EverCommerce Inc.

Thank you for standing by, and welcome to EverCommerce's second quarter 2025 earnings call. My name is Shannon, 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 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 call is being recorded today, Wednesday, August 6, 2025. And now I would 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 Ryan Surak, EverCommerce's Chief Financial Officer. Joining them for the Q&A portion of the call is EverCommerce's President, Matt Feierstein, EverPro Chief Executive Officer, Josh McCarter, and EverHealth Chief Executive Officer, Evan Verlaine. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended June 30th, 2025. For links 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 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 also refer to certain non-GAAP financial measures in our comments today. A reconciliation of non-gap-to-gap historical measures is provided in both our earnings press release and our earnings call presentation. As a reminder, following our announcement in March that we are seeking strategic alternatives to the marketing technology solutions business, we have classified marketing technology as discontinued operations. Our commentary today will focus on the continuing operations of our business, focused on our EverHealth, EverPro, and EverWell verticals. All financial and operating metric results are presented related to continuing operations only unless otherwise specified. I will now turn it over to our CEO, Eric Reamer. Please continue.

Thank you, Brad. I'll begin our prepared remarks focused on our strong results and trends before turning the call over to Ryan to discuss our financial performance in more detail. We had another strong quarter with financial results that exceeded guidance and solid progress on our key leading indicators. Our second quarter revenue exceeded the top end of our guidance range. Revenue increased 5.3% year-over-year, but increased 7.4% year-over-year on a pro forma basis, which adjusts prior year for the sale of fitness solutions. Adjusted EBITDA $45 million also beat the top vendor for guidance range, representing a 30.4% margin. Adjusted EBITDA margin expanded more than 230 basis points year-over-year. Payments revenue, excluding the fitness solutions, grew 6.8% year-over-year. Finally, I'd like to highlight that at the end of July, we repriced and extended our credit facility, increasing financial flexibility and resulting in approximately $1.3 million in annual interest savings. Pepper Commerce provides SaaS solutions for the service S&P economy. We offer tremendous value to our customers by providing the system of actions necessary to run their businesses with tailored, unique workflows. We provide end-to-end solutions to more than 725,000 customers across our three major verticals. EverPro for home and field services, EverHealth for physician practices, and EverWell for wellness, with the two former verticals representing 95% of consolidated revenue. Our large base of customers represents an immense embedded opportunity to provide value-added features and services like payments and customer rebates through our purchasing programs. On a pro-former basis, for the last 12 months, we generated $574.1 million of revenue, representing 7.9% year-over-year growth, with subscription and transaction revenue growing 8.1% year-over-year. We generated a 30.7% adjusted EBITDA margin on an LTN basis. Finally, our annualized total payment volume, or TPV, expanded to approximately $12.9 billion. Accelerating payments adoption and utilization continues to be one of our highest priorities, and in 2025, we are making specific investments in our product capabilities and go-to-market motions to prioritize payments attachments at the point of initial sale. These include product capability investments to expand addressable payments volume within our system of actions, as well as go-to-market and selling resources to catalyze incremental enablement and utilization. At the end of the second quarter, 261,000 customers were enabled for more than one solution, reflecting a 32% year-over-year growth. This is a 400 basis point acceleration in growth rate, over the prior quarter's year-over-year growth rate. At the end of the second quarter, approximately 112,000 customers were actually utilizing more than one solution, reflecting 29% year-over-year growth. This is 1,000 basis point acceleration in growth rate over the prior quarter's year-over-year growth rate. Enabling customers for more than one solution is the first step in the funnel that leads to increased revenue, retention, and ultimately profitability for these customers. As we noted before, we began prioritizing attach at the point of initial SaaS sale, and in just a few quarters, we are seeing really good results. In the second quarter, we had record attach rates in our two flagship system of action softwares within our EverPro and EverHealth verticals. Once customers are enabled, the next action item is for us to facilitate usage. In the case of payment, this is getting our customers to actively process on our platform. We measure this step in the funnel as utilization. Customers that purchase and utilize more than one solution are naturally some of our most profitable and sickiest customers. As we have illustrated past earnings call, the effect of more customers taking payments or other add-on features and services is higher net revenue retention. Looking back over the trailing 12 months, our annualized net revenue retention, or NRR, was 97%. Year over year, our payments revenue on a pro-form basis grew over 6.8% and accounted for approximately 21% of overall revenue. As a reminder, we report our payments revenue on a net basis, and therefore, it typically contributes approximately 95% gross margin. As such, payments revenue growth is a meaningful contributor to our overall adjusted EBITDA margin expansion. As I mentioned in my introductory comments, second quarter estimated annual total payments volume, or TPV, was approximately $12.9 billion, representing nearly 7% year-over-year growth. Within this, we continue to see higher TPV growth in our top solutions. offset by lower growth in legacy payment products. This can be a positive mixed shift over time, as our top solutions often have higher take rates. Now I'll pass it over to Ryan, who will review our financial results in more detail, as well as provide third quarter and updated full year 2025 guidance.

Thanks, Eric. Total reported revenue in the second quarter was $148 million, up 5.3% from the prior year period. Subscription and transaction revenue are primary recurring revenue base. was $142.8 million. For Q2 2025, year-over-year pro forma subscription and transaction revenue growth was 7.4%. The difference between actual and pro forma revenue growth rate is to present information on a comparable basis and is attributable to the removal of prior year revenue associated with the sale of our fitness solutions that closed in 2024. Within pro forma subscription and transaction revenue, pro forma payment revenue growth was 6.8%. The solid performance in subscription and transaction revenue was largely due to continued execution of our growth strategy to provide customers with our core system of action software solutions and driving expansion by promoting cross-sell and up-sell opportunities, leading with payments. Adjusted gross profit in the quarter was $114.6 million, representing an adjusted gross margin of 77.4% versus 77.5% in Q2 2024. relatively flat across the comparison period. Second quarter adjusted EBITDA was $45 million, which is 14% growth year over year. Adjusted EBITDA margins of 30.4% compares to 28.1% in Q2 2024. Q2 year over year margin expansion of over 230 basis points was partially aided by the timing of certain expenses and investments. with a portion of the favorability compared to guidance expected to be reallocated to the rest of 2025. On a year-over-year basis, margins improved due to cost optimization initiatives, mixed shift to higher margin products, and overall scale economies. Now, turning to adjusted operating expenses, which are reconciled in the appendix to this presentation, overall adjusted operating expenses improved as a percentage of revenue, both for the quarter from 49.5% to 47.1%, on a year-over-year basis and on an LTM basis from 48.8% to 47.3%. While the timing of investments and expenses was a factor, the long-term trend of continued operating expense moderation is deliberate and attributable to both growth of the business and specific actions taken as part of our transformation and optimization program. We maintain our focus on improvement in customer satisfaction and acquisition while also remaining highly focused on cost discipline in functional support areas. Next, I'll turn to some key liquidity measures, which include cash flow from continuing and discontinued operations. We continue to generate significant free cash flow as we invest to grow our business. Cash flow from operations for the quarter was $27 million, improving from $23.9 million generated in Q2 2024. Levered free cash flow was $18.9 million in the quarter And for the trailing 12-month period, we generated nearly $110.8 million in levered free cash flow. Due to the investments we are making in 2025, we see an impact in our levered free cash flow, primarily due to increases in our capitalized software spend year over year as we continue to enhance features, functionality, as well as our enterprise support model. Adjusted unlevered free cash flow was $34.9 million in the quarter and $143.7 million for the last 12 months. representing 16.2% and 18.8% year-over-year growth, respectively. We ended the quarter with $151 million in cash and cash equivalents and $155 million of undrawn capacity on our revolver. As of June 30th, we had $529 million of debt outstanding. Our total net leverage, as calculated for our credit facility, was approximately two times and continues to demonstrate our deleveraging from strong operational performance, and free cash generation. We have 425 million of notional swaps at a weighted average rate of 3.91% that effectively hedge the floating rate component of our interest costs through October, 2027. In July, we repriced and extended our outstanding term loan for an additional three years through July, 2031, and further reduced our interest costs by 25 basis points to SOFR plus 2.25%. In addition, We extended our $155 million revolving credit facility, which steps down in capacity to $125 million in July 2026 and continues through July 2030. The repricing on the term loan results in interest cost savings of approximately $1.3 million on an annualized basis, and the extension of the term loan and revolving credit facility provides financial flexibility. In the second quarter, we repurchased approximately 2 million shares, for $20.6 million at an average price of $10.01 per share. Based on the shares repurchased through June 30, 2025, we have approximately $51.1 million remaining in our total repurchase authorization. I would now like to finish by discussing our outlook for the third quarter and full year of 2025. As a reminder, our guidance for revenue and adjusted EBITDA for 2025 is based on our continued operations. which excludes marketing technology solutions. For the third quarter of 2025, we expect total revenue of $146.5 to $149.5 million and adjusted EBITDA of $41 to $43 million. For full year 2025, we expect total revenue of $581 to $601 million, and we are increasing our guidance for adjusted EBITDA to a range of $171 to $177 million. Operator, we are now ready to take the first question.

Thank you. 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 1-1 again. Our first question comes from the line of Bevin Shaw with Deutsche Bank. Your line is now open.

Great. Thanks for taking my question, and congrats on a strong quarter. Eric, maybe just for you to start off, can you just maybe give us a little state of the union on where you are in terms of your transformation initiatives and how you guys think you're progressing against that?

Yeah, you know, when we talk about the transformation optimization, you know, many of those are ongoing scenarios that we're going to continue to look for opportunities, specifically in optimization, continue to gain more margin as we get more efficient across the organization. From a transformation perspective, it was really focused on really creating more energy and more focus within the BUs and the specific verticals, EverHealth and EverPro. Both our CEOs that we've talked to before, Ever Berlin and Josh McCarter, are both doing a phenomenal job building out organizations, building out full management teams, getting the teams closer to the end customer, which we're starting to see really positive results in efficiency and sales efficiency and marketing efficiency. and other things that we really had expected to happen, and we're starting to see some of those green shoots happen already.

That's great. And just a quick follow-up for Ryan. Ryan, I think the second quarter in a row where you guys have exceeded the top end of your revenue guidance, why not raise the rest of the year? Is there anything that you're seeing from a macro perspective or anything else you should keep in mind for the back end?

Yeah, I appreciate the question. Thanks, Bob. From a macro perspective, you know, things continue to trend. Well, we've talked about how we are relatively resilient overall in terms of the macro economy, and we'll continue to track that and look at it on a regular basis. We felt comfortable raising the EBITDA guidance really because of the confidence we have in the back half of the year, but also looking at, you know, some moderation with regard to the overperformance that we had in the first half of the year for investments and other things that we're doing really to continue to generate growth and acceleration in active programs like payments or cross-sell and up-sell opportunities. On the revenue side, it's really being prudent with regard to what we see the back half of the year compared to the first half of the year. So at this point, we feel comfortable with both the remaining revenue guidance for the back half of the year as well as the raise on the adjusted EBITDA guidance. That's helpful.

Thanks for taking my questions.

Thank you. Our next question comes from the line of Kirk Maturin with Evercore ISI. Your line is now open.

Hi, this is Bill. I'm for Kirk, and thanks for taking my question. You know, what are some of the embedded AI functionalities that you believe will enhance the overall customer experience of your software going forward?

Yeah, I'll start in terms of things that we've actually done from an AI perspective, and then I'll pass it over actually to Evan and potentially Josh, who will talk about some of the things that we're considering. Over the last 18 months, and we've talked about this, we've launched AI-powered features across several of our product lines, including prospect marketing solutions and our customer engagement, our customer experience solution. We've launched customer survey tools within our customer experience solutions. And really, those have helped us improve prospect targeting for the end customer and customer engagement and actionable insights that our customers now have because of the embedded AI that we've put in those products. And AI advancement within our products is now a core part of our future product roadmaps, really across all of our verticals. And I'll pass it over to Evan to start in terms of some thoughts at the EverHealth level.

Thanks, Matt. I think the features we've got embedded in the roadmap for the rest of the year are features that really help our customers be more efficient. So thinking about things in the clinical space like ambient scribe, appointment no-show predictors that help them just run a more efficient business. And then we have a full roadmap already built for 2026. So look for more features to be delivered across all of our core products within EverHealth.

Great. And then can you provide us, you know, do you have any early thoughts on the passage of the one big beautiful bill in terms of tax implications?

Yeah, I would say it's early for us in terms of the analysis of that. That's ongoing in terms of the implication. But we do think there'll be some benefits from, you know, limitations that previously existed from interest deductibility as an example. But on an ongoing basis, we'll have more to share, I think, in the coming quarter.

Appreciate it. Thank you.

Thank you. Our next question comes from the line of Matt Hedberg with RBC. Your line is now open.

Great. Thanks for taking my questions. Congrats on another good quarter. I guess, you know, circling back on the revenue guide, you beat expectations on the top line for now two straight quarters, you know, and you've maintained the full year guide. You know, I can appreciate there's probably some conservatism from macros in there, but just making sure there's nothing else. Like, were deals pulled into the first half? or anything that you sort of flagged for the second half? Because it feels like you're coming off of a strong first half of the year.

The first half of the year was strong, and we feel good about that. We didn't pull in anything unusual from a revenue perspective in Q1 or Q2. We're not planning to pull anything in necessarily from a Q3 or Q4 perspective either. We do a bottoms-up build, and we look at kind of all the different factors within each one of the solutions. As you know, we have you know, some top solutions that are core to our systems of action as well as payments. And we also have a number of other important solutions as well. So it's, I would say, a relatively complex build, but we feel good about what we're setting for Q3 and Q4. And yes, there is some conservatism. We like to call it prudence, but we want to make sure that, you know, we're not being overly aggressive in terms of what we're publishing. I think from our standpoint right now, we feel like what we're guiding towards is appropriate for both Q3 and Q4.

Got it. Okay. And then, you know, I wanted to follow up on AI as well. Last quarter, you talked not only about, you know, from a product perspective, but using AI internally to just improve efficiency. I wonder if you can give a little bit of update there. Are you seeing any improvements, whether it's in R&D with code suggestion tools or sales and marketing customer service You know, any sort of anecdotal evidence that it could be driving, you know, either more efficiencies there or perhaps even, you know, better sales outcomes.

Yeah, for sure. I'm going to focus on customer support. I think we have talked about this in the past, but that continues to be an area where, again, still early innings with AI. So across all of our functions, we are actively leaning in an AI-forward way to find efficiencies. In customer service, specifically our customer support operation within mobile solutions at EverPro, We have deployed AI agents within our chat channel that are now resolving between 25% to 50% of all support tickets that come in, depending on which solution within that mobile mix. It's got customer SAT scores that are above 85%, and generating some nice significant cost avoidance from that standpoint. And that is literally just across our chat channel. We're going to add email and voice channel there, and we expect that impact to grow meaningfully. So we are excited. It is still the early innings from a functional standpoint of that. Yes, from a product and engineering standpoint, from a digital marketing standpoint, from a people operations standpoint. And from a financial systems and security operations standpoint, those are areas where we're actively testing and learning into the productivity gains and the efficiency gains from utilizing this technology company-wide.

Great. Thanks for the call.

Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your touchtone telephone. Our next question comes from the line of Alexander Sklar with Raymond James. Your line is now open.

Hi, thanks for taking the question. This is John on for Alex. I wanted to dig in a little bit with the customers utilizing more than one solution. We've seen a really nice step up in the amount of customers using more than one solution in one queue and now again in two queue. Do you think this upper single digit, low double digit thousand growth is the right cadence to think about moving forward? And then I have a quick follow up.

Yeah, I'd say we're obviously really pleased with the progress we've made. We're obviously not going to guide to growth percentages there. I think you heard Eric talk about in his comments the areas where we've obviously continued to make investments in product and technology and go to market to better enable that continued multi-product take and ultimately utilization. Obviously, payments is more than 85% of payments. of that multi-product enablement and utilization. And you also, you heard Eric talk through across our core growth pillars and payments from attachment to activation to wallet share expansion, you know, again, significant, execution and investment in those areas just to continue to expand the value that we can provide to our customers in areas like attachment, launching something like Canadian processing capability that some of our solutions where we didn't have them allow us to access an unaddressable part of the base that we had before. In areas like Wallachia expansion, really continuing to refine payments workflows within our systems of action and increasing ways to pay mobile check capture ACH payment Google and Apple pay support. These things add flexibility and also increase and really drive that merchant processing volume from where it was to where we believe it can be. So, again, really pleased with the progress we've made. Obviously, there is significant runway for us to continue to drive more utilization of second, third, fourth products into the base. And as we continue to integrate more of those products into our systems of action, we expect to do just that.

And just to add to what Matt said, as we've talked about a bunch, these are the leading indicators. These are the top of the funnel. And our job is to kind of continue to execute down funnels so we can increase revenue and increase retention as more customers take more products. Obviously, that grows revenue. And the more products an individual customer takes, it significantly increases retention as well.

Okay, thanks. Really good call there. And then can you maybe help frame the spread between the total payment volume growth we saw this quarter and that customers using more than one solution? Is there a lag there that we should think about as customers are unable to use more than one solution and use payments? Or is there maybe some macro factors that are causing that bit of a spread?

We wouldn't call it macro. I think, again, as Eric explained, it is a funnel. And you start at the top of the funnel with Attach, obviously making nice significant strides there. Utilization comes next. Wallet share expansion comes there. So it comes after that. So there is a lag only in that you do need to take every single customer down that funnel in terms of enablement into utilization, into expansion. You know, secondarily, obviously, we've talked about this in the past. We have a pretty broad portfolio of solutions where we've integrated payments. Some of them are more mature legacy portfolios that are growing at a bit slower of a rate. Obviously, we've again talked about our top five payment opportunities where we have the most significant executional approach and investments. And those are growing at a much faster rate. The TPV there is growing between 12% to 13% from a year-over-year perspective. And many of those are less than 10% penetrated. So the opportunity is incredibly large. So, yes, there's a lag from a funnel perspective. And, you know, again, we look to continue to grow through just some of the more mature legacy parts of the portfolio.

Thank you very much.

Thank you. Our next question comes from the line of Aaron Kimson with Citizens. Your line is now open.

Great. Thank you. Eric, you started this business as a payments company. Payments was 21% of revenue in the first half of this year, up from 17% full year 24. Obviously, it's a big piece of the thesis going forward. Given the circle IPO in June and all the subsequent investor attention that's gone into understanding the potential of stable coins to affect payments revenue streams, How do you think about the potential for stablecoins to affect pay grade or method of payment in your service-based SMB customer base over the medium and long-term at all?

Well, appreciate the question. You know, we are, you know, in terms of focusing on stablecoins and how it's going to affect our payment, our current payment methods. I mean, that is not currently on the roadmap, quite honestly. We provide all many ways for our customers to get paid. And to date, there's been I would say, you know, anecdotally, not few requests. There's been zero requests for things of that nature. So we will continue to become, you know, continue to be very focused on what our customers need, build products, build roadmaps based upon making sure that they get what they need to accept payments the way they need to, in addition to be able to provide their customers what they want. So we will be responsive to the marketplace if and when that happens. But to date, it's definitely not a short-term roadmap and I wouldn't even say midterm. Clearly that can shift if the market sentiment shifts, but right now that's not a core focus.

Got it. That's really helpful. And then, Ryan, can you talk about the improved visibility you're having for the business as a result of the MarTech discontinuation and eventual divestiture when giving us guidance now? And maybe also what needs to go right to potentially accelerate back to a double-digit grower in the out years? Thanks.

Yeah, I appreciate the question, Aaron. Really, from a visibility perspective, I would say, for the most part, what we've taken out from a continuing operations perspective is seasonality or variabilities to seasonality. So it's much more linear, I think, overall. There is very little seasonality when you take out MarTech from the overall business. And I would say that it just continues to refocus essentially where everybody is spending their time and effort, which is within EverPro and EverHealth and EverWell at this point in time. We continue with the process on the MarTech side, and we will continue with the optimization efforts that we have. And I think you can see that coming through from our operating expenses as a percentage of revenue overall. If you look at the LTM on a basis of year-over-year analysis, we're going to continue to, as we talked about earlier, we have the transformation efforts, we have the optimization efforts. On the optimization piece, we intend to actually take costs out on an optimized basis, whether it's through AI or otherwise, in order to make the continued investments for, you know, revenue expansion that we want to make going forward.

Thank you. And I'm currently showing no further questions at this time. I would now like to hand the call back over to Eric Reamer for closing remarks.

Well, thanks for that. Well, thank you guys for joining us today. Not only did we beat our headline expectations, we're also showing real positive momentum in our leading indicators. This is exactly what we set out to do, and I look forward to sharing our continued success in the coming quarters. Thanks again.

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