EverCommerce(EVCM) - 2024 Q1 - Quarterly Report

Part I — FINANCIAL INFORMATION Financial Statements EverCommerce reported Q1 2024 revenues of $170.1 million (up 5.6%), a net loss of $16.3 million, and $13.3 million cash from operations Condensed Consolidated Balance Sheets Total assets decreased to $1.48 billion as of March 31, 2024, due to assets held for sale, with total stockholders' equity at $800.7 million Balance Sheet Highlights (in thousands) | Balance Sheet Highlights (in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $89,976 | $92,609 | | Assets held for sale | $12,596 | $0 | | Goodwill | $917,709 | $927,431 | | Total assets | $1,482,516 | $1,518,064 | | Liabilities | | | | Total current liabilities | $113,865 | $117,376 | | Long-term debt, net | $525,628 | $526,696 | | Total liabilities | $681,830 | $692,028 | | Total stockholders' equity | $800,686 | $826,036 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2024 total revenues grew 5.6% to $170.1 million, with a net loss of $16.3 million after an $11.2 million loss on held for sale and impairments Income Statement Highlights (in thousands) | Income Statement Highlights (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Subscription and transaction fees | $134,724 | $123,820 | | Marketing technology solutions | $30,292 | $31,788 | | Total revenues | $170,113 | $161,136 | | Operating loss | ($4,610) | ($5,288) | | Loss on held for sale and impairments | $11,221 | $1,063 | | Net loss | ($16,324) | ($20,775) | | Basic and diluted net loss per share | ($0.09) | ($0.11) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $13.3 million in Q1 2024, while financing activities used less cash due to reduced stock repurchases Cash Flow Highlights (in thousands) | Cash Flow Highlights (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,297 | $12,700 | | Net cash used in investing activities | ($3,606) | ($4,857) | | Net cash used in financing activities | ($12,371) | ($30,409) | | Net decrease in cash | ($3,273) | ($22,516) | Notes to Condensed Consolidated Financial Statements Notes detail the $10.8 million loss from fitness solutions divestiture and $12.1 million in stock repurchases under the expanded program - On March 13, 2024, the company agreed to sell its fitness solutions to Jonas Software, resulting in a $4.8 million loss on disposal, a $3.4 million goodwill impairment, and a $2.6 million loss on held for sale for the UK Fitness business [45][48] - The company's stock repurchase program was expanded to a total of $150.0 million and extended through December 31, 2024, with 1.2 million shares repurchased for $12.1 million in Q1 2024, leaving $27.9 million available [83][84] - As of March 31, 2024, the company had $536.3 million in term loans outstanding and uses two interest rate swap agreements with a combined notional amount of $300.0 million to manage interest rate risk [73][76] Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2024 total revenue increased 5.6%, driven by subscription fees, with Adjusted EBITDA up 28% to $40.9 million and improved operating margins Overview and Key Metrics EverCommerce serves over 708,000 SMB customers, with 97% recurring revenue, a 5.7% Pro Forma Revenue Growth Rate, and increased Adjusted EBITDA - The company serves over 708,000 customers across three core verticals: Home Services, Health Services, and Fitness & Wellness [107] - Pro Forma Revenue Growth Rate was 5.7% for the three months ended March 31, 2024 [121] Adjusted EBITDA Reconciliation (in thousands) | Adjusted EBITDA Reconciliation (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | ($16,324) | ($20,775) | | Interest and other expense, net | $5,791 | $15,188 | | Income tax expense | $5,923 | $299 | | Depreciation and amortization | $22,951 | $25,950 | | Stock-based compensation expense | $5,576 | $7,514 | | Transaction-related and other non-recurring costs | $15,303 | $2,453 | | Adjusted EBITDA | $40,890 | $31,938 | Results of Operations Total revenue grew 5.6% to $170.1 million, driven by subscription fees, with operating expenses improving by 390 basis points and a $11.2 million divestiture loss Revenues by Type (in thousands) | Revenues by Type (in thousands) | Q1 2024 | Q1 2023 | Change $ | | :--- | :--- | :--- | :--- | | Subscription and transaction fees | $134,724 | $123,820 | $10,904 | | Marketing technology solutions | $30,292 | $31,788 | ($1,496) | | Other | $5,097 | $5,528 | ($431) | | Total revenues | $170,113 | $161,136 | $8,977 | - The combination of cost of revenue, sales and marketing, product development, and general and administrative costs as a percentage of revenue declined from 86.5% to 82.6%, an improvement of approximately 390 basis points [147] - Loss on held for sale and impairments increased by $10.2 million, driven by a $4.8 million loss on disposal, a $3.4 million goodwill impairment, and a $2.6 million loss on held for sale measurement related to the fitness solutions divestiture [156] Liquidity and Capital Resources The company maintains strong liquidity with $92.9 million cash and $190.0 million available revolver capacity, funding operations and $12.1 million in repurchases - As of March 31, 2024, the company had cash, cash equivalents and restricted cash of $92.9 million and $190.0 million of available borrowing capacity under its Revolver [161] - The company repurchased and retired 1.2 million shares of common stock for approximately $12.1 million during Q1 2024, with $27.9 million remaining available under the Repurchase Program [182] - The company has $536.3 million outstanding under its Term Loans and was in compliance with all debt covenants as of March 31, 2024 [179] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported since the 2023 Annual Report on Form 10-K - There have been no material changes to the company's market risk disclosures since the last Annual Report on Form 10-K [189] Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2024, due to a previously identified material weakness - Management concluded that as of March 31, 2024, disclosure controls and procedures were not effective at the reasonable assurance level [190] - The ineffectiveness stems from a material weakness in internal control over financial reporting, as detailed in the 2023 Annual Report on Form 10-K [190][191] Part II — OTHER INFORMATION Legal Proceedings A class action lawsuit alleges the 'CEO Approval Right' unlawfully limits Board authority, but the company asserts meritorious defenses - A putative class action lawsuit alleges the 'CEO Approval Right' for Sponsor Stockholders unlawfully limits the Board's authority under Delaware law [102] - The company asserts meritorious defenses, believing any liability is neither probable nor reasonably estimable [102] Risk Factors No material changes to risk factors were reported since the 2023 Annual Report on Form 10-K - No material changes to risk factors were reported since the filing of the Annual Report on Form 10-K [195] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1.2 million shares for $12.1 million in Q1 2024, with $27.9 million remaining under the $150 million program Stock Repurchase Program Activity | Period | Total Shares Purchased | Average Price Paid ($) | Remaining Authorization (in thousands) | | :--- | :--- | :--- | :--- | | Jan 2024 | 346,713 | $10.26 | $36,414 | | Feb 2024 | 381,887 | $9.92 | $32,625 | | Mar 2024 | 504,905 | $9.30 | $27,929 | - The Repurchase Program authorizes purchases up to $150.0 million in total and has been extended through December 31, 2024 [196]