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United States securities and exchange commission logo
April 27, 2021
Marc Thompson
Chief Financial Officer
EverCommerce Inc.
3601 Walnut Street, Suite 400
Denver, Colorado 80205
Re: EverCommerce Inc.
Draft Registration
Statement on Form S-1
Submitted March 31,
2021
CIK No. 0001853145
Dear Mr. Thompson:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted March 31, 2021
Prospectus Summary, page 1
1. Please disclose the
basis for your claim that you are a leading provider of integrated
software-as-a-service
(SaaS) solutions for service-based small- and medium-sized
businesses. Please
disclose the measure by which you determined that you are a "leading
provider."
Marc Thompson
FirstName LastNameMarc Thompson
EverCommerce Inc.
Comapany
April NameEverCommerce Inc.
27, 2021
April 227, 2021 Page 2
Page
FirstName LastName
Our Market Opportunity, page 3
2. Please define "small- and medium- sized businesses" (SMBs) in the
context of the
verticals that you serve. Clarify whether SMBs are measured in terms
of revenue,
employees, and/or other criteria. Further, provide the basis for the
statistics regarding
your addressable market and your market opportunity.
Summary Consolidated Financial and Operating Data, page 13
3. Please revise the column header for 2018 to indicate this information
is unaudited. A
similar revision should be made to your Selected Consolidated
Financial and Operating
Data table.
Risk Factors, page 16
4. We note a significant majority of your debt has an interest rate that
may be based on
LIBOR. Please revise to include a risk factor addressing the possible
discontinuation of
LIBOR, including any anticipated impact on the company, if material.
Refer to the Staff
Statement on LIBOR Transition from July 12, 2019 available on our
website.
We are dependent on payment card networks..., page 22
5. You state that you have entered into agreements with certain payment
processors,
including Worldpay and PayPal. Please disclose the material terms of
those agreements
including the term of the agreement and any termination provisions.
If lower margin solutions and services grow at a faster rate..., page 29
6. You state that some of your solutions and services, such as your
marketing technology
solutions, have lower margins as compared to your other solutions and
services, such as
your vertical business management software and integrated payment
solutions. Please
disclose the percentage of revenue generated from marketing technology
solutions
compared to your vertical business management software and integrated
payment
solutions. We note from your disclosure elsewhere that marketing
technology solutions
revenue increased 130% from 2019 to 2020. To the extent that you
expect greater growth
in the solutions with lower margins, please discuss the impact on your
business in the
Management's Discussion and Analysis.
Our amended and restated certificate of incorporation will provide that the
Court of Chancery...,
page 49
7. We note that your forum selection provision identifies the federal
district courts of the
United States of America as the exclusive forum for claims arising
under the Securities
Act. Please revise to highlight enforceability concerns arising from
the fact that Section 22
of the Securities Act creates concurrent jurisdiction in federal and
state courts over all
suits brought to enforce any duty or liability created by the
Securities Act or the rules and
Marc Thompson
FirstName LastNameMarc Thompson
EverCommerce Inc.
Comapany
April NameEverCommerce Inc.
27, 2021
April 327, 2021 Page 3
Page
FirstName LastName
regulations thereunder.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
64
8. Please revise here to disclose the total number of actual customers
for each period
presented and include a discussion of fluctuations from period to
period. In this regard,
we note that you have expanded your customer base through both
acquisitions and organic
growth. Please separately quantify the growth in your customer base
due to each of these
factors.
9. We note you consider net revenue retention rate to be an important
measure of the health
of your business and further growth prospects. Please address the
following with regards
to this measure:
Disclose the actual net revenue retention rate for each period
presented and
discuss any significant fluctuations from period to period.
Include a discussion regarding the correlation between the net
revenue retention rates
achieved during each period and the success of your
land-and-expand business
strategy.
Revise to relabel this measure as a pro-forma measure. In this
regard, we note that
revenue used in such calculations assumes the acquisitions
occurred on the first day
of the period presented.
Clarify whether this calculation starts with customers that
generated revenue in the
prior period compared to the revenue in the current period from
that same set of
customers.
Tell us what other metrics, if any, you use to monitor customer
retention and
renewals.
Refer to SEC Release No. 33-10751.
10. We note your discussion here regarding the lifetime value of a
customer and the cost of
customer acquisition. Please revise your disclosures to address the
following:
Tell us why you use a two-year period to determine the customer
lifetime. In this
regard, we note that your contracts run anywhere from one month to
five years and
you have determined the period of benefit for amortizing contract
costs to be five
years.
Discuss how you determine the gross margin factor used in
such measure.
Disclose how you calculate the monthly revenue an average customer
generates and
address how you decide what constitutes an average customer.
Disclose what expenses are considered direct sales and marketing
expenses
associated with acquiring new customers. Explain how they relate
to GAAP sales and
marketing expenses as reported, or clearly indicate that such
amounts are not
calculated based on GAAP numbers and clarify how they may differ
from GAAP.
Clarify whether management uses this information in managing your
business and if
so, how.
Marc Thompson
FirstName LastNameMarc Thompson
EverCommerce Inc.
Comapany
April NameEverCommerce Inc.
27, 2021
April 427, 2021 Page 4
Page
FirstName LastName
Key Factors Affecting Our Performance, page 65
11. You state that you have acquired 49 companies since your inception,
including 14 in 2019
and 9 in 2020. Please provide a balanced discussion regarding any
material challenges
related to these acquisitions. Discuss the "framework for
identification, execution,
integration, and onboarding of targets" that you reference.
Key Business and Financial Metrics, page 66
12. You state that normalized growth rate is a key performance indicator
used by management
to assess your "consolidated operating performance" over time.
However, this measure
appears to present the growth rate in your pro forma revenues. Please
confirm whether
that is the case and, if so, revise to refer it as a pro forma revenue
growth rate measure.
Also, explain further how this allows you to measure organic revenue
growth and discuss
the underlying factors that contributed to the decrease in this
measure from 15.8% in 2019
and 6.7% in 2020. Lastly, considering you have provided pro forma
revenue information,
tell us your consideration to also include supplemental pro forma
information regarding
the impact of acquisitions on your expenses and overall results of
operations.
Non-GAAP Financial Measures, page 67
13. Please revise your reconciliation of adjusted gross profit to
reconcile to the most directly
comparable GAAP measure of gross profit. Ensure that the GAAP gross
profit measure
provided in the reconciliation includes depreciation and amortization
expense pursuant to
SAB Topic 11B. Also, revise your discussion of this non-GAAP measure,
as necessary,
to ensure that it appropriately describes this measure and its
usefulness pursuant to
the revised reconciliation. Refer to Item 10(e)(i)(A) of Regulation
S-K.
14. We note you include an adjustments for acquisition-related deferred
revenue in your
calculation of Adjusted EBITDA. Considering deferred revenue was
adjusted to fair value
in accordance with GAAP at the time of your acquisitions, please tell
us how you
considered whether such adjustment is substituting an individually
tailored recognition
and measurement method for one of GAAP. Refer to Question 100.04 of
the Non-GAAP
Compliance and Disclosure Interpretations and Rule 100(b) of
Regulation G.
15. We also note that Adjusted EBITDA excludes acquisition related
non-recurring costs and
amortization of capitalized contract acquisition costs. Considering
you have acquired
several businesses during each of the last several years, and as you
state you are currently
tracking over 10,000 software businesses as potential acquisition
targets, please tell us
how you considered whether acquisition related costs are normal cash
operating expenses
for your business. Similarly, explain whether sales commissions are
normal cash
operating expenses necessary to operate your business. Refer to
Question 100.01 of the
Non-GAAP Compliance and Disclosure Interpretations.
16. While you refer to Adjusted Unlevered Free Cash Flow as a performance
measure,
considering it is reconciled to GAAP operating cash flow, it appears
to be a non-GAAP
Marc Thompson
EverCommerce Inc.
April 27, 2021
Page 5
liquidity measure. Item 10(e)(1)(ii)(A) of Regulation S-K prohibits
excluding charges
that require cash settlement from a non-GAAP liquidity measure. Please
revise to remove
all adjustments that required, or will require, cash settlement. Also,
revise your discussion
of this measure to explain how it is useful information to investors
with regards to your
liquidity.
Description of Certain Components of Financial Data
Revenues, page 69
17. We note you provide a percentage breakdown of revenue by your three
main verticals.
Please provide similar information for fiscal 2019. To the extent the
allocation among
verticals or the amount of revenue generated from any vertical changed
significantly from
period to period, please include a discussion of the reason(s) for
such change.
Results of Operations
Comparison of the Years Ended December 31, 2020 and 2019 - Revenues, page 72
18. Please revise to separately quantify the impact on your subscription
and transaction fee
revenues due to the growth in your customer base and the COVID-19
pandemic. Refer to
Item 303(a)(3) of Regulation S-K and Section III.D of SEC Release No.
33-6835.
Business, page 95
19. Please revise your intellectual property disclosure to disclose the
expiration date for your
U.S. patent.
Principal Stockholders, page 113
20. Please disclose the natural person or persons who exercise the voting
and/or dispositive
powers with respect to the securities owned by entities affiliated
with Providence Strategic
Growth and Silver Lake.
Underwriting, page 129
21. Please disclose the exceptions to the lock-up agreements.
Consolidated Statements of Operations and Comprehensive Loss, page F-4
FirstName LastNameMarc Thompson
22. It appears you do not allocate any depreciation and amortization to cost
of revenues.
Comapany NameEverCommerce
Therefore, please revise to Inc.
relabel the cost of revenues line item to
indicate that it
excludes depreciation
April 27, 2021 Page 5 and amortization. Refer to SAB Topic 11.B.
FirstName LastName
Marc Thompson
FirstName LastNameMarc Thompson
EverCommerce Inc.
Comapany
April NameEverCommerce Inc.
27, 2021
April 627, 2021 Page 6
Page
FirstName LastName
Notes to Consolidated Financial Statements
Note 4. Revenue, page F-27
23. You state that your contracts may allow either party to terminate for
convenience without
penalty by providing appropriate notice. Please tell us how you
considered this fact when
calculating the amount of remaining performance obligations. In this
regard, for
arrangements that include such termination provisions, tell us how you
determined that
they meet the definition of a contract under ASC 606-10-25-1 through
25-3. In addition,
considering your contract terms can range up to five years, tell us
the periods in which you
expect to recognize the 57% of remaining performance obligations
included in
"thereafter" and how your current disclosures reflect the appropriate
time bands for your
arrangements. Refer to ASC 606-10-50-13(b).
Note 10. Equity, page F-32
24. We note that concurrent with their exchange of common stock for newly
issued Series B
shares, Silver Lake purchased an additional 17.7 million shares of
Series B stock.
However, as per the roll-forward of Series B shares, it appears such
shares are reflected in
the line item "conversion from common stock" rather than "convertible
shares issued."
Please revise or advise.
Note 11. Stock-Based Compensation, page F-34
25. Please provide us with a breakdown of all equity awards granted during
2020 and to date
through 2021, and include the fair value of the underlying common
stock at the date of
such grants. To the extent there were any significant fluctuations in
the fair values from
period-to-period, describe for us the factors that contributed to
these fluctuations,
including any intervening events within the company or changes in your
valuation
assumptions or methodology, underlying common stock used to value such
awards as
determined by your board of directors.
26. Please revise to disclose the amount of unrecognized compensation
expense related to
your unvested funding restricted stock awards. In addition, revise to
address whether the
various transactions described herein, such as the Preferred Stock
Conversion, the Class B
Reclassification, and the IPO offering itself, will impact the vesting
of these awards,
including any compensation expense you expect to record in conjunction
with these
transactions.
General
27. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communication.
Marc Thompson
FirstName LastNameMarc Thompson
EverCommerce Inc.
Comapany
April NameEverCommerce Inc.
27, 2021
April 727, 2021 Page 7
Page
FirstName LastName
You may contact Brittany Ebbertt, Senior Staff Accountant, at (202)
551-3572 or
Kathleen Collins, Accounting Branch Chief, at (202) 551-3499 if you have
questions regarding
comments on the financial statements and related matters. Please contact
Alexandra Barone,
Staff Attorney, at (202) 551-8816 or Jan Woo, Legal Branch Chief, at (202)
551-3453 with any
other questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Benjamin J. Cohen