EverCommerce Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are primarily with FY2020. EverCommerce provides vertically tailored SaaS and payment solutions to service-based small and medium-sized businesses across Home Services, Health Services, and Fitness & Wellness. It reported more than 600,000 customers and operated as a single reportable segment.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $490.1 million | $337.5 million | +45.2% |
| Subscription and transaction fees | $351.8 million | $232.9 million | +51.0% |
| Marketing technology solutions | $118.3 million | $86.3 million | +37.0% |
| Operating loss | $(27.2) million | $(22.0) million | Loss widened |
| Net loss | $(82.0) million | $(60.0) million | Loss widened |
| Adjusted EBITDA | $107.2 million | $78.8 million | +36.1% |
| Cash provided by operating activities | $37.5 million | $57.5 million | Down $20.1 million |
Revenue growth reflected customer-base expansion, higher payment volumes, marketing activity, and acquisitions. Approximately 95% of revenue was recurring or re-occurring; management reported net pro forma revenue retention of at least 99% in each of the last eight quarters. FY2021 pro forma revenue growth was 21.5%; the company cautions that this acquisition-adjusted measure is not organic growth.
GAAP gross profit was $308.3 million, or approximately 62.9% of revenue, versus $207.7 million, or 61.5%, in FY2020. Adjusted gross profit was $327.9 million, approximately 66.9% of revenue. Operating expenses grew faster than revenue in several areas: sales and marketing rose 86.7% to $93.8 million, and product development rose 62.9% to $49.5 million. Sales and marketing increased to 19.1% of revenue from 14.9%; general and administrative declined to 22.5% from 25.8%.
Cash, debt, and liquidity
- Year-end cash and cash equivalents were $94.0 million, with $3.6 million of restricted cash. Cash, cash equivalents, and restricted cash totaled $97.6 million.
- At December 31, 2021, $548.6 million was outstanding under the new credit facilities, all in term loans; the $190.0 million revolver was undrawn. The balance sheet reports debt of $546.1 million net of financing costs and discounts, including $10.9 million of current maturities.
- Management said cash, revolver availability, and operating cash flow should fund working capital, planned capital expenditures, and debt service for at least 12 months. The company reported compliance with credit covenants at year-end.
- Operating cash flow fell to $37.5 million from $57.5 million. Investing cash use was $379.7 million, including $364.9 million for acquisitions, net of cash acquired. Financing provided $341.2 million; year-end cash and restricted cash decreased by $0.8 million.
- The July 2021 IPO and related transactions generated net common-stock proceeds of $415.7 million, including the over-allotment, and a Silver Lake private placement generated $75.0 million. Preferred stock converted to common stock at the IPO.
Material changes and unusual items
- EverCommerce completed five acquisitions for total consideration of $367.1 million, including DrChrono and Timely. Acquisitions contributed $21.6 million of FY2021 revenue after closing; acquisition spending and integration remain central to the growth strategy.
- The July 2021 refinancing replaced prior facilities. A $28.7 million loss on debt extinguishment contributed to the larger FY2021 net loss. Interest expense declined to $36.1 million from $41.5 million.
- Stock-based compensation increased to $22.1 million from $10.7 million. Depreciation and amortization rose to $101.4 million from $76.8 million, primarily reflecting acquired intangible assets.
- Goodwill was $921.4 million and net intangible assets were $508.5 million at year-end. Management reported no goodwill impairment in 2021.
- COVID-19 negatively affected some Health Services and Fitness & Wellness customers, while accelerating demand for digital services and telehealth. Management said revenue excluding acquisitions recovered as customers resumed operations, but future effects remained uncertain.
Outlook, risks, and contingencies
The filing provides no formal numerical revenue or earnings guidance. Management expects continued investment in sales and marketing, product development, technology, and public-company compliance; it said sales and marketing expense may rise as a percentage of revenue in the near and medium term, and public-company compliance costs will have a greater effect from 2022 onward. It also expects to continue pursuing acquisitions, while acknowledging that historical growth rates may not be sustainable and growth may slow.
Key risks include acquisition execution and financing, significant debt and variable interest rates, competition and pricing pressure, dependence on payment processors and card networks, cybersecurity and service interruptions, privacy and healthcare regulation, SMB customer failures and economic weakness. The company reported a $13.0 million provision for sales, use, and gross-receipts taxes at year-end. It said ordinary-course legal matters were not expected to have a material adverse effect. Disclosure controls were assessed as effective at the reasonable-assurance level; management’s internal-control assessment and auditor attestation were not included under the new-public-company transition period.
Key facts for investors to verify
- How much of revenue growth and customer growth was organic versus acquired, and whether the 99%+ retention measure remains representative as the business scales.
- Whether Adjusted EBITDA growth converts into durable operating cash flow, given the FY2021 decline in operating cash flow and continuing acquisition-related cash needs.
- Debt repayment capacity, exposure to floating rates, covenant headroom, and the effect of future acquisitions on leverage; management estimated a 100-basis-point rate increase would add about $5.5 million in annual interest expense.
- Acquisition integration, expected returns, goodwill and intangible-asset recoverability, and the sustainability of margins if lower-margin marketing solutions grow faster.
- Progress in public-company financial controls and compliance, and the implications of sponsor ownership and control; the filing says sponsor-stockholder parties owned approximately 78% of common stock.