Reaffirms 2022 Guidance
Veterans Administration Approval to
Operate
Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) today reported
preliminary financial results for the third quarter of 2022.
“Our Q3 financial results demonstrated continued revenue growth
and strong EBITDA margins despite the volatile economic conditions.
In addition, we celebrated the first anniversary of the Spin,
devoting significant resources to separate from our former parent
and fill out the roles as a separate public company. We achieved a
significant milestone receiving the Authority to Operate from the
Veterans Administration in late Q3. This combined with our pipeline
of new customer opportunities bodes well for the remainder of the
year and into 2023.” said Scott Turicchi, CEO of Consensus.
THIRD QUARTER UNAUDITED 2022
HIGHLIGHTS
Q3 2022 GAAP quarterly revenues increased by $6.7 million or
7.5% to $95.9 million compared with $89.2 million for Q3 2021. Our
growth was primarily due to an increase of $8.0 million or 18.6% in
our Corporate business (inclusive of $1.9 million due to the Summit
acquisition); partially offset by a decline of $1.2 million or 2.7%
in our SoHo business. On a constant dollar basis, revenues grew by
$8.1 million or 9.2% compared to the prior year.
GAAP net income from continuing operations decreased to $17.1
million in Q3 2022 compared to $41.1 million for Q3 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, including increased headcount and sales
tax related expenses; partially offset by higher revenues.
GAAP earnings per diluted share from continuing operations (1)
decreased to $0.86 in Q3 2022 compared to $2.07 for Q3 2021. The
decrease is related to the items discussed above.
Adjusted EBITDA (3) for Q3 2022 of $51.3 million is favorable
compared to Q3 2021 pro forma adjusted EBITDA (5) of $50.9 million.
Adjusted non-GAAP earnings per diluted share (1)(2)(3) for the
quarter increased to $1.52 or 5.6% compared to pro forma Adjusted
non-GAAP earnings per diluted share (4) of $1.44 for Q3 2021.
Consensus ended the quarter with $103.7 million in cash and cash
equivalents after cash outlays related to capital expenditures of
$7.3 million and payments to the Former Parent of $7.2 million,
primarily related to commingled cash and the settlement of certain
cost associated with the spin.
Key financial results from continuing operations for Q3 2022
versus Q3 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)
Q3 2022
Q3 2021
Q3 2021
% Change
Revenues
$
95,912
$
89,198
$
89,198
7.5
%
GAAP net income
$
17,141
$
41,132
GAAP net income per diluted share
(1)
$
0.86
$
2.07
Adjusted Non-GAAP net income
(2)
$
30,294
$
43,894
$
28,579
6.0
%
Adjusted Non-GAAP income per diluted
share (1)(2)(3)
$
1.52
$
2.21
$
1.44
5.6
%
Adjusted EBITDA (3)
$
51,307
$
55,478
$
50,886
0.8
%
Adjusted EBITDA margin (3)
53.5
%
62.2
%
57.0
%
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.
VETERANS ADMINISTRATION
Enterprise Cloud Fax (ECFax), available through our partnership
with prime contractor Cognosante, has achieved Authority to Operate
(ATO) from the Department of Veterans Affairs (VA), and marks
Consensus’ official entry into the U.S. federal government
marketplace.
Notes:
(1)
The estimated GAAP effective tax rates
were approximately 28.8% for Q3 2022 and 21.9% for Q3 2021. The
estimated pro forma Adjusted non-GAAP effective tax rate was
approximately 24.0% for Q3 2021. The estimated non-GAAP effective
tax rates were approximately 20.9% for Q3 2022 and 19.9% for Q3
2021. The estimated pro forma Adjusted non-GAAP effective tax rate
was approximately 24.0% for Q3 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
September 30, 2022 and 2021. Such exclusions totaled $0.66 and
$0.14 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 $(0.77) per
diluted share for three months ended September 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 Q3 2022
actual results versus Q3 2021 pro forma. Q3 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. See Certain Other Pro Forma
Financial Information for a reconciliation from GAAP to pro forma
Adjusted non-GAAP net income and pro forma Adjusted non-GAAP income
per diluted share.
(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 the world’s
largest digital fax provider and a trusted global source for the
transformation, enhancement and secure exchange of digital
information. We leverage our 25-year history of success by
providing advanced solutions for regulated industries such as
healthcare, finance, insurance and manufacturing, as well as state
and the federal government. Our solutions consist of: cloud faxing;
digital signature; intelligent data extraction using natural
language processing and artificial intelligence; robotic process
automation; interoperability; and workflow enhancement that result
in improved healthcare outcomes. Our solutions can be combined with
best-in-class managed services for optimal implementations. 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)
September 30,
2022
December 31,
2021
ASSETS
Cash and cash equivalents
$
103,683
$
66,778
Accounts receivable, net of allowances of
$4,410 and $4,743, respectively
31,075
24,829
Prepaid expenses and other current
assets
4,921
4,650
Total current assets
139,679
96,257
Property and equipment, net
47,441
33,849
Operating lease right-of-use assets
7,419
7,233
Intangibles, net
49,702
43,549
Goodwill
342,104
339,209
Deferred income taxes
39,077
41,842
Other assets
1,967
873
TOTAL ASSETS
$
627,389
$
562,812
LIABILITIES AND STOCKHOLDERS’
DEFICIT
Accounts payable and accrued expenses
$
61,695
$
40,206
Income taxes payable, current
4,883
5,227
Deferred revenue, current
26,050
24,370
Operating lease liabilities, current
2,458
2,421
Due to Former Parent
908
5,739
Total current liabilities
95,994
77,963
Long-term debt
793,387
792,040
Deferred revenue, non-current
109
184
Operating lease liabilities,
non-current
13,998
14,108
Liability for uncertain tax positions
6,969
4,795
Deferred income taxes
6,239
6,027
Other long-term liabilities
353
360
TOTAL LIABILITIES
917,049
895,477
Commitments and contingencies
Common stock, $0.01 par value. Authorized
120,000,000; total issued is 20,016,950 and 19,978,580 shares and
total outstanding is 19,827,836 and 19,978,580 shares at September
30, 2022 and December 31, 2021, respectively
200
200
Treasury stock, at cost (189,114 and zero
shares at September 30, 2022 and December 31, 2021,
respectively)
(7,596
)
—
Additional paid-in capital
16,419
2,878
Accumulated deficit
(263,954
)
(318,886
)
Accumulated other comprehensive loss
(34,729
)
(16,857
)
TOTAL STOCKHOLDERS’ DEFICIT
(289,660
)
(332,665
)
TOTAL LIABILITIES AND STOCKHOLDERS’
DEFICIT
$
627,389
$
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenues
$
95,912
$
89,198
$
280,000
$
263,660
Cost of revenues (1)
15,419
14,604
46,111
43,128
Gross profit
80,493
74,594
233,889
220,532
Operating expenses:
Sales and marketing (1)
16,626
13,115
48,850
40,031
Research, development and engineering
(1)
3,236
2,019
8,313
5,635
General and administrative (1)
25,604
8,237
61,860
20,262
Total operating expenses
45,466
23,371
119,023
65,928
Income from operations
35,027
51,223
114,866
154,604
Interest expense
(13,941
)
(131
)
(39,573
)
(611
)
Other income, net
2,992
1,552
4,742
1,833
Income before income taxes
24,078
52,644
80,035
155,826
Income tax expense
6,937
11,512
21,915
36,606
Income from continuing operations
17,141
41,132
58,120
119,220
Loss from discontinued operations, net of
income taxes (1)
—
(13,908
)
—
(17,118
)
Net income
$
17,141
$
27,224
$
58,120
$
102,102
Net income per common share from
continuing operations:
Basic
$
0.86
$
2.07
$
2.92
$
5.99
Diluted
$
0.86
$
2.07
$
2.91
$
5.99
Net loss per common share from
discontinued operations:
Basic
$
—
$
(0.70
)
$
—
$
(0.86
)
Diluted
$
—
$
(0.70
)
$
—
$
(0.86
)
Net income per common share:
Basic
$
0.86
$
1.37
$
2.92
$
5.13
Diluted
$
0.86
$
1.37
$
2.91
$
5.13
Weighted average shares outstanding:
Basic
19,791,019
19,902,924
19,879,759
19,902,924
Diluted
19,885,880
19,902,924
19,951,653
19,902,924
(1) Includes share-based compensation
expense as follows:
Cost of revenues
$
219
$
37
$
658
$
136
Sales and marketing
269
93
812
281
Research, development and engineering
390
99
1,086
300
General and administrative
3,736
123
12,052
399
Loss from discontinued operations, net of
income taxes
—
1,099
—
3,254
Total
$
4,614
$
1,451
$
14,608
$
4,370
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED, IN
THOUSANDS)
Nine Months Ended September
30,
2022
2021 (1)
Cash flows from operating activities:
Net income
$
58,120
$
102,102
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
11,359
48,744
Amortization of financing costs and
discounts
1,391
—
Non-cash operating lease costs
1,130
3,991
Share-based compensation
14,608
4,370
Provision for doubtful accounts
5,250
6,562
Deferred income taxes, net
(2,435
)
10,722
Loss on sale of businesses
—
21,798
Goodwill impairment on business
—
32,629
Other
—
3,530
Changes in operating assets and
liabilities:
Decrease (increase) in:
Accounts receivable
(10,162
)
3,546
Prepaid expenses and other current
assets
(83
)
(7,392
)
Other assets
(1,097
)
(1,119
)
Increase (decrease) in:
Accounts payable and accrued expenses
19,991
(13,921
)
Income taxes payable
(140
)
(6,911
)
Deferred revenue
(2,797
)
(2,631
)
Operating lease liabilities
(1,389
)
(6,553
)
Liability for uncertain tax positions
2,174
(2,374
)
Other liabilities
(6,648
)
(704
)
Net cash provided by operating
activities
89,272
196,389
Cash flows from investing activities:
Purchases of property and equipment
(21,060
)
(28,280
)
Acquisition of businesses, net of cash
received
(12,230
)
(56,838
)
Proceeds from sale of businesses, net of
cash divested
—
48,876
Purchases of intangible assets
(1,000
)
(1,511
)
Net cash used in investing activities
(34,290
)
(37,753
)
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
(1,698
)
—
Deferred payments for acquisitions
—
(6,267
)
Contribution from Former Parent
—
21,238
Other
—
(593
)
Net cash (used in) provided by financing
activities
(8,895
)
14,378
Effect of exchange rate changes on cash
and cash equivalents
(9,182
)
(3,411
)
Net change in cash and cash
equivalents
36,905
169,603
Cash and cash equivalents at beginning of
period
66,778
128,189
Cash and cash equivalents at end of
period
$
103,683
$
297,792
Less cash and cash equivalents at end of
period, discontinued operations
—
266,582
Cash and cash equivalents at end of
period, continuing operations
$
103,683
$
31,210
(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
(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 September 30, 2022 and 2021 to the most closely
comparable GAAP measure.
Three Months Ended September
30,
2022
Per Diluted Share *
2021
Per Diluted Share *
Net income
$
17,141
$
0.86
$
41,132
$
2.07
Plus:
Share-based compensation (1)
4,460
0.22
336
0.02
Amortization (2)
814
0.04
888
0.04
Spin-off related costs (3)
128
0.01
414
0.02
Non-income related sales tax (4)
6,425
0.32
—
—
Acquisition related integration costs
(5)
220
0.01
—
—
Intra-entity transfer (6)
1,106
0.06
1,124
0.06
Adjusted non-GAAP net income
$
30,294
$
1.52
$
43,894
$
2.21
Pro forma adjustments
—
—
(15,315
)
(0.77
)
Pro forma adjusted non-GAAP net
income
$
30,294
$
1.52
$
28,579
$
1.44
* 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
(UNAUDITED, IN THOUSANDS,
EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended September
30,
2022
2021
Cost of revenues
$
15,419
$
14,604
Plus:
Share-based compensation (1)
(219
)
(37
)
Amortization (2)
—
(1
)
Adjusted non-GAAP cost of
revenues
$
15,200
$
14,566
Sales and marketing
$
16,626
$
13,115
Plus:
Share-based compensation (1)
(269
)
(93
)
Spin-off related costs (3)
—
(50
)
Adjusted non-GAAP sales and
marketing
$
16,357
$
12,972
Research, development and
engineering
$
3,236
$
2,019
Plus:
Share-based compensation (1)
(390
)
(99
)
Spin-off related costs (3)
—
(28
)
Adjusted non-GAAP research, development
and engineering
$
2,846
$
1,892
General and administrative
$
25,604
$
8,237
Plus:
Share-based compensation (1)
(3,736
)
(123
)
Amortization (2)
(1,061
)
(1,211
)
Spin-off related costs (3)
(157
)
(485
)
Non-income related sales tax (4)
(7,422
)
—
Acquisition related integration costs
(5)
(291
)
—
Adjusted non-GAAP general and
administrative
$
12,937
$
6,418
Interest expense
$
(13,941
)
$
(131
)
Plus:
Non-income related sales tax (4)
657
—
Adjusted non-GAAP interest expense,
net
$
(13,284
)
$
(131
)
Income tax expense
$
6,937
$
11,512
Plus:
Share-based compensation (1)
154
16
Amortization (2)
247
324
Spin-off related costs (3)
29
149
Non-income related sales tax (4)
1,654
—
Acquisition related costs (5)
71
—
Intra-entity Transfer of IP (6)
(1,106
)
(1,124
)
Adjusted non-GAAP income tax
expense
$
7,986
$
10,877
Total adjustments
$
(13,153
)
$
(2,762
)
GAAP earnings per diluted share
$
0.86
$
2.07
Adjustments *
$
0.66
$
0.14
Adjusted non-GAAP earnings per diluted
share
$
1.52
$
2.21
* 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 sales tax. The Company has excluded
certain non-income related sales taxes because 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. 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
(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 September
30,
2022
2021
Pro Forma 2021
Net income
$
17,141
$
41,132
$
28,579
Plus:
Interest expense
13,941
131
12,706
Other income, net
(2,992
)
(1,552
)
(1,552
)
Income tax expense
6,937
11,512
9,025
Depreciation and amortization
3,795
3,340
2,128
EBITDA:
Plus:
Share-based compensation
4,614
352
—
Spin-off related costs
157
563
—
Non-income related sales tax
7,423
—
—
Acquisition related costs
291
—
—
Adjusted EBITDA
$
51,307
$
55,478
$
50,886
Adjusted EBITDA as calculated above represents earnings before
interest, other income, net, income tax expense and depreciation
and amortization 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
$
37,066
$
—
$
89,272
Less: Purchases of property and
equipment
(6,915
)
(6,829
)
(7,316
)
—
(21,060
)
Free cash flows
$
42,993
$
(4,531
)
$
29,750
$
—
$
68,212
(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
SEPTEMBER 30, 2021
(UNAUDITED, IN THOUSANDS
EXCEPT SHARE AND PER SHARE DATA)
Consensus
Non-GAAP Adjustments
Pro Forma Adjustments
(1)
Consensus Pro Forma
Revenues
$
89,198
$
—
$
—
$
89,198
Cost of revenues
14,604
(38
)
146
14,712
Gross profit
74,594
38
(146
)
74,486
Operating expenses:
Sales and marketing
13,115
(143
)
—
12,972
Research, development and engineering
2,019
(127
)
—
1,892
General and administrative
8,237
(1,819
)
4,446
10,864
Total operating expenses
23,371
(2,089
)
4,446
25,728
Income from operations
51,223
2,127
(4,592
)
48,758
Interest expense
(131
)
—
(12,575
)
(12,706
)
Interest income
—
—
—
—
Other expense, net
1,552
—
—
1,552
Income before income taxes
52,644
2,127
(17,167
)
37,604
Income tax expense
11,512
(635
)
(1,852
)
9,025
Net income
$
41,132
$
2,762
$
(15,315
)
$
28,579
Net income per common share from
continuing operations:
Basic
$
2.07
$
0.14
$
(0.77
)
$
1.44
Diluted
$
2.07
$
0.14
$
(0.77
)
$
1.44
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
September 30, 2022 and 2021 (in thousands, except for
percentages):
Three Months Ended September
30,
2022
2021
Corporate revenue
$
51,202
$
43,175
Corporate customer accounts
47
45
Corporate ARPA (1)
$
364.82
$
314.69
Corporate paid adds (2)
4
3
Corporate monthly account churn (3)
1.71
%
3.20
%
SoHo revenue
$
44,708
$
45,931
SoHo customer accounts
978
1,064
SoHo ARPA (1)
$
15.06
$
14.34
SoHo paid adds (2)
86
98
SoHo monthly account churn (3)
3.60
%
3.21
%
(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/20221110005903/en/
Laura Hinson Consensus Cloud Solutions, Inc 844-211-1711
investor@consensus.com
Concensus Cloud Solutions (NASDAQ:CCSI)
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