EngageSmart(US:ESMT)2023-02-09 18:40Financial Data and Key Metrics Changes - Revenue for 2022 was $303.9 million, representing a 41% growth from 2021, with adjusted EBITDA of $49.3 million or 16.2% of revenue [15][24] - Q4 revenue was $83.9 million, reflecting a 36% year-over-year growth, driven by customer count and transactions processed [26] - Adjusted gross margin for Q4 increased to 79.5% from 77.8% in Q4 2021, primarily due to pricing and packaging changes [27] Business Line Data and Key Metrics Changes - The SMB segment achieved outstanding revenue growth of 52% in 2022, driven by new customer additions and favorable subscription mix [43] - The enterprise segment reported revenue of $38.7 million in Q4, representing 27% year-over-year growth, driven by new customer ads and strong digital payment adoption [27] - Subscription revenue in the SMB segment for Q4 was $33.5 million, growing 58% year-over-year [50] Market Data and Key Metrics Changes - The mental health market is characterized by a shortage of professionals and increasing demand for care, which is expected to continue driving growth for the SimplePractice solution [21][16] - The company has captured about 1% of the $28 billion U.S. market opportunity across all verticals [53] Company Strategy and Development Direction - The company is prioritizing group practices in 2023, enhancing features to improve efficiency for these customers [44] - Continued investment in product innovation and marketing is planned to drive growth and expand market share [22][47] - The company aims to achieve a midterm revenue milestone of $500 million while expanding margins [47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, particularly in mental health, and expects consistent gross customer additions in 2023 [16][128] - The company anticipates a slight increase in churn due to pricing changes but expects strong net revenue retention above 100% [85][128] - Management highlighted the importance of revenue cycle management as a significant opportunity to support customers in managing collections [157] Other Important Information - Free cash flow for 2022 was $45.8 million, with a cash balance of $311.8 million as of December 31, 2022 [24] - The company plans to increase pricing for its integrated payment processing solution by 20 basis points in late Q1 2023 [161] Q&A Session Summary Question: What is the outlook for new customer growth in 2023? - Management expects consistent trends in gross customer additions driven by high demand for mental health treatment [128] Question: How does the company view the impact of pricing changes on margins? - Management indicated that pricing and packaging changes are significant contributors to margin expansion, with expectations for continued improvement [85][144] Question: What are the growth expectations for the SMB and enterprise segments in 2023? - SMB is expected to grow approximately 30%, while enterprise is projected to grow around 20% [92][93]