EverCommerce Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited results. EverCommerce provides vertical SaaS, payments, and marketing solutions to more than 500,000 service SMB customers across home services, health services, and fitness and wellness.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $121.1 million | $79.3 million | $226.0 million | $156.4 million |
| Operating loss | $10.8 million | $4.5 million | $17.4 million | $14.9 million |
| Net loss | $24.3 million | $13.7 million | $40.3 million | $33.6 million |
| Adjusted EBITDA (non-GAAP) | $27.6 million | $19.4 million | $48.9 million | $27.6 million |
| Operating cash flow | Not separately provided | Not separately provided | $3.8 million | $9.7 million |
- Q2 revenue increased 52.6%; six-month revenue increased 44.5%. Subscription and transaction fees rose 64.0% and 47.9%, respectively; marketing technology revenue rose 37.8% and 49.5%. Other revenue declined.
- Revenue from acquisitions completed after June 30, 2020 contributed $20.0 million in Q2 and $36.7 million in the first half. Management’s pro forma revenue growth rates, which include acquired businesses as if owned earlier, were 31.1% for Q2 and 21.2% for the first half.
- Q2 gross profit was $75.5 million, a 62.4% gross margin; adjusted gross profit was $80.2 million, a 66.3% adjusted margin. For the first half, gross profit was $140.2 million (62.0% margin) and adjusted gross profit was $149.4 million (66.1% margin). Adjusted measures are non-GAAP.
- Q2 operating expenses increased faster than revenue in several categories: sales and marketing rose 114.5%, product development 94.1%, and general and administrative 71.3%. General and administrative expense included $11.0 million of Q2 stock-based compensation; $9.7 million related to vesting of funding restricted stock awards.
- First-half investing cash outflow was $75.8 million, principally $69.0 million for acquisitions. Financing cash inflow was $176.0 million, including $109.8 million net preferred-stock proceeds and $69.2 million of debt proceeds. Cash, cash equivalents, and restricted cash totaled $202.6 million at June 30.
- June 30 debt was $794.4 million principal, or $766.2 million carrying value, including current maturities. The term loans bore a stated rate of 5.61%; the company reported covenant compliance. Stockholders’ deficit was $429.8 million.
Changes, outlook, and notable events
- Compared with Q2 2020, revenue grew substantially, while net loss widened and operating loss increased. Cost of revenue declined as a share of revenue, to 33.8% from 36.6%; management attributed this primarily to the mix of acquired businesses. Sales and marketing and product development spending rose as the company invested in growth and technology.
- Management reported that approximately 95% of revenue was recurring or re-occurring and that average monthly net pro forma revenue retention was at least 99% in each of the prior nine quarters. These are company-defined metrics.
- Management said revenue trends recovered as businesses reopened, but COVID-19 continued to affect customer verticals unevenly, particularly fitness and wellness. It cautioned that pandemic duration and financial effects remained uncertain.
- No specific forward revenue or earnings guidance is provided in the filing. Management expects continued investment in sales and marketing, product development, and public-company costs, and anticipates future acquisitions may require additional financing. It said available resources and operating cash flows were expected to cover working capital, planned capital expenditures, and debt service for at least 12 months.
- After quarter-end, the July IPO generated approximately $303.9 million net proceeds; the July 29 over-allotment added $43.9 million, and a July private placement generated $75.0 million net proceeds. Preferred shares converted to common stock in connection with the IPO. The company refinanced its former credit facility, used IPO and new-debt proceeds to repay it, and recorded a $28.7 million debt-extinguishment loss in July. It repaid $44.0 million of new revolver borrowings in August.
- Two acquisitions were completed in July for disclosed purchase prices of $99.9 million and $16.1 million. The filing also identifies risks including acquisition integration and financing, substantial debt and interest-rate exposure, competition, cybersecurity and privacy obligations, healthcare and payments regulation, COVID-19 effects, and dependence on SMB customers. Sponsors retain significant voting influence; the company is a Nasdaq controlled company.
Important facts for investors to verify
- How much reported growth is organic versus attributable to acquisitions, and whether pro forma growth and retention metrics remain consistent over time.
- Whether operating cash generation improves from the first-half $3.8 million level amid acquisition spending, working-capital needs, and debt service.
- The effect of the July refinancing on debt principal, borrowing costs, covenant headroom, and the $28.7 million extinguishment charge.
- Whether the elevated stock-based compensation and growth investments translate into durable operating leverage and improved GAAP profitability.
- How COVID-19, customer churn, acquisition integration, privacy and payment-network compliance, and sales-and-use-tax exposures—including the recorded $9.3 million liability—develop.