Consensus Cloud Solutions, Inc.

Good day, ladies and gentlemen, and welcome to the Consensus Q3 2023 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. 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 Nevergall, COO, Jim Malone, CFO, 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 Q3 2023 financial results, other key information, and 2023 guidance. Joining me today are Scott Turicchi, CEO, John Navarro, COO, and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. John will give you an update on our operational progress since our Q2 investor call, and then Jim will discuss the Q3 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 the procedures for asking your 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 in those documents regarding safe harbor language as well as forward-looking statements. Now, let me turn the call over to Scott.

Thank you, Adam. It has now been two years since our spin. I would like to make some brief comments as we look back over these past two years. As you know, we spun with a go-to-market focus and product roadmap aimed at the healthcare sector. We have made substantial investments and strides in this space with more than half of our corporate revenue now coming from the healthcare sector. However, we have also seen inflation and a tight labor market impact revenue growth in this piece of our business. In fact, in the past two quarters, we have seen overall corporate revenue growth of approximately 3%, Down from approximately 13% in Q3 of 2022. This is driven by a slowdown in revenue generation from our healthcare customers due to stable usage, slower signups, and a slow ramp of our larger customers. Until there is a substantial relief in the labor markets, we expect these trends to continue. As we look to next year with continuing uncertainty in both the economy as well as the labor markets, we'll be focusing our attention on EBITDA and free cash flow generation. As a result, we will reduce our capitalized investments from the level of the past two years while still investing in the business at a rate higher than prior to the spin. The record cash balances of $156 million in future free cash flow will be dedicated to repurchasing our equity and debt securities. Now that we have cleared the two-year mark from the spin, we are able to repurchase debt, and as a result, the Board has authorized a $300 million repurchase program over the next three years. This program covers both the 6% notes that mature in October of 2026 as well as the 6.5% notes due in October of 2028. These repurchases can take a variety of forms and will be opportunistic, similar in manner to our existing stock repurchase program. While we are early in the budgeting process, I would expect negligible overall revenue growth in 2024 with continuing decline in SOHO revenues offset by mid-single-digit growth in our corporate channel. Thank you for joining us. On the corporate side, in addition to the headwinds experienced in the healthcare sector, we also completed the migration of our fax box customer base, but did incur customer attrition in the process. This was a legacy system that needed to be retired, notwithstanding the customer and revenue loss. On the bright side, our EBITDA margin remained strong at 52.5%, the midpoint of our range, and coupled with interest income on our cash balances and a lower share count, produced year-over-year growth in EPS. In addition, we generated a record $50 million of free cash flow for a full fiscal quarter post-spin, and more importantly, $83 million for the nine months. As usual, there are timing differences in payment of estimated taxes and cash collections of receivables. Also, as we've noted before, due to our debt structure and interest payments, we generate most of our free cash flow in quarters one and three. I will now turn the call over to John for more detail on the quarter.