EverCommerce Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 9, 2024. EverCommerce provides integrated SaaS and payment solutions to service-based small and medium-sized businesses, with more than 708,000 customers across home, health, and fitness and wellness services.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $170.1 million | $161.1 million |
| Operating loss | $4.6 million | $5.3 million |
| Net loss | $16.3 million | $20.8 million |
| Adjusted EBITDA (non-GAAP) | $40.9 million | $31.9 million |
| Net cash from operating activities | $13.3 million | $12.7 million |
- Revenue rose 5.6%. Subscription and transaction fees increased 8.8% to $134.7 million; marketing technology revenue declined 4.7% to $30.3 million, which management attributed primarily to reduced consumer-spending-driven demand. Other revenue was $5.1 million.
- GAAP gross profit was $108.4 million, or approximately 63.7% of revenue, versus $99.3 million, or 61.6%, a year earlier. Adjusted gross profit (non-GAAP) was $113.3 million versus $105.2 million. Cost of revenue fell to 33.4% of revenue from 34.7%.
- Adjusted EBITDA increased to $40.9 million from $31.9 million. It excludes items including stock-based compensation, interest, taxes, depreciation and amortization, and transaction-related and other non-recurring costs; those adjustments totaled $15.3 million in Q1 2024 versus $2.5 million in Q1 2023.
- Cash, cash equivalents and restricted cash totaled $92.9 million at quarter-end. Operating cash flow was $13.3 million; investing cash outflow was $3.6 million and financing cash outflow was $12.4 million. The company repurchased $12.1 million of stock.
- Debt principal was $536.3 million, with $531.1 million reported after financing-cost and discount adjustments; $5.5 million was classified as current maturities. Term-loan interest was approximately 8.4% for the quarter before interest-rate swaps. No revolver borrowings were outstanding; stated available revolver capacity was $190 million. The company reported compliance with debt covenants.
- Management said available cash, revolver capacity, and operating cash flows are expected to cover working capital, planned capital expenditures, and debt service for at least the next 12 months.
Changes, outlook, and material items
- On March 13, 2024, the company sold its North American Fitness businesses and agreed to sell UK Fitness to Jonas Software. The UK transaction remained subject to customary conditions and Financial Conduct Authority approval and was expected to close in Q3 2024. The divestiture did not qualify as a discontinued operation.
- Fitness-related items contributed to $11.2 million of loss on held-for-sale assets and impairments, including a $4.8 million North American disposal loss, $3.4 million goodwill impairment, and $2.6 million UK Fitness held-for-sale valuation loss. The prior-year quarter included $1.1 million in this expense line.
- Interest and other expense declined to $5.8 million from $15.2 million, largely due to a $4.8 million unrealized interest-rate-swap gain versus a $4.2 million loss in the prior-year quarter. The benefit is valuation-related and may fluctuate.
- Income tax expense rose to $5.9 million from $0.3 million; the reported effective tax rate was 56.9% versus 1.5%. Management cited higher U.S. federal and state taxes and discrete items, including the North American Fitness sale.
- Management reported 5.7% pro forma revenue growth, approximately 97% recurring or re-occurring revenue, and quarterly annualized net pro forma revenue retention of approximately 93%; retention for core software and payments, excluding marketing technology, was approximately 99%.
- No specific financial guidance was provided in the filing. Management noted macroeconomic risks including inflation, higher interest rates, geopolitical developments, currency fluctuations, and supply-chain disruption, which could affect demand, revenue, and costs. It also cited competition, cybersecurity and service-disruption risks, payment-network and processor dependencies, and acquisition execution risks.
- Disclosure controls and procedures were not effective as of March 31, 2024 because of a previously reported material weakness in internal control over financial reporting. The company said remediation work continued; no material changes in internal control occurred during the quarter.
- A putative Delaware class action challenges a sponsor stockholder veto right over CEO hiring or firing. The company said it believes it has meritorious defenses; it assessed liability as not probable and any potential loss as not reasonably estimable. The filing also reports a $10.9 million provision for sales, use, gross-receipts, and goods-and-services taxes.
Key facts investors should verify
- Whether the UK Fitness sale closes as expected and the final proceeds, costs, and resulting balance-sheet effects.
- How much of the reported Adjusted EBITDA improvement is sustained by underlying operations versus exclusions, including disposal and impairment costs.
- Debt-service capacity and sensitivity to interest rates, given substantial debt and floating-rate exposure despite swaps.
- Progress in remediating the material weakness and the timing of effective internal controls.
- Trends in marketing technology demand, subscription and transaction growth, and customer retention after the fitness divestiture.
- Resolution or material developments in the Delaware litigation and tax exposures.