EverCommerce Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless noted. EverCommerce provides vertical SaaS and payment solutions to more than 685,000 service-based SMB customers across home, health, and fitness and wellness services.
Financial and operating performance
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Revenue | $161.1 million | $143.6 million | Up 12.2%; pro forma growth was 12.2% |
| Subscription and transaction fees | $123.8 million | $108.0 million | Up 14.6% |
| Marketing technology revenue | $31.8 million | $29.9 million | Up 6.3% |
| GAAP gross profit | $99.3 million | $87.3 million | Gross margin approximately 61.6%, versus 60.8% |
| Adjusted gross profit | $105.2 million | $92.8 million | Non-GAAP; margin approximately 65.3%, versus 64.7% |
| Operating loss | $(5.3) million | $(13.6) million | Operating margin approximately (3.3)%, versus (9.5)% |
| Net loss | $(20.8) million | $(13.3) million | Basic and diluted loss per share $(0.11), versus $(0.07) |
| Adjusted EBITDA | $31.9 million | $23.0 million | Non-GAAP; margin approximately 19.8%, versus 16.0% |
| Cash from operations | $12.7 million | $12.9 million | Nearly unchanged |
| Cash used in investing | $(4.9) million | $(4.4) million | Primarily software development costs |
| Cash used in financing | $(30.4) million | $(0.7) million | Primarily $29.6 million of share repurchases |
Revenue growth reflected approximately $9.0 million more software and subscription revenue, attributed to customer expansion and price increases, and approximately $7.0 million more payment transaction volume. About 95% of revenue was recurring or re-occurring; annualized net revenue retention was approximately 100%.
Balance sheet, debt, and liquidity
- At March 31, 2023, cash and cash equivalents were $69.8 million and restricted cash was $3.5 million, compared with $92.6 million and $3.2 million, respectively, at year-end 2022. Cash and restricted cash together were $73.3 million.
- Term-loan principal was $541.8 million; no revolver borrowings were outstanding, and $190.0 million of revolver capacity was available. The reported long-term debt balance, net of current maturities and financing costs, was $529.9 million.
- The term-loan effective interest rate was approximately 7.9% for the quarter. Interest and other expense rose to $15.2 million from $5.5 million, reflecting higher rates and losses on interest rate swaps.
- Two swaps cover $300 million of term-loan notional in total. The swaps’ combined reported fair-value liability was $7.1 million at quarter-end. Debt is secured by substantially all company assets; the company reported covenant compliance.
- Current assets were $163.3 million and current liabilities $105.3 million. Management stated existing cash, revolver availability, and operating cash flows should fund working capital, planned capital expenditures, and debt service for at least the next 12 months.
Material changes, outlook, and risks
- Net loss increased despite improved operating loss, chiefly alongside the increase in interest and other expense and the absence of the prior-year tax benefit. The Q1 2022 tax benefit included discrete items related to a California law change and an intercompany intellectual-property sale; Q1 2023 recorded a $0.3 million tax expense.
- Share repurchases totaled $29.6 million for 3.1 million shares in Q1. At March 31, $27.6 million remained authorized under the program, which runs through December 31, 2023.
- Remaining performance obligations for contracts with original terms longer than one year were $20.5 million; the company expected to recognize approximately 60% within one year.
- The filing provides no specific quarterly or full-year revenue or earnings guidance. Management described ongoing investment in product development and sales and marketing, and cited inflation, higher interest rates, foreign exchange, supply-chain disruption, and broader macroeconomic conditions as potential pressures on demand and costs. Future acquisitions could require additional financing.
- Disclosure controls and procedures were deemed ineffective at March 31 because of a material weakness in internal control over financial reporting previously reported in the 2022 Form 10-K. Remediation work continued; no material control changes occurred during the quarter.
- The company recorded an $11.1 million liability for sales and use, gross receipts, and goods and services taxes. It reported ordinary-course legal matters but said it was not aware of proceedings expected to have a material adverse effect. It reported no material changes to its previously disclosed risk factors.
Important facts for investors to verify
- Whether revenue growth, retention, and payment transaction volumes persist, and how much growth is organic versus acquisition-related.
- Cash generation and liquidity after repurchases, acquisition spending, capitalized software costs, and debt interest; confirm the terms and availability of the revolver.
- Floating-rate debt exposure, swap performance and valuation, and continued compliance with credit-facility covenants.
- Progress and evidence of remediation of the material weakness in internal control over financial reporting.
- The assumptions and exclusions in non-GAAP adjusted gross profit and Adjusted EBITDA reconciliations, including stock compensation and other adjustments.