EverCommerce Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2023; filed November 7, 2023. Financial statements are unaudited. Amounts below are in U.S. dollars; financial figures are in millions unless noted.
Business context
EverCommerce provides vertical SaaS, payments, billing, customer experience and marketing solutions to service-based small and medium-sized businesses. It reported more than 685,000 customers across Home Services, Health Services, and Fitness & Wellness. Approximately 95% of revenue in the nine-month periods was recurring or re-occurring. Annualized net revenue retention was approximately 97% for the quarter; excluding marketing technology, retention for core software and payments was above 100%.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $174.7 | $158.1 | $505.9 | $458.9 |
| Operating income (loss) | $6.3 | ($7.3) | $2.8 | ($26.9) |
| Net loss | ($0.6) | ($15.9) | ($22.3) | ($42.0) |
| Adjusted EBITDA (non-GAAP) | $41.8 | $30.2 | $112.5 | $83.9 |
| Cash from operating activities | — | $68.6 | $37.6 |
- Q3 revenue increased 10.5%; nine-month revenue increased 10.2%. Subscription and transaction fees rose 10.5% and 12.5%, respectively, while marketing technology revenue grew 1.5% and 1.7%.
- Q3 cost of revenue was 35.2% of revenue, versus 36.5% a year earlier; nine-month cost of revenue was 34.7%, versus 35.6%. Adjusted gross profit was $113.3 million for Q3 and $330.3 million for the nine-month period; this is a non-GAAP measure.
- Cash, cash equivalents and restricted cash totaled $90.8 million at September 30, 2023, down from $95.8 million at year-end 2022. Current assets were $179.3 million and current liabilities $108.6 million.
- Operating cash flow improved by $31.0 million year over year for the nine-month period. Investing used $31.8 million, including $15.0 million for the Kickserv acquisition and $14.7 million of capitalized software costs. Financing used $41.6 million, primarily reflecting $41.3 million of share repurchases.
- Debt principal was $539.0 million, with $5.5 million classified as current; no revolver borrowings were outstanding and $190.0 million of revolver capacity was available. The term-loan rate was approximately 8.7% at quarter-end. The company reported compliance with debt covenants.
Material changes and unusual items
- EverCommerce acquired Kickserv, a home-services field-management software provider, for approximately $15.0 million in cash on August 10, 2023. Its post-acquisition results were not material to the reported period.
- Operating income turned positive in both the quarter and nine-month comparison. Net loss narrowed, while nine-month interest and other expense rose $5.5 million, primarily due to higher credit-facility interest expense; interest-rate swap gains partly offset this increase.
- The company repurchased $41.2 million of stock during the first nine months. On November 5, 2023, after quarter-end, the board expanded total repurchase authorization from $100 million to $150 million and extended the program through December 31, 2024.
- Interest-rate swaps covered $300 million of term-loan notional value. The credit facilities transitioned from LIBOR to SOFR effective July 1, 2023; management did not expect a significant financial-statement impact.
Outlook, risks and controls
The filing provides no specific revenue, earnings or cash-flow guidance. Management said existing cash, available revolver capacity and operating cash flow should be sufficient for working capital, planned capital expenditures and debt service for at least the next 12 months, while noting future funding needs could depend on acquisitions and market conditions. Management cited inflation, higher interest rates, currency movements, geopolitical developments and supply-chain disruption as potential pressures on demand and costs.
Disclosure controls and procedures were reported as ineffective at September 30, 2023 because of an existing material weakness in internal control over financial reporting. Remediation efforts continued, with no materially impactful control changes reported during the quarter. The company also reported an $10.8 million provision for sales, use, gross-receipts and goods-and-services taxes. It disclosed ordinary-course legal matters but said it knew of no proceeding expected to have a material adverse effect. Risks include high debt and floating-rate exposure, macroeconomic pressure, acquisition integration and execution, customer retention, competition, cybersecurity, and the possibility that growth or profitability expectations may not be achieved.
Important facts for investors to verify
- Progress and timing of remediation of the material weakness in internal controls.
- Cash generation relative to interest costs, debt maturities and the elevated term-loan rate.
- Revenue growth and retention trends, particularly the slower growth in marketing technology solutions.
- Use of the expanded share-repurchase authorization and its effect on cash and share count.
- Final purchase-price allocation for Kickserv and any subsequent acquisition or integration costs.