Earnings call transcript: Consensus Cloud Solutions Q1 2025 beats EPS forecast

Consensus Cloud Solutions Inc. (CCSI) reported its Q1 2025 earnings, surpassing expectations with an EPS of $1.37 against the forecasted $1.31. Revenue for the quarter reached $87.14 million, slightly above the anticipated $87.02 million. Following the announcement, CCSI’s stock rose by 2.83% to close at $22.31 in after-hours trading. According to InvestingPro analysis, the company maintains an impressive gross profit margin of 80.11% and currently appears undervalued based on its Fair Value assessment.

Key Takeaways

• Consensus Cloud Solutions exceeded EPS expectations for Q1 2025.
• Revenue slightly surpassed forecasts, despite a year-over-year decline.
• Stock price increased by 2.83% in after-hours trading.
• The company maintained a strong corporate customer base with a 9% increase year-over-year.

Company Performance

Consensus Cloud Solutions showed resilience in Q1 2025, with a slight revenue decline of 1.1% year-over-year. However, the company reported strong performance in its corporate segment, which grew by 5.6%. The strategic reduction in the SOHO channel continued, aligning with the company’s focus on corporate growth. The customer base expanded to approximately 60,000, marking a 9% increase from the previous year.

Financial Highlights

• Revenue: $87.1 million (1.1% decrease YoY)
• Adjusted EPS: $1.37 (2.1% decrease YoY)
• Adjusted EBITDA: $47.3 million (54.2% margin)
• Corporate Revenue: $54.3 million (5.6% increase YoY)
• SOHO Revenue: $32.8 million (10.6% planned decrease)

Earnings vs. Forecast

Consensus Cloud Solutions reported an EPS of $1.37, beating the forecast of $1.31 by 4.6%. Revenue was slightly above expectations at $87.14 million versus the projected $87.02 million. This positive surprise reflects the company’s ability to manage costs and drive growth in its core segments.

Market Reaction

Following the earnings announcement, CCSI’s stock price increased by 2.83%, closing at $22.31 in after-hours trading. This movement places the stock closer to its 52-week high of $32.10, reflecting investor confidence in the company’s performance and outlook. Analyst targets range from $20 to $38, with a consensus recommendation suggesting moderate optimism. The stock has demonstrated strong momentum, delivering a remarkable 70.83% return over the past year.

Outlook & Guidance

For the full year 2025, Consensus Cloud Solutions projects revenue between $343 million and $357 million, with adjusted EPS ranging from $5.30 to $5.42. The company anticipates Q2 2025 revenue between $85 million and $89 million and adjusted EPS between $1.31 and $1.42. These projections suggest a cautious yet optimistic outlook amid economic uncertainties.

Executive Commentary

Scott Turicchi, CEO, stated, "We are not currently seeing any impact from the tariffs and related negotiations," highlighting the company’s stable market position. Johnny Hecker, CRO, emphasized the strength of Cloud Fax, noting, "Cloud Fax remains the cornerstone of our revenue, consistently contributing over 90% to our corporate revenue."

Risks and Challenges

• Economic Uncertainty: Potential GDP slowdown in late 2025 could impact growth.
• SOHO Channel Reduction: Continued strategic reduction may affect revenue streams.
• Market Saturation: The company must innovate to maintain its competitive edge.

- Regulatory Changes: Compliance with evolving regulations, especially in healthcare and government sectors, remains crucial.

For deeper insights into CCSI’s financial health, valuation metrics, and expert analysis, explore the comprehensive Pro Research Report available on InvestingPro. The platform offers exclusive access to over 10 additional ProTips and detailed financial metrics that can help inform your investment decisions.

Q&A

During the earnings call, analysts inquired about the acceleration of VA deployments and the strategic management of the SOHO channel. Executives confirmed plans to hire approximately 40 people in sales and related functions, indicating a focus on expanding market reach and customer engagement.

Full transcript - Consensus Cloud Solutions Inc (CCSI) Q1 2025:

Operator: Good day, ladies and gentlemen, and welcome to the consensus Q1 twenty twenty five Earnings Call. My name is Paul, and I will be the operator assisting you today. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. On this call from consensus will be Scott Turicchi, CEO Jim Malone, CFO Johnny Hecker, CRO and Executive Vice President of Operations and Adam Varon, Senior Vice President of Finance.

I will now turn the call over to Adam Varon, Senior Vice President of Finance at Consensus. Thank you. You may begin.

Adam Varon, Senior Vice President of Finance, Consensus: Good afternoon, and welcome to the Consensus investor call to discuss our Q1 twenty twenty five financial results, other key information and our 2025 full year and Q2 twenty twenty five quarterly guidance. Joining me today are Scott Turicchi, CEO Johnny Hecker, CRO and EVP of Operations and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. Johnny will give an operational update on the progress since our year end twenty twenty four investor call, and then Jim will provide Q1 twenty twenty five financial results, then discuss our full year 2025 and Q2 twenty twenty five guidance range. After we finish our prepared remarks, we will conduct a Q and A session.

At that time, the operator will instruct you on the procedures for asking a question. Before we begin our prepared remarks, allow me to direct you to our forward looking statements and risk factors on Slide two of our investor presentation. As you know, this call and the webcast will include forward looking statements. Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our 10 ks SEC filing.

Now, let me turn the call over to Scott for his opening remarks.

Scott Turicchi, CEO, Consensus: Thank you, Adam. As noted in the press release, I’m pleased with the results of the first quarter. This quarter was primarily without any of the volatility introduced by the tariffs, most of which were announced on April 2. We slightly exceeded our revenue objective with corporate revenue posting 5.6% growth over Q1 twenty twenty four, ahead of our budget and the best growth year over year in eight quarters on a normalized basis. Solo revenue was in line with our expectations.

We carefully watched our cost structure and exceeded our EBITDA expectations by more than the outperformance on revenue. We delivered a robust 54.2% adjusted EBITDA margin. As we discussed on the Q4 earnings call, our goals for this year include the following: first, to pursue the acquisition of customers primarily in the healthcare space for our corporate channel and driving revenue growth to 6.25% this year. Two, to manage our cost structure while making modest investments primarily in our go to market operations for the benefit of 2026 and beyond. Three, putting our bank loan refinancing in place for the retirement of the remaining 6% notes due October 2026.

And finally, number four, managing the SOHO channel for cash flow efficiency, which we began last year. While Johnny will provide more detail in his portion of the presentation, I am pleased that our corporate channel exceeded our revenue expectations in Q1, driven by strong usage, improved revenue retention, new customer acquisition and increased contribution from our advanced products. In addition, eFax Protect had record sign ups. In addition, at the VA, we continue to see more facilities come online and a record level of usage. All of these contributed to the 5.6% growth year over year.

I’m pleased to report that while revenues for the SoHo channel declined in the quarter as anticipated, it was the slowest rate of decline since we began the program to reduce marketing costs. We maintained our discipline on the cost side across the board, generating an EBITDA margin of 54.2%, one hundred basis points ahead of our Q1 expectations. Free cash flow for the quarter was 33,700,000.0 modestly down from Q1 of twenty twenty four due to increased receivables from our growing corporate channel and lower revenues and EBITDA year over year. We continue to expect our free cash flow in 2025 to be similar to 2024. We were able to repurchase approximately $10,000,000 of debt in the quarter and additional $6,000,000 so far in Q2.

This brings our total repurchases since launching the program in November of twenty twenty three to 222,600,000 reducing our total outstanding debt to approximately $582,000,000 or 3.1 times our trailing twelve month adjusted EBITDA on a gross basis and 2.9 times on a net basis. We have made progress on the bank financing and expect it to be finalized in late Q2 or early Q3. Before turning the call over to Johnny, I would like to comment on the recent volatility in the markets and concerns in the economy regarding a slowdown in economic activity. First, the nature of our business is such that we are not directly impacted by the tariffs and related negotiations. Second, we provide an essential service of critical and secure information delivery across a variety of industries.

As part of our normal quarterly process, we did look at a potential slowdown in the economy in the back half of the year with a reduced annual GDP output that is modestly positive, but less than the GDP growth expected upon entering this year. Under such a scenario, we would expect a modest headwind to our revenues in Q3 and Q4, but still be within our range of guidance. To be clear, this is a stress test against our annual plans and budget, not our base case. We are not currently seeing any impact from the tariffs and related negotiations. We will closely monitor the situation as events develop.

I will turn the call over to Johnny to provide more operating details.

Johnny Hecker, CRO and Executive VP of Operations, Consensus: Thank you, Scott, and hello, everyone. Thank you for joining us today to discuss our Q1 twenty twenty five results. As always, I will be focusing on key areas such as revenue, customer count and go to market strategies for both our corporate and SOHO business channels. I will also provide an update on our operations and share some insights and highlights. I’m happy to report that our corporate business continues to demonstrate positive momentum.

In q one twenty twenty five, we saw revenue reach a record high of $54,300,000 representing a solid 5.6% increase compared to the $51,400,000 in Q1 twenty twenty four. It is important to remember that business days significantly impact our corporate business. Q1 twenty twenty four had an additional business day because of the leap year, which makes this quarter’s growth rate the best since Q1 of twenty twenty three on normalized basis, even more impressive and supports our confidence in achieving double digit growth for this business channel. The exceptional q one growth rate stems from several factors, sustained increase in CloudFlex consumption within health care, greater advanced product adoption among existing and new clients, and the onboarding of new customers. We attribute this positive trajectory in our corporate revenue channel as a direct result of our focus on maximizing customer satisfaction through innovative product expansion that delivers tangible value.

This approach is not only driving strong retention, but also fostering enduring customer loyalty. I am excited to report another increase in our revenue retention rate by 55 basis points since just last quarter to now 101% for the last trailing twelve months, well in line with our target of at least 100% and significantly higher than the 97.9% in Q1 of last year. Our corporate customer base has grown to a record approximately 60,000 at the close of Q1, up 9% year over year. A key driver of the success was the strong of Efax Protect and the continued effectiveness of our SOHO to corporate upsell program, which together contributed over 3,700 new corporate accounts during the quarter within our lower SMB cohort alone. This robust growth underscores the ability to effectively penetrate the market and strengthens our confidence in future expansion across the corporate customer base.

We observed a positive sequential trend in corporate ARPA increasing by almost $3 to $3.00 $7 from the previous quarter. However, our current corporate ARPA of $307 represents a $10 decrease year over year from Q1 of twenty twenty four. This reflects the inherent dynamics of our corporate customer portfolio, where the ARPA is both supported by large enterprise clients, such as the Department of Veterans Affairs, and moderated by the success and growth within our lower SMB cohort. Speaking of the VA, we are pleased to report that the rollout continues with significant momentum and urgency. While we navigated the recent disruptions and uncertainties within the government and contractor ecosystem, our commitment to delivering this highly efficient offering remains steadfast.

Usage within the VA is steadily increasing and new deployments are proceeding as planned, reinforcing our confidence in the program’s success. Furthermore, our recent FedRAMP high authorization has, given the circumstances, generated substantial interest and engagement from other government agencies, revitalizing our public sector pipeline. While we anticipate the tangible impact of these developments will materialize beyond 2025, the public sector remains a core pillar of our product and go to market strategy. Before moving on to Soho, I’d like to provide some key insights into our revenue composition and the central role of Cloud Fax. It’s crucial to highlight that Cloud Fax remains the cornerstone of our revenue, consistently contributing over 90% to our corporate revenue and exceeding 95% of our total revenue.

Its ongoing growth underscores its in very importance to our business. Therefore, our core fax business will continue to be a priority. Complementing this strength, we’re delighted to see increasing adoption and broader usage of our advanced solutions like Unite and Clarity featuring AI technology for data extraction. Furthermore, we leverage and continue to see success with our integration solutions, which we’ve further enhanced since the twenty twenty two Summit acquisition. The growing customer engagement with these offerings alongside eFax reinforces the validity of our go to market and product strategy, particularly within the important healthcare vertical.

We are very happy with the strong momentum we’ve carried into 2025. This positive start driven by our successful strategies provides the tailwind needed to achieve our ambitious goals in our corporate business for the fiscal year and beyond. Onto our several channel. We’ve recorded q one revenue of $32,800,000 compared to $36,800,000 in the first quarter of the previous year, representing a planned decrease of 10.6%. This reflects our ongoing strategic focus on optimizing profitability and maximizing the efficiency of our advertising investments in this business.

As anticipated, the total global Zoho account base experienced a slight reduction from 747,000 to 730,000 during the quarter. While Zoho ARPA saw a minor decrease to $14.83 in q one of twenty twenty five from $14.99 in q four of twenty twenty four, we’re encouraged by the continued improvement in our SOHO cancel rate, which declined to 3.26% in q one of twenty twenty five from 3.38% in the prior quarter, our analysis reveals that the slight ARPA adjustment this quarter is primarily attributable to the residual effect of the 2024 holiday promotions last November and December. Importantly, our strategic transition away from free trials across multiple brands is proving effective in enhancing the monetization of newly acquired customers and increasing paid acquisitions, a positive impact that is partially balanced by customer churn. Our focus on automating and optimizing customer acquisition programs continues to yield success with a very close eye on return on advertising spend at a healthy lifetime value to customer acquisition cost, commonly referred to as LTV to CAC ratio. Key to this success is our close collaboration with advertising partners and our focus on optimizing search results within the ever changing search environment.

In closing, despite the prevailing macroeconomic landscape, our confidence remains strong. Our corporate business is delivering as anticipated, supported by a robust pipeline and increasing customer engagement with our solutions. For our SoHo channel, our strategic direction is yielding positive results. While we maintain vigilance regarding macroeconomic factors, we are reaffirming our guidance. Before handing off, a big thank you to our employees for their dedication this past quarter and to our customers and partners for their continued trust and collaboration.

We’ve had a great start into the year and we anticipate to continue that way. With that, I’d like to turn the call over to our CFO, Jim Malone, who will now provide a detailed update on our financial performance and outlook. Jim?

Jim Malone, CFO, Consensus: Thank you, Johnny, and good afternoon, everyone. In our press release and on this call today, we are discussing Q1 twenty twenty five results and guidance for Q2 twenty twenty five and full year. We expect to file our 10 Q by close of business today. Let’s start with our corporate business results. Q1 twenty twenty five was a record quarter for corporate with revenue of $54,300,000 an increase of $2,900,000 or 5.6% versus prior year, performing ahead of expectations.

This represents the highest corporate growth year over year in the past eight quarters on a normalized basis. As Johnny noted, we continue to see growing fax usage, which demonstrates strong demand for our core digital fax product. Q1 twenty twenty five corporate offer of $3.00 $7 was up sequentially by approximately $3 and down $10 over the prior comparable period, primarily driven by the success of our growing eFax protect base within the lower SMNB cohort. Our record Q1 twenty twenty five corporate revenue delivered a trailing 12 retention rate of 101%, a three ten and fifty five basis points improvement from the prior comparable period in Q4 twenty twenty four. Moving to SoHo, Q1 20 20 5 revenue of $32,800,000 compared to $36,800,000 over the prior year represents a planned decrease of $3,900,000 or 10.6%.

We are continuing our strategic focus of optimizing advertising spend and profitability in the SOHO revenue channel. ARPA of $14.83 had a modest sequential decline, largely attributable to our holiday promotions in November and December of twenty twenty four. SoHo churn of 3.26% improved 12 basis points sequentially and 16 basis points year over year. Moving to consolidated results. Revenue of $87,100,000 represents a decrease of 1,000,000 or 1.1% versus Q1 twenty twenty four, performing in line with expectations and an improvement of 3.6% in Q1 twenty twenty four versus 2023.

Adjusted EBITDA of $47,300,000 is a decrease of 800,000 or 1.7% versus Q1 twenty twenty four, delivering a solid margin of fifty four point two percent and one hundred basis points favorable to our Q1 twenty twenty five guidance range. As mentioned in our twenty twenty four year end earnings call, adjusted net income calculation will eliminate foreign exchange gain and loss on intercompany balances both in current and prior comparable periods. This line item can fluctuate significantly from period to period and the metric does not represent the company’s operating performance. Therefore, beginning this quarter and going forward, adjusted net income will not include this foreign gain and loss. Q1 twenty twenty five adjusted net income of $27,000,000 is an increase of $100,000 or 0.2% versus Q1 twenty twenty four adjusted net income of $26,900,000 primarily driven by lower net interest expense, offset by adjusted EBITDA flow through, depreciation and amortization and taxes.

Adjusted EPS of 1.37 is unfavorable to the prior year by 2.1% or $03 driven by the items I just mentioned and a higher share count. The Q1 twenty twenty five non GAAP tax rate and share count was approximately twenty one point two percent and 19,700,000.0 shares. As mentioned in our November 2023 earnings call, we announced a 300,000,000 3 year bond repurchase program. In Q1 twenty twenty five, we repurchased $10,000,000 face value bonds at par and an additional $6,000,000 in Q2 twenty twenty five to date. Our continued strong cash flow has allowed us to repurchase approximately $223,000,000 face value bonds for approximately $2.00 $9,000,000 cash program to date with approximately $77,000,000 remaining under our current authorized program.

We expect our free cash flow to be similar to 2024 providing us with sufficient cash to meet our leverage target on and before the maturity of our 6% notes. Scott noted in his opening remarks, we are working on the refinance process for a bank loan to retire our remaining 6% notes through October 2026. We expect the bank loan to be completed in late Q2 or early Q3. With the debt repurchases just mentioned, Q1 twenty twenty five total debt to adjusted EBITDA is 3.1x. Net debt to adjusted EBITDA ratio is 2.9x.

And we were getting very close to achieving our total debt to adjusted EBITDA target of three times. We ended Q1 twenty twenty five with cash of approximately $53,000,000 which is sufficient to fund our operations and repurchases of our debt and equity. Q1 twenty twenty five key free cash flow is $33,700,000 versus $35,800,000 in the prior comparable period, primarily due to the increased receivables from our growing corporate channel and lower adjusted EBITDA. CapEx of $7,100,000 was down $1,800,000 or approximately 19% versus the prior year. Going to guidance, we are reaffirming our 2025 full year guidance as follows.

Full year revenue between $343,000,000 and $357,000,000 with $350,000,000 at midpoint adjusted EBITDA between $179,000,000 and $190,000,000 with $185,000,000 at midpoint Adjusted EPS of $5.3 to $5.42 with $5.22 at midpoint. Full year estimated share count and income tax rates are approximately 20,000,000 shares and tax rate between 20.522.5% with 21.5% at midpoint. Please remember that as previously mentioned, our 2025 guidance and actual results exclude foreign exchange gain or loss on revaluation of intercompany accounts. For our second quarter, we are providing guidance as follows: revenue between $85,000,000 and $89,000,000 with $87,000,000 at the midpoint adjusted EBITDA between $45,000,000 and $48,000,000 with $46,500,000 at the midpoint Adjusted EPS of $1.31 to $1.42 with midpoint of $1.37 Estimated Q2 twenty twenty five share count and income tax rate are approximately 20,000,000 shares and a tax rate between 20.5% to 22.5%. This concludes my formal remarks.

I’d like to turn the call back to the operator for Q and A. Thank you.

Operator: Thank you. We will now be conducting a question and answer session.

David Larson, Analyst, BTIG: In

Operator: of ask you please limit yourself to one And the first question today is coming from BTIG, and it’s David Larson. David, your line is live.

David Larson, Analyst, BTIG: Hi. Congratulations on the good quarter. Can you talk a little bit more about growth in corporate revenue? The growth rate looked pretty good to me. And I think you mentioned in your prepared comments that the VA deployment is accelerating.

I think you finally got, like, this formal paperwork and formal certification recently. Just any more color around the government sales process, the VA corporate growth would be great. Thank you.

Johnny Hecker, CRO and Executive VP of Operations, Consensus: Yeah, I can take that. Hi, this is Johnny. Hi, David. Thanks for getting on the call. Good questions.

So, to answer your first one, the corporate growth was really supported by multiple things. First of all, we saw continued strong usage across our fax brands, upmarket as well as downmarket, but significantly growth up market in our existing customer base. And then secondly, good adoption and deployment of advanced solutions. So that is starting to contribute there as well. So, in all, and adding new customers is the third big component of driving the corporate revenue in this quarter.

So, all in all good trends on all three of those fronts. Now, with regards to the VA, yes, we got the FedRAMP high certification. That was something that we announced last quarter already. That was an important milestone on that journey, something that the VA required from us and that we have now accomplished. That is unlocking some new opportunities and also revitalizing a couple of older opportunities that had actually stalled in that public sector pipeline.

So customers had paused the process for a while and said, we need you guys to finish that process, get that official certification. So that is helping us. Are we gonna see a significant impact of this in 2025? I don’t think so. Maybe we’ll close a couple of deals, but as you know, with the government, it’ll take a while till those ramp.

And there’s general reluctance and uncertainty in the government space, right? In the ecosystem as well as within the agencies. So we’re experiencing some of that, but we’re encouraged by the engagement. We thought it would be significantly worse.

David Larson, Analyst, BTIG: Okay, great. And then in terms of SOHO, I completely understand how you’re converting SOHO accounts to corporate, so the decline in revenue is intentional. But when would you expect that decline to sort of moderate or perhaps become like flat on a year over year basis? How are you thinking about sort of the intentional by design contraction of SOHO, which is still a significant portion of total revenue? Thanks.

Johnny Hecker, CRO and Executive VP of Operations, Consensus: Yeah. So that’s a that’s a difficult question to answer because there are so many things that influence that that number. Right now, we saw a little bit of a reduction in the cancel rates. We’re we’re encouraged by the new customers that we’re adding. So it’s a good trend, which is why the revenue decline is actually slowing down in that space.

But it’s really a function of multiple things, particularly on how much advertising spend we’re willing to expense every quarter in order to win new customers. And we are monitoring that profitability very closely. So at the point where we don’t experience that to be profitable for us anymore, we will probably slow down that advertising spend, which will accelerate that decrease in the customer base a little bit more. But at what point, whether it is gonna be in ’twenty six or in ’twenty seven, we will actually find that base or beyond is unclear because as long as it’s profitable, it wouldn’t make sense for us to stop also spending in that space. I don’t know, Scott, if you or Adam, if you want to

Operator: add anything to that.

Scott Turicchi, CEO, Consensus: No, I think that’s well said. I think, as you referenced in your prepared remarks, what we watch very closely is the LTV to CAC in terms of the marketing spend. And then on the flip side, if you look at the base, we actually look at each cohort and what is going on in terms of their retention rates, hence, by implication, their cancel rates. And so that’s the math that guides us to how much we’re willing to invest. And then you run the math out, you can come up with some numbers.

But it is proceeding according to the plan. It was actually developed more than a year ago. And it’s proceeding consistent with our expectations for this year and what we said last quarter in terms of guidance. And I don’t think one should expect that there’s a magic bullet that will suddenly cause it to stabilize certainly this year, if not probably even next year.

David Larson, Analyst, BTIG: Okay, great. And then just one more quick one. Tariffs, I think I heard you say no impact. Two potential areas of concern is on the hospital side, hospitals may face higher supply costs, so that might slow their purchasing of eFax solutions. And then also on your side, any technologies or hardware?

I think what I heard you say was you’re not seeing any impact from tariffs either on the demand side or on your cost side.

Scott Turicchi, CEO, Consensus: That’s correct.

David Larson, Analyst, BTIG: Okay, thanks very much. Congrats on a good quarter. I’ll hop back in the queue.

Scott Turicchi, CEO, Consensus: Paul, before we go to the next live question, we’ve received a couple by email, so let me at least take one of them, because it leverages the conversation we just had with David regarding revenue growth. The question I’ll summarize it is more about the company as a whole, but it really does feed off of the two pieces we just talked about. And that is returning to total revenue growth for the whole company. So one, when do we expect that to occur? Obviously, if we’re going to be flat year over year, we do expect that to occur at some point during this year under our base case scenario.

I would say that’s really a Q4 event. And then the follow on question to that is, do we expect that to persist? Now feeding off of Johnny’s question, the answer would be, and of course, there’s always an economic caveat here that the economy doesn’t do something wildly crazy, that we would expect the rate of decline of SOHO to continue to lessen as we see corporate increasing in its growth. So that should imply once we hit a positive total enterprise growth that that would continue. But as usual, hey, is subject to economic conditions and also subject to what Johnny just mentioned in terms of exactly how much we inject into the SoHo channel in terms of marketing spend.

Okay, Paul, there’s another live question, ready to take it.

Operator: Yeah, we have a couple more from the lines. The next one is coming from Gene Nanheimer from Freedom Capital Markets. Gene, your line is live.

Gene Nanheimer, Analyst, Freedom Capital Markets: Sure. Thank you. Good afternoon and congrats on the good numbers. So related to those questions around growth of the corporate channel, Scott or Johnny, think you talked about making some hires this year, maybe about 40 people in sales and sales related Can you talk about where that stands at this point? And if I joined the call a little late, so I don’t know if you talked about it already.

Scott Turicchi, CEO, Consensus: No, Gene, we didn’t really address any detail. You’re correct. You recall for those that were not part of the Q4 call in February, we talked about as we go through this year, adding additional personnel, not exclusively, but predominantly in the go to market area, which is Johnny’s area. There was some modest amount of that in Q1, both per the plan. It does accelerate as we go through the year.

So as I mentioned in my opening remarks, although our EBITDA margin was ahead of our own expectations, even the margins hadn’t been fully baked in, still would be somewhat higher than if you look at the midpoint of our guidance and the imputed margin. So I’ll turn it over to Johnny to talk about some of the areas in which he’s looking to hire over the course of this year. And then the one caveat I would make is we’re going to be very careful on these hires as we look at economic conditions. Right now, we’re not seeing anything, whether it’s the tariffs or the downstream effects from them in terms of the economy. But clearly, if we were to see something go materially negative in terms of the economy, that might influence how many of those hires we want to bring in this year versus potentially pushing some of them into next year.

I want you to give Gina flavor of some of the areas that you’re looking at to enhance your department.

Johnny Hecker, CRO and Executive VP of Operations, Consensus: Yeah. Yeah. Thank you, Gina. It’s really good question. It’s really across the entire customer life cycle, right?

So we’re strengthening a little bit on the marketing and on the operation side. And then we’re very much focused as we’re able to capture a lot more down market through our e commerce program, we’re focused on hiring on the upmarket sales side, where we still have to engage with the customer, whether it’s through sales representatives or sales engineers in order to win and retain those accounts. And then beyond that, it’s about implementation and customer service, especially with the advanced products. There’s a little bit more engagement there. So almost like a professional services component to it that we’re but it’s tiny from a revenue perspective, but to onboard those customers.

So those are the areas where we’re hiring primarily upmarket sales, as well as customer onboarding and customer success management. And it’s going, we’re on track, let’s put it that way. I think we’re putting a lot of emphasis onto leadership teams to really stay on top of this because, as we stated in the last call, this is an investment into the future and into 2026 and the growth beyond in that year and beyond.

Gene Nanheimer, Analyst, Freedom Capital Markets: Yep, great. Thank you for that color, Scott and Johnny. And my, so my follow-up would be just on the SOHO side. I understand the ARPA was down sequentially, as a result of the absence of the holiday promotion. But in theory, that ARPA of 1483, probably be the low watermark for SoHo this year?

Is that the way to think about it?

Scott Turicchi, CEO, Consensus: Hard to say, Jean, because we do and we are doing right now. We do a variety of promotions and testing. So what occurred at the end of ’twenty four were holiday promotions that are not ongoing now, but they bleed in because the customer base comes in at basically cheaper ARPAs that will affect 2025. And then there’s some things that can go in the other direction. So look, I’ll be honest with you.

I don’t get that focused or attuned on ARPA movements that are generally measured within nickels and dimes. Because those are things that occur in the ordinary course based on different marketing programs that we’re trying, different save programs, meaning when a customer wants to cancel, what is the save opportunity there? What might the pricing be on that? It’s a mixture of a whole bunch of different categories. What I would say is that even with those things that we are doing and testing, I think the ARPA is probably within a fairly narrow range.

But I can’t tell you it’s not going to tick a few pennies lower in some subsequent quarter. It may very well do that.

Gene Nanheimer, Analyst, Freedom Capital Markets: Right, right. Yeah, I’m thinking about is $15 something in that area.

Scott Turicchi, CEO, Consensus: Yeah, I would say, look, I think we have fundamentally a $15 ARPA base of customers, but there is a band around it. Remember, too, it’s also the function of the mix across the different brands. So you’ve got some brands like eFax that will have a higher price at full price. You’ll have other brands that actually are below the $15 ARPA. So you’ve got another variable in there, which is when we look at the, call it rounded 60,000 gross ads that come in in a quarter, what’s the distribution across the different brands?

And that will in large part be driven by what we’re doing marketing wise.

Gene Nanheimer, Analyst, Freedom Capital Markets: Got it. Okay. So there’s

Scott Turicchi, CEO, Consensus: a lot of different pieces that go into it. But yes, I think you can say that within a range around $15 you’ve got a relatively stable ARPA. But yes, it will move within that range. By the standing on the cancel rate. We do certain things that might negatively or positively on the margin influence the cancel rate.

And so can it move 10 bps either side of some mean? Yes.

Gene Nanheimer, Analyst, Freedom Capital Markets: Got it. Okay, thanks very much.

Scott Turicchi, CEO, Consensus: Okay, Paul, before we go to another live question, I’ve got another email question. There’s actually two of them, but they’re related. I’ll put them under capital allocation is probably the best way to address them. And one has to do with you may notice in our press release, and you’ll certainly see it also in the financials in the Q that’s filed this evening, that we made a $5,000,000 investment, not in our own company, another company. And so the question is, what is that in strategic value?

Some of you may remember that in, I believe it was early ’twenty three, we made an investment in one of our vendor partners in the advanced products or advanced services space. This is a follow on investment in the same company. I’m not at liberty to disclose the name or really much more about them right now, as they are in the process of going out and raising capital. But I am certainly hopeful that when we have our Q2 call in August, we’ll be able to discuss this in much more robust detail. But to be clear, there are third party vendor of ours that we partner with in the advanced product area of our company, and it is a follow on investment to what we made previously back in early ’twenty three.

Now, the adjacent question that kind of go hand in hand is, and it’s not really the way the question is word, it’s not really, it’s how it came about, but it’s not actually the right premise. But why are we building cash? So obviously, built cash from Q4 to Q1, in part because it’s just a strong free cash flow quarter. Q1 and Q3 are. We did buy some debt, as both myself and Jim have noted.

But it’s been increasingly hard to buy the debt in the open market. As we have shrunk down both the 66.5%, you see in a year ago period or in earlier periods in ’twenty four, we might be able to get $45,000,000 in a quarter. We only got 10,000,000 this quarter, although as I noted, we did buy $6,000,000 in Q2 to date. We were a little late on buying the shares. Quite frankly, would have liked to have allocated some more capital to share repurchases.

But we fairly quickly, after the earnings call, went into a closed window. That did not execute. We bought very few shares during the quarter. But there is, as you look out between now and the end of the year, there is actually a need. We need to build some amount of cash on our balance sheet, because we’re going out very shortly with our bank financing or refinancing, the goal of which is to take out the 6% notes.

And right now, it’s looking like that will be a $225,000,000 issuance, combination of line of credit and term loan A. Those are secured. And our bond indentures, both the sixes and even when they’re gone, the six and a halves, have an interesting lean test. And the lean test is basically 50% of trailing twelve month EBITDA plus $50,000,000 plus cash on your balance sheet. So in order to fully utilize the line of credit, we need those numbers to add up to at least $225,000,000 So it is our intention to continue to get back into the market in terms of applying our excess cash and cash flow towards both debt retirement and share repurchases, but we do have to be cognizant that certainly as we get out later in the year, we have certain cash balances to justify the lien amount for the loan that will be put in place, as I mentioned in my opening remarks, either late this quarter or early next quarter.

Okay, Paul, next questions.

Operator: Certainly. The next question is coming from Ian Zaffino from Oppenheimer. Ian, your line is live.

Isaac Selhausen, Analyst, Oppenheimer: Hey, good afternoon. This is Isaac Selhausen on for Ian. Thanks for taking the questions. Just have two the corporate business as well. In terms of corporate accounts, it’s good to see the growth there.

And you talked about the growth of eFax and the upsells. But could you also discuss if there are any notable ads for larger enterprise accounts? And then secondly, tying into that, anything you could share on general sentiment from larger enterprise prospects in terms of making purchasing decisions? Thank you.

Johnny Hecker, CRO and Executive VP of Operations, Consensus: Yeah, this is Johnny. I can comment on that. Absolutely. And it’s a very good question. Thank you for asking that.

Absolutely, yeah, we’re adding customers. And I think I alluded to at least a little bit in my remarks, we’re adding customers across the board, right? So we’ve disclosed the number on the lower end, the number of customers that we’re adding through certain programs, that’s not all, we’re also adding customers to other programs on the lower end, but we’re adding new customers across the board all the way to very large enterprises. We have a robust pipeline, we’ve had a robust pipeline for multiple quarters. And we’ve been able to turn that pipeline into new customers as well.

So, it’s really corporate success across the entire customer continuum.

Isaac Selhausen, Analyst, Oppenheimer: Okay, great. Thank you very much.

Operator: Thank you. And there were no other questions at this time. I will now hand the call back to Scott Turicchi for closing remarks.

Scott Turicchi, CEO, Consensus: Great. Thank you, Paul. We thank you all for joining us today for our Q1 twenty twenty five earnings call. And we will, as I mentioned in response to one of the questions, we’ll report our Q2 results within the first week to ten days of August and obviously have an earnings call associated with that. There may be a couple of conferences that we attend between now and then, so be on the lookout for those announcements.

And clearly, you have any questions that were not asked during this call, you can feel free to reach the company, and we’ll get back to you. Thank you.

Operator: Thank you. This does conclude today’s conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.

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