EverCommerce Inc. Q2 FY2023 earnings

EverCommerce reported second quarter fiscal 2023 revenue of $170.1 million, an 8.1% increase from $157.2 million in the prior-year quarter. Year-to-date revenue reached $331.2 million, up 10.1% from $300.8 million. The company recorded operating income of $1.8 million, compared with an operating loss of $6.1 million in the prior-year quarter. Operating margin was 1.0%, compared with -3.9%. Net loss narrowed to $0.9 million from $12.9 million. Diluted earnings per share was $0.00, compared with -$0.07 per share in the prior-year quarter. On a non-GAAP basis, Adjusted EBITDA was $38.8 million, up from $30.7 million, which management described as 26.2% year-over-year growth and more than 325 basis points of Adjusted EBITDA margin expansion.

Operational metrics point to a stable customer base. EverCommerce serves more than 685,000 customers across Home Services, Health Services, and Fitness & Wellness Services. Roughly 95% of revenue in the six months ended June 30, 2023 and 2022 was recurring or re-occurring. Annualized net revenue retention was approximately 98% for the quarter ended June 30, 2023. Excluding marketing technology solutions, annualized net revenue retention for core software and payments solutions was greater than 100% for the three months ended June 30, 2023. Management has completed 52 acquisitions since inception. During the quarter, the company repurchased and retired 904,000 shares of common stock for approximately $10.0 million. As of June 30, 2023, $17.5 million remained available under the repurchase program.

The top line benefited from a mix of software subscription expansion and higher payment transaction volumes, according to the MD&A. EverCommerce said the increase came from more customers, certain price increases, and higher transaction volumes processed through its payments platforms. Those gains were partially offset by declines in marketing technology solutions and other revenue. The company operates as a single reportable segment and sells to service-based small and medium-sized businesses through three core verticals.

Cash generation improved sharply. Operating cash flow was $28.45 million for the current quarter, up 155.2% from $11.15 million in the prior-year quarter. Year-to-date operating cash flow was $41.15 million, up 71.4% from $24.00 million. Capital expenditures were $0.72 million for the current quarter, up 7.2% from $0.68 million. Year-to-date capital expenditures were $1.20 million, down 23.3% from $1.56 million. Deferred revenue, current portion, was $24.9 million, down 2.4% from $25.5 million in the prior-year quarter. Remaining performance obligations were $22.3 million, down 3.5% from $23.1 million. On a year-to-date basis, net loss narrowed to $21.67 million from $26.19 million. Diluted earnings per share for the year to date was -$0.11, compared with -$0.13. Year-to-date operating loss narrowed to $3.51 million from $19.67 million. Year-to-date operating margin improved to -1.1% from -6.5%.

Guidance for the third quarter of fiscal 2023 sets Adjusted EBITDA at $34.5 million to $37.5 million. For the full fiscal year 2023, management expects Adjusted EBITDA of $142 million to $148 million. The company says it cannot reconcile Adjusted EBITDA to net income on a forward-looking basis without unreasonable efforts because of variability in stock-based compensation and other excluded charges. Those charges could prove material to results computed under GAAP.

Macroeconomic pressure remains a stated risk. The filing cites rising inflation, rising interest rates, a strengthened US Dollar, supply chain disruptions, and the COVID-19 pandemic as factors that may adversely affect revenue and costs. Company-specific risks include a limited operating history, the possibility that recent growth rates are not sustainable, potential failure to reach profitability, quarterly and annual fluctuations in operating results, acquisition integration challenges, intense competition, dependence on payment card networks and processors, data breaches, a material weakness in internal control over financial reporting, and substantial indebtedness. The Credit Facilities also carry interest rate risk, and the company amended the facilities in June 2023 to replace LIBOR with Adjusted Term SOFR.