Q3 2021 Consensus Cloud Solutions, Inc. Earnings Conference Call

Uh-huh.

[music]. Thank you for holding we sincerely appreciate your patience. Please stay on the line and we'll be back in a moment.

Speaker 1: Thank you for holding. We sincerely appreciate your patience. We stay on the line and we'll be back in a moment.

Speaker 1: Thank you for holding. We look forward to talking with you soon. Please hold the line and we'll be right back with you.

Speaker 1: Thank you for holding. We look forward to talking with you soon. Please hold the line and

We look forward to talking with you soon.

Hold the line.

Good afternoon, ladies and gentlemen, thank you for holding your conference call will begin in just a couple of minutes. Please stay on the line you're conference call will begin in just a couple of minutes.

Speaker 2: Good afternoon ladies and gentlemen, thank you for holding your conference call we'll begin in just a couple minutes. Please stay on the line, your conference call will begin in just a couple of minutes.

[music].

Speaker 1: Thanks for holding. We appreciate your time and patience. Please stay on the line and we'll be back in just a moment.

Thanks for holding we appreciate your time and patience. Please stay on the line and we'll be back in just a moment.

[music].

Thanks for holding we appreciate your time and patience. Please stay on the line and we'll be back in just a moment.

Speaker 3: Thanks for holding. We appreciate your time and patience. Please stay on the line and we'll be back in just a moment.

Speaker 1: Thank you for waiting.

[music].

Speaker 4: Your patience is appreciated.

Speaker 4: Please hold the line and we'll be right back with you.

Speaker 1: The.

Speaker 3: Thank you for holding. We look forward to talking with you soon. Please hold the line and we'll be right back with you.

The line it will be right back with you.

[music].

Speaker 1: I I.

Good day, ladies and gentlemen, and welcome to a consensus investor call.

Speaker 2: Good day ladies and gentlemen and welcome to a consensus investor call.

Speaker 2: My name is Paul and I will be the operator assisting you today. At the time, all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should acquire operator assistance during the conference, please press star zero on your telephone keypad.

My name is Paul and I will be the operator, assisting you today at.

At this time all participants are in a listen only knows.

A question and answer session was followed a formal presentation if anyone should acquire operator assistance during the conference. Please press star zero on your telephone keypad.

This call will be scuffed, Freaky seals consensus John neighbor Golf C O O and Adam from senior Vice President of finance and accounting of consensus.

Speaker 2: On this call will be Scott Tureiki, CEO of Consensus, John Nebrogal, CEO , and Adam Faran, Senior Vice President of Finance and Accounting of Consensus.

Speaker 2: I will now turn the call over to Adam Veron, Senior Vice President of Finance and Accounting of Concemsis.

I will now turn the call over to Adam's run senior Vice President of finance and accounting of consensus.

Thank you you may begin.

Good afternoon, and welcome to the consensus Investor call to discuss Q3 results joining.

Speaker 4: Good afternoon and welcome to the consensus investor call to discuss Q3 results.

Joining me today, or Scott, Turkey, CEO of consensus and John never Golf R. C O L.

Speaker 4: Joining me today are Scott Toreke, CEO of Consensus and John Nebergall, our COO. The format will be similar to an earnings call.

The format will be similar to an earnings call.

That will provide some opening comments.

John will give an update operational progress since our September 14th call and then Scott will discuss the pro forma Q3 financial results.

Speaker 4: John will give an update on the operation progress since our September 14th call. And then Scott will discuss the pro-Farm at key three financial results.

[noise] associated matrix and our guidance for Q4.

Speaker 4: Associated Macrips and our guidance for Q4.

After we finish our prepared remarks, we will conduct a Q&A session at that time, the operator will instruct you and the procedures for asking a question.

Speaker 4: After we finish our prepared remarks, we will conduct a Q&A session. At that time, the operator will instruct you in the procedures for asking a question.

Before we begin our prepared remarks allow me to direct you to the Safe Harbor language on slide too.

Speaker 4: Before we begin our prepared remarks, allow me to direct you to the Safe Harbor language on slide...

As you know.

Speaker 4: As you know, this call on the webcast will include forward-looking states.

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.

Speaker 4: 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've disclosing our form 10 S. A SEC filings.

Speaker 4: 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 form 10 SEC filings, as well as a summary of those risk factors that we have included as part of the slide show for the web.

Well as a summary of those risk factors that we've included as part of a slide show for the webcast.

We refer you to discussions and those documents regarding safe Harbor language as well as forward looking statements.

Speaker 4: We refer you to discussions in those documents regarding safe harbor language, as well as forward-looking statements. Now, let me turn.

Now, let me turn the call over to Scott.

Adam Thank you very much.

Speaker 5: Adam, thank you very much. I'd like to welcome our investors and analysts now at the spin is completed.

I'd like to welcome or investors and analysts now at the spin is completed.

I'd also like to thank our 450 employees, who worked diligently over the past six months to bring us to this point.

Speaker 5: I'd also like to thank our 450 employees who have worked diligently over the past six months to bring us to this point.

We're very pleased with the operation financial performance of consensus during the year that hasn't had many distractions due to the spin.

Speaker 5: We are very pleased with the operational financial performance of consensus during a year that hasn't had many distractions due to the spin.

Speaker 5: As a standalone company, we look forward to pursuing our three organic growth initiatives and to make the necessary investments in people, systems, and hardware to enhance our opportunity for success.

As a standalone company, we look forward to pursuing our three organic growth initiatives and to make the necessary investments and people systems and hardware to enhance our opportunity for success.

And our Soho channel, we've seen a turnaround the performance over the past several quarters, we look to add to our marketing and advertising spin as well as promote a recently released blockchain digital signature J sign which John will discuss in more detail.

Speaker 5: In our Solo channel, we have seen a turnaround on the performance over the past several quarters.

Speaker 5: we look to add to our marketing and advertising spend, as well as promote our recently released Blockchain Digital Signature, JSign, which John will discuss in more detail.

You know our corporate channel, we look to continue to penetrate the health care space with a high Trust certified cloud fact solution given the large volume of medical information that is transmitted via fax.

Speaker 5: In our corporate channel, we look to continue to penetrate the healthcare space with our HITRUST certified CloudFacts solution given the large volume of medical information that is transmitted via fax.

We're also seeing traction with our current health care interoperability solutions, such as consensus unite and consensus signal and look forward to the release of consensus clarity in early 2022 and consensus harmony at the end of next year or early twenty-three.

Speaker 5: We are also seeing traction with our current healthcare interoperability solutions, such as consensus unite and consensus signal, and look forward to the release of consensus clarity in early 2022 and consensus harmony at the end of next year or early 23.

Before turning the call over to John I would like to provide you with an update on our search for a C. F O.

Speaker 5: Before trying to call over to John , I would like to provide you with an update on our search for a CFO . As you know, I currently serve as the interim CFO . We've had an active search going for the past few months, and I'm pleased to note that we have identified excellent candidates.

As you know I currently serve as the interim CFO we've.

We've had an active search going for the past few months and I'm pleased to note that we have identified excellent candidates.

We are now in the final stages of vetting those candidates and expect to have the rule filled before year end.

Speaker 5: We are now in the final stages of vetting those candidates and expect to have the role filled before you're in.

I will now turn the call over to John who will give you a breakdown of our two revenue channels recent developments on a revenue in product and an update on the progress of our service roadmap.

Speaker 5: I will now turn the call over to John , who will give you a breakdown of our two revenue channels, recent developments on a revenue and product, and an update on the progress of our service roadmap.

Thank you Scott.

Let's go to slide five.

In advance of Scots discussion on the financials, we wanted to spend a couple of minutes reviewing the profile of our customer base and sharing some key performance updates from the third quarter.

Speaker 2: In advance of Scott's discussion on the financials, we wanted to spend a couple minutes reviewing the profile of our customer base and sharing some key performance updates from the third quarter.

As you May recall, our customer base falls into three identifiable groups. While all three are subscription based the revenue flows have some specific attribute customer.

Speaker 2: As you may recall, our customer base falls into three identifiable groups. While all three are subscription-based, the revenue flows have some specific picked, yet Schuloff says it will substitute the individual, who chose the name from the

Speaker 2: customer acquisition efforts and the related relationship management activities vary based on a client's size and complex

Customer acquisition efforts and the related relationship management activities vary based on our clients size and complexity.

The percentages you see in terms of subscription versus usage revenue are are general guidelines and not precise measurements. The actual percentages will vary from quarter to quarter, but these numbers serve as a reasonable range for the relationship between the two.

Speaker 2: The percentages you see in terms of subscription versus usage revenue are general guidelines and not precise measurements. The actual percentages will vary from quarter to quarter, but these numbers serve as a reasonable range for the relationship between the two.

The Soho market is characterized by itself service approach for selecting a subscription either a monthly or annual plan and then a customer's credit card is auto build on that monthly or annual basis.

Speaker 2: The SOHO market is characterized by a self-service approach for selecting a subscription, either a monthly or annual plan, and then a customer's credit card is auto-billed on that monthly or annual basis.

Monthly plan usage leant limits are generally not exceeded and subscription revenue is dominant.

Speaker 2: Monthly plan usage limits are generally not exceeded and subscription revenue is dominant.

This past quarter, we continued refining our marketing approach in this segment and we were able to make the number of key improvement in our sales funnel and overall website environment.

Speaker 2: This past quarter we continued refining our marketing approach in this segment and we were able to make a number of key improvements in our sales funnel and overall website environment.

And implementing those improvements we did experience some minor interruptions to inbound sales slowed during the quarter, but we've addressed those and in fact this past week recorded our largest school new weekly subscription growth since last night.

Speaker 2: in implementing those improvements, we did experience some minor interruptions to inbound sales flow during the quarter, but we've addressed those, and in fact, this past week recorded our largest new weekly subscription growth since last May.

Additionally, churn in this account group remained well within the normal range, adding more evidence that cloud facts in our new work from home economy isn't important business tool and we believe will continue to be a key dynamic in the Soho space.

Speaker 2: Additionally, churn in this account group remains well within the normal range, adding more evidence that cloud facts in our new work from home economy is an important business tool and we believe will continue to be a key dynamic in the the

Small and medium businesses often require direct sales from one of our tails telesales staff lead to come into our contract center through a web form Phil direct inbound call. A response to an Internet campaign. We also do outbound prospecting an account based marketing to acquire new customers.

Speaker 2: Small and medium businesses often require direct sales from one of our telesales staff. Leads come into our contract center through a web form fill, direct inbound call, or response to an internet campaign. We also do outbound prospecting and account-based marketing to acquire new customers.

The sales cycle here is short generally a week or less clothes and these customers will tend to exceed their plan limits more frequently than the Soho group, but subscriptions are still the larger revenue stream with a measurable variable revenue component added.

Speaker 2: The sales cycle here is short. Generally, a weaker, less close in these customers will tend to exceed their plan limits more frequently than the SOHO group, but subscriptions are still the larger revenue stream with a measurable, variable revenue component added.

Our sales momentum in this account group remained strong with third quarter closed deals volume about 11% over Q3 of 2020.

Speaker 2: Our sales momentum in this account group remained strong. With third quarter closed, it deals volume about 11% over Q3 of 2020.

And revenue from new business that is the revenue attributed to deals closed in 2021 is coming in at 16% better than Q3 of 2020.

Speaker 2: and revenue from new business, that is the revenue attributed to deals closed in 2021 is coming in at 16% better than Q3 of 20.

Now the enterprise level is the traditional large prospect sales approach in person selling longer sales cycles and very sophisticated buyers typical.

Speaker 2: Now the enterprise level is the traditional large prospect sales approach in person selling longer sales cycles and very sophisticated bikes.

Typical agreements or a three year contracts that then go into an annual auto renew model.

Speaker 2: Typical agreements are three year contracts that then go into an annual auto-renume

<unk> well virtually all contracts have a subscription component.

Speaker 2: While virtually all contracts have a subscription component, those minimum usage commitments are regularly exceeded and transaction charges make up the lion's share of our top line.

Those minimum usage commitments are regularly exceeded and transaction charges make up the lion's share of our top line.

I'm happy to report that our enterprise sales team is continuing to be very effective in competing for these important customers and in Q3 have increased year over year bookings measured by sold annual contract value by.

Speaker 2: I'm happy to report that our enterprise sales team is continuing to be very effective in competing for these important customers and in Q3 have increased year-over-year bookings measured by sold annual contract value by 44% over Q3 of 2015.

By 44% over Q3 of 2020.

Collectively the S M B and enterprise customer base is called the corporate segment. That's Scott will show you in later slides the expected performance of flat to small growth in Soho and more robust growth in the corporate segment continues to hold true.

Speaker 2: Collectively, the SMB and enterprise customer base is called the corporate segment. As Scott will show you in later slides, the expected performance of flat to small growth in SOHO and more robust growth in the corporate segment continues to hold true.

On slide six we have a few notable items that'll be important for the business as we build momentum through Q4 hit 2022, and a full strike.

Speaker 2: On slide six, we have a few notable items that'll be important for the business as we build momentum through Q4 to hit 2022 in full stride.

First our initial soft launch of J sin afforded us an opportunity to assess the best approach and positioning as we fully commercialize the offering.

Speaker 2: First, our initial soft launch of J-Sign afforded us an opportunity to assess the best approach and positioning as we fully commercialize the office.

You'll recall that J sin is our blockchain based secure digital signature product based on market feedback, we have built and released a multiuser capability with Central administration and as of last week began actively selling it without telesales group.

Speaker 2: You'll recall that J.Sine is our blockchain-based, secure digital signature product. Based on market feedback, we have built and released a multi-user capability with Central Administration, and as of last week began actively selling it with our tele sales group.

Additionally, a b testing performed by R. E Commerce team cause identified demand for J sign S effects companion and later this month it'll be added as a bundled offering with the facts for the Soho market.

Speaker 2: Additionally, AB testing performed by our e-commerce team has identified demand for J-Sign SFX Companion. And later this month, it will be added as a bundled offering with effects for the sell-home market.

Finally, there was a building interests for J sin as a marketplace offering and he has been added to the App Sparks marketplace with additional similar placement expected in the next several quarters.

Speaker 2: Finally, there is a building interest for J-Sign at a marketplace offering and has been added to the App Park marketplace with additional similar placements expected in the next several quarters.

The product team has completed work on the Universal a P I and offering that can streamline and minimize the number of interfaces required for a health care organization to communicate with their care networks.

Speaker 2: The product team has completed work on the universal API, and offering that can streamline and minimize the number of interfaces required for a healthcare organization to communicate with their care network.

Speaker 2: This offering supplies a single connection that manages communication with hundreds of HIEs, lab vendors, prior authorization suppliers, and pharmacies.

This offering supplies a single connection that manages communication with hundreds of Hie's lab vendors prior authorization suppliers in pharmacies.

The Universal a P. I both stands alone as a product and there's also an important component of the coming consensus harmony collaborative data sharing network due for release in 2022.

Speaker 2: The Universal API both stands alone as a product and is also an important component of the coming consensus harmony collaborative data sharing network due for release in 2022.

Central to being effective in our business is security and this quarter. We've completed the required recertification for high Trust.

Speaker 2: central to being effective in our business is security. And this quarter we have completed the required recertification for high-

The extensive third party audit of our systems documentation security practices and employee adherence to best practices fruit in a secure environment.

Speaker 2: The extensive third party audit of our systems documentation, security practices, and employee adherence to best practices for a secure environment validates the consensus security promise and remains a key differentiator in the marketplace.

Validates the consensus security promise and remained a key differentiator in the marketplace.

Other key developments or completion of a major product to have the capability to seamlessly integrate E fax digital cloud faxed directly into the Salesforce C. R M.

Speaker 2: Other key developments are completion of a major product to have the capability to seamlessly integrate eFacts digital CloudFacts directly into the Salesforce CRM.

E fax will be the only cloud faq solution available and the sales force help cloud.

Speaker 2: EFACS will be the only cloud FACS solution available in the Salesforce Health Cloud.

And now it is also in addition to that also available to all verticals.

Speaker 2: And now it is also, in addition to that, also available to all verticals.

We've also completed the work to bundle effects into the Verizon One talk you cast Voip solution targeted as a consolidated set of business tools for Verizon commercial customers.

Speaker 2: We've also completed the work to bundle effects into the Verizon OneTalk U-CAST VoIP solution, targeted as a consolidated set of business tools for Verizon commercial customers.

In addition, our consensus business development team has begun holding training sessions for the Verizon enterprise.

Speaker 2: In addition, our consensus business development team has begun holding training sessions for the Verizon enterprise, tele sales, public, SMB, and mid-market sales teams to offer effects as part of their overall business solutions.

Telesales public S.

S M B and mid market sales teams to offer E facts as part of their overall business solution set.

Finally, we have begun to roll out the facts into one of the largest diagnostic lab companies in the country and fulfillment of a deal that closed earlier this year.

Speaker 2: Finally, we have begun to roll out eFacts into one of the largest diagnostic lab companies in the country in fulfillment of a deal that closed earlier this year.

We anticipate that rollout to continue to early 2022.

Speaker 2: We anticipate that rollout to continue through early 2022.

On this line seven.

That's five seven has illustrated our development grilled red at the top of the slide and the ability of our overall platform capability on the bottom of the slide.

Speaker 2: Slide seven has illustrated our development road map at the top of the slide and the ability of our overall platform capability on the bottom.

The approach remains as we have previously discussed leveraging our position as the premier provider of digital cloud fax technology and from that foundation, delivering additional capabilities and the transformation enhancement and secure exchange of digital information.

Speaker 2: The approach remains as we have previously discussed, leveraging our position as the premier provider of digital cloud facts technology, and from that foundation, delivering additional capabilities in the transformation, enhancement, and secure exchange of digital information.

To that end in 2020, we introduced advanced interoperability solutions that include both cloud facts as well as secure direct messaging Hell.

Speaker 2: To that end, in 2020, we introduced advanced interoperability solutions that include both cloud facts as well as secure direct messaging, health language 7 or HL7. Fast internet healthcare resources or fire.

Health language, seven or H L. Seven.

Fast Internet health care resources or fire.

And electronic patient record query capabilities.

While still only a small portion of our overall revenue the third quarter saw great progress with our interoperability products.

Speaker 2: while still only a small portion of our overall revenue, the third quarter saw great progress with our interoperability product.

Having a 138% increase in deals closed and a 300% plus increase in overall revenues over Q3 2020.

Speaker 2: having a 138% increase in deals closed, and a 300% plus increase in overall revenues over Q3 2020.

So far this year, we book over $2 million in annual contract value and as a result of an investment in Onboarding automation for identity and credential verification have reduced implementation time by 80% an accelerated the contract to cash cycle time, while improving customer satisfaction.

Speaker 2: So far this year we booked over $2 million in annual contract value and as a result of an investment in onboarding automation for identity and credential verification, have reduced implementation time by 80% and accelerated the contract to cash cycle time while improving customer satisfaction.

We previously discussed dark commercialization initiative for J sign and as we spoke about on the previous slide are in the process of delivering the universal a P. I component of harmony this month.

Speaker 2: We've previously discussed our commercialization initiative for J-Sign, and as we spoke about on the previous slide, our in the process of delivering the Universal API component of Harmony this month.

From our operating and execution perspective, the team has been extraordinarily focused and productive, especially in the context of a major event. The spin that could have easily been to distraction to even the most disciplined of organizations.

Speaker 2: From our operating and execution perspective, the team has been extraordinarily focused and productive, especially in the context of a major event, the spin, that could have easily been a distraction to even the most disciplined of organizations.

Speaker 2: With our high trust recertification complete, the Universal API released our J-Sign commercialization plan and momentum in corporate sales for both cloud facts and interoperability solutions.

With our high Trust recertification complete the <unk> the Universal a P. I released R. J sign commercialization plan and momentum and corporate sales for both cloud facts and interoperability solutions.

Top of the improvements in R. E Commerce web environment, We view Q3, as a very successful step forward and delivering life's essential data.

Speaker 2: On top of the improvements in our e-commerce web environment, we view Q3 as a very successful step forward in delivering life's essential data when, where, and how you need it.

When where and how you need it.

Now to look at the financial results in detail I'll have it back to Scott.

Speaker 2: Now to look at the financial results in detail, I'll hand it back to Scott.

Thank you John for that update I would now like to review our pro forma results for Q3.

Speaker 5: Thank you John for that update. I would now like to review our ProFone results for Q3.

As you know since the spin was completed in two four ZIP owns the results for two three and we will present on a pro forma basis to include our Standalone cost capital structure in tax rate and exclude the cyber security and more tech business units that were distributed to ZIP immediately prior to the spin.

Speaker 5: As you know, since the spin was completed in Q4, Ziff owns the results for Q3, and we will present on a pro forma basis to include our standalone cost, capital structure, and tax rate, and exclude the cybersecurity and MarTech business units that were distributed to Ziff immediately prior to the spin.

Please refer to our 8-K file today that carves out on a pro forma basis, the consensus financials and provides reconciliations regarding certain non-GAAP measures to the nearest GAAP equivalent.

Speaker 5: Please refer to our 8K file today that Carves out on a pro-former basis that Consensus financials and provides Reconciliation regarding certain non- GAAP measures to the nearest gap equivalent.

Turning to slide nine.

Our corporate channel had another strong quarter with 42.3 million of revenue up 13.1% from $37.4 million and two 320, 20, which was a strong comparable quarter. After some variable revenue impact from the early stages of Covid in two to 2020.

Speaker 5: Our corporate channel had another strong quarter with 42.3 million of revenue up 13.1% from 37.4 million in Q3 2020, which was a strong comparable quarter after some variable revenue impact from the early stages of COVID in Q2 2020.

While the metrics show a modest decline you over a year and accounts 46000 to 45000 I would remind you that we cleaned up approximately 4000 accounts in Q2 and two three due to assistance migration with modest revenue impact.

Speaker 5: While the metrics show a modest decline in your over-year and accounts, 46,000 to 45,000, I would remind you that we cleaned up approximately 4,000 accounts in Q2 and Q3 due to a systems migration with modest revenue impact.

Our monthly revenue per account grew 13% from two 320 22 north of $311 per account per month due to increased traffic and the addition of larger customers versus the attrition of lower revenue customers.

Speaker 5: Our monthly revenue per account grew 13% from Q3 2020 to north of $311 per account per month due to increased traffic and the addition of larger customers versus the attrition of lower revenue customers.

We added 3000, new accounts in the quarter similar to Q3 2020.

Speaker 5: We added 3,000 new accounts in the quarter, similar to Q3 2020.

Finally, our monthly account churn was up due to the account cleanup due to the system's migration previously mentioned more.

Speaker 5: Finally, our monthly account churn was up due to the account cleanup, due to the systems migration previously mentioned. More importantly, our latest 12-month revenue retention for corporate was approximately 104%, and exclusive of the account cleanup, the council rate was 1.74% for the quarter.

More importantly, our latest 12 month revenue retention for corporate was approximately 104% and exclusive of the account cleanup. The council rate was 1.74% for the quarter.

Fly 10 is an overview of our Soho channel, which produce 46.8 million of revenue up one half percent from two 320 20.

Speaker 5: Slide 10 is an overview of our SOHO channel, which produced 46.8 million of revenue up 1.5% from Q3 2020.

This is the Soho channels fifth consecutive quarter of your over your revenue growth.

Speaker 5: This is the SOHO Channel's fifth consecutive quarter of year-over-year revenue growth.

The accounts were down about 2% versus Q3 2020 due to lower paid ads of 10000 and canceled on legacy brands, which we no longer support.

Speaker 5: The accounts were down about 2% versus Q3 2020 due to lower paid ads of $10,000 and cancels on legacy brands, which we no longer support.

The average revenue per account increased to $14.39 per month up from $14.18 a year ago.

Speaker 5: The average revenue per account increased to $14.39 per month up from $14.18 a year ago.

Or cancel right for Q3 had a difficult cop is the Q3 2020 cancel right wasn't 11 quarter low.

Speaker 5: Our cancel rate for Q3 had a difficult cop as the Q3 2020 cancel rate was an 11 quarter low.

Our monthly canceled ready to 3.17% in two 320 21 was consistent with our average monthly cancerate over the past 11 quarters.

Speaker 5: Our monthly council rate of 3.17% in 2,3, 2021 was consistent with our average monthly council rate over the past 11 quarters.

I would note that two thirds of our cancels come from customers H less than one year. These are people that use the service for a specific project or find that their business is not sustainable.

Speaker 5: I would note that two-thirds of our cancels come from customers aged less than one year. These are people that use the service for a specific project or find that their business is not sustainable.

Speaker 5: Note the precipitous drop in cancel rate to less than one and a half percent per month for those aged more than one year.

Note the precipitous drop in cancel right to less than 1.5% per month for those aged more than one year.

On slide 11, we begin with the revenue performance by channel for the most recent quarter as well as consolidated for the company.

Speaker 5: On Slide 11 we begin with the Revenue Performance by Channel for the most recent quarter as well as consolidated for the company.

Combining the revenue performance by channel that we just discussed the company's total revenue grew 6% to 89.1 million up from 84 million and two 320 20 I would note that the revenue growth is all organic.

Speaker 5: Combining the revenue performance by channel that we just discussed, the company's total revenue grew 6% to 89.1 million, up from 84 million in Q3 2020. I would note that the revenue growth is all organic.

Pro forma EBITDA for the quarter inclusive of the three months of Standalone public company costs and certain costs that were previously provided by various departments of Ziff Davis, which are approximately 20 million annually for.

Speaker 5: Propor may EBITDA for the quarter, inclusive of the three months of standalone public company costs, and certain costs that were previously provided by various departments of ZIF Davis, which are approximately 20 million annually.

For two 320 21 pro forma EBITDA from 3% to 51.2 million versus 49.7 million in two 320 20.

Speaker 5: For Q3 2021, pro-forming EBITDAQ grew 3% to 51.2 million versus 49.7 million in Q3 2020.

EBITDA margin for two 320, 21 was 57.5% compared to 59.3% in Q3, 2020, which was unusually high do the measures taken in reaction to the COVID-19, pandemic, including reduction in marketing and hiring freezes.

Speaker 5: The Yibadal margin for Q3 2021 was 57.5% compared to 59.3% in Q3 2020, which was unusually high due to measures taken in reaction to the COVID-19 pandemic, including reduction in marketing and hiring free.

I would note that we intend to make additional investments in our R&D efforts as well as sales and marketing and therefore target and approximately 55% EBITDA margin in the near to intermediate term.

Speaker 5: I would note that we intend to make additional investments in our R&D efforts as well as sales and marketing and therefore target an approximate 55% EBITDA margin in the near to intermediate term. In order to obtain our non-GAP net income, we have provided you with non-GAP depreciation and amortization, pro forma interest expense, and taxes and the assumed rate of 24%.

In order to obtain are non-GAAP net income we've provided you with non-GAAP depreciation and amortization pro forma interest expense and taxes and assume right of 24%.

The shields 27 million a pro forma non-GAAP net income or $1.34 in earnings per share for Q3, 2021, compared to 26.8 million a pro forma non-GAAP net income and a dollar thirty-three and earnings per share for two 320 20.

Speaker 5: This yields 27 million of pro-form and non-gap net income or $1.34 in earnings per share for Q3 2021 compared to 26.8 million of pro-form and non-gap net income and $1.33 in earnings per share for Q3 2020.

Slide 12 shows in a non-GAAP pro forma basis, what are trailing 12 months piano would look like the.

Speaker 5: Slide 12 shows in a non-GAF performance basis what our trailing 12 month P&L would look like.

The key additional pieces of information below EBITDA or depreciation and amortization, which is 12 and a half million annually on a gap basis and $7.2 million on a non-GAAP basis, which excludes amortization of intangibles due to M&A.

Speaker 5: The key additional pieces of information below EBITDA are depreciation and amortization, which is 12.5 million annually on a gap basis and 7.2 million on a non-gap basis, which excludes amortization of intangibles due to M&A.

Interest expense of 51.6 million the elimination of stock based compensation expense of $1.2 million, an estimated tax rate of 24% and is sure kind of 20.1 million chairs for purposes of calculating EPS.

Speaker 5: Interest expense of 51.6 million, the elimination of stock-based compensation expense of $1.2 million, an estimated tax rate of 24% and a share count of 20.1 million shares for purposes of calculating EPS.

I would note that we were reviewing our stock based compensation program with the expectation that there will be additional grants made before you're in.

Speaker 5: I would note that we were reviewing our stock-based compensation program with the expectation that there will be additional grants made before year-end.

Slide 13 is our guidance for two for this includes the one week of operations that are owned by Ziff Davis in this fiscal quarter, we expect our revenues to be between $87.6 million and 89 million pro forma adjusted EBITDA to be between $49.5 million and 50.5.

Speaker 5: Slide 13 is our guidance for Q4. This includes the one week of operations that are owned by ZIF Davis in this fiscal quarter. We expect our revenues to be between 87.6 million and 89 million. Pro forma adjusted EBITDA to be between 49.5 million and 50.5 million. And Pro forma adjusted non-GAP EPS to be between $1.30 per share and $1.33 per share.

<unk> and pro forma adjusted non-GAAP EPS to be between $1.30 per share and $1.33 per share.

Speaker 5: I would note that Q4 has fewer business days than other quarters due to the holidays. Each business day is worth about $400,000 of variable revenue. We are losing approximately three business days from Q3 2021 and approximately one and a half business days from Q4 2021.

I would note the queue for has fewer business days in other quarters due to the holidays. Each business day is worth about $400000 a variable revenue, we're losing approximately three business days from two 320, 21, and approximately one and a half business days from two 420 21.

On the right hand side is the full your pro forma guidance as if we had been a standalone company since January one.

Speaker 5: On the right hand side is the full year pro forma guidance, as if we had been a stand alone company since January 1.

This shows a revenue range of between 351 million and $352.4 million adjusted EBITDA between 201.3 million in 202.3 million and pro forma non-GAAP EPS between $5.39 per share and $5.42 per share.

Speaker 5: This shows a revenue range of between $351 million and $352.4 million, adjusted EBITDA between $201.3 million and $202.3 million, and pro forma non-GAAP EPS between $5.39 per share and $5.42 per share.

Before turning to call back to the operator for questions. We do have additional information in the appendix, notably metrics by channel of revenue by quarter from two 120 19 and.

Speaker 5: Before turning the call back to the operator for questions, we do have additional information in the appendix, notably metrics by Channel of Revenue by Quarter from Q1 2019. In addition, the various non-GAP to GAP reconciliations are provided in the appendix as well as in the AK that I referenced earlier today. I would now ask our operator to instruct you

In addition, the various non gap to gap reconciliations are provided in the appendix as well as in the 8-K that I referenced earlier today I.

I would now ask our operator to instruct you had a cute for questions.

Thank you.

Speaker 6: Thank you. We will now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question. If you would like to ask a question, please press star one on your telephone key.

We will now be conducting a question and answer session in the interest of time, we ask that you. Please limit yourself to one question. If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation told them will indicate your line isn't a question Q U.

Speaker 6: confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove yourself from the queue.

Speaker 6: You may press star 2 if you would like to remove yourself from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker 6: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment.

One moment, please while we begin.

And the first question is coming from Daniel Ives from Wedbush. Daniel Your line is life, Thanks, and congrats Scott to to you and the team.

Speaker 6: And the first question is coming from Daniel Ives from Wedbush. Daniel, your line is live. Thanks, and congrats, Scott.

So thank you Scott.

Speaker 7: So, you just got one, when we think about sort of the...

<unk>.

When we think about sort of the.

The strategic split what's been the thing that surprise you maybe on the positive in terms of whether should T. Jiggly or just in terms of from customer feedback or internal and then maybe like what do you think is is maybe like the biggest challenge over the coming months that the teams working on you know what it is.

Speaker 7: What's been the thing that surprised you maybe on the positive in terms of whether strategically or just in terms of from customer feedback or internal? And then maybe like what do you think is maybe like the biggest challenge over the coming months that the team's working on is part of this sort of strategic good?

Part of the shore strategic transformation.

Yeah. Thanks.

Speaker 8: Yeah, thanks, Dan. And in some respects, I think both are interrelated with my perspective, and I'd ask John to chime in. You know, one of the things that is both a big opportunity that we talked about during the six month process of the spin are things that we'd be able to do that just didn't make sense or work in the J2 system by being a portfolio company. So, you know, once we spawn October the 8th,

In some respects I think both are interrelated from my perspective, I'd ask John to chime in you know one of the things that is both a big opportunity that we talked about during the six month process of the spin.

We'd be able to do that just didn't make sense or war in the J two system by being a portfolio company. So you know once we spot of October the eighth we immediately began to implement a plan to beef up our efforts a lot of that is related to hiring additional personnel.

Speaker 8: We immediately began to implement a plan to beef up our R&D efforts. A lot of that is relating to hiring additional personnel, some of which is already occurred in Q4 in the month of October . And that's important because while we feel comfortable in the product roadmap we release and the timeframes that we discuss, there's a lot more to come. And if we can accelerate that time frame so much to better for us as an independent company.

Some of which is already occurred in queue for in the month of October that's important because while we feel comfortable in the product roadmap. We released in the time frame that we discuss there's a lot more to come in if we can accelerate that timeframe. So much the better for us as an independent company.

Now the flip side of that is trying to hire people in a very difficult labor market. So I'd say in some respects. It's two sides of the same coin. The other element is that when you do a spin.

Speaker 8: Now the flip side of that is trying to hire people in a very difficult labor market. So I would say in some respects it's two sides of the same coin. The other element is that when you do a spin...

You don't come necessarily fully staff as as I noted in the prepared remarks about $20 million a year.

Speaker 5: you don't come necessarily fully staffed as I noted in the prepared remarks. There's about 20 million a year.

Speaker 5: that consensus, when it was part of J-2, either was serviced by J-2 or Zip Davis, or now needs to bear those costs incrementally as a standalone public company. Many of those are employee related, but not all. So we have, in addition to our program, to expand the

Consensus when it was part of J, two either with service by Jake towards Ziff Davis or now needs to bear those costs incrementally as a standalone public company. Many of those are employee related but not all so we have an addition to our program to expand our R. A D.

Speaker 5: our R&D group, we also need to fill in certain spots in G&A that are encompassed in that $4.8 million per quarter number you see in our pro forma financials. These are things like additional finance.

We also need to fill a certain spark and G&A that are encompass in that $4.8 million per quarter number you see it are pro forma financials. These are things like additional finance people. The CFO additional people in our legal department. Our H R Department, you can pretty much go down every department.

Speaker 5: the CFO , additional people in our legal department, our HR department. You can pretty much go down every department, act.

And while we took people from Ziff Davis and there was a split at a department I think was done very fairly there weren't enough people enough expertise such that we would have a full complement as we spun out so hiring people I'd say, it's been my my biggest concern as we have.

Speaker 5: And while we took people from Zip Davis, and there was a split of the departments, I think was done very well.

Speaker 5: there weren't enough people and enough expertise such that we would have a full complement as we spun out. So hiring people I'd say has been my biggest concern as we have...

Spot, although I have to say, our our H R departments done a fantastic job as we've been hiring notwithstanding the the challenges of this labor market. So right now I'd say, we're on plan, but we want to accomplish in queue for you'll see a little bit downward pressure in the queue for pro forma EBITDA margin verses 234.

Speaker 5: Although I have to say our HR department's not a fantastic job is we've been hiring, notwithstanding the challenges of this labor market. So right now I say we're on plan, we want to accomplish in Q4. You'll see a little bit downward pressure in the Q4 performing EBITDA margin versus Q3.

Speaker 5: almost all that relates to hires, hires that we hope to make, some of which have already occurred in October , but we're still on a fairly strong pace of hiring in November and December .

Almost all of that relief tyres tires that we hope to make some of which have already occurred in October but we're still on a fairly strong pace of hiring in November and December.

That's super site and.

Okay and I was just the building on Wisconsin say certainly the degrees of freedom to be able to.

Speaker 2: Okay, I was just building on what Scott was saying. Certainly the degrees of freedom to be able to spread our wings in the interoperability space and be able to bring to market the products and services that we have specific to solving that problem of interoperability is also a big upside in being able to have the kinds of opportunities we have as a spun company.

<unk> and the interoperability space and being able to bring to market the products and services that we have specific to solving that problem with interoperability is also a big upside and being able to have the kinds of opportunities we have as as fun company.

Great. Thanks.

Thanks, Dan.

Thank you for.

Speaker 6: Thank you. The next question is coming from Ian Zafino from Oppenheimer. Ian, your line is live.

The next question is coming from Ian Zaffino from Oppenheimer.

And your line is life.

I I gray down that thank you very much I mean, I I I guess, the the questions would be you know as far as the new product offerings, you know like a clarity or a harmony you don't have you been speaking to customers our current customers and potential customers know about these products are we.

Speaker 9: I agree. Thank you very much. I mean, I guess the questions would be, you know, as far as the new product offerings, you know, like a Clarity or a Harmony, you know, have you been speaking to customers or current customers or potential customers now about these products? Are we…

Yeah do they have an idea of when they might be rolling out and what's the general feedback so far on those things.

Speaker 9: Did they have an idea when they might be rolling out and you know what's in the general feedback so far?

Great, but thanks for the question, yes, we have.

Speaker 2: Great. Thanks for the question. Yes, we have been talking with current customers and prospects about these. In fact, I think I mentioned in an earlier call of the demonstration, a live demonstration of the capabilities of the system, specifically clarity that we did at the HIMS conference in Las Vegas.

I'm talking with current customers and prospects about these in fact, I think I mentioned.

Earlier call of the demonstration a live demonstration of the capabilities of the system, specifically clarity that we can add the hymns conference in Las Vegas in August and the feedback has been tremendous there is <unk>.

Speaker 2: in August . And the feedback has been tremendous. There is a valid interest. We're very excited to bring these to market. What we think, as Scott mentioned, will be in early release of clarity in 2022 and a late 2022 release of Harmony. Although, what we're doing is incrementally releasing pieces of the overall solution that can stand

Yes, we're very excited to bring these to market. What we think is Scott mention.

Will be in currently release of clarity and 2022 and 2022 release harmony, although what we're doing.

Incrementally releasing pieces of the overall solution that can stand alone and.

In addition to being part of a larger solution. So for example in the release of the Universal API, we are going to market with that and we expect to have some interesting pipeline built for the universal Ipi component of characterize as harmony, we expect that this year and.

Speaker 2: In addition to being part of the larger solution, so for example, in the release of the universal API, we are going to market with that, and we expect to have some interest in pipeline built for the universal API component of consensus harmony. We expect that this year. And we're very mindful of trying to ensure that we can commercialize these larger solutions.

Uhm, what we're very mindful trying to ensure that we can commercialize these uhm.

Larger solutions.

In digestible sort of bits for our customers to consume as we walk towards the full buildout solution, but you're going to be released early and late next year.

Speaker 2: indigestible to sort of bits for our customers to consume as we walk towards the full built out solution, which you're going to be released early in late next year.

Thank you.

And the next question is coming from.

<unk> from sake Sham your line is life.

Hey, guys. This is Jared on for sure. Thank you for taking the question congrats on the solid order and a successful spent off I know that you I'd give it out uhm I'll look for the fourth quarter just out of high level. How are you thinking about the setup into next year and the key drivers that you're looking at there.

Speaker 10: Hey guys, this is Jared on for sure. Thank you for taking the question. Congrats on the solid order and the successful spin off. I know that you all can put out some outlook for the fourth quarter, just at a high level, how are you thinking about the setup into next year and the key drivers that you're looking at there? And following up on that, is there anything to call out as you're thinking about revenue and EBITASA's analogy into the next year? And is there anything that you'd point to as a solid benchmark there?

And following up on that is there anything to call out as you're thinking about revenue and EBITDA seasonality and put them into the next year and is there anything that you'd point to as a solid benchmark there.

Sure so by the way they feel free to we ask you a question and we don't hit them. All so I think in terms of that element as you know the September 14th call. The John I hosted has talked about you know range of revenue and EBITDA grow not limited to the current year in fact actually really posted.

Speaker 2: Sure. So by the way, Jared, please feel free to re-ask your question if we don't hit them all. So I think in terms of the first element, as you know, the September 14th call that John and I hosted, we talked about, you know, ranges of revenue and EBITDA growth not limited to the current year. In fact, actually really post-thin between 5 and 9% and EBITDA margins between 50 and 55.

Between five and 9% and EBITDA margins between 50 and 55 Oh.

We clarify that by saying that when they get in here to intermediate charge 55 per cent.

Speaker 5: We clarify that by saying we think in the near intermediate term 55 percent EVA margins are the target. That doesn't mean for Q4 because you'll see actually if you look at our guidance it's higher than that. But as we go into next year as we fill out the complement of our staff across all these different departments

EBITDA margins are the tart that doesn't mean for Q4 cause you'll see actually if you look at our guidance and tired of that but as we go into next year as we fill out the compliment of our staff across all these different departments, that's kind of the margin that we see we're still early and budgeting, it's not it's not a formal.

Speaker 5: That's kind of the margin that we see. We're still early in budgeting. It's not a formal guidance, but I think that that's realistic. It allows us to make investments in people, in sales and marketing. And I think that is a fair EBITDA margin.

You know guidance, but I think that that's realistic it allows us to make investments in people in sales and marketing and I think that is a you know a fair EBITDA margin.

The end of the foreseeable future I think in terms of revenue growth. Obviously, we've been clocking in at around six ish percent organic right now I'm not contemplating doesn't be any emanated would supplement 2022, because as I mentioned previous they think that <unk> will be you know from time to time, maybe once every couple of years will do a deal.

Speaker 5: into the foreseeable future. I think in terms of revenue growth, obviously we've been clocking in it at around a six-ish percent, all organic. Right now I'm not contemplating that we'd be any M&A that would supplement 2022, because as I mentioned previously, I think that R&A will be, you know, from time to time, maybe once every couple of years we'll do a deal. So I think that five to nine percent range that we talked about, hell, holds, as we are going through our budgeting. And obviously in February we will...

So I think that 5% to 9% range and we talked about hell holes as we are going through our budgeting and obviously in February we will <unk>.

I actually disclose the full complement of guidance for 2022.

Speaker 5: actually disclosed the full complement of guidance for 2022. In terms of seasonality, you know, relative to when we're part of ZIP.

In terms of seasonality you know relative to we are part of this really does look like we hadn't seasonality, but as a standalone company as I referenced in the remarks, it's important to understand the dynamics of queue for N.

Speaker 5: really didn't look like we had any seasonality, but as a standalone company, as I referenced in the remarks, it's important to understand the dynamics of Q4. And...

Our services are both sold and used primarily on business days, So clearly Monday through Friday, they're not holidays count as business days, but you know as you get into December depending on when Christmas and New year's fall you get a lot of vacation traditionally being taken we have what we call a lot of fractional business days. So Q4 is generally.

Speaker 5: Our services are both sold and used primarily on business days. So clearly Monday through Friday they're not holidays, count as business days. But you know as you get into December depending on when Christmas and New Year's falls, you get a lot of vacation traditionally being taken. We have what we call a lot of fractional business days. So Q4 is generally two to four...

<unk> two to four <unk>.

Business days later than say Q3, if you're looking at the business sequentially.

Speaker 8: business days lighter than say Q3 if you're looking at the business sequentially.

Speaker 5: Because of the various mixes of revenue that John talked about, and the fact that as we move upstream it's more variable versus fixed.

Because of the various mixes of revenue the John talked about and the fact that as we move upstream it's more variable versus fix that.

That $400000 a day.

Speaker 5: That $400,000 a day is relevant when you take a look at the sequential performance of the business from Q3 into Q4. In this particular year, and it does matter when Christmas and New Year's falls, we're down about two and a half business days sequentially, or about a million dollars from Q3 to Q4 if the business were just stable, flat, no gross.

Relevant when you took take a look at the sequential performance of the business from Q3 into cute for this particular year and it does matter.

Christmas and new year's falls.

We're down about two and a half business days sequentially or about a million dollars from Q3 to queue for if the business would just stable flat no growth. So that is the seasonality that you know you need to appreciate that reverses out in Q1 to some degree usually Q2 and Q3 are similar.

Speaker 5: So that is the seasonality that you need to appreciate. That reverses out in Q1 to some degree. Usually Q2 and Q3 are similar and they are.

And they are at the peak.

Speaker 5: anywhere from 64 to 65 business days.

Anywhere from 64 to 65 business days in either two two or two three but it's very much a function of looking at the calendar each year counting the Monday through Friday, making judgements around fractional or partial holidays like the day. After Thanksgiving. Good news is we have years of accumulated data.

Speaker 5: in either Q2 or Q3, but it's very much a function of looking at the calendar each year.

Speaker 5: counting the Monday through Fridays and making judgments around fractional or partial holidays like the day after Thanksgiving. Good news is we have years of accumulated data.

So our estimates tend to be I think fairly well honed at this point other than that no. There's no major seasonality V. The fact, we have a few fewer selling days in queue for doesn't really impact revenue because.

Speaker 5: So our estimates tend to be, I think, fairly well honed at this point. Other than that, no, there's no major seasonality. The fact we have a few fewer selling days in Q4 doesn't really impact revenue because, you know, those customers come radably over the quarter and they're going to only partially impact Q4.

Customers come randomly over the quarter and they're gonna only.

Partially impact Q4.

Because you know you're gonna get basically at most one half benefit.

Speaker 5: because you're going to get basically at most one half better.

Speaker 5: It's a variable revenue that we tee in on when we lose business days more than the fixed amount or the selling days, which are also limited because our services are sold based on business days. Those are the first that we are now investigating.

The variable revenue that we see it on when we lose business days more than the fixed amount or the selling days, which are also limited because our our services sold based on business days.

Okay, great. Thanks for all that color.

You're welcome.

Thank you <unk>.

And the next question is coming from Greg Burns from <unk> Company, Greg Your line is wise.

Speaker 6: And the next question is coming from Greg Burns from Siddolian Company. Greg, your line is left.

Afternoon, and get it correct congratulations on the completing the spin.

Speaker 11: Yes, noon and again, correct. Congratulations on the complete and the spin. It's had a question about the JSON solution. How are you positioning that in the market versus competing solutions in terms of maybe from pricing and features standpoint?

Uhm just had a question about J sign solution, how how're you positioning that in the market verses competing solutions in terms of maybe some pricing and feature standpoint.

Hey, Thanks for the question I appreciate it <unk> I think it is really being position as a complement to the other products that we have and we identify.

Speaker 2: Okay, thanks for the question. I appreciate it. You know, J-Sign, I think it is really being positioned as a complement to the other products that we have. We've identified in healthcare workflows the need for a digital signature to be integrated into a process that leads to communication. So we see J-Sign fitting in nicely there at the...

And health care of workflows, the need for a digital signature to be integrated into a process that leads to communication. So we see Jason I'm sitting in nicely there at the Soho level, we see J sign has a strong companion to fax N R. A D.

Speaker 2: Soho level, we see J-Sign as a strong companion to fax and our AB testing has shown it to be exactly that. So we're excited to be able to offer J-Sign as an addition to our fax purchasers and we are certainly going to remarket our existing base.

<unk> has shown it to be exactly that so we're excited to be able to offer J sign as in addition to are are facts purchasers and we are certainly going to re market our our existing base.

At the mid market level, we think <unk> is a strong performer oh with facts and also for the mid market for us that'd be in particular, an attractive opportunity. When you think of the the the larger solutions that are out there J sign can be cost competitive.

Speaker 2: And at the mid-market level, we think J-Sign is a strong performer both with facts and also for the mid-market press and being particular and attractive opportunity. When you think of the larger solutions that are out there, J-Sign can be cost competitive. It's not quite as feature rich and that's why design, it's a value play. And we've gotten very good feedback in our initial week of public.

It's not quite as feature rich and that's fine design, it's a value play and we've gotten very good feedback in our initial <unk> selling it directly to that S. M B segment.

Speaker 2: selling it directly to that FMB segment that doesn't necessarily need all the big bells and whistles you get with some of the other players in this space, but more of a bare-bones approach that's more affordable. And we've had a pretty good first.

Sarah we need all the big bells, and whistles, you get with some of the other players in the space, but more of a bare bones approach that are affordable and and we had a pretty good first week.

So what what is it like the typical <unk> for the solution.

Speaker 11: So what is like the typical R-Po for the solution?

We have a range of.

Speaker 2: We have a range of.

Subscription starting from as well as $10 a month going up to multi users as many as 500 users and a a multi user a single administrator kind of model. So we really have to find our feet here to say what what is the are going to look like after me.

Speaker 2: subscriptions starting from as well as $10 a month going up to multi-users, as many as 500 users in a multi-user single administrator kind of model. So we really have to find our feet here to say what is the ARP2 going to look like after we have a few months of sales data under our belt.

Have a few months of sales data under our belt, but we're hopeful that it's going to be at least as strong as are but we have an E X.

Speaker 2: But we're hopeful that it's going to be at least as strong as the ARPU we have for E-FACs.

Okay, Great and then just <unk> lastly on.

Speaker 11: Okay, great. And then just lastly, on the corporate side, have all the accounts been cleaned up? Or is there more kind of cleanup that could happen over the next couple of quarters that might impact trends? They've all been cleaned up and I just would add a note on that grade that they were pretty much evenly split.

On the the corporate side have all the account's been cleaned up or is there more kind of clean up that could happen over the last couple of quarters that my <unk>, they've all been cleaned up but I just want to add a note on that great that so they were pretty much evenly split between Q2 and two three so if you look at the trailing 12 months and at 930 or if you look at.

Speaker 5: between Q2 and Q3. So if you look at the trailing 12 months into 930 or if you look at the nine months of this current year, all 4,000 accounts are dealt with from a from a metric standpoint, but they were split basically 2 and 2 between Q2 and Q3 of this year.

The nine months of this current year. All 4000 accounts are dealt with from a from a metric standpoint, but they were split basically two and two between Q2 and Q3 of this year.

Okay, great. Thanks.

Thank you.

Thank you once again, ladies and gentlemen, if you do wish to enter the queue. You can still do so by pressing star one on your phone.

Speaker 6: Thank you once again ladies and gentlemen if you do wish to enter the queue you can do so by pressing star 1 on your phone.

Star One if you wish to enter the accused the next question is coming from James Breen from William Blair. James Your line is life.

Speaker 6: Star 1 if you wish to enter the queue. The next question is coming from James Briehn from William Blair. James, your line is live.

Thanks for taking my question Uhm, Scott can you just talk about what the balance sheet looks like pro forma and then what you saw this quarter in terms of free cashflow flow through from <unk>. Thanks.

Speaker 12: Thanks, David. The question, Scott, can you just talk about what the balance sheet looks like pro forma and then what you saw this quarter in terms of three cash flow through from the dollar line?

Yeah, well, we don't really have a free cash flow. This quarter remember if you look at the 8-K V files and the reason we file an 8-K as opposed to press releases that.

Speaker 5: Yeah, well we don't really have a free cash flow this quarter. Remember, if you look at the 8K we filed, and the reason we filed an 8K as opposed to a press release is that...

What was spun was the old Jake two cloud services, so the financial's associated with it including the free cash flow statement include items and businesses that were not spot is part of consensus such as as you may recall, the cyber security business <unk> business <unk> Ziff Davis still Oh, so there isn't.

Speaker 5: What was spun was the old J2 cloud services. So the financials associated with it, including the free cash flow statement, include items and businesses that were not spun as part of consensus, such as, as you may recall, the cybersecurity business and the MarTech business that Zip Davis still owns. So there isn't a...

A solid free cash flow, however, I would say that they've been given our capital structure, which is the 805 million a dead, but we issue just prior to spin.

Speaker 5: solid free cash flow. However, I would say that they've been given our capital structure, which is the 805 million in debt that we issued just prior to spend and our level of capex the what we did

At our level of Capex.

The the what we'd be using it sort of EBITDA minus capex cause those are cash cost minus interest those are cash minus taxes. Those are cash will come in about 25 million now we didn't pay in interest expense. This quarter. So this quarter would actually be somewhat higher than that because we only make those interest payments twice a year about.

Speaker 5: Minus cap X because those are cash costs, minus interest, those are cash, minus taxes, those are cash. It would come in about 25 million. Now we didn't pay an interest expense this quarter. So this quarter would actually be somewhat higher than that. Because we only make those interest payments twice a year, about 25 million in the October and I believe April timeframe.

25 million in the October and I believe April timeframe.

So this quarter worrying now.

Speaker 5: So this quarter we're in now will be the first quarter we'll have a true free cash flow statement or consensus. I can tell you though that by looking at the weekly cash balance.

Will be the first quarter, we'll have a true free cash flow statement for consensus I can tell you, though that by looking at the weekly cash balances.

I have grown very nicely from the date of spin and all of that cash generation is ours.

Speaker 5: They've grown very nicely from the date of spin and all of that cash generation is ours.

You have one other question Jim.

Just a balance you schedule that you talked about the <unk> the balance sheet structures. Yeah. So the balance sheet decor. The balance sheet is we have two tranches of debt. So we have 305 million of five year notes to your non call at 6%. We have 500 million seven year notes five year not call at six in it.

Speaker 12: Just the balance sheet structure which you talked about in terms of the debt ratio. The balance sheet structure, yeah. So the balance sheet, the core of the balance sheet is we have two tranches of debt. So we have $305 million of five-year notes, two-year non-call at 6%. We have $500 million of seven-year notes, five-year non-call at 6.5. So that's $51 million a year roughly of cash interest expense for the debt combined.

Has that $51 million a year roughly of cash interest expense for the desk combine.

At the time of spin we were left with about 30 million of cash in the company that turns out there was a little bit more cash left and was intended uhm there'll be a true with a zip priority you're in because we need to return that cash to them and also we have an agreement of how we're sharing various season expenses.

Speaker 5: At the time of spin, we were left with about $30 million of cash in the company.

Speaker 5: Now it turns out there was a little bit more cash left than was intended. There will be a true up with ZIF prior to year in, because we need to return that cash to them. And also we have an agreement of how we're sharing various fees and expenses of the spend. So once all those expenses are known, we will then have a true up. My suspicion is we'll end up writing a check to ZIF to return the money they left in, plus probably some additional amount for a sharing of the fees and expenses.

The spin so once all those expenses or no. We will then.

Sure. My suspicion is will end up writing a check the zip to return the money they left in plus probably some additional amount for a sharing of the fees and expenses.

But basically as soon we about 30 billion of caches did an expectation of generate 100 million of free cash flow in any in the next 12 months ensuing period.

Speaker 5: But basically, assume we have about 30 million in cash to spend and an expectation of generating 100 million of free cash flow in the next 12 month ensuing period.

So if we did you know.

Speaker 5: So if we did nothing with the cash, we'd end up with 130 million by sometime of October of 2022.

Nothing with the cash we end up with 130 million by some time of October of 2022.

Great. Thanks.

Mhm.

Thank you and the next question is coming from John <unk> from C. J S Securities John Your line is life.

Speaker 6: Thank you. And the next question is coming from John Tanwanteng from CJS Securities.

Hey, good afternoon, guys and congrats on the successful spend to do you and your new team.

Speaker 13: Hey, good afternoon guys and congrats on the successful spin to you and your team.

Scott I was wondering in your spending plenty to go forward you know working down from 58 and 57 per cent EBIT margin towards you know 55, and you know put perhaps 50 and and the target model I was just wondering what portion of that is allocated to R&D versus marketing.

Speaker 13: Scott, I was wondering in your spending plan as you go forward, you know, working down from 58 and 57 percent even margins towards, you know, 55 and, you know, perhaps 50 in the target model. I was just wondering what portion of that is allocated to R&D versus marketing versus corporate spend and kind of how you guys are modeling the returns on those investments as you go forward, whether it's, you know, increasing growth or something else you're using as a metric.

Dresses corporate spend and kind of how you guys are modeling the returns on those investments as you go forth, whether it's you know increasing growth or something else you're using the metric.

Yeah, So, let's start with where the Martin giraffe, because you're correct that if you look on the form 10 for the six months do you look for the nine months, you're gonna see higher margins.

Speaker 5: Yeah, so let's start with where the margins are at because you're correct that if you look in the form 10 for the six months, you look for the nine months, you're going to see higher margins. One of the things that buys those margins up on a trailing 12 month basis is that Q3 and Q4 of a year ago

One of the things that buys those those margins up on a trailing 12 month basis is that two three and two four of a year ago.

An extraordinarily high margin even pro forma in the 50, 859% range and the reason for that is that as part of the pandemic.

Speaker 5: were an extraordinarily high margin, even pro-former, the 58, 59% range. And the reason for that is that as part of the pandemic that started in the large timeframe of 2020, there were a variety of things that were implemented.

Started in you know the March timeframe of 2020, there are a variety of things that were implemented.

Speaker 5: in large part to preserve cash and EBITDA. So in the case of the consensus business unit, there was a hiring freeze. So as people left, they were not replaced. There was a reduction in marketing spend and all those things had the effect of boosting the Q3 and Q4 EBITDA margins that quite frankly are not sustainable and we're not sustainable. And so if you look at the more granular level, the real starting point for the margins is really about 57% EBITDA margin.

A large part to preserve cash and EBITDA. So in the case of the consensus business unit. There was a hiring freeze so as people left it we're not replace there was a reduction in marketing spend it all those things had the effect of boosting the Q3 and Q4 EBITDA margins that quite frankly are not sustainable.

And we're not sustainable and so if you look at the more granular level the real starting point for the large is really about 57% EBITDA margins. So the 57 to 55 bridge that two points.

Speaker 8: So the 57 to 55 bridge, that's two points.

Most of what you're calling the corporate is already embedded in the pro forma analysis.

Speaker 5: Most of what you're calling the corporate is already embedded in the pro forma analysis.

It is the case, yes, they'll probably be a few more people hired them was contemplating the pro forma and yes, and this labour environment. Some of those people may be more expensive the contemplated so there's a little bit of.

Speaker 8: Now, it is the case, yes, there'll probably be a few more people hired than was contemplated in the pro forma, and yes, in this labor environment, some of those people may be more expensive than contemplated. So there's a little bit of...

Degradation and margin of filling out the corporate staff.

Speaker 5: degradation and margin of filling out the corporate staff. The larger two pieces though will be the R&D staff enhance.

A large or two pieces, though will be the R&D staff enhancement, some of which will be capitalized and what period Capex some of which will flow through as opex and hit the margins and then the other piece will be in sales and marketing.

Speaker 5: some of which will be capitalized and will appear in CapEx, some of which will flow through as OpEx and hit the margins. And then the other piece will be in sales and marketing. The sales and marketing piece is probably the easier of the two to ROI because we spent a lot of money in advertising, we have the ability to look on the margin if we launch a new program, like for example, J-Sign wants in the SOHO channel and SMB channel marketing dollars. So we can look and...

The sales and marketing pieces, probably be easier of the two two R. O Y because we spent a lot of money in advertising we have the ability to look on the margin. If we launch a new program like for example, J site, what's in the Soho channel and S. M. B channel marketing dollars. So we can.

Look and we will measure.

How effective that spend is if it's not effective we will perpetuate it but if it is we will continue it the R. D. One is more a longer term play.

Speaker 8: how effective that spend is if it's not effective, we won't perpetuate it, but if it is, we will continue it. The R&D one is more a longer term play.

Because.

You know it running in the portfolio concept of J two <unk>.

Speaker 5: You know, running on in the portfolio concept of J2 or zip.

I think that it was a group.

Speaker 8: I think that it was a group that was run very, very lean.

That was went very very lean.

And so there's sort of a multi bold effect of what we intend to accomplish by beefing up that staff part of it is the external service product roadmap and releasing those services.

Speaker 5: And so there's sort of a multiple the fact of what we intend to accomplish by beefing up that fact. Part of it is the external service product roadmap and releasing those services, and to their extent, to the extent they meet our expectations, there'll be a very good return on that investment. But there's also a portion of those costs that are allocated for internal purposes. First the fact of it is that...

You know to their except to the extent they meet our expectations there'll be a very good return on that investment, but there's also a portion of those costs are allocated for internal purposes.

The system's migration, but I don't mean.

Things that were related to the actual physical running of the business as I'm talking more about R. E. R. P system. You May you may recall that you know is if we had implemented or confusion at the cloud and the ink level Oh over well, let live basically October 2020.

Speaker 5: things that were related to the actual physical running of the businesses. I'm talking more about our ERP system. You may recall that, you know, in Ziff we had implemented Oracle Fusion at the cloud and the Inc. level over, well, it went live basically October 2020.

So when we spun from ZIP we inherited instance, Oracle fusion.

Speaker 5: So when we spun from zip, we inherited instance of oracle fusion.

But that was never V is whether we were a spun company order remain part of J too.

Speaker 5: But that was never the end, whether we were a spun company or the remain part of J2. There was a phase two.

There was a face too.

Speaker 5: has to do with cleaning up some legacy systems. Well, we need staff and personnel to do that as a stand-alone company. And then there's even a phase three and phase four, which is...

Which has to do with cleaning up some legacy systems, but we need staff and personnel to do that as a standalone company.

And then there's even a phase three and face for which is.

Speaker 5: What kind of external modules should we add to Oracle Fusion? There are HR modules, there's tax modules, there's pretty much a module for every department you can imagine. So some of the personnel that Jeff, our CTO, is hiring goes into that area, which is really for our own benefit and efficiency.

What kind of external modules should we add to Oracle fusion. There are HR module, there's tax module, there's pretty much a module for every department you can imagine so some of the personnel that Jeff R. C. T O is hiring.

Goes into that area, which is really oh for our own benefit and efficiency timeliness of getting information quality of the information we get for both operational purposes for John in his teens, but also as a public company for external reporting.

Speaker 5: Timeliness of getting information, quality of the information we get for both operational purposes for John and his teams, but also as a public company for external reporting.

Got it that's that's a lot of do sound great color. Thank you and just to you know the touch a little bit more than inflation that you're sitting in the in the labor markets I assume that you know the corporate and R&D Saturn are gonna be a little bit harder to fill out. There are are you seeing any challenges just in terms of getting the right people number one and number two how much that impacts your.

Speaker 13: Got it. That's a lot of views on great colors. Thank you. And just to, you know, touch a little bit more than inflation that you're seeing in the labor market. I assume that, you know, the corporate and the R&D that are going to be a little bit harder to fill out there. Are you seeing any challenges just in terms of getting the right people number one and number two? How much that impacts your, you know, your cost going forward and maybe if there's ability to pass that pricing through?

You know your your costs going forward and and maybe if there's going to pass that pricing through.

Yeah I was originally concerned it would affect the first part of your question, which is the ability to find the right people on the right people arches, those with the right skill sets.

Speaker 5: Yeah, I was originally concerned it would affect the first part of your question, which is the ability to find the right people. And the right people aren't just those with the right skill sets, but it's also those who can who fit our culture.

But it's also those who can who fit our culture.

This is very very important element because it's too full criteria issue need the skills to fulfill your job function, but you also need to fit into our vision or mission vision and values, which you spent a lot of time off during.

Speaker 2: I think this is a very important element because it's a two-fold criteria. Yes, you need the skills to fulfill your job function, but you also need to fit into our vision, our mission, vision, and values, which we spent a lot of time on during the pendency of the spin.

That the pendency of the spirit revealed them. Shortly after we spun to the current 450 employees of consensus. So we really want is we bring people law irrespective of what position. They are they've got a by entities and so that's gonna disqualify some kennedy.

Speaker 2: We revealed them shortly after we spun to the current 450 employees of consensus. And so we really want, as we bring people on, irrespective of what position they are, they've got to buy into these. And so that's going to disqualify some candidates.

Speaker 2: As I mentioned that we had very good hiring in October . Really only over three weeks.

As I mentioned that we had a very good hiring at October really only over three weeks. So we're finding the right people both from a cultural skills standpoint in some cases, you're correct given the areas that we are pursuing their coming in somewhat higher than your previous expectations, maybe 545, 6% higher so.

Speaker 5: So we're finding the right people, both from a cultural and skill standpoint. In some cases, you're correct, given the areas that we are pursuing. They're coming in somewhat higher than your previous expectations.

Speaker 5: you know, maybe five, four, five, six percent higher. So, you know, we're taking a very hard look at that as we think about 2022 and the overall budget. But we're too early in the budgeting process to have any definitive conclusions. But I'm expecting that, yes, there's going to be some upward pressure in the cost structure for employees, which is our number one cost structure.

So you know, we're taking a very hard look at that as we think about 2022 and the overall budget or too early in the budgeting process to have any definitive conclusions, but I'm expecting that yes, there's gonna be some upward pressure in the cost structure for employees, which is our number one cost structure. That's.

450, and growing that's gonna be the number one cost component within consensus.

Speaker 2: 450 and growing, that's going to be the number one cost component within consensus.

Great. Thank you.

Thank you John.

Thank you and the next question is coming from Joe Goodwin from G. M. P Securities Joe Your line of Slash.

Speaker 6: Thank you. And the next question is coming from Joe Goodwin from JMP Securities. Joe, your line is live. Great. Thank you so much for taking the question. I just had a question on…

Great. Thank you so much for taking the question.

On on a question on on product development. You can you talk about just kind of how your engagement customers are you rolling out these new products on the product roadmap and kind of how much that implies alright, how.

How much implication of these these customer engagements are that she kind of informs you guys, probably roadmap and then kind of off of that with harmony coming out next year do you already have kind of early adopters lined up to actually be leveraging that product and actually kind of.

You know using it as a communication network any color that would be great.

Sure Great question Jones, and I appreciate that.

Speaker 14: Sure, great question, Joan, and I appreciate it.

Speaker 14: Product development team is very connected to our sales team, our marketing team, uses the feedback that we have from both our current customers and the prospects that we talk to in order to make sure that we're hitting the mark with what we're bringing to market.

Elephant team is very connected to our sales team our marketing team uses the feedback that we have from both of our current customers and prospects that we talk to in order to make sure that we're getting the mark with what we're bringing to market.

Speaker 14: and making the kinds of changes and adjustments as we go through the development process to ensure that we're honing ourselves to what the market need is.

And making the kinds of changes and adjustments as we go through the development process to ensure that were holding ourselves to what the market need is the feedback that we have been getting on on the products themselves. As we brought them to market has been very positive because I think that the way that we think about it is in turn.

Speaker 14: The feedback that we have been getting on the products themselves as we've brought them to market has been very positive because I think that the way that we think about it is in terms of natural extensions.

As a natural extension rather than just trying to bring something out of left field into the marketplace that that doesn't relate to what we already are so so I think our DNA add a very secure very reliable very robust and scalable platform for inform.

Speaker 14: rather than just trying to bring something out of left field into the marketplace that doesn't relate to what we already are.

Speaker 14: So I think our DNA as a very secure, very reliable, very robust and scalable platform.

Speaker 14: for information sharing is really the knitting that we're sticking to.

Nation sharing is really the knitting that for sticking to you and the kinds of products that we're developing are are all stay in that arena and because of that what were our concept here is that we're bringing alternatives to a marketplace that can communicate a number of different ways, depending on who they are.

Speaker 14: and the kinds of products that we're developing are all staying in that arena. And because of that, what we're, our concept here is that we're bringing alternatives to a marketplace.

Speaker 14: that can communicate a number of different ways depending on who they're talking to, it can find the best route or the best protocol in order to do that.

[noise] talking to it can find the best route or the best protocol in order to do that.

And when you're thinking about are potential for I, I think beta adoption of things like harmony and clarity I I'd say, we're we're further down the path on beta adoption.

Speaker 14: Now when you're thinking about our potential for, I think beta adoption of things like Harmony and Clarity, I say we're further down the path on beta adoption in Clarity, but that's just by happenstance of where we are in terms of the overall product roadmap. With Harmony,

And clarity, but that's just but by happenstance of where we are in terms of the overall product roadmap and with harmony.

The real idea that uhm putting out.

Speaker 14: The real idea that putting out

Part of the harmony product that can stand alone universally Guy had a great example of that which we are are building pipeline for and have feedback on on market desire for that kind of thing is giving us the ability to have some traction with a major.

Speaker 14: parts of the Harmony product that can stand alone. The universe lay guy is a great example of that, which we are building pipeline for and have feedback on market.

Speaker 14: desire for that kind of thing is giving us the ability to have some traction with a major product launched that we have in the future with the components of it.

Product wash that we have in the future with components of it early on so that we're doing two things number one accelerating the the ability for us to to generate revenue from new products that are in the marketplace that we serve and also getting the early feedback about.

Speaker 14: early on so that we're doing two things. Number one,

Speaker 14: accelerating the ability for us to generate revenue.

Speaker 14: from new products that are in the marketplace that we serve.

Speaker 14: And also getting early feedback about what customers like and what customers don't. So in the process of developing that larger product for full release later on down the line, we've made the right adjustments, listened to the market, and made sure that the product that we release is the product that is going to fit what our customers need.

What customers like them, what customer stone so in the process of developing that larger product or full of relief later on down. The line. We've made the right adjustments listened to the market and make sure that the product that we release is a product that is acquainted fifth what our customers needs.

Thank you.

Thank you and there were no other questions in the queue. At this time I would like to have the call back to Scott, Turkey for any closing remarks.

Speaker 6: Thank you. And there were no other questions in the queue at this time. I would like to hand the call back to Scott Taricki for any closing remarks.

Thank you Paul I appreciate it. Thank you all for participating today and our investor call.

Speaker 14: Thank you Paul, we appreciate it. Thank you all for participating today in our investor call.

When we report to for results it'll be more traditional and that will have a press release with the pro forma results out technically they will be pro forma because we're gonna add that one week in October that is owned by Zip.

Speaker 2: When we report Q4 results, it'll be more traditional and then we'll have a press release with the pro forma result out technically. They will be pro forma because we're gonna add that one week in October that is owned by Zim.

We do have a conference or two between now and that earnings call. We put out a release on the one coming up next week at R. D. C. So we'd ask you. If you have interest to join us there'll be a fireside chat the John I will participate in will also be doing some one on one I believe there's a C. J F conference will be.

Speaker 5: We do have a conference or two between now and that earnings call. We put out a release on the one coming up next week at.

Speaker 2: So we'd ask you if you have interest to join us, there'll be a fireside chat that John and I will participate in, we'll also be doing someone on ones. I believe there's a CJF conference will be at virtually in January . And then we would expect that we would report Q4 results and provide 2022 guidance sometime in the mid-February timeframe. So thank you once again for your participation and for your support as the Fin has now officially been completed.

At virtually in January.

And then we would expect that we were before Q4 results and provide 2022 guidance sometime in the mid February timeframe. So thank you once again for your participation and for your support.

Spin has now officially been completed.

Thank you ladies and gentlemen, this does conclude today's conference you.

You may disconnect. Your phones at this time I have a wonderful day. Thank you for your participation.

Speaker 6: You may disconnect your phones at this time and have a wonderful day. Thank you for your participation.