Cision Ltd (CISN) Q2 2019 Earnings Call Transcript

Cision Ltd (CISN)
Q2 2019 Earnings Call
Aug 08, 2019, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to Cision Limited second-quarter 2019 conference call. [Operator instructions] Please note, this event is being recorded. Before we get started, we need to remind everyone that in our call we'll be making some statements that are not based on historical fact, including statements about management's beliefs or expectations. These statements are forward-looking within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act and relate to, among other things, our expected operating results and 2019 outlook, our integration of Falcon and TrendKite and the realization of the expected benefits from the transactions, our business strategy and other matters relating to our business.

These forward-looking statements are intended to be covered by the safe harbors created by the federal securities laws. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual operating results, financial position or performance to be materially different from those expressed or implied in our forward-looking statements. We believe that all forward-looking statements are based upon reasonable assumptions. However, we caution you that you should not place undue reliance on these statements.

We disclaim any obligation to update those forward-looking statements. For additional information concerning factors that could affect our financial results or cause actual results to differ materially, please refer to the cautionary statements, including in our filings with the SEC in the sections entitled Risk Factors, including the risk factors set forth in our most recent annual report on Form 10-K in which we discuss some important assumptions and business risks that could cause our actual results to differ materially from those in our forward-looking statements. In addition, please note that on today's call, in our investor presentation and in our press release issued earlier today, we refer to certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and adjusted net income. These measures are reconciled to the most comparable GAAP measures in our financial statements and can be found in the investor presentation posted on our website under the Investor tab.

Investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures and are advised not to place undue reliance on non-GAAP information. I would now like to turn the call over to Kevin Akeroyd, Cision's chief executive officer, to begin the call. Kevin?

Kevin Akeroyd -- Chief Executive Officer

Thank you, operator; and welcome, everyone to Cision's second-quarter 2019 conference call. This afternoon, I will begin with a walk-through of our Q2 '19 performance, discuss a few of our recent accomplishments and conclude with an update of our key execution priorities for the remainder of FY '19. I will then turn the call over to Jack Pearlstein, our CFO, who will discuss our Q2 FY '19 financial results and provide an updated outlook for fiscal-year 2019. We will then turn it back over to the operator to kick off the question-and-answer session.

Both Jack and I will be working from the investor presentation that has been posted on the investor section of our website. To kick this off today, and beginning on Slide 2 of the presentation, we delivered a solid second-quarter 2019. Our Q2 adjusted revenue, which adjusts for the impact of purchase accounting, came in at $194.3 million, close to the top end of our guidance range. On a pro forma and constant-currency basis, which adjusts for acquisitions and divestitures, our core revenues were up 3.4% organically in the second quarter versus the prior year and in line with prior expectations.

Our Q2-adjusted EBITDA was also strong, coming in at $66.1 million. Our adjusted EBITDA margins in Q2 were 34%, right on expectations for the quarter as we work through our post-acquisition synergy realization plan. In addition to delivering on the financial side of the business, we've also made recent progress on a number of renovation priorities. In July, we launched the next-generation Cision Communications Cloud, integrating the best functionality and content from Cision and TrendKite, a recent acquisition, into one platform.

This platform will be the foundation of many of our operational goals, including increased revenue retention rates and acceleration in the cross sell of our industry-leading suite of products. When we acquired TrendKite, our thesis focused on combining its modern SaaS technology and analytics engine with our industry-leading content to deliver more value for customers. We believe this next-generation Cision Communication Cloud is well positioned to deliver on its potential. In Q2, we also launched audience activation, the latest product to build on top of Cision ID, allowing communications and marketing professionals to use earned media analytics and data to drive paid advertising audience creation and activation.

Early campaigns that we've run validate our hypothesis that consumers who are exposed to positive earned media of forcing an advertisement are more likely to act on that ad than those that swear they do not. By allowing our customers to enhance their digital audiences with earned media consumption data, we can increase the effectiveness of their paid budgets and reinforce the need for continued investment in earned media. Put very simply, the very large digital paid ad budgets are performing better when activated from Cision ID audiences. And lastly, earlier this week, we announced that Edelman, the largest communications agency in the world, formed a dedicated practice around Cision Impact and Audiences.

Edelman's investment around our technology and data is a positive proof point for our vision. We look forward to supporting Edelman as a pioneer in this area in building deeper relationships with other leading PR agency partners who are all ideally positioned to educate our shared clients on the benefits of measurable PR and create joint commercial opportunities. Each of these initiatives moves us closer to our ultimate goal of the company. As most of you know, we want to be the definitive cloud platform for earned media, serving our PR and corporate communications customers in the same way that Adobe serves marketers and Salesforce.com serves sales professionals.

Consolidating workflow into an integrated SaaS platform, empowering our customers to better understand and target their audiences and form strategic partnerships with key ecosystem leaders are all key ingredients in the cloud platform playbook, and I'm proud of our team for making significant accomplishments on each of these fronts. Moving on to Slide 3. Consistent with past quarters, APAC led the company with 6.1% year-over-year constant currency growth that was followed first by the Americas at 5.8%, and then Europe down, shrinking 2.6%. The performance in Q2 is consistent with the guidance provided to investors concurrent with our first-quarter earnings call and reflects a few underlying trends that we've discussed at different lengths in the past.

Our APAC revenue growth slowed versus prior period due to the deceleration in international press release volumes out of China. We believe that volume weakness was driven by macro issues rather than Cision-specific factors. While we have seen a rebound in activity in July, we're maintaining a more conservative forward view with respect to APAC given the continued and ongoing trade tensions. Our Americas revenue a was solid growth of 5.8%, driven by growth in both the U.S.

and Canada. Our U.S. segment continues to benefit from the TrendKite acquisition and its infusion of both strong technical and go-to-market, as well as product leadership. We still see significant room for improvement here though and are focused on making sure we execute on our remaining operational initiatives such that we are best positioned to accelerate growth going forward.

And finally, our EMEA business posted another down quarter, declining 2.6% year over year on a constant-currency basis. We saw, as expected, ongoing weakness in volume-based media monitoring in France and U.K. As Jack will walk you through in his financial review section, though also was discussed on previous earnings calls, we do anticipate that EMEA will return to organic growth in Q3 as all the in-market initiatives of the last year we've put in place and the Q1 leadership upgrades both are translating into positive results. Improved performance in June and July in both the U.K.

and France give us confidence that we're getting back on track. On to Slide 4. Subscription customer growth in Q2 was approximately 2.5% versus the prior year, driven by both new business wins and conversions of transaction contracts to subscription contracts. ARPU per subscription contract was also up versus the prior year, with an increase of approximately 2.1%, resulting from our growing the size of the bundle we sold to customers, offset by our shifting of transactional PR Newswire customers to subscription contracts.

Those typically transition initially at a lower ARPU. Transaction trends remain as expected, and per our strategy with a number of customers transacting with us during the quarter declining versus the prior-year period, but the transaction revenue per customer during the quarter increasing versus the prior-year period. Moving to Slide 5. We expect our organic growth rate to accelerate in the back half of the year, primarily due to our EMEA turnaround that we have seen over the last couple of months.

At the midpoint of the range, we expect growth to top 5% in Q3 and roughly 4.5% for the full year. While we had hoped for a stronger acceleration of this growth rate in the back half of 2019, we're unexpectedly hit by trade tensions in China, and a number of the large new business deals that we expected to close in Q1 and Q2 are progressing through our pipeline more slowly than anticipated. While we do believe that these opportunities will ultimately translate to bookings shortly and that the Edelman partnership we announced this week will drive second-half Cision ID revenue upside, we're taking a conservative approach by not including the larger pipeline items into our forecast. Next I will spend a minute on our execution priorities for the remainder of the year.

First, we have made significant progress since January, integrating both Falcon and TrendKite. The vast majority of synergies created by the transaction have been realized. Over the second half of 2019, we expect to realize additional cost savings that will put us slightly ahead of the plan we created in January underlying both acquisitions. On the product differentiation side, we are heads down adding features and integration to the Cision Communication Cloud or C3, which is, I said above, is now C3 plus TrendKite.

These include social influencer databases, influencer management, sophisticated image monitoring and analytics, streamlined workflows, superior content discovery and yet even deeper integration back into the paid and owned systems our clients have implemented on the marketing and advertising fronts. As these feature adds and integration are completed, we're shifting some of our resources to the integration of Falcon into C3 next. We expect the incorporation of social media management will create further differentiation in the marketplace versus our competitors who either have to resell third-party solutions or just completely lack the functionality altogether in this important area of communication plus social workflow. We remain committed to ensuring that Cision has the most feature-rich platform for PR and corporate communication professionals in the industry, and we'll continue devote significant development resources to enhance our category-leading product and service offering that should result in an ever-improving customer experience.

Our next execution priority is to accelerate the ARPU improvement. Our focus over the next few quarters will be on both packaging enhancements and continue to raise the percentage of our deals that contain more than one of our attribution products. We are now going to market with strong customer case studies across all Cision ID product offerings that helps demonstrate the value proposition of this unique offering. And lastly, our final execution priority is to support the strategic initiatives around our Edelman partnership and other key agency partners around the world that we expect to drive wider adoption of our attribution offerings.

So in summary, a solid second quarter, highlighted by steady progress toward a number of key commercial and product milestones. Going forward, we're heads down on execution and driving organic growth in the back half of the year. I'll now turn it over to Jack Pearlstein, our CFO, who will provide and discuss our Q2 FY '19 financial results and provide an updated outlook for the remainder of fiscal year. Jack?

Jack Pearlstein -- Chief Financial Officer

Thanks, Kevin. I'll begin with a review of our second-quarter performance and conclude with an updated outlook for fiscal 2019. A number of the non-GAAP financial measures that I plan to reference have been provided in this afternoon's second-quarter FY '2019 earnings release, along with our underlying calculations and definitions. Our GAAP Q2 2019 revenue came in at $190.5 million, a 1.6% increase over our Q2 2018 revenue of $187.5 million.

After adjusting for the reduction of GAAP revenue from purchase accounting, our Q2 revenue came in at a $194.3 million, up 3.5% and near the top end of the guidance range. On a pro forma and constant-currency basis, which adjust for both our acquisitions and divestitures, our core PR revenues were up 3.4% versus the prior-year second quarter. After adjusting for both the impact of currency and non-core revenues, pro forma organic revenue growth in the Americas was up 5.8% in Q2 versus the prior-year period. As mentioned earlier in the call, we were positively impacted by improving revenue retention in the U.S., a strong quarter for transactional distribution revenue and continued outperformance of Canada where the leadership continues to gain market share.

After adjusting for the impact of currency, pro forma organic revenue growth in our APAC business was up 6.1% in Q2 versus the prior-year period. While we continue to see strong momentum in the region with accelerating sales efforts in South Korea, Japan and Australia and some early success selling software subscriptions and insight services, we were negatively impacted by reduced outbound international press release distribution volume in China, a direct result, as Kevin mentioned, of the ongoing trade tension. So far this quarter, we have seen a decent rebound in volumes and expect APAC growth to rebound off these levels in Q3 and Q4. After adjusting for the impact of currency, pro forma organic revenue growth in our EMEA business was down 2.6% in Q2 versus the prior-year period.

Declines in our French and U.K. transactional monitoring businesses weighed down, otherwise very strong performance across the Nordics, Germany and Portugal. As Kevin mentioned previously, we expect to see a return to growth in Q3 in EMEA as the in-market efforts over the last 12 months begin to pay off through credit, through turnaround, through pricing and packaging changes, as well as focused efforts to target prospects who benefit from our most comprehensive product portfolio. Our average number of subscribers in Q2 2019 was approximately 46,340, 2.5% higher than the average number of subscribers in the same period a year ago.

The average annualized revenue per subscription customer during Q2 on a constant-currency basis was approximately 11,510, a 2.1% increase versus the prior-year period. As Kevin mentioned earlier in the call, the solid growth in ARPU on the software side of our subscription business was partially offset by a strong PRN transaction to subscription quarter that converted transaction contracts to subscription at lower-than-average ARPUs. On the transactional side, we had approximately 37,422 customers transact with us during the second-quarter 2019, an approximate 9.2% decrease from the same period a year ago. A portion of this decline, as we've spoken about before, relates to the conversion of transaction customers to subscription customers, with additional declines driven in part by our decision to reduce the number of lower-end distribution resellers that we work with.

Average revenue for the quarter from customers that transacted with us came in at approximately $1,535, approximately 6.2% higher than the same period a year ago. For those of you following along with the online presentation, I'm now on Slide 6. GAAP gross margin for Q2 2019 was 63.9%, including our cost of revenue for the second quarter was approximately $5 million of amort related to acquired intangibles, approximately $1.8 million of acquisition-related costs and expenses and approximately $0.1 million of stock compensation charges. Excluding these items and adjusting revenue for the impact of purchase accounting, gross margin for Q2 2019 would have been 68.1%.

For comparative purposes, gross margin for Q2 2018 on the same adjusted basis was 68.4%. Acquisition-related costs and expenses during Q2 were approximately $11 million, with roughly $1.8 million of these costs included in cost of revenue, $1 million included within sales and marketing, approximately $0.9 million included within R&D and approximately $7.3 million included in G&A. Acquisition-related costs and expenses during the quarter was driven by one-time costs related to our acquisitions of Falcon and TrendKite, our divestiture of our email marketing assets and the synergy actions we took in the second quarter to reduce ongoing run rate costs in the business. We still expect this number to decline throughout the remainder of FY 2019.

In Q2, we delivered another solid quarter of adjusted EBITDA, which came in at $66.1 million. Our focus on overall cost controls and our continued effort to further drive synergies in the business will continue to be a priority. Adjusted EBITDA margins were 34% in the second quarter of 2019, right on our projected adjusted EBITDA margin. Adjusted net income for the quarter of -- second quarter of 2019 was $29.5 million.

Adjusted net income per share for Q2 came in at $0.20, down $0.03 versus the prior year on roughly 21 million more shares. Cash from operations during the quarter was significantly impacted by an incremental $15.2 million in cash taxes, driven primarily by the gain on sale from the divestiture of our email marketing asset. We expect cash taxes in the back half of the year to be approximately $8 million to $10 million. We remain committed as a management team to driving free cash flow and using that cash flow to reduce our term loan.

Consistent with prior statements, we still expect to get our net debt to EBITDA below four times in the first half of 2020. Now on to our updated outlook for fiscal 2019, to Slide 7 in the presentation. Currency headwinds from the dollar strong move against a number of foreign currencies, the anticipation of some temporary sluggishness in China due to continued trade tension and delays in certain large new customer wins and the ramp of those new customer wins resulted in a slight reduction in our full-year guidance for revenue, EBITDA and adjusted net income for 2019. As highlighted in our earnings release this afternoon, we expect full-year GAAP revenue of between $766 million and $773 million and Q3 GAAP revenue of between $187 million and $190 million.

For our adjusted revenue outlook, which excludes the impact of purchase accounting, we expect full-year revenue between $775 million and $782 million and Q3 adjusted revenue of between $191 million and $194 million. The reduction to the midpoint of full-year adjusted revenue guidance is approximately 1%, with roughly 40% of that reduction coming from currency headwind. The midpoint of the revised range implies constant currency pro forma organic revenue growth of roughly 5.3% in Q3 and 4.5% for the full-year FY '19. We expect FY '19 adjusted EBITDA between $267 million and $271 million and Q3 adjusted EBITDA between $65 million and $67 million.

Roughly $1 million of the $3-million reduction to the midpoint of the guidance range for EBITDA is due to currency headwind. We expect FY 2019 adjusted net income of between $119 million and $122 million and Q3 adjusted net income of between $29 million and $31 million. We expect FY '19 adjusted net income per share of between $0.80 and $0.82 and for Q3 adjusted net income per share between $0.20 and $0.21. On Slide 9, we have provided revenue in constant currency growth rate expectations for Q3, Q4 and the full year at the consolidated Americas, EMEA and APAC levels.

As you will see on this slide, we expect our organic constant currency growth rate to pick up in the back half of the year, and we expect it to return to growth in our EMEA region for the first time in quite some time in Q3. Additionally, within the earnings release furnished this afternoon, we provided an updated full-year outlook for a number of other financial items, including depreciation expense, amortization expense, interest expense, cash interest expense, stock-based comp and capex. The outlook items provided on this call, as well as those included in today's earnings release, assume exchange rates of $1.21, $1.11 and $0.74, respectively, for the British pound, the Euro and the Canadian dollar to the U.S. dollar.

Additionally, our outlook for the fiscal-year 2019 excludes any additional acquisitions, divestitures or other anticipated events. That concludes our prepared remarks. I'll now turn it back over to the operator to begin the Q&A session. Operator?

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] And your first question today will come from Matt Hedberg of RBC Capital Markets. Please go ahead.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Hey, it's Dan Bergstrom for Matt Hedberg. Thanks for taking our questions. Could you drill down a little more on some of those larger deals that are progressing through the pipeline a little slower than expected? What are you seeing? Will any of those change? That's in the outlook. I guess is that the 60% beyond currency?

Kevin Akeroyd -- Chief Executive Officer

Yes. As we said, it's a combination of the APAC slowdown, right, which is really more, we think, macro trends around trade tensions than it is anything Cision-specific. And the other component of that 60% of the 1% is that, yes, as we continue to go up market and we are selling a larger platform deals with multiple solutions at higher price points, higher new organization, they're great for the business. But unfortunately, they do take a little -- the sales cycle elongates and that's exactly what we're experiencing.

As we said in the prepared remarks, we do expect them to come in. But lags in -- right, lags in them coming in is resulting in some conservatism going forward.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Great. And then EMEA, the return to growth, great to see constant-currency growth rate for the quarter. And then guidance for Q3 and Q4 showed sequential improvement through year end. What's behind those assumptions? Maybe a little more there.

Is it largely the pricing and packaging efforts you called out in your prepared remarks? And then some improvement in the transaction business?

Kevin Akeroyd -- Chief Executive Officer

I think that's right. As everyone knows, we made some significant leadership changes in the beginning of the year. And as we've talked about in the last two earnings calls, we communicated that this was going to be a full-year rebound, that it was not going to come back in Q1 and Q2 but that we were very optimistic it was going to come back in Q3 and Q4. And the superior pricing and packaging, the superior sales execution and the upgrade in leadership, all of which we kicked in at the beginning of the reason, is now really starting to impact and we'll see it in the second half.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Great, thanks.

Operator

And our next question today will come from George Tong of Goldman Sachs. Please go ahead.

George Tong -- Goldman Sachs -- Analyst

Hi, thanks. Good afternoon. As it relates to your updated revenue guidance, can you distinguish how much of the decline in the guidance is related to China macro headwinds and how much of it is related to a slower pipeline conversion?

Kevin Akeroyd -- Chief Executive Officer

Jack, you want to quantify that?

Jack Pearlstein -- Chief Financial Officer

Yes. China headwinds are probably on the order of magnitude of about $1 million. So if you think about $4.5 million at the midpoint that's not currency related, that would leave you $3 million and change for what I would call some of the bigger deals that we expected to win in Q1, ramp in Q2, that many of which have now just recently been closed. And now we're ramping in sort of -- won't really materialize until late Q3 or late Q4.

George Tong -- Goldman Sachs -- Analyst

Got it. That's helpful. You cited in the quarter some of good cost controls and synergies in the business. Could you provide us with an update around your timeline for realizing the remaining synergies that are in the plan? And then also, if you have any quantified cost savings over the next two to four quarters that you hope to achieve?

Jack Pearlstein -- Chief Financial Officer

Yes, we haven't really given out any figures for the next couple of quarters. I think where we are with what's left to go this year is a couple million dollars that we've actually already begun on here in Q3. So we believe we're on track with the original synergy plans, which was essentially around the TrendKite and Falcon acquisitions. I would say we continue to look for more.

We continue to try and make the business more efficient. But we haven't put forth any guidance with respect to what we hope to gain over the next couple quarters.

George Tong -- Goldman Sachs -- Analyst

Got it, thank you.

Operator

Our next question today will come from Michael Turrin of Deutsche Bank. Please go ahead.

Michael Turrin -- Deutsche Bank -- Analyst

Yes, hey there. Thanks. I wanted to try to just get better sort of granular understanding in terms of the shift from transition to -- transactional to subscription that's happening. Q2 is typically a seasonally stronger quarter for transaction.

We know that shift is happening at the overall level and then we can see the ARPU from the transactional side coming in stronger as well. But can you just help us parse through how much of an offset that shift is creating?

Jack Pearlstein -- Chief Financial Officer

You probably have about 150 to 200 basis points of shift in the current quarter going from transaction over to subscription.

Michael Turrin -- Deutsche Bank -- Analyst

OK. That's helpful. And then in terms of EBITDA, you're at 34% margin today, and I think the full-year guide implies somewhere similar for the year. I know you're not going to guide for commentary beyond that, but when you think about levers left to pull and where EBITDA margins could ultimately get to, what are some of those levers and how do you think about the trajectory going forward?

Jack Pearlstein -- Chief Financial Officer

I mean, I think the biggest lever for us is continuing to grow the top line. There's a lot of leverage in the model, right? It's one platform. It's an existing and already built out distribution network. So the incremental margin of adding 500 customers, 1,000 customers or 10,000 press releases is going to drop down to the bottom line pretty precipitously.

We also have, as I mentioned, right, opportunities to get more efficient. And so I would say, we still have opportunity to consolidate some of the underlying technology. Kevin mentioned that at the top of the call. We have opportunity to just get more efficient generally as it relates to back office personnel, systems, etc.

And so I don't think those are maybe quite as large as the revenue of slowdown opportunity. I think they're still fairly significant to substantial. And I think we're still believers that this is a mid- to high-30s EBITDA margin business over the near term, with opportunities to get up into 40% or something that starts with a four in a couple of years' time.

Michael Turrin -- Deutsche Bank -- Analyst

Got it, that's helpful. Thanks.

Operator

Our next question will come from Bob Labick of CJS Securities. Please go ahead.

Bob Labick -- CJS Securities -- Analyst

Good afternoon. Thanks. I wanted to start for us to get really -- we've been really excited about the opportunity for the acceleration of organic growth. And I think, just thinking a little longer term, a lot of that's going to be from ARPU, probably cross-selling organic share of wallet, and then also the uptick on products like attribution going from freemium to premium.

So can you just talk to us about the timing of when these initiatives will hit the P&L and give us an update on the paying attribution customers and the trends there?

Kevin Akeroyd -- Chief Executive Officer

Yes. Jack, maybe I'll start with that one. Bob, I think you can kind of lump the cross sell and the ARPU increase kind of together because, again, in these kind of marketing tech or ad tech platforms, it's not really per seat. It's going and getting a customer that's only buying one of the six products.

And you'll get that second product in that spend, you get that third product in that spend as we continue to collapse products right under the integrated platform because the customer no longer wants to work with three or four no-integrated vendors, right, for four different things. That's going to drive cross sell on ARPU at the same time. The nice halo effect that as everybody knows in SaaS, the more products they have, the lower the revenue churn goes, right? Not only for utility value but then just what it would be like to rip us out and replace us with four discrete products from four discrete vendors again. So that left punch, right punch of both ARPU expansion and churn reduction really is the big lever from a core business.

And again, we continue to see that being a slow, steady, gradually improving uptick that will just keep going quarter after quarter after quarter. And then we are very encouraged by the adoption of the attribution products. As most of the audience here knows, right, '19 is the adoption year; and Bob, you kind of called that freemium. I like that, right? Next year is really the monetization year.

And as these things get adopted and they really start working and the communications professional actually can prove real or lie for the category for the first time, and they've got a data set that's making the advertising better, there's some real upside there. That's a little bit harder to predict because we're in freemium and adoption mode. We haven't actually litmus tested what happens when we go after the paid versus the freemium. But we're a lot optimistic about that.

So I think the first one is slow and steady, continue gradual. And then it's a little bit to be determined the slope for the upside when the attribution products hit, but the good news is they won't hit if you don't get the kind of adoption we're getting this year. They're not going to hit next year. And the good news is that we're getting the kind of adoption we want this year.

So we're positioned very well to head into next year taking advantage of that.

Bob Labick -- CJS Securities -- Analyst

OK. Great. Thank you. And then just the other one for me is you talked quickly the launch of Audiences.

Can you tell us the initial impressions from customers that have seen it and your expectations for that over the next, I don't know, six, 12, 18 months?

Kevin Akeroyd -- Chief Executive Officer

Yes, yes. Bob, to remind you and everybody else on the call, Audience is now basically -- Cision is now capturing -- Kevin Akeroyd is now a Cision ID and we are capturing, right, what kind of earned media or influencer or press releases or articles he is consuming. And then what kind of behavior he exhibits after those. And the thesis was that if that person is consuming a lot of third-party influencer content, reading a lot of articles, reading a lot of press releases, that's a strong signal that whatever he or she is reading about, right, or getting influencer content about, that's a very strong signal of interest and we are pulling that Cision data out and people are running their large retargeting or their large paid advertising campaigns against it.

We are seeing double-digit material improvement, right, in those double ad budgets. So when you really simplify this, right, every one of the $200 billion of paid spend a year out there is driven off of Audience data. Cision ID is an extremely strong and starting to prove effective, right, data that is stronger signal and is improving the performance of the advertising. that's really the fundamental value prop is.

I can finally know what that person is reading about and what kind of the influencers they're listening to. And when I plug that into the ad equation, I'm certainly [Inaudible] double-digit less in their response. So, Bob, hopefully that makes sense.

Bob Labick -- CJS Securities -- Analyst

Yes, that sounds great.

Kevin Akeroyd -- Chief Executive Officer

Very exciting because that turns Cision into a chief marketing officer story, not just a chief communication officer story. Obviously, the TAM and the budgets over there and the CMOs are a lot bigger.

Bob Labick -- CJS Securities -- Analyst

Yes, absolutely.

Operator

And our next question will come from Tyler Radke of Citi. Please go ahead.

Tyler Radke -- Citi -- Analyst

Hey, thanks, guys. Good afternoon. I was just hoping you could talk a little bit more about Europe. It sounds like you're expecting to see kind of improvement in trends over there.

And a lot of companies we've heard this quarter have actually called out more caution as it relates to Q3 on some of the macro issues. So maybe just frame for us what you're seeing from a macro perspective and what gives you the confidence that you can actually see underlying business pickup in Q3? Thank you.

Kevin Akeroyd -- Chief Executive Officer

Very simply, we have spent the last nine months, you know, three quarters, undergoing a fundamental shift to get this large customer set to stop buying radio or TV or newspaper articles or clips transactionally and shifted them on to the SaaS subscription model on the SaaS platform. And after, right, three quarters of strong execution, strong go to market and some very successful packaging and pricing, as well as just better performance management and leadership, right, in the leadership team, those have been the seeds we've been planting, right? That sits in the nine months of the turnaround. And because we have shifted enough of those customers onto subscription, and we've shifted enough of them onto the new pricing and packaging, that transactional buy by the drink clip that has been hurting us in the last three quarters is finally going to be overcome by the strength and the growth of the pricing, packaging and the subscription models that we've been religiously putting out there over the last nine months. So, Jack, you want to add anything to that?

Jack Pearlstein -- Chief Financial Officer

No, I think that's a pretty good summation.

Tyler Radke -- Citi -- Analyst

So just to be clear, you're not seeing any macro stuff that you're worried about over in Europe?

Kevin Akeroyd -- Chief Executive Officer

Yes. Quite the opposite. There's nothing macro as in worldwide macro or Europe macro. The tiny little macro trend that has hit this business in this industry has been the overall lower appetite to pay that X number of dollars per newspaper clip or per radio clip or per TV clip.

That macro trend around pay by the drink analog non-digital content consumption that hurt us is now, right, kind of turning around. So the macro macros we're not really seeing. And that little Cision-specific or Cision industry-specific macro we've started to get on top of by getting out of that transactional business into a majority of the subscription business.

Tyler Radke -- Citi -- Analyst

Got it. Makes sense. Maybe just shifting gears a bit, could you just talk about how cross-sell bookings and the performance of Cision ID was in the quarter?

Kevin Akeroyd -- Chief Executive Officer

Yes. And as you probably know, right, cross sell basically is, two years ago, for some of you that remember this, right, as an example, right, when the new company comes in the door and they've been in the family for a quarter or two, you still got discrete sales team, you still got discrete buyers, discrete brands, etc. That's through cross sell. One of the beauties of getting everything into this integrated platform, right, and now we've got TrendKite and Cision, is it stops being as much cross sell as it is just getting the customer to buy, right, tab No.

3, tab No. 4, tab No. 5. So they're not actually buying functionality.

PR Newswire used to be a true cross sell, right, with a company that was different six months ago. Now it's literally buying wire as a subscription as a module inside the software platform. So the comment I made about five minutes ago, where ARPU expansion and cross sell really are turning into the same thing, now that everything that I can buy and we could cross sell is literally, right, a module that I can light up, right, in a tab I see in the UI inside the platform. There is the real accelerant, is we're really just saying, hey, it's all in here.

Now do you want to [Inaudible] product two, three, four, five, six? So I really think that that's the right way to think about it, is cross sell is ARPU expansion. And that's basically just getting product two, three, four, five into the customer's hands now that they're all in this integrated platform.

Tyler Radke -- Citi -- Analyst

Great. And the Cision ID?

Kevin Akeroyd -- Chief Executive Officer

Oh, yes, I'm sorry. Cision ID. The adoption continues to go very well. We're excited about the adoption.

And as people that have listened to earlier calls know, we have chosen to bundle the Cision ID. If you go to the new platform, if you buy at least two products, if you buy PR Newswire as a subscription instead of a transaction, right, that drives the core P&L. And then we know that that customer that I just described is going to churn at 200 to 300 basis points less. We've bundled in, as Bob Labick called it, a freemium of the Cision ID.

That adoption continues to go very, very well. The adoption of people that are buying above and beyond the freemium is going well. And probably most important, as I just mentioned, the fact that chief communication officers are now working in with tangible ROI to show true business impact, the way the market and advertisers are, which our buyers have never been able to do for last 40 or 50 years. The fact that they can show the same metrics and the same actual revenue business results as marketing advertising, that adoption, right, is the most important because it's delivering true value.

And the Audiences that I just mentioned, which is the second product on Cision ID, that's when I get to take those Cision IDs out of, right, Cision Communication Cloud. And when I go run, retargeting our paid advertising against the Cision IDs, it's delivering double-digit performance improvement in that advertising. So the fact that we have campaigns out there where people are doing head-to-head tests, right, for an ad campaign using Cision ID versus an ad campaign not using Cision ID and we're seeing double-digit lift on those very, very large paid budgets, it'd be an understatement to say that's a promising sign.

Tyler Radke -- Citi -- Analyst

Makes sense, thanks a lot, guys.

Operator

Our next question will come from Rob Oliver of Baird. Please go ahead.

Matt Lemenager -- Robert W. Baird and Company -- Analyst

Great. Thanks, guys, it's Matt Lemenager on for Rob. Thanks for taking the question. I have one on the sales cycles getting a little bit longer for those large deals.

Kevin, do you think that's something that over time those sales cycle right now, you're out and you have to evangelize that sale a little bit? You're going in with more of a platform, it takes longer to sell to those? If we fast forward 12 or 24 months, do you think anything changes there with those sales cycle or, is this just a matter of you're going in with the larger platform sale, it's just going to take a little bit longer to make that sale?

Kevin Akeroyd -- Chief Executive Officer

It does come back. It actually spikes and then it comes back, right? When Adobe was out there trying to pitch eight-figure marketing cloud deals, right, to an uneducated buyer, that took a while and Salesforce was selling enterprisewide customer experience platforms. We're in that life cycle. As we sell to the C-suite, right, we've got a chief communication officer and a chief information officer making a global decision, right, on a seven-figure deal to standardize on Cision as their earned media tech stack.

That's a very, very different sale cycle than walking in and saying, "Do I get your press release business this year or not," right? So the good news is five-figure deals turn into six-figure deals. Six-figure deals turn into seven-figure deals, and seven-figure deals turn into eight-figure deals because you're now a strategic platform purchase that is going to go globally across these large enterprise companies. The bad news is, is now you're selling at the C-suite, you've got a CMO, a CCO, a CIO, Infosec, etc. So it's a little bit tougher.

It elongates sales cycles. But boy, once you're in, you're in. So I think that we are just like any other SaaS company that has gone from this point solution to platform play. We're in the meat of it right now where buyers aren't used to working this way.

It is going to elongate the sales cycle for X number of quarters, but then that normalizes it because now we're being purchased exactly the same way as HCM or marketing tech or CRM or ERPR. We're just in the middle of that transition phase right now. So hopefully that makes sense.

Matt Lemenager -- Robert W. Baird and Company -- Analyst

OK. Got it. I appreciate that. And then the Cision Impact, the attribution product.

Last quarter, I think you guys gave the metric 511 paying customers as of last quarter. Is there anything you'd talk about with that product this quarter, either a metric like that or even I guess just anecdotally and the traction that that product is getting?

Kevin Akeroyd -- Chief Executive Officer

Yes. Jack, if you want to talk about reporting, I'll hand the baton off to you. But again, basically, that's gone from a, right, a concept to beta products to an independent SKU to now just a feature in the platform. So we're kind of seeing, hey, that is just -- the real metric is going to can we drive more platform and can we drive ARPU accordingly with Cision ID in there? That's the simple answer.

But Jack, you want to elaborate on that at all from a reporting standpoint?

Jack Pearlstein -- Chief Financial Officer

Yes, no. Look, I think, we had sequential improvement. I think what we are working on in terms of go-forward reporting is really to try and tease out the number of modules or the number of types of products within the platform that customers are buying. And we think that the best two metrics will be, over time, the number of subscribers, the number of different products they buy within the module and ultimately, the average revenue per platform unit or per subscriber.

And that's something that we're obviously working toward and we think that's going to be the best thing for folks to anchor on and the best indicator of where we're driving the business.

Kevin Akeroyd -- Chief Executive Officer

And Jack, one more qualitative answer because I think it's important for everybody listening to really get this clear. I mentioned six-figure deals going to seven-figure deals, right? Getting a CIO, a CMO, a CCO and a CFO to all agree on a multi-million dollar platform purchase to standardize globally on Cision as their communications and earned media stack, that would be extremely hard to do if we did not have Cision ID Impact and Cision ID Audiences, right? If software investments can't show tangible ROI, they very rarely enjoy seven-figure investments, right? This category has suffered from that for decades. This is kind of the breakthrough. So the fact that Cision ID and the attribution products are being adopted so robustly is the big reason why we're selling at a C-level instead of the manager level and why, right, deals are turning into much larger deals is because of the attribution component.

So it is a really, really key driver and it's something that the industry struggled with. And certainly, we're bullish about it mid and long term because it's something that we can offer and our competitors can't.

Matt Lemenager -- Robert W. Baird and Company -- Analyst

Thanks, guys.

Operator

Our next question will come from Mark Murphy of JP Morgan. Please go ahead.

Matt Coss -- J.P. Morgan -- Analyst

Hi, good afternoon. This is Matt Coss. On behalf of Mark Murphy, thank you for taking my questions. Just going back to the transactional customers.

Jack, you mentioned a portion of the transactional customer decline really relates to the conversion of some of them to cloud customers. As you've seen the decline accelerate in transactional customers, can we assume that conversion rates also improve? You mentioned, I think, 150 to 200 basis points of shift. Is that more than it was last quarter?

Jack Pearlstein -- Chief Financial Officer

The shift is about the same, and it's not a formula that you can just apply like that. We have kind of one more item that's taking place in the distribution side of the business, and that relates to some of the distribution resellers we have out in the marketplace. They often have ebbs and flows in terms of their own business. At times, we actually vote here internally to stop working with somebody, and that has a fairly significant impact on the transactional level.

And we think that we've been trying to really judiciously prune the number of distribution reseller partners that we work with and making sure they are of best quality and best partners. So there is a little bit of that that's happening that makes it pretty tough to bake into a formula. But we've seen fairly steady, 100, 150, sometimes 200 bps of move from transactional to subscription.

Matt Coss -- J.P. Morgan -- Analyst

OK. That's helpful. Thank you. And I know there was a big cash tax payment this quarter, primarily due to the gain on the sale of the email marketing assets.

But is there anything that's changed in other parts of the business, like spending down federal NOLs that would change cash taxes in the near term?

Jack Pearlstein -- Chief Financial Officer

We've got some tax NOLs that we're currently evaluating. We obviously still have some at our disposal, but I think as we've talked about previously, we ultimately, in the next year or two, become a full-cash tax payer. It's probably in and around the range, maybe a little bit lower of what we use from an adjusted net income perspective in terms of that tax rate, 26%. It's probably a bit lower than that.

But we do still have some shield but that is working its way off. And ultimately, we'll be paying corporate tax just like everybody else.

Matt Coss -- J.P. Morgan -- Analyst

Thank you.

Operator

Our next question today will come from Timothy McHugh of William Blair. Please go ahead.

Timothy McHugh -- William Blair -- Analyst

Hi, thanks. Most of my questions have been answered, but maybe two quick ones. One, in Asia, have you -- is it limited to press release distribution? Have you seen client engagement change more broadly with other products? And then the slower pipeline conversion, how -- is there any change in your win rate, I guess, or is it simply a delay as you look at that data? Thanks.

Kevin Akeroyd -- Chief Executive Officer

Yes. Remember, we are very, very concentrated in the press release offering in China. So the fact that it hit the press release volume and the concentration of revenue in that specific offering is so high, it's really the one that's material, to answer the first question. It's the only one that moves the needle currently.

That's why we're so excited about diversifying into more software and more other offerings out there. But that is the one that moves it. And the second one is, the great news is the average sales prices, our ARPUs are much, much larger, and the win rates are actually improving in these large deals. The downside is the timing.

So to answer it very directly, conversion rate's up, price is up, sales cycle is elongated.

Timothy McHugh -- William Blair -- Analyst

OK, thank you.

Operator

Our next question will come from Dan Salmon of BMO Capital Markets. Please go ahead.

Dan Salmon -- BMO Capital Markets -- Analyst

Hey, good afternoon, guys. I apologize if this has been covered already, I've been bouncing around a few different calls tonight. But, Kevin, I wanted to ask a little bit about the partnership that you announced with Edelman the other day. Obviously, you work with a lot of PR agencies out there so I would love to hear just a little bit more color on sort of what this, I guess, enhanced partnership encompasses.

And then just in the press release, it sort of highlights sort of exclusive partnerships a few times. If you can maybe just touch on that a little bit? Is this sort of something that can be reproduced with other agencies? Or is it something that you're kind of locked into with Edelman for some time?

Kevin Akeroyd -- Chief Executive Officer

Two great questions, Dan. Thank you. And for the first part, again, this is a fantastic milestone and proof point, right? Just like when Accenture built a big practice around Salesforce, when WPP built a big practice around Adobe, right? When the agencies and service providers start to realize, oh, this is real, right, there's a lot of money to be made here and the customer really needs help, guidance, strategy, content creative win, the world's largest agency forms a practice specifically dedicated to your tech stack. That's usually a very good sign in the adoption curve, which is what we've been chasing for the last couple years.

So first and foremost, right, very industry-changing because, right, it's the largest service provider realizing that this is no longer just Cision's idea, this is going to go through the industry like wildfire and we better get on top of it and we're going to be first to market with a practice. So extremely good data point for Cision. But more importantly, probably a good data point for the entire industry because it means this software category is finally moving into that stage of maturity just like all the other ones that we like to mention have already been through that stage of maturity. And then the second part, Dan, is if you read that, right, we still sell Cision Impact and Cision Audiences to every end-user client, and we still sell them to every single agency in the world.

So it's not a product exclusivity, but there are thousands of data attributes on the Cision ID, most of which we do not surface in the out-of-the-box product. And there are some permitted use cases around, for instance, comingling Cision IDs with other data sources to do Edelman-specific audiences. So what we've done is we've carved off a chunk of the data that is not in the out-of-box product, and we've allowed a comingling of the data to basically be, if you want to call it, OEM, into derivative products around the audience activation. That's the piece that we've gone ahead and said, "Hey, Edelman, right, given the energy and the commitment and the certified resources, those advanced use cases around more data and comingling it to do derivative products, that's the exclusive corner." But it's not that we've all of sudden said, "We're out of business with agencies." We work with thousands of agencies, and we will continue to do it, not only in monitoring in press releases and database, but in Impact and Audiences as well.

Dan Salmon -- BMO Capital Markets -- Analyst

Great cap. Thank you. That's very helpful.

Operator

Ladies and gentlemen, this will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Kevin Akeroyd for any closing remarks.

Kevin Akeroyd -- Chief Executive Officer

Well, thanks, everyone, for the great level of engagement and the questioning. And in closing, I'd like to say that the Cision management team remains truly excited about the opportunities in front of us to continue to drive revenue and margin growth globally, deliver innovation to our customers and create value for our shareholders. We believe recent commercial and product milestones put us in even stronger position to capitalize on the vast opportunity in this PR marketing comm space. And lastly, I'd like to thank everyone for joining us on the call and spending some time with us this afternoon.

Thank you.

Duration: 55 minutes

Call participants:

Kevin Akeroyd -- Chief Executive Officer

Jack Pearlstein -- Chief Financial Officer

Dan Bergstrom -- RBC Capital Markets -- Analyst

George Tong -- Goldman Sachs -- Analyst

Michael Turrin -- Deutsche Bank -- Analyst

Bob Labick -- CJS Securities -- Analyst

Tyler Radke -- Citi -- Analyst

Matt Lemenager -- Robert W. Baird and Company -- Analyst

Matt Coss -- J.P. Morgan -- Analyst

Timothy McHugh -- William Blair -- Analyst

Dan Salmon -- BMO Capital Markets -- Analyst

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