What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-10 compared with 2022-11-14 · 236 added, 365 removed, 552 unchanged (52% of the section changed)

4 unchanged sentences

(Unaudited, in thousands except share and per share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 111,265 $ 94,164

18 unchanged sentences

Long-term debt 794,341 793,865

Deferred revenue, non-current 109 184

Operating lease liabilities, non-current 13,998 14,108

Deferred revenue, noncurrent 2,316 2,319

Operating lease liabilities, noncurrent 13,379 13,877

Liability for uncertain tax positions 7,438 6,725

5 unchanged sentences

Authorized 120,000,000 ;

total issued is 20,016,950 and 19,978,580 shares and total outstanding is 19,827,836 and 19,978,580 shares at September 30, 2022 and December 31, 2021, respectively

Treasury stock, at cost ( 189,114 and zero shares at September 30, 2022 and December 31, 2021, respectively)

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

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

8 unchanged sentences

(Unaudited, in thousands except share and per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Revenues $ 91,454 $ 89,298

6 unchanged sentences

Research, development and engineering (1)

3,236 2,019 8,313 5,635

General and administrative (1)

3 unchanged sentences

Interest expense ( 12,566 ) ( 13,274 )

Other income, net 2,992 1,552 4,742 1,833

Other (expense) income, net ( 844 ) 174

Income before income taxes 20,587 25,559

Income tax expense 5,129 7,038

Income from continuing operations 17,141 41,132 58,120 119,220

Loss from discontinued operations, net of income tax (1)

— ( 13,908 ) — ( 17,118 )

Net income $ 15,458 $ 18,521

Net income per common share from continuing operations:

Basic $ 0.86 $ 2.07 $ 2.92 $ 5.99

Diluted $ 0.86 $ 2.07 $ 2.91 $ 5.99

Net loss per common share from discontinued operations:

Basic $ — $ ( 0.70 ) $ — $ ( 0.86 )

Diluted $ — $ ( 0.70 ) $ — $ ( 0.86 )

Net income per common share:

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General and administrative 4,432 4,551

Loss from discontinued operations, net of income taxes — 1,099 — 3,254

Total $ 5,140 $ 5,403

4 unchanged sentences

(Unaudited, in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income $ 15,458 $ 18,521

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustment 3,078 ( 2,117 )

Other comprehensive loss ( 11,411 ) ( 8,248 ) ( 17,872 ) ( 13,555 )

Other comprehensive income (loss) 3,078 ( 2,117 )

Comprehensive income $ 18,536 $ 16,404

4 unchanged sentences

(Unaudited, in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Deferred income taxes, net ( 66 ) ( 1,310 )

Loss on sale of businesses — 21,798

Goodwill impairment on business — 32,629

Other — 3,530

Changes in operating assets and liabilities:

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Acquisition of businesses, net of cash received — ( 12,855 )

Proceeds from sale of businesses, net of cash divested — 48,876

Purchase of investments ( 4,000 ) —

Purchases of intangible assets — ( 1,000 )

2 unchanged sentences

Debt issuance costs — ( 232 )

Issuance of common stock under employee stock purchase plan 631 —

Repurchase of common stock ( 9,195 ) —

Shares withheld related to net share settlement ( 451 ) ( 1,173 )

Deferred payments for acquisitions — ( 6,267 )

Contribution from Former Parent — 21,238

Other — ( 593 )

Net cash (used in) provided by financing activities ( 8,895 ) 14,378

Net cash used in financing activities ( 9,646 ) ( 1,405 )

Effect of exchange rate changes on cash and cash equivalents 1,324 ( 647 )

2 unchanged sentences

Cash and cash equivalents at end of period $ 111,265 $ 93,864

Less cash and cash equivalents at end of period, discontinued operations — 266,582

Cash and cash equivalents at end of period, continuing operations $ 103,683 $ 31,210

See Notes to Condensed Consolidated Financial Statements

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited, in thousands except share amounts)

Common stock Additional

paid-in Treasury stock Accumulated Accumulated other comprehensive Net parent Total

Shares Amount capital Shares Amount Deficit loss investment Equity

Balance, July 1, 2021 — $ — $ — — $ — $ — $ ( 61,273 ) $ 1,295,005 $ 1,233,732

Net income — — — — — — — 27,224 27,224

Other comprehensive loss — — — — — — ( 8,248 ) — ( 8,248 )

Share-based compensation — — — — — — — 1,451 1,451

Parent contribution — — — — — — — ( 17,462 ) ( 17,462 )

Balance, September 30, 2021 — $ — $ — — $ — $ — $ ( 69,521 ) $ 1,306,218 $ 1,236,697

Common stock Additional

paid-in Treasury stock Accumulated Accumulated other comprehensive Total

Shares Amount capital Shares Amount Deficit loss Equity

Balance, July 1, 2022 20,015,838 $ 200 $ 11,913 ( 189,114 ) $ ( 7,596 ) $ ( 280,416 ) $ ( 23,318 ) $ ( 299,217 )

Balance, January 1, 2022 19,978,580 $ 200 $ 2,878 — $ — $ ( 318,886 ) $ ( 16,857 ) $ ( 332,665 )

Net income — — — — — 18,521 — 18,521

3 unchanged sentences

Share-based compensation — — 5,403 — — — — 5,403

Reclassifications related to the Separation (Note 1)

Reclassifications related to the Separation

— — — — — ( 2,672 ) — ( 2,672 )

Balance, September 30, 2022 20,016,950 $ 200 $ 16,419 ( 189,114 ) $ ( 7,596 ) $ ( 263,954 ) $ ( 34,729 ) $ ( 289,660 )

Common stock Additional

paid-in Treasury stock Accumulated Accumulated other comprehensive Net parent Total

Shares Amount capital Shares Amount Deficit loss investment Equity

Balance, January 1, 2021 — $ — $ — — $ — $ — $ ( 55,966 ) $ 1,178,508 $ 1,122,542

Net income — — — — — — — 102,102 102,102

Other comprehensive loss — — — — — — ( 13,555 ) — ( 13,555 )

Share-based compensation — — — — — — — 4,370 4,370

Parent contribution — — — — — — — 21,238 21,238

Balance, September 30, 2021 — $ — $ — — $ — $ — $ ( 69,521 ) $ 1,306,218 $ 1,236,697

Balance, March 31, 2022 19,995,528 $ 200 $ 7,108 — $ — $ ( 303,037 ) $ ( 18,974 ) $ ( 314,703 )

Common stock Additional

3 unchanged sentences

Net income — — — — — 15,458 — 15,458

Other comprehensive loss — — — — — — ( 17,872 ) ( 17,872 )

Other comprehensive income — — — — — — 3,078 3,078

Vested restricted stock 24,840 — — — — — — —

2 unchanged sentences

Share-based compensation — — 5,660 — — — — 5,660

Issuance of shares under ESPP 15,806 — 631 — — — — 631

Reclassifications related to the Separation (Note 1)

— — — — — ( 3,188 ) — ( 3,188 )

Balance, September 30, 2022 20,016,950 $ 200 $ 16,419 ( 189,114 ) $ ( 7,596 ) $ ( 263,954 ) $ ( 34,729 ) $ ( 289,660 )

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

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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 more than one million customers of all sizes, from enterprises to individuals, across over 50 countries and multiple industry verticals including healthcare, financial services, law and education.

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.

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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 previously announced separation of the cloud fax business (the “Separation”), into an independent publicly traded company, Consensus Cloud Solutions, 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.

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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 September 30, 2022 (see Note 17 - Related Party Transactions).

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

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Basis of Presentation

The consolidated financial statements of Consensus for periods prior to the completion of the Separation are those of J2 Cloud Services, which were derived from the interim condensed consolidated financial statements of Ziff Davis on a carve-out basis using the historical assets, liabilities, and results of operations attributable to the legal entities and business units which comprised historical J2 Cloud Services.

J2 Cloud Services was a wholly-owned subsidiary of Ziff Davis, and together with its subsidiaries, was a provider of internet services, including cloud-based subscription services to consumers and businesses including cloud fax, voice, cybersecurity, privacy and marketing technology.

For periods prior to the Separation, the interim condensed consolidated financial statements of Consensus included an allocation of certain corporate expenses related to services provided to J2 Cloud Services by Ziff Davis.

These expenses included the cost of executive management, information technology, legal, treasury, risk management, human resources, accounting and financial reporting, investor relations, public relations, and internal audit services provided by the Former Parent company personnel to J2 Cloud Services.

The cost of these services had been allocated to J2 Cloud Services based on specific identification when possible or, when the expenses were determined to be global in nature, based on the percentage of J2 Cloud Services’ relative revenue to total Ziff Davis revenue for the periods presented.

Management believes that these allocations were reasonable representations of the costs incurred for the services provided;

however, these allocations may not be indicative of the actual expenses that would have been incurred by J2 Cloud Services had it been operating as an independent company for the periods presented.

Interest expense relates to interest incurred on third-party debt issued by historical J2 Cloud Services.

No interest expense incurred by Ziff Davis was allocated to J2 Cloud Services as Ziff Davis’ third-party debt was not specifically related to historical operations of J2 Cloud Services.

As the Cloud Fax business was not historically held by a single legal entity, “net parent investment” is shown to represent Ziff Davis’ interest in the recorded net assets of historical J2 Cloud Services.

Other comprehensive income or loss attributable to J2 Cloud Services is presented as a separate component of equity.

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, although the Company believes that the disclosures made are adequate to make that information not misleading.

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, 2021, included in our Annual Report (Form 10-K) filed with the SEC on April 15, 2022.

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.

1 unchanged sentence

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with 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 net 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, fair value of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, lease impairment, contingent consideration, income taxes, sales taxes, contingencies and allowances for doubtful accounts.

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”).

Discontinued Operations

The accounting requirements for reporting the Company’s non-fax business as a discontinued operation were met when the Separation was completed.

Accordingly, the Condensed Consolidated Statements of Income reflect the results of the non-fax business as a discontinued operation for the prior period presented (see Note 5 - Discontinued Operations and Disposition of Business).

Allowances for Doubtful Accounts

3 unchanged sentences

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 adequacy of these reserves.

On an ongoing basis, management evaluates the appropriateness of these reserves.

Revenue Recognition

4 unchanged sentences

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 Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”), for principal-agent considerations and assesses:

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.

9 unchanged sentences

• 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 J2 Cloud Services overall business;

• 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;

3 unchanged sentences

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 third quarter of 2022.

In the third quarter of 2021, the Company recorded impairment of certain operating right-of-use assets related to the non-fax business (refer to Note 5 - Discontinued Operations and Disposition of Businesses).

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.

1 unchanged sentence

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.

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.

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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, with amortization expense included in general and administrative expenses on the Condensed Consolidated Statements of Income.

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 impairment exist.

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 upon goodwill.

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.

1 unchanged sentence

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 third quarter of 2022 and 2021.

Historically, J2 Cloud Services was included in the federal consolidated and state combined income tax returns with the Former Parent and its other subsidiaries.

For purposes of the prior year Condensed Consolidated Statement of Income prior to the Separation, the Company’s taxes were determined using the separate return method as if the Company had filed separate tax returns as a C-Corporation.

In addition, J2 Cloud Services’ 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.

No impairment was recorded in the first quarter of 2023 or 2022.

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).

The Company’s income is subject to taxation in both the U.S.

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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 recognized accrued interest and penalties related to uncertain income tax positions in income tax expense on its Condensed Consolidated Statements of Income.

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.

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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

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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, Consensus may change the input factors used in determining future share-based compensation expense.

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 historical exercise behavior of the Company’s employees (see Note 13 - Equity Incentive and Employee Stock Purchase Plan).

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 ASC Topic No.

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.

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The dilutive effect of participating securities is calculated under the more dilutive of either the treasury method or the two-class method.

For periods prior to the Separation, EPS is calculated using the number of shares issued to the Former Parent upon the legal formation of Consensus and the contribution of the Cloud Fax business.

The dilutive effect of Consensus stock-based compensation awards that were exchanged for the Former Parent stock-based compensation awards is included in the denominator of diluted EPS on a prospective basis.

Segment Reporting

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The chief operating decision maker views the Company as one reportable segment known as Cloud Fax (see Note 13 - Segment Information).

Adjustment related to the Spin-off

During 2022, the Company identified certain improper classifications related to executive bonuses and other corporate charges incurred prior to the Separation that were incorrectly treated as equity contributions at the time of the Spin-off rather than liabilities.

The Company recorded a reclassification of $( 0.5 ) million for the three and $ 0.6 million for the nine months ended September 30, 2022 from equity to accrued expenses to correct the prior period classification on the balance sheet.

The Company determined that the impact of this reclassification was not material to the current or prior period financial statements.

Additionally, on September 27, 2022, the Company reached a settlement agreement with the Former Parent and agreed to pay $ 2.6 million to close out transaction fees related to the Spin-Off.

This adjustment to the amount paid to the Former Parent as part of the Spin-off was recorded as an adjustment to equity during the nine months ended September 30, 2022.

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.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

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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.

The accommodations are available for all entities through December 31, 2022, with early adoption permitted.

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments and reduce complexity.

In addition, it amends the guidance for scope exception surrounding derivatives for contracts in an entity’s own equity.

In each case, the related guidance surrounding EPS has also been amended.

The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.

This amendment may be adopted using either a modified or fully retrospective method of transition.

The Company does not expect the adoption of this standard to have an impact on the Company’s consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No.

2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The amendments in this ASU improve the accounting for acquired revenue contracts with customers

in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability, and payment terms and their effect on subsequent revenue recognized by the acquirer.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, including the interim periods within those fiscal years.

Early adoption is permitted.

The Company early adopted ASU 2021-08 in the second quarter of 2022 and applied it to the Summit acquisition as disclosed within Note 4 - Business Acquisitions.

As a result of this adoption, the Company recognized $ 0.9 million in Deferred revenue with a corresponding increase in Goodwill.

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.

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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 consolidated financial statements and related disclosures.

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).

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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 does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.

The Company’s revenues substantially consist of monthly recurring subscription and usage-based fees, the majority of which are paid in advance by credit card.

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:

Prospective application to all new leasehold improvements recognized on or after the date that the entity first applies the amendments in this ASU;

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;

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.

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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Corporate $ 49,407 $ 46,519

Small office home office (“SoHo”) 42,030 42,779

Other 2 92 23 275

Total revenues $ 91,454 $ 89,298

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Total $ 91,454 $ 89,298

The Company has recorded $ 4.0 million and $ 4.1 million of revenue for the three months ended September 30, 2022 and 2021, respectively, and $ 19.2 million and $ 20.7 million of revenue for the nine months ended September 30, 2022 and 2021, respectively, that was previously included in the deferred revenue balance as of the beginning of each respective year.

As of September 30, 2022 and December 31, 2021, the Company acquired $ 5.0 million and zero , respectively, of Deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions), which are subject to purchase accounting adjustments.

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.

Performance Obligations

The Company’s contracts with customers may include multiple performance obligations.

For such arrangements, revenues are allocated to each performance obligation based on its relative standalone selling price.

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 term between invoicing and when payment is due is not significant.

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

In determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is also required to determine the standalone selling price for each distinct performance obligation.

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

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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, revenues for these services are recognized over the contract period when faxing capabilities are provided.

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.

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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 the services because other payment terms would affect the nature of the risk assumed by the Company to provide service given the costs of the customer acquisition and the highly competitive and commoditized nature of the business Consensus operates which allows customers to easily move from one provider to another.

This additional risk may make it uneconomical to provide the service.

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.

Costs to Fulfill a Contract

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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.

Business Acquisitions

On February 4, 2022, in a cash transaction, the Company acquired certain assets of Summit Healthcare Services, Inc.

(“Summit”), a Massachusetts based provider of secure interoperability solutions within the healthcare industry.

The Condensed Consolidated Statement of Income since the date of acquisition and balance sheet as of September 30, 2022, reflect the results of operations of this 2022 acquisition.

For the nine months ended September 30, 2022, this acquisition contributed $ 5.3 million to the Company’s revenues.

Net income contributed by this acquisition was not separately identifiable due to the Company’s integration activities and is not material.

Total consideration for this transaction was $ 12.2 million, net of cash acquired, and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the preliminary allocation of the purchase consideration, net of cash acquired, for this acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 1,248

Prepaid expenses and other current assets 30

Property and equipment 9

Operating lease right-of-use assets, non-current 413

Trademarks 1,000

Customer relationships 7,200

Goodwill 6,789

Other intangibles 1,200

Accounts payable and accrued expenses ( 295 )

Deferred revenue ( 4,951 )

Operating lease liabilities, non-current ( 413 )

Total $ 12,230

The initial accounting for the Summit acquisition is preliminary and subject to change.

The Company expects to finalize the accounting for the Summit acquisition within twelve months of the acquisition date.

During the third quarter of 2022, the Company recorded a working capital adjustment of $ 2.1 million, which reduced the purchase price of the acquisition by the same amount.

Since the date of acquisition, the Company has recorded $ 1.4 million in additional deferred revenue with a corresponding increase in Goodwill as a measurement period adjustment.

Additionally, as a result of the early adoption of ASU 2021-08 in the second quarter of 2022, the Company recognized $ 0.9 million in Deferred revenue with a corresponding increase in Goodwill.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition.

Goodwill recognized associated with this acquisition during the nine months ended September 30, 2022 is $ 6.8 million, of which $ 6.8 million is expected to be deductible for income tax purposes.

Discontinued Operations and Disposition of Businesses

On October 7, 2021, the Former Parent transferred certain assets and liabilities associated with its Cloud Fax business to Consensus, including the equity interests in J2 Cloud Services, in exchange for approximately $ 259.1 million in cash, an asset related to the $ 500 million aggregate principal amount of the 6.5 % Senior Notes due in 2028, and the return of the assets and liabilities related to the non-fax business back to Ziff Davis.

The transfer to the Former Parent of the non-fax business met the accounting requirements to be presented as a discontinued operation once the Separation was completed as the disposition of the non-fax business constituted a strategic shift that had a major effect on the Company’s operations relative to the historical operations of J2 Cloud Services.

Accordingly, the condensed consolidated financial statements reflect the results of the non-fax business as a discontinued operation for all periods presented.

The Condensed Consolidated Statements of Income report discontinued operations separate from continuing operations.

The Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Stockholders’ (Deficit) Equity combine continuing and discontinued operations.

The Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders’ (Deficit) Equity include the non-fax business activity through October 7, 2021.

The key components of income from discontinued operations that were included in the Company’s Condensed Consolidated Statement of Income are as follows (in thousands):

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

$ 92,904 $ 265,230

Cost of revenues

26,102 72,731

Gross profit 66,802 192,499

Operating expenses:

Sales and marketing

25,297 70,775

Research, development and engineering

General and administrative

29,025 84,348

Goodwill impairment on business — 32,629

Total operating expense 60,563 204,113

Income (loss) from discontinued operations 6,239 ( 11,614 )

Interest expense ( 51 ) ( 229 )

Interest income 181 680

Loss on sale of businesses ( 24,599 ) ( 21,797 )

Other expense, net

( 675 ) ( 426 )

Loss from discontinued operations before income taxes

( 18,905 ) ( 33,386 )

Income tax benefit

( 4,997 ) ( 16,268 )

Loss from discontinued operations, net of income taxes

$ ( 13,908 ) $ ( 17,118 )

The key components of cash flows from discontinued operations are as follows (in thousands):

Nine Months Ended September 30, 2021

Depreciation and amortization

Capital expenditure

Share-based compensation

Non-cash operating lease costs 3,227

Deferred income taxes, net 5,416

Lease asset impairments and other charges 2,707

Loss on sale of businesses 21,798

Goodwill impairment on business 32,629

Prior to the Separation, the Company completed the following dispositions that did not meet the criteria for discontinued operations by themselves but were subsequently classified as discontinued operations as they are part of the non-fax business transferred back to the Former Parent.

Voice Asset Sales (Non-Consensus)

During the first quarter of 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets.

On February 9, 2021, in a cash transaction, the Company sold the Voice assets.

For the nine months ended September 30, 2021, the total gain recognized on the sale was $ 2.8 million which was recorded in discontinued operations on the Condensed Consolidated Statement of Income.

B2B Back-up Sale (Non-Consensus)

During the first quarter of 2021, the Company committed to a plan to sell its B2B Backup business as it was determined to be a non-core business.

During the second quarter of 2021, the Company received an offer to purchase the business.

Management determined that the fair value of the business less cost to sell was lower than its carrying amount.

As a result, the Company recorded an impairment to goodwill of $ 32.6 million which was recorded in the second quarter of 2021.

and is included within discontinued operations on the Condensed Consolidated Statement of Income.

On September 17, 2021, in a cash transaction, the Company sold the B2B Backup business.

For the three and nine months ended September 30, 2021, the total loss recognized on the sale was $ 24.6 million and is included within discontinued operations on the Condensed Consolidated Statement of Income.

Fair Value Measurements

The Company complies with the provisions of 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.

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.

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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.

Goodwill and Intangible Assets

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These determinations are primarily based upon the Company’s historical experience and expected benefit of each intangible asset.

If it is determined that such assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset.

If it is determined that such

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.

In the nine months ended September 30, 2022, the Company acquired technology for jSign, a corporate solution that provides electronic signature and digital signature solutions to businesses, offering document markup and end-user signing services via mobile-aware web application and enterprise API.

The purchase price was $ 1.0 million and the asset is included in Intangibles, net on the Condensed Consolidated Balance Sheet.

The changes in carrying amounts of goodwill for the nine months ended September 30, 2022 are as follows (in thousands):

The changes in carrying amounts of goodwill for the three months ended March 31, 2023 are as follows (in thousands):

Balance as of January 1, 2023 $ 346,585

Goodwill acquired (Note 4) 6,789

Foreign exchange translation 1,167

Balance as of September 30, 2022 $ 342,104

Balance as of March 31, 2023 $ 347,752

Intangible Assets with Indefinite Lives:

Intangible assets are summarized as follows (in thousands):

September 30, 2022 December 31, 2021

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

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Intangible Assets Subject to Amortization:

As of September 30, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

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

Weighted-Average Remaining

Cost Accumulated

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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, 2021, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

As of December 31, 2022, intangible assets subject to amortization are summarized as follows (in thousands):

Weighted-Average Remaining

Cost Accumulated

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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.

Estimated amortization expense for the remainder of fiscal year 2022 and succeeding years is as follows:

(in thousands)

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

2023 (remainder) $ 3,177

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Total $ 16,698

Amortization expense was $ 1.1 million and $ 1.2 million for the three months ended September 30, 2022 and 2021, respectively.

Amortization expense was $ 3.7 million and $ 4.4 million for the nine months end September 30, 2022 and 2021, respectively.

Amortization expense was $ 1.1 million and $ 1.5 million for the three months ended March 31, 2023 and 2022, respectively.

Long-term debt consists of the following (in thousands):

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

2026 Senior Notes $ 305,000 $ 305,000

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Total long-term debt $ 794,341 $ 793,865

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

2023 (remainder) $ —

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

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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 Sheet as of September 30, 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, commencing on April 15, 2022.

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”).

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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 September 30, 2022.

As of September 30, 2022 and December 31, 2021, the estimated fair value of the 2026 Senior Notes was approximately $ 266.9 million and $ 316.1 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.

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

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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 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 Sheet as of September 30, 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, commencing on April 15, 2022.

The 2028 Senior Notes mature on October 15, 2028, 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”).

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.

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The Company is in compliance with its debt covenants as of September 30, 2022.

As of September 30, 2022 and December 31, 2021, the estimated fair value of the 2028 Senior Notes was approximately $ 425.0 million and $ 521.2 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.

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 senior secured 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.

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 September 30, 2022, no amount has been drawn down on the Credit Facility.

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”) based interest rate between 1.75 % - 2.50 %, with stepdowns subject to the total net leverage ratio.

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.

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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 September 30, 2022.

The Company is in compliance with its covenants as of March 31, 2023.

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 five years and generally provide renewal options for terms up to an additional five years .

In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement.

The components of lease expense are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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.

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,

Operating lease cost $ 669 $ 628

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Lease-related assets and liabilities

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Supplemental cash flow information related to leases is as follows (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 727 $ 648

Operating cash flows from finance leases — 2,719

Right-of-use assets obtained in exchange for lease obligations:

Operating leases $ — $ 1,316

Finance leases — 2,719

Other supplemental operating lease information consists of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Operating leases:

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Weighted average discount rate 4.8 % 4.6 %

Maturities of operating lease liabilities as of September 30, 2022 are as follows (in thousands):

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

Operating Leases

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The Company historically did not collect sales tax in states where it was not able to quantify the appropriate sales tax to be collected.

The Company believes it is probable that a sales tax liability exists for its corporate accounts for periods from 2017 through 2021;

however, the Company could not estimate the sales tax liability for its corporate customers.

Prior to the third quarter of 2022, the Company was unable to determine which of these customers are either exempt organizations or resellers and are 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 of $ 8.0 million during the three and nine months ended September 30, 2022 within accounts payable and accrued expenses on the Company’s Condensed Consolidated Balance Sheets, as the exposure became probable and estimable.

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 taken the same approach in estimating the liability for the nine months ended September 30, 2022.

Accordingly, the Company has recorded a sales tax expense within general and administrative expenses in the Condensed Consolidated Statements of Income of $ 8.4 million and $ 9.5 million for the three and nine months ended September 30, 2022, respectively, and zero for the three and nine months ended September 30, 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.

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 within 6-12 months.

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 our business.

The process is expected to be completed in the second quarter of 2023.

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.

As such, the Company has recorded a $ 17.8 million sales tax reserve recorded in accounts payable and accrued expenses on the Company’s Condensed Consolidated Balance Sheets as of September 30, 2022.

Historically, the Company was included in the federal consolidated and state combined income tax returns with the Former Parent and its other subsidiaries.

For purposes of the prior period condensed consolidated financial statements, the Company’s taxes were determined using the separate return method as if the Company had filed separate tax returns as a C-Corporation.

Accordingly, income tax amounts computed under this method (including deferred taxes and net operating loss carryforwards) may differ from amounts included in the Former Parent’s historical consolidated provision.

Pursuant to the terms of the Separation, any tax liabilities with respect to Discontinued Operations remains the responsibility of the Former Parent.

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.

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.

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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 September 30, 2022 and 2021 was 28.8 % and 21.9 %, respectively.

The Company’s effective tax rate for the nine months ended September 30, 2022 and 2021 was 27.4 % and 23.5 %, respectively.

The Company’s increased rate during the three and nine months ended September 30, 2022 is primarily due to certain expenses not being deductible for tax.

Income before income taxes included income from domestic operations of $ 0.8 million and $ 97.8 million for the nine months ended September 30, 2022 and 2021, respectively, and income from foreign operations of $ 79.2 million and $ 58.0 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, the Company had $ 7.0 million and $ 4.8 million, respectively, in liabilities for uncertain income tax positions.

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.

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The Company files tax returns in the US, Ireland, Netherlands, France, Canada, Japan and Hong Kong.

As of September 30, 2022, the Company is not under audit in any jurisdiction that it operates within.

The Company has recently filed its first set of post-spin tax returns including some international subsidiaries who have previously filed in their local jurisdictions.

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.

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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 and nine months ended September 30, 2022, the Company repurchased zero and 189,114 shares, respectively, under this program.

Cumulatively as of September 30, 2022, 189,114 shares have been repurchased at an aggregate cost of $ 7.6 million.

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.

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These shares do not count against the authorized capacity under the Company’s share repurchase program described above.

During the three and nine months ended September 30, 2022 the Company withheld shares on its vested restricted stock units relating to its share-based compensation plans of 1,906 and 29,725 shares, respectively

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.

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).

Equity Incentive and Employee Stock Purchase Plan

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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 staff pursuant to the 2021 Plan.

Compensation expense resulting from restricted stock and restricted 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 typically one year for awards to members of the Company’s Board of Directors, four years for staff and five years for the Chief Executive Officer and Chief Operating Officer (excluding market-based awards discussed below).

The Company granted 16,523 shares and 66,767 shares of restricted stock and restricted stock units (excluding awards with market conditions below) during the three and nine months ended September 30, 2022, respectively.

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.

Restricted Stock and Restricted Stock Units with Market Conditions

The Company has awarded certain key employees market-based restricted stock awards pursuant to the 2021 Plan.

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 specified stock price targets over 30 trading days.

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 period.

During the three and nine months ended September 30, 2022, the Company awarded zero and 5,091 market-based restricted stock awards, respectively.

The per share weighted average grant-date fair value of the market-based restricted stock awards granted during the nine months ended September 30, 2022 was $ 47.54 , as determined by the valuation.

Notwithstanding the valuation, all market-based stock awards are issued at the market value at the close of business on the date the grant is awarded.

The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:

September 30, 2022

Underlying stock price at valuation date $ 57.15

Expected volatility 35.0 %

Risk-free interest rate 1.3 %

Restricted stock activity for the nine months ended September 30, 2022 is set forth below:

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).

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

Nonvested at January 1, 2023 35,416 $ 38.42

Granted 884 57.77

Vested ( 9,615 ) 37.97

Nonvested at September 30, 2022

Nonvested at March 31, 2023

25,801 $ 38.59

Restricted stock unit activity for the nine months ended September 30, 2022 is set forth below:

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:

Shares Weighted-Average

Term (in years) Aggregate

Fair Value Weighted-Average

Life (in years) Aggregate

Outstanding at January 1, 2023 1,082,451 $ 51.63

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Canceled ( 8,177 ) 56.53

Outstanding at September 30, 2022

Outstanding at March 31, 2023

1,091,188 $ 51.95 3.6 $ 37,198,599

Vested and expected to vest at September 30, 2022

Vested and expected to vest at March 31, 2023

727,674 $ 53.10 3.1 $ 24,806,395

As of September 30, 2022, the Company had unrecognized share-based compensation cost of $ 35.5 million associated with these awards.

This cost of $ 0.7 million for awards and $ 34.8 million for units is expected to be recognized over a weighted-average period of 1.2 years for awards and 4.7 years for units.

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 the issuance of a maximum of 1,000,000 shares of common stock.

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 on the beginning or the end of the offering period, with each offering period being six months.

The Company determined that a plan provision exists that allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature.

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.

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.

The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the ESPP.

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.

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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 1.94 % as of September 30, 2022.

For the three and nine months ended September 30, 2022, zero and 15,806 shares, respectively, were purchased under the Purchase Plan.

Cash received upon the issuance of Consensus common stock under the Purchase Plan during the three and nine months ended September 30, 2022 was zero and $ 0.6 million, respectively.

As of September 30, 2022, 973,773 shares were available under the Purchase Plan for future issuance.

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:

September 30, 2022

March 31, 2023

Risk-free interest rate 4.54 %

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 (1)

Three Months Ended March 31,

Numerator for basic and diluted net income per common share:

2 unchanged sentences

( 21 ) ( 52 )

Net income available to common shareholders from continuing operations $ 17,116 $ 41,132 $ 58,013 $ 119,220

Net income available to common shareholders from operations $ 15,437 $ 18,469

Weighted-average outstanding shares of common stock 19,847,280 19,921,375

3 unchanged sentences

Common stock and common stock equivalents 19,884,657 20,035,827

Net income per share from continuing operations:

Net income per share from operations:

Basic $ 0.78 $ 0.93

Diluted $ 0.78 $ 0.92

(1) On October 7, 2021, the separation of Consensus into an independent publicly traded company was completed.

The Former Parent distributed 19,902,924 shares of Consensus common stock to holders of J2 Global common stock as of the close of business on October 1, 2021, the record date for the distribution.

This share amount was utilized for the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2021 because the number of shares issued simply reflect a recharacterization of the capital account previously held by the Former Parent.

(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 and nine months ended September 30, 2022, there were 495,010 anti-dilutive shares that were excluded from the earnings per share calculation.

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.

Segment Information

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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 accounting policies of the businesses are the same as those described in Note 1 - Basis of Presentation.

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.

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Such information attributes revenues based on markets where revenues are reported (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

United States $ 72,313 $ 69,593

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Long-lived assets:

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Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss, which solely comprises of foreign currency translation adjustments, for the three months ended September 30, 2022 (in thousands):

Foreign Currency Translation

Balance as of July 1, 2022 $ ( 23,318 )

Other comprehensive loss ( 11,411 )

Net increase in other comprehensive loss ( 11,411 )

Balance as of September 30, 2022 $ ( 34,729 )

The following table summarizes the changes in accumulated balances of other comprehensive loss, which solely comprises of foreign currency translation adjustments, for the nine months ended September 30, 2022 (in thousands):

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 loss ( 17,872 )

Net increase in other comprehensive loss ( 17,872 )

Balance as of September 30, 2022 $ ( 34,729 )

There were zero reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2022.

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.

Related Party Transactions

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The agreed-upon charges, if any, for such services are intended to cover any costs and expenses incurred in providing such services.

As of September 30, 2022, 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.

Further, as noted in Note 9, Ziff Davis assigned its lease of office space in Los Angeles, California to Consensus.

Ziff Davis and Consensus will have joint liability under the lease through October 7, 2022, after which time the Company will be the sole lessee under the lease.

During the three and nine months ended September 30, 2022, the Company paid approximately $ 7.2 million and $ 18.7 million to Ziff Davis, respectively, to settle co-mingled cash accounts, costs associated with the transition services agreement and Separation.

Additionally, the Company incurred approximately $ 0.1 million and $ 0.6 million, respectively, in costs related to the registration of shares for sale held by Ziff Davis for the three and nine months ended September 30, 2022.

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 September 30, 2022.

Amounts due to Ziff Davis as of September 30, 2022 and December 31, 2021 were $ 0.9 million and $ 5.7 million, respectively, related to these items, as well as reimbursement related to certain transaction related costs.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements