EverCommerce Inc.

thank you for standing by and welcome to ever commerce's fourth quarter 2023 earnings call my name is daniel and i will be your operator for today 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 1 1 on your telephone you will then hear an automated message advising your hand is raised to withdraw your question please press star 1 1 again as a reminder This conference call is being recorded today, Thursday, March 14th, 2024. And I would now like to turn the conference over to Brad Korch, SVP 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 December 31st, 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 containing the earnings materials 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 with 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. The reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and 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 fourth quarter results, discuss EverCommerce's strategic transformation and optimization initiatives, which includes the recently announced sale of our fitness assets, And finally, end with a discussion of our key customer trends before turning the call over to Mark to dive deeper into our financials. At its core, EverCommerce provides business management software that supports end-to-end business processes for service SMBs. Our SaaS solutions support highly specialized workflows in each of our verticals, enabling our customers to automate manual processes, generate new business, and create more loyal customers. Our solutions are ERP tools for our customers and are critical to our customers' businesses. We enhanced the value of our business management solutions by upselling and cross-selling additional features, such as robust payments integration, customer engagement solutions, lead generation, and group buying programs. Keeping to our mission statement, we were simplifying the lives of those service providers that supported us every single day. Full-year revenue growth was 9%, and most importantly, we significantly expanded margins throughout the year. Our 2023 adjusted EBITDA margins of 23% represented at 380 basis points of expansion when compared to 2022. An absolute 2023 adjusted EBITDA grew 30.7% in 2023, exceeding guidance given one year ago by $17.6 million at the midpoint. Turning to our fourth quarter highlights, our fourth quarter adjusted EBITDA also exceeded the top end of our guidance range. Adjusted EBITDA grew 22% year over year, and equated to a 25% margin. As we've highlighted in the past, we've seen headwinds in the more transactional aspects of our business, and this was true in the fourth quarter as well, specifically in our marketing technology solutions revenue streams. Due to both macroeconomic pressures and weather-related impact, our MarTech revenue was down nearly 10% year-over-year, impacting our overall revenue growth rate. Consolidated revenue growth in the quarter was 5%. Subscription and transaction revenue, which excludes marketing and technology services, was approximately 10%. With sustained growth and profitability, we are creating the opportunity to incrementally invest in our higher growth, higher margin, larger market opportunities. One of our biggest opportunities is to invest to drive growth in payments. Driving payments adoption continues to be a key element of our strategy, and for the fourth quarter, we increased our payment revenue by 20%. Before we dive deeper in our fourth quarter performance, I want to highlight an important transaction we announced yesterday that will impact our business moving into 2024. We signed an agreement that will result in EverCommerce exiting the fitness vertical. As we discussed publicly for the past 12 to 24 months, the fitness vertical is less than 4% of our total revenue, but it is one of our most competitive markets and our solutions have not recovered to pre-COVID levels of operation. This has resulted in near flat revenue performance, negatively impacting our overall growth rate and creating a drag on our consolidated profitability. We believe that selling our fitness software solutions to a leading large player in the fitness space is the best outcome for our customers, employees, and investors. This enables us to allocate resources to a higher growth, higher margin, larger market opportunities within EverCommerce. The sale of the North American fitness assets closed yesterday, while we expected the sale of international assets will close following regulatory approval in the third quarter. We will exclude the fitness assets from the guidance Mark will provide in a few moments, so in comparing growth rates, it's important to note that these assets contributed approximately $24 million of revenue in 2023 and a break-even contribution to adjusted EBITDA. The sale of our fitness assets is the first step in our plan to simplify our business and invest in assets that can provide the best growth and strongest returns to our shareholders. In addition to this sale, we're also taking steps to transform and optimize our operations. In the fourth quarter, we engaged a third-party advisor to help us assess our operations and identify specific initiatives and strategies to simplify, optimize, and better scale our operations. With this, we will sharpen our customer-centric vertical market focus to better position us to accelerate growth. There are two main components to this program. First, we'll be doubling down on our customer-centric vertical go-to-market structure, increasing investments in our key verticals such as EverPro and EverHealth. This includes simplifying our organizational structure and consolidating products and legacy brands, as well as investing in our go-to-market engine. Our ongoing consolidation of solutions within EverHealth, which began last year, was really the beginning of this evolution. With help from our third-party advisors, we developed plans to fast-track similar strategies within EverPro. We believe this will help us improve our execution by streamlining functions ranging from sales, marketing, product development, and really help accelerate growth in 2025 and beyond, as well as improve our ability to allocate capital while also enhancing our customer experience. Second, we're going to continue to optimize our operations and cost structure and improving scalability, which will help fund key growth investments and allow us to continue to expand margins and cash flow generation over the coming years. As I mentioned, we completed our initial assessment in the fourth quarter of 2023 and have already begun implementation of several initiatives. We expect these transformation optimization initiatives to continue through the next 18 to 24 months. Turning back to our fourth quarter highlights, we continue to execute on our land and expand strategy. We land with a core business management software and then upsell, cross-sell our existing customers, additional features, services, and products. This enhances our value to our customers received from the relationship with EverCommerce and drives additional revenue. As we've shown in various examples in previous earning calls, This translates to lower churn and higher retention. As of the end of the fourth quarter, we continue to see an increase in customers utilizing more than one solution to approximately 82,000. In addition, the number of customers that have contracted onboard for two or more products grew 26% year-over-year to approximately 183,000. The payments-enabled customers in this grouping represent a significant near-term opportunity for payments processing and payments revenue growth for EverCommerce. Customers that purchase and utilize more than one solution are naturally some of our most profitable and sickiest customers. This is because we provided significant value to them and their businesses. This fact presents itself through strong net revenue retention. Looking back over the trailing 12 months, our annualized net revenue retention, or NRR, for our core software payment solutions was 100%. Embedded payments is our most accretive cross-sold solution and stands to be a long-term driver for EverCommerce's revenue growth and margin expansion. Year-over-year, our payments revenue grew 20%, accounting for approximately 70% of our overall revenue. We report our payments revenue on a net basis, and as a result, payments revenue contributes approximately 95% gross margin, and is a meaningful contributor to our overall adjusted EBITDA margin expansion. Fourth quarter annualized total payment volume, or TPV, was approximately $11.9 billion, representing a 9% year-over-year growth. We expect TPV and overall payments revenue to grow as we continue to embed our payment solutions and a core system of actions. I would like to end my portion of prepared remarks by highlighting an organic growth opportunity for the company that we are incredibly excited about, EverPro Edge. EverPro Edge is a new solution that provides customers the opportunity to save, learn, and grow, creating a community and trusted brand for engagement with them. The genesis of EverPro Edge was a customer rebates program that existed within our home and field service solution set. Because of the SMB nature of our customer base, they lack the buying power of typical mid-size or enterprise-scale business operations. Now, through their association with EverCommerce, our customers can benefit from the collective buying power of more than 350,000 home and field service providers. Our customers will benefit from real savings in parts and supplies they're already purchasing, and for EverCommerce, we benefit from a revenue share of the rebates and the increased value our customers see from the use of our software. As part of the EverPro Edge community, our customers also receive targeted business growth and education content to help them drive performance to their business. Over time, we believe EverPro Edge has the ability to accelerate revenue for EverCommerce and decrease churn as customers realize more value from the EverCommerce ecosystem. EverPro Edge was launched in the second half of 2023 to our Joyce customer base, and today we have over 7,500 customers using it. In 2024, we will expand this solution to additional systems of action. Now I'll pass it over to Mark, who will review our financial results in more detail, as well as provide first quarter and full year 2024 guidance.

Thanks, Eric. Total revenue in the fourth quarter was $169.4 million, up 4.7% from the prior year period. We continue to experience demand-driven headwinds in our marketing technology solutions. We also experience slower growth in our fitness solutions, underscoring our decision to part ways with this piece of our business. Within total revenues, subscription and transaction revenue was $133.5 million, up 9.8% from the prior year period. And revenue for marketing technology solutions was $30.1 million, a decrease of 9.5% from the prior year period. 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 payments. To reiterate a point that Eric made earlier, full year 2023 payments revenue represented 17% of total revenue, an increase from 14% of revenue for the full year 2022. Full year 2023 revenue was $675.4 million, up 8.8% year-over-year on a reported basis, and excluding marketing technology and fitness solutions, our growth would have been 12.2%. In the fourth quarter, we continued to deliver on our full year 2023 objectives by exceeding EBITDA guidance and achieving record EBITDA margins. Fourth quarter adjusted EBITDA was 43.1 million, representing a 25.4% margin versus 21.7% in the fourth quarter of 2022 and 22.4% growth year over year. Adjusted EBITDA outperformance in the quarter was underscored by our focus on actively managing our operating expenses, driving operating leverage, and cash flow generation. Additionally, full year 2023 adjusted EBITDA was $155.6 million, representing a 23% margin and a 30.7% increase compared to 2022. 2023 full year adjusted EBITDA finished 17.6 million, or 12.8% higher than the midpoint of our initial 2023 guidance given approximately a year ago. Adjusted gross profit in the quarter was 114 million, representing an adjusted gross margin of 67.3% versus 66.7% in Q4 2022. Full year 2023 adjusted gross profit was 444.4 million, representing an adjusted gross margin of 65.8%. The increase in gross margin is partially attributable to an increasing mix of higher margin payments revenue and a decreasing mix of lower margin marketing technology solutions revenue. Now turning to operating expenses. Adjusted sales and marketing expenses, $29.6 million, or 17.5% of revenue, up from 17.2% of revenue reported in the prior year period. Due to timing of spend, we had anticipated a modest sequential increase in sales and marketing expenses going into the fourth quarter. Adjusted product development expense was $18.3 million, or 10.8% of revenue, in line with the prior year period. Adjusted G&A expense was $23 million, or 13.6% of revenue, down from 16.9% of revenue in the prior year period. Adjusted G&A costs declined both as a percent of revenue and in absolute dollars as we continue to achieve cost savings from ongoing consolidation activities, benefit from the reduction in force announced last quarter, and as we anniversary the investments made in 2021 and 2022 to support our public company infrastructure. We continue to generate significant free cash flow as we invest to grow our business. Leverage-free cash flow was $29.8 million in the quarter. This was up approximately $7.1 million or 31.3% year-over-year due to both growth in operating income and changes in working capital. For the trailing 12 months, leverage-free cash flow was $81.5 million, which represents a 12.1% margin and a 74.5% increase over the prior year, continuing to underscore the efficiency of our business and enhancing our balance sheet flexibilities. 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 fourth quarter, we repurchased approximately 2.7 million shares for a total cash consideration of approximately 26 million at an average price of $9.65 per share. As of December 31st, 2023, we had approximately $40 million remaining in our repurchase authorization that runs through year-end 2024. We ended the quarter with $92.6 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 2.6 times, consistent with our financial policy. We have no material maturities until 2028. I would now like to finish by discussing our outlook for 2024. We're pleased with our ability to actively manage bottom-line results that exceeded expectations, as demonstrated by our record-adjusted EBITDA margins. However, we were disappointed in our slower growth impacted by revenue headwinds in certain parts of our business. We believe EverCommerce is undervalued in the market, and we take our fiduciary duty to create shareholder value very seriously. As yesterday's announcement regarding the sale of our fitness assets illustrates, we are not and will not be shy about taking additional actions to simplify our business or increase growth and margins to unlock value. As we navigate this transformation and the future of EverCommerce without a fitness vertical, we expect 2024 to be a transition year. While growth may be more muted, we will further expand margins and profitability. A portion of these efficiency gains will be used to reinvest in our products with the goal to accelerate growth in 2025 and beyond. The following non-GAAP guidance excludes our fitness assets, which, as we stated, contributed approximately $24 million in revenue and near zero contribution to adjusted EBITDA in 2023. Our guidance also assumes near zero growth in our marketing technology solutions on a full year basis. For the first quarter of 2024, we expect total revenue of $160.5 to $163.5 million, and we expect adjusted EBITDA of $36 to $38 million. For the full year of 2024, we expect total revenue of $676 to $696 million and adjusted EBITDA of $167 to $176 million. Before we begin the question and answer portion of the call, I want to thank the entire EverCommerce team for their efforts in delivering bottom-line results that exceeded expectations despite a challenging environment. Our focus for 2024 continues to be centered on balancing growth with profitability, and the transformational initiatives we described today should allow us to do that in a way that preserves continued margin expansion while allowing for growth acceleration in 2025. 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.

Our first question comes from with Deutsche Bank.

Your line is now open.

Great. Thanks for taking my question. Tim, I appreciate the comments you talked about on the marketing side of the house. Can you maybe just elaborate a little bit more on the core business software and what you're seeing maybe from a new logo side and a retention aspect? Any changes that you're seeing relative to the last few quarters from a demand perspective on Pro or Health?

Well, I appreciate the question. Thank you so much. Matt, you want to take that?

Yeah, you know, I think quarter over quarter, I don't, I wouldn't say there's any significant changes in trends from a demand standpoint. Again, you know, we've talked about how we go to market, you know, largely, you know, digital acquisition based in both pro and health. Not a significant change from a trend standpoint there, you know, from a new customer acquisition standpoint. Obviously, we also remain incredibly focused on customer expansion, you know, certainly pleased, but see a lot of opportunity for growth, specifically on the payment side of the house. And you heard our comments about EverPro Edge, specifically on the EverPro side being a real opportunity for growth that we see in the future. So no major change in trends that we've seen quarter over quarter.

And just to add to that, on either the customer acquisition or on the customer retention, it seems to be pretty steady for the last several quarters.

That's helpful there. And Eric, maybe just given the demand backdrop, particularly on the marketing side of things, and now the elevator is focused on EverPro and EverHealth given the sales fitness. How, if at all, does that change how you're thinking about the timing or the size of M&A kind of going forward?

Another great question. I mean, we've always going to be focused and open to opportunities. In November, we closed the deal focused within the EverPro vertical, and we think, again, EverHealth and EverPro as big opportunities. a situation and an asset that makes sense that we think can accelerate both growth and overall value to our customers, we'll continue to look at those. So we remain active when they make sense, but we're going to be very, very focused on those specific verticals that we think are going to have the biggest acceleration opportunities.

Appreciate it. Thanks for my questions.

Thank you. One moment for our next question. Our next question comes from Ryan McWilliams with Barclays.

Your line's now open.

Thanks for taking the question. Great to see the focus on doubling down your strengths while improving some operational efficiencies from here. Eric, how do you view the potential for other areas of perhaps portfolio rationalizations or potential sale of assets from here?

Thanks, Ryan, for the question. Again, as Mark said really well, we're always going to be focused on maximizing value, both obviously for the operations and for our shareholders, and we'll continue to monitor what makes the most sense organizationally. I do think, as we've said several times already in the call and in our prepared remarks, that EverPro and EverHealth are, you know, really great verticals and really great organizations with excellent tier one softwares and opportunity to really grow. So those are the areas that we are, you know, double, tripling down. We do have very good solutions also in our salon spa assets within the Everwell, which was, fitness was a part of, so know those are kind of standalone. Those are growing at really nice paces and provide really great value to our customers as well. So those three areas with a kind of a reason when we kind of talk about EverPro and EverHealth, much greater than on the Everwell. It's just the percentage of business that we have that represents about 75% of our business and the greatest opportunity for us to grow going forward. So we'll always look for rationalizations where it makes sense. We talked about some of the areas that have been dragged in our business, and we'll continue to monitor those to see if there's an opportunity, again, to accelerate growth in investments as well as increase shareholder value.

Excellent. And one for Mark. How do you feel about the growth rate of the marketing technology assets from here? Like, do you feel like you've seen the worst of the macro impact at this point? And do you view these marketing technology as, like, is this a core part of the EverCommerce portfolio or would it be separate from, like, would it be to add on to, like, an EverPro or an EverHealth customer? Thanks.

So, look, I mean, obviously, as we shared in our guidance or in my guidance comments, think about it, the trend that was this year flat, thinking about that into next year. You know, we're always trying to be prudent with our guide, particularly around this particular solution set. We have seen volatility. There is a lot of exogenous demand-driven variables that are harder to predict in that business. Having said that, I do think we sort of talked about in the second half of last year stabilization there. And I think our performance, to be quite honest, you know, we feel pretty good about our performance in terms of stabilizing the operation. I think going into this year, the team has some nice ideas on how to reduce some of the volatility on the revenue side and continue to work hard on margin. So we're doing the best we can relative to the backdrop, and I think we have positioned ourselves for upside should it come from some of those exogenous positive factors, hopefully with a macro tailwind instead of a headwind. I was just going to say on the other part of your question, Ryan, marketing technology, the investment thesis there remains true. These are solutions that our SMB service providers do need. They are a third derivative. And when we talk about driving dollars into our highest growth, largest market opportunities, we always lead with payments because of the scalability and the profitability and the TAM available to us in that regard. Some of our horizontal SaaS solutions fall into that same category. Marketing technology solutions, that cross-sell motion is a different motion and requires more investment to get there. So we don't think of it as something that's not required by our customers. We think of it as something that absolutely is, and we work to connect those dots. But I would say it is that third derivative, if you will.

Thanks, Mark. Ryan, it's a great question. You asked, is it core? I mean, the answer is it's not core in the sense of the core part of our business. We've said this over and over again. It's providing customer-centric vertical software to service-based SMBs. That's the core. You know, that's the core of everything we do. Providing additional value to enhance their value as well as provide more success is where marketing came in. Unlike payments where we've done, you know, right off the bat, a really good job integrating and penetrating the market, MarTech has been a little slower to kind of make that uptick. So it is an add-on versus kind of core to what we do, but we'll continue to kind of work to make it better, you know, sell through our ecosystem.

Really great color there.

Thanks, guys.

Thank you.

One moment for our next question.

Our next question comes from Alexander Sklar with Raymond James. Your line's now open.

Great. Thank you. Just one for me. I don't know, Eric or Matt. I just wanted to see what have you seen in terms of kind of deal sizes or expansion activity with some of the solutions that you already went through the brand consolidation with that's helping you kind of push forward with the EverPro side in terms of driving further brand consolidation? Thanks.

Yeah, I mean, as we've talked about in the past, we're obviously further along from an EverHealth standpoint. We've seen nice successes playing on our thesis of core system of action with those integrated value-add solutions in EverHealth. That's been the integration of our claims clearinghouse. the integration of our patient engagement solutions, and the integration of our patient pay capabilities, just think core payments from that standpoint. And we've seen nice progress across all of those. The integration of our core claims clearinghouse continues across multiples of our systems of action there. And we're actually through that in one of them and making nice headway in another. from that perspective is we still have penetration opportunity there, but we've done a really, really good job there. So all of that says, you know, thesis, you know, we see that thesis come through in terms of core system of action with value-add solutions add-on. Again, in EverPro, as we think about it, you know, in a place where we have a little bit less of that product consolidation done, it's going to look a little bit different. But what we have done in EverPro is obviously EverPro is core in our system of action solution systems of action solutions, sorry, where we have integrated payments. And obviously, the majority of our payments integration work has already been done there from that perspective. So we talked about the EverPro Edge. That will be another value-add solution that, again, as we consolidate products, think about those value-add solutions being more integrated into those systems of action. So hopefully that gives you a little bit of color. We've definitely learned a lot at EverHealth. But, you know, we're not starting from zero from a product consolidation standpoint at EverPro. We've done that with the value-add solutions already.

Thanks, Matt. And just to add to that, it's a great question. When you think about what we've done with the consolidation of EverHealth, and Matt said really well, connecting the dots with all those core solutions, for new customer acquisitions, the ARPU has increased 13% year over year. So we are seeing those customers spending more money with us as they're utilizing more products and services.

Got it. That's great color and great data point, and we'll call it a deal then. Thanks, guys. Thank you.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone.

Our next question comes from Alexey Gogolev with J.P.

Morgan. Your line is now open.

Hello, everyone. Eric, thank you for these comments and your prepared remarks about the first steps that you're taking to transform the business. I was wondering if you have any thoughts about what might be the next step. I think Mark outlined that 2024 will be a transition year. Anything you could maybe elaborate on what sort of steps in terms of simplifying the business you may take in the near term.

Well, thank you for the question. I mean, the first step, as you talked about, was that Mark brought up in detail, was to sell our finest assets. As we kind of looked at reduce the perimeter of the organization and focus our resources on both people and dollars into investments into those core solutions that we believe have the largest growth opportunity, that's part of the transformation. We continue to talk about that vertically-centric software solution that focused on helping that service be more successful. So investments in products and go-to-market and the core verticals that we feel very strong about. And so that's kind of the external. Internally, it's better organizing. The transformation is organizing within the verticals to make sure that we reduce friction, we have better alignment and better products and better go-to-market for those customers. When you think about optimization, I mean, that's something we've done very well the last few years, and this is an extension of that. You think about over the last two years, we've increased EBITDA margins by almost 700 basis points. And so when you think about our ability to expand those margins, that's the ongoing optimization we see in the organization. And we're actually kind of really doubled down on that in terms of focused on those, not in the low-hanging fruit, but those areas that we see that we can generate more optimization, which is why we've expanded our kind of guide from a EBITDA margin this year as well.

That is well said. I think, you know, the sharpening the focus is all about not just optimizing for the bottom line, but also positioning for the top line. Well, actually, particularly in terms of allocating capital across our solutions. I think that, you know, what we're doing in EverHealth, which is sort of the leading edge of the wedge, if you will, around brand and product consolidation, we're able to see real efficiency gains, much sharper focus, really starting with the customer in towards our operations. So identify the ideal customer profile, work backwards from there and make sure we're delivering customer frictionless set of solutions they need to completely run their business and enhance their workflows, drive digital payments for other businesses, et cetera.

Thank you. And a follow-up question for Mark. I was wondering how much of a tailwind have you incorporated from EverPro Edge and from the KickServe acquisition in the 2024 guidance?

Did you say tailwind? They're incorporated.

I'm assuming, yeah.

Well, KickServe, as you may recall, is a very small tuck-in acquisition, and it is baked into the guide to be candid. It's not a needle mover in and of itself. That's what we described when we talked about the acquisition. In terms of EverPro Edge, it started from a base of zero in the middle of last year. We've grown it very nicely in really what's been six to nine months I think we've got more than 7,000 customers using that. It's a very high margin opportunity. So it's just still early days there, Alexi, but we also do have that built into our guys.

Alexi, when you think about really as we build that momentum, the opportunity of our ProEdge, even though it's relatively small, the reason we bring it up, the opportunity to expand in multiple additional solution sets as well as bring in additional products. So far right now we're selling really into one solution with one product. So as we look to expand that, again, throughout 24, I think we'll see the acceleration in terms of real needle-mover revenue potential into 25 versus in 24 where we're still making those investments into the solution set.

Thank you very much. Thank you. One moment for our next question.

Our next question comes from Mason Marion with Jeffries. Your line's now open.

All right. Thanks for taking the questions today. So payments continue to grow well. I'm thinking of this more from a macro perspective. If you look at it kind of like on a TPV per customer basis, what trends are you seeing there? Are your individual customers reducing spend on average? Are you seeing any signs that perhaps there could be some inflection going forward that you

Yeah, I appreciate the question. You know, obviously, that's something that we track closely. Obviously, seasonality across our different sectors does impact that, but we don't see anything out of the normal in terms of that. And obviously, that's a focus for us. Growing TPV per customer is something that, you know, is one of the core growth levers in our payments program. So, you know, exogenously nothing outside of seasonality that we see from an impact as we, you know, finish Q1 and head into Q2. And that is a real lever for us to continue to push on from a customer success standpoint to continue to expand our customers' revenue through payments expansion.

Great. Thank you. Thank you. One moment for our next question. And our next question comes from Clark Jeffries with Piper Sandler.

Your line's now open.

Hello. Thank you for taking the question. First is a question on the residual assets in the wellness portfolio. How are you viewing those assets between the fitness and the wellness, the remaining wellness assets, maybe any kind of color on what those assets are now. And then a second question is, Mark, it seems like the progression of adjusted EBITDA and levered free cash flow has been pretty consistent, those kind of being in lockstep with each other. Do you expect that to continue in the coming year? Thank you.

Yeah, thanks so much for the question. I'll start with the 1st, 1. um, yeah, that you mean in ever. Well, are really focused in salon and spa, which, unlike the fitness, uh, they came right back. Um, when COVID, you know, uh, with with the kind of, uh. Um, and did for all types of purposes, we, we saw specifically in, uh. salons. When a state would turn back on that you can go to a salon, it went back up to 100%. So we really like those assets we have there. We have two main assets, one timely, the other one SalonBiz, Timely is kind of our global solution, where SalonBiz is more domestic. Really great solutions with both really great growth rates. We continue to invest in both of those, both new customer acquisition as well as integrated payments. So we're excited about the category, and we think that category has got a long runway of growth in front of it.

So the question on adjusted EBITDA and pre-cash flow generation, I mean, yeah, this is obviously been a primary focus all year. We felt like we committed to that. So our board and our investors coming into 23, we feel very good about our performance in terms of driving efficiency into the business and optimizing our business, as well as driving and improving scalability in the operation to better position us for growth down the road. So everything that we began and continued to do through the year of 23 We sort of doubled down on that, if you will, through the transformation optimization initiatives that Eric mentioned. Within, obviously, driving efficiency on that bottom line really relates as much to the optimization initiatives as it does to the transformation side. But as we continue to sharpen our focus, consolidate our operations around brands and products, invest appropriately, and drive more scalability, and have identified, you know, a pretty long list of a variety of different initiatives that we can do to continue to drive efficiency into the business. I think you see that reflected in the guide forward, right? I mean, we're committing to driving increased profitability this coming year. And I think, you know, harking back to kind of our thoughts on the mid and long term when we took the business public, we always felt very good about our ability to drive operating leverage through the business as we drove scale. And as we got over the hump, particularly of a lot of investments we needed to make as we went public and then began operating as a public company. So a lot of work we're very focused on here in 24 and beyond over the next, you know, really one to two years to continue to grow into that motion.

Really appreciate it. Thank you very much.

Thank you. One moment for our next question. Our next question comes from Dan Bergstrom with RBC Capital Markets. Your line's now open.

Hey, it's Dan Bergstrom from Matt Hedberg. Thanks for taking our question. Just on payment adoption and an earlier question, I know you tried out some different strategies to drive payment adoption last year with mandates, etc. Is there anything that you really learned from that testing that you're leaning on more in 24 here to drive payment adoption?

Yeah, great question. Thanks for the follow up on that. Absolutely. We've tested mandates across Multiple solutions, certainly learned a lot in terms of, you know, what percentage of uptake we got on those mandates, how to position the mandates. And, you know, we've actually pulled that forward into, you know, how we think about the, you know, using similar tactic in 2024. Obviously, there's a variety of different things that we are thinking of from a payment attached standpoint. Obviously, it goes beyond mandates. It goes to pricing packaging. And so, you know, definitely we're obviously everything we do going forward is a function of what we've learned. We're very test and learn focused and did pick up a bunch of points from those mandates that we'll be driving forward in 24.

That's great. Appreciate the color. Then maybe for Mark, again, to build off a previous question on the guidance range for 24. Maybe what are some of the underlying assumptions or what could work well that could push results, say, towards the upper end of the range?

Well, I think a few things. Obviously, on the top side of things, continuing to invest in our core strategies within our core programs. you know, solutions, systems of action, and integrating payments and things like EverPro Edge, new add-on features that can drive both growth and profitability, and frankly, improve retention. I mean, our investments we're making year over year are always as much about acquiring new customers as much about investing in our ability to expand our customer relationships and also really improve features, functions, remain competitive, and drive improved retention. Obviously, when you sell more than one solution to customers, you drive retention that way. So I think a variety of everything we're doing on the investment side in 24, particularly in these higher growth, higher margin, higher market opportunities, I think is all geared towards positioning us for upside. So we're driving the investment dollars in, we're taking the actions, and execution could certainly improve our ability to drive that top line. I do think, as I mentioned, on marketing technology, you know, we are being prudent in our guide. We do see stabilization, but the world is not in our control. I do think there could always be upside there, and we're certainly well positioned for that. And I think, as I mentioned earlier, the team has done a really nice job of managing through a really murky environment the last 18 to 24 months. On the bottom line, I think we demonstrated through this year and really over the last 18 to 24 months, just as we had said, we were going to overcome the hump of the infrastructure costs we needed to make and the investments we needed to make to get and be public. I think we've delivered on that and then some, and I think we're positioning ourselves to deliver on that this year with real confidence in building that into our guidance, but obviously we can't work fast enough to drive more efficiency and scalability of operations into the business. And we're doing that as quickly as we can, but there could be upside there from a variety of different initiatives we have going on internally as we continue to transform and optimize the business this year and next.

And just to add to that, when you think about some of the opportunities that, you know, we continue to work on that, we think we'll both, you know, drive, you know, growth up around this year as well as into next year. I mean, we Of over 700,000 customers, you know, over 350,000, you know, field service contractors, almost 100,000, you know, practitioners in the EverHealth. We have a massive amount of small business customers that utilize our core solutions to run the business every day. Our opportunity to provide more value to them through additional services, products, and solutions. We are still in the early innings of that. And, you know, fortunately, that's a very large base. So it gives us a lot of things, a lot of runway to grow with. But those are the things that we focus on every day. How do we provide more value to those customers? Obviously, it makes them more successful and provides more revenue to EverCommerce.

Thank you.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Eric Reamer for closing remarks.

Well, I appreciate everyone joining the call today. EverCommerce continues to balance growth and profitability. And as we've said several times, as we look forward to 2024, I'm very excited to continue the implementation of our transformation and optimization initiatives. They'll both accelerate growth while expanding our margins. So thank you guys so much for joining today.

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