EverCommerce Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless noted. EverCommerce provides vertical SaaS, payments and marketing solutions to service-based SMBs across Home Services, Health Services, and Fitness & Wellness, serving more than 600,000 customers.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change / context |
|---|---|---|---|
| Revenue | $143.6 million | $104.9 million | Up 36.9%; pro forma revenue growth was 20.2% |
| Subscription and transaction fees | $108.0 million | $75.2 million | Up 43.6% |
| Marketing technology solutions | $29.9 million | $25.4 million | Up 17.8% |
| GAAP gross profit | $87.3 million | $64.6 million | Gross margin approximately 60.8%, versus 61.6% |
| Operating loss | $(13.6) million | $(6.6) million | Loss widened |
| Net loss | $(13.3) million | $(16.0) million | Loss narrowed; Q1 2021 common-stockholder loss also included $15.1 million preferred-stock accretion |
| Adjusted EBITDA | $23.0 million | $21.3 million | Non-GAAP measure; up approximately 7.7% |
| Operating cash flow | $12.9 million | $(5.4) million | Improved by $18.3 million |
| Cash, cash equivalents and restricted cash | $105.0 million | $97.6 million at Dec. 31, 2021 | Includes $3.8 million restricted cash |
| Debt | $552.9 million principal; $545.2 million carrying value | $554.1 million principal at Dec. 31, 2021 | $547.3 million term loans outstanding; no revolver borrowings |
Revenue growth included $17.0 million from acquisitions completed after March 31, 2021. Management attributed growth primarily to customer-base expansion, higher payment volumes, acquired businesses, increased use of digital marketing applications and more consumer leads. Approximately 95% of revenue was recurring or re-occurring, and annualized net revenue retention exceeded 100%.
Operating expenses grew faster than revenue in several areas: cost of revenue rose 42.2%, sales and marketing 53.1%, product development 70.8%, and general and administrative 41.3%. The company cited increased media spend, personnel, product and technology investment, and higher stock-based compensation. Interest and other expense fell to $5.5 million from $12.9 million, contributing to the narrower net loss. Adjusted EBITDA and adjusted gross profit are non-GAAP measures and should be considered alongside GAAP results.
Financial position, outlook and risks
- Cash provided by operations was $12.9 million; investing used $4.4 million, mainly for $3.5 million of capitalized software development. Financing used $0.7 million, primarily for debt payments. Cash and restricted cash increased $7.4 million during the quarter.
- The company reported $190.0 million of available revolver capacity and said cash, revolver availability and operating cash flows should cover working capital, planned capital expenditures and debt service for at least the next 12 months. Future liquidity needs depend partly on growth and acquisition timing; additional financing may be needed for future acquisitions and may not be available on acceptable terms.
- Term loans mature in July 2028, bear variable rates, and had an approximately 4.0% effective interest rate for the quarter. The facilities are secured by substantially all company assets and contain covenants. The company reported compliance at March 31, 2022. Legacy subordinated notes of approximately $5.6 million in total principal had balloon maturities in September and December 2022.
- Management expects continued investment in sales and marketing, product development and administrative capacity. The filing provides no specific revenue or earnings guidance. Results for the quarter are not necessarily indicative of full-year results.
- Risks highlighted include acquisition execution and financing, debt and variable interest rates, competition, customer retention, payment processor and network dependency, cybersecurity and service disruptions, economic and COVID-19 effects, and the possibility that growth rates may not continue. Management said risk factors had not materially changed from its 2021 Form 10-K.
- Operating lease minimum payments totaled $39.9 million through 2030. Management expected adoption of lease accounting guidance to add right-of-use assets and lease liabilities, with no material income-statement impact expected based on its assessment to date. Ordinary-course legal matters were not expected to have a material adverse effect.
- After quarter-end, COO Stone de Souza resigned, effective May 20, 2022; Shane Driggers began serving as Chief Human Resources Officer on May 4, 2022. Disclosure controls were assessed as effective at the reasonable-assurance level, with no material internal-control changes reported.
Most important facts for investors to verify
- How much of reported revenue growth is organic versus acquisition-related, and whether the 20.2% pro forma growth rate is sustained.
- Whether expense growth and investment translate into improved operating margins, given the wider operating loss and slightly lower GAAP gross margin.
- Cash-flow durability, the assumptions behind management’s 12-month liquidity assessment, and the funding needs of future acquisitions.
- Debt terms, variable-rate exposure, covenant headroom, and the timing and funding of the 2022 subordinated-note maturities.
- The definitions and calculation of net revenue retention and non-GAAP measures, including the adjustments used in Adjusted EBITDA.