UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2021
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ___________________ to ___________________
Commission File Number: 001-40575
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(720 ) 647-4948
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of August 6, 2021, there were 195,336,835 shares of the registrant’s common stock, par value $0.00001, outstanding.
TABLE OF CONTENTS
| Page | ||||||||
| Part I | FINANCIAL INFORMATION | |||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth and our objectives for future operations.
The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.
SUMMARY RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those described in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:
•Our limited operating history and our evolving business make it difficult to evaluate our future prospects and the risks and challenges we may encounter.
•Our recent growth rates may not be sustainable or indicative of future growth and we expect our growth rate to slow.
•We have experienced net losses in the past and we may not achieve profitability in the future.
•We may continue to experience significant quarterly and annual fluctuations in our operating results due to a number of factors, which makes our future operating results difficult to predict.
•We may reduce our rate of acquisitions and may be unsuccessful in achieving continued growth through acquisitions.
•Revenues and profits generated through acquisitions may be less than anticipated, and we may fail to uncover all liabilities of acquisition targets.
•In order to support the growth of our business and our acquisition strategy, we may need to incur additional indebtedness or seek capital through new equity or debt financings.
•We may not be able to continue to expand our share of our existing vertical markets or expand into new vertical markets, which would inhibit our ability to grow and increase our profitability.
•We face intense competition in each of the industries in which we operate, which could negatively impact our business, results of operations and financial condition and cause our market share to decline.
•The industries in which we operate are rapidly evolving and subject to consolidation and the market for technology-enabled services that empower small- and medium-sized businesses is relatively immature and unproven.
•We are subject to economic and political risk, the business cycles of our clients and changes in the overall level of consumer and commercial spending, which could negatively impact our business, financial condition and results of operations.
•We are dependent on payment card networks, such as Visa and MasterCard, and payment processors, such as Worldpay and PayPal, and if we fail to comply with the applicable requirements of our payment network or payment processors, they can seek to fine us, suspend us or terminate our registrations through our bank sponsors.
•If we cannot keep pace with rapid developments and changes in the electronic payments market or are unable to introduce, develop and market new and enhanced versions of our software solutions, we may be put at a competitive disadvantage with respect to our services that incorporated payment technology.
•Real or perceived errors, failures or bugs in our solutions could adversely affect our business, results of operations, financial condition and growth prospects.
•Unauthorized disclosure, destruction or modification of data, disruption of our software or services could expose us to liability, protracted and costly litigation and damage our reputation.
•Our estimated total addressable market is subject to inherent challenges and uncertainties.
•Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance and utilization of our solutions.
•Our systems and our third-party providers’ systems may fail, or our third-party providers may discontinue providing their services or technology generally or to us specifically, which in either case could interrupt our business, cause us to lose business and increase our costs.
•If lower margin solutions and services grow at a faster rate than our higher margin solutions and services, we may experience lower aggregate profitability and margins.
•The outbreak of the novel strain of coronavirus disease has impacted, and a future pandemic, epidemic or outbreak of an infectious disease in the United States could impact, our business, financial condition and results of operations, as well as the business or operations of third parties with whom we conduct business.
•We may be unable to adequately protect or enforce, and we may incur significant costs in enforcing or defending, our intellectual property and other proprietary rights.
•We may be subject to patent, trademark and other intellectual property infringement claims, which may be time-consuming, and cause us to incur significant liability and increase our costs of doing business.
•We are subject to governmental regulation and other legal obligations, including those related privacy, data protection and information security and the healthcare industry, and our actual or perceived failure to comply with such regulations and obligations could harm our business. Compliance with such laws could
also impair our efforts to maintain and expand our customer and user bases, and thereby decrease our revenue.
•The parties to our sponsor stockholders agreement, who also hold a significant portion of our common stock, control the direction of our business and such parties’ ownership of our common stock prevent you and other stockholders from influencing significant decisions.
•We are a “controlled company” under the corporate governance rules of The Nasdaq Stock Market and, as a result, qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements.
PART I — FINANCIAL INFORMATION
Condensed Consolidated Financial Statements (unaudited)
EverCommerce Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share and share amounts)
(unaudited)
| June 30, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Accounts receivable, net of allowance for doubtful accounts of $ | |||||||||||
| Contract assets | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Non-current assets: | |||||||||||
| Property and equipment, net | |||||||||||
| Capitalized software, net | |||||||||||
| Other non-current assets | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Total non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
EverCommerce Inc.
Condensed Consolidated Balance Sheets (Continued)
(in thousands, except per share and share amounts)
(unaudited)
| June 30, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Liabilities, Convertible Preferred Stock and Stockholders’ Deficit | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other | |||||||||||
| Deferred revenue | |||||||||||
| Customer deposits | |||||||||||
| Current maturities of long-term debt | |||||||||||
| Total current liabilities | |||||||||||
| Non-current liabilities: | |||||||||||
| Deferred tax liability, net | |||||||||||
| Long-term deferred revenue | |||||||||||
| Long-term debt, net of current maturities and deferred financing costs | |||||||||||
| Other non-current liabilities | |||||||||||
| Total non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 15) | |||||||||||
| Convertible Preferred Stock: | |||||||||||
Series B convertible preferred stock, $ | |||||||||||
Series C convertible preferred stock, $ | |||||||||||
Series A convertible preferred stock, $ | |||||||||||
| Total convertible preferred stock | |||||||||||
| Stockholders’ deficit: | |||||||||||
Common stock, $ | |||||||||||
| Accumulated other comprehensive income | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ deficit | ( | ( | |||||||||
| Total liabilities, convertible preferred stock and stockholders’ deficit | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
EverCommerce Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share and share amounts)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Subscription and transaction fees | $ | $ | $ | $ | |||||||||||||||||||
| Marketing technology solutions | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization presented separately below) | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Product development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Interest and other expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Net loss before income tax benefit (expense) | ( | ( | ( | ( | |||||||||||||||||||
| Income tax benefit (expense) | ( | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
| Foreign currency translation gains (losses), net | ( | ||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss attributable to common stockholders: | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Adjustments to net loss (see Note 12) | ( | ( | ( | ||||||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average shares of common stock outstanding used in computing net loss per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
EverCommerce Inc.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
(in thousands)
(unaudited)
| Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series A Convertible Preferred Stock | Total Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Total Stockholders’ Deficit | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||
| Rollover equity in consideration of net assets acquired | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Stock option exercises | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Foreign currency translation gains, net | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Accretion of Series B convertible preferred stock to redemption value | — | — | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||
Balance at March 31, 2021 | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of convertible preferred stock, net | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Measurement period adjustment to update fair value of rollover equity | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock option exercises | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Foreign currency translation gains, net | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | $ | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
EverCommerce Inc.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit (Continued)
(in thousands)
(unaudited)
| Series B Convertible Preferred Stock | Series A Convertible Preferred Stock | Total Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||
| Rollover equity in consideration of net assets acquired | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Stock option exercises | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Foreign currency translation losses, net | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||
| Accretion of Series B convertible preferred stock to redemption value | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||
| Balance at March 31, 2020 | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Stock option exercises | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Foreign currency translation gains, net | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Accretion of Series B convertible preferred stock to redemption value | — | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
EverCommerce Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Six Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows provided by operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of discount on long-term debt | |||||||||||
| Amortization of deferred financing costs on long-term debt | |||||||||||
| Amortization of costs and fees on credit facility commitments | |||||||||||
| Deferred taxes | ( | ||||||||||
| Bad debt expense | |||||||||||
| Paid-in-kind interest on long-term debt | |||||||||||
| Stock-based compensation expense | |||||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Other non-current assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other | ( | ( | |||||||||
| Deferred revenue | |||||||||||
| Customer deposits and other long-term liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows used in investing activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Capitalization of software costs | ( | ( | |||||||||
| Payment of contingent consideration | ( | ||||||||||
| Acquisition of companies, net of cash acquired | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
EverCommerce Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(in thousands)
(unaudited)
| Six Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows provided by financing activities: | |||||||||||
| Payments on long-term debt | ( | ( | |||||||||
| Proceeds from long-term debt | |||||||||||
| Exercise of stock options | |||||||||||
| Proceeds from preferred stock issuance, net | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of foreign currency exchange rate changes on cash | ( | ||||||||||
| Net increase in cash and cash equivalents and restricted cash | |||||||||||
| Cash and cash equivalents and restricted cash: | |||||||||||
| Beginning of period | |||||||||||
| End of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Supplemental disclosures of noncash investing and financing activities: | |||||||||||
| Rollover equity in consideration of net assets acquired | $ | $ | |||||||||
| Fair value of earnout in consideration of net assets acquired | $ | $ | |||||||||
| Accretion of Series B convertible preferred stock to redemption value | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
| EverCommerce Inc. | ||
June 30, 2021 | ||
| Notes to Condensed Consolidated Financial Statements | ||
Note 1. Nature of the Business
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2020 and the related notes contained in the Company’s final prospectus for its initial public offering of its common stock (“IPO”) dated as of June 30, 2021 and filed with the SEC pursuant to Rule 424(b)(4) on July 6, 2021 (the “Prospectus”). The December 31, 2020 condensed consolidated balance sheet was derived from our audited consolidated financial statements as of that date. Our unaudited interim condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the unaudited condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation. There have been no significant changes in accounting policies during the six months ended June 30, 2021 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2020 and the related notes appearing in our Prospectus, other than as noted below in Accounting Pronouncements Issued and Adopted.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain amounts reported in the unaudited condensed consolidated financial statements, including the accompanying notes. The Company bases its estimates on historical factors, current circumstances, and the experience and judgment of management. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from those estimates. Significant estimates reflected in the consolidated financial statements include revenue recognition, allowance for doubtful accounts, valuation allowances with respect to deferred tax assets, assumptions underlying the fair value used in the
8
| EverCommerce Inc. | ||
June 30, 2021 | ||
| Notes to Condensed Consolidated Financial Statements | ||
Recently Issued Accounting Pronouncements not yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to improve financial reporting about leasing transactions. The ASU affects all companies that lease assets such as real estate and equipment for a period for more than 12 months, and will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The updated standard will be effective for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, which includes the Company’s accounts receivable and contract assets. This updated standard will be effective for annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements.
Accounting Pronouncements Issued and Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740); Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company adopted this ASU for the six months ended June 30, 2021 and it did not have a material impact on its financial statements.
Note 3. Acquisitions
2021 Acquisitions
During the six months ended June 30, 2021, the Company completed two business acquisitions in conjunction with the execution of its long-term plans and objectives in building a service commerce platform supporting the success of SMBs. Both of the acquisitions qualified as business combinations under ASC Topic 805, Business Combinations (“ASC 805”). Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition date fair values, with any excess consideration recognized as goodwill. Goodwill primarily represents the value associated with the assembled workforce, and expected synergies subsumed into goodwill.
Assets acquired and liabilities assumed in connection with each acquisition have been recorded at their fair values. Fair values were determined by management using the assistance of third-party valuation specialists. The valuation methods used to determine the fair value of intangible assets included the income approach—relief from royalty method for developed technology and trade name, the income approach—excess earnings method for customer
9
| EverCommerce Inc. | ||
June 30, 2021 | ||
| Notes to Condensed Consolidated Financial Statements | ||
relationships and the comparative business valuation method for non-compete agreements. A Monte Carlo simulation was used as the valuation method to determine the fair value of earnout liabilities. A number of assumptions and estimates were involved in the application of these valuation methods, including revenue forecasts, expected competition, costs of revenues, obsolescence, tax rates, capital spending, discount rates and working capital changes. Cash flow forecasts were generally based on pre-acquisition forecasts coupled with estimated revenues and cost synergies available to a market participant.
The Company’s condensed consolidated results of operations include $2.7 million of acquisition related transaction costs in general and administrative expense for acquisitions consummated during the six months ended June 30, 2021.
Each acquisition allows for an adjustment to the purchase price to be made subsequent to the transaction closing date based on the actual amount of working capital and cash delivered to the Company. The consideration paid and purchase price allocations disclosed reflect the effects of these adjustments.
The allocation of purchase consideration related to all 2021 acquisitions is considered preliminary.
The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed for each acquisition during the six months ended June 30, 2021:
| Briostack | PulseM | Total | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Cash | $ | $ | $ | ||||||||||||||
| Rollover equity | |||||||||||||||||
| Total consideration | $ | $ | $ | ||||||||||||||
| Net assets acquired: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Accounts receivable, trade | |||||||||||||||||
| Other receivables | |||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||
| Property and equipment | |||||||||||||||||
| Other non-current assets | |||||||||||||||||
| Intangible—developed technology | |||||||||||||||||
| Intangible—customer relationships | |||||||||||||||||
| Intangible—trade name | |||||||||||||||||
| Intangible—non-compete agreements | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Accounts payable | ( | ( | ( | ||||||||||||||
| Other current liabilities | ( | ( | |||||||||||||||
| Accrued expenses and other | ( | ( | ( | ||||||||||||||
| Deferred tax liability | ( | ( | |||||||||||||||
| Deferred revenue | ( | ( | ( | ||||||||||||||
| Total net assets acquired | $ | $ | $ | ||||||||||||||
10
| EverCommerce Inc. | ||
June 30, 2021 | ||
| Notes to Condensed Consolidated Financial Statements | ||
Briostack
On January 19, 2021, the Company acquired 100 % of the interest of Briostack LLC dba Briostack (“Briostack”), a provider of operational management software to pest control businesses, for $35.2 million. Under the terms of the purchase agreement, certain members of Briostack received 45,454 shares of common stock rollover equity. The Company assessed the fair value of the shares at $0.7 million by applying a market approach. The fair value of the rollover equity is reflected in the total consideration above.
PulseM
On March 17, 2021, the Company acquired 100 % of the interest of Speetra, Inc. dba PulseM (“PulseM”), a provider of enterprise-level reputation management software for small businesses, for $34.6 million.
2020 Acquisitions
During 2020 and in the six months ended June 30, 2020, the Company completed nine and four business acquisitions, respectively, in conjunction with the execution of its long-term plans and objectives in building a service commerce platform supporting the success of SMBs. All of the acquisitions qualified as business combinations under ASC 805. Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition date fair values, with any excess consideration recognized as goodwill. Goodwill primarily represents the value associated with the assembled workforce, and expected synergies subsumed into goodwill.
Assets acquired and liabilities assumed in connection with each acquisition have been recorded at their fair values. Fair values were determined by management using the assistance of third-party valuation specialists. The valuation methods used to determine the fair value of intangible assets included the income approach—relief from royalty method for developed technology and trade name, the income approach—excess earnings method for customer relationships and the comparative business valuation method for non-compete agreements. A Monte Carlo simulation was used as the valuation method to determine the fair value of earnout liabilities. A number of assumptions and estimates were involved in the application of these valuation methods, including revenue forecasts, expected competition, costs of revenues, obsolescence, tax rates, capital spending, discount rates and working capital changes. Cash flow forecasts were generally based on pre-acquisition forecasts coupled with estimated revenues and cost synergies available to a market participant.
The Company’s condensed consolidated results of operations include $15.5 million of acquisition related transaction costs in general and administrative expense for acquisitions consummated in 2020, with $4.9 million incurred in the six months ended June 30, 2020.
Each acquisition allows for an adjustment to the purchase price to be made subsequent to the transaction closing date based on the actual amount of working capital and cash delivered to the Company. The consideration paid and purchase price allocations disclosed reflect the effects of these adjustments.
The allocation of purchase consideration related to certain 2020 acquisitions is considered preliminary with provisional amounts related to tax-related and other items.
11
| EverCommerce Inc. | ||
June 30, 2021 | ||
| Notes to Condensed Consolidated Financial Statements | ||
The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed for each acquisition in 2020:
| Remodeling | Qiigo | AlertMD | Invoice Simple | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cash | $ | $ | $ | $ | |||||||||||||||||||
| Rollover equity | |||||||||||||||||||||||
| Fair value of earnout | |||||||||||||||||||||||
| Total consideration | $ | $ | $ | $ | |||||||||||||||||||
| Net assets acquired: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Accounts receivable, trade | |||||||||||||||||||||||
| Other receivables | |||||||||||||||||||||||
| Contract assets | |||||||||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||||||||
| Property and equipment | |||||||||||||||||||||||
| Other non-current assets | |||||||||||||||||||||||
| Intangible—developed technology | |||||||||||||||||||||||
| Intangible—customer relationships | |||||||||||||||||||||||