Consensus Cloud Solutions, Inc. Q1 FY2025 earnings call

• Scott mentioned goals for 2025 include pursuing customer acquisition in healthcare for corporate channel, managing cost structure with modest investments in go-to-market, refinancing bank loan, and managing SoHo channel for cash flow efficiency.
• Johnny noted corporate business had record revenue in Q1, with 5.6% growth, driven by factors like Cloud Fax consumption in healthcare, advanced product adoption, new customer onboarding. Corporate customer base grew to ~60,000, revenue retention rate increased to 101% for trailing 12 months. VA rollout continued with momentum, and FedRAMP high authorization generated interest from other govt agencies. Cloud fax contributes over 90% to corporate revenue and over 95% to total revenue. For SoHo, revenue declined as planned, but cancel rate improved, and the decline rate was the slowest since cost reduction program began.

Corporate: In Q1 2025, corporate revenue reached a record high of $54.3 million, a solid 5.6% increase compared to Q1 2024. It represents the best growth year-over-year in 8 quarters on a normalized basis. Cloud fax remains the cornerstone, contributing over 90% to corporate revenue. The corporate customer base grew to a record ~60,000 at the close of Q1, up 9% year-over-year. SoHo: Q1 2025 revenue was $32.8 million, a planned decrease of 10.6% compared to Q1 2024. Consolidated: Revenue was $87.1 million, a decrease of $1 million or 1.1% versus Q1 2024. Adjusted EBITDA was $47.3 million, delivering a margin of 54.2%, 100 basis points favorable to Q1 2025 guidance range.

• Full year 2025 guidance: Revenue between $343 million and $357 million ($350 million midpoint); adjusted EBITDA between $179 million and $190 million ($185 million midpoint); adjusted EPS of $5.03 to $5.42 ($5.22 midpoint). Estimated share count ~20 million shares and tax rate between 20.5% and 22.5%.
• Q2 2025 guidance: Revenue between $85 million and $89 million ($87 million midpoint); adjusted EBITDA between $45 million and $48 million ($46.5 million midpoint); adjusted EPS of $1.31 to $1.42 ($1.37 midpoint). Estimated share count ~20 million shares and tax rate between 20.5% to 22.5%.

• Market volatility and concerns about economic slowdown could cause actual results to differ materially from anticipated results. For example, a potential slowdown in the economy in the back half of the year could modestly impact revenues. Also, tariffs could potentially have downstream effects, although currently no impact is seen.

Q: Congratulations on the good quarter. Can you talk a little bit more about growth in corporate revenue? The growth rate looked pretty good to me. And I think you mentioned in your prepared comments that the VA deployment is accelerating. I think you finally got like this formal paperwork and formal certification recently. Just any more color around like the government sales process, the VA corporate growth would be great.

A: Johnny Hecker responded that corporate growth was supported by strong usage across fax brands (upmarket and downmarket), good adoption and deployment of advanced solutions, and adding new customers. Regarding VA, they got FedRAMP high certification, which unlocked new opportunities and revitalized older ones in the public sector pipeline, though significant impact in 2025 is not expected soon due to government reluctance and uncertainty.

Q: In terms of like SoHo, I completely understand how you're converting SoHo accounts to corporate. So the decline in revenue is intentional. But when would you expect that to sort of that decline to sort of moderate or perhaps become like flat on a year-over-year basis? Just how are you thinking about sort of the intentional by design contraction of SoHo, which is still a significant portion of total revenue?

A: Johnny Hecker said it's a difficult question as many factors influence it. Cancel rates are improving, and it's a function of advertising spend and profitability. Scott Turicchi added they watch LTV to CAC in terms of marketing spend and cohort retention rates, and it's proceeding according to the plan developed over a year ago, but stabilization isn't expected to happen suddenly this year or next likely.

Q: Related to those questions around growth of the corporate channel, Scott or Johnny, I think you talked about making some hires this year, maybe about 40 people in sales and sales-related functions. Can you talk about where that stands at this point?

A: Scott Turicchi said they added personnel in Q1 as per plan, accelerating through the year, with a focus on go-to-market areas. Johnny Hecker mentioned hiring across the customer life cycle, including upmarket sales, customer onboarding, and customer success management, and they're on track with hiring for investment in the future.

Q: In terms of corporate accounts, it's good to see the growth there. And you talked about the growth of eFax and upsells. But could you also discuss if there are any notable adds for larger enterprise accounts? And then secondly, tying into that, anything you could share on general sentiment from larger enterprise prospects in terms of making purchasing decisions?

A: Johnny Hecker responded that they are adding customers across the board, including larger enterprise accounts, and have a robust pipeline, with corporate success across the entire customer continuum.