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What changed in Consensus Cloud Solutions, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Consensus Cloud Solutions, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+227 added−252 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-31)

Top changes in Consensus Cloud Solutions, Inc.'s 2023 10-K

227 paragraphs added · 252 removed · 177 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

33 edited+12 added−7 removed24 unchanged
Biggest changeUnite : Unite is a single platform that allows the user to choose between several protocols to send and receive healthcare information in an environment that can integrate into an existing electronic health record (“EHR”) system or stand-alone if no EHR is present. jSign® : jSign® provides electronic signature and digital signature solutions to businesses, offering document markup and end-user signing services via mobile-aware web application and enterprise API.
Biggest changeUnite : Unite is a single platform that allows the user to choose between several protocols to send and receive healthcare information in an environment that can integrate into an existing electronic health record (“EHR”) system or stand-alone if no EHR is present. jSign® : jSign® provides electronic signature and digital signature solutions to businesses, offering document markup and end-user signing services via mobile-aware web application and enterprise API. -4- Conductor: Conductor is a r obust interface engine and complete interoperability platform that provides seamless integration technology supporting all the latest standards for connectivity and data formats (API/FHIR, HL7, Direct Secure Messaging, web services, message queues, etc.), addressing a wide range of interoperability challenges from the simple to the extremely complex.
Key drivers to cloud adoption include: • Digitization : Key industry verticals such as healthcare, government, financial services and law have been heavily investing in digitization of information and the online fax industry has significantly benefited from the trend. • Data security and data privacy awareness: Digital cloud fax technology is demonstrably more secure than traditional email and traditional fax machines, which are vulnerable to physical security threats and retrieval problems. • Regulatory tailwinds: Because of its security, eFax® meets regulatory requirements for data security and remains ubiquitous in highly regulated industries, such as healthcare and sectors where large volumes of sensitive information is exchanged. -3- • Cost efficiency : Cloud-based solutions often have minimal installation costs and are highly efficient to scale as the needs of the organization fluctuate. • Green initiatives: Cloud-based solutions appeal to customers engaging in “green” initiatives to reduce their impact on the environment because they rely less on paper for printing documents.
Key drivers to cloud adoption include: • Digitization : Key industry verticals such as healthcare, government, financial services and law have been heavily investing in digitization of information and the online fax industry has significantly benefited from the trend. • Data security and data privacy awareness: Digital cloud fax technology is demonstrably more secure than traditional email and traditional fax machines, which are vulnerable to physical security threats and retrieval problems. • Regulatory tailwinds: Because of its security, eFax® meets regulatory requirements for data security and remains ubiquitous in highly regulated industries, such as healthcare and sectors where large volumes of sensitive information is exchanged. • Cost efficiency : Cloud-based solutions often have minimal installation costs and are highly efficient to scale as the needs of the organization fluctuate. • Green initiatives: Cloud-based solutions appeal to customers engaging in “green” initiatives to reduce their impact on the environment because they rely less on paper for printing documents.
Our experienced management team has a highly successful track record with regard to both business performance among its industry peer group, growing new business lines, and identifying and integrating strategic acquisitions. Our Strategy Our strategy focuses on generating attractive organic growth, achieving solid margins and free cash flow generation, pursuing value-accretive acquisitions and delivering high value to our shareholders.
Our experienced management team has a highly successful track record with regard to both business performance among its industry peer group, growing new business lines, and identifying and integrating strategic acquisitions. -5- Our Strategy Our strategy focuses on generating attractive organic growth, achieving solid margins and free cash flow generation, pursuing value-accretive acquisitions and delivering high value to our shareholders.
For information about the regulations to which we are subject and the risks we face with respect to governmental regulation, please see Item 1A of this Annual Report on Form 10-K entitled Risk Factors. Seasonality General economic conditions have an impact on our business and financial results.
For information about the regulations to which we are subject and the risks we face with respect to governmental regulation, please see Item 1A of this Annual Report on Form 10-K entitled Risk Factors. -6- Seasonality General economic conditions have an impact on our business and financial results.
Position in the Growing Enterprise Cloud Fax Market. We believe our status in the enterprise cloud fax space provides Consensus with an opportunity for organic growth and the potential to explore acquisitions that are value accretive and enhance our scale and geographic diversity. Positioned to Support Healthcare Interoperability.
We believe our status in the enterprise cloud fax space provides Consensus with an opportunity for organic growth and the potential to explore acquisitions that are value accretive and enhance our scale and geographic diversity. Positioned to Support Healthcare Interoperability.
Our revenues consist of monthly recurring subscription and usage-based fees, with monthly recurring subscription revenue representing approximately 73% of our total subscription revenue for 2022. Our cancellation rates have remained relatively steady over time, and we expect this trend to continue into the future given that many of the services we provide are critical to our customers’ business operations.
Our revenues consist of monthly recurring subscription and usage-based fees, with monthly recurring subscription revenue representing approximately 72% of our total subscription revenue for 2023. Our cancellation rates have remained relatively steady over time, and we expect this trend to continue into the future given that many of the services we provide are critical to our customers’ business operations.
Clarity: Using Natural Language Processing and Artificial Intelligence (NLP/AI) Clarity’s valuable insightful information can transform unstructured documents into structured actionable data. Clarity’s intelligent data extraction allows data to be sent to the right person, at the right place, at the right time - to accelerate patient treatment across the continuum of care.
Clarity: Using Natural Language Processing and Artificial Intelligence (NLP/AI), the Clarity platform can transform unstructured documents into structured actionable data. Clarity’s intelligent data extraction allows data to be sent to the right person, at the right place, at the right time - to accelerate patient treatment across the continuum of care.
Those benefits include comprehensive health insurance coverage and covering 84% of health insurance premiums for covered U.S. employees and their families, an employee stock purchase program, share based compensation, flexible time off, up to 16 weeks of paid parental leave for birth parents and 24 hours annually of fully paid Volunteer Time Off.
Those benefits include comprehensive health insurance -7- coverage and covering 85% of health insurance premiums for covered U.S. employees and their families, an employee stock purchase program, share based compensation, flexible time off, sick time, up to 16 weeks of paid parental leave for birth parents, up to 10 weeks of paid parental leave for secondary caregivers and 24 hours annually of fully paid volunteer time off.
To address market demand for effective interoperability solutions, Consensus is concentrating its development efforts in tools capable of integrating with existing healthcare IT infrastructure to facilitate timely and accurate communication between providers and allow use of multiple transmission protocols within a single cloud-based platform. Our Products and Solutions Corporate Solutions eFax Corporate®: eFax Corporate® provides digital cloud fax technology.
To address market demand for effective interoperability solutions, Consensus is concentrating its development efforts in tools capable of integrating with existing healthcare IT infrastructure to facilitate timely and accurate communication between providers and allow use of multiple transmission protocols within a single cloud-based platform.
The Code is posted on the corporate governance page of Consensus’ website, and can be accessed at http://investor.consensus.com . Any changes to or waiver of our Code of Business Conduct and Ethics for senior financial officers, executive officers or directors will be posted on that website. -8-
The Code is posted on the corporate governance page of Consensus’ website, and can be accessed at http://investor.consensus.com . Any changes to or waiver of our Code of Business Conduct and Ethics for senior financial officers, executive officers or directors will be posted on that website, to the extent required under Nasdaq or SEC rules. -9-
We currently serve approximately 52,000 Corporate customers, generally small/medium businesses or large enterprises, to whom sales are made through direct interaction with a sales person and involve specific pricing, multiple line subscriptions, API connections and/or commercial grade security.
We currently serve approximately 54 thousand Corporate customers, generally small/medium businesses or large enterprises, to whom sales are made through e-commerce, but primarily still direct interaction with a sales person and involve specific pricing, multiple line subscriptions, API connections and/or commercial grade security.
For more information regarding the technological risks that we face, please refer to the section entitled Risk Factors contained in Item 1A of this Annual Report on Form 10-K.
For more information regarding the technological risks that we face, please refer to the section entitled Risk Factors contained in Item 1A of this Annual Report on Form 10-K. None of our employees are represented by collective bargaining.
Our strategy includes: • Continuing to grow in Corporate secure information exchange; • Solving healthcare interoperability challenges; • Optimize eCommerce (SoHo) revenue; • Leveraging our technology to enter new markets (e.g. government); • Positioning the business for sustained growth through continued focus on profitability and cash flow generation; • Focused investments in our products and capabilities; and • Complementing organic growth investments with targeted acquisitions. -5- Patents and Proprietary Rights We regard the protection of our intellectual property rights as important to our success.
Our strategy includes: • Continuing to grow in Corporate secure information exchange; • Solving healthcare interoperability challenges; • Optimizing eCommerce (SoHo) revenue streams; • Leveraging our technology to enter new markets (e.g., government); • Positioning the business for sustained growth through continued focus on profitability and cash flow generation; • Focused investments in our products and capabilities; and • Complementing organic growth investments with targeted acquisitions.
Our solutions relate to online faxing and compete primarily against traditional fax machine manufacturers, which are generally large and well-established companies, as well as publicly traded and privately-held providers of fax servers and related software and outsourced fax services.
Our solutions relate to online faxing and compete primarily against traditional fax machine manufacturers, which are generally large and well-established companies, as well as publicly traded and privately-held providers of fax servers and related software and outsourced fax services. Some of these companies may have greater financial and other resources than we do.
SoHo Fax Solutions eFax® : eFax® is a global online faxing service with customers worldwide. In addition to eFax®, we offer a variety of brands for subscription.
SoHo Fax Solutions eFax® : eFax® is a global online faxing service with customers worldwide. In addition to eFax®, we offer a variety of brands for subscription. Customers We have a diverse set of customers globally, using cloud fax, electronic signature and interoperability products.
Some of these companies may have greater financial and other resources than we do. -7- As we pursue our expansion into expanded secure information delivery services and healthcare interoperability services, we compete against other providers of secure information delivery services, including providers of electronic signature solutions.
As we pursue our expansion into expanded secure information delivery services and healthcare interoperability services, we compete against other providers of secure information delivery services, including providers of electronic signature solutions.
To this effect, we created a Diversity, Equity and Inclusion (“DEI”) Council to promote thoughtful discussion, implement training and events to foster respectful awareness of diversity, equity, and inclusion in our workplace environment and create a community where each employee feels they belong and where they can contribute to the overall success of the Company.
The aim of the DEI Council is to foster respectful awareness of diversity, equity, and inclusion in our workplace environment and create a community where each employee feels they belong and can contribute to the overall success of the Company.
None of our employees are represented by collective bargaining. -6- Human Capital Resources As of December 31, 2022, we had 581 employees, with about one-third of the employees located outside of the United States. Our ability to continue to attract, retain and motivate our highly qualified workforce is very important to our continued success.
Human Capital Resources As of December 31, 2023, we had 559 employees, with slightly more than one-quarter of the employees located outside of the United States. Our ability to continue to attract, retain and motivate our highly qualified workforce is very important to our continued success.
Health and Wellness Creating a culture where all colleagues feel supported and valued is paramount to our corporate mission. We expect to evolve our programs to meet our colleagues’ health and wellness needs, which we believe are essential to attract and retain employees of the highest caliber, and we offer a competitive benefits package focused on fostering work/life integration.
We continue to evolve our programs to meet our colleagues’ health (physical, mental and financial) and wellness needs, which we believe are essential to attract and retain employees of the highest caliber, and we offer a competitive benefits package focused on fostering work/life integration.
We provide our employees with benefits we believe are effective at attracting and retaining the talent critical for our success and, more importantly, promoting their day to day well-being.
We are committed to fair pay practices; roles are periodically benchmarked to help inform where adjustments may be needed. We provide our employees with benefits we believe are effective at attracting and retaining the talent critical for our success and, more importantly, promoting their day to day well-being.
We believe that our key strengths and competitive advantages include: Differentiated Product Offering Based on Scalable SaaS Platform. Our scalable and highly customizable technology infrastructure supports the transmission of a large number of documents each year. Due to our scale and capabilities, we have differentiated visibility into the trends that affect the way our customers transmit, store and manage information.
Our scalable and highly customizable technology infrastructure supports the transmission of a large number of documents each year. Due to our scale and capabilities, we have differentiated visibility into the trends that affect the way our customers transmit, store and manage information. Position in the Growing Enterprise Cloud Fax Market.
We intend to continue to invest in patents, to aggressively protect our patent assets from unauthorized use and to generate patent licensing revenues from authorized users. We seek patents for inventions that may contribute to our business or technology sector.
Several of our U.S. patents have been reaffirmed through reexamination proceedings before the United States Patent and Trademark Office (“USPTO”). We intend to continue to invest in patents, to aggressively protect our patent assets from unauthorized use and to generate patent licensing revenues from authorized users. We seek patents for inventions that may contribute to our business or technology sector.
Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with the Securities and Exchange Commission (the “SEC”).
We refer to the transactions that resulted in the separation of Consensus and Ziff Davis into two separate publicly traded companies as the “Spin-Off” or “separation and distribution.”). -8- Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with the Securities and Exchange Commission (the “SEC”).
Customers We have a diverse set of customers globally, using cloud fax, electronic signature and interoperability products. -4- Our Strengths Building on our position as a global provider of internet fax solutions from individuals to enterprises and across industries, Consensus is well positioned to capitalize on shifts in how we share private documents and information.
Our Strengths Building on our position as a global provider of internet fax solutions from individuals to enterprises and across industries, Consensus is well positioned to capitalize on shifts in how we share private documents and information. We believe that our key strengths and competitive advantages include: Differentiated Product Offering Based on Scalable SaaS Platform.
We currently serve approximately 942,000 small office/home office (“SoHo”) online fax customers, generally consumers and SoHo users, who acquire a pre-defined subscription through an e-commerce website without direct interaction with a sales person. Our SoHo brands include eFax®, jSign®, MyFax®, Sfax®, Metrofax®, and SRfax®.
We currently serve approximately 831 thousand small office/home office (“SoHo”) online fax customers, generally consumers and SoHo users, but also single corporate users who acquire a pre-defined subscription through an e-commerce website without direct interaction with a sales person. Approximately 70% of our SoHo base have been customers for more than two years.
The use of fax is particularly high in industries subject to data protection laws such as the Health Insurance Portability and Accountability Act (“HIPAA”), as fax offers safety of transmission and nearly universal legal acceptance. Cloud adoption has grown quickly in secure transmission, taking share from on-premises solutions over the past decade.
Fax remains one of the most ubiquitous technologies to transmit documents securely. The use of fax is particularly high in industries subject to data protection laws such as the Health Insurance Portability and Accountability Act (“HIPAA”), as fax offers safety of transmission and nearly universal legal acceptance.
We aggressively protect these rights by relying on a combination of patents, trademarks, copyrights, trade dress and trade secrets. We also enter into confidentiality and intellectual property assignment agreements with employees and contractors, and nondisclosure agreements with parties with whom we conduct business in order to limit access to and disclosure of our proprietary information.
We also enter into confidentiality and intellectual property assignment agreements with employees and contractors, and nondisclosure agreements with parties with whom we conduct business in order to limit access to and disclosure of our proprietary information. Through a combination of internal technology development and acquisitions, we have built a portfolio of numerous U.S. and foreign patents.
We believe our leadership in digital cloud fax, HL7, FHIR and our deep domain knowledge and experience in the healthcare industry positions Consensus well to help healthcare providers accomplish their broader digitization and interoperability objectives.
We believe our leadership in digital cloud fax, intelligent data extraction, HL7, FHIR and our deep domain knowledge and experience in the healthcare industry positions Consensus well to help healthcare providers accomplish their broader digitization and interoperability objectives. -3- Our Industry Secure Information Communication Our products and services are a component of the secure information transmission market, which is part of the broader public cloud services market, for which demand for cloud services is expected to accelerate in the future.
Substantially all of Consensus’ revenue is recurring in nature and is generated either via fixed subscription plans or usage-based contracts. Over the past decade, Consensus has progressively shifted focus towards larger commercial customers (“Corporate”). As enterprise data communication shifted toward digitization and cloud-based solutions, Consensus entered industry verticals such as healthcare, government, financial services, law and education.
Our mission is to democratize secure information interchange across technologies and industries and solve the healthcare interoperability challenge. Substantially all of Consensus’ revenue is recurring in nature and is generated either via fixed subscription plans or usage-based contracts. Over the past decade, Consensus has progressively shifted focus towards larger commercial customers (“Corporate”).
Employee Compensation & Benefits Compensation is an important consideration for all of our employees and we strive to pay competitive compensation packages that reflect the success of the business and the individual contributions of each colleague. We are committed to fair pay practices; roles are periodically benchmarked to help inform where adjustments may be needed.
Hiring We reinforce our culture and our values by seeking out candidates, that align well with our organizational priorities, values, mission and vision. Employee Compensation & Benefits Compensation is an important consideration for all of our employees and we strive to pay competitive compensation packages that reflect the success of the business and the individual contributions of each colleague.
Consensus serves approximately 1 million customers of all sizes, from enterprises to individuals, across approximately 50 countries and multiple industry verticals including healthcare, government, financial services, law and education. Beginning as an online fax company over two decades ago, Consensus has evolved into a leading global provider of enterprise secure communication solutions.
Beginning as an online fax company over two decades ago, Consensus has evolved into a leading global provider of enterprise secure communication solutions. Our communication, extraction and digital signature solutions enable our customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries.
(“Summit”), a leading provider of digital Health Level Seven (“HL7”) and Fast Healthcare Interoperability Resources (“FHIR”) technology which are complementary to our existing product set for healthcare interoperability. The sector is undergoing a large-scale digitization effort, with the objective to streamline workflows, increase efficiency for operators, and increase transparency for patients.
The sector continues to undergo a large-scale digitization effort, with the objective to streamline workflows, increase efficiency for operators, and increase transparency for patients.
Our Corporate business has grown from $170 million of revenue in 2021 to approximately $192 million of revenue in 2022, representing a 13.2% annual growth rate.
As enterprise data communication shifted toward digitization and cloud-based solutions, Consensus entered industry verticals such as healthcare, government, financial services, law and education. Our Corporate business has grown from $192 million of revenue in 2022 to approximately $200 million of revenue in 2023, representing a 3.9% annual growth rate.
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Our communication and digital signature solutions enable our customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries. Our mission is to democratize secure information interchange across technologies and industries and solve the healthcare interoperability challenge.
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Consensus serves approximately 900 thousand customers of all sizes, from enterprises to individuals, across approximately 47 countries and multiple industry verticals including healthcare, government, financial services, law and education. Our top 10 customers represent approximately $25 million or 7% of total revenues.
Removed
In 2020, we launched the Consensus Unite healthcare interoperability platform, a comprehensive workflow collaboration and data exchange solutions suite. Healthcare represents Consensus’ largest industry vertical and has information, secure communication, management and interoperability needs. In early 2022, we acquired Summit Healthcare Services, Inc.
Added
Our SoHo brands include eFax®, jSign®, MyFax®, Sfax®, Metrofax®, and SRfax®. Healthcare represents Consensus’ largest industry vertical and has information, secure communication, management and interoperability needs. In addition to the offerings discussed above, Consensus has several product offerings that are specific to the healthcare industry.
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Our Industry Secure Information Communication Our products and services are a component of the secure information transmission market, which is part of the broader public cloud services market, for which demand for cloud services is expected to accelerate in the future. Fax remains one of the most ubiquitous technologies to transmit documents securely.
Added
Our Consensus Unite healthcare interoperability platform, a comprehensive workflow collaboration and data exchange solutions suite, now services thousands of healthcare organizations ranging from single-provider offices to care settings with hundreds of beds in use.
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Conductor: Conductor is a r obust interface engine and complete interoperability platform that provides seamless integration technology that supports all the latest standards for connectivity and data formats (API/FHIR, Web Service), addressing a wide range of interoperability challenges from the simple to the extremely complex.
Added
Our Conductor platform delivers a flexible and performant solution to healthcare organizations’ pervasive interoperability challenges, delivering support for digital Health Level Seven (“HL7”), Fast Healthcare Interoperability Resources (“FHIR”), and Direct Secure Messaging (“DSM”) technology that has been fully integrated with our enterprise cloud services offerings.
Removed
Through a combination of internal technology development and acquisitions, we have built a portfolio of numerous U.S. and foreign patents. Several of our U.S. patents have been reaffirmed through reexamination proceedings before the United States Patent and Trademark Office (“USPTO”).
Added
In 2022, Consensus launched Clarity, an intelligent data extraction technology which uses artificial intelligence and machine learning to extract and, combined with other Consensus offerings, transform unstructured information in documents such as faxes into structured data such as HL7, FHIR, and DSM formats.
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Hiring We reinforce our culture and our values by seeking out diverse candidates, and looking for candidates that fit well with our organizational priorities, values, mission and vision.
Added
In 2023, we launched pre-packaged applications of Clarity – Clarity Clinical Documentation™ and Clarity Prior Authorization™ – to tackle specific data extraction challenges in the healthcare industry.
Removed
We refer to the transactions that resulted in the separation of Consensus and Ziff Davis into two separate publicly traded companies as the “Spin-Off” or “separation and distribution.”).
Added
Cloud adoption has grown quickly in secure transmission, taking share from on-premises solutions over the past decade.
Added
Our Products and Solutions Corporate Solutions eFax Corporate®: eFax Corporate® provides digital cloud fax technology enabling users to send, receive and manage faxes digitally through multiple user interfaces or seamlessly integrated in their application through a robust API.
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ECFax: ECFax is comparable to eFax Corporate in its features and use cases, but specifically developed for use by public sector customers with extremely high security demands. ECFax is operated and only accessible in a FedRAMP government cloud environment to meet those standards.
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Patents and Proprietary Rights We regard the protection of our intellectual property rights as important to our success. We aggressively protect these rights by relying on a combination of patents, trademarks, copyrights, trade dress and trade secrets.
Added
To this effect, we have employees throughout the organization who form our Diversity, Equity and Inclusion (“DEI”) Council to promote thoughtful discussion, implement product and onboarding training to create community and events.
Added
Health and Wellness Creating a culture where all colleagues feel supported and valued is paramount to our corporate mission.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf the distribution, together with certain related transactions, fails to qualify as a transaction that is generally tax-free under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, Ziff Davis would recognize taxable gain as if it has sold the Consensus common stock in a taxable sale for its fair market value and Ziff Davis stockholders who received shares of Consensus common stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. -27- Under the tax matters agreement entered into by Ziff Davis and Consensus in connection with the separation, Consensus generally is required to indemnify Ziff Davis for any taxes resulting from the separation (and any related costs and other damages) to the extent such amounts resulted from (i) an acquisition of all or a portion of the equity securities or assets of Consensus, whether by merger or otherwise (and regardless of whether Consensus participated in or otherwise facilitated the acquisition), (ii) other actions or failures to act by Consensus or (iii) any of the representations or undertakings of Consensus contained in any of the separation-related agreements or in the documents relating to the IRS private letter ruling and/or any tax opinion being incorrect or violated.
Biggest changeUnder the tax matters agreement entered into by Ziff Davis and Consensus in connection with the separation, Consensus generally is required to indemnify Ziff Davis for any taxes resulting from the separation (and any related costs and other damages) to the extent such amounts resulted from (i) an acquisition of all or a portion of the equity securities or assets of Consensus, whether by merger or otherwise (and regardless of whether Consensus participated in or otherwise facilitated the acquisition), (ii) other actions or failures to act by Consensus or (iii) any of the representations or undertakings of Consensus contained in any of the separation-related agreements or in the documents relating to the IRS private letter ruling and/or any tax opinion being incorrect or violated.
The full impact of these measures, or of any potential responses to them by Russia or other countries, on the businesses and results of operations or our customers or us is unknown. Risks Related To Our Regulation Including Taxation Changes in regulations relating to health information communication protocols could affect our business.
The full impact of these measures, or of any potential responses to them by Russia or other countries, on the businesses and results of operations or our customers or us is unknown. Risks Related To Regulation Including Taxation Changes in regulations relating to health information communication protocols could affect our business.
Our amended and restated bylaws provide that, unless Consensus consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of Consensus, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder of Consensus to Consensus or its stockholders, (c) any action asserting a claim against Consensus or any current or former director, officer or other employee of Consensus arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (d) any action asserting a claim against Consensus or any current or former director, officer or other -26- employee of Consensus governed by the internal affairs doctrine shall, in each case to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, a the federal district court for the District of Delaware.
Our amended and restated bylaws provide that, unless Consensus consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of Consensus, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder of Consensus to Consensus or its stockholders, (c) any action asserting a claim against Consensus or any current or former director, officer or other employee of Consensus arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (d) any action asserting a claim against Consensus or any current or former director, officer or other employee of Consensus governed by the internal affairs doctrine shall, in each case to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, a the federal district court for the District of Delaware.
In addition, the IRS private letter ruling does not address all of the issues that are relevant to determining whether the distribution, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes, and an opinion of outside counsel or other external tax advisor represents the judgment of such counsel or advisor which is not binding on the IRS or any court.
In addition, the IRS private letter ruling does not address all of the issues that are relevant to determining whether the distribution, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes, and an opinion of outside counsel or other external -28- tax advisor represents the judgment of such counsel or advisor which is not binding on the IRS or any court.
The market price of our common stock has in the past, and may continue to, fluctuate significantly due to a number of factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; • the operating and stock price performance of comparable companies; • changes to the regulatory and legal environment in which we operate; and • domestic and worldwide economic conditions.
The market price of our common stock has in the past, and may continue to, fluctuate significantly due to a number of factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our operating results; • changes in earnings estimated by securities analysts or our ability to meet those estimates; -25- • the operating and stock price performance of comparable companies; • changes to the regulatory and legal environment in which we operate; and • domestic and worldwide economic conditions.
We -28- may also need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. • Following the separation, the cost of capital for our business may be higher than Ziff Davis’s cost of capital prior to the separation. • Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Ziff Davis.
We may also need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. • Following the separation, the cost of capital for our business may be higher than Ziff Davis’s cost of capital prior to the separation. • Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Ziff Davis.
Several states have enacted additional, more -22- restrictive and punitive laws regulating commercial email. Foreign legislation exists as well, including Canada’s Anti-Spam Legislation and the European laws that have been enacted pursuant to the GDPR and European Union Directive 2002/58/EC and its amendments. We use email as a significant means of communicating with our existing and potential users.
Several states have enacted additional, more restrictive and punitive laws regulating commercial email. Foreign legislation exists as well, including Canada’s Anti-Spam Legislation and the European laws that have been enacted pursuant to the GDPR and European Union Directive 2002/58/EC and its amendments. We use email as a significant means of communicating with our existing and potential users.
In particular, the recruitment and retention of top technical, marketing, sales and subject matter experts - particularly those with specialized knowledge, will be critical to our success. Competition for such people is intense, substantial and continuous, and we may not be able to attract, integrate or retain highly qualified technical, sales or managerial personnel in the future.
In particular, the recruitment and retention of top technical, marketing, sales and subject matter experts - particularly those with specialized knowledge, will -20- be critical to our success. Competition for such people is intense, substantial and continuous, and we may not be able to attract, integrate or retain highly qualified technical, sales or managerial personnel in the future.
Failure to comply with the requirements of HIPAA or HITECH or any of the applicable federal and state laws regarding patient privacy, identity theft prevention and detection, breach notification and data security may subject us to penalties, including civil monetary penalties and, in some circumstances, criminal penalties or contractual liability under agreements with our customers and clients.
Failure to comply with the requirements of HIPAA or HITECH or any of the applicable federal and state laws regarding patient privacy, identity theft prevention and detection, breach notification and data security may subject us to penalties, including civil monetary penalties and, in some circumstances, criminal penalties or contractual liability under -21- agreements with our customers and clients.
Many of our competitors have access to considerable financial and technical resources with which to compete aggressively, including by funding future growth and expansion and investing in acquisitions, -16- technologies, and research and development. Further, emerging start-ups may be able to innovate and provide new products and services faster than we can.
Many of our competitors have access to considerable financial and technical resources with which to compete aggressively, including by funding future growth and expansion and investing in acquisitions, technologies, and research and development. Further, emerging start-ups may be able to innovate and provide new products and services faster than we can.
Any current or future material weakness in our internal control over financial reporting, or adverse report thereon, could cause investors to lose confidence in the accuracy and completeness of our financial reports, could cause the market price of our common stock to decline, and could subject us to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities or shareholder litigation.
Any future material weakness in our internal control over financial reporting, or adverse report thereon, could cause investors to lose confidence in the accuracy and completeness of our financial reports, could cause the market price of our common stock to decline, and could subject us to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities or shareholder litigation.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could also adversely affect the trading price of our common stock. -24- We do not intend to pay dividends on our common stock. We have no present intention to pay cash dividends on our common stock.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could also adversely affect the trading price of our common stock. We do not intend to pay dividends on our common stock. We have no present intention to pay cash dividends on our common stock.
In June 2022, the registration statement on Form S-1 we filed with respect to the shares of our common stock held by Ziff Davis became effective, and Ziff Davis has informed us that it reduced its position in our common stock from 19.9% to approximately 5% over the course of 2022.
In June 2022, the registration statement on Form S-1 we filed with respect to -26- the shares of our common stock held by Ziff Davis became effective, and Ziff Davis has informed us that it reduced its position in our common stock from 19.9% to approximately 5% over the course of 2022.
Customers or vendors could use any of these four components to define their particular “interoperability solution.” Separately, the Center for Medicare and Medicaid Services further defined a fifth component of interoperability that includes patients, which is not included in the HIMSS definition.
Customers or vendors could use any of these four components to define their particular “interoperability solution.” Separately, the Center for Medicare and Medicaid Services further defined a fifth component of interoperability that includes patients, which is not included in the -12- HIMSS definition.
We have replicated, and must continue to replicate, certain systems, infrastructure and -31- personnel to which we no longer have access and have incurred, and expect to continue to incur, capital and other costs associated with developing and implementing our own support functions in these areas. Such costs could be material.
We have replicated, and must continue to replicate, certain systems, infrastructure and personnel to which we no longer have access and have incurred, and expect to continue to incur, capital and other costs associated with developing and implementing our own support functions in these areas. Such costs could be material.
Some of our existing competitors and possible entrants may have greater brand recognition for certain products and services, more expertise in a particular segment of the market, and greater operational, strategic, technological, financial, personnel, or other resources than we do.
Some of our existing competitors and possible entrants may have greater brand recognition for certain products and services, more expertise in a particular segment of the market, and greater operational, strategic, technological, financial, -17- personnel, or other resources than we do.
From time to time, we may be subject to litigation or claims or become involved in other legal disputes or regulatory inquiries, including in the areas of patent infringement and anti-trust that could negatively affect our business operations and -18- financial condition.
From time to time, we may be subject to litigation or claims or become involved in other legal disputes or regulatory inquiries, including in the areas of patent infringement and anti-trust that could negatively affect our business operations and financial condition.
In our effort to attract and retain key personnel, we may experience increased compensation costs that are not offset by either improved productivity or higher prices for our products or services -19- We have observed an increasingly competitive labor market.
In our effort to attract and retain key personnel, we may experience increased compensation costs that are not offset by either improved productivity or higher prices for our products or services We have observed an increasingly competitive labor market.
Our historical financial results for periods prior to the separation reflect allocations of corporate expenses from Ziff Davis for such functions were likely less than the expenses we would have incurred had we operated as a separate publicly traded company.
Our historical financial results for periods prior to the separation reflect allocations of corporate expenses from Ziff Davis for such functions were likely less than the expenses we would have incurred had we operated as a separate publicly -29- traded company.
Acquisitions may also cause us to: • use a substantial portion of our cash resources or incur debt; • significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; • assume liabilities; • issue common stock that would dilute our current stockholders’ percentage ownership; • record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges; • incur amortization expenses related to certain intangible assets; and -12- • become subject to intellectual property or other litigation.
Acquisitions may also cause us to: • use a substantial portion of our cash resources or incur debt; • significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition; • assume liabilities; • issue common stock that would dilute our current stockholders’ percentage ownership; • record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges; -13- • incur amortization expenses related to certain intangible assets; and • become subject to intellectual property or other litigation.
Furthermore, the Office of the National Coordinator for Health Information Technology (the “ONC”) has -11- developed another definition that is included in the 21st Century Cures Act, which includes the concept of “information blocking” as a component of healthcare interoperability.
Furthermore, the Office of the National Coordinator for Health Information Technology (the “ONC”) has developed another definition that is included in the 21st Century Cures Act, which includes the concept of “information blocking” as a component of healthcare interoperability.
Historically, our business was operated as one of Ziff Davis’s business units, and Ziff Davis performed certain of the corporate functions for our operations. Following the distribution, Ziff Davis provided support to us with respect to certain of these functions on a transitional basis.
Historically, our business was operated as one of Ziff Davis’s business units, and Ziff Davis performed certain of the corporate functions for our operations. Following the distribution, Ziff Davis provided support to us with respect to certain of -32- these functions on a transitional basis.
We may not be able to -29- implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.
We may not be able to implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.
Any system failure or security breach that causes interruptions or data loss in our operations, our partners, vendors, or other third parties, or in the computer systems of our customers or leads to the misappropriation of our or our customers’ confidential information could result in a significant liability to us (including in the form of judicial decisions and/or settlements, regulatory findings and/or forfeitures, and other means), cause considerable harm to us and our reputation (including requiring notification -15- to customers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potential customers from using our services.
Any system failure or security breach that causes interruptions or data loss in our operations, our partners, vendors, or other third parties, or in the -16- computer systems of our customers or leads to the misappropriation of our or our customers’ confidential information could result in a significant liability to us (including in the form of judicial decisions and/or settlements, regulatory findings and/or forfeitures, and other means), cause considerable harm to us and our reputation (including requiring notification to customers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potential customers from using our services.
As a result, our -21- future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.
As a result, our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.
As a result, any or all of our current carriers could discontinue providing us with service at rates acceptable to us, or at all, and we may not be able to obtain adequate replacements, which could materially and adversely affect our business, prospects, financial condition, operating results and cash flows. -13- Our business could suffer if we cannot obtain or retain numbers, are prohibited from obtaining local numbers or are limited to distributing local numbers to only certain customers.
As a result, any or all of our current carriers could discontinue providing us with service at rates acceptable to us, or at all, and we may not be able to obtain adequate replacements, which could materially and adversely affect our business, prospects, financial condition, operating results and cash flows. -14- Our business could suffer if we cannot obtain or retain numbers, are prohibited from obtaining local numbers or are limited to distributing local numbers to only certain customers.
To the extent we expand our business operations in countries outside the U.S., our future results could be materially adversely affected by a variety of uncontrollable and changing factors including, among others, foreign currency exchange rates; political or social unrest, economic instability, geopolitical tensions or war in a specific country or region (including the invasion of Ukraine by Russia); trade protection measures and other regulatory requirements which may affect our ability to provide our services; difficulties in staffing and managing international operations; and adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries and affiliates and transfer pricing implications.
To the extent we expand our business operations in countries outside the U.S., our future results could be materially adversely affected by a variety of uncontrollable and changing factors including, among others, foreign currency exchange rates; political or social unrest, economic instability, geopolitical tensions or war in a specific country or region (including the invasion of Ukraine by Russia and the conflict in the Middle East); trade protection measures and other regulatory requirements which may affect our ability to provide our services; difficulties in staffing and managing international operations; and adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries and affiliates and transfer pricing implications.
If the market does not develop further, develops more slowly, or in a way that we do not expect, our business will be adversely affected. • There are particular challenges in addressing the market for healthcare interoperability solutions. • Our industry is undergoing rapid technological changes and we may not be able to keep up. • We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results. • The COVID-19 pandemic, as well as any future pandemics or global health crises, and related governmental responses could negatively affect our business, operations and financial performance. • Our business could suffer if providers of broadband Internet access services block, impair or degrade our services. • Our business is dependent on a small number of telecommunications carriers in each region and our inability to maintain agreements at attractive rates with such carriers may negatively impact our business. • The successful operation of our business depends on the supply of critical business elements from other companies, including data center services. • Our sales cycle with enterprise and commercial customers can be long and unpredictable, and our sales efforts require considerable time and expense. • We face risks associated with system failures, cybersecurity breaches and other technological issues. • The markets in which we operate are highly competitive, and we may not be successful in growing our brands or revenue. • We may be found to infringe the intellectual property rights of others, and we may be unable to adequately protect of our own intellectual property rights. • We may be subject to risks from international operations, including risks associated with currency fluctuations and foreign exchange controls and adverse changes in global financial markets. • We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and our management’s time and attention. • Our business is highly dependent on our billing systems functioning properly, and we face risks associated with card declines and merchant standards imposed by card companies. • Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results. • We face risks associated with political instability and volatility in the economy. -9- Risks Related To Regulation, Including Taxation • Changes in regulations relating to health information communication protocols could affect our business. • Our services may become subject to burdensome regulation, which could increase our costs or restrict our service offerings. • Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results. • Taxing authorities may successfully assert that we should have collected, or in the future should collect sales and use, telecommunications or similar taxes, and we could be subject to liability with respect to past or future tax, which could adversely affect our operating results. • We are subject to a variety of new and existing laws and regulations which could subject us to claims, judgments, monetary liabilities, and other remedies, and to limitations on our business practices.
If the market does not develop further, develops more slowly, or in a way that we do not expect, our business will be adversely affected. • There are particular challenges in addressing the market for healthcare interoperability solutions. • Our industry is undergoing rapid technological changes and we may not be able to keep up. • We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results. • Current or future pandemics or global health crises, and related governmental responses could negatively affect our business, operations and financial performance. • Our business could suffer if providers of broadband Internet access services block, impair or degrade our services. • Our business is dependent on a small number of telecommunications carriers in each region and our inability to maintain agreements at attractive rates with such carriers may negatively impact our business. • The successful operation of our business depends on the supply of critical business elements from other companies, including data center services. • Our sales cycle with enterprise and commercial customers can be long and unpredictable, and our sales efforts require considerable time and expense. • We face risks associated with system failures, cybersecurity breaches and other technological issues. • The markets in which we operate are highly competitive, and we may not be successful in growing our brands or revenue. • We may be found to infringe the intellectual property rights of others, and we may be unable to adequately protect of our own intellectual property rights. • We may be subject to risks from international operations, including risks associated with currency fluctuations and foreign exchange controls and adverse changes in global financial markets. • We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and our management’s time and attention. • Our business is highly dependent on our billing systems functioning properly, and we face risks associated with card declines and merchant standards imposed by card companies. • Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results. • We face risks associated with political instability and volatility in the economy. -10- Risks Related To Regulation, Including Taxation • Changes in regulations relating to health information communication protocols could affect our business. • Our services may become subject to burdensome regulation, which could increase our costs or restrict our service offerings. • Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results. • Taxing authorities may successfully assert that we should have collected, or in the future should collect sales and use, telecommunications or similar taxes, and we could be subject to liability with respect to past or future tax, which could adversely affect our operating results. • We are subject to a variety of new and existing laws and regulations which could subject us to claims, judgments, monetary liabilities, and other remedies, and to limitations on our business practices.
The markets in which we operate are highly competitive and our competitors may have greater resources to commit to growth, superior technologies, cheaper pricing or more effective marketing strategies. Also, we face significant competition for users, advertisers, publishers, developers and distributors. Some of our competitors include major companies with much greater resources and significantly larger customer bases than we have.
The markets in which we operate are highly competitive and our competitors may have greater resources to commit to growth, superior technologies, cheaper pricing or more effective marketing strategies. Also, we face significant competition for users, developers and distributors. Some of our competitors include major companies with much greater resources and significantly larger customer bases than we have.
As a result of the FCC’s reforms, regulated providers of telecommunications services are determining how the rates they charge customers like us will -14- change in order to comply with the new rules. It is possible that some or all of our underlying carriers will increase the rates we pay for certain telecommunications services.
As a result of the FCC’s reforms, regulated providers of telecommunications services are determining how the rates they charge customers like us will -15- change in order to comply with the new rules. It is possible that some or all of our underlying carriers will increase the rates we pay for certain telecommunications services.
It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA went into effect on January 1, 2023 and become enforceable on July 1, 2023.
It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA went into effect on January 1, 2023 and became enforceable on July 1, 2023.
If future adoption of digital signature products results in a reduction for our fax services without a -10- corresponding adoption of our digital signature or other products, it could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows. Developments in the healthcare industry could adversely affect our business.
If future adoption of digital signature products results in a reduction for our fax services without a -11- corresponding adoption of our digital signature or other products, it could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows. Developments in the healthcare industry could adversely affect our business.
The extent of any continued or future adverse effects of the COVID-19 pandemic, as well as any future pandemics or global health crises, will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the emergence and virulence of new variants, the effect of the rollout of vaccines on the pandemic and public acceptance of vaccines, the direct and indirect impact of the pandemic on our employees, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.
The extent of any future adverse effects of pandemics or global health crises will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the emergence and virulence of new variants, the effect of the rollout of vaccines on the pandemic and public acceptance of vaccines, the direct and indirect impact of the pandemic on our employees, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.
In connection with the separation, we entered into several agreements with Ziff Davis, including among others a transition services agreement, a separation agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement and a stockholder and registration rights agreement with respect to Ziff Davis’ continuing ownership of Consensus common stock.
In connection with the separation, we entered into several agreements with Ziff Davis, including among others, a separation agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement and a stockholder and registration rights agreement with respect to Ziff Davis’ continuing ownership of Consensus common stock.
To date, these events have not resulted in the material impairment of any business operations. Although we have experienced, and expect to continue to confront, efforts by third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information systems, to date, these events have not resulted in the material impairment of any business operations.
Although we have experienced, and expect to continue to confront, efforts by third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information systems, to date, these events have not resulted in the material effect of any business operations.
Future sales by Ziff Davis or others of our common stock, or the perception that such sales may occur, could depress our common stock price. Ziff Davis has informed us that as of December 31, 2022, Ziff Davis owned 5% of the economic interest and voting power of our outstanding common stock.
Future sales by Ziff Davis or others of our common stock, or the perception that such sales may occur, could depress our common stock price. Ziff Davis has informed us that as of December 31, 2023, Ziff Davis owned 5% of the economic interest and voting power of our outstanding common stock.
As reported elsewhere in this Annual Report on Form 10-K, we have identified material weaknesses in our internal control over financial reporting. We cannot assure you that additional material weaknesses in our internal control over financial reporting will not be identified in the future.
As reported elsewhere in this Annual Report on Form 10-K, we previously identified material weaknesses in our internal control over financial reporting. We cannot assure you that additional material weaknesses in our internal control over financial reporting will not be identified in the future.
Matters affecting our internal controls, including the material weaknesses described above, may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, violations of applicable stock exchange listing rules, and litigation brought by our shareholders and others.
Matters affecting our internal controls, may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, violations of applicable stock exchange listing rules, and litigation brought by our shareholders and others.
As reported elsewhere in this Annual Report on Form 10-K, we have identified material weaknesses in our internal control over financial reporting.
As reported elsewhere in this Annual Report on Form 10-K, we previously identified material weaknesses in our internal control over financial reporting.
In addition, any event of default or declaration of acceleration under one debt instrument could result in an event of default under one or more of our other debt instruments. We or Ziff Davis may fail to perform under the transition services agreement and other transaction agreements that were executed as part of the separation.
In addition, any event of default or declaration of acceleration under one debt instrument could result in an event of default under one or more of our other debt instruments. We or Ziff Davis may fail to perform under transaction agreements that were executed as part of the separation.
Our debt obligations could adversely affect our business and our ability to meet our obligations and pay dividends. As of December 31, 2022, Consensus has total outstanding indebtedness of approximately $805 million. We may also incur additional indebtedness in the future.
Our debt obligations could adversely affect our business and our ability to meet our obligations and pay dividends. As of December 31, 2023, Consensus has total outstanding indebtedness of approximately $742 million. We may also incur additional indebtedness in the future.
Risks Related To Our Common Stock • We cannot be certain that an active trading market for our common stock will continue and stock price has in the past and may in the future fluctuate significantly. • Shares of our common stock generally will be eligible for resale, which may cause our stock price to decline. • We do not intend to pay dividends on our common stock. • We have identified material weaknesses in internal control over financial reporting which could adversely affect our business, reputation, results of operations and stock price.
Risks Related To Our Common Stock • We cannot be certain that an active trading market for our common stock will continue and stock price has in the past and may in the future fluctuate significantly. • Shares of our common stock generally will be eligible for resale, which may cause our stock price to decline. • We do not intend to pay dividends on our common stock. • We previously identified material weaknesses in internal control over financial reporting and if we fail to design and maintain effective internal control over financial reporting it could adversely affect our business, reputation, results of operations and stock price.
In addition, our effective tax rate for future periods is uncertain and could be impacted by mergers and acquisitions. The COVID-19 pandemic, as well as any future pandemics or global health crises, and related governmental responses could negatively affect our business, operations and financial performance.
In addition, our effective tax rate for future periods is uncertain and could be impacted by mergers and acquisitions. Pandemics or global health crises, and related governmental responses could negatively affect our business, operations and financial performance.
Our provision for income taxes is based on a jurisdictional mix of earnings, statutory tax rates and enacted tax rules, including transfer pricing. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.
We are a U.S.-based multinational company subject to taxes in the U.S. and foreign jurisdictions. Our provision for income taxes is based on a jurisdictional mix of earnings, statutory tax rates and enacted tax rules, including transfer pricing. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.
In addition, the COVID-19 pandemic has, at times, contributed to (i) increased unemployment and decreased consumer confidence and business generally; (ii) sudden and significant declines, and significant increases in volatility, in financial and capital markets; (iii) increased spending on our business continuity efforts, which has required and may further require that we cut costs or investments in other areas; and (iv) heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements.
In addition, pandemics and global health crises have in the past, and may in the future, contribute to (i) increased unemployment and decreased consumer confidence and business generally; (ii) sudden and significant declines, and significant increases in volatility, in financial and capital markets; (iii) increased spending on our business continuity efforts, which has required and may further require that we cut costs or investments in other areas; and (iv) heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements.
If we are not able to remediate these existing material weaknesses and document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting, if and when required.
If we are not able to maintain effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting, if and when required.
Failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to the collection, use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence in us, damage to our brands, and ultimately in a loss of users and advertising partners, which could adversely affect our business.
Similar laws have been passed in several other states, and have been proposed in additional states and at the federal level. -24- Failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to the collection, use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence in us, damage to our brands, and ultimately in a loss of users and advertising partners, which could adversely affect our business.
We have identified material weaknesses in our internal control over financial reporting, and if our remediation of such material weaknesses is not effective, or if we experience additional material weaknesses or otherwise fail to design and maintain effective internal control over financial reporting we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
We previously identified material weaknesses in our internal control over financial reporting, and if we fail to design and maintain effective internal control over financial reporting we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Any failure or perception of failure of our products or services to meet HIPAA, HITECH and related regulatory requirements could expose us to risks of investigation, notification, litigation, penalty or enforcement, adversely affect demand for our products and services and force us to expend significant capital and other resources to modify our products or services to address the privacy and security requirements of our clients and HIPAA and HITECH. -20- Our services may become subject to burdensome regulation, which could increase our costs or restrict our service offerings.
Any failure or perception of failure of our products or services to meet HIPAA, HITECH and related regulatory requirements could expose us to risks of investigation, notification, litigation, penalty or enforcement, adversely affect demand for our products and services and force us to expend significant capital and other resources to modify our products or services to address the privacy and security requirements of our clients and HIPAA and HITECH.
Changes in these or any other laws and regulations or the interpretation of them could increase our future compliance costs, limit the amount and type of data we can collect, transfer, share, or sell, make our products and services less attractive to our users, or cause us to change or limit our business practices. -23- Further, any failure on our part to comply with any relevant laws or regulations may subject us to significant civil or criminal liabilities.
Changes in these or any other laws and regulations or the interpretation of them could increase our future compliance costs, limit the amount and type of data we can collect, transfer, share, or sell, make our products and services less attractive to our users, or cause us to change or limit our business practices.
Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a material compromise or breach of the technology used by us, our partners, vendors, or other third parties, to protect transaction and other confidential data. Additionally, due to geopolitical tensions related to Russia’s invasion of Ukraine, the risk of cyber-attacks may be elevated.
Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a material compromise or breach of the technology used by us, our partners, vendors, or other third parties, to protect transaction and other confidential data.
Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and the United States federal district courts as the exclusive forum for claims under the Securities Act, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or employees.
Under the tax matters agreement, we would be required to indemnify Ziff Davis for the resulting tax, and this indemnity obligation might discourage, delay or prevent a change of control that you may consider favorable. -27- Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and the United States federal district courts as the exclusive forum for claims under the Securities Act, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or employees.
The separation agreement, tax matters agreement, employee matters agreement and intellectual property license agreement determine the allocation of assets and liabilities between the companies following the separation for those respective areas and include any necessary indemnifications related to liabilities and obligations. We rely on Ziff Davis to satisfy its performance and payment obligations under these agreements.
These agreements determine the allocation of named assets and liabilities between the companies following the separation and include any necessary indemnifications related to liabilities and obligations. We rely on Ziff Davis to satisfy its performance and payment obligations under these agreements.
As a result, we may not be able to effectively prevent competitors in these regions from utilizing our intellectual property, which could reduce our competitive advantage and ability to compete in those regions and negatively impact our business. -17- We also strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions.
As a result, we may not be able to effectively prevent competitors in these -18- regions from utilizing our intellectual property, which could reduce our competitive advantage and ability to compete in those regions and negatively impact our business.
Further, the impact on the global economy as a result of unforeseen global crises such as war (including the invasion of Ukraine by Russia and any related political or economic responses and counter-responses or otherwise by various global actors), strife, strikes, global health pandemics, earthquakes or major weather events or other uncontrollable events could negatively impact our revenue and operating results.
Further, the impact on the global economy as a result of unforeseen global crises such as war (including the ongoing conflict in the Middle East, invasion of Ukraine by Russia and any related political or economic responses and counter-responses or otherwise by various global actors), strife, strikes, global health pandemics, earthquakes or major weather events or other uncontrollable events could negatively impact our revenue and operating results. -19- We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and our management’s time and attention.
If we are subject to burdensome laws or regulations or if we fail to adhere to the requirements of public or private regulations, our business, financial condition and results of operations could suffer.
Further, any failure on our part to comply with any relevant laws or regulations may subject us to significant civil or criminal liabilities. If we are subject to burdensome laws or regulations or if we fail to adhere to the requirements of public or private regulations, our business, financial condition and results of operations could suffer.
These restrictions will also not prevent us from incurring obligations that do not constitute “indebtedness.” If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.
These restrictions will also not prevent us from incurring obligations that do not constitute “indebtedness.” If new indebtedness is added to our current debt levels, the related risks that we now face could intensify. -30- We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
In certain instances, we may be subject to enhanced privacy obligations based on the type of information we store and process. While we believe we are in compliance with the relevant laws and regulations, we could be subject to enforcement actions, fines, forfeitures and other adverse actions.
While we believe we are in compliance with the relevant laws and regulations, we could be subject to enforcement actions, fines, forfeitures and other adverse actions.
We maintain insurance related to cybersecurity risks, but this insurance may not be sufficient to cover all of our losses from any breaches or other adverse consequences related to a cybersecurity-event. Any of these events could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows, or cause us to suffer other negative consequences.
Any of these events could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows, or cause us to suffer other negative consequences.
If this were to occur and we were to be held liable for someone’s use of our service for unauthorized calling or text messaging mobile users, the financial penalties could cause a material adverse effect on our operations and harm our business reputation.
If this were to occur and we were to be held liable for someone’s use of our service for unauthorized calling or text messaging mobile users, the financial penalties could cause a material adverse effect on our operations and harm our business reputation. -22- Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results.
Sales by Ziff Davis or others of a substantial number of shares after the distribution, or a perception that such sales could occur, could significantly reduce the market price of our common stock. -25- Immediately following the distribution, we filed a registration statement on Form S-8 registering under the Securities Act the shares of our common stock reserved for issuance under our 2021 Equity Incentive Plan.
Immediately following the distribution, we filed a registration statement on Form S-8 registering under the Securities Act the shares of our common stock reserved for issuance under our 2021 Equity Incentive Plan.
We may incur substantial liabilities for expenses necessary to comply with these laws and regulations, as well as potential substantial penalties for any failure to comply. Compliance with these laws and regulations may also cause us to change or limit our business practices in a manner adverse to our business.
We may incur substantial liabilities for expenses necessary to comply with these laws and regulations, as well as potential substantial penalties for any failure to comply.
Additionally, third parties could also seek to hold us responsible for any of the liabilities that Ziff Davis has agreed to retain.
Additionally, third parties could also seek to hold us responsible for any of the liabilities that Ziff Davis has agreed to retain. In addition, Ziff Davis’s insurers may attempt -31- to deny us coverage for liabilities associated with certain occurrences of indemnified liabilities prior to the separation.
While we have designed and implemented, or expect to implement, measures to remediate these material weaknesses, our efforts to remediate these material weaknesses may not be effective. Moreover, we are also continuing to develop our internal controls and processes.
While we have designed and implemented measures to remediate these material weaknesses, completion of remediation does not provide assurance that our remediation or other controls will continue to operate properly or remain adequate. Moreover, we are also continuing to develop our internal controls and processes.
In addition, Ziff Davis’s insurers may attempt to deny us coverage for liabilities associated with certain occurrences of indemnified liabilities prior to the separation. -30- Moreover, even if we ultimately succeed in recovering from Ziff Davis or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses.
Moreover, even if we ultimately succeed in recovering from Ziff Davis or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could negatively affect our business, financial position, results of operations and cash flows. We are subject to continuing contingent liabilities following the separation.
The impact of the COVID-19 pandemic and subsequent variants has had a negative effect on the global economy, disrupting the financial markets and creating increasing volatility and overall uncertainty. Among other things, the COVID-19 pandemic has resulted in travel bans around the world, declarations of states of emergency, stay- or shelter-at-home requirements, business and school closures and manufacturing restrictions.
Among other things, pandemics and global health crises have resulted in, and may in the future result in, travel bans around the world, declarations of states of emergency, stay- or shelter-at-home requirements, business and school closures and manufacturing restrictions.
Each of these risks could negatively affect our business, financial position, results of operations and cash flows. We are subject to continuing contingent liabilities following the separation. Following the separation, there are several significant areas where the liabilities of Ziff Davis may become our obligations.
Following the separation, there are several significant areas where the liabilities of Ziff Davis may become our obligations.
Our Board is briefed on cybersecurity risks and we implement cybersecurity risk management under our Board’s oversight. We use vendors to assist with cybersecurity risks, but these vendors may not be able to assist us adequately in preparing for or responding to a cybersecurity incident.
We use vendors to assist with cybersecurity risks, but these vendors may not be able to assist us adequately in preparing for or responding to a cybersecurity incident. We maintain insurance related to cybersecurity risks, but this insurance may not be sufficient to cover all of our losses from any breaches or other adverse consequences related to a cybersecurity-event.
Removed
We have adjusted certain aspects of our operations to protect our employees and customers while still seeking to meet customers’ needs for our vital cloud fax services. We cannot predict at this time the extent to which the COVID-19 pandemic could negatively affect our business, operations and financial performance.
Added
The impact of pandemics and global health crises, such as the COVID-19 pandemic, has in the past had, and may in the future have, a negative effect on the global economy, disrupting the financial markets and creating increasing volatility and overall uncertainty.
Removed
We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and our management’s time and attention.
Added
Additionally, due to geopolitical tensions related to Russia’s invasion of Ukraine and the conflict in the Middle East, the risk of cyber-attacks may be elevated. Moreover, these threats are constantly evolving, thereby making it more difficult to successfully defend against them or to implement adequate preventative measures.
Removed
Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results. We are a U.S.-based multinational company subject to taxes in the U.S. and foreign jurisdictions.
Added
We may not have the current capability to detect certain vulnerabilities, which may allow those vulnerabilities to persist in our systems over long periods of time.
Removed
Similar laws have been passed in several other states, and have been proposed in additional states and at the federal level.
Added
We also strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions.
Removed
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the internal control deficiencies that led to our material weaknesses, that the material weaknesses will be remediated on a timely basis, or that additional material weaknesses will not be identified in the future.
Added
Our services may become subject to burdensome regulation, which could increase our costs or restrict our service offerings.
Removed
If the steps we take do not remediate the outstanding material weaknesses in a timely manner, there could continue to be a possibility that these control deficiencies or others could result in a material misstatement of our annual or interim consolidated financial statements.
Added
Compliance with these laws and regulations may also cause us to change or limit our business practices in a manner adverse to our business. -23- In certain instances, we may be subject to enhanced privacy obligations based on the type of information we store and process.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeLegal Proceedings See Note 11 - Commitments and Contingencies to our accompanying consolidated financial statements for a description of our legal proceedings. Item 4. Mine Safety Disclosures Not applicable. -32- PART II
Biggest changeLegal Proceedings See Note 11 - Commitments and Contingencies to our accompanying consolidated financial statements for a description of our legal proceedings. Item 4. Mine Safety Disclosures Not applicable. -35- PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+3 added−2 removed2 unchanged
Biggest changePerformance Graph This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Consensus under the Securities Act of 1933, as amended, or the Exchange Act.
Biggest changePerformance Graph This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Consensus under the Securities Act of 1933, as amended, or the Exchange Act. -36- The following graph compares the cumulative total stockholder return for Consensus, the Nasdaq Composite and an index of companies that Consensus has selected as its peer group in the cloud services for business space.
Measurement points for the performance graph are October 8, 2021 and the last trading day of each month from October 2021 to December 2022. The graph assumes that $100 was invested on October 8, 2021 in Consensus’ common stock and in each of the indices.
Measurement points for the performance graph are October 8, 2021 and the last trading day of each quarter from October 2021 to December 2023. The graph assumes that $100 was invested on October 8, 2021 in Consensus’ common stock and in each of the indices.
The stock price performance on the following graph is not necessarily indicative of future stock price performance. -33- [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -34- Item 6. [Reserved]
The stock price performance on the following graph is not necessarily indicative of future stock price performance. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -37- Item 6. [Reserved]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “CCSI ”. Holders We have 170 registered stockholders as of March 24, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “CCSI ”. Holders We have 164 registered stockholders as of February 23, 2024.
Both Vocera Communications, Inc. and Bottomline Technologies, Inc. were removed because they were acquired during 2022. Consensus common stock has been listed on the Nasdaq under the symbol “CCSI” since October 8, 2021. Prior to that time, there was no public market for our common stock.
Both NextGen Healthcare, Inc. and Tabula Rasa HealthCare, Inc. were removed because they went private during 2023. Consensus common stock has been listed on the Nasdaq under the symbol “CCSI” since October 8, 2021. Prior to that time, there was no public market for our common stock.
Our current debt agreements could trigger restriction on dividend payments under certain circumstances. Recent Sales of Unregistered Securities Not applicable. Issuer Purchases of Equity Securities Not applicable.
Our current debt agreements could trigger restriction on dividend payments under certain circumstances. Recent Sales of Unregistered Securities Not applicable. Issuer Purchases of Equity Securities On March 1, 2022, the Company’s Board of Directors approved a share buyback program.
CommonVault Systems, Inc., Computer Programs and Systems, Inc., Ebix, Inc., Evolent Health, Inc., HealthStream, Inc., NextGen Healthcare, Inc., Omnicell, Inc., OneSpan, Inc., Phreesia, Inc., Progress Software Corp., R1 Rcm Holdco, Inc., SecureWorks Corp., Tabula Rasa HealthCare, Inc., Verint Systems, Inc., Veradigm, Inc. and Yext, Inc. Given our businesses’ continued focus on developing healthcare interoperability solutions we removed LiveRamp, Inc.
Consensus’ peer group index consists of Box, Inc. CommonVault Systems, Inc., Computer Programs and Systems, Inc., Ebix, Inc., Evolent Health, Inc., HealthStream, Inc., Omnicell, Inc., OneSpan, Inc., Phreesia, Inc., Progress Software Corp., R1 Rcm Holdco, Inc., SecureWorks Corp., Verint Systems, Inc., Veradigm, Inc. and Yext, Inc.
Removed
The following graph compares the cumulative total stockholder return for Consensus, the Nasdaq Composite and an index of companies that Consensus has selected as its peer group in the cloud services for business space. Consensus’ peer group index for 2021 consists of Bottomline Technologies, Inc., Box, Inc. CommonVault Systems, Inc., Computer Programs and Systems, Inc., Ebix, Inc., HealthStream, Inc.
Added
Under this program, the Company may purchase in the public market or in off-market transactions up to $100.0 million worth of the Company’s common stock through February 2025. The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant.
Removed
LiveRamp, Inc., NextGen Healthcare, Inc. OneSpan, Inc. Phreesia, Inc., Progress Software Corp., SecureWorks Corp., Tabula Rasa HealthCare, Inc., Vocera Communications, Inc. and Yext, Inc. Consensus’ peer group index for 2022 consists of Box, Inc.
Added
For further information on our share repurchases refer to Note 14 - Stockholders' Equity of the Notes to the Consolidated Financial Statements (Part II, Item 8).
Added
The following table summarizes the share repurchase activity for the three months ended December 31, 2023: Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Program (in thousands) October 1 - 31, 2023 348,595 $ 24.35 348,595 $ 68,917 November 1 - 30, 2023 — — — 68,917 December 1 - 31, 2023 — — — 68,917 348,595 348,595 68,917 (1) Average price paid per share includes costs associated with the repurchases, but excludes the 1% excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

58 edited+23 added−52 removed38 unchanged
Biggest changeThe increase in general and administrative expense for the year ended December 31, 2022 versus the prior year was primarily due to increased expenses related to operating as a standalone public company, included increases of $26.6 million in salary and benefits (inclusive of $15.7 million of share-based compensation) and $6.3 million in professional fees, partially offset by a $4.8 million reduction in bad debt expense and the absence $11.5 million in non-recurring expenses related to the spin-off from Ziff Davis in 2021.
Biggest changeThe increase in general and administrative expense for the year ended December 31, 2022 over the prior comparable period was primarily due to increased expenses related to operating as a standalone public company, included increases of $26.6 million in salary and benefits (inclusive of $15.7 million of share-based compensation) and $6.3 million in professional fees, partially offset by a $4.8 million reduction in bad debt expense and the absence of $11.5 million in non-recurring expenses related to the spin-off from Ziff Davis in 2021. -44- Share-Based Compensation The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 (in thousands): Years ended December 31, 2023 2022 2021 Cost of revenues $ 1,400 $ 874 $ 72 Operating expenses: Sales and marketing 1,679 988 92 Research, development and engineering 379 746 (19) General and administrative 14,705 17,447 1,711 Continuing operations 18,163 20,055 1,856 Loss from discontinued operations, net of income tax — — 602 Total $ 18,163 $ 20,055 $ 2,458 Non-Operating Income and Expenses Interest expense .
Net cash used in investing activities in 2021 and 2020 was related to business acquisitions and capital expenditures associated with the purchase of property and equipment (including capitalized software development costs); partially offset by proceeds from the sale of businesses.
Net cash used in investing activities in 2021 was related to business acquisitions and capital expenditures associated with the purchase of property and equipment (including capitalized software development costs), partially offset by proceeds from the sale of businesses.
The measurement of share-based compensation expense is based on several criteria including, but not limited to, the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award cancellation rate. These inputs are subjective and are determined using management’s judgment.
The measurement of share-based compensation expense is based on several criteria including, but not limited to, the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and forfeiture rate. These inputs are subjective and are determined using management’s judgment.
We currently anticipate that our existing cash and cash equivalents and cash generated from operations will be sufficient to meet our anticipated needs for working capital, capital expenditures and stock repurchases, if any, for at least the next 12 months from the issuance of this Annual Report on Form 10-K and the foreseeable future.
We currently anticipate that our existing cash and cash equivalents and cash generated from operations will be sufficient to fund our anticipated needs for working capital, capital expenditures and stock repurchases, if any, for at least the next 12 months from the issuance of this Annual Report on Form 10-K and the foreseeable future.
This measure is calculated monthly and expressed as an average over the applicable period. -36- Critical Accounting Policies and Estimates We prepare our consolidated financial statements and related disclosures in accordance with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.
This measure is calculated monthly and expressed as an average over the applicable period. -39- Critical Accounting Policies and Estimates We prepare our consolidated financial statements and related disclosures in accordance with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.
When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized. As of December 31, 2022 and 2021, the Company has interest expense limitation carryovers of $23.4 million and $4.9 million, respectively, which last indefinitely.
When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized. As of December 31, 2023 and 2022, the Company has interest expense limitation carryovers of $30.4 million and $23.4 million, respectively, which last indefinitely.
The increase in cost of revenues for the year ended December 31, 2022 was primarily due to an increase in revenues, compensation for additional acquisition and organic headcount and higher software licensing and infrastructure / database hosting costs as a result of moving our data storage from physical storage into the cloud.
The increase in cost of revenues for the year ended December 31, 2022 over the prior comparable period was primarily due to an increase in revenues, compensation for additional acquisition and organic headcount and higher software licensing and infrastructure / database hosting costs as a result of moving our data storage from physical storage into the cloud.
Consensus serves approximately 1 million customers of all sizes, from enterprises to individuals, across approximately 50 countries and multiple industry verticals including healthcare, government, financial services, law and education. Beginning as an online fax company over two decades ago, Consensus has evolved into a leading global provider of enterprise secure communication solutions.
Consensus serves approximately 900 thousand customers of all sizes, from enterprises to individuals, across approximately 47 countries and multiple industry verticals including healthcare, government, financial services, law and education. Beginning as an online fax company over two decades ago, Consensus has evolved into a leading global provider of enterprise secure communication solutions.
The increase in research, development and engineering costs for the year ended December 31, 2022 was mostly due to our continued focus on developing our platform, products and solutions to primarily support corporate revenue growth as well as additional personnel from our Summit acquisition. -42- The increase in research, development and engineering costs for the year ended December 31, 2021 versus the prior comparable period was mostly due to our continued focus on developing our platform, products and solutions to primarily support corporate revenue growth.
The increase in research, development and engineering costs for the year ended December 31, 2022 over the prior comparable period was primarily attributable to our continued focus on developing our platform, products and solutions to primarily support corporate revenue growth as well as additional personnel from our Summit acquisition.
As of December 31, 2022, cash and cash equivalents held within domestic and foreign jurisdictions were $37.6 million and $56.6 million, respectively. On October 7, 2021, the Company issued $305 million of 6.0% senior notes due in 2026 (the “2026 Senior Notes”), in a private placement offering exempt from the registration requirements of the Securities Act of 1933.
As of December 31, 2023, cash and cash equivalents held within domestic and foreign jurisdictions were $14.5 million and $74.2 million, respectively. On October 7, 2021, the Company issued $305 million of 6.0% senior notes due in 2026 (the “2026 Senior Notes”), in a private placement offering exempt from the registration requirements of the Securities Act of 1933.
Consensus received proceeds of $301.2 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 2026 Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Consolidated Balance Sheets as of December 31, 2022 and 2021.
Consensus received proceeds of $301.2 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 2026 Senior Notes are presented as current portion of long-term debt and long-term debt, net of current portion, both of which are net -46- of deferred issuance costs, on the Consolidated Balance Sheets as of December 31, 2023 and 2022.
Operating Expenses Sales and Marketing (in thousands, except percentages) 2022 2021 2020 Percentage Change 2022 versus 2021 Percentage Change 2021 versus 2020 Sales and marketing $ 64,413 $ 53,648 $ 47,116 20% 14% As a percent of revenues 18% 15% 14% Our sales and marketing costs consist primarily of internet-based advertising, personnel costs and other business development-related expenses.
Operating Expenses Sales and Marketing (in thousands, except percentages) 2023 2022 2021 Percentage Change 2023 versus 2022 Percentage Change 2022 versus 2021 Sales and marketing $ 65,084 $ 64,413 $ 53,648 1% 20% As a percent of revenues 18% 18% 15% Our sales and marketing costs consist primarily of internet-based advertising, personnel costs and other business development-related expenses.
Years ended December 31, 2022 2021 2020 Revenues 100% 100% 100% Cost of revenues 17 16 16 Gross profit 83 84 84 Operating expenses: Sales and marketing 18 15 14 Research, development and engineering 3 2 2 General and administrative 20 17 8 Total operating expenses 41 34 24 Income from operations 42 50 60 Interest expense (14) (4) (23) Interest income — — — Other (expense) income, net — — 10 Income before income taxes 28 46 47 Income tax expense 7 11 9 Income from continuing operations 21 35 38 (Loss) income from discontinued operations, net of income tax — (3) 9 Net income 21% 32% 47% Revenues (in thousands, except percentages) 2022 2021 2020 Percentage Change 2022 versus 2021 Percentage Change 2021 versus 2020 Revenues $ 362,422 $ 352,664 $ 331,168 3% 6% Consensus revenues primarily consist of revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services.
Years ended December 31, 2023 2022 2021 Revenues 100% 100% 100% Cost of revenues 19 17 16 Gross profit 81 83 84 Operating expenses: Sales and marketing 18 18 15 Research, development and engineering 2 3 2 General and administrative 20 20 17 Total operating expenses 40 41 34 Income from operations 41 42 50 Interest expense (13) (14) (4) Interest income 1 — — Other (expense) income, net (1) — — Income before income taxes 28 28 46 Income tax expense 7 7 11 Income from continuing operations 21 21 35 Loss from discontinued operations, net of income tax — — (3) Net income 21% 21% 32% Revenues (in thousands, except percentages) 2023 2022 2021 Percentage Change 2023 versus 2022 Percentage Change 2022 versus 2021 Revenues $ 362,562 $ 362,422 $ 352,664 —% 3% Consensus revenues primarily consist of revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services.
Increased employee turnover, changes in the availability of our employees, including as a result of COVID-19-related absences and labor shortages generally have resulted in, and could continue to result in, increased costs, and could adversely impact the efficiency of our operations.
Increased employee turnover, changes in the availability of our employees and labor shortages generally have resulted in, and could continue to result in, increased costs, and could adversely impact the efficiency of our operations.
Year ended December 31, 2022 Fourth Quarter Third Quarter (1) Second Quarter (1) First Quarter (1) Revenues $ 90,232 $ 91,777 $ 91,115 $ 89,298 Gross profit 74,391 76,358 75,528 74,194 Net income from continuing operations 16,902 15,370 21,921 18,521 Net income from continuing operations per common share: Basic $ 0.85 $ 0.78 $ 1.10 $ 0.93 Diluted $ 0.85 $ 0.77 $ 1.10 $ 0.92 Weighted average shares outstanding Basic 19,814,405 19,791,019 19,928,316 19,921,375 Diluted 19,939,806 19,873,137 19,968,340 20,035,827 Year ended December 31, 2021 (2) Fourth Quarter Third Quarter Second Quarter First Quarter Revenues $ 89,004 $ 89,198 $ 87,842 $ 86,620 Gross profit 74,132 74,594 73,288 72,650 Net income from continuing operations 1,953 41,132 38,854 39,235 Net income from continuing operations per common share: Basic $ 0.10 $ 2.07 $ 1.95 $ 1.97 Diluted $ 0.10 $ 2.07 $ 1.95 $ 1.97 Weighted average shares outstanding Basic 19,908,135 19,902,924 19,902,924 19,902,924 Diluted 19,990,787 19,902,924 19,902,924 19,902,924 (1) The quarterly results for the third quarter of 2022 reflect the restated amounts in the Q3 Form 10-Q/A filed on March 31, 2023.
Year ended December 31, 2022 Fourth Quarter Third Quarter (1) Second Quarter (1) First Quarter (1) Revenues $ 90,232 $ 91,777 $ 91,115 $ 89,298 Gross profit 74,391 76,358 75,528 74,194 Net income from continuing operations 16,902 15,370 21,921 18,521 Net income from continuing operations per common share: Basic $ 0.85 $ 0.78 $ 1.10 $ 0.93 Diluted $ 0.85 $ 0.77 $ 1.10 $ 0.92 Weighted average shares outstanding Basic 19,814,405 19,791,019 19,928,316 19,921,375 Diluted 19,939,806 19,873,137 19,968,340 20,035,827 (1) The quarterly results for the third quarter of 2022 reflect the restated amounts in the Q3 Form 10-Q/A filed on March 31, 2023.
General and Administrative (in thousands, except percentages) 2022 2021 2020 Percentage Change 2022 versus 2021 Percentage Change 2021 versus 2020 General and administrative $ 74,122 $ 58,228 $ 26,852 27% 117% As a percent of revenues 20% 17% 8% Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, share-based compensation expense, bad debt expense, professional fees, severance and insurance costs.
General and Administrative (in thousands, except percentages) 2023 2022 2021 Percentage Change 2023 versus 2022 Percentage Change 2022 versus 2021 General and administrative $ 74,203 $ 74,122 $ 58,228 —% 27% As a percent of revenues 20% 20% 17% Our general and administrative costs consist primarily of personnel-related expenses (inclusive of share-based compensation), professional fees, depreciation and amortization, bad debt expense and non-income related tax expenses.
See Note 11 - Commitments and Contingencies of the notes to consolidated financial statements in Part II, Item 8 of this Form 10-K.
See Note 3 - Revenues of the notes to consolidated financial statements in Part II, Item 8 of this Form 10-K.
Vested Restricted Stock At the time of certain vesting events related to restricted stock units or restricted stock awards that are held by participants in the Consensus’ Equity Incentive Plan, a portion of the awards subject to vesting are withheld by the Company to satisfy the employees’ tax withholding obligations that arise upon the vesting of restricted stock.
The excise tax is assessed at 1% of the fair market value of net stock repurchases after December 31, 2022. -47- Vested Restricted Stock At the time of certain vesting events related to restricted stock units or restricted stock awards that are held by participants in Consensus’ Equity Incentive Plan, a portion of the awards subject to vesting are withheld by the Company to satisfy the employees’ tax withholding obligations that arise upon the vesting of restricted stock.
The following table sets forth certain key operating metrics for our continuing operations for the years ended December 31, 2022, 2021 and 2020 (in thousands, except for percentages): Years ended December 31, 2022 2021 2020 Revenue ($ in thousands) Corporate $ 192,195 $ 169,732 $ 148,981 SoHo 170,199 182,390 181,784 362,394 352,122 330,765 Other Revenues 28 542 403 Consolidated $ 362,422 $ 352,664 $ 331,168 Average Revenue per Customer Account (“ARPA”) (1)(2) Corporate $ 331.77 $ 308.42 $ 276.46 SoHo 14.32 14.40 14.32 Consolidated $ 29.07 $ 26.65 $ 24.99 Customer Accounts (in thousands) (1) Corporate 52 45 47 SoHo 942 1,039 1,072 Consolidated 994 1,084 1,119 Paid Adds (in thousands) (3) Corporate 15 13 12 SoHo 364 411 423 Consolidated 379 424 435 Monthly Churn % (4) Corporate 1.78 % 2.68 % 1.64 % SoHo 3.70 % 3.37 % 3.21 % Consolidated 3.61 % 3.34 % 3.15 % (1) Consensus customers are defined as paying Corporate and SoHo customer accounts.
The following table sets forth certain key performance metrics for our continuing operations for the years ended December 31, 2023, 2022 and 2021 (in thousands, except for percentages): Years ended December 31, 2023 2022 2021 Revenue ($ in thousands) Corporate $ 199,621 $ 192,195 $ 169,732 SoHo 162,916 170,199 182,390 Total 362,537 362,394 352,122 Other revenues 25 28 542 Consolidated $ 362,562 $ 362,422 $ 352,664 Average Revenue per Customer Account (“ARPA”) (1)(2) Corporate $ 315.51 $ 331.77 $ 308.42 SoHo $ 15.31 $ 14.32 $ 14.40 Consolidated $ 32.16 $ 29.07 $ 26.65 Customer Accounts (in thousands) (1) Corporate 54 52 45 SoHo 831 942 1,039 Consolidated 885 994 1,084 Paid Adds (in thousands) (3) Corporate 12 15 13 SoHo 274 364 411 Consolidated 286 379 424 Monthly Churn % (4) Corporate 1.49 % 1.78 % 2.68 % SoHo 3.54 % 3.70 % 3.37 % Consolidated 3.43 % 3.61 % 3.34 % (1) Consensus customers are defined as paying Corporate and SoHo customer accounts.
The global economy continues to be impacted by macroeconomic uncertainty and volatility resulting from the COVID-19 pandemic, Russia’s invasion of Ukraine, inflationary pressures, supply chain disruptions and challenges and labor market pressures. During fiscal 2022 and 2021, we have observed an increasingly competitive labor market.
The global economy continues to be impacted by macroeconomic uncertainty and volatility resulting from recent global conflicts, inflationary pressures, supply chain disruptions and challenges as well as labor market pressures. During fiscal 2022 and through 2023, we have observed an increasingly competitive labor market.
We continue to actively monitor the situation and will continue to adapt our business operations as necessary. -35- Key Performance Metrics We use the following metrics to evaluate our business, including the growth of our business, the value provided by customers to our business and our customer retention.
We continue to actively monitor the situation and will continue to adapt our business operations as necessary. -38- Key Performance Metrics We use the following metrics to generally assess the operational and financial performance of our business, including the growth of our business, the value provided by customers to our business and our customer retention that provide insights that contribute to certain of our business planning decisions.
In addition, the Company also has $1.0 million and $0.1 million state research and development tax credits carryforwards, respectively. If unused, $1 million of the credits as of December 31, 2022 can be carried over indefinitely. Income tax expense (benefit) amounted to $26.2 million, $39.9 million and $30.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2023 and 2022, the Company has $1.3 million and $0.5 million, respectively, of foreign tax credit carryforwards that begin to expire in 2031, and $1.8 million and $1.0 million, respectively, of state research and development tax credits carryforwards that can be carried over indefinitely. -45- Income tax expense amounted to $25.9 million, $26.2 million and $39.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Certain of these tax positions have in the past been, and may be challenged in the future, and this may have a significant impact on our effective tax rate if our tax reserves are insufficient.
We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. Certain of these tax positions have in the past been, and may be challenged in the future, and this may have a significant impact on our effective tax rate if our tax reserves are insufficient.
The increase in sales and marketing expenses of $6.5 million for the year ended December 31, 2021 versus the prior comparable period was primarily due to an increase in third party advertising of $3.0 million, primarily in SoHo, as well as an increase of $3.5 million in personnel expenses due to continued investment in the corporate sales team.
The increase in sales and marketing expenses of $0.7 million for the year ended December 31, 2023 over the prior comparable period was primarily due to an increase of $4.4 million in personnel-related expenses due to continued investment in the corporate sales team and a $0.6 million increase in computer related costs, partially offset by a reduction in third party advertising spend of $4.5 million, primarily in SoHo.
In assessing this valuation allowance, we review historical and future expected operating results and other factors to determine whether it is more likely than not that deferred tax assets are realizable.
In assessing this valuation allowance, we review historical and future expected operating results and other factors to determine whether it is more likely than not that deferred tax assets are realizable. See Note 13 - Income Taxes of the notes to consolidated financial statements in Part II, Item 8 of this Form 10-K.
Our total revenue increased by $9.8 million as a result of an increase of approximately $15.6 million in corporate revenues due to organic growth in existing customer usage and new customer acquisitions, as well as acquired revenue of $6.8 million from our acquisition of Summit Healthcare Services, Inc.
Revenues increased $9.8 million for the year ended December 31, 2022 over the prior comparable period. Total revenues increased primarily due to organic growth in customer usage and new customer acquisitions in corporate revenues of $15.6 million, as well as acquired revenue of $6.8 million from our acquisition of Summit Healthcare Services, Inc.
Net cash used in investing activities was $43.3 million, $42.5 million and $60.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. Net cash used in investing activities in 2022 was primarily comprised of capital expenditures associated with the purchase of property and equipment (including capitalized software development costs) and business acquisitions.
Net cash used in investing activities in 2023 included capital expenditures associated with the purchase of property and equipment (including capitalized software development costs) and cash paid for investments. Net cash used in investing activities in 2022 was primarily comprised of capital expenditures associated with the purchase of property and equipment (including capitalized software development costs) and business acquisitions.
We believe that our most critical accounting policies are those related to revenue recognition, share-based compensation expense, impairment or disposal of long-lived and intangible assets, fair value of assets acquired and liabilities assumed in connection with business combinations, income taxes, contingencies and allowance for doubtful accounts.
We believe that our most critical accounting policies are those related to revenue recognition, internal-use software development costs, share-based compensation expense, income taxes, tax contingencies and impairment or disposal of long-lived and intangible assets.
The increase in sales and marketing expenses of $10.8 million for the year ended December 31, 2022 versus the prior year was primarily due to an increase in third party advertising of $4.7 million, primarily in SoHo, as well as an increase of $5.0 million in personnel expenses due to continued investment in the corporate sales team.
The increase in sales and marketing expenses of $10.8 million for the year ended December 31, 2022 over the prior comparable period was primarily due to an increase in third party advertising of $4.7 million, primarily in SoHo, as well as an increase of $5.0 million in personnel expenses due to continued investment in the corporate sales team. -43- Research, Development and Engineering (in thousands, except percentages) 2023 2022 2021 Percentage Change 2023 versus 2022 Percentage Change 2022 versus 2021 Research, development and engineering $ 7,727 $ 10,018 $ 7,652 (23)% 31% As a percent of revenues 2% 3% 2% Our research, development and engineering costs consist primarily of personnel-related expenses.
Net cash used in financing activities was $10.6 million, $247.8 million and $179.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. Net cash used in financing activities in 2022 included the repurchase of common stock and shares withheld to cover employee income taxes.
Net cash used in financing activities was $81.7 million, $10.6 million and $247.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. Net cash used in financing activities in 2023 primarily relates to the repurchases of debt and common stock.
We expect our business to primarily grow organically and inorganically through the use of capital for re-investment in the business and opportunistic acquisitions that expedite our product roadmap in the interoperability space should they arise. -40- The following table sets forth information derived from our Statements of Income as a percentage of revenues for the years ended December 31, 2022, 2021 and 2020.
We expect our business to primarily grow organically and inorganically through the use of capital for re-investment in the business and opportunistic acquisitions that expedite our product roadmap in the interoperability space should they arise.
Ziff Davis then exchanged the 2028 Senior Notes with lenders under its credit agreement (or their affiliates) in exchange for extinguishment of a similar amount indebtedness under such credit agreement. The 2028 Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Consolidated Balance Sheets as of December 31, 2022 and 2021.
Ziff Davis then exchanged the 2028 Senior Notes with lenders under its credit agreement (or their affiliates) in exchange for extinguishment of a similar amount indebtedness under such credit agreement.
Our effective tax rates for 2022, 2021 and 2020 were 26.5%, 24.8% and 19.8%, respectively.
Our effective tax rates for the year ended December 31, 2023, 2022 and 2021 were 25.1%, 26.5% and 24.8%, respectively.
Monthly ARPA on an annual basis is calculated by dividing revenue for the year by the average customer base for the applicable four quarters and dividing that amount by 12 months. We believe ARPA provides investors an understanding of the average monthly revenues we recognize per account associated within the Consensus’ customer base.
(2) Represents a monthly ARPA for the year calculated as follows. Monthly ARPA on an annual basis is calculated by dividing revenue for the year by the average customer base for the applicable four quarters and dividing that amount by 12 months.
In addition, our income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.
Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensation and lease payments for our offices.
Net cash provided by operating activities was $114.1 million, $83.1 million and $233.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensation and lease payments for our offices.
Our interest expense is due to outstanding debt. Interest expense was $51.4 million, $14.3 million and $75.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. The increase from 2021 to 2022 is primarily due to twelve months of interest associated with the 2026 and 2028 Senior Notes compared to three months in 2021.
Interest expense for the year ended December 31, 2022 compared to 2021 increased primarily due to twelve months of interest associated with the 2026 and 2028 Senior Notes compared to three months in 2021. Interest income . Our interest income is generated from interest earned on cash and cash equivalents.
Results of Operations Years Ended December 31, 2022, 2021 and 2020 The main strategic focus of our Consensus offerings is to enable our customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries.
Recent Accounting Pronouncements See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies, to our accompanying consolidated financial statements for a description of recent accounting pronouncements and our expectations of their impact on our consolidated financial position and results of operations. -41- Results of Operations Years Ended December 31, 2023, 2022 and 2021 The main strategic focus of our Consensus offerings is to enable our customers to securely and cooperatively access, exchange and use information across organizational, regional and national boundaries.
Interest income was not material for the years ended December 31, 2022, 2021 and 2020. Other (expense) income, net . Our other (expense) income, net is generated primarily from miscellaneous items and gain or losses on currency exchange.
Our other (expense) income, net is generated primarily from foreign currency and miscellaneous items. Other (expense) income, net was $(2.4) million, $(1.6) million and $0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Dollar and exchange rate fluctuations. The change in our gains (losses) recognized in earnings from 2020 to 2021 was primarily attributable to lower inter-company balances between periods in foreign subsidiaries that were in functional currencies other than the U.S. Dollar and exchange rate fluctuations.
The change between periods was primarily attributable to exchange rate fluctuations on inter-company balances between periods in foreign subsidiaries that were in functional currencies other than the U.S. Dollar. Income Taxes Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis.
This information should be read in conjunction with the accompanying financial statements and the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
The following table sets forth information derived from our Statements of Income as a percentage of revenues for the years ended December 31, 2023, 2022 and 2021. This information should be read in conjunction with the accompanying financial statements and the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. This data should be read in conjunction with our consolidated financial statements included elsewhere in this Report.
The operating results for any quarter are not necessarily indicative of results for any future period. This data should be read in conjunction with our consolidated financial statements included elsewhere in Part II, Item 8 of this Form 10-K.
The increase in cash and cash equivalents resulted primarily from cash provided by operations, partially offset by cash used for purchases of property and equipment (including software development costs), acquisitions of businesses and cash used to repurchase our common stock.
The decrease in cash and cash equivalents resulted primarily from cash used to repurchase our debt, an increase in repurchases of our common stock in 2023, as well as continued investment in our internally developed software, partially offset by an increase in cash provided by operations.
The quarterly results for the first and second quarters of 2022 reflect the revised amounts presented within the Q3 Form 10-Q/A filed on March 31, 2023. (2) On October 7, 2021, the separation of Consensus into an independent publicly traded company was completed.
The quarterly results for the first and second quarters of 2022 reflect the revised amounts presented within the Q3 Form 10-Q/A filed on March 31, 2023. Liquidity and Capital Resources Cash and Cash Equivalents At December 31, 2023, we had cash and cash equivalents of $88.7 million compared to $94.2 million at December 31, 2022.
We adjust these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
The Company has no federal net operating loss or capital loss limitation carryforwards as of December 31, 2022 or 2021. The Company has $0.5 million and $0.2 million of foreign tax credit carryforwards as of December 31, 2022 and 2021, respectively, which will expire between 2031 and 2032.
The Company has no federal net operating loss or capital loss limitation carryforwards as of December 31, 2023 or 2022.
Common Stock Repurchase Program On March 1, 2022, the Company’s Board of Directors approved a share buyback program. Under this program, the Company may purchase in the public market or in off-market transactions up to $100.0 million worth of the Company’s common stock through February 2025.
Under this program, the Company may purchase, in the public market, or in off-market transactions, up to $100.0 million of the Company’s common stock through February 2025. The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant.
During the year ended December 31, 2022, the Company withheld shares on its vested restricted stock units relating to its share-based compensation plans of 71,509 shares. -46- Cash Flows The prior years include cash flows from discontinued operations of the non-Consensus business. As a result, the prior periods are not comparable.
During the years ended December 31, 2023, 2022 and 2021 the Company withheld shares on its vested restricted stock units and restricted stock awards relating to its share-based compensation plans of 61,878, 71,509 and zero shares, respectively.
Our total revenue increased primarily as a result of an increase of approximately $20.0 million in corporate revenues due to organic growth in existing customer usage and new customer acquisitions. -41- Cost of Revenues (in thousands, except percentages) 2022 2021 2020 Percentage Change 2022 versus 2021 Percentage Change 2021 versus 2020 Cost of revenues $ 61,951 $ 58,000 $ 53,379 7% 9% As a percent of revenues 17% 16% 16% Cost of revenues is primarily comprised of costs associated with data transmission, network operations, customer service, software licenses for resale, online processing fees and equipment depreciation.
(“Summit”), partially offset by a $12.2 million decline in SoHo and $0.4 million in other revenue. -42- Cost of Revenues (in thousands, except percentages) 2023 2022 2021 Percentage Change 2023 versus 2022 Percentage Change 2022 versus 2021 Cost of revenues $ 68,319 $ 61,951 $ 58,000 10% 7% As a percent of revenues 19% 17% 16% Cost of revenues is primarily comprised of costs associated with personnel costs, data transmission, online processing fees, network operations as well as capitalized software amortization and equipment depreciation.
We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable.
These reserves for tax contingencies are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations.
Our primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents. Net cash provided by operating activities was $83.1 million, $233.7 million and $238.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Cash Flows The year ended December 31, 2021 includes cash flows from discontinued operations of the non-Consensus business and is not comparable to the years ended December 31, 2023 and 2022. Our primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents.
(“Summit”), partially offset by a $12.2 million decline in Small office home office (“SoHo”) and $0.4 million in other revenue. Revenues increased $21.5 million in the year ended December 31, 2021 over the prior comparable period primarily due to growth in our corporate business.
Revenues remained consistent for the year ended December 31, 2023 over the prior comparable period. Total revenues increased by $0.1 million as a result of an increase in corporate revenues of $7.4 million due to organic growth in customer usage and new customer acquisitions, partially offset by a $7.3 million decline in SoHo.
The timing and amounts of purchases will be determined by the Company, depending on market conditions and other factors it deems relevant. The Company entered into Rule 10b-18 and Rule 10b5-1 trading plans and during the year ended December 31, 2022, the Company repurchased 189,114 shares under this program.
The Company entered into Rule 10b-18 and Rule 10b5-1 trading plans and during the years ended December 31, 2023 and 2022, the Company repurchased 839,548 and 189,114 shares, respectively, at an aggregate cost of $23.7 million (inclusive of excise tax of $0.2 million) and $7.6 million, respectively, under this program.
Net cash used in financing activities in 2021 increased over 2020 primarily due to distributions to the Former Parent in 2021 compared to contributions from the Former Parent in 2020. Partially offsetting these amounts, the Company had cash inflows related to the issuance of debt in 2021, compared to repayment of debt in 2020.
Net cash used in financing activities in 2022 included the repurchase of common stock and shares withheld to cover employee income taxes. Net cash used in financing activities in 2021 included distributions to the Former Parent, partially offset cash inflows related to the issuance of debt in 2021.
The decrease in our net cash provided by operating activities in 2021 compared to 2020 was primarily attributable to a decrease in operating lease liabilities, offset by increased prepaid expenses, accounts payable and other long-term liabilities. Our prepaid tax payments were $8.0 million and zero at December 31, 2022 and 2021, respectively.
Our prepaid tax payments were $3.7 million and $8.0 million at December 31, 2023 and 2022, respectively. Net cash used in investing activities was $40.5 million, $43.3 million and $42.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The increase in cost of revenues for the year ended December 31, 2021 compared to the prior comparable period was primarily due to an increase in revenues and higher software licensing and infrastructure / database hosting costs as a result of moving our data storage from physical storage into the cloud.
The increase in cost of revenues for the year ended December 31, 2023 over the prior comparable period was primarily due to increases of $4.1 million in personnel-related expenses and $1.8 million in depreciation associated with platform development costs compared to the prior comparable period.
The increase in our annual effective income tax rate from 2020 to 2021 was primarily attributable to an increase in the state tax expenses due to our expanded state footprints and a reduction in the foreign rate differential due to the change in the geographical mix of earnings. -44- Quarterly Results of Operations (Unaudited) The following tables contain selected unaudited Statements of Operation information for each quarter of 2022 and 2021 (in thousands, except share and per share data).
Quarterly Results of Operations (Unaudited) The following tables contain selected unaudited Statements of Operation information for each quarter of 2022 (in thousands, except share and per share data). The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the period presented.
As of December 31, 2022, no amount has been drawn down on the Credit Facility.
As of December 31, 2023, no amount has been drawn down on the Credit Facility. Material Cash Requirements Our long-term contractual obligations generally include our debt and related interest payments, noncancellable operating leases as well as other commitments.
Removed
(2) Represents a monthly ARPA for the quarter or year calculated as follows. Monthly ARPA on a quarterly basis is calculated using our standard convention of dividing revenue for the quarter by the average of the quarter’s beginning and ending customer base and dividing that amount by 3 months.
Added
We believe these financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
Removed
The Company estimates the expected term based upon the contractual term of the award.
Added
We believe ARPA provides investors an understanding of the average monthly revenues we recognize per account associated within the Consensus’ customer base.
Removed
Impairment or Disposal of Long-lived and Intangible Assets We account for long-lived assets, which include property and equipment, operating lease right-of-use assets and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with the provisions of FASB ASC Topic No. 360, Property, Plant, and Equipment (“ASC 360”), which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Added
Internal-Use Software Development Costs We capitalize certain internal-use software and website development costs that are incurred during the application development stage, provided that management with the relevant authority authorizes and commits to the funding of the project, it is probable the project will be completed, and the software will be used to perform the function intended.
Removed
Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset.
Added
Costs related to preliminary project activities and post implementation activities are expensed as incurred. Capitalized internal-use software development costs are included in property and equipment and are amortized on a straight-line basis over their estimated useful lives. There is judgment involved in estimating the stage of development as well as estimating time allocated to a particular project.
Removed
If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference. -37- We assess the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Added
A significant change in the time spent on each project could have a material impact on the amount capitalized and related amortization expense in subsequent periods. See Note 7 - Property and Equipment of the notes to consolidated financial statements in Part II, Item 8 of this Form 10-K.
Removed
Factors we consider important which could individually or in combination trigger an impairment review include the following: • Significant underperformance relative to expected historical or projected future operating results; • Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; • Significant negative industry or economic trends; • Significant decline in our stock price for a sustained period; and • Our market capitalization relative to net book value.
Added
The Company estimates the expected term based upon the contractual term of the award. -40- See Note 15 - Equity Incentive and Employee Stock Purchase Plan of the notes to consolidated financial statements in Part II, Item 8 of this Form 10-K. Income Taxes Our income is subject to taxation in both the U.S. and numerous foreign jurisdictions.
Removed
If we determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.
Added
Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities.
Removed
We have assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of definite-lived intangibles and long-lived assets may not be recoverable.
Added
The decrease in research, development and engineering costs for the year ended December 31, 2023 over the prior comparable period was primarily attributable to increased capitalization of personnel-related expenses due to our continued focus on internally developing our platform, products and solutions as well as a reduction in external development costs.
Removed
We recorded total impairment of $7.5 million related to operating lease right-of-use assets, of which $6.5 million is related to continuing operations and $1.0 million is related to discontinued operations for the year ended December 31, 2021. Additionally, we recorded an impairment charge of $1.7 million for associated property and equipment for the year ended December 31, 2021.
Added
The increase in capitalization resulted in a decrease in personnel-related expenses of $2.1 million.
Removed
The impairment is related to the Company’s decision to exit and seek subleases for certain leased facilities, primarily due to a distributed workforce as a result of the pandemic. As we seek to return to offices, we will seek a hybrid return to office model. No impairment was recorded for the years ended December 31, 2022 and 2020.
Added
General and administrative expense remained consistent for the year ended December 31, 2023 over the prior comparable period.
Removed
The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Added
The $0.1 million increase is primarily due to increases in the following: $4.5 million in bad debt expense, $1.7 million in professional fees and $1.3 million in computer related equipment costs, partially offset by a decrease in non-income related tax expenses of $7.4 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+2 added−2 removed2 unchanged
Biggest changeOur objective in managing foreign exchange risk is to minimize the potential exposure to changes that exchange rates might have on earnings, cash flows and our financial position. We currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such hedging risk.
Biggest changeWe currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such hedging risk. However, we may, in the future, engage in hedging transactions to manage our exposure to fluctuations in foreign currency exchange rates.
Readers should carefully review the risk factors described in this document as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K filed or to be filed by us in 2023.
Readers should carefully review the risk factors described in this document as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K filed or to be filed by us in 2024.
Interest Rate Risk Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of December 31, 2022, the carrying value of our cash and cash equivalents approximated fair value. Our return on these investments is subject to interest rate fluctuations.
Interest Rate Risk Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of December 31, 2023, the carrying value of our cash and cash equivalents approximated fair value.
Cumulative translation losses included in other comprehensive income for the years ended December 31, 2022, 2021 and 2020, were $2.3 million, $14.4 million and $11.1 million, respectively. -48-
Cumulative translation gains (losses) included in other comprehensive income for the years ended December 31, 2023, 2022 and 2021, were $5.9 million, $(2.3) million and $(14.4) million, respectively. -49-
The economic impact of currency exchange rate movements is often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause us to adjust our financing and operating strategies. As currency exchange rates change, translation of the income statements of the international businesses into U.S.
As we expand our international presence, we become further exposed to foreign currency risk by entering new markets with additional foreign currencies. The economic impact of currency exchange rate movements is often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.
Foreign Currency Risk We conduct business in certain foreign markets, primarily in Canada, Australia, the European Union and Japan. Our principal exposure to foreign currency risk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarily the Euro and the Japanese Yen.
Our principal exposure to foreign currency risk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarily the Euro and the Japanese Yen. If we are unable to settle our short-term intercompany debts in a timely manner, we remain exposed to foreign currency fluctuations.
We cannot ensure that future interest rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cash flows. To date, we have not entered into interest rate hedging transactions to control or minimize certain of these risks.
We do not have interest rate risk on our outstanding long-term debt as these arrangements have fixed interest rates. We cannot ensure that future interest rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cash flows.
Dollars affects year-over-year comparability of operating results, the impact of which is immaterial to the comparisons set forth in this Annual Report on Form 10-K. Historically, we have not hedged translation risks because cash flows from international operations were generally reinvested locally; however, we may do so in the future.
As currency exchange rates change, translation of the income statements of the international businesses into U.S. Dollars affects year-over-year comparability of operating results, the impact of which is immaterial to the comparisons set forth in this Annual Report on Form 10-K.
The change in our gains (losses) recognized in earnings from 2021 to 2022 was primarily attributable to the translation of certain intra-entity balances in foreign currencies. The change in our gains (losses) recognized in earnings from 2020 to 2021 was primarily attributable to the settlement of certain intra-entity transactions of $33.1 million in 2020 that was not present in 2021.
For the years ended December 31, 2023, 2022 and 2021, foreign exchange (losses) gains amounted to $(2.4) million, $(1.6) million and $0.2 million, respectively. The change in foreign exchange in all comparable periods was primarily attributable to the translation of certain intra-entity balances in foreign currencies.
As of December 31, 2022 and 2021, we had cash and cash equivalent investments primarily in cash and checking accounts of $94.2 million and $66.8 million, respectively. We do not have interest rate risk on our outstanding long-term debt as these arrangements have fixed interest rates.
Our return on these investments is subject to interest rate fluctuations. -48- As of December 31, 2023 and 2022, we had cash and cash equivalent investments, primarily in money market funds and cash held in foreign and domestic bank accounts, of $88.7 million and $94.2 million, respectively.
Removed
If we are unable to settle our short-term intercompany debts in a timely manner, we remain exposed to foreign currency fluctuations. As we expand our international presence, we become further exposed to foreign currency risk by entering new markets with additional foreign currencies.
Added
To date, we have not entered into interest rate hedging transactions to control or minimize certain of these risks. Foreign Currency Risk We conduct business in certain foreign markets, primarily in Canada, Australia, the European Union and Japan.
Removed
However, we may, in the future, engage in hedging transactions to manage our exposure to fluctuations in foreign currency exchange rates. For the years ended December 31, 2022, 2021 and 2020, foreign exchange (losses) gains amounted to $(1.6) million, $0.2 million and $31.6 million, respectively.
Added
Historically, we have not hedged translation risks because cash flows from international operations were generally reinvested locally; however, we may do so in the future. Our objective in managing foreign exchange risk is to minimize the potential exposure to changes that exchange rates might have on earnings, cash flows and our financial position.

Other CCSI 10-K year-over-year comparisons