Consensus Cloud Solutions, Inc.

Good day, ladies and gentlemen, and welcome to Consensus Q2 2022 Earnings Call. My name is Paul, and I will be the operator assisting you today. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. On this call from Consensus will be Scott Tariki, CEO, John Nebergall, COO, Jim Malone, CFO, and Adam Ferron, Senior Vice President of Finance. I will now turn the call over to Adam Ferron, Senior Vice President of Finance at ConsenSys. Thank you. You may begin.

Good afternoon, and welcome to the ConsenSys Investor Call to discuss our Q2 2022 financial results, other key information, and reaffirmation of our 2022 guidance. Joining me today are Scott Tariki, CEO, John Nebergall, COO, and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. John will give an update on operational progress since our Q1 investor call, and then Jim will discuss Q2 2022 financial results and 2022 guidance. After we finish our prepared remarks, we will conduct a Q&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 the safe harbor language on slide two. 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 outlined on slide three that we have disclosed in our 10-K SEC filing, as well as a summary of those risk factors that we have included as part of the slideshow for the webcast. We refer you to discussions of those documents regarding safe harbor language, as well as forward-looking statements. Now, let me turn the call over to Scott.

Thank you, Adam. This was a very good quarter in light of high inflation and the risk of an impending recession. We were able to produce a record quarterly revenue by growing 6% versus Q2 2021. In addition, we continue to operate at healthy EBITDA margins, 54%, at the high end of our stated range of 50% to 55%. These results were driven by continued strong performance by the corporate business, which grew 17.1% versus Q2 2021, and I would note 11.1% organically. In addition, this is the eighth consecutive quarter of corporate revenue growth and its eighth straight quarter of ARPA growth, up more than 19% versus Q2 2021. With clarity tracking to produce revenue in Q3, additional features in JSON, the introduction of Unite Lite, the integration of Certain of Summit's technology resulting in Consensus Conductor, the corporate channel is well-positioned for continued growth driven by the revenue from the healthcare sector. All of these initiatives, including our core digital facts product, have produced significant momentum in our corporate channel, and we have a rich pipeline of opportunities for the second half of 2022. Our Soho channel had a good result in light of three factors impeding its performance in Q2. First, early in the quarter, a geo-compliance regulation in Japan resulted in the cancellation of approximately 3,500 accounts. Also during the quarter, we began to test a price increase to new customers and a portion of the Soho base, which was done in lieu of directly charging state sales taxes. Finally, currency headwinds continued affecting the Q2 results by approximately $1.1 million versus Q2 2021, most of which is allocable to our SOHO revenue streams. We believe these FX headwinds will continue throughout the year. However, the other two factors are substantially behind us. Jim will provide more detail on the financial performance for the quarter, as well as for each channel of revenue. We made significant progress on the EC FACS system for the VA. We continue to work with Cognosante and the VA and expect authority to operate by the end of September. Initial rollout is scheduled for late September, early October. I would note we do not expect this rollout to contribute meaningful revenue this fiscal year. As we stated last quarter, we are also seeing additional early interest from other federal government agencies. John will provide additional details on each of these areas in his portion of the presentation. Despite the tight labor market, we have continued to make progress in our overall hiring with a focus on our technical team and filling out our staff as a standalone company. We ended the quarter with 540 employees, and I would like to welcome all of our new employees who have joined us since the last earnings call. As we come to the one-year anniversary of the spin, we have substantially completed the separation from Ziff Davis, our former parent. We made a payment of $11.5 million during the quarter for fees and expenses related to the spin and Ziff cash that we were holding. We expect a final payment before Q3 quarter end. In addition, during the quarter, we assisted in the marketing of 2.3 million shares, or about 58% of ZIF's holdings, in consensus. This transaction was beneficial to us in several respects. First, it eliminated a large piece of the ZIF overhang on our stock. Two, it allowed us to market the consensus story in a manner similar to an IPO. And three, it provides us the opportunity to gain additional research coverage. While the sale of this large amount of stock put temporary downward pressure on our stock price, we were able to take advantage of this opportunity by repurchasing in the open market approximately 189,000 shares at an average cost of approximately $40 per share. Before handing the call over to John, one final thought on the economic environment. As I mentioned at the beginning of my comments, the economy remains fragile with high inflation and and a recession that is either upon us or just around the corner. We remain liquid with more than $75 million of cash on our balance sheet and the undrawn line of credit that we put in place last quarter. We remain well positioned for these weakening economic conditions due to the fundamental necessity of our services, the subscription nature of our business, which has approximately 70% fixed revenue, and the increasing percentage of our business that maps to the health care space. We remain confident in our business prospects and reaffirm our financial guidance for 2022. I'll now turn the call over to John.