Consensus Cloud Solutions, Inc. 10-Q

Item 1. Financial Statements. CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands except share and per share data) September 30, 2024 December 31, 2023 ASSETS Cash and cash equivalents $ 54,598 $ 88,715 Accounts receivable, net of allowances of $ 5,441 and $ 6,271 , respectively 25,807 26,342 Prepaid expenses and other current assets 9,430 10,191 Total current assets 89,835 125,248 Property and equipment, net 96,342 81,196 Operating lease right-of-use assets 6,924 6,766 Intangibles, net 42,201 44,990 Goodwill 349,454 348,822 Deferred income taxes 33,319 34,869 Other assets 4,419 5,364 TOTAL ASSETS $ 622,494 $ 647,255 LIABILITIES AND STOCKHOLDERS’ DEFICIT Accounts payable and accrued expenses $ 47,422 $ 36,506 Income taxes payable, current 4,787 2,224 Deferred revenue, current 21,386 22,041 Operating lease liabilities, current 2,330 2,038 Current portion of long-term debt 9,366 8,575 Total current liabilities 85,291 71,384 Long-term debt, net of current portion 603,124 725,405 Deferred revenue, noncurrent 2,005 2,270 Operating lease liabilities, noncurrent 12,586 13,212 Liability for uncertain tax positions 11,887 9,740 Deferred income taxes 545 1,098 Other long-term liabilities 245 268 TOTAL LIABILITIES 715,683 823,377 Commitments and contingencies (Note 8) Common stock, $ 0.01 par value. Authorized 120,000,000 ; total issued is 20,375,622 and 20,273,686 shares and total outstanding is 19,303,998 and 19,245,024 shares as of September 30, 2024 and December 31, 2023, respectively 204 203 Treasury stock, at cost ( 1,071,624 and 1,028,662 shares as of September 30, 2024 and December 31, 2023, respectively) ( 31,990 ) ( 31,282 ) Additional paid-in capital 55,083 41,247 Accumulated deficit ( 101,749 ) ( 173,113 ) Accumulated other comprehensive loss ( 14,737 ) ( 13,177 ) TOTAL STOCKHOLDERS’ DEFICIT ( 93,189 ) ( 176,122 ) TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 622,494 $ 647,255 See Notes to Condensed Consolidated Financial Statements -3- CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues $ 87,753 $ 90,562 $ 263,399 $ 274,808 Cost of revenues (1) 17,658 16,853 51,828 51,607 Gross profit 70,095 73,709 211,571 223,201 Operating expenses: Sales and marketing (1) 12,500 15,319 36,776 49,719 Research, development and engineering (1) 2,034 1,677 5,582 5,346 General and administrative (1) 17,136 17,798 53,240 56,382 Total operating expenses 31,670 34,794 95,598 111,447 Income from operations 38,425 38,915 115,973 111,754 Interest expense ( 9,760 ) ( 12,615 ) ( 24,616 ) ( 37,998 ) Interest income 659 1,519 2,175 2,184 Other (expense) income, net ( 2,069 ) 3,725 2,496 3,445 Income before income taxes 27,255 31,544 96,028 79,385 Income tax expense 6,135 7,537 24,664 18,862 Net income $ 21,120 $ 24,007 $ 71,364 $ 60,523 Net income per common share: Basic $ 1.09 $ 1.22 $ 3.71 $ 3.07 Diluted $ 1.09 $ 1.22 $ 3.69 $ 3.07 Weighted average shares outstanding: Basic 19,300,283 19,627,188 19,256,739 19,708,991 Diluted 19,442,130 19,647,855 19,321,274 19,730,765 (1) Includes share-based compensation expense as follows: Cost of revenues $ 465 $ 309 $ 1,449 $ 939 Sales and marketing 592 375 1,856 1,134 Research, development and engineering 95 61 260 153 General and administrative 2,270 3,009 8,045 11,331 Total $ 3,422 $ 3,754 $ 11,610 $ 13,557 See Notes to Condensed Consolidated Financial Statements -4- CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited, in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 21,120 $ 24,007 $ 71,364 $ 60,523 Other comprehensive gain (loss): Foreign currency translation adjustment 6,091 ( 6,238 ) ( 1,560 ) ( 4,131 ) Other comprehensive gain (loss) 6,091 ( 6,238 ) ( 1,560 ) ( 4,131 ) Comprehensive income $ 27,211 $ 17,769 $ 69,804 $ 56,392 See Notes to Condensed Consolidated Financial Statements -5- CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income $ 71,364 $ 60,523 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,968 13,053 Amortization of financing costs and discounts 1,387 1,526 Non-cash operating lease costs 1,158 1,304 Share-based compensation 11,610 13,557 Provision for doubtful accounts 3,220 4,409 Deferred income taxes, net 1,255 2,029 Gain on extinguishment of debt ( 6,667 ) — Other — 30 Changes in operating assets and liabilities: Decrease (increase) in: Accounts receivable ( 2,663 ) ( 6,126 ) Prepaid expenses and other current assets 759 7,144 Other assets 947 1,182 Increase (decrease) in: Accounts payable and accrued expenses 11,265 10,210 Income taxes payable 2,544 4,615 Deferred revenue ( 924 ) ( 2,088 ) Operating lease liabilities ( 1,726 ) ( 1,578 ) Liability for uncertain tax positions 2,147 2,323 Other liabilities ( 23 ) ( 34 ) Net cash provided by operating activities 110,621 112,079 Cash flows from investing activities: Purchases of property and equipment ( 25,460 ) ( 28,725 ) Purchase of investments — ( 4,000 ) Net cash used in investing activities ( 25,460 ) ( 32,725 ) Cash flows from financing activities: Proceeds from the issuance of common stock under employee stock purchase plan 747 871 Repurchase of common stock ( 708 ) ( 13,716 ) Taxes paid related to net share settlement ( 686 ) ( 1,245 ) Repurchase of debt ( 116,162 ) — Net cash used in financing activities ( 116,809 ) ( 14,090 ) Effect of exchange rate changes on cash and cash equivalents ( 2,469 ) ( 3,746 ) Net change in cash and cash equivalents ( 34,117 ) 61,518 Cash and cash equivalents at beginning of period 88,715 94,164 Cash and cash equivalents at end of period $ 54,598 $ 155,682 See Notes to Condensed Consolidated Financial Statements -6- CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (Unaudited, in thousands except share amounts) Common stock Additional paid-in Treasury stock Accumulated Accumulated other comprehensive Total Shares Amount capital Shares Amount deficit loss deficit Balance, July 1, 2023 20,176,291 $ 202 $ 32,182 ( 527,668 ) $ ( 18,937 ) $ ( 213,892 ) $ ( 17,001 ) $ ( 217,446 ) Net income — — — — — 24,007 — 24,007 Foreign currency translation adjustment — — — — — — ( 6,238 ) ( 6,238 ) Vested restricted stock 8,383 — — — — — — — Shares withheld related to net share settlement ( 2,412 ) — ( 70 ) — — — — ( 70 ) Repurchase of common stock — — — ( 152,399 ) ( 3,791 ) — — ( 3,791 ) Share-based compensation — — 4,250 — — — — 4,250 Balance, September 30, 2023 20,182,262 $ 202 $ 36,362 ( 680,067 ) $ ( 22,728 ) $ ( 189,885 ) $ ( 23,239 ) $ ( 199,288 ) Common stock Additional paid-in Treasury stock Accumulated Accumulated other comprehensive Total Shares Amount capital Shares Amount deficit loss deficit Balance, July 1, 2024 20,368,194 $ 204 $ 51,043 ( 1,071,624 ) $ ( 31,990 ) $ ( 122,869 ) $ ( 20,828 ) $ ( 124,440 ) Net income — — — — — 21,120 — 21,120 Foreign currency translation adjustment — — — — — — 6,091 6,091 Vested restricted stock 10,917 — — — — — — — Shares withheld related to net share settlement ( 3,489 ) — ( 71 ) — — — — ( 71 ) Share-based compensation — — 4,111 — — — — 4,111 Balance, September 30, 2024 20,375,622 $ 204 $ 55,083 ( 1,071,624 ) $ ( 31,990 ) $ ( 101,749 ) $ ( 14,737 ) $ ( 93,189 ) -7- CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (Unaudited, in thousands except share amounts) Common stock Additional paid-in Treasury stock Accumulated Accumulated other comprehensive Total Shares Amount capital Shares Amount deficit loss deficit Balance, January 1, 2023 20,105,545 $ 201 $ 21,650 ( 189,114 ) $ ( 7,596 ) $ ( 250,408 ) $ ( 19,108 ) $ ( 255,261 ) Net income — — — — — 60,523 — 60,523 Foreign currency translation adjustment — — — — — — ( 4,131 ) ( 4,131 ) Vested restricted stock 82,503 1 ( 1 ) — — — — — Shares withheld related to net share settlement ( 35,368 ) — ( 1,245 ) — — — — ( 1,245 ) Repurchase of common stock — — — ( 490,953 ) ( 15,132 ) — — ( 15,132 ) Share-based compensation — — 15,087 — — — — 15,087 Issuance of shares under ESPP 29,582 — 871 — — — — 871 Balance, September 30, 2023 20,182,262 $ 202 $ 36,362 ( 680,067 ) $ ( 22,728 ) $ ( 189,885 ) $ ( 23,239 ) $ ( 199,288 ) Common stock Additional paid-in Treasury stock Accumulated Accumulated other comprehensive Total Shares Amount capital Shares Amount deficit loss deficit Balance, January 1, 2024 20,273,686 $ 203 $ 41,247 ( 1,028,662 ) $ ( 31,282 ) $ ( 173,113 ) $ ( 13,177 ) $ ( 176,122 ) Net income — — — — — 71,364 — 71,364 Foreign currency translation adjustment — — — — — — ( 1,560 ) ( 1,560 ) Vested restricted stock 96,912 1 ( 1 ) — — — — — Shares withheld related to net share settlement ( 40,396 ) — ( 686 ) — — — — ( 686 ) Repurchase of common stock — — — ( 42,962 ) ( 708 ) — — ( 708 ) Share-based compensation — — 13,776 — — — — 13,776 Issuance of shares under ESPP 45,420 — 747 — — — — 747 Balance, September 30, 2024 20,375,622 $ 204 $ 55,083 ( 1,071,624 ) $ ( 31,990 ) $ ( 101,749 ) $ ( 14,737 ) $ ( 93,189 ) See Notes to Condensed Consolidated Financial Statements -8- CONSENSUS CLOUD SOLUTIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The Company Consensus Cloud Solutions, Inc., together with its subsidiaries (“Consensus Cloud Solutions”, “Consensus”, the “Company”, “our”, “us” or “we”), is a provider of secure information delivery services with a scalable Software-as-a-Service (“SaaS”) platform. Consensus serves approximately 825 thousand customers of all sizes, from enterprises to individuals, across approximately 45 countries and multiple industry verticals including healthcare, government, financial services, law and education. Beginning as an online fax company over two decades ago, Consensus has evolved into a global provider of enterprise secure communication solutions. Our communication and digital signature solutions enable our customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries. Consensus Cloud Solutions, Inc. Spin-Off On September 21, 2021, J2 Global, Inc., known since October 7, 2021 as Ziff Davis, Inc. (“Ziff Davis” or the “Former Parent”) announced that its Board of Directors approved its separation of the Cloud Fax business (the “Separation” or the “Spin-Off”), into an independent publicly traded company, Consensus Cloud Solutions, Inc. On October 7, 2021, the Separation was completed and the Former Parent transferred certain assets and liabilities associated with its Cloud Fax business to Consensus, including the equity interests in J2 Cloud Services, LLC (“J2 Cloud Services”), in exchange for approximately $ 259.1 million in cash, an asset related to $ 500.0 million in aggregate principal amount of the 6.5 % Senior Notes due 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”. Ziff Davis retained a 19.9 % interest in Consensus following the Separation. Subsequently, Ziff Davis has sold, or otherwise disposed of, its Consensus shares, reducing its beneficial ownership in the Company to zero as of September 30, 2024 (see Note 15 - Related Party Transactions). Principles of Consolidation The accompanying interim condensed consolidated financial statements include the accounts of Consensus and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Basis of Presentation The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. The Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of these interim financial statements have been reflected. It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2023, included in our Annual Report (Form 10-K) filed with the SEC on February 28, 2024. Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein. The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period. Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about the reported amounts of revenue and expenses during the reporting period. The Company believes that its most significant estimates are those related to revenue recognition, internal-use software development costs, share-based -9- 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 factors such as inflationary pressures and elevated interest rates. Significant Accounting Policies There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Segment Reporting Financial Accounting Standards Board (“FASB”) ASC Topic No. 280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report information about operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company’s business segment is based on the organization’s structure used by the chief operating decision maker, 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. The chief operating decision maker views the Company as one reportable segment known as Cloud Fax (see Note 14 - Segment Information). Reclassifications Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. 2. Recent Accounting Pronouncements In 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 are intended to 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. 3. Revenues The Company earns revenue from contracts with customers, primarily through the provision of cloud-based communication and digital signature solutions that allow customers to access the Company’s software without taking possession. The contracts include both recurring subscription and usage-based fees, and the total transaction price is allocated to -10- performance obligations in each contract as appropriate. Revenue for cloud-based services is recognized over time in the period earned. The contracts may be terminated early. Fees collected in advance are non-refundable, and they are deferred and recognized in revenue when the related performance obligations are satisfied. Standard Corporate contracts billed monthly include a termination charge equal to the minimum fees payable through the last day of the contract term. Revenues from external customers classified by revenue source are as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues Corporate $ 53,085 $ 50,430 $ 156,195 $ 150,198 Small office home office (“SoHo”) 34,664 40,129 107,197 124,588 Other 4 3 7 22 Total $ 87,753 $ 90,562 $ 263,399 $ 274,808 Timing of revenue recognition Point in time $ 289 $ 112 $ 737 $ 410 Over time 87,464 90,450 262,662 274,398 Total $ 87,753 $ 90,562 $ 263,399 $ 274,808 The Company has recorded $ 4.1 million and $ 4.2 million of revenue for the three months ended September 30, 2024 and 2023, respectively, and $ 18.6 million and $ 20.2 million of revenue for the nine months ended September 30, 2024 and 2023, respectively, that was previously included in the deferred revenue balance as of the beginning of each respective year. Performance Obligations Generally, the Company’s contracts with customers include one performance obligation, however, certain contracts may include multiple performance obligations. For such arrangements, revenues are allocated to each performance obligation based on their relative standalone selling price. The Company 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. Due to the nature of the services provided, there are no obligations for returns. Significant Judgments Determining whether products and services are considered distinct performance obligations may require significant judgment. When a contract 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. Judgment is also required to determine the standalone selling price for each distinct performance obligation when there are multiple performance obligations. In certain cases, the Company is able to establish the standalone selling price based on observable prices of products or services sold or priced separately in comparable circumstances to similar customers. The Company uses a range of amounts to estimate the standalone selling price when each of the products and services is sold separately to determine whether there is a discount to be allocated based on the relative standalone selling price of the various products and services. Performance Obligations Satisfied Over Time The Company’s business consists primarily of performance obligations that are satisfied over time based on the fact that the nature of the cloud-based services offered is subscription based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. Depending on the individual contracts with the customer, revenue for these services is recognized over the contract period when services are provided. The Company expects to recognize revenue for Corporate contracts typically 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. Revenue from usage- -11- based fees is recognized in proportion to the amount for which the Company has the right to invoice for services performed, which corresponds with the utilization of the services by the customer. The Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligations over time is a time-based measure. The Company recognizes revenue on a straight-line basis throughout the subscription period and believes that the method used is a faithful depiction of the transfer of goods and services. Practical Expedients Existence of a Significant Financing Component in a Contract As a practical expedient, the Company has not assessed whether a contract has a significant financing component because the Company expects at contract inception that the period between payment by the customer and the transfer of promised goods or services by the Company to the customer will be one year or less. In addition, the Company has determined that the payment terms the Company provides to its customers are structured primarily for reasons other than the provision of finance to the Company. The Company typically charges an upfront subscription amount for services, or amount for usage in arrears, or a combination thereof, as other payment terms would affect the nature of the risk assumed by the Company due to the costs of the customer acquisition and the highly competitive and commoditized nature of the business the Company operates. Costs to Fulfill a Contract The Company’s revenues are primarily generated from customer contracts that are for one year or less. Costs primarily consist of incentive compensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the revenue is earned. Incentive compensation is paid upon the issuance or renewal of the customer contract. As a practical expedient, for amortization periods that are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred. For those customer contracts greater than one year, the Company capitalizes and amortizes the expenses, when appropriate, over the period of benefit. Revenues Invoiced The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed. 4. Fair Value Measurements The Company complies with the provisions of FASB ASC Topic No. 820, Fair Value Measurement, (“ASC 820”), which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: § Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. § Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. § Level 3 – Unobservable inputs which are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. -12- 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 $ 43.1 million and $ 72.1 million as of September 30, 2024 and December 31, 2023, 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 7 - Long-Term Debt). The carrying value of long-term debt is reflected in the financial statements at cost. Assets Measured on a Non-Recurring Basis The Company’s non-financial assets, which primarily consist of goodwill, indefinite-lived intangible 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. 5. Property and Equipment Property and equipment, stated at cost, as of September 30, 2024 and December 31, 2023 consisted of the following (in thousands): September 30, 2024 December 31, 2023 Internal-use software development costs $ 82,982 $ 51,396 Computers, software and equipment 19,327 21,701 Furniture and fixtures 888 887 Leasehold improvements 1,720 1,720 Internal-use software development costs in process 43,508 48,022 148,425 123,726 Less: Accumulated depreciation and amortization ( 52,083 ) ( 42,530 ) Total property and equipment, net $ 96,342 $ 81,196 Depreciation and amortization expense was $ 4.1 million and $ 3.3 million for the three months ended September 30, 2024 and 2023, respectively, and $ 12.2 million and $ 9.8 million for the nine months ended September 30, 2024 and 2023, respectively. No impairment was recorded in the three and nine months ended September 30, 2024 and 2023. 6. Goodwill and Intangible Assets The changes in carrying amounts of goodwill for the nine months ended September 30, 2024 are as follows (in thousands): Amount Balance as of January 1, 2024 $ 348,822 Foreign exchange translation 632 Balance as of September 30, 2024 $ 349,454 As of September 30, 2024 the Company’s goodwill had no accumulated impairment. -13- Intangible Assets with Indefinite Lives: Intangible assets are summarized as of September 30, 2024 and December 31, 2023 as follows (in thousands): September 30, 2024 December 31, 2023 Trade names $ 27,375 $ 27,367 Other 4,045 4,045 Total $ 31,420 $ 31,412 Intangible Assets Subject to Amortization: As of September 30, 2024, intangible assets subject to amortization are summarized as follows (in thousands): Weighted-Average Remaining Amortization Period Historical Cost Accumulated Amortization Net Trade names 0.3 years $ 8,215 $ 7,901 $ 314 Patent and patent licenses 0.0 years 54,341 54,341 — Customer relationships (1) 2.2 years 108,604 99,652 8,952 Other purchased intangibles 1.3 years 11,927 10,412 1,515 Total $ 183,087 $ 172,306 $ 10,781 (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, 2023, intangible assets subject to amortization are summarized as follows (in thousands): Weighted-Average Remaining Amortization Period Historical Cost Accumulated Amortization Net Trade names 0.3 years $ 8,199 $ 7,789 $ 410 Patent and patent licenses 0.0 years 54,341 54,341 — Customer relationships (1) 2.6 years 108,417 97,333 11,084 Other purchased intangibles 1.8 years 11,989 9,905 2,084 Total $ 182,946 $ 169,368 $ 13,578 (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 September 30, 2024 are as follows (in thousands): Fiscal Year: Amount 2024 (remainder) $ 911 2025 2,600 2026 2,093 2027 1,395 2028 986 Thereafter 2,796 Total $ 10,781 -14- Amortization expense was $ 1.0 million and $ 1.0 million for the three months ended September 30, 2024 and 2023, respectively, and $ 2.8 million and $ 3.2 million for the nine months ended September 30, 2024 and 2023, respectively. 7. Long-Term Debt Long-term debt as of September 30, 2024 and December 31, 2023 consists of the following (in thousands): September 30, 2024 December 31, 2023 2026 Senior Notes $ 255,532 $ 280,014 2028 Senior Notes 362,696 462,414 Total 618,228 742,428 Less: deferred issuance costs ( 5,738 ) ( 8,448 ) Total debt 612,490 733,980 Less: current portion, net of debt issuance costs ( 9,366 ) ( 8,575 ) Total long-term debt, less current portion $ 603,124 $ 725,405 As of September 30, 2024 and December 31, 2023, the estimated fair value of the 2026 Senior Notes was approximately $ 254.9 million and $ 266.0 million, respectively, and was based on quoted market prices or dealer quotes for the 2026 Senior Notes which are Level 1 inputs in the fair value hierarchy. As of September 30, 2024 and December 31, 2023, the estimated fair value of the 2028 Senior Notes was approximately $ 361.8 million and $ 422.5 million, respectively, and was based on quoted market prices or dealer quotes for the 2028 Senior Notes which are Level 1 inputs in the fair value hierarchy. At September 30, 2024, future contractual principal payments for debt were as follows (in thousands): Fiscal year: Total 2024 (1) (remainder) $ 9,111 2025 — 2026 248,980 2027 — 2028 360,137 Thereafter — Total $ 618,228 (1) The Company has reclassified $ 6.5 million and $ 2.6 million from the 2026 and 2028 periods, respectively, into the 2024 period as debt repurchases were made subsequent to September 30, 2024 but prior to the filing of these financial statements (see Note 16 - Subsequent Event). The Company capitalized $ 0.7 million and $ 0.7 million of interest expense within property and equipment, net on the Company’s Condensed Consolidated Balance Sheets during the three months ended September 30, 2024 and 2023, respectively, and $ 2.1 million and $ 1.8 million during the nine months ended September 30, 2024 and 2023, respectively. 2026 Senior Notes On October 7, 2021, Consensus issued $ 305.0 million of senior notes due in 2026 (the “2026 Senior Notes”), receiving net proceeds of $ 301.2 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. 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 Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023. The 2026 Senior Notes bear interest at a rate of 6.0 % per annum and mature on October 15, 2026. The indenture pursuant to which the 2026 Senior Notes were issued contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Restricted payments are applicable only if Consensus Cloud Solutions, Inc. and subsidiaries designated as restricted subsidiaries has a net leverage ratio -15- of greater than 3.0 to 1.0. In addition, if such net leverage ratio is in excess of 3.0 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not to exceed the greater of (A) $ 100.0 million and (B) 50.0 % of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available. The Company is in compliance with its debt covenants as of September 30, 2024. 2028 Senior Notes On October 7, 2021, Consensus issued $ 500.0 million of 6.5 % senior notes due in 2028 (the “2028 Senior Notes”) to Ziff Davis (see Note 15 - Related Party Transactions) in exchange for the equity interest in the Company. Ziff Davis then exchanged the 2028 Senior Notes with lenders under its credit agreement (or their affiliates) in exchange for extinguishment of a similar amount of indebtedness under such credit agreement for a total amount of $ 483.8 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 2028 Senior Notes are presented as current portion of long-term debt and long-term debt, net of current portion, net of deferred issuance costs, on the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023. The 2028 Senior Notes bear interest at a rate of 6.5 % per annum and mature on October 15, 2028. The indenture pursuant to which the 2028 Senior Notes were issued contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Restricted payments are applicable only if Consensus Cloud Solutions, Inc. and subsidiaries designated as restricted subsidiaries has a net leverage ratio of greater than 3.0 to 1.0. In addition, if such net leverage ratio is in excess of 3.0 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not to exceed the greater of (A) $ 100.0 million and (B) 50.0 % of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available. The Company is in compliance with its debt covenants as of September 30, 2024. Credit Agreement On March 4, 2022, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain lenders party thereto (the “Lenders”) and MUFG Union Bank, N.A., as agent (the “Agent”). Pursuant to the Credit Agreement, the Lenders have provided Consensus with a senior secured revolving credit facility of $ 25.0 million (the “Credit Facility”) with an option held by the Company to obtain an additional commitment of up to a maximum of $ 25.0 million. The final maturity of the Credit Facility will occur on March 4, 2027. As of September 30, 2024, no amount had been drawn down on the Credit Facility. The Credit Facility is guaranteed by each wholly-owned material domestic subsidiary of Consensus, and secured by substantially all assets of Consensus and the guarantors. The loans made under the Credit Facility are subject to a Secured Overnight Financing Rate (“SOFR”) base interest rate plus a SOFR margin between 1.75 % - 2.50 %, with stepdowns subject to the total net leverage ratio. The Credit Facility is subject to a total net leverage ratio covenant and a minimum EBITDA requirement, in each case tested on a quarterly basis. The Credit Agreement contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Unsecured indebtedness may be incurred, assets may be disposed of, restricted payments may be made and investments may be made, in each case subject to compliance with the Company’s financial covenants. The Company is in compliance with its covenants as of September 30, 2024. 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. During the three and nine months ended September 30, 2024, the Company retired $ 31.1 million and $ 124.2 million, respectively, in principal of its senior notes. Refer to Note 16 - Subsequent Event for debt repurchases made subsequent to September 30, 2024 but prior to the filing of these financial statements. During the three and nine months ended September 30, 2023, the Company retired zero in principal of its senior notes. As of September 30, 2024, the Company had -16- retired an aggregate of $ 186.8 million in principal of its senior notes under this program. In connection with the Debt Repurchase Program, the Company reclassified $ 9.4 million and $ 8.6 million of long-term debt, net of current portion to the current portion of long-term debt as of September 30, 2024 and December 31, 2023, respectively, as the Company had the intention and cash on hand to extinguish the respective amounts of debt within twelve months of the end of the reporting periods. For the three and nine months ended September 30, 2024, a net gain on debt extinguishment of $ 0.1 million and $ 6.7 million, respectively, related to the Debt Repurchase Program is included in interest expense on the Condensed Consolidated Statements of Income. For the three and nine months ended September 30, 2023, no net gain on debt extinguishment was recorded. 8. Commitments and Contingencies Litigation From time to time, the Company and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinary course of business. Any claims or regulatory actions against the Company and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief. The Company does not believe, based on current knowledge, that any legal proceedings or claims currently exist which, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. It is the Company’s policy to expense legal fees related to any litigation as incurred. Non-Income Related Taxes In the third quarter of 2022, the Company initiated a Voluntary Disclosure Agreement (“VDA”) process to voluntarily report sales tax liability related to prior periods where the Company had previously not been able to estimate its exposure. The Company recorded an accrual as the exposure became probable and estimable. The VDA process was completed in the fourth quarter of 2023. While the Company believes that it has sufficiently reserved for historical sales tax liabilities under FASB ASC Topic No. 450, Contingencies, some state taxing authorities may still challenge the Company’s sales tax position, the methodology used to calculate the sales tax liability, and may also impose other taxes on its business. Taxing authorities may successfully assert that the Company should have collected, or in the future should collect sales and use, telecommunications or similar taxes, and could be subject to liability with respect to past or future tax, which could adversely affect the Company’s operating results. The Company recorded a sales tax expense within general and administrative expenses in the Condensed Consolidated Statements of Income of $ 0.1 million and $ 0.8 million for the three months ended September 30, 2024 and 2023, respectively, and $ 1.2 million and $ 2.0 million for the nine months ended September 30, 2024 and 2023, respectively. The Company will continue to review and monitor the impact of sales tax rules in order to mitigate any associated risks on its business. The sales tax liability within accounts payable and accrued expenses on the Company’s Condensed Consolidated Balance Sheets was $ 5.9 million and $ 7.3 million as of September 30, 2024 and December 31, 2023, respectively. -17- 9. Other Balance Sheet Account Details Prepaid expenses and other current assets Prepaid expenses and other current assets consisted of the following (in thousands): September 30, 2024 December 31, 2023 Prepaid insurance $ 97 $ 939 Prepaid income taxes 3,111 3,698 Prepaid software licenses 3,154 3,232 Other prepaid expenses 2,718 1,799 Other current assets 350 523 Total $ 9,430 $ 10,191 Accounts payable and accrued expenses Accounts payable and accrued expenses consisted of the following (in thousands): September 30, 2024 December 31, 2023 Accounts payable $ 9,518 $ 9,858 Accrued sales and other taxes 7,486 8,806 Accrued interest 17,876 9,885 Accrued compensation 8,043 4,337 Accrued advertising expenses 2,021 2,485 Other accrued expenses 2,478 1,135 Total $ 47,422 $ 36,506 10. Income Taxes The Company’s tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate adjusted for discrete interim period tax impacts. Each quarter the Company updates its estimated annual effective tax rate and, if the estimate changes, makes a cumulative adjustment. Changes in the geographical mix, permanent differences or the estimated level of annual pre-tax income can affect the effective tax rate. The Company’s effective tax rate for the three months ended September 30, 2024 and 2023 was 22.5 % and 23.9 %, respectively. The Company’s effective tax rate for the nine months ended September 30, 2024 and 2023 was 25.7 % and 23.8 %, respectively. The decrease in the Company’s effective income tax rate for the three months ended September 30, 2024 was primarily due to the change in the geographical mix of income. The increase in the Company’s effective income tax rate for the nine months ended September 30, 2024 was primarily attributable to the change in the geographical mix of income, an increase in the valuation allowance and an increase in state taxes on foreign earnings not permanently reinvested. The Company’s effective tax rates for the three and nine months ended September 30, 2024 and 2023 differed from the U.S. federal statutory rates of 21% primarily as a result of state income taxes, nondeductible expenses for tax purposes, foreign rate differential, research and development credits and uncertain tax positions. As of September 30, 2024 and December 31, 2023, the Company had $ 11.9 million and $ 9.7 million, respectively, in liabilities for uncertain income tax positions, including interest and penalties. Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company’s Condensed Consolidated Statements of Income. Income Tax Audits The Company is required to file tax returns in the United States, Ireland, Canada, Japan, Netherlands, France and Hong Kong. As of September 30, 2024, the Company was not under audit in any jurisdiction that it operates within. In respect to these international subsidiaries, tax returns for the years from 2017 onwards are still open to examination by tax authorities. -18- 11. Stockholders’ Deficit Common Stock Repurchase Program On March 1, 2022, the Company’s Board of Directors approved a share buyback program. Under this program, the Company may purchase in the public market or in off-market transactions up to $ 100.0 million of the Company’s common stock through February 2025. The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant. The Company entered into Rule 10b-18 and Rule 10b5-1 trading plans under this program. There were no shares repurchased during the three months ended September 30, 2024 under this program. During the three months ended September 30, 2023, the Company repurchased 152,399 shares under this program at an aggregate cost of $ 3.8 million, inclusive of excise tax of $ 0.1 million. During the nine months ended September 30, 2024 and 2023, the Company repurchased 42,962 and 490,953 shares, respectively, at an aggregate cost of $ 0.7 million and $ 15.1 million, respectively, inclusive of excise tax of zero and $ 0.1 million, respectively. Cumulatively as of September 30, 2024, 1,071,624 shares have been repurchased under this program at an aggregate cost of $ 32.0 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 At the time of certain vesting events related to restricted stock units or restricted stock awards that are held by participants in Consensus’ Equity Incentive Plan, a portion of the awards subject to vesting are withheld by the Company to satisfy the employees’ tax withholding obligations that arise upon the vesting of restricted stock. As a result, the number of shares issued upon vesting for these awards is net of the statutory withholding requirements that the Company pays on behalf of its employees. Although shares withheld are not issued, they are treated as common share repurchases in the Company’s condensed consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the Company’s share repurchase program described above. During the three months ended September 30, 2024 and 2023, the Company withheld shares on its vested restricted stock units and restricted stock awards relating to its share-based compensation plans of 3,489 shares and 2,412 shares, respectively. During the nine months ended September 30, 2024 and 2023, the Company withheld shares on its vested restricted stock units and restricted stock awards relating to its share-based compensation plans of 40,396 shares and 35,368 shares, respectively. Dividends The Company currently does not issue dividends to Consensus shareholders. Future dividends are subject to Board approval. Our current debt agreements could trigger restrictions on dividend payments under certain circumstances (see Note 7 - Long-Term Debt). 12. Equity Incentive Plan The Company’s share-based compensation plans include the 2021 Equity Incentive Plan (the “2021 Plan”). 2021 Equity Incentive Plan In December 2021, Consensus’ Board of Directors adopted the 2021 Plan, which provides for the grant of incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and share units and other share-based awards. Under the 2021 Plan, 4,000,000 shares of common stock are authorized to be granted. As of September 30, 2024, 2,147,611 shares were available to be used under the 2021 Plan. Restricted Stock and Restricted Stock Units The Company has awarded restricted stock and restricted stock units to its Board of Directors and certain employees pursuant to the 2021 Plan. Compensation expense resulting from restricted stock and restricted stock unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period. Vesting periods are generally 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. -19- Restricted Stock and Restricted Stock Units with Market Conditions The Company has awarded certain key employees market-based restricted stock and restricted stock units pursuant to the 2021 Plan. The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock. Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets for 20 out of 30 trading days or 20 out of 25 trading days (look-back period), based on the award agreement. Stock-based compensation expense related to an award with a market condition is recognized over the requisite service period using the graded-vesting method, unless the market condition has been met and requisite service period has been completed, then the expense will be accelerated and recognized in the period that the market condition and service period requirement have been met. During the nine months ended September 30, 2024 and 2023, the Company awarded zero market-based restricted stock awards and restricted stock units. Restricted stock activity for the nine months ended September 30, 2024 is set forth below: Number of Shares Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2024 15,679 $ 39.24 Granted — — Vested ( 9,225 ) 37.95 Canceled ( 6,454 ) 41.07 Nonvested at September 30, 2024 — $ — As of September 30, 2024, the Company had no remaining unrecognized share-based compensation cost related to its restricted stock awards, as they have been fully expensed as of the end of the period. Restricted stock unit activity for the nine months ended September 30, 2024 is set forth below: Number of Shares Weighted-Average Grant-Date Fair Value Outstanding at January 1, 2024 1,560,557 $ 40.27 Granted 101,067 16.46 Vested ( 103,366 ) 54.37 Canceled ( 54,344 ) 40.04 Outstanding at September 30, 2024 1,503,914 $ 37.71 As of September 30, 2024, the Company had unrecognized share-based compensation cost related to its restricted stock units of $ 22.2 million, which is expected to be recognized over a weighted-average period of 2.3 years. The Company capitalized $ 0.7 million and $ 0.5 million of share-based compensation cost during the three months ended September 30, 2024 and 2023, respectively, and $ 2.2 million and $ 1.5 million during the nine months ended September 30, 2024 and 2023, respectively, within property and equipment, net on its Condensed Consolidated Balance Sheets. -20- 13. Earnings Per Share The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Numerator for basic and diluted net income per common share: Net income attributable to common shareholders $ 21,120 $ 24,007 $ 71,364 $ 60,523 Net income available to participating securities (1) — ( 12 ) ( 9 ) ( 52 ) Net income available to common shareholders from operations $ 21,120 $ 23,995 $ 71,355 $ 60,471 Denominator: Weighted-average outstanding shares of common stock 19,300,283 19,627,188 19,256,739 19,708,991 Dilutive effect of: Equity incentive plans 138,490 12,649 60,478 15,744 Employee Stock Purchase Plan 3,357 8,018 4,057 6,030 Common stock and common stock equivalents 19,442,130 19,647,855 19,321,274 19,730,765 Net income per share from operations: Basic $ 1.09 $ 1.22 $ 3.71 $ 3.07 Diluted $ 1.09 $ 1.22 $ 3.69 $ 3.07 (1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid). For the three months ended September 30, 2024 and 2023, there were 1,005,413 and 836,655 anti-dilutive shares, respectively, that were excluded from the earnings per share calculation. For the nine months ended September 30, 2024 and 2023, there were 1,238,732 and 704,837 anti-dilutive shares, respectively, that were excluded from the earnings per share calculation. 14. Segment Information The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance. The CODM views the Company as one segment: Cloud Fax. 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. -21- The Company maintains operations in the U.S., Canada, Ireland and other countries. Geographic information about the U.S. and all other countries for the reporting periods is presented below. Such information attributes revenues based on markets where revenues are reported (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: United States $ 69,197 $ 71,724 $ 208,108 $ 217,606 Canada 13,440 13,091 39,813 39,043 Ireland 2,984 3,571 9,195 11,331 All other countries 2,132 2,176 6,283 6,828 Foreign countries 18,556 18,838 55,291 57,202 Total $ 87,753 $ 90,562 $ 263,399 $ 274,808 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): September 30, 2024 December 31, 2023 Long-lived assets: United States $ 102,784 $ 87,378 Canada 222 196 Ireland 189 250 All other countries 71 138 Foreign countries 482 584 Total $ 103,266 $ 87,962 15. Related Party Transactions In connection with the Separation, Consensus and Ziff Davis entered into a transition services agreement (“TSA”) following the Separation, which 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. The Company paid approximately $ 0.1 million and $ 0.1 million during the three months ended September 30, 2024 and 2023, respectively, and $ 0.3 million and $ 0.6 million, during the nine months ended September 30, 2024 and 2023, respectively, to Ziff Davis for costs primarily associated with the transition services agreement. Subsequent to the disposition of the shares, Ziff Davis’ beneficial ownership in the Company was zero as of September 30, 2024 (see Note 1 - Basis of Presentation). Amounts due to Ziff Davis as of September 30, 2024 and December 31, 2023 were zero and $ 0.1 million, respectively. These amounts are recorded within accounts payable and accrued expenses on the Condensed Consolidated Balance Sheets. 16. Subsequent Event In connection with the Company’s Debt Repurchase Program (see Note 7 - Long-Term Debt), the Company paid $ 9.2 million, which includes accrued interest, to repurchase $ 9.1 million in principal of its senior notes subsequent to the period ended September 30, 2024. -22-