Consensus Cloud Solutions, Inc.

Good day, ladies and gentlemen, and welcome to Consensus Q2 2023 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 Turicchi, CEO, John Nabergal, COO, Jim Malone, CFO, Johnny Hecker, 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 ConsenSys. Thank you. You may begin.

Good afternoon and welcome to the ConsenSys Investor Call to discuss our Q2 2023 financial results, other key information, and 2023 guidance. Joining me today are Scott Turicchi, CEO, John Nevergall, COO, Johnny Hecker, EVP of Operations, and Jim Long, CFO. The earnings call will begin with Scott providing opening remarks. John will give an update on our operational progress since our Q1 investor call. Johnny will discuss progress on our go-to-market realignment. And then Jim will wrap it up to discuss our Q2 2023 financial results and 23 guidance. After we finish our prepared remarks, we will conduct a Q&A session. At that time, the operator will instruct you on procedures for asking a question. Before we begin our prepared remarks, allow me to direct you to the State Harbor language on slide two. As you know, this call and 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 FTC 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 in those documents regarding safe harbor language as well as forward-looking statements. Now, let me turn this call over to Scott.

Thank you, Adam. While there are many important accomplishments in the quarter, most of them are not yet producing meaningful revenue. As a result, and coupled with continuing slow decision-making from our prospective corporate customers, weak results from Summit, and some near-term loss of efficiency due to our internal Salesforce realignment, our top-line revenue was weaker than anticipated and has influenced us to focus on the lower end of our revenue guidance for the year. Our focus on costs have allowed us to maintain an EBITDA margin consistent with our guidance range of between 50 and 55%. By investing our excess cash, improving our tax position, and reducing our share count, our bottom line non-GAAP EPS is ahead of our expectations and should be above the midpoint of our guidance for the year. I will now provide some additional commentary regarding various aspects of our business before handing the call over to John. As noted in our press release, we have made significant progress in our go-to-market realignment. Based on the customer buying motions that we will outline in a later slide, the realignment is showing early success with the pipeline growing significantly from Q1 2023. In addition, we continue to see strong fax volumes in the quarter, slightly ahead of our Q1 record results. However, this process of realignment and the continuation of slow decision-making in the healthcare sector for new business, which we have addressed for several quarters, did impact our revenue for the quarter in our corporate channel, which grew 6% exclusive of Summit and 3.1% in the aggregate. Turning to our Clarity product, we have signed our first customer on Clarity and also decided to produce additional variations of Clarity to address specific needs in healthcare. Our first customer is using the service for prior authorizations which is a $1.9 billion a year business and expected to grow to $4.1 billion by 2028 according to global market estimates research. As a result, the service to address prior auths will be known as Clarity PA. Additionally, we will be announcing the release of Clarity CD. This service will allow unstructured clinical data from faxes and scanned documents to be routed into the correct patient records. Look for our press release in the coming days to learn more about this service. As we discussed last quarter, the VA began the rollout of the eCFACS service. As of the end of July, the initial group of 10 sites encompassing 40 facilities has been successfully rolled out. A plan is now being developed for the implementation of more facilities this year. In addition, there are approximately 30 additional agencies interested in the eCFACS solution. Cognosante has begun more detailed conversations with several of these agencies. Our SOHO customer base has now completed the price increase that began last year. We are pleased that the cancel rate for the SOHO customers returned to the near historic monthly average of 3.5% per month during the quarter. Before handing the call over to John, I'd like to discuss our liquidity and capital allocation opportunities. In the quarter, we generated positive free cash flow with an approximately $8 million improvement from Q2 2022. I remind everyone that we generate most of our free cash flow in quarters one and three due to the interest payments that we make in quarters two and four. We ended the quarter with $112 million of cash and investments, a record for us, after spending $10.1 million in capitalized expenses and $2 million in the repurchase of 67,000 shares of our stock during the quarter. In terms of our capital allocation strategy, we focus in the near term on investments in the business, both capitalized and expensed, followed by opportunistic share repurchases. We have built cash balances because it is our goal to retire some of our debt prior to maturity. It is our belief that the credit markets will not return in the near to intermediate term to the favorable rate environment that existed in the summer of 2021 when the bonds were issued. Due to limitations imposed by the SPIN, we have not been able to repurchase debt until the second anniversary of the SPIN, which is this October. We are now studying the options available for us to effectuate repurchases of our debt. I'll now turn the call over to John.