QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
☒ | Smaller reporting company | ||||||||||
Emerging growth company |
Page | |||||||||||
March 31, 2022 | December 31, 2021 | ||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Intangibles, net | |||||||||||
Goodwill | |||||||||||
Deferred income taxes | |||||||||||
Other assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||
Accounts payable and accrued expenses | |||||||||||
Income taxes payable, current | |||||||||||
Deferred revenue, current | |||||||||||
Operating lease liabilities, current | |||||||||||
Due to Former Parent | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Deferred revenue, non-current | |||||||||||
Operating lease liabilities, non-current | |||||||||||
Liability for uncertain tax positions | |||||||||||
Deferred income taxes | |||||||||||
Other long-term liabilities | |||||||||||
TOTAL LIABILITIES | |||||||||||
Commitments and contingencies (Note 10) | |||||||||||
Common stock, $ | |||||||||||
Treasury stock, at cost ( | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
TOTAL STOCKHOLDERS’ DEFICIT | ( | ( | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Total revenues | $ | $ | |||||||||
Cost of revenues (1) | |||||||||||
Gross profit | |||||||||||
Operating expenses: | |||||||||||
Sales and marketing (1) | |||||||||||
Research, development and engineering (1) | |||||||||||
General and administrative (1) | |||||||||||
Total operating expenses | |||||||||||
Income from operations | |||||||||||
Interest expense | ( | ( | |||||||||
Interest income | |||||||||||
Other income, net | |||||||||||
Income before income taxes | |||||||||||
Income tax expense | |||||||||||
Income from continuing operations | |||||||||||
Income from discontinued operations, net of income taxes (1) | |||||||||||
Net income | $ | $ | |||||||||
Net income per common share from continuing operations: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ | |||||||||
Net income per common share from discontinued operations: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ | |||||||||
Net income per common share: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ | |||||||||
Weighted average shares outstanding: | |||||||||||
Basic | |||||||||||
Diluted | |||||||||||
(1) Includes share-based compensation expense as follows: | |||||||||||
Cost of revenues | $ | $ | |||||||||
Sales and marketing | |||||||||||
Research, development and engineering | |||||||||||
General and administrative | |||||||||||
Income from discontinued operations, net of income taxes | |||||||||||
Total | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Net income | $ | $ | |||||||||
Other comprehensive loss: | |||||||||||
Foreign currency translation adjustment | ( | ( | |||||||||
Other comprehensive loss | ( | ( | |||||||||
Comprehensive income | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Amortization of financing costs and discounts | |||||||||||
Non-cash operating lease costs | |||||||||||
Share-based compensation | |||||||||||
Provision for doubtful accounts | |||||||||||
Deferred income taxes, net | ( | ||||||||||
Lease asset impairments | |||||||||||
Gain on sale of businesses | ( | ||||||||||
Changes in fair value of contingent consideration | |||||||||||
Decrease (increase) in: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Other assets | ( | ||||||||||
Increase (decrease) in: | |||||||||||
Accounts payable and accrued expenses | ( | ||||||||||
Income taxes payable | ( | ||||||||||
Deferred revenue | |||||||||||
Operating lease liabilities | ( | ( | |||||||||
Liability for uncertain tax positions | |||||||||||
Other long-term liabilities | ( | ||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Acquisition of businesses, net of cash received | ( | ||||||||||
Proceeds from sale of businesses, net of cash divested | |||||||||||
Purchases of intangible assets | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Debt issuance costs | ( | ||||||||||
Acquired restricted stock | ( | ||||||||||
Deferred payments for acquisitions | ( | ||||||||||
Contribution from Parent | |||||||||||
Other | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
Net change in cash and cash equivalents | |||||||||||
Cash and cash equivalents at beginning of period | |||||||||||
Cash and cash equivalents at end of period | |||||||||||
Less cash and cash equivalents at end of period, discontinued operations | |||||||||||
Cash and cash equivalents at end of period, continuing operations | $ | $ |
Common stock | Additional paid-in | Treasury stock | Accumulated | Accumulated other comprehensive | Net parent | Total | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | Deficit | loss | investment | Equity | |||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2021 | $ | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Parent contribution | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | $ | $ | $ | $ | $ | ( | $ | $ |
Common stock | Additional paid-in | Treasury stock | Accumulated | Accumulated other comprehensive | Total | ||||||||||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | Deficit | loss | Equity | ||||||||||||||||||||||||||||||||||
Balance, January 1, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||
Repurchase of common stock | ( | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||
Treasury stock | — | — | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Reclassifications related to bonuses and other corporate accruals prior to the Separation (Note 1) | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Corporate | $ | $ | |||||||||
Small office home office (“SoHo”) | |||||||||||
Other | |||||||||||
Total revenues | $ | $ | |||||||||
Timing of revenue recognition | |||||||||||
Point in time | $ | $ | |||||||||
Over time | |||||||||||
Total | $ | $ |
Assets and Liabilities | Valuation | ||||
Accounts receivable | $ | ||||
Prepaid expenses and other current assets | |||||
Property and equipment | |||||
Operating lease right-of-use assets, noncurrent | |||||
Trademarks | |||||
Customer relationships | |||||
Goodwill | |||||
Other intangibles | |||||
Accounts payable and accrued expenses | ( | ||||
Deferred revenue | ( | ||||
Operating lease liabilities, noncurrent | ( | ||||
Total | $ |
Three Months Ended March 31, 2021 | |||||
Revenues | $ | ||||
Cost of revenues | |||||
Gross Profit | |||||
Operating expenses: | |||||
Sales and marketing | |||||
Research, development and engineering | |||||
General and administrative | |||||
Total operating expense | |||||
Income from discontinued operations | |||||
Interest expense | ( | ||||
Interest income | |||||
Gain on sale of businesses | |||||
Other income | |||||
Income from discontinued operations before income taxes | |||||
Income tax expense | |||||
Income from discontinued operations, net of income taxes | $ |
Three Months Ended March 31, 2021 | |||||
Depreciation and amortization | $ | ||||
Capital expenditure | |||||
Share-based compensation expense | |||||
Non-cash operating lease costs | |||||
Deferred income taxes, net | ( | ||||
Lease asset impairments and other charges | |||||
Gain on sale of businesses | $ | ( |
§ | 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. |
Amount | |||||
Balance as of January 1, 2022 | $ | ||||
Goodwill acquired (Note 4) | |||||
Foreign exchange translation | ( | ||||
Balance as of March 31, 2022 | $ |
March 31, 2022 | December 31, 2021 | ||||||||||
Trade names | $ | $ | |||||||||
Other | |||||||||||
Total | $ | $ |
Weighted-Average Amortization Period | Historical Cost | Accumulated Amortization | Net | ||||||||||||||||||||
Trade names | $ | $ | $ | ||||||||||||||||||||
Patent and patent licenses | |||||||||||||||||||||||
Customer relationships (1) | |||||||||||||||||||||||
Other purchased intangibles | |||||||||||||||||||||||
Total | $ | $ | $ |
Weighted-Average Amortization Period | Historical Cost | Accumulated Amortization | Net | ||||||||||||||||||||
Trade names | $ | $ | $ | ||||||||||||||||||||
Patent and patent licenses | |||||||||||||||||||||||
Customer relationships (1) | |||||||||||||||||||||||
Other purchased intangibles | |||||||||||||||||||||||
Total | $ | $ | $ |
Fiscal Year: | (in thousands) | ||||
2022 (Remainder) | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter | |||||
Total | $ | ||||
March 31, 2022 | December 31, 2021 | ||||||||||
2026 Senior Notes | $ | $ | |||||||||
2028 Senior Notes | |||||||||||
Total Notes | |||||||||||
Less: Deferred issuance costs | ( | ( | |||||||||
Total long-term debt | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Operating lease cost | $ | $ | |||||||||
Short-term lease cost | |||||||||||
Finance lease cost | |||||||||||
Amortization of right-of-use assets | |||||||||||
Total lease cost | $ | $ |
March 31, 2022 | December 31, 2021 | ||||||||||
Operating leases | |||||||||||
Operating lease right-of-use assets | $ | $ | |||||||||
Total operating lease right-of-use assets | $ | $ | |||||||||
Operating lease liabilities, current | $ | $ | |||||||||
Operating lease liabilities, noncurrent | |||||||||||
Total operating lease liabilities | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
Operating cash flows from operating leases | $ | $ | |||||||||
Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
Operating leases | $ | $ |
March 31, 2022 | December 31, 2021 | ||||||||||
Operating leases: | |||||||||||
Weighted average remaining lease term | |||||||||||
Weighted average discount rate | % | % |
Operating Leases | |||||
Fiscal Year: | |||||
2022 (remainder) | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter | |||||
Total lease payments | $ | ||||
Less: Imputed interest | |||||
Present value of operating lease liabilities | $ |
March 31, 2022 | |||||
Underlying stock price at valuation date | $ | ||||
Expected volatility | % | ||||
Risk-free interest rate | % |
Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
Nonvested at January 1, 2022 | $ | ||||||||||
Granted | |||||||||||
Vested | ( | ||||||||||
Canceled | |||||||||||
Nonvested at March 31, 2022 | $ |
Number of Shares | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||||
Outstanding at January 1, 2022 | |||||||||||||||||
Granted | |||||||||||||||||
Vested | ( | ||||||||||||||||
Canceled | ( | ||||||||||||||||
Outstanding at March 31, 2022 | $ | ||||||||||||||||
Vested and expected to vest at March 31, 2022 | $ |
March 31, 2022 | |||||
Risk-free interest rate | |||||
Expected term (in years) | |||||
Dividend yield | |||||
Expected volatility | |||||
Weighted average volatility |
Three Months Ended March 31, | |||||||||||
2022 | 2021 (1) | ||||||||||
Numerator for basic and diluted net income per common share: | |||||||||||
Net income from continuing operations attributable to common shareholders | $ | $ | |||||||||
Net income available to participating securities (2) | ( | ||||||||||
Net income available to common shareholders from continuing operations | $ | $ | |||||||||
Denominator: | |||||||||||
Weighted-average outstanding shares of common stock | |||||||||||
Dilutive effect of: | |||||||||||
Equity incentive plans | |||||||||||
Employee Stock Purchase Plan | |||||||||||
Common stock and common stock equivalents | |||||||||||
Net income per share from continuing operations: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Revenues: | |||||||||||
United States | $ | $ | |||||||||
Canada | |||||||||||
Ireland | |||||||||||
All other countries | |||||||||||
Foreign countries | |||||||||||
$ | $ |
March 31, 2022 | December 31, 2021 | ||||||||||
Long-lived assets: | |||||||||||
United States | $ | $ | |||||||||
Canada | |||||||||||
Ireland | |||||||||||
All other countries | |||||||||||
Foreign countries | |||||||||||
Total | $ | $ |
Foreign Currency Translation | |||||
Balance as of January 1, 2022 | $ | ( | |||
Other comprehensive loss | ( | ||||
Net increase in other comprehensive loss | ( | ||||
Balance as of March 31, 2022 | $ | ( |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Revenue ($ in thousands) | |||||||||||
Corporate | $ | 46,519 | $ | 41,154 | |||||||
Small office home office (“SoHo”) | 44,406 | 45,374 | |||||||||
90,925 | 86,528 | ||||||||||
Other Revenues | — | 92 | |||||||||
Consolidated | $ | 90,925 | $ | 86,620 | |||||||
Average Revenue per Customer Account (“ARPA) (1)(2) | |||||||||||
Corporate | $ | 339.94 | $ | 289.37 | |||||||
SoHo | 14.41 | 14.16 | |||||||||
Consolidated | $ | 28.25 | $ | 25.86 | |||||||
Customer Accounts (in thousands) (1) | |||||||||||
Corporate (5) | 46 | 47 | |||||||||
SoHo | 1,027 | 1,068 | |||||||||
Consolidated | 1,073 | 1,115 | |||||||||
Paid Adds (in thousands) (3) | |||||||||||
Corporate | 4 | 3 | |||||||||
SoHo | 100 | 113 | |||||||||
Consolidated | 104 | 116 | |||||||||
Monthly Churn % (4) | |||||||||||
Corporate | 2.05 | % | 1.87 | % | |||||||
SoHo | 3.50 | % | 3.51 | % | |||||||
Consolidated | 3.44 | % | 3.45 | % |
Three Months Ended March 31, | Percentage Change | ||||||||||||||||
2022 | 2021 | ||||||||||||||||
Revenues | $ | 90,925 | $ | 86,620 | 5% |
Three Months Ended March 31, | Percentage Change | ||||||||||||||||
2022 | 2021 | ||||||||||||||||
Cost of revenue | $ | 15,104 | $ | 13,970 | 8% | ||||||||||||
As a percent of revenue | 17% | 16% |
Three Months Ended March 31, | Percentage Change | ||||||||||||||||
2022 | 2021 | ||||||||||||||||
Sales and Marketing | $ | 15,830 | $ | 13,235 | 20% | ||||||||||||
As a percent of revenue | 17% | 15% |
Three Months Ended March 31, | Percentage Change | ||||||||||||||||
2022 | 2021 | ||||||||||||||||
Research, Development and Engineering | $ | 2,336 | $ | 1,676 | 39% | ||||||||||||
As a percent of revenue | 3% | 2% |
Three Months Ended March 31, | Percentage Change | ||||||||||||||||
2022 | 2021 | ||||||||||||||||
General and Administrative | $ | 18,806 | $ | 6,048 | 211% | ||||||||||||
As a percent of revenue | 21% | 7% |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Cost of revenues | $ | 223 | $ | 50 | |||||||
Operating expenses: | |||||||||||
Sales and marketing | 273 | 95 | |||||||||
Research, development and engineering | 356 | 102 | |||||||||
General and administrative | 4,361 | 136 | |||||||||
Continuing Operations | 5,213 | 383 | |||||||||
Income from discontinued operations | — | 1,108 | |||||||||
Total | $ | 5,213 | $ | 1,491 |
Payment Due by Period (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Contractual Obligations | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | |||||||||||||||||||||||||||||||||||||
Long-term debt - principal (a) | $ | — | $ | — | $ | — | $ | — | $ | 305,000 | $ | 500,000 | $ | 805,000 | ||||||||||||||||||||||||||||||
Long-term debt - interest (b) | 50,800 | 50,800 | 50,800 | 50,800 | 50,800 | 65,000 | 319,000 | |||||||||||||||||||||||||||||||||||||
Operating leases (c) | 2,082 | 2,602 | 2,561 | 2,389 | 2,461 | 10,697 | 22,792 | |||||||||||||||||||||||||||||||||||||
Telecom services and co-location facilities (d) | 810 | 251 | 5 | — | — | — | 1,066 | |||||||||||||||||||||||||||||||||||||
Holdback payment (e) | — | 750 | 750 | — | — | — | 1,500 | |||||||||||||||||||||||||||||||||||||
Other (f) | 315 | — | — | — | — | — | 315 | |||||||||||||||||||||||||||||||||||||
Total | $ | 54,007 | $ | 54,403 | $ | 54,116 | $ | 53,189 | $ | 358,261 | $ | 575,697 | $ | 1,149,673 |
Exhibit Number | Description | ||||
2.1* | Separation and Distribution Agreement, dated as of October 7, 2021, by and between Ziff Davis, Inc. and Consensus Cloud Solutions, Inc. (incorporated by reference to Ex. 2.1 to Consensus’ Current Report on Form 8-K filed with the Commission on October 8, 2021, File No. 001-40750). | ||||
3.1 | Amended and Restated Certificate of Incorporation of Consensus Cloud Solutions, Inc.(incorporated by reference to Ex. 3.1 to Consensus’ Current Report on Form 8-K filed with the Commission on October 8, 2021, File No. 001-40750). | ||||
3.2 | Amended and Restated Bylaws of Consensus Cloud Solutions, Inc.(incorporated by reference to Ex. 3.2 to Consensus’ Current Report on Form 8-K filed with the Commission on October 8, 2021, File No. 001-40750). | ||||
31.1* | |||||
31.2* | |||||
32.1** | |||||
101 | The following financial information from Consensus Cloud Solutions, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021, (ii) Condensed Consolidated Statements of Income for the three months ended March 31, 2022 and 2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021, (v) Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2022 and 2021, and (vi) the Notes to Condensed Consolidated Financial Statements. | ||||
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
* Filed herewith ** Furnished herewith |
Consensus Cloud Solutions, Inc. | |||||||||||
Date: | May 16, 2022 | By: | /s/ R. SCOTT TURICCHI | ||||||||
R. Scott Turicchi | |||||||||||
Chief Executive Officer, Interim Chief Financial Officer and Director | |||||||||||
(Principal Executive Officer) | |||||||||||
Date: | May 16, 2022 | By: | /s/ JAMES C. MALONE | ||||||||
James C. Malone | |||||||||||
Chief Financial Officer | |||||||||||
(Principal Financial and Accounting Officer) | |||||||||||
Dated: | May 16, 2022 | /s/ R. SCOTT TURICCHI | |||||||||
R. Scott Turicchi | |||||||||||
Chief Executive Officer, Interim Chief Financial Officer and Director | |||||||||||
(Principal Executive Officer) |
/s/ JAMES C. MALONE | ||||||||
James C. Malone | ||||||||
Dated: | May 16, 2022 | Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ R. SCOTT TURICCHI | |||||||||||
R. Scott Turicchi | |||||||||||
Dated: | May 16, 2022 | Chief Executive Officer, Interim Chief Financial Officer and Director (Principal Executive Officer) |
Dated: | May 16, 2022 | /s/ JAMES C. MALONE | ||||||
James C. Malone | ||||||||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 3,988 | $ 4,743 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 120,000,000 | 120,000,000 |
Common stock, shares issued (in shares) | 19,995,528 | 19,978,580 |
Common stock, shares outstanding (in shares) | 19,995,528 | 19,978,580 |
Treasury stock (in shares) | 19,922 | 0 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Share-based compensation expense | $ 5,213 | $ 1,491 |
Cost of revenues | ||
Share-based compensation expense | 223 | 50 |
Sales and marketing | ||
Share-based compensation expense | 273 | 95 |
Research, development and engineering | ||
Share-based compensation expense | 356 | 102 |
General and administrative | ||
Share-based compensation expense | 4,361 | 136 |
Income from discontinued operations | ||
Share-based compensation expense | $ 0 | $ 1,108 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 18,706 | $ 47,362 |
Other comprehensive loss: | ||
Foreign currency translation adjustment | (2,117) | (7,708) |
Other comprehensive loss | (2,117) | (7,708) |
Comprehensive income | $ 16,589 | $ 39,654 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Cash flows from operating activities: | ||
Net income | $ 18,706 | $ 47,362 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,706 | 17,046 |
Amortization of financing costs and discounts | 461 | 0 |
Non-cash operating lease costs | 447 | 1,955 |
Share-based compensation | 5,213 | 1,491 |
Provision for doubtful accounts | 2,045 | 1,607 |
Deferred income taxes, net | (1,310) | 190 |
Lease asset impairments | 0 | 561 |
Gain on sale of businesses | 0 | (1,979) |
Changes in fair value of contingent consideration | 0 | 648 |
Decrease (increase) in: | ||
Accounts receivable | (4,585) | (5,446) |
Prepaid expenses and other current assets | (494) | (2,266) |
Other assets | (433) | 1,280 |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | 14,799 | (3,722) |
Income taxes payable | 4,781 | (184) |
Deferred revenue | 1,886 | 2,828 |
Operating lease liabilities | (459) | (1,869) |
Liability for uncertain tax positions | 0 | 1,147 |
Other long-term liabilities | 5,145 | (723) |
Net cash provided by operating activities | 49,908 | 59,926 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (6,915) | (7,472) |
Acquisition of businesses, net of cash received | (12,855) | 0 |
Proceeds from sale of businesses, net of cash divested | 0 | 5,999 |
Purchases of intangible assets | (1,000) | 0 |
Net cash used in investing activities | (20,770) | (1,473) |
Cash flows from financing activities: | ||
Debt issuance costs | (232) | 0 |
Acquired restricted stock | (1,173) | 0 |
Deferred payments for acquisitions | 0 | (1,583) |
Contribution from Parent | 0 | 12,306 |
Other | 0 | (142) |
Net cash provided by (used in) financing activities | (1,405) | 10,581 |
Effect of exchange rate changes on cash and cash equivalents | (647) | (562) |
Net change in cash and cash equivalents | 27,086 | 68,472 |
Cash and cash equivalents at beginning of period | 66,778 | 128,189 |
Cash and cash equivalents at end of period | 93,864 | 196,661 |
Less cash and cash equivalents at end of period, discontinued operations | 0 | 46,986 |
Cash and cash equivalents at end of period, continuing operations | $ 93,864 | $ 149,675 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY - USD ($) $ in Thousands |
Total |
Common stock |
Additional paid-in capital |
Treasury stock |
Accumulated Deficit |
Accumulated other comprehensive loss |
Net parent investment |
---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2020 | 0 | 0 | |||||
Beginning balance at Dec. 31, 2020 | $ 1,122,542 | $ 0 | $ 0 | $ 0 | $ 0 | $ (55,966) | $ 1,178,508 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 47,362 | 47,362 | |||||
Other comprehensive loss, net of tax | (7,708) | (7,708) | |||||
Share-based compensation | 1,491 | 1,491 | |||||
Parent contribution | 12,306 | 12,306 | |||||
Ending balance (in shares) at Mar. 31, 2021 | 0 | 0 | |||||
Ending balance at Mar. 31, 2021 | 1,175,993 | $ 0 | 0 | $ 0 | 0 | (63,674) | $ 1,239,667 |
Beginning balance (in shares) at Dec. 31, 2021 | 19,978,580 | 0 | |||||
Beginning balance at Dec. 31, 2021 | (332,665) | $ 200 | 2,878 | $ 0 | (318,886) | (16,857) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 18,706 | 18,706 | |||||
Other comprehensive loss, net of tax | $ (2,117) | (2,117) | |||||
Repurchase of common stock (in shares) | 0 | (19,922) | |||||
Repurchase of common stock | $ (1,173) | (1,173) | |||||
Treasury stock (in shares) | 19,922 | (19,922) | |||||
Share-based compensation (in shares) | 36,870 | ||||||
Share-based compensation | 5,213 | 5,213 | |||||
Reclassifications related to bonuses and other corporate accruals prior to the Separation | (1,888) | (1,888) | |||||
Ending balance (in shares) at Mar. 31, 2022 | 20,015,450 | 0 | |||||
Ending balance at Mar. 31, 2022 | $ (313,924) | $ 200 | $ 6,918 | $ 0 | $ (302,068) | $ (18,974) |
Basis of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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 more than one million customers of all sizes, from enterprises to individuals, across over 50 countries and multiple industry verticals including healthcare, financial services, law and education. 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 previously announced separation of the cloud fax business (the “Separation”), 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 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. 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 consolidated financial statements of Consensus for periods prior to the completion of the Separation are those of J2 Cloud Services, which were derived from the interim condensed consolidated financial statements of Ziff Davis on a carve-out basis using the historical assets, liabilities, and results of operations attributable to the legal entities and business units which comprised historical J2 Cloud Services. J2 Cloud Services was a wholly-owned subsidiary of Ziff Davis, and together with its subsidiaries, was a provider of internet services, including cloud-based subscription services to consumers and businesses including cloud fax, voice, cybersecurity, privacy and marketing technology. For periods prior to the Separation, the interim condensed consolidated financial statements Consensus included an allocation of certain corporate expenses related to services provided to J2 Cloud Services by Ziff Davis. These expenses included the cost of executive management, information technology, legal, treasury, risk management, human resources, accounting and financial reporting, investor relations, public relations, and internal audit services provided by the Former Parent company personnel to J2 Cloud Services. The cost of these services had been allocated to J2 Cloud Services based on specific identification when possible or, when the expenses were determined to be global in nature, based on the percentage of J2 Cloud Services’ relative revenue to total Ziff Davis revenue for the periods presented. Management believes that these allocations were reasonable representations of the costs incurred for the services provided; however, these allocations may not be indicative of the actual expenses that would have been incurred by J2 Cloud Services had it been operating as an independent company for the periods presented. Interest expense relates to interest incurred on third-party debt issued by historical J2 Cloud Services. No interest expense incurred by Ziff Davis was allocated to J2 Cloud Services as Ziff Davis’ third-party debt was not specifically related to historical operations of J2 Cloud Services. As the Cloud Fax business was not historically held by a single legal entity, “net parent investment” is shown to represent Ziff Davis’ interest in the recorded net assets of historical J2 Cloud Services. Other comprehensive income or loss attributable to J2 Cloud Services is presented as a separate component of equity. The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements although the Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of these interim financial statements have been reflected. It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, included in our Annual Report (Form 10-K) filed with the SEC on April 15, 2022. 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 net revenue and expenses during the reporting period. The Company believes that its most significant estimates are those related to revenue recognition, share-based compensation expense, fair value of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, lease impairment, contingent consideration, income taxes, sales taxes, contingencies and allowances for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors that the Company believes to be reasonable under the circumstances. Actual results could materially differ from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the novel coronavirus pandemic (“COVID-19”). Discontinued Operations The accounting requirements for reporting the Company’s non-fax business as a discontinued operation were met when the Separation was completed. Accordingly, the Condensed Consolidated Statements of Income reflect the results of the non-fax business as a discontinued operation for the prior period presented (see Note 5 - Discontinued Operations and Disposition of Business). Allowances for Doubtful Accounts The Company maintains an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Income. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status. 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. Revenue Recognition The Company recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues). Principal vs. Agent The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”), for principal-agent considerations and assesses: (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. Sales Taxes 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. Impairment or Disposal of Long-Lived 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. Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset. If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference. 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: •Significant underperformance relative to expected historical or projected future operating results; •Significant changes in the manner of our use of the acquired assets or the strategy for J2 Cloud Services overall business; and •Significant negative industry or economic trends; •Significant decline in the Company’s stock price for a sustained period; and •The Company’s market capitalization relative to net book value. If the Company determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, it would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value. The Company assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of long-lived assets may not be recoverable. No impairment was recorded in the first quarter of 2022. In the first quarter of 2021, the Company recorded impairment of certain operating right-of-use assets (see Note 9 - Leases). 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. 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. Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions. The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 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. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from 1 to 20 years and are included in general and administrative expenses on the Condensed Consolidated Statements of Income. The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if the Company believes indicators of impairment exist. In connection with the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test upon goodwill. The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference. No impairment was recorded in the first quarter of 2022 and 2021. 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 Condensed Consolidated Statement of Income prior to the Separation, the Company’s taxes were determined using the separate return method as if the Company had filed separate tax returns as a C-Corporation. In addition, J2 Cloud Services’ income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company’s income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. 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 limitations. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate (see Note 11 - Income Taxes). The Company accounts for income taxes in accordance with FASB ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized. The valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuation allowance, the Company reviews historical and future expected operating results and other factors, including its recent cumulative earnings experience, expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is more likely than not that deferred tax assets are realizable. ASC 740 provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in the financial statements and applies to all income tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuring uncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Company recognized accrued interest and penalties related to uncertain income tax positions in income tax expense on its Condensed Consolidated Statements of Income. 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. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property. The Company does not believe these provisions have a significant impact to our current and deferred income tax balances. The Company will benefit from the technical correction to tax depreciation related to qualified improvement property and has elected to defer income tax payments and employer side social security payments where eligible. 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. 718, Compensation - Stock Compensation (“ASC 718”). 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. These inputs are subjective and are determined using management’s judgment. If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, Consensus may change the input factors used in determining future share-based compensation expense. Any such changes could materially impact the Company’s results of operations in the period in which the changes are made and in periods thereafter. The Company estimates the expected term based upon the historical exercise behavior of the Company’s employees (see Note 12 - Equity Incentive and Employee Stock Purchase Plan). Earnings Per Common Share (“EPS”) EPS is calculated pursuant to the two-class method as defined in ASC Topic No. 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. Basic EPS is calculated by dividing net distributed and undistributed earnings allocated to common shareholders, excluding participating securities, by the weighted-average number of common shares outstanding. The Company’s participating securities consist of its unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents. 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. Segment Reporting 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 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 15 - Segment Information). Reclassifications to correct prior period errors In the first quarter of 2022, the Company identified certain errors related to executive bonuses and other corporate charges incurred prior to the Separation that were incorrectly treated as equity contributions at the time of the Spin-off rather than liabilities. The Company recorded a reclassification of $1.9 million from equity to accrued expenses and due to Former Parent to correct the prior period errors on the balance sheet. The Company determined that the impact of this reclassification was not material to the current or prior period financial statements.
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Recent Accounting Pronouncements |
3 Months Ended |
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Mar. 31, 2022 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The accommodations are available for all entities through December 31, 2022, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments and reduce complexity. In addition, it amends the guidance for scope exception surrounding derivatives for contracts in an entity’s own equity. In each case, the related guidance surrounding EPS has also been amended. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company does not expect the adoption of this standard to have an impact on the Company’s consolidated financial statements and related disclosures. In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this ASU improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability, and payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, including the interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.
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Revenues |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | Revenues The Company’s revenues substantially consist of monthly recurring subscription and usage-based fees, the majority of which are paid in advance by credit card. The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned. Revenues from external customers classified by revenue source are as follows (in thousands):
The Company has recorded $10.9 million and $12.3 million of revenue for the three months ended March 31, 2022 and 2021, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year. As of March 31, 2022 and December 31, 2021, the Company acquired $2.6 million and zero, respectively, of deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments. Performance Obligations The Company’s contracts with customers may include multiple performance obligations. For such arrangements, revenues are allocated to each performance obligation based on its relative standalone selling price. The Company satisfies its performance obligations upon delivery of services to its customers. Payment terms vary by type and location of the Company’s customers and the services offered. The term between invoicing and when payment is due is not significant. Due to the nature of the services provided, there are no obligations for returns. Significant Judgments In determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is also required to determine the standalone selling price for each distinct performance obligation. Performance Obligations Satisfied Over Time The Company’s business consists primarily of performance obligations that are satisfied over time. This has been determined based on the fact that the nature of services offered are subscription based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when faxing capabilities are provided. 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 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 that the Company provides to its customers are structured primarily for reasons other than the provision of finance to the Company. The Company typically charges a single upfront amount for the services because other payment terms would affect the nature of the risk assumed by the Company to provide service given the costs of the customer acquisition and the highly competitive and commoditized nature of the business Consensus operates which allows customers to easily move from one provider to another. This additional risk may make it uneconomical to provide the service. 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 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. 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.
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Business Acquisitions |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisitions | Business Acquisitions On February 4, 2022, in a cash transaction, the Company acquired certain assets of Summit Healthcare Services, Inc., a Massachusetts based provider of secure interoperability solutions within the healthcare industry for a total consideration of $15.0 million. The Condensed Consolidated Statement of Income since the date of acquisition and balance sheet as of March 31, 2022, reflect the results of operations of this 2022 acquisition. For the three months ended March 31, 2022, this acquisition contributed $0.8 million to the Company’s revenues. Net income contributed by this acquisition was not separately identifiable due to the Company’s integration activities and is not material. Total consideration for this transaction was $14.4 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid. The following table summarizes the allocation of the purchase consideration for this acquisition (in thousands):
The initial accounting for the Summit acquisition is incomplete due to timing of available information and is subject to change. The Company has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital, and related tax items. The Company expects to finalize the accounting for the Summit acquisition within twelve months of the acquisition date. 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 three months ended March 31, 2022 is $5.5 million, of which $5.5 million is expected to be deductible for income tax purposes.
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Discontinued Operations and Disposition of Businesses |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposition of Businesses | 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. 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 will have a major effect on the Company’s operations relative to the historical operations of J2 Cloud Services. Accordingly, the condensed consolidated financial statements reflect the results of the non-fax business as a discontinued operation for all periods presented. The Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income report discontinued operations separate from continuing operations. The Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Stockholders’ Equity combine continuing and discontinued operations. The Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders’ Equity include the non-fax business activity through October 7, 2021. The key components of income from discontinued operations that were included in the Company’s Condensed Consolidated Statement of Income are as follows (in thousands):
The key components of cash flows from discontinued operations are as follows (in thousands):
Prior to the Separation, the Company completed the following dispositions that did not meet the criteria for discontinued operations by themselves but were subsequently classified as discontinued operations as they are part of the non-fax business transferred back to the Former Parent. Voice Asset Sales (Non-Consensus) During the first quarter of 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets. On February 9, 2021, in a cash transaction, the Company sold the Voice assets for a gain of $2.0 million which was recorded in discontinued operations on the Condensed Consolidated Statement of Income for the three months ended March 31, 2021.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The Company complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. 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:
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 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 8 - Long-Term Debt).
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | 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. 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 are not accurate, then the resulting change will impact the fair value of the intangible asset. Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from 1 year to 20 years. In the three months ended March 31, 2022, the Company acquired technology for jSign, a corporate solution that provides electronic signature and digital signature solutions to businesses, offering document markup and end-user signing services via mobile-aware web application and enterprise API. The purchase price was $1.0 million and the asset is included in Other Purchased Intangibles on the Condensed Consolidated Balance Sheet. The changes in carrying amounts of goodwill for the three months ended March 31, 2022 are as follows (in thousands):
Intangible Assets with Indefinite Lives: Intangible assets are summarized as of March 31, 2022 and December 31, 2021 as follows (in thousands):
Intangible Assets Subject to Amortization: As of March 31, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):
(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 to five years, despite the overall life of the asset. As of December 31, 2021, intangible assets subject to amortization relate primarily to the following (in thousands):
(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 to five years, despite the overall life of the asset. Estimated amortization expense for the remainder of fiscal year 2022 and succeeding years is as follows:
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Debt |
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Long-term debt as of March 31, 2022 and December 31, 2021 consists of the following (in thousands):
Interest expense was $13.3 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively. 2026 Senior Notes On October 7, 2021, Consensus issued $305.0 million of senior notes due in 2026 (the “2026 Senior Notes”), in a private placement offering exempt from the registration requirements of the Securities Act of 1933. Consensus received proceeds of $301.2 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 2026 6.0% Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Condensed Consolidated Balance Sheet as of March 31, 2022. The 2026 Senior Notes bear interest at a rate of 6.0% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2022. The 2026 Senior Notes mature on October 15, 2026, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”). If Consensus Cloud Solutions, Inc. 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 2026 Senior Notes were issued (the “2026 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 2026 Senior Notes. The Company may redeem some or all of the 2026 Senior Notes at any time on or after October 15, 2023 at specified redemption prices plus accrued and unpaid interest, if any, to, but excluding the redemption date. Before October 15, 2023, and following certain equity offerings, the Company also may redeem up to 40% of the 2026 Senior Notes at a price equal to 106.0% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding the redemption date. The Company may make such redemption only if, after such redemption, at least 50% of the aggregate principal amount of the 2026 Senior Notes remains outstanding. In addition, at any time prior to October 15, 2023, the Company may redeem some or all of the 2026 Senior Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium. The Indenture 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 March 31, 2022. As of March 31, 2022 and December 31, 2021, the estimated fair value of the 2026 Senior Notes was approximately $302.7 million and $316.1 million, respectively, and was based on quoted market prices or dealer quotes for the 2026 Senior Notes which are Level 1 inputs in the fair value hierarchy. 2028 Senior Notes On October 7, 2021, Consensus issued $500.0 million of 6.5% senior notes due in 2028 (the “2028 Senior Notes”), in a private placement offering exempt from the registration requirements of the Securities Act of 1933. In exchange for the equity interest in the Company, Consensus issued the 2028 Senior Notes to Ziff Davis (see Note 15 - Related Party Transactions). Ziff Davis then exchanged the 2028 Senior Notes with lenders under its credit agreement (or their affiliates) in exchange for extinguishment of a similar amount indebtedness under such credit agreement for a total amount of $483.8 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 2028 Senior Notes were presented as long-term debt, net of deferred issuance costs, on the Condensed Consolidated Balance Sheet as of March 31, 2022. The 2028 Senior Notes bear interest at a rate of 6.5% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2022. The 2028 Senior Notes mature on October 15, 2028, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”). If Consensus Cloud Solutions, Inc. 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. The Indenture 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 March 31, 2022. As of March 31, 2022 and December 31, 2021, the estimated fair value of the 2028 Senior Notes was approximately $495.6 million and $521.2 million, respectively, and was based on quoted market prices or dealer quotes for the 2028 Senior Notes which are Level 1 inputs in the fair value hierarchy. 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 MUFG has provided Consensus with a senior secured revolving credit facility of $25.0 million (the “Credit Facility”). The final maturity of the Credit Facility will occur on March 4, 2027. As of March 31, 2022, no amount has been drawn down on the Credit Facility. The Credit Facility is guaranteed by each wholly-owned material domestic subsidiary of Consensus, and secured by substantially all assets of Consensus and the guarantors. The loans made under the Credit Facility are subject to a Secured Overnight Financing Rate (“SOFR”) based interest rate between 1.75% - 2.50%, with stepdowns subject to the total net leverage ratio. The 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 March 31, 2022.
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases 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 to five years and generally provide renewal options for terms up to an additional five years. In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement. The components of lease expense were as follows (in thousands):
Supplemental balance sheet information related to leases was as follows (in thousands):
(1) Included in “Other assets” in the Consolidated Balance Sheet. The full amount of the finance leases were prepaid. Therefore, there is no corresponding lease liability associated with the finance right-of-use assets. Supplemental cash flow information related to leases was as follows (in thousands):
Other supplemental operating lease information consists of the following:
Maturities of operating lease liabilities as of March 31, 2022 were as follows (in thousands):
Significant Judgments 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. Options The lease term is generally the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs. 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 regard to the lease which 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. The Amendment granted the Landlord’s consent to the assignment of the Lease by the Assignor to Assignee.
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Leases | Leases 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 to five years and generally provide renewal options for terms up to an additional five years. In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement. The components of lease expense were as follows (in thousands):
Supplemental balance sheet information related to leases was as follows (in thousands):
(1) Included in “Other assets” in the Consolidated Balance Sheet. The full amount of the finance leases were prepaid. Therefore, there is no corresponding lease liability associated with the finance right-of-use assets. Supplemental cash flow information related to leases was as follows (in thousands):
Other supplemental operating lease information consists of the following:
Maturities of operating lease liabilities as of March 31, 2022 were as follows (in thousands):
Significant Judgments 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. Options The lease term is generally the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs. 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 regard to the lease which 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. The Amendment granted the Landlord’s consent to the assignment of the Lease by the Assignor to Assignee.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 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 as incurred legal fees related to any litigation. Non-Income Related Taxes The Company has not historically withheld sales tax in states where it was not able to quantify the appropriate sales tax to be withheld. The Company believes it is probable that sales tax liability exists for its corporate accounts for the periods 2017 through 2021. However, the Company is currently unable to determine which of these customers are either exempt organizations or resellers and are thus exempt from sales tax. Therefore it cannot estimate the sales tax liability for these corporate customers. The Company is currently analyzing the pool of corporate customers subject to sales tax in order to estimate the liability and will record an accrual when the exposure is estimable. The Company currently cannot estimate the range of sales tax liability for corporate customers. In the year ended December 31, 2021, the Company determined that a sales tax liability is probable and it developed a methodology to estimate the liability for the sales tax for the SoHo revenue stream during the affected periods 2017 through 2021. The Company has taken the same approach in estimating the liability for the three months ended March 31, 2022. Accordingly, the Company has recorded a sales tax expense in three months ended March 31, 2022 and 2021 of $0.8 million and zero, respectively, for the period, net of federal income tax benefit of $0.2 million.
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Income Taxes |
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Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Historically, we were included in the federal consolidated and state combined income tax returns with the Former Parent and its other subsidiaries. For purposes of the prior period condensed consolidated financial statements, the Company’s taxes were determined using the separate return method as if the Company had filed separate tax returns as a C-Corporation. Accordingly, income tax amounts computed under this method (including deferred taxes and net operating loss carryforwards) may differ from amounts included in the Parent’s historical consolidated provision. Pursuant to the terms of the Separation, any tax liabilities with respect to Discontinued Operations remains the responsibility of the Former Parent. 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. The Company’s effective tax rate was 27.4% and 24.3% for the three months ended March 31, 2022 and 2021, respectively. The Company’s increased rate during the three months ended March 31, 2022 is primarily due to certain compensation not being deductible for tax. Income before income taxes included income from domestic operations of $0.8 million and $29.4 million for the three months ended March 31, 2022 and 2021, respectively, and income from foreign operations of $24.9 million and $22.4 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and December 31, 2021, the Company had $4.8 million and $4.8 million, respectively, in liabilities for uncertain income tax positions. Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company’s Condensed Consolidated Statements of Income. Cash paid for income taxes net of refunds received was $3.6 million and $1.2 million for the three months ended March 31, 2022 and 2021, respectively. Certain taxes are prepaid during the year and, where appropriate, included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet. The Company’s prepaid tax payments were zero at March 31, 2022 and December 31, 2021, respectively. Income Tax Audits: The Company files tax returns in the US, Ireland, Netherlands, France, Canada, Japan and Hong Kong. As of March 31, 2022, the Company is not under audit in any jurisdiction that it operates within. The Company has not filed any tax returns for the post spin periods, however it does have some international subsidiaries who have previously filed tax returns in their local jurisdictions. In respect to these international subsidiaries, tax returns filed for the years from 2018 onwards are still open to examination by tax authorities
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Stockholders' Equity |
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Mar. 31, 2022 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity 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 worth 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. During the first quarter of 2022, the Company entered into Rule 10b-18 and Rule 10b5-1 trading plans and during the three months ended March 31, 2022, the Company repurchased zero shares under these program. Periodically, participants in the Consensus’ Equity Incentive Plan surrender to the Company shares of the Company’s stock to satisfy tax withholding obligations arising upon the vesting of restricted stock. During the three months ended March 31, 2022, participants surrendered to the Company 19,922 shares from plan participants for this purpose at an aggregate cost of $1.2 million. Dividends |
Equity Incentive and Employee Stock Purchase Plan |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Incentive and Employee Stock Purchase Plan | Equity Incentive and Employee Stock Purchase Plan The Company’s share-based compensation plans include the 2021 Equity Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (the “Purchase Plan”). Each plan is described below. (a) 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. 4,000,000 shares of common stock are authorized to be used for 2021 Plan purposes. Restricted Stock and Restricted Stock Units The Company has awarded restricted stock and restricted stock units to its Board of Directors and staff pursuant to the 2021 Plan. Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period. Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, four years for staff and five years for the Chief Executive Officer and Chief Operating Officer (excluding market-based awards discussed below). The Company granted 26,612 shares of restricted stock and restricted stock units (excluding awards with market conditions below) during the three months ended March 31, 2022. Restricted Stock Awards with Market Conditions The Company has awarded certain key employees market-based restricted stock awards pursuant to the 2021 Plan. The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock. Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving specified stock price targets over 30 (trading days). Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method unless the market condition has been met and requisite service period has been completed, then the expense will be accelerated and recognized in period. During the three months ended March 31, 2022, the Company awarded 5,091 market-based restricted stock awards. The per share weighted average grant-date fair value of the market-based restricted stock awards granted during the three months ended March 31, 2022 were $47.54, as determined by the valuation. Notwithstanding the valuation, all market-based stock awards are issued at the market value at the close of business on the date the grant is awarded. The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:
Restricted stock award activity for the three months ended March 31, 2022 is set forth below:
Restricted stock unit activity for the three months ended March 31, 2022 is set forth below:
As of March 31, 2022, the Company had unrecognized share-based compensation cost of $44.5 million associated with these awards. This cost of $1.1 million for awards and $43.3 million for units is expected to be recognized over a weighted-average period of 1.3 years and 5.2 years, respectively. (b) Employee Stock Purchase Plan In October 2021, Consensus established the Purchase Plan, which provides the issuance of a maximum of 1,000,000 shares of common stock. Under the Purchase Plan, eligible employees can have up to 15% of their earnings withheld, up to certain maximums, to be used to purchase shares of Consensus’ common stock at certain plan-defined dates. The purchase price for each offering period is 85% of the lesser of the fair market value of a share of common stock of the Company on the beginning or the end of the offering period, with each offering period being six months. The Company determined that a plan provision exists 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 Purchase Plan to be compensatory and the Company to recognize compensation expense. The compensation cost is recognized on a straight-line basis over the requisite service period. The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the ESPP. The expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is 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 Company uses an annualized dividend yield based upon the per share dividends declared by the Company’s Board of Directors. Estimated forfeiture rates were 10.34% as of March 31, 2022. For the three months ended March 31, 2022, zero shares were purchased under the Purchase Plan. Cash received upon the issuance of Consensus common stock under the Purchase Plan was zero for the three months ended March 31, 2022. As of March 31, 2022, 989,579 shares were available under the Purchase Plan for future issuance. The compensation expense related to the Purchase Plan has been estimated utilizing the following assumptions:
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):
(1) On October 7, 2021, the separation of Consensus into an independent publicly traded company was completed. The Former Parent distributed 19,902,924 shares of Consensus common stock to holders of J2 Global common stock as of the close of business on October 1, 2021, the record date for the distribution. This share amount was utilized for the computation of basic and diluted earnings per share for the three months ended March 31, 2021 because the number of shares issued simply reflect a recharacterization of the capital account previously held by the former parent. (2) 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 March 31, 2022, 495,010 anti-dilutive shares were excluded from the earnings per share calculation.
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 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 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 accounting policies of the businesses are the same as those described in Note 1 - Basis of Presentation. The Company evaluates performance based on revenue, gross margin and profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses. 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).
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Accumulated Other Comprehensive Loss |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The following table summarizes the changes in accumulated balances of other comprehensive loss, which solely comprises of foreign currency translation adjustments, for the three months ended March 31, 2022 (in thousands):
There were zero reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2022.
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Related Party Transactions |
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Mar. 31, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party TransactionsIn 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, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a stockholder and registration rights agreement (the “Agreements”). The transition services agreement governs services including certain information technology services, finance and accounting services and human resource and employee benefit services. The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services and are expected to terminate no later than twelve months following the Separation. Further, as noted in Note 9, Ziff Davis assigned its lease of office space in Los Angeles, California to Consensus. Ziff Davis and Consensus will have joint liability under the lease through October 7, 2022, after which time the Company will be the sole lessee under the lease. Amounts due to Ziff Davis as of March 31, 2022 and December 31, 2021 was $11.7 million and $5.7 million, respectively, related to these items, as well as reimbursement related to certain transaction related costs. |
Basis of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | 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.
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Basis of Presentation | Basis of Presentation The consolidated financial statements of Consensus for periods prior to the completion of the Separation are those of J2 Cloud Services, which were derived from the interim condensed consolidated financial statements of Ziff Davis on a carve-out basis using the historical assets, liabilities, and results of operations attributable to the legal entities and business units which comprised historical J2 Cloud Services. J2 Cloud Services was a wholly-owned subsidiary of Ziff Davis, and together with its subsidiaries, was a provider of internet services, including cloud-based subscription services to consumers and businesses including cloud fax, voice, cybersecurity, privacy and marketing technology. For periods prior to the Separation, the interim condensed consolidated financial statements Consensus included an allocation of certain corporate expenses related to services provided to J2 Cloud Services by Ziff Davis. These expenses included the cost of executive management, information technology, legal, treasury, risk management, human resources, accounting and financial reporting, investor relations, public relations, and internal audit services provided by the Former Parent company personnel to J2 Cloud Services. The cost of these services had been allocated to J2 Cloud Services based on specific identification when possible or, when the expenses were determined to be global in nature, based on the percentage of J2 Cloud Services’ relative revenue to total Ziff Davis revenue for the periods presented. Management believes that these allocations were reasonable representations of the costs incurred for the services provided; however, these allocations may not be indicative of the actual expenses that would have been incurred by J2 Cloud Services had it been operating as an independent company for the periods presented. Interest expense relates to interest incurred on third-party debt issued by historical J2 Cloud Services. No interest expense incurred by Ziff Davis was allocated to J2 Cloud Services as Ziff Davis’ third-party debt was not specifically related to historical operations of J2 Cloud Services. As the Cloud Fax business was not historically held by a single legal entity, “net parent investment” is shown to represent Ziff Davis’ interest in the recorded net assets of historical J2 Cloud Services. Other comprehensive income or loss attributable to J2 Cloud Services is presented as a separate component of equity. The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements although the Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of these interim financial statements have been reflected. It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, included in our Annual Report (Form 10-K) filed with the SEC on April 15, 2022. 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.
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Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about the reported amounts of net revenue and expenses during the reporting period. The Company believes that its most significant estimates are those related to revenue recognition, share-based compensation expense, fair value of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, lease impairment, contingent consideration, income taxes, sales taxes, contingencies and allowances for doubtful accounts. 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”).
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Discontinued Operations | Discontinued OperationsThe accounting requirements for reporting the Company’s non-fax business as a discontinued operation were met when the Separation was completed. Accordingly, the Condensed Consolidated Statements of Income reflect the results of the non-fax business as a discontinued operation for the prior period presented (see Note 5 - Discontinued Operations and Disposition of Business). | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowances for Doubtful Accounts | Allowances for Doubtful Accounts The Company maintains an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Income. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status. 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.
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Revenue Recognition | Revenue Recognition The Company recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues). Principal vs. Agent The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Accounting Standards Codification 606, Revenue from Contracts with Customers (“Topic 606”), for principal-agent considerations and assesses: (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. Sales Taxes 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. The Company’s revenues substantially consist of monthly recurring subscription and usage-based fees, the majority of which are paid in advance by credit card. The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.Performance Obligations The Company’s contracts with customers may include multiple performance obligations. For such arrangements, revenues are allocated to each performance obligation based on its relative standalone selling price. The Company satisfies its performance obligations upon delivery of services to its customers. Payment terms vary by type and location of the Company’s customers and the services offered. The term between invoicing and when payment is due is not significant. Due to the nature of the services provided, there are no obligations for returns. Significant Judgments In determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is also required to determine the standalone selling price for each distinct performance obligation. Performance Obligations Satisfied Over Time The Company’s business consists primarily of performance obligations that are satisfied over time. This has been determined based on the fact that the nature of services offered are subscription based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when faxing capabilities are provided. 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 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 that the Company provides to its customers are structured primarily for reasons other than the provision of finance to the Company. The Company typically charges a single upfront amount for the services because other payment terms would affect the nature of the risk assumed by the Company to provide service given the costs of the customer acquisition and the highly competitive and commoditized nature of the business Consensus operates which allows customers to easily move from one provider to another. This additional risk may make it uneconomical to provide the service. 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 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. 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.
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Impairment or Disposal of Long-Lived Assets | Impairment or Disposal of Long-Lived 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. Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset. If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference. 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: •Significant underperformance relative to expected historical or projected future operating results; •Significant changes in the manner of our use of the acquired assets or the strategy for J2 Cloud Services overall business; and •Significant negative industry or economic trends; •Significant decline in the Company’s stock price for a sustained period; and •The Company’s market capitalization relative to net book value. If the Company determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, it would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value. The Company assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of long-lived assets may not be recoverable. No impairment was recorded in the first quarter of 2022. In the first quarter of 2021, the Company recorded impairment of certain operating right-of-use assets (see Note 9 - Leases). 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.
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Business Combinations | 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. Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions. The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 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. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from 1 to 20 years and are included in general and administrative expenses on the Condensed Consolidated Statements of Income. The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if the Company believes indicators of impairment exist. In connection with the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test upon goodwill. The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference.
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Valuation of Goodwill and Intangible Assets | 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. Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions. The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 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. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from 1 to 20 years and are included in general and administrative expenses on the Condensed Consolidated Statements of Income. The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if the Company believes indicators of impairment exist. In connection with the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test upon goodwill. The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference.
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Income Taxes | 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 Condensed Consolidated Statement of Income prior to the Separation, the Company’s taxes were determined using the separate return method as if the Company had filed separate tax returns as a C-Corporation. In addition, J2 Cloud Services’ income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company’s income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. 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 limitations. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate (see Note 11 - Income Taxes). The Company accounts for income taxes in accordance with FASB ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized. The valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuation allowance, the Company reviews historical and future expected operating results and other factors, including its recent cumulative earnings experience, expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is more likely than not that deferred tax assets are realizable. ASC 740 provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in the financial statements and applies to all income tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuring uncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Company recognized accrued interest and penalties related to uncertain income tax positions in income tax expense on its Condensed Consolidated Statements of Income. 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. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property. The Company does not believe these provisions have a significant impact to our current and deferred income tax balances. The Company will benefit from the technical correction to tax depreciation related to qualified improvement property and has elected to defer income tax payments and employer side social security payments where eligible.
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Share-Based Compensation | 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. 718, Compensation - Stock Compensation (“ASC 718”). 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. These inputs are subjective and are determined using management’s judgment. If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, Consensus may change the input factors used in determining future share-based compensation expense. Any such changes could materially impact the Company’s results of operations in the period in which the changes are made and in periods thereafter. The Company estimates the expected term based upon the historical exercise behavior of the Company’s employees (see Note 12 - Equity Incentive and Employee Stock Purchase Plan).
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Earnings Per Common Share (“EPS”) | Earnings Per Common Share (“EPS”) EPS is calculated pursuant to the two-class method as defined in 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. Basic EPS is calculated by dividing net distributed and undistributed earnings allocated to common shareholders, excluding participating securities, by the weighted-average number of common shares outstanding. The Company’s participating securities consist of its unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents. 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.
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Segment Reporting | Segment Reporting 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 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 15 - Segment Information).
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Reclassifications to correct prior period errors | Reclassifications to correct prior period errorsIn the first quarter of 2022, the Company identified certain errors related to executive bonuses and other corporate charges incurred prior to the Separation that were incorrectly treated as equity contributions at the time of the Spin-off rather than liabilities. The Company recorded a reclassification of $1.9 million from equity to accrued expenses and due to Former Parent to correct the prior period errors on the balance sheet. The Company determined that the impact of this reclassification was not material to the current or prior period financial statements. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The accommodations are available for all entities through December 31, 2022, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments and reduce complexity. In addition, it amends the guidance for scope exception surrounding derivatives for contracts in an entity’s own equity. In each case, the related guidance surrounding EPS has also been amended. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company does not expect the adoption of this standard to have an impact on the Company’s consolidated financial statements and related disclosures. In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this ASU improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability, and payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, including the interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.
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Fair Value Measurements | The Company complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. 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:
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 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 8 - Long-Term Debt).
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Revenues (Tables) |
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Disaggregation of Revenue | Revenues from external customers classified by revenue source are as follows (in thousands):
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Business Acquisitions (Tables) |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allocation of Aggregate Purchase Consideration | The following table summarizes the allocation of the purchase consideration for this acquisition (in thousands):
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Discontinued Operations and Disposition of Businesses (Tables) |
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Disposal Groups, Including Discontinued Operations | The key components of income from discontinued operations that were included in the Company’s Condensed Consolidated Statement of Income are as follows (in thousands):
The key components of cash flows from discontinued operations are as follows (in thousands):
|
Goodwill and Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amounts of Goodwill | The changes in carrying amounts of goodwill for the three months ended March 31, 2022 are as follows (in thousands):
|
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Intangible Assets with Indefinite Lives | Intangible assets are summarized as of March 31, 2022 and December 31, 2021 as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets Subject to Amortization | As of March 31, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):
(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 to five years, despite the overall life of the asset. As of December 31, 2021, intangible assets subject to amortization relate primarily to the following (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Intangible Assets Amortization Expense | Estimated amortization expense for the remainder of fiscal year 2022 and succeeding years is as follows:
|
Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Long-term Debt | Long-term debt as of March 31, 2022 and December 31, 2021 consists of the following (in thousands):
|
Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Lease Expense and Supplemental Cash Flow Information | The components of lease expense were as follows (in thousands):
Other supplemental operating lease information consists of the following:
|
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Balance Sheet and Other Supplemental Operating Lease Information | Supplemental balance sheet information related to leases was as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities as of March 31, 2022 were as follows (in thousands):
|
Equity Incentive and Employee Stock Purchase Plan (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Market-Based Restricted Stock Awards, Valuation Assumptions | The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:
|
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Restricted Stock Award Activity | Restricted stock award activity for the three months ended March 31, 2022 is set forth below:
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Restricted Stock Unit Award Activity | Restricted stock unit activity for the three months ended March 31, 2022 is set forth below:
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Employee Stock Purchase Plan, Valuation Assumptions | The compensation expense related to the Purchase Plan has been estimated utilizing the following assumptions:
|
Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Basic and Diluted Earnings Per Share | The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):
(1) On October 7, 2021, the separation of Consensus into an independent publicly traded company was completed. The Former Parent distributed 19,902,924 shares of Consensus common stock to holders of J2 Global common stock as of the close of business on October 1, 2021, the record date for the distribution. This share amount was utilized for the computation of basic and diluted earnings per share for the three months ended March 31, 2021 because the number of shares issued simply reflect a recharacterization of the capital account previously held by the former parent. (2) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).
|
Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues and Long-lived Assets by Geographic Information | 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).
|
Accumulated Other Comprehensive Loss (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||
Summary of Changes in Accumulated Balances in Other Comprehensive Loss | The following table summarizes the changes in accumulated balances of other comprehensive loss, which solely comprises of foreign currency translation adjustments, for the three months ended March 31, 2022 (in thousands):
|
Basis of Presentation (Details) customer in Millions |
3 Months Ended | |||
---|---|---|---|---|
Oct. 07, 2021
USD ($)
|
Mar. 31, 2022
USD ($)
country
segment
customer
|
Mar. 31, 2021
USD ($)
|
Oct. 08, 2021 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Number of customers served (more than) | customer | 1 | |||
Number of countries served (over) | country | 50 | |||
Impairment of goodwill and intangible assets | $ 0 | $ 0 | ||
Number of reportable segments | segment | 1 | |||
Reclassifications related to bonuses and other corporate accruals prior to the Separation | $ 1,888,000 | |||
Minimum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Weighted-Average Amortization Period | 1 year | |||
Maximum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Weighted-Average Amortization Period | 20 years | |||
Consensus Cloud Solutions Inc | Ziff Davis, Inc. | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Interest retained in company following separation | 19.90% | |||
2028 Notes | Senior Notes | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Debt instrument, face amount | $ 500,000,000 | |||
Stated interest rate | 6.50% | |||
Ziff Davis, Inc. | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Cash consideration paid for equity interest | $ 259,100,000 |
Revenues (Disaggregation of Revenue) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 90,925 | $ 86,620 |
Point in time | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 105 | 0 |
Over time | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 90,820 | 86,620 |
Corporate | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 46,519 | 41,154 |
Small office home office (“SoHo”) | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 44,406 | 45,374 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 0 | $ 92 |
Revenues (Narrative) (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Revenue from Contract with Customer [Abstract] | |||
Contract liability, revenue recognized | $ 10,900,000 | $ 12,300,000 | |
Deferred revenue acquired | $ 2,600,000 | $ 0 |
Business Acquisitions (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Feb. 04, 2022 |
Mar. 31, 2022 |
|
Business Acquisition [Line Items] | ||
Goodwill acquired during period | $ 5,513 | |
Summit Healthcare Services, Inc. | ||
Business Acquisition [Line Items] | ||
Gross considerations for transaction | $ 15,000 | |
Revenue of acquiree since acquisition date | 800 | |
Total consideration of transactions | $ 14,400 | |
Goodwill acquired during period | 5,500 | |
Expected income tax deductible amount of goodwill | $ 5,500 |
Business Acquisitions (Allocation of Aggregate Purchase Price) (Details) - USD ($) |
Mar. 31, 2022 |
Feb. 04, 2022 |
Dec. 31, 2021 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 344,025,000 | $ 339,209,000 | |
Deferred revenue | $ (2,600,000) | $ 0 | |
Summit Healthcare Services, Inc. | |||
Business Acquisition [Line Items] | |||
Accounts receivable | $ 1,248,000 | ||
Prepaid expenses and other current assets | 30,000 | ||
Property and equipment | 9,000 | ||
Operating lease right-of-use assets, noncurrent | 413,000 | ||
Goodwill | 5,513,000 | ||
Accounts payable and accrued expenses | (99,000) | ||
Deferred revenue | (2,646,000) | ||
Operating lease liabilities, noncurrent | (413,000) | ||
Total | 14,355,000 | ||
Summit Healthcare Services, Inc. | Trademarks | |||
Business Acquisition [Line Items] | |||
Finite-lived intangible assets | 1,100,000 | ||
Summit Healthcare Services, Inc. | Customer relationships | |||
Business Acquisition [Line Items] | |||
Finite-lived intangible assets | 7,900,000 | ||
Summit Healthcare Services, Inc. | Other intangibles | |||
Business Acquisition [Line Items] | |||
Finite-lived intangible assets | $ 1,300,000 |
Discontinued Operations and Disposition of Businesses (Narrative) (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Oct. 07, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Gain on sale of business | $ 0 | $ 1,979,000 | |
2028 Notes | Senior Notes | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Debt instrument, face amount | $ 500,000,000 | ||
Stated interest rate | 6.50% | ||
Ziff Davis, Inc. | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Cash consideration paid for equity interest | $ 259,100,000 | ||
Voice Assets | Discontinued Operations, Disposed of by Sale | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Gain on sale of business | $ 2,000,000 |
Discontinued Operations and Disposition of Businesses (Key Components of Income) (Details) - Spinoff - J2 Cloud Services $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2021
USD ($)
| |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Revenues | $ 84,809 |
Cost of revenues | 22,994 |
Gross Profit | 61,815 |
Operating expenses: | |
Sales and marketing | 20,737 |
Research, development and engineering | 4,943 |
General and administrative | 29,211 |
Total operating expense | 54,891 |
Income from discontinued operations | 6,924 |
Interest expense | (100) |
Interest income | 252 |
Gain on sale of businesses | 1,979 |
Other income | 75 |
Income from discontinued operations before income taxes | 9,130 |
Income tax expense | 1,003 |
Income from discontinued operations, net of income taxes | $ 8,127 |
Discontinued Operations and Disposition of Businesses (Key Components of Cash Flows) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Gain on sale of businesses | $ 0 | $ (1,979) |
Spinoff | J2 Cloud Services | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Depreciation and amortization | 14,224 | |
Capital expenditure | 3,160 | |
Share-based compensation expense | 1,108 | |
Non-cash operating lease costs | 1,371 | |
Deferred income taxes, net | (1,951) | |
Lease asset impairments and other charges | 561 | |
Gain on sale of businesses | $ (1,979) |
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Purchase of intangible assets | $ 1,000 | $ 0 |
Amortization expense | $ 1,500 | $ 1,700 |
Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 1 year | |
Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 20 years |
Goodwill and Intangible Assets (Changes in Carrying Amounts of Goodwill) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2022
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning balance | $ 339,209 |
Goodwill acquired | 5,513 |
Foreign exchange translation | (697) |
Ending balance | $ 344,025 |
Goodwill and Intangible Assets (Intangible Assets with Indefinite Lives) (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Indefinite-lived Intangible Assets [Line Items] | ||
Intangible assets | $ 31,054 | $ 31,071 |
Trademarks | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Intangible assets | 27,373 | 27,388 |
Other | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Intangible assets | $ 3,681 | $ 3,683 |
Goodwill and Intangible Assets (Intangible Assets Subject to Amortization) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Historical Cost | $ 182,827 | $ 135,112 |
Accumulated Amortization | 160,878 | 122,634 |
Net | $ 21,949 | $ 12,478 |
Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 1 year | |
Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 20 years | |
Trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 1 year 9 months 18 days | 1 year 7 months 6 days |
Historical Cost | $ 7,880 | $ 12,219 |
Accumulated Amortization | 6,321 | 10,633 |
Net | $ 1,559 | $ 1,586 |
Patent and patent licenses | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 0 years | 0 years |
Historical Cost | $ 54,340 | $ 10,162 |
Accumulated Amortization | 54,340 | 9,751 |
Net | $ 0 | $ 411 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 4 years 1 month 6 days | 4 years 3 months 18 days |
Historical Cost | $ 107,845 | $ 99,571 |
Accumulated Amortization | 91,291 | 90,050 |
Net | $ 16,554 | $ 9,521 |
Customer relationships | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Substantial amortization period, majority of amortization expense | 4 years | 4 years |
Customer relationships | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Substantial amortization period, majority of amortization expense | 5 years | 5 years |
Other purchased intangibles | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted-Average Amortization Period | 3 years 9 months 18 days | 3 years 9 months 18 days |
Historical Cost | $ 12,762 | $ 13,160 |
Accumulated Amortization | 8,926 | 12,200 |
Net | $ 3,836 | $ 960 |
Goodwill and Intangible Assets (Estimated Intangible Assets Amortization Expense) (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Fiscal Year: | ||
2022 (Remainder) | $ 3,818 | |
2023 | 4,465 | |
2024 | 3,201 | |
2025 | 2,601 | |
2026 | 2,122 | |
Thereafter | 5,742 | |
Net | $ 21,949 | $ 12,478 |
Debt (Summary of Long-term Debt) (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Debt Instrument [Line Items] | ||
Less: Deferred issuance costs | $ (12,505) | $ (12,960) |
Total long-term debt | 792,495 | 792,040 |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Gross long-term debt | 805,000 | 805,000 |
2026 Senior Notes | Senior Notes | ||
Debt Instrument [Line Items] | ||
Gross long-term debt | 305,000 | 305,000 |
2028 Senior Notes | Senior Notes | ||
Debt Instrument [Line Items] | ||
Gross long-term debt | $ 500,000 | $ 500,000 |
Debt (Narrative) (Details) - USD ($) |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 04, 2022 |
Oct. 07, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Debt Instrument [Line Items] | |||||
Interest expense | $ 13,300,000 | $ 200,000 | |||
Senior Notes | 2026 Notes | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, face amount | $ 305,000,000 | ||||
Proceeds from issuance of senior long-term debt | $ 301,200,000 | ||||
Stated interest rate | 6.00% | ||||
Covenant, leverage ratio, minimum | 3.0 | ||||
Covenant, leverage ratio, maximum | 3.0 | ||||
Covenant, restriction on payments, aggregate amount, maximum | $ 100,000,000 | ||||
Covenant, earnings before interest, taxes, depreciation, and amortization, maximum | 50.00% | ||||
Notes payable, fair value | 302,700,000 | $ 316,100,000 | |||
Senior Notes | 2026 Notes | Debt Instrument, Redemption, Period One | |||||
Debt Instrument [Line Items] | |||||
Percentage of principal amount redeemed | 40.00% | ||||
Redemption price, percentage | 106.00% | ||||
Redemption , threshold percentage principal amount remaining | 50.00% | ||||
Senior Notes | 2026 Notes | Debt Instrument, Redemption, Period Two | |||||
Debt Instrument [Line Items] | |||||
Redemption price, percentage | 100.00% | ||||
Senior Notes | 2028 Notes | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, face amount | $ 500,000,000 | ||||
Proceeds from issuance of senior long-term debt | $ 483,800,000 | ||||
Stated interest rate | 6.50% | ||||
Covenant, leverage ratio, minimum | 3.0 | ||||
Covenant, leverage ratio, maximum | 3.0 | ||||
Covenant, restriction on payments, aggregate amount, maximum | $ 100,000,000 | ||||
Covenant, earnings before interest, taxes, depreciation, and amortization, maximum | 50.00% | ||||
Notes payable, fair value | 495,600,000 | $ 521,200,000 | |||
Line of Credit | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Line of credit facility, maximum borrowing capacity | $ 25,000,000 | ||||
Long-term line of credit | $ 0 | ||||
Line of Credit | Revolving Credit Facility | Minimum | Secured Overnight Financing Rate (SOFR) | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, basis spread on variable rate | 1.75% | ||||
Line of Credit | Revolving Credit Facility | Maximum | Secured Overnight Financing Rate (SOFR) | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, basis spread on variable rate | 2.50% |
Leases (Narrative) (Details) |
Mar. 31, 2022 |
---|---|
Lessee, Lease, Description [Line Items] | |
Operating lease renewal term | 5 years |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Operating lease terms | 3 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Operating lease terms | 5 years |
Leases (Components of Lease Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Leases [Abstract] | ||
Operating lease cost | $ 628 | $ 626 |
Short-term lease cost | 440 | 541 |
Finance lease cost | ||
Amortization of right-of-use assets | 302 | 78 |
Total lease cost | $ 1,370 | $ 1,245 |
Leases (Supplemental Balance Sheet Operating Lease Information) (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 8,102 | $ 7,233 |
Finance lease right-of-use assets | $ 2,341 | $ 2,648 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Other assets, Prepaid expenses and other current assets | Other assets, Prepaid expenses and other current assets |
Total operating lease right-of-use assets | $ 10,443 | $ 9,881 |
Operating lease liabilities, current | 2,821 | 2,421 |
Operating lease liabilities, non-current | 14,523 | 14,108 |
Total operating lease liabilities | $ 17,344 | $ 16,529 |
Leases (Supplemental Cash Flow Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ 648 | $ 286 | |
Right-of-use assets obtained in exchange for lease obligations: | |||
Operating leases | $ 1,316 | $ 0 | |
Operating leases: | |||
Weighted average remaining lease term | 8 years 4 months 24 days | 8 years 9 months 18 days | |
Weighted average discount rate | 4.76% | 4.84% |
Leases (Maturities of Operating Lease Liabilities) (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Fiscal Year: | ||
2022 (remainder) | $ 2,082 | |
2023 | 2,602 | |
2024 | 2,561 | |
2025 | 2,389 | |
2026 | 2,461 | |
Thereafter | 10,697 | |
Total lease payments | 22,792 | |
Less: Imputed interest | 5,448 | |
Present value of operating lease liabilities | $ 17,344 | $ 16,529 |
Commitments and Contingencies (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Sales tax expense | $ 800,000 | $ 0 |
Federal sales tax benefit | $ 200,000 | $ 200,000 |
Income Taxes (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Income Tax Disclosure [Abstract] | |||
Effective income tax rate | 27.40% | 24.30% | |
Income before income taxes, domestic operations | $ 800,000 | $ 29,400,000 | |
Income before income taxes, foreign operations | 24,900,000 | 22,400,000 | |
Liability for uncertain tax positions | 4,795,000 | $ 4,795,000 | |
Cash paid for income taxes, net of refunds | 3,600,000 | $ 1,200,000 | |
Prepaid tax payments | $ 0 | $ 0 |
Stockholders' Equity (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 01, 2022 |
|
Equity [Abstract] | ||
Stock repurchase program, authorized amount | $ 100,000,000 | |
Stock repurchased during period, shares (in shares) | 0 | |
Share-based payment arrangement, shares withheld for tax withholding obligation (in shares) | 19,922 | |
Share-based payment arrangement, decrease for tax withholding obligation | $ 1,200,000 |
Equity Incentive and Employee Stock Purchase Plan (Narrative) (Details) - USD ($) |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Oct. 31, 2021 |
Mar. 31, 2022 |
Dec. 31, 2021 |
|
Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Lookback period | 30 days | ||
Restricted Stock, Restricted Stock Units (RSUs) and Market-based Restricted Stock Awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unrecognized compensation cost related to non-vested awards granted | $ 44,500,000 | ||
Market-based Restricted Stock Awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted (in shares) | 5,091 | ||
Granted (in dollars per share) | $ 47.54 | ||
Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted (in shares) | 0 | ||
Granted (in dollars per share) | $ 0 | ||
Unrecognized compensation cost related to non-vested awards granted | $ 1,100,000 | ||
Weighted-average period to recognize compensation cost | 1 year 3 months 18 days | ||
Restricted Stock Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted (in shares) | 31,703 | ||
Unrecognized compensation cost related to non-vested awards granted | $ 43,300,000 | ||
Weighted-average period to recognize compensation cost | 5 years 2 months 12 days | ||
Employee Stock Purchase Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Estimated forfeiture rates | 10.34% | ||
Equity Incentive Plan 2021 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Maximum issuance of common stock (in shares) | 4,000,000 | ||
Equity Incentive Plan 2021 | Restricted Stock and Restricted Stock Units (RSU) | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted (in shares) | 26,612 | ||
Equity Incentive Plan 2021 | Restricted Stock and Restricted Stock Units (RSU) | Board of Directors | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Award vesting periods | 1 year | ||
Equity Incentive Plan 2021 | Restricted Stock and Restricted Stock Units (RSU) | Staff | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Award vesting periods | 4 years | ||
Equity Incentive Plan 2021 | Restricted Stock and Restricted Stock Units (RSU) | Chief Executive Officer and Chief Operating Officer | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Award vesting periods | 5 years | ||
Employee Stock Purchase Plan 2021 | Employee Stock Purchase Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Maximum issuance of common stock (in shares) | 1,000,000 | ||
Maximum earnings withheld by the employees | 15.00% | ||
Purchase price of common stock, percent | 85.00% | ||
Issuance of shares under employee stock purchase plan (in shares) | 0 | ||
Cash received upon the issuance of common stock | $ 0 | ||
Number of shares available for issuance (in shares) | 989,579 |
Equity Incentive and Employee Stock Purchase Plan (Market-Based Restricted Stock Awards, Valuation Assumptions) (Details) - Market-based Restricted Stock Awards |
3 Months Ended |
---|---|
Mar. 31, 2022
$ / shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Underlying stock price at valuation date (in dollars per share) | $ 57.15 |
Expected volatility | 35.00% |
Risk-free interest rate | 1.30% |
Equity Incentive and Employee Stock Purchase Plan (Restricted Stock and Restricted Stock Unit Award Activity) (Details) |
3 Months Ended |
---|---|
Mar. 31, 2022
USD ($)
$ / shares
shares
| |
Restricted Stock | |
Number of Shares | |
Beginning of period (in shares) | 65,235 |
Granted (in shares) | 0 |
Vested (in shares) | (10,057) |
Canceled (in shares) | 0 |
End of period (in shares) | 55,178 |
Weighted-Average Grant-Date Fair Value | |
Nonvested at beginning of period (in dollars per share) | $ / shares | $ 57.77 |
Granted (in dollars per share) | $ / shares | 0 |
Vested (in dollars per share) | $ / shares | 63.69 |
Canceled (in dollars per share) | $ / shares | 0 |
Nonvested at end of period (in dollars per share) | $ / shares | $ 56.70 |
Restricted Stock Units | |
Number of Shares | |
Beginning of period (in shares) | 1,013,097 |
Granted (in shares) | 31,703 |
Vested (in shares) | (36,870) |
Canceled (in shares) | (8,045) |
End of period (in shares) | 999,885 |
Vested and expected to vest at end of period (in shares) | 601,934 |
Weighted-Average Remaining Contractual Term (in years) | |
Outstanding at end of period | 4 years 3 months 18 days |
Vested and expected to vest at end of period | 3 years 6 months |
Aggregate Intrinsic Value | |
Outstanding at end of period | $ | $ 60,123,085 |
Vested and expected to vest at end of period | $ | $ 36,194,267 |
Equity Incentive and Employee Stock Purchase Plan (Employee Stock Purchase Plan, Valuation Assumptions) (Details) - Employee Stock Purchase Plan |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate | 0.05% |
Expected term (in years) | 6 months |
Dividend yield | 0.00% |
Expected volatility | 17.89% |
Weighted average volatility | 17.89% |
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Oct. 07, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||
Net income from continuing operations attributable to common shareholders | $ 18,706 | $ 39,235 | |
Net income available to participating securities, basic | (46) | 0 | |
Net income available to participating securities, diluted | (46) | 0 | |
Net income available to common shareholders from continuing operations | 18,660 | 39,235 | |
Net income available to common shareholders from continuing operations | $ 18,660 | $ 39,235 | |
Denominator: | |||
Weighted-average outstanding shares of common stock (in shares) | 19,921,375 | 19,902,924 | |
Dilutive effect of: | |||
Common stock and common stock equivalents (in shares) | 20,005,307 | 19,902,924 | |
Net income per share from continuing operations: | |||
Basic (in dollars per share) | $ 0.94 | $ 1.97 | |
Diluted (in dollars per share) | $ 0.93 | $ 1.97 | |
Anti-dilutive shares were excluded from earnings per share calculation (in shares) | 495,010 | ||
J2 Global, Inc. | Ziff Davis, Inc. | |||
Net income per share from continuing operations: | |||
Separation and distribution agreement, number of shares distributed (in shares) | 19,902,924 | ||
Equity incentive plans | |||
Dilutive effect of: | |||
Equity incentive plans (in shares) | 72,281 | 0 | |
Employee Stock Purchase Plan | |||
Dilutive effect of: | |||
Equity incentive plans (in shares) | 11,651 | 0 |
Segment Information (Narrative) (Details) |
3 Months Ended |
---|---|
Mar. 31, 2022
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
Segment Information (Revenues and Long-lived Assets by Geographic Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | $ 90,925 | $ 86,620 | |
Long-lived assets | 68,405 | $ 53,560 | |
United States | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 71,138 | 66,925 | |
Long-lived assets | 59,715 | 43,727 | |
Canada | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 12,156 | 11,322 | |
Long-lived assets | 6,577 | 7,128 | |
Ireland | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 4,960 | 5,712 | |
Long-lived assets | 1,716 | 2,625 | |
All other countries | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 2,671 | 2,661 | |
Long-lived assets | 397 | 80 | |
Foreign countries | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 19,787 | $ 19,695 | |
Long-lived assets | $ 8,690 | $ 9,833 |
Accumulated Other Comprehensive Loss (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | $ (332,665,000) | $ 1,122,542,000 |
Net increase in other comprehensive loss | (2,117,000) | (7,708,000) |
Ending balance | (313,924,000) | $ 1,175,993,000 |
Reclassification from accumulated other comprehensive loss | 0 | |
Foreign Currency Translation | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | (16,857,000) | |
Other comprehensive loss | (2,117,000) | |
Net increase in other comprehensive loss | (2,117,000) | |
Ending balance | $ (18,974,000) |
Related Party Transactions (Details) - USD ($) $ in Millions |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Ziff Davis | ||
Related Party Transaction [Line Items] | ||
Due to affiliate, current | $ 11.7 | $ 5.7 |
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