Consensus(CCSI) - 2025 Q1 - Quarterly Results

Consensus Cloud Solutions, Inc. Q1 2025 Earnings Release The company reports Q1 2025 results, showing stable performance with a slight revenue decline but strong margins and debt reduction Financial Highlights Q1 2025 revenue slightly decreased to $87.1 million, with stable Adjusted EBITDA and a decline in GAAP Net Income - CEO Scott Turicchi expressed satisfaction with the start of fiscal 2025, highlighting continued improvement in Corporate revenue growth, robust operating margins, and debt reduction fueled by strong cash flows[2] Q1 2025 vs. Q1 2024 Key Financial Results | (Unaudited, in thousands except per share amounts and percentages) | Q1 2025 | Q1 2024 | Favorable / (Unfavorable) Change | | :--- | :--- | :--- | :--- | | Revenues | $ 87,138 | $ 88,146 | (1.1)% | | Net income | $ 21,152 | $ 26,370 | (19.8)% | | Earnings per diluted share | $ 1.07 | $ 1.37 | (21.9)% | | Adjusted net income | $ 26,968 | $ 26,903 | 0.2% | | Adjusted earnings per diluted share | $ 1.37 | $ 1.40 | (2.1)% | | Adjusted EBITDA | $ 47,250 | $ 48,066 | (1.7)% | | Adjusted EBITDA margin | 54.2 % | 54.5 % | (0.3) pts | | Net cash provided by operating activities | $ 40,943 | $ 44,689 | (8.4)% | | Free cash flow | $ 33,747 | $ 35,766 | (5.6)% | - The 1.1% revenue decrease was primarily due to a planned $3.9 million (10.6%) decline in the SoHo business, partially offset by a $2.9 million (5.6%) increase in the Corporate business[3] - The decrease in Net Income to $21.2 million was mainly caused by a debt extinguishment loss and changes in foreign exchange revaluation[4] - Free cash flow decreased to $33.7 million from $35.8 million, primarily due to lower net cash inflows from working capital and decreased income[4][46] Capital Allocation The company continued its capital allocation strategy in Q1 2025 by repurchasing debt and common stock Q1 2025 Capital Allocation (in thousands) | Capital Allocation: | Q1 2025 | Cumulative Total | Remaining Under the Plan | | :--- | :--- | :--- | :--- | | Debt repurchase program | $ 9,731 | $ 216,614 | $ 83,386 | | Common stock repurchase program | $ 34 | $ 32,147 | $ 67,853 | - The company has a debt repurchase program authorizing up to $300 million in principal reduction, which expires in November 2026[11] - The Board of Directors approved a three-year extension of the $100 million share repurchase program, now running through February 2028[11] Business Outlook The company reaffirmed its full-year 2025 guidance and provided specific projections for Q2 2025 Full-Year 2025 Guidance (in millions, except per share) | | Low | Midpoint | High | | :--- | :--- | :--- | :--- | | Revenue | $ 343 | $ 350 | $ 357 | | Adjusted EBITDA | $ 179 | $ 185 | $ 190 | | Adjusted earnings per diluted share | $ 5.03 | $ 5.22 | $ 5.42 | Q2 2025 Guidance (in millions, except per share) | | Low | Midpoint | High | | :--- | :--- | :--- | :--- | | Revenue | $ 85.0 | $ 87.0 | | | Adjusted EBITDA | $ 45.0 | $ 46.5 | | | Adjusted earnings per diluted share | $ 1.31 | $ 1.37 | | - Guidance is provided on a non-GAAP basis (except for revenue) due to difficulty in predicting certain items for a GAAP reconciliation[14] Financial Statements This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2025 Condensed Consolidated Balance Sheets Total assets increased to $629.6 million while total liabilities decreased, improving the stockholders' deficit Balance Sheet Highlights (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $ 53,399 | $ 33,545 | | Total current assets | $ 91,461 | $ 74,525 | | TOTAL ASSETS | $ 629,647 | $ 602,201 | | Total current liabilities | $ 73,345 | $ 79,311 | | Long-term debt, net of current portion | $ 577,590 | $ 574,080 | | TOTAL LIABILITIES | $ 679,005 | $ 681,664 | | TOTAL STOCKHOLDERS' DEFICIT | $ (49,358) | $ (79,463) | Condensed Consolidated Statements of Income Q1 2025 revenue was $87.1 million, with net income declining to $21.2 million from the prior-year quarter Income Statement Highlights (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $ 87,138 | $ 88,146 | | Gross profit | $ 69,068 | $ 71,098 | | Income from operations | $ 37,497 | $ 37,667 | | Net income | $ 21,152 | $ 26,370 | | Diluted EPS | $ 1.07 | $ 1.37 | - A key factor in the net income decline was the 'Other (expense) income, net' line, which shifted from a $3.9 million income in Q1 2024 to a $1.1 million expense in Q1 2025[26] Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $40.9 million, resulting in a net cash increase of $19.9 million Cash Flow Highlights (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $ 40,943 | $ 44,689 | | Net cash used in investing activities | $ (12,196) | $ (8,923) | | Net cash used in financing activities | $ (10,122) | $ (58,829) | | Net change in cash and cash equivalents | $ 19,854 | $ (27,204) | - Major cash uses in Q1 2025 included $9.7 million for debt repurchase and $7.2 million for purchases of property and equipment[29] Reconciliation of GAAP to Non-GAAP Financial Measures This section reconciles GAAP metrics to non-GAAP measures like Adjusted Net Income, EBITDA, and Free Cash Flow - The company uses non-GAAP measures like Adjusted Net Income, Adjusted EBITDA, and Free Cash Flow for internal decision-making and believes they provide meaningful supplemental information by excluding items not indicative of recurring core business operations[19][20] Reconciliation of Net Income to Adjusted Net Income Q1 2025 GAAP Net Income of $21.2 million is reconciled to Adjusted Net Income of $27.0 million Net Income to Adjusted Net Income Reconciliation (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $ 21,152 | $ 26,370 | | Plus: Share-based compensation | 4,264 | 4,450 | | Plus: Foreign exchange loss (gain) | 1,099 | (3,888) | | Plus: Amortization | 615 | 833 | | Plus: Debt extinguishment loss (gain) | 77 | (4,865) | | Plus: Other adjustments & tax impact | (239) | 3,945 | | Adjusted net income | $ 26,968 | $ 26,903 | - Beginning in 2025, the company excludes foreign exchange gains or losses from Adjusted Net Income, with prior periods adjusted for consistency[30][35] Reconciliation of Net Income to Adjusted EBITDA Q1 2025 GAAP Net Income of $21.2 million is reconciled to Adjusted EBITDA of $47.3 million Net Income to Adjusted EBITDA Reconciliation (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $ 21,152 | $ 26,370 | | Plus: Interest expense, net | 8,525 | 5,276 | | Plus: Other expense (income), net | 1,097 | (3,902) | | Plus: Income tax expense | 6,723 | 9,923 | | Plus: Depreciation and amortization | 5,178 | 4,767 | | Plus: Share-based compensation | 4,264 | 4,450 | | Plus: Other | 311 | 1,182 | | Adjusted EBITDA | $ 47,250 | $ 48,066 | Reconciliation to Free Cash Flow Q1 2025 Net Cash from Operations of $40.9 million is reconciled to Free Cash Flow of $33.7 million Free Cash Flow Reconciliation (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $ 40,943 | $ 44,689 | | Less: Purchases of property and equipment | (7,196) | (8,923) | | Free cash flow | $ 33,747 | $ 35,766 | Key Performance Metrics Corporate segment revenue grew while SoHo revenue declined, with mixed trends in customer accounts and churn rates Q1 2025 vs Q1 2024 Key Performance Metrics (in thousands, except percentages/ARPA) | | 2025 | 2024 | | :--- | :--- | :--- | | Corporate | | | | Revenue | $ 54,289 | $ 51,390 | | Customer accounts | 60 | 55 | | Monthly account churn | 2.49 % | 1.92 % | | SoHo | | | | Revenue | $ 32,849 | $ 36,754 | | Customer accounts | 730 | 808 | | Monthly account churn | 3.26 % | 3.42 % | - Corporate revenue grew 5.6% YoY, while SoHo revenue declined 10.6% YoY[3][50] - A notable trend is the increase in Corporate monthly account churn (from 1.92% to 2.49% YoY) alongside a decrease in SoHo monthly account churn (from 3.42% to 3.26% YoY)[50]