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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-03-31 · 358 added, 411 removed, 987 unchanged (44% of the section changed)

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Consensus Cloud Solutions, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Consensus Cloud Solutions, Inc.

and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for the year ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Property and Equipment, net—Internal-Use Software Development Costs—Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

The Company develops software for internal use and capitalizes certain costs incurred in the application development phase of the internal-use software, records the related capitalized costs as internal-use software development costs in property and equipment, and amortizes these costs over the estimated lives of the internal-use software.

Costs related to preliminary internal-use software project activities and post implementation activities are expensed as incurred.

The determination of whether an internal-use software project’s development costs are capitalized or expensed require a higher degree of management judgment.

We identified management’s determination of capitalized internal-use software development costs, including those in process, as a critical audit matter because of the judgment exercised by management in determining whether costs incurred on internal-use software development projects meet the capitalization criteria.

The determination of costs to capitalize is subjective in nature requiring management judgment to determine if costs (1) related to an internal-use software project that entered the application development stage, (2) resulted in additional functionality, (3) the internal-use software project was probable of completion, and (4) the internal-use software would be used to perform the function intended.

Our evaluation of management’s judgments and their determination of the project and related internal-use software development activities and related costs to be capitalized under the relevant accounting guidance, required subjective and higher degree of auditor judgment, and audit effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assessment of the appropriateness of capitalized internal-use software development costs included the following, among others:

• We obtained an understanding of management’s process for evaluating internal-use software development costs and the nature of the internal-use software development costs capitalized.

• We tested the effectiveness of management’s controls over the identification and recording of costs incurred on internal-use software development projects to be capitalized.

• We assessed management’s methodology utilized in calculating capitalized internal-use software development costs based on the allocation of capitalized labor costs.

We selected a sample of internal-use software projects and performed audit procedures to agree capitalized labor costs to time records and made certain inquiries of project members to further assess the reasonableness of time allocated to the selected internal-use software projects.

• We selected a sample of individual research and development costs incurred and evaluated whether such costs were properly capitalized as internal-use software or not based upon the nature and stage of work performed and whether the requisite capitalization criteria were met.

• We conducted corroborative interviews with Company personnel involved in internal-use software development regarding the nature and functionality of costs incurred related to capitalized software projects.

/s/ DELOITTE & TOUCHE LLP

Los Angeles, California

February 27, 2024

We have served as the Company's auditor since 2023.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Consensus Cloud Solutions, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 31, 2023 expressed an adverse opinion thereon.

We have audited the accompanying consolidated balance sheet of Consensus Cloud Solutions, Inc.

(the “Company”) as of December 31, 2022, the related consolidated statements of income, comprehensive income, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022 , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition – Small Office Home Office (SoHo)

As discussed in Note 3 to the Company’s consolidated financial statements, the Company’s small office home office (“SoHo”) revenue stream consist substantially of monthly recurring subscription and usage-based fees for access to the SaaS platform.

The Company’s process for recognizing SoHo revenue is automated as it relates to the initiation and processing of transactions.

However, SoHo revenue is recorded in the general ledger through manual journal entries.

Total SoHo revenue recognized for the year ended December 31, 2022 was approximately $170 million.

We identified the manual nature of how SoHo revenue is recorded as a critical audit matter.

The recording of SoHo revenue is dependent upon the effective design and operation of certain management review controls.

Certain errors were identified by management relating to the manual journal entries used to record SoHo revenue in the general ledger, resulting in a material weakness related to the precision of management’s review of the manual journal entries to record SoHo revenue, including the completeness and accuracy of the underlying data from system generated reports.

Based on these factors, performing audit procedures to evaluate the existence and accuracy of SoHo revenue, including the completeness and accuracy of underlying data from system generated reports, was especially challenging due to increased extent of our audit effort.

The primary procedures we performed to address this critical audit matter included:

• Testing the system generated reports used to record SoHo revenue, including testing:

(i) IT general controls over the billing systems, (ii) the automated application controls within those billing systems by tracing the activity for a selection of customer accounts through each billing system to the general ledger, and (iii) the custom report queries related to the billing system reports.

• Reconciling (i) certain billing system reports to SoHo revenue recorded in the general ledger, and (ii) certain billing system reports to cash receipts reports for certain geographies;

and testing the completeness and accuracy of the underlying data of the cash receipts reports.

Sales tax accrual – Corporate customers

As described in Note 11 to the consolidated financial statements, the Company recorded sales tax expense of $9.4 million within general and administrative expenses for the year ended December 31, 2022.

The Company did not collect and remit sales taxes for its U.S.

corporate revenue (“Corporate”) customers in prior periods because the Company had not yet completed its analysis of Corporate customers subject to sales tax, which was necessary to reasonably estimate the sales tax liability on its Corporate revenue.

We identified the estimation of the Corporate sales tax accrual as a critical audit matter.

The estimation of the Corporate sales tax accrual is complex as each state has specific rules and regulations regarding the taxability of products and services sold in its jurisdiction.

Performing procedures to audit the reasonableness of the Corporate sales tax accrual required especially subjective auditor judgment due to the nature and extent of audit effort required, including the need to involve professionals with expertise in state and local taxes.

The primary procedures we performed to address this critical audit matter included:

• Utilizing internal state and local sales tax professionals to assess legal opinions obtained by management related to the taxability of the Company’s services in certain states and local jurisdictions with material sales.

• Testing management’s estimate of the Corporate sales tax accrual in states and local jurisdictions where the Company’s services are taxable by validating (i) the completeness and accuracy of system generated revenue reports, and (ii) the tax rates, interest and penalties applicable to each state and local jurisdiction.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2014.

We served as the Company's auditor from 2014 through 2023.

Los Angeles, California

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Operating lease liabilities, current 2,038 2,793

Current portion of long-term debt 8,575 —

Due to Former Parent 76 156

Total current liabilities 71,384 71,322

Long-term debt 793,865 792,040

Long-term debt, net of current portion 725,405 793,865

Deferred revenue, noncurrent 2,270 2,319

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Authorized 120,000,000 ;

total issued is 20,105,545 and 19,978,580 shares and total outstanding is 19,916,431 and 19,978,580 shares at December 31, 2022 and December 31, 2021, respectively

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

total issued is 20,273,686 and 20,105,545 shares and total outstanding is 19,245,024 and 19,916,431 shares as of December 31, 2023 and December 31, 2022, respectively

Treasury stock, at cost ( 1,028,662 and 189,114 shares as of December 31, 2023 and December 31, 2022, respectively)

( 31,282 ) ( 7,596 )

Additional paid-in capital 41,247 21,650

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Income from continuing operations 77,295 72,714 121,174

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

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

— — ( 12,173 )

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Diluted $ 3.94 $ 3.64 $ 6.04

Net (loss) income per common share from discontinued operations:

Net loss per common share from discontinued operations:

Basic $ — $ — $ ( 0.61 )

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General and administrative 14,705 17,447 1,711

(Loss) income from discontinued operations, net of income tax — 602 4,138

Loss from discontinued operations, net of income tax

Total $ 18,163 $ 20,055 $ 2,458

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Net income $ 77,295 $ 72,714 $ 109,001

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustment 5,931 ( 2,251 ) ( 14,397 )

Other comprehensive loss ( 2,251 ) ( 14,397 ) ( 11,093 )

Other comprehensive income (loss) 5,931 ( 2,251 ) ( 14,397 )

Comprehensive income $ 83,226 $ 70,463 $ 94,604

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Deferred income taxes 2,428 ( 1,653 ) 7,155

Loss (gain) on sale of businesses — 21,797 ( 17,122 )

Gain on extinguishment of debt ( 4,795 ) — —

Loss on sale of businesses — — 21,797

Lease asset impairments and other charges — — 9,149

Changes in fair value of contingent consideration — — 642

Foreign currency remeasurement loss (gain) — 181 ( 35,142 )

Foreign currency remeasurement loss — — 181

Goodwill impairment on business — — 32,629

Loss on extinguishment of debt — — 37,969

Decrease (increase) in:

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Purchases of property and equipment ( 36,461 ) ( 30,045 ) ( 32,998 )

Proceeds from sale of assets — — 507

Acquisition of businesses, net of cash received — ( 12,230 ) ( 56,838 )

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

Purchases of investments ( 4,000 ) — —

Purchases of intangible assets — ( 1,000 ) ( 1,511 )

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Payment of debt — — ( 593 )

Debt extinguishment costs — — ( 29,250 )

Issuance of long-term debt — — 305,000

Issuance of common stock under employee stock purchase plan 1,284 519 —

Proceeds from the issuance of common stock under employee stock purchase plan 1,386 1,284 519

Repurchase of common stock ( 23,483 ) ( 7,596 ) —

Shares withheld related to net share settlement ( 4,079 ) — —

Notes payable from related parties — — ( 819 )

Taxes paid related to net share settlement ( 1,888 ) ( 4,079 ) —

Repurchase of debt ( 57,672 ) — —

Deferred payments for acquisitions — — ( 6,267 )

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— — ( 266,539 )

Other — — ( 1,387 )

Net cash used in financing activities ( 81,657 ) ( 10,623 ) ( 247,773 )

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Cash and cash equivalents at end of year $ 88,715 $ 94,164 $ 66,778

Less cash and cash equivalents at end of year, discontinued operations — — 61,979

Cash and cash equivalents at end of year, continuing operations $ 94,164 $ 66,778 $ 66,210

See Notes to Consolidated Financial Statements

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

Shares Amount capital Shares Amount Deficit loss investment (Deficit)

Shares Amount capital Shares Amount deficit

loss investment (deficit)

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

Net income — — — — — — — 152,913 152,913

Other comprehensive loss — — — — — — ( 11,093 ) — ( 11,093 )

Share-based compensation — — — — — — — 5,623 5,623

Parent contribution — — — — — — — 508,938 508,938

Balance, December 31, 2020 — $ — $ — — $ — $ — $ ( 55,966 ) $ 1,178,508 $ 1,122,542

Foreign currency translation adjustment prior to Separation — — — — — — ( 13,555 ) — ( 13,555 )

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Balance, December 31, 2021

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

Net income — — — — — 72,714 — — 72,714

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Share-based compensation — — 21,568 — — — — — 21,568

Adjustments related to the Separation (Note 2) — — — — — ( 4,236 ) — — ( 4,236 )

Adjustments related to the Separation

— — — — — ( 4,236 ) — — ( 4,236 )

Balance, December 31, 2022 20,105,545 $ 201 $ 21,650 ( 189,114 ) $ ( 7,596 ) $ ( 250,408 ) $ ( 19,108 ) $ — $ ( 255,261 )

Net income — — — — — 77,295 — — 77,295

Other comprehensive income — — — — — — 5,931 — 5,931

Vested restricted stock 173,356 2 ( 2 ) — — — — — —

Shares withheld related to net share settlement ( 61,878 ) ( 1 ) ( 1,887 ) — — — — — ( 1,888 )

Repurchase of common stock — — — ( 839,548 ) ( 23,686 ) — — — ( 23,686 )

Issuance of shares under ESPP 56,663 1 1,385 — — — — — 1,386

Share-based compensation — — 20,101 — — — — — 20,101

Balance, December 31, 2023

20,273,686 $ 203 $ 41,247 ( 1,028,662 ) $ ( 31,282 ) $ ( 173,113 ) $ ( 13,177 ) $ — $ ( 176,122 )

See Notes to 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 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.

Consensus serves approximately 900 thousand customers of all sizes, from enterprises to individuals, across approximately 47 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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(“Ziff Davis” or the “Former Parent”) announced that its Board of Directors approved its separation of the Cloud Fax business (the “Separation” or the “Spin-Off”), into an independent publicly traded company, Consensus Cloud Solutions, Inc.

On October 7, 2021, the Separation was completed and the Former Parent transferred certain assets and liabilities associated with its Cloud Fax business to Consensus, including the equity interests in J2 Cloud Services, LLC (“J2 Cloud Services”), in exchange for approximately $ 259.1 million in cash, an asset related to $ 500.0 million in aggregate principal amount of the 6.5 % Senior Notes due 2028, and the return of the assets and liabilities related to the non-fax business back to Ziff Davis.

On October 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 in 2028, and the return of the assets and liabilities related to the non-fax business back to Ziff Davis.

On October 8, 2021, Consensus began trading on the Nasdaq Stock Market LLC (“Nasdaq”) under the stock symbol “CCSI”.

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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 Consensus consolidated financial statements included an allocation of certain corporate expenses related to services provided to J2 Cloud Services by Ziff Davis.

For the period prior to the Separation, the Consensus consolidated financial statements 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.

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The preparation of 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 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, impairment or disposal of long-lived and intangible assets, fair value of assets acquired and liabilities assumed in connection with business combinations, income taxes, contingencies and allowances for doubtful accounts.

The Company believes that its most significant estimates are those related to revenue recognition, internal-use software development costs, share-based compensation expense and income taxes.

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”).

Actual results could materially differ from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to factors such as inflationary pressures and elevated interest rates.

(d) 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 consolidated financial statements reflect the results of the non-fax business as a discontinued operation for the years ended December 31, 2021 and 2020 (see Note 5 - Discontinued Operations and Disposition of Businesses).

Accordingly, the consolidated financial statements reflect the results of the non-fax business as a discontinued operation for the year ended December 31, 2021 (see Note 5 - Discontinued Operations and Disposition of Businesses).

(e) Allowances for Doubtful Accounts

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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.

(f) Revenue Recognition

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If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis.

In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC Topic No.

606, Revenue from Contracts with Customers

(“Topic 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.

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 No.

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.

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by the Company from a customer.

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The fair value of the Company’s outstanding debt was determined using the quoted market prices of debt instruments with similar terms and maturities when available.

As of the same dates, the carrying value of other long-term liabilities approximated fair value as the related interest rates approximate rates currently available to the Company.

(h) Cash and Cash Equivalents

(h) Investments

The Company accounts for investments in equity securities in accordance with FASB ASC Topic No.

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 resulting from adjustments due to observable price changes, if applicable, are reported within earnings on the Consolidated Statement of Income.

As of December 31, 2023 the carrying amount of the Company’s investments accounted under the measurement alternative method in accordance with ASC 321 was $ 4.0 million and is included in other assets within the Company’s 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.

During the year ended December 31, 2023, the Company did not recognize any unrealized gains or losses and did not have any impairments during the respective periods.

(i) Cash and Cash Equivalents

The Company considers cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities of three months or less at the purchase date.

(i) Debt Issuance Costs

(j) Debt Issuance Costs

The Company capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs as a reduction to the debt amount.

These costs are amortized and included in interest expense over the life of the borrowing using the effective interest method.

(j) Concentration of Credit Risk

All of the Company’s cash and cash equivalents are invested at major financial institutions primarily within the United States, the United Kingdom and Canada.

These costs are amortized and included in interest expense over the life of the related debt security using the effective interest method.

(k) Concentration of Credit Risk

All of the Company’s cash and cash equivalents are invested at major financial institutions.

These institutions are required to invest the Company’s cash in accordance with the Company’s investment policy with the principal objectives being preservation of capital, fulfillment of liquidity needs and above market returns commensurate with preservation of capital.

At December 31, 2023, the Company’s cash and cash equivalents were maintained in accounts in qualifying financial institutions that are insured up to the limit determined by the applicable governmental agency.

These institutions are primarily in the United States, the United Kingdom and Canada, however, the Company has accounts within several other countries including Australia, France, Hong Kong, Ireland, Japan, New Zealand and Switzerland.

(k) Foreign Currency

These institutions are primarily within

Luxembourg and the United States, however, the Company has accounts within several other countries including the United Kingdom, Australia, Japan, Canada, Ireland, Hong Kong, New Zealand and France.

(l) Foreign Currency

Some of Consensus’ foreign subsidiaries use the local currency of their respective countries as their functional currency.

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Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive loss.

Net translation loss was $ 2.3 million, $ 14.4 million and $ 11.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

In 2022, the Company recorded a $ 5.5 million out of period correction that increased goodwill with an offset to the cumulative translation adjustment.

It was deemed to be an out of period correction that was not material to 2022 or any prior period.

Realized gains and losses from foreign currency transactions are recognized within other (expense) income, net.

Foreign exchange (losses) gains amounted to $( 1.6 ) million, $ 0.2 million and $ 31.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(l) Property and Equipment

Net translation gain (loss) was $ 5.9 million, $( 2.3 ) million and $( 14.4 ) million for the years ended December 31, 2023, 2022 and 2021, respectively.

Foreign exchange (losses) gains from foreign currency transactions are recorded within other (expense) income, net on the Consolidated Statements of Income and amounted to $( 2.4 ) million, $( 1.6 ) million and $ 0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

(m) Property and Equipment

Property and equipment are stated at cost.

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The estimated useful lives of property and equipment range from 1 to 10 years.

Fixtures, which are comprised primarily of leasehold improvements and equipment under finance leases, are amortized on a straight-line basis over their estimated useful lives or for leasehold improvements, the related lease term, if less.

The Company has capitalized certain internal-use software and website development costs which are included in property and equipment.

Costs to develop internal-use software incurred during the application development stage are capitalized and amortized over their estimated useful lives.

(n) Internal-Use Software Development Costs

The Company capitalizes certain internal-use software and website development costs that are incurred during the application development stage, provided that management with the relevant authority authorizes and commits to the funding of the project, it is probable the project will be completed, and the software will be used to perform the function intended.

Management estimates the stage of development as well as the time allocated to internal-use software projects.

Costs related to preliminary project activities and post implementation activities are expensed as incurred.

Capitalized internal-use software development costs are included in property and equipment and are amortized on a straight-line basis over their estimated useful lives and is recorded in cost of revenues and general and administrative expenses on the Consolidated Statements of Income.

The estimated useful life of costs capitalized is evaluated for each specific project and ranges from 1 to 7 years (see Note 7 - Property and Equipment).

(m) Impairment or Disposal of Long-Lived and Intangible Assets

(o) Impairment or Disposal of Long-Lived and Intangible Assets

The Company accounts for long-lived assets, which include property and equipment, operating lease right-of-use assets and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with the provisions of FASB ASC Topic No.

360, Property, Plant, and Equipment (“ASC 360”), which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

360, Property, Plant, and Equipment (“ASC 360”).

ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset.

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The Company assesses the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Factors it considers important which could individually or in combination trigger an impairment review include the following:

Factors it considers important are those that could individually or in combination trigger an impairment review include the following:

• Significant underperformance relative to historical or projected future operating results;

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The Company assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of definite-lived assets may not be recoverable.

There were no impairments recorded in 2022.

There were no impairments recorded in 2023 and 2022.

In the year ended December 31, 2021, the Company recorded an impairment of $ 1.7 million in property and equipment (see Note 7 - Property and Equipment) and an impairment of $ 6.5 million in operating right-of-use assets (see Note 10 - Leases) in connection with the downtown Los Angeles lease.

Additionally, the Company recorded an impairment of $ 1.0 million in operating right-of-use assets included in discontinued operations in relation to exiting a lease.

There were no impairments recorded in 2020.

The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon designation as an asset held for sale, the Company stops recording

depreciation expense on the asset.

The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

(n) Business Combinations and Valuation of Goodwill and Intangible Assets

Additionally, the Company recorded an impairment of $ 1.0 million in operating right-of-use assets included in discontinued operations in relation to exiting a lease in the year ended December 31, 2021.

(p) Business Combinations and Valuation of Goodwill and Intangible Assets

The Company applies the acquisition method of accounting for business combinations in accordance with GAAP and uses estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets, and liabilities acquired.

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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 and the amortization expense is included in general and administrative expenses on the Consolidated Statements of Income.

The fair values of these identified intangible assets are based upon expected future cash flows or income, which take into consideration certain assumptions such as customer turnover, trade names and patent lives.

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

If it is determined that such assumptions have changed in future periods, then the resulting change will impact the fair value of the intangible asset.

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 cost of revenues and general and administrative expenses on the 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 for impairment annually or more frequently if the Company believes indicators of 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 was 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.

In connection with the annual impairment test for goodwill, on October 1, the Company has the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test on goodwill.

The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill.

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If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference.

The Company has a single reporting unit.

In the fourth quarter of 2023, the Company performed the annual impairment test for goodwill for the year ended December 31, 2023 using a qualitative assessment, primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events.

The Company performed the annual impairment test for intangible assets with indefinite lives for the year ended December 31, 2023 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events.

The Company concluded that there were no impairments in 2022, 2021 and 2020.

(o) Income Taxes

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 consolidated Statement of Income prior to 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 was subject to taxation in both the U.S.

and numerous foreign jurisdictions.

Significant judgment was required in evaluating the J2 Cloud Services’ 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.

There is no accumulated impairment as of December 31, 2023.

(q) Income Taxes

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

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These reserves for tax contingencies are established when the Company believes that certain positions might be challenged despite the Company’s belief that its tax return positions are fully supportable.

The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of

The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations.

The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate (see Note 13 - Income Taxes).

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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 Consolidated Statements of Income.

The Company recognizes accrued interest and penalties related to uncertain income tax positions in income tax expense on its 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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On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law and is effective for taxable years beginning after December 31, 2022.

The IRA includes a new corporate alternative minimum tax of 15% on adjusted financial statement income of corporations with profits greater than $1 billion, a 1% excise tax on the fair market value of net share buy-backs, in addition to multiple incentives to the clean energy industry.

The Company does not believe these provisions have a significant impact to our current and deferred income tax balances.

The Company benefited from the technical correction to tax depreciation related to qualified improvement property and has elected to defer the employer side social security payments where eligible.

The Company benefited from the technical correction to tax depreciation related to qualified improvement property and had 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.

(p) Share-Based Compensation

(r) Share-Based Compensation

The Company accounts for share-based awards to employees and non-employees in accordance with the provisions of FASB ASC Topic No.

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Accordingly, the Company measures share-based compensation expense at the grant date, based on the fair value of the award, and recognizes the expense over the employee’s requisite service period using the straight-line method.

The measurement of share-based compensation expense is based on several criteria, including but not limited to the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award cancellation rate.

The measurement of share-based compensation expense is based on several criteria, including but not limited to, the valuation model used and associated input factors, such as expected

term of the award, stock price volatility, risk free interest rate, dividend rate and forfeiture rate.

These inputs are subjective and are determined using management’s judgment.

If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, the Company may change the input factors used in determining future share-based compensation expense.

Any such changes could materially impact the Company’s results of operations in the period in which the changes are made and in periods thereafter.

The Company estimates the expected term based upon the contractual term of the award (see Note 15 - Equity Incentive and Employee Stock Purchase Plan).

(q) Earnings Per Common Share (“EPS”)

EPS is calculated pursuant to the two-class method as defined in ASC Topic No.

(s) Earnings Per Common Share (“EPS”)

EPS is calculated pursuant to the two-class method as defined in FASB ASC Topic No.

260, Earnings per Share (“ASC 260”), which specifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents are considered participating securities and should be included in the computation of EPS pursuant to the two-class method.

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Diluted EPS includes the determinants of basic EPS and, in addition, reflects the impact of other potentially dilutive shares outstanding during the period.

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

In 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.

(r) Research, Development and Engineering

The dilutive effect of participating securities is calculated under the more dilutive of either the treasury method or the two-class method (see Note 17 - Earnings Per Share).

(t) Research, Development and Engineering

Research, development and engineering costs are expensed as incurred.

(s) Segment Reporting

Development of internal-use software is capitalized and amortized as described in paragraph (n).

(u) Segment Reporting

FASB ASC Topic No.

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ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.

The Company’s business segment is based on the organization’s structure used by the chief operating decision maker for making operating and investment decisions and for assessing performance.

The chief operating decision maker views the Company as one reportable segment known as Cloud Fax (see Note 18 - Segment Information).

(t) Advertising Costs

Advertising costs are expensed as incurred.

Advertising costs for the years ended December 31, 2022, 2021 and 2020 was $ 55.4 million, $ 45.7 million and $ 47.1 million, respectively.

(u) Recent Accounting Pronouncements

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

The Company’s business segment is based on the organization’s structure used by the chief operating decision maker, who is our chief executive officer (CEO), for making operating and investment decisions and for assessing performance.

The Company’s chief executive officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources.

Accordingly, the Company has determined that it operates one reportable segment known as Cloud Fax (see Note 18 - Segment Information).

(v) Advertising Costs

Advertising costs are expensed as incurred and are included in sales and marketing expenses on our Consolidated Statements of Income.

Advertising costs for the years ended December 31, 2023, 2022 and 2021 were $ 51.7 million, $ 55.4 million and $ 45.7 million, respectively.

(w) Recent Accounting Pronouncements

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.

In December 2022, the FASB issued ASU No.

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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 the Company for the year ended December 31, 2022.

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

The Company adopted ASU 2020-06 in the fourth quarter of 2022 using a modified retrospective method of transition.

The adoption of this standard did not 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 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 June 2022, the FASB issued ASU No.

2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

This ASU clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

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

Early adoption is permitted.

This amendment should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.

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

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50).

This ASU enhances the transparency of supplier finance programs.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on

rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

This amendment should be applied retrospectively to each period in which a balance sheet is presented, except for the amendment on rollforward information, which should be applied prospectively.

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

(w) Adjustments related to the Spin-off

During 2022, the Company identified certain improper classifications related to executive bonuses, 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, and certain intangible assets post Separation that were incorrectly included in the opening balance at the time of the Spin-off which belonged to the Former Parent.

The Company recorded a reclassification of $ 0.6 million from equity to accrued expenses to correct the prior period classification and $ 0.8 million from intangible assets to equity to correct the opening balance on the balance sheet for the year ended December 31, 2022.

The Company determined that the impact of these reclassifications were 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 during the third quarter of 2022 to close out transaction fees related to the Spin-Off.

This payment to the Former Parent as part of the Spin-off and a related adjustment of $ 0.3 million was recorded as an adjustment to equity during year ended December 31, 2022.

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 consolidated financial statements and related disclosures.

In October 2023, the FASB issued ASU No.

2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which amends the disclosure or presentation requirements of a variety of topics in the accounting standards codification in order to conform with certain SEC amendments in Release No.

33-10532, Disclosure Update and Simplification.

The effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules.

However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective.

The Company is evaluating the potential impact of this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

The amendments in this ASU are effective for all fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

The Company is evaluating the potential impact of this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The amendments are intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.

The amendments in this ASU should be applied on either a prospective or retrospective basis.

The amendments in this ASU are effective for fiscal periods beginning after December 15, 2024.

Early adoption is permitted.

The Company is evaluating the potential impact of this guidance on its consolidated financial statements.

(x) 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.

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.

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The Company has recorded $ 23.6 million and $ 22.9 million of revenue for the years ended December 31, 2023 and 2022, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of December 31, 2022 and 2021, the Company acquired $ 4.8 million and zero , respectively, of deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions).

Performance Obligations

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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 Company satisfies its performance obligations upon delivery of products or services to its customers.

Payment terms vary by type and location of the Company’s customers and the products and services offered.

The time between invoicing and when payment is due is not significant.

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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.

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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 obligation over time is a time-based measure.

The Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligations over time is a time-based measure.

The Company recognizes revenue on a straight-line basis throughout the subscription period and believes that the method used is a faithful depiction of the transfer of goods and services.

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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 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 Consensus operates.

Costs to Fulfill a Contract

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Costs primarily consist of incentive compensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the revenue is earned.

Incentive compensation is paid on the issuance or renewal of the customer contract.

As a practical expedient, for amortization periods which are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred.

For those customer contracts greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

Incentive compensation is paid upon the issuance or renewal of the customer contract.

As a practical expedient, for amortization periods that are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred.

For those customer contracts greater than one year, the Company capitalizes and amortizes the expenses, when appropriate, over the period of benefit.

Revenues Invoiced

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Total consideration for this transaction was $ 12.2 million, net of cash acquired, and was subject to certain post-closing adjustments through the measurement period.

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

The following table summarizes the allocation of the purchase consideration, net of cash acquired, as of the acquisition date (in thousands):

Assets and Liabilities Valuation

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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 year ended December 31, 2022 is $ 5.7 million, of which $ 5.7 million is expected to be deductible for income tax purposes.

SRFax Acquisition

On February 18, 2020, the Company completed an asset purchase of EDC Systems, Inc.

(operating under the name “SRFax”), a Canadian-based provider of fax solutions.

The purchase price accounting for this acquisition was completed in 2021.

The Consolidated Statement of Income since the date of acquisition reflects the results of operations of SRFax.

For the year ended December 31, 2020, SRFax contributed $ 7.3 million to the Company’s revenues.

Net income contributed by SRFax is not separately identifiable due to the Company’s integration activities and is impracticable to provide.

Total consideration was $ 25.0 million, net of cash acquired and assumed liabilities for SRFax.

Unaudited Pro Forma Financial Information

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired business been combined companies during the periods presented.

These pro forma results exclude any savings or synergies that would have resulted from the business acquisition had it occurred on January 1, 2020 and do not take into consideration the exiting of any acquired lines of business.

This unaudited pro forma supplemental information includes incremental intangible asset amortization, income tax expense, and interest income as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and SRFax as if the acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

December 31, 2020

Revenues $ 332,431

Net income from continuing operations $ 122,912

EPS - Basic (1)

EPS - Diluted (1)

(1) Basic and Diluted EPS are calculated based on net income from continuing operations attributable to common shareholders.

Business Acquisitions Classified in Discontinued Operations

SEOmoz Acquisition

During the year ended December 31, 2021, the Company completed a share purchase of SEOmoz, acquired on June 4, 2021, a Seattle-based provider of search engine optimization (“SEO”) solutions.

As part of the Separation, the Company transferred all of the assets and liabilities acquired to the Former Parent.

The Consolidated Statement of Income for the year ended December 31, 2021 reflects the results of operations of SEOmoz, which contributed $ 14.4 million to revenue within discontinued operations.

Total consideration for SEOmoz was $ 66.5 million, net of cash acquired and assumed liabilities.

2020 Acquisitions

On November 2, 2020, the Company completed a share purchase of the entire issued capital of Inspired eLearning, LLC, a Texas-based platform for cybersecurity awareness and compliance training, as well as the purchase of two other immaterial businesses.

As part of the Separation, the Company transferred the Inspired eLearning assets and the two immaterial businesses acquired to the Former Parent.

The Consolidated Statement of Income, since the date of acquisition, reflects the results of operations of Inspired eLearning.

For the year ended December 31, 2020, Inspired eLearning contributed $ 1.6 million to revenue within discontinued operations.

Total consideration for Inspired eLearning was $ 20.5 million, net of cash acquired and assumed liabilities.

The two other immaterial businesses acquired during the year ended December 31, 2020 are also included in discontinued operations.

Goodwill recognized associated with this acquisition during the year ended December 31, 2022 was $ 5.7 million, of which $ 5.7 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 2028 and the return of the assets and liabilities related to the non-fax business back to Ziff Davis.

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 constitutes a strategic shift that had a major effect on the Company’s operations relative to the historical operations of J2 Cloud Services.

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

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

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

Year ended December 31, 2021

$ 271,571 $ 347,293

Cost of revenues 74,294

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Total operating expenses 206,023

(Loss) income from discontinued operations ( 8,746 ) 40,053

Loss from discontinued operations

Interest expense ( 235 )

Interest income 693

(Loss) gain on sale of businesses

( 21,797 ) 17,122

Other income (expense)

1,752 ( 1,606 )

(Loss) income from discontinued operations before income taxes

( 28,333 ) 55,593

Income tax (benefit) expense

( 16,160 ) 25,093

(Loss) income from discontinued operations, net of income taxes

$ ( 12,173 ) $ 30,500

Loss on sale of businesses

Loss from discontinued operations before income taxes

Income tax benefit

Loss from discontinued operations, net of income taxes

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

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Depreciation and amortization

$ 39,727 $ 67,995

Capital expenditure

14,322 19,633

Share-based compensation expense

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Lease asset impairments and other charges 990

Loss (gain) on sale of businesses 21,797 ( 17,122 )

Loss on sale of businesses

Goodwill impairment on business 32,629

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For the year ended December 31, 2021, the total gain recognized on the sale was $ 2.8 million, which was recorded in discontinued operations on the Consolidated Statement of Income.

During the second quarter of 2020, the Company committed to a plan to sell certain Voice assets in Australia and New Zealand as they were determined to be non-core assets.

On August 31, 2020, in a cash transaction, the Company sold the Voice assets.

For the year ended December 31, 2020, the total gain recognized on the sale was $ 17.1 million, which was recorded in discontinued operations on the Consolidated Statement of Income.

B2B Back-up (Non-Consensus)

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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 Consolidated Statement of Income.

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 Consolidated Statement of Income.

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

9 unchanged sentences

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Cash and cash equivalents include money market funds of $ 72.1 million and zero as of December 31, 2023 and 2022, respectively, which are valued based on Level 1 inputs consisting of quoted prices in active markets.

The carrying value of the Company’s cash and cash equivalents approximates fair value.

The fair value of long-term debt is determined using recent quoted market prices or dealer quotes for each of the Company’s instruments, which are Level 1 inputs (see Note 9 - Long-Term Debt).

During the year ended December 31, 2021, the Company recorded an increase in the fair value of the contingent consideration of $ 0.7 million using Level 3 inputs and reported such increase in general and administrative expenses.

The carrying value of long-term debt is reflected in the financial statements at cost.

During the year ended December 31, 2021, the Company recorded an increase in the fair value of the contingent consideration of $ 0.7 million, in connection with the acquisition of SRFax, using Level 3 inputs and reported such increase in general and administrative expenses.

The contingent consideration was fully paid during 2021.

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 the date of the Company’s acquisition of Summit on February 4, 2022, 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.

The Company’s non-financial assets, which primarily consist of goodwill, indefinite-lived intangibles assets, long-lived assets and equity securities without a readily determinable fair value 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, if any of these types of assets become impaired, the carrying values of the assets are written down to fair value using Level 3 inputs.

During the year ended December 31, 2021, the Company recorded total non-cash impairment charges of $ 7.5 million related to its operating lease right-of-use assets, based on their fair value determined using Level 3 inputs (see Note 10 - Leases).

1 unchanged sentence

Property and equipment, stated at cost, at December 31, 2023 and 2022 consisted of the following (in thousands):

Computers, equipment and software $ 54,372 $ 36,319

Furniture and equipment 828 846

Internal-use software development costs

$ 51,396 $ 31,738

Computers, software and equipment

21,701 22,634

Furniture and fixtures

Leasehold improvements 1,720 1,717

Internal software in development 28,442 15,092

Internal-use software development costs in process

48,022 28,442

123,726 85,359

Accumulated depreciation and amortization ( 42,530 ) ( 30,401 )

Total property and equipment, net $ 81,196 $ 54,958

Prior year balances of certain property and equipment categories have been reclassified to conform to the current year's presentation.

Depreciation and amortization expense was $ 13.1 million, $ 10.6 million and $ 7.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

2 unchanged sentences

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired.

Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets.

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, the resulting change will impact the fair value of the intangible asset.

Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from 1 year to 20 years.

The changes in carrying amounts of goodwill attributable to continuing operations for the years ended December 31, 2022 and 2021 are as follows (in thousands):

The changes in carrying amounts of goodwill for the years ended December 31, 2023 and 2022 are as follows (in thousands):

Balance as of January 1, 2022

Goodwill acquired (Note 4) 5,677

Foreign exchange translation

Balance as of December 31, 2022

Goodwill acquired (Note 4) 5,677

Foreign exchange translation

Balance as of December 31, 2023

(1) In 2022, the Company recorded a $ 5.5 million out of period correction that increased goodwill with an offset to the cumulative translation adjustment.

It was deemed to be an out of period correction that was not material to 2022 or any prior period.

There has not previously been an impairment charge of goodwill related to continuing operations.

Intangible Assets with Indefinite Lives:

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Total $ 182,946 $ 169,368 $ 13,578

(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years , despite the overall life of the asset.

(1) The Company amortizes its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years , which may not correlate to the overall life of the asset.

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

9 unchanged sentences

Total $ 181,604 $ 163,830 $ 17,774

(1) The December 31, 2021 patent and patent licenses historical cost and accumulated amortization balance was adjusted to conform with presentation of the December 31, 2022 balance for comparability purposes.

There was no impact to the net balance.

(2) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years , despite the overall life of the asset.

(1) The Company amortizes its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years , which may not correlate to the overall life of the asset.

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

6 unchanged sentences

2028 Senior Notes 462,414 500,000

Total Notes 805,000 805,000

742,428 805,000

Deferred issuance costs ( 8,448 ) ( 11,135 )

Total long-term debt $ 793,865 $ 792,040

733,980 793,865

Current portion, net of debt issuance costs

Total long-term debt, less current portion

$ 725,405 $ 793,865

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

Thereafter 500,000

Interest expense was $ 51.4 million, $ 14.3 million, and $ 75.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Interest expense for the year ended December 31, 2022 includes $ 0.8 million related to sales tax (refer to Note 11 - Commitments and Contingencies).

The $ 75.8 million interest expense for the year ended December 31, 2020 includes a loss on debt extinguishment of $ 38.0 million related to the redemption of all of its outstanding $ 650.0 million 6.0 % Senior Notes in 2020.

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 Consolidated Balance Sheet as of December 31, 2022 and 2021.

The 2026 Senior Notes are presented as current portion of long-term debt and long-term debt, net of current portion, net of deferred issuance costs, on the Consolidated Balance Sheet as of December 31, 2023 and 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.

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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 Consolidated Balance Sheets as of December 31, 2022 and 2021.

The 2028 Senior Notes are presented as current portion of long-term debt and long-term debt, net of current portion, net of deferred issuance costs, on the Consolidated Balance Sheets as of December 31, 2023 and 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.

1 unchanged sentence

If Consensus Cloud Solutions, Inc.

Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 2028 Senior Notes.

or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an Insignificant Subsidiary (as defined in the indenture pursuant to which the 2028 Senior Notes were issued (the “2028 Indenture”)), after the issue date, or any Insignificant Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 2028 Senior Notes.

The Company may redeem some or all of the 2028 Senior Notes at any time on or after October 15, 2026 at specified redemption prices plus accrued and unpaid interest, if any, to, but excluding the redemption date.

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$ 456,578 $ 492,613

2025 Senior Notes

On June 27, 2017, J2 Cloud Services, LLC (“J2 Cloud”) and J2 Cloud Co-Obligor, Inc.

(the “Co-Issuer” and together with J2 Cloud, the “Issuers”), wholly-owned subsidiaries of the Company, completed the issuance and sale of $ 650.0 million aggregate principal amount of their 6.0 % senior notes due in 2025 (the “2025 Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

The Company received proceeds of $ 636.5 million, after deducting the initial purchasers’ discounts, commissions and offering expenses.

The 6.0 % Senior Notes bore interest at a rate of 6.0 % per annum, payable semi-annually in arrears on January 15 and July 15 of each year.

On October 7, 2020, the Company redeemed all of its outstanding $ 650.0 million 2025 Senior Notes for $ 694.6 million, including an early redemption premium of $ 29.2 million and accrued and unpaid interest of $ 15.4 million.

The Company recorded a loss on extinguishment of $ 38.0 million, which is recorded in interest expense, net in the Consolidated Statements of Income.

Credit Agreement

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(v) merge or consolidate with another company;

transfer and sell assets.

and (vi) transfer and sell assets.

These covenants contain certain exceptions.

1 unchanged sentence

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

Consensus leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031.

Debt Repurchase Program

On November 9, 2023, the Board of Directors approved a debt repurchase program, pursuant to which Consensus may reduce, through redemptions, open market purchases, tender offers, privately negotiated purchases or other retirements, a combination of the outstanding principal balance of the 2026 Senior Notes and 2028 Senior Notes (“Debt Repurchase Program”).

The authorization permits an aggregate principal amount reduction of up to $ 300 million and expires on November 9, 2026.

The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant.

As of December 31, 2023 the Company has retired $ 62.6 million in principal of its senior notes under this program.

In connection with the Debt Repurchase Program the Company reclassified $ 8.6 million of long-term debt, net of current portion to the current portion of long-term debt as of December 31, 2023 as the Company has the intention and cash on hand to extinguish the $ 8.6 million of debt within the next reporting period.

For year ended December 31, 2023 a gain on debt extinguishment of $ 4.8 million related to the Debt Repurchase Program is included in interest expense on the Consolidated Statements of Income.

The Company leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031.

Office and equipment leases are typically for terms of three to ten years and generally provide renewal options for terms up to an additional five years .

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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 Consolidated Statements of Income.

Interest on finance lease right-of-use assets, if any, is included in interest expense in the Consolidated Statements of Income.

Amortization of finance lease right-of-use assets is included in general and administrative expenses in the Consolidated Statements of Income.

Interest related to finance lease right-of-use assets, if any, is included in interest expense in the Consolidated Statements of Income.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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No impairment was recorded in 2023 or 2022.

The components of lease expense, recorded in cost of revenues and general and administrative expenses on the Consolidated Statements of Income, were as follows for the years ended December 31, 2022, 2021 and 2020 (in thousands):

The components of lease expense, recorded in cost of revenues and general and administrative expenses on the Consolidated Statements of Income, are as follows (in thousands):

Years ended December 31,

5 unchanged sentences

Total lease cost $ 5,391 $ 4,959 $ 4,384

Supplemental balance sheet information related to leases as of December 31, 2022 and 2021 was as follows (in thousands):

Lease-Related Assets and Liabilities December 31, 2022 December 31, 2021

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

Lease-related assets and liabilities

December 31, 2023 December 31, 2022

Operating lease right-of-use assets $ 6,766 $ 7,875

6 unchanged sentences

Therefore, there is no corresponding lease liability associated with the finance right-of-use assets.

Supplemental cash flow information related to leases for the years ended December 31, 2022, 2021 and 2020 was as follows (in thousands):

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

Years ended December 31,

11 unchanged sentences

Weighted average discount rate 4.8 % 4.6 %

Maturities of lease liabilities as of December 31, 2022 were as follows (in thousands):

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

Thereafter 5,555

4 unchanged sentences

Discount Rate

The majority of the Company’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable.

Rates are obtained from various large banks to determine the appropriate incremental borrowing rate each quarter for collateralized loans with a maturity similar to the lease term.

The majority of the Company’s leases are discounted using the Company’s collateralized incremental borrowing rate as the rate implicit in the lease is not readily determinable.

Rates are obtained from various large banks to determine the appropriate incremental borrowing rate at the lease commencement date for collateralized loans with a maturity similar to the lease term.

The lease term is generally the minimum noncancelable period of the lease.

1 unchanged sentence

Facility Lease

On October 28, 2021, Ziff Davis (the “Assignor”) and Consensus (the “Assignee”) entered into the Assignment and First Amendment to Office Lease (the “Amendment”) with the NREA-TRC 700 LLC (the “Landlord”), in regards to the lease that was previously entered into on April 24, 2019 between the Assignor and the Landlord for certain office space located at 700 South Flower Street, Los Angeles, California (the “Lease”).

On October 28, 2021, Ziff Davis (the “Assignor”) and Consensus (the “Assignee”) entered into the Assignment and First Amendment to Office Lease (the “Amendment”) with the NREA-TRC 700 LLC (the “Landlord”), in regard to the lease that was previously entered into on April 24, 2019 between the Assignor and the Landlord for certain office space located at 700 South Flower Street, Los Angeles, California (the “Lease”).

The lease has an expiration date of January 31, 2031.

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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 SoHo liability for the year ended December 31, 2022.

Accordingly, the Company has recorded a sales tax expense within general and administrative expenses in the Consolidated Statements of Income of $ 9.4 million for both SoHo and Corporate sales for the year ended December 31, 2022, and $ 8.6 million the year ended December 31, 2021 for SoHo sales only.

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 Company has taken the same approach in estimating the SoHo liability through the year ended December 31, 2023.

Accordingly, the Company has recorded a sales tax expense of $ 2.0 million and $ 9.4 million for both SoHo and Corporate sales for the years ended December 31, 2023 and 2022, respectively.

The Company has recorded a sales tax expense of $ 8.6 million for the year ended December 31, 2021 for SoHo sales only.

Sales tax expense is recorded within general and administrative expenses in the Consolidated Statements of Income.

The Company initiated a Voluntary Disclosure Agreement (“VDA”) process in the third quarter of 2022, to voluntarily report the prior period sales tax liability.

The process has been completed in the fourth 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.

52 unchanged sentences

Effective tax rates 25.1 % 26.5 % 24.8 %

The effective tax rate for the year ended December 31, 2022 differs from the federal statutory rate primarily due to the Global Intangible Low-Taxes Income inclusion, impact of jurisdictional mix of earnings, an increase in the net reserve for uncertain tax positions during 2022, various tax credits and certain expenses not deductible for tax purposes, such as, non-deductible executive compensation.

The effective tax rate for the years ended December 31, 2023 and 2022 differs from the federal statutory rate primarily due to the Global Intangible Low-Taxes Income inclusion, an increase in the net reserve for uncertain tax positions during 2023 and 2022, impact of jurisdictional mix of earnings, various tax credits and certain expenses not deductible for tax purposes.

The effective tax rate for the year ended December 31, 2021 differs from the federal statutory rate primarily due to impacts of the Global Intangible Low-Taxed Income inclusion, an increase in the reserve for uncertain tax positions during 2021 and various tax credits.

The effective tax rate for the year ended December 31, 2020 differs from the federal statutory rate primarily due to the Global Intangible Low-Taxes income inclusion, impact of jurisdictional mix of earnings and various tax credits.

The primary foreign tax jurisdictions that the Company operates in are:

Canada, Ireland and Japan with a statutory tax rate of 26.5%, 12.5% and 30.6%, respectively.

Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows (in thousands):

Years Ended December 31,

Deferred tax assets:

21 unchanged sentences

Net deferred tax assets $ 33,771 $ 35,253

Deferred income taxes (non-current assets)

$ 34,869 $ 35,981

Deferred income taxes (non-current liabilities)

Net deferred tax assets

$ 33,771 $ 35,253

The Company had approximately $ 33.8 million and $ 35.3 million in net deferred tax assets as of December 31, 2023 and 2022, respectively, related primarily to basis differences in tangible and intangible assets.

4 unchanged sentences

As of December 31, 2023 and 2022, the Company had $ 1.3 million and $ 0.5 million foreign tax credit carryforward, respectively.

If unused, these credits expire between 2031 and 2032.

If unused, these credits will begin to expire in 2031.

In addition, as of December 31, 2023 and 2022, the Company had state research and development tax credits of $ 1.8 million and $ 1.0 million, respectively, which can be carried forward indefinitely.

Federal and state laws can impose substantial restrictions on the utilization of tax credit carry-forwards in the event of an “ownership change,” as defined in Section 382 of the Internal Revenue Code.

The Company has determined that no significant limitation would be placed on the utilization of its tax credit carry-forwards due to ownership changes.

The Company has not provided deferred taxes on approximately $ 330.9 million of undistributed earnings from foreign subsidiaries as of December 31, 2022.

The Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes.

Because of the various avenues in which to repatriate the earnings, it is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted.

Federal and state laws can impose substantial restrictions on the utilization of tax credit carryforwards in the event of an “ownership change,” as defined in Section 382 of the Internal Revenue Code.

The Company has determined that no significant limitation would be placed on the utilization of its tax credit carryforwards due to ownership changes.

The Company has approximately $ 376.6 million of undistributed earnings from foreign subsidiaries as of December 31, 2023.

The Company considers the earnings of $ 31.2 million of certain non-U.S.

subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings.

If the Company decides to repatriate these foreign earnings, the Company would need to adjust the income tax provision in the period in which it is determined that the earnings will no longer be indefinitely invested outside the United States.

Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company’s prepaid tax payments were $ 8.0 million and zero at December 31, 2022 and 2021, respectively.

The Company’s prepaid tax payments were $ 3.7 million and $ 8.0 million at December 31, 2023 and 2022, respectively.

Uncertain Income Tax Positions

13 unchanged sentences

Increases related to tax positions taken in the current year 2,745 2,870 685

Decreases related to expiration of statute of limitations — — —

Ending balance $ 8,487 $ 5,742 $ 3,735

The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes.

As of December 31, 2022, 2021 and 2020, the total amount of interest and penalties accrued was $ 1.0 million, $ 1.0 million and $ 0.9 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

As of December 31, 2023 and 2022, the total amount of interest and penalties accrued was $ 1.2 million and $ 1.0 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

In connection with tax matters, the Company recognized interest and penalty expense in 2023, 2022 and 2021 of $ 0.3 million, $ 0.1 million and $ 0.2 million, respectively.

2 unchanged sentences

In addition, the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations.

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

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

As of December 31, 2023, 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.

The Company has filed its post-spin tax returns for the tax years 2021 and 2022 including some international subsidiaries who have previously filed in their local jurisdictions.

In respect to these international subsidiaries, tax returns filed for the years from 2017 onwards are still open to examination by tax authorities.

Stockholders’ Equity

Stockholders’ Deficit

Recapitalization

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 2028, and the return of the assets and liabilities related to the non-fax business back to Ziff Davis.

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.

In connection with the Separation, 19,902,924 shares of common stock were issued to the Former Parent and the historical net parent investment was recharacterized as share capital and additional-paid-in-capital to reflect the new corporate structure of Consensus.

Additional-paid-in-capital (APIC) was further adjusted to reflect (i) the distribution of cash to the Former Parent in the amount of $ 290.3 million ($ 259.1 million base amount plus additional net cash sweeps of $ 31.2 million), (ii) the transfer to the parent of the $ 500.0 million aggregate principal amount of the 6.5 % Senior Notes due 2028, and (iii) the transfer of the net assets of the non-fax business in the amount of $ 837.3 million back to Ziff Davis.

Additional-paid-in-capital (APIC) was further adjusted to reflect (i) the distribution of cash to the Former Parent in the amount of $ 290.3 million ($ 259.1 million base amount plus additional net cash sweeps of $ 31.2 million), (ii) the transfer to the parent of the $ 500.0 million aggregate principal amount of the 6.5 % Senior Notes due in 2028, and (iii) the transfer of the net assets of the non-fax business in the amount of $ 837.3 million back to Ziff Davis.

At the time of the separation, the excess of the distributions to the Former Parent over the remaining net parent investment (i.e., the negative APIC balance) was reclassified to accumulated deficit.

10 unchanged sentences

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 years ended December 31, 2022 and 2021, the Company repurchased 189,114 and zero shares, respectively, under this program.

Cumulatively as of December 31, 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 years ended December 31, 2023 and 2022, the Company repurchased 839,548 and 189,114 shares, respectively, at an aggregate cost of $ 23.7 million (inclusive of excise tax of $ 0.2 million) and $ 7.6 million, respectively, under this program.

Cumulatively as of December 31, 2023, 1,028,662 shares have been repurchased at an aggregate cost of $ 31.3 million (inclusive of excise tax of $ 0.2 million).

The excise tax is assessed at 1 % of the fair market value of net stock repurchases after December 31, 2022.

Vested Restricted Stock

1 unchanged sentence

As a result, the number of shares issued upon vesting for these awards is net of the statutory withholding requirements that the Company pays on behalf of its employees.

Although shares withheld are not issued, they are treated similarly as common share repurchases in the Company’s consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting.

Although shares withheld are not issued, they are treated as common share repurchases in the Company’s consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting.

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

During the years ended December 31, 2022 and 2021 the Company withheld shares on its vested restricted stock units relating to its share-based compensation plans of 71,509 and zero shares, respectively.

During the years ended December 31, 2023, 2022 and 2021 the Company withheld shares on its vested restricted stock units and restricted stock awards relating to its share-based compensation plans of 61,878 , 71,509 and zero shares, respectively.

Refer to Note 15 - Equity Incentive and Employee Stock Purchase Plan, for shares of common stock issued in relation to the Company’s equity incentive plan.

1 unchanged sentence

Prior to the Separation from Ziff Davis, the Company recorded share-based compensation expense for share-based awards granted to its employees and non-employees for services provided based on expense that was allocated from the Former Parent to the Company for each relevant employee on a monthly basis.

The Former Parents’ plans included their 2015 Stock Plan and the 2001 Employee Stock Purchase Plan.

The Former Parent’s plans included its 2015 Stock Plan and the 2001 Employee Stock Purchase Plan.

In connection with the Separation, the Former Parent terminated awards that were held by Consensus employees.

7 unchanged sentences

4,000,000 shares of common stock are authorized to be used for 2021 Plan purposes.

As of December 31, 2023, 2,147,484 shares were available to be used under the 2021 Plan.

Restricted Stock and Restricted Stock Units

1 unchanged sentence

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 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 issued 884 and 59,175 shares of restricted stock during the years ended December 31, 2022 and 2021, respectively.

All of the restricted stock issued in 2021 were exchanged in the Separation.

Vesting periods are typically 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 issued zero , 884 and 59,175 shares of restricted stock during the years ended December 31, 2023, 2022 and 2021, respectively.

The Company granted 567,218 , 216,959 and 510,128 restricted stock units, which includes 91,203 shares exchanged in the Separation in 2021, during the years ended December 31, 2023, 2022 and 2021, respectively.

4 unchanged sentences

Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method unless the market condition has been met and the requisite service period has been completed, then the expense will be accelerated and recognized in the period that the market condition and service period requirement have been met.

During the year ended December 31, 2021, the Company issued 6,060 shares of market-based restricted stock, all of which were exchanged in the Separation.

During the year ended

December 31, 2021, the Company issued 6,060 shares of market-based restricted stock, all of which were exchanged in the Separation.

The Company granted 503,144 market-based restricted stock units, which includes 34,638 shares exchanged in the Separation, during the year ended December 31, 2021.

During the year ended December 31, 2022, the Company granted 42,586 shares of market-based restricted stock units.

During the years ended December 31, 2023 and 2022, the Company granted 122,150 and 42,586 shares, respectively, of market-based restricted stock units.

The per share weighted-average grant-date fair values of the market-based awards granted during the years ended December 31, 2023, 2022 and 2021 was $ 23.69 , $ 55.47 and $ 46.07 , respectively, as determined by the Monte Carlo valuation.

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The Monte Carlo valuation model used to estimate the fair value of the market-based awards granted utilized the following weighted-average assumptions:

December 31, 2022 December 31, 2021

December 31, 2023 December 31, 2022 December 31, 2021

Underlying stock price at valuation date $ 25.00 $ 59.66 $ 57.06

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Risk-free interest rate 4.2 % 3.6 % 1.3 %

Contractual term 8 years 6.1 years

Contractual term 8 years 8 years 6.1 years

Restricted stock activity for the years ended December 31, 2023, 2022 and 2021 is set forth below:

Number of Shares Weighted-Average

Fair Value (1)

Nonvested at January 1, 2021

Exchanged in Separation 65,235 38.46

Granted 65,235 38.46

Nonvested at December 31, 2021

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Nonvested at December 31, 2022

Vested ( 19,737 ) 37.77

Nonvested at December 31, 2023

15,679 $ 39.24

(1) The Company revised the grant date fair value of certain awards which were inaccurately disclosed related to the prior period.

The Company determined that the update of this disclosure did not have a material impact to the current or prior period financial statements.

As of December 31, 2023, the Company had unrecognized share-based compensation cost related to its restricted stock awards of $ 0.1 million, which is expected to be recognized over a weighted-average period of 0.2 years.

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Shares Weighted-Average

Fair Value (1)

Weighted-Average

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Outstanding at December 31, 2021

1,013,097 50.71

Granted 259,545 57.61

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Outstanding at December 31, 2022 1,082,451 51.63

Granted 689,368 27.21

Vested ( 173,356 ) 55.96

Canceled ( 37,906 ) 55.45

Outstanding at December 31, 2023 1,560,557 40.27 3.3 $ 40,902,199

Vested and expected to vest at December 31, 2023 1,160,759 $ 40.44 2.8 $ 30,423,506

(1) The Company revised the grant date fair value of certain awards which were inaccurately disclosed related to the prior period.

The Company determined that the update of this disclosure did not have a material impact to the current or prior period financial statements.

As of December 31, 2023, the Company had unrecognized share-based compensation cost related to its restricted stock units of $ 36.7 million, which is expected to be recognized over a weighted-average period of 2.6 years.

The Company recognized $ 1.3 million and $ 0.2 million, respectively, of tax benefits related to the share-based compensation costs for the years ending December 31, 2022 and 2021 related to the 2021 Plan.

The Company recognized $ 0.9 million, $ 1.3 million and $ 0.2 million, respectively, of tax benefits related to the share-based compensation costs for the years ended December 31, 2023, 2022 and 2021 related to the 2021 Plan.

(b) Employee Stock Purchase Plan (“ESPP”)

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During 2023, 2022 and 2021, 56,663 , 32,096 and 10,421 Consensus shares were purchased under the Purchase Plan for a weighted average purchase price of $ 24.45 , $ 40.39 and $ 49.67 per share, respectively.

Cash received upon issuance of the Company’s common stock under the Purchase plan was $ 1.3 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively.

Cash received upon issuance of the Company’s common stock under the Purchase plan was $ 1.4 million, $ 1.3 million and $ 0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023, there are 900,820 shares available under the Purchase Plan for future issuance.

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Options under the 2015 Plan may be granted at exercise prices determined by the Former Parent’s Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100 % of the fair market value of Ziff Davis’ common stock subject to the option on the date the option is granted.

At December 31, 2021 and 2020, options to purchase were zero and 250 shares, respectively, of common stock that were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of zero and $ 29.53 , respectively.

At December 31, 2021, options to purchase were zero of common stock that were exercisable under and outside of the 2015 Plan, at weighted average exercise price of zero .

Stock options generally expire after 10 years and vest over a 5-year period.

All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section

All stock option grants were approved by “outside directors” within the meaning of Internal Revenue Code Section

Stock Options

The stock option activity attributable to Consensus employees for the years ended December, 2021 and 2020 is summarized as follows:

The stock option activity attributable to Consensus employees for the year ended December, 2021 is summarized as follows:

Number of Shares

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( 250 ) 29.53

Options outstanding at December 31, 2020 8,460 $ 29.53

( 250 ) 29.53

Adjustment due to Separation

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Vested and expected to vest at December 31, 2021

For the years ended December 31, 2021 and 2020, the Former Parent granted no options to Consensus employees, respectively, to purchase shares of common stock pursuant to the 2015 Plan.

For the year ended December 31, 2021 the Former Parent granted no options to Consensus employees to purchase shares of common stock pursuant to the 2015 Plan.

Stock options granted under the 2015 plan vested 20 % per year and expired 10 years from the date of grant.

The total intrinsic values of options exercised attributable to Consensus employees during the years ended December 31, 2021 and 2020 was zero .

The total fair value of options vested during the period prior the Separation attributable to Consensus employees was zero for the years ended December 31, 2021 and 2020.

Cash received by the Former Parent from options exercised under all share-based payment arrangements for the years ended December 31, 2021 and 2020 was zero .

The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements was zero for the years ended December 31, 2021 and 2020.

The total intrinsic values of options exercised attributable to Consensus employees during the year ended December 31, 2021 was zero .

The total fair value of options vested during the period prior the Separation attributable to Consensus employees was zero for the year ended December 31, 2021.

Cash received by the Former Parent from options exercised under all share-based payment arrangements for the year ended December 31, 2021 was zero .

The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements was zero for the year ended December 31, 2021.

As of December 31, 2021, there was no unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan.

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The Former Parent used an annualized dividend yield based upon the per share dividends declared by the Former Parent’s Board of Directors.

Estimated forfeiture rates were 12.4 % and 13.0 % as of December 31, 2021 and 2020, respectively.

Estimated forfeiture rates were 12.4 % as of December 31, 2021.

Restricted Stock and Restricted Stock Units

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Vesting periods are approximately one year for awards to members of the Former Parent’s Board of Directors, five years for senior staff (excluding market-based awards discussed below) and eight years for the Chief Executive Officer.

The Former Parent granted 2,207 and 2,961 shares of restricted stock and restricted units the years ended December 31, 2021 and 2020, respectively.

The Former Parent granted 2,207 shares of restricted stock and restricted units the year ended December 31, 2021.

Restricted Stock Awards with Market Conditions

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Stock-based compensation expense related awards with a market condition were recognized over the requisite service period using the graded-vesting method, regardless of whether the market condition was satisfied, provided that the requisite service period had been completed.

During the nine months ended September 30, 2021 and the year ended December 31, 2020, the Former Parent awarded 73,094 and 82,112 market-based restricted stock awards, respectively.

The per share weighted average grant-date fair values of the market-based restricted stock awards granted during the years ended December 31, 2021, 2020 were $ 113.27 and $ 91.17 , respectively.

During the nine months ended September 30, 2021 the Former Parent awarded 73,094 market-based restricted stock awards.

The per share weighted average grant-date fair value of the market-based restricted stock awards granted during the year ended December 31, 2021 was $ 113.27 .

The Monte Carlo valuation model used by the Former Parent to estimate the fair value of market-based restricted stock awards granted utilized the following weighted-average assumptions:

December 31, December 31,

Underlying stock price at valuation

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Risk-free interest rate

Contractual term 8 years 8 years

The restricted stock award activity for the years ended December 31, 2021 and 2020 is set forth below:

Shares Weighted-Average Grant-Date Fair Value

Contractual term

The restricted stock award activity for the year ended December 31, 2021 is set forth below:

Weighted-Average Grant-Date Fair Value

Nonvested at January 1, 2021

Vested ( 7,785 ) 76.43

Canceled ( 3,020 ) 77.37

Nonvested at December 31, 2020 26,869 $ 57.21

Vested ( 6,189 ) 74.52

Canceled ( 6,850 ) 83.14

26,869 $ 57.21

( 6,189 ) 74.52

( 6,850 ) 83.14

Adjustment due to Separation

( 13,830 ) 53.72

Nonvested at December 31, 2021

The restricted stock unit activity attributable to Consensus employees for the years ended December 31, 2021 and 2020 is set forth below:

Number of Shares Weighted-Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value

The restricted stock unit activity attributable to Consensus employees for the year ended December 31, 2021 is set forth below:

Number of Shares

Weighted-Average Remaining Contractual Life (in Years)

Aggregate Intrinsic Value

Outstanding at January 1, 2021

Granted 5,431

Vested ( 1,734 )

Canceled ( 360 )

Outstanding at December 31, 2020 13,694

Granted 4,416

Vested ( 2,470 )

Canceled ( 8,856 )

Adjustment due to Separation

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Vested and expected to vest at December 31, 2021

The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2021 and 2020 was $ 1.3 million and $ 0.7 million, respectively.

The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled zero, respectively, for the years ended December 31, 2021 and 2020.

(b) Employee Stock Purchase Plan ( “ESPP”)

In May of 2001, the Former Parent established the J2 Global, Inc.

2001 Employee Stock Purchase Plan, as amended (the “Purchase Plan”), which provided for the issuance of a maximum of 2,000,000 shares of common stock.

Under the Purchase Plan, eligible employees could have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares of Ziff Davis’ common stock at certain plan-defined dates.

The price of the common stock purchased under the Purchase Plan for the offering periods is equal to 95 % of the fair market value of the common stock at the end of the offering period.

On February 2, 2018, the Former Parent approved an amendment to the Former Parent’s Amended and Restated 2001 Employee Stock Purchase Plan, to be effective May 1, 2018, such that (i) the purchase price for each offering period shall be 85 % of the lesser of the fair market value of a share of common stock of the Parent (a “Share”) on the beginning or the end of the offering period, and (ii) each offering period will be six months.

The Former Parent performed an analysis of the Amendment terms and determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature.

The purchase price discount and the look-back feature cause the Former Parent’s Purchase Plan to be compensatory and the Former Parent to recognize compensation expense.

The compensation cost is recognized on a straight-line basis over the requisite service period.

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

The expected volatility was based on historical volatility of the Former Parent’s common stock.

The risk-free interest rate was based on U.S.

Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant.

The Former Parent used an annualized dividend yield based upon the per share dividends declared by the Former Parent’s Board of Directors.

Estimated forfeiture rates were 11.15 % and 11.15 % as of December 31, 2021 and 2020, respectively.

During the years ended December 31, 2021 and 2020, 503 and 1,413 shares were purchased under the Purchase Plan, respectively.

Shares purchased under the Purchase Plan were priced at $ 72.92 per share during 2021.

As of December 31, 2021, zero shares were available under the Purchase Plan for future issuance.

The total fair value of restricted stock and restricted stock units vested during the year ended December 31, 2021 was $ 1.3 million.

The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled zero for the year ended December 31, 2021.

Defined Contribution 401(k) Savings Plan

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Diluted $ 3.94 $ 3.64 $ 6.04

(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 year ended December 31, 2020 because the number of shares issued simply reflect a recharacterization of the capital account previously held by the former parent (see Note 1 - The Company).

(1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

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The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance.

The CODM views the Company as one business, Cloud Fax.

The Company’s Cloud Fax business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with minor seasonal weakness in the fourth quarter.

The CODM views the Company as one segment:

The Company’s Cloud Fax business is driven primarily by subscription revenues.

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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Total $ 362,562 $ 362,422 $ 352,664

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

The following presents the Company’s long-lived assets by geographic region, which consist of property and equipment, net and operating lease right-of-use assets (in thousands):

2023 December 31,

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Supplemental Cash Flows Information

Cash paid for interest on outstanding debt during the years ended December 31, 2022, 2021 and 2020 was $ 51.9 million, zero and $ 54.4 million, respectively.

The Company capitalized $ 1.4 million of interest expense within property and equipment, net on the Company’s Consolidated Balance Sheets during the year ended December 31, 2022.

Zero interest expense was capitalized during the years ended December 31, 2021 and 2020.

The Company capitalized $ 1.5 million of share-based compensation cost within property and equipment, net on our Consolidated Balance Sheets during the year ended December 31, 2022.

Zero share-based compensation cost was capitalized during the years ended December 31, 2021 and 2020.

Cash paid for interest on outstanding debt during the years ended December 31, 2023, 2022 and 2021 was $ 51.4 million, $ 51.9 million and zero , respectively.

The Company capitalized $ 2.6 million and $ 1.4 million of interest expense within property and equipment, net on the Company’s Consolidated Balance Sheets during the years ended December 31, 2023 and 2022, respectively.

Zero interest expense was capitalized during the year ended December 31, 2021.

The Company capitalized $ 1.9 million and $ 1.5 million of share-based compensation cost within property and equipment, net on the Company’s Consolidated Balance Sheets during the years ended December 31, 2023 and 2022, respectively.

Zero share-based compensation cost was capitalized during the year ended December 31, 2021.

Cash paid for income taxes net of refunds received was $ 16.6 million, $ 36.5 million and $ 3.1 million during the years ended December 31, 2023, 2022 and 2021, respectively.

During the year ended December 31, 2021, in a non-cash transaction, an asset related to the $ 500.0 million aggregate principal amount of the 6.5 % Senior Notes due 2028 (see Note 9 - Long-Term Debt) and $ 837.3 million of non-fax business net assets were transferred to Ziff Davis with a corresponding reduction in additional-paid-in-capital.

During the year ended December 31, 2021, in a non-cash transaction, an asset related to the $ 500.0 million aggregate principal amount of the 6.5 % Senior Notes due in 2028 (see Note 9 - Long-Term Debt) and $ 837.3 million of non-fax business net assets were transferred to Ziff Davis with a corresponding reduction in additional-paid-in-capital.

Accumulated Other Comprehensive Income (Loss)

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Other comprehensive loss before reclassifications ( 14,397 )

Net current period other comprehensive loss ( 11,093 )

Balance as of December 31, 2020 $ ( 55,966 )

Other comprehensive loss before reclassifications ( 14,397 )

Transfer of non-fax business to Former Parent 53,506

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Balance as of December 31, 2022

(1) In 2022, the Company recorded a $ 5.5 million out of period correction that increased goodwill with an offset to the cumulative translation adjustment.

It was deemed to be an out of period correction that was not material to 2022 or any prior period.

Other comprehensive income before reclassifications

Net current period other comprehensive income

Balance as of December 31, 2023

There were no reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2023, 2022 and 2021.

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In addition, the Company paid Ziff Davis approximately $ 8.9 million subsequent to the Separation due to excess cash held at the Separation date net of other related items pursuant to the Separation and Distribution Agreement.

In connection with the Separation, Consensus and Ziff Davis entered into several agreements that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement (“TSA”), a tax matters agreement, an employee matters agreement, an intellectual property license agreement and a stockholder and registration rights agreement (the “Agreements”).

The TSA governs services including certain information technology services, finance and accounting services and human resource and employee benefit services.

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

As of December 31, 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.

In connection with the Separation, Consensus and Ziff Davis entered into several agreements that governed the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement (“TSA”), a tax matters agreement, an employee matters agreement, an intellectual property license agreement and a stockholder and registration rights agreement (the “Agreements”).

The TSA governed services including certain information technology services, finance and accounting services and human resource and employee benefit services.

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

The TSA terminated on October 7, 2023.

Further, as noted in Note 10, Ziff Davis assigned its lease of office space in Los Angeles, California to Consensus.

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

During the year ended December 31, 2022, the Company paid approximately $ 20.8 million to Ziff Davis, to settle co-mingled cash accounts, costs associated with the transition services agreement and Separation.

Additionally, the Company incurred approximately $ 0.6 million in costs related to the registration of shares for sale held by Ziff Davis for the year ended

December 31, 2022.

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

During the year ended December 31, 2023 and 2022, the Company paid approximately $ 1.0 million and $ 20.8 million, respectively, to Ziff Davis, to settle co-mingled cash accounts, costs associated with the transition services agreement and Separation.

Additionally, the Company incurred approximately $ 0.6 million in costs related to the registration of shares for sale held by Ziff Davis for the year ended December 31, 2022.

No costs were incurred in 2023 related to the registration of shares for sale held by Ziff Davis.

These costs were recorded in general and administrative expenses within the Consolidated Statement of Income.

Subsequent to the disposition of the shares, Ziff Davis’ beneficial ownership in the Company was under 10 % as of December 31, 2023.

Amounts due to Ziff Davis as of December 31, 2022 and December 31, 2021 were $ 0.2 million and $ 5.7 million, respectively, related to these items, as well as reimbursement related to certain transaction related costs.

Amounts due to Ziff Davis as of December 31, 2023 and 2022 were $ 0.1 million and $ 0.2 million, respectively.

Subsequent Events

In connection with the Company’s Debt Repurchase Program (see Note 9 - Long-Term Debt), the Company paid $ 28.6 million to repurchase $ 30.4 million in principal of its senior notes subsequent to year-end.

Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data