Consensus(US:CCSI)2024-05-08 20:00Q1 2024 Financial Highlights Consensus Cloud Solutions reported mixed Q1 2024 results with a 3.6% revenue decline, but strong profitability growth and cash flow Overall Performance Q1 2024 saw a 3.6% revenue decline to $88.1M, but GAAP Net Income surged 70.6% and Adjusted EBITDA rose 8.7% to $48.1M Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $88.1M | $91.5M | (3.6)% | | GAAP Net Income | $26.4M | $15.5M | 70.6% | | GAAP Net Income per Diluted Share | $1.37 | $0.78 | 75.6% | | Adjusted non-GAAP Net Income | $29.8M | $22.0M | 35.6% | | Adjusted non-GAAP EPS | $1.55 | $1.10 | 40.9% | | Adjusted EBITDA | $48.1M | $44.2M | 8.7% | | Adjusted EBITDA Margin | 54.5% | 48.4% | 6.1 pts | | Free Cash Flow | $35.8M | $29.4M | 21.6% | - CEO Scott Turicchi highlighted that SoHo and Corporate revenues exceeded expectations, which, combined with cost-saving measures, led to a strong EBITDA margin of 54.5%1 Revenue Analysis Q1 2024 total revenue decreased 3.6% to $88.1M, driven by a 12.6% decline in SoHo, partially offset by 4.0% Corporate growth Revenue by Segment | Revenue Segment | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Corporate | $51.4M | $49.4M | 4.0% | | SoHo | $36.8M | $42.0M | (12.6)% | | Total Revenue | $88.1M | $91.5M | (3.6)% | - The overall revenue decline of $3.3 million was driven by a $5.3 million decrease in the SoHo business, offset by a $2.0 million increase in the Corporate business6 Profitability Analysis Q1 2024 profitability significantly improved, with GAAP net income rising to $26.4M and Adjusted EBITDA increasing to $48.1M - GAAP net income increased by 70.6% to $26.4 million, primarily due to a $3.7 million increase in income from operations, a $4.9 million gain on debt extinguishment, and a $4.7 million foreign exchange gain54 - Adjusted non-GAAP net income grew 35.6% to $29.8 million, while Adjusted non-GAAP EPS increased 40.9% to $1.55, also benefiting from a lower share count due to repurchases5558 - Adjusted EBITDA for Q1 2024 increased to $48.1 million from $44.2 million in Q1 2023, with the Adjusted EBITDA margin rising to 54.5%, an increase of approximately 6 percentage points year-over-year7 Cash Flow and Capital Allocation Strong cash generation in Q1 2024 saw free cash flow increase 21.6% to $35.8M, with $63.5M spent on debt repurchase, reducing net debt-to-EBITDA to 3.2x - Free cash flow increased by over 21% year-over-year, enabling the company to repurchase $63.5 million of debt in Q1 20241 Q1 2024 Capital Allocation | Capital Allocation (Q1 2024) | Amount | | :--- | :--- | | Debt Repurchase Program | $63.5M | | Common Stock Repurchase Program | $0.7M | | Purchases of Property and Equipment | ($8.9M) | - Since November 2023, the company has repurchased $126.0 million of debt, lowering its net debt-to-EBITDA ratio to 3.2, with a target of less than 3x1 Financial Guidance Consensus Cloud Solutions provided Q2 2024 guidance and reaffirmed full-year 2024 projections for revenue, Adjusted EBITDA, and Adjusted non-GAAP EPS Q2 2024 Guidance Consensus projects Q2 2024 revenues between $84.5M and $88.5M, Adjusted EBITDA from $46.0M to $49.0M, and Adjusted non-GAAP EPS from $1.30 to $1.35 Q2 2024 Financial Guidance | Q2 2024 Guidance | Low | Midpoint | High | | :--- | :--- | :--- | :--- | | Revenue | $84.5M | $86.5M | $88.5M | | Adjusted EBITDA | $46.0M | $47.5M | $49.0M | | Adjusted non-GAAP EPS | $1.30 | $1.33 | $1.35 | Full Year 2024 Guidance The company reaffirmed full-year 2024 guidance, projecting revenues between $338M and $352M, Adjusted EBITDA from $182M to $188M, and Adjusted non-GAAP EPS from $5.08 to $5.20 Full Year 2024 Financial Guidance | Full Year 2024 Guidance | Low | Midpoint | High | | :--- | :--- | :--- | :--- | | Revenue | $338M | $345M | $352M | | Adjusted EBITDA | $182M | $185M | $188M | | Adjusted non-GAAP EPS | $5.08 | $5.14 | $5.20 | Key Performance Metrics (KPIs) Q1 2024 KPIs show Corporate segment growth in revenue and accounts, while the SoHo segment experienced revenue and customer declines Corporate Segment KPIs The Corporate segment showed positive Q1 2024 momentum with 4.0% revenue growth to $51.4M and increased customer accounts, despite higher monthly churn Corporate Segment Key Performance Indicators | Corporate Segment Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $51,390k | $49,407k | | Customer Accounts | 55k | 53k | | ARPA | $316.07 | $315.76 | | Paid Adds | 4k | 3k | | Monthly Account Churn | 1.92% | 1.37% | SoHo Segment KPIs The SoHo segment experienced an anticipated Q1 2024 decline, with revenue falling 12.6% to $36.8M and customer base contraction, though monthly churn improved SoHo Segment Key Performance Indicators | SoHo Segment Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $36,754k | $42,030k | | Customer Accounts | 808k | 914k | | ARPA | $14.95 | $15.10 | | Paid Adds | 64k | 78k | | Monthly Account Churn | 3.42% | 3.76% | Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated balance sheets, statements of income, and cash flows for Q1 2024 Consolidated Balance Sheets As of March 31, 2024, total assets were $620.8M, total liabilities decreased to $772.6M, and stockholders' deficit was $151.8M Consolidated Balance Sheets (in thousands) | Balance Sheet Item (in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $61,511 | $88,715 | | Total Assets | $620,791 | $647,255 | | Long-term debt, net | $671,697 | $725,405 | | Total Liabilities | $772,615 | $823,377 | | Total Stockholders' Deficit | ($151,824) | ($176,122) | Consolidated Statements of Income Q1 2024 revenues decreased to $88.1M, but income from operations rose to $37.7M, leading to a significant net income increase to $26.4M Consolidated Statements of Income (in thousands) | Income Statement Item (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues | $88,146 | $91,454 | | Gross Profit | $71,098 | $73,946 | | Income from Operations | $37,667 | $33,997 | | Net Income | $26,370 | $15,458 | | Diluted EPS | $1.37 | $0.78 | Consolidated Statements of Cash Flows Q1 2024 net cash from operations increased to $44.7M, while investing used $8.9M and financing used $58.8M, resulting in a $27.2M cash decrease Consolidated Statements of Cash Flows (in thousands) | Cash Flow Item (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $44,689 | $37,971 | | Net cash used in investing activities | ($8,923) | ($12,548) | | Net cash used in financing activities | ($58,829) | ($9,646) | | Net change in cash and cash equivalents | ($27,204) | $17,101 | | Cash and cash equivalents at end of period | $61,511 | $111,265 | Reconciliation of GAAP to Non-GAAP Financial Measures This section provides reconciliations from GAAP net income to Adjusted Non-GAAP Net Income, Adjusted EBITDA, and Free Cash Flow for Q1 2024 Reconciliation of Net Income to Adjusted Non-GAAP Net Income Q1 2024 GAAP Net Income of $26.4M was adjusted for various items, resulting in an Adjusted Non-GAAP Net Income of $29.8M Reconciliation of Net Income to Adjusted Non-GAAP Net Income (in thousands) | Reconciliation (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (GAAP) | $26,370 | $15,458 | | Share-based compensation | $3,733 | $4,332 | | Amortization | $622 | $756 | | Severance and related charges | $893 | $130 | | Intra-entity transfer | $942 | $882 | | Debt extinguishment gain | ($3,636) | — | | Other | $902 | $435 | | Adjusted non-GAAP net income | $29,826 | $21,993 | Reconciliation of Net Income to Adjusted EBITDA Q1 2024 Adjusted EBITDA was $48.1M, derived from GAAP Net Income of $26.4M after adding back interest, taxes, D&A, share-based compensation, and other adjustments Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Reconciliation (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (GAAP) | $26,370 | $15,458 | | Interest expense | $6,199 | $12,566 | | Income tax expense | $9,923 | $5,129 | | Depreciation and amortization | $4,767 | $4,347 | | Share-based compensation | $4,450 | $5,140 | | Severance and related charges | $1,194 | $173 | | Other adjustments | ($4,837) | $1,423 | | Adjusted EBITDA | $48,066 | $44,236 | Reconciliation to Free Cash Flow Q1 2024 free cash flow was $35.8M, a 21.6% increase, derived from $44.7M in operating cash flow less $8.9M in capital expenditures Reconciliation to Free Cash Flow (in thousands) | Reconciliation (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $44,689 | $37,971 | | Less: Purchases of property and equipment | ($8,923) | ($8,548) | | Free cash flows | $35,766 | $29,423 |