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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 September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 001-40575
EverCommerce Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware81-4063248
(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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.00001 par valueEVCMThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 November 3, 2023, there were 188,658,621 shares of the registrant’s common stock, par value $0.00001, outstanding.




TABLE OF CONTENTS
Page
Part IFINANCIAL INFORMATION
Financial Statements
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2023 and 2022
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities




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 small and medium-sized businesses 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; impacts from COVID-19 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)
September 30,December 31,
20232022
Assets
Current assets:
Cash and cash equivalents$87,335 $92,625 
Restricted cash3,488 3,199 
Accounts receivable, net of allowance for expected credit losses of $6.3 million and $4.7 million at September 30, 2023 and December 31, 2022, respectively
50,725 48,032 
Contract assets13,233 12,971 
Prepaid expenses and other current assets24,480 23,760 
Total current assets179,261 180,587 
Property and equipment, net10,261 11,930 
Capitalized software, net40,607 32,554 
Other non-current assets46,563 46,855 
Intangible assets, net340,841 405,720 
Goodwill923,766 914,082 
Total assets1,541,299 1,591,728 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$8,354 $8,373 
Accrued expenses and other57,935 56,963 
Deferred revenue24,639 22,885 
Customer deposits12,188 11,360 
Current maturities of long-term debt5,500 5,500 
Total current liabilities108,616 105,081 
Long-term debt, net of current maturities and deferred financing costs527,762 530,946 
Other non-current liabilities42,765 49,008 
Total liabilities679,143 685,035 
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.00001 par value, 50,000,000 shares authorized and no shares issued or outstanding as of September 30, 2023 and December 31, 2022
  
Common stock, $0.00001 par value, 2,000,000,000 shares authorized and 188,927,445 and 191,447,237 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
2 2 
Accumulated other comprehensive loss(12,919)(10,198)
Additional paid-in capital1,471,713 1,489,935 
Accumulated deficit(596,640)(573,046)
Total stockholders’ equity862,156 906,693 
Total liabilities and stockholders’ equity$1,541,299 $1,591,728 
The accompanying notes are an integral part of these condensed consolidated financial statements.

1



EverCommerce Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share and share amounts)
(unaudited)
Three months ended
September 30,
Nine months ended
September 30,
2023202220232022
Revenues:
Subscription and transaction fees$132,640 $120,085 $386,765 $343,734 
Marketing technology solutions36,838 36,276 103,081 101,340 
Other5,263 1,765 16,083 13,874 
Total revenues174,741 158,126 505,929 458,948 
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization presented separately below)61,471 57,655 175,602 163,503 
Sales and marketing30,086 29,440 91,660 89,531 
Product development19,318 18,508 56,352 53,568 
General and administrative31,538 32,164 101,553 96,748 
Depreciation and amortization26,035 27,613 77,975 82,524 
Total operating expenses168,448 165,380 503,142 485,874 
Operating income (loss)6,293 (7,254)2,787 (26,926)
Interest and other expense, net(6,666)(8,890)(26,615)(21,070)
Net loss attributable to common stockholders before income tax (expense) benefit
(373)(16,144)(23,828)(47,996)
Income tax (expense) benefit
(241)291 1,543 5,953 
Net loss attributable to common stockholders(614)(15,853)(22,285)(42,043)
Other comprehensive loss:
Foreign currency translation losses, net(1,940)(6,978)(2,721)(15,811)
Comprehensive loss attributable to common stockholders$(2,554)$(22,831)$(25,006)$(57,854)
Basic and diluted net loss per share attributable to common stockholders$ $(0.08)$(0.12)$(0.22)
Basic and diluted weighted-average shares of common stock outstanding used in computing net loss per share188,805,421 194,542,764 189,039,709 195,205,260 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2



EverCommerce Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Common StockAdditional
Paid-In Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Loss
Total
Stockholders’ Equity
SharesAmount
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 units348 — — — — — 
Stock-based compensation— — 7,514 — — 7,514 
Stock option exercises103 — 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, 2023188,774 $2 $1,468,415 $(595,130)$(10,297)$862,990 
Issuance of common stock for Employee Stock Purchase Plan324 — 1,765 — — 1,765 
Common stock issued upon vesting of restricted stock units404 — — — — — 
Stock-based compensation— — 6,241 — — 6,241 
Stock option exercises38 — 300 — — 300 
Repurchase and retirement of common stock including taxes(904)— (10,361)— — (10,361)
Foreign currency translation losses, net— — — — (682)(682)
Net loss— — — (896)— (896)
Balance at June 30, 2023188,636 $2 $1,466,360 $(596,026)$(10,979)$859,357 
Common stock issued upon vesting of restricted stock units295 — — — — — 
Stock-based compensation— — 5,855 — — 5,855 
Stock option exercises156 — 1,073 — — 1,073 
Repurchase and retirement of common stock including taxes
(160)— (1,575)— — (1,575)
Foreign currency translation losses, net— — — — (1,940)(1,940)
Net loss— — — (614)— (614)
Balance at September 30, 2023188,927 $2 $1,471,713 $(596,640)$(12,919)$862,156 

The accompanying notes are an integral part of these condensed consolidated financial statements.
3



Common StockAdditional
Paid-In Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Loss
Total
Stockholders’ Equity
SharesAmount
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 exercises126 — 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 
Issuance of common stock for Employee Stock Purchase Plan218 — 1,804 — — 1,804 
Stock-based compensation— — 6,508 — — 6,508 
Stock option exercises96 — 381 — — 381 
Repurchase and retirement of common stock(296)— (2,665)— — (2,665)
Foreign currency translation losses, net— — — — (8,169)(8,169)
Net loss— — — (12,881)— (12,881)
Balance at June 30, 2022
195,528 2 1,513,529 (539,420)(10,600)963,511 
Issuance of common stock for Employee Stock Purchase Plan
— — (50)— — (50)
Common stock issued upon vesting of restricted stock units
116 — — — — — 
Stock-based compensation— — 7,133 — — 7,133 
Stock option exercises95 — 571 — — 571 
Repurchase and retirement of common stock
(1,801)— (19,198)— — (19,198)
Foreign currency translation losses, net— — — — (6,978)(6,978)
Net loss— — — (15,853)— (15,853)
Balance at September 30, 2022
193,938 $2 $1,501,985 $(555,273)$(17,578)$929,136 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4



EverCommerce Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine months ended
September 30,
20232022
Cash flows provided by operating activities:
Net loss$(22,285)$(42,043)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization77,975 82,524 
Stock-based compensation expense19,610 19,776 
Deferred taxes(2,066)(6,855)
Amortization of deferred financing costs and non-cash interest1,240 1,622 
Bad debt expense5,285 2,362 
Other non-cash items(4,807)1,583 
Changes in operating assets and liabilities:
Accounts receivable, net(9,145)(11,722)
Prepaid expenses and other current assets(1,331)(7,151)
Other non-current assets4,511 (1,313)
Accounts payable(62)(1,450)
Accrued expenses and other1,436 (1,308)
Deferred revenue1,514 2,503 
Other non-current liabilities(3,288)(916)
Net cash provided by operating activities68,587 37,612 
Cash flows used in investing activities:
Purchases of property and equipment(2,140)(2,155)
Capitalization of software costs(14,727)(11,440)
Acquisition, net of cash acquired
(14,959) 
Net cash used in investing activities(31,826)(13,595)
Cash flows used in financing activities:
Payments on debt(4,125)(6,125)
Exercise of stock options1,982 1,675 
Proceeds from common stock issuance for Employee Stock Purchase Plan1,765 1,754 
Repurchase and retirement of common stock(41,268)(21,863)
Net cash used in financing activities(41,646)(24,559)
Effect of foreign currency exchange rate changes on cash(116)(1,796)
Net decrease in cash and cash equivalents and restricted cash
(5,001)(2,338)
Cash and cash equivalents and restricted cash:
Beginning of period95,824 97,559 
End of period$90,823 $95,221 
Supplemental disclosures of cash flow information:
Cash paid for interest$34,112 $19,460 
Cash paid for income taxes$2,939 $1,950 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

EverCommerce Inc.
Notes to Unaudited 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 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 nine months ended September 30, 2023 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2022 and the related notes. Certain prior year amounts have been reclassified to conform to the current year presentation.
The operating results for the three and nine months ended September 30, 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 expected credit losses, 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 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.
6

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 on January 1, 2023 and it is prospectively applicable to all business combinations from the adoption date. The adoption of this standard was not material to the KickServ Acquisition (see Note 3).
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2024. There was no material impact to our financial statements from the adoption of this standard.
We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the financial statements.
Note 3. Kickserv Acquisition
On August 10, 2023, the Company acquired 100% of the interest of Norman’s Dojo Inc. (“Kickserv”), a provider of field service management software for home service businesses for approximately $15.0 million in cash. The acquisition adds offerings for SMBs across diversified portfolios with an opportunity to capture a broader segment of new customers within the Home Services vertical.
We accounted for the acquisition as a business combination under ASC 805, Business Combinations. Accordingly, the Company recorded identifiable assets acquired and liabilities assumed at their acquisition date estimated fair values, with any excess consideration recognized as goodwill. Goodwill primarily represents the value associated with the assembled workforce and expected synergies subsumed into goodwill. The goodwill recognized as a result of the acquisition of Kickserv is not deductible for tax purposes.
We measured the identifiable assets and liabilities assumed at their acquisition date estimated fair values separately from goodwill, which represent Level 3 fair value measurements as defined in ASC 820, Fair Value Measurement. The estimated fair values were determined by management using the assistance of third-party valuation specialists. The valuation methods used to determine the estimated fair value of intangible assets included the income approach—relief from royalty method for developed technology with an estimated useful life of five years, and the income approach—multi period excess earnings method for customer relationships with an estimated useful life of 13 years. A number of assumptions and estimates were involved in the application of these valuation methods, including revenue forecasts, expected competition, costs of revenues, obsolescence, tax rates, capital spending, customer attrition rates, discount rates and working capital changes. Cash flow forecasts were generally based on pre-acquisition forecasts coupled with estimated revenues and cost synergies available to a market participant.
Our purchase price allocation for the acquisition is preliminary and subject to revision with provisional amounts related to tax-related and other items. Additional information that existed as of the acquisition date but at the time was unknown to us may become known to us during the remainder of the measurement period, which is not to exceed 12 months from the acquisition date.
The financial results of Kickserv since the closing through September 30, 2023, were not material to our consolidated financial statements, nor were they material to our prior period consolidated results on a pro forma basis.
7

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed at the acquisition date:
August 10, 2023
(in thousands)
Total consideration transferred:
Cash$14,993 
Net assets acquired:
Prepaid expenses and other assets$51 
Intangibles—definite lived3,155 
Goodwill12,516 
Accounts payable, accrued expenses and other(11)
Deferred tax liability, net(397)
Deferred revenue(274)
Other non-current liabilities(47)
Total net assets acquired$14,993 
Note 4. Revenue
Disaggregation of Revenue
The following tables present a disaggregation of our revenue from contracts with customers by revenue recognition pattern and geographical market:
Three months ended
September 30,
Nine months ended
September 30,
2023202220232022
(in thousands)
By pattern of recognition (timing of transfer of services):
Point in time$17,984 $14,496 $48,141 $40,112 
Over time156,757 143,630 457,788 418,836 
Total$174,741 $158,126 $505,929 $458,948 
By geographical market:
United States$159,859 $146,492 $461,336 $418,510 
International14,882 11,634 44,593 40,438 
Total$174,741 $158,126 $505,929 $458,948 
Contract Balances
Supplemental balance sheet information related to contracts from customers as of:
September 30,December 31,
20232022
(in thousands)
Accounts receivable, net$50,725 $48,032 
Contract assets$13,233 $12,971 
Deferred revenue$24,639 $22,885 
Customer deposits$12,188 $11,360 
Long-term deferred revenue$2,192 $2,496 
8

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 condensed consolidated balance sheets. Long-term contract liabilities are included within long-term deferred revenue, which is classified within other non-current liabilities on the condensed consolidated balance sheets. Revenue recognized from the contract liability balance at December 31, 2022 was $21.0 million for the nine months ended September 30, 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 September 30, 2023, was $21.4 million, which is comprised of contracts where the contract term under ASC 606, Revenue from Contracts with Customers, is in excess of one year. The Company expects to recognize approximately 61% of its remaining performance obligations as revenue within the next year, 28% of its remaining performance obligations as revenue the subsequent year, 8% 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 condensed 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 $8.1 million and $6.6 million at September 30, 2023 and December 31, 2022, respectively, and long-term assets were $17.5 million and $15.1 million at September 30, 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 $1.4 million and $1.1 million for the three months ended September 30, 2023 and 2022, respectively, and $4.2 million and $3.1 million for the nine months ended September 30, 2023 and 2022, respectively. The Company recorded amortization expense within cost of revenues on the condensed consolidated statements of operations and comprehensive loss of $0.6 million and $0.4 million for the three months ended September 30, 2023 and 2022, respectively, and $1.6 million and $1.2 million for the nine months ended September 30, 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”).
9

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 5. Goodwill

Goodwill activity consisted of the following for the nine months ended September 30, 2023 (in thousands):
Balance at December 31, 2022
$914,082 
Acquired goodwill12,516 
Effect of foreign currency exchange rate changes(2,832)
Balance at September 30, 2023
$923,766 
Note 6. Intangible Assets
Intangible assets consisted of the following as of:
September 30, 2023
Useful
Life
Gross Carrying
Value
Accumulated
Amortization
Net Book
Value
(in thousands)
Customer relationships
3-20 years
$608,024 $318,175 $289,849 
Developed technology
2-12 years
106,702 71,298 35,404 
Trade name
3-10 years
38,655 23,183 15,472 
Non-compete agreements
2-5 years
2,404 2,288 116 
Total
$755,785 $414,944 $340,841 
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 $22.5 million and $25.2 million for the three months ended September 30, 2023 and 2022, respectively, and $68.6 million and $75.7 million for the nine months ended September 30, 2023 and 2022, respectively.
Note 7. Property and Equipment
Property and equipment consisted of the following as of:
September 30,December 31,
20232022
(in thousands)
Computer equipment and software$10,737 $9,327 
Furniture and fixtures3,741 3,570 
Leasehold improvements11,954 11,941 
Total property and equipment26,432 24,838 
Less accumulated depreciation(16,171)(12,908)
Property and equipment, net$10,261 $11,930 
Depreciation expense was $1.3 million and $1.0 million for the three months ended September 30, 2023 and 2022, respectively, and $3.3 million and $3.1 million for the nine months ended September 30, 2023 and 2022, respectively.
10

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 8. Capitalized Software
Capitalized software consisted of the following as of:
September 30,December 31,
20232022
(in thousands)
Capitalized software$59,872 $45,872 
Less: accumulated amortization(19,265)(13,318)
Capitalized software, net$40,607 $32,554 
Amortization expense was $2.3 million and $1.4 million for the three months ended September 30, 2023 and 2022, respectively, and $6.1 million and $3.7 million for the nine months ended September 30, 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. The Company recorded a charge to general and administrative on the accompanying condensed consolidated statements of operations and comprehensive loss of $0.1 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively, and $0.6 million and $0.6 million for the nine months ended September 30, 2023 and 2022, respectively, related to capitalized features no longer expected to be used.
Note 9. 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
September 30,
Nine months ended
September 30,
2023202220232022
(in thousands)
Operating lease cost$1,578 $1,851 $4,875 $5,928 
Variable lease cost478 374 1,587 1,121 
Short-term lease cost109 80 258 268 
Total lease cost$2,165 $2,305 $6,720 $7,317 
Supplemental cash flow information related to leases is as follows:

Three months ended
September 30,
Nine months ended
September 30,
2023202220232022
(in thousands)
Cash paid for operating lease liabilities$1,127 $2,105 $4,860 $6,080 
Operating lease assets obtained in exchange for operating lease liabilities$ $177 $183 $810 
11

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Supplemental balance sheet information, included in other non-current assets, accrued expenses and other and other non-current liabilities on the condensed consolidated balance sheets, related to leases is as follows:
September 30,December 31,
20232022
(in thousands)
Operating lease right-of-use assets$16,394 $21,756 
Current operating lease liabilities3,692 5,239 
Long-term operating lease liabilities19,256 22,500 
Total operating lease liabilities$22,948 $27,739 
At September 30, 2023 and December 31, 2022, the weighted average remaining lease term for operating leases was 6.03 years and 6.34 years, respectively, and the weighted average discount rate was 4.9%.
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 September 30, 2023 is as follows (in thousands):

Year ended December 31,
2023 (remainder of year)$1,450 
20244,751 
20254,421 
20264,225 
20273,775 
Thereafter8,512 
Total lease payments27,134 
Less: imputed interest4,187 
Total present value of lease liabilities$22,948 
In addition to what is included in the table above, as of September 30, 2023, we have entered into an office lease that has not yet commenced with aggregate future lease payments of approximately $1.6 million. This lease is expected to commence in the fourth quarter 2023, and will have a lease term of approximately three years.
Note 10. Long-Term Debt
Long-term debt consisted of the following as of:
September 30,December 31,
20232022
(in thousands)
 Term notes with interest payable monthly, interest rate at Adjusted SOFR or Alternative Base Rate (“ABR”), plus an applicable margin of 3.25% (8.69554% at September 30, 2023) quarterly principal payments of 0.25% of original principal balance with balloon payment due July 2028
$539,000 $543,125 
Revolver with interest payable monthly, interest rate at Adjusted SOFR or ABR, plus an applicable margin of 3.25% (8.68056% at September 30, 2023), and outstanding balance due July 2026
  
Principal debt539,000 543,125 
Deferred financing costs on long-term debt(4,210)(4,900)
Discount on long-term debt(1,528)(1,779)
Total debt533,262 536,446 
Less current maturities5,500 5,500 
Long-term portion$527,762 $530,946 
12

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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”).
Prior to July 1, 2023, borrowings under the Credit Facilities are available as ABR or Eurocurrency borrowings. ABR borrowings under the Credit Facilities accrued interest at an alternate base rate plus an applicable rate, and Eurocurrency borrowings accrued interest at an adjusted LIBOR rate plus an applicable rate. The ABR rate represented 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.
On June 26, 2023, the Credit Facilities were amended to replace the reference rate of LIBOR with the Adjusted SOFR rate (see definition below). The interest rate on any loans outstanding under the Credit Facilities continued to be determined by reference to LIBOR until June 30, 2023, after which time the interest rates on such loans began bearing interest by reference to SOFR. The Company continues to monitor the impact of the transition from LIBOR to SOFR on its business but does not expect a significant impact to the consolidated financial statements.
Effective as of July 1, 2023, borrowings under the Credit Facilities bear interest at the Company’s option at ABR plus an applicable rate, or at a forward-looking term rate based upon the secured overnight financing rate, plus (i) (a) with respect to Term Loans, credit spread adjustments of 0.11448%, 0.26161%, 0.42826% and 0.71513% for interest periods of one, three, six and twelve months, respectively and (b) with respect to revolving loans, a credit spread adjustment of 0.0% (“Adjusted SOFR”) plus (ii) an applicable rate, in each case with such applicable rate based on the Company’s first lien net leverage ratio. The ABR represents the highest of the prime rate, Federal Reserve Bank of New York rate plus ½ of 1%, and the Adjusted SOFR for a one month interest period plus 1%. The applicable rate for the Term Loans and the Revolver is 3.0% for Adjusted SOFR borrowings and 2.0% for ABR borrowings, in each case subject to change based on our first lien net leverage ratio.
The Company determines the fair value of long-term debt based on trading prices for its debt if available. As of September 30, 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 $539.7 million and $531.6 million as of September 30, 2023 and December 31, 2022, respectively.
Effective October 31, 2022, the Company entered into an interest rate swap agreement (the “Initial Swap”) in connection with the Company’s Credit Facilities for a notional amount of $200.0 million to convert a portion of the floating rate component of the Term Loans from a floating rate to a fixed rate. The Initial Swap agreement has a term of five years with a fixed rate in the agreement of 4.212%, as amended in June 2023. Additionally, effective March 31, 2023, the Company entered into a second interest rate swap agreement (the “Second Swap” and together with the Initial Swap, the “Swap Agreements”) in connection with the Company’s Credit Facilities for a notional amount of $100.0 million to convert a portion of the floating rate component of the Term Loans from a floating rate to a fixed rate. The Second Swap agreement has a term of approximately 4.5 years with a fixed rate in the agreement of 3.951%, as amended in June 2023.
The Swap Agreements are accounted for as derivatives whereby the fair value of each contract is reported within the condensed consolidated balance sheets, and associated gains or 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 September 30, 2023 the fair value of the Swap Agreements was an asset of $3.7 million that is reported in other non-current assets on the condensed consolidated balance sheets.
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 September 30, 2023, the Company was in compliance with all of its covenants.
13

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Aggregate maturities of the Company’s debt for the years ending December 31 are as follows as of September 30, 2023 (in thousands):
Year ending December 31:
2023 (remainder of year)
$1,375 
20245,500 
20255,500 
20265,500 
20275,500 
Thereafter515,625 
Total aggregate maturities of the Company’s debt$539,000 
Note 11. 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. 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. The Company expects to fund repurchases with existing cash on hand.
The Company repurchased and retired 0.2 million and 4.2 million shares of common stock pursuant to the Repurchase Program for $1.6 million and $41.2 million including transaction fees, during the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, $16.0 million remained available under the Repurchase Program.
Note 12. 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 Initial Public Offering (“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. Stock-Based Compensation in the Annual Report on Form 10-K.
14

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table summarizes our restricted stock unit (“RSU”) and stock option activity for the nine months ended September 30, 2023:
RSUsStock Options
(in thousands)
Outstanding as of January 1, 20232,022 16,937 
Granted2,839  
Vested or exercised(347)(103)
Cancelled or forfeited(24)(78)
Outstanding as of March 31, 2023
4,490 16,756 
Granted149  
Vested or exercised(404)(38)
Cancelled or forfeited(188)(2,799)
Outstanding as of June 30, 2023
4,047 13,919 
Granted87  
Vested or exercised(292)(156)
Cancelled or forfeited(122)(124)
Outstanding as of September 30, 2023
3,720 13,639 
As of September 30, 2023, total unrecognized compensation expense was $34.1 million and $12.4 million related to outstanding restricted stock units and outstanding stock options, respectively.
Stock-based compensation expense was classified in the unaudited condensed consolidated statements of operations and comprehensive loss as follows:
Three months ended
September 30,
Nine months ended
September 30,
2023202220232022
(in thousands)
Cost of revenues$127 $109 $362 $278 
Sales and marketing402 380 1,281 1,127 
Product development642 501 1,808 1,389 
General and administrative4,684 6,143 16,159 16,982 
Total stock-based compensation expense$5,855 $7,133 $19,610 $19,776 
Note 13. Net Loss Per Share Attributable to Common Stockholders
The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock as of:
Three months ended
September 30,
Nine months ended
September 30,
2023202220232022
(in thousands except per share amounts)
Numerator for basic and diluted EPS – net loss attributable to common stockholders$(614)$(15,853)$(22,285)$(42,043)
Denominator:
Denominator for basic and diluted EPS – weighted-average shares of common stock outstanding used in computing net loss per share188,805 194,543 189,040 195,205 
Basic and diluted net loss per share attributable to common stockholders$ $(0.08)$(0.12)$(0.22)
15

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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:
September 30,
20232022
(in thousands)
Outstanding options to purchase common stock and unvested RSUs17,359 19,118 
Total anti-dilutive outstanding potential common stock17,359 19,118 
Note 14. 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 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.
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. Our interest rate swaps are valued based upon interest yield curves, interest rate volatility and credit spreads. Our interest rate swaps are classified within Level 2 of the fair value hierarchy as all significant inputs are corroborated by observable data.
There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2023 and 2022.
The following table presents information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of:
September 30, 2023Balance Sheet Classification
Level 1Level 2Level 3Total
(in thousands)
Assets:
Money market$11,365 $ $ $11,365 Cash equivalents
Interest rate swaps$ $3,743 $ $3,743 Other non-current assets
December 31, 2022Balance Sheet Classification
Level 1Level 2Level 3Total
(in thousands)
Asset:
Money market$6,568 $ $ $6,568 Cash equivalents
Liability:
Interest rate swap$ $2,893 $ $2,893 Other non-current liabilities
16

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 15. Income Taxes
Our provision for income taxes in interim periods has historically been 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. In the third quarter of 2023, it is the Company's judgement that the estimated annual effective tax rate did not result in a reliable estimate, so an estimate was determined using year to date results.
The income tax (expense) benefit was expense of $0.2 million and a benefit of $0.3 million for the three months ended September 30, 2023 and 2022, respectively, and a benefit of $1.5 million and $6.0 million for the nine months ended September 30, 2023 and 2022, respectively. Our effective income tax rate was (64.6)% and 1.8% for the three months ended September 30, 2023 and 2022, respectively, and 6.5% and 12.4% for the nine months ended September 30, 2023 and 2022, respectively. The difference in income tax (expense) benefit for the three and nine months ended September 30, 2023 as compared to the corresponding period in 2022, with such changes driven primarily by discrete items. The nine months ended September 30, 2023 includes the release of a valuation allowance in the second quarter 2023. The nine months ended September 30, 2022 included a California law change, an intercompany intellectual property sale, and the establishment of a valuation allowance for our New Zealand subsidiaries in the first quarter of 2022.
Note 16. 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)$3,252 
202413,040 
202510,279 
20262,125 
20272,625 
Thereafter687 
Total future minimum payments due$32,008 
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 September 30, 2023 and December 31, 2022, the Company recorded a liability in the amount of $10.8 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 17. Geographic Areas
The following table sets forth long-lived assets by geographic area as of:
September 30,December 31,
20232022
(in thousands)
United States$40,245 $36,226 
International$10,623 $8,258 
17

EverCommerce Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 18. Subsequent Event
On November 5, 2023, 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 (from $100.0 million to $150.0 million in total) and an extension to the expiration of the Repurchase Program through December 31, 2024.

18


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.
19


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 nine months ended September 30, 2023 and 2022 was recurring or re-occurring, and we maintained an annualized net revenue retention rate of approximately 97% for the quarter ended September 30, 2023. Excluding our marketing technology solutions, our annualized net revenue retention rate for our core software and payments solutions was greater than 100% for the three months ended September 30, 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.
We acquire companies to deepen our competitive moats in existing verticals and enter new verticals and geographies. We have acquired 53 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.
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Impact of Macroeconomic Climate
The macroeconomic climate continues to see pressure from global developments such as international geopolitical conflict, terrorism, COVID-19, rising inflation, the strengthened US Dollar, rising interest rates and supply chain disruptions. These developments have had and may continue to 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 COVID-19 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. For a discussion about why we consider our Non-GAAP measures useful and a discussion of the material risks and limitations of such measures, please see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Business and Financial Metrics – Non-GAAP Financial Measures” included in our Annual Report on Form 10-K filed on March 15, 2022.
Key Business and Financial Metrics
In addition to our results and measures of performance determined in accordance with Generally Accepted Accounting Principles (“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 10.3% and 10.2% for the three and nine months ended September 30, 2023, respectively, 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
Gross profit is calculated as total revenue less cost of revenue (exclusive of depreciation and amortization), amortization of developed technology, amortization of capitalized software and depreciation expense (allocated to cost of revenues). We calculate Adjusted Gross Profit as gross profit 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
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profit, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted Gross Profit on a consolidated basis.
 Three months ended
September 30,
ChangeNine months ended
September 30,
Change
 20232022
$
20232022
$
 (in thousands)
Revenue$174,741 $158,126 $16,615 $505,929 $458,948 $46,981 
Cost of revenues (exclusive of depreciation and amortization)61,471 57,655 3,816 175,602 163,503 12,099 
Amortization of developed technology3,824 4,048 (224)11,473 12,301 (828)
Amortization of capitalized software2,224 1,346 878 6,051 3,686 2,365 
Depreciation expense allocated to cost of revenues336 50 286 864 611 253 
Gross profit
106,886 95,027 11,859 311,939 278,847 33,092 
Depreciation and amortization 6,384 5,444 940 18,388 16,598 1,790 
Adjusted gross profit$113,270 $100,471 $12,799 $330,327 $295,445 $34,882 
Adjusted EBITDA
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 and non-recurring costs are specific deal-related costs such as legal fees, financial and tax due diligence, consulting and escrow fees as well as expenses such as system implementation costs and severance related to planned restructuring activities. Acquisition-related and 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
September 30,
ChangeNine months ended
September 30,
Change
 20232022$20232022$
 (in thousands)
Net loss$(614)$(15,853)$15,239 $(22,285)$(42,043)$19,758 
Adjusted to exclude the following:
Interest and other expense, net6,666 8,890 (2,224)26,615 21,070 5,545 
Income tax expense (benefit)241 (291)532 (1,543)(5,953)4,410 
Depreciation and amortization26,035 27,613 (1,578)77,975 82,524 (4,549)
Other amortization1,431 1,093 338 4,184 3,063 1,121 
Stock-based compensation expense5,855 7,133 (1,278)19,610 19,776 (166)
Acquisition-related and non-recurring costs
2,190 1,570 620 7,985 5,429 2,556 
Adjusted EBITDA$41,804 $30,155 $11,649 $112,541 $83,866 $28,675 
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.”
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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 and nine months ended September 30, 2023, revenue from Subscription and Transaction Fees increased 10.5% and 12.5%, respectively, and revenue from Marketing Technology Solutions increased 1.5% and 1.7%, respectively, compared to the prior year periods. 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.
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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 related to interest rate swap agreements.
Income Tax (Expense) Benefit
US GAAP 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 (expense) benefit 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. Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K.
Comparison of the three and nine months ended September 30, 2023 and 2022
 Three months ended
September 30,
ChangeNine months ended
September 30,
Change
 20232022
$
20232022$
 (in thousands)
Revenues:  
Subscription and transaction fees$132,640 $120,085 $12,555 $386,765 $343,734 $43,031 
Marketing technology solutions36,838 36,276 562 103,081 101,340 1,741 
Other5,263