Q1 2025 Consensus Cloud Solutions Inc Earnings Call
Thank you for waiting. Your patience is appreciated. Please hold the line and we'll be right back with you.
Jonathan Tanwanteng, David Larsen, John
Paul: Good day, ladies and gentlemen, and welcome to the Consensus Q1 2025 earnings call. My name is Paul, and I will be the operator assisting you today.
Paul: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Scott Taricki: On this call, from Consensus, will be Scott Tureki, CEO , Jim Malone, CFO , Johnny Hecker, CRO, and Executive Vice President of Operations, and Adam Varon, Senior Vice President of Finance.
Speaker Change: I will now turn the call over to Adam Varon, Senior Vice President of Finance at Consensus. Thank you, you may begin.
Speaker Change: Good afternoon and welcome to the Consensus Investor call to discuss our Q1 2025 financial results, other key information in our 2025 full year and Q2 2025 quarterly guidance.
Scott Tariqi: Joining me today are Scott Teriki, CEO , Johnny Hecker, CRO, and EVP of Operations, and Jim Malone, CFO .
The earnings call will begin with SCAP providing opening remarks.
Johnny Hecker: Johnny will give an operational update on the progress since our year end 2024 for Investical and then Jim will provide Q1 2025 financial results then discuss our full year 2025 and Q2 2025 guidance range.
Johnny Hecker: After we finish our prepared remarks, we will conduct a Q&A session.
Johnny Hecker: At that time, the operator will instruct you on the procedures for asking a question.
Before we begin our prepare remarks,
Johnny Hecker: Allow me to direct you to our forward-looking statements and risk factors on slide two of our investor presentation.
Johnny Hecker: As you know, this call and the webcast will include forward-looking statements.
Johnny Hecker: Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results.
Johnny Hecker: Some of those risks and uncertainties include better or not limited to the risk factors that we have disclosed in our 10K SEC filing.
Scott: Now, let me turn the call over to Scott for his opening remarks.
Scott: Thank you, Adam. As noted in the press release, I'm pleased with the results of the first quarter.
Scott: This quarter was primarily without any of the volatility introduced by the tariffs, most of which were announced on April 2nd.
Scott: We slightly exceeded our revenue objective with corporate revenue posting 5.6% growth over Q1 2024, ahead of our budget and the best growth year over year in eight quarters on
Solo Revenue was in line with our expectations.
Scott: We carefully watched our cost structure and exceeded our EBITDA expectations by more than the outperformance on revenue.
We delivered a robust 54.2% adjusted evidom margin.
Scott: As we discussed on the Q4 earnings call, our goals for this year include the following. First,
Scott: To pursue the acquisition of customers primarily in the healthcare space for a corporate channel and driving revenue growth to 6.25% this year.
Scott: 2. To manage our cost structure while making modest investments primarily in our go-to market operations for the benefit of 2026 and beyond.
Scott: 3. Putting our bank loan refinancing in place for the retirement of the remaining 6% notes
Scott: And finally, number four, managing the Soho Channel for Cash Flow Efficiency, which we began last year.
Scott: While Johnny will provide more detail in his portion of the presentation, I am pleased that our corporate channel exceeded our revenue expectations in Q1, driven by strong usage, improved revenue retention, new customer acquisition, and increased contribution from our advanced products.
In addition, EFACS Protect had record sign-ups
Scott: In addition, at the VA, we continue to see more facilities come online and a record level of usage. All of these contributed to the 5.6% growth year over year.
Scott: I am pleased to report that while revenues for the Soho Channel declined in the quarter as anticipated, it was the slowest rate of decline since we began the program to reduce marketing costs.
Scott: We maintained our discipline on the cross side across the board, generating an Eva-Dame margin of 54.2%, a hundred basis points ahead of our Q1 expectations.
Scott: Free cash flow for the quarter was 33.7 million modestly down from Q1 of 2024 due to increased receivables from our growing corporate channel and lower revenues in EBITDAW year over year. We continue to expect our free cash flow in 2025 to be similar to 2024.
Scott: We were able to repurchase approximately 10 million of debt in the quarter and additional 6 million so far in Q2.
Scott: This brings our total repurchases since launching the program in November of 2023 to 222.6 million.
Scott: Reducing our total outstanding debt to approximately 582 million or 3.1 times our trailing 12 month adjusted EBADAR on a gross basis and 2.9 times on a net basis.
Scott: We have made progress on the bank financing and expected to be finalized in late Q2 or early Q3.
Speaker Change: Before turning the call over to Johnny, I would like to comment on the recent volatility in the markets and concerns in the economy regarding a slowdown in economic activity.
Speaker Change: First, the nature of our business is such that we are not directly impacted by the tariffs and related negotiations.
Speaker Change: Second, we provide an essential service of critical and secure information delivery across a variety of industries.
Speaker Change: As part of our normal quarterly process, we did look at a potential slowdown in the economy in the back half of the year, with a reduced annual GDP output that is modestly positive but less than the GDP growth expected upon entering this year.
Speaker Change: Under such a scenario, we would expect a modest headwind to our revenues in Q3 and Q4 but still be within our range of guidance.
Speaker Change: To be clear, this is a stress test against our annual plans in budget, not our base case.
Speaker Change: We are not currently seeing any impact from the tariffs and related negotiations. We will closely monitor the situation as events develop. I will turn the call over to Johnny to provide more operating details.
Speaker Change: Thank you, Scott, and hello everyone. Thank you for joining us today to discuss our Q1 2025 results. As always, I will be focusing on key areas such as revenue, custom account, and go-to-market strategies for both our corporate and so-hope business channels.
Johnny Hecker: I've also provided an update on our operations and share some insights and highlights.
Johnny Hecker: I'm happy to report that our corporate business continues to demonstrate positive momentum.
Johnny Hecker: In Q1 2025, we saw revenue reach a record high of $54.3 million, representing a solid 5.6% increase compared to the $51.4 million in Q1 2024.
Johnny Hecker: It is important to remember that business day significantly impact our corporate business.
Johnny Hecker: Q1 2024 had an additional business day because of the leap year, which makes this quarter's growth rate the best since Q1 of 2023 on normalized basis even more impressive and supports our confidence in achieving double digit growth for this business channel.
Johnny Hecker: The exceptional Q1 growth rate stems from several factors, sustained increase in cloud-fax consumption within healthcare, greater advanced product adoption among existing and new clients, and the onboarding of new customers.
Johnny Hecker: We attribute this positive trajectory in our corporate revenue channel as a direct result of our focus on maximizing customer satisfaction through innovative product expansion that delivers tangible value.
Johnny Hecker: This approach is not only driving strong retention but also fostering enduring customer loyalty.
Johnny Hecker: I am excited to report another increase in our revenue retention rate by 55 basis points since just last quarter to now 101% for the last trailing 12 months.
Johnny Hecker: Well in line with our target of at least 100% and significantly higher than the 97.9% in Q1 of last year.
Johnny Hecker: Our corporate customer base has grown to a record approximately 60,000 at the close of Q1 up 9% year over year.
Johnny Hecker: A key driver of the success was the strong adoption of effects protect and the continued effectiveness of our soho to corporate upsell program which together contributed over 3,700 new corporate accounts during the quarter within our lower SMB cohort alone.
Johnny Hecker: This robust growth underscores the ability to effectively penetrate the market and strengthens our confidence in future expansion across the corporate customer base.
Johnny Hecker: We observed a positive sequential trend in corporate ARPA, increasing by almost $3 to $307 from the previous quarter.
Johnny Hecker: However, our current corporate ARPA of $307 represents a $10 decrease year over year from Q1 of 2024.
Johnny Hecker: This reflects the inherent dynamics of our corporate customer portfolio, where the ARPA is both supported by large enterprise clients, such as the Department of Veterans Affairs, and moderated by the success and growth within our lower SMB cohort.
Johnny Hecker: Speaking of the VA, we're pleased to report that the rollout continues with significant momentum and urgency.
Johnny Hecker: While we navigated the recent disruptions and uncertainties within the government and contractor ecosystem, our commitment to delivering this highly efficient offering remains steadfast.
Johnny Hecker: Usage within the VA is steadily increasing and new deployments are proceeding as planned, reinforcing our confidence in the program's success.
Johnny Hecker: Furthermore, our recent FedRAMP High Authorization has given the circumstances generated substantial interest in engagement from other government agencies.
Revitalizing our Public Sector Pipeline
Yeah.
Johnny Hecker: While we anticipate the tangible impact of these developments will materialize beyond 2025, the public sector remains a core pillar of our product and go-to-market strategy.
Johnny Hecker: Before moving on to Selho, I'd like to provide some key insights into our revenue composition and the central role of cloud facts.
Johnny Hecker: It's crucial to highlight that CloudFacts remains the cornerstone of our revenue, consistently contributing over 90% to our corporate revenue and exceeding 95% of our total revenue.
Johnny Hecker: It's ongoing growth on the scores it's enduring importance to our business. Therefore, our core facts business will continue to be a priority.
Johnny Hecker: Complementing this strength, we're delighted to see increasing adoption and broader usage of our advanced solutions like Unite and clarity featuring AI technology for data extraction.
Johnny Hecker: Furthermore, we leverage and continue to see success with our integration solutions, which we've further enhanced since the 2022 Summit acquisition.
Johnny Hecker: The growing customer engagement with these offerings, alongside effects, reinforces the validity of our go-to-market and product strategy, particularly within the important healthcare vertical. We are very happy with the strong momentum we've carried into 2025.
Johnny Hecker: This positive start, driven by our successful strategies, provides the tailwind needed to achieve our ambitious goals in our corporate business for the fiscal year and beyond. On to our social channel.
Johnny Hecker: We've recorded Q1 revenue of $32.8 million compared to $36.8 million in the first quarter of the previous year, representing a plant decrease of 10.6%.
Johnny Hecker: This reflects our ongoing strategic focus on optimizing profitability and maximizing the efficiency of our advertising investments in this business.
Johnny Hecker: As anticipated, the total global SOHO account base experienced a slight reduction from 747,000 to 730,000 during the quarter. But SOHO ARPA, so I minor decreased to $14.83 in Q1 of 2025 from $14.99 in Q4 of 2024.
Johnny Hecker: We're encouraged by the continued improvement in our cell phone canfully, which declined to 3.26% in Q1 of 2025 from 3.38%
Johnny Hecker: in the prior quarter. Our analysis reveals that the slide ARPA adjustment this quarter is primarily attributable to the residual effects of the 2024 holiday promotions last November and December .
Johnny Hecker: Importantly, our strategic transition away from free trials across multiple brands is proving effective in enhancing the monetization of newly acquired customers and increasing paid acquisitions, a positive impact.
that is partially balanced by customer terms.
Johnny Hecker: Our focus on automating and optimizing customer acquisition programs continues to yield success with a very close eye on return on advertising spend.
Johnny Hecker: at a healthy, lifetime value to customer acquisition cost, commonly referred to as LTV to CAC ratio. Key to this success is our close collaboration with advertising partners and our focus on optimizing search results within the ever changing search environment.
Johnny Hecker: In closing, despite the prevailing macroeconomic landscape, our confidence remains strong. Our corporate business is delivering as anticipated, supported by a robust pipeline and increasing customer engagement with our solutions.
Johnny Hecker: For our SOHO channel, our strategic direction is healing positive results. While we maintain vigilance regarding macroeconomic factors, we are reaffirming our guidance.
Johnny Hecker: Before handing off a big thank you to our employees for their dedication this past quarter and to our customers and partners for the continued trust and collaboration.
Speaker Change: We've had a great start into the year and we anticipate to continue that way with that. I'd like to try to call over to our CFO Jim Malone who will now provide a detailed update on our financial performance and outlook.
Jim?
Thank you, Johnny, and good afternoon to everyone.
and our press release.
Speaker Change: and on this call today, we are discussing Q1 2025 results.
and Guidance for Q2 2025 and full year.
Speaker Change: We expect to file our 10Q by close a business today.
Let's start with our corporate business results.
Speaker Change: Q-1 2025 was a record quarter for corporate, with revenue of 54.3 million, an increase to 2.9 million or 5.6% for his prior year, performing ahead of expectations.
Speaker Change: This represents the highest corporate growth year-over-year in the past eight quarters.
on unnormalised basis.
Johnny Hecker: As Johnny noted, we continue to see growing facts usage, which demonstrates strong demand for our core digital facts product.
Johnny Hecker: Q-12025 corporate offer of $307, this is up sequentially by approximately $3, and down $10 over the prior comparable period, primarily driven by the success of our growing e-facts protect
within the lower SM&B.
Collort.
Johnny Hecker: Our Wrecked Q1 2025 Corporate Revenue delivered a 12, a trailing 12-month retention rate of 101 percent, a 310 and 55 basis points of improvement from the prior comparable period and Q4 2024.
Moving to Soho.
Q1 2025 revenue of $32.8 million.
Johnny Hecker: Compared to 36.8 million over the prior year, represents a plan decrease of 3.9 million or 10.6%. We are continuing our strategic focus of optimizing advertising spend and profitability in the Soho Revenue Channel.
Johnny Hecker: ARPA of $14.83 had a modest sequential decline, lodging the troop loop to our holiday promotions in November and December of 2024.
Johnny Hecker: Soho Charne, 3.26% improved 12 basis points, coincially in 16 basis points, year over year.
Moving to Consolidator Results
Johnny Hecker: Revenue of 87.1 million represents a decrease of 1 million or 1.1% versus Q1 2024, performing in line with expectations and an improvement of 3.6% and Q1, Q1, 24 versus 23.
Justin EBITDA, 47.3 million .
Johnny Hecker: is a decrease of 0.8 million or 1.7% versus Q1 2024, delivering a solid margin of 54.2% and 100 basis points favorable to our Q1 2025 guidance range.
Johnny Hecker: As mentioned in our 2024 year in earnings call, adjusted net income calculation will eliminate foreign exchange data loss on inter-company balances.
Both in current and prior comparable periods.
Johnny Hecker: This line item can fluctuate saved significantly from period to period, and the metric does not represent the company's operating performance.
Johnny Hecker: Therefore, beginning this quarter and going forward, adjusted net income will not include
This foreign gain and loss.
Johnny Hecker: Q1 2025 adjusted net income of 27 million is an increase of 0.1 million or 0.2% versus Q1 2024 adjusted net income of 26.9 million, primarily driven by lower net interest expense.
Offset by just the eve of eve doth flow through depreciation and memorization and taxes.
Johnny Hecker: Just an EPS of $1.37 is unfavorable to the prior year by 2.1% or 3 cents, to everybody items I just mentioned and a higher share count.
Johnny Hecker: The Q-1 2020-25 Nungad tax rate in share count was approximately 21.2% and 19.7 million shares.
Johnny Hecker: As mentioned in our November 2023 earnings call, we announced the 300 million three-year bond repurchase program.
Johnny Hecker: In Q1 2025, we repurchased 10 billion face value bonds at par and an additional 6 million in Q2 2025 to date.
Johnny Hecker: Our continued strong cash flow has allowed us to repurchase approximately 223 million face value bonds for approximately 209 million cash program to date.
with approximately 77 million remaining under our current authorized program.
Johnny Hecker: We expect our free cash flow to be similar to 2024, providing us with sufficient cash to meet our leverage target on and before the maturity of our 6% notes.
Speaker Change: Scott noted in his opening remarks, we are working on the refinance process for a bank loan to retire our remaining 6% notes to October 2026. We expect the bank loan to be completed in late Q2 or early Q3.
With the death repurchases just mentioned, Q1 2025
Speaker Change: Total debt to adjusted EBITAR is 3.1 times net debt to adjusted EBITAR ratio is 2.9 times and we were getting very close to achieving our total debt to adjusted EBITAR target of 3 times.
Speaker Change: We end the Q-1 2025 with cash of approximately 53 million, which is sufficient to fund our operations and repurchases of our debt and equity.
Q-1, 20, 25 keys, free cash flow.
Speaker Change: is 33.7 million versus 35.8 million in a prior comparable period.
Speaker Change: Primarily due to the increased receivables from a growing corporate channel and lower adjusted
Speaker Change: Capac's of 7.1 million was down 1.8 million or approximately 19% versus the prior year.
Speaker Change: Going to guidance, we are reaffirming our 2025 full-year guidance as follows.
Speaker Change: Folier Revenue between 343 million and 357 million with 350 million at Midpoint.
Speaker Change: Adjusted EBITDA between $179 million and $190 million with $185 million at midpoint.
Adjusted EPS of $5.03 to $5.42 with $5.22 at midpoint.
Speaker Change: Full-year estimated share count and income tax rates are approximately 20 million shares and tax rate between 20.5 and 22.5% with 21.5% at midpoint.
Speaker Change: Please remember that as previously mentioned are 2025 guidance and actual results include foreign exchange, gain or loss on revaluation of inter-company accounts.
For a second quarter, we are providing guidance as follows
Speaker Change: Revenue between 85 million and 89 million with 87 million at the midpoint [inaudible]
Speaker Change: Justin Evadot, between 45 million and 48 million, with 46.5 million at the midpoint. Adjusted EPS of $1.31 to $1.42 with midpoint of $1.37.
Speaker Change: Estimated Q2 2025 share count, an income tax rate, or approximately 20 million shares, and a tax rate between 20.5% to 22.5%.
Speaker Change: This concludes my former remarks. I'd like to turn the call back to the operator for Q&A. Thank you.
Thanks for watching!
Speaker Change: 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 your question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star two 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. One moment please, while we begin.
And the first question today is coming from BTIG.
and David Larsen.
David, your line is live
David Larson: Hi, congratulations on the good quarter. Can you talk a little bit more about growth in corporate revenue? The growth rate looked pretty good to me. And I think you mentioned and you prepared comments that the VA deployment is accelerating. I think you finally got like this formal.
David Larson: Paperwork and formal certification recently. Just any more, more color around like the government, you know, sales process, the VA, corporate growth would be great. Thank you.
David Larson: Yeah, I can take that. Hi, this is Johnny. Hi, David. Thanks for getting on the call.
David Larson: Good questions. So to answer your first, to first one, the corporate growth was really supported by multiple things. First of all, we saw continued strong usage in, you know, across our fax brands,
David Larson: Upmarket as well as downmarket, but significantly growth upmarket in our existing customer base.
David Larson: And then secondly, good adoption and deployment of advanced solutions. So that is starting to contribute there as well.
David Larson: So all in all, and adding new customers is the third big component of, you know, of driving the corporate revenue in this quarter. So all in all, good trends on all three of those fronts. Now with regards to the VA, yes, we got the the federal and high certification that was something that we announced last quarter already.
David Larson: That there was an important milestone on that journey, something that the it required from us and that we have now accomplished. That is unlocking.
Excuse me, that is unlocking some...
David Larson: Some new opportunities and also revitalizing a couple of older opportunities that had actually stalled in that public sector pipeline. So customers had paused the process for a while and said we need you guys to finish that process, get that off official certification, so that is helping us.
David Larson: Are we going to see a significant impact of this in 2025?
David Larson: I don't think so. Maybe we'll close a couple of deals, but as you know, with the government, it'll take a while till those ramps. And there's there's general.
David Larson: You know, reluctance and uncertainty in the government space, right? In the ecosystem as well as within the agencies. So we're experiencing some of that but we're encouraged by the engagement we thought it would be, it would be significantly worse.
Okay, great
David Larson: And then in terms of like, um, so how I completely understand how you're converting so whole accounts to corporate, so the decline in revenue is intentional.
But, when would you expect that to sort of-
David Larson: You know, that decline to sort of moderate or perhaps become like flat on a year of your basis.
David Larson: How are you thinking about sort of the intentional by design contraction of SOHO which is still a significant portion of total revenue? Thanks.
Yeah, so...
David Larson: That's a difficult question to answer because there are so many things that influence that number. Right now we saw a little bit of a reduction in the cancel rate. We're encouraged by the new customers that we're adding.
So it's a good trend.
David Larson: which is why the revenue decline is actually slowing down in that space, but it's really a function of multiple things, particularly on how much advertising spend we're willing to expend every quarter in order to win new customers.
David Larson: and we are monitoring that profitability very closely. So, at the point where we don't, you know,
David Larson: Experience that to be profitable for us anymore, we will probably slow down that advertising spend which will accelerate that decrease in the customer base load of more. But at what point whether it is going to be you know in 26 or in 27 we will actually find that base.
Or Beyond is unclear because
Speaker Change: Get out as long as it's profitable, it wouldn't make sense for us to stop also spending in that space. I don't know if Scott, if you were Adam, if you want to add anything. No, I think that's well said. I think, you know, as you represent your prepared remarks, what we watch very closely is the LTV to cat in terms of the. [inaudible]
Speaker Change: Marketing Spend. And then on the flip side, if you look at the base, we look actually look at each cohort and what is going on in terms of their retention rates, hence my implications are cancel rates. And so that's the math that guides us to. [inaudible]
Speaker Change: How much will we link to invest and then you run the math out and you can come up with some numbers but it is proceeding. Thank you very much.
Speaker Change: According to the plan, it was actually developed more than a year ago and it's proceeding consistent with our expectations for this year and what we said last quarter in terms of guidance and I don't think one should expect.
Speaker Change: There's a magic bullet that will certainly cause it to stabilize, certainly this year, if not probably even next year.
Okay. Great. And then just.
Speaker Change: One more quick one, tariffs. I think I heard you say no impact.
Speaker Change: There's two potential areas that concern is on the hospital side, hospitals may face higher supply costs.
Speaker Change: And then also on your side, any technologies or hardwares and I think what I heard you say was you're not seeing any impact from tariffs either on the demand side or on your cost side.
That's correct.
Speaker Change: Okay, thanks very much. Congrats on a good quarter. I'll hop back in the queue.
Speaker Change: Paul, before we go to the next live question, we've received a couple by email, so only we take one of them because it leverages the conversation we just had with David regarding revenue growth.
Speaker Change: The question, I'll summarize, it is more about the company as a whole but it really...
Speaker Change: Does feed off of the two pieces we just talked about, and that is...
The total, to returning to total revenue grows for the whole company.
Speaker Change: So one, when we expect that to occur, obviously we're going to be flat year over year. We do expect that to occur at some point during this year under our base case scenario. I would say that's really a cue for that. And then the follow on questions of that is, but we do expect that to persist.
Speaker Change: Now, feeding off of Johnny's question, the answer would be, and of course there's always an economic caveat here that the economy doesn't do something wildly crazy, that we would expect the rate of decline of soho
to continue to listen.
Speaker Change: As we see corporate increasing in its growth so that should imply once we hit a positive total enterprise growth that that would continue.
Johnny Hecker: But as usual as hey, this subject economic conditions and also subject to what Johnny just mentioned in terms of exactly how much we inject into the Soho Channel in terms of marketing spend. [inaudible]
Speaker Change: Okay, Paul, if there's another live question, where you're taking it?
Speaker Change: Yeah, we have a couple more from the lines. The next one is coming from Jean Nanheimer from Freedom Capital Markets. Jean New Line is live.
Thank you, good afternoon, and congrats on the good numbers.
Speaker Change: So related to those questions around growth of the corporate channel.
Speaker Change: Scott or Johnny, I think you talked about making some hires this year or maybe about 40 people in sales and sales related functions. Can you talk about where where that stands at this point and if I join the call a little late so I don't know if you talked about it already. No, no, we didn't really address in the detail you're correct your call for those that. Yeah, it's, uh.
Speaker Change: We're not part of the Q4 call in February . We talked about as we go through this year adding additional personnel, not exclusively, but predominantly in the go to market area, which is Johnny's area.
Speaker Change: There was some modest amount of that in Q1, both per the plan. It does accelerate as we go through the year. So as I mentioned in my opening remarks, although I even thought margin was ahead of our own expectation.
Speaker Change: Even the margins hadn't been fully baked in, still would be somewhat higher than if you look at the midpoint of our guidance in the imputed margin.
Speaker Change: So I'll turn over to Johnny to talk about some of the areas in which he's looking to hire over the course this year and then you know the one caveat I would make is
I want to be very careful on these hires.
as we look at economic conditions.
Speaker Change: Right now, we're not seeing anything, whether it's the tariffs or the downstream effects of them in terms of the economy, but clearly, if we were to see something go, materially negative in terms of the economy, that might influence how many of those hires we want to bring in this year versus potentially pushing some of them into next year.
Yep.
Speaker Change: Yeah, but I want to give Gene a flavor of some of the areas that you're looking at to enhance your department. Yeah, thank you. It's a really good question.
Speaker Change: It's really across the entire customer life cycle, so we're strengthening a little bit on the marketing and on the operation side.
Speaker Change: and then we're very much focused as we're able to capture a lot more down market through our e-commerce program. We're focused on hiring on the upmarket sales side where we still have to engage with the customer whether it's resailed.
representatives or sales engineers.
Speaker Change: in order to win and retain those accounts. And then beyond that, it's about implementation and customer service, especially with the advanced products. There's a little more engagement in there, so almost like the professional services.
Component to it that we're, but
Speaker Change: It's tiny from a revenue perspective, but for to onboard those customers. So those are the areas where we're hiring, primarily upmarket sales, as well as customer onboarding and customer success management. And it's going.
Speaker Change: We're on track. Let's put it that way. I think we're we're putting a lot of emphasis.
Speaker Change: on to our leadership teams to really stay on top of this because...
Speaker Change: As we stated in the last call, this is an investment into the future and into 2026 and the growth beyond in that year and beyond.
Yep.
Speaker Change: Great. Thank you for that color, Scott and Johnny. So my follow up would be just on the Soho side, I understand the ARPA was down sequentially, you know, as a result of the absence of the holiday promotion, but in theory,
Speaker Change: That ARPA of 1483 probably be the low water mark for Soho this year, is that is that the way to think about it?
Speaker Change: Hard to say, Jean, because, you know, we do, and we are doing right now. We do a variety of...
Speaker Change: Promotions and testing, so what occurred at the end of 24 were holiday promotions that are not ongoing now, but they bleed in because the customer base comes in at basically cheaper arbours that will affect
Speaker Change: 25 and then there's some things that can go in the other direction. So look, I'll be honest with you I don't get that
Speaker Change: focused or attuned on ARPA movements that are generally measured within Nichols and Dines.
Speaker Change: Because those are things that occur in the ordinary course based on different marketing programs that we're trying different save programs, meaning when a customer wants to cancel, what is the save opportunity there, what might the pricing be on that? It's a mixture of a whole bunch of different categories. What I would say is that,
Speaker Change: Even with those things that we are doing and testing, I think the ARPA is probably within a fairly narrow range, but I can't tell you it's not going to tick a few pennies lower in some subsequent court. It may very well do that.
Speaker Change: Right, right. Yeah, I'm thinking about as, you know, like $15 something, you know, in that area. Yeah, I would say look, I think we have fundamentally a $15 arpa base of customers, but there is a band around it. Remember, too, it's also the function of the mix across the different brands.
So you've got some brands like E-Facts that will have
A higher price at full price.
Speaker Change: You'll have other brands that actually are below the $15 ARPA. So you've got another variable in there which is when we look at the, you know, call it around at $60,000 gross ad that come in in a quarter, what's the distribution across the different brands and that was largely driven by what we're doing marketing was.
Speaker Change: There's a lot of different pieces that go into it, but yes, I think you can say that within a range around $15, you've got a relatively stable barba, but yes, it will move within that range.
Speaker Change: We do certain things that might negatively or positively on the margin influence the cancel
Speaker Change: And so, can it move ten bits? Either side of some knee? Yes.
Got it. Okay. Thanks very much.
Speaker Change: All the way to another live question. I've got another email question. There's actually two of them, but they're related. I'll put them under capital allocation. It's probably the best way to address them.
Speaker Change: And what has to do with you may notice in our press release and you'll certainly see it also in the financials and the queue that's filed this evening. We made a $5 million investment, not in our own company and another company. And so the question is, what is that strategic value?
Speaker Change: Some of you may remember that in I believe was early 23, we made an investment in one of our vendor partners.
in the Advanced Products or Advanced Services Space.
Speaker Change: This is a follow-on investment in the same company. I'm not at liberty to disclose the name or really much more about them right now as they're in the process of going out and raising capital, but I am certainly hopeful that we have our Q2 call in August . We'll be able to discuss this in much more robust detail.
Speaker Change: But to be clear, there are third party Vendra bars that we partner with in the advanced product area of our company and it is a follow on investment to what we made previously back in early 23. Now the adjacent question, the kind of go hand in hand is.
Speaker Change: And it's not really the way the question is, word, it's not really, it's how it came about, but it's not actually...
Speaker Change: The right premise, but why are we building cash?
So obviously we don't cash from-
Speaker Change: Q-4 to Q-1 in part because it's just a strong free cash flow order. Q-1 and Q-3 are.
um
Speaker Change: We did buy some debt as both myself and Jim have noted.
Speaker Change: But it's been increasingly hard to buy the debt in the open market as we have shrunk down both the six percent, six and a half.
Speaker Change: You know, you see that in a year ago period or in earlier periods in 24, we might be able to get 20, 25 million in a quarter. We only got 10 this quarter, although as I noted, we did by 6 million in...
Q to the date.
Speaker Change: We were a little late on buying the shares. We, Fred Franklin would have liked to have allocated some more capital to share
Speaker Change: But we fairly quickly after the earnings call went into a closed window.
Speaker Change: That did not execute. We bought very few shares during the quarter, but there is as you look out between now and into the year, there is actually a need we need to build some amount of cash for our balance sheet.
Financing or refinancing?
Speaker Change: The goal of which is to take out the 6% note, and right now it's looking like that will be a $225 million issue when it's combination of line and credit and term loan A. Those are secured.
Speaker Change: And our bond inventors, both the sixes and even when they're gone, the six and a half, have a interesting lean test.
Speaker Change: And the lean test is basically 50% of trailing 12 months EBITDA plus 50 million plus cash on your balance sheet.
Speaker Change: So in order to fully utilize the line of credit, we need those numbers to add up
to at least 225 million.
So,
Speaker Change: It is our intention to continue to get back into the market in terms of applying our excess cash and cash flow.
Speaker Change: Towards both debt retirement and sharey purchases. But we do have to be cognizant that certainly we get out later in the year. We have certain cash balances to justify the lean amount for the loan that will be put in place. As I mentioned in my opening remarks, either late this quarter or early next quarter.
Okay, Paul, next question.
Speaker Change: Certainly, the next question is coming from Ian Zessino from Oppenheimer and your line is live.
Speaker Change: Hey, good afternoon, this is Isaac Selhausen on for E and thanks for taking the questions.
Speaker Change: I just have two on the corporate business as well. In terms of corporate accounts, it's good to see the growth there, and you know you talked about the growth of e-facts and upsells, but could you also discuss if there are any notable ads for larger enterprise accounts? And then secondly, tie into that, anything you could share on general sentiment from larger enterprise prospects in terms of making purchasing decisions. Thank you.
Yeah, this is Johnny. I can comment on that, absolutely.
Speaker Change: and it's a very good question. Thank you for asking that.
Speaker Change: Absolutely. Yeah, we're adding customers, and I think I alluded to at least a little bit in my remarks. We're adding customers across the board, right? So we've disclosed the number on the lower end, the number of customers that we're adding through a certain programs. That's not all. We're also adding customers through other programs on the lower end, but we're adding new customers across the board all the way to very large enterprises. [inaudible]
Speaker Change: We have a robust pipeline. We've had a robust pipeline for multiple quarters.
Speaker Change: and we've been able to turn that pipeline into new customers as well. So it's really corporate corporate success across the entire customer continuum.
Okay, great. Thank you very much.
David Larsen, James Malone, Unknown Executive, James Malone, Unknown Executive
Speaker Change: Thank you, and there were no other questions at this time. I will now hand the call back to Scott Dr. Ricky for Closering or Max.
Scott Taricki: All right, thank you Paul. We thank you all for joining us today for Q125 earnings call and we will, as I mentioned in response to one of the questions.
Scott Taricki: We'll report our Q2 results within the first week to 10 days of August and obviously have an earnings call associated with that.
Scott Taricki: There may be a couple of conferences that we attend between now and then so be on the lookout for those announcements and clearly if you have any questions that we're not asked. During this call, you can feel free to reach the company and we'll get back. Thank you.
Scott Taricki: Thank you. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.