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Consensus Cloud Solutions, Inc. Reports First Quarter 2024 Results; Releases Q2 2024 and Reaffirms Full Year 2024 Guidance; Achieves Record GAAP Net Income/EPS and Non-GAAP Net Income/Non-GAAP EPS

Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) today reported financial results for the first quarter of 2024. “I am pleased with our Q1 performance. SoHo and Corporate revenues were ahead of expect...

Business Wire

LOS ANGELES: Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) today reported financial results for the first quarter of 2024.

“I am pleased with our Q1 performance. SoHo and Corporate revenues were ahead of expectations, which combined with our cost saving measures, produced a strong EBITDA margin of 54.5%. Our free cash flow was up more than 21% year over year, allowing us to end the quarter with $61.5 million of cash following a spend of $63.5 million on our debt repurchase program. Since the program began in November 2023, we have repurchased $126.0 million of debt and lowered our net debt-to-EBITDA ratio to 3.2, continuing toward a leverage ratio of less than 3x.” said Scott Turicchi, CEO of Consensus.

FIRST QUARTER UNAUDITED 2024 HIGHLIGHTS

Q1 2024 quarterly revenues decreased by $3.3 million or 3.6% to $88.1 million compared to $91.5 million for Q1 2023. This decline was primarily due to an anticipated decrease of $5.3 million or 12.6% in our Small office home office (“SoHo”) business, partially offset by an increase of $2.0 million or 4.0% in our Corporate business.

GAAP net income (1) increased to $26.4 million in Q1 2024 compared to $15.5 million for Q1 2023. The increase is primarily due to an increase of $3.7 million in income from operations, a gain of $4.9 million on the extinguishment of debt, a gain of $4.7 million due to a foreign exchange revaluation, a decrease of $1.5 million in interest expense and an increase of $0.9 million in interest income.

GAAP net income per diluted share (1) increased to $1.37 or 75.6% in Q1 2024 compared to $0.78 for Q1 2023. The increase is related to the items discussed above and a lower share count as a result of share repurchases.

Adjusted EBITDA (3)(4) for Q1 2024 of $48.1 million increased compared to Q1 2023 of $44.2 million primarily driven by the increase in income from operations. Q1 2024 Adjusted EBITDA margin(3) of 54.5% is at the higher end of the range presented in our annual 2024 guidance and an increase of approximately 6 percentage points over Q1 2023.

Adjusted non-GAAP net income (1)(2) in Q1 2024 increased to $29.8 million from $22.0 million in Q1 2023 due to the items discussed above, excluding the gain on the extinguishment of debt.

Adjusted non-GAAP earnings per diluted share (1)(2)(3) for the quarter increased to $1.55 or 40.9% compared to $1.10 for Q1 2023 primarily due to the items discussed above and a lower share count as a result of share repurchases.

Key financial results from operations for Q1 2024 versus Q1 2023 are set forth in the following table. Reconciliations of non-GAAP measures to comparable GAAP financial measures accompany this press release.

(Unaudited, in thousands except per share amounts and percentages)

 

Favorable / (Unfavorable)

 

Q1 2024

Q1 2023

Change

Revenues

$

88,146

 

$

91,454

 

(3.6

)%

GAAP net income (1)

$

26,370

 

$

15,458

 

70.6

%

GAAP net income per diluted share (1)

$

1.37

 

$

0.78

 

75.6

%

Adjusted non-GAAP net income (1)(2)

$

29,826

 

$

21,993

 

35.6

%

Adjusted non-GAAP earnings per diluted share (1)(2)(3)

$

1.55

 

$

1.10

 

40.9

%

Adjusted EBITDA (3)(4)

$

48,066

 

$

44,236

 

8.7

%

Adjusted EBITDA margin (3)

 

54.5

%

 

48.4

%

6.1

pts

Net cash provided by operating activities

$

44,689

 

$

37,971

 

17.7

%

Free cash flows (5)

$

35,766

 

$

29,423

 

21.6

%

Notes:

(1)

The GAAP effective tax rates were approximately 27.3% for Q1 2024 and 24.9% for Q1 2023. The non-GAAP effective tax rates were approximately 21.3% for Q1 2024 and 20.0% for Q1 2023.

(2)

Adjusted non-GAAP net income and Adjusted non-GAAP earnings per diluted share exclude certain non-GAAP items, which are presented on an after-tax basis, as defined in the accompanying reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Such exclusions totaled $0.18 and $0.32 per diluted share, respectively, for the three months ended March 31, 2024 and 2023. Adjusted non-GAAP net income and Adjusted non-GAAP earnings per diluted share are not meant as a substitute for GAAP, but are presented solely for informational purposes.

(3)

Adjusted EBITDA is defined as earnings before interest expense; interest income; other income (expense), net; income tax expense; depreciation and amortization; and other items used to reconcile GAAP income per diluted share to Adjusted non-GAAP earnings per diluted share, as presented in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues. Adjusted EBITDA amounts and Adjusted EBITDA margin are not meant as a substitute for GAAP, but are presented solely for informational purposes.

(4)

See Net Income to Adjusted EBITDA Reconciliation for the components of Consensus Adjusted EBITDA.

(5)

Free cash flow is defined as net cash provided by operating activities, less purchases of property and equipment. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

CAPITAL ALLOCATION STRATEGIC INITIATIVES

Consensus ended the quarter with $61.5 million in cash and cash equivalents after the cash outlays detailed below.

The following table consists of our material capital allocation strategic initiatives (in thousands):

Capital Allocation:

Q1 2024

Cumulative Total

Remaining

Under the Plan

Debt repurchase program (6)

$

63,455

 

$

126,027

 

$

173,973

 

Common stock repurchase program (7)

$

707

 

$

31,790

 

$

68,210

 

 

 

 

 

 

Q1 2024

Q1 2023

Change

Purchases of property and equipment

$

(8,923

)

$

(8,548

)

 

4.4

%

Notes:

(6)

On November 9, 2023, the Company’s Board of Directors approved a debt repurchase program, pursuant to which Consensus may reduce, through redemptions, open market purchases, tender offers, privately negotiated purchases or other retirements, a combination of the outstanding principal balance of the 2026 Senior Notes and 2028 Senior Notes. The authorization permits an aggregate principal amount reduction of up to $300 million and expires on November 9, 2026.

(7)

On March 1, 2022, the Company’s Board of Directors approved a share buyback program. Under this program, the Company may purchase in the public market or in off-market transactions up to $100.0 million worth of the Company’s common stock through February 2025.

REAFFIRMS 2024 GUIDANCE (i)

The following table presents ranges for the Company’s 2024 full year guidance (in millions, except per share amounts):

 

Low

Midpoint

High

Revenue

$

338

$

345

$

353

Adjusted EBITDA

$

182

$

188

$

194

Adjusted non-GAAP earnings per diluted share (ii)

$

5.08

$

5.20

$

5.31

Q2 2024 GUIDANCE (i)

The following table presents ranges for the Company’s Q2 2024 guidance (in millions, except per share amounts):

 

Low

Midpoint

High

Revenue

$

84.5

$

86.5

$

88.5

Adjusted EBITDA

$

46.0

$

47.5

$

49.0

Adjusted non-GAAP earnings per diluted share (ii)

$

1.30

$

1.33

$

1.36

Notes:

(i)

Annual and quarterly guidance is provided on a non-GAAP basis only because certain information necessary to calculate the most comparable GAAP measures is unavailable due to the uncertainty and inherent difficulty of predicting the occurrence and the future financial statement impact of certain items. Therefore, as a result of the uncertainty and variability of the nature and amount of future adjustments, which could be significant, we are unable to provide a reconciliation of these measures without unreasonable effort.

(ii)

Annual and quarterly guidance for Adjusted non-GAAP earnings per diluted share excludes share-based compensation, amortization of acquired intangibles and certain gains or costs related to non-routine and other matters that are nonrecurring, in each case net of tax. The non-GAAP effective tax rate for Q2 2024 is expected to be between 20.5% and 22.5%.

About Consensus Cloud Solutions

Consensus Cloud Solutions, Inc. (NASDAQ: CCSI) is one of the world’s largest digital fax providers and a trusted global source for the transformation, enhancement and secure exchange of digital information. We leverage our 25-year history of success by providing advanced data transformation solutions for regulated industries such as healthcare, finance, insurance, real estate and manufacturing, as well as technology for state and the federal government. Our solutions consist of: cloud faxing; digital signature; intelligent data extraction using natural language processing and artificial intelligence; robotic process automation; interoperability; workflow enhancement, and a powerful connectivity and integration engine for healthcare providers. Our solutions can be combined with managed services for optimal outcomes. For more information about Consensus, visit consensus.com and follow @ConsensusCS on X, formerly Twitter, to learn more.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow fax revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; general economic and political conditions, including political tensions and war (such as the ongoing conflict in Ukraine and the Middle East); and the numerous other factors set forth in Consensus’ filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Consensus, refer to the 2023 Annual Report on Form 10-K filed by Consensus on February 28, 2024, and the other reports filed by Consensus from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release are subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.

About non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP net income, Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA, Adjusted EBITDA margin and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this Release.

CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

 

March 31,
2024

 

December 31,
2023

ASSETS

 

 

 

Cash and cash equivalents

$

61,511

 

 

$

88,715

 

Accounts receivable, net of allowances of $6,088 and $6,271, respectively

 

27,421

 

 

 

26,342

 

Prepaid expenses and other current assets

 

9,772

 

 

 

10,191

 

Total current assets

 

98,704

 

 

 

125,248

 

Property and equipment, net

 

86,743

 

 

 

81,196

 

Operating lease right-of-use assets

 

6,391

 

 

 

6,766

 

Intangibles, net

 

43,998

 

 

 

44,990

 

Goodwill

 

347,219

 

 

 

348,822

 

Deferred income taxes

 

32,783

 

 

 

34,869

 

Other assets

 

4,953

 

 

 

5,364

 

TOTAL ASSETS

$

620,791

 

 

$

647,255

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

Accounts payable and accrued expenses

$

45,215

 

 

$

36,506

 

Income taxes payable, current

 

4,514

 

 

 

2,224

 

Deferred revenue, current

 

22,452

 

 

 

22,041

 

Operating lease liabilities, current

 

2,003

 

 

 

2,038

 

Current portion of long-term debt

 

 

 

 

8,575

 

Total current liabilities

 

74,184

 

 

 

71,384

 

Long-term debt, net of current portion

 

671,697

 

 

 

725,405

 

Deferred revenue, noncurrent

 

2,186

 

 

 

2,270

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