SEC Filing | EverCommerce Inc.

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evcm-20230331

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, 2023


☐			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 5, 2023, there were 187,934,868 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, 2023 (unaudited) and December 31, 2022	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three months ended March 31, 2023 and 2022	2
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (unaudited) for the three months ended March 31, 2023 and 2022	3
	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2023 and 2022	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
Signatures		37

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, macroeconomic and market conditions, equity compensation, business strategy, plans, market growth, future acquisitions and other capital expenditures, progress towards remediation of our material weakness 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 subject to economic and political risk; 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; the impact of the COVID-19 pandemic and the risk of future pandemics, epidemics or outbreaks of an infectious disease in the United States; 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, 2022 (“Annual Report on Form 10-K”), as updated by our other filings with the Securities and Exchange Commission (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,
	2023		2022

Assets
Current assets:
Cash and cash equivalents	$	69,786	$	92,625
Restricted cash	3,522		3,199
Accounts receivable, net of allowance for expected credit losses of $5.7 million and $4.7 million at March 31, 2023 and December 31, 2022, respectively	48,038		48,032
Contract assets	14,748		12,971
Prepaid expenses and other current assets	27,182		23,760
Total current assets	163,276		180,587
Property and equipment, net	11,391		11,930
Capitalized software, net	34,826		32,554
Other non-current assets	44,527		46,855
Intangible assets, net	382,779		405,720
Goodwill	913,774		914,082
Total assets	1,550,573		1,591,728

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	8,127		8,373
Accrued expenses and other	57,071		56,963
Deferred revenue	24,205		22,885
Customer deposits	10,435		11,360
Current maturities of long-term debt	5,500		5,500
Total current liabilities	105,338		105,081
Long-term debt, net of current maturities and deferred financing costs	529,886		530,946
Other non-current liabilities	52,359		49,008
Total liabilities	687,583		685,035

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, 2023 and December 31, 2022	—		—
Common stock, $0.00001 par value, 2,000,000,000 shares authorized and 188,773,974 and 191,447,237 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	2		2
Accumulated other comprehensive loss	(10,297)		(10,198)
Additional paid-in capital	1,468,415		1,489,935
Accumulated deficit	(595,130)		(573,046)
Total stockholders’ equity	862,990		906,693
Total liabilities and stockholders’ equity	$	1,550,573	$	1,591,728

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,
		2023		2022

Revenues:
Subscription and transaction fees		$	123,820	$	108,001
Marketing technology solutions		31,788		29,904
Other		5,528		5,671
Total revenues		161,136		143,576
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization presented separately below)		55,946		50,745
Sales and marketing		30,899		30,145
Product development		18,703		17,637
General and administrative		34,926		31,226
Depreciation and amortization		25,950		27,391
Total operating expenses		166,424		157,144
Operating loss		(5,288)		(13,568)
Interest and other expense, net		(15,188)		(5,478)
Net loss attributable to common stockholders before income tax benefit (expense)		(20,476)		(19,046)
Income tax benefit (expense)		(299)		5,737
Net loss attributable to common stockholders		(20,775)		(13,309)
Other comprehensive loss:
Foreign currency translation losses, net		(99)		(664)
Comprehensive loss attributable to common stockholders		$	(20,874)	$	(13,973)






Basic and diluted net loss per share attributable to common stockholders		$	(0.11)	$	(0.07)

Basic and diluted weighted-average shares of common stock outstanding used in computing net loss per share		190,042,673		195,432,404

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

(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, 2022	—	$	—	191,447	$	2	$	1,489,935	$	(573,046)	$	(10,198)	$	906,693

Common stock issued upon vesting of restricted stock units	—	—		348	—		—		—		—		—
Stock-based compensation	—	—		—	—		7,514		—		—		7,514
Stock option exercises	—	—		103	—		609		—		—		609
Repurchase and retirement of common stock	—	—		(3,124)	—		(29,643)		—		—		(29,643)
Adoption of ASC 326, Current Expected Credit Losses	—	—		—	—		—		(1,309)		—		(1,309)
Foreign currency translation losses, net	—	—		—	—		—		—		(99)		(99)
Net loss	—	—		—	—		—		(20,775)		—		(20,775)
Balance at March 31, 2023	—	$	—	188,774	$	2	$	1,468,415	$	(595,130)	$	(10,297)	$	862,990


	Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		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

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,
	2023		2022

Cash flows provided by operating activities:
Net loss	$	(20,775)	$	(13,309)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	25,950		27,391
Stock-based compensation expense	7,514		6,135
Deferred taxes	(177)		(5,990)
Amortization of deferred financing costs and non-cash interest	413		539
Bad debt expense	1,314		460
Other non-cash items	5,704		—
Changes in operating assets and liabilities:
Accounts receivable, net	(2,634)		(2,261)
Prepaid expenses and other current assets	(5,350)		(5,717)
Other non-current assets	1,278		(691)
Accounts payable	(247)		(2,122)
Accrued expenses and other	(848)		3,498
Deferred revenue	1,321		4,060
Other non-current liabilities	(763)		861
Net cash provided by operating activities	12,700		12,854

Cash flows used in investing activities:
Purchases of property and equipment	(476)		(889)
Capitalization of software costs	(4,381)		(3,503)


Net cash used in investing activities	(4,857)		(4,392)

Cash flows used in financing activities:
Payments on debt	(1,375)		(1,375)


Exercise of stock options	609		723



Repurchase and retirement of common stock	(29,643)		—

Net cash used in financing activities	(30,409)		(652)
Effect of foreign currency exchange rate changes on cash	50		(370)
Net increase (decrease) in cash and cash equivalents and restricted cash	(22,516)		7,440
Cash and cash equivalents and restricted cash:
Beginning of period	95,824		97,559
End of period	$	73,308	$	104,999

Supplemental disclosures of cash flow information:
Cash paid for interest	$	10,632	$	4,943
Cash paid for income taxes	$	517	$	235

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


EverCommerce Inc.
March 31, 2023
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 (“service SMBs”). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. Today, the Company serves more than 685,000 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. The Company is headquartered in Denver, Colorado, and has operations across the United States, Canada, Jordan, United Kingdom, Australia and New Zealand.

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, 2022 and the related notes (“Annual Report on Form 10-K”). The December 31, 2022 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, 2023 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2022 and the related notes.

The operating results for the three months ended March 31, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023.

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.

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


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

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

Accounting pronouncements issued and adopted

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 is effective for annual reporting periods beginning after December 15, 2022. The Company adopted this ASU for the year ending December 31, 2023 and it did not have a material impact on the 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 is effective for annual reporting periods beginning after December 15, 2022. The Company adopted this ASU for the year ending December 31, 2023 and it had no impact on the financial statements, but will have an impact on any future acquisitions.

Note 3. 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,
		2023		2022
		(in thousands)

By pattern of recognition (timing of transfer of services):
Point in time		$	14,738	$	12,106
Over time		146,398		131,470
Total		$	161,136	$	143,576
By geographical market:
United States		$	148,965	$	130,286
International		12,171		13,290
Total		$	161,136	$	143,576


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

Contract Balances

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


	March 31,		December 31,
	2023		2022
	(in thousands)

Accounts receivable, net	$	48,038	$	48,032
Contract assets	$	14,748	$	12,971
Deferred revenue	$	24,205	$	22,885
Customer deposits	$	10,435	$	11,360
Long-term deferred revenue	$	2,394	$	2,496

Accounts receivable, net: Accounts receivable, net of allowance for expected credit losses, 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 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, 2022 was $16.0 million for the three months ended March 31, 2023.

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, 2023, was $20.5 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 60% of its remaining performance obligations as revenue within the next year,


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

28% of its remaining performance obligations as revenue the subsequent year, 9% 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 five years, which corresponds with the useful life of the related capitalized software. Short-term assets were $7.1 million and $6.6 million at March 31, 2023 and December 31, 2022, respectively, and long-term assets were $15.8 million and $15.1 million at March 31, 2023 and December 31, 2022, respectively. The Company recorded amortization expense within sales and marketing on the condensed consolidated statements of operations and comprehensive loss of $1.3 million and $0.9 million for the three months ended March 31, 2023 and 2022, respectively. The Company recorded amortization expense within cost of revenues on the condensed consolidated statements of operations and comprehensive loss of $0.5 million and $0.4 million for the three months ended March 31, 2023 and 2022, respectively.

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”).

Note 4. Goodwill

Goodwill activity consisted of the following for the three months ended March 31, 2023 (in thousands):


Balance at December 31, 2022	$	914,082


Effect of foreign currency exchange rate changes	(308)
Balance at March 31, 2023	$	913,774

Note 5. Intangible Assets

Intangible assets consisted of the following as of:


	March 31, 2023
	Useful Life	Gross Carrying Value		Accumulated Amortization		Net Book Value
	(in thousands)

Customer relationships	3-20 years	$	605,984	$	283,122	$	322,862
Developed technology	2-12 years	105,812		63,377		42,435
Trade name	3-10 years	38,141		20,914		17,227
Non-compete agreements	2-5 years	2,402		2,147		255
Total		$	752,339	$	369,560	$	382,779


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements


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

Customer relationships	3-20 years	$	605,753	$	265,342	$	340,411
Developed technology	2-12 years	105,766		59,208		46,558
Trade name	3-10 years	38,131		19,725		18,406
Non-compete agreements	2-5 years	2,402		2,057		345
Total		$	752,052	$	346,332	$	405,720

Amortization expense was $23.2 million and $25.2 million for the three months ended March 31, 2023 and 2022, respectively.

Note 6. Property and Equipment

Property and equipment consisted of the following as of:


	March 31,		December 31,
	2023		2022
	(in thousands)

Computer equipment and software	$	9,625	$	9,327
Furniture and fixtures	3,720		3,570
Leasehold improvements	11,977		11,941
Total property and equipment	25,322		24,838
Less accumulated depreciation	(13,931)		(12,908)
Property and equipment, net	$	11,391	$	11,930

Depreciation expense was $1.0 million for each of the three months ended March 31, 2023 and 2022.

Note 7. Capitalized Software

Capitalized software consisted of the following as of:


	March 31,		December 31,
	2023		2022
	(in thousands)

Capitalized software	$	49,958	$	45,872
Less: accumulated amortization	(15,132)		(13,318)
Capitalized software, net	$	34,826	$	32,554

Amortization expense was $1.8 million and $1.2 million for the three months ended March 31, 2023 and 2022, respectively. During the ordinary course of business, the Company may determine that certain capitalized features of its software will no longer be used either internally or to deliver value to its customers. During the three months ended March 31, 2023 the Company recorded a charge to general and administrative on the accompanying


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

condensed consolidated statements of operations and comprehensive loss for $0.3 million, related to capitalized features no longer expected to be used.

Note 8. Leases

The Company leases real estate from unrelated parties under operating lease agreements that have initial terms ranging from one year to 11 years. Some leases include one or more options to renew, generally at our sole discretion, of five additional years each.

The components of lease expense are as follows:


	Three months ended March 31,
	2023		2022
	(in thousands)

Operating lease cost	$	1,624	$	2,117
Variable lease cost	495		374
Short-term lease cost	55		89
Total lease cost	$	2,174	$	2,580

Supplemental cash flow information related to leases is as follows:


	Three months ended March 31,
	2023		2022
	(in thousands)

Cash paid for amounts included in measurement of lease liabilities:
Operating cash outflows - payments on operating leases	$	1,842	$	1,771

Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	—	$	540

Supplemental balance sheet information, included in other non-current assets, accrued expenses and other and other non-current liabilities on the consolidated balance sheet, related to leases is as follows:


	March 31,		December 31,
	2023		2022
	(in thousands)

Operating lease right-of-use assets	$	19,762	$	21,756

Current operating lease liabilities	4,789		5,239
Long-term operating lease liabilities	21,702		22,500
Total operating lease liabilities	$	26,491	$	27,739

At March 31, 2023 and December 31, 2022, the weighted average remaining lease term for operating leases was 6.19 years and 6.34 years, respectively, and the weighted average discount rate was 4.8%.


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

Future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the balance sheet as of March 31, 2023 is as follows (in thousands):


Year ended December 31,
2023 (remainder of year)	$	4,767
2024	4,952
2025	4,563
2026	4,414
2027	3,990
Thereafter	8,590
Total lease payments	31,276
Less: imputed interest	4,785
Total present value of lease liabilities	$	26,491

Note 9. Long-Term Debt

Long-term debt consisted of the following as of:


	March 31,		December 31,
	2023		2022
	(in thousands)

Term notes with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25% (7.88% at March 31, 2023) quarterly principal payments of 0.25% of original principal balance with balloon payment due July 2028	$	541,750	$	543,125
Revolver with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25% (8.09% at March 31, 2023), and outstanding balance due July 2026	—		—
Principal debt	541,750		543,125
Deferred financing costs on long-term debt	(4,669)		(4,900)
Discount on long-term debt	(1,695)		(1,779)
Total debt	535,386		536,446
Less current maturities	5,500		5,500
Long-term portion	$	529,886	$	530,946

In 2021, the Company agreed to two term loans for an aggregate principal amount of $550.0 million (“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. These debt arrangements 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, 2023, 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 $535.0 million and $531.6 million as of March 31, 2023 and December 31, 2022, respectively.


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

Effective October 31, 2022, the Company entered into an interest rate swap agreement in connection with the Company’s Credit Facilities for a notional amount of $200.0 million to convert a portion of the Term Loans from a floating rate to a fixed rate. The swap agreement has a term of five years with a fixed rate in the agreement of 4.2295%. Additionally, effective March 31, 2023, the Company entered into a second interest rate swap agreement in connection with the Company’s Credit Facilities for a notional amount of $100.0 million to convert a portion of the Term Loans from a floating rate to a fixed rate. This swap agreement has a term of approximately 4.5 years with a fixed rate in the agreement of 3.9690% (the “Swap Agreements”).

The Swap Agreements are accounted for as derivatives whereby the fair value of the contracts are reported in other non-current assets or other non-current liabilities on the consolidated balance sheet, and gains and losses resulting from changes in the fair value are reported in interest and other expense, net, in the statement of operations and comprehensive loss. As of March 31, 2023 the fair value of the Swap Agreements was a liability of $7.1 million and reported in other non-current liabilities on the condensed consolidated balance sheet.

The Company’s Credit Facilities are subject to certain financial and nonfinancial covenants and are secured by substantially all assets of the Company. As of March 31, 2023, 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, 2023 (in thousands):


Years ending December 31:
2023 (remainder of year)	$	4,125
2024	5,500
2025	5,500
2026	5,500
2027	5,500
Thereafter	515,625
Total aggregate maturities of the Company’s debt	$	541,750

Note 10. Equity

On July 6, 2021, the Company filed an Amended and Restated Certificate of Incorporation 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.

On June 14, 2022, our Board of Directors approved a stock repurchase program (the “Repurchase Program”) with authorization to purchase up to $50.0 million in shares of the Company’s common stock through the expiration of the program on December 21, 2022. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. This program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of the Board of Directors. The Company expects to fund repurchases with existing cash on hand. On November 7, 2022, our Board of Directors approved an expansion of the Repurchase Program with authorization to purchase up to an additional $50.0 million in shares of the Company’s common stock ($100.0 million total) and an extension to the expiration of the Repurchase Program through December 31, 2023.


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

The Company repurchased and retired 3.1 million shares of common stock for $29.6 million, including transaction fees, during the three months ended March 31, 2023. As of March 31, 2023, $27.6 million remains available under the Repurchase Program.

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, 2022, as of January 1, 2023 the number of shares reserved for issuance under the 2021 Plan increased by 5.7 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 12 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, 2023:


	RSUs	Options
	(in thousands)

Outstanding as of January 1, 2023	2,022	16,937
Granted	2,839	—
Vested or exercised	(347)	(103)
Cancelled or forfeited	(24)	(78)
Outstanding as of March 31, 2023	4,490	16,756

As of March 31, 2023, total unrecognized compensation expense was $40.9 million and $18.1 million related to outstanding restricted stock units and outstanding stock options, respectively.


EverCommerce Inc.
March 31, 2023
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,
		2023		2022
		(in thousands)

Cost of revenues		$	108	$	82
Sales and marketing		402		328
Product development		562		392
General and administrative		6,442		5,333
Total stock-based compensation expense		$	7,514	$	6,135

Note 12. Net Loss Per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock as of:


	Three months ended March 31,
		2023		2022
		(in thousands except share and per share amounts)







Numerator for basic and diluted EPS – net loss attributable to common stockholders		$	(20,775)	$	(13,309)

Denominator:
Denominator for basic and diluted EPS – weighted-average shares of common stock outstanding used in computing net loss per share		190,042,673		195,432,404

Basic and diluted net loss per share attributable to common stockholders		$	(0.11)	$	(0.07)

The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented due to their anti-dilutive effect as of:


	March 31,
	2023	2022

Outstanding options to purchase common stock and unvested RSUs	21,245,514	19,690,100

Total anti-dilutive outstanding potential common stock	21,245,514	19,690,100

Note 13. Fair Value of Financial Instruments

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

can significantly affect estimated fair value.

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

•Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

•Level 2: Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. The Company has no assets or liabilities valued with Level 2 inputs.

•Level 3: Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying value of cash and cash equivalents, accounts receivable, contract assets and accounts payable approximate their fair value because of the short-term nature of these instruments.

There were no transfers between fair value measurement levels during the three months ended March 31, 2023 or 2022.

The following table presents information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of:


	March 31, 2023								Balance Sheet Classification
	Level 1		Level 2		Level 3		Total
	(in thousands)

Asset:
Money market	$	1,550	$	—	$	—	$	1,550	Cash equivalents
Liability:
Interest rate swaps	$	—	$	7,137	$	—	$	7,137	Other non-current liabilities


	December 31, 2022								Balance Sheet Classification
	Level 1		Level 2		Level 3		Total
	(in thousands)

Asset:
Money market	$	6,568	$	—	$	—	$	6,568	Cash equivalents
Liability:
Interest rate swap	$	—	$	2,893	$	—	$	2,893	Other non-current liabilities

Note 14. Income Taxes

Our provision for income taxes in interim periods is based on our estimated annual effective tax rate. We record cumulative adjustments in the quarter in which a change in the estimated annual effective rate is determined.


EverCommerce Inc.
March 31, 2023
Notes to Condensed Consolidated Financial Statements

The income tax benefit (expense) was ($0.3 million) and $5.7 million for the three months ended March 31, 2023 and 2022, respectively. Our effective income tax rate was (1.5%) and 30.1% for the three months ended March 31, 2023 and 2022, respectively.

The difference in the effective income tax rate for the three months ended March 31, 2023 as compared to the corresponding period in 2022 was primarily driven by discrete items, including a California law change and an intercompany intellectual property sale, in the three months ended March 31, 2022.

Note 15. Commitments and Contingencies

The Company has non-cancelable contractual purchase obligations incurred in the normal course of business to help deliver our services and products and provide support to our customers. These contracts with vendors primarily relate to software service, targeted mail costs, third party fulfillment costs and software hosting. Unrecognized future minimum payments due under these agreements are as follows (in thousands):


Year ended December 31,
2023 (remainder of year)	$	9,515
2024	12,800
2025	10,279
2026	2,125
2027	2,625
Thereafter	688
Total future minimum payments due	$	38,032

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

The Company assesses the applicability of nexus in jurisdictions in which the Company sells products and services. As of March 31, 2023 and December 31, 2022, the Company recorded a liability in the amount of $11.1 million and $11.2 million, respectively, within current liabilities and other long-term liabilities as a provision for sales and use, gross receipts and goods and services tax. In connection with the Company's accounting for acquisitions, the Company has recorded liabilities and corresponding provisional escrow or indemnity receivables within the purchase price allocations for instances in which the Company is indemnified for tax matters.

Note 16. Geographic Areas

The following table sets forth long-lived assets by geographic area as of:


	March 31,		December 31,
	2023		2022
	(in thousands)

United States	$	37,767	$	36,226
International	$	8,450	$	8,258

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "EverCommerce," the “Company,” “we,” “us” and “our” refer to EverCommerce Inc. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report on Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

EverCommerce is a leading provider of integrated, vertically-tailored software-as-a-service (“SaaS”) solutions for service-based small- and medium-sized businesses (“service SMBs”). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. Today, we serve more than 685,000 customers across three core verticals: Home Services; Health Services; and Fitness & Wellness Services. Within our core verticals, our customers operate within numerous micro-verticals, ranging from home service professionals, such as home improvement contractors and home maintenance technicians, to physician practices and therapists within Health Services, to personal trainers and salon owners within Fitness & Wellness. Our platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly specialized 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.

We offer several vertically-tailored suites of solutions, each of which follows a similar and repeatable go-to-market playbook: offer a “system of action” Business Management Software that streamlines daily business workflows, integrate highly complementary, value-add adjacent solutions and complete gaps in the value chain to create end-to-end solutions. These solutions focus on addressing how service SMBs market their services, streamline operations and retain and engage their customers.

•Business Management Software: Our vertically-tailored Business Management Software is the system of action at the center of a service business’s operation, and is typically the point-of-entry and first solution adopted by a customer. Our software, designed to meet the day-to-day workflow needs of businesses in specific vertical end markets, streamlines front and back-office processes and provides polished customer-facing experiences. Using these offerings, service SMBs can focus on growing their customers, improving their services and driving more efficient operations.

•Billing & Payment Solutions: Our Billing & Payment Solutions provide integrated payments, billing and invoicing automation and business intelligence and analytics. Our omni-channel payments capabilities include point-of-sale, eCommerce, online bill payments, recurring billing, electronic invoicing and mobile payments. Supported payment types include credit card, debit card and Automated Clearing House (“ACH”) processing. Our payments platform also provides a full suite of service commerce features, including customer management as well as cash flow reporting and analytics. These value-add features help small- and medium-sized businesses (“SMBs”) to ensure more timely billing and payments collection and provide improved cash flow visibility.

•Customer Experience Solutions: Our Customer Experience Solutions modernize how businesses engage and interact with customers by leveraging innovative, bespoke customer listening and communication solutions to improve the customer experience and increase retention. Our software provides customer listening capabilities with real-time customer surveying and analysis to allow standalone businesses and multi-location brands to receive voice of the customer (“VoC”) insights and manage the customer experience lifecycle.

These applications include: customer health scoring, customer support systems, real-time alerts, NPS-based customer feedback collection, review generation and automation, reputation management, customer satisfaction surveying and a digital communication suite, among others. These tools help our customers gain actionable insights, increase customer loyalty and repeat purchases and improve customer experiences.

•Marketing Technology Solutions: Our Marketing Technology Solutions work with our Customer Experience Solutions to help customers build their businesses by invigorating marketing operations and improving return on investment across the customer lifecycle. These solutions help businesses to manage campaigns, generate quality leads, increase conversion and repeat sales, improve customer loyalty and provide a polished brand experience. Our solutions include: custom website design, development and hosting, responsive web design, marketing campaign design and management, search engine optimization (“SEO”), paid search and display advertising, social media and blog automation, call tracking, review monitoring and marketplace lead generation, among others.

We go to market with suites of solutions that are aligned to our three core verticals: (i) the EverPro suite of solutions in Home Services; (ii) the EverHealth suite of solutions within Health Services; and (iii) the EverWell suite of solutions in Fitness & Wellness Services. Within each suite, our Business Management Software – the system of action at the center of a service business’ operation – is typically the first solution adopted by a customer. This vertically-tailored point-of-entry provides us with an opportunity to cross-sell adjacent products, previously offered as fragmented and disjointed point solutions by other software providers. This “land and expand” strategy allows us to acquire customers with key foundational solutions and expand into offerings via product development and acquisitions that cover all workflows and power the full scope of our customers’ businesses. This results in a self-reinforcing flywheel effect, enabling us to drive value for our customers and, in turn, improve customer stickiness, increase our market share and fuel our growth.

We generate three types of revenue: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, (ii) Marketing Technology Solutions, which includes both recurring and re-occurring revenue streams and (iii) Other revenue which consists primarily of one-time revenue streams. Our recurring revenue generally consists of monthly, quarterly and annual software and maintenance subscriptions, transaction revenue associated with integrated payments and billing solutions and monthly contracts for Marketing Technology Solutions. Additionally, our re-occurring revenue includes revenue related to the sale of marketing campaigns and lead generation under contractual arrangements with customers.

Our business benefits from attractive unit economics. Approximately 95% of our revenue in the three months ended March 31, 2023 and 2022 was recurring or re-occurring, and we maintained an annualized net revenue retention rate of approximately 100% for the quarter ended March 31, 2023. We believe the retention and growth of revenue from our existing customers is a helpful measure of the health of our business and our future growth prospects. Our ability to cross sell additional products and services to our existing customers can increase customer engagement with our suite of solutions and thus have a positive impact on our net pro forma revenue retention rate. For example, we have leveraged our land and expand strategy to cross sell solutions to our existing customers, which has supported our high net pro forma revenue retention rate by increasing customer utilization of our solutions, educating customers as to how our platform and synergies can support their businesses and, in turn, improving customer stickiness.

We calculate our monthly net pro forma revenue retention rate for a particular month as the recurring or re-occurring revenue gained/lost from existing customers, less the recurring or re-occurring revenue lost from cancelled customers, as a percentage of total recurring or re-occurring revenue 12 months prior, divided by 12. For existing customers, we consider customers that existed 11 or more months prior to the current month and that do not have an end date (i.e., cancelled relationship) on or after the first day of the current month. For example, the recurring or re-occurring revenue gained/lost from existing customers in November 2022 is the difference between the recurring or re-occurring revenue generated in November 2022 and the same such revenue generated in November 2021, for customers with a start date prior to December 1, 2021 and no end date or cancelled relationship on or after

November 1, 2022. For cancelled customers, we examine customers that cancelled their relationships on or after the first day of the month that is 12 months prior to the current month and before the first day of the current month. For example, the recurring or reoccurring revenue lost from cancelled customers in November 2022 is the difference between the recurring or re-occurring revenue generated in November 2022 and the same such revenue generated in November 2021, for customers that cancelled on or after November 1, 2021 and before November 1, 2022. Net pro forma revenue retention is calculated as if acquisitions that were closed during the prior period presented were closed on the first day of such period presented. Our calculation of net pro forma revenue retention rate for any fiscal period includes the positive recurring and re-occurring revenue impacts of selling new solutions to existing customers and the negative impacts of contraction and attrition among this set of customers. Our net pro forma revenue retention rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of solutions, new acquisitions and our ability to retain our customers. Our calculation of net pro forma revenue retention rate may differ from similarly titled metrics presented by other companies.

This rate for any fiscal period includes the positive recurring and re-occurring revenue impacts of selling new solutions to existing customers and the negative impacts of contraction and attrition among this set of customers. Our net pro forma revenue retention rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of solutions, new acquisitions and our ability to retain our customers. Our calculation of net pro forma revenue retention rate may differ from similarly titled metrics presented by other companies.

We acquire companies to deepen our competitive moats in existing verticals, and enter new verticals and geographies. We have acquired 52 companies since our inception. We have an established framework for identification, execution, integration, and onboarding of targets, which leverages our significant acquisition experience and utilizes internal criteria for evaluating acquisition candidates and prospective businesses. We have developed and refined our internal criteria over time with our acquisitions, which has helped us to more readily identify attractive and complementary targets that can be efficiently onboarded. These acquired solutions can bring deep industry expertise and vertically-tailored software solutions that provide additional sources of growth. We believe that our methodology, track record, and reputation for sourcing, evaluating, and integrating acquisitions positions us as an “acquirer-of-choice” for potential targets.

Impact of Macroeconomic Climate

The macroeconomic climate continues to see pressure from global developments such as the COVID-19 pandemic, rising inflation, the strengthened US Dollar, rising interest rates and supply chain disruptions. These developments may have an adverse effect on our revenues and demand for our products and services, as well as on our costs of doing business. We have taken and will continue to take actions to help mitigate the impact of these economic challenges, but there can be no assurance as to the effectiveness of our efforts going forward.

For more information regarding the potential impact of the COVID-19 pandemic on our business, refer to Part I. Item 1A. “Risk Factors—Risks Related to our Business—The COVID-19 pandemic has impacted, and a future pandemic, epidemic or outbreak of an infectious disease 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” in our Annual Report on Form 10-K.

Key Factors Affecting Our Performance

We believe that our performance and future success depends on a number of factors that present significant opportunities for us but also pose risks and challenges. For discussion of these factors, please see “Key Factors Affecting Our Performance” in the Management’s Discussion and Analysis section of our Annual Report on Form 10-K.

Key Business and Financial Metrics

In addition to our results and measures of performance determined in accordance with Generally Accepted Accounting Principals (“GAAP”), we believe the following key business and non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions.

Pro Forma Revenue Growth Rate

Pro Forma Revenue Growth Rate is a key performance measure that our management uses to assess our consolidated operating performance over time. Management also uses this metric for planning and forecasting purposes.

Our year-over-year Pro Forma Revenue Growth Rate is calculated as though all acquisitions closed as of the end of the latest period were closed as of the first day of the prior year period presented. In calculating Pro Forma Revenue Growth Rate, we add the revenue from acquisitions for the reporting periods prior to the date of acquisition (including estimated purchase accounting adjustments) to our results of operations, and then calculate our revenue growth rate between the two reported periods. As a result, Pro Forma Revenue Growth Rate includes pro forma revenue from businesses acquired during the period, including revenue generated during periods when we did not yet own the acquired businesses. In including such pre-acquisition revenue, Pro Forma Revenue Growth Rate allows us to measure the underlying revenue growth of our business as it stands as of the end of the respective period, which we believe provides insight into our then-current operations. Pro Forma Revenue Growth Rate does not represent organic revenue generated by our business as it stood at the beginning of the respective period. Pro Forma Revenue Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had the acquisitions been consummated on the first day of the prior year period presented. We believe that this metric is useful to investors in analyzing our financial and operational performance period over period and evaluating the growth of our business, normalizing for the impact of acquisitions. This metric is particularly useful to management due to the number of acquired entities.

Our Pro Forma Revenue Growth rate was 12.2% for the three months ended March 31, 2023, reflective of the underlying growth in our business including new customers and providing more solutions to existing customers.

Non-GAAP Financial Measures

Adjusted Gross Profit

Adjusted Gross Profit is a key performance measure that our management uses to assess our operational performance, as it represents the results of revenues and direct costs, which are key components of our operations. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it reflects the gross profitability of our operations, and excludes the indirect costs associated with our sales and marketing, product development, general and administrative activities and depreciation and amortization, and the impact of our financing methods and income taxes.

We calculate Adjusted Gross Profit as gross profit (as defined below) adjusted to exclude depreciation and amortization allocated to cost of revenues. Adjusted Gross Profit should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss) or profitability. The following table presents a reconciliation of gross profit, the

most directly comparable financial measure calculated in accordance with GAAP, to Adjusted Gross Profit on a consolidated basis.


	Three months ended March 31,
		2023			2022
		(in thousands)

Gross profit (1)		$	99,281	(2)	$	87,278	(3)
Depreciation and amortization		5,909			5,553
Adjusted gross profit		$	105,190		$	92,831

(1)Gross profit is calculated as total revenues less cost of revenues (exclusive of depreciation and amortization), amortization of developed technology, amortization of capitalized software and depreciation expense (allocated to cost of revenues).

(2)For the three months ended March 31, 2023, gross profit represents total revenues of $161.1 million less cost of revenues (exclusive of depreciation and amortization) of $55.9 million, amortization of developed technology of $3.8 million, amortization of capitalized software of $1.8 million and depreciation expense (allocated to cost of revenues) of $0.3 million.

(3)For the three months ended March 31, 2022, gross profit represents total revenues of $143.6 million less cost of revenues (exclusive of depreciation and amortization) of $50.7 million, amortization of developed technology of $4.2 million, amortization of capitalized software of $1.1 million and depreciation expense (allocated to cost of revenues) of $0.3 million.

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it provides a comparable overview of our operations across historical periods. In addition, we believe that providing Adjusted EBITDA, together with a reconciliation of net loss to Adjusted EBITDA, helps investors make comparisons between our company and other companies that may have different capital structures, different tax rates and/or different forms of employee compensation.

Adjusted EBITDA is used by our management team as an additional measure of our performance for purposes of business decision-making, including managing expenditures, and evaluating potential acquisitions. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of net income or income from continuing operations. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees. Our Management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, and may not be directly comparable to similarly titled metrics used by other companies.

We calculate Adjusted EBITDA as net loss adjusted to exclude interest and other expense, net, income tax expense (benefit), depreciation and amortization, other amortization, acquisition related costs, stock-based compensation, and other non-recurring costs. Other amortization includes amortization for capitalized contract acquisition costs. Acquisition related costs are specific deal-related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. Other non-recurring costs are expenses such as system implementation costs and severance related to planned restructuring activities. Acquisition related costs and other non-recurring costs are excluded as they are not representative of our underlying operating performance. Adjusted EBITDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss). The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA on a consolidated basis.


	Three months ended March 31,
		2023		2022
		(in thousands)

Net loss		$	(20,775)	$	(13,309)
Adjusted to exclude the following:
Interest and other expense, net		15,188		5,478
Income tax expense (benefit)		299		(5,737)
Depreciation and amortization		25,950		27,391
Other amortization		1,309		942
Acquisition related costs		606		597
Stock-based compensation expense		7,514		6,135
Other non-recurring costs		1,847		1,465
Adjusted EBITDA		$	31,938	$	22,962

Description of Certain Components of Financial Data

Revenues

We derive our revenue from three primary sources which are described in detail below: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, (ii) Marketing Technology Solutions, which includes both recurring and re-occurring revenue streams and (iii) Other revenue, which consists primarily of the sale of distinct professional services and hardware. Our revenue recognition policies are discussed in more detail under “Critical Accounting Policies and Significant Judgments and Estimates.”

Subscription and Transaction Fees: Revenue includes (i) recurring monthly, quarterly and annual SaaS subscriptions and software license and maintenance fees from the sale of our Business Management, Customer Experience and Billing and Payment solutions; (ii) payment processing fees based on the transaction volumes processed through our integrated payment solutions and processing fees based on transaction volumes for our revenue cycle management, chronic care management and health insurance clearinghouse solutions and (iii) membership subscriptions and our share of rebates from suppliers generated though group purchasing programs. Our revenue from payment processing fees is recorded net of credit card and ACH processing and interchange charges in the month the services are performed.

Marketing Technology Solutions: Revenue includes (i) recurring revenues for managing digital advertising programs on behalf of our customers including website hosting, search engine management and optimization, social media

management and blog automation and (ii) re-occurring fees paid by service professionals for consumer leads generated by our various platforms.

Other: Revenue includes (i) consulting, implementation, training and other professional services; (ii) website development; (iii) revenue from various business development partnerships; (iv) event income and (v) hardware sales related to our business management or payment software solutions.

Cost of Revenues

Cost of revenue (exclusive of depreciation and amortization) consists of expenses related to delivering our services and products and providing support to our customers and includes employee costs and related overhead, customer credit card processing fees, targeted mail costs, third party fulfillment costs and software hosting expenses.

We expect that cost of revenue as a percentage of revenue will fluctuate from period to period based on a variety of factors, including the mix of revenue between Subscription and Transaction Fees and Marketing Technology Solutions, labor costs, third-party expenses and acquisitions. In particular, Marketing Technology Solutions revenue generally has a higher cost of revenue as a percentage of revenue than our Subscription and Transaction Fee revenue. For the three months ended March 31, 2023, revenue from Subscription and Transaction Fees increased 14.6% compared to the three months ended March 31, 2022 whereas Marketing Technology Solutions revenue increased 6.3%. To the extent our Marketing Technology Solutions revenue grows at a faster rate, whether by acquisition or otherwise, than our Subscription and Transaction Fees revenue, it could negatively impact our cost of revenues as a percentage of revenue.

Sales and Marketing

Sales and marketing expense consists primarily of employee costs for our sales and marketing personnel, including salaries, benefits, bonuses, stock based compensation and sales commissions. Sales and marketing expenses also include advertising costs, travel-related expenses and costs to market and promote our products, direct customer acquisition costs, costs related to conferences and events and partner/broker commissions. Software and subscription services dedicated for use by our sales and marketing organization, and outside services contracted for sales and marketing purposes are also included in sales and marketing expense. Sales commissions that are incremental to obtaining a customer contract are deferred and amortized ratably over the estimated period of our relationship with that customer. We expect our sales and marketing expenses will increase in absolute dollars and may increase as a percentage of revenue for the foreseeable future as we continue to increase investments to support our growth.

Product Development

Product development expense consists primarily of employee costs for our product development personnel, including salaries, benefits, stock-based compensation and bonuses. Product development expenses also include third-party outsourced technology costs incurred in developing our platforms, and computer equipment, software and subscription services dedicated for use by our product development organization. We expect our product development expenses to increase in absolute dollars and remain generally consistent as a percentage of revenue for the foreseeable future as we continue to dedicate substantial resources to develop, improve and expand the functionality of our solutions.

General and Administrative

General and administrative expense consists of employee costs for our executive leadership, accounting, finance, legal, human resources and other administrative personnel, including salaries, benefits, bonuses and stock-based compensation. General and administrative expenses also include external legal, accounting and other professional services fees, rent, software and subscription services dedicated for use by our general and administrative employees

and other general corporate expenses. We expect general and administrative expense to increase on an absolute dollar basis for the foreseeable future as we continue to increase investments to support our growth and due to increased costs as a result of being a public company. As we are able to further scale our operations in the future, we would expect that general and administrative expenses would decrease as a percentage of revenue.

Depreciation and Amortization

Depreciation and amortization primarily relate to intangible assets, property and equipment and capitalized software.

Interest and Other Expense, net

Interest and other expense, net, primarily consists of interest expense on long-term debt, net of interest income. It also includes amortization expense of financing costs and discounts, as well as realized and unrealized gains and losses.

Income Tax Benefit (Expense)

We account for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires deferred tax assets and liabilities to be recognized for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at the expected tax rates for the periods in which the assets or liabilities will be realized, as well as for the expected tax benefit (expense) of net operating loss and tax credit carryforwards. Income taxes are recognized for the amount of taxes payable by the Company's corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

Results of Operations

The following tables summarize key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future. We operate as a single reportable segment to reflect the way our chief operating decision maker (“CODM”) reviews and assesses the performance of our business. For additional information concerning our accounting policies, see Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K.

Comparison of the three months ended March 31, 2023 and 2022


	Three months ended March 31,
		2023		2022
		(in thousands)

Revenues:
Subscription and transaction fees		$	123,820	$	108,001
Marketing technology solutions		31,788		29,904
Other		5,528		5,671
Total revenues		161,136		143,576
Operating expenses:
Cost of revenues (1) (exclusive of depreciation and amortization presented separately below)		55,946		50,745
Sales and marketing (1)		30,899		30,145
Product development (1)		18,703		17,637
General and administrative (1)		34,926		31,226
Depreciation and amortization		25,950		27,391
Total operating expenses		166,424		157,144
Operating loss		(5,288)		(13,568)
Interest and other expense, net		(15,188)		(5,478)

Net loss attributable to common stockholders before income tax benefit (expense)		(20,476)		(19,046)
Income tax benefit (expense)		(299)		5,737
Net loss attributable to common stockholders		$	(20,775)	$	(13,309)

(1)Includes stock-based compensation expense as follows:


	Three months ended March 31,
		2023		2022
		(in thousands)

Cost of revenues		$	108	$	82
Sales and marketing		402		328
Product development		562		392
General and administrative		6,442		5,333
Total stock-based compensation expense		$	7,514	$	6,135

Revenues


	Three months ended March 31,				Change
	2023		2022		Amount		%
	(dollars in thousands)

Revenues:
Subscription and transaction fees	$	123,820	$	108,001	$	15,819	14.6	%
Marketing technology solutions	31,788		29,904		1,884		6.3	%
Other	5,528		5,671		(143)		(2.5)	%
Total revenues	$	161,136	$	143,576	$	17,560	12.2	%

Revenues increased $17.6 million or 12.2% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. The increase was partly driven by a $9.0 million increase from software & subscription revenues due to an expansion in our number of customers and certain price increases across our portfolio. Additionally there was a $7.0 million increase due to higher transaction volumes processed through our payments platforms.

Cost of Revenues


	Three months ended March 31,						Change
	2023			2022			Amount		%
	(dollars in thousands)

Cost of revenues (exclusive of depreciation and amortization presented separately below)	$	55,946		$	50,745		$	5,201	10.2	%
Percentage of revenues	34.7		%	35.3		%

Cost of revenues increased by $5.2 million or 10.2% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. This increase was primarily comprised of an additional $1.3 million of lead generation expense, $1.0 million of promotional spend, $0.9 million of personnel and compensation expense, $0.9 million of email and SMS expense and $0.7 million of campaign mail expense, partially offset by a $1.3 million decrease in media spend. As a percentage of revenue, cost of revenues was 34.7% and 35.3% for the three months ended March 31, 2023 and 2022, respectively.

Sales and Marketing


	Three months ended March 31,						Change
	2023			2022			Amount		%
	(dollars in thousands)

Sales and marketing	$	30,899		$	30,145		$	754	2.5	%
Percentage of revenues	19.2		%	21.0		%

Sales and marketing expenses increased by $0.8 million or 2.5% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. The increase was relatively consistent as a percentage of revenue, sales and marketing was 19.2% and 21.0% for the three months ended March 31, 2023 and 2022, respectively.

Product Development


	Three months ended March 31,						Change
	2023			2022			Amount		%
	(dollars in thousands)

Product development	$	18,703		$	17,637		$	1,066	6.0	%
Percentage of revenues	11.6		%	12.3		%

Product development expenses increased by $1.1 million or 6.0% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. This increase was a result of continued investment in our technology and teams to support our various solutions as well as centralized security operations, information technology and cloud engineering, with an additional $0.6 million of software and tools expense, $0.2 million of consulting expense and $0.1 million of personnel expenses. As a percentage of revenue, product development expenses were 11.6% and 12.3% for the three months ended March 31, 2023 and 2022, respectively.

General and Administrative


	Three months ended March 31,						Change
	2023			2022			Amount		%
	(dollars in thousands)

General and administrative	$	34,926		$	31,226		$	3,700	11.8	%
Percentage of revenues	21.7		%	21.7		%

General and administrative expenses increased by $3.7 million or 11.8% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. This increase was primarily driven by an additional $1.4 million of personnel and compensation expense and $1.1 million of stock-based compensation expenses. As a percentage of revenue, general and administrative expenses were 21.7% for both the three months ended March 31, 2023 and 2022.

Depreciation and Amortization


	Three months ended March 31,						Change
	2023			2022			Amount		%
	(dollars in thousands)

Depreciation and amortization	$	25,950		$	27,391		$	(1,441)	(5.3)	%
Percentage of revenues	16.1		%	19.1		%

Depreciation and amortization decreased by $1.4 million or 5.3% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. This decrease was primarily driven by a decrease of $2.1 million in intangible assets’ amortization, partially offset by $0.7 million of additional capitalized software amortization. As a percentage of revenue, depreciation and amortization expenses were 16.1% and 19.1% for the three months ended March 31, 2023 and 2022, respectively.

Interest and Other Expense, net


	Three months ended March 31,						Change
	2023			2022			Amount		%
	(dollars in thousands)

Interest and other expense, net	$	15,188		$	5,478		$	9,710	177.3	%
Percentage of revenues	9.4		%	3.8		%

Interest and other expense, net, increased by $9.7 million or 177.3% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. The increase was primarily due a higher effective interest rate and the loss on the interest rate swaps recorded in the first quarter of 2023. As a percentage of revenue, interest and other expense were 9.4% and 3.8% for the three months ended March 31, 2023 and 2022, respectively.

Income Tax Benefit (Expense)


	Three months ended March 31,						Change
	2023			2022			Amount		%
	(dollars in thousands)

Income tax benefit (expense)	$	(299)		$	5,737		$	(6,036)	(105.2	%)
Percentage of revenues	(0.2		%)	4.0		%

Income tax benefit (expense) changed by $6.0 million or 105.2% for the three months ended March 31, 2023, as compared to the corresponding period in 2022. The change was primarily driven by discrete items, including a California law change and an intercompany intellectual property sale, in the three months ended March 31, 2022.

Liquidity and Capital Resources

To date, our primary sources of liquidity have been net cash provided by operating activities, proceeds from equity issuances and proceeds from long-term debt.

Our primary use of liquidity has been acquisitions of businesses. For a description of our recent acquisitions, see Note 3 in our Annual Report on Form 10-K. Absent significant deterioration of market conditions, we expect that working capital requirements, capital expenditures, acquisitions, the Company’s Repurchase Program (defined below), debt servicing and lease obligations will be our principal needs for liquidity going forward.

As of March 31, 2023, we had cash, cash equivalents and restricted cash of $73.3 million, $190.0 million of available borrowing capacity under our Revolver (as defined below) and $541.8 million outstanding under our Term Loans (as defined below). We believe that our existing cash, cash equivalents and restricted cash, availability under our Credit Facilities, and our cash flows from operations will be sufficient to fund our working capital requirements and planned capital expenditures, and to service our debt obligations for at least the next twelve months. However, our future working capital requirements will depend on many factors, including our rate of revenue growth, the timing and size of future acquisitions, and the timing of introductions of new products and services. We expect to consummate acquisitions of complementary businesses in the future that could require us to seek additional equity or debt financing. Market and macroeconomic conditions may, from time to time, impact our ability to raise capital. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected. See Part II, Item 1A.“Risk Factors.”

Cash Flows

The following table sets forth cash flow data for the periods indicated therein:


	Three months ended March 31,
	2023		2022
	(in thousands)

Net cash provided by operating activities	$	12,700	$	12,854
Net cash used in investing activities	(4,857)		(4,392)
Net cash used in financing activities	(30,409)		(652)
Effect of foreign currency exchange rate changes on cash	50		(370)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(22,516)	$	7,440

Cash Flow from Operating Activities

Net cash provided by operating activities was $12.7 million for the three months ended March 31, 2023, compared to $12.9 million for the three months ended March 31, 2022. Changes in net cash provided by operating activities result primarily from cash received from net sales within our subscription and transaction fees and marketing technology solutions. Other drivers of the changes in net cash provided by operating activities include payments for personnel expenses for our employees, costs related to delivering our services and products, partner commissions, advertising and interest on our long-term debt.

The decrease in cash provided for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to higher interest payments of $5.5 million, higher investments made to support the growth of our business including personnel expenses of $2.5 million, costs directly related to the delivery of our services and products of $4.0 million and $1.9 million for other expenses and the timing of payments offset by

higher cash collections from our subscription and transaction fees and marketing technology solutions of approximately $14.2 million.

Cash Flow from Investing Activities

During the three months ended March 31, 2023, net cash used in investing activities was $4.9 million. The cash was used primarily for costs to develop software of $4.4 million. The remainder was used primarily for purchases of property and equipment.

During the three months ended March 31, 2022, net cash used in investing activities was $4.4 million. The cash was used primarily for costs to develop software of $3.5 million. The remainder was used primarily for purchases of property and equipment.

Cash Flow from Financing Activities

During the three months ended March 31, 2023, net cash used in financing activities was $30.4 million. The cash was used primarily for the repurchase and retirement of shares of our common stock of $29.6 million.

During the three months ended March 31, 2022, net cash used in financing activities was $0.7 million. The cash was used for payments on long-term debt of $1.4 million, partially offset by the exercise of stock options of $0.7 million.

Credit Facilities

In 2021, the Company entered into a credit agreement providing for two term loans for an aggregate principal amount of $550.0 million (“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. These debt arrangements are collectively referred to herein as the (“Credit Facilities”).

Simultaneously with the execution of the Credit Facilities, we and various of our subsidiaries entered into a collateral agreement and guarantee agreement. Pursuant to the guarantee agreement, EverCommerce Intermediate Inc. and various of our subsidiaries are guarantors of the obligations under the Credit Facilities. Pursuant to the collateral agreement, the Credit Facilities are secured by liens on substantially all of our assets, including our intellectual property and the equity interests of our various subsidiaries, including EverCommerce Solutions Inc.

The Credit Facilities contain certain affirmative and negative covenants, including, among other things, restrictions on indebtedness, issuance of preferred equity interests, liens, fundamental changes and asset sales, investments, negative pledges, repurchases of stock, dividends and other distributions, and transactions with affiliates. In addition, we are subject to a financial covenant with respect to the Revolver whereby, if the aggregate principal amount of revolving loans (excluding letters of credit) outstanding on the last day of any fiscal quarter exceeds 35% of the aggregate commitments available under the Revolver, then our first lien leverage ratio as of the last day of such fiscal quarter must be 7.50 to 1.00 or less.

Borrowings under the Credit Facilities are available as ABR or Eurocurrency borrowings. ABR borrowings under the Credit Facilities accrue interest at an alternate base rate plus an applicable rate, and Eurocurrency borrowings accrue interest at an adjusted LIBOR rate plus an applicable rate. The ABR rate represents the greater of the prime rate, Federal Reserve Bank of New York rate plus ½ of 1%, and an adjusted LIBOR rate for a one month interest period plus 1%. The applicable rate for the Term Loans and the Revolver is 3% for Eurocurrency borrowings and 2% for ABR Borrowings, in each case subject to change based on our first lien net leverage ratio.

With respect to ABR borrowings, interest payments are due on a quarterly basis on the last business day of each March, June, September and December. With respect to Eurocurrency borrowings, interest payments are due on the

last business day of the interest period applicable to the borrowing and, in the case of a Eurocurrency borrowing with an interest period of more than three months’ duration, each day prior to the last day of such interest period that occurs at intervals of three months’ duration after the first day of such interest period.

The Revolver has a variable commitment fee, which is based on our first lien leverage ratio. We expect the commitment fee to range from 0.25% to 0.375% per annum. We are obligated to pay a fixed fronting fee for letters of credit of 0.125% per annum.

Amounts borrowed under the Revolver may be repaid and re-borrowed through maturity of the Revolver in July 2026. The Term Loans mature in July 2028. The Term Loans may be repaid or prepaid but may not be re-borrowed.

As of March 31, 2023, there was $541.8 million outstanding under our Credit Facilities, all of which was related to the Term Loans as no amounts were outstanding under the Revolver. The effective interest rate on the Term Loans was approximately 7.9% for the three months ended March 31, 2023.

As of March 31, 2023, we were in compliance with the covenants under the Credit Facilities.

Stock Repurchase Program

On June 14, 2022, our Board of Directors approved the stock repurchase program (as subsequently amended, the “Repurchase Program”) with authorization to purchase up to $50.0 million in shares of the Company’s common stock through the expiration of the program on December 21, 2022. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. This program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of the Board of Directors. The Company expects to fund repurchases with existing cash on hand. The Company repurchased and retired 3,123,697 shares of common stock for $29.6 million during the three months ended March 31, 2023, respectively.

On November 7, 2022, our Board of Directors approved an expansion of the Repurchase Program with authorization to purchase up to an additional $50.0 million in shares of the Company’s common stock ($100.0 million total) and an extension to the expiration of the Repurchase Program through December 31, 2023. As of March 31, 2023, $27.6 million remains available under the Repurchase Program.

Contractual Obligations

There have been no material changes to our contractual obligations as of March 31, 2023 from those disclosed in our Annual Report on Form 10-K.

Refer to Notes 8, 9 and 15 in the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and notes thereto for a discussion of our operating leases, debt and contractual obligations, respectively.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Our critical accounting policies are described in Part II Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K. During the three months ended March 31, 2023, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 2 in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.

Election Under the Jumpstart Our Business Startups Act of 2012

The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies.

The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. Our utilization of these transition periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the transition periods afforded under the JOBS Act.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to our disclosures regarding market risk as described in our Annual Report on Form 10-K under the heading Part II. Item 7A. “Quantitative and Qualitative Disclosures about Market Risk.”

Item 4. Controls and Procedures

Limitations on effectiveness of controls and procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of disclosure controls and procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that

evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level, due to the material weakness in our internal control over financial reporting as described in Part II, Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Changes in Internal Control over Financial Reporting

We continue to work to remediate our material weakness in our internal control over financial reporting as described in Part II, Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for the year ended December 31, 2022. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various legal proceedings, claims, and governmental inspections, audits, or investigations that arise in the ordinary course of our business. We believe that the ultimate resolution of these matters would not be expected to have a material adverse effect on our business, financial condition, or operating results.

Item 1A. Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors disclosed in Part I. Item 1A “Risk Factors” of our Annual Report on Form 10-K. There have been no material changes to our risk factors from those included in our Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities; Purchases of Equity Securities by the Issuer or Affiliated Purchaser

During the three months ended March 31, 2023, we repurchased $29.6 million in shares of our common stock under our stock repurchase program, including transaction fees. The stock repurchase activity under our stock repurchase program during the three months ended March 31, 2023 was as follows:


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)	Approximate dollar value of shares that may yet be purchased under the plans or programs
	(in thousands, except per share and share amounts)

January 1, 2023 - January 31, 2023	1,157,697	$	8.47	1,157,697	$	47,336
February 1, 2023 - February 28, 2023	817,748	$	10.38	817,748	$	38,845
March 1, 2023 - March 31, 2023	1,148,252	$	9.82	1,148,252	$	27,565
Total	3,123,697			3,123,697

(1)On June 14, 2022, the Board of Directors of the Company approved the Repurchase Program with authorization to purchase up to $50.0 million in shares of the Company’s common stock through the expiration of the program on December 21, 2022. On November 7, 2022, our Board of Directors approved an expansion of the Repurchase Program with authorization to purchase up to an additional $50.0 million in shares of the Company’s common stock ($100.0 million total) and an extension to the expiration of the Repurchase Program through December 31, 2023. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Exchange Act. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. This program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of its board of directors. The Company expects to fund repurchases with existing cash on hand.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Incorporated by Reference

Filed/

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Furnished
Herewith

3.1

Amended and Restated Certificate of Incorporation of EverCommerce Inc

8-K

001-40575

3.1

7/9/2021

3.2

Amended and Restated Bylaws of EverCommerce Inc

8-K

001-40575

3.2

7/9/2021

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	EVERCOMMERCE INC.

Date: May 9, 2023	By:	/s/ Eric Remer
		Eric Remer
		Chief Executive Officer
		(Principal Executive Officer)


Date: May 9, 2023	By:	/s/ Marc Thompson
		Marc Thompson
		Chief Financial Officer
		(Principal Financial Officer)

Document

Exhibit 31.1

CERTIFICATION

I, Eric Remer, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of EverCommerce Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 9, 2023	By:	/s/ Eric Remer
		Eric Remer
		Chief Executive Officer and Director (principal executive officer)

Document

Exhibit 31.2

CERTIFICATION

I, Marc Thompson, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of EverCommerce Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: May 9, 2023	By:	/s/ Marc Thompson
		Marc Thompson
		Chief Financial Officer (principal financial officer)

Document

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of EverCommerce Inc. (the “Company”) for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


Date: May 9, 2023	By:	/s/ Eric Remer
		Eric Remer
		Chief Executive Officer and Director (principal executive officer)

Document

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


Date: May 9, 2023	By:	/s/ Marc Thompson
		Marc Thompson
		Chief Financial Officer (principal financial officer)