Consensus Cloud Solutions, Inc. Q1 FY2024 Earnings Call

Good day, ladies and gentlemen, and welcome to Consensus Q1 2024 Earnings Call. My name is Paul, and I will be the operator assisting you today. On this call from Consensus are Scott Turicchi, CEO; Jim Malone, CFO; Johnny Hecker, CRO and Executive Vice President of Operations; and Adam Varon, Senior Vice President of Finance. I will now turn the call over to Adam Varon, Senior Vice President of Finance at Consensus. Thank you. You may begin.

Good afternoon, and welcome to the Consensus investor call to discuss our Q1 2024 financial results, other key information, Q2 2024 guidance, and our 2024 guidance for the full year. Joining me today are Scott Turicchi, CEO; Johnny Hecker, CRO and EVP of Operations; and Jim Malone, CFO. The earnings call will begin with Scott providing opening remarks. Johnny will give an update on operational progress since our year-end 2023 investor call. And then Jim will discuss our Q1 2024 financial results, Q2 guidance, and reaffirmation of our full year 2024 guidance. After we finish our prepared remarks, we will conduct a Q&A session. At that time, the operator will instruct you on the procedures for asking a question. Before we begin our prepared remarks, allow me to direct you to the safe harbor language on Slide 2. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors outlined on Slide 3 that we have disclosed in our 10-K SEC filing, as well as a summary of those risk factors that we have included as part of the slideshow for the webcast. We refer you to discussions in those documents regarding safe harbor language as well as forward-looking statements. Now, let me turn the call over to Scott.

Thank you, Adam. As noted in the press release, I am pleased with the results of our first fiscal quarter. As we discussed on the Q4 earnings call, our goals for this year include the following. First, eliminating certain costs of the SoHo channel, especially in the area of marketing, allowing us to stabilize the base of revenue over time. Second, continuing to pursue the acquisition of customers primarily in the healthcare space for our corporate channel. Third, reviewing our overall cost structure with the goal of driving EBITDA margins north of 54%. And fourth, continuing the repurchase of our debt to further reduce our net debt to EBITDA ratio in anticipation of the first tranche maturing in October of 2026. Johnny will provide more detail in his portion of the presentation. However, I'd like to highlight several things before turning the presentation over to him. I'm happy to report that while revenues for the SoHo Channel dipped in the quarter versus Q1 of 2023, it was better than our expectation. We were able to substantially reduce our marketing spend and still generate 63,000 paid adds, more than in Q4, and similar to our Q3 productivity that had higher levels of marketing spend. We continue to monitor the various cohorts and look for opportunities to possibly allocate additional marketing dollars to work above our budgeted amount later in the year. In our Corporate channel, our new cloud fax product, eFax Protect, had strong sign-ups in only its second full quarter of offering. We also saw a record number of upgrades from our SoHo channel to corporate. In addition, we saw more facilities come online and a ramping of usage from the VA. All of these contributed to 4% growth, which, while not to our desired long-term target, is an improvement over the past three quarters. On the AI front, we saw additional wins for Clarity PA and Clarity CD. We maintained our discipline on the cost side with cuts primarily coming from the SoHo marketing mentioned earlier. The result was a 6-percentage-point pickup on our EBITDA margin to 54.5% and near the upper end of our long-term range. The combination of improved EBITDA, strong cash collections, and the retirement of debt allowed us to improve our free cash flow by more than 20% from Q1 of 2023 to approximately $36 million in Q1 of 2024, which is before our reduction in CapEx that begins this quarter. We were able to repurchase an additional $63.5 million of debt during the quarter. This brings our total repurchases since launching the repurchase program in November 2023 to $126 million and reducing our outstanding debt to $679 million, or 3.6x our trailing 12-month EBITDA on a gross basis and 3.2x on a net basis. I will turn the call over to Johnny, who will provide you more operating details.

Thank you, Scott. And hello, everyone. Let's dive into our sales and operations updates, starting with our encouraging performance in the Corporate business. Q1 is traditionally an active quarter for us, and this year was no exception. We are pleased to report revenue of $51.4 million versus $49.4 million last year for Q1, marking a 4% increase over the same period last year. This solid result demonstrates the continued momentum of our corporate solutions and marks another record quarter for our Corporate business, underscoring the strength of our offerings. Within our Corporate business, the SoHo upsell strategy remains a rich source for upsells, with roughly 1,500 customers deciding to upgrade in Q1. This represents excellent growth, up 24% quarter-over-quarter, and an impressive 38% increase year-over-year. We expect this initiative to slow down a bit in Q2 due to some operational changes we're making. Furthermore, our advanced products are regaining traction, accounting for 21% of new sales in Q1. Driven by demand for Clarity and Unite, this figure shows a healthy increase over Q4. Our commitment to innovation is paying off as customers embrace these powerful interoperability and AI-driven solutions. The momentum for eFax Protect remains strong, and we continue to see growing adoption and positive customer feedback. The Q3 launch of our dedicated e-commerce channel for corporate clients has been instrumental in driving this success. Turning to our SoHo business, Q1 revenue was $36.8 million versus $42 million the previous year. Consistent with the marketing changes we announced last year, the total SoHo account base has decreased from 831,000 to 808,000. This is slightly ahead of expectations as we introduced new price plans that are economically beneficial. These first-month discounted plans are popular among new customers in lieu of our free trial offering. Consequently, we see ARPA decline modestly from $15.12 in Q4 to $14.95 in Q1, while the cancel rate is up slightly at 3.42% compared to 3.34% in the previous quarter. Bear in mind that rate includes the accounts we have upgraded to the corporate product, essentially making up the entirety of the increase in cancels. As discussed in our last earnings call, we have made these adjustments to improve the LTV to CAC ratio. I am pleased to say these steps have shown real promise in that area, and Q1 has seen a dramatic improvement, demonstrating the effectiveness of our smarter ad spend efforts and enhancing the profitability of our customer acquisition efforts. While it's early days, we're encouraged with these results and will continue to aggressively manage this key metric. Let's discuss some of the key initiatives and wins. The VA roll-out is progressing at the expected pace, and we remain optimistic about its potential. We have successfully adjusted our deployment approach to streamline the process with our partners and remain confident in our ability to achieve a 7-digit contribution from the VA in 2024, laying a foundation for further growth in the following years. The uptake of our eCFax offering continues to gain traction in the extended public sector. We remain in close contact with our existing partner Cognosante and are excited about their announced merger with Accenture. This signifies the strength of Cognosante and expands the potential opportunity for eCFax in that growing market segment. In Q1, we were able to form a new partnership with a leading software company specialized in document delivery and data transfer solutions. These strategic collaborations expand our capacities and capabilities to deploy our eFax and NLP AI solutions, enabling the consumption of structured data for our customers. The goal of this partnership is to provide a seamless and efficient experience for users, leveraging the expertise of both organizations to deliver innovative solutions. Furthermore, we are in the process of launching a joint go-to-market partnership with one of the largest revenue cycle management and electronic medical record systems in the country. This partnership represents a significant step forward, creating synergies with a major player in the healthcare technology space. By bringing our two leading brands together and combining the strengths and capabilities of both organizations, we aim to deliver comprehensive solutions that meet the evolving needs of the healthcare industry, enhancing patient care and streamlining administrative processes. During Q1, we attended three important industry events: ViVE in Los Angeles, HIMSS in Orlando, and Channel Partners in Las Vegas. This provided invaluable opportunities to interact with current and potential customers, as well as partners, underscoring the importance of in-person connections. I'm also happy to announce that we have successfully refreshed the eFax.com website. The redesigned site provides an optimized user experience that aligns with our ongoing efforts to attract and retain high-value users. Overall, we're on track with the execution of our 2024 initiatives. With customers and partners understandably focusing on cost consciousness and ROI, we haven't witnessed any significant changes in the market or customer behavior. There remains a high level of interest in our solutions, but clients continue to be slow in decision-making and remain resource-constrained. We don't expect this to change anytime soon. Now, let's delve into product updates. Our AI-powered solution Clarity continues to generate a strong pipeline, and we're seeing increased demand for document types beyond fax. We're actively onboarding first customers and building the POC backlog. The ongoing interest in Clarity remains very encouraging. For our flagship brand, eFax, we launched the integrated portal, providing an enhanced user experience and laying the foundation for future consolidated offerings. Our investment in security, including HITRUST and FedRAMP efforts, continues to pay off. While the recent cyber-attack disruptions in the healthcare industry were horrific, we were pleased that our digital cloud fax solution was a fallback lifeline for some of the impacted parties. This resulted in some increased volume and project triggers. Security is paramount, and Consensus offers high-quality solutions with a strong focus on secure information exchange. In summary, we made solid progress in Q1 2024 with record revenue in the Corporate business and significant progress on key initiatives. We are successfully executing our strategy focused on profitability, cash flow generation, and the optimization of our customer base. And now I'll hand the call over to our CFO, Jim Malone, who will provide further details about our financial results and guidance.

Thank you, Johnny. Hello, everyone. In our press release and on this earnings call today, we are discussing Q1 2024 results, Q2 2024 guidance, and reaffirming full-year 2024 guidance. We expect to file our 10-Q today. Let's start with our Corporate business results. Q1 2024 revenue was a record $51.4 million, an increase of $2 million or 4% over the prior year comparable period and ahead of our expectations. Corporate ARPA of $316 is up slightly from the prior comparable period. Monthly customer churn was 1.92% for the quarter. Let me remind you that this metric is based upon account cancels and the vast majority of customers are biased towards the lower end of our customer continuum, representing primarily e-commerce to SMB accounts. The trailing 12-month revenue retention was 98%. Moving to SoHo, Q1 2024 revenue of $36.8 million is a decrease of $5.3 million, or 12.6%, over the prior comparable period, and again, better than expectations. The year-over-year decrease was primarily driven by planned reduced advertising spend in the current period and the year-over-year base reduction due to fewer paid adds. ARPA of $14.95 decreased 1%, primarily as a result of shifting to price plans with a discounted first month versus a free trial period resulting in higher paid adds in the quarter. As Johnny mentioned, these plans are net beneficial to us. Churn declined 34 basis points to 3.42% year-over-year. As we accelerate the movement of SoHo customers to Corporate, this will have an effect on the SoHo cancel rate. In the quarter, that movement of customers accounted for about 6 basis points of the churn. Moving to Q1 consolidated results, revenue of $88.1 million is a decrease of $3.3 million or 3.6% over Q1 2023 and better than expectations. Adjusted EBITDA of $48.1 million and 54.5% margin was an increase of $3.8 million or 8.7% over Q1 2023. The main drivers were our focus on cost structure, most notably the reduction in SoHo marketing spend, as well as other operating savings. EBITDA margin of 54.5% is near the higher end of the range presented in our annual 2024 guidance and an increase of 6 percentage points over the prior year comparable period. Adjusted non-GAAP net income of $29.8 million is an increase of $7.8 million or 35.6% over the prior year driven by items I mentioned plus benefits from non-cash foreign exchange on revaluation of intercompany accounts and net interest expense and a modestly lower share count. Just a non-GAAP EPS of $1.55 is higher than the prior comparable period by 40.9% or $0.45. Q1 2024 non-GAAP tax rate and share count were 21.3% and 19.2 million shares, respectively. Moving to our capital allocation strategy, as mentioned in our Q3 2023 earnings call, we announced the $300 million 3-year bond repurchase program approved by our Board. In Q1 2024, we purchased $63 million face value for $58 million of cash. Programmed to date, we have purchased $126 million face value for $115 million cash. We have approximately $174 million in bond repurchases remaining on this plan. You'll see in the deck that we have distributed a new slide, debt to EBITDA leverage. As I mentioned, and as Scott has, we have purchased $126 million of debt program to date. The schedule depicts our gross and net debt to EBITDA leverage from spin to Q1 2024. As we were not able to repurchase any debt until the second anniversary of the spin, which was October 2023, the repurchase activity began in Q4 of 2023. As of Q1 2024, our net debt to EBITDA ratio has decreased to 3.2x, solid progress towards a debt burden of less than three times. We end Q1 2024 with $61.5 million in cash, which is sufficient to fund our operations and repurchase of debt and equity. This decrease from our year-end balance of $89 million is primarily due to the repurchases. Q1 2024 free cash flow is $35.8 million, 21.6% versus the prior comparable period. Q1 2024 CapEx of $8.9 million is consistent with the prior comparable period. Moving to guidance, we are reaffirming our full year 2024 guidance. Additionally, for assistance with the quarterly spread of our guidance, we are providing guidance for the current quarter. For the full year, our guidance revenue is between $338 million and $353 million, or $345 million at midpoint. Adjusted non-GAAP EBITDA is $182 million to $194 million, with $188 million at midpoint. Adjusted non-GAAP EPS of $5.08 to $5.31 with $5.20 at midpoint. Our estimated share count and income tax rate are 19.4 million shares and a tax rate of 20.5% to 22.5%. For Q2 '24 guidance, revenues are expected between $84.5 million and $88.5 million, with $86.5 million at midpoint. Adjusted non-GAAP EBITDA between $46 million and $49 million, with $47.5 million at the midpoint. Adjusted non-GAAP EPS, $1.30 to $1.36, with $1.33 at midpoint. Our estimated share count and income tax rate are 19.3 million shares and 20.5% to 22.5% tax rate. This concludes my formal remarks, and I'd like to turn the call back to the operator for the Q&A.

And the first question today is coming from Jon Tanwanteng from CJS Securities.

I was just wondering, looking at the midpoint of the Q2 guidance, it's a little bit down sequentially on an EBITDA basis. And I'm wondering what's going on in that number and kind of what the puts and takes are? I know that, SoHo, you're bleeding off a little bit, but is there increased expenses? My understanding was that SoHo was maybe a low to no margin business that the customers that you were running off.

No, Jon. Remember, the revenues have decreased from Q1 to Q2, which puts pressure on us. We need to compensate for that difference. Customers who cancel can actually be quite profitable since they are contributing something to us from a previous period, whether it was last quarter or last month. The customers who are less or not profitable relate to the marketing issue we discussed during this call and earlier, concerning the type of customers signing up and whether they are exploiting the free trial period without making payments, despite our marketing expenses. Additionally, they may only stay for a very short duration. This introduces a different aspect regarding a new plan that requires upfront payment at a discounted rate. However, nearly all of the customers we lose in SoHo are profitable to varying extents because those marketing costs were accounted for in earlier periods. Therefore, we need to mitigate that loss. I believe that the midpoint indicates an improvement in margins along with a maintained level of EBITDA.

If I could sneak another one in there. I was wondering about the changes you mentioned about that would impact the upsell amount in Q2 and kind of what's going on there.

Johnny, take that.

This program is significant for us as it helps increase the number of new customers, but since it's on the lower end, we anticipate that its impact won't be dramatic. We are making some adjustments, focusing our team members in that program more towards generating leads in the upper market. We will be filling those positions again, but this will result in a slight decline, and we don't expect Q2 to be as strong as Q1.

The next question is coming from David Larsen from BTIG.

This is Jenny Shen on for Dave Larsen. Congrats on the quarter. It was helpful color to hear that advanced products made up 20% of new sales. Can you just provide some more color there? What opportunities you're seeing from Clarity and Unite? How receptive prospective clients have been? And also, the potential revenue and margin impact there?

Thank you for your question. We have seen strong sales with Unite in the past. This suite provides more than just faxing services to smaller physician offices and clinics, offering a wider range of interoperable products. We continue to see significant interest in this product, and our focused sales initiative for this line has resulted in strong sales in the first quarter. Regarding Clarity, as I mentioned earlier, we have acquired our first customers for the Clarity platform and are in the process of rolling it out.

We find, I think, increasing use cases, and there's some proof of concepts going on that are beyond the prior proof of concepts in certain areas we talked about in the last couple of quarters. So there is an expanding interest in what Clarity can do as a platform, and it's iterating around either new use cases for it or derivatives of some of our existing use cases, which would be in clinical documentation and prior authorization. In terms of your question on the margin, I would say certainly in the aggregate, Clarity, Unite, and really almost all the advanced services fall in line with our margin structure. Some, depending upon how they're deployed, could have a slightly higher contribution margin. Some might be slightly lower, but as a basket, I'd say they're in line with where we operate today. And when I say that, I'm talking about an operating contribution margin, so before things like G&A and whatnot. So higher than the 54.5% EBITDA margin that we reported, which includes all of those G&A costs.

Yes. On the overall revenue mix, though, the vast majority is just based on the large baseline that we have in the fax business. Obviously, still our fax revenue will take some time for those advanced products to catch up since we're still growing in fax as well, right? So the vast majority of our revenue maintains and continues to be fax. On the new sales side, we're excited that we're able to book a substantial part of our bookings with advanced products.

And if I can sneak in a quick follow-up here, I'm not sure if I missed it, but did you guys report a bookings number? And if not, can you just provide some general comments around your visibility and the pipeline?

No.

Provide some general comments around your visibility and the pipeline?

So, yes, the bookings, you're correct, it was never a formal metric in our presentation. It is something that for a number of quarters we would talk about in the operational section. Our view was that it was not terribly helpful because it was not. You could not extrapolate from the booking numbers to a future, say, quarter or year worth of revenue. And it's a fairly volatile number. So you can have, like when the VA comes in, a very big increase, but that may spread out over a number of years. So that is not something that we currently book or track or report and don't intend to. But I think Johnny can give you sort of a feel for in terms of sales activity and what's going on in terms of both in the core fax business, and I think he's already addressed the advanced interoperable, what we're seeing there.

Yes, to add to that, a few quarters ago I talked about the customer continuum. It clearly shows that for smaller customers, we experience a very quick ramp-up time. They typically begin billing almost immediately, usually within a month after we close the deal. For larger customers, it can take anywhere from 6 months to over a year before they start generating significant revenue. This has led us to remove that somewhat confusing metric. On the pipeline front, we are doing well. We are still building our pipeline and closing deals. As I mentioned earlier, we haven't observed any significant behavior changes in the market. We're still facing sluggish decision-making processes in larger accounts, but we are confident in our ability to continue closing deals. However, we don't see a noticeable shift in the pace right now.

And you can see that in Johnny's presentation. The driver for the new adds in the Corporate channel were primarily from the upgrades from the SoHo channel, which was good. But they come at a lower ARPA. And also the relatively new eFax Protect.

And congrats on the quarter.

The next question is coming from Anne Samuel from JPMorgan.

Congrats on the quarter, guys. I was hoping you could provide a little bit more color on the partnership that you mentioned with the Revenue Cycle Management vendor and what that entails.

Yes. So that is a large provider of a solution, a healthcare IT provider in that space. And we're jointly going to market to market our products to their existing customer base and closely connected and then delivering documents into their systems. So those are many thousands of customers that they currently serve, and we're going to do joint campaigns. Their teams are going to reach out to their existing customers. So this is really an exciting opportunity for us to work with them.

Maybe just one follow-up. Last quarter, you had noted that the VA partnership had started to contribute to revenue. I was just hoping you could provide an update on the roll-out there and contribution in the quarter.

Yes. The roll-out is continuing at a government's pace, let's call it that, right? So it's contributing at the rate that we were expecting. There's ups and downs in that roll-out, but it's growing now at a steady and continued pace.

Yes, we've expanded to several hundred facilities. However, not all of them are making significant contributions, and that represents a notable increase from the approximately 100 we had two or three quarters ago. It's important to note that facilities in the VA vary greatly in terms of significance, size, and contribution. Currently, most of our facilities are still in the lower quartile, maybe slightly above the midpoint in size, and the larger ones have yet to come online. This presents substantial opportunities for further expansion and deeper engagement in those locations where we've already established a presence. There are many different methods of faxing used at these facilities, including servers, physical devices like multifunction printers, and embedded software applications, along with both inbound and outbound capabilities. Inbound traffic is critical because it involves porting telephone numbers, while outbound does not. To fully capture all traffic at a facility, we need to address all five components, which we currently do not have in most locations. There are various reasons for this, such as slow number porting and existing contracts that prevent facilities from disconnecting devices. Over time, these issues will resolve and benefit us as we continue to expand. Regarding your specific question, we will not disclose a specific contribution from the VA.

The next question is coming from Fatima Boolani from Citigroup.

This is Mark on for Fatima. Maybe just wanted to touch on the SoHo to Corporate conversion momentum. It seems like the upgrade reached 1,500 accounts this quarter, which was actually higher than your usual cadence, I'll call it around the 1,200 mark. Is this number one ahead of your internal expectations for this quarter? And any sort of changes you're seeing in momentum there? Is it more SoHo customers seeing better budgets to actually do these upgrades, or just recognizing the value of the corporate product?

Yes, as I mentioned, we are very excited about the success of this program and reaching over 1,500 accounts in Q1. The key to this success is our operational excellence. We have learned to effectively identify the most promising customers in the SoHo segment and present them to the upsell team. It also involves establishing a routine, as it takes time for our representatives to adapt and find their rhythm. We have been able to achieve this over nearly four quarters. The main factors driving our results are the effective selection of accounts for upselling and recognizing patterns among the SoHo customers who are most interested in this product. This learning has given us confidence in continuing this program, allowing us to implement planned changes in Q2.

And then maybe if I could sneak in a quick follow-up, too. Any sort of just presentation to the free cash flow performance this quarter, fairly strong. And then any updates to the full year outlook for free cash flow specifically? I know the last update was, call it low 80s for the year, any updates post this quarter's performance?

Yes, you are correct. It was a strong quarter for free cash flow, starting with EBITDA, which outperformed expectations. Our EBITDA is primarily cash, so its outperformance compared to our expectations and the previous year is the main reason. Taxes didn't have a significant impact one way or another. CapEx remained relatively flat year-over-year, as the reductions begin now in Q2. The main factor is the EBITDA generation. Additionally, as we reduced our debt, we have fewer expenses related to our capital structure, but that is only marginally relevant for Q1 free cash flow. For the full fiscal year, it is reasonable to expect the gains from Q1 to be sustained, moving us from the low 80s to the mid-80s range. However, there is a lot of volatility in free cash flow when looking at all four quarters. The timing of tax payments and working capital are factors to consider. The success in Q1 and our operational efforts should provide sustainable benefits. If there are no surprises in the tax rate or the timing of tax payments, we should be positioned to achieve close to the mid-80s for this year.

And we did have a follow-up coming from Jon Tanwanteng from CJS Securities.

I was just wondering if you had any early communication with Accenture and if you did, are they committed to your partnership with Cognosante? Do they have other fax partners in their tech stack? And if they are committed, how does that improve your opportunity over the long run in the public sector?

Yes, so I think it's too early to say. The deal is in progress. We're actually excited about and bullish about this deal. I think the footprint that Accenture has in the federal government is far larger than the very focused approach that Cognosante had. So it's really a good addition to the Accenture offering because they complement each other very well and offer us the expansion more broadly. We haven't talked to them yet as the deal isn't closed, but I think our offering right now in the federal government space at the security level that we're at is fairly exclusive. So we're confident that we can actually benefit from this merger.

And then can you just go into the ARPA in Corporate in Q1? It was up sequentially, and I didn't catch why. If you could dive into that and tell me what you expect going forward, that would be helpful.

So the ARPA in the quarter, we had some items last quarter that we mentioned with respect to cash collections and terminations of customers. So it's a mix of that and basically the quarter-over-quarter increase in our number and our revenue for the quarter. When you look at it sequentially versus Q1, Q2, and Q3 of last year, it's very comparable.

Yes. I would say the last five quarters have been within a fairly narrow band where you can move up a few hundred dollars, positive or negative, off of that, and I would argue that kind of goes into just things that happen throughout a quarter. So I wouldn't make a lot about it other than I would say the ARPA has been stable within a tight range for five quarters.

There were no other questions from the lines. And Scott, over to you for any internet questions.

Certainly. We have received a few questions by email. One relates to guidance on Corporate revenue growth moving forward, considering the 4% growth in Q1 and the acceleration from the previous three quarters' 3% growth. I want to emphasize that one quarter does not establish a trend; therefore, from a broader guidance perspective, I would still advise looking at revenue and EBITDA towards the midpoint of our ranges. For EPS, I would lean towards the higher end of the range. As noted by Jim and others, there are non-cash FX revaluations that were positive this quarter, while they were significantly negative in Q4. We believe we are close to mitigating that volatility; however, on a year-to-date basis, looking at just these three months, including April, we see a positive contribution. This is likely adding about $0.15 to $0.16 to the bottom line for the year. Nevertheless, I wouldn’t want to speculate on extrapolating the growth from this quarter, suggesting that if it’s 4% now, it could be 5%, then 6%, then 7%. We need to wait and see how Q2 performs and how our business builds, including contributions from initiatives discussed by Johnny. We can revisit this topic during the Q2 call. The second question pertained to the SoHo business and whether the full effect of our marketing spending strategy was realized in Q1. The answer is no, as the benefits were not fully seen due to a ramp-down in spending. This ties back to the earlier question about how we could see a sequential revenue decline of $1.6 million from Q1 to Q2 while keeping EBITDA close to flat. This is because there are some marketing expenses that will be reduced, with a lower average in Q2 compared to Q1. Nonetheless, we’ve identified some enticing opportunities for spending, along with favorable LTV to CAC ratios. We are assessing whether to allocate additional funds toward these promising prospects. If we find it justifiable, there may be incremental funds added to our core budget. Generally, you should anticipate a slight decrease in marketing spend for Q2 compared to Q1, which may exert downward pressure on net additions, though this will likely be offset by savings from the lesser marketing spend. We have no further questions via email. Before we conclude, I want to inform you about upcoming investor conferences: Tomorrow, Oppenheimer will host a virtual conference with no formal presentation—only one-on-one meetings. If you haven’t signed up, it may be too late. Next Tuesday, we will participate in Goldman Sachs' high-yield conference, which is also one-on-ones only, with no formal presentation. On June 5, we’ll be at the Jefferies Global Healthcare Conference, which will include a formal presentation that will be webcast, along with one-on-one meetings. A week later, on June 13, we’ll attend the Goldman Sachs Healthcare Equity Conference, featuring a webcast presentation and one-on-one meetings. Our next formal call to discuss Q2 results will take place in August, with a press release to follow in July providing the exact date and time. Thank you for joining the call to review our Q1 results.

Thank you. This does conclude today's conference. You may disconnect at this time and have a wonderful day. Thank you for your participation.