EverCommerce Inc. Price & Performance (EVCM)

Good afternoon, and thank you for joining. Today's call will be led by Eric Reimer, EverCommerce' Chairman and Chief Executive Officer and Ryan Zurich, EverCommerce's Chief Financial Officer. Joining them for the Q and A portion of the call are EverCommerce' President, Matt Feierstein EverPro's Chief Executive Officer, Josh McCarter EverHealth's Chief Executive Officer, Evan Berlin. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months and year ended 12/31/2024, well as our 2025 guidance. For a link to the live or replay webcast, please visit the Investor Relations section of the EverCommerce Commerce website www.evercommerce.com. The slide presentation and earnings release are also directly available on the site. Please turn to Page two of our earnings call presentation while I review our Safe Harbor statement. Statements made on this call and contained in the earnings materials available on our website are not historical in nature may constitute forward looking statements. [indiscernible] Such statements are based on the current expectations and beliefs of management. Actual results may differ materially from these forward looking statements due to risks, and uncertainties that are described in more detail in our filings with the SEC.

We undertake no obligation to publicly update or revise these forward looking statements except as required by law. [indiscernible] will also refer to certain non GAAP financial measures in our comments today. A reconciliation of non GAAP to GAAP historical measures is provided in both our earnings press release and our earnings presentation. Before we discuss fourth quarter results, I would like to highlight a press release that we issued earlier in the week. In this press release, we disclosed that we are actively seeking strategic alternatives for our marketing The company began this process in late twenty twenty four we expect the sale to occur in 2025. Accordingly, financial guidance provided today will focus on continuing operations and excludes marketing technology. EverCommerce does not intend to make any further public comment regarding the review of strategic alternatives until it has been completed or the company determines that a disclosure is required by law or otherwise deemed appropriate. [indiscernible] will now turn it over to our CEO, Eric Reamer. Please continue. Thank you, Brad.

On today's call, I will highlight fourth quarter twenty twenty four results, as well as provide an update on our top priorities within our key verticals of 2025. After my remarks, Brian will take over and dive deeper into our financial performance.

We ended 2024 on a strong note. Our fourth quarter reported revenue exceeded the top end of our guidance range. In fact, throughout 2024, we consistently met or beat expectations. For the fourth quarter GAAP revenue increased 3.3% year over year. And on a pro form a basis, which adjusts prior year for the sale of the fitness solutions, revenue increased 7% year over year. Adjusted EBITDA of $50,400,000 also be the top end of our guidance range. Representing a 28.8% margin Adjusted EBITDA margin expanded nearly three forty basis points year over year, Payments revenue, excluding the fitness solutions, grew 8.9% year over year, driven by 9% growth in TPV. Finally, with last quarter's announcement of Josh McCarter Jordan as CEO of EverPro, and more recently our announcement at Ever Berlin, our prior Chief Operating Officer has transitioned to the Everhealth's CEO role. We have made significant progress in our transformation efforts that are key to achieving our growth acceleration goals. With the establishment of these leaders, the Celebrities Solution twenty twenty four and our recent announcement regarding our tech to sell marketing technology solutions. We are positioning our future growth as a pure play SaaS and embedded payments platform empowering critical service providers in the SMB space.

EverCommerce provides SaaS solutions for the service S and P economy. We offer tremendous value to our customers who are providing system of action that's to other businesses with tailored unique workflows. As you know, we only update our customer count once per year I'm now happy to report that we grew our customer count by more than 7% over the past year. We provide end to end solutions to more than 740,000 customers across our three major verticals. Our large base of customers is a key strength of EverCommerce. Each one of those customers represents opportunity to utilize embedded payments, add more features and our users and upsell to more robust products as the business grows. We talked often about our transformation optimization programs financial benefits, whether it's cost savings or accelerated growth. But another key outcome of this program is enhancing our ability to provide more value our large base of customers. On a pro form a basis in 2024, we generated $690,700,000 of revenue, representing a 5.7% year over year growth. Subscription transaction revenue grew 8.4% year over year, For the full year, we generated 25.3% adjusted EBITDA margin, which is approximately two thirty basis points of margin expansion year over year.

Finally, our annualized total paper volume for TPV expanded to over $12,600,000,000 As Fred highlighted in his opening remarks, we recently announced that we were exploring strategic alternatives to our marketing technology solutions. These solutions are valuable products to our customers fueled by the fact that service based small businesses need various digital channels promote their businesses and acquire customers. What has become clear to us as we've been on transformation optimization journey, however, is that our primary focus energy and investments need to be a providing best in class vertical sound software with embedded payments. We believe that focusing on these areas will allow us to maximize long term growth margin accretion and ultimately shareholder value. From a more practical standpoint, we believe that removing this campaign based revenue stream and lower margin business will help highlight the higher growth higher gross margin businesses from our core SaaS and Payments businesses. Post the planned sale of the Marketing Technology business, our core verticals will be EverCommerce for Home Services, EverHealth for health services and EverWell for Wellness. With the two former verticals representing approximately 95% of consolidated revenue. EverPro is an industry leading provider of integrated workflow driven solutions for the SMB field service professionals providing end to end management from lead management scheduling dispatch, estimating, invoicing and value added solutions such as payments, and customer experience management EverPro faces a fragmented and largely unaddressed market While there are competitors in our space, our growth opportunity in EverPro largely stems from attracting customers who are not using integrated solutions and from increasing payments adoption.

Our 2025 priorities with EverCommerce are focused on growing our basic customer improving the expansion of cross sell opportunities. Inherent in the business. Most importantly, the adoption of payments. We plan to augment our go to market approach, including scaling our efforts of partnerships and channel optimization. Additionally, we are streamlining product development and engineering unifying roadmaps rationalizing platforms, and leveraging AI to continue to provide market leading products to our customers. While we publicly announced Josh Rygals to Lead Ever Pro, we've also augmented leadership team with a hiring approved successful leaders across sales, marketing, product and technology. We have broken down the fragmented solution centric organization structure within EverPro and built a strong functional organization we believe will improve efficiency, enable fast decisions and accelerate growth. EverCommerce is a leading provider of NNAN capabilities for small physician practice. From scheduling, to practice management to patient engagement to revenue cycle management, that our health care customers need The Capstone appointment at Ever Health was our announcement in January that Everbelent will be taking the reins as the new CEO. We are investing in our product to provide enhanced features AI driven workflows, and deeper integration to create more value for our customers that we believe will provide better customer acquisition and higher retention.

Our platform enables providers to select a single partner of choice to support their entire operation. While we leave with SaaS to empower our customers, accelerating payments continues to be a high priority for e EverCommerce. Not only have we made good progress throughout 2024, but the real time investments we're making today are geared toward increased enablement and usage. As I mentioned last quarter, we are specifically investing in our product capabilities and go to market motions to prioritize payment attachment, as a point of initial SaaS sale as opposed to a separate add on sales motion. At the end of the fourth quarter, approximately 219,000 customers enabled for more than one solution. Reflecting a 22% year over year growth.

As we discussed when we introduced this metric, enabling customers to more than one solution is the first step in the funnel that leads to increased revenue retention and ultimate profitability of these customers. Once customers are enabled, the next action item process to facilitate usage. In the case of payments, this is getting our customers to actively process on our platform. We measure this step in the funnel as utilization. At the end of the fourth quarter, approximately 91,000 customers were actively utilizing more than one solution reflecting more than a 14% year over year growth. The acceleration of the year over year growth reported in the prior quarter.

Customers have purchased and utilized more than one solution are now listed as our most profitable and state based customers. As we have illustrated in the past earnings calls, the effect of more customers taking payments and other add on features and services with higher net revenue retention Looking back over the trailing twelve months, our annualized net revenue retention or NRR for the core software and payment solutions was 96%. Consistent with our prior quarter. Year over year, our payments revenue on a pro form a basis grew 9% accounting for approximately 17% of overall revenue. This is an acceleration in growth versus last quarter and it speaks to the continued progress we're making in payments adoption. We report our payments revenue on a net basis and as a result, payments revenue contributes approximately 95% gross margin as a meaningful contributor to overall adjusted EBITDA margin. Fourth quarter estimated annual total payments volume or TPV was approximately $12,600,000,000 representing a 9% year over year growth. As I mentioned earlier, making strategic high ROI investments into our payments platform routine. [indiscernible] we believe will result in increased payments adoption TPV growth and revenue acceleration. Now, I will pass it over to Ryan who will review our financial results in more detail as well as provide first quarter and full year 2025 guidance.

Thanks, Eric. The total reported revenue in the fourth quarter was $175,000,000 up 3.3% from the prior year period. Within total reported revenue, subscription and transaction revenue was $139,000,000 up 4.2% from the prior year period and Marketing Technology Solutions revenue was $29,600,000 down 1.6% The amounts presented on this slide for marketing technology revenue include amounts historically presented as marketing technology solutions. As well as related marketing technology components included within subscription and transaction revenue. We manage the business for sustainable organic growth and selectively utilize strategic acquisitions or divestitures to augment the trajectory of this growth. As a result, we believe it is important for investors to also evaluate our growth on a pro form a basis. Which is how we measure and manage the business internally. We calculate our pro form a revenue growth as though all acquisitions and divestitures that were completed as of the end of the latest period were closed as of the first day of the prior year period. We believe the pro form a growth rate provides the best insight into the underlying growth dynamics of our business.

For Q4 twenty twenty four, year over year pro form a revenue growth was 7%, while year over year pro form a subscription and transaction revenue growth was 8.9%. The primary difference between the actual pro form a revenue growth is attributable to the removal of prior year revenue associated with the sale of our fitness solutions that closed in 2024. The solid performance in subscription and transaction revenue was largely due to continued execution of our growth strategy, to provide customers our core system of action software solutions and driving expansion. By promoting cross sell and up sell opportunities. Leading with painters. As Eric noted, we also exceeded the top end of our adjusted EBITDA guidance range Fourth quarter adjusted EBITDA was $50,400,000 representing a 28.8% margin. Versus 25.4% in Q4 twenty twenty three. Which is 17% growth year over year. Q4 margin expansion was aided by seasonality in our business sequentially, as well as the timing of some transformation investments. On a year over year basis, margins improved due to cost optimization initiatives mix shift to higher margin products, and overall scale economies. Adjusted gross profit in the quarter was $124,000,000 representing an adjusted gross margin of 70.9% versus 67.3% in Q4 twenty twenty three.

Adjusted gross profit improved largely as a result of positive mix shift in the business As a percentage of revenue, payments and rebate revenue both of which have 95% plus gross margin profiles, grew compared to the decline in marketing technology which carries a lower gross margin profile.

Net Turning to adjusted operating expenses. Which are reconciled in the appendix to this presentation. Overall adjusted operating expenses modestly increased as a percentage of revenue from 41.9% to 42.1% for the quarter on a year over year basis.

While improving on an LTM basis from 42.8% to 42% representing our approach to balance the amount and timing of investments made in our solutions. We maintained our focus on improvement in customer satisfaction and acquisition while also highly focused on cost discipline and functional support areas. Now turning to some key liquidity measures. We continue to generate significant free cash flow. As we invest to grow our business. Cash flow from operations for the quarter $48,400,000 dollars as compared to $36,000,000 in Q4 twenty twenty three. [indiscernible] Leverage free cash flow was 43,800,000.0 in the quarter and for the trailing twelve month period, we generated more than $94,000,000 in levered free cash flow. [indiscernible] Adjusted unlevered free cash flow was $39,100,000 in the quarter and $134,500,000 for the last twelve months representing 31.520.5% year over year growth respectively. We ended the quarter with $136,000,000 in cash and cash equivalents and we maintained $190,000,000 of undrawn capacity on our revolver. We have $532,000,000 of debt outstanding as of the end of the quarter. Which matures in July 2028. Our total net leverage as calculated for our credit facility at the end of the quarter was approximately 2.2 times. Consistent with our financial policy.

We have $425,000,000 of notional swaps at a weighted average rate of 3.91% for the floating rate component of our interest [indiscernible] In December, we successfully repriced the fixed rate component of our term loan. As part of the continued transformation and optimization efforts.

The term loan was repriced at par and reduced the fixed price component of the interest rate by 50 basis points while also eliminating the credit spread adjustment to now bear an interest rate of SOFR plus 2.5%. Resulting in annualized interest cost savings of approximately $3,300,000 dollars We continue to view strong free cash flow generation as a key priority for the company. With it, we are able to invest in our growing business, while also allowing us to efficiently allocate capital across a spectrum of opportunities. Including the outstanding buyback authorization and M and A prospects. In the fourth quarter, repurchased approximately 623,000 shares for $7,000,000 at an average price of $10.88 per share. Based on the Board's authorization as of 12/31/2024, we had approximately $32,700,000 remaining in our repurchase authorization that runs through year end 2025.

I would now like to finish by discussing our outlook for the first quarter and full year of 2025. As a reminder, our guidance for revenue and adjusted EBITDA for 2025 is based on our continued operations. Which will exclude Marketing Technology Solutions. Please note that Marketing Technology Solutions will be reported as discontinued operations beginning in Q1 twenty twenty five. To assist in the comparison of 2025 guidance, to prior year results, We have provided the associated amounts of revenue, and adjusted EBITDA for Marketing Technology Solutions included in our consolidated results for 2024 as part of this presentation. For the first quarter of twenty twenty five, we expect total revenue of $138,000,000 to $141,000,000 and adjusted EBITDA of $39,000,000 to $41,000,000 For the full year 2025, we expect total revenue of $581,000,000 to $6.00 $1,000,000 and adjusted EBITDA of $167,500,000 to $175,500,000 Operator, are now ready to take the first question.

And our first question will come from the line of Bhavan Shah with Deutsche Bank. Your line is open.

Finish of the year.

I guess first, just on the macro, can you just give us an update on kind of what you're seeing with the health of your customers and any impact you're seeing from tariffs or hesitancy as we kind of approach the new administration?

And Matt, do you want to take that? Yes, absolutely. So thanks, Bob, for the question. Right now, seeing really nothing currently discernible in either acquisition utilization or churn trends that would point to a macro impact at this point in time. And as you know, given the highly digital nature of our new customer acquisition funnel, we do have real near time indicators that we continue to monitor. So we look [indiscernible] Cost per lead, lead to close conversion rates, cost per acquisition, sales cycle times, new sales ASPs, to really assess that net macro impact along with additional utilization and retention indicators. And right now, again, nothing discernible, but obviously something that we're going to keep our finger on.

And only I'll add to that. If you look at our two main verticals, which represent 95% of our business, our home field service business is really primarily great fix. We don't do new starts and things of that nature and that really is pretty consistent regardless of macro. And then the second largest is our health services, EverHealth. And again, very consistent regardless of tariffs or macroeconomics that we see That's helpful there. And just a quick follow-up. I know you talked about augmenting your existing go to market with partnerships and channel optimization. Can you just expand on what you exactly mean by that? And how big is partnerships or channel today in terms of driving traffic?

You want to take, John? Yes. I'll certainly talk about it from my perspective and then perhaps Evan and Josh will follow on from the vertical perspectives. I think we've always talked about partnerships. It's kind of one leg of the stool of our new customer acquisition. As we've always talked about, digital is kind of by far the largest. But partnerships and then in person trade shows and conference [indiscernible] Of our customer acquisition. With digital being as we've always talked about, between 80% to 85% of that new customer acquisition, Obviously, from a partnership perspective that it's it's probably the second stool, but a much smaller stool and leg in that stool. Evan, anything to add from a Yes. It's a great question. I would just say in Ever Health, focused on the existing partnerships we've got plus new partnerships that we see double digit growth in that channel distribution.

Group of partners that we've got. And those are other affiliates and other EMRs. They're leveraging our patient engagement capabilities as well as the marketplace that we've got within Everhealth.

And so there's actually different channels within that third party distribution and something we can [indiscernible] acquisition and also just reduce our cost of acquisition.

Great. Thanks for taking my questions.

Thank you. One moment for our next question. And that will come from the line of Alex Sklar with Raymond James. Your line is open.

Great. Thank you. Eric or Matt, on the accelerating customer growth that you referenced, so now seven little over 7% pro form a full year. Can you talk about how that played out from a linearity for perspective versus the 3% in 2023?

And then with that, what have been kind of the biggest factors the acceleration? Is that on the gross pension side? Is it more digital conversion, better on the demand gen? Just kind of curious what's played into that acceleration?

Yes. I appreciate the question. Yes, obviously quite happy with the growth of customers. I think when you think about that total customer count, what goes into that, obviously new acquisition trended nicely across the year, again, really driven by our digital efforts. But also again, is increasing investments in partnerships and and the small other areas that we've been looking to diversify from that standpoint. So across 2024, we certainly saw as we got into Q2 and Q3 some benefit to those efforts from a new customer acquisition standpoint. I wouldn't say that beyond that there's anything from a trend standpoint. I think our execution from a new customer acquisition standpoint was consistent across the year. And then from obviously a retention standpoint, that's the other side of the coin of of the customer accounts. Retention was where we expected it to be, an area that we continue to invest in how we engage with our customers, are continuing to invest in our products to to make them only more valuable and strengthen their value prop for our end customers. And we continue to iterate across our portfolio on that. And I think across the course of 2024, that really manifested in that 7% growth of total customers of of execution on both the NCA and the retention side.

I'll add to that. Thanks, Matt. We talked about that 7% growth, but I think the really important number to really focus on is the 740,000 customers. It's a massive scale of SMB customers that gives us the opportunity getting better and better at providing more value to by providing more services to them. So that continues to be a large focus for us. Obviously, we're happy continue that to grow, but the overall scale of that I think lost sometimes of how many customers we actually have within the EverCommerce ecosystem.

Great answers. And Eric, I guess you want to dovetail on that for the second question here. So the scale you've built out you're obviously divesting of the marketing solutions, but you've talked about how important some of these horizontal solutions are to your customer base in general. So strategy post the marketing sale, can you just talk about the opportunity to enable more kind of horizontal optionality either both more marketplace partners or you talked a lot about partnerships today. Just curious on that strategy broadly.

Yes. No, it's a great question. And look, all of our customers is why we went to the marketing space in the first place, They need leads, they need some of the services we do provide. What we've seen in our efforts providing more value we've seen the greatest success by a large amount in embedded finance, specifically payments. And so as we look to provide more value, I mean, we provide reputation management, we provide other integrated services beyond payments, but we definitely are seeing that as the continued focus and really the core need of our customers at this time. So for things outside of the ecosystem that we need to partner to drive our value we'll bring in partnerships and we have those as we speak and Matt could talk about some of those as well. But I think as we look at the future of where we're going as an organization, we want to make sure we create the best SaaS products for our customers provide the best integrated embedded finance that they're looking for to grow their business, and really stay laser focused and make sure that we're dialing those two objectives. And now that that?

Yes.

I mean, think so internally super focused on payments on the customer experience solutions, on edge which we've talked about over the recent quarters. And again, we certainly you heard Eric talk about the value that marketing technology solutions can provide to end customers that's certainly something that through third party partnerships we can continue to provide to those end Great. Thank you both. Congrats on the quarter. Thank you.

That will come from the line of Matthew Hedberg with RBC Capital Markets. Your line is open. Hey guys, it's Mike Richards on for Matt. Thanks for taking the question.

Obviously, there's a lot of them in parts, the divestiture, but Ryan, is this your first guide you're kind of owning as a CFO? How should we think about the guidance philosophy relative to guides in the past? And then then what are the levers to that growth acceleration in the back half that we should be looking for?

Yes. I think, I mean, we feel good about the guide. I think you can see from a guidance perspective for 2024. We came in almost on top of where our guidance was from an actual perspective and exceeded or beat on a quarterly basis kind of throughout the year. We're trying to give a fifty-fifty in terms of our view of where the business will be. Right, there's a lot of moving parts We had the fitness divestiture in 2024. Obviously, we announced the that we're going through a process right now for marketing technology. Really to focus in the areas that both Eric and Matt had talked about. But from a guide perspective, in the areas that will be representing our continuing operations, we feel strongly about our ability to kind of see where that is right now. Should anything change, we'll update that. But right now, we spent a good deal of time looking at the historicals and also looking at the trends that we see in the marketplace that Matt talked about upfront. And yes, for first quarter, and for the full year, we feel good right now.

And the word we used all of last year is just being prudent. I'd we want to put numbers out there that we feel very confident that we will beat and exceed and as we did every quarter last year and for the full year, we expected it the same this year. Got it.

And then it was awesome to see the acceleration payments Maybe you guys could talk more on the investment that you're making into that platform and what are some of the biggest frictions you tend to see in adoption? And maybe would those investments be addressing those frictions that you're seeing with customers?

Yes, for sure. I mean, I think heard us talk about the payments funnel before getting more increasing customers to attach, getting those attached customers to activate and then expanding the wallet share. Of those customers. I think one of the the largest friction points we've seen across all of our time dealing with SMBs. It's just a change and that's something that obviously we're going to and we have experience and we'll continue to push through with investments to remove that inertia of change. So again, when you look at increasing attach rates to our existing SaaS customers, We've talked you heard Eric talk about prior our integrated sales motion, so making investments there. In terms of selling SaaS and payments at the same time, continue to invest in our payment sales team, so having payment sales reps that can follow-up beyond the SaaS SaaS sales rep when there's a payments lead that didn't close, closing on that in our activation funnel, really putting customer success resources into the ground to follow-up on. Great, we've got a payments customer attached they're starting to utilize, how do we expedite and drive additional utilization there. So again, that's another area of investments.

And when you think about expanding wallet share, really the expansion of our product landscape, we've talked about that over several quarters from a payments perspective, improving payment work flows within our core systems of action, the addition of functionality like Cap2Pay across the payments ecosystem. So all three of those core areas of the funnel we are actively making investments to drive further penetration beyond where we are today.

Great.

Thanks.

Thank you. One moment for our next question. And that will come from the line of Kirk Materne with Evercore ISI. Your line is open. Kirk, if you're on mute, please unmute your line. Okay. We'll move on to the next question. Just one moment. And that will come from the line of Aaron Kimson with Citizens.

Great. Thanks guys. Congrats to Evan on the new role running Ever Health. How should we think about the payments opportunity and the penetration or maturity of that motion within Everhealth rest of the Everfront?

Yes. Thanks, Aaron. Good to see a couple of weeks back. I think ultimately, the business versus EverCommerce, just when you think about the overall healthcare dynamics where you've got patient payments as a percentage of the total, but the businesses tend to be larger. The needs in terms of actually giving patients lots of ways to make those payments, especially if you think about the advent and the acceleration of higher deductible plans. It's absolutely something that our customers need deeply embedded within both their their patient engagement and their kind of core management solution. So I would say we're very much in the early stages, especially in our core platforms like Prano, where we do have payments integrated. We're still to Matt's point working on building out all of the work flows and then driving all of the kind of funnel steps within our health services ecosystem, get customers enabled, activated, and ultimately expand share of wallet as we invest in the product. So we see a lot of continued opportunity within Everhealth from a patient payments perspective.

That's helpful. And then the 740,000 is great to see for the cross sell opportunity.

Given that we only get customer count once a year, I wanted to ask on the public call, if there's any color you can provide about how we should think about customer count on an ex MarTech basis as of twelvethirty, onetwenty four to see if we can get an idea of how to model that as things happen throughout '25.

Thanks. [indiscernible] Yes. Aaron, this is Brad. It's about we'll give the exact number when we get to next quarter, but it's about 15,000 customers. Got it.

Thank you. One moment for our next question.

And we'll try Kirk Materne's line with Evercore ISI. Your line is open. And hi, Kirk. We're having trouble hearing you on our end. Thank you. That is all the time we have for our question and answer session today. I would now like to turn the call back over to Ms. Eric Remmer for closing remarks.

Well, thank you for that. Thanks again for joining us today and for your continued support of EverCommerce. We are very excited about the transformation progress we have made and where it can take us both in twenty twenty five and beyond. And we look forward to connecting with individually over the next coming days and weeks. Thank you very much.

This concludes today's program. Thank you all for participating. [indiscernible]