Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) today reported
financial results for the third quarter of 2024.
“I am pleased with our Q3 results and the continued execution
against our four point plan for 2024. Corporate and SoHo revenues
were ahead of expectations, with Corporate revenues growing at
their fastest pace in six quarters. Our continued strong operating
performance and free cash flow allowed us to retire an additional
$31 million of debt in the quarter and brings us very close to
achieving our leverage goal. Since the program began approximately
one year ago, we have retired $187 million of our debt.” said Scott
Turicchi, CEO of Consensus.
THIRD QUARTER UNAUDITED 2024
HIGHLIGHTS
Q3 2024 quarterly revenues decreased by $2.8 million or 3.1% to
$87.8 million compared to $90.6 million for Q3 2023. This decline
was primarily due to an anticipated decrease of $5.5 million or
13.6% in our Small office home office (“SoHo”) business, partially
offset by an increase of $2.7 million or 5.3% in our Corporate
business.
Net income (1) decreased to $21.1 million in Q3 2024 compared to
$24.0 million for Q3 2023. The decrease was primarily due to a loss
of $2.1 million due to a noncash foreign exchange revaluation in Q3
2024 compared to a noncash foreign exchange revaluation gain of
$3.7 million in Q3 2023, partially offset by a favorable decrease
of $2.9 million in interest expense. Q3 2024 net income margin (1)
was 24.1% compared to 26.5% for Q3 2023.
Earnings per diluted share (1) decreased to $1.09 or 10.7% in Q3
2024 compared to $1.22 for Q3 2023. The decrease was due to the
items discussed above, which was slightly offset due to a lower
share count as a result of share repurchases.
Adjusted EBITDA (3)(4) for Q3 2024 of $46.9 million decreased
compared to Q3 2023 of $47.5 million primarily driven by a 3.1%
decline in revenues, partially offset by the benefit of our cost
saving measures. Q3 2024 Adjusted EBITDA margin (3) of 53.5% was an
increase of approximately 1 percentage point over Q3 2023.
Adjusted net income (1)(2) in Q3 2024 decreased to $25.5 million
from $29.7 million in Q3 2023 due to the items discussed above.
Adjusted earnings per diluted share (1)(2) for the quarter
decreased to $1.31 or 13.2% compared to $1.51 for Q3 2023 primarily
due to the items discussed above, which was slightly offset due to
a lower share count as a result of share repurchases.
Net cash provided by operating activities in Q3 2024 decreased
to $41.6 million from $60.0 million in Q3 2023. Free cash flow(5)
in Q3 2024 decreased to $33.6 million from $49.9 million in Q3
2023. The decrease in these two items was primarily due to the
impact on Q3 2023 of a foreign tax refund and the deferral of the
Q2 and Q3 2023 federal income tax payments under the California
Disaster Relief Act which were subsequently paid in Q4 2023.
Key financial results from operations for Q3 2024 versus Q3 2023
are set forth in the following table. Reconciliations of GAAP
measures to comparable non-GAAP financial measures accompany this
press release.
(Unaudited, in thousands except per
share amounts and percentages)
Favorable /
(Unfavorable)
Q3 2024
Q3 2023
Change
Revenues
$
87,753
$
90,562
(3.1
)%
Net income (1)
$
21,120
$
24,007
(12.0
)%
Net income margin (1)
24.1
%
26.5
%
(2.4) pts
Earnings per diluted share (1)
$
1.09
$
1.22
(10.7
)%
Adjusted net income (1)(2)
$
25,478
$
29,721
(14.3
)%
Adjusted earnings per diluted share
(1)(2)
$
1.31
$
1.51
(13.2
)%
Adjusted EBITDA (3)(4)
$
46,916
$
47,501
(1.2
)%
Adjusted EBITDA margin (3)
53.5
%
52.5
%
1.0 pts
Net cash provided by operating
activities
$
41,567
$
59,987
(30.7
)%
Free cash flow (5)
$
33,586
$
49,937
(32.7
)%
Notes:
(1)
The effective tax rates were approximately
22.5% for Q3 2024 and 23.9% for Q3 2023. The non-GAAP effective tax
rates were approximately 18.9% for Q3 2024 and 19.1% for Q3 2023.
The calculation for net income margin is net income divided by
revenues.
(2)
Adjusted net income and Adjusted earnings
per diluted share exclude certain non-GAAP items, as defined in the
accompanying Reconciliation of GAAP to non-GAAP Financial Measures.
Such exclusions totaled $0.22 and $0.29 per diluted share,
respectively, for the three months ended September 30, 2024 and
2023. Adjusted net income and Adjusted earnings per diluted share
are not meant as a substitute for measures calculated in accordance
with GAAP, but are presented solely for informational purposes.
(3)
Adjusted EBITDA is defined as earnings
before interest expense; interest income; other (expense) income,
net; income tax expense; depreciation and amortization; and other
items used to reconcile net income per diluted share to Adjusted
earnings per diluted share, as presented in the Reconciliation of
GAAP to non-GAAP Financial Measures. Adjusted EBITDA margin is
defined as Adjusted EBITDA divided by revenues. Adjusted EBITDA
amounts and Adjusted EBITDA margin are not meant as a substitute
for measures calculated in accordance with GAAP, but are presented
solely for informational purposes. The most directly comparable
GAAP financial measure to Adjusted EBITDA and Adjusted EBITDA
margin is net income and net income margin.
(4)
See Net Income to Adjusted EBITDA
Reconciliation for the components of Adjusted EBITDA.
(5)
Free cash flow is defined as net cash
provided by operating activities, less purchases of property and
equipment. Free cash flow amounts are not meant as a substitute for
measures calculated in accordance with GAAP, but are solely for
informational purposes.
CAPITAL ALLOCATION STRATEGIC
INITIATIVES
Consensus ended the quarter with $54.6 million in cash and cash
equivalents after the cash outlays detailed below.
The following table consists of our material capital allocation
strategic initiatives (in thousands):
Capital Allocation:
Q3 2024
Cumulative Total
Remaining Under the
Plan
Debt repurchase program (6)
$
31,075
$
186,772
$
113,228
Common stock repurchase program (7)
$
—
$
31,790
$
68,210
Q3 2024
Q3 2023
Change
Purchases of property and equipment
$
(7,981
)
$
(10,050
)
(20.6
)%
Notes:
(6)
On November 9, 2023, the Company’s Board
of Directors approved a debt repurchase program, pursuant to which
Consensus may reduce, through redemptions, open market purchases,
tender offers, privately negotiated purchases or other retirements,
a combination of the outstanding principal balance of the 2026
Senior Notes and 2028 Senior Notes. The authorization permits an
aggregate principal amount reduction of up to $300 million and
expires on November 9, 2026.
(7)
On March 1, 2022, the Company’s Board of
Directors approved a share buyback program. Under this program, the
Company may purchase in the public market or in off-market
transactions up to $100.0 million worth of the Company’s common
stock through February 2025.
Q4 2024 GUIDANCE (i)
The following table presents ranges for the Company’s Q4 2024
guidance (in millions, except per share amounts):
Low
Midpoint
High
Revenues
$
83.0
$
85.0
$
87.0
Adjusted EBITDA
$
42.0
$
43.5
$
45.0
Adjusted earnings per diluted share
(ii)
$
1.14
$
1.19
$
1.24
FULL YEAR 2024 GUIDANCE
(i)
The following table presents ranges for the Company’s 2024 full
year guidance (in millions, except per share amounts). The Revenues
and Adjusted EBITDA range has been narrowed within previously
provided guidance based on year to date 2024 performance plus Q4
2024 guidance presented above:
Prior as of August 8,
2024
Updated as of November 7,
2024
Low
High
Low
High
Revenues
$
338
$
353
$
346
$
350
Adjusted EBITDA
$
182
$
194
$
186
$
189
Adjusted earnings per diluted share
(ii)
$
5.45
$
5.55
$
5.45
$
5.55
Notes:
(i)
Annual and quarterly guidance is provided
on a non-GAAP basis, except revenues, only because certain
information necessary to calculate the most comparable GAAP
measures is 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.
(ii)
Annual and quarterly guidance for Adjusted
earnings per diluted share excludes share-based compensation,
amortization of acquired intangibles and certain gains or costs
related to non-routine and other matters that are nonrecurring, in
each case net of tax. The non-GAAP effective tax rate for Q4 2024
is expected to be between 20.5% and 22.5%.
About Consensus Cloud Solutions
Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) is a global
leader in digital cloud fax technology. With over 25 years of
success with eFax® at its core, the Company has evolved to
be a trusted provider of interoperability solutions, leveraging
artificial intelligence and secure data exchange to transform
digital information, automate critical workflows, and maximize
operational efficiencies. Consensus maintains industry-leading
compliance standards, making it a preferred partner for heavily
regulated industries including healthcare, the public sector,
financial services, insurance, real estate, and manufacturing. For
more information about Consensus, visit consensus.com.
“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. 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 Middle East); 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 2023
Annual Report on Form 10-K filed by Consensus on February 28, 2024,
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 are 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 condensed consolidated financial statements,
which are prepared and presented in accordance with GAAP, we use
the following non-GAAP financial measures: Adjusted net income,
Adjusted earnings per diluted share, Adjusted EBITDA, Adjusted
EBITDA margin and Free cash flow. The presentation of this non-GAAP
financial information is not intended to be considered in isolation
from, or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP.
We use these 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
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 non-GAAP
financial measures in assessing our performance and when planning,
forecasting, and analyzing future periods. These non-GAAP financial
measures also facilitate management’s internal comparisons to our
historical performance and liquidity. We believe these 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 non-GAAP financial measures,
please see the appropriate GAAP to 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, 2024
December 31, 2023
ASSETS
Cash and cash equivalents
$
54,598
$
88,715
Accounts receivable, net of allowances of
$5,441 and $6,271, respectively
25,807
26,342
Prepaid expenses and other current
assets
9,430
10,191
Total current assets
89,835
125,248
Property and equipment, net
96,342
81,196
Operating lease right-of-use assets
6,924
6,766
Intangibles, net
42,201
44,990
Goodwill
349,454
348,822
Deferred income taxes
33,319
34,869
Other assets
4,419
5,364
TOTAL ASSETS
$
622,494
$
647,255
LIABILITIES AND STOCKHOLDERS’
DEFICIT
Accounts payable and accrued expenses
$
47,422
$
36,506
Income taxes payable, current
4,787
2,224
Deferred revenue, current
21,386
22,041
Operating lease liabilities, current
2,330
2,038
Current portion of long-term debt
9,366
8,575
Total current liabilities
85,291
71,384
Long-term debt, net of current portion
603,124
725,405
Deferred revenue, noncurrent
2,005
2,270
Operating lease liabilities,
noncurrent
12,586
13,212
Liability for uncertain tax positions
11,887
9,740
Deferred income taxes
545
1,098
Other long-term liabilities
245
268
TOTAL LIABILITIES
715,683
823,377
Commitments and contingencies
Common stock, $0.01 par value. Authorized
120,000,000; total issued is 20,375,622 and 20,273,686 shares and
total outstanding is 19,303,998 and 19,245,024 shares as of
September 30, 2024 and December 31, 2023, respectively
204
203
Treasury stock, at cost (1,071,624 and
1,028,662 shares as of September 30, 2024 and December 31, 2023,
respectively)
(31,990
)
(31,282
)
Additional paid-in capital
55,083
41,247
Accumulated deficit
(101,749
)
(173,113
)
Accumulated other comprehensive loss
(14,737
)
(13,177
)
TOTAL STOCKHOLDERS’ DEFICIT
(93,189
)
(176,122
)
TOTAL LIABILITIES AND STOCKHOLDERS’
DEFICIT
$
622,494
$
647,255
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,
2024
2023
2024
2023
Revenues
$
87,753
$
90,562
$
263,399
$
274,808
Cost of revenues (1)
17,658
16,853
51,828
51,607
Gross profit
70,095
73,709
211,571
223,201
Operating expenses:
Sales and marketing (1)
12,500
15,319
36,776
49,719
Research, development and engineering
(1)
2,034
1,677
5,582
5,346
General and administrative (1)
17,136
17,798
53,240
56,382
Total operating expenses
31,670
34,794
95,598
111,447
Income from operations
38,425
38,915
115,973
111,754
Interest expense
(9,760
)
(12,615
)
(24,616
)
(37,998
)
Interest income
659
1,519
2,175
2,184
Other (expense) income, net
(2,069
)
3,725
2,496
3,445
Income before income taxes
27,255
31,544
96,028
79,385
Income tax expense
6,135
7,537
24,664
18,862
Net income
$
21,120
$
24,007
$
71,364
$
60,523
Net income per common share:
Basic
$
1.09
$
1.22
$
3.71
$
3.07
Diluted
$
1.09
$
1.22
$
3.69
$
3.07
Weighted average shares outstanding:
Basic
19,300,283
19,627,188
19,256,739
19,708,991
Diluted
19,442,130
19,647,855
19,321,274
19,730,765
(1) Includes share-based compensation
expense as follows:
Cost of revenues
$
465
$
309
$
1,449
$
939
Sales and marketing
592
375
1,856
1,134
Research, development and engineering
95
61
260
153
General and administrative
2,270
3,009
8,045
11,331
Total
$
3,422
$
3,754
$
11,610
$
13,557
CONSENSUS CLOUD SOLUTIONS,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED, IN
THOUSANDS)
Nine Months Ended September
30,
2024
2023
Cash flows from operating activities:
Net income
$
71,364
$
60,523
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
14,968
13,053
Amortization of financing costs and
discounts
1,387
1,526
Non-cash operating lease costs
1,158
1,304
Share-based compensation
11,610
13,557
Provision for doubtful accounts
3,220
4,409
Deferred income taxes, net
1,255
2,029
Gain on extinguishment of debt
(6,667
)
—
Other
—
30
Changes in operating assets and
liabilities:
Decrease (increase) in:
Accounts receivable
(2,663
)
(6,126
)
Prepaid expenses and other current
assets
759
7,144
Other assets
947
1,182
Increase (decrease) in:
Accounts payable and accrued expenses
11,265
10,210
Income taxes payable
2,544
4,615
Deferred revenue
(924
)
(2,088
)
Operating lease liabilities
(1,726
)
(1,578
)
Liability for uncertain tax positions
2,147
2,323
Other liabilities
(23
)
(34
)
Net cash provided by operating
activities
110,621
112,079
Cash flows from investing activities:
Purchases of property and equipment
(25,460
)
(28,725
)
Purchase of investments
—
(4,000
)
Net cash used in investing activities
(25,460
)
(32,725
)
Cash flows from financing activities:
Proceeds from the issuance of common stock
under employee stock purchase plan
747
871
Repurchase of common stock
(708
)
(13,716
)
Taxes paid related to net share
settlement
(686
)
(1,245
)
Repurchase of debt
(116,162
)
—
Net cash used in financing activities
(116,809
)
(14,090
)
Effect of exchange rate changes on cash
and cash equivalents
(2,469
)
(3,746
)
Net change in cash and cash
equivalents
(34,117
)
61,518
Cash and cash equivalents at beginning of
period
88,715
94,164
Cash and cash equivalents at end of
period
$
54,598
$
155,682
CONSENSUS CLOUD SOLUTIONS, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER
SHARE AMOUNTS)
The following table sets forth the reconciliation of net income
to Adjusted net income for the three months ended September 30,
2024 and 2023:
Three Months Ended September
30,
2024
Per Diluted Share
2023 *
Per Diluted Share *
Net income
$
21,120
$
1.09
$
24,007
$
1.22
Plus:
Share-based compensation (1)
3,422
0.18
3,754
0.19
Amortization (2)
834
0.04
977
0.05
Intra-entity transfers (3)
937
0.05
1,041
0.05
Debt extinguishment gain (4)
(112
)
(0.01
)
—
—
Other (5)
31
—
464
0.03
Income tax impact of above items
(754
)
(0.04
)
(522
)
(0.03
)
Adjusted net income
$
25,478
$
1.31
$
29,721
$
1.51
* The prior year amounts have been reclassified for consistency
with the current year presentation. These reclassifications had no
effect on the reported Adjusted net income or Adjusted earnings per
diluted share.
Adjusted net income as calculated above represents net income
and the items used to reconcile GAAP to non-GAAP financial
measures, including (1) share-based compensation; (2) amortization;
(3) intra-entity transfers; (4) debt extinguishment gain; (5) other
benefits or costs related to non-routine and other matters; and (6)
income tax impact. Adjusted net income and weighted average diluted
shares are then used to calculate Adjusted earnings per diluted
share. The Company discloses these measures as a 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 measures
are broadly used by analysts, rating agencies and investors in
assessing our performance. Accordingly, the Company believes that
the presentation of these measures provides useful information to
investors.
Adjusted net income and Adjusted earnings per diluted share are
not calculated in accordance with, or presented as an alternative
to, net income or earnings per diluted share, and may be different
from similarly or identically named non-GAAP measures used by other
companies. In addition, these measures are not based on any
comprehensive set of accounting rules or principles. These 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, the Company uses the following non-GAAP financial
measures: Adjusted net income, Adjusted earnings per diluted share,
Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow
(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.
The Company’s non-GAAP financial measures are adjusted for the
following items:
(1) Share-based compensation. The Company excludes share-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. 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) 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 excluding the cumulative future unrealized benefit of
the assets transferred in 2019 and amortization of the tax asset in
the subsequent years in the non-GAAP financial measures, thereby
presenting the tax benefit in the non-GAAP measures in the year of
realization, provides meaningful supplemental information regarding
operational performance and facilitates comparisons to historical
operating results.
(4) Debt extinguishment gain. The Company excludes certain gains
associated with the retirement of our debt. 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.
(5) Other. The Company excludes certain benefits or costs
related to non-routine and other matters. 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.
CONSENSUS CLOUD SOLUTIONS, INC. AND
SUBSIDIARIES NET INCOME TO ADJUSTED EBITDA
RECONCILIATION (UNAUDITED, IN THOUSANDS)
The following table sets forth a reconciliation of net income to
Adjusted EBITDA for the three months ended September 30, 2024 and
2023:
Three Months Ended September
30,
2024
2023 *
Net income
$
21,120
$
24,007
Plus:
Interest expense
9,760
12,615
Interest income
(659
)
(1,519
)
Other expense (income), net
2,069
(3,725
)
Income tax expense
6,135
7,537
Depreciation and amortization
5,038
4,364
EBITDA:
Plus:
Share-based compensation
3,422
3,754
Other
31
468
Adjusted EBITDA
$
46,916
$
47,501
* The prior year amounts have been reclassified for consistency
with the current year presentation. These reclassifications had no
effect on Adjusted EBITDA.
Adjusted EBITDA as calculated above represents earnings before
interest expense, interest income, other expense (income), net,
income tax expense, depreciation and amortization and the items
used to reconcile GAAP to non-GAAP financial measures, including
(1) share-based compensation; and (2) other benefits or costs
related to non-routine and other matters. The Company discloses
Adjusted EBITDA as a 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 measures similar to Adjusted EBITDA are
broadly used by analysts, rating agencies and investors in
assessing our performance. Accordingly, the Company believes that
the presentation of Adjusted EBITDA provides useful information to
investors.
Adjusted EBITDA is not calculated in accordance with, or
presented as an alternative to, net income, and may be different
from similarly or identically named 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
NET CASH PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW RECONCILIATION
(UNAUDITED, IN
THOUSANDS)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net cash provided by operating
activities
$
41,567
$
59,987
$
110,621
$
112,079
Less: Purchases of property and
equipment
(7,981
)
(10,050
)
(25,460
)
(28,725
)
Free cash flow
$
33,586
$
49,937
$
85,161
$
83,354
Net cash provided by operating activities in Q3 2024 decreased
to $41.6 million from $60.0 million in Q3 2023. Free cash flow in
Q3 2024 decreased to $33.6 million from $49.9 million in Q3 2023.
The decrease in these two items was primarily due to the impact on
Q3 2023 of a foreign tax refund and the deferral of the Q2 and Q3
2023 federal income tax payments under the California Disaster
Relief Act which were subsequently paid in Q4 2023.
The term Free cash flow is defined as net cash provided by
operating activities, less purchases of property and equipment. The
Company discloses Free cash flow as a 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 flow is not calculated in accordance with, or
presented as an alternative to, net cash provided by operating
activities, and may be different from non-GAAP measures with
similar or even identical names used by other companies. In
addition, free cash flow 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.
Key Performance Metrics (Unaudited)
The following table sets forth certain key performance metrics
for Consensus for the three months ended September 30, 2024 and
2023 (in thousands, except for percentages and Average Revenue per
Customer Account):
Three Months Ended September
30,
2024
2023
Corporate revenue
$
53,085
$
50,430
Corporate customer accounts (1)
58
54
Corporate Average Revenue per Customer
Account (“ARPA”) (2)
$
310.13
$
312.45
Corporate paid adds (3)
5
3
Corporate monthly account churn (4)
2.61
%
1.49
%
SoHo revenue
$
34,664
$
40,129
SoHo customer accounts (1)
767
859
SoHo ARPA (2)
$
14.88
$
15.31
SoHo paid adds (3)
64
64
SoHo monthly account churn (4)
3.38
%
3.49
%
(1) Consensus customers are defined as paying Corporate and SoHo
customer accounts.
(2) Represents a monthly ARPA for the quarter and is 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.
(3) Paid Adds represents paying new Consensus customer accounts
added during the periods presented.
(4) Monthly churn represents paid monthly SoHo and Corporate
customer accounts that were cancelled during each month of the
quarter divided by the average number of customers during each
month of the same quarter (including the paid adds). The period
measured is the quarter and expressed as a monthly churn rate over
the respective period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241107423506/en/
Laura Hinson Consensus Cloud Solutions, Inc 844-211-1711
investor@consensus.com
Concensus Cloud Solutions (NASDAQ:CCSI)
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