Welcome to the Consensus Q1 2025 Earnings Call. My name is Paul, and I will be the operator assisting you today. [Operator Instructions]. On this call from Consensus will be Scott Turicchi, CEO; Jim Malone, CFO; Johnny Hecker, CRO and Executive Vice President of Operations; and Adam Varon, Senior Vice President of Finance. I will now turn the call over to Adam Varon, Senior Vice President of Finance at Consensus.

Thank you. You may begin. Good afternoon, and welcome to the Consensus investor call to discuss our Q1 2025 financial results other key information and our 2025 full year and Q2 2025 quarterly guidance. Joining me today are Scott Turicchi, CEO; Johnny Hecker, CRO and EVP of Operations; and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. Johnny will give an operational update on the progress since our year-end 2024 investor call, and then Jim will provide Q1 2025 financial results, then discuss our full year 2025 and Q2 2025 guidance range. After we finish our prepared remarks, we will conduct a Q&A session. At that time, the operator will instruct you on the procedures for asking a question. Before we begin our prepared remarks, allow me to direct you to our forward-looking statements and risk factors on Slide 2 of our investor presentation. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our 10-K SEC filing. Now let me turn the call over to Scott for his opening remarks.

Thank you, Adam. As noted in the press release, I'm pleased with the results of the first quarter. This quarter was primarily without any of the volatility introduced by the tariffs, most of which were announced on April 2. 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 8 quarters on a normalized basis. So revenue was in line with our expectations. 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 EBITDA margin. As we discussed on the Q4 earnings call, our goals for this year include the following: first, to pursue the acquisition of customers, primarily in the health care space for our corporate channel and driving revenue growth to 6.25% this year; two, to manage our cost structure while making modest investments primarily in our go-to-market operations for the benefit of 2026 and beyond; three, putting our bank loan refinancing in place for the retirement of the remaining 6% notes due October 2026. And finally, number four, managing the SoHo channel for cash flow efficiency, which we began last year. 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, eFax Protect had record sign-ups. 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. I am pleased to report that while revenues for the SoHo channel declined in the quarter as anticipated, it was…

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, customer count and go-to-market strategies for both our corporate and SoHo business channels. I will also provide an update on our operations and share some insights and highlights. I'm happy to report that our corporate business continues to demonstrate positive momentum. 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 of 2024. It is important to remember that business days significantly impact our corporate business. 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 a normalized basis, even more impressive and supports our confidence in achieving double-digit growth for this business channel. The exceptional Q1 growth rate stems from several factors: sustained increase in Cloud Fax consumption within health care, greater advanced product adoption among existing and new clients and the onboarding of new customers. 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. This approach is not only driving strong retention but also fostering enduring customer loyalty. I am excited to report an increase in our revenue retention rate by 55 basis points since just last quarter to now 101% for the last trailing 12 months, well in line with our target of at least 100% and significantly higher than the 97.9% in Q1 of last year. Our corporate customer base has grown to a record approximately 60,000 at the close of Q1, up 9% year-over-year. A…

Thank you, Johnny, and good afternoon, everyone. In our press release and on this call today, we are discussing Q1 2025 results and guidance for Q2 2025 and full year. We expect to file our 10-Q by close of business today. Let's start with our corporate business results. Q1 2025 was a record quarter for corporate with revenue of $54.3 million, an increase of $2.9 million or 5.6% versus prior year, performing ahead of expectations. This represents the highest corporate growth year-over-year in the past eight quarters on a normalized basis. As Johnny noted, we continue to see growing fax usage, which demonstrates strong demand for our core digital fax product. Q1 2025 corporate ARPA of $307 was up sequentially by approximately $3 and down $10 over the prior comparable period primarily driven by the success of our growing eFax Protect base within the lower SMB cohort. Our record Q1 2025 corporate revenue delivered a trailing 12-month retention rate of 101%, a 310 and 55 basis points improvement from the prior comparable period and Q4 2024. Moving to SoHo. Q1 2025 revenue of $32.8 million compared to $36.8 million over the prior year represents a planned 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. ARPA of $14.83 had a modest sequential decline, largely attributable to our holiday promotions in November and December of 2024. SoHo churn of 3.26% improved 12 basis points sequentially and 16 basis points year-over-year. Moving to consolidated results. 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% in Q1 '24 versus '23. Adjusted EBITDA of $47.3 million is a decrease of $0.8 million or 1.7%…

[Operator Instructions] And the first question today is coming from BTIG, and it's David Larson.

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

Yes, I can take that. This is Johnny. Hi David, thanks for getting on the call. Good questions. So to answer your first one, the corporate growth was really supported by multiple things. First of all, we saw continued strong usage across our fax brands. upmarket as well as downmarket, but significantly growth upmarket in our existing customer base. And then secondly, good adoption and deployment of advanced solutions. So that is starting to contribute there as well. So all in all and adding new customers is the third big component 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 FedRAMP high certification. That was something that we announced last quarter already. there was an important milestone on that journey, something that we required from us and that we have now accomplished. That is unlocking some new opportunities and also revitalizing a couple of older opportunities that had actually stalled in that public sector pipeline. So customers have paused the process for a while and said we need you guys to finish that process, get that official certification. So that is helping us. Are we going to see a significant impact of this in 2025? I don't think so. Maybe we'll close a couple of deals. But as you know, with the government, it will take a while until those ramp. And there's general 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 significantly worse.

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

Yes. So 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 rates. We're encouraged by the new customers that we're adding. So it's a good trend, 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 expense every quarter in order to win new customers. And we are monitoring that profitability very closely. So at the point where we don't experience that to be profitable for us anymore, we will probably slowdown that advertising spend, which will accelerate that decrease in the customer base a little bit more. But at what point, whether it is going to be in '26 or in '27, we will actually find that base or beyond is unclear because as long as it's profitable, it wouldn't make sense for us to stop also spending in that space. I don't know, Scott, if you or Adam, if you want to add anything to that?

No, I think that's well said. I think as you referenced in your prepared remarks, what we watch very closely is the LTV to CAC in terms of the marketing spend. And then on the flip side, if you look at the base, we actually look at each cohort and what is going on in terms of their retention rates, hence, by implication, their cancel rates. And so that's the math that guides us to how much we're willing to invest and then you run the math out and you can come up with some numbers. But it is proceeding 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 that there's a magic bullet that will suddenly cause it to stabilize certainly this year, if not probably even next year.

And then just one more quick one on tariffs. I think I heard you say no impact. There're two potential areas of concern on the hospital side, hospitals may face higher supply costs, so that might slow their purchasing of eFax solutions. 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?

Paul, before we go to the next live question, we've received a couple by e-mail. So let me at least take one of them because it leverages the conversation we just had with David regarding revenue growth. The question, I'll summarize it, is more about the company as a whole, but it really does feed off of the 2 pieces we just talked about. And that is returning to total revenue growth for the whole company. So one, when do we expect that to occur? Obviously, if 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 Q4 event. And then the follow-on question to that is, do we expect that to persist? 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 lessen as we see corporate increasing in its growth. So that should imply once we hit a positive total enterprise growth that, that would continue. But as usual, I'll say it is subject to 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. Paul, if there's another live question, ready to take it.

We have a couple more from the lines. The next one is coming from Gene Mannheimer from Freedom Capital Markets.

So, related to those questions around growth of the corporate channel, Scott or Johnny, I think you talked about making some hires this year, maybe about 40 people in sales and sales-related functions. Can you talk about where that stands at this point? And I joined the call a little late, so I don't know if you talked about it already.

No, Gene, we didn't really address any detail. You're correct. You'll recall for those that were 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. 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 our EBITDA margin was ahead of our own expectations, even the margins hadn't been fully baked in, still would be somewhat higher than if you look at the midpoint of our guidance and the imputed margin. So I'll turn it over to Johnny to talk about some of the areas in which he's looking to hire over the course of this year. And then the one caveat I would make is we're going to be very careful on these hires as we look at economic conditions. Right now, we're not seeing anything, whether it's the tariffs or the downstream effects from 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. Why don't you give Gene a flavor of some of the areas that you're looking at to enhance your department?

Gene. It's a really good question. It's really across the entire customer life cycle, right? So we're strengthening a little bit on the marketing and on the operations side. And then we're very much focused as we're able to capture a lot more down market through our e-commerce program, we are focused on hiring on the upmarket sales side, where we still have to engage with the customer, whether it's through sales representatives or sales engineers in order to win and retain those accounts. And then beyond that, it's about implementation and customer service, especially with the advanced product, there's a little bit more engagement there. So almost like a professional services component to it but it's tiny from a revenue perspective, but 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 we're on track, let's put it that way. I think we're putting a lot of emphasis on to our leadership teams to really stay on top of this because as we stated in the last call, this is an investment into the future and into 2026 and the growth in that year and beyond.

And so my follow-up would be just on the SoHo side. I understand the ARPA was down sequentially as a result of the absence of the holiday promotion. But in theory, that ARPA of $14.83 will probably be the low watermark for SoHo this year. Is that the way to think about it?

Hard to say, Gene, because we do, and we are doing right now. We do a variety of promotions and testing. So, what occurred at the end of '24 for holiday promotions that are not ongoing now, but they bleed in because the customer base comes in at basically cheaper ARPAs that will affect 2025. 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 focused or attuned on ARPA movements that are generally measured within nickels and dimes 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 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 quarter. It may very well do that.

I'm thinking about is like $15 something in that area.

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 eFax that will have a higher price at full price. 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, call it, rounded 60,000 gross adds that come in, in a quarter, what's the distribution across the different brands. And that will in large part be driven by what we're doing marketing-wise. 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 ARPA. But yes, it will move within that range. And by the way, depending on the cancel rate. We do certain things that might negatively or positively on the margin influence the cancel rate. And so can it move 10 bps either side of some mean? Yes. Paul, before we go to another live question, I've got another e-mail question. There's actually 2 of them, but they're related. I'll put them under capital allocation is probably the best way to address them. And one has to do with you may notice in our press release, and you'll certainly see it also in the financials in the Q that's filed this evening that we made a $5 million investment, not in our own company, in another company. And so the question is, what is that in the strategic value. Some of you may remember that in I believe it was early '23, we made an investment in one of our vendor partners in the advanced…

The next question is coming from Ian Zaffino from Oppenheimer.

This is Isaac Sellhausen on for Ian. 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 talked about the growth of eFax and upsells. But could you also discuss if there are any notable adds for larger enterprise accounts? And then secondly, tying into that, anything you could share on general sentiment from larger enterprise prospects in terms of making purchasing decisions?

Yes. This is Johnny. I can comment on that, absolutely. And it's a very good question. Thank you for asking that. Absolutely. Yes, we're adding customers, and I think I alluded to it 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 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. We have a robust pipeline. We've had a robust pipeline for multiple quarters, and we've been able to turn that pipeline into new customers as well. So it's really corporate success across the entire customer continuum.

And there were no other questions at this time. I will now hand the call back to Scott Turicchi for closing remarks.

Great. Thank you, Paul. We thank you all for joining us today for our Q1 2025 earnings call. And we will as I mentioned in response to one of the questions, we'll report our Q2 results in within the first week to 10 days of August and obviously have an earnings call associated with that. There may be a couple of conferences that we attend between now and then, so be on the lookout for those announcements. And then clearly, if you have any questions that were not asked during this call, you can feel free to reach the company, and we'll get back to you. Thank you.

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.