Consensus(CCSI) - 2025 Q2 - Quarterly Results

Q2 2025 Earnings Release Overview Consensus Cloud Solutions reported positive total revenue growth in Q2 2025, driven by strong Corporate segment performance, robust operating margins, and successful debt refinancing 1.1 Management Commentary Management reported a return to positive total revenue growth in Q2 2025, exceeding expectations, with strong Corporate segment performance and robust operating margins - Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) reported financial results for Q2 2025[1] - Total positive revenue growth returned in Q2, exceeding expectations, with Corporate revenue growing 6.9% year-over-year due to strong usage, improved retention, and new customer acquisition[2] - Robust operating margins contributed to strong cash flows from operations and healthy cash balances[2] - Post-quarter, a $225 million credit facility was secured to partially retire 6% senior notes due October 2026[2] 1.2 Q2 2025 Financial Highlights Q2 2025 revenues increased slightly to $87.7 million, driven by Corporate segment growth, while Adjusted net income and free cash flow saw positive increases despite a GAAP net income decrease Q2 2025 vs Q2 2024 Key Financial Results | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | Change | | :----------------------------- | :------ | :------ | :------- | | Revenues | $87,721 | $87,500 | 0.3% | | Net income | $20,781 | $23,874 | (13.0)% | | Net income margin (%) | 23.7 % | 27.3 % | (3.6) pts | | Earnings per diluted share ($) | $1.07 | $1.24 | (13.7)% | | Adjusted net income | $28,444 | $27,555 | 3.2% | | Adjusted earnings per diluted share ($) | $1.46 | $1.43 | 2.1% | | Adjusted EBITDA | $48,065 | $49,072 | (2.1)% | | Adjusted EBITDA margin (%) | 54.8 % | 56.1 % | (1.3) pts | | Net cash provided by operating activities | $28,299 | $24,365 | 16.1% | | Free cash flow | $20,345 | $15,809 | 28.7% | - Q2 2025 revenues increased by $0.2 million (0.3%) to $87.7 million, driven by a 6.9% increase in Corporate business revenue, partially offset by a 9.4% planned decrease in SoHo business revenue[3] - GAAP net income decreased to $20.8 million in Q2 2025 from $23.9 million in Q2 2024, primarily due to foreign exchange fluctuations[4] - Adjusted net income increased to $28.4 million in Q2 2025 from $27.6 million in Q2 2024, mainly due to reduced interest expense from debt repurchases[4] - Net cash provided by operating activities increased to $28.3 million from $24.4 million, and free cash flow rose to $20.3 million from $15.8 million in Q2 2024[4] Capital Allocation Strategic Initiatives This section details the company's capital allocation strategies, including debt and stock repurchase programs, aimed at optimizing its financial structure 2.1 Debt and Stock Repurchase Programs The company ended Q2 2025 with $57.9 million in cash, actively repurchasing $6.0 million in debt and $12.4 million in common stock, and extending its stock repurchase program - Consensus ended Q2 with $57.9 million in cash and cash equivalents[9] Q2 2025 Capital Allocation Strategic Initiatives | Capital Allocation | Q2 2025 ($ thousands) | Cumulative Total ($ thousands) | Remaining Under the Plan ($ thousands) | | :---------------------- | :------ | :--------------- | :----------------------- | | Debt repurchase program | $6,000 | $222,614 | $77,386 | | Common stock repurchase program | $12,436 | $44,581 | $55,419 | | Purchases of property and equipment | $7,954 | $15,150 | | - The Board approved a debt repurchase program on November 9, 2023, authorizing up to $300 million in principal reduction, expiring November 9, 2026[10] - The share repurchase program was extended for three years through February 2028 by the Board in February 2025[10] Financial Guidance This section provides the company's financial outlook for the full year 2025 and Q3 2025, including revenue, Adjusted EBITDA, and Adjusted earnings per diluted share 3.1 Full Year 2025 Guidance Full-year 2025 revenue and Adjusted EBITDA guidance were reaffirmed, while Adjusted earnings per diluted share guidance was raised by approximately $0.22 based on year-to-date performance FY 2025 Guidance | Metric | Low ($ millions) | Midpoint ($ millions) | High ($ millions) | | :----------------------------- | :---- | :------- | :---- | | Revenue | $343 | $350 | $357 | | Adjusted EBITDA | $179 | $185 | $190 | | Adjusted earnings per diluted share ($) | $5.25 | $5.45 | $5.65 | - Adjusted earnings per diluted share guidance was increased by approximately $0.22 per share from previous guidance, reflecting year-to-date 2025 performance[11] 3.2 Q3 2025 Guidance Q3 2025 guidance projects revenues between $85.9 million and $89.9 million, Adjusted EBITDA between $44.4 million and $47.4 million, and Adjusted EPS between $1.33 and $1.42 Q3 2025 Guidance | Metric | Low ($ millions) | Midpoint ($ millions) | High ($ millions) | | :----------------------------- | :---- | :------- | :---- | | Revenue | $85.9 | $87.9 | $89.9 | | Adjusted EBITDA | $44.4 | $45.9 | $47.4 | | Adjusted earnings per diluted share ($) | $1.33 | $1.38 | $1.42 | - Annual and quarterly guidance, excluding revenues, is provided on a non-GAAP basis due to the inherent difficulty in predicting certain GAAP measures and their future financial impact[13] Company Information This section provides an overview of Consensus Cloud Solutions' business and a safe harbor statement regarding forward-looking information 4.1 About Consensus Cloud Solutions Consensus Cloud Solutions is a global leader in digital cloud fax technology, providing AI-driven interoperability solutions for secure data exchange and workflow automation in regulated industries - Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) is a global leader in digital cloud fax technology[14] - The company provides AI-driven interoperability solutions for secure data exchange, workflow automation, and operational efficiency[14] - Consensus is a preferred partner for heavily regulated industries, including healthcare and financial services, due to its industry-leading compliance standards[14] 4.2 Safe Harbor Statement This statement clarifies that forward-looking statements are subject to risks and uncertainties, and actual results may differ materially, directing readers to SEC filings for detailed risk factors - This press release contains "forward-looking statements" as defined by The Private Securities Litigation Reform Act of 1995[16] - Forward-looking statements are based on current expectations and subject to assumptions, risks, and uncertainties that could cause actual results to differ materially[16] - Detailed risk factors and uncertainties are available in the 2024 Annual Report on Form 10-K filed February 20, 2025, and other SEC filings at www.sec.gov[16](index=16&type=chunk) Condensed Consolidated Financial Statements This section presents the company's condensed consolidated balance sheets, statements of income, and statements of cash flows for the reported periods 5.1 Balance Sheets Total assets increased to $641.5 million by June 30, 2025, driven by cash growth, while total liabilities decreased, significantly reducing the total stockholders' deficit Condensed Consolidated Balance Sheets Highlights | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $57,894 | $33,545 | | Total current assets | $92,424 | $74,525 | | TOTAL ASSETS | $641,518 | $602,201 | | Total current liabilities | $61,936 | $79,311 | | Long-term debt, net of current portion | $578,155 | $574,080 | | TOTAL LIABILITIES | $667,997 | $681,664 | | TOTAL STOCKHOLDERS' DEFICIT | $(26,479) | $(79,463) | 5.2 Statements of Income Q2 2025 revenues slightly increased to $87.7 million, but net income decreased by 13.0% to $20.8 million, with similar trends for the six-month period Condensed Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | | :-------------------------- | :------ | :------ | | Revenues | $87,721 | $87,500 | | Gross profit | $70,097 | $70,378 | | Income from operations | $39,049 | $39,881 | | Net income | $20,781 | $23,874 | | Diluted EPS ($) | $1.07 | $1.24 | Condensed Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | | :-------------------------- | :--------- | :--------- | | Revenues | $174,859 | $175,646 | | Gross profit | $139,165 | $141,476 | | Income from operations | $76,546 | $77,548 | | Net income | $41,933 | $50,244 | | Diluted EPS ($) | $2.14 | $2.61 | 5.3 Statements of Cash Flows Net cash from operating activities remained strong at $69.2 million for the six months ended June 30, 2025, while net cash used in financing activities significantly decreased due to lower debt repurchases Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | | :------------------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $69,242 | $69,054 | | Net cash used in investing activities | $(20,150) | $(17,479) | | Net cash used in financing activities | $(28,588) | $(86,101) | | Net change in cash and cash equivalents | $24,349 | $(39,514) | | Cash and cash equivalents at end of period | $57,894 | $49,201 | - Debt repurchases for the six months ended June 30 were $(15,764) thousand in 2025 compared to $(85,525) thousand in 2024[24] Non-GAAP Financial Measures & Reconciliations This section defines and reconciles non-GAAP financial measures, including Adjusted net income, Adjusted EBITDA, and Free cash flow, to their most comparable GAAP counterparts 6.1 About Non-GAAP Financial Measures The company utilizes non-GAAP measures like Adjusted net income and Free cash flow to supplement GAAP, providing insights into core operating results by excluding non-cash or non-recurring expenses - Non-GAAP financial measures used to supplement GAAP statements include Adjusted net income, Adjusted earnings per diluted share, Adjusted EBITDA, Adjusted EBITDA margin, and Free cash flow[17] - Non-GAAP financial information is not intended to be considered in isolation from, or as a substitute for, GAAP financial information[17] - Management believes these non-GAAP measures offer meaningful supplemental information on performance and liquidity by excluding non-recurring or non-core business expenses[18] 6.2 Net Income to Adjusted Net Income Reconciliation Adjusted net income for Q2 2025 increased to $28.4 million ($1.46 per diluted share), up from $27.6 million, after adjusting for share-based compensation, foreign exchange, and amortization Net Income to Adjusted Net Income Reconciliation (Three Months Ended June 30) | Metric | 2025 ($ thousands) | Per Diluted Share ($) | 2024 * ($ thousands) | Per Diluted Share * ($) | | :-------------------------- | :----- | :---------------- | :----- | :------------------ | | Net income | $20,781 | $1.07 | $23,874 | $1.24 | | Plus: Share-based compensation | $4,207 | $0.22 | $3,738 | $0.19 | | Plus: Foreign exchange loss (gain) | $2,330 | $0.12 | $(667) | $(0.03) | | Plus: Amortization | $632 | $0.03 | $845 | $0.04 | | Plus: Debt extinguishment loss (gain) | $46 | — | $(1,691) | $(0.09) | | Adjusted net income | $28,444 | $1.46 | $27,555 | $1.43 | - Beginning in 2025, foreign exchange gains or losses are excluded from Adjusted net income and Adjusted earnings per diluted share, with prior year amounts adjusted for consistency[25] 6.3 Net Income to Adjusted EBITDA Reconciliation Adjusted EBITDA for Q2 2025 was $48.1 million, a decrease from $49.1 million in Q2 2024, after adding back interest, taxes, depreciation, amortization, and share-based compensation Net Income to Adjusted EBITDA Reconciliation (Three Months Ended June 30) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | | :-------------------------- | :----- | :----- | | Net income | $20,781 | $23,874 | | Plus: Interest expense | $8,673 | $8,657 | | Plus: Income tax expense | $7,763 | $8,606 | | Plus: Depreciation and amortization | $4,571 | $5,163 | | Plus: Share-based compensation | $4,207 | $3,738 | | Adjusted EBITDA | $48,065 | $49,072 | 6.4 Net Cash Provided by Operating Activities to Free Cash Flow Reconciliation Free cash flow for Q2 2025 increased by 28.7% to $20.3 million, and for the six months ended June 30, 2025, it reached $54.1 million, reflecting strong operating cash flow less capital expenditures Free Cash Flow Reconciliation (Three Months Ended June 30) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | | :------------------------------------ | :----- | :----- | | Net cash provided by operating activities | $28,299 | $24,365 | | Less: Purchases of property and equipment | $(7,954) | $(8,556) | | Free cash flow | $20,345 | $15,809 | Free Cash Flow Reconciliation (Six Months Ended June 30) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | | :------------------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $69,242 | $69,054 | | Less: Purchases of property and equipment | $(15,150) | $(17,479) | | Free cash flow | $54,092 | $51,575 | - The increase in free cash flow was primarily due to decreased net cash outflows from working capital changes, partially offset by lower income (excluding non-cash items)[41] 6.5 Explanation of Non-GAAP Adjustments This section details specific non-GAAP adjustments, such as share-based compensation, foreign exchange, and amortization, to provide a clearer view of core operational performance - Non-GAAP financial measures are adjusted for share-based compensation, foreign exchange loss (gain), amortization, intra-entity transfers, debt extinguishment loss (gain), and other items[29][30][31][32][33][34][35] - The company believes these non-GAAP measures provide meaningful supplemental information on the business's operational performance[30][31][32][34][35] Key Performance Metrics This section presents key performance indicators for the Corporate and SoHo segments, including revenue, customer accounts, ARPA, paid adds, and monthly account churn 7.1 Corporate Segment Metrics Corporate segment revenue grew 6.9% to $55.3 million in Q2 2025, with increased customer accounts and paid adds, despite a slight decrease in ARPA and higher churn Corporate Segment Key Performance Metrics (Three Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Corporate revenue ($ thousands) | $55,302 | $51,720 | | Corporate customer accounts (thousands) | 63 | 56 | | Corporate Average Revenue per Customer Account ("ARPA") ($) | $301.29 | $310.18 | | Corporate paid adds (thousands) | 8 | 4 | | Corporate monthly account churn (%) | 2.86 % | 2.29 % | - Corporate revenue growth reached 6.9% year-over-year, driven by strong usage, improved revenue retention, and new customer acquisition[2] 7.2 SoHo Segment Metrics SoHo segment revenue saw a planned 9.4% decrease to $32.4 million in Q2 2025, with fewer customer accounts, stable paid adds, and increased monthly churn SoHo Segment Key Performance Metrics (Three Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | SoHo revenue ($ thousands) | $32,414 | $35,779 | | SoHo customer accounts (thousands) | 682 | 760 | | SoHo ARPA ($) | $15.62 | $15.45 | | SoHo paid adds (thousands) | 62 | 61 | | SoHo monthly account churn (%) | 3.84 % | 3.55 % | - SoHo revenue decreased as planned by $3.4 million (9.4%)[2][3] - Dormant accounts were eliminated from SoHo customer accounts in the current period, with prior year figures revised for consistency, resulting in a 26 thousand decrease in prior year SoHo customer accounts[45]