EverCommerce Inc. Q1 FY2024 earnings

EverCommerce reported first quarter fiscal 2024 revenue of $170.1 million, up 5.6% from the prior-year quarter. The company stayed unprofitable on a GAAP basis: net loss was $16.3 million, or $(0.09) per diluted share, and that loss narrowed from a year earlier. Operating loss also narrowed, to $4.6 million. Operating margin was -2.7%, an improvement of 0.6 percentage points. Adjusted EBITDA, a non-GAAP measure, was $40.9 million compared with $31.9 million in the prior-year quarter. Management tied the quarter to execution and to transformation and optimization work meant to accelerate growth and lift shareholder value.

The revenue mix shifted. Subscription and transaction fees rose 8.8%, while marketing technology solutions fell 4.7%. EverCommerce attributed the subscription and transaction fee growth to a larger customer base, certain price increases and higher payment transaction volumes. It said the marketing technology decline came from lower demand as consumer spending eased. The company serves more than 708,000 customers. Annualized net pro forma revenue retention was approximately 93% for the quarter, and the core software and payments business, excluding marketing technology, retained approximately 99% of revenue. Adjusted gross profit, a non-GAAP measure, was $113.3 million compared with $105.2 million a year earlier. Cost of revenues fell to 33.4% of revenue from 34.7%, which lifted gross margin. Management has made margin expansion a centerpiece of its transformation effort.

Deferred revenue and backlog moved in opposite directions. Deferred revenue, current portion only, rose 7.0% to $25.9 million. Remaining performance obligations fell 4.9% to $19.5 million, a metric worth watching because it can foreshadow slower recognized revenue. Operating cash flow rose 4.7% to $13.3 million, and capital expenditures fell 15.5% to $0.4 million. EverCommerce repurchased and retired 1.2 million shares for approximately $12.1 million during the quarter, leaving $27.9 million available under the repurchase program as of March 31, 2024. The company closed the sale of its North American Fitness business in March 2024 and expects the UK Fitness sale to close in the third quarter of 2024, subject to regulatory approval. The fitness deals drove losses on held for sale and impairments in the quarter and leave a narrower portfolio.

Guidance frames the next two periods. For the second quarter of 2024, management issued an Adjusted EBITDA range of $39 million to $42 million. For the full year 2024, Adjusted EBITDA guidance is $167 million to $176 million. Revenue guidance for both periods excludes the fitness assets and is non-GAAP. Adjusted EBITDA guidance is likewise non-GAAP, and the company said a reconciliation to net income is not available without unreasonable efforts on a forward-looking basis.

The risk list is long. EverCommerce has posted net losses and may not reach profitability, and management notes that recent growth rates may not be sustainable. Marketing technology revenue is shrinking, and the drop in remaining performance obligations could pressure future revenue. Macroeconomic pressure includes inflation, interest rates, currency swings, supply chain disruptions and geopolitical conflict. Competition is intense across the verticals the company serves. The payments business depends on card networks such as Visa and MasterCard and processors such as Worldpay and PayPal, and the company also cites cyber breach and data protection exposure. Execution on integration and transformation remains the swing factor for the year.