EverCommerce Inc. is a leading provider of integrated, vertically-tailored software-as-a-service (SaaS) solutions for service-based small- and medium-sized businesses (service SMBs). The company's platform spans across the full lifecycle of interactions between consumers and service professionals, offering a comprehensive suite of solutions to address the unique demands of service SMBs.
Company Overview
Founded in 2016, EverCommerce has grown to serve more than 690,000 customers across three core verticals: Home Services, Health Services, and Wellness Services. The company's solutions are designed to provide service SMBs with the tools they need to thrive in an increasingly digital-driven marketplace, offering a system of action business management software, integrated billing and payment solutions, customer experience applications, and marketing technology.
Growth and Expansion
Since its inception, EverCommerce has experienced significant growth and expansion. In its early years, the company focused on building out its core business management software solutions tailored to specific verticals. By the end of 2019, EverCommerce had organically grown its customer base to over 470,000 by providing essential workflow automation, billing and payments, and marketing tools that service SMBs needed.
The company's growth trajectory accelerated in 2020 and 2021 through a series of strategic acquisitions that expanded its product suite and customer reach. Notable acquisitions included Kickserv, a field service management software provider, and Fitness Solutions, which offered business management software for the fitness industry. These acquisitions allowed EverCommerce to further penetrate its existing verticals and diversify into new ones.
Challenges
However, EverCommerce's journey has not been without challenges. In 2022, the company faced headwinds from macroeconomic factors such as rising inflation and supply chain disruptions, which impacted its customers and revenue growth. Additionally, EverCommerce had to address a material weakness in its internal controls over financial reporting, which it worked to remediate throughout 2023. Despite these obstacles, the company remained focused on executing its strategy, streamlining operations, and strengthening its market position as a leading provider of vertical-specific SaaS solutions for service SMBs.
Financials
EverCommerce's financial performance in recent years has demonstrated the strength of its business model and the growing demand for its suite of services. In fiscal year 2023, the company reported revenue of $675.37 million and a net loss of $45.62 million. The company's annual operating cash flow stood at $104.61 million, while its free cash flow reached $81.53 million.
In the most recent quarter (Q3 2024), EverCommerce reported revenue of $176.26 million, up 0.9% year-over-year, and a net loss of $9.16 million. The company's operating cash flow for the quarter was $27.53 million, with free cash flow of $36.08 million. The adjusted EBITDA of $44.5 million represented a 25.3% margin and a 140 basis point expansion compared to the prior-year period.
EverCommerce's revenue growth was primarily driven by its subscription and transaction fee segment, which increased 3.7% year-over-year to $137.57 million in Q3 2024. This growth was attributed to increases in the number of customers, price increases, and growth in rebate revenue from supplier contracts in group purchasing programs. However, the marketing technology solutions segment saw a 6.7% decline in revenue, primarily due to reduced demand driven by decreases in consumer spending, partially offset by price increases and growth in customer count for lead generation services.
The company's other revenue segment, consisting primarily of one-time revenue streams such as consulting and implementation services, decreased by 17.6% in Q3 2024 compared to the prior year period. This decline was driven by a reduction in revenue from project implementation and customer development services.
EverCommerce's geographic revenue distribution shows a strong focus on the United States market, which generated $162.46 million, or 92.1%, of its Q3 2024 revenue. The remaining $13.80 million, or 7.9%, came from international markets.
The company's annualized net revenue retention rate for its core software and payment solutions stood at 96% in the trailing 12-month period, indicating strong customer loyalty and upselling success. Additionally, EverCommerce reported an annualized total payment volume (TPV) of $12.4 billion, representing 8.4% year-over-year growth.
Liquidity
As of the latest reporting period, EverCommerce maintained a solid liquidity position. The company's cash and cash equivalents stood at $101.57 million, with an additional $190 million available under its revolving credit facility. The company's debt-to-equity ratio was 0.6863, indicating a manageable level of leverage. Both the current ratio and quick ratio stood at 1.81, suggesting that EverCommerce has sufficient short-term assets to cover its near-term liabilities.
EverCommerce's financial results have been impacted by its strategic decision to divest its fitness solutions business in 2024. The sale of the North American and UK-based fitness assets was completed in the third quarter, with the company recognizing losses of $5.0 million related to the transaction. Additionally, a $6.4 million goodwill impairment charge was recorded during the period. This divestiture allows EverCommerce to focus on its core service-based verticals, where it sees significant growth opportunities.
Growth Strategy
To drive future growth, EverCommerce has implemented a multi-pronged strategy centered around transformation and optimization initiatives. The company's transformation efforts aim to bring decision-making closer to customer needs, with the recent hiring of a seasoned leader, Josh McCarter, to head its EverPro vertical. McCarter's extensive experience in vertical SaaS, consumer marketplaces, and integrated fintech is expected to be instrumental in accelerating growth within the home and field services segment.
EverCommerce's optimization initiatives are designed to identify and execute on cost-saving opportunities, providing a runway for long-term margin expansion and free cash flow generation. These efforts include the consolidation of third-party vendors and contracts, rationalization of the real estate footprint, and optimization of hosting and partner platforms.
Customer Expansion
The company's focus on cross-selling and upselling additional solutions to its existing customer base has also contributed to its strong financial performance. At the end of the third quarter, approximately 212,000 customers were enabled for more than one solution, reflecting a 25% year-over-year growth. As customers utilize more of EverCommerce's integrated offerings, the company has seen higher net revenue retention, with the annualized net revenue retention rate for its core software and payment solutions standing at 96% in the trailing 12-month period.
Future Outlook
Looking ahead, EverCommerce has provided fourth-quarter 2024 guidance, expecting revenue in the range of $168 million to $172 million and adjusted EBITDA between $43 million and $46 million. This guidance follows a strong third quarter where the company exceeded the top-end of its revenue guidance range and beat the top end of its adjusted EBITDA guidance. The company's full-year 2024 guidance remains unchanged from previous projections at the midpoint, incorporating the given fourth-quarter ranges.
Despite the broader macroeconomic headwinds, EverCommerce's focus on transforming its business, optimizing operations, and deepening relationships with its service SMB customers has positioned the company for continued growth and success in the evolving service commerce landscape. The company's strategic initiatives, coupled with its strong market position and growing customer base, provide a solid foundation for future expansion and value creation in the vertical-specific SaaS solutions market for service SMBs.