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Date

Wednesday, Nov. 5, 2025, at 5 p.m. ET

Call participants

  • Chief Executive Officer — Scott Turicchi
  • Chief Financial Officer — Jim Malone
  • Chief Revenue Officer and EVP of Operations — Johnny Hecker
  • Senior Vice President of Finance — Adam Varon

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Risks

  • Management indicated that the adjusted EBITDA margin for Q4 2025 is expected to be lower, reflecting headcount additions and seasonal audit-related costs.
  • The Soho (SOHO) business faces a "near-term headwind" according to Johnny Hecker in organic sign-ups due to changes in the search environment. Management noted this "will continue in Q4," according to Scott Turicchi.
  • Q4 2025 free cash flow is expected to be negligible, as semiannual bond interest is paid, limiting cash generation in that period.

Takeaways

  • Consolidated Revenue -- $87.8 million in revenue for Q3 fiscal year 2025, flat compared to Q3 fiscal year 2024.
  • Corporate Revenue -- $56.3 million in corporate revenue for Q3 2025, up 6.1% from $53.1 million in Q3 2024 and rising sequentially from $55.3 million in Q2 2025.
  • Corporate Customer Base -- Approximately 65,000 customers, up over 12% from 58,000 in Q3 2024 and up from approximately 63,000 in Q2 2025.
  • Corporate Trailing 12-Month Revenue Retention -- 101.9%, stable from 102% sequentially and up from 99.8% in Q3 2024.
  • Corporate ARPA -- $293, down from $301 in Q2 2025 and $310 in Q3 2024, reflecting an SMB mix shift; Management highlighted sustained ARPA growth, excluding eFax Protect, for several quarters.
  • eFax Protect Growth -- Approximately 6,700 customers added in Q3 2025, driving SMB segment expansion.
  • VA Public Sector -- Management reported record high usage and revenue from the VA in Q3 2025, stating the rollout was "unfazed by the government shutdown."
  • SOHO Revenue -- $31.5 million in Q3 2025, down 9.2% from $34.7 million in Q3 2024 and slightly below $32.4 million in Q2 2025, described as a planned, strategic decrease.
  • SOHO Account Base -- Declined from 682,000 to 661,000 sequentially.
  • SOHO ARPA -- $15.56 for Q3 2025, stable versus $15.62 in Q2 2025 and up from $15.38 in Q3 2024.
  • SOHO Cancellation Rate -- 3.71% in Q3 2025, an improvement from 3.84% in Q2 2025; management attributed sequential volatility to acquisition channel mix.
  • Adjusted EBITDA -- $46.4 million in adjusted EBITDA for Q3 2025, down 1.2% ($600,000) from Q3 2024 due to planned headcount additions, resulting in a 52.8% adjusted EBITDA margin, about 60 bps above the Q3 2025 guidance midpoint.
  • Adjusted Net Income -- $26.6 million in Q3 2025, down 0.8% ($200,000) from Q3 2024. This was primarily driven by lower interest expense and depreciation and amortization, partially offset by lower adjusted EBITDA and higher income tax.
  • Adjusted EPS -- Adjusted EPS was $1.38 for Q3 2025, unchanged from the prior year.
  • Free Cash Flow -- $44.4 million in Q3 2025, up 32% from $33.6 million in Q3 2024; management highlighted "outstanding rate of collections" according to Scott Turicchi and DSOs declined to 25 days in Q3 2025.
  • Cash Balance -- $98 million in cash at the end of Q3 2025, with management stating it is "sufficient to fund our operations, repurchases of equity and debt."
  • CapEx -- $7.2 million in Q3 2025, down about 10% ($800,000) from the prior year.
  • Indebtedness Reduction -- Retired $200 million of 6% notes after Q3 2025 via a $200 million credit facility draw, The remaining $34 million will be retired with $20 million from the credit facility and $14 million from cash on or about November 10, 2025; total debt will drop from $805 million to $569 million.
  • Debt Net Leverage Target -- Management expects to approach "three times gross debt to adjusted EBITDA."
  • Interest Rate -- New credit facility rate at 5.65%, approximately 35 bps below notes being retired.
  • Equity Repurchases -- 121,000 shares repurchased in Q3 2025 for $2.7 million, with cumulative repurchases of approximately 1.8 million shares for about $47 million under a $67 million authorization as of Q3 2025.
  • Q4 2025 Guidance -- Revenue guidance for Q4 2025 is $84.9 million to $88.9 million (midpoint $86.9 million); Adjusted EBITDA guidance is $43.1 million to $46 million (midpoint $44.5 million) for Q4 2025; Adjusted EPS guidance is $1.27 to $1.37 (midpoint $1.32) for Q4 2025; share count about 19.4 million; Non-GAAP tax rate guidance is 20.5%-22.5% for Q4 2025.
  • Brand Refresh -- Announced redesign of the "eFax" and Consensus brands, aiming to unify go-to-market strategy and leverage established market trust for additional offerings such as interoperability and AI-enabled solutions.

Summary

Management confirmed both sequential and year-over-year increases in corporate channel revenue for Q3 2025, supported by record customer net adds and all-time high usage at major public sector clients. Capital structure actions reduced overall indebtedness, with expectations for lower interest costs following debt refinancing activity. Management stated that while SOHO revenue and customer base continued to decline in line with strategic priorities in Q3 2025, the cancellation rate improved to 3.71% and ARPA remained stable at $15.56, supported by ongoing optimization of acquisition channels. Investments in advanced solutions such as AI-powered clarity and EHR integration were credited with supporting revenue performance in the corporate business, while the company reaffirmed its commitment to further hiring, product innovation, and capital returns in the current competitive landscape.

  • Johnny Hecker said, "Q3 2025 revenue reached a record $56.3 million, a 6.1% increase over $53.1 million in Q3 2024, and a sequential increase from the $55.3 million in revenue we reported in Q2 2025."
  • Scott Turicchi stated, "Thank you, Adam. We had another solid quarter in Q3 2025 with a slight increase in revenue over Q3 2024. Our corporate channel continued to lead the way with another quarter of over 6% growth, despite a difficult comparable presented by Q3 2024. This was driven once again by record usage from our customers and a record quarterly number of net adds from our eFax Protect service."
  • Jim Malone reported, "Adjusted EBITDA of $46.4 million is a decrease of $600,000 or 1.2% versus Q3 2024, primarily driven by planned headcount additions."
  • Management cited record high usage and revenue from the VA in Q3 2025, indicating minimal impact from the government shutdown on public sector momentum.
  • Management outlined further debt and equity repurchases would be "opportunistic in nature" according to Scott Turicchi into 2026, contingent on cash balances and available capital, with no fixed mix set between the two.
  • Team expects temporary friction in SOHO sign-ups and paid ads recovery could "take several months" according to Johnny Hecker and may impact Q4 and "possibly in Q1 as well." according to Scott Turicchi

Industry glossary

  • ARPA: Average revenue per account—a metric indicating average revenue generated per customer account in a given period.
  • DSOs: Days sales outstanding—a working capital metric measuring the average number of days to collect payment after a sale.
  • eFax Protect: A lower-ARPA, SMB-targeted cloud fax product contributing to customer growth in the corporate segment.
  • FedRAMP High Impact Certification: A federal security authorization enabling solutions to process sensitive government data; significant for public sector cloud adoption.
  • Clarity: The company's AI-driven product for extracting structured data from unstructured documents, cited as a driver of advanced product revenue.
  • EHR: Electronic Health Record—a software system for storing and sharing patient health information, integration with which is an advanced Consensus product area.

Full Conference Call Transcript

Operator: Good day, ladies and gentlemen, and welcome to Consensus Cloud Solutions, Inc. Q3 2025 earnings call. My name is Paul, and I will be the operator assisting you today. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If any of you require operator assistance during the conference, on this call from Consensus Cloud Solutions, Inc. will be Scott Turicchi, CEO; Jim Malone, CFO; Johnny Hecker, CRO and Executive Vice President of Operations; and Adam Varon, Senior Vice President of Finance. I will now turn the call over to Adam Varon, Senior Vice President of Finance at Consensus Cloud Solutions, Inc. Thank you. You may begin.

Adam Varon: Good afternoon, and welcome to the Consensus Cloud Solutions, Inc. investor call to discuss our Q3 2025 financial results, other key information, and our Q4 2025 quarterly guidance. Joining me today are Scott Turicchi, CEO; Johnny Hecker, CRO and EVP of Operations; and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks, Johnny will give an update on operational progress since our Q2 2025 investor call, then Jim will provide Q3 2025 financial results and our Q4 2025 guidance range. After we finish our prepared remarks, we will conduct a Q&A session. At that time, the operator will instruct you on the procedures for asking a question.

Before we begin our prepared remarks, allow me to direct you to our forward-looking statements and risk factors on Slide two of our investor presentation. As you know, this call and the webcast will include forward-looking statements from the anticipated results that could cause actual results to differ. Such statements may involve risks and uncertainties.

Scott Turicchi: Thank you, Adam. We had another solid quarter in Q3 with a slight increase in revenue over Q3 2024. Our corporate channel continued to lead the way with another 6% plus growth quarter, despite there being a difficult comparable presented by Q3 2024. This was led once again by record usage from our customers and a record quarterly amount of net ads from our eFax Protect service. In addition, the VA also hit record high usage and revenue for the quarter. So revenue was in line with our expectations and showed an improvement in its rate of decline from Q2 2025. Adjusted EBITDA was slightly ahead of our expectations and generated a 52.8% adjusted EBITDA margin.

In the quarter, we added key personnel that we outlined in our original guidance in February, and we expect to continue to hire in Q4. As a result, due to these hires and seasonal cash costs associated with the year-end audit, we would expect a lower adjusted EBITDA margin in Q4 than we experienced in Q3. Free cash flow in the quarter was an exceptional amount of $44.4 million, up 32% from $33.6 million in 2024. This was due in large part to the adjusted EBITDA conversion to free cash flow coupled with an outstanding rate of collections, especially in our corporate channel, which has driven our total DSOs down to 25 days for the company as a whole.

A reminder, we pay our interest on the bond semiannually in Q4, and as a result, we do not expect the quarter to generate much, if any, free cash flow. However, based on our nine-month free cash flow, we would expect the free cash flow for the year to be in excess of $95 million, which is ahead of our original expectations. On October 15, we drew approximately $200 million of our credit facility and retired a like amount of the 6% notes. We have issued a call notice for the remaining $34 million, which will be funded with a further draw of $20 million from the credit facility and $14 million from our cash balances.

This will reduce our total indebtedness from the original $805 million to $569 million and will put us very close to our target of three times gross debt to adjusted EBITDA. In addition, the interest rate on the new debt will be 5.65% or 35 basis points below the cost of the notes that we are retiring. We will continue to look for opportune repurchases of both our debt and equity. I will now turn the call over to Johnny to provide more operational details.

Johnny Hecker: Thank you, Scott, and hello, everyone. During my remarks, I will focus on our key performance indicators, such as revenue and customer metrics, and we'll discuss the go-to-market strategies for our corporate and Zoho business channels. I will also provide operational updates and share several key highlights from the quarter. Our corporate channel continues to demonstrate strong execution and sustained positive momentum. Q3 2025 revenue reached a record $56.3 million, a 6.1% increase over $53.1 million in Q3 2024, and a sequential increase from the $55.3 million in revenue we reported in Q2 2025. As we noted last quarter, Q3 2024 was a particularly strong comparable, which makes this continued 6% plus year-over-year growth even more encouraging.

This growth is driven by the sustained expansion and increased usage within our enterprise accounts and the continued momentum in our public sector business, complemented by stable growth in advanced products and strong performance in our corporate e-commerce channels. This reaffirms our corporate go-to-market strategy and lays the foundation for our future go-to-market plans, which I will address later in my remarks. I am pleased to announce that our trailing twelve-month revenue retention rate stands at 101.9%. This is stable from 102% in the previous quarter, again, confidently meeting our greater than 100% target, up from 99.8% in Q3 2024. Our corporate customer base expanded to a new record of approximately 65,000 at the close of Q3.

This represents an increase of over 12% from 58,000 in Q3 of last year and a sequential increase from approximately 63,000 at the close of Q2. The primary driver for this growth remains our eFax Protect offering, which expanded by approximately 6,700 new customers this quarter, contributing to our SMB cohort. Corporate ARPA was $293 for the quarter, compared to $301 in the prior quarter and $310 in Q3 of last year. This expected trend is a direct result of two counterbalancing factors: the successful expansion of our smaller SMB cohort, which includes our eFax Protect product at an ARPA of around $50, balanced by strong high-value performance from our large enterprise clients.

Importantly, we are proud to report strong sustained growth in our corporate ARPA net of eFax Protect for several quarters now, which demonstrates the underlying strength and growing value of our core enterprise customer base. Our corporate performance this quarter continued to trend from recent quarters, demonstrating sustained success at all levels of the market. We are effectively pairing robust revenue growth at high retention rates from our enterprise clients with steady customer base expansion in the SMB cohort. This balanced approach to growth proves our ability to execute across the entire customer continuum and provide significant stability.

This is evident by a continued expansion on two key metrics in our eFax network: the number of participants and the volume of data we process across the network. Turning to the public sector, I want to make a clear distinction. Our main revenue driver in this vertical, the VA, saw its rollout and usage remain unfazed by the government shutdown. The VA continues to set new all-time high records for usage, a clear proof of deepening adoption that has persisted even during the shutdown. Separately, since achieving our official FedRAMP High Impact Certification, we have built a solid pipeline among other government agencies and non-government organizations. We are successfully winning and onboarding new customers onto the eFax product.

While the temporary government shutdown has led to some delayed decision-making, we see this as a short-term timing impact on the conversion pace, and it does not affect our positive outlook for this new pipeline. Moving on to our Zoho business, we recorded Q3 revenue of $31.5 million, representing a strategic planned year-over-year decrease of 9.2% from $34.7 million in Q3 2024. This is a slight sequential decrease from $32.4 million in Q2 2025, reflecting our continued strategic focus on optimizing profitability and maximizing the efficiency of our advertising investments in this channel. The global sellout account base declined from approximately 682,000 in the prior quarter to approximately 661,000 during Q3.

Soho ARPA for Q3 2025 was $15.56, compared to $15.62 in Q2 2025 and $15.38 in Q3 of last year. Our SOHO cancellation rate in Q3 2025 was 3.71%, down from 3.84% in the previous quarter. As I explained on our Q2 call, our Soho customer acquisition strategy led to an unusual spike in ads last quarter, which temporarily influenced the cancel rate in both Q2 and Q3. Since then, our customer acquisition has reverted to a more normal pattern. Yet, like all businesses that rely on digital marketing, we are actively navigating the recent changes in the search environment.

This has created a near-term headwind, contributing to a slight decline in organic sign-ups in Q3, which we believe will continue in Q4. We are already executing a multi-step plan to recover from these impacts. While we continue to manage profitability with discipline, we are determined to return our paid ads numbers to the mid-fifties, which we expect will take several months to fully realize. One key factor in this plan is to emphasize one of our greatest assets, our trademark and redesigned eFax brand. This strategic focus on eFax follows a year-long intensive brand study.

From day one, more than thirty years ago, eFax was a pioneer and leader in digital transformation, and we have invested heavily in this brand over decades. With the brand refresh, we now better leverage that established market trust, proven by millions of visitors to our web assets every month, to unify our advanced solutions. It allows us to bring our entire go-to-market portfolio from CloudFax to interoperability and AI under one familiar name, clarifying our evolution from a simple fax service to a comprehensive platform for secure data exchange and digital transformation. Consensus Cloud Solutions, Inc., which has also received a brand refresh, will remain the company's Nasdaq-listed brand for investor continuity and as a universal home for employees.

To summarize, we are very pleased with the quarter's performance and remain highly confident in our strategy. We will continue on our go-to-market path, which has proven to be very effective. Healthcare remains at the center of our strategy, complemented by strong execution on our automated e-commerce channel for the down market. We are expanding our efforts in the corporate SMB and upper enterprise markets, which has extended into the public sector. We expect our Soho business to continue on its trajectory with a clear focus on profitability. Before handing the call over, I want to express my sincere thanks to our employees for their hard work and dedication this past quarter.

My gratitude also extends to our customers and partners for their ongoing trust and collaboration. We have delivered another excellent quarter, and we are focused on building on this momentum. With that, I'm handing over to our CFO, Jim Malone, who will now provide a detailed update on our financial performance and outlook. Jim?

Jim Malone: Thank you, Johnny. Good afternoon, everyone. In our press release and on this call today, we are discussing Q3 2025 results and guidance for Q4 2025. We expect to file our 10-Q by close of business today. Moving to corporate. Beginning with our corporate business results, Q3 2025 was another strong quarter for corporate with record revenue of $56.3 million, an increase of $3.2 million or 6.1% versus the prior year quarter. As Johnny just mentioned, Q3 2024 was a particularly strong comparable quarter, which makes the continued 6% plus corporate growth even more meaningful.

Our record Q3 2025 corporate revenue delivered a trailing twelve-month revenue retention rate of approximately 102%, up from 99.8% from the prior comparable period and stable sequentially. Our corporate customer base expanded to approximately 65,000 in Q3 2025 versus 63,000 in Q2 2025 and 58,000 in the prior comparable period. Corporate ARPA was $293 versus $301 in Q2 2025 and $310 in Q3 2024. This trend is in line with our expectations amid an expanding customer base in the lower SMB cohort, primarily due to record eFax Protect paid ads, which generated an approximate $50 ARPA.

As Johnny stated, corporate ARPA net of eFax Protect has experienced sustained growth for several quarters, demonstrating strong performance from our core enterprise customer base. Moving to Soho, Q3 2025 revenue of $31.5 million compared to $34.7 million, representing a strategic planned decline of $3.2 million or 9.2% from the prior comparable period, and a slowing decline from the Q2 2025 comparable year-over-year period of 9.4%. Q3 2025 ARPA of $15.56 had an improvement from the prior year comparable period of 18¢ and was in line sequentially. The Soho cancel rate improved sequentially to 3.71% from 3.84% in Q2 2025. Moving to consolidated results. Revenue was $87.8 million, consistent with the prior year comparable period.

Adjusted EBITDA of $46.4 million is a decrease of $600,000 or 1.2% versus Q3 2024, primarily driven by planned headcount additions. We delivered a healthy 52.8% adjusted EBITDA margin or approximately 60 basis points favorable to the midpoint of our Q3 2025 guidance range. Q3 2025 adjusted net income of $26.6 million is a decrease of $200,000 or 0.8% versus Q3 2024, primarily driven by lower interest expense and depreciation and amortization, offset in part by lower adjusted EBITDA and higher income tax. Adjusted EPS of $1.38 was unchanged from the prior year comparable period. Q3 2025 non-GAAP tax rate and share count was 22.3% and 19.3 million shares. Capital allocation.

Free cash flow, Q3 2025, free cash flow is $44.4 million, an increase of approximately $11 million or 32% versus the prior comparable period, driven primarily by operational performance. Q3 2025 CapEx of $7.2 million, a decrease of $800,000 or approximately 10% versus the prior year. Cash and cash equivalents. We ended Q3 2025 with cash of approximately $98 million, which is sufficient to fund our operations, repurchases of equity and debt. 6% notes debt retirement. As noted in our 8-K filed on 07/14/2025, we executed a $225 million three-bank club deal, including standard covenants to retire our 6% notes due October 2026.

The loan consists of a $150 million delayed draw term loan plus a $75 million revolving credit facility. The interest rate is SOFR plus an applicable margin based on total net leverage ratio. Subsequent to the quarter end on 10/15/2025, we called $200 million of our 6% notes at par, leaving $34 million outstanding. We utilized our $150 million delayed draw term loan plus $50 million on the revolver. We didn't retire the entire $234 million as our secure lien capacity under our bond indentures was $200 million based upon our June 30, 2025 cash balance. The borrowing cost will be approximately 10 to 35 basis points lower than our current 6% rate.

We have notified our trustee and we will call the remaining balance of the 6% notes, $34 million, on or about November 10 with a combination of $14 million balance sheet cash and $20 million of the remaining revolver. Equity repurchases. In February 2025, the board approved an extension to the previously approved program for another three years and up to $67 million. In Q3 2025, we repurchased 121,000 shares for $2.7 million, bringing the total equity purchases to date of approximately 1.8 million shares for approximately $47 million. There were no bond repurchases in Q3 2025. Moving to guidance. We are providing Q4 2025 guidance as follows.

Revenues between $84.9 million and $88.9 million, with $86.9 million at the midpoint. Adjusted EBITDA between $43.1 million and $46 million, with $44.5 million at the midpoint. Adjusted EPS of $1.27 to $1.37, with $1.32 at the midpoint. Estimated Q4 2025 share count is approximately 19.4 million shares, with a tax rate between 20.5% and 22.5%, with 21.5% at the midpoint. Please remember that as previously mentioned, our 2025 guidance and actual results exclude foreign exchange gain or losses on revaluation of intercompany accounts. That concludes my formal remarks. I'd like to turn the call back to the operator for Q&A. Thank you.

Operator: Thank you. We will now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we begin. And the first question today is coming from David Larsen from BTIG. David, your line is live.

David Larsen: Hi. Congratulations on the good quarter. Can you maybe talk a bit about the VA and corporate sales? And I think I heard you say that the VA had their highest usage rate yet. Just any sort of color there in terms of incremental growth going forward and just any thoughts here would be helpful.

Scott Turicchi: Great. Yeah. I'll turn it over to Johnny.

Johnny Hecker: Thank you, David. Good question. Yeah. The VA continues to expand. So what we're seeing is increased usage in the existing base. But we also continue to roll out to new facilities. We still haven't rolled out the solution to the entire base of facilities and sites. But we also think there is room for expansion in the adoption within the existing sites. We see growth with the usage in existing sites, so basically, same-store sales. But also, with new sites coming on. And as I stated on the call, we do see record highs in usage on weekdays. And overall, the volume is growing as well. So that is very encouraging.

And we expect that growth to continue into 2026. So I don't think we've reached the limits of the potential yet.

David Larsen: How many VA sites are you in now? And what is the total potential? Or on a scale of one to 10, 10 being 100% penetrated across all potential VA sites, what number would you put yourself at now?

Scott Turicchi: Well, I think there's two elements to that question. So one is we're more than 50% in the absolute raw number of sites deployed, but not all sites are equal. That's one element. But the other element is even in the sites where we are deployed, we do not yet have, in many instances, all of the traffic. And there are some reasons for that, such as incumbent contracts that have to burn off before we'll capture some of that traffic. In some instances, the site didn't fully appreciate all the different ways in which faxes could be either sent or received. Or outbound is easier to do.

So you've got to port the numbers for you to the inbound traffic. So that's why I tagged on to what Johnny said, which is we're on the $5 million plus pace for this year in terms of actual revenue. And we'll meet that goal. We'll go somewhat north of $5 million. And then what we're studying is the exit run rate going into 2026. That will give us a book of business based on the number of pages processed on average per business day, peak volumes, etc.

And then the exercise we're going through now from a budgetary standpoint is what is the timing and what is the pace at which we pick up incremental traffic in the sites where we're already deployed but don't yet have all of it. So it's all of those pieces together. But if you don't bind it to a given year, and I understand kind of where you're headed because people are looking at, you know, trying to build 2026 models. But if you go look out over, say, a two to three-year time frame, there leads us to believe there are multiples of revenue available to what we booked in 2025.

David Larsen: How many multiples? So could the five turn into 10 or 20 million?

Scott Turicchi: That's what's still under discussion. So could the five turn into 10 or 20 million? Yes. But the question is where? Between 10 and 20 million. I think 10 is a highly confident number. And it's the number we talked about when this contract was originally won several years ago. But I think we have good reason to believe it's a higher number than that. The question is, how much higher than 10? And in order to get confidence in that number, we need to, in conjunction with the VA, do some additional analytical work and then see what is a reasonable time frame over which that traffic can be captured. Not all of which is in our control.

It's all had to do with the VA, some had to do with the way they roll things out. And as I said, existing contracts that carried over that need to expire. So I think it is probably still at least three years before realistically we can capture all the traffic, but it could be even more than three years.

David Larsen: Okay. Great. And then another quick one if you don't mind. The Soho, you know, year-over-year revenue growth, it was down 9%. What would you expect that deceleration rate to be, let's say, in 2027 or 2028? When are we going to see that sort of level off?

Scott Turicchi: Yeah. I think that's a good question, but it's very difficult to predict. I don't think we can give guidance in that direction two years out at this point. We've been talking about it for, you know, a year and a half now, and where is that, you know, at one point, at what point is it gonna, like, reach that steady base, and then the decline will go into the low single digits? But it's very difficult to model. There are so many moving parts to this business. I mean, we've seen it slow down, you know, over time. But I don't think we can give you a clear number on 2027 just yet.

I mean, I only get a look. It's clearly a salary pace, it's not gonna happen in 2026. Probably depending on where your goal is, it's not gonna happen in 2027. So it's 2028 or later, and the input factors that are relevant to us are, you know, as the base ages, how we see that cancel rate come down. You saw it come down sequentially from Q2 to Q3, 13, 14 basis points. Some of that, as Johnny mentioned, is prepared remarks, is negatively influenced by certain excess customers that were acquired in Q2, which burn off very quickly, but they're very cheap acquisition costs.

So we're actually looking at studying the various cohorts to see where is that stabilized base of cancel as that base ages? So that's one element of the equation. And the other element is not only how many gross adds you bring in, many new net customers in a given period, or what kind of customers do you bring in? Are they short-lived customers that you can get at a very attractive LTV to cap? But they might only be around two, three, four months. Or are they longer customers? Because there's a whole range of use cases that will dictate the life of the customer.

For us, it's really a matter of matching the right expense against their life, not so much whether their life is four months or twelve months or eighteen months, what are you paying to get that stream of revenue? So all those things are going in. We will be crunching those models as we go through our budgeting process, which has commenced, but it's still early stage.

David Larsen: Okay. And then just one more quick one. Can you talk a little bit about the advanced products upsells into corporate? Just any color there on, you know, the use of AI, you know, RCM acceleration. Thanks very much.

Johnny Hecker: Yeah. I can comment on that, David. It's a couple of things that we saw accelerate, and one of them is clarity adoption and clarity revenue, which is that AI product that drives data. Turns that unstructured data into structured data. So I've commented on it, I think, on the last call a little bit, but that is one of the key drivers. And the other one was in combination with that, really, our integration engine business, right, where we help customers connect their EHR systems to provide that interoperability. That has also been performing quite well, and the combination of those two with the connectivity to our eFax network is what's driving revenue there and what's helping us.

David Larsen: Okay. Great. I'll hop back in the queue. Congrats on a good quarter.

Johnny Hecker: Thank you. Thank you.

Operator: Thank you. And as a reminder, it will be star one on your phone if you wish to ask a question today. Next question is coming from Gene Mannheimer from Freedom Capital. Gene, your line is live.

Gene Mannheimer: Thank you. Hey. Good afternoon, guys. Congrats on the good numbers. Question on that Soho paid ads. I know, Johnny, you talked about that. It's 50. It was the lowest in a while. And just so for my edification, that was due to a spike last quarter around promotional pricing. Or is there also some level of conversion of the Soho customer to enterprise that was a factor?

Johnny Hecker: No. I think what we've mentioned, Gene, for the question. Yeah. What we mentioned was last quarter, we had a little bit of a spike. That was because of an acquisition channel for our new customers, you know, commercially very interesting for us. But as Scott mentioned earlier, those customers come on at a low price, but they also fall off fairly quickly. So they burn off. They have a shorter lifetime than regular customers. We did see a little bit of a decline in our paid ads this quarter. There were multiple factors to it.

And the one that I mentioned was, you know, the change in search that we're seeing a little bit of headwind in the organic traffic. But we have put some measures in place, and we are already seeing some recovery of that. We're getting additional sign-ups and reverting back to that mid-50 number. I don't think it's gonna happen overnight. I don't think we will probably not reach that by the end of this quarter. Q4 is usually a slow quarter for Soho anyway. We're expecting it in the course of, you know, the first few months of the next year to get back to that.

Gene Mannheimer: Okay. Yeah. That helps out. Thanks, Johnny. And then just my follow-up is on the VA discussion, getting from, say, $10 million in revenue to $20 million or whatever the number happens to be, can that be accomplished based on the scope of the agreement you have in place today, or would it involve selling additional products into the VA?

Johnny Hecker: That's a good question. I think we are right now, we're just talking about the fax platform. Right? About the eFax platform that is FedRAMP High certified. There's obviously potential to upsell other solutions into the VA. It would have to go through, you know, a similar process as the fax platform to be certified on the FedRAMP high platform or environment. I think we've learned a lot, so it wouldn't take us as long as it did for a fax. But what we're talking about right now is really only the fax platform. We're not adding in any additional products into that.

Gene Mannheimer: That's great. Thank you very much.

Scott Turicchi: And we have before we go to more live questions, we've got a question by email. So what has to do with capital allocation? Our thoughts really as we look forward to 2026, between retirement of debt and share repurchases. As I noted in my opening remark, I think both are gonna be opportunistic in nature. Right now, there's no mix that we've set between the two as it relates to either cash balances or free cash flow generated in 2026.

One of the things that we're gonna be looking at is as we get into 2027, and we look at the six and a halves, and their maturity in October 2028, what is sort of the right level of debt as we think about that refinancing? So that may influence some retirement of debt, which could be a combination of either the continuation of buying the six and a half percent in the open market, but as I noted before, the volume there has been limited because we've taken about $150 million out over the last couple of years. But we do have the ability, as we generate cash, to take our revolver down.

And I think that we're gonna prepay or repay any bank debt or credit facility, it would be in the revolver because that we can reborrow. The delayed draw term loan by its terms does have some mandatory prepayments per quarter of slightly under $2 million per quarter. So you will see about a little under $8 million come out next year just for the terms of the delayed draw term loan. But if we do have excess cash, we can't buy bonds, if you don't like stock price, we can't get enough stock, we could pay down the revolver. And then if we have needs in the future, we could reborrow the revolver.

So that's kind of how we're thinking about it now. As I mentioned, we're still in the relatively early stages of budgeting. So things like how much free cash flow and based on our current balances, what kind of capital is available is also gonna be a question of the jurisdictional issue of where that cash sits. Not only at 12/31/25, but as it's earned over 2026.

Clearly, there'll be an amount in the US, but there are also amounts in foreign jurisdictions, and so we'll have to look at how much of that cash we can bring back home to the US because both stock repurchases and debt retirement, whether it is in the form of the bank debt or the 6 and a half, require US cash as opposed to foreign cash. Paul, is there another live question? Because if not, I've got another email question.

Operator: There were no other questions from the lines at this time.

Scott Turicchi: Okay. So the second email question that came in had to do, I think I can interpret this email in terms of its quote, it stated the marketing-related disruption we mentioned in Soho, which I think is really what Johnny commented both in his prepared remarks, but also in response to Gene's question. Is that does this likely disrupt the improvement year over year going into Q4 in 2026? If you mean the rate of decline, which has been declining, it may very well impact Q4 somewhat. In other words, we've been seeing on a pretty much sequential basis the rate of decline coming down, so it went from 9.4 to 9.2, from Q2 to Q3.

That could, we'll have to see because I think, as Johnny mentioned, it's probably gonna take up to get that normalized base a few months, which will take us into early 2026, possibly through Q1, back to around 55,000 net adds per quarter. So you could see a little bit of friction in Q4. Haven't done, say, enough budgeting and enough of that to know what kind of impact there might be. But I think, yeah, you should expect there could be some noise in Q4, possibly in Q1 as well. Paul, we'll open up if there's any further live questions.

Operator: There were no further questions from the line, Scott. I will hand it back to you for closing remarks.

Scott Turicchi: Great. Thank you. Appreciate everybody for joining us today for the Q3 call. We will be at a couple of conferences, I think more carry the high yield market than the equity market, between now and our next earnings call. So stay tuned for those activities. We will also be putting out a release probably in late January, early February in terms of giving the timing for the Q4 release, at which time we will give full-year 2026 guidance. At this point, we would intend, as we've done in the past, to give a range of revenues, adjusted EBITDA, and adjusted net earnings per share.

So, obviously, there'll be a call that'll look back to 2025, report the quarter, the full fiscal year, and then what we're seeing as we look forward to 2026. And, obviously, if there's any questions that you have between now and then, feel free to reach out. Contact Laura or any one of us. We can either arrange a call or if it's a fairly straightforward question, answer it by email.

Operator: Thank you. And this does conclude today's conference. You may disconnect your lines at this time. Have a wonderful day. Thank you for your participation.