Consensus Cloud Solutions, Inc.

Good day, ladies and gentlemen, and welcome to Consensus Q4 2024 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 ConsenSys will be Scott Tariki, CEO, Jim Malone, CFO, Johnny Hecker, CRO and Executive Vice President of Operations, and Adam Varan, Senior Vice President of Finance. I will now turn the call over to Adam Varan, Senior Vice President of Finance at ConsenSys. Thank you. You may begin.

Good afternoon, and welcome to the ConsenSys Investor Call to discuss our Q4 and year-end 2024 financial results. other key information, and our 2025 full year and Q1 2025 guidance. Joining me today are Scott Tariki, CEO, Johnny Hecker, CRO and EVP of operations, and Jim Malone, our CFO. The earnings call will begin with Scott providing opening remarks. Johnny will give an update on our operational progress since our Q3 2024 investor call, and then Jim We'll wrap it up to discuss Q4 2024 and full-year 2024 financial results, then provide our full-year 2025 and Q1 2025 guidance range. 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 forward-looking statements and risk factors on slide 2 of our investor presentation. As you know, this call on 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-K SEP file. Now, let me turn the call over to Scott for his opening remarks. Scott, take it away.

Thank you, Adam. Q4 was another solid quarter for consensus. We saw an improving revenue growth rate in our corporate channel and a continuation of the slowing rate of revenue decline in our SOHO channel, both of which resulted in reaching the high end of our quarterly revenue guidance. Based in part on planned increased marketing spend, we expected an EBITDA margin in Q4 of 51%, which we were able to obtain. We were also able to repurchase approximately $20 million in debt during the quarter, bringing us closer to our goal of total debt to EBITDA of less than three times. Looking at the full year, it was very successful against our stated objectives for 2024. We were able to exceed our expectations for corporate revenue growth, coming in just shy of 5% for the year, against an expectation of 3.1% at the midpoint of our guidance. Similarly, in our SOHO channel, we saw a decline of 13.3%, against an expectation of a decline of 14.5%. This combination allowed us to exceed our midpoint of guidance by $5.3 million in revenues for the year. As we stated each quarter, our focus was on driving EBITDA productivity while rationalizing our online marketing spend. We achieved margins for the year of approximately 54%, which is at the high end of our range of 50% to 55%. More importantly, this EBITDA translated into a record $88 million in free cash flow. We utilized this cash flow plus cash balances to repurchase approximately $144 million principal amount of debt during the year and $207 million since the program's inception in late 2023. Additionally, we continued to add customers to our corporate channel, especially in the healthcare sector, increased the pace of rollout to the VA facilities, and started to see traction with our clarity offerings. We are excited for 2025 and beyond. Johnny and Jim will provide granular detail for our guidance, but I will make a few observations. We see a continuation of the trend for improved corporate growth and a slowing of the decline in SOHO. This combination has us flat for the year in revenues at the midpoint of our range and improvement over the revenue decline of 3.4% experienced in 2024. From an operational perspective, we believe that we could hold EBITDA margins flat with 2024, but view this as a mistake given the opportunity in our space. Based on the two years of work that Johnny and his team have done to realign the sales and marketing teams in the corporate channel, we will be adding personnel to our go-to-market operations throughout the year. While it will negatively impact our margin by approximately one percentage point in 2025, we believe that it will provide us with the momentum to return to total revenue growth in 2026. We have also begun to look at our capital structure in anticipation of the 6% notes maturing in October 2026. We will continue to evaluate the various options and markets available to us. However, based on what we know today, it appears that our most cost-effective and expeditious financing option will be to expand our bank line of credit. This combined with our intention to pay down an additional $30 to $40 million of debt by October 2026 will give us ample proceeds to retire the notes and maturity. While we have looked at refinancing both tranches of debt, the cost of retiring the currently non-callable 6.5% notes is prohibitive. We will update you throughout the year as our thinking gels on our refinancing options. I will now turn the call over to Johnny.