SEC Filing | EverCommerce Inc.

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evcm-20220331

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 March 31, 2022


☐			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

EverCommerce Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware			81-4063248
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3601 Walnut Street, Suite 400 Denver, Colorado			80205
(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
Common stock, $0.00001 par value	EVCM	The Nasdaq Stock Market LLC

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).

Yes ☒ No ☐

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

☐

Non-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 May 6, 2022, there were 195,601,997 shares of the registrant’s common stock, par value $0.00001, outstanding.

TABLE OF CONTENTS


		Page
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three months ended March 31, 2022 and 2021	3
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited) for the three months ended March 31, 2022 and 2021
	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signatures		42

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, future acquisitions and other capital expenditures 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, our limited operating history and evolving business; our recent growth rates may not be sustainable or indicative of future growth; 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; we may need to incur additional indebtedness or seek capital through new equity or debt financings, which may not be available to us on acceptable terms or at all; we may not be able to continue to expand our share of our existing vertical markets or expand into new vertical markets; we face intense competition in each of the industries in which we operate; the industries in which we operate are rapidly evolving and the market for technology-enabled services that empower SMBs is relatively immature and unproven; we are dependent on payment card networks and payment processors 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; the inability to 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; real or perceived errors, failures or bugs in our solutions; unauthorized disclosure, destruction or modification of data, disruption of our software or services or cyber breaches; our estimated total addressable market is subject to inherent challenges and uncertainties; actual or perceived inaccuracies in our operational metrics may harm our reputation; failure to effectively develop and expand our sales and marketing capabilities; failure to maintain and enhance our reputation and brand recognition; inability to retain current customers or to sell additional functionality and services to them may adversely affect our revenue growth; our systems and our third-party providers’ systems may fail or our third-party providers may discontinue providing their services or technology or to us specifically; faster growth of lower margin solutions and services than higher margin solutions and services; risks related to the COVID-19 pandemic; economic and political risks, including the business cycles of our clients and changes in the overall level of consumer and commercial spending; our ability to retain and hire skilled personnel; risks related to our indebtedness; risks related to the increasing focus on environmental sustainability and social initiatives; our ability to adequately protect or enforce our intellectual property and other proprietary rights; risk of patent, trademark and other intellectual property infringement claims; risks related to governmental regulation; risks related to our sponsor stockholders agreement and qualifying as a “controlled company” under the rules of The Nasdaq Stock Market; as well as the other factors described in our Annual Report on Form 10-K for the year ended December 31, 2021, as updated by our other filings with the SEC. 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.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

EverCommerce Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share and share amounts)

(unaudited)


	March 31,		December 31,
	2022		2021

Assets
Current assets:
Cash and cash equivalents	$	101,201	$	93,993
Restricted cash	3,798		3,566
Accounts receivable, net of allowance for doubtful accounts of $2.1 million and $1.9 million at March 31, 2022 and December 31, 2021, respectively	42,318		40,514
Contract assets	12,861		11,039
Prepaid expenses and other current assets	26,304		22,505
Total current assets	186,482		171,617
Non-current assets:
Property and equipment, net	13,367		13,509
Capitalized software, net	26,357		24,000
Other non-current assets	21,036		24,296
Intangible assets, net	482,536		508,535
Goodwill	921,615		921,416
Total non-current assets	1,464,911		1,491,756
Total assets	$	1,651,393	$	1,663,373

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Balance Sheets (Continued)

(in thousands, except per share and share amounts)

(unaudited)


	March 31,		December 31,
	2022		2021

Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,195	$	10,325
Accrued expenses and other	53,735		49,340
Deferred revenue	27,075		22,992
Customer deposits	8,805		9,828
Current maturities of long-term debt	11,070		10,943
Total current liabilities	108,880		103,428
Non-current liabilities:
Deferred tax liability, net	7,747		17,862
Long-term deferred revenue	2,982		2,803
Long-term debt, net of current maturities and deferred financing costs	534,122		535,184
Other non-current liabilities	19,129		18,448
Total non-current liabilities	563,980		574,297
Total liabilities	672,860		677,725

Commitments and contingencies (Note 15)





Stockholders’ equity:
Preferred stock, $0.00001 par value, 50,000,000 shares authorized and no shares issued or outstanding as of March 31, 2022 and December 31, 2021	—		—
Common stock, $0.00001 par value, 2,000,000,000 shares authorized and 195,510,446 and 195,384,291 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	2		2
Accumulated other comprehensive loss	(2,431)		(1,767)
Additional paid-in capital	1,507,501		1,500,643
Accumulated deficit	(526,539)		(513,230)
Total stockholders’ equity	978,533		985,648
Total liabilities, convertible preferred stock and stockholders’ equity	$	1,651,393	$	1,663,373

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share and share amounts)

(unaudited)


	Three months ended March 31,
		2022		2021

Revenues:
Subscription and transaction fees		$	108,001	$	75,195
Marketing technology solutions		29,904		25,388
Other		5,671		4,323
Total revenues		143,576		104,906
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization presented separately below)		50,745		35,674
Sales and marketing		30,145		19,689
Product development		17,637		10,325
General and administrative		31,226		22,094
Depreciation and amortization		27,391		23,697
Total operating expenses		157,144		111,479
Operating loss		(13,568)		(6,573)
Interest and other expense, net		(5,478)		(12,949)

Net loss before income tax benefit		(19,046)		(19,522)
Income tax benefit		5,737		3,527
Net loss		$	(13,309)	$	(15,995)
Other comprehensive income:
Foreign currency translation gains (losses), net		(664)		543
Comprehensive loss		$	(13,973)	$	(15,452)

Net loss attributable to common stockholders:
Net loss		$	(13,309)	$	(15,995)
Adjustments to net loss (see Note 12)		—		(15,105)
Net loss attributable to common stockholders		$	(13,309)	$	(31,100)

Basic and diluted net loss per share attributable to common stockholders		$	(0.07)	$	(0.72)

Basic and diluted weighted-average shares of common stock outstanding used in computing net loss per share		195,432,404		43,231,295

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

(unaudited)


	Preferred Stock		Common Stock			Additional Paid-In Capital	Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
		Shares	Amount	Shares									Amount

Balance at December 31, 2021			—	$	—	195,384	$	2	$	1,500,643	$	(513,230)	$	(1,767)	$	985,648





Stock-based compensation			—	—		—	—		6,135		—		—		6,135
Stock option exercises			—	—		126	—		723		—		—		723

Foreign currency translation losses, net			—	—		—	—		—		—		(664)		(664)

Net loss			—	—		—	—		—		(13,309)		—		(13,309)
Balance at March 31, 2022			—	$	—	195,510	$	2	$	1,507,501	$	(526,539)	$	(2,431)	$	978,533


	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 Income		Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount					Shares									Amount

Balance at December 31, 2020	72,226	$	745,046	44,958	$	163,264	$	908,310		43,074	$	—	$	40,564	$	(431,264)	$	1,546	$	(389,154)



Rollover equity in consideration of net assets acquired	—	—		—	—		—			45	—		416		—		—		416
Stock-based compensation	—	—		—	—		—			—	—		903		—		—		903
Stock option exercises	—	—		—	—		—			223	—		735		—		—		735


Foreign currency translation gains, net	—	—		—	—		—			—	—		—		—		543		543
Accretion of Series B convertible preferred stock to redemption value	—	15,105		—	—		15,105			—	—		(15,105)		—		—		(15,105)
Net loss	—	—		—	—		—			—	—		—		(15,995)		—		(15,995)
Balance at March 31, 2021	72,226	$	760,151	44,958	$	163,264	$	923,415		43,342	$	—	$	27,513	$	(447,259)	$	2,089	$	(417,657)

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three months ended March 31,
	2022		2021

Cash flows provided by (used in) operating activities:
Net loss	$	(13,309)	$	(15,995)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization	27,391		23,697
Amortization of discount on long-term debt	104		1,540
Amortization of deferred financing costs on long-term debt	229		59
Amortization of costs and fees on credit facility commitments	99		229
Deferred taxes	(5,990)		(3,429)
Bad debt expense	460		637
Paid-in-kind interest on long-term debt	107		99
Stock-based compensation expense	6,135		903
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	(2,261)		(4,715)
Prepaid expenses and other current assets	(5,717)		(776)
Other non-current assets	(691)		(2,039)
Accounts payable	(2,122)		1,471
Accrued expenses and other	3,498		(10,289)
Deferred revenue	4,240		5,143
Other long-term liabilities	681		(1,935)
Net cash provided by (used in) operating activities	12,854		(5,400)

Cash flows used in investing activities:
Purchases of property and equipment	(889)		(262)
Capitalization of software costs	(3,503)		(2,765)

Acquisition of companies, net of cash acquired	—		(69,117)
Net cash used in investing activities	(4,392)		(72,144)

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

(unaudited)


	Three months ended March 31,
	2022		2021

Cash flows provided by (used in) financing activities:
Payments on long-term debt	(1,375)		(2,015)
Proceeds from long-term debt	—		69,216

Exercise of stock options	723		735



Net cash provided by (used in) financing activities	(652)		67,936
Effect of foreign currency exchange rate changes on cash	(370)		196
Net increase (decrease) in cash and cash equivalents and restricted cash	7,440		(9,412)
Cash and cash equivalents and restricted cash:
Beginning of period	97,559		98,337
End of period	$	104,999	$	88,925

Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,943	$	10,837
Cash paid for income taxes	$	235	$	5

Supplemental disclosures of noncash investing and financing activities:
Rollover equity in consideration of net assets acquired	$	—	$	416

Accretion of Series B convertible preferred stock to redemption value	$	—	$	15,105

The accompanying notes are an integral part of these condensed consolidated financial statements.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 1. Nature of the Business

EverCommerce Inc. and subsidiaries (the “Company” or “EverCommerce”) is a leading provider of integrated software-as-a-service (“SaaS”) solutions or services for service-based small- and medium-sized businesses (“SMBs”). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. Today, the Company serves over 600,000 customers across three core verticals: Home Services; Health Services; and Fitness & Wellness Services. Within the core verticals, customers operate within numerous micro-verticals, ranging from home service professionals, such as construction contractors and home maintenance technicians, to physician practices and therapists in the Health Services industry, to personal trainers and salon owners in the Fitness & Wellness sectors. The platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly nuanced demands, as well as highly complementary solutions that complete end-to-end offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences. See Note 3 in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on acquired subsidiaries. The Company was incorporated in Delaware on September 29, 2016, and began operations on October 17, 2016 (Inception). The Company is headquartered in Denver, Colorado, and has operations across the United States, Canada, Jordan, United Kingdom, Australia and New Zealand. The Company changed its name from PaySimple Holdings, Inc. to EverCommerce Inc. as of December 14, 2020.

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, 2021 and the related notes (“Annual Report on Form 10-K”). The December 31, 2021 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 three months ended March 31, 2022 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2021 and the related notes.

The operating results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.

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 calculation of stock-based compensation, valuation of intangible assets and goodwill and useful lives of tangible and intangible assets, among others.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Emerging Growth Company

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use the extended transition period under the JOBS Act until the earlier of the date that it is (i) no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The adoption dates are discussed below to reflect this election within the “Recently Issued Accounting Pronouncements” section.

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 and interim periods the following year. The Company will adopt this standard in the fourth quarter of 2022. Based on management’s current assessment, the impact of adoption will result in an additional right-of-use asset and corresponding lease liability presented on the consolidated balance sheet, largely comprised of its future real estate lease obligations in Note 15 in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q along with any embedded leases in service contracts. Based on our assessment through March 31, 2022, we expect no material impact to the consolidated statements of operations and comprehensive loss; however, management’s analysis of the impact of adoption is not complete.

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.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends the guidance in ASC 805 to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. FASB’s objective in issuing the ASU is to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity and inconsistency related to both the recognition of an acquired contract liability and payment terms’ effects on subsequent revenue recognized by the acquirer. This updated standard will be effective for annual reporting periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating whether it will early adopt this standard. The impact of adoption is unknown as it will be based on any potential acquisitions consummated in the year of adoption.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 3. Acquisitions

2021 Acquisitions

During 2021 and in the three months ended March 31, 2021, the Company completed five and two 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 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 statements of operations and comprehensive loss include $8.4 million of acquisition related transaction costs in general and administrative for acquisitions consummated in 2021, with $2.7 million incurred in the three months ended March 31, 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 certain 2021 acquisitions is considered preliminary.


EverCommerce Inc.
March 31, 2022
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 2021:


	Briostack		PulseM		MDTech		Timely		DrChrono		Total
	(in thousands)

Cash	$	34,441	$	34,430	$	15,751	$	99,820	$	181,919	$	366,361
Rollover equity	726		—		—		—		—		726

Total consideration	$	35,167	$	34,430	$	15,751	$	99,820	$	181,919	$	367,087

Net assets acquired:
Cash and cash equivalents	$	17	$	—	$	100	$	1,170	$	130	$	1,417
Accounts receivable, trade	156		—		175		290		3,344		3,965
Other receivables	222		151		48		95		149		665
Contract Assets	—		—		—		—		1,172		1,172
Prepaid expenses and other current assets	53		32		34		128		3,115		3,362
Property and equipment	22		4		16		219		226		487
Deposits and other long-term assets	144		3		—		52		23		222
Intangible—developed technology	1,360		2,380		1,640		7,014		8,480		20,874
Intangible—customer relationships	4,800		12,510		5,830		28,836		53,970		105,946
Intangible—trade name	390		260		200		1,414		3,250		5,514
Intangible—non-compete agreements	23		10		10		63		10		116
Goodwill	28,274		22,866		7,899		69,737		126,947		255,723
Deferred tax asset, net	1		—		2		3,397		—		3,400
Accounts payable	(33)		(113)		(44)		(230)		(2,749)		(3,169)
Other Current Liabilities	(28)		—		—		(670)		(2,086)		(2,784)
Accrued expenses and other	(206)		(99)		(116)		(940)		(2,948)		(4,309)
Deferred tax liability, net	—		(3,538)		—		(10,463)		(10,740)		(24,741)
Deferred revenue	(28)		(36)		(43)		(292)		(374)		(773)
Total net assets acquired	$	35,167	$	34,430	$	15,751	$	99,820	$	181,919	$	367,087

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 finalized the fair value of the shares at $0.7 million in the quarter ended June 30, 2021 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 $34.4 million.

MDTech

On July 8, 2021, the Company acquired 100% of the interest of PM Ventures, LLC dba MDTech (“MDTech”), a provider of electronic charge capture solutions to physicians via its SaaS-based MD Coder application and suite of add-ons, for $15.8 million.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Timely

On July 8, 2021, the Company acquired 100% of the interest of Timely Ltd. (“Timely”), a booking and business management software company, for $99.8 million. Timely is based in New Zealand and has operations in the U.K. and Australia, as well.

DrChrono

On November 18, 2021, the Company acquired 100% of the interest of DrChrono Inc. (“DrChrono”), an electronic health record and practice management provider, for $181.9 million.

Pro Forma Results of Acquisitions (unaudited)

The following table presents unaudited pro forma consolidated results of operations for the three months ended March 31, 2022 and 2021, as if the aforementioned 2021 acquisitions had occurred as of January 1, 2021. The Company did not consummate any transactions during the three months ended March 31, 2022; accordingly, no adjustments have been made to the results reported for that period. The pro forma information includes the business combination accounting effects resulting from these acquisitions, including interest expense of $3.1 million for the three months ended March 31, 2021 to account for funds borrowed earlier, issuance of our common stock at earlier dates which impacts the calculation of basic and diluted net loss per share, removal of transaction costs of $2.7 million for the three months ended March 31, 2021 and additional amortization expense of $3.6 million for the three months ended March 31, 2021 resulting from the amortization of intangible assets beginning as of January 1, 2021. We prepared the pro forma financial information for the combined entities for comparative purposes only, and the information is not indicative of what actual results would have been if the acquisitions had occurred at the beginning of the periods presented, nor is the information intended to represent or be indicative of future results of operations.


	Three months ended March 31,
		2022 Pro Forma		2021 Pro Forma
		(in thousands, except per share amounts)
		(unaudited)

Total revenue		$	143,576	$	119,493
Net loss		$	(13,309)	$	(20,728)
Adjustments to net loss per share (see Note 12)		—		(15,105)
Net loss attributable to common stockholders		$	(13,309)	$	(35,833)

Basic and diluted net loss per share attributable to common stockholders		$	(0.07)	$	(0.83)


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 4. Revenue

Disaggregation of Revenue

The following tables present a disaggregation of our revenue from contracts with customers by revenue recognition pattern and geographical market:


	Three months ended March 31,
		2022		2021
		(in thousands)

By pattern of recognition (timing of transfer of services):
Point in time		$	12,106	$	11,253
Over time		131,470		93,653
Total		$	143,576	$	104,906
By geographical market:
United States		$	130,286	$	93,685
International		13,290		11,221
Total		$	143,576	$	104,906

Contract Balances

Supplemental balance sheet information related to contracts from customers as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Accounts receivables	$	42,318	$	40,514
Contract assets	$	12,861	$	11,039
Deferred revenue	$	27,075	$	22,992
Customer deposits	$	8,805	$	9,828
Long-term deferred revenue	$	2,982	$	2,803

Accounts receivable, net: Accounts receivable represent rights to consideration in exchange for products or services that have been transferred by us, when payment is unconditional and only the passage of time is required before payment is due.

Contract assets: Contract assets represent rights to consideration in exchange for products or services that have been transferred (i.e., the performance obligation or portion of the performance obligation has been satisfied), but payment is conditional on something other than the passage of time. These amounts typically relate to contracts that include on-premise licenses and professional services where the right to payment is not present until completion of the contract or achievement of specified milestones and the fair value of products or services transferred exceed this constraint.

Contract liabilities: Contract liabilities represent our obligation to transfer products or services to a customer for which consideration has been received in advance of the satisfaction of performance obligations. Short-term contract


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

liabilities are included within deferred revenue on the consolidated balance sheets. Long-term contract liabilities are included within long-term deferred revenue on the consolidated balance sheets. Revenue recognized from the contract liability balance at December 31, 2021 was $14.5 million for the three months ended March 31, 2022.

Customer deposits: Customer deposits relate to payments received in advance for contracts, which allow the customer to terminate a contract and receive a pro rata refund for the unused portion of payments received to date. In these arrangements, we have concluded there are no enforceable rights and obligations during the period in which the option to cancel is exercisable by the customer and therefore the consideration received is recorded as a customer deposit liability.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of unsatisfied or partially satisfied performance obligations within contracts with an original expected contract term that is greater than one year for which fulfillment of the contract has started as of the end of the reporting period. Variable consideration accounted for under the variable consideration allocation exception associated with unsatisfied performance obligations or an unsatisfied promise that forms part of a single performance obligation under application of the series guidance have been excluded. Remaining performance obligations generally relate to those which are stand-ready in nature, as found within the subscription and Marketing Technology Solutions revenue streams. The aggregate amount of transaction consideration allocated to remaining performance obligations as of March 31, 2022, was $24.6 million, which is comprised of contracts where the contract term under ASC 606 is in excess of one year. The Company expects to recognize approximately 53% of its remaining performance obligations as revenue within the next year, 27% of its remaining performance obligations as revenue the subsequent year, 10% of its remaining performance obligations as revenue in the third year, and the remainder during the two year period thereafter.

Cost to Obtain and Fulfill a Contract

The Company incurs certain costs to obtain contracts, principally sales and third-party commissions, which the Company capitalizes when the liability has been incurred if they are (i) incremental costs of obtaining a contract, (ii) expected to be recovered and (iii) have an expected amortization period that is greater than one year (as the Company has elected the practical expedient to expense any costs to obtain a contract when the liability is incurred if the amortization period of such costs would be one year or less).

Assets resulting from costs to obtain contracts are included within prepaid expenses and other current assets for short-term balances and other non-current assets for long-term balances on the Company’s consolidated balance sheets. The costs to obtain contracts are amortized over 5 years, which corresponds with the useful life of the related capitalized software. Short-term assets were $5.2 million and $4.8 million at March 31, 2022 and December 31, 2021, respectively, and long-term assets were $12.5 million and $11.9 million at March 31, 2022 and December 31, 2021, respectively. The Company recorded amortization expense of $1.3 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively, which is included in sales and marketing expense on the condensed consolidated statements of operations and comprehensive loss.

The Company has concluded that there are no other material costs incurred in fulfillment of customer contracts that are not accounted for under other GAAP, which meet the capitalization criteria under ASC 606 and FASB ASC Topic 340-40, Accounting for Other Assets and Deferred Costs (“ASC 340-40”). The Company has elected to account for shipping and handling activities as fulfillment activities and recognize the associated expense when the transfer of control of the product has occurred, as permitted under the shipping and handling activities practical expedient.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 5. Goodwill

Goodwill activity consisted of the following for the three months ended March 31, 2022 (in thousands):


Balance at December 31, 2021	$	921,416

Measurement period adjustments(1)	(73)
Effect of foreign currency exchange rate changes	272
Balance at March 31, 2022	$	921,615

(1)The $0.1 million of measurement period adjustments relate to acquisitions consummated during the year ended December 31, 2021.

Note 6. Intangible Assets

Intangible assets consisted of the following as of:


	March 31, 2022
	Useful Life	Gross Carrying Value		Accumulated Amortization		Net Book Value
	(in thousands)

Customer relationships	3-20 years	$	606,975	$	207,005	$	399,970
Developed technology	2-12 years	106,015		46,496		59,519
Trade name	3-10 years	38,189		15,845		22,344
Non-compete agreements	2-5 years	2,409		1,706		703
Total		$	753,588	$	271,052	$	482,536


	December 31, 2021
	Useful Life	Gross Carrying Value		Accumulated Amortization		Net Book Value
	(in thousands)

Customer relationships	3-20 years	$	607,625	$	187,556	$	420,069
Developed technology	2-12 years	106,162		42,215		63,947
Trade name	3-10 years	38,218		14,540		23,678
Non-compete agreements	2-5 years	2,409		1,568		841
Total		$	754,414	$	245,879	$	508,535

Amortization expense was $25.2 million and $22.0 million for the three months ended March 31, 2022 and 2021, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 7. Property and Equipment

Property and equipment consisted of the following as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Computer equipment and software	$	9,059	$	8,191
Furniture and fixtures	3,676		3,667
Leasehold improvements	12,030		12,032
Total property and equipment	24,765		23,890
Less accumulated depreciation	(11,398)		(10,381)
Property and equipment, net	$	13,367	$	13,509

Depreciation expense was $1.0 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively.

Note 8. Capitalized Software

Capitalized software consisted of the following as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Capitalized software	$	35,453	$	31,960
Less: accumulated amortization	(9,096)		(7,960)
Capitalized software, net	$	26,357	$	24,000

Amortization expense was $1.2 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 9. Long-Term Debt

Long-term debt consisted of the following as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Term notes with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25% (3.75% at March 31, 2022) quarterly principal payments of 0.25% of original principal balance with balloon payment due July 2028	$	547,250	$	548,625
Revolver with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25% (3.71% at March 31, 2022), and outstanding balance due July 2026	—		—


Subordinated unsecured promissory note related to acquisition of Service Nation, Inc., interest paid-in-kind, interest rate at 8.5% with balloon payment due September 2022	2,927		2,866
Subordinated unsecured promissory note related to acquisition of Technique Fitness, Inc. D/B/A Club OS, interest paid-in-kind, interest rate at 7% with balloon payment due December 2022	2,701		2,655
Principal debt	552,878		554,146
Deferred financing costs on long-term debt	(5,597)		(5,826)
Discount on long-term debt	(2,089)		(2,193)
Total debt	545,192		546,127
Less current maturities	11,070		10,943
Long-term portion	$	534,122	$	535,184

On July 6, 2021, the Company entered into a credit facility (“Credit Agreement”) that includes term loans in an aggregate principal amount of $350.0 million (“Initial Term Loans”), a revolver with a capacity of $190.0 million (“Revolver”) and a sub-limit of the Revolver available for letters of credit up to an aggregate face amount of $20.0 million. The Initial Term Loans were used to retire the Company’s debt arrangements that were outstanding prior to the Initial Public Offering (“IPO”).

As of November 2021, the Company had $35.0 million outstanding under the Revolver, and borrowed the remaining capacity of the Revolver to fund the acquisition of DrChrono. Subsequently in the same month, the Company received additional term loans in an aggregate principal amount of $200.0 million (together with the Initial Term Loans, the “Term Loans”), the proceeds of which were used to repay the outstanding principal balance of the Revolver of $190.0 million and for general corporate purposes. The Initial Term Loans, Revolver and Additional Term Loans are collectively referred to herein as the (“Credit Facilities”).

The Company determines the fair value of long-term debt based on trading prices for its debt if available. As of March 31, 2022, the Company obtained trading prices for the term notes outstanding. However, as such trading prices require significant unobservable inputs to the pricing model, such instruments are classified as Level 2. If no such trading prices are available, the Company determines the fair value of long-term debt using discounted cash flows, applying current interest rates and current credit spreads, based on its own credit risk. The fair value amounts were approximately $545.9 million and $552.8 million as of March 31, 2022 and December 31, 2021, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

As of January 1, 2021, the Company also had outstanding subordinated promissory notes (“Legacy Subordinated Notes”) that included paid-in-kind (“PIK”) interest. The interest on the Legacy Subordinated Notes is all PIK and is due upon maturity. Total PIK interest was $0.1 million for each of the three months ended March 31, 2022 and 2021.

The Company’s Credit Facilities are subject to certain financial and nonfinancial covenants and is secured by substantially all assets of the Company. As of March 31, 2022, the Company was in compliance with all of its covenants.

Aggregate maturities of the Company’s debt for the years ending December 31 are as follows as of March 31, 2022 (in thousands):


Years ending December 31:
2022 (remaining nine months)	$	9,998
2023	5,500
2024	5,500
2025	5,500
2026	5,500
Thereafter	521,125
Total aggregate maturities of the Company’s debt	$	553,123

Included in aggregate maturities is future paid-in-kind interest totaling $0.2 million that will accrue over the term of the related debt.

Note 10. Equity

On May 5, 2021, the Company amended its Certificate of Incorporation (“Third Amended and Restated Certificate of Incorporation”) to increase the number of authorized shares of Preferred Stock from 125,000,000 shares to 140,000,000 shares of Preferred Stock, $0.00001 par value per share, of which 50,000,000 were designated as Series A, 75,000,000 were designated as Series B and 15,000,000 were designated as Series C as of such date. Each share of Series A, Series B and Series C could have been converted into common stock at any time, at the option of the holder, based on a prescribed formula set forth in the Company’s Third Amended and Restated Certificate of Incorporation. In the event of a liquidation, dissolution, winding up of the Company or other similar event, liquidation payments would have first been made to the holders of Series B, then to Series C, then to Series A. In May 2021, the Company issued 7.9 million shares of Series C for proceeds of $109.8 million net of issuance costs.

In accordance with ASC 480, Distinguishing Liabilities from Equity, if the carrying value of redeemable preferred stock is less than its redemption value, redeemable preferred stock shall be accreted to its redemption value if it is probable it will become redeemable. Prior to March 15, 2021, the Company concluded it was probable that the Series B would become redeemable due to the passage of time. However, after that date the Company concluded that it was no longer probable that the Series B would become redeemable due to the increased likelihood of a successful IPO prior to February 23, 2026. The Company’s Series B accruing dividends comprised a component of the redemption value of such stock. The Company recorded the accretion of Series B through March 15, 2021, by increasing its carrying value and recording a corresponding reduction of Additional Paid-In Capital in the amount of $15.1 million for the three months ended March 31, 2021.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Immediately prior to the closing of the IPO, the Company filed an Amended and Restated Certificate of Incorporation on July 6, 2021 with the Secretary of State of the State of Delaware to authorize the issuance up to 2,050,000,000 shares, par value $0.00001 per share, consisting of 2,000,000,000 shares of common stock and 50,000,000 shares of preferred stock. In connection with the IPO, all of the Company’s then outstanding convertible preferred stock converted into shares of common stock on a one-for-one basis. Upon conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock and additional paid-in capital.

Note 11. Stock-Based Compensation

In 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan provided for the granting of stock-based awards, including stock options, stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards, and other stock-based awards. In connection with the IPO, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO and, as a result of which, the Company can no longer make awards under the 2016 Plan. The 2021 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. The number of shares initially reserved for issuance under the 2021 Plan was 22,000,000 shares, inclusive of available shares previously reserved for issuance under the 2016 Plan. In addition, the number of shares reserved for issuance under the 2021 Plan is subject to an annual increase on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 3% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares as determined by the Company’s board of directors, provided that no more than 22,000,000 shares may be issued upon the exercise of incentive stock options. Based on the Company’s outstanding shares of common stock as of December 31, 2021, as of January 1, 2022 the number of shares reserved for issuance under the 2021 Plan increased by 5.9 million.

In connection with the IPO, the Company’s board of directors adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). For more information on the ESPP, refer to Note 11 in the Annual Report on Form 10-K.

The following table summarizes our restricted stock unit (“RSU”) and stock option activity for the three months ended March 31, 2022:


	RSUs	Options
	(in thousands)

Outstanding as of January 1, 2022	541	16,444
Granted	1,521	1,480
Vested or exercised	—	(126)
Cancelled or forfeited	(10)	(160)
Outstanding as of March 31, 2022	2,052	17,638

As of March 31, 2022, total unrecognized compensation expense was $25.3 million and $40.5 million related to outstanding restricted stock units and outstanding stock options, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Stock-based compensation expense was classified in the unaudited condensed consolidated statements of operations and comprehensive loss as follows:


	Three months ended March 31,
		2022		2021
		(in thousands)

Cost of revenues		$	82	$	1
Sales and marketing		328		29
Product development		392		33
General and administrative		5,333