EverCommerce Inc.

Okay, just to verify.

Thank you very much.

Thank you for standing by, and welcome to EverCommerce's second quarter 2023 earnings call. My name is Michelle, and I will be your operator for today. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone, You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. As a reminder, this conference is being recorded today, Monday, August 7th, 2023. And I would now like to turn the conference over to Brad Kortsch, Senior Vice President and Head of Investor Relations for EverCommerce. Please go ahead.

Good afternoon and thank you for joining. Today's call will be led by Eric Reamer, EverCommerce's Chairman and Chief Executive Officer, and Mark Thompson, EverCommerce's Chief Financial Officer. Joining them for the Q&A portion of the call is EverCommerce's President, Matt Feierstein. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended June 30th, 2023. For a link to the live or replay webcast, please visit the investor relations section of the EverCommerce 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 material available on our website that are not historical in nature may constitute forward-looking statements. 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 of the SEC. We undertake no obligation to publicly update or revise these forward-looking statements except as required by law. We will also refer to certain non-GAAP financial measures to provide additional information to you, our investors. A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and on our earnings call presentation. I will now turn it over to our CEO, Eric Reamer. Please continue.

Thank you, Brad. On today's call, I will highlight second quarter results and discuss key customer trends and metrics before turning the call over to Mark to dive deeper into our financials. EverCommerce continues a strong start to 2023 with solid revenue growth, particularly within our software and payment solutions, and a very robust adjusted EBITDA beat against the top end of the second quarter guidance. We achieved strong bottom line performance by doubling down on balancing growth and profitability. Through both active management of our cost base, with a focus on efficiency, we deliver 23% adjusted EBITDA margins, while supporting 13% year-over-year subscription and transaction revenue growth, which includes our core software payment solutions, and 8% year-over-year total revenue growth. With upside to profitability, we are creating the opportunity to incrementally invest in areas that can accelerate growth in 2024 and beyond. In addition to efficiently growing our customer base, our strategy is to lead with our core system of action, SaaS solutions, and then upsell, cross-sell additional solutions and features to enhance customer value while driving customer expansion and revenue growth for EverCommerce. Payments is the best illustration of this strategy. During the second quarter, our payments revenue grew 32% year-over-year. EverCommerce provides vertically tailored end-to-end SaaS solutions that support the highly diverse workflows and customer interactions and professionals in home services, health services, and fitness and wellness services used to automate manual processes, generate new business, and create more loyal customers. As a leading service commerce platform, we provide a system of action software across many micro verticals, which in turn drive the workflows to help our customers generate new business, fulfill services, manage day-to-day operations, and engage with their customers. Upselling and cross-selling our existing customers' additional features, services, and products is not only important for ARPU growth. It is important because it enhances the value our customers receive from the relationship with EverCommerce, which ultimately translates to lower churn and higher retention. For several quarters, we've disclosed a number of customers that are utilizing more than one solution. While this is a data point we continue to measure, we believe a metric that is even more reflective of our current cross-sell progress is the number of customers that have contracted and onboarded for more than one solution. While this is a measurement that tracks progress slightly higher in the funnel of customer revenue realization, for areas like payments enablement specifically, it marks a critical milestone in the customer's journey towards an integrated set of solutions that power more of their business. As of the end of second quarter, while we continue to see expansion of customers utilizing more than one solution to approximately 75,000, the number of customers that have contracted and aborted for two or more products grew 29% year-over-year to approximately 162,000. And with over 685,000 total EverCommerce customers as of the beginning of 2023, we continue to have a very large embedded opportunity to continue to grow this base of multi-solution customers. Finally, when looking back over the trailing 12 months, our annualized net revenue retention, or NRR, for core software payment solutions remains above 100%. Embedded payments is our most mature and accretive cross-sell solution and is a key element of our land and expand strategy. Year-over-year, our payment revenue grew 32%, contributing to our margin expansion given its gross margin profile. Additionally, payments revenue as a percent of total revenue grew more than 300 basis points over the past 12 months. Second quarter annualized total payments volume, or TPV, was approximately $11.4 billion, representing a 13% year-over-year growth. We expect TPV and overall payments revenue to grow as we continue to embed our payment solutions into our core system of actions. Accelerating payments attachment and utilization are key elements of our long-term growth plan, and we continue to see success throughout our core system of action solutions. We are actively testing and implementing new strategic initiatives designed to increase the attachment of payment capabilities drive more payment-enabled customers into active processing, and further increase the wall chair of customers who are already processing. And lastly, I want to briefly touch upon our current progress in integrating generative AI into our business operations, both within solutions we provide to our end customers as well as within our development of our products and services to support our customers in operational scalability. As an example, in Q2, we launched AI-driven capabilities within our surveying products that create significant efficiencies for our customers in how they analyze, interpret, and act upon large quantities of raw and unstructured survey feedback. These insights allow customers to more quickly and efficiently implement programs to accelerate revenue, as well as generate recommendations for risk mitigation from negative feedback. Early customer feedback has been incredibly positive relative to the even greater efficiency that our solutions can now bring to their operation. We are excited about this early progress. We will continue to leverage AI to drive greater efficiencies in our operation and even more innovative and impactful offerings to our customers. Now I'll pass it over to Mark, who will review our financial results in more detail, as well as provide third quarter and updated full year 2023 guidance.

Thanks, Eric.

Total revenue in the second quarter was $170.1 million, up 8.1% from the prior year period. Within total revenue, subscription and transaction revenue was $130.3 million, up 12.7% from the prior year period. And revenue for marketing technology solutions was $34.5 million, down 2% from the prior year period. The strong performance in subscription and transaction revenue, at 12.7% growth and in line with our long-term targets, was largely due to the solid execution of our growth strategy to provide customers a core system of action software solutions and driving expansion by promoting cross-sell and up-sell opportunities, leading with payments. Since the second half of 2022, we've seen headwinds to growth in our marketing technology solutions. And while this continued through the second quarter, we are starting to see early signs of stabilization. At the end of the second quarter, LTM revenue was $651.1 million, up 15.2% year-over-year on a reported basis, and 11.7% on a pro forma basis. As a reminder, we calculate our pro forma revenue growth as though all acquisitions closed as of the end of the latest period were closed as of the first day of the prior year period, including before the time we completed the acquisition. We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business. Our reported growth rate for Q2 is equivalent to our pro forma growth rate because we did not complete any acquisitions during the relevant periods. Second quarter adjusted EBITDA was $38.8 million, representing a 22.8% margin versus 19.6% in the second quarter of 2022 and 26.2% growth year over year. Additionally, LTM adjusted EBITDA was $136.1 million, representing a 20.9% margin. In the second quarter, we're clearly delivering towards our full year of 2023 objectives by exceeding guidance and achieving record EBITDA margins. Adjusted EBITDA performance in the quarter was underscored by our focus on actively managing our operating expenses, driving operating leverage, and cash flow generation. The timing and pacing of investments through the first half was a more modest factor, and we expect to make targeted investments in the back half of the year that should enable us to enter 2024 on a solid growth footing. For example, one area of incremental investment is resources to accelerate payment adoption among our systems of action software solutions. Adjusted gross profit in the quarter was $111.9 million, representing an adjusted gross margin of 65.8% versus 65% in Q2 2022. LTM adjusted gross profit was $425.9 million, representing an adjusted gross margin of 65.4%. The increase in gross margin is partially attributable to an increasing mix of higher margin payments revenue. And now turning to operating expenses. Adjusted sales and marketing expense was $28.7 million, or 16.9% of revenue, down from 18.2% of revenue in the prior year period. Absolute adjusted sales and marketing expenses were approximately flat year over year due to a combination of optimization and economies of scale. Adjusted product development expense was $17.7 million, or 10.4% of revenue, down from 10.8% of revenue reported in the prior year period. Absolute adjusted product development expense grew 4.7% year over year as we continue to invest in our solutions. Adjusted G&A expense was $26.6 million, or 15.7% of revenue, down from 16.5% of revenue in the prior year period. As we anniversary the investments made in 2021 and 2022 to support our public company infrastructure, we're beginning to see meaningful operating leverage. We continue to generate significant free cash flow as we invest to grow our business. Our adjusted unlevered free cash flow for the quarter was $27.1 million, representing 21.2% year-over-year growth and a 15.9% margin. For the last 12 months, our adjusted unlevered free cash flow was $97.5 million. Levered free cash flow, which accounts not only for debt service but also various working capital adjustments, is $22.6 million in the quarter. This is up approximately $16.1 million year over year due to both growth in operating income and changes in working capital. For the trailing 12 months, levered free cash flow is $62.2 million, continuing to underscore our balance sheet flexibility. Strong free cash flow generation allows us to continue to invest in our growing business and deliver strong returns to our shareholders. It also allows us to efficiently allocate capital across a spectrum of opportunities, including the outstanding buyback authorization and M&A prospects. In the second quarter, we repurchased approximately 900,000 shares for a total cash consideration of approximately $10 million at an average price of $11.10 per share. We ended the quarter with $83.1 million in cash and cash equivalents, and we maintain $190 million of undrawn capacity on our revolver. Our debt is a combination of floating and fixed rate, and total net leverage as calculated per our credit facility at the end of the quarter was approximately 2.9 times consistent with our financial policy. We have no material maturities until 2028. I'd like to finish by providing our outlook for the remainder of 2023, beginning with the third quarter. For Q3, we expect total revenue of $174 to $178 million, and we expect adjusted EBITDA of $34.5 to $37.5 million. Our full year 2023 revenue guidance remains 680 to 700 million, and we are raising our adjusted EBITDA guidance again by an additional 5 million to 142 to 148 million. As we noted on our first quarter call, continuing to execute our growth strategies, price increases and new product introductions are expected to support growth and strong margins throughout the year. Our 2023 outlook does not include any potential impact of M&A activity that could take place. Before we begin the question and answer portion of the call, I want to thank the entire EverCommerce team for their efforts in delivering these strong results. Our focus continues to be optimizing our operations, managing costs effectively, and delivering on our strategic priorities. Operator, we're now ready to begin the question and answer section of the call.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. The first question comes from Kirk Maturne with Evercore. Your line is open.

Yeah, thanks very much. Eric, I was wondering if you could just talk about the level of activity with you all and your customer base this quarter, maybe versus the prior two quarters, just in terms of pipeline generation, how you're feeling about sort of top of funnel activity, realize marketing is still a bit challenged, but just kind of curious if you're seeing anything from a macro perspective that makes you feel, you know, perhaps a little better heading in the second half of the year, if it's still about the same. Thanks.

Yeah, thanks, Kirk. I appreciate the question. Yeah, I think we felt pretty good going to Q2. We saw some things specifically in the marketing service part, which is why we guided and achieved what we achieved. But I think the stabilization both in that part and the continued consistency in the pipelines that we're seeing in the core business of software and payments really remains on the you know, right on plan. So we feel really good about going to the second half. And I think that's kind of, you know, showing the guidance. Matt, want to look at that?

Yeah, I think you nailed that. In that core software and payments, specifically the systems of action and the addition of payments to that, from a top-of-the-funnel perspective, we see opportunities to also double down on investments in those core areas where we see large-end markets, lots of opportunity, strong unit economics, so to Eric's point. exactly where we expect it to be with opportunities in the second half to continue to drive top of funnel activities beyond where they are today.

And, Kirk, just one thing to add to Matt's thing, just to answer that specifically. From a macro perspective, in the core verticals that we serve, we're not seeing any, you know, continued degradation that we might have saw last year.

That's great. And, Mark, one follow-up for you. You mentioned, obviously, some spend that was supposed to happen in the first half is going in the second half. I guess just how should we interpret sort of the EBITDA guidance for the back out or the implied, I guess, for the fourth quarter? Adjusted EBITDA guidance, you know, somewhat flattish versus 2Q. Is that just spend that you're maybe holding back on the first quarter coming in the model? And how do you think about just sort of operating leverage in general? Thanks.

I'll start. If you think about, we raised after first quarter, we raised again after second quarter. We feel really good about where we are right now, and I think we've been prudent throughout the year. Obviously, we still live in a volatile world, and we want to be consistent and conservative and prudent as we look to the second half.

Yeah, I mean, exactly, Kirk. Coming out of last year, the world was obviously changing before us, and we wanted to make sure that We are actively managing our spend and pace of investment through the year. I think we've done a great job in the first half. It gives us the opportunity to hit the gas pedal on some initiatives that are really going to underscore the core growth strategies, payments enablement, all of that sort of stuff. So feeling as though it's time to put a little bit more into the back half to make sure that we continue to set ourselves up for a nice 24 and beyond.

Super. Thank you all.

Please stand by for the next question.

The next question comes from Brad Reback with Stifel.

Your line is open.

Great. Thanks very much. I believe it was during Mark's prepared remarks, he talked about accelerated investment in payments adoption in the back half of the year. Can you maybe walk through what you're going to do differently going forward versus what you've done to try to help drive that linkage? Thanks.

Yeah, again, I don't think this is all that different than things that we've talked about in prior quarters. But, you know, from an attachment standpoint, you know, as you think from a top of funnel down strategic standpoint, you know, continuing to drive incremental resources from, you both into our PLG-led products, but also where there can be some outbound sales touches into the software customer base to drive that front as you go down the funnel in terms of converting more of our payment-enabled users into active processing users, looking at outbound customer success resources that we have been testing. and you know have metrics around and now have the ability to say this is where we should double down from incremental resources from that perspective as well and then you know as you go further down funnel both to get more people actively processing and expand wallet share looking at opportunities to like we've talked about in in past quarters expand the base of payment enablement product landscape throughout the ecosystem. So those are all areas where we are looking at and actively know for 2-H that incremental investments on top will help really drive quicker execution on those strategies.

And, Brad, thanks for the question. One more thing to add to that. We have implemented payment mandates in two of our solutions, which one has been mandated as of August 1st, and one was in kind of early Q2. And so that takes some time to kind of roll out those mandates, but those are positive things that we've kind of implemented. Some of them just got implemented literally last week. So we're excited about the things that Matt brought up in addition to some mandates we're putting into our software solutions.

Great. And then, Eric, on the AI monetization side, is that going to be direct or more indirect in so much as that'll help support future price increases broadly across the product portfolio? Thanks.

I think, Brad, both. Ultimately, I think what Eric spoke to was incremental monetization, but certainly there will be indirect monetization via just more firepower behind some of the products that we're able to bring to market. So we see the opportunity for both, and Eric's example was really an incremental monetization opportunity.

And the one that we didn't talk about much because I'm sure every company has different pieces of that puzzle, but, you know, we utilize and we've been utilizing, you know, AI-type capabilities internally to our operations for quite some time. And with the increased, you know, AI access, we've implemented some of those in different operational capabilities internally that we'll start seeing hopefully some additional value probably in 2024.

Great. Thanks very much.

Please, Sam. Please stand by for the next question. The next question comes from Alexander Sklar with Raymond James. Your line is open.

Hi. Thanks for taking the question. This is John on for Alex. Eric or Matt, I know pricing has really been more of a lever this year than we've been looking to push versus prior years. I'm just curious on pricing. any metrics you can give on price elasticity to date, and you can maybe share the percent of your base that's seen an increase, or maybe some of the retention dynamics surrounding that.

Yeah, this is Mark. Sorry. Go for it.

Two things. One, you know, we come into each year with a series of pricing actions planned in for the year, and we've executed against most of those, and you'll really expect to see continuing impact from that through the year. But overall, you know, we kind of talked about circa 3% for the year. I think that's very much still the way we think about that. In terms of churn, we historically always plan that into our internal plans, and quite honestly – execute quite well through those and never really see that materialize the way we plan. So we tend to be pretty conservative in our outlook on that internally. And I've really not seen any real impact from that, from any of the pricing actions that have been taken thus far in the first half.

And I think that's the best metric. You mentioned elasticity. That's probably our best metric on county elasticity is actually our expected and anticipated churn with all of them are running lower than where we expected. So I think we met that mark from an elasticity standpoint, and that would mean there's likely more there too.

Opportunity as you look at the 24 to maintain and or increase price and actions into 24.

Okay, thanks. That was a really helpful call there. And then I know we only get logo growth annually, but I'm just curious if there's been any changes in terms of the vertical or micro verticals driving the growth that you've seen so far this year through July.

Thanks. It's been pretty consistent across the board. You know, the one area that we talk about and we've talked about before, our fitness kind of category has been, you know, a laggard in the industry. It's starting to came, you know, some of the kind of fitness has came out and said they're just starting to see some growth in stores. But in general, the market has just been slow to recover from COVID. So that's the one area within the ecosystem that we serve that we've seen all kind of a lack of growth. But the rest of them is pretty consistent, you know, pretty across the board.

Thank you very much.

Please stand by for the next question. The next question comes from Bob and Shaw with Deutsche Bank. Your line is open.

Great. Thanks for taking my question. I just wanted to follow up on an earlier comment you made about kind of mandating payments across two-year solutions. What's been the customer reception to that, and how long will that take to go throughout that customer base? or those two respective customer bases?

Yeah, so the mandate, I'll let Mac in on something specific. The mandate was really driven, you know, A, you kind of convert to our payments. We had about, you know, 35% in a specific solution utilizing it. So we went off to the back book, and it said if you take our payments, that's great. Otherwise, you've got a pretty significant price increase if you don't not take it. And so we did plan, you know, some people might be not – Attrition against it, attrition has been significantly lower than we had expected. Response has been very positive. It takes some time. Matt gets more specific in terms of the time of rollout and then ultimately seeing the value of that.

Yeah, I mean, to Derek's point, there's really three outcomes from that, two that we like. One that we really like, which is more people will sign up and take payments and start utilizing that. The second is they'll opt into paying an incremental amount for their software. And the third is obviously we don't like this at all and they may choose to loop the solution. You know, starting from the back forward, again, churn, when we model it against these mandates, it's been lower than we expected. Incremental take rate, again, some of these mandates have been in place for several quarters. One that we just started this quarter, we're kind of right where we expect it to be from, you know, incremental folks taking payments, which is good. And again, folks that say, you know, we don't opt into this and are taking the price increase, again, we've just seen you know, less than expected churn against that. So we feel good about the execution of the mandates that we've done to date, and it's certainly a strategy that we'll continue to use across the portfolio.

And I think, you know, because of the way it rolls out, you know, you get them to say yes, you sign them up, they transition to payments, they start processing. As you're going through a base of thousands of customers, you know, you'll start seeing the benefit of that in 2024.

That makes sense. And is this something you can kind of roll out through the rest of your kind of core business solutions, or is this something more on a case-by-case basis?

Every solution is a little bit different, but we definitely are choosing the ones that we think have the greatest opportunity and the greatest upside first. As you can imagine, you're potentially underwriting several thousand customers to get them on the payments. You want to be thoughtful about the rollout, so we will be doing these in a bespoke process. But we think we have several others that we could be doing similar activities to as well.

Super helpful. Thanks for taking my question.

Please stand by for the next question. Please stand by for the next question. The next question comes from Erin Kimson with JMP. Your line is open.

Hey guys, I know we're probably still two quarters away from an initial 2024 guide, but how do investors get comfortable with the organic revenue growth rate X price increases for 24 and beyond?

Well, if you look at kind of where, you know, we haven't obviously given that guidance yet, but I think we're pretty comfortable with where we feel the second half of the year is going and we're seeing positive trends on the way up from there. So I think when we look at some of the ladder dragging down the business right now, some of the, we talked about the fitness and we talked about marketing services, you know, fortunately it's becoming less a part of our business. I think we, you know, Mark talked about in his presentation, opening payments as a percentage of total revenue increased 300 basis points year over year. And we expect that to also continue to grow. And it could be overall payments growth. And so the areas of business that are becoming the larger part of the business We expect to continue to make investments in those and continue to make those a large part of business. So as we look for the rest of the year with a lot of confidence, and then as we look at 2024, obviously, we'll wait until we, you know, see how the year goes from a macro standpoint, but we feel pretty confident in terms of our ability to continue to ramp our growth rates, you know, at and higher than current levels.

That's very helpful. Thank you. And then just stepping back, I mean, You left the two-year mark as a public company last month. The stock hasn't really worked from the $17 IPO price. So overall, you've executed pretty well, right? What would you say you think the one or two things the street still fails to appreciate two years in as a public company are?

I think the people that are following us, I think, do appreciate it. I think we have other challenges that we're dealing with from a technical standpoint that have really nothing to do with operations. I think we've done a really good job from an operational standpoint. But I think it still gets underappreciated, the scale of the operations and the customer base that we're dealing with. We have Over approximately 700,000 active customers utilizing our solutions, as we talked about today. Over 160,000 have signed up for an onboarding for more than one of those solutions. And our ability to continually sell more product and service into this very, very fertile base. It's extremely exciting. Matt touched upon the things we're doing from a payments perspective. Not only is payments incredibly accretive from a growth and margin perspective, but it's incredibly accretive from a value perspective to our customer base. As we begin to put more resources, both internally and then outbound, reaching these customers to get them utilizing the solutions more effectively from a payments perspective, the economic upside from that perspective is is extremely, extremely high. We haven't really built that into our models as we're starting to see that come, but I don't think that's been appreciated externally from the street perspective yet. Awesome. Thank you.

Please stand by for the next question. The next question comes from Clark Jeffries with Piper Sandler. Your line is open.

Hello, thank you for taking the question. I wanted to ask about that disclosure around enabled and utilization in the customer base. Do you help us think through how those buckets work, how the enabled flows into the utilized, and maybe how much opportunity is left to add to that enabled bucket rather than the overall logos? I'm thinking of large systems of action that may not have that payments enablement or sort of add-on functionality to really offer that enablement to the customer.

Yeah, thanks, Clark. I'll start with just so you define it properly and then Mac can talk about the specifics. So the reason we opened that, the reason we kind of brought the statistic up, because it really is a better leading indicator of how we're doing in terms of getting people, when we say enabled, you're right, enabled is even higher. So we need to integrate the payment solutions into a software so they even have the opportunity to take it. And then we're actually talking about when we say enabled, they enable, sign up, and onboard it. So they've actually said, yes, I want it. And then that third statistic that we've been giving is the utilization. So the statistic that we kind of brought up today that we're going to be giving going forward is that middle one. So they've been enabled in terms of the integration. It's now signed up and onboarded, and we've yet to get them to fully utilize or have it utilize that particular month. Do you want to talk some more statistics on that?

Yeah, I mean, I think Eric makes a great point. We really think it's just a better leading indicator to where we are with multi-product, ultimately getting to multi-product utilization, empowering more of our customers' businesses. with the integrated suite of solutions that we have. So, you know, again, as Eric talked about, obviously getting people contracted and onboarding for that second solution. And then from a strategy perspective, you know, ensuring that, like, again, thinking about the payments world where we've just done the most, you know, first we're focused on the go-to-market motions and marketing sales. That's going to drive payment attachment. We talked about some of the strategic initiatives today. like mandating payments, that's going to help us achieve that. We talked about adding outbound sales, such as the complement product-led growth funnels and in-product messaging. And again, once that's enabled, really, we go to our next strategy efforts, which are focused much further down the customer engagement funnel. So driving them into for-all payments, customer active processing, expanding their wallet share. Initiatives like proactive customer success engagement, those outbound touches, adding more product real estate to the payment integration. And frankly, that could be adding more product real estate to any integration that's going to drive that multi-product utilization. So, again, really that's how we think about it. Again, you know, it's a, you know, these are numbers that we'll continue to publish going forward, but we think really the right indicators of where we are in that journey to multi-product utilization.

Perfect. And just to clarify, is any part of it a discretionary choice of the customer or is it really just duration as in they will, move towards that utilizing bucket over time and it's more time dependent rather than discretionary. And just a separate question for Mark. You mentioned stabilization marketing. Any way you could further clarify whether stabilization means, you know, return to positive year-over-year growth or any way you could bracket subscription and transaction growth in the second half of the year so we know the kind of balance between, you know, the segments in the second half?

Yeah, I can take the first part.

Think about it from a customer engagement funnel. And they're obviously making the choice within our go-to-market motions to engage with that second product again. We'll use payments as that example. Then, of course, we've got to go through the process of getting them contracted, onboarded, and we're going to deploy a next set of strategy and resources behind that to turn that payment-attached customer, that enabled customer, into a utilizing customer. So I wouldn't necessarily – to us, that's not discretion. It's just the next step in that engagement.

I mean, the question is meant – it's a proactive decision that they are making, and 160,000 people have made that decision to do that. So it's not a default number, to be very clear. Our opportunity is – to get those people who have made that decision to follow through with that decision to ultimately utilize it. So it's good that they made the decision. We've made it available. They've signed up, and now we want them to utilize it.

Yeah, 100%, not a default. That's not discretion. In fact, it is their discretion. They made the choice that they wanted that integrated.

And in many cases, we've talked about this before, it's almost illogical to not utilize it in some scenarios, just in some of the workflows that we have. And they just keep dealing with small businesses, and they're busy, and a lot of things going on, and it's inertia more than anything else. And so we feel very strongly that we have the opportunity to continue to penetrate the basic customers we have at a much higher level, and we've made really good progress and a lot of progress to come.

mark on the second part of the question yeah i think on the second part look we don't we don't break our revenue guidance into pieces when we say stabilize um i think you should take that to mean you know what we've seen the last couple of quarters is consistent with what we expect to see in the second half and that's all baked into our guidance going forward um i would just sort of leave it at that all right thank you for all the clarification please stand by for the next

The next question comes from Jeremy Seller with Jefferies. Your line is open.

Hey, guys. This is Jeremy on First Amantamana. Thanks for taking my question. So I guess the first one is kind of a two-parter. I guess as you continue to drive attachment of embedded payments, it's kind of hard to parse out the seasonality. Can you maybe kind of give us some color into what the seasonality of TPV is in a steady-state environment? And then also, you mentioned that take rate expansion again. I guess what levers are you pulling to drive that take rate expansion and kind of how much more is there to go there?

Yeah, I mean, I think we can talk to the first part, seasonality. I think we've described it across the business, you know, Q4 and Q1 would represent the lower end of seasonality. There's also some just calendaring in Q4 across the whole payments landscape. When you think about November and December and shorter business days, that plays into it. So we typically think about Q4 and Q1 as the lower end from a seasonality perspective when it comes to payments in Q2 and Q3, and specifically in home services where there is a lot more activity. We typically see the higher end of TPV from a seasonality perspective there. about take rate and things that we can continue to do, expand that. Obviously, we're happy about the expansion of take rate over the last 18 months. I think we talked about this last quarter. There is a variety of things that we do from pricing and packaging. Some of it is, frankly, just a mix of our payment space as well, as we are driving more and more attachment and utilization in some of our higher take rate solutions, specifically in home services, we have seen take rate expansion just in aggregate go up. But obviously from our end, we have opportunities to A, grow the expanse of payment capabilities within our integrated systems of action. That allows us to continue to obviously add more value to the end customer, but also commensurate price to value from that perspective. And then, you know, lastly, you know, we continue to have opportunities with our end providers for as we continue to scale, creating scale in the economic relationship from a take rate standpoint in those contractual arrangements.

Got it. That's a useful color. The rest of mine are asked. Thanks for making my question.

Please stand by for our next question. The next question comes from Dan Bergstrom with RBC Capitals. Your line is open.

Hey, it's Dan Bergstrom for Matt Hedberg. Thanks for taking our question. Stan, EverHealth, it's been a couple of quarters now with the rebrand. I know we're early in a long process here, but anything to point out around initial customer reception of the changes? You know, is it accelerating customer adoption?

It's been extremely positive. You know, the EverHealth brand is kind of been soft launched, you know, as kind of a an overhead brand for the, you know, kind of our health group within the organization. It'll be really officially launched really in Q1, NFQ1 of next year, as we're going to really go to market really with one brand and consolidate all the other branding parts of it. And I think we'll start seeing even more efficiencies, both in the operations and even, you know, hopefully, an increased upsell on the selling part of it as well. To date, the response has been very positive. We've been selling these solutions, again, under one organization. suite of solutions to our customers, which I genuinely appreciate, versus having to connect the dots themselves in other partners where they have getting point solutions versus one whole solution. So the early feedback is positive. We've seen consistent growth in that category. I think when we launch it fully next year, I think it will be an uptick, hopefully, in growth, but definitely, in minimum, an operational efficacy and efficiency that we'll get in the organization.

Yeah, I mean, I think it's played out the way we have expected it to. You know, from an external standpoint to Eric's point, the reception has been really, really positive. And from an internal standpoint and ultimately to a customer-facing standpoint, it really has set us up for that, you know, multi-product sale. So think about, you know, EMRPM is the base system of actions. but having those active integrations for integrated insurance clearinghouse and claims, integrated patient pay, and now integrated patient engagement solutions really becoming more active in those EMRPMs. It is exactly what our customers want. They don't want multiple providers, and us being able to drive that to market more and more and more over time, again, that's part of the receptivity that we've got from our end customers. So excited about where we are, and to Eric's point, there's a lot more progress to come over the next year.

That's great. Appreciate the color. Thanks.

As I was As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. The next question comes from Eamon Coughlin with Barclays. Your line is open.

Hi, this is Eamon Coughlin on for Ryan Williams from Barclays. Can you just broadly describe how S&P has fared in 2Q and what management is factoring in for 2H23 guidance in terms of macro? Thanks.

Yeah, again, thank you for the question. You know, I think everything, we can only speak to the, you know, the S&Ds, the verticals that we serve, and the verticals we serve are pretty resilient. If you think about the, you know, healthcare customers we serve and the home service customers we serve represent The vast majority of our customers, they've been very resilient, and we've seen no degradation in both, you know, growth and pipeline within the customers that we serve. And we're expecting kind of a similar trajectory for the second half of the year. So not necessarily increased or decreased, but really, you know, along the same lines you've been seeing for the last couple quarters.

Got it. Okay, thanks.

At this time, I'm not showing any further questions. I would now like to turn the call back to Eric Reamer for closing remarks.

Thank you very much. Well, EverCommerce had another consistent quarter of exceeding expectations. The market and the opportunity for our software and solutions continue to grow and remain extremely excited about our unique position in the marketplace to capitalize that opportunity. We appreciate you all joining the call today, and we'll speak to you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect. Amen. Bye. Thank you. Thank you. Bye. you Thank you for standing by, and welcome to EverCommerce's second quarter 2023 earnings call. My name is Michelle, and I will be your operator for today. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. As a reminder, this conference is being recorded today, Monday, August 7th, 2023. And I would now like to turn the conference over to Brad Korch, Senior Vice President and Head of Investor Relations for EverCommerce. Please go ahead.

Good afternoon and thank you for joining. Today's call will be led by Eric Reamer, EverCommerce's Chairman and Chief Executive Officer, and Mark Thompson, EverCommerce's Chief Financial Officer. Joining them for the Q&A portion of the call is EverCommerce's President, Matt Fierstein. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended June 30, 2023. For a link to the live or replay webcast, please visit the Investor Relations section of the EverCommerce 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 material available on our website that are not historical in nature may constitute forward-looking statements. 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 of the SEC. We undertake no obligation to publicly update or revise these forward-looking statements, except as required by law. We will also refer to certain non-GAAP financial measures to provide additional information to you, our investors. A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and on our earnings call presentation. I will now turn it over to our CEO, Eric Reamer. Please continue.

Thank you, Brad. On today's call, I will highlight second quarter results and discuss key customer trends and metrics before turning the call over to Mark to dive deeper into our financials. EverCommerce continues a strong start to 2023 with solid revenue growth, particularly within our software and payment solutions, and a very robust adjusted EBITDA beat against the top end of the second quarter guidance. We achieved strong bottom line performance by doubling down on balancing growth and profitability. Through both active management of our cost base with a focus on efficiency, we deliver 23% adjusted EBITDA margins while supporting 13% year-over-year subscription and transaction revenue growth, which includes our core software payment solutions, and 8% year-over-year total revenue growth. With upside to profitability, we are creating the opportunity to incrementally invest in areas that can accelerate growth in 2024 and beyond. In addition to efficiently growing our customer base, our strategy is to lead with our core system of action, SaaS solutions, and then upsell, cross-sell additional solutions and features to enhance customer value while driving customer expansion and revenue growth for EverCommerce. Payments is the best illustration of this strategy. During the second quarter, our payments revenue grew 32% year-over-year. EverCommerce provides vertically tailored end-to-end SaaS solutions that support the highly diverse workflows and customer interactions of professionals in home services, health services, and fitness and wellness services used to automate manual processes, generate new business, and create more loyal customers. As a leading service commerce platform, we provide a system of action software across many micro verticals, which in turn drive the workflow to help our customers generate new business, fulfill services, manage day-to-day operations, and engage with their customers. Upselling and cross-selling our existing customers' additional features, services, and products is not only important for ARPU growth, it is important because it enhances the value our customers receive from the relationship with EverCommerce, which ultimately translates to lower churn and higher retention. For several quarters, we've disclosed the number of customers that are utilizing more than one solution. While this is a data point we continue to measure, we believe a metric that is even more reflective of our current cross-sell progress is the number of customers that have contracted and onboarded for more than one solution. While this is a measurement that tracks progress slightly higher in the funnel of customer revenue realization, for areas like payments enablement specifically, it marks a critical milestone in the customer's journey towards an integrated set of solutions that power more of their business. As of the end of second quarter, while we continue to see expansion of customers utilizing more than one solution to approximately 75,000, the number of customers that have contracted and aborted for two or more products grew 29% year-over-year to approximately 162,000. And with over 685,000 total EverCommerce customers as of the beginning of 2023, we continue to have a very large embedded opportunity to continue to grow this space of multi-solution customers. Finally, when looking back over the trailing 12 months, our annualized net revenue retention, or NRR, for core software payment solutions remains above 100%. Embedded payments is our most mature and accretive cross-sell solution and is a key element of our land and expand strategy. Year-over-year, our payment revenue grew 32%, contributing to our margin expansion given its gross margin profile. Additionally, payments revenue as a percent of total revenue grew more than 300 basis points over the past 12 months. Second quarter annualized total payments volume, or TPV, was approximately $11.4 billion, representing a 13% year-over-year growth. We expect TPV and overall payments revenue to grow as we continue to embed our payment solutions into our core system of actions. Accelerating payments attachment and utilization are key elements of our long-term growth plan, and we continue to see success throughout our core system of action solutions. We are actively testing and implementing new strategic initiatives designed to increase the attachment of payment capabilities drive more payment-enabled customers into active processing, and further increase the wall chair of customers who are already processing. And lastly, I want to briefly touch upon our current progress in integrating generative AI into our business operations, both within solutions we provide to our end customers as well as within our development of our products and services to support our customers in operational scalability. As an example, in Q2, we launched AI-driven capabilities within our surveying products that create significant efficiencies for our customers in how they analyze, interpret, and act upon large quantities of raw and unstructured survey feedback. These insights allow customers to more quickly and efficiently implement programs to accelerate revenue, as well as generate recommendations for risk mitigation from negative feedback. Early customer feedback has been incredibly positive relative to the even greater efficiency that our solutions can now bring to their operation. We are excited about this early progress. We will continue to leverage AI to drive greater efficiencies in our operation and even more innovative and impactful offerings to our customers. Now I'll pass it over to Mark, who will review our financial results in more detail, as well as provide third quarter and updated full year 2023 guidance.

Thanks, Eric.

Total revenue in the second quarter was $170.1 million, up 8.1% from the prior year period. Within total revenue, subscription and transaction revenue was $130.3 million, up 12.7% from the prior year period. And revenue for marketing technology solutions was $34.5 million, down 2% from the prior year period. The strong performance in subscription and transaction revenue, at 12.7% growth and in line with our long-term targets, was largely due to the solid execution of our growth strategy to provide customers a core system of action software solutions and driving expansion by promoting cross-sell and up-sell opportunities, leading with payments. Since the second half of 2022, we've seen headwinds to growth in our marketing technology solutions. And while this continued through the second quarter, we are starting to see early signs of stabilization. At the end of the second quarter, LTM revenue was $651.1 million, up 15.2% year-over-year on a reported basis, and 11.7% on a pro forma basis. As a reminder, we calculate our pro forma revenue growth as though all acquisitions closed as of the end of the latest period were closed as of the first day of the prior year period, including before the time we completed the acquisition. We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business. Our reported growth rate for Q2 is equivalent to our pro forma growth rate because we did not complete any acquisitions during the relevant periods. Second quarter adjusted EBITDA was $38.8 million, representing a 22.8% margin versus 19.6% in the second quarter of 2022 and 26.2% growth year over year. Additionally, LTM adjusted EBITDA was $136.1 million, representing a 20.9% margin. In the second quarter, we're clearly delivering towards our full year 2023 objectives by exceeding guidance and achieving record EBITDA margins. Adjusted EBITDA performance in the quarter was underscored by our focus on actively managing our operating expenses, driving operating leverage, and cash flow generation. The timing and pacing of investments through the first half was a more modest factor, and we expect to make targeted investments in the back half of the year that should enable us to enter 2024 on a solid growth footing. For example, one area of incremental investment is resources to accelerate payment adoption among our systems of action software solutions. Adjusted gross profit in the quarter was $111.9 million, representing an adjusted gross margin of 65.8% versus 65% in Q2 2022. LTM adjusted gross profit was $425.9 million, representing an adjusted gross margin of 65.4%. The increase in gross margin is partially attributable to an increasing mix of higher margin payments revenue. And now turning to operating expenses. Adjusted sales and marketing expense was $28.7 million, or 16.9% of revenue, down from 18.2% of revenue in the prior year period. Absolute adjusted sales and marketing expenses were approximately flat year over year due to a combination of optimization and economies of scale. Adjusted product development expense was $17.7 million, or 10.4% of revenue, down from 10.8% of revenue reported in the prior year period. Absolute adjusted product development expense grew 4.7% year over year as we continue to invest in our solutions. Adjusted G&A expense was $26.6 million, or 15.7% of revenue, down from 16.5% of revenue in the prior year period. As we anniversary the investments made in 2021 and 2022 to support our public company infrastructure, we're beginning to see meaningful operating leverage. We continue to generate significant free cash flow as we invest to grow our business. Our adjusted unlevered free cash flow for the quarter was $27.1 million, representing 21.2% year-over-year growth and a 15.9% margin. For the last 12 months, our adjusted unlevered free cash flow was $97.5 million. Levered free cash flow, which accounts not only for debt service but also various working capital adjustments, is $22.6 million in the quarter. This is up approximately $16.1 million year over year due to both growth in operating income and changes in working capital. For the trailing 12 months, levered free cash flow is $62.2 million, continuing to underscore our balance sheet flexibility. Strong free cash flow generation allows us to continue to invest in our growing business and deliver strong returns to our shareholders. It also allows us to efficiently allocate capital across a spectrum of opportunities, including the outstanding buyback authorization and M&A prospects. In the second quarter, we repurchased approximately 900,000 shares for a total cash consideration of approximately $10 million at an average price of $11.10 per share. We ended the quarter with $83.1 million in cash and cash equivalents, and we maintain $190 million of undrawn capacity on our revolver. Our debt is a combination of floating and fixed rates, and total net leverage is calculated per our credit facility at the end of the quarter was approximately 2.9 times consistent with our financial policy. We have no material maturities until 2028. I'd like to finish by providing our outlook for the remainder of 2023, beginning with the third quarter. For Q3, we expect total revenue of $174 to $178 million, and we expect adjusted EBITDA of $34.5 to $37.5 million. Our full year 2023 revenue guidance remains 680 to 700 million, and we are raising our adjusted EBITDA guidance again by an additional 5 million to 142 to 148 million. As we noted on our first quarter call, continuing to execute our growth strategies, price increases and new product introductions are expected to support growth and strong margins throughout the year. Our 2023 outlook does not include any potential impact of M&A activity that could take place. Before we begin the question and answer portion of the call, I want to thank the entire EverCommerce team for their efforts in delivering these strong results. Our focus continues to be optimizing our operations, managing costs effectively, and delivering on our strategic priorities. Operator, we're now ready to begin the question and answer section of the call.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. The first question comes from Kirk Maturne with Evercore. Your line is open.

Yeah, thanks very much. Eric, I was wondering if you could just talk about the level of activity with you all and your customer base this quarter, maybe versus the prior two quarters, just in terms of pipeline generation, how you're feeling about sort of top of funnel activity, realize marketing is still a bit challenged, but just kind of curious if you're seeing anything from a macro perspective that makes you feel, you know, perhaps a little better heading in the second half of the year, if it's still about the same. Thanks.

Yeah, thanks, Kirk. I appreciate the question. Yeah, I think you hit it. We felt pretty good going to Q2. We saw some things specifically in the marketing service part, which is why we guided and achieved what we achieved. But I think the stabilization both in that part and the continued consistency in the pipelines that we're seeing in the core business of software and payments really remains on the

it right on plan so we feel really good about going to the second half um and i think that's kind of you know showing the guidance matt when i look at that yeah i i think you nailed that and you know in that core software and payment specifically the systems of action and the and the uh the the addition of payments to that where you know from a top of funnel perspective we see opportunities to also double down on investments in those core areas where we see you know large end markets lots of opportunity you know strong unit economics, so to Eric's point, exactly where we expect it to be with opportunities in the second half to continue to drive top of funnel activities beyond where they are today.

And, Kirk, just one thing to add to Matt's thing, just to answer that specifically. From a macro perspective, in the core verticals that we serve, we're not seeing any, you know, continued degradation that we might have saw last year.

That's great. And, Mark, one follow-up for you. You mentioned, obviously, some spend that was supposed to happen in the first half is going in the second half. I guess just how should we interpret sort of the EBITDA guidance for the back out or the implied, I guess, for the fourth quarter? Adjusted EBITDA guidance, you know, somewhat flattish versus 2Q. Is that just spend that you're maybe holding back on the first quarter coming in the model? And how do you think about just sort of operating leverage in general? Thanks.

I'll start. If you think about, we raised after first quarter, we raised again after second quarter. We feel really good about where we are right now, and I think we've been prudent throughout the year. Obviously, we still live in a volatile world, and we want to be consistent and conservative and prudent as we look to the second half.

Yeah, I mean, exactly, Kirk. Coming out of last year, the world was obviously changing before us, and we wanted to make sure that We are actively managing our spend and pace of investment through the year. I think we've done a great job in the first half. Gives us the opportunity to hit the gas pedal on some initiatives that are really going to underscore the core growth strategies, payments enablement, all of that sort of stuff. So feeling as though it's time to put a little bit more into the back half to make sure that we continue to set ourselves up for a nice 24 and beyond.

Super. Thank you all.

Please stand by for the next question.

The next question comes from Brad Reback with Stifel.

Your line is open.

Great. Thanks very much. I believe it was during Mark's prepared remarks, he talked about accelerated investment in payments adoption in the back half of the year. Can you maybe walk through what you're going to do differently going forward versus what you've done to try to help drive that linkage? Thanks.

Yeah, again, I don't think this is all that different than things that we've talked about in prior quarters. But, you know, from an attachment standpoint, you know, as you think from a top of funnel down strategic standpoint, you know, continuing to drive incremental resources from, you know, both into our PLG-led products, but also, you know, where there can be some outbound sales touches into the software customer base to drive that front as you go down the funnel in terms of, converting more of our payment-enabled users into active processing users, looking at outbound customer success resources that we have been testing and have metrics around and now have the ability to say, this is where we should double down from incremental resources from that perspective as well. And then as you go further down the funnel, both to get more people actively processing and expand wallet share, looking at opportunities to, like we've talked about in past quarters, expand the base of payment enablement product landscape throughout the ecosystem. So those are all areas where we are looking at and actively know for 2-H that incremental investments on top will help really drive quicker execution on those strategies.

And Brad, thanks for the question. One more thing to add to that. We have implemented payment mandates in two of our solutions, which one has been mandated as of August 1st, and one was in kind of early Q2. And so we're That takes some time to kind of roll out those mandates, but those are positive things that we've kind of implemented. Some of them just got implemented literally last week. So we're excited about the things that Matt brought up in addition to some mandates we're putting to our software solutions.

Great. And then, Eric, on the AI monetization side, is that going to be direct or more indirect in so much as that will help support future price increases broadly across the product portfolio? Thanks.

I think, Brad, both. Ultimately, I think what Eric spoke to was incremental monetization, but certainly there will be indirect monetization via just more firepower behind some of the products that we're able to bring to market. So we see the opportunity for both, and Eric's example was really an incremental monetization opportunity.

And the one that we didn't talk about much because I'm sure every company has different pieces of that puzzle, but we utilize and we've been utilizing AI-type capabilities internally to our operations for quite some time. And with the increased AI access, we've implemented some of those in different operational capabilities internally that we'll start seeing hopefully some additional value probably in 2024.

Great. Thanks very much.

Please, Sam. Please stand by for the next question. The next question comes from Alexander Sklar with Raymond James. Your line is open.

Hi. Thanks for taking the question. This is John on for Alex. Eric or Matt, I know pricing has really been more of a lever this year than we've been looking to push versus prior years. I'm just curious on pricing. any metrics you can give on price elasticity to date, and you can maybe share the percent of your base that's seen an increase, or maybe some of the retention dynamics surrounding that.

Yeah, this is Mark. Sorry, go for it.

So, two things. One, You know, we come into each year with a series of pricing actions planned in for the year, and we've executed against most of those, and you'll really expect to see continuing impact from that through the year. But overall, you know, we kind of talked about circa 3% for the year. I think that's very much still the way we think about that. In terms of churn, we historically always plan that into our internal plans, and quite execute quite well through those and never really see that materialize the way we plan. So we tend to be pretty conservative in our outlook on that internally. And I've really not seen any real impact from that, from any of the pricing actions that have been taken thus far in the first half.

And I think that's the best metric. You mentioned elasticity. That's probably our best metric on county elasticity is actually our expected and anticipated churn with all of them are running lower than where we expected. So I think we met that mark from an elasticity standpoint, and that would mean there's likely more there too.

Opportunity as you look at the 24 to maintain and or increase price and actions into 24.

Okay, thanks. That was a really helpful call there. And then I know we only get logo growth annually, but I'm just curious if there's been any changes in terms of the vertical or micro verticals driving the growth that you've seen so far this year through July.

Thanks. It's been pretty consistent across the board. You know, the one area that we talk about and we've talked about before, our fitness kind of category has been, you know, a laggard in the industry. It's starting to came, you know, some of the kind of fitness just came out and said they're just starting to see some growth in stores. But in general, the market has just been slow to recover from COVID. So that's the one area within the ecosystem that we serve that we've seen all kind of a lack of growth. But the rest of them is pretty consistent, you know, pretty across the board.

Thank you very much.

Please stand by for the next question. The next question comes from Bob and Shaw with Deutsche Bank. Your line is open.

Great. Thanks for taking my question. I just wanted to follow up on an earlier comment you made about kind of mandating payments across two-year solutions. What's been the customer reception to that, and how long will that take to go throughout that customer base? or those two respective customer bases?

Yeah, so the mandate, I'll let Mac in on some specifics. The mandate was really driven, you know, A, you kind of convert to our payments. We had about, you know, 35% in a specific solution utilized in it. So we went off to the back book, and it said if you take our payments, that's great. Otherwise, you've got a pretty significant price increase if you don't not take it. And so we did plan, you know, some people might be not – Attrition against it, attrition has been significantly lower than we expected. Response has been very positive. It takes some time. MAC is more specific in terms of the time of rollout and then ultimately seeing the value of that.

Yeah, I mean, to Derek's point, there's really three outcomes from that, two that we like. One that we really like, which is more people will sign up and take payments and start utilizing that. The second is they'll opt into paying an incremental amount for their software, and the third is obviously we don't like this at all and they may choose to lose the solution. You know, starting from the back forward, again, churn, when we model it against these mandates, it's been lower than we expected. Incremental take rate, again, some of these mandates have been in place for, several quarters. One that we just started this quarter, we're kind of right where we expected to be from, you know, incremental folks taking payments, which is good. And again, folks that say, you know, we don't opt into this and are taking the price increase again, we've just seen, you know, less than expected churn against that. So we feel good about the execution of the mandates that we've done to date. And it's certainly a strategy that we'll continue to use across the portfolio.

And I think because of the way it rolls out, you get them to say yes, you sign them up, they transition the payments, they start processing. As you're going through a base of thousands of customers, you'll start seeing the benefit of that in 2024.

That makes sense. And is this something you can kind of roll out through the rest of your kind of core business solutions, or is this something more on a case-by-case basis?

Every solution is a little bit different, but we definitely are choosing the ones that we think have the greatest opportunity and the greatest upside first. As you can imagine, you're potentially underwriting several thousand customers to get them on the payments. You want to be thoughtful about the rollout, so we will be doing these in a bespoke process. But we think we have several others that we could be doing similar activities to as well.

Super helpful. Thanks for taking my question.

Please stand by for the next question. Please stand by for the next question. The next question comes from Erin Kimson with JMP. Your line is open.

Hey guys, I know we're probably still two quarters away from an initial 2024 guide, but how do investors get comfortable with the organic revenue growth rate, the X price increases for 24 and beyond?

Well, if you look at kind of where, you know, we haven't obviously given that guidance yet, but I think we're pretty comfortable with where you feel the second half of the year is going and we're seeing positive trends on the way up from there. So I think when we look at some of the ladder dragging down the business right now, some of the, we talked about the fitness and we talked about marketing services, you know, fortunately it's becoming less a part of our business. I think we, you know, Mark talked about in his presentation, opening payments as a percentage of total revenue increased 300 basis points year over year. And we expect that to also continue to grow. And it could be overall payments growth. And so the areas of business that are becoming the larger part faster, full stop. We expect to continue to make investments in those and continue to make those a large part of business. So as we look for the rest of the year with a lot of confidence, and then as we look at 2024, obviously, we'll wait until we, you know, see how the year goes from a macro standpoint, but we feel pretty confident in terms of our ability to continue to ramp our growth rates, you know, at and higher than current levels.

That's very helpful. Thank you. And then just stepping back, I mean, You left the two-year mark as a public company last month. The stock hasn't really worked from the $17 IPO price, so overall you've executed pretty well, right? What would you say you think the one or two things the street still fails to appreciate two years in as a public company are?

Yeah, look, I think the people that are following us, I think, do appreciate it. I think we have other challenges that we're dealing with from a technical standpoint that have really nothing to do with operations. I think we've done a really good job from an operational standpoint. But I think it still gets underappreciated, the scale of the operations and the customer base that we're dealing with. Over approximately 700,000 active customers utilizing our solutions, as we talked about today. Over 160,000 have signed up for an onboarding for more than one of those solutions. And our ability to continually sell more product and service into this very, very fertile base. It's extremely exciting. Matt touched upon the things we're doing from a payments perspective. Not only is payments incredibly accretive from a growth and margin perspective, but it's incredibly accretive from a value perspective to our customer base. As we begin to put more resources, both internally and then outbound, reaching these customers to get them utilizing the solutions more effectively from a payments perspective, the economic upside from that perspective is is extremely, extremely high. We haven't really built that into our models as we're starting to see that come, but I don't think that's been appreciated externally from the street perspective yet. Awesome. Thank you.

Please stand by for the next question. The next question comes from Clark Jeffries with Piper Sandler. Your line is open.

Hello, thanks for taking the question. I wanted to ask about that disclosure around enabled and utilization in the customer base. Do you help us think through how those buckets work, how the enabled flows into the utilized, and maybe how much opportunity is left to add to that enabled bucket rather than the overall logos? I'm thinking of large systems of action that may not have that payments enablement or sort of add-on functionality to really offer that enablement to the customer.

Yeah, thanks, Clark. I'll start with just so you define it properly, and then Matt can talk about the specifics. So the reason we opened that, the reason we kind of brought the statistic up, because it really is a better leading indicator of how we're doing in terms of getting people, when we say enabled, you're right, enabled is even higher. So we need to integrate the payment solutions into a software so they even have the opportunity to take it. And then we're actually talking about when we say enabled, they enable, sign up, and onboard it. So they've actually said, yes, I want it. And then that third statistic that we've been giving is the utilization. So the statistic that we kind of brought up today that we're going to be giving going forward is that middle one. So they've been enabled in terms of the integration. It's now signed up and onboarded, and we've yet to get them to fully utilize or have it utilize that particular month. Do you want to talk to us with more statistics on that?

Yeah, I mean, I think Eric makes a great point. We really think it's just a better leading indicator to where we are with multi-product, ultimately getting to multi-product utilization, empowering more of our customers' businesses. with the integrated suite of solutions that we have. So, you know, again, as Eric talked about, obviously getting people contracted and onboarding for that second solution. And then from a strategy perspective, you know, ensuring that, like, again, thinking about the payments world where we've just done the most, you know, first we're focused on the go-to-market motions and marketing sales. That's going to drive payment attachment. We talked about some of the strategic initiatives today. like mandating payments, that's going to help us achieve that. We talked about adding outbound sales touches to complement product-led growth funnels and in-product messaging. And again, once that's enabled, really, we go to our next strategy efforts, which are focused much further down the customer engagement funnel. So driving them into for-all payments, customer active processing, expanding their wallet share, initiatives like proactive customer success engagement, those outbound touches, adding more product real estate to the payment integration. And frankly, that could be adding more product real estate to any integration that's going to drive that multi-product utilization. So again, really that's how we think about it. Again, like, you know, it's a, you know, these are, these are numbers that we'll continue to publish going forward, but we think really the right indicators of where we are in that journey to multi-product utilization.

Perfect. And just to clarify, is any part of it a discretionary choice of the customer or is it really just duration as in they will, move towards that utilizing bucket over time and it's more time dependent rather than discretionary. And just a separate question for Mark. You mentioned stabilization marketing. Any way you could further clarify whether stabilization means, you know, return to positive year-over-year growth or any way you could bracket subscription and transaction growth in the second half of the year so we know the kind of balance between, you know, the segments in the second half?

Yeah, I can take the first part.

Think about it from a customer engagement funnel. And they're obviously making the choice within our go-to-market motions to engage with that second product again. We'll use payments as that example. Then, of course, we've got to go through the process of getting them contracted, onboarded, and we're going to deploy a next set of strategy and resources behind that to turn that payment-attached customer, that enabled customer, into a utilizing customer. So I wouldn't necessarily – to us, that's not discretion. It's just the next step in that engagement.

I mean, the question is meant – it's a proactive decision that they are making, and 160,000 people have made that decision to do that. So it wasn't – it's not a default number, to be very clear. Our opportunity is – to get those people who have made that decision to follow through with that decision to ultimately utilize it. So it's a good that they made the decision, we've made it available, they've signed up, and now we want them to utilize it.

Yeah, 100%, not a default. That's not discretion. In fact, it is their discretion. They made the choice that they wanted that integrated suite.

And in many cases, we've watched this before, It's almost illogical to not utilize it in some scenarios, just in some of the workflows that we have. And they just keep dealing with small businesses, and they're busy, and a lot of things going on, and it's inertia more than anything else. And so we feel very strongly that we have the opportunity to continue to penetrate the basic customers we have at a much higher level, and we've made really good progress and a lot of progress to come. Mark, on the second part of the question.

Yeah, I think on the second part, look, we don't break our revenue guidance into pieces. When we say stabilize, I think you should take that to mean, you know, what we've seen in the last couple of quarters is consistent with what we expect to see in the second half, and that's all baked into our guidance going forward. I would just sort of leave it at that.

All right. Thank you for all the clarification.

Please stand by for the next

question the next question comes from jeremy seller with jeffries your line is open hey guys this is jeremy on first i'm on samana uh thanks for taking my questions um so i guess first one is kind of a two-parter i guess as you continue to drive attachment of embedded payments it's kind of hard to parse out the seasonality can you maybe kind of give us some color into what the seasonality of tpv is in a steady state environment And then also, you mentioned that take rate expansion again. I guess what levers are you pulling to drive that take rate expansion and kind of how much more is there to go there?

Yeah, I mean, I think we can talk to the first part, seasonality. I think we've described it across the business, you know, services, Q4 and Q1, would represent the lower ends of seasonality. There's also some just calendaring in Q4 across the whole payments landscape. When you think about November and December and shorter business days, that plays into it. So we typically think about Q4 and Q1 as the lower end from a seasonality perspective when it comes to payments in Q2 and Q3, and specifically in home services where there is a lot more activity. We typically see that higher end of tpb from a seasonality perspective there the second question i believe was about take rate and things that we can continue to do expand that obviously we're happy about the expansion of take rate over the last 18 months you know i think we talked about this uh last quarter there is you know a variety of things that we do from uh pricing and packaging some of it is is frankly just mix of our payment space as well um as we're driving more and more attachment and utilization in some of our higher take rate solutions, specifically in home services, we have seen take rate expansion just in aggregate go up. But obviously from our end, we have opportunities to A, just grow the expanse of payment capabilities within our integrated systems of action. That allows us to continue to obviously add more value to the end customer, but also commensurate price to value from that perspective. And then, you know, lastly, you know, we continue to have opportunities with our end providers for as we continue to scale, creating scale in the economic relationship from a take rate standpoint in those contractual arrangements.

Got it. That's a useful color. The rest of mine were asked. Thanks for making my question.

Please stand by for our next question. The next question comes from Dan Bergstrom with RBC Capitals. Your line is open.

Hey, it's Dan Bergstrom from Matt Hedberg. Thanks for taking our question. Stan, EverHealth, it's been a couple of quarters now with the rebrand. I know we're early in a long process here, but anything to point out around initial customer reception of the changes? You know, is it accelerating customer adoption?

It's been extremely positive. You know, the EverHealth brand is kind of a soft launch, you know, as kind of a kind of an overhead brand for the, you know, kind of our health group within the organization. It'll be really officially launched really in Q1, NFQ1 of next year as we're going to really go to market really with one brand and consolidate all the other branding parts of it. And I think we'll start seeing even more efficiencies both in the operations and even, you know, hopefully an increased upsell on the selling part of it as well. To date, the response has been very positive. We've been selling these solutions, again, under one organization, so we've been making various a suite of solutions to our customers, which I genuinely appreciate, versus having to connect the dots themselves in other partners where they have getting point solutions versus one whole solution. So the early feedback is positive. We've seen consistent growth in that category. I think when we launch it fully next year, I think it will be an uptick, hopefully, in growth, but definitely, in minimum, an operational efficacy and efficiency that we'll get in the organization.

Yeah, I mean, I think it's played out the way we have expected it to. You know, from an external standpoint to Eric's point, the reception has been really, really positive. And from an internal standpoint and ultimately to a customer-facing standpoint, it really has set us up for that, you know, multi-product sale. So think about, you know, EMRPM is the base system of action. but having those active integrations for integrated insurance clearinghouses and claims, integrated patient pay, and now integrated patient engagement solutions really becoming more active in those EMR PMs, it is exactly what our customers want. They don't want multiple providers, and us being able to drive that to market more and more and more over time, again, that's part of the receptivity that we've got from our end customers. So excited about where we are, and to Eric's point, there's a lot more progress to come over the next year.

That's great. Appreciate the color. Thanks.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. The next question comes from Eamon Coughlin with Barclays. Your line is open.

Hi, this is Eamon Coughlin on for Ryan Williams from Barclays. Can you just broadly describe how S&P has fared in 2Q and what management is factoring in for 2H23 guidance in terms of macro? Thanks.

Yeah, again, thank you for the question. You know, I think everything, we can only speak to the, you know, the S&Ds, the verticals that we serve, and the verticals we serve are pretty resilient. If you think about the, you know, healthcare customers we serve and the home service customers we serve represent the vast majority of our customers. They've been very resilient, and we've seen no degradation in both, you know, growth and pipeline within the customers that we serve. And we're expecting a similar trajectory for the second half of the year. So not necessarily increased or decreased, but really along the same lines you've been seeing for the last couple quarters.

Got it. Okay, thanks.

At this time, I'm not showing any further questions. I would now like to turn the call back to Eric Reamer for closing remarks.

Thank you very much. Well, EverCommerce had another consistent quarter of exceeding expectations. The market and the opportunity for our software and solutions continue to grow and remain extremely excited about our unique position in the marketplace to capitalize that opportunity. We appreciate you all joining the call today, and we'll speak to you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.