)
Net change in cash and cash
equivalents
9,514
64,414
Cash and cash equivalents at beginning of
period
66,778
128,189
Cash and cash equivalents at end of
period
$
76,292
$
192,603
Less cash and cash equivalents at end of
period, discontinued operations
—
84,937
Cash and cash equivalents at end of
period, continuing operations
$
76,292
$
107,666
(1) The prior period includes cash flows from discontinued
operations of the non-Consensus business. As a result, the prior
period is not comparable.
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO
ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED JUNE 30,
2022 AND 2021
(UNAUDITED, IN THOUSANDS,
EXCEPT SHARE AND PER SHARE AMOUNTS)
The following tables sets forth
reconciliations regarding certain non-GAAP measures for the three
months ended June 30, 2022 and 2021 to the most closely comparable
GAAP measure.
Three Months Ended June
30,
2022
Per Diluted Share *
2021
Per Diluted Share *
Net income
$
22,274
$
1.11
$
38,854
$
1.95
Plus:
Share-based compensation (1)
4,162
0.21
292
0.02
Amortization (2)
784
0.04
866
0.04
Spin-off related costs (3)
731
0.04
—
—
Non-income related sales tax (4)
(349
)
(0.02
)
—
—
Acquisition related integration costs
(5)
149
0.01
—
—
Intra-entity transfer (6)
1,255
0.06
1,163
0.06
Adjusted non-GAAP net income
$
29,006
$
1.45
$
41,175
$
2.07
* The reconciliation of net income per share from GAAP to
Adjusted non-GAAP may not foot since each is calculated
independently.
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
RECONCILIATION TO ADJUSTED
NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED JUNE 30,
2022 AND 2021
(UNAUDITED, IN THOUSANDS,
EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended June
30,
2022
2021
Cost of revenues
$
15,587
$
14,554
Plus:
Share-based compensation (1)
(216
)
(49
)
Amortization (2)
(10
)
(1
)
Adjusted non-GAAP cost of
revenues
$
15,361
$
14,504
Sales and marketing
$
16,394
$
13,681
Plus:
Share-based compensation (1)
(270
)
(93
)
Adjusted non-GAAP sales and
marketing
$
16,124
$
13,588
Research, development and
engineering
$
2,741
$
1,940
Plus:
Share-based compensation (1)
(340
)
(99
)
Adjusted non-GAAP research, development
and engineering
$
2,401
$
1,841
General and administrative
$
17,450
$
5,976
Plus:
Share-based compensation (1)
(3,955
)
(140
)
Amortization (2)
(1,073
)
(1,181
)
Spin-off related costs (3)
(995
)
—
Non-income related sales tax (4)
526
—
Acquisition related integration costs
(5)
(204
)
—
Adjusted non-GAAP general and
administrative
$
11,749
$
4,655
Interest expense
$
(12,359
)
$
(254
)
Plus:
Non-income related sales tax (4)
58
—
Adjusted non-GAAP interest expense,
net
$
(12,301
)
$
(254
)
Income tax expense
$
7,935
$
12,486
Plus:
Share-based compensation (1)
619
89
Amortization (2)
299
316
Spin-off related costs (3)
264
—
Non-income related sales tax (4)
(119
)
—
Acquisition related costs (5)
55
—
Intra-entity Transfer of IP (6)
(1,255
)
(1,163
)
Adjusted non-GAAP income tax
expense
$
7,798
$
11,728
Total adjustments
$
(6,732
)
$
(2,321
)
GAAP earnings per diluted share
$
1.11
$
1.95
Adjustments *
$
0.34
$
0.12
Adjusted non-GAAP earnings per diluted
share
$
1.45
$
2.07
* The reconciliation of net income per share from GAAP to
Adjusted non-GAAP may not foot since each is calculated
independently.
The Company discloses Adjusted non-GAAP Earnings Per Share
(“EPS”) and adjusted non-GAAP net income as supplemental Non-GAAP
financial performance measures, as it believes they are useful
metrics by which to compare the performance of its business from
period to period. The Company also understands that these Adjusted
non-GAAP measure is broadly used by analysts, rating agencies and
investors in assessing the Company’s performance. Accordingly, the
Company believes that the presentation of this Adjusted non-GAAP
financial measure provides useful information to investors.
Adjusted non-GAAP EPS and Adjusted non-GAAP net income are not
in accordance with, or an alternative to, net income per share or
net income and may be different from Non-GAAP measures with similar
or even identical names used by other companies. In addition, these
Adjusted non-GAAP measures are not based on any comprehensive set
of accounting rules or principles. These Adjusted non-GAAP measures
have limitations in that they do not reflect all of the amounts
associated with the Company’s results of operations determined in
accordance with GAAP.
Non-GAAP Financial Measures
To supplement its unaudited condensed consolidated financial
statements and pro forma condensed consolidated financial
statements, each of which are prepared and presented in accordance
with US GAAP, the Company uses the following Non-GAAP financial
measures: Adjusted EBITDA, Adjusted non-GAAP Net Income and
Adjusted non-GAAP Diluted EPS (collectively the “Non-GAAP financial
measures”). The presentation of this financial information is not
intended to be considered in isolation or as a substitute for, or
superior to, the financial information prepared and presented in
accordance with U.S. GAAP. The Company uses these Non-GAAP
financial measures for financial and operational decision making
and as a means to evaluate period-to-period comparisons. The
Company believes that they provide useful information about core
operating results, enhance the overall understanding of past
financial performance and future prospects, and allow for greater
transparency with respect to key metrics used by management in its
financial and operational decision making.
(1) Share-based compensation. The Company excludes stock-based
compensation because it is non-cash in nature and because the
Company believes that the Non-GAAP financial measures excluding
this item provides meaningful supplemental information regarding
the operational performance of the business. The Company further
believes this measure is useful to investors in that it allows for
greater transparency to certain line items in its financial
statements. In addition, excluding this item from the Non-GAAP
measures facilitates comparisons to historical operating results
and comparisons to peers, many of which similarly exclude this
item.
(2) Amortization. The Company excludes amortization of patents
and acquired intangible assets because it is non-cash in nature and
because the Company believes that the Non-GAAP financial measures
excluding this item provides meaningful supplemental information
regarding the operational performance of the business. In addition,
excluding this item from the Non-GAAP measures facilitates
comparisons to historical operating results and comparisons to
peers, many of which similarly exclude this item.
(3) Spin-off related costs. The Company excludes certain
expenses associated with the spin-off from Ziff Davis, Inc. The
Company believes that the Non-GAAP financial measures excluding
this item provides meaningful supplemental information regarding
the operational performance of the business. In addition, excluding
this item from the Non-GAAP measures facilitates comparisons to
historical operating results and comparisons to peers.
(4) Non-income related tax. The Company has excluded certain
non-income related taxes in connection with the recent spin-off
from Ziff Davis, Inc. The Company believes that the Non-GAAP
financial measures excluding this item provides meaningful
supplemental information regarding the operational performance of
the business.
(5) Acquisition related integration costs. The Company excludes
certain acquisition and related integration costs such as
adjustments to contingent consideration, severance, lease
terminations, retention bonuses and other acquisition-specific
items. The Company believes that the Non-GAAP financial measures
excluding this item provide meaningful supplemental information
regarding operational performance. In addition, excluding this item
from the Non-GAAP measures facilitates comparisons to historical
operating results and comparisons to peers, many of which similarly
exclude this item.
(6) Intra-entity transfers. The Company excludes certain effects
of intra-entity transfers to the extent the related tax asset or
liability in the financial statement is not recovered or settled,
respectively during the year. During December 2019, the Company
entered into an intra-entity asset transfer that resulted in the
recording of a tax benefit and related tax asset representing tax
deductible amounts to be realized in future years which is expected
to be recovered over a period of up to 20 years and related foreign
currency fluctuations. The Company believes that the Non-GAAP
financial measures excluding the cumulative future unrealized
benefit of the assets transferred and including the tax benefit in
the year of realization provides meaningful supplemental
information regarding operational performance. In addition,
excluding this item from the Non-GAAP measures facilitates
comparisons to historical operating results.
The Company presents Adjusted non-GAAP Cost of Revenues,
Adjusted non-GAAP Research, Development and Engineering, Adjusted
non-GAAP Sales and Marketing, Adjusted non-GAAP General and
Administrative, Adjusted non-GAAP Interest Expense, net, Adjusted
non-GAAP Other Income, net, Adjusted non-GAAP Income Tax Expense,
and Adjusted non-GAAP Net Income because the Company believes that
these provide useful information about our operating results and
enhance the overall understanding of past financial performance and
future prospects.
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
NET INCOME TO ADJUSTED EBITDA
RECONCILIATION
THREE MONTHS ENDED JUNE 30,
2022 AND 2021
(UNAUDITED, IN
THOUSANDS)
The following table sets forth a
reconciliation of Adjusted EBITDA to net income, the most directly
comparable GAAP financial measure.
Three Months Ended June
30,
2022
2021
Pro Forma 2021
Net income
$
22,274
$
38,854
$
26,982
Plus:
Interest expense
12,359
254
12,820
Other income, net
(1,577
)
97
97
Income tax expense
7,935
12,486
8,521
Depreciation and amortization
3,858
2,779
1,597
EBITDA:
Plus:
Share-based compensation
4781
381
—
Spin-off related costs
995
—
—
Non-income related sales tax
(526
)
—
—
Acquisition related costs
204
—
—
Adjusted EBITDA
$
50,303
$
54,851
$
50,017
Adjusted EBITDA as calculated above represents earnings before
interest, depreciation and amortization, income tax expense and the
items used to reconcile GAAP to Adjusted non-GAAP financial
measures, including (1) share-based compensation; (2) spin-off
related costs; (3) non-income related sales tax; and (4)
acquisition related costs. We disclose Adjusted EBITDA as a
supplemental Non-GAAP financial performance measure as we believe
it is a useful metric by which to compare the performance of our
business from period to period. We understand that measures similar
to Adjusted EBITDA are broadly used by analysts, rating agencies
and investors in assessing our performance. Accordingly, we believe
that the presentation of Adjusted EBITDA provides useful
information to investors.
Adjusted EBITDA is not in accordance with, or an alternative to,
net income, and may be different from Non-GAAP measures used by
other companies. In addition, Adjusted EBITDA is not based on any
comprehensive set of accounting rules or principles. This Adjusted
non-GAAP measure has limitations in that it does not reflect all of
the amounts associated with the Company’s results of operations
determined in accordance with GAAP.
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL
MEASURES
(UNAUDITED, IN
THOUSANDS)
Q1
Q2 (1)
Q3
Q4
YTD
2022
Net cash provided by operating
activities
$
49,908
2,298
$
—
$
—
$
52,206
Less: Purchases of property and
equipment
(6,915
)
(6,829
)
—
—
(13,744
)
Free cash flows
$
42,993
$
(4,531
)
$
—
$
—
$
38,462
(1) Net cash provided by operating activities during the second
quarter was impacted by cash outlays related to interest expense
payments of $26.5 million (occurring in Q2 and Q4) and other
significant payments of ~$20 million.
The Company discloses free cash flows as supplemental Non-GAAP
financial performance measure, as it believes it is a useful metric
by which to compare the performance of its business from period to
period. The Company also understands that this Non-GAAP measure is
broadly used by analysts, rating agencies and investors in
assessing the Company’s performance. Accordingly, the Company
believes that the presentation of this Non-GAAP financial measure
provides useful information to investors.
Free cash flows is not in accordance with, or an alternative to,
Cash Flows from Operating Activities, and may be different from
Non-GAAP measures with similar or even identical names used by
other companies. In addition, the Non-GAAP measure is not based on
any comprehensive set of accounting rules or principles. This
Non-GAAP measure has limitations in that it does not reflect all of
the amounts associated with the Company’s results of operations
determined in accordance with GAAP.
Certain Other Pro Forma Financial Information
(Unaudited)
CONSENSUS CLOUD SOLUTIONS,
INC
PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
JUNE 30, 2021
(UNAUDITED, IN THOUSANDS
EXCEPT SHARE AND PER SHARE DATA)
Consensus
Pro Forma Adjustments
(1)
Consensus Pro Forma
Revenues
$
87,842
$
—
$
87,842
Cost of revenues
14,554
95
14,649
Gross profit
73,288
(95
)
73,193
Operating expenses:
Sales and marketing
13,681
(93
)
13,588
Research, development and engineering
1,940
(101
)
1,839
General and administrative
5,976
3,370
9,346
Total operating expenses
21,597
3,176
24,773
Income from operations
51,691
(3,271
)
48,420
Interest expense
(254
)
(12,566
)
(12,820
)
Interest income
—
—
—
Other expense, net
(97
)
—
(97
)
Income before income taxes
51,340
(15,837
)
35,503
Income tax expense
12,486
(3,965
)
8,521
Net income
$
38,854
$
(11,872
)
$
26,982
Net income per common share from
continuing operations:
Basic
$
1.95
$
(0.59
)
$
1.36
Diluted
$
1.95
$
(0.59
)
$
1.36
Weighted average shares outstanding:
Basic
19,902,924
Diluted
19,902,924
(1) Pro forma adjustments represents the following:
- Represents incremental costs to be incurred as a standalone
public entity and overhead currently shared from Ziff Davis such as
legal, accounting, finance, human resource and payroll, net of
tax.
- Reflects the interest expense related to debt of $805 million
principal amount issued by Consensus Cloud Solutions, Inc., on
October 7, 2021, in connection with the separation capitalization
plan with an interest rate of 6.3% per annum.
- Reflects the effects of the pro forma adjustments at the
applicable statutory income tax rates.
The following table sets forth certain pro forma financial and
operating information for Consensus for the three months ended June
30, 2022 and 2021 (in thousands).
Three Months Ended June
30,
2022
2021
Corporate revenue
$
49,140
$
41,961
Corporate customer accounts
46
46
Corporate ARPA (1)
$
356.97
$
298.44
Corporate paid adds (2)
4
3
Corporate monthly account churn (3)
1.88
%
3.14
%
SoHo revenue
$
44,002
$
45,790
SoHo customer accounts
1,002
1,072
SoHo ARPA (1)
$
14.46
$
14.27
SoHo paid adds (2)
96
110
SoHo monthly account churn (3)
3.87
%
3.20
%
(1) Represents a monthly ARPA calculated for the quarter
calculated as follows. Monthly ARPA on a quarterly basis is
calculated using our standard convention of dividing revenue for
the quarter by the average of the quarter’s beginning and ending
customer base and dividing that amount by 3 months. Consensus
believes ARPA provides investors an understanding of the average
monthly revenues we recognize per account associated within
Consensus’ customer base. As ARPA varies based on fixed
subscription fee and variable usage components, Consensus believes
it can serve as a measure by which investors can evaluate trends in
the types of services, levels of services and the usage levels of
those services across Consensus’ customers.
(2) Paid Adds represents paying new Consensus customer accounts
added during the annual period.
(3) Monthly churn is defined as a Consensus paying customer
accounts that cancelled its services during the period divided by
the average number customers over the period. This measure is
calculated monthly and expressed as an average over the applicable
period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220809005879/en/
Laura Hinson Consensus Cloud Solutions, Inc 844-211-1711
investor@consensus.com
Concensus Cloud Solutions (NASDAQ:CCSI)
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