Consensus(CCSI) - 2021 Q3 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements The company presents its unaudited condensed consolidated financial statements for the period ended September 30, 2021 Condensed Consolidated Balance Sheets Total assets grew to $1.58 billion, driven by increased cash, while total liabilities decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $297,792 | $128,189 | | Total current assets | $367,331 | $198,275 | | Goodwill | $875,896 | $924,496 | | Total assets | $1,576,776 | $1,491,420 | | Liabilities & Equity | | | | Total current liabilities | $177,752 | $204,666 | | Total liabilities | $340,079 | $368,878 | | Total member's equity | $1,236,697 | $1,122,542 | | Total liabilities and member's equity | $1,576,776 | $1,491,420 | Condensed Consolidated Statements of Income Revenue grew 7% in Q3, but net income declined significantly due to a loss on the sale of businesses Condensed Consolidated Statements of Income (in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $182,103 | $170,248 | $528,891 | $507,090 | | Gross profit | $141,396 | $131,827 | $413,031 | $390,882 | | Income from operations | $57,462 | $62,507 | $142,990 | $180,317 | | Goodwill impairment | $0 | $0 | $32,629 | $0 | | (Loss) gain on sale of businesses | $(24,600) | $17,122 | $(21,798) | $17,122 | | Net income | $27,224 | $58,923 | $102,102 | $133,334 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $196.4 million, supported by contributions from the Parent company Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $196,389 | $160,295 | | Net cash used in investing activities | $(37,753) | $(29,290) | | Net cash provided by (used in) financing activities | $14,378 | $(83,739) | | Net change in cash and cash equivalents | $169,603 | $48,346 | | Cash and cash equivalents at end of period | $297,792 | $171,121 | Notes to Condensed Consolidated Financial Statements Notes detail the carve-out basis, spin-off, acquisitions, dispositions, and subsequent debt issuance - The financial statements were prepared on a "carve-out" basis from J2 Global, which may not reflect standalone expenses[24][25] - The spin-off from J2 Global was completed on October 7, 2021, establishing an independent public company[21][166] - The acquisition of SEOmoz for $66.5 million contributed $14.4 million to revenues for the nine-month period[85][86] - The sale of the B2B Backup business resulted in a $24.6 million loss, following a $32.6 million goodwill impairment[95] - Post-spin-off, the company issued $805 million in new senior notes to fund operations[167] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes carve-out basis financial results, highlighting revenue growth and increased operating expenses - The MD&A is based on historical carve-out financials that include businesses not part of Consensus post-separation[178] Revenue Analysis (in thousands) | Period | Revenue | % Change YoY | | :--- | :--- | :--- | | Q3 2021 | $182,103 | 7% | | 9 Months 2021 | $528,891 | 4% | - Increased Sales and Marketing expenses, up 33% in Q3, were driven by costs from recent acquisitions[195] - A goodwill impairment charge of $32.6 million was recorded in Q2 2021 related to the planned sale of the B2B Backup business[200] - Net cash from operations for the nine-month period increased to $196.4 million from $160.3 million in the prior year[222] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include minimal interest rate risk and foreign currency exposure - Interest rate risk is minimal as cash equivalents have short maturities and there was no variable-rate long-term debt[231][232] - The company is exposed to foreign currency risk from business in Canada, Australia, and the European Union[234] Foreign Currency Impact (in millions) | Metric | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | | Foreign exchange gain (in earnings) | $1.4 | $15.5 | | Cumulative translation adjustment loss (in OCI) | $(13.6) | $(11.6) | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021 - The company's management concluded that disclosure controls and procedures were effective as of the end of the period[243] - No material changes occurred during the third quarter that affected the company's internal control over financial reporting[244] Part II. Other Information Legal Proceedings Ongoing legal proceedings are not expected to have a material adverse effect on the company's financials - Information regarding legal proceedings is detailed in Note 9 of the Notes to Consolidated Financial Statements[245] Risk Factors No material changes to risk factors have occurred since the company's Information Statement filing - No material changes to the risk factors have occurred since those described in the Information Statement[246] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None[247] Exhibits This section lists key agreements filed with the Form 10-Q related to the company's spin-off - Exhibits include the Separation and Distribution Agreement with Ziff Davis, Inc, dated October 7, 2021[252] - Indentures for the 6.0% Senior Notes due 2026 and the 6.5% Senior Notes due 2028 are filed as exhibits[252] - Other key agreements filed include the Transition Services Agreement, Tax Matters Agreement, and Employee Matters Agreement[252]