EverCommerce Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited consolidated results. EverCommerce provides vertical SaaS, payments and marketing technology to service-based small and midsize businesses across Home Services, Health Services, and Fitness & Wellness; it reports one operating segment and serves over 500,000 customers.
Financial performance
Amounts below are in millions, except per-share data and percentages.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $128.5 | $89.2 | $354.5 | $245.5 |
| Operating income (loss) | $(4.1) | $3.7 | $(21.4) | $(11.1) |
| Net loss | $(36.9) | $(5.4) | $(77.2) | $(39.0) |
| Adjusted EBITDA (non-GAAP) | $29.0 | $29.1 | $77.9 | $56.8 |
| Operating cash flow | Not separately presented | Not separately presented | $13.7 | $32.1 |
- Q3 revenue increased 44.2% year over year; nine-month revenue increased 44.4%. Subscription and transaction fees grew 52.9% in Q3 and 49.7% year to date; marketing technology revenue grew 29.8% and 41.8%, respectively.
- GAAP gross margin was approximately 62.5% in Q3 and 62.2% for the first nine months. Adjusted gross profit was $85.6 million in Q3 and $235.0 million year to date. Q3 operating margin was approximately negative 3.2%.
- Q3 net loss included a $28.7 million loss on extinguishment of debt related to the July refinancing. Interest expense was $5.1 million in Q3, down from $9.8 million; nine-month interest expense was $31.3 million versus $30.7 million.
- Cash and cash equivalents were $95.6 million and restricted cash was $2.8 million at September 30. Current assets were $162.7 million and current liabilities $87.6 million.
- Net cash used in investing activities was $194.2 million, including $183.2 million for acquisitions. Financing provided $180.5 million; cash, cash equivalents and restricted cash increased by just $0.007 million over the nine-month period. Property/equipment purchases and capitalized software totaled $11.0 million.
- Debt principal was $390.4 million ($385.1 million carrying value, net of financing costs and discount), including $350 million of term loans and $35 million drawn on the revolver. The company reported $155 million of available revolver capacity and covenant compliance. The term loans’ effective interest rate was approximately 4% from July 6 to September 30.
Material changes and capital transactions
- Revenue growth included $20.8 million in Q3 and $57.5 million year to date from acquisitions completed after September 30, 2020. Management’s pro forma revenue growth rates, which include acquired businesses as if acquired earlier, were 20.0% for Q3 and 20.6% for the first nine months.
- Four acquisitions closed in the first nine months for total consideration of $185.3 million, including Timely ($99.7 million) and MDTech ($15.9 million) in July. Acquisition purchase price allocations remained preliminary.
- The July IPO and over-allotment generated net proceeds of approximately $347.8 million; a related private placement raised $75.0 million. Outstanding preferred shares converted to common stock at the IPO, and reported stockholders’ equity was $983.8 million at quarter end.
- After quarter end, EverCommerce agreed to acquire DrChrono for approximately $182.5 million, subject to resolution of pending legal and regulatory matters.
- Compared with 2020, nine-month operating cash flow declined to $13.7 million from $32.1 million, while adjusted EBITDA increased to $77.9 million from $56.8 million. Sales and marketing expense rose to $67.6 million from $36.3 million, reflecting staffing, advertising and partner commissions.
Outlook, risks and notable items
- The filing provides no specific full-year 2021 revenue, profit or cash-flow guidance. Management said existing cash, revolver availability and operating cash flows should fund working capital, planned capital expenditures and debt service for at least 12 months, while noting future acquisitions may require additional financing.
- Management reported that approximately 95% of revenue was recurring or re-occurring and that average monthly net pro forma revenue retention had remained at 99% or more in each of the prior eight quarters. These are company-defined metrics and may not be comparable to similarly titled measures elsewhere.
- Management said COVID-19 had previously affected Health Services and Fitness & Wellness customers; reopening supported recovery, but effects remained uncertain and varied by vertical. The filing also identifies risks from slower growth, acquisition execution and integration, competition, SMB customer losses, cybersecurity and privacy, payment-network dependence, healthcare regulation, and debt and interest-rate exposure.
- Sales and use tax liabilities were $10.0 million at September 30, compared with $8.3 million at year-end 2020. The company said it knew of no legal proceedings expected to have a material adverse effect.
- Management concluded disclosure controls and procedures were effective at the reasonable assurance level as of September 30; no material change in internal control over financial reporting was reported during the quarter.
Important facts for investors to verify
- How much reported growth reflects organic performance versus acquired revenue, and whether pro forma growth and retention metrics continue.
- Whether operating cash generation improves and can support acquisition spending, capital needs and debt service.
- The full terms, financing and closing status of the proposed DrChrono acquisition, and the integration and purchase-accounting impacts of recent acquisitions.
- The refinancing’s ongoing interest cost, covenant headroom, variable-rate exposure and the remaining revolver capacity.
- The status and potential exposure related to the $10.0 million sales and use tax provision, as well as privacy, cybersecurity, payment-processing and healthcare compliance risks.
- The cover page marks “No” for having filed all reports required during the preceding 12 months; investors should confirm the reporting-history context and any implications.