EverCommerce Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. Financial statements are presented under U.S. GAAP and audited by Ernst & Young.
Business context
EverCommerce provides vertically tailored SaaS, payment, customer experience and marketing solutions to service-based small and midsize businesses in Home Services, Health Services, and Fitness & Wellness. It reported approximately 708,000 customers at year-end. The company operates as one reportable segment and pursues growth through customer acquisition, cross-selling and acquisitions.
Financial performance and liquidity
| Metric | FY2023 | FY2022 | Change or context |
|---|---|---|---|
| Revenue | $675.4 million | $620.7 million | Up 8.8%; pro forma growth was 8.6% |
| Subscription and transaction fees | $520.2 million | $465.3 million | Up 11.8% |
| Marketing technology revenue | $133.2 million | $134.6 million | Down 1.1% |
| GAAP gross profit | $419.3 million | $380.1 million | Gross margin approximately 62.1%, versus 61.2% |
| Operating income (loss) | $2.4 million | $(30.6) million | Returned to operating income |
| Net loss | $(45.6) million | $(59.8) million | Loss narrowed; diluted loss per share was $0.24 versus $0.31 |
| Adjusted EBITDA | $155.6 million | $119.0 million | Adjusted EBITDA margin approximately 23.0%, versus 19.2%; non-GAAP measure |
| Cash from operations | $104.6 million | $64.8 million | Increased $39.8 million |
| Cash used in investing | $(38.0) million | $(18.1) million | Included $20.0 million of capitalized software and $15.0 million for Kickserv |
| Cash used in financing | $(66.6) million | $(47.3) million | Primarily share repurchases |
At December 31, 2023, cash and cash equivalents were $92.6 million, with $3.6 million of restricted cash. Current assets were $180.1 million and current liabilities were $117.4 million. Long-term debt principal was $537.6 million, with $190.0 million of revolver capacity available and no revolver borrowings. The term loans had an approximately 8.5% effective interest rate for 2023, before the effect of swaps, and mature in 2028. The company reported covenant compliance. Interest and other expense rose 36.9% to $46.4 million, primarily due to higher variable rates.
Material changes and unusual items
- Revenue growth was driven by customer expansion, price increases and payment processing volumes. Subscription and transaction fee growth outpaced the decline in marketing technology revenue; management attributed the latter mainly to weaker consumer spending.
- Operating expenses were 99.6% of revenue, down from 104.9%. Cost of revenue, sales and marketing, product development, and general and administrative expenses together fell to 83.3% of revenue from 87.1%.
- FY2023 included $6.3 million of impairment charges, including about $5.1 million related to the fitness asset group and $1.2 million related to leased facilities. No comparable impairment charge was recorded in 2022.
- On March 13, 2024, the company agreed to sell its fitness solutions to Jonas Software. The North American businesses closed at signing; the international businesses were expected to close in Q3 2024, subject to customary conditions and approvals. The company said the sale did not represent a strategic shift qualifying for discontinued-operations reporting.
- The company repurchased 6.9 million shares for $67.6 million, including fees and taxes, during 2023. At year-end, $40.0 million remained under the expanded $150.0 million repurchase authorization, which runs through December 31, 2024.
Outlook, risks and contingencies
The filing provides no specific numerical revenue or earnings guidance. Management expects to continue investing in technology, operations, compliance and growth, while pursuing organic expansion and acquisitions; it notes these investments may weigh on short-term profitability. Management stated that cash, revolver availability and operating cash flow should cover working capital, planned capital expenditures and debt service for at least the next 12 months, absent significant deterioration in market conditions.
- Key business risks include competition, SMB customer churn and price sensitivity, macroeconomic weakness, the ability to improve margins in lower-margin marketing technology, and execution and integration risks from acquisitions.
- Payment processing depends on card networks, processors and sponsor banks. Cybersecurity, system outages, data privacy, healthcare regulation and evolving payment or licensing requirements could disrupt services, increase costs or lead to penalties.
- Variable-rate debt exposes the company to interest-rate changes; management estimated a 100-basis-point increase in Adjusted SOFR would add approximately $2.4 million to annual interest expense at year-end debt levels. Interest-rate swaps cover $300 million notional in aggregate.
- Management identified a material weakness in order-to-cash revenue controls, related to incomplete integration of certain systems and deficiencies in manual controls. Disclosure controls and internal control over financial reporting were therefore deemed ineffective as of December 31, 2023. No material misstatement was identified. Remediation may extend beyond 2024. The financial statement auditor did not opine on internal control effectiveness.
- A putative Delaware class action filed January 31, 2024 challenges sponsor stockholders’ veto rights over CEO hiring and dismissal. The company said liability was not probable and any potential loss was not reasonably estimable.
- The company recorded a $10.9 million liability for sales, use and gross receipts taxes at year-end. It also reported a $51.9 million valuation allowance against deferred tax assets, reflecting uncertainty about their realization.
Important facts for investors to verify
- Whether revenue growth and operating cash generation continue, and whether marketing technology revenue stabilizes.
- Progress in remediating the revenue-control material weakness, including system integration, control testing and any subsequent disclosures.
- Final terms, proceeds and completion status of the fitness-solutions sale, including the international closings and any effect on future results.
- Debt servicing capacity, interest-rate exposure, covenant headroom and availability of the $190.0 million revolver.
- Share-repurchase pace and funding relative to liquidity, debt and investment needs.
- Developments in the Delaware litigation, tax exposures and cybersecurity or regulatory matters.