Consensus Cloud Solutions Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Consensus delivered 6.9% corporate revenue growth YoY—the highest in ten quarters—while achieving a 54.8% adjusted EBITDA margin, exceeding Q2 guidance and returning to consolidated revenue growth.
  • Positive Sentiment: Free cash flow rose 29% to $20.3 M in Q2, enabling the repurchase of $6 M in debt and $12 M in stock, and 2025 free cash flow is now expected to exceed $85 M.
  • Positive Sentiment: Corporate channel momentum continues with strong contributions from the healthcare vertical, record eFax Protect sign-ups, and an accelerating public sector pipeline driven by FedRAMP High certification and ongoing VA rollouts.
  • Neutral Sentiment: SOHO revenue declined 9.4% YoY as planned, with churn of 3.84%, as management focuses on optimizing advertising spend and improving profitability through disciplined customer acquisition.
  • Neutral Sentiment: The company secured a $225 M bank facility (a $150 M term loan and $75 M revolver) to refinance 6% notes due October 2026, aiming to maintain borrowing costs in line with current levels.
AI Generated. May Contain Errors.
Earnings Conference Call
Consensus Cloud Solutions Q2 2025
00:00 / 00:00

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Operator

Good day, ladies and gentlemen, and welcome to the consensus q two twenty twenty five earnings call. My name is Tom, and I will be the operator assisting you today. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator

On this call from Consensus will be Scott Tericchi, CEO Jim Malone, CFO Johnny Hecker, CRO and executive vice president of operations and Adam Varon, senior vice president of finance. I will now turn the call over to Adam Varon, senior vice president of finance at Consensus. Thank you. You may begin.

Adam Varon
Adam Varon
SVP - Finance at Consensus Cloud Solutions

Good afternoon, and welcome to the Consensus investor call to discuss our Q2 twenty twenty five financial results, other key information and our 2025 full year and Q3 twenty twenty five quarterly guidance. Joining me today are Scott Tericchi, CEO Johnny Hecker, CRO and EVP of Operations and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. Johnny will give an update on operational progress since our Q1 twenty twenty five investor call. Then Jim will provide Q2 twenty twenty five financial results and our full year 2025 and Q3 twenty twenty five guidance range.

Adam Varon
Adam Varon
SVP - Finance at Consensus Cloud Solutions

After we finish our prepared remarks, we will conduct a Q and A session. At that time, the operator will instruct you on the procedures for asking a question. Before we begin our prepared remarks, allow me to direct you to our forward looking statements and risk factors on Slide two of our investor presentation. As you know, this call and the webcast will include forward looking statements. Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results.

Adam Varon
Adam Varon
SVP - Finance at Consensus Cloud Solutions

Some of those risks and uncertainties include, but are not limited to the risk factors that we have disclosed in our regulatory filings, including our annual 10 ks and quarterly 10 Q SEC filings. Now, let me turn the call over to Scott for his opening remarks.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

Thank you, Adam. We had a strong Q2 returning us to total revenue growth earlier than anticipated. The continuing improvement in our corporate revenue growth demonstrates both the necessity and value proposition of our solutions. We exceeded our revenue objective, driven by corporate revenue growth posting 6.9% over q two twenty twenty four, ahead of our forecast and the best growth year over year in 10 quarters on a normalized basis. So revenue was in line with our expectations and below a 10% year over year decline for the first time since we began the reduced marketing in late twenty twenty three.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

We carefully monitored our cost structure and exceeded our adjusted EBITDA expectations by more than the outperformance on revenue. We delivered a robust 54.8% adjusted EBITDA margin, near the top end of our 50% to 55% range. We remain committed to our goals that we outlined in February, which include pursuing the acquisition of customers, primarily in the health care space for our corporate channel and driving revenue growth in excess of 6.25% this year. Two, manage our corporate cost structure while making modest investments primarily in our go to market operations for the benefit of 2026 and beyond. Three, putting a bank loan in place for the retirement of the remaining 6% notes due October 2026.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

And finally managing the SOHO channel for cash flow efficiency, which we began last year. As previously announced, we concluded in early July a $225,000,000 bank facility that we will utilize to retire the 6% notes in part due October 2026. The loan consists of two pieces: a $75,000,000 revolver and a $150,000,000 term loan. We expect that our borrowing costs, which are SOFR based, will be similar to the current cost of the 6% notes. Johnny will provide more detail in his portion of the presentation regarding the operational results for Q2.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

I'm pleased that our corporate channel exceeded our revenue expectations and hit a growth rate in excess of our target. This success was driven by strong usage, improved revenue retention, new customer acquisition and increased contribution from our advanced products. In addition, eFax Protect had record sign ups, which seems to be a trend each quarter. In addition, at the VA, we continue to see more facilities come online and record level of usage. All of these contributed to the 6.9% year over year growth. While revenues for the SoHo Channel declined in the quarter as anticipated, I am pleased to report that it was the slowest rate of decline since we began the program to reduce marketing costs. We maintained our discipline on the cost side, generating an adjusted EBITDA margin of 54.8%, more than 100 basis points ahead of our Q2 expectations.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

I would note that we would expect a lower margin in Q3 due to a seasonal increase in costs associated with our upcoming year end audit and the hiring of additional employees, especially in our go to market operations that we discussed when we released our annual guidance in February. Free cash flow was $20,300,000 in the quarter, up 29% from Q2 twenty twenty four due to excellent management of our receivables, low estimated tax payments and lower interest expense than a year ago. We now expect our free cash flow in 2025 to exceed the $85,000,000 of free cash flow in 2024. We were able to repurchase an approximate $6,000,000 of debt in the quarter. As we have stated previously, liquidity is modest in each tranche, both of which trade at or near par.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

We were able to repurchase approximately $12,000,000 of our common stock during the quarter at a valuation of approximately five times adjusted EBITDA, which we view as attractive. Before turning the call over to Johnny, I would like to comment briefly on the One Big Beautiful Bill Act that was signed into law on July 4. We are studying the impact of the bill, particularly with respect to the anticipated cuts to Medicaid and Medicare over the next ten years, and how those cuts may generally impact providers, especially the smaller practices in rural areas. While the cuts do not start until late twenty twenty six, we understand that some providers are already making anticipatory cost cutting decisions. We believe that we are well positioned to assist those efforts to reduce cost structure, which we know is one of utmost importance right now.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

Moreover, the need for health care does not evaporate in these scenarios. It merely shifts locations, predominantly to emergency care facilities. We have a large, diverse base of customers in all care settings, such as providers, payers, doctors' practices, labs, pharmacies, etcetera, including those in the emergency care facilities with little customer concentration. We will closely monitor the situation as it unfolds. I will now turn the call over to Johnny to provide you more operational details.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Thank you, Scott, and hello, everyone. In my remarks, I will cover key performance indicators, including revenue and customer metrics, as well as our go to market strategies for the corporate and SOHO channels. I'll also touch on operational updates and provide some key highlights for the quarter. Our corporate channel continues to show robust performance and positive momentum. In Q2 twenty twenty five, we saw revenue reach a record $55,300,000 a 6.9% increase over $51,700,000 in 2024, and another sequential increase from $54,300,000 in revenue we've reported in 2025.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

This was an exceptional quarter. While we anticipate continued growth, we don't expect it to maintain this accelerated year over year growth pace, especially considering our strong performance in 2024. Nevertheless, this quarter's results, coupled with a strong sales pipeline across our entire portfolio of services reinforce our confidence that we are well on our path to achieving double digit growth for this business channel. Our Q2 growth is driven by several key factors. As a direct result of our focus on the healthcare industry, we're experiencing sustained and impressive growth within the healthcare vertical, which is becoming an ever larger portion of our total corporate revenue.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Our strategic partnerships continue to yield significant contributions to our growth. Furthermore, we are particularly encouraged by the sustained expansion within our largest account cohorts, including both strategic and public sector clients. I am pleased to announce that our trailing twelve months revenue retention rate has reached 102%. This is up from 101% in the previous quarter, keeping us on track with our 100% target and marking a substantial year over year increase from 99% in 2024. Our corporate customer base has grown to a record approximately 63,000 at the close of Q2, up 11% year over year.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

This is an increase from approximately 60,000 at the close of Q1. As in the previous quarters, Effex Protect and the increasingly automated SOHO to corporate upsell option of our customers drive the growth in this metric. Together, they contributed over 5,800 new accounts during Q2 to the SMB cohort. Corporate ARPA was $3.00 $1 for the quarter from $3.00 $7 in the previous quarter and $310 in 2024. Corporate ARPA is simultaneously bolstered by significant enterprise clients, such as the Department of Veterans Affairs, and tampered by the account expansion and achievements within our smaller SMB cohort.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Our strong corporate performance is multifaceted, demonstrating success at every level of the market. The combination of robust revenue growth and high retention rates among our enterprise clients paired with the steady expansion of our SMB customer base underscores our ability to execute effectively across the entire customer continuum. This balanced growth model provides significant stability even in uncertain market conditions and strengthens our overall market position. It establishes us as a credible and attractive partner, a crucial advantage in a fragmented industry like healthcare. Our capacity to serve this diverse spectrum of clients is a key differentiator and fundamental to our long term market expansion and product strategies.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Turning to our public sector initiatives, I am thrilled to report uninterrupted progress. The VA rollout is proceeding well, and we are seeing steady increase in the adoption of our services. This is a direct reflection of the government's commitment to enhancing operational efficiency, and we are proud to be a key partner in that mission. The value of our FedRAMP High certification cannot be overstated. It has opened up numerous doors, and we are now in active high level discussions with other government agencies and nongovernmental organizations that require this level of security for their critical communications.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Consequently, our public sector pipeline remains robust and is accelerating. While we are actively bidding on several larger opportunities, our immediate priority is to build upon the success with the VA. We are seeing smaller deals progress through the sales funnel at a higher velocity, of which we're excited to report one just closed early in Q3. Adding to our book of business on this product line is a key focus in our public sector business at the moment. The 2025 has concluded with strong momentum in corporate, and we are very pleased with the results.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

This positive performance, a direct outcome of our strategic execution, gives us the necessary tailwinds to confidently pursue our ambitious goals for the corporate business throughout the fiscal year and into the future. Before moving on to SOHO, I'd like to comment on the evolving and dynamic regulatory landscape, specifically with regards to the expected Medicaid and Medicare reform from the One Big Beautiful Bill Act, the continued discussion around the TESSCO network, and the prior authorization automation ambitions. The impact of these changes can create substantial opportunities for our business by the increasing need for efficiency and automation. Since administrative burden has historically been a driver for our business, the increase in complexity may accelerate demand for our solutions. We believe our broad presence across multiple sectors of the health care industry is a huge offsetting asset and key factor of stability regardless of the possible risks from potential provider financial strain.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

With regards to Tefka and prior authorization automation, we view ourselves as a critical on ramp to the newer interoperable networks that the industry is moving toward. For example, we have just in the last quarter enabled a large health system to automate their high touch prior authorization process by taking unstructured faxes, extracting key data with our AI powered clarity offering and translating it into a modern FHIR resource based format that feeds directly into the enterprise platform. This solution bridges the old and the new, seamlessly connecting legacy workflows to modern networks without requiring a costly overhaul from the provider. Moving on to our SOHO business, we recorded Q2 revenue of $32,400,000 representing a planned and slowing year over year decrease of 9.4% from $35,800,000 in 2024. This is a slight sequential decrease from $32,900,000 in 2025, reflecting our continued strategic focus on optimizing profitability and maximizing the efficiency of our advertising investments in this channel.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

As anticipated, the total global SOHO account base saw an expected reduction from 702,000 in the prior quarter to 682,000 during Q2. SOHO ARPA for Q2 twenty twenty five was $15.62 compared to $15.39 in 2025. Our SOHO cancellation rate in 2025 was 3.84%, up from 3.52% in the previous quarter. Our strategic focus in the SOHO channel remains squarely on optimizing customer acquisition for maximum profitability with a close watch on metrics like return on advertising spend and LTV to CAC. I want to provide some color on the recent volatility in our SOHO cancel rate, which we see as a direct result of our strategic execution.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

There are two primary drivers. First, as we continuously refine our acquisition strategy, we're attracting a more diverse mix of customers with varied usage profiles. This includes an increase in limited use customers from certain channels, a cohort we welcome as long as they meet our strict profitability thresholds. Second, the outstanding success of our corporate e commerce channel allows us to more effectively guide customers to the right product from their very first interaction. This eliminates the need for many to start in SOHO and manually upgrade later.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

As a result, the composition of our remaining SOHO customer base is changing, leading to a churn rate range that is slightly broader than the narrow range of the past. This is an acceptable outcome of our recently established and strictly executed strategy. To summarize, we are very pleased with the quarter's performance and remain highly confident in our outlook. Our corporate business is executing as planned, driven by a healthy pipeline and growing customer adoption of our solutions. In the sellout channel, our strategic initiatives are delivering the expected outcomes.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

While we continue to monitor the broader macroeconomic environment, we are reaffirming our full year revenue and EBITDA guidance. Before I hand the call over, I want to extend my sincere gratitude to our employees for their dedication and hard work this past quarter. Many thanks also go out to our customers and partners for their continued trust and collaboration. We've had an excellent first half of the year and we look forward to building on this momentum. With that, I'm turning the call over to our CFO, Jim Malone, who will now provide a detailed update on our financial performance and outlook. Jim?

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

Thank you, Johnny, and good afternoon, everyone. In our press release and on this call today, we are discussing Q2 twenty twenty five results and guidance for Q3 twenty twenty five and full year 2025. We expect to file our 10 Q by close of business today. I'll begin with our corporate business results. Q2 'twenty five was another strong quarter for corporate with revenue of $55,300,000 an increase of $3,600,000 or 6.9% versus prior year, performing ahead of our expectations.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

This represents the highest corporate growth year over year in the past ten quarters on a normalized basis. As Johnny stated, we continue to see growth in our healthcare vertical and strong demand for our core digital fax product. Q2 'twenty five corporate ARPA of $3.00 $1 from $3.00 $7 in Q1 'twenty five and $310 in Q2 'twenty four is in line with our expectations. Corporate offer varies across our customer continuum based on the mix of customers that range from the lower end of the continuum through large enterprise clients such as the VA. Therefore, ARPA is pressured as the eFax Protect base continues to grow within the lower SMB cohort base.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

Our record Q2 'twenty five corporate revenue delivered a trailing twelve month retention rate of 102%, 300 basis points and 100 basis points improvement from the prior comparable period and Q1 twenty twenty five, respectively. Moving to SoHo. Q2 twenty twenty five revenue of $32,400,000 compared to $35,800,000 over the prior year represents a planned decrease of $3,400,000 or 9.4%. We continue our strategic focus on optimizing advertising spend and profitability in the SoHo revenue channel. I would like to note that in the current period, we eliminated dormant accounts not contributing to revenue from the number of SoHo customer accounts.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

The prior year period has been revised for consistency with the current year and all metrics calculated based on the number of customer accounts, including ARPA and monthly churn percent are calculated based on the revised number. As a result of this change, the prior year period of SoHo customer accounts decreased by 26,000. Again, I'd like to reiterate that the elimination of dormant accounts had no impact on revenues. Based on the adjusted customer accounts noted, Q2 twenty five ARPA of $15.62 had a modest improvement from the prior year comparable period of $0.17 and a sequential improvement of $0.22 The SoHo cancel rate was 3.84% versus 3.55% in the prior comparable period. The increase as Johnny stated is due to the improving funnel effect and success of the eFax Protect and a marginal shift in marketing dollars towards a customer that is more profitable, but has a shorter life.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

Moving to consolidated results. Consolidated revenue of $87,700,000 represents an increase of $200,000 or 0.3% versus Q2 'twenty four and returning us to total revenue growth earlier than anticipated. This is the first quarterly year over year consolidated revenue increase in eight quarters. Adjusted EBITDA of $48,100,000 is a decrease of $1,000,000 or 2.1% versus Q2 twenty twenty four, primarily driven by planned headcount. We delivered a healthy 54.8% adjusted EBITDA margin or approximately 135 basis points favorable to the midpoint of our Q2 twenty twenty five guidance range.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

Q2 twenty twenty five adjusted net income of $28,400,000 is an increase of $900,000 or 3.2% versus Q2 twenty twenty four, primarily driven by lower interest expense and depreciation and amortization, offset in part by adjusted EBITDA and a higher share count. Adjusted EPS of $1.46 is favorable to prior year by 2% or $03 driven by the items mentioned and a lower share count. Q2 twenty twenty five non GAAP tax rate and share count was approximately twenty one percent and 19,500,000.0 shares respectively. Capital allocation, free cash flow. Q2 twenty twenty five free cash flow is $20,300,000 versus $15,800,000 in the prior comparable period, primarily driven by operational performance.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

CapEx of $8,000,000 was down $600,000 or approximately 7% versus the prior year. Cash and cash equivalents. We ended Q2 twenty twenty five with cash of approximately $58,000,000 which is sufficient to fund our operations and repurchases of equity and debt. Equity repurchases in February 25 the board approved an extension to the previously approved program for another three years and up to $67,000,000 In Q2 twenty twenty five, we repurchased 546,000 shares for $12,000,000 bringing the total to date equity purchases of approximately 1,600,000.0 shares for $45,000,000 Bond repurchases. As mentioned in our November 23 earnings call, we announced a $300,000,000 three year bond repurchase program.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

In Q2 twenty twenty five, we repurchased approximately $6,000,000 face value of bonds at par. Our continued strong cash flow has allowed us to repurchase approximately $223,000,000 face value bonds for approximately $2.00 $9,000,000 of the cash to cash in a program to date with approximately $77,000,000 remaining under our current authorized program. Debt refinance. As noted in our eight ks filed on 07/14/2025, we concluded a $225,000,000 bank facility that we will utilize to retire our 6% notes due October 26. The loan consists of 150,000,000 delayed draw term loan plus a $75,000,000 revolving credit facility.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

Interest rate is SOFR plus applicable margin based on total net leverage ratio. We expect our borrowing costs to be similar to the current cost of the 6% notes. Executed a three bank club deal including standard covenants. The new credit facility credit agreement will be filed with our 10 Q. Moving to 25 guidance.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

We're reaffirming twenty five full year guidance for revenue and adjusted EBITDA, while raising our adjusted EPS range as follows. Full year revenue between $343,000,000 and $357,000,000 with $350,000,000 at midpoint adjusted EBITDA between $179,000,000 and $190,000,000 with $185,000,000 at midpoint Adjusted EPS between 5.25 to $5.65 with $5.45 at midpoint, an increase of approximately $0.23 Full year estimated share count and income tax rate of approximately 19,400,000.0 shares and a tax rate between twenty point five percent and twenty two point five percent with 21.5% at the midpoint. Please remember that as previously mentioned, our 2025 guidance and actual results exclude foreign exchange gain or losses on revaluation of intercompany accounts. Moving to Q3 twenty twenty five guidance. Revenues between $85,900,000 and $89,900,000 with $87,900,000 at the midpoint.

Jim Malone
Jim Malone
CFO at Consensus Cloud Solutions

Adjusted EBITDA between $44,400,000 and $47,400,000 with $45,900,000 at the midpoint adjusted EPS of 1.33 to 1.42 with $1.38 at midpoint. Estimated Q3 twenty twenty five share count and income tax rate are approximately 19,100,000.0 shares and a tax rate between 20.5% to 22.5%. This concludes my formal remarks. And I'd like to turn the call back to the operator for Q and A. Thank you.

Operator

Thank you. We will now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator

You may press star two if you would like to remove yourself from queue. And the first question today is coming from David Larson from BTIG. David, your line is live. Please go ahead.

Jenny Shen
Jenny Shen
Equity Research Associate at BTIG

Hi, this is Jenny Shen on for Dave. Thanks for taking the question and congrats on the quarter. I was just wanting to know more of your thoughts on demand and the pipeline. We've seen all the major hospital systems report and they've faced some tough quarters. They're seeing a slowdown in year over year growth in volumes.

Jenny Shen
Jenny Shen
Equity Research Associate at BTIG

Just any of your thoughts on discussions with the hospitals, is this translating into more cautious spending, more cautious budgets, or have you not seen that impact at all? Thanks.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Hi, Jenny. This is

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Johnny, and thanks for the question. I think it's a really good question. Currently, we're not experiencing what you're seeing, so actually, we were able to close some significant deals just very recently with large health systems and hospitals. So, we're not experiencing that they're slowing down. As I mentioned on the call, there's really two things that are important to say here.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

One is, first of all, we're serving a very, very broad spectrum of healthcare customers across multiple sub verticals. So on the one side, it's healthcare providers, really starting from single physician offices all the way up to large health systems and everything in between. But then it's also payers, it's also PBMs and pharma distribution customers, and a lot of our customers are also in the healthcare IT space. So it's a very broad spectrum across any size of customer you can imagine. So we're not particularly impacted if one piece or one cohort of that market is potentially suffering a little bit at the moment.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

That's the one thing. The other thing is, with our services and what we're providing, we're really driving efficiency. There's oftentimes a clear ROI for those customers. They go through a POC, they test the product, and then they roll it out. So, I think with lowering that administrative burden, with increasing efficiencies, and with saving costs, we are an attractive service even for providers that are suffering from a little bit more financial strain, as you just mentioned.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

Okay, we have a couple of questions by email, and then we'll go back to live questions. It was noted in this email question that our revenue retention rate had improved 102%. And the question is, what are the drivers behind that in terms of the customer types and sizes and our expectations for that trend as we go into the back half of the year? Johnny, once again, that's a good one for you because

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Yeah.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

You're dealing with that every day.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Yeah. There's multiple drivers for this, right? And as we noted, the retention rate has significantly improved. This doesn't happen overnight. One of the key drivers is obviously our very large strategic accounts and public sector, our EC Fax offering, which is definitely contributing to that retention rate, but also in the enterprise space and in the large account space, we have, with the go to market realignment a couple of years ago, really changed our approach in how we service those customers.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

So we're very close, we have assigned these books of business to our sales teams, we have rolled out different kinds of sales methodologies. We're up and cross selling into those existing accounts. We're making sure that we're not losing that business, but on the flip side, we're trying to grow it and expanding in those accounts. And then lastly, I think on the lower end of the customer continuum in the SMB world, we have multiple different programs that we have launched in order to improve our retention rate and really tackle churn, and those programs are showing success and are bearing fruits as well. So, our offering, our product offering, the way we monitor our customers, the way we look for churn signals, all of those things are being considered and are being worked on and have been rolled out into programs, and that is driving retention really across the entire customer continuum.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Now, that said, we're expecting that retention rate to stay above the 100% mark. That is definitely our goal, and we're working very hard to sustain that and ideally grow it.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

Okay, we'll take another question by email, which is a pivot to the public sector pipeline that you mentioned Johnny in your prepared remarks. And I think there's really a couple of embedded questions here. One is the length of the sales cycle that we're experiencing in the public sector. And then the second is the partnerships we have in terms of approaching that sector, particularly Cognizant now by Accenture.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Yeah.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

So first thing, I mentioned part of this on the call, these are very diverse deal sizes in the public sector. They can be very, very small, that's a few thousand bucks a month for customers that still need that high level of security. Obviously, those sales cycles are a lot faster and we can bring those customers, it's a couple of months, just like in the commercial space to get through, we have very standardized contract terms, pricing, and all those kind of things, so we're able to process them quickly. That was the deal that we just recently closed, so an additional customer on that platform, which is a big win for us. There's others that we're working on that are at the same speed.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

Once they get larger, and if you talk to very large government agencies, they go through an RFI and RFP process and sometimes go silent for six, twelve months. They wait till the next budgeting cycle. So these sales cycles, just like with the VA, it was multiple years until we were able to close that deal and then eventually roll it out, and really vary tremendously from a few couple of months to multiple years. Now, the size is not the only thing that matters. Sometimes these larger deals can also move faster, but we're still early in our federal government sales program and learning as we go, but we do have a few RFPs that we have responded to and we're hoping to close some more deals in the near future.

Johnny Hecker
Johnny Hecker
Chief Revenue Officer & EVP - Operations at Consensus Cloud Solutions

And with regards to our partnership with Accenture and former Cognizante, Accenture Federal Services, that is working really well. If you've noticed, the cloud service provider ship was transferred over to us. We're now the listed cloud service provider on the FedRAMP marketplace. This makes sense because we're actually the owner of the IP and the inventor of the technology, but besides that, that partnership is working really well. We're working very closely still with Accenture on many of these larger government deals, and on the smaller ones it doesn't make sense for a large system integrator to participate, we do that by ourselves.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

Tom, do want to see if there's any other live questions?

Operator

Certainly. And as a reminder to the audience, if you'd like to join the queue at this time to ask a question, And there are no further questions in queue at this time. As such, I would like to turn the floor back to Scott Tericke, CEO of Consensus, for closing remarks.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

Great. Well, we appreciate you joining us today for the results of our second fiscal quarter and our outlook for the balance of the year. Keep posted. We do have a virtual conference we'll be participating about actually next week. So stay tuned for that.

Scott Turicchi
Scott Turicchi
CEO & Director at Consensus Cloud Solutions

And other conferences that we have between now and November, we'll announce by press release. And then in early November, we'll have our Q3 earnings call. So thank you. And if you have any other further questions that you didn't have a chance to ask now, can email us and we'll get back to you.

Operator

Thank you. This does conclude today's conference call. You may disconnect at this time and have a wonderful day. Thank you once again for your participation.

Executives
    • Adam Varon
      Adam Varon
      SVP - Finance
    • Scott Turicchi
      Scott Turicchi
      CEO & Director
    • Johnny Hecker
      Johnny Hecker
      Chief Revenue Officer & EVP - Operations
    • Jim Malone
      Jim Malone
      CFO
Analysts
    • Jenny Shen
      Equity Research Associate at BTIG
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