EverCommerce Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; unaudited. EverCommerce provides vertically tailored SaaS, payments, customer-experience and marketing solutions to service-based SMBs across home, health, and fitness and wellness markets, serving more than 600,000 customers.
Financial performance
Amounts below are in millions except per-share data and percentages. Comparisons are with the corresponding 2021 period.
| Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 |
|---|---|---|---|---|
| Revenue | $157.2 | $121.1 | $300.8 | $226.0 |
| Revenue growth | 29.9% | — | 33.1% | — |
| Operating loss | $(6.1) | $(10.8) | $(19.7) | $(17.4) |
| Net loss | $(12.9) | $(24.3) | $(26.2) | $(40.3) |
| Net loss per share, diluted | $(0.07) | $(0.56) | $(0.13) | $(1.27) |
| Adjusted EBITDA (non-GAAP) | $30.7 | $27.6 | $53.7 | $48.9 |
| Cash from operating activities | Not presented by quarter | $24.0 | $3.8 |
- Q2 subscription and transaction fees increased 35.8% to $115.6 million; marketing technology revenue rose 10.0% to $35.2 million. For H1, those streams grew 39.5% and 13.4%, respectively. Management attributed growth to customer additions, higher payment transaction volumes, marketing customers and 2021 acquisitions.
- Revenue from acquisitions completed after June 30, 2021 contributed $17.7 million in Q2 and $34.8 million in H1. Pro forma revenue growth, which includes acquired businesses as if owned in the comparison period, was 16.1% for Q2 and 18.0% for H1.
- Cost of revenue excluding depreciation and amortization was 35.0% of revenue in Q2 versus 33.8% a year earlier, and 35.2% for H1 versus 33.9%. The filing reports GAAP operating losses; it does not present a conventional gross-margin line. Adjusted gross profit, a non-GAAP measure, was $102.1 million in Q2 and $195.0 million in H1.
- Adjusted EBITDA increased, but its margin declined to approximately 19.6% in Q2 from 22.8%, and 17.9% for H1 from 21.6%. These margins are calculated from the filing’s non-GAAP figures.
- Operating loss narrowed in Q2 but widened for H1. Net loss improved in both periods, in part as interest and other expense fell 49.1% in Q2 and 53.4% in H1. H1 income tax benefit of $5.7 million included discrete items, including a California law change and an intercompany IP sale.
Cash, debt and liquidity
- At June 30, cash and cash equivalents were $105.2 million, with restricted cash of $3.9 million; combined cash and restricted cash totaled $109.1 million. Total current assets were $199.8 million and current liabilities $108.4 million.
- Debt principal was $551.6 million; reported debt carrying value was $544.3 million, including financing-cost and debt-discount deductions. The company had $190.0 million of undrawn revolving capacity and no revolver balance. Term loans mature in July 2028; debt is secured by substantially all company assets.
- The term-loan rate was 4.31% at June 30, 2022, and management reported covenant compliance. H1 cash interest paid was $10.6 million.
- H1 operating cash flow was $24.0 million. Investing cash use was $9.1 million, mainly $7.5 million of capitalized software costs; financing cash use was $2.5 million. Cash, cash equivalents and restricted cash increased by $11.6 million.
Changes, outlook and risks
- Compared with H1 2021, revenue and operating cash flow rose substantially; the prior period included $69.0 million of acquisition spending and $176.0 million of financing inflows. No acquisitions were completed in H1 2022.
- Operating expenses increased with growth investments: H1 sales and marketing rose 41.4%, product development 56.7%, and general and administrative 19.6%. Management expects sales and marketing and product development spending to continue increasing in absolute dollars; it anticipates sales and marketing may also rise as a share of revenue in the near to medium term.
- Management believes cash, operating cash flow and available credit are sufficient for working capital, planned capital spending and debt service for at least the next 12 months. Future acquisitions could require additional debt or equity financing. No specific revenue or earnings guidance was provided.
- The board authorized up to $50 million in share repurchases through December 21, 2022, funded with existing cash at management’s discretion. The company repurchased 296,046 shares for $2.7 million during Q2.
- Risks highlighted include acquisition execution and financing needs, variable-rate debt, economic conditions affecting SMB customers, competition, cybersecurity and service disruptions, payment-network and processor dependence, and the uncertain effects of COVID-19. Management reported no material change to previously disclosed risk factors, no known legal matters expected to have a material adverse effect, and effective disclosure controls.
- The company expected to adopt lease accounting in Q4 2022, anticipating recognition of right-of-use assets and lease liabilities; management did not expect a material income-statement impact but said its assessment was incomplete.
Investor verification points
- Assess how much reported growth came from acquisitions versus underlying expansion; acquired-company revenue was $17.7 million in Q2 and $34.8 million in H1.
- Track cost-of-revenue and operating-expense growth against revenue, and evaluate adjusted EBITDA alongside GAAP losses and the exclusions in the non-GAAP reconciliation.
- Review cash conversion, capitalized software spending, and whether liquidity remains adequate as debt service, repurchases and potential acquisitions compete for cash.
- Confirm progress and remaining authorization under the $50 million repurchase program, as well as continued compliance with secured-debt covenants and exposure to variable interest rates.
- Monitor customer retention and recurring revenue: management reported that about 95% of H1 revenue was recurring or re-recurring and quarterly annualized net revenue retention exceeded 100%.