Consensus Cloud Solutions, Inc. Common Stock 2026 Q2 Earnings Call

Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results. Some of these risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our regulatory filings, including our annual 10-K and quarterly 10-Q SEC filings. Now let me turn the call over to Scott for his opening remarks.

Thank you, Kip. We had excellent financial results in Q2, continuing our acceleration of total revenue growth with meaningful contributions from each channel of revenue. In addition, this was the third consecutive quarter that we had year-over-year growth in the following key financial metrics: consolidated revenue, adjusted EBITDA, adjusted non-GAAP EPS, and free cash flow. Our revenue growth was driven by the continuing improvement in our corporate channel, which reinforces both the necessity and value proposition of our solutions. We exceeded our revenue objective, with corporate revenue posting a 9.3% growth over Q2 2025 ahead of our forecast. This success was driven by record strong usage, increased revenue retention, new customer acquisition, and contribution from our advanced products. In addition, eFax Protect had record signups, which is a continuing trend each quarter.

In addition at the VA, we continue to see more facilities come online, generating a record level of usage. All of these factors contributed to the stellar year-over-year growth for our corporate channel. SOHO revenue was also ahead of our expectations and had the slowest rate of decline since we began the shift of our marketing dollars to corporate in late 2023. We continue to be judicious in adding to our cost structure, producing an adjusted EBITDA margin of 52.9% in Q2, comfortably within our range of 50%-55%. Johnny will provide more detail in his portion of the presentation regarding the operational results for Q2. Free cash flow was $25.5 million in the quarter, up approximately 25% from Q2 2025 due to excellent management of our receivables and lower interest expense than a year ago.

We continue to expect our free cash flow in 2026 to approximate the $106 million of free cash flow in 2025. In addition, we were able to repurchase approximately $9.6 million of our stock during the quarter, or approximately 300,000 shares. Before turning the call over to Johnny, I want to share two strategic developments during the quarter. The first is the formation of our new Healthcare Strategy and Solutions Group, headed by Steve Tolle, and the second is the tuck-in acquisition of Summit Healthcare. The Healthcare Strategy and Solutions Group will own the healthcare product portfolio, go-to-market efforts, and strategy primarily for our non-fax solutions. This group will build on the foundation we have built in healthcare through our eFax product.

By way of example, when our fax customers receive referrals, prior authorizations, orders, or record requests via fax, they are receiving data in an unstructured format, and as a result, they need someone to process the document and enter the information into the EHR. We can seamlessly fill that gap with our variety of technologies and solutions. We have discussed our vision for Harmony before and how pieces of it are already in production. This group will be responsible for unifying our healthcare portfolio of solutions. The inbound image in the prior example will be transformed into structured data, which will be routed to the right people so they can act. These solutions will target specific segments and use cases in the healthcare ecosystem.

This will allow our existing eFax customers to expand into higher-value services and for new clients to come to us for the intelligence rather than merely the transport. The Healthcare Strategy and Solutions Group will be led by Steve Tolle, as I mentioned, and he will have the role of Chief Healthcare Solutions Officer. He's a 35-year healthcare technology executive who delivered the industry's first AI-based radiology product at IBM Watson Health. He also founded iConnect Network at Merge Healthcare before its acquisition by IBM, and he's held senior roles at Allscripts, Optum Insight, and Pfizer. His domain is interoperability and AI applied to clinical workflow, which is precisely what this group is tasked to do.

We will continue to hire into this business unit and its related areas over the balance of the year and into 2027 as we look for meaningful contributions from this group to our non-fax revenue in 2028 and beyond. dochealth is a workflow platform developed by a practicing medical professional. It handles the clinically adjacent work that surrounds patient care but doesn't live cleanly inside an electronic health record, such as referral management, care coordination, patient follow-up, and the administrative tasks that fall between visits. dochealth fits perfectly into our vision for the Harmony Platform. Adam will provide more financial details regarding the transaction, but I'm excited to welcome the 14 employees of dochealth that have joined Consensus, as well as its customer base and pipeline and key technologies. I'll now turn the call over to Johnny, who will provide more operational details.

Thank you, Scott, and hello, everyone. As Scott mentioned, we are pleased to see continued progress across the business with consolidated revenue growing 4.1% year-over-year to $91.4 million. Over the last few quarters, I have talked extensively about the structural shift in our business toward high-value corporate revenue. In Q2, we saw this established pattern solidify. I want to emphasize the strength of secure cloud fax in this context. It is the primary driver of total dollar growth, which we expect to continue into the future. The migration to the cloud in regulated industries, especially in healthcare and the public sector, has only just begun. We're vigorously riding that wave by replacing legacy on-premise servers across these verticals. Our volume growth is coming from three distinct, reliable pillars.

We're winning new customers, our existing customers' traffic is growing, and we're capturing larger shares of wallet within those established accounts. fax is what is driving our top line, and the demand for it remains robust. Our Q2 results reflect the power of that core engine delivering another quarter of record performance. The corporate channel achieved a major milestone, crossing the $60 million mark for the very first time to deliver a record $60.5 million in total revenue for the quarter. That represents a 9.3% year-over-year increase and a solid 3% sequential increase from Q1, setting a new high watermark for this channel. With Q2 coming in at 9.3% corporate growth, we're consistently operating in the high single digits, well on our path to reaching double digits.

This record growth is supported by an expanding market presence, ending the quarter with approximately 67,000 corporate customers, which is a 9.4% increase year-over-year. Another key metric that truly demonstrates the health and durability of our corporate business is our net revenue retention rate. I am very pleased to share that our NRR continued its upward climb this quarter by more than 1%, reaching 103.1%, up from 102% in Q1. This is the ultimate validation of our strategy. It proves that once we land these enterprise accounts, we're successfully expanding our footprint, capturing more volume, and embedding ourselves deeper into their daily operations. To secure and grow those enterprise accounts, we're continuing to invest purposefully in our healthcare solution strategy. As Scott mentioned in his opening remarks, this investment involves building out a dedicated group of subject matter experts.

Their specific mandate is to build laser-focused solutions that could create tangible value for our healthcare customers at the intelligence and workflow layer. Last quarter, I spoke quite a bit about the importance of workflow. I am excited to report that we made great progress on that front in Q2, executing a strategic buy versus build decision through a small asset acquisition, whereby we acquired excellent caliber technology and talent. It brings an appealing customer base and strong partnerships that will directly benefit our go-to-market motions and accelerate our roadmap for flexible healthcare provider workflows. The decision fits perfectly into our broader product strategy. The new eFax platform we continue to deploy provides excellent entry-level workflow capabilities right out of the box.

By integrating these newly acquired advanced capabilities upmarket, we're building an ecosystem where we can provide AI-powered workflow layers seamlessly along the entire customer continuum, from a small independent clinic all the way up to a major health system or payer. This strategy is the natural evolution of our platform, supporting our deep vertical focus by making our core fax products stickier and more deeply embedded in clinical workflows. This continuous product evolution brings me to our SOHO channel and how it converges with our corporate SMB business. We countered the overlap of SOHO and corporate with a very high-performing upgrade program in the past. We launched a new corporate e-commerce offering, eFax Protect, in mid-2023, which has been a meaningful service and a highly relevant revenue contributor.