EverCommerce Inc (EVCM) 2025 Q1 法說會逐字稿

Thank you for standing by and welcome to EverCommerce's first-quarter 2025 earning call. My name is Corey. I'll be your operator today. (Operator Instructions) As a reminder, this conference call is being recorded today, Thursday, May 8 of 2025.

And I would now like to turn the conference call over to Brad Korch, SVP, and Head, Investor Relations for EverCommerce. Please go ahead.

Good afternoon and thank you for joining. Today's call will be led by Eric Remer, EverCommerce's Chairman, Chief Executive Officer; and Ryan Siurek, EverCommerce's Chief Financial Officer.

Joining them for the Q&A portion of the call are EverCommerce's President, Matt Feierstein; EverCommerce's Chief Executive Officer, Josh McCarter, and EverHealth's Chief Executive Officer, Evan Berlin.

This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended March 30, 2025. For a link to the live or replay webcast, please visit the Investor Relations section of the EverCommerce website, www.evercommerce.com.

The slide presentation and earnings release are also directly available on the site. Please turn to page 2 of our earnings call presentation while I review our Safe Harbor statement. Statements made on this call and contained in the earnings materials available on our website that are not historical in nature may constitute forward-looking statements. Such statements are based on the current expectations and beliefs of management.

Actual results may differ materially from these forward-looking statements due to risks and uncertainties that are described in more detail in our filings of the SEC. We undertake no obligation to publicly update or revise these forward-looking statements except as required by law.

We'll also refer to certain non-GAPP financial measures in our comments today. A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and on our earnings call presentation. As a quick reminder, following our announcement in March that we are seeking strategic alternatives for the marketing technology solutions, we have classified marketing technology as discontinued operations.

Our commentary today will focus on the continuing operations of our business, focus on our EverHealth, EverPro, and EverWell verticals. All financial and operating metric results are presented related to the continuing operations only unless otherwise specified.

I will now turn it over to our CEO, Eric Remer. Please continue.

Thank you, Brad. I'll focus my commentary on first-quarter 2025 results, as well as our top strategic priorities. Brian will then discuss our financial performance in more detail.

Our first-quarter reported revenue exceeded the top end of our guidance range. For the first three months of the year, GAAP revenue increased 3.2% year over year at a pro forma basis, which adjusts to the prior year sale of fitness solutions, revenue increased 7.4% year over year.

Adjusted EBITDA $44.9 million also beat the top end of our guidance range, representing a 31.6% margin. Adjusted EBITDA margin expanded nearly 360 basis points year over year. Payments revenue, excluding the fitness solutions grew 8.4% year over year, driven by nearly 9% growth in TPV.

Finally, our Board of Directors approved a $50 million dollar increase to a share repurchase program, while also extending this authorization to year-end 2026. EverCommerce provides SaaS solutions for the service SMB economy. We offer tremendous value to our customers by providing system of action necessary to run their businesses with tailored unique workflows.

Adjusted to account the planned sale of marketing technology solutions, we provide end-to-end solutions to more than 725,000 customers across the three major verticals: EverPro for home field services, EverHealth for physician practices, and EverWell for wellness, with the two former verticals representing 95% consolidated revenue.

Our large base of customers represents an immense embedded opportunity to provide value-added features and services like payments and customer rebates through our purchasing programs. On a pro forma basis, for the last 12 months, we generated $563.9 billion in revenue representing 7.8% year-over-year growth. Subscription and transaction revenue grew 8.1% year over year. Over the last 12 months, we generated 30.1% adjusted EBITDA margin.

Finally, our annualized total payment volume or TPV expanded to over $12.7 billion. Before I dive into our normal course discussion of customer trends, I want to update you on our AI initiatives at EverCommerce. AI is an important part of our forward strategy for multiple reasons.

First, embedding AI capabilities into our customer-facing software allows us to innovate faster to maintain a leading competitive position. Second, using AI for development work enables us to more efficiently and more quickly bring new features, functions, and solutions to market. And third, we believe that using AI-driven workflows internally will be a key driver to continue our cost discipline and drive additional long-term margin expansion.

Over the past 6 to 12 months, we've made significant progress integrating AI in our products and our internal workflows. We've deployed third-party AI platform features and automation tools across talent acquisition, people operations, employee development functions to reduce manual workloads, improve data collection, and create impactful actionable insights. Looking ahead, we expect additional AI use cases to have a meaningful contribution to our products and operations.

Before discussing our customer metrics, I want to once again remind you that these metrics have been restated for both the current and year-ago periods to exclude marketing technology solutions. Accelerating payments adoptions and utilization continues to be our highest priority, and in 2025, we're making specific investments in our product capabilities and go-to-market motions to prioritize payment attachment at the point of initial SaaS sale.

At the end of the first quarter, 244,000 customers were enabled to more than one solution, reflecting 28% year-over-year growth. As we discussed when we introduced this metric, enabling customers to more than one solution is the first step in the funnel that leads to increased revenue, retention, and ultimate profitability of these customers.

Once customers are enabled, the next action item for us is to facilitate usage. In the case of payments, this is getting our customers to actively process on our platform. We measure the step in the funnel as utilization. At the end of the first quarter, approximately 99,000 customers were actively utilizing more than one solution, reflecting 20% year-over-year growth.

Customers that purchase and utilize more than one solution are naturally some of our most profitable and stickiest customers. As we've illustrated in past earnings calls, the effect of more customers taking payments or other add-on features and services is higher net revenue retention.

Looking back on the trailing 12 months, our annualized net revenue retention or NRR was 97%. Year over year, our payments revenue on a pro forma basis grew over 8% and accounted for approximately 21% of overall revenue. As a reminder, we report our payments revenue on a net basis and therefore contribute approximately 95% gross margin.

Payments revenue is a meaningful contributor to overall adjusted EBITDA margin expansion. First-quarter estimated annualized total payment volume of TPV was approximately $12.7 billion, representing nearly 9% year-over-year growth. As I mentioned earlier, we are making strategic high ROI investments into our payment platform and team, which we believe will result in increased payment adoption, TPV growth, and revenue acceleration.

Now I'll pass it over to Ryan, who'll review our financial results in more detail as well as provide our second-quarter guidance.

Thanks, Eric. While total reported revenue in the first quarter was $142.3 million subscription and transaction revenue, our primary revenue base was $137.8 million, up 3.3% from the prior-year period.

For Q1 2025, year-over-year pro forma revenue growth was 7.4%, while year-over-year pro forma subscription and transaction revenue growth was 7.6%. The primary difference between the actual and pro forma revenue growth is attributable to the removal of prior-year revenue associated with the sale of our fitness solutions that closed in 2024.

The solid performance and subscription and transaction revenue was largely due to continued execution of our growth strategy to provide customers our core system of action software solutions and driving expansion by promoting cross-sell and upsell opportunities leading with payments.

As Eric noted, we also exceeded the top end of our adjusted EBITDA guidance range. First-quarter adjusted EBITDA was $44.9 million, representing a 31.6% margin versus 28% in Q1 2024, which is 16.3% growth year over year.

Q1 margin expansion of over 360 basis points was aided by the timing of certain expenses and investments, with a significant portion of the favorability compared to guidance expected to be reallocated to later periods within the year. On a year-over-year basis, margins improved due to cost optimization initiatives, mixed shift to higher margin products, and overall scale economies.

Adjusted gross profit in the quarter was $111.1 million, representing an adjusted gross margin of 78.1% versus 77.1% in Q1 2024. Adjusted gross profit improved largely as a result of a positive mix shift in the business to high margin revenue streams such as payments and rebates.

Now turning to adjusted operating expenses, which are reconciled in the appendix to this presentation. Overall, adjusted operating expenses improved as a percentage of revenue, both for the quarter from 49.1% to 46.5% on a year-over-year basis and on an LTM basis from 49.2% to 47.9%.

While the previously mentioned timing of investments and expenses was a factor, the long-term trend of continued operating expense moderation is deliberate and attributable to both growth of the business and specific actions taken as part of our transformation and optimization program. We maintain our focus on improving the customer satisfaction and acquisition while also highly focused on cost discipline in functional support areas.

Now turning to some key liquidity measures which include cash flow from continuing and discontinued operations, we continue to generate significant free cash flow as we invest to grow our business. Cash flow from operations for the quarter was $30.7 million, more than double the $13.3 million generated in Q1 2024. Levered free cash flow was $25.1 million in the quarter and for the trailing 12-month period, we generated more than $110.9 million in lever free cash flow. Adjusted unlevered free cash flow was $34.3 million in the quarter and $138.9 million for the last 12 months, representing 14.8% and 17.7% year-over-year growth, respectively.

We ended the quarter with $148 million cash and cash equivalents, and we maintained $190 million of undrawn capacity on our revolver. We have $531 million of debt outstanding as of the end of the quarter, which matures in July 2028. Our total net leverage as calculated for our credit facility at the end of the quarter was approximately 2.1 times, consistent with our financial policy.

We have $425 million of notional swaps at a weighted average rate of 3.91% for the floating rate component of our interest cost. Owing in large part to our strong balance sheet, cash flow generation and liquidity profile, our Board of Directors once again increased our share repurchase authorization by another $50 million and extended the program, which was set to expire at the end of this year to year-end 2026.

In the first quarter, we repurchased approximately 1.1 million shares for $11.2 million at an average price of $10.08 per share. Based on the recently increased authorization and shares repurchased through March 31, 2025, we have approximately $71.6 million remaining in our total repurchase authorization.

I would now like to finish by discussing our outlook for the second quarter and full year of 2025. As a reminder, our guidance for revenue and adjusted EBITDA for 2025 is based on our continued operations, which excludes marketing technology solutions.

For the second quarter of 2025, we expect total revenue of $144.5 million to $147.5 million and adjusted EBITDA of $39.5 million to $41.5 million. For full year 2025, we expect total revenue of $581 million to $601 million and adjusted EBITDA of $167.5 million to $175.5 million, unchanged from the guidance provided in mid-March.

Operator, we are now ready to take the first question.

(Operator Instructions) Kirk Materne, Evercore ISI.

Hi, this is [Bill] on for Kirk, and thanks for taking my question. Last quarter, prioritizing payment attachment at the point of sale versus a future add-on sales motion was mentioned as part of your strategy. How has this been playing out for your sales teams in terms of win rates?

Yeah, I appreciate the question. Super excited about that again. I think that's still a core focus, a core strategy for us. In Q1, we absolutely saw some benefits of that, saw increases in that payment attach with new customers, and it's -- there's nuance to that as well. We're also doing things like, again, integrating that payment -- that selling motion of payments into the SaaS workflow. But also, we're doing sell behind efforts.

So when a sale goes unclosed with a closed loss reason or it's just unclosed, we have our payments team falling behind. So again, a lot of focus on payments attached at the time of software sale. That is through that integrated motion, but we're also investing in additional go-to-market optimization motions around that as well, and that's definitely proven true for us in Q1.

Okay, great. And then outside of payments integrations, what do you view as the biggest upsell opportunities within your portfolio of EverPro, EverHealth and EverWell?

Yeah, I'll start and certainly, if Evan and Josh want to chime in from each of their vertical perspectives. Obviously, super focused on payments from that penetration execution. It is our largest opportunity. But we're really excited about additional product integrations into our core systems of actions.

A couple of examples, some of which we've spoken about in the past, obviously EverProEdge has been a big opportunity from a growth perspective over the last year, but additional products that we have from a customer experience solution standpoint. So reviews integrations at system of actions like Joist and Service Fusion also create real opportunities for us to expand the perimeter of our existing systems of actions with additional product capabilities.

Kevin, would you have anything from the EverHealth fund?

Yes, good question, Bill. I just say we talked about it in the past quarters from an EverHealth perspective that beyond payments, we're working to move beyond cross sell and really working on delivering more value in the packages that we're selling to customers just given the integrated capabilities we've got within EverHealth. So not just selling practice management and the DMR solution, but integrating patient engagement, RCM, our insurance clearinghouse in addition to the kind of payments upsell.

So the answer in EverHealth is really around a more integrated package that our small practices can purchase from us and then certainly as they grow and scale, buy more features over a period of time.

Operator, next question.

Operator, can you hear us?

Yes, Alex. Your line is open.

Great, thank you. Eric or Matt, just in terms of macro, you serve some resilient end markets we talked about this in the past, but any change in pipeline activity or some of the net expansion metrics you're tracking over the last two months tied to macro or any tariff concerns?

Yeah, thanks for the question. We obviously are monitoring it daily with the volatility of the macroeconomic environment. But to date, we are not seeing any degradation in any of our kind of key metrics we follow from lead gen to throughout the funnel onboarding, so on and so forth. So we'll continue to monitor it, but to date, it's kind of business as usual.

Maybe just a quick follow-up on that for Ryan. Anything different embedded in the outlook for potential, different changes in demand environment tied to that macro?

Now when we look at the full year and we updated our guidance for Q2 but left the full year unchanged, we're not making any particular assumption differently with regard to kind of the macroeconomic environment and things that are in the news currently. Should that change, we obviously would make things updated.

We've just continued to be prudent in the guidance that we're giving overall. We feel good about the Q1 results. But as I said, we had some expense favorability that we think we're going to continue to move forward into the rest of the year and nothing therefore changes for the full-year guidance perspective.

And just to add on the premise of your question, we do agree we have really good end markets that are resilient. We're not immune to massive macro changes that could occur. And so that's why as Ryan said and I said earlier, we're just going to track it closely and make sure that we're doing what we need to do accordingly internally.

Okay. And then maybe just one other follow-up from me, similar to the first question, but the multi-product adoption, I think was a record sequential growth. Is there anything we can read into that in terms of TPV or payments growth kind of accelerating here next quarter or the rest of the year, or is there good cross-sell of kind of other solutions outside of payments? Thanks.

Yeah, I'll start, and I'll certainly let Josh add. Again, we're excited and remain excited about the opportunity and the progress that we continue to make across payments, although, again, lots of field in front of us to continue to drive that execution and growth. I think again, enablement, as Eric said, is the first step in the process. So excited for the continued and really solid quarter from a payment attach standpoint.

The next step in the funnel is obviously utilization and we're incredibly focused on -- to go-to-market optimization that we're doing, the product enhancements that we're doing. Again, we need to continue to drive SaaS workflow improvements, add to the payment features that we have and integrate customer success.

So those are all things that we're actively investing in and all things that we believe as we have a greater foundation of enabled customers for payments that we believe that that's going to turn itself into more utilization and ultimately more TPV. And I did speak to some of the other products that we have. I mean, that -- we're all excited about that. I didn't mention additional, homeowner financing and consumer lending products that we've integrated in, as well as like I mentioned, EverPro Edge and further integration of our reviews products across our portfolio.

Sorry. Josh, anything you would add there?

I think you hit most of it. The only other two things I would say is that as we're adding and improving the product and adding more ways to pay, that will enable us to capture more TPV. So as we're adding tap to pay and more mobile payments and ACH and check capture and so forth, that definitely grows the pie.

And then the other point on the product that you brought up, something like Edge or the reviews, that's also a retention aspect because the more products that a customer buys from us, that's going to retain them longer and produce a longer lifetime value for us. So those are two other things I'd highlight.

All right, great. Super thorough. Thank you all.

(Operator Instructions) Aaron Kimson, Citizens.

Great, thanks for the question, guys. I'm sorry if some of this came up. I've been jumping around calls. But when we think about your 500,000 customers or so in the US, is it safe to assume that most of the potential tariff exposure there is on the EverPro side of the business? And do you have any thoughts on what percentage of revenue could be exposed to tariffs?

Yeah, again, most of our EverPro business is break fix, so we're not in kind of new starts and major construction, so we're -- we don't do things from a macro perspective. Our customers are going to be directly hit by -- our specific EverPro customers are going to be directly hit by that.

Will some of their supplies, potentially, and that those costs would pass on to the customer. Will customers if the macroeconomics gets worse, pull back on fixing non-critical things potentially. So we're aware of all the potential pitfalls that could happen with regard to it, but we're not directly exposed in terms of tariffs hitting our business having a direct impact on our customers.

Got it. And then, secondly, for Josh, maybe, you've had about six months now to wrap your arms around the EverPro business. Are there any pleasant surprises or particular areas of improvement you've identified so far? And I know you joined Mindbody right around the take private, but since investors know that's from its public days, are there any lessons from Mindbody you think will prove particularly relevant running EverPro?

Yeah, absolutely. Well, thank you for the question. First of all, the last six months have been fantastic and I've continued to find more opportunity in the business, which has been great, and several of the areas -- we've talked about payments and I think that we all see that as (technical difficulty) and specifically within EverPro. Outside of that, we have a lot of opportunity to cross-sell other products and start building out more features and functions within CES, within marketing products, and then also thinking about other verticals that our solutions can support.

We also have another product that is called Service Nation, which is a training trade show and rebate program that I think we just barely scratched the surface on. Right now, we have several 1,000 participants in that program, and I think that could grow significantly.

So as we look at rebates, you heard about Edge before, a lot of those type of programs can bring more people into the fold, whether they're on those programs or on other systems of action. So I'm very optimistic and very positive about the opportunity at EverPro.

And then the question about Mindbody. A lot of the work that we did there was transformational work, and you've heard about the transform and optimize initiatives that we have going across EverCommerce. And I think a lot of the things that we did in terms of restructuring the sales organization and consolidating down from multiple organizations into one, streamlining different processes, consolidating down systems, streamlining, reporting, launching a revenue operations function, all of those type of things that we did at Mindbody were very applicable to EverPro. And we've also built out a great executive team that has experience in this type of transformation that's really helping to drive those initiatives forward.

Great. Thank you, guys.

Thank you very much. At this time, I am showing no further questions. And I would like to turn it back to Eric Remer for closing remarks.

Thank you again for joining us today. While we are pleased with the results this quarter, we are much more excited about the trajectory of the business and successes we're seeing on our transformation journey. We look forward to sharing even more with you in the weeks and months ahead. Thanks again.

Thank you very much for your participation in today's conference. This does conclude the program. You may now disconnect.