6. Consensus Cloud Solutions Inc. (NASDAQ:CCSI)
Market Cap as of December 2: $471.23 million
Number of Hedge Fund Holders: 17
Consensus Cloud Solutions Inc. (NASDAQ:CCSI) is a leading global provider of digital fax solutions and digital information exchange services. Its platform empowers businesses to streamline customer interactions across multiple channels, including voice, chat, and email. By using AI, it helps companies to enhance customer service, automate tasks, and gain valuable insights from customer interactions.
The company reported strong Q3 2024 results, driven primarily by the growth of its corporate channel, which caters to larger organizations, such as healthcare providers, financial institutions, and law firms. This channel experienced its best revenue growth in 6 quarters, with a 5.3% increase year-over-year, fueled by new customer acquisitions.
Its e-commerce platform, eFax Protect, has attracted significant new healthcare customers. Additionally, upselling existing SoHo (Small Office/Home Office) customers to the corporate channel and securing several key enterprise deals contributed to the overall growth of the corporate channel. The corporate customer base reached a record high of 58,000 accounts, with a stable average revenue per account of $310.
The company’s focus on customer retention yielded positive results, with a modest increase in revenue retention to 100% over the past 12 months in the corporate channel. Consensus Cloud Solutions Inc. (NASDAQ:CCSI) also leveraged AI-powered solutions to drive innovation and customer satisfaction.
Meridian Small Cap Growth Fund stated the following regarding Consensus Cloud Solutions, Inc. (NASDAQ:CCSI) in its first quarter 2024 investor letter:
“Consensus Cloud Solutions, Inc. (NASDAQ:CCSI), a leading supplier of both secure data delivery for enterprise healthcare interoperability and cloud fax solutions to small office home office (SoHo) customers, was spun out of longtime holding J2 Global (now Ziff Davis) in the fourth quarter of 2022. Consensus has historically enjoyed a high percentage of recurring revenues, low churn in the enterprise segment, and high margins. Much of the company’s current strategic focus is to build upon its legacy digital cloud fax service for the enterprise healthcare sector where data security and interoperability are key concerns. Despite an earnings report in line with expectations, the stock declined during the quarter on lower[1]than-expected guidance. The healthcare business continues to be under macro pressure, largely driven by IT staffing issues that are slowing enterprise-level adoptions of Consensus’ solutions. The company has rightly downshifted to a lower revenue reality and management is proactively shifting marketing spend from inefficient top-line growth efforts in its SoHo segment toward higher revenue generating customers in healthcare. We expect healthcare’s macro issues to eventually ease, resulting in revenue growth accelerating from the low single-digit growth today towards low double digits. The stock was recently trading at an attractive three times earning multiple with more than a 20% free cash flow yield. We believe that even modest growth from here and continued deleveraging could result in a materially higher share price. We maintained our position in the company during the quarter.”
