Core Insights - The Meridian Small Cap Growth Fund reported a 4.20% net return in Q3 2025, underperforming the Russell 2000 Growth Index which returned 12.19% [1] - U.S. small caps outperformed large caps in Q3 2025, with small caps gaining 12.4% compared to large caps' 5.3% [1] - Value stocks slightly outperformed growth stocks among small caps, returning 12.6% and 12.2% respectively [1] Company Analysis: Consensus Cloud Solutions, Inc. (NASDAQ:CCSI) - Consensus Cloud Solutions, Inc. is a leading provider of secure data delivery for enterprise healthcare and cloud fax solutions, with a market capitalization of $427.25 million [2][3] - The stock experienced a one-month return of -24.36% and a 52-week loss of 9.83%, closing at $22.48 per share on December 02, 2025 [2] - The company reported Q3 2025 revenue of $87.8 million, consistent with Q3 2024, and maintained strong margins in the mid-50% range [4] - Consensus Cloud Solutions has a high percentage of recurring revenues and low churn in the enterprise segment, which supports its growth potential [3] - The stock is trading at around five times earnings with a ~20% free cash flow yield, indicating limited downside potential [3] Hedge Fund Interest - Consensus Cloud Solutions was held by 14 hedge fund portfolios at the end of Q3 2025, a decrease from 15 in the previous quarter [4] - Despite its potential, certain AI stocks are viewed as offering greater upside potential and less downside risk compared to Consensus Cloud Solutions [4]

Core Insights - Consensus Cloud Solutions, Inc. (CCSI) specializes in secure digital document exchange solutions and operates in a competitive landscape with peers such as Ziff Davis, Sterling Check, PC Connection, N-able, and Enfusion [1] - CCSI has a strong Return on Invested Capital (ROIC) of 18.90% compared to a Weighted Average Cost of Capital (WACC) of 8.04%, resulting in a ROIC to WACC ratio of 2.35, indicating effective capital utilization and potential for value creation [2][5] Peer Comparison - Ziff Davis, Inc. has a ROIC of 5.70% and a WACC of 7.37%, leading to a ROIC to WACC ratio of 0.77, suggesting less efficient capital use compared to CCSI [3][5] - Sterling Check Corp. and N-able, Inc. exhibit negative ROIC to WACC ratios of -0.01 and -0.34, respectively, highlighting their inability to generate returns above their cost of capital [3] - PC Connection, Inc. has the highest ROIC to WACC ratio among CCSI's peers at 1.27, but still falls short of CCSI's 2.35 ratio, emphasizing CCSI's superior capital efficiency [4] - Enfusion, Inc. has a ROIC to WACC ratio of 0.40, further underscoring CCSI's leading position in capital utilization [4]

Core Insights - Jet.AI Inc. and Consensus Core Technologies Inc. have completed the second milestone for their hyperscale data center projects in Midwestern and Maritime Canada, indicating significant progress in their development plans [1][2] Project Milestones - The second milestone completion includes the assumption of $1.8 million in unsecured debt and accrued interest from Consensus Core related to the Midwestern Project [2] - The next milestone involves a $2 million contribution from Jet.AI for the submission of a Transmission Power Load Study application for the Midwest data center project [3] - The Maritime Project requires confirmation from a natural gas utility or other supplier to supply sufficient flow for the operation of proposed turbines [3] Financial Contributions - Jet.AI has contributed $1.7 million to the joint venture and executed a letter of intent to acquire 350 acres adjacent to the existing Midwestern Project property, significantly larger than the previously anticipated 100 acres [6]

Core Insights - Consensus Cloud Solutions, Inc. reported a solid Q3 2025 with a revenue increase of 6.1% year-over-year, reaching $56.3 million, driven by strong performance in the corporate channel and record usage of the eFax Protect service [8][20][21] - The company achieved an adjusted EBITDA margin of 52.8%, slightly above expectations, and free cash flow increased by 32% to $44.4 million [5][22][23] - The corporate customer base expanded to approximately 65,000, reflecting a 12% increase from the previous year, while the trailing twelve-month revenue retention rate remained stable at 101.9% [10][20] Financial Performance - Total revenue for Q3 2025 was $87.8 million, consistent with the prior year, while adjusted EBITDA was $46.4 million, a decrease of 1.2% from Q3 2024 [22][21] - Adjusted net income for the quarter was $26.6 million, with adjusted EPS remaining unchanged at $1.38 [22] - The company expects Q4 2025 revenues to range between $84.9 million and $88.9 million, with adjusted EBITDA between $43.1 million and $46 million [26] Operational Highlights - The corporate channel's growth was attributed to increased usage within enterprise accounts and strong performance in public sector business, particularly with the VA [9][12] - The eFax Protect service added approximately 6,700 new customers in Q3 2025, contributing to the growth of the SMB cohort [10][11] - The Zoho business recorded a planned revenue decline of 9.2% year-over-year, reflecting a strategic focus on optimizing profitability [13][21] Debt Management - The company reduced total indebtedness from $805 million to $569 million through debt retirement, with a new interest rate of 5.65% on the refinanced debt [7][24] - Free cash flow for the year is expected to exceed $95 million, ahead of original expectations, despite a lower expected free cash flow in Q4 due to seasonal costs [6][5] Strategic Outlook - The company remains confident in its growth strategy, focusing on healthcare and expanding efforts in corporate SMB and upper enterprise markets [18] - The VA's continued high usage rates indicate potential for future revenue growth, with expectations of reaching $10 million to $20 million in revenue over the next few years [30][34] - The company is actively navigating changes in the digital marketing environment to recover from recent impacts on customer acquisition [15][44]

Core Insights - Consensus Cloud Solutions, Inc. (CCSI) reported quarterly earnings of $1.38 per share, exceeding the Zacks Consensus Estimate of $1.36 per share, and showing an increase from $1.31 per share a year ago, resulting in an earnings surprise of +1.47% [1] - The company posted revenues of $87.77 million for the quarter ended September 2025, slightly missing the Zacks Consensus Estimate by 0.07%, and showing a marginal increase from $87.75 million year-over-year [2] - The stock has gained approximately 20.3% since the beginning of the year, outperforming the S&P 500's gain of 15.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.32 on revenues of $87.33 million, while for the current fiscal year, the estimate is $5.52 on revenues of $350.04 million [7] - The estimate revisions trend for Consensus Cloud Solutions was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Internet - Software industry, to which Consensus Cloud Solutions belongs, is currently ranked in the top 34% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - The company reported a slight increase in revenue for Q3 2025 compared to Q3 2024, with adjusted EBITDA slightly ahead of expectations, resulting in a 52.8% adjusted EBITDA margin [4][19] - Free cash flow for Q3 2025 was $44.4 million, up 32% from $33.6 million in Q3 2024, driven by strong adjusted EBITDA conversion and outstanding collections [5][19] - The company expects free cash flow for the year to exceed $95 million, ahead of original expectations [5] Business Line Data and Key Metrics Changes - Corporate channel revenue reached a record $56.3 million, a 6.1% increase from $53.1 million in Q3 2024, driven by strong performance in upper enterprise accounts and public sector business [8][17] - SOHO business revenue was $31.5 million, representing a strategic planned decline of 9.2% from $34.7 million in Q3 2024, reflecting a focus on optimizing profitability [12][18] - Corporate ARPA was $293 for the quarter, down from $301 in Q2 2025 and $310 in Q3 2024, influenced by the expansion of the SMB cohort [10][18] Market Data and Key Metrics Changes - The corporate customer base expanded to approximately 65,000, up over 12% from 58,000 in Q3 2024 [9][17] - The VA segment saw record high usage and revenue, unaffected by the government shutdown, indicating strong adoption [11][12] - SOHO cancellation rate improved to 3.71% from 3.84% in the previous quarter, reflecting better customer retention [13][18] Company Strategy and Development Direction - The company is focused on expanding its corporate SMB and upper enterprise markets while maintaining a strong emphasis on healthcare [15] - A brand refresh for eFax aims to unify the company's advanced solutions under a familiar name, enhancing market trust [14][15] - The company plans to continue opportunistic repurchases of both debt and equity as part of its capital allocation strategy [6][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of the VA segment, anticipating continued expansion and increased adoption [28] - The company acknowledged potential near-term headwinds in the SOHO segment due to changes in the search environment, but is executing a recovery plan [13][50] - Management expects to provide full-year 2026 guidance in early 2026, indicating a positive outlook for future performance [53] Other Important Information - The company drew approximately $200 million from its credit facility to retire a like amount of 6% notes, reducing total indebtedness significantly [6][22] - The company ended Q3 2025 with cash of approximately $98 million, sufficient to fund operations and repurchases [21] Q&A Session Summary Question: Can you talk about the VA and corporate sales? - Management noted that the VA continues to expand, with increased usage and ongoing rollout to new facilities, expecting growth to continue into 2026 [28] Question: What is the current penetration of VA sites? - The company is more than 50% deployed in terms of raw numbers, but not all sites are fully utilized yet, indicating potential for future growth [30] Question: What is the expected deceleration rate for SOHO revenue? - Management indicated it is difficult to predict, but expects the decline to continue into 2028 or later, with a focus on stabilizing the customer base [34] Question: Can you discuss advanced product upsells into corporate? - Management highlighted strong performance in AI product adoption and integration services, which are key drivers of revenue growth [37] Question: What factors influenced the decline in SOHO paid ads? - The decline was attributed to a spike in customer acquisition costs and changes in the search environment, with recovery measures already in place [40] Question: Can the VA revenue grow from $10 million to $20 million? - Management indicated that while the current focus is on the eFax platform, there is potential for upselling additional solutions into the VA in the future [42]

Revenue Performance - Total revenue for the three months ended September 30, 2025, was $87,767 thousand, consistent with the prior year, while revenue for the nine months was $262,626 thousand, a slight decrease of $0.8 million compared to the previous year[113][114]. - Corporate revenue increased by $3.2 million or 6% for the three months ended September 30, 2025, while SoHo revenue decreased by $3.2 million or 9%[114]. - Total revenues for the three months ended September 30, 2025, were $87.767 million, consistent with $87.753 million in 2024, while revenues for the nine months ended September 30, 2025, decreased slightly to $262.626 million from $263.399 million in 2024[113]. Customer Metrics - Average Revenue per Customer Account (ARPA) for Corporate was $293.12 for the three months ended September 30, 2025, down from $310.13 in 2024, while consolidated ARPA increased to $39.79 from $36.19[109]. - The total number of customer accounts decreased to 726 thousand as of September 30, 2025, down from 799 thousand in the prior year[109]. - Monthly churn rate for Corporate customers increased to 3.47% for the three months ended September 30, 2025, compared to 2.61% in 2024[109]. - The company serves approximately 726 thousand customers across 41 countries, with top 10 customers contributing about 9% of total revenues[105]. Expenses and Costs - Cost of revenues for the three months ended September 30, 2025, was $17,520 thousand, a decrease of 1% from the prior year, while for the nine months, it increased by 3% to $53,214 thousand[115][116]. - Sales and marketing expenses for the three months ended September 30, 2025, were $13,006 thousand, a 4% increase from the prior year, and for the nine months, they rose to $38,246 thousand, also a 4% increase[118][120]. - Research, development, and engineering costs for Q3 2025 were $1,950,000, a decrease of 4% compared to Q3 2024, and for the nine months ended September 30, 2025, costs were $5,406,000, down 3% year-over-year[121][122]. - General and administrative expenses for Q3 2025 were $17,361,000, an increase of 1% from Q3 2024, while for the nine months ended September 30, 2025, expenses decreased by 4% to $51,284,000[123][125]. - Share-based compensation for Q3 2025 totaled $3,966,000, up from $3,422,000 in Q3 2024, and for the nine months ended September 30, 2025, it was $12,437,000 compared to $11,610,000 in the prior year[126]. Financial Position - Cash and cash equivalents as of September 30, 2025, were $97,600,000, significantly up from $33,500,000 as of December 31, 2024[135]. - The company entered into a $75,000,000 revolving credit facility and a $150,000,000 delayed-draw term loan facility as part of the 2025 Credit Agreement[136]. - As of September 30, 2025, the company had $582,400,000 in outstanding debt and total minimum lease payments of $15,200,000[137]. Cash Flow - Net cash provided by operating activities for the nine months ended September 30, 2025, was $120,900,000, an increase from $110,600,000 in the prior year[142]. - Net cash used in investing activities increased to $27.3 million for the nine months ended September 30, 2025, compared to $25.5 million in 2024, primarily due to investments made in the current period[143]. - Net cash used in financing activities decreased significantly to $33.1 million for the nine months ended September 30, 2025, from $116.8 million in 2024, mainly due to reduced cash outflows related to debt repurchases[144]. Taxation - The effective tax rate for Q3 2025 was 26.3%, up from 22.5% in Q3 2024, primarily due to changes in the geographical mix of income and an increase in the officer's compensation limitation[133]. - The provision for income taxes was $7.9 million for the three months ended September 30, 2025, compared to $6.1 million for the same period in 2024[132].

Financial Performance - Corporate revenue increased by 6.1% to $56.3 million in Q3 2025, compared to $53.1 million in Q3 2024[11] - SoHo revenue was $31.5 million in Q3 2025, compared to $34.7 million in the previous year, showing a slowing rate of decline[14] - Q3 2025 free cash flow was $44.4 million, a 32% increase compared to $33.6 million in Q3 2024[30] - The company's cash balance was approximately $98 million in Q3 2025, with interest income on excess cash invested of approximately $0.8 million[28] - Adjusted EBITDA margin was 52.8% in Q3 2025[27] Customer Metrics - Corporate customer count increased to 65,000 in Q3 2025, compared to 58,000 in Q3 2024[11] - Corporate revenue retention rate was 102% in Q3 2025, compared to 100% in Q3 2024[11] - SoHo account base was 661,000 in Q3 2025, compared to 682,000 in Q2 2025[14] - SoHo churn rate was 3.71% in Q3 2025, compared to 3.84% in Q2 2025[14] Capital Allocation - The company repurchased 121,000 shares for approximately $2.7 million in Q3 2025, with program-to-date equity repurchases of 1.8 million shares for approximately $47.1 million[30] - $200 million of 6.0% Notes were called at par on October 15, 2025[30]

Financial Performance - Q3 2025 revenues remained consistent at $87.8 million, with a 6.1% increase in Corporate business offset by a 9.2% decrease in SoHo business[4] - Net income for Q3 2025 increased to $22.1 million, a 4.6% rise from $21.1 million in Q3 2024, resulting in a net income margin of 25.2%[5][7] - Earnings per diluted share rose to $1.15, reflecting a 5.5% increase compared to $1.09 in Q3 2024[5][7] - Adjusted EBITDA for Q3 2025 was $46.4 million, a decrease of 1.2% from $46.9 million in Q3 2024, with an Adjusted EBITDA margin of 52.8%[5][7] - Revenues for the three months ended September 30, 2025, were $87,767,000, slightly up from $87,753,000 in the same period of 2024, indicating a marginal increase of 0.02%[24] - Net income for the three months ended September 30, 2025, was $22,091,000, compared to $21,120,000 in 2024, showing an increase of approximately 4.6%[24] - Adjusted net income for the three months ended September 30, 2025, was $26,617,000, consistent with $26,819,000 in 2024, indicating stability in performance[27] Cash Flow and Liquidity - Net cash provided by operating activities increased to $51.6 million, up 24.2% from $41.6 million in Q3 2024[5][7] - Free cash flow for Q3 2025 rose to $44.4 million, a 32.3% increase from $33.6 million in Q3 2024[5][7] - Cash and cash equivalents at the end of the period increased to $97,649,000 from $54,598,000, marking a significant rise of 78.5%[26] - The company reported a net cash provided by operating activities of $120,868,000 for the nine months ended September 30, 2025, compared to $110,621,000 in 2024, an increase of approximately 9.3%[26] Guidance and Projections - Q4 2025 revenue guidance is set between $84.9 million and $88.9 million, with Adjusted EBITDA guidance between $43.1 million and $46.0 million[12] - Adjusted earnings per diluted share for Q4 2025 is projected to be between $1.27 and $1.37[12] Corporate and SoHo Business Performance - Corporate revenue for Q3 2025 was $56.3 million, compared to $53.1 million in Q3 2024, showing a growth of approximately 4.2%[47] - Corporate customer accounts increased to 65 in Q3 2025 from 58 in Q3 2024, reflecting a growth of about 12.1%[47] - Corporate Average Revenue per Customer Account (ARPA) decreased to $293.12 in Q3 2025 from $310.13 in Q3 2024, a decline of approximately 5.5%[47] - SoHo revenue decreased to $31.5 million in Q3 2025 from $34.7 million in Q3 2024, indicating a decline of about 9.5%[47] - SoHo customer accounts decreased to 661 in Q3 2025 from 741 in Q3 2024, a reduction of approximately 10.8%[47] Operating Expenses and Liabilities - Operating expenses for the three months ended September 30, 2025, totaled $32,317,000, compared to $31,670,000 in 2024, an increase of about 2%[24] - Total liabilities decreased slightly to $677,607,000 as of September 30, 2025, from $681,664,000 at December 31, 2024, a reduction of about 0.6%[22] - The company incurred interest expense of $8,836,000 for the three months ended September 30, 2025, down from $9,760,000 in 2024, reflecting a decrease of approximately 9.5%[24] Debt Management - The company utilized a new credit facility to retire $200 million of 6% Notes due October 2026, with plans to retire the remaining $34 million by year-end[3]

Core Viewpoint - Consensus Cloud Solutions, Inc. (CCSI) has been upgraded to a Zacks Rank 2 (Buy), indicating an upward trend in earnings estimates which is a significant factor affecting stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is based solely on a company's changing earnings picture, tracking the Zacks Consensus Estimate for EPS from sell-side analysts [2]. - The Zacks rating upgrade reflects a positive outlook on the earnings potential of Consensus Cloud Solutions, which could positively influence its stock price [4][6]. Impact of Earnings Estimates on Stock Prices - Changes in future earnings potential, as shown by earnings estimate revisions, are strongly correlated with near-term stock price movements [5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to significant price movements based on their trading activities [5]. Performance of Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [8]. - The upgrade of Consensus Cloud Solutions to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [11]. Earnings Estimate Revisions for Consensus Cloud Solutions - For the fiscal year ending December 2025, Consensus Cloud Solutions is expected to earn $5.52 per share, with no year-over-year change [9]. - Over the past three months, the Zacks Consensus Estimate for the company has increased by 3.7%, reflecting a positive trend in earnings estimates [9].