Good day, and thank you for standing by. Welcome to the EverCommerce Inc. Second Quarter 2021 Earnings Conference Call. At this time all participants are in listen-only mode. After the speakers’ presentation there'll be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to speaker today. Brian Denyeau. Please begin sir.

Good afternoon, and welcome to EverCommerce’s earnings conference call for the second quarter of fiscal year 2021, which ended on June 30. On the call with me today is Eric Remer. EverCommerce's Chief Executive Officer, and Mark Thompson, EverCommerce's Chief Financial Officer. A complete disclosure of our results can be found in our press release issued today, which is available on the Investor Relations section of our website. Today's call is being recorded and a replay will be available following conclusion of the call. Statements made on this call may include forward-looking statements regarding our financial results, products, customer demand, operations, the impact of COVID-19 on our business and other matters. These statements are subject to risks, uncertainties and assumptions and are based on management's current expectations as of today, and may not be updated in the future. Therefore, these statements should not be relied upon as representing our views as of any subsequent date. In addition to any risk that we highlight during the call, important factors that may affect our future results are described at the most recent SEC reports and today's earnings press release. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of non-GAAP to GAAP historical measures is provided in our press release and investor presentation, which are posted our Investor Relations website at investors.evercommerce.com, with the primary differences being depreciation and amortization, stock-based compensation, acquisition related costs and other non-recurring costs. In terms of the agenda for today's call, Eric will provide a quick overview of our second quarter results, as well as review our market opportunity and growth strategy. Marc will then provide an overview of our financial model, a detailed review of our second quarter results and provide our guidance for the third quarter and full year 2021. With that, let me turn the call over to Eric.

Thank you, Brian. Welcome everyone to EverCommerce's second quarter financial results call, our first as a publicly traded company. Our successful IPO was an important milestone for the company. It enhances our ability to deliver on our mission to power the service economy with software solutions, that digitally transform millions of small service-based businesses around the world. A $1 trillion global market opportunity is massive, made up of plumbers, physicians, home remodelers and wellness professionals that support our lives every day. We believe our growth strategy and suite of tailored modern SaaS solutions uniquely positions us to penetrate this large, fragmented landscape. With a rapidly growing customer base of over half million SMB service providers across more than 200 countries, we've only just begun. Let's begin with a few highlights of our Q2 financial results, which were strong both in terms of revenue and adjusted EBITDA. We reported total revenue of $121.1 million, up 53% year-over-year, adjusted EBITDA of $27.6 million, representing a 23% margin. Since this is our first call as a public company, I would like to start by spending a few minutes provide an overview of the business, our strategy, and the opportunity ahead for EverCommerce. First, for those of you who are new to our story, EverCommerce is a leading service commerce platform. We provide vertically tailored integrated SaaS solutions that transform end-to-end business and consumer experiences. In the last five years, our business has grown by a factor of 20, and we're just scratching the surface on the opportunity. Let me step back and highlight what we are seeing in the marketplace today. First, the service SMB market is huge. 77% of U.S. GDP is generated by service businesses. 40% of U.S. GDP is generated by SMBs. And approximately 50 million people are currently employed…

Thanks, Eric. Today I'll provide an overview of our financial model, review our second quarter fiscal 2021 results, and also provide our outlook for the third quarter and full year fiscal 2021. To start, EverCommerce has a highly recurring and reoccurring revenue model that consists of recurring SaaS subscription and transaction solutions, and reoccurring marketing technology services. Subscription and transaction revenue represents about 70% of our total revenue today. And included within is our payments business, which is about 14% of our overall revenue. We expect this segment to continue to drive the majority of our growth going forward. The other meaningful component of revenue is our marketing technology solutions, which is primarily focused on lead generation and other solutions that help our customers grow their customer bases. This reoccurring revenue represents about 25% of the business today. Given more than half of our revenue is generated within our Home Services vertical, we do experience some seasonality and our consolidated results, with Q4 and Q1 being the most impacted quarters. Underscoring our focus on delivering our SMB customers, valuable solutions and a great customer experience, we have realized the stable average monthly net revenue retention rate above 99% in each of the last eight quarters. Now with that background, let's turn to our second quarter results in detail. Total revenue in the second quarter was $121.1 million, up 53% from the prior year period. Within total revenue, subscription and transaction fees were $85.1 million, up 64% from the prior year period, and marketing technology solutions were $32 million, up 38% from the prior year period. As Eric discussed, M&A is a core part of our growth strategy. As a result, we believe it's also important for investors to evaluate our business growth on a pro forma basis, which is how…

Thank you. [Operator Instructions] Our first question comes from Sterling Auty with JP Morgan. Your line is open.

Yeah, thanks. Hi, guys. So looking at the improvement in the pro forma growth year-to-date to 21%, you did mention the easy compares. But within the areas of improvement, can you peel back the onion a little bit more and give us a sense which of the verticals saw the bigger improvement in that pro forma growth? And why?

Thanks for question, Sterling. This was Marc, why don't I start with that. And as you know, we don't break out vertical performance. But it's fair to say that each of the verticals performed well through the quarter and for the year-to-date period, and we feel quite positive about the growth drivers across each of the verticals, including growth from new customer acquisition, upsell, cross-sell et cetera.

Alright, great. And then one follow-up would be when you look at the new guidance for the full year, help us understand to what extent or to what magnitude is there contributions from Timely and medical design that were not already reflected in street models?

So Timely, which is in our outlook, I think was in streets models. MDTech is not. And as we discussed previously about the cadence in which we want to operate, we will report on M&A when we report on the period in which it was acquired. So in Q3, we would expect to report on a contribution from MDTech as well as a forward contribution too in the outlook changes going forward.

Understood. Thank you.

Thank you.

Thank you. Our next question comes from Brent Bracelin with Piper Sandler. Your line is open.

Thank you, and good afternoon. Maybe one for Eric and one for Marc, if I could. Eric, I’d love to get your view around the international opportunity. The Timely acquisition clearly signals a greater appetite to expand internationally. How is the integration of Timely going so far? And is that changing how you're thinking about attacking the international market, either more confidently more aggressively, or maybe pausing given some of the Delta variant activity happening out there?

Brent, thank you for the question. So I'll take the first part in terms of what we're looking at. I’ll let Matt Feierstein, our President has also joined us talk about the integration of Timely thus far. So yeah, we've been actually pretty active Timely, as are including Canada, probably our seventh international acquisition. We have UK, Australia, Amman, Jordan, and now in New Zealand. And we're seeing opportunities, both in Western and Eastern Europe as well. So, we've been pretty proactive, looking at opportunities to expand existing verticals, geography, and potentially go into new verticals, into new geographies. And so, we're excited. We think the opportunities that we see abroad often have potentially better prices and some in domestic, so we continue to be opportunistic in looking for those opportunities. And in terms of the integration of the Timely, I'm going to pass it over to Matt and walk through where we are so far.

So with all of our acquisitions we immediately began onboarding the acquired solutions into our centralized operating platform. That includes our operational infrastructure, functions like finance and accounting, legal, HR, and talent acquisition, as well as our growth functions really focused on marketing, product strategy, and go-to-market and general managements, and these are significant focus areas for the first 90 to 120 days. Obviously, based on the solution type and with Timely, that's a solution that we're going to remain focused on as a discrete system of action, business management, software. Onboarding projects are also focused really on embedding our marketing and growth themes, and really identifying and actioning those horizontal integrations or enhancements, like payments, and like customer engagement.

Helpful color there. I guess, Marc for you, I want to go back to pro forma growth. It really stood out here in the quarter pretty sharp acceleration. I know you can't talk and don't discuss kind of the vertical breakouts quarter-to-quarter. But did you see a meaningful uplift tied to cross-sell or payment attach rate? Or, was it really just an easier compare with Q2 being the first quarter where you saw some SMB turn and challenges tied to COVID last year? Any color there would be helpful?

Look, I think the business absolutely continue to accelerate in a positive way, kind of across all fronts. But no question we've benefited from an easier compare in Q2 just given that that was the period for us in which COVID impacted us the most.

Got it. Super helpful. That's all I had. Thank you.

Thank you. And our next question comes from Matt Hedberg with RBC Capital Markets. Your line is open.

Hey, guys, thanks for taking my questions. Maybe I'll start Eric, in your prepared remarks you noted I think the payment is 14% of revenue. Can you give us a sense for the penetration in your base? And when you add that, what does that typically do to wallet spend with a customer?

Yes. Thanks, Matt, appreciate the question. Matt, you want to take that one?

Yeah, absolutely. So I think we've said this in the past, from a volume perspective, when you think about that $7.5 billion dollars of PPV that we had through at the end of 2020 that was about 10% penetration on volume standpoint, when you think about it on a customer location standpoint. And we look at the applicable business management systems of action customer basis, that penetration in terms of attach rate is about 30%.

Got it. Thanks, Matt. That's helpful. And then maybe just a quick one for Marc, you gave a revenue and EBITDA guidance, but I'm wondering if you could help us with the share count that we should assume for either 3Q and if possible the full year from a non-GAAP perspective?

So obviously Q2, the IPO wasn't complete. So the share count going forward in Q3 pro forma for the IPO, going to be on the range of $197 million.

Got it. Thanks a lot, guys. Congrats on the quarter.

Thank you, Matt.

Thank you. Our next question comes from Samad Samana with Jefferies. Your line is now open.

Good evening, and thanks for taking my questions and congrats in the first quarter out of the gate. So, one of the things that I wanted to ask about is obviously EverCommerce is great at attracting new customers. And I'm curious, I know it hasn't been that long since the IPO. But I'm curious as you think about maybe the brand itself if you’re starting to see any branding benefits from being public? And just generally how maybe even zooming out from that how the top of the funnel is looking and conversion, given some of the uncertainties in the background, obviously, your results are great? I'm curious if you're seeing better activity at the top of the funnel.

I'll take the first part, and I'll hand it over to Matt. It's a little early to get the benefit of being public at this point. I don't think the EverCommerce brand has popped international yet. But I think the opportunity to continue to invest in both the sub brands EverPro, EverWell, EverHealth, we think we'll start seeing some benefit to that down the road. Matt, you want to talk about the pipeline?

Yeah, and I’d just add to that finer point, we've spoke about this in the past, you talked about the brand. And historically through today, we've really been utilizing those solution brands. We are taking to market more of this kind of Ever brand approach at the macro level, which really is helping us from today on position, that more complete value chain of integrated solutions to potential customers. So we are excited about seeing the potential impact of that from a conversion standpoint. We've talked about it before. Digital really remains our core channel from that scalability and productivity perspective, approximately 80% of new customer acquisition comes from digital and digital really continue to perform well, through the beginning of the year through Q2. It's been an organizational core competency for over 16-years, with our go-to-market Inception with PaySimple. Again, as we think about that go-to-market, we're complementing it with channels like partnership. And we're excited about the return to in-person industry, trade shows and events. And these are really efficient and valuable channels that are going to help us continue to create awareness and generate interest in our solutions with those SMBs in addition to digital. So digital continues to perform really, really well from a conversion standpoint, and was definitely underpinned that strong customer acquisition growth in Q2.

Great. And then maybe just a follow-up on the M&A side, I know that it's an important part of the company's strategy and you mentioned it earlier as well. As I think about maybe the primary focus verticals given that they're recovering somewhat unevenly. Is that influencing maybe what the M&A strategy will be in the short-term? Or, should we think about it as wherever is most opportunistic, just maybe thinking about the impact of the reopening on how you are thinking about your M&A strategy?

It's a great question and we think about internally quite a bit. If I step back just a second and talk about how we look at M&A, we looked it by companies for three main reasons. Number one, expanding capabilities in existing verticals. Second, look to expand geographic opportunities and existing protocols. And then third, look to enter new verticals. And so as we're looking at really that question on the top two, it's a little bit more opportunistic. Even though, fitness wellness has been the industry most affected, we're incredibly excited with a Timely acquisition that we just made, both in the geographical -- again, even if New Zealand, as we all know has been partially shut down. We think the long-term prospects of that opportunity within the spas and salons is huge. So we'll be opportunistic, looking for great opportunities in all of our core verticals.

Great. Thanks again, taking my questions and great start to the public period.

Great. Thank you so much.

Thank you. Our next question comes from Bhavin Shah with Deutsche Bank. Your line is now open.

Great. Thanks for taking my question, and congrats on the IPO and the strong second quarter. I got one for Matt or Eric, can you just maybe talk about the progress you’ve made cross selling your solutions during the quarter? And how should we think about that timeline are really pushing those Ever brands that you just spoke about?

Yeah, I would say I’d start from the back to the front. From a timeline perspective, as you can appreciate, brand transition is a long-term journey. It's certainly not a destination. So we're going to be very specific about how we do that. Certainly, test and learn into that to continue to take advantage of the strong brand equity we have in those solutions brands. But at the same time look for all of the advantages that we can get out of that Ever brand approach, which is going to drive more of that integrated sale, more multi product sale from that perspective. So, again, I would say think of that more as a long-term journey across the course of learning in, call it 12 to 18-months over that period of time. The second question was…

Yeah, just on your ability to cross sell during the quarter.

Cross sell path, absolutely. Absolutely, a growth driver in Q2, we continue to see nice progress from a cross-sell perspective on payments integration, that is where we had and are coming into the quarter, the most miles under our tires to-date. And we continue to make really, really strong progress from that perspective. Our integrations from a customer engagement application standpoint continue to improve, which helped us to really kind of start that cross-sell. And Marc spoke to in his remarks, strong performance from a marketing technology SaaS standpoint, and we saw benefit from cross-sell there as well.

Perfect. Thanks so much, and congrats again.

Thanks, Bhavin.

Thank you. Our next question comes from Brad Reback with Stifel. Your line is now open.

Great. Thanks very much. Historically, you guys have only used cash pretty much to do your acquisitions. Post the IPO here, do you think that changes how you think about paying for deals?

Yeah, I think we've obviously a combination of cash and debt. And we have used equity to some extent, as rollover as part of our deals. I think in a similar fashion, I think the companies that we've been talking to going forward will be interested in our equity as well. I think cash still become the primary. But the opportunity to supplement that and make a deal more appealing to potential sellers, we would consider utilizing equity as well.

That's great. And then Marc, maybe two quick ones for you. Obviously, big revenue upside in the quarter, just trying to figure out if there was any incremental inorganic there versus original expectations. And then looking forward to the back-half of the year, how conservative have you been with the potential for the Delta variant to cause additional headwinds? Thanks.

So, there was no M&A completed in Q2. So there's none of that in the results. And in terms of your second question, Brad, with respect to the Delta variant, I think we have absolutely factored COVID into our outlook in the second-half. We've certainly been through this before, and we have factored that into our outlook with some conservatism in the second-half.

That’s great. Thank you.

Thank you. Our next question comes from DJ Hynes from Canaccord. Your line is now open.

Hey, guys, congrats on the good start here. I want to ask another question on cross-sell. I don't know if it's for Eric or Matt. But how much is self-serve versus what you're actively selling? In other words, like, what do push versus pull dynamics look like there? And then is there a typical timeframe after you execute an acquisition where you start to see the most momentum on the cross-sell front?

Yeah, thanks for the question DJ. I’ll start with, from a timeframe standpoint, it's going to vary by solution. So depending upon the level of integration of that kind of horizontal component, when we get to that customer base, or as that customer comes on board, that could be different. So for an entity or for one of our business management system of action solutions that already has integrated payments, that cross-sell could happen fairly immediately, that could be a time of sale, or a very, very fast follow-up in the first 30, 60 to 90-days. If it is an add-on piece of functionality that we integrate later, obviously, that cross-sell could happen a little bit later in that customer's journey. Second part of that question was…

Just push versus pull dynamics, how much you are actively selling versus self-service?

Thank you for reminding me that. I get so excited about the first part. Honestly, DJ it’s both, we do both push versus pull. We're obviously looking at indicators from a customer data standpoint, when it might make sense to introduce a second or third product to one of our customers. From that perspective, we're going to be looking at data and actually pushing that that could be in product that could be follow-up from a customer sales rep. And from a pull perspective, we will also find customers that are coming to us after they've gotten started on a business management software and have integrated themselves into core workflows of that, and are then seeing the availability to add another efficiency driver like integrated payments, they could be coming to us directly as well. So it's a bit of both.

Yeah. Okay. Make sense. And then maybe a quick follow-up for Marc. Just how do you think about EBITDA to cash conversion ratios? Do you have targets out there? And how might those changes the business scales?

So thanks for the question. We think of conversion of adjusted EBITDA, the cash flow to be in that 70% to 80% range, that's been fairly consistent over time and don't really expect that to change. And we do look at that internally as a more or less a normalized way to look at our cash flow generation, because obviously, we have some significant fluctuations quarter-to-quarter given the M&A.

Yep. Perfect. Thank you, guys.

Thank you.

Thank you. Our next question comes from Brian Peterson with Raymond James. Your line is open.

Thanks for taking the question, and congrats on the strong results. So maybe one for me just on the IPO was a branding event. I know I've got to ask from a customer perspective. I'm curious if that's changed anything on the M&A side? Are you guys seeing as a great destination for potential targets or anything that's happened to the pipeline there, curious to get your thoughts? Thanks.

Thanks, Brian. I think, I would like to believe we are deemed as a positive destination prior to the IPO. And I will say that we've gotten a lot of the -- at least some of the pipeline that we've been working with kind of pre-IPO definitely got their attention and got some additional inbound discussions from groups that we had been in contact with. So I think it was a positive event for us. We kind of showed where we were related to scale and opportunity and growth and allowed us to tell the story, or publicly to some of these organizations. So I think it was definitely a positive event. And we've seen some of the benefits of that already.

Great. Thank you.

Thank you. Our next question comes from Kirk Materne with Evercore. Your line is open.

Thanks very much. Eric just kind of curious, when we look at your sort of horizontal solutions and the attach rates, are those generally proportional with sort of the sizes of the specific verticals, whether it's EverPro, EverHealth or EverWell? Just kind of curious how we should think about sort of the adoption rate of those horizontals solutions, if one maybe is ahead of the game than others? And then how do you think about balancing that? Meaning, when you're building sort of your go-to-market playbook for each one of those businesses, there are certain ones that you want to focus payments on heavier than the others. I know, you don't want to get into too many details, first part you just talked about this, like, more at a higher level. But just any thoughts on that would be helpful. Thanks.

Great. Thanks for the question, Kirk. I'll start at a high level and then Matt and Marc could jump in. The answer is, yes, each individual vertical has its own different ways of doing business. So if you just think from our EverHealth division, that would not be a core place that you're going to penetrate major payments, because you're dealing with a lot of more traditional claims processing, versus EverPro payments would be a much more obvious attachment similar with salons and gyms. And so, based on the verticals that go after each individual horizontal solution will make more sense, based upon how those businesses workflows and how those businesses actually do business. Matt, you want add to that?

No, from a proportion standpoint, just based on the size of our ecosystem, you're spot on that really proportionally when you think about something like integrated payments, it's going to follow their proportions of the business as a whole today.

And I think the same follows for the marketing technologies solution. Today, that's over indexed towards the home services field. But they are horizontal, and we call them that for a specific reason. We intend to be able to drive those across each of the verticals. That's a great question, Kirk.

Okay. And then just one maybe follow-up along the M&A lines. When you bring on an M&A solution, do you push harder with that from sort of a go-to-market perspective in terms of what you spend on that digitally, right after you buy it? Meaning, is there a sort of a fast push with some of those? Or, do you just let it sort of unfold naturally? I was just kind of curious, when you bring these really good technologies on a much bigger distribution platform, do you try to gun it upfront to try to get more awareness, more adoption upfront? Or, is it something that sort of -- I'm sure, maybe it depends on the answers, maybe it depends. But I was just kind of curious how you handle that as you bring a new product to the market more broadly?

Well, it's a great question. And we don't let anything just naturally do anything because if we do that, nothing will really happen. So there's a proactive process that we go through the diligence that we have a very detailed plan that our growth engagement team puts in place prior to closing the acquisition. After what happens, Kirk, as we close the deal, most of the companies we buy are subscale businesses who don't have the infrastructure in place to go big right away. So the first thing we're often doing is creating the infrastructure, lead capture, lead generation, tracking mechanisms, so once those are in place, we can actually put the pedal to the metal and go fast with those organizations. If an organization is little more sophisticated, and the infrastructure is in place, they just didn't have the sophistication on the actual digital marketing, we can be much more aggressive in our earlier timeframe. So we're very thoughtful about making sure prior to making very big proactive investments and those new acquisitions, we've invested in the backend infrastructure to capture the demand and capture the leads, and ultimately the conversion of those sales.

Thanks very much. Congrats on the quarter.

Thanks, Kirk.

Thank you. [Operator Instructions] Our next question comes from Pat Walravens with JMP. Your line is open.

Oh, great. Thank you. Let me add my congratulations. Eric, let me maybe go sort of big picture here since it’s your first quarter outlook as a public company. What do you think are the top two or three strategic imperatives for you over the next 12-months? So of all the things you have to do, what are the top two or three most important ones?

I'll take it. I'll start on a bigger picture, then I'll go into more specifics. And on a bigger picture, we want to stay at the forefront of the acceleration of the digitization of the service economy. So everything we're doing is focused on how do we make sure that we have software and solutions that allow the service based SMBs that we provide value to both domestically and abroad be most successful. So within that internally, I think as we've talked about a couple of times already, from an organic standpoint, the two biggest opportunities are to increase the new customer acquisition, and then secondly, which will remain probably our biggest opportunity for several years to come, the upsell, cross-sell opportunity into over half a million customer base. And so those are the two kind of internal organic. And I'd probably lean a little bit on just the long runway of the upsell, cross-sell. Secondly, from an M&A perspective, which is kind of a core focus to us, it was asked earlier about how the branding of being public, we think we are getting a little bit of tailwind, being public now in some of the M&A opportunities that we've been looking at. And so making sure that we are selectively looking at those opportunities that we think are going to drive the most kind of long-term value to overall ecosystem, and finding those right customers, right acquisitions to join the ecosystem. So that's how I really look at it, both from an organic perspective, inorganic, those would be really the three main priorities of the company.

Awesome. Thank you.

Thank you. And at this time, I'm showing no further questions in the queue. I'd like to hand the conference back over to Mr. Eric Remer, for closing comments.

Well, I appreciate everyone's time and appreciate the questions that were asked. As we said on the remarks earlier, we're incredibly excited about not only the performance of the quarter, but kind of as we look forward, we do feel we are the leading provider of solutions that are really digitizing the service economy. And we expect to stay in the forefront of that process and creating the integrated tailored solutions that make the service SMBs that we serve more successful, and that really is the core and the vision and really the goal of the company that we work on every single day. So really, to close off again, thank you again for everyone joining the call today. And we look forward to talking to you again real soon.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day. Good-bye.