EverCommerce(US:EVCM)2022-03-14 16:00PART I Item 1. Business The company provides integrated SaaS solutions for service SMBs, detailing its business model, growth strategy, and the market trends driving demand - EverCommerce provides tailored, end-to-end SaaS solutions for over 600,000 service SMBs in Home Services, Health Services, and Fitness & Wellness Services, focusing on customer acquisition, operations management, and customer engagement202124 - The company's growth strategy includes attracting new customers, expanding into new products and verticals, and increasing Average Revenue per Unit (ARPU) through cross-selling, up-selling, and strategic acquisitions, with 52 companies acquired since inception26717375 - The total addressable market (TAM) for EverCommerce's current solutions is estimated at $1.3 trillion globally in 2020, with $520 billion in North America, indicating significant untapped market opportunity44 - Key industry trends driving demand include accelerating adoption of digital technologies, mobile enablement, focus on customer experience, digital marketing, digital payments, and increasing demand for vertical-specific software293031333435 Key Financial Highlights (2020-2021) | Metric | 2021 (Millions) | 2020 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $490.1 | $337.5 | 45.2% | | Net Loss | $(82.0) | $(60.0) | 36.7% | | Adjusted EBITDA | $107.2 | $78.8 | 36.0% | Item 1A. Risk Factors The company faces significant risks related to its limited operating history, competition, data security, acquisition strategy, and regulatory compliance - EverCommerce's limited operating history and evolving business model make future prospects and risk assessment challenging, including attracting new customers, retaining existing ones, expanding into new markets, and integrating acquisitions108109 - The company's historical growth rates may not be sustainable, and it has incurred net losses ($82.0 million in 2021) with no guarantee of future profitability due to ongoing investments112[115](index=115&type=chunk]116 - Significant risks include intense competition from specialized and horizontal providers, dependence on payment card networks and processors, and the need to keep pace with rapid technological developments139140150155 - Data security breaches, unauthorized data disclosure, or errors in solutions could lead to liability, costly litigation, and reputational damage, while the estimated TAM is subject to uncertainties163164172173 - The company's acquisition strategy poses challenges such as integration difficulties and potential undisclosed liabilities, while indebtedness and interest rate fluctuations also present financial risks121127219224 - Compliance with governmental regulations, particularly in privacy (CCPA, HIPAA, GDPR) and information security, is complex and evolving, potentially leading to increased costs and legal liabilities253255256258259 - Major stockholders control a substantial portion of common stock (78.0%), influencing business direction and potentially conflicting with other stockholders' interests296305314 Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - The company has no unresolved staff comments342 Item 2. Properties The company leases all its facilities, including its global headquarters in Denver and numerous domestic and international offices - EverCommerce's global corporate headquarters is in Denver, Colorado, under a sublease expiring in 2031343 - The company operates 24 additional offices in the United States and international offices in Canada, the UK, Australia, New Zealand, and Jordan344 - All facilities are leased, and current space is considered sufficient, with plans to optimize the lease footprint with acquisitions344345 Item 3. Legal Proceedings The company is subject to various legal proceedings in the ordinary course of business but does not expect a material adverse effect - The company is subject to various legal proceedings, claims, and governmental inspections in the ordinary course of business346 - Management believes the ultimate resolution of these matters will not have a material adverse effect on its business, financial condition, or operating results346 Item 4. Mine Safety Disclosures This section is not applicable as the company has no mine safety disclosures - There are no mine safety disclosures347 PART II Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities This section details the company's common stock market information, dividend policy, and stock performance since its IPO in July 2021 - EverCommerce Class A common stock began trading on Nasdaq (EVCM) on July 1, 2021350 - As of March 4, 2022, there were 108 registered holders of common stock351 - The company has not paid and does not intend to pay cash dividends, prioritizing reinvestment in business growth and being limited by debt covenants352339 Stock Performance (July 1, 2021 - Dec 31, 2021) | Date | EverCommerce Common Stock | Nasdaq Composite Index | Nasdaq US Small Cap Software Index | | :--- | :--- | :--- | :--- | | 7/1/21 | $100.00 | $100.00 | $100.00 | | 7/30/21 | $99.83 | $101.03 | $98.41 | | 8/30/21 | $119.32 | $105.12 | $102.85 | | 9/30/21 | $93.69 | $99.49 | $98.17 | | 10/29/21 | $117.50 | $106.72 | $104.12 | | 11/30/21 | $92.50 | $106.99 | $98.11 | | 12/31/21 | $89.49 | $107.73 | $93.88 | Item 6. [Reserved] This item is reserved and contains no information - This section is reserved359 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results of operations, including its business model, performance factors, and key metrics Overview The company provides integrated SaaS solutions for service SMBs, utilizing a 'land and expand' strategy with primarily recurring revenue streams - EverCommerce provides integrated, vertically-tailored SaaS solutions for over 600,000 service SMBs in Home Services, Health Services, and Fitness & Wellness Services361 - The company's 'land and expand' strategy involves initially adopting Business Management Software and then cross-selling adjacent products to cover end-to-end workflows369 - Revenue is categorized into Subscription and Transaction Fees, Marketing Technology Solutions, and Other revenue, with approximately 95% of revenue in 2020 and 2021 being recurring or re-occurring370374 - EverCommerce completed its IPO in July 2021, generating $303.9 million in net proceeds, and a private placement for $75.0 million378379 - The COVID-19 pandemic accelerated digital transformation for SMBs but also caused revenue declines in certain verticals in Q2 2020, with recovery throughout H2 2020 and 2021380383 Key Factors Affecting Our Performance Future performance depends on expanding product offerings, pursuing strategic acquisitions, acquiring new customers, and increasing revenue from the existing base - Performance is driven by expanding into new products and verticals, leveraging customer insights to develop or acquire value-additive solutions386 - Acquisitions are a core strategy to accelerate market leadership, with 52 companies acquired since inception, including 5 in 2021 and 9 in 2020387 - The customer base grew from over 500,000 in 2020 to over 600,000 in 2021, with 98% of customers having less than $2,000 in billings390391 - Significant opportunity exists to increase revenue from existing customers through cross-selling digital payments, customer engagement, and marketing technology solutions393 - Continued investment in sales, marketing, and product development is expected to increase operating expenses, impacting short-term profitability395396 Key Business and Financial Metrics The company uses key business and non-GAAP financial measures like Pro Forma Revenue Growth, Adjusted Gross Profit, and Adjusted EBITDA to evaluate performance - Pro Forma Revenue Growth Rate, a key performance measure, increased to 21.5% for the year ended December 31, 2021, normalizing for acquisitions to show underlying revenue growth401402 - Adjusted Gross Profit and Adjusted EBITDA are non-GAAP measures used to assess operational and financial performance, excluding items like depreciation, amortization, acquisition costs, and stock-based compensation403407409 Adjusted Gross Profit Reconciliation (2020-2021) | Metric | 2021 (Thousands) | 2020 (Thousands) | | :--- | :--- | :--- | | Gross profit | $308,301 | $207,691 | | Depreciation and amortization | $19,608 | $14,814 | | Adjusted Gross Profit | $327,909 | $222,505 | Adjusted EBITDA Reconciliation (2020-2021) | Metric | 2021 (Thousands) | 2020 (Thousands) | | :--- | :--- | :--- | | Net loss | $(81,966) | $(59,954) | | Interest and other expense, net | $36,111 | $41,545 | | Income tax benefit | $(10,051) | $(3,630) | | Loss on debt extinguishment | $28,714 | — | | Depreciation and amortization | $101,437 | $76,844 | | Other amortization | $2,814 | $1,801 | | Acquisition related costs | $3,452 | $9,558 | | Stock-based compensation | $22,095 | $10,721 | | Other non-recurring costs | $4,592 | $1,905 | | Adjusted EBITDA | $107,198 | $78,790 | Description of Certain Components of Financial Data This section details the components of the company's financial data, including revenue sources and various operating expenses - Revenue is derived from Subscription and Transaction Fees, Marketing Technology Solutions, and Other revenue streams like consulting and hardware sales413414415 - Cost of revenues includes employee costs, credit card processing fees, and software hosting, and is expected to fluctuate based on revenue mix416417418 - Sales and marketing, product development, and general and administrative expenses are projected to increase in absolute dollars due to growth and public company operations419420421 - Other financial components include depreciation and amortization, interest expense, loss on debt extinguishment, and income tax benefit422424425426 Results of Operations The company's revenues grew significantly in 2021, though net loss also increased due to a loss on debt extinguishment and higher operating expenses - Cost of revenues increased by $47.2 million (41.0%) in 2021, but decreased as a percentage of revenue from 34.1% to 33.1%434 - Sales and marketing expenses increased by $43.5 million (86.7%) in 2021, rising from 14.9% to 19.1% of revenue436 - Product development expenses increased by $19.1 million (62.9%) in 2021, mainly due to personnel investments in technology teams437 - General and administrative expenses increased by $23.3 million (26.8%) in 2021, but decreased as a percentage of revenue from 25.8% to 22.5%438 - Depreciation and amortization increased by $24.6 million (32.0%) in 2021, mainly from intangible asset additions from acquisitions440 - Interest and other expense, net, decreased by $5.4 million (13.1%) in 2021 due to a lower outstanding debt balance and effective interest rate after refinancing441 - A $28.7 million loss on debt extinguishment was recorded in 2021 due to the refinancing of credit facilities443 - Income tax benefit increased by $6.4 million (176.9%) in 2021, driven by acquisition accounting and differences in foreign income tax rates445 Consolidated Statements of Operations (2020-2021) | Metric | 2021 (Thousands) | 2020 (Thousands) | | :--- | :--- | :--- | | Revenues: | | | | Subscription and transaction fees | $351,831 | $232,931 | | Marketing technology solutions | $118,275 | $86,331 | | Other | $20,033 | $18,263 | | Total revenues | $490,139 | $337,525 | | Operating expenses: | | | | Cost of revenues (exclusive of depreciation and amortization) | $162,230 | $115,020 | | Sales and marketing | $93,789 | $50,246 | | Product development | $49,506 | $30,386 | | General and administrative | $110,369 | $87,068 | | Depreciation and amortization | $101,437 | $76,844 | | Total operating expenses | $517,331 | $359,564 | | Operating loss | $(27,192) | $(22,039) | | Interest and other expense, net | $(36,111) | $(41,545) | | Loss on debt extinguishment | $(28,714) | — | | Net loss before income tax benefit | $(92,017) | $(63,584) | | Income tax benefit | $10,051 | $3,630 | | Net loss | $(81,966) | $(59,954) | Revenue Growth (2020-2021) | Revenue Type | 2021 (Thousands) | 2020 (Thousands) | Change Amount (Thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Subscription and transaction fees | $351,831 | $232,931 | $118,900 | 51.0% | | Marketing technology solutions | $118,275 | $86,331 | $31,944 | 37.0% | | Other | $20,033 | $18,263 | $1,770 | 9.7% | | Total revenues | $490,139 | $337,525 | $152,614 | 45.2% | Liquidity and Capital Resources The company's liquidity stems from operations, equity issuances, and debt, which are primarily used for acquisitions, working capital, and debt servicing - Primary liquidity sources are operating activities, stock issuances (including IPO), and long-term debt, with main uses being acquisitions, working capital, and debt servicing448449 - The company expects existing liquidity to be sufficient for the next 12 months but may seek additional financing for future acquisitions450 - In July 2021, the company refinanced its credit facilities, entering into a new credit agreement for $540.0 million, resulting in a $28.7 million loss on debt extinguishment464760 - As of December 31, 2021, $548.6 million was outstanding under the New Credit Facilities, and the company was in compliance with all debt covenants470471 Liquidity Position (December 31, 2021) | Metric | Amount (Millions) | | :--- | :--- | | Cash, cash equivalents, and restricted cash | $97.6 | | Available borrowing capacity (New Revolver) | $190.0 | | Outstanding long-term debt (New Credit Facilities) | $548.6 | Cash Flow Data (2020-2021) | Cash Flow Activity | 2021 (Thousands) | 2020 (Thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,482 | $57,539 | | Net cash used in investing activities | $(379,668) | $(418,308) | | Net cash provided by financing activities | $341,183 | $401,850 | | Effect of foreign currency exchange rate changes on cash | $224 | $(87) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(779) | $40,994 | Critical Accounting Estimates Financial statements rely on critical accounting estimates for revenue recognition, business combinations, capitalized software, and stock-based compensation - Critical accounting estimates include revenue recognition, business combinations, capitalized software, and stock-based compensation473563 - Revenue recognition involves identifying performance obligations, measuring transaction prices, allocating prices based on standalone selling prices, and determining the contract term475488489589592 - Business combinations require significant judgment in fair valuing acquired tangible and intangible assets and liabilities, with any excess recorded as goodwill493495565566 - Capitalized software costs are amortized over an estimated useful life of five years, with impairment reviews conducted when circumstances indicate499501575579 - Stock-based compensation is valued at fair value using the Black-Scholes model, considering risk-free interest rate, expected term, volatility, and expected dividends502503504623 - As an 'emerging growth company,' EverCommerce has elected to adopt new accounting guidance within the same timeframe as private companies, which may affect comparability509510634 Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily from fluctuations in interest rates and foreign currency exchange rates - EverCommerce is exposed to market risk from interest rate fluctuations and foreign currency exchange rates512 - A 100 basis point increase in the interest rate would increase annual interest expense by approximately $5.5 million513 - The company currently does not hedge interest rate or foreign currency exposure but may use derivative financial instruments in the future513515 - Foreign currency risks are related to subsidiaries in Canada, the UK, Australia, Jordan, and New Zealand, but a 10% change in the U.S. dollar's value is not expected to have a material effect514 Item 8. Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements and supplementary data for the years 2019 through 2021 Report of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on the company's consolidated financial statements for 2019, 2020, and 2021 - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for 2021, 2020, and 2019521 - The audit was conducted in accordance with PCAOB standards, assessing risks of material misstatement and evaluating accounting principles and estimates523524 - The firm did not perform an audit of internal control over financial reporting523 Consolidated Balance Sheets The balance sheets show a significant increase in total assets and a shift from a stockholders' deficit to positive equity in 2021 - Total assets increased by $335.8 million (25.3%) from 2020 to 2021, primarily due to increases in goodwill and intangible assets from acquisitions527 - Total liabilities decreased by $130.7 million (16.2%) from 2020 to 2021, mainly driven by a reduction in long-term debt531 - Stockholders' equity shifted from a deficit of $(389.2) million in 2020 to a positive equity of $985.6 million in 2021, largely due to the IPO and conversion of preferred stock531 Consolidated Balance Sheets (December 31, 2021 vs. 2020) | Metric | 2021 (Thousands) | 2020 (Thousands) | | :--- | :--- | :--- | | Assets | | | | Total current assets | $171,617 | $143,828 | | Total non-current assets | $1,491,756 | $1,183,756 | | Total assets | $1,663,373 | $1,327,584 | | Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit) | | | | Total current liabilities | $103,428 | $86,701 | | Total non-current liabilities | $574,297 | $721,727 | | Total liabilities | $677,725 | $808,428 | | Total convertible preferred stock | — | $908,310 | | Total stockholders' equity (deficit) | $985,648 | $(389,154) | | Total liabilities, convertible preferred stock and stockholders' equity (deficit) | $1,663,373 | $1,327,584 | Consolidated Statements of Operations and Comprehensive Loss The company's revenues grew significantly in 2021, though net loss also increased due to a loss on debt extinguishment and higher operating expenses - Total revenues increased by 45.2% from $337.5 million in 2020 to $490.1 million in 2021533 - Net loss increased to $82.0 million in 2021 from $60.0 million in 2020, primarily due to a $28.7 million loss on debt extinguishment533 - Operating expenses increased significantly, with cost of revenues up 41.0%, sales and marketing up 86.7%, and product development up 62.9% in 2021434436437438 Consolidated Statements of Operations and Comprehensive Loss (2019-2021) | Metric | 2021 (Thousands) | 2020 (Thousands) | 2019 (Thousands) | | :--- | :--- | :--- | :--- | | Total revenues | $490,139 | $337,525 | $242,142 | | Operating loss | $(27,192) | $(22,039) | $(54,255) | | Net loss | $(81,966) | $(59,954) | $(93,745) | | Comprehensive loss | $(85,279) | $(58,750) | $(93,215) | | Basic and diluted net loss per share attributable to common stockholders | $(0.82) | $(3.06) | $(14.13) | Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) The statements detail the transformation of the company's equity structure in 2021, driven by the IPO and conversion of all preferred stock - In 2021, all outstanding convertible preferred stock ($908.3 million in 2020) converted into common stock as part of the IPO555588783 - Total stockholders' equity transitioned from a deficit of $(389.2) million in 2020 to a positive equity of $985.6 million in 2021, driven by the IPO and private placement531542 - Significant equity activities in prior years included issuances and conversions of Series A and B preferred stock, stock-based compensation, and common stock repurchases537541766767768769 Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (2019-2021) | Metric | 2021 (Thousands) | 2020 (Thousands) | 2019 (Thousands) | | :--- | :--- | :--- | :--- | | Total Convertible Preferred Stock | — | $908,310 | $690,329 | | Additional Paid-In Capital | $1,500,643 | $40,564 | $96,129 | | Accumulated Deficit | $(513,230) | $(431,264) | $(371,310) | | Total Stockholders' Equity (Deficit) | $985,648 | $(389,154) | $(274,839) | Consolidated Statements of Cash Flows Cash flow statements show a decrease in operating cash flow, continued significant investment in acquisitions, and substantial cash from financing activities in 2021 - Net cash provided by operating activities decreased by $20.1 million (35.0%) from $57.5 million in 2020 to $37.5 million in 2021452545 - Net cash used in investing activities was $379.7 million in 2021, primarily driven by $364.9 million for acquisitions455545 - Net cash provided by financing activities was $341.2 million in 2021, including $415.7 million from the IPO and $109.8 million from preferred stock issuance, offset by debt payments457549 Consolidated Statements of Cash Flows (2019-2021) | Cash Flow Activity | 2021 (Thousands) | 2020 (Thousands) | 2019 (Thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $37,482 | $57,539 | $(613) | | Net cash used in investing activities | $(379,668) | $(418,308) | $(323,779) | | Net cash provided by financing activities | $341,183 | $401,850 | $309,674 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $(779) | $40,994 | $(15,019) | | End of year cash and cash equivalents and restricted cash | $97,559 | $98,338 | $57,344 | Notes to Consolidated Financial Statements The notes provide detailed explanations of accounting policies and financial data, covering acquisitions, revenue, debt, equity, and other key areas - EverCommerce is a leading SaaS provider for service-based SMBs across Home, Health, and Fitness & Wellness Services553 - The IPO in July 2021 resulted in the issuance of common stock and conversion of all outstanding convertible preferred stock, significantly altering the equity structure554555 - The company's accounting policies adhere to U.S. GAAP, with critical estimates in revenue recognition, business combinations, and stock-based compensation556563565589620 - Acquisitions are a key growth strategy, with 5 in 2021 and 9 in 2020, contributing significantly to goodwill and intangible assets643653654655656657658 - Long-term debt was refinanced in July 2021, resulting in new credit facilities of $540.0 million and a $28.7 million loss on debt extinguishment758760 - Stock-based compensation expense was $22.1 million in 2021, primarily from stock options and restricted stock awards802785786 - The company had a net deferred tax liability of $17.8 million in 2021 and recorded a valuation allowance of $31.1 million against deferred tax assets824827 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - There are no changes in or disagreements with accountants on accounting and financial disclosure853 Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021 - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of December 31, 2021855 - The company is not yet required to provide a management report or auditor attestation on internal control over financial reporting under Section 404856 - No material changes in internal control over financial reporting occurred during Q4 2021857 Item 9B. Other Information This item states that there is no other information to report - There is no other information to report in this section858 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - This section is not applicable859 PART III Item 10. Directors, Executive Officers and Corporate Governance This section provides information on the company's leadership, board of directors, and corporate governance framework - EverCommerce's executive officers include Eric Remer (CEO), Matthew Feierstein (President), and Marc Thompson (CFO)864866867868869870871872 - The board of directors includes both executive and non-employee directors, with members serving on various committees864 - The company has adopted a Code of Conduct and Ethics applicable to all officers, directors, and employees863 - EverCommerce is a 'controlled company' under Nasdaq rules, with affiliates owning approximately 78.0% of common stock, allowing exemptions from certain governance requirements304305 Item 11. Executive Compensation Information regarding executive compensation will be provided in the company's definitive Proxy Statement - Executive compensation details will be included in the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders886 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Information concerning security ownership will be disclosed in the company's definitive Proxy Statement - Security ownership information will be included in the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders887 Item 13. Certain Relationships and Related Transactions, and Director Independence Details regarding related transactions and director independence will be provided in the company's definitive Proxy Statement - Information on related transactions and director independence will be included in the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders888 Item 14. Principal Accountant Fees and Services Information concerning principal accountant fees and services will be disclosed in the company's definitive Proxy Statement - Principal accountant fees and services information will be included in the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders889 PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements and exhibits filed as part of the Annual Report - The section includes a list of consolidated financial statements and supplementary data, as presented in Part II, Item 8892 - All financial statement schedules are omitted because they are not applicable, not material, or the information is already included in the consolidated financial statements893 - A comprehensive list of exhibits filed or incorporated by reference is provided, including corporate governance documents and material agreements894895897 Item 16. Form 10-K Summary This item indicates that no Form 10-K summary is provided - No Form 10-K summary is provided899