EverCommerce(US:EVCM)2024-08-06 21:14Part I Item 1. Financial Statements Unaudited H1 2024 financial statements show revenue growth and improved operating income, despite a net loss and asset decrease from dispositions Condensed Consolidated Balance Sheets As of June 30, 2024, total assets and stockholders' equity decreased, primarily due to reductions in intangible assets, goodwill, and net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,467,076 | $1,518,064 | | Cash and cash equivalents | $86,697 | $92,609 | | Goodwill | $918,653 | $927,431 | | Intangible assets, net | $263,927 | $315,519 | | Total Liabilities | $682,984 | $692,028 | | Long-term debt, net | $524,565 | $526,696 | | Total Stockholders' Equity | $784,092 | $826,036 | - The company classified $13.2 million in assets and $5.5 million in liabilities as 'held for sale' as of June 30, 2024, related to the planned divestiture of its UK Fitness solutions726 Condensed Consolidated Statements of Operations and Comprehensive Loss Q2 2024 revenues and operating income increased, though net loss widened, while the six-month period achieved revenue growth and reversed operating loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $177,393 | $170,052 | $347,506 | $331,188 | | Subscription and transaction fees | $137,041 | $130,305 | $271,765 | $254,125 | | Operating Income (Loss) | $6,879 | $1,782 | $2,269 | ($3,506) | | Net Loss | ($3,376) | ($896) | ($19,700) | ($21,671) | | Net Loss Per Share (Basic & Diluted) | ($0.02) | $0.00 | ($0.11) | ($0.11) | - A significant 'Loss on held for sale and impairments' of $11.7 million was recorded in the first six months of 2024, compared to $1.1 million in the prior year period, primarily related to the divestiture of fitness solutions8 Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $37.2 million in H1 2024, with significant cash used in financing activities due to stock repurchases Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,216 | $41,146 | | Net cash used in investing activities | ($8,526) | ($10,686) | | Net cash used in financing activities | ($34,190) | ($39,769) | | Net decrease in cash | ($6,138) | ($8,982) | - The company spent $36.0 million on the repurchase and retirement of common stock in the first half of 2024, compared to $39.7 million in the first half of 202314 Notes to Condensed Consolidated Financial Statements Notes detail fitness solution divestitures, resulting in losses and impairment, alongside significant long-term debt, ongoing stock repurchases, and a class action lawsuit - On March 13, 2024, the company sold its North American fitness solutions, resulting in a $5.0 million loss and a $3.4 million goodwill impairment charge for the six months ended June 30, 20242534 - The sale of UK Fitness closed on July 1, 2024, with $2.9 million loss recognized from assets classified as held for sale as of June 30, 20242656 - The company is a defendant in a class action lawsuit filed on January 31, 2024, regarding a CEO approval right, believing it has meritorious defenses55 - The company repurchased 3.7 million shares for $36.3 million in the first six months of 2024, with $54.0 million remaining available for repurchases as of June 30, 202446 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported revenue growth and increased Adjusted EBITDA for Q2 and H1 2024, driven by subscription fees and cost discipline, maintaining strong liquidity Key Business and Financial Metrics (Non-GAAP) Non-GAAP metrics show Pro Forma Revenue Growth of 6.0% for Q2 2024 and increased Adjusted EBITDA to $41.2 million, reflecting underlying business expansion - The annualized net revenue retention rate was approximately 92% for the quarter ended June 30, 2024, down from 98% in the prior-year quarter, with the core software and payments rate at 97%60 Adjusted EBITDA Reconciliation (in thousands) | Description | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net loss | ($3,376) | ($896) | ($19,700) | ($21,671) | | Adjustments | $44,591 | $39,694 | $101,805 | $92,408 | | Adjusted EBITDA | $41,215 | $38,798 | $82,105 | $70,737 | Results of Operations Q2 2024 total revenues increased by 4.3%, driven by subscription and transaction fees, leading to improved operating margins despite rising product development costs - Subscription and transaction fee revenue grew by $6.7 million (5.2%) in Q2 2024, driven by customer expansion, price increases, and group purchasing programs87 - Depreciation and amortization expense decreased by $4.1 million (15.6%) in Q2 2024, primarily due to fewer business acquisitions93 - General and administrative costs as a percentage of revenue improved by 80 basis points for the six-month period, reflecting cost discipline from transformation initiatives92 Liquidity and Capital Resources As of June 30, 2024, the company maintained $90.0 million in cash and $190.0 million available under its revolver, with sufficient liquidity for future operations - The company's credit facility includes $534.9 million outstanding under Term Loans and $190.0 million available under its Revolver as of June 30, 202497103 - The Board increased the stock repurchase program by $50.0 million on May 21, 2024, totaling $200.0 million authorization and extending through December 31, 2025106 - To manage interest rate risk, the company uses two interest rate swap agreements with a combined notional amount of $300.0 million to convert floating-rate debt to a fixed rate104 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk disclosures were reported compared to its 2023 Annual Report on Form 10-K - There were no material changes to the company's market risk disclosures during the quarter112 Item 4. Controls and Procedures As of June 30, 2024, disclosure controls and procedures were deemed ineffective due to a material weakness in internal control over financial reporting - The principal executive and financial officers concluded that disclosure controls and procedures were not effective as of June 30, 2024113 - This ineffectiveness stems from a material weakness in internal control over financial reporting, as previously disclosed in the 2023 Annual Report113 - The company is actively working to remediate the material weakness, with no material changes to internal control over financial reporting during the quarter114 Part II Item 1. Legal Proceedings The company is involved in various legal proceedings but anticipates no material adverse effect on its financial condition or operating results - The company does not expect current legal proceedings to have a material adverse effect on its business116 Item 1A. Risk Factors No material changes to the company's risk factors were reported compared to its 2023 Annual Report on Form 10-K - No material changes to risk factors were reported for the quarter117 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company repurchased 2.5 million shares for $24.1 million, with $54.0 million remaining in the expanded repurchase program Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | April 2024 | 947,591 | $9.08 | $69,322,000 | | May 2024 | 784,011 | $9.92 | $61,542,000 | | June 2024 | 766,495 | $9.82 | $54,013,000 | Item 5. Other Information CEO Eric Remer established a Rule 10b5-1 trading plan on June 14, 2024, to sell up to 1.0 million shares through September 2025 - CEO Eric Remer established a Rule 10b5-1 trading plan on June 14, 2024, to sell up to 1.0 million shares of common stock through September 2025119 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files