EverCommerce Inc.

Thank you for standing by and welcome to EverCommerce first quarter 2024 earnings call. My name is Marvin and I'll be your operator for today. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. As a reminder, this conference call is being recorded today, Thursday, May 9th, 2024. Now, I'd like to turn the conference over to Brad Gorge, SVP and Head of Investment 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, and EverCommerce's chief operating officer, Evan Berlin. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended March 31st, 2024. 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 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. A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and our earnings call presentation. Before we discuss first quarter results, I'd like to highlight the presentation of results and KPIs included in the earnings call slides and our prepared comments. As discussed last quarter, we announced the sale of our four fitness industry solutions in early March. The sale of the two North American solutions closed simultaneously with deal signing. While the two international solutions are expected to close in the third quarter, they have been classified as held for sale prospectively from the date of signing. As we also discussed last quarter, the revenue guidance given excluded the fitness solutions, and we noted that the evens of contribution of these solutions was near zero. As a result, the revenue, revenue growth, and operational metrics such as customer count, TPV, and customers enabled for more than one solution that we will discuss today have all been adjusted to exclude the fittest solutions on a pro forma basis, except were specifically noted as GAAP-reported revenue. We will continue this basis of presentation for the remainder of the year. I will now turn it over to our CEO, Eric Riemler. Please continue.

Thank you, Brad. On today's call, I will highlight first quarter 2024 results, discuss EverCommerce's presence in the SMB market, our continuing strategic transformation optimization initiatives, and finally end with a discussion of our key customer trends before turning the call over to Mark to dive deeper into our financials. Turning to our first quarter results, our Q1 reported revenue exceeded the top end of our guidance range with growth of 6% year over year. Within this, core subscription and transaction revenue grew 9%. Adjusted EBITDA grew 28% year-over-year, beating the top end of the guidance range and exceeding the midpoint of guidance by $3.9 million. Adjusted EBITDA margins expanded more than 420 basis points to 24% compared to 19.8% in the first quarter of 2023. With continued growth and profitability, we are creating the opportunity to invest in our higher growth, higher margin, large market opportunities. Payments revenue grew 11% year-over-year, driven by 9% growth in TPV and modest take rate expansion. Thriving payments adoption continues to be a key element of our strategy. Last week was National Small Business Week, and given that, I want to take a few moments to highlight the scale of our customer base, all that we do to support our customers, and the tremendous market opportunity in front of us. Service-based business is the backbone of the economy, and small businesses employ the majority of service professionals. There are more than 450 million service-based small businesses globally, which translates to a total addressable market of well over a trillion dollars. 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. We enhance the value of our business management solutions by upselling and cross-selling additional features such as robust payment integration, customer engagement solutions, lead generation, and group buying programs. The products and services we provide are focused on the biggest areas of opportunity. The global addressable market for our business management software solutions is $900 billion and the payment processing represents an additional $200 billion. Moreover, In most cases, the opportunity in front of us is greenfield. We estimate that the penetration of service SMB market with fully integrated software solution is in the very low double digits. We continue to focus on simplifying the lives of those service providers that support us every single day. Our goal has always been to empower the rapidly growing and evolving SMB market. Everconverse offers tremendous value to our customers by providing solutions tailored to the unique workflows and interactions that various services require. Our software solutions not only provide the system of action necessary to run the daily business processes, but also the marketing solutions to attractive business, the billing and payment solutions to collect effortlessly, and the customer experience solutions to create predictable and convenient experiences. Our solutions are cost-effective, easy to implement, and purpose-built for service businesses. We provide end-to-end solutions that our customers need to compete and grow in a marketplace that is rapidly transforming. As we discussed last quarter, we're taking steps to transform and optimize our operations. In the fourth quarter of 2023, 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 an eye towards sharpening the customer-centric, vertical market focus that will better position us to accelerate growth. With respect to the optimization, defined initiatives will provide a long runway for continued margin expansion and free cash flow generation. Embedded in our 2024 guide is just a small fraction of the overall expected benefit, which should phase in the full run rate by the end of 2026. These initiatives include optimizing third-party vendor spend, which will continue through the end of the year, as well as operationalizing other significant cost-saving opportunities. These savings will not only fund key growth investments, but also allow us to continue to deliver long-term margin expansion and significant cash flow generation over the coming years. With our transformation initiatives, we'll be taking the lessons learned from our ongoing EverHealth consolidation and applying them to the rest of the company. This includes simplifying our organization structure and sunsetting certain legacy brands, as well as investing in key sales and go-to-market gaps that have impacted our growth rate. Given our focus on executing these initiatives, we expect 2024 to be a transition year. While growth may be more tempered, we will work to further expand margins and profitability. A portion of our efficiency gains will be used to reinvest in our products with the goal to accelerate growth in 2025 and beyond. Turning back to our first quarter highlights, we continue to progress well against 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 the value of our customers' receipt from the relationship with EverCommerce and drives additional revenue. The KPIs we regularly share on our earnings call illustrate our progress. As a reminder, these KPIs have been restated in both our current and year-ago periods to exclude our finished solutions. As of the end of the first quarter, we continue to see an increase in the customers utilizing more than one solution to approximately 83,000. In addition, the number of customers that have contracted and onboarded for two or more products grew 27% year-over-year to approximately 191,000. The payments-enabled customers in this cohort represent a significant near-term opportunity for payment processing and payment revenue growth for EverCommerce. Customers that purchased and utilized more than one solution are nationally some of our most profitable and stickiest customers. This is because we provided significant value to them and their businesses. This fact presents itself through the strong net revenue retention. Looking back over the traveling 12 months, our annualized net revenue retention, or NRR, for our core software payment solutions was 99%. Embedded payments is the most creative cross-sale solution and stands to be a long-term driver for EverCommerce's revenue growth and margin expansion. Year-over-year, our pro-pharma payments revenue grew 11%, accounting for approximately 17% of 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. First quarter annualized total payments volume, or TPV, was approximately $11.7 billion, representing 9% year-over-year growth. We expect TPV and overall payments revenue to grow as we continue to embed our payment solutions in our core system of action. Now I'll pass it over to Mark, who will review our financial results in more detail, as well as provide second quarter and full year 2024 guidance.