0001866633 FALSE 12/31 2023 Q1 P4Y P4Y P3Y http://fasb.org/us-gaap/2022#PrepaidExpenseAndOtherAssetsCurrent http://fasb.org/us-gaap/2022#PrepaidExpenseAndOtherAssetsCurrent 0001866633 2023-01-01 2023-03-31 0001866633 2023-05-04 xbrli:shares 0001866633 2023-03-31 iso4217:USD 0001866633 2022-12-31 iso4217:USD xbrli:shares 0001866633 2022-01-01 2022-03-31 0001866633 us-gaap:CostOfSalesMember 2023-01-01 2023-03-31 0001866633 us-gaap:CostOfSalesMember 2022-01-01 2022-03-31 0001866633 us-gaap:SellingAndMarketingExpenseMember 2023-01-01 2023-03-31 0001866633 us-gaap:SellingAndMarketingExpenseMember 2022-01-01 2022-03-31 0001866633 us-gaap:ResearchAndDevelopmentExpenseMember 2023-01-01 2023-03-31 0001866633 us-gaap:ResearchAndDevelopmentExpenseMember 2022-01-01 2022-03-31 0001866633 us-gaap:GeneralAndAdministrativeExpenseMember 2023-01-01 2023-03-31 0001866633 us-gaap:GeneralAndAdministrativeExpenseMember 2022-01-01 2022-03-31 0001866633 2021-12-31 0001866633 2022-03-31 0001866633 us-gaap:CommonStockMember 2021-12-31 0001866633 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001866633 us-gaap:TreasuryStockCommonMember 2021-12-31 0001866633 us-gaap:RetainedEarningsMember 2021-12-31 0001866633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001866633 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001866633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001866633 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001866633 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001866633 us-gaap:CommonStockMember 2022-03-31 0001866633 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001866633 us-gaap:TreasuryStockCommonMember 2022-03-31 0001866633 us-gaap:RetainedEarningsMember 2022-03-31 0001866633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001866633 us-gaap:CommonStockMember 2022-12-31 0001866633 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001866633 us-gaap:TreasuryStockCommonMember 2022-12-31 0001866633 us-gaap:RetainedEarningsMember 2022-12-31 0001866633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 0001866633 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001866633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-01-01 2023-03-31 0001866633 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001866633 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001866633 us-gaap:TreasuryStockCommonMember 2023-01-01 2023-03-31 0001866633 us-gaap:CommonStockMember 2023-03-31 0001866633 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001866633 us-gaap:TreasuryStockCommonMember 2023-03-31 0001866633 us-gaap:RetainedEarningsMember 2023-03-31 0001866633 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-03-31 ccs:customer ccs:country 0001866633 ccs:ZiffDavisIncMember 2021-10-07 2021-10-07 0001866633 us-gaap:SeniorNotesMember ccs:Notes2028Member 2021-10-07 xbrli:pure 0001866633 ccs:ConsensusCloudSolutionsIncMember ccs:ZiffDavisIncMember 2021-10-08 0001866633 srt:MaximumMember ccs:ConsensusCloudSolutionsIncMember ccs:ZiffDavisIncMember 2022-12-31 0001866633 srt:MinimumMember 2023-01-01 2023-03-31 0001866633 srt:MaximumMember 2023-01-01 2023-03-31 ccs:segment 0001866633 ccs:CorporateInformationDeliveryServicesMember 2023-01-01 2023-03-31 0001866633 ccs:CorporateInformationDeliveryServicesMember 2022-01-01 2022-03-31 0001866633 ccs:SmallOfficeHomeOfficeInformationDeliveryServicesMember 2023-01-01 2023-03-31 0001866633 ccs:SmallOfficeHomeOfficeInformationDeliveryServicesMember 2022-01-01 2022-03-31 0001866633 ccs:OtherInformationDeliveryServicesMember 2023-01-01 2023-03-31 0001866633 ccs:OtherInformationDeliveryServicesMember 2022-01-01 2022-03-31 0001866633 us-gaap:TransferredAtPointInTimeMember 2023-01-01 2023-03-31 0001866633 us-gaap:TransferredAtPointInTimeMember 2022-01-01 2022-03-31 0001866633 us-gaap:TransferredOverTimeMember 2023-01-01 2023-03-31 0001866633 us-gaap:TransferredOverTimeMember 2022-01-01 2022-03-31 0001866633 us-gaap:TradeNamesMember 2023-03-31 0001866633 us-gaap:TradeNamesMember 2022-12-31 0001866633 us-gaap:OtherIntangibleAssetsMember 2023-03-31 0001866633 us-gaap:OtherIntangibleAssetsMember 2022-12-31 0001866633 us-gaap:TradeNamesMember 2023-01-01 2023-03-31 0001866633 us-gaap:TradeNamesMember 2023-03-31 0001866633 us-gaap:PatentsMember 2023-01-01 2023-03-31 0001866633 us-gaap:PatentsMember 2023-03-31 0001866633 us-gaap:CustomerRelationshipsMember 2023-01-01 2023-03-31 0001866633 us-gaap:CustomerRelationshipsMember 2023-03-31 0001866633 us-gaap:OtherIntangibleAssetsMember 2023-01-01 2023-03-31 0001866633 us-gaap:OtherIntangibleAssetsMember 2023-03-31 0001866633 srt:MinimumMember us-gaap:CustomerRelationshipsMember 2023-01-01 2023-03-31 0001866633 srt:MaximumMember us-gaap:CustomerRelationshipsMember 2023-01-01 2023-03-31 0001866633 us-gaap:TradeNamesMember 2022-01-01 2022-06-30 0001866633 us-gaap:TradeNamesMember 2022-12-31 0001866633 us-gaap:PatentsMember 2022-01-01 2022-06-30 0001866633 us-gaap:PatentsMember 2022-12-31 0001866633 us-gaap:CustomerRelationshipsMember 2022-01-01 2022-06-30 0001866633 us-gaap:CustomerRelationshipsMember 2022-12-31 0001866633 us-gaap:OtherIntangibleAssetsMember 2022-01-01 2022-06-30 0001866633 us-gaap:OtherIntangibleAssetsMember 2022-12-31 0001866633 us-gaap:SeniorNotesMember ccs:SeniorNotesDue2026Member 2023-03-31 0001866633 us-gaap:SeniorNotesMember ccs:SeniorNotesDue2026Member 2022-12-31 0001866633 ccs:SeniorNotesDue2028Member us-gaap:SeniorNotesMember 2023-03-31 0001866633 ccs:SeniorNotesDue2028Member us-gaap:SeniorNotesMember 2022-12-31 0001866633 us-gaap:SeniorNotesMember 2023-03-31 0001866633 us-gaap:SeniorNotesMember 2022-12-31 0001866633 ccs:Notes2026Member us-gaap:SeniorNotesMember 2021-10-07 0001866633 ccs:Notes2026Member us-gaap:SeniorNotesMember 2021-10-07 2021-10-07 0001866633 ccs:Notes2026Member us-gaap:SeniorNotesMember us-gaap:DebtInstrumentRedemptionPeriodOneMember 2021-10-07 2021-10-07 0001866633 ccs:Notes2026Member us-gaap:SeniorNotesMember us-gaap:DebtInstrumentRedemptionPeriodOneMember 2021-10-07 0001866633 ccs:Notes2026Member us-gaap:SeniorNotesMember us-gaap:DebtInstrumentRedemptionPeriodTwoMember 2021-10-07 2021-10-07 0001866633 ccs:Notes2026Member us-gaap:SeniorNotesMember 2023-03-31 0001866633 ccs:Notes2026Member us-gaap:SeniorNotesMember 2022-12-31 0001866633 us-gaap:SeniorNotesMember ccs:Notes2028Member 2021-10-07 2021-10-07 0001866633 us-gaap:SeniorNotesMember ccs:Notes2028Member 2023-03-31 0001866633 us-gaap:SeniorNotesMember ccs:Notes2028Member 2022-12-31 0001866633 us-gaap:LineOfCreditMember us-gaap:RevolvingCreditFacilityMember 2022-03-04 0001866633 us-gaap:LineOfCreditMember us-gaap:RevolvingCreditFacilityMember 2023-03-31 0001866633 srt:MinimumMember us-gaap:LineOfCreditMember us-gaap:RevolvingCreditFacilityMember us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember 2022-03-04 2022-03-04 0001866633 srt:MaximumMember us-gaap:LineOfCreditMember us-gaap:RevolvingCreditFacilityMember us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember 2022-03-04 2022-03-04 0001866633 srt:MinimumMember 2023-03-31 0001866633 srt:MaximumMember 2023-03-31 0001866633 2022-03-01 0001866633 2022-03-01 2023-03-31 0001866633 ccs:EquityIncentivePlan2021Member 2021-12-31 0001866633 ccs:EquityIncentivePlan2021Member 2023-03-31 0001866633 ccs:EquityIncentivePlan2021Member srt:DirectorMember ccs:RestrictedStockAndRestrictedStockUnitsRSUsMember 2023-01-01 2023-03-31 0001866633 ccs:StaffMember ccs:EquityIncentivePlan2021Member ccs:RestrictedStockAndRestrictedStockUnitsRSUsMember 2023-01-01 2023-03-31 0001866633 ccs:EquityIncentivePlan2021Member ccs:ChiefExecutiveOfficerAndChiefOperatingOfficerMember ccs:RestrictedStockAndRestrictedStockUnitsRSUsMember 2023-01-01 2023-03-31 0001866633 ccs:EquityIncentivePlan2021Member ccs:RestrictedStockAndRestrictedStockUnitsRSUsMember 2023-01-01 2023-03-31 0001866633 srt:MinimumMember ccs:LookBackPeriodOneMember 2023-01-01 2023-03-31 0001866633 srt:MaximumMember ccs:LookBackPeriodOneMember 2023-01-01 2023-03-31 0001866633 srt:MinimumMember ccs:LookBackPeriodTwoMember 2023-01-01 2023-03-31 0001866633 srt:MaximumMember ccs:LookBackPeriodTwoMember 2023-01-01 2023-03-31 0001866633 ccs:MarketBasedRestrictedStockAwardsMember 2023-01-01 2023-03-31 0001866633 us-gaap:RestrictedStockMember 2022-12-31 0001866633 us-gaap:RestrictedStockMember 2023-01-01 2023-03-31 0001866633 us-gaap:RestrictedStockMember 2023-03-31 0001866633 us-gaap:RestrictedStockUnitsRSUMember 2022-12-31 0001866633 us-gaap:RestrictedStockUnitsRSUMember 2023-01-01 2023-03-31 0001866633 us-gaap:RestrictedStockUnitsRSUMember 2023-03-31 0001866633 us-gaap:EmployeeStockMember ccs:EmployeeStockPurchasePlan2021Member 2021-10-31 0001866633 us-gaap:EmployeeStockMember ccs:EmployeeStockPurchasePlan2021Member 2021-10-01 2021-10-31 0001866633 us-gaap:EmployeeStockMember ccs:EmployeeStockPurchasePlan2021Member 2023-01-01 2023-03-31 0001866633 us-gaap:EmployeeStockMember ccs:EmployeeStockPurchasePlan2021Member 2023-03-31 0001866633 us-gaap:EmployeeStockMember 2023-01-01 2023-03-31 0001866633 us-gaap:StockCompensationPlanMember 2023-01-01 2023-03-31 0001866633 us-gaap:StockCompensationPlanMember 2022-01-01 2022-03-31 0001866633 us-gaap:EmployeeStockMember 2022-01-01 2022-03-31 0001866633 country:US 2023-01-01 2023-03-31 0001866633 country:US 2022-01-01 2022-03-31 0001866633 country:CA 2023-01-01 2023-03-31 0001866633 country:CA 2022-01-01 2022-03-31 0001866633 country:IE 2023-01-01 2023-03-31 0001866633 country:IE 2022-01-01 2022-03-31 0001866633 ccs:AllOtherCountriesNotSeparatelyDisclosedMember 2023-01-01 2023-03-31 0001866633 ccs:AllOtherCountriesNotSeparatelyDisclosedMember 2022-01-01 2022-03-31 0001866633 ccs:ForeignCountriesNotSeparatelyDisclosedMember 2023-01-01 2023-03-31 0001866633 ccs:ForeignCountriesNotSeparatelyDisclosedMember 2022-01-01 2022-03-31 0001866633 country:US 2023-03-31 0001866633 country:US 2022-12-31 0001866633 country:CA 2023-03-31 0001866633 country:CA 2022-12-31 0001866633 country:IE 2023-03-31 0001866633 country:IE 2022-12-31 0001866633 ccs:AllOtherCountriesNotSeparatelyDisclosedMember 2023-03-31 0001866633 ccs:AllOtherCountriesNotSeparatelyDisclosedMember 2022-12-31 0001866633 ccs:ForeignCountriesNotSeparatelyDisclosedMember 2023-03-31 0001866633 ccs:ForeignCountriesNotSeparatelyDisclosedMember 2022-12-31 0001866633 us-gaap:AccumulatedTranslationAdjustmentMember 2022-12-31 0001866633 us-gaap:AccumulatedTranslationAdjustmentMember 2023-01-01 2023-03-31 0001866633 us-gaap:AccumulatedTranslationAdjustmentMember 2023-03-31 0001866633 srt:AffiliatedEntityMember 2023-01-01 2023-03-31 0001866633 srt:AffiliatedEntityMember 2022-01-01 2022-03-31 0001866633 ccs:ConsensusCloudSolutionsIncMember ccs:ZiffDavisIncMember 2022-12-31 0001866633 ccs:ConsensusCloudSolutionsIncMember ccs:ZiffDavisIncMember 2023-03-31 0001866633 srt:AffiliatedEntityMember ccs:ZiffDavisIncMember 2023-03-31 0001866633 srt:AffiliatedEntityMember ccs:ZiffDavisIncMember 2022-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to
Commission File Number: 001-40750

Consensus Cloud Solutions, Inc.
(Exact name of registrant as specified in its charter)

Delaware |  | 87-1139414
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

700 S. Flower Street, 15th Floor
Los Angeles, California 90017
(Address of principal executive offices)
(323) 860-9200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol |  | Name of each exchange on which registered
Common Stock, $0.01 par value |  | CCSI |  | Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of May 4, 2023, there were approximately 19,659,661 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS

|  |  | Page
Part I. | Financial Information |
| Item 1. | Financial Statements |
|  | Condensed Consolidated Balance Sheets (unaudited) | 3
|  | Condensed Consolidated Statements of Income (unaudited) | 4
|  | Condensed Consolidated Statements of Comprehensive Income (unaudited) | 5
|  | Condensed Consolidated Statements of Cash Flows (unaudited) | 6
|  | Condensed Consolidated Statements of Stockholders’ (Deficit) Equity (unaudited) | 7
|  | Notes to Condensed Consolidated Financial Statements (unaudited) | 9
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 36
| Item 4. | Controls and Procedures | 37
Part II. | Other Information |
| Item 1. | Legal Proceedings | 38
| Item 1A. | Risk Factors | 38
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38
| Item 3. | Defaults Upon Senior Securities | 39
| Item 4. | Mine Safety Disclosures | 39
| Item 5. | Other Information | 39
| Item 6. | Exhibits | 40
|  | Signatures | 41

-2-

Part I - Financial Information
Item 1. Financial Statements.
CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except share and per share data)

| March 31, 2023 |  | December 31, 2022 |
ASSETS |  |  |  |
Cash and cash equivalents | $ | 111,265 |  |  | $ | 94,164 |  |
Accounts receivable, net of allowances of $4,727 and $4,681, respectively | 29,644 |  |  | 28,029 |  |
Prepaid expenses and other current assets | 14,607 |  |  | 14,335 |  |
Total current assets | 155,516 |  |  | 136,528 |  |
Property and equipment, net | 61,419 |  |  | 54,958 |  |
Operating lease right-of-use assets | 7,459 |  |  | 7,875 |  |
Intangibles, net | 48,096 |  |  | 49,156 |  |
Goodwill | 347,752 |  |  | 346,585 |  |
Deferred income taxes | 36,639 |  |  | 35,981 |  |
Other assets | 6,392 |  |  | 2,816 |  |
TOTAL ASSETS | $ | 663,273 |  |  | $ | 633,899 |  |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |  |  |  |
Accounts payable and accrued expenses | $ | 54,305 |  |  | $ | 41,246 |  |
Income taxes payable, current | 2,786 |  |  | 2,548 |  |
Deferred revenue, current | 25,336 |  |  | 24,579 |  |
Operating lease liabilities, current | 2,818 |  |  | 2,793 |  |
Due to Former Parent | 207 |  |  | 156 |  |
Total current liabilities | 85,452 |  |  | 71,322 |  |
Long-term debt | 794,341 |  |  | 793,865 |  |
Deferred revenue, noncurrent | 2,316 |  |  | 2,319 |  |
Operating lease liabilities, noncurrent | 13,379 |  |  | 13,877 |  |
Liability for uncertain tax positions | 7,438 |  |  | 6,725 |  |
Deferred income taxes | 737 |  |  | 728 |  |
Other long-term liabilities | 321 |  |  | 324 |  |
TOTAL LIABILITIES | 903,984 |  |  | 889,160 |  |
Commitments and contingencies (Note 8) |  |  |  |
Common stock, $0.01 par value. Authorized 120,000,000; total issued is 20,118,967 and 20,105,545 shares and total outstanding is 19,659,661 and 19,916,431 shares at March 31, 2023 and December 31, 2022, respectively | 201 |  |  | 201 |  |
Treasury stock, at cost (459,306 and 189,114 shares at March 31, 2023 and December 31, 2022, respectively) | (16,791) |  |  | (7,596) |  |
Additional paid-in capital | 26,859 |  |  | 21,650 |  |
Accumulated deficit | (234,950) |  |  | (250,408) |  |
Accumulated other comprehensive loss | (16,030) |  |  | (19,108) |  |
TOTAL STOCKHOLDERS’ DEFICIT | (240,711) |  |  | (255,261) |  |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 663,273 |  |  | $ | 633,899 |  |

See Notes to Condensed Consolidated Financial Statements
-3-

CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except share and per share data)

|  |  | Three Months Ended March 31,
|  |  |  |  | 2023 |  | 2022
Revenues |  |  |  |  | $ | 91,454 |  |  | $ | 89,298 |
Cost of revenues (1) |  |  |  |  | 17,508 |  |  | 15,104 |
Gross profit |  |  |  |  | 73,946 |  |  | 74,194 |
Operating expenses: |  |  |  |  |  |  |
Sales and marketing (1) |  |  |  |  | 16,893 |  |  | 15,830 |
Research, development and engineering (1) |  |  |  |  | 1,904 |  |  | 2,336 |
General and administrative (1) |  |  |  |  | 21,152 |  |  | 17,369 |
Total operating expenses |  |  |  |  | 39,949 |  |  | 35,535 |
Income from operations |  |  |  |  | 33,997 |  |  | 38,659 |
Interest expense |  |  |  |  | (12,566) |  |  | (13,274) |
Other (expense) income, net |  |  |  |  | (844) |  |  | 174 |
Income before income taxes |  |  |  |  | 20,587 |  |  | 25,559 |
Income tax expense |  |  |  |  | 5,129 |  |  | 7,038 |
Net income |  |  |  |  | $ | 15,458 |  |  | $ | 18,521 |
Net income per common share: |  |  |  |  |  |  |
Basic |  |  |  |  | $ | 0.78 |  |  | $ | 0.93 |
Diluted |  |  |  |  | $ | 0.78 |  |  | $ | 0.92 |
Weighted average shares outstanding: |  |  |  |  |  |  |
Basic |  |  |  |  | 19,847,280 |  |  | 19,921,375 |
Diluted |  |  |  |  | 19,884,657 |  |  | 20,035,827 |

(1) Includes share-based compensation expense as follows: |  |  |  |  |  |  |
Cost of revenues |  |  |  |  | $ | 296 |  |  | $ | 223 |
Sales and marketing |  |  |  |  | 372 |  |  | 273 |
Research, development and engineering |  |  |  |  | 40 |  |  | 356 |
General and administrative |  |  |  |  | 4,432 |  |  | 4,551 |
Total |  |  |  |  | $ | 5,140 |  |  | $ | 5,403 |

See Notes to Condensed Consolidated Financial Statements
-4-

CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)

|  |  | Three Months Ended March 31,
|  |  |  |  | 2023 |  | 2022
Net income |  |  |  |  | $ | 15,458 |  |  | $ | 18,521 |
Other comprehensive income (loss): |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  |  |  | 3,078 |  |  | (2,117) |
Other comprehensive income (loss) |  |  |  |  | 3,078 |  |  | (2,117) |
Comprehensive income |  |  |  |  | $ | 18,536 |  |  | $ | 16,404 |

See Notes to Condensed Consolidated Financial Statements
-5-

CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

| Three Months Ended March 31,
| 2023 |  | 2022
Cash flows from operating activities: |  |  |
Net income | $ | 15,458 |  |  | $ | 18,521 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Depreciation and amortization | 4,347 |  |  | 3,706 |
Amortization of financing costs and discounts | 495 |  |  | 461 |
Non-cash operating lease costs | 416 |  |  | 447 |
Share-based compensation | 5,140 |  |  | 5,403 |
Provision for doubtful accounts | 1,831 |  |  | 608 |
Deferred income taxes, net | (66) |  |  | (1,310) |
Changes in operating assets and liabilities: |  |  |
Decrease (increase) in: |  |  |
Accounts receivable | (3,429) |  |  | (3,148) |
Prepaid expenses and other current assets | (266) |  |  | (494) |
Other assets | 424 |  |  | (433) |
Increase (decrease) in: |  |  |
Accounts payable and accrued expenses | 12,400 |  |  | 14,799 |
Income taxes payable | 206 |  |  | 4,776 |
Deferred revenue | 735 |  |  | 1,886 |
Operating lease liabilities | (423) |  |  | (459) |
Liability for uncertain tax positions | 713 |  |  | — |
Other liabilities | (10) |  |  | 5,145 |
Net cash provided by operating activities | 37,971 |  |  | 49,908 |
Cash flows from investing activities: |  |  |
Purchases of property and equipment | (8,548) |  |  | (6,915) |
Acquisition of businesses, net of cash received | — |  |  | (12,855) |
Purchase of investments | (4,000) |  |  | — |
Purchases of intangible assets | — |  |  | (1,000) |
Net cash used in investing activities | (12,548) |  |  | (20,770) |
Cash flows from financing activities: |  |  |
Debt issuance costs | — |  |  | (232) |
Repurchase of common stock | (9,195) |  |  | — |
Shares withheld related to net share settlement | (451) |  |  | (1,173) |
Net cash used in financing activities | (9,646) |  |  | (1,405) |
Effect of exchange rate changes on cash and cash equivalents | 1,324 |  |  | (647) |
Net change in cash and cash equivalents | 17,101 |  |  | 27,086 |
Cash and cash equivalents at beginning of period | 94,164 |  |  | 66,778 |
Cash and cash equivalents at end of period | $ | 111,265 |  |  | $ | 93,864 |

See Notes to Condensed Consolidated Financial Statements
-6-

CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands except share amounts)

| Common stock |  |  |  |  |  | Additional paid-in | Treasury stock |  | Accumulated |  | Accumulated other comprehensive |  |  |  |  | Total
| Shares |  | Amount |  |  |  |  |  |  |  | capital | Shares | Amount |  | Deficit |  | loss |  |  |  |  | Equity
Balance, January 1, 2022 | 19,978,580 |  |  | $ | 200 |  |  |  |  |  |  |  |  | $ | 2,878 |  | — |  | $ | — |  |  | $ | (318,886) |  |  | $ | (16,857) |  |  |  |  |  | $ | (332,665) |
Net income | — |  |  | — |  |  |  |  |  |  |  |  | — |  | — |  | — |  |  | 18,521 |  |  | — |  |  |  |  |  | 18,521 |
Other comprehensive loss | — |  |  | — |  |  |  |  |  |  |  |  | — |  | — |  | — |  |  | — |  |  | (2,117) |  |  |  |  |  | (2,117) |
Vested restricted stock | 36,870 |  |  | — |  |  |  |  |  |  |  |  | — |  | — |  | — |  |  | — |  |  | — |  |  |  |  |  | — |
Shares withheld related to net share settlement | (19,922) |  |  | — |  |  |  |  |  |  |  |  | (1,173) |  | — |  | — |  |  | — |  |  | — |  |  |  |  |  | (1,173) |
Share-based compensation | — |  |  | — |  |  |  |  |  |  |  |  | 5,403 |  | — |  | — |  |  | — |  |  | — |  |  |  |  |  | 5,403 |
Reclassifications related to the Separation | — |  |  | — |  |  |  |  |  |  |  |  | — |  | — |  | — |  |  | (2,672) |  |  | — |  |  |  |  |  | (2,672) |
Balance, March 31, 2022 | 19,995,528 |  |  | $ | 200 |  |  |  |  |  |  |  |  | $ | 7,108 |  | — |  | $ | — |  |  | $ | (303,037) |  |  | $ | (18,974) |  |  |  |  |  | $ | (314,703) |

| Common stock |  |  |  |  |  | Additional paid-in | Treasury stock |  | Accumulated |  | Accumulated other comprehensive |  |  | Total
| Shares |  | Amount |  |  |  |  |  |  |  | capital | Shares | Amount |  | Deficit |  | loss |  |  | Equity
Balance, January 1, 2023 | 20,105,545 |  |  | $ | 201 |  |  |  |  |  |  |  |  | $ | 21,650 |  | (189,114) |  | $ | (7,596) |  |  | $ | (250,408) |  |  | $ | (19,108) |  |  |  | $ | (255,261) |
Net income | — |  |  | — |  |  |  |  |  |  |  |  | — |  | — |  | — |  |  | 15,458 |  |  | — |  |  |  | 15,458 |
Other comprehensive income | — |  |  | — |  |  |  |  |  |  |  |  | — |  | — |  | — |  |  | — |  |  | 3,078 |  |  |  | 3,078 |
Vested restricted stock | 24,840 |  |  | — |  |  |  |  |  |  |  |  | — |  | — |  | — |  |  | — |  |  | — |  |  |  | — |
Shares withheld related to net share settlement | (11,418) |  |  | — |  |  |  |  |  |  |  |  | (451) |  | — |  | — |  |  | — |  |  | — |  |  |  | (451) |
Repurchase of common stock | — |  |  | — |  |  |  |  |  |  |  |  | — |  | (270,192) |  | (9,195) |  |  | — |  |  | — |  |  |  | (9,195) |
Share-based compensation | — |  |  | — |  |  |  |  |  |  |  |  | 5,660 |  | — |  | — |  |  | — |  |  | — |  |  |  | 5,660 |
Balance, March 31, 2023 | 20,118,967 |  |  | $ | 201 |  |  |  |  |  |  |  |  | $ | 26,859 |  | (459,306) |  | $ | (16,791) |  |  | $ | (234,950) |  |  | $ | (16,030) |  |  |  | $ | (240,711) |

See Notes to Condensed Consolidated Financial Statements
-7-

CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The Company
Consensus Cloud Solutions, Inc., together with its subsidiaries (“Consensus Cloud Solutions”, “Consensus”, the “Company”, “our”, “us” or “we”), is a provider of secure information delivery services with a scalable Software-as-a-Service (“SaaS”) platform. Consensus serves approximately 1 million customers of all sizes, from enterprises to individuals, across approximately 50 countries and multiple industry verticals including healthcare, government, financial services, law and education. Beginning as an online fax company over two decades ago, Consensus has evolved into a global provider of enterprise secure communication solutions. Our communication and digital signature solutions enable our customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries.
Consensus Cloud Solutions, Inc. Spin-Off
On September 21, 2021, J2 Global, Inc., known since October 7, 2021 as Ziff Davis, Inc. (“Ziff Davis” or the “Former Parent”) announced that its Board of Directors approved its separation of the Cloud Fax business (the “Separation” or the “Spin-Off”), into an independent publicly traded company, Consensus Cloud Solutions, Inc. On October 7, 2021, the Separation was completed and the Former Parent transferred certain assets and liabilities associated with its Cloud Fax business to Consensus, including the equity interests in J2 Cloud Services, LLC (“J2 Cloud Services”), in exchange for approximately $259.1 million in cash, an asset related to $500.0 million in aggregate principal amount of the 6.5% Senior Notes due 2028, and the return of the assets and liabilities related to the non-fax business back to Ziff Davis. On October 8, 2021, Consensus began trading on the Nasdaq Stock Market LLC (“Nasdaq”) under the stock symbol “CCSI”. Ziff Davis retained a 19.9% interest in Consensus following the Separation. Subsequently Ziff Davis has sold, or otherwise disposed of, a portion of its Consensus shares, reducing its beneficial ownership in the Company to under 10% as of December 31, 2022 (see Note 15 - Related Party Transactions).
Principles of Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Consensus and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements, the Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of these interim financial statements have been reflected. It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2022, included in our Annual Report (Form 10-K) filed with the SEC on March 31, 2023. Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein.
The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.
-8-

Use of Estimates
The preparation of condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about the reported amounts of revenue and expenses during the reporting period. The Company believes that its most significant estimates are those related to revenue recognition, share-based compensation expense, impairment or disposal of long-lived and intangible asset impairment, income taxes, contingencies and allowances for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors that the Company believes to be reasonable under the circumstances. Actual results could materially differ from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the novel coronavirus pandemic (“COVID-19”).
Allowances for Doubtful Accounts
The Company maintains an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Income. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status. It also considers customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. On an ongoing basis, management evaluates the appropriateness of these reserves.
Revenue Recognition
The Company recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues).
Principal vs. Agent
The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), for principal-agent considerations and assesses: (i) if another party is involved in providing goods or services to the customer and (ii) whether the Company controls the specified goods or services prior to transferring control to the customer.
Sales Taxes
The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by the Company from a customer.
Impairment or Disposal of Long-Lived Assets
The Company accounts for long-lived assets, which include property and equipment, operating lease right-of-use assets and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with the provisions of FASB ASC Topic No. 360, Property, Plant, and Equipment (“ASC 360”). ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset. If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference.
-9-

The Company assesses the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors it considers important which could individually or in combination trigger an impairment review include the following:
•Significant underperformance relative to expected historical or projected future operating results;
•Significant changes in the manner of the Company’s use of the acquired assets or the strategy for Consensus’ overall business;
•Significant negative industry or economic trends;
•Significant decline in the Company’s stock price for a sustained period; and
•The Company’s market capitalization relative to net book value.
If the Company determines that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, it would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.
The Company assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of long-lived assets may not be recoverable. No impairment was recorded in the first quarter of 2023 and 2022.
The Company classifies its long-lived assets to be sold as held for sale in the period if (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset. The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.
Business Combinations and Valuation of Goodwill and Intangible Assets
The Company applies the acquisition method of accounting for business combinations in accordance with GAAP and uses estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets, and liabilities acquired. Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions. The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from 1 to 20 years and the amortization expense is included in general and administrative expenses on the Condensed Consolidated Statements of Income.
The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized, but tested annually for impairment or more frequently if the Company believes indicators of
-10-

impairment exist. In connection with the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test on goodwill. The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference. No impairment was recorded in the first quarter of 2023 or 2022.
Investments
The Company accounts for investments in equity securities in accordance with FASB ASC Topic 321, Investments - Equity Securities (“ASC 321”), which requires the accounting for equity investments, other than those accounted for under the equity method of accounting, generally be measured at fair value for equity securities with readily determinable fair values. Equity securities without a readily determinable fair value, which are not accounted for under the equity method of accounting, are measured at their cost, less impairment, if any, and adjusted for observable price changes arising from orderly transactions in the same or similar investment from the same issuer. Any unrealized gains or losses are reported within earnings on the Condensed Consolidated Statement of Income.
As of March 31, 2023 the carrying amount of the Company’s investments accounted for using the measurement alternative method in accordance with ASC 321 was $4.0 million and is included in other assets within the Company’s Condensed Consolidated Balance Sheets. If the Company becomes aware of a significant decline in value that is other-than-temporary, the Company assesses whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other market conditions. The loss will be recorded in the period in which the Company identifies the decline. No impairment has been recorded. During the three months ended March 31, 2023, the Company recognized zero investment gain (loss).
Income Taxes
The Company’s income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that certain positions might be challenged despite the Company’s belief that its tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate (see Note 9 - Income Taxes).
The Company accounts for income taxes in accordance with FASB ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized. The valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuation allowance, the Company reviews historical and future expected operating results and other factors, including its recent cumulative earnings experience, expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is more likely than not that deferred tax assets are realizable.
ASC 740 provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in the financial statements and applies to all income tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuring uncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Company
-11-

recognized accrued interest and penalties related to uncertain income tax positions in income tax expense on its Condensed Consolidated Statements of Income.
In addition, on March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (“CARES”) Act” was enacted into law providing for changes to various tax laws that impact business. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law and is effective for taxable years beginning after December 31, 2022. The IRA includes a new corporate alternative minimum tax of 15% on adjusted financial statement income of corporations with profits greater than $1 billion, a 1% excise tax on the fair market value of net share buy-backs, in addition to multiple incentives to the clean energy industry.
The Company does not believe these provisions have a significant impact to our current and deferred income tax balances. The Company benefited from the technical correction to tax depreciation related to qualified improvement property and has elected to defer the employer side social security payments where eligible. The Company remitted the deferred employer side social security payments during the year ended December 31, 2022. The Company will continue to evaluate the impact of these provisions on its financial statements.
Share-Based Compensation
The Company accounts for share-based awards to employees and non-employees in accordance with the provisions of FASB ASC Topic No. 718, Compensation - Stock Compensation (“ASC 718”). Accordingly, the Company measures share-based compensation expense at the grant date, based on the fair value of the award, and recognizes the expense over the employee’s requisite service period using the straight-line method. The measurement of share-based compensation expense is based on several criteria, including but not limited to, the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award cancellation rate. These inputs are subjective and are determined using management’s judgment. If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, the Company may change the input factors used in determining future share-based compensation expense. Any such changes could materially impact the Company’s results of operations in the period in which the changes are made and in periods thereafter. The Company estimates the expected term based upon the contractual term of the award (see Note 11 - Equity Incentive and Employee Stock Purchase Plan).
Earnings Per Common Share (“EPS”)
EPS is calculated pursuant to the two-class method as defined in FASB ASC Topic No. 260, Earnings per Share (“ASC 260”), which specifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents are considered participating securities and should be included in the computation of EPS pursuant to the two-class method.
Basic EPS is calculated by dividing net distributed and undistributed earnings allocated to common shareholders, excluding participating securities, by the weighted-average number of common shares outstanding. The Company’s participating securities consist of its unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents. Diluted EPS includes the determinants of basic EPS and, in addition, reflects the impact of other potentially dilutive shares outstanding during the period. The dilutive effect of participating securities is calculated under the more dilutive of either the treasury method or the two-class method.
-12-

Segment Reporting
FASB ASC Topic No. 280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report information about operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company’s business segment is based on the organization’s structure used by the chief operating decision maker for making operating and investment decisions and for assessing performance. The chief operating decision maker views the Company as one reportable segment known as Cloud Fax (see Note 13 - Segment Information).
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
2.Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, that extends the period of time preparers can utilize the reference rate reform relief guidance. To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024. The Company does not expect the adoption of this standard to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This ASU clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this ASU are effective for fiscal years beginning after December 15, 2024, including the interim periods within those fiscal years. Early adoption is permitted. This amendment should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company does not expect the adoption of this standard to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50). This ASU enhances the transparency of supplier finance programs. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. This amendment should be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on rollforward information, which should be applied prospectively. The Company adopted ASU 2022-04 in the first quarter of 2023. The adoption of this standard did not have an impact on the Company’s condensed consolidated financial statements and related disclosures.
In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangement, which addresses the accounting by private companies and certain not-for-profit entities (NFPs) for common control leases and amends the accounting for leasehold improvements in common-control arrangements for all entities. This ASU offers: 1) private companies, as well as not-for-profit entities that are not conduit bond obligors, a practical expedient that gives them the option of using the written terms and conditions of a common-control arrangement when determining whether a lease exists and the subsequent accounting for the lease, including the lease’s classification (Issue 1) and 2) amends the accounting for leasehold improvements in common-control arrangements for all entities (Issue 2). The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statement that have not yet been made available. If an entity adopts the amendments in an interim period, it must must adopt them as of the beginning of the fiscal year that includes the interim period. The amendments applicable to the Company (Issue 2) are required to be applied using the option of one of the following adoption methods:
-13-

1.Prospective application to all new leasehold improvements recognized on or after the date that the entity first applies the amendments in this ASU;
2.Prospective application to all new and existing leasehold improvements recognized on or after the date that the entity first applies the amendments in this ASU, with any remaining balance of leasehold improvements amortized over their remaining useful life to the common-control group determined as of that date; or
3.Retrospective application to the beginning of the period in which an entity first applied Topic 842, with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to opening retained earnings at the beginning of the earliest period presented in accordance with Topic 842.
The Company does not expect the adoption of this standard to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted in any interim period. If an entity adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that interim period. The amendment should be applied on either a modified retrospective or a retrospective basis. The Company does not expect the adoption of this standard to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
3.Revenues
The Company’s revenues substantially consist of monthly recurring subscription and usage-based fees from customers accessing the Company’s cloud-based subscription (the “Cloud Fax Services”), a significant portion of which are paid in advance by credit card. The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned. The Cloud Fax Services allow customers to access the Company’s software without taking possession.
Revenues from external customers classified by revenue source are as follows (in thousands):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2023 |  | 2022
Corporate |  |  |  |  | $ | 49,407 |  |  | $ | 46,519 |
Small office home office (“SoHo”) |  |  |  |  | 42,030 |  |  | 42,779 |
Other |  |  |  |  | 17 |  |  | — |
Total revenues |  |  |  |  | $ | 91,454 |  |  | $ | 89,298 |
Timing of revenue recognition |  |  |  |  |  |  |
Point in time |  |  |  |  | $ | 153 |  |  | $ | 131 |
Over time |  |  |  |  | 91,301 |  |  | 89,167 |
Total |  |  |  |  | $ | 91,454 |  |  | $ | 89,298 |

The Company has recorded $11.5 million and $10.9 million of revenue for the three months ended March 31, 2023 and 2022, respectively, that was previously included in the deferred revenue balance as of the beginning of each respective year.
As of March 31, 2023 and December 31, 2022, the Company acquired zero and $4.8 million, respectively, of deferred revenue in connection with the Company’s acquisition of Summit Healthcare Services, Inc. on February 4, 2022.
-14-

Performance Obligations
Generally, the Company’s contracts with customers include one performance obligation, however, certain contracts may include multiple performance obligations. For such arrangements, revenues are allocated to each performance obligation based on their relative standalone selling price. The Company accounts for these arrangements as a single performance obligation as the performance obligations related to a specific arrangement are all consumed simultaneously.
The Company satisfies its performance obligations upon delivery of services to its customers. Payment terms vary by
type and location of the Company’s customers and the services offered. The time between invoicing and when payment is due
is not significant. Due to the nature of the services provided, there are no obligations for returns.
Significant Judgments
Determining whether products and services are considered distinct performance obligations may require significant judgment. When a cloud-based service includes both on-premises software licenses and cloud-based services, judgment is required to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the cloud-based service and recognized over time. The Cloud Fax Services and related licenses depend on a significant level of integration between the desktop applications and cloud-based services and are accounted for together as one performance obligation.
Judgment is also required to determine the standalone selling price for each distinct performance obligation when there are multiple performance obligations. In certain cases, the Company is able to establish the standalone selling price based on observable prices of products or services sold or priced separately in comparable circumstances to similar customers. The Company uses a range of amounts to estimate the standalone selling price when each of the products and services is sold separately to determine whether there is a discount to be allocated based on the relative standalone selling price of the various products and services.
Performance Obligations Satisfied Over Time
The Company’s business consists primarily of performance obligations that are satisfied over time. This has been determined based on the fact that the nature of services offered are subscription based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. Depending on the individual contracts with the customer, revenue for these services is recognized over the contract period when faxing capabilities are provided. The Company expects to recognize revenue for Corporate contracts in a range from month-to-month up to 36 months and recognize revenue for SoHo contracts in a range from month-to-month up to one year.
The Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligations over time is a time-based measure. The Company recognizes revenue on a straight-line basis throughout the subscription period and believes that the method used is a faithful depiction of the transfer of goods and services.
Practical Expedients
Existence of a Significant Financing Component in a Contract
As a practical expedient, the Company has not assessed whether a contract has a significant financing component because the Company expects at contract inception that the period between payment by the customer and the transfer of promised goods or services by the Company to the customer will be one year or less. In addition, the Company has determined that the payment terms the Company provides to its customers are structured primarily for reasons other than the provision of finance to the Company. The Company typically charges a single upfront amount for services, as other payment terms would affect the nature of the risk assumed by the Company due to the costs of the customer acquisition and the highly competitive and commoditized nature of the business the Company operates.
-15-

Costs to Fulfill a Contract
The Company’s revenues are primarily generated from customer contracts that are for one year or less. Costs primarily consist of incentive compensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the revenue is earned. Incentive compensation is paid upon the issuance or renewal of the customer contract. As a practical expedient, for amortization periods that are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred. For those customer contracts greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.
Revenues Invoiced
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.
4. Fair Value Measurements
The Company complies with the provisions of FASB ASC Topic No. 820, Fair Value Measurement, (“ASC 820”), which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

| § | Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
| § | Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
| § | Level 3 – Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The fair value of long-term debt is determined using recent quoted market prices or dealer quotes for each of the Company’s instruments, which are Level 1 inputs (see Note 6 - Debt).
Assets Measured on a Non-Recurring Basis
The Company’s non-financial assets, which primarily consist of goodwill, other intangible assets and fixed assets, are reported at carrying value, or at fair value as of their acquisition dates, and are not required to be measured at fair value on a recurring basis. However, on a periodic basis (at least annually for goodwill and indefinite-lived intangibles or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable), non-financial assets are assessed for impairment. If impaired, the carrying values of the assets are written down to fair value using Level 3 inputs.
5. Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets. The fair values of these identified intangible assets are based upon expected future cash flows or income, which take into consideration certain assumptions such as customer turnover, trade names and patent lives. These determinations are primarily based upon the Company’s historical experience and expected benefit of each intangible asset. If it is determined that such
-16-

assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset. Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from 1 year to 20 years.
The changes in carrying amounts of goodwill for the three months ended March 31, 2023 are as follows (in thousands):

| Amount
Balance as of January 1, 2023 | $ | 346,585 |
Foreign exchange translation | 1,167 |
Balance as of March 31, 2023 | $ | 347,752 |

Intangible Assets with Indefinite Lives:
Intangible assets are summarized as of March 31, 2023 and December 31, 2022 as follows (in thousands):

| March 31, 2023 |  | December 31, 2022 |  |
Trade names | $ | 27,353 |  |  | $ | 27,337 |  |  |
Other | 4,045 |  |  | 4,045 |  |  |
Total | $ | 31,398 |  |  | $ | 31,382 |  |  |

Intangible Assets Subject to Amortization:
As of March 31, 2023, intangible assets subject to amortization are summarized as follows (in thousands):

| Weighted-Average Remaining Amortization Period |  | Historical Cost |  | Accumulated Amortization |  | Net
Trade names | 0.4 years |  | $ | 8,178 |  |  | $ | 7,666 |  |  | $ | 512 |
Patent and patent licenses | 0.0 years |  | 54,341 |  |  | 54,341 |  |  | — |
Customer relationships (1) | 3.0 years |  | 107,512 |  |  | 93,788 |  |  | 13,724 |
Other purchased intangibles | 2.0 years |  | 11,936 |  |  | 9,474 |  |  | 2,462 |
Total |  |  | $ | 181,967 |  |  | $ | 165,269 |  |  | $ | 16,698 |

(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed. This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years, despite the overall life of the asset.
As of December 31, 2022, intangible assets subject to amortization are summarized as follows (in thousands):

| Weighted-Average Remaining Amortization Period |  | Historical Cost |  | Accumulated Amortization |  | Net
Trade names | 0.5 years |  | $ | 8,151 |  |  | $ | 7,605 |  |  | $ | 546 |
Patent and patent licenses | 0.0 years |  | 54,341 |  |  | 54,341 |  |  | — |
Customer relationships (1) | 3.1 years |  | 107,175 |  |  | 92,573 |  |  | 14,602 |
Other purchased intangibles | 2.0 years |  | 11,937 |  |  | 9,311 |  |  | 2,626 |
Total |  |  | $ | 181,604 |  |  | $ | 163,830 |  |  | $ | 17,774 |

(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed. This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years, despite the overall life of the asset.
-17-

Expected amortization expenses for intangible assets subject to amortization at March 31, 2023 are as follows (in thousands):

Fiscal Year: | Amount
2023 (remainder) | $ | 3,177 |
2024 | 3,520 |
2025 | 2,629 |
2026 | 2,119 |
2027 | 1,416 |
Thereafter | 3,837 |
Total | $ | 16,698 |

Amortization expense was $1.1 million and $1.5 million for the three months ended March 31, 2023 and 2022, respectively.
6. Debt
Long-term debt consists of the following (in thousands):

| March 31, 2023 |  | December 31, 2022 |  |
2026 Senior Notes | $ | 305,000 |  |  | $ | 305,000 |  |  |
2028 Senior Notes | 500,000 |  |  | 500,000 |  |
Total Notes | 805,000 |  |  | 805,000 |  |  |
Less: Deferred issuance costs | (10,659) |  |  | (11,135) |  |  |
Total long-term debt | $ | 794,341 |  |  | $ | 793,865 |  |  |

At March 31, 2023, future principal payments for debt were as follows (in thousands):

| Total
Fiscal year: |
2023 (remainder) | $ | — |
2024 | — |
2025 | — |
2026 | 305,000 |
2027 | — |
Thereafter | 500,000 |
Total | $ | 805,000 |

The Company capitalized $0.5 million and zero of interest expense within property and equipment, net on the Company’s Condensed Consolidated Balance Sheets during the three months ended March 31, 2023 and 2022, respectively
2026 Senior Notes
On October 7, 2021, Consensus issued $305.0 million of senior notes due in 2026 (the “2026 Senior Notes”), in a private placement offering exempt from the registration requirements of the Securities Act of 1933. Consensus received proceeds of $301.2 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 2026 6.0% Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022. The 2026 Senior Notes bear interest at a rate of 6.0% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, which commenced on April 15, 2022.
The 2026 Senior Notes mature on October 15, 2026, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”). If Consensus Cloud Solutions, Inc. or any of its restricted
-18-

subsidiaries acquires or creates a domestic restricted subsidiary, other than an Insignificant Subsidiary (as defined in the indenture pursuant to which the 2026 Senior Notes were issued (the “2026 Indenture”)), after the issue date, or any Insignificant Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 2026 Senior Notes.
The Company may redeem some or all of the 2026 Senior Notes at any time on or after October 15, 2023 at specified redemption prices plus accrued and unpaid interest, if any, to, but excluding the redemption date. Before October 15, 2023, and following certain equity offerings, the Company also may redeem up to 40% of the 2026 Senior Notes at a price equal to 106.0% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding the redemption date. The Company may make such redemption only if, after such redemption, at least 50% of the aggregate principal amount of the 2026 Senior Notes remains outstanding. In addition, at any time prior to October 15, 2023, the Company may redeem some or all of the 2026 Senior Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium.
The Indenture contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Restricted payments are applicable only if Consensus Cloud Solutions, Inc. and subsidiaries designated as restricted subsidiaries has a net leverage ratio of greater than 3.0 to 1.0. In addition, if such net leverage ratio is in excess of 3.0 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not to exceed the greater of (A) $100.0 million and (B) 50.0% of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available. The Company is in compliance with its debt covenants as of March 31, 2023.
As of March 31, 2023 and December 31, 2022, the estimated fair value of the 2026 Senior Notes was approximately $265.4 million and $282.8 million, respectively, and was based on quoted market prices or dealer quotes for the 2026 Senior Notes which are Level 1 inputs in the fair value hierarchy.
2028 Senior Notes
On October 7, 2021, Consensus issued $500.0 million of 6.5% senior notes due in 2028 (the “2028 Senior Notes”), in a private placement offering exempt from the registration requirements of the Securities Act of 1933. In exchange for the equity interest in the Company, Consensus issued the 2028 Senior Notes to Ziff Davis (see Note 15 - Related Party Transactions). Ziff Davis then exchanged the 2028 Senior Notes with lenders under its credit agreement (or their affiliates) in exchange for extinguishment of a similar amount of indebtedness under such credit agreement for a total amount of $483.8 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 2028 Senior Notes were presented as long-term debt, net of deferred issuance costs, on the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022. The 2028 Senior Notes bear interest at a rate of 6.5% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, which commenced on April 15, 2022.
The 2028 Senior Notes mature on October 15, 2028, and are senior unsecured obligations of the Company that are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”). If Consensus Cloud Solutions, Inc. or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an Insignificant Subsidiary (as defined in the indenture pursuant to which the 2028 Senior Notes were issued (the “2028 Indenture”)), after the issue date, or any Insignificant Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 2028 Senior Notes.
The Company may redeem some or all of the 2028 Senior Notes at any time on or after October 15, 2026 at specified redemption prices plus accrued and unpaid interest, if any, to, but excluding the redemption date.
-19-

The Indenture contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Restricted payments are applicable only if Consensus Cloud Solutions, Inc. and subsidiaries designated as restricted subsidiaries has a net leverage ratio of greater than 3.0 to 1.0. In addition, if such net leverage ratio is in excess of 3.0 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not to exceed the greater of (A) $100.0 million and (B) 50.0% of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available. The Company is in compliance with its debt covenants as of March 31, 2023.
As of March 31, 2023 and December 31, 2022, the estimated fair value of the 2028 Senior Notes was approximately $411.9 million and $459.4 million, respectively, and was based on quoted market prices or dealer quotes for the 2028 Senior Notes which are Level 1 inputs in the fair value hierarchy.
Credit Agreement
On March 4, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain lenders party thereto (the “Lenders”) and MUFG Union Bank, N.A., as agent (the “Agent”). Pursuant to the Credit Agreement, the Lenders have provided Consensus with a revolving credit facility of $25.0 million (the “Credit Facility”) with an option held by the Company to obtain an additional commitment of up to a maximum of $25.0 million. The final maturity of the Credit Facility will occur on March 4, 2027. As of March 31, 2023, no amount has been drawn down on the Credit Facility. The Credit Facility is guaranteed by each wholly-owned material domestic subsidiary of Consensus, and secured by substantially all assets of Consensus and the guarantors. The loans made under the Credit Facility are subject to a Secured Overnight Financing Rate (“SOFR”) base interest rate plus a SOFR margin between 1.75% - 2.50%, with stepdowns subject to the total net leverage ratio.
The Credit Facility is subject to a total net leverage ratio covenant and a minimum EBITDA requirement, in each case tested on a quarterly basis. The Credit Agreement contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Unsecured indebtedness may be incurred, assets may be disposed of, restricted payments may be made and investments may be made, in each case subject to compliance with the Company’s financial covenants. The Company is in compliance with its covenants as of March 31, 2023.
7. Leases
The Company leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031. Office and equipment leases are typically for terms of three to ten years and generally provide renewal options for terms up to an additional five years. The Company determines if an arrangement is a lease at inception. Short-term leases are defined as leases that have a term of 12 months or less and do not include an option to purchase the underlying asset or include an option to purchase the underlying asset that the Company is not reasonably certain to exercise.
The Company accounts for short-term leases by recognizing the lease payments in general and administrative expenses in the Condensed Consolidated Statements of Income. Short-term lease expense is recognized on a straight-line basis over the term of the lease and associated variable lease payments are recognized in the period in which the obligation for the payments is incurred.
Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. The Company uses a collateralized incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Operating leases typically require payment of certain non-lease costs, such as real estate taxes, common area maintenance and insurance. These components comprise the majority of the Company’s variable lease costs and are excluded from the present value of lease liabilities unless an event occurs that results in the payments becoming fixed for the remaining term. The remaining lease and non-lease components are accounted for together as a single lease component for all underlying classes of assets. Operating lease assets are adjusted for lease incentives, initial direct costs, impairments and exit or disposal costs.
-20-

The Company accounts for operating leases greater than one year by recognizing the lease payments in general and administrative expenses in the Condensed Consolidated Statements of Income. Operating lease costs are recognized on a straight-line basis from the commencement date to the end of the lease term. Amortization on finance lease right-of-use assets are included in general and administrative expenses in the Condensed Consolidated Statements of Income. Interest on finance lease right-of-use assets, if any, is included in interest expense in the Condensed Consolidated Statements of Income. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The components of lease expense, recorded in cost of revenues and general and administrative expenses on the
Condensed Consolidated Statements of Income, were as follows (in thousands):

|  |  | Three Months Ended March 31, |  |
|  |  |  |  | 2023 |  | 2022 |  |  |  |
Operating lease cost |  |  |  |  | $ | 669 |  |  | $ | 628 |  |  |  |  |
Short-term lease cost |  |  |  |  | 394 |  |  | 440 |  |  |  |  |
Finance lease cost |  |  |  |  |  |  |  |  |  |  |
Amortization of right-of-use assets |  |  |  |  | 301 |  |  | 302 |  |  |  |  |
Total lease cost |  |  |  |  | $ | 1,364 |  |  | $ | 1,370 |  |  |  |  |

Supplemental balance sheet information related to leases is as follows (in thousands):

| March 31, 2023 |  | December 31, 2022
Lease-related assets and liabilities |  |  |
Operating lease right-of-use assets | $ | 7,459 |  |  | $ | 7,875 |
Finance lease right-of-use assets (1) | 1,132 |  |  | 1,427 |
Total right-of-use assets | $ | 8,591 |  |  | $ | 9,302 |
Operating lease liabilities, current | $ | 2,818 |  |  | $ | 2,793 |
Operating lease liabilities, noncurrent | 13,379 |  |  | 13,877 |
Total operating lease liabilities | $ | 16,197 |  |  | $ | 16,670 |

(1) The full amount of the finance leases were prepaid. Therefore, there is no corresponding lease liability associated with the finance right-of-use assets.
Supplemental cash flow information related to leases is as follows (in thousands):

| Three Months Ended March 31,
| 2023 |  | 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases | $ | 727 |  |  | $ | 648 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |
Operating leases | $ | — |  |  | $ | 1,316 |

Other supplemental operating lease information consists of the following:

| March 31, 2023 |  | December 31, 2022
Operating leases: |  |  |
Weighted average remaining lease term | 7.4 years |  | 7.6 years
Weighted average discount rate | 4.8 | % |  | 4.6 | %

-21-

Maturities of operating lease liabilities as of March 31, 2023 are as follows (in thousands):

| Operating Leases |  |
Fiscal Year: |  |  |
2023 (remainder) | $ | 2,183 |  |  |
2024 | 2,826 |  |  |
2025 | 2,389 |  |  |
2026 | 2,461 |  |  |
2027 | 2,534 |  |  |
Thereafter | 8,166 |  |  |
Total lease payments | $ | 20,559 |  |  |
Less: Imputed interest | (4,362) |  |  |
Present value of operating lease liabilities | $ | 16,197 |  |  |

Significant Judgments
Discount Rate
The majority of the Company’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable. Rates are obtained from various large banks to determine the appropriate incremental borrowing rate each quarter for collateralized loans with a maturity similar to the lease term.
Options
The lease term is generally the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs.
Facility lease
On October 28, 2021, Ziff Davis (the “Assignor”) and Consensus (the “Assignee”) entered into the Assignment and First Amendment to Office Lease (the “Amendment”) with the NREA-TRC 700 LLC (the “Landlord”), in regard to the lease which was previously entered into on April 24, 2019 between the Assignor and the Landlord for certain office space located at 700 South Flower Street, Los Angeles, California (the “Lease”). The lease has an expiration date of January 31, 2031. The Amendment granted the Landlord’s consent to the assignment of the Lease by the Assignor to Assignee.
8. Commitments and Contingencies
Litigation
From time to time, the Company and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinary course of business. Any claims or regulatory actions against the Company and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief.
The Company does not believe, based on current knowledge, that any legal proceedings or claims currently exist which, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. It is the Company’s policy to expense legal fees related to any litigation as incurred.
-22-

Non-Income Related Taxes
The Company historically did not collect sales tax in states where it was not able to quantify the appropriate sales tax to be collected. For the periods from 2017 through 2021, the Company believed it was probable that a sales tax liability existed for its corporate and SoHo accounts.
In the year ended December 31, 2021, the Company determined that a sales tax liability was probable and it developed a methodology to estimate the sales tax liability for the SoHo revenue stream during the affected periods from 2017 through 2021. The Company has been remitting SoHo sales tax in applicable states since August 2022.
However, the sales tax liability for its corporate customers was not estimable until the third quarter of 2022. Prior to the third quarter of 2022, the Company was unable to determine which of these customers were either exempt organizations or resellers and were thus exempt from sales tax. In the third quarter of 2022, the Company completed an analysis of the pool of corporate customers subject to sales tax in order to estimate the range of sales tax liability on its corporate revenues. As a result, the Company recorded an accrual as the exposure became probable and estimable. Additionally, the Company started sales tax collection and remittance on corporate sales in applicable states in August 2022.
The Company has initiated a Voluntary Disclosure Agreement (“VDA”) process in the third quarter of 2022, to voluntarily report the prior period sales tax liability. The process is expected to be completed in the second quarter of 2023. While the Company believes that it has sufficiently reserved for historical sales tax liabilities under ASC 450, some state taxing authorities may still challenge the Company’s sales tax position, the methodology used to calculate the sales tax liability, and may also impose other taxes on its business. Taxing authorities may successfully assert that the Company should have collected, or in the future should collect sales and use, telecommunications or similar taxes, and could be subject to liability with respect to past or future tax, which could adversely affect the Company’s operating results.
During the three months ended March 31, 2023, the Company did not record any sales tax expense pertaining to the prior periods. The Company recorded a sales tax expense within general and administrative expenses in the Condensed Consolidated Statements of Income of $0.6 million and $1.0 million for the three months ended March 31, 2023 and 2022, respectively.
The Company will continue to review and monitor the impact of sales tax rules in order to mitigate any associated risks on its business. Sales tax liability within accounts payable and accrued expenses on the Company’s Condensed Consolidated Balance Sheets was $10.1 million and $13.1 million as of March 31, 2023 and December 31, 2022, respectively.
9. Income Taxes
The Company’s tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate adjusted for discrete interim period tax impacts. Each quarter the Company updates its estimated annual effective tax rate and, if the estimate changes, makes a cumulative adjustment. Changes in the geographical mix, permanent differences or the estimated level of annual pre-tax income can affect the effective tax rate. The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 was 24.9% and 27.5%, respectively. The Company’s decreased rate during the three months ended March 31, 2023 is primarily due to a reduction in nondeductible expenses for tax purposes and the change in the geographical mix of income.
Income before income taxes included (loss) income from domestic operations of $(1.6) million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively, and income from foreign operations of $22.2 million and $24.9 million for the three months ended March 31, 2023 and 2022, respectively.
As of March 31, 2023 and December 31, 2022, the Company had $7.4 million and $6.7 million, respectively, in liabilities for uncertain income tax positions. Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company’s Condensed Consolidated Statements of Income.
-23-

Income Tax Audits
The Company files tax returns in the US, Ireland, Netherlands, France, Canada, Japan and Hong Kong. As of March 31, 2023, the Company is not under audit in any jurisdiction that it operates within. The Company has filed its first set of post-spin tax returns including some international subsidiaries who have previously filed in their local jurisdictions. Depending on the jurisdictions in which the Company is filing, tax returns for the years from 2016 onwards are still open to examination by tax authorities.
10. Stockholders’ Equity
Common Stock Repurchase Program
On March 1, 2022, the Company’s Board of Directors approved a share buyback program. Under this program, the Company may purchase, in the public market or in off-market transactions, up to $100.0 million of the Company’s common stock through February 2025. The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant. The Company entered into Rule 10b-18 and Rule 10b5-1 trading plans and during the three months ended March 31, 2023 and 2022, the Company repurchased 270,192 and zero shares, respectively, under this program. Cumulatively as of March 31, 2023, 459,306 shares have been repurchased at an aggregate cost of $16.8 million.
Vested Restricted Stock
At the time of certain vesting events related to restricted stock units or restricted stock awards that are held by participants in Consensus’ Equity Incentive Plan, a portion of the awards subject to vesting are withheld by the Company to satisfy the employees’ tax withholding obligations that arise upon the vesting of restricted stock. As a result, the number of shares issued upon vesting for these awards is net of the statutory withholding requirements that the Company pays on behalf of its employees. Although shares withheld are not issued, they are treated as common share repurchases in the Company’s condensed consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the Company’s share repurchase program described above. During the three months ended March 31, 2023 and 2022 the Company withheld shares on its vested restricted stock units and restricted stock awards relating to its share-based compensation plans of 11,418 and 19,922 shares, respectively.
Dividends
The Company currently does not issue dividends to Consensus shareholders. Future dividends are subject to Board approval. Our current debt agreements could trigger restrictions on dividend payments under certain circumstances (see Note 6 - Debt).
11. Equity Incentive and Employee Stock Purchase Plan
The Company’s share-based compensation plans include the 2021 Equity Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (the “Purchase Plan”). Each plan is described below.
(a) 2021 Equity Incentive Plan
In December 2021, Consensus’ Board of Directors adopted the 2021 Plan, which provides for the grant of incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and share units and other share-based awards. 4,000,000 shares of common stock are authorized to be used for 2021 Plan purposes. As of March 31, 2023, 2,735,286 shares were available to be used under the 2021 Plan.
Restricted Stock and Restricted Stock Units
The Company has awarded restricted stock and restricted stock units to its Board of Directors and certain employees pursuant to the 2021 Plan. Compensation expense resulting from restricted stock and restricted stock unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period. Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, four years for employees and five years for the Chief Executive Officer and Chief Operating Officer. The Company granted 41,754 shares of restricted stock units during the three months ended March 31, 2023.
-24-

Restricted Stock and Restricted Stock Units with Market Conditions
The Company has awarded certain key employees market-based restricted stock and restricted stock units pursuant to the 2021 Plan. The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock. Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets for 20 out of 30 trading days or 20 out of 25 trading days (look-back period). Stock-based compensation expense related to an award with a market condition is recognized over the requisite service period using the graded-vesting method unless the market condition has been met and requisite service period has been completed, then the expense will be accelerated and recognized in the period that the marketing condition and service period requirement have been met. During the three months ended March 31, 2023, the Company awarded zero market-based restricted stock awards and restricted stock units.
Restricted stock activity for the three months ended March 31, 2023 is set forth below:

| Shares |  | Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2023 | 35,416 |  |  | $ | 38.42 |
Granted | — |  |  | — |
Vested | (9,615) |  |  | 37.97 |
Canceled | — |  |  | — |
Nonvested at March 31, 2023 | 25,801 |  |  | $ | 38.59 |

As of March 31, 2023, the Company had unrecognized share-based compensation cost related to its restricted stock
awards of $0.3 million, which is expected to be recognized over a weighted-average period of 0.9 years.
Restricted stock unit activity for the three months ended March 31, 2023 is set forth below:

| Number of Shares |  | Weighted-Average Grant-Date Fair Value |  | Weighted-Average Remaining Contractual Life (in years) |  | Aggregate Intrinsic Value
Outstanding at January 1, 2023 | 1,082,451 |  | $ | 51.63 |  |  |  |  |
Granted | 41,754 |  |  | 59.50 |  |  |  |  |
Vested | (24,840) |  |  | 48.85 |  |  |  |  |
Canceled | (8,177) |  |  | 56.53 |  |  |  |  |
Outstanding at March 31, 2023 | 1,091,188 |  |  | $ | 51.95 |  |  | 3.6 |  | $ | 37,198,599 |
Vested and expected to vest at March 31, 2023 | 727,674 |  |  | $ | 53.10 |  |  | 3.1 |  | $ | 24,806,395 |

As of March 31, 2023, the Company had unrecognized share-based compensation cost related to its restricted stock units of $36.1 million, which is expected to be recognized over a weighted-average period of 2.7 years.
The Company capitalized $0.5 million and zero, respectively, of share-based compensation cost within property and equipment, net on our Condensed Consolidated Balance Sheets during the three months ended March 31, 2023 and 2022.
(b) Employee Stock Purchase Plan
In October 2021, Consensus established the Purchase Plan, which provides for the issuance of a maximum of 1,000,000 shares of common stock. Under the Purchase Plan, eligible employees can have up to 15% of their earnings withheld, up to certain maximums, to be used to purchase shares of Consensus’ common stock on certain plan-defined dates. The purchase price for each offering period is 85% of the lesser of the fair market value of a share of common stock of the Company (a “Share”) on the first or last day of the offering period, with each offering period being six months.
-25-

The plan includes a provision that allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature, to be used in the purchase price calculation. The purchase price discount and the look-back feature cause the Purchase Plan to be compensatory and the Company to recognize compensation expense. The compensation cost is recognized on a straight-line basis over the requisite service period, which is the same as the offering period of the Purchase Plan. The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the Purchase Plan. The expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. The Company uses an annualized dividend yield based upon the per share dividends declared by the Company’s Board of Directors. Estimated forfeiture rates were 6.73% as of March 31, 2023.
For the three months ended March 31, 2023, zero shares were purchased under the Purchase Plan. Cash received upon the issuance of Consensus common stock under the Purchase Plan during the three months ended March 31, 2023 was zero. As of March 31, 2023, 957,483 shares were available under the Purchase Plan for future issuance.
The compensation expense related to the current offering period of the Purchase Plan has been estimated utilizing the following assumptions:

| March 31, 2023 |  |
Risk-free interest rate | 4.54% |  |
Expected term (in years) | 0.5 |  |
Dividend yield | 0.00% |  |
Expected volatility | 48.19% |  |
Weighted average volatility | 48.19% |  |

12. Earnings Per Share
The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2023 |  | 2022
Numerator for basic and diluted net income per common share: |  |  |  |  |  |  |
Net income from continuing operations attributable to common shareholders |  |  |  |  | $ | 15,458 |  |  | $ | 18,521 |
Net income available to participating securities (1) |  |  |  |  | (21) |  |  | (52) |
Net income available to common shareholders from operations |  |  |  |  | $ | 15,437 |  |  | $ | 18,469 |
Denominator: |  |  |  |  |  |  |
Weighted-average outstanding shares of common stock |  |  |  |  | 19,847,280 |  |  | 19,921,375 |
Dilutive effect of: |  |  |  |  |  |  |
Equity incentive plans |  |  |  |  | 27,655 |  |  | 102,801 |
Employee Stock Purchase Plan |  |  |  |  | 9,722 |  |  | 11,651 |
Common stock and common stock equivalents |  |  |  |  | 19,884,657 |  |  | 20,035,827 |
Net income per share from operations: |  |  |  |  |  |  |
Basic |  |  |  |  | $ | 0.78 |  |  | $ | 0.93 |
Diluted |  |  |  |  | $ | 0.78 |  |  | $ | 0.92 |

(1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).
For the three months ended March 31, 2023 and 2022, there were 597,542 and 500,585 anti-dilutive shares, respectively, that were excluded from the earnings per share calculation.
-26-

13. Segment Information
The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance. The CODM views the Company as one business, Cloud Fax.
The Company’s Cloud Fax business is driven primarily by subscription revenues that have relatively higher margins, are stable and predictable from quarter to quarter with minor seasonal weakness in the fourth quarter.
The Company evaluates performance based on revenue, gross margin and profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses.
The Company maintains operations in the U.S., Canada, Ireland and other countries. Geographic information about the U.S. and all other countries for the reporting periods is presented below. Such information attributes revenues based on markets where revenues are reported (in thousands):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2023 |  | 2022
Revenues: |  |  |  |  |  |  |
United States |  |  |  |  | $ | 72,313 |  |  | $ | 69,593 |
Canada |  |  |  |  | 12,834 |  |  | 12,105 |
Ireland |  |  |  |  | 3,942 |  |  | 4,910 |
All other countries |  |  |  |  | 2,365 |  |  | 2,690 |
Foreign countries |  |  |  |  | 19,141 |  |  | 19,705 |
|  |  |  |  | $ | 91,454 |  |  | $ | 89,298 |

The following presents the Company’s long-lived assets, excluding finite-lived intangible assets (in thousands):

| March 31, 2023 |  | December 31, 2022
Long-lived assets: |  |  |
United States | $ | 68,062 |  |  | $ | 61,858 |
Canada | 446 |  |  | 531 |
Ireland | 118 |  |  | 167 |
All other countries | 252 |  |  | 277 |
Foreign countries | 816 |  |  | 975 |
Total | $ | 68,878 |  |  | $ | 62,833 |

14. Accumulated Other Comprehensive Loss
The following table summarizes the changes in accumulated other comprehensive loss, which solely comprises of foreign currency translation adjustments, for the three months ended March 31, 2023 (in thousands):

|  |  | Foreign Currency Translation |  |
Balance as of January 1, 2023 |  |  | $ | (19,108) |  |  |
Other comprehensive income |  |  | 3,078 |  |  |
Net increase in other comprehensive income |  |  | 3,078 |  |  |
Balance as of March 31, 2023 |  |  | $ | (16,030) |  |  |

There were zero reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2023.
-27-

15. Related Party Transactions
In connection with the Separation, Consensus and Ziff Davis entered into several agreements that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement (“TSA”), a tax matters agreement, an employee matters agreement, an intellectual property license agreement and a stockholder and registration rights agreement (the “Agreements”). The TSA governs services including certain information technology services, finance and accounting services and human resource and employee benefit services. The agreed-upon charges, if any, for such services are intended to cover any costs and expenses incurred in providing such services. As of March 31, 2023, a majority of the services provided under TSA were completed or terminated, with a select few services still winding down and set to terminate no later than 24 months following the Separation.
During the three months ended March 31, 2023 and 2022, the Company paid approximately $0.2 million and zero, respectively, to Ziff Davis to settle co-mingled cash accounts, costs associated with the transition services agreement and Separation. These costs were recorded in general and administrative expenses within the Condensed Consolidated Statement of Income. Subsequent to the disposition of the shares, Ziff Davis’ beneficial ownership in the Company was under 10%, as of March 31, 2023 and December 31, 2022. Amounts due to Ziff Davis as of March 31, 2023 and December 31, 2022 were $0.2 million and $0.2 million, respectively, related to these items, as well as reimbursement related to certain transaction related costs.
-28-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Information
In addition to historical information, we have also made forward-looking statements in this report. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words “expects,” “may,” “anticipates,” “believes,” “estimates,” “will,” “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed below, the risk factors discussed in Part II, Item 1A - “Risk Factors” of this Quarterly Report on Form 10-Q (if any) and in Part I, Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (together, the “Risk Factors”), and the factors discussed in the section in this Quarterly Report on Form 10-Q entitled “Quantitative and Qualitative Disclosures About Market Risk.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the Risk Factors and the risk factors set forth in other documents we file from time to time with the SEC.
Some factors that could cause actual results to differ materially from those anticipated in these forward-looking statements include, but are not limited to, our ability and intention to:
◦Sustain growth or profitability, particularly in light of an uncertain U.S. or worldwide economy, inflationary pressures and increasing interest rates, and the related impact on customer acquisition and retention rates, customer usage levels and credit and debit card payment declines;
◦Maintain and increase our customer base and average revenue per user;
◦Generate sufficient cash flow to make interest and debt payments, reinvest in our business and pursue desired activities and business plans while satisfying restrictive covenants relating to debt obligations;
◦Acquire businesses on acceptable terms and successfully integrate and realize anticipated synergies from such acquisitions;
◦Continue to expand our Cloud Fax businesses and operations internationally in the wake of numerous risks, including adverse currency fluctuations, difficulty in staffing and managing international operations, higher operating costs as a percentage of revenues or the implementation of adverse regulations;
◦Maintain our financial position, operating results and cash flows in the event that we incur new or unanticipated costs or tax liabilities, including those relating to federal and state income tax and indirect taxes, such as sales, value-added and telecommunication taxes;
◦Accurately estimate the assumptions underlying our effective worldwide tax rate;
◦Manage risks from our international operations, including risks associated with currency fluctuations and foreign exchange controls and adverse changes in global financial markets;
◦Manage certain risks inherent to our business, such as costs associated with fraudulent activity, system failure or network security breach; effectively maintaining and managing our billing systems; allocating time and resources required to manage our legal proceedings; liability for legal and other claims; or adhering to our internal controls and procedures;
◦Compete with other similar providers with regard to price, service and functionality;
◦Cost-effectively procure, retain and deploy large quantities of fax numbers in desired locations in the United States and abroad;
◦Achieve business and financial objectives in light of burdensome domestic and international telecommunications, internet or other regulations including data privacy, access, security and retention;
◦Successfully manage our growth, including but not limited to, our operational and personnel-related resources, and integration of newly acquired businesses;
◦Successfully adapt to technological changes and diversify services and related revenues at acceptable levels of financial return;
◦Successfully develop and protect our intellectual property, both domestically and internationally, including our brands, patents, trademarks and domain names, and avoid infringing upon the proprietary rights of others;
◦Recruit and retain key personnel; and
◦Maintain favorable relationships with critical third-party vendors whose financial condition will not negatively impact the services they provide;
-29-

In addition, other factors that could cause actual results to differ materially from those anticipated in these forward-looking statements or materially impact our financial results include the risks associated with new accounting pronouncements, as well as those associated with natural disasters, public health crises, pandemics including the COVID-19 outbreak and other catastrophic events outside of our control, including as to COVID-19 the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us.
Overview
Consensus is a leading provider of secure information delivery services with a scalable Software-as-a-Service (“SaaS”) platform. Consensus serves approximately one million customers of all sizes, from enterprises to individuals, approximately 50 countries and multiple industry verticals including healthcare, government, financial services, law and education. Beginning as an online fax company over two decades ago, Consensus has evolved into a leading global provider of enterprise secure communication solutions. Consensus is well positioned to capitalize on advancements in how people and businesses share private documents and information. Its mission is to democratize secure information interchange across technologies and industries, and solve the healthcare interoperability challenge. Consensus’ communication and interoperability solutions enable its customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries.
The global economy continues to be impacted by macroeconomic uncertainty and volatility resulting from the COVID-19 pandemic, Russia’s invasion of Ukraine, inflationary pressures, supply chain disruptions and challenges and labor market pressures. During fiscal year 2022 and through the first quarter of 2023, we have observed an increasingly competitive labor market. Increased employee turnover, changes in the availability of our employees, including as a result of COVID-19-related absences, and labor shortages generally have resulted in, and could continue to result in, increased costs, and could adversely impact the efficiency of our operations. We continue to actively monitor the situation and will continue to adapt our business operations as necessary.
For purposes of this management’s discussion and analysis of the results of operations and financial condition of Consensus (“MD&A”) section, we use the terms “the Company,” “we,” “us” and “our” to refer to Consensus. References in this MD&A section to “Former Parent” or “Former Parent Company” refers to Ziff Davis, Inc., collectively with its consolidated subsidiaries.
-30-

Key Performance Metrics
We use the following metrics to evaluate our business, including the growth of our business, the value provided by customers to our business and our customer retention.
The following table sets forth certain key operating metrics for our operations for the three months ended March 31, 2023 and 2022 (in thousands, except for percentages):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2023 |  | 2022
Revenue ($ in thousands) |  |  |  |  |  |  |
Corporate |  |  |  |  | $ | 49,407 |  |  | $ | 46,519 |
Small office home office (“SoHo”) |  |  |  |  | 42,030 |  |  | 42,779 |
|  |  |  |  | 91,437 |  |  | 89,298 |
Other revenues |  |  |  |  | 17 |  |  | — |
Consolidated |  |  |  |  | $ | 91,454 |  |  | $ | 89,298 |
Average Revenue per Customer Account (“ARPA) (1)(2) |  |  |  |  |  |  |
Corporate |  |  |  |  | $ | 315.76 |  | $ | 339.95
SoHo |  |  |  |  | 15.10 |  | 13.88
Consolidated |  |  |  |  | $ | 31.09 |  | $ | 27.74
Customer Accounts (in thousands) (1) |  |  |  |  |  |  |
Corporate |  |  |  |  | 53 |  | 46 |
SoHo |  |  |  |  | 914 |  | 1,027 |
Consolidated |  |  |  |  | 967 |  | 1,073 |
Paid Adds (in thousands) (3) |  |  |  |  |  |  |
Corporate |  |  |  |  | 3 |  | 4
SoHo |  |  |  |  | 78 |  | 100
Consolidated |  |  |  |  | 81 |  | 104
Monthly Churn % (4) |  |  |  |  |  |  |
Corporate |  |  |  |  | 1.37 | % |  | 2.05 | %
SoHo |  |  |  |  | 3.76 | % |  | 3.50 | %
Consolidated |  |  |  |  | 3.63 | % |  | 3.44 | %

(1)Consensus customers are defined as paying Corporate and SoHo customer accounts.
(2)Represents a monthly ARPA for the quarter or year calculated as follows. Monthly ARPA on a quarterly basis is calculated using our standard convention of dividing revenue for the quarter by the average of the quarter’s beginning and ending customer base and dividing that amount by 3 months. Monthly ARPA on an annual basis is calculated by dividing revenue for the year by the average customer base for the applicable four quarters and dividing that amount by 12 months. We believe ARPA provides investors an understanding of the average monthly revenues we recognize per account associated within Consensus’ customer base. As ARPA varies based on fixed subscription fee and variable usage components, we believe it can serve as a measure by which investors can evaluate trends in the types of services, levels of services and the usage levels of those services across Consensus’ customers.
(3)Paid Adds represents paying new Consensus customer accounts added during the annual period.
(4)Monthly churn is defined as Consensus paying customer accounts that cancelled its services during the period divided by the average number of customers over the period. This measure is calculated monthly and expressed as an average over the applicable period.
-31-

Critical Accounting Policies and Estimates
In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions. Our critical accounting policies are described in our 2022 Annual Report on Form 10-K filed with the SEC on March 31, 2023. During the three months ended March 31, 2023, there were no significant changes in our critical accounting policies and estimates.
Results of Operations for the Three Months Ended March 31, 2023 and 2022
The main strategic focus of our Consensus offerings is to enable our customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries. As a result, we expect to continue to take steps to enhance our existing offerings and offer new services to continue to satisfy the evolving needs of our customers.
We expect our business to primarily grow organically and inorganically through the use of capital for re-investment in the business and opportunistic acquisitions that expedite our product roadmap in the interoperability space should they arise.
Revenues

(in thousands, except percentages) |  |  |  |  | Three Months Ended March 31, |  | Percentage Change
|  |  |  |  |  |  | 2023 |  | 2022 |  |
Revenues |  |  |  |  |  |  | $ | 91,454 |  |  | $ | 89,298 |  |  | 2%

Our revenues primarily consist of revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services.
Revenues increased by $2.2 million or 2% over the prior comparable three month period. Our growth was primarily due to an increase of $2.9 million or 6% in our corporate business; partially offset by a decline of $0.7 million or 2% in our SoHo business.
Cost of Revenues

(in thousands, except percentages) |  |  |  |  | Three Months Ended March 31, |  | Percentage Change
|  |  |  |  |  |  | 2023 |  | 2022 |  |
Cost of revenues |  |  |  |  |  |  | $17,508 |  | $15,104 |  | 16%
As a percent of revenue |  |  |  |  |  |  | 19% |  | 17% |  |

Cost of revenues is primarily comprised of costs associated with data transmission, network operations, customer service, software licenses for resale, online processing fees and equipment depreciation.
The increase in cost of revenues for the three months ended March 31, 2023 was primarily due to an increase of $1.1 million in personnel-related expenses and $1.0 million in depreciation associated with platform development costs compared to the prior comparable three month period.
-32-

Operating Expenses
Sales and Marketing

(in thousands, except percentages) |  |  |  |  | Three Months Ended March 31, |  | Percentage Change
|  |  |  |  |  |  | 2023 |  | 2022 |  |
Sales and marketing |  |  |  |  |  |  | $16,893 |  | $15,830 |  | 7%
As a percent of revenue |  |  |  |  |  |  | 18% |  | 18% |  |

Our sales and marketing costs consist primarily of internet-based advertising, personnel costs and other business development-related expenses. Our internet-based advertising relationships consist primarily of fixed cost and performance-based (cost-per-impression, cost-per-click and cost-per-acquisition) advertising relationships with an array of online service providers. Our sales personnel consist of a combination of inside sales and outside sales professionals.
Sales and marketing costs for the three months ended March 31, 2023 were $16.9 million (primarily consisting of $9.1 million of third-party advertising costs and $7.2 million of personnel costs) compared to the prior period of $15.8 million (primarily consisting of $9.8 million of third-party advertising costs and $5.6 million of personnel costs). The increase in sales and marketing expenses for the three months ended March 31, 2023 versus the prior comparable period was primarily due to increased personnel-related expenses, partially offset by a reduction of third-party advertising spend.
Research, Development and Engineering

(in thousands, except percentages) |  |  |  |  | Three Months Ended March 31, |  | Percentage Change
|  |  |  |  |  |  | 2023 |  | 2022 |  |
Research, development and engineering |  |  |  |  |  |  | $1,904 |  | $2,336 |  | (18)%
As a percent of revenue |  |  |  |  |  |  | 2% |  | 3% |  |

Our research, development and engineering costs consist primarily of personnel-related expenses.
The decrease in research, development and engineering costs for the three months ended March 31, 2023 versus the prior comparable period was primarily attributable to increased capitalization of personnel-related expenses due to our continued focus on internally developing our platform, products and solutions as well as a reduction in external development costs partially offset by an increase in personnel-related expenses.
General and Administrative

(in thousands, except percentages) |  |  |  |  | Three Months Ended March 31, |  | Percentage Change
|  |  |  |  |  |  | 2023 |  | 2022 |  |
General and administrative |  |  |  |  |  |  | $21,152 |  | $17,369 |  | 22%
As a percent of revenue |  |  |  |  |  |  | 23% |  | 19% |  |

Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization,
share-based compensation expense, bad debt expense, professional fees and insurance costs.
The increase in general and administrative expenses for the three months ended March 31, 2023 versus prior comparable period was primarily due to increased expenses of $2.3 million in professional fees in connection with the year-end audit, current quarter bad debt expense of $0.9 million and personnel-related expenses of $0.8 million.
-33-

Share-Based Compensation
The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying Condensed Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 (in thousands):

|  |  | Three Months Ended March 31, |  |
|  |  |  |  | 2023 |  | 2022 |  |  |  |
Cost of revenues |  |  |  |  | $ | 296 |  |  | $ | 223 |  |  |  |  |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  |  |  | 372 |  |  | 273 |  |  |  |  |
Research, development and engineering |  |  |  |  | 40 |  |  | 356 |  |  |  |  |
General and administrative |  |  |  |  | 4,432 |  |  | 4,551 |  |  |  |  |
Total |  |  |  |  | $ | 5,140 |  |  | $ | 5,403 |  |  |  |  |

Non-Operating Income and Expenses
Interest expense. Our interest expense is due to outstanding debt and is reduced by any capitalized interest. Interest expense for the three months ended March 31, 2023 and 2022 was $12.6 million and $13.3 million, respectively. Interest expense for both periods included interest expense on $805.0 million of debt associated with the 2026 and 2028 senior notes. Interest expense for the three months ended March 31, 2023 was reduced by $0.5 million of capitalized interest that did not occur during the first quarter of 2022.
Other (expense) income, net. Our other (expense) income, net is generated primarily from miscellaneous items and gains or losses on currency exchange. Other (expense) income, net for the three months ended March 31, 2023 and 2022 was $(0.8) million and $0.2 million, respectively. Changes in other (expense) income, net was driven by higher foreign exchange losses when compared to the prior comparable period.
Income Taxes
Our effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different tax rates in the various jurisdictions in which we operate. The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize. When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized.
Provision for income taxes for the three months ended March 31, 2023 and 2022 was $5.1 million and $7.0 million, respectively.
The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 was 24.9% and 27.5%, respectively. The decrease in our effective income tax rate for the three months ended March 31, 2023 was primarily attributable to a reduction in nondeductible expenses for tax purposes and the change in the geographical mix of income.
Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. Certain of these tax positions have, in the past been challenged, and this may have a significant impact on our effective tax rate if our tax reserves are insufficient.
Liquidity and Capital Resources
Cash and Cash Equivalents
At March 31, 2023, we had cash and cash equivalents of $111.3 million compared to $94.2 million at December 31, 2022. The increase in cash and cash equivalents resulted primarily from cash provided by operations; partially offset by cash used in the repurchase of commons stock, purchases of property and equipment (including capitalized labor) and the purchase of investments. As of March 31, 2023, cash and cash equivalents held within domestic and foreign jurisdictions were $44.0 million and $67.3 million, respectively.
-34-

Credit Agreement
On March 4, 2022, the Company entered into a Credit Agreement with certain lenders party thereto (collectively, the “Lenders”) and MUFG Union Bank, N.A., as agent (the “Agent”). Pursuant to the Credit Agreement, the Lenders have provided Consensus with a revolving credit facility of $25.0 million (the “Credit Facility”) with an option held by the Company to obtain an additional commitment of up to a maximum of $25.0 million.. The final maturity of the Credit Facility will occur on March 4, 2027. As of March 31, 2023, no amount has been drawn down on the Credit Facility.
Material Cash Requirements
Our long-term contractual obligations generally include our debt and related interest payments, noncancellable operating leases as well as other commitments. As of March 31, 2023, we had outstanding $805.0 million in aggregate principal amount of indebtedness (see Note 6 - Debt of the Notes to the Condensed Consolidated Financial Statements). As of March 31, 2023, our total minimum lease payments are $20.6 million (see Note 7 - Leases of the Notes to the Condensed Consolidated Financial Statements). As of March 31, 2023, our liability for uncertain tax positions was $7.4 million. Due to uncertainties in the timing of the amounts and timing of cash settlement with the taxing authorities we are unable to make a reasonably reliable estimate of the timing of payments.
We currently anticipate that our existing cash and cash equivalents and cash generated from operations will be sufficient to meet our anticipated needs for working capital, capital expenditures and stock repurchases, if any, for at least the next 12 months and the foreseeable future.
Common Stock Repurchase Program
On March 1, 2022, the Company’s Board of Directors approved a share buyback program. Under this program, the Company may purchase in the public market or in off-market transactions up to $100.0 million worth of the Company’s common stock through February 2025. The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant. The Company entered into Rule 10b-18 and Rule 10b5-1 trading plans and during the three months ended March 31, 2023 and 2022, the Company repurchased 270,192 and zero, respectively, shares under this program. Cumulatively as of March 31, 2023, 459,306 shares have been repurchased at an aggregate cost of $16.8 million.
At the time of certain vesting events related to restricted stock units or restricted stock awards that are held by participants in Consensus’ Equity Incentive Plan, a portion of the awards subject to vesting are withheld by the Company to satisfy the employees’ tax withholding obligations that arise upon the vesting of restricted stock. As a result, the number of shares issued upon vesting for these awards is net of the statutory withholding requirements that the Company pays on behalf of its employees. Although shares withheld are not issued, they are treated as common share repurchases in the Company’s condensed consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the Company’s share repurchase program described above. During the three months ended March 31, 2023 and 2022 the Company withheld shares on its vested restricted stock units and restricted stock awards relating to its share-based compensation plans of 11,418 and 19,922 shares, respectively.
Cash Flows
Our primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents. Net cash provided by operating activities was $38.0 million and $49.9 million for the three months ended March 31, 2023 and 2022, respectively. Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services and employee compensation. The decrease in our net cash provided by operating activities in 2023 compared to 2022 was largely attributable to an increase in other liabilities in the first quarter of 2022, as well as lower increases in accounts payable and accrued expenses and income taxes payable during 2023 compared to 2022, partially offset by increased income after considering noncash items in 2023 compared to 2022.
Net cash used in investing activities was $12.5 million and $20.8 million for the three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023, net cash used in investing activities was primarily attributed to the purchase of investments and capital expenditures associated with the purchase of property and equipment (including capitalized labor). For the three months ended March 31, 2022, net cash used in investing activities was primarily due to business and asset acquisitions and capital expenditures associated with the purchase of property and equipment (including capitalized labor). The decrease in our net cash used in investing activities in 2023 compared to 2022 was due to a lower cash outlay related to the purchase of investments in 2023, compared to a higher cash outlay associated with a business acquisition in 2022.
-35-

Net cash used in financing activities was $9.6 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023 and 2022, net cash used in financing activities was primarily due to the repurchase of common stock and the payment of employee income tax obligations related to the net settlement of equity awards. The change in net cash used in financing activities in 2023 compared to 2022 was primarily attributable to cash outflows related to the repurchase of common stock 2023 that did not occur in 2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following discussion of the market risks we face contains forward-looking statements. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. Consensus undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Readers should carefully review the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2022, as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K filed or to be filed by us in 2023.
Interest Rate Risk
Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of March 31, 2023, the carrying value of our cash and cash equivalents approximated fair value. Our return on these investments is subject to interest rate fluctuations.
As of March 31, 2023 and December 31, 2022, we had cash and cash equivalent investments primarily in cash of $111.3 million and $94.2 million, respectively. We do not have interest rate risk on our outstanding long-term debt as these arrangements have fixed interest rates.
We cannot ensure that future interest rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cash flows. To date, we have not entered into interest rate hedging transactions to control or minimize certain of these risks.
Foreign Currency Risk
Our principal exposure to foreign currency risk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarily the Euro and the Japanese Yen. If we are unable to settle our short-term intercompany debts in a timely manner, we remain exposed to foreign currency fluctuations.
As we expand our international presence, we become further exposed to foreign currency risk by entering new markets with additional foreign currencies. The economic impact of currency exchange rate movements is often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.
As currency exchange rates change, translation of the income statements of the international businesses into U.S. Dollars affects year-over-year comparability of operating results, the impact of which is immaterial to the comparisons set forth in this Form 10-Q.
Historically, we have not hedged translation risks because cash flows from international operations were generally reinvested locally; however, we may do so in the future. Our objective in managing foreign exchange risk is to minimize the potential exposure to changes that exchange rates might have on earnings, cash flows and financial position. We currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such hedging risk. However, we may in the future engage in hedging transactions to manage our exposure to fluctuations in foreign currency exchange rates.
Foreign exchange (loss) gain for the three months ended March 31, 2023 and 2022 was $(0.9) million and $0.2 million, respectively. The change in foreign exchange (loss) gain was primarily attributable to the translation of certain intra-entity balances in foreign currencies.
-36-

Cumulative translation adjustment gain (loss), included in other comprehensive income for the three months ended March 31, 2023 and 2022 was $3.1 million and $(2.1) million, respectively.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the quarterly period ended March 31, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses in internal control over financial reporting, described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Previously Reported Material Weaknesses
The Company has identified the following material weaknesses in our internal control over financial reporting:
Control Environment and Monitoring
Material weaknesses existed in the design of our entity-level controls impacting the control environment and the effective monitoring of controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were primarily caused by a lack of sufficient accounting resources and technical expertise during the first half of 2022, which contributed to (i) ineffective structure and accountability over the performance of controls and (ii) ineffective evaluation and determination as to whether the components of internal controls were present and functioning.
These material weaknesses contributed to the following additional material weaknesses:
Control Activities and Information and Communication
•Management did not design and maintain effective internal controls that addressed (i) appropriate revenue recognition accounting policies, (ii) the review of reports used to support manual revenue recognition entries for completeness and accuracy and (iii) precision and documentation of management review controls over transactions and analysis that support revenue recognition and the allowance for bad debt.
•Management did not design and maintain effective internal controls to ensure the complete assessment and timeliness in preparing and reviewing technical accounting documentation relating to significant unusual transactions.
•Management did not design and maintain effective internal controls to ensure the timeliness of balance sheet account reconciliations, including account balances related to the spin-off transaction.
•Management did not design and maintain effective internal controls in the areas of (i) user access and segregation of duties related to systems that track employee related costs, and (ii) the documentation of the review of completeness and accuracy of underlying data used in the operation of certain internal controls that support employee related costs and internally developed software.
Remediation Measures
We have identified and begun to implement several steps, as further described below, designed to remediate the foregoing material weaknesses and to enhance our overall control environment. To remediate these material weaknesses, we
-37-

began the year ending December 31, 2023 with the appropriate level of resources and technical expertise in finance, accounting, financial reporting and tax departments compared to the first half of the year ended December 31, 2022. During the fourth quarter of 2022, we implemented Blackline’s Modern Accounting Playbook software to bolster our internal controls over balance sheet account reconciliations in 2023. As part of the 2022 year end close, we performed enhanced revenue reconciliation procedures in response to the errors identified and disclosed in our the Current Report on Form 8-K that the Company filed with the SEC on February 22, 2023, and will continue these practices throughout fiscal year 2023. During the first quarter of fiscal year 2023, we implemented new internal controls to properly address the segregation of duties and select system user access findings identified via our audits. Also, we will be expanding the use of our financial reporting team’s SEC experts to ensure technical accounting memos and related documentation are prepared and reviewed timely with regard to significant unusual transactions. Lastly, we continue to address and implement new accounting policies and management review controls over analysis, schedules and reports that support revenue recognition, bad debt reserve and financial reporting process to significantly reduce the risk of reporting errors.
While the foregoing measures are intended to effectively remediate the material weaknesses described in this Item 4, it is possible that additional remediation steps will be necessary. As such, as we continue to evaluate and implement our plan to remediate the material weaknesses, our management may decide to take additional measures to address the material weaknesses or modify the remediation steps described above. The material weaknesses cannot be considered fully remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
(b) Changes in Internal Controls
Other than the actions taken to remediate the material weakness described above, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) which occurred during the first quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
See Note 8 - Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements (Part I, Item 1) for information regarding certain legal proceedings in which we are involved.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part 1, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as well as in other documents we file from time to time. There have been no material changes to the risk factors from those described in our Annual Report on Form 10-K for the year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities
None.
(b) Issuer Purchases of Equity Securities
On March 1, 2022, the Company’s Board of Directors approved a share buyback program. Under this program, the Company may purchase in the public market or in off-market transactions up to $100.0 million worth of the Company’s common stock through February 2025. The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant. For further information on our share repurchases refer to Note 10 - Stockholders' Equity of the Notes to the Condensed Consolidated Financial Statements (Part I, Item 1).
-38-

The following table summarizes the share repurchase activity for the three months ended March 31, 2023:

| Total Number of Shares Purchased | Average Price Paid Per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program
|  |  |  | (in thousands)
January 1 - 31, 2023 | — |  | $ | — |  | — |  | $ | 92,404 |
February 1 - 28, 2023 | 20,192 |  | 47.57 |  | 20,192 |  | 91,443 |
March 1 - 31, 2023 | 250,000 |  | 32.95 |  | 250,000 |  | 83,206 |
| 270,192 |  | 270,192 | $ | 83,206 |

(1) Average price paid per share includes costs associated with the repurchases.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
-39-

Item 6. Exhibits

Exhibit Number | Description
3.1 | Amended and Restated Certificate of Incorporation of Consensus Cloud Solutions, Inc.(incorporated by reference to Ex. 3.1 to Consensus’ Current Report on Form 8-K filed with the Commission on October 8, 2021, File No. 001-40750).
3.2 | Amended and Restated Bylaws of Consensus Cloud Solutions, Inc.(incorporated by reference to Ex. 3.2 to Consensus’ Current Report on Form 8-K filed with the Commission on October 8, 2021, File No. 001-40750).
31.1* | Rule 13a-14(a) Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* | Rule 13a-14(a) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** | Section 1350 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 | The following financial information from Consensus Cloud Solutions, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, (ii) Condensed Consolidated Statements of Income for the three months ended March 31, 2023 and 2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022, (v) Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three months ended March 31, 2023 and 2022, and (vi) the Notes to Condensed Consolidated Financial Statements.
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith ** Furnished herewith

-40-

Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | Consensus Cloud Solutions, Inc.
Date: | May 10, 2023 | By: | /s/ R. SCOTT TURICCHI
|  |  | R. Scott Turicchi
|  |  | Chief Executive Officer and Director
|  |  | (Principal Executive Officer)
Date: | May 10, 2023 | By: | /s/ JAMES C. MALONE
|  |  | James C. Malone
|  |  | Chief Financial Officer
|  |  | (Principal Financial and Accounting Officer)

-41-