EverCommerce Inc. Q2 FY2024 earnings

EverCommerce reported second quarter revenue of $177.4 million, up 4.3% from the prior-year quarter, and year-to-date revenue of $347.5 million, up 4.9%. Operating income was $6.9 million for the quarter, up 286.0%, and $2.3 million for the first half, which swung to a profit from an operating loss in the prior-year period. Operating margin improved to 3.9% for the quarter and to 0.7% year to date. The bottom line was weaker. Net loss was $3.4 million for the quarter, a wider loss than the prior-year quarter, while the year-to-date net loss of $19.7 million narrowed from the prior-year period. Diluted EPS was $(0.02) for the quarter, swinging to a loss, and $(0.11) for the year to date, flat versus the prior-year period. Adjusted EBITDA, a non-GAAP measure, was $41.2 million for the quarter compared with $38.8 million a year earlier, and $82.1 million for the first half compared with $70.7 million.

Operational trends were mixed. Pro forma revenue growth was 6.0% for the quarter and 5.8% for the first half. Annualized net revenue retention was approximately 92% for the quarter, down from 98% a year earlier. Excluding marketing technology solutions, retention for core software and payments solutions was approximately 97%, down from 100%. Recurring or re-occurring revenue represented approximately 97% of revenue in the first half, up from 95%. The company served more than 708,000 customers as of December 31, 2023, or more than 690,000 excluding customers tied to the fitness assets. EverCommerce divested its fitness assets during the period, with the North American Fitness sale closing in March 2024 and the UK Fitness sale closing on July 1, 2024. Those international fitness assets were fully divested on July 1, 2024, and management said revenue guidance excludes them.

Cash generation and capital returns told a different story. Operating cash flow was $23.9 million for the quarter, down 15.9%, and $37.2 million year to date, down 9.6%. Capital expenditures were $0.63 million for the quarter, down 12.6%, and $1.04 million year to date, down 13.7%. Deferred revenue was $26.9 million, up 7.9% from the prior-year quarter. Remaining performance obligations were $18.9 million, down 15.2%. As of June 30, 2024, the company held $90.0 million in cash, cash equivalents and restricted cash, including amounts classified as held for sale, and had $190.0 million of available borrowing capacity under its revolver. The company repurchased and retired 2.5 million shares for approximately $24.1 million during the quarter, and 3.7 million shares for approximately $36.3 million in the first half. The board approved a $50.0 million increase to the repurchase authorization in May 2024, bringing total authorization to $200.0 million, and extended the program through December 31, 2025. As of June 30, 2024, $54.0 million remained available.

Management framed 2024 as a transition year, balancing growth with profitability while investing in transformation initiatives to benefit 2025 and beyond. For the third quarter of 2024, the company guided Adjusted EBITDA to a range of $39 million to $42 million, and for the full year 2024 to a range of $167 million to $176 million. Revenue guidance for both the third quarter and the full year excludes the now-divested fitness assets. Risks include macroeconomic pressure from geopolitical conflict, terrorism, inflation, currency fluctuations, rising interest rates and supply chain disruptions. EverCommerce also faces intense competition, dependence on payment card networks such as Visa and MasterCard and payment processors such as Worldpay and PayPal, and a history of net losses. Retention softened across the business, and interest rate swap volatility drove swings in interest and other expense, net. Management continues to invest in technology, centralized security operations, information technology and cloud engineering.