EverCommerce Inc. (EVCM) Q4 2022 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to EverCommerce's Fiscal Year 2022 Fourth Quarter Earnings Call. My name is Sarah, and I will be your operator for today. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference call is being recorded today, Wednesday, March 15, 2023. And I would now like to turn the conference over to Brad Korch, SVP and Head of Investor Relations for EverCommerce. Please go ahead.

Good afternoon. Thank you for joining. Today's call will be led by Eric Remer, EverCommerce's Chairman and Chief Executive Officer; and Marc Thompson, EverCommerce's Chief Financial Officer. Joining them for the Q&A portion of the call is EverCommerce's President, Matt Feierstein. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended December 31, 2022. For a link to the live or replay webcast, please visit the Investor Relations section of the EverCommerce website, www.evercommerce.com. The slide presentation and earnings release are also directly available on the site. Please turn to Page 2 of our earnings call presentation while I review our safe harbor statement. Statements made on this call and contained in the earnings materials available on our website that are not historical in nature may constitute forward-looking statements. Such statements are based on the current expectations and beliefs of management. Actual results may differ materially from these forward-looking statements due to risks and uncertainties that are described in more detail in our filings with the SEC. We undertake no obligation to publicly update or revise these forward-looking statements, except as required by law. We will also refer to certain non-GAAP financial measures to provide additional information to you, our investors. A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and our earnings call presentation. I will now turn the presentation over to our CEO, Eric Remer.

Thank you, Brad. On today's call, I will highlight fourth quarter results and discuss key economic trends and metrics before turning the call over to Marc to dive deep into our financials. EverCommerce finished the year strong, beating the top end of the fourth quarter guidance for both revenue and adjusted EBITDA. For the quarter, our reported year-over-year revenue growth was 19%. And normalizing the effects of M&A, our pro forma revenue growth was 14% for the quarter. For 2022, our year-over-year pro forma revenue growth was 16%. We continue to operate the business balancing growth and profitability. For the fourth quarter, our adjusted EBITDA and adjusted unlevered free cash flow margins were higher than previous quarters at approximately 22% and 16%, respectively. For the full year, adjusted EBITDA margins were 19%, while adjusted unlevered free cash flow margins were 14%. Customer payments growth are a key part of our business strategy. Our total payment volume, or TPV, grew 90% year-over-year. We continue to see increased uptake of payments processing within our core vertical system of actions. Our annualized net revenue retention, or NRR, was also steady at 100% in the quarter. EverCommerce provides vertically tailored end-to-end SaaS solutions that support the highly diverse workflows and customer actions that professionals in home services, health services and fitness and wellness services use to automate manual processes, generate new business and create more loyal customers. At the core, we provide system-of-action software across many market verticals. This is the ERP for these smaller vertical service-based businesses and the way in which our customers generate new business, fulfill services, manage day-to-day operations and engage with their customers. Our vertical software solutions not only provide a system of action necessary to run their daily business processes, but also the marketing solutions to track new business, to building a payment solutions to collect effortlessly, and the customer experience solutions to create predictable and convenient experiences. Our business thrives through two motions, acquiring new customers and expanding our revenue base with existing customers by selling more seats, more features and cross-selling other solutions like embedded payments. We ended the year serving approximately 690,000 customers across our many diverse verticals and sub-verticals. We acquire customers at strong economics as overwhelming majority of our customers are acquired digitally. Our large customer base represents an incredible opportunity for continued expansion of cross-sell upsell of our solutions. Over the past year, the average ARPU at the solution level grew approximately 8% year-over-year. One of the biggest drivers for ARPU expansion is our land-to-expand motion of selling core system-of-action software to our customers and then upselling them new features and cross-selling them new capabilities, such as payments and customer engagement solutions. We measure our cross-sell progress by looking at the growth in the number of customers that are taking more than one solution. We ended the quarter with more than 71,000 of our customers using more than one solution, a 29% increase year-over-year. Embedded payments is our most accretive add-on solution, representing the lion's share of our cross-sell activity today. Measure and report our payments ecosystem growth through TPV, we ended the quarter with an annualized TPV of approximately $10.9 billion, which represents 19% year-over-year growth. We expect TPV to grow as we continue to embed our payment solutions into our core systems of action. Our priorities for 2023 underscore our focus of providing premier systems-of-action software across many verticals, embedding payments and adding ancillary services that promote our customer successes. We often discuss our TAM with you. And in doing so, we cited greater than $500 billion opportunity in the U.S. and over $1.3 trillion opportunity globally. With nearly 690,000 customers currently using our software and solutions, we have a tremendous opportunity right in front of us to provide more value and sell additional services to existing customers. We are prioritizing our investments towards our best opportunities to achieve our growth objectives, and at the top of this list is driving adoption of embedded payments. Embedded payments not only drive continued organic growth, but also provide better customer economics as customers who have embedded payments yield higher ARPU and improved retention. Entering 2023, we expanded our EverCommerce payments team to accelerate payments adoption across our solution set. To do so, we are taking steps to improve the seamless onboarding of payments capabilities for our customers. And later in the year, we'll be introducing new capabilities. Recognizing the environment we're in, we'll be even more deliberate on price. Our pricing philosophy at EverCommerce has been to price to value, that is increment price over time as new features are added and the customer value proposition is enhanced. In 2023, we will keep this philosophy at our core, but we'll be pressing harder on the price lever where appropriate. We're also doubling down on the notion of balancing growth and profitability by institutionalizing a disciplined focus on cost controls, particularly in the areas of people costs, general and administrative spend and sales and marketing costs. We continue to target 20% EBITDA margins with an eye towards operating leverage-driven margin expansion beyond 2023. Finally, we will continue to optimize our solution and product mix, including utilizing M&A where appropriate to add capabilities in targeted market verticals and compound consistent organic growth. Now I'll pass it over to Marc, who will review our financial results in more detail as well as provide guidance for the first quarter and the full year 2023.

Thanks, Eric. Total revenue in the fourth quarter was $161.8 million, up 19.3% from the prior year period. Within total revenue, subscription and transaction fees were $121.6 million, up 22% from the prior year period, and marketing technology solutions were $33.3 million, up 13.5% from the prior year period. For the full year, revenue was $620.7 million, up 26.6% on a reported basis. We manage our business for sustainable organic growth and selectively utilize strategic acquisitions to augment this growth. As a result, we believe it's important for investors to evaluate our business growth on a pro forma basis, which is how we measure and manage the business internally. We calculate our pro forma revenue growth 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, including before the time we completed the acquisition. We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business. Our year-over-year pro forma growth rate for the fourth quarter was approximately 14.2%, while our year-over-year 2022 pro forma growth rate was approximately 15.6%. Fourth quarter adjusted EBITDA was $35.2 million, representing a 21.7% margin, while full year 2022 adjusted EBITDA was $119 million, representing a 19.2% margin. During the fourth quarter, we took several actions, including the implementation of a temporary hiring freeze, to tightly manage costs and deliver against our profitability objectives. In 2023, we plan to continue disciplined active management of our operating expenses as we look to drive profitability and cash flow generation. Adjusted gross profit in the quarter was $107.9 million, representing an adjusted gross margin of 66.7%. Full year 2022 adjusted gross profit was $403.4 million, representing an adjusted gross margin of 65%. Adjusted gross profit is seasonally strongest in the fourth quarter while seasonally weakest in the first quarter. Now turning to operating expenses. Adjusted sales and marketing expenses were $27.9 million or 17.2% of revenue, down from 18.5% of revenue in the prior year period. This was driven largely by managing growth investments while working to meet our profitability objectives during the quarter. Adjusted product development costs were $17.5 million or 10.8% of revenue, roughly flat compared to 10.5% of revenue reported in the prior year period. Adjusted G&A expense was $27.8 million or 17.2% of revenue, down from 17.8% of revenue in the prior year period. This was also driven by disciplined spend management during the quarter. We continue to generate significant free cash flow as we invest to grow our business. Our adjusted unlevered free cash flow for the quarter was $26.1 million, representing 17.4% year-over-year growth and a 16.1% margin. For the full year, our adjusted unlevered free cash flow was $85.3 million. Levered free cash flow, which accounts not only for debt service but also various working capital adjustments, was $22.7 million in the quarter. For the full year, levered free cash flow of $46.7 million underscores our balance sheet flexibility. This balance sheet flexibility provides optionality as we look to efficiently allocate capital in our business. Our strong free cash flow generation allows us to operate our business with an optimal capital structure that includes modest levels of leverage, which allows us to deliver enhanced equity returns to our shareholders. In the fourth quarter, we repurchased 2.9 million shares for a total cash consideration of $21 million. During the full year 2022, we repurchased approximately 5 million shares for $43 million, leaving us a remaining authorization of $57 million approved for year-end 2023. We ended the quarter with $93 million in cash and cash equivalents, and we maintain $190 million of undrawn capacity on our revolver. Our debt is a combination of floating and fixed rate, and total net leverage is calculated per our credit facility at the end of the quarter was approximately 3.5 times, consistent with our financial policy. We have no material maturities until 2028. As I'm sure we'll get the question in Q&A, let me comment briefly on our relationship with Silicon Valley Bank. EverCommerce has accounts at SVB, but based on our diversified account structure, our relationships with other global banking partners and the fact that we generate excess cash from operations and have substantial capital, we did not expect the potential failure of SVB to disrupt our business operations, and it hasn't. Today, we have full access to our balances that were held at SVB, and we've already transferred the majority of these deposits to other large banks. I'd like to finish by providing our outlook, beginning with the first quarter. For Q1, we expect total revenue of $157 million to $160 million, and we expect adjusted EBITDA of $27 million to $29 million. Our full year 2023 guidance is $680 million to $700 million for revenue and $134 million to $142 million for adjusted EBITDA. Our first quarter guidance reflects the seasonality inherent in our business, which can be summarized by seasonally slower growth and lower margins in the first quarter, seasonally higher growth in the warmer months and seasonally higher margins in the fourth quarter. Our 2023 outlook does not include any potential impact of M&A activity that could take place. In summary, we're very pleased with our fourth quarter financial results. We executed well and delivered top line growth that exceeded our most recent guidance while also tightly managing our cost base to deliver better-than-expected profitability. Looking ahead, we believe the core of our business, vertical SaaS solutions and embedded payments, is quite resilient. We intend to focus on both investing in the areas of our business that will produce the best growth in returns, but also double down on optimizing our operations and managing costs in order to balance this growth with profitability. We believe EverCommerce is well positioned to be a primary beneficiary of the digital transformation that is just getting underway amongst SMB and service SMB companies. Our continuing focus is to execute our strategic priorities and deliver consistent profitable growth that we believe can generate significant value for our shareholders. Operator, we're now ready to begin the question-and-answer section of the call.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from DJ Hynes with Canaccord. Please go ahead.

Hey, guys. Thanks for taking the question. Marc, I might have expected to see a bit more operating leverage in the 2023 guide, just kind of as an offset to slower growth. I mean you highlighted cost controls. We haven't seen any recent M&A. Look, 20% EBITDA margins is very solid, but were running below kind of 2021 levels. Acknowledging now, we have public company costs and all that sort of stuff. Maybe just touch on kind of the puts and takes of the margin guide. And if we end up seeing faster growth, is it right to think that a lot of that upside would flow through to the bottom line?

Yeah. Thanks for the question, DJ. So I think, first of all, just comparing the year '22 versus '21, remember, there are a couple of things going on there. One is '21 didn't include a full year of public company costs, and '22 actually included [Indiscernible], which, as we described, was $4 million to $5 million in '21. So we're transitioning that in '22. So that just is a little bit of a level set. I do believe that we baked in a lot of the investments we need to make, certainly around being a public company and a lot of investments in scalable operations such that what you just described should be true. Obviously, we're trying to be prudent in the way that we guide given the continuing environment that we're seeing. But we absolutely believe that we want to be in front of our cost structure to make sure that we can drive that kind of drop through that you're describing.

Yeah. Makes sense. And then the second question is just around net revenue retention, right? So when you guys went public, I think NRR was in that 90%-95% range. Since then, we've seen really nice improvement, right? I think we're kind of plus or minus 100%, which is great. That said, with the marketing business turning against you guys a little bit, I'm surprised we haven't seen any degradation in NRR. So I guess the question is like, has there been success elsewhere with cross-sell that's maybe being underappreciated given the headwinds in marketing? Or maybe just help me understand kind of how you're keeping NRR whole at 100%.

Can you hear me all right?

Yeah, we got you.

You highlighted other areas of the business where cross-sell is performing, as you can see. From our continued focus on payments and the results in payments, payments cross-sell is clearly a place where that -- the expansion of the customer base is certainly doing NRR from that perspective. Obviously, upsell continues to be a strong motion in the business. That also buoys NRR as well. So yeah, certainly in the past, there may have been some drag from that -- some of that martech slowness in the past, but we feel really good about the parts of the business that are driving that up from a customer expansion standpoint.

Got it. Helpful color. Thank you, guys.

Thanks, DJ.

Our next question comes from Samad Samana with Jefferies. Please go ahead.

Hey, guys. This is Jeremy on for Samad. Thanks for taking my question. So first on the customer count growth from 12%, that's down from 20% last year. I guess, what should we kind of expect in terms of net adds going forward? And I guess, which of your three verticals are you seeing most of these net adds coming from? Or if you can just provide some color there.

Was the growth. You talk about the vertical.

Yeah. Again, I think -- we've discussed in the past, from an organic growth lever standpoint, obviously, customer growth one gross lever; and then obviously, ARPU expansion, the other big growth lever. Saw a nice expansion from an ARPU standpoint. Obviously, customer growth fell a little bit from the prior year. As you probably see in some of our marketing expense in '22, we did pull back on that as we navigated really the unknowns of the turbulent economic environment that -- going forward, we still expect it to be a significant part of that lever so -- of our gross lever. So we continue to expect that to run in a healthy range of where it has been in the past from that perspective.

And just the second part of the question, thank you for the question. The health care services, which represents more than half of our business, continues to operate at the fastest growth levels, and we continue to see that. Health services, which our second largest vertical, is our second fastest-growing vertical. And then our fitness and wellness is just really distinctly broken up into kind of the fitness and then the launch of spas. Spas and spas are doing great. In general, this is not necessarily specifically EverCommerce. We just have not fully recovered from the pre-COVID level. So that particular category remains relatively flat to pre-COVID levels versus the growth we're getting from the other verticals. Fortunately, that's our smallest vertical. So it does have the biggest impact of that in terms of the verticals, in terms of how we look at that kind of breakout.

Got it. Thank you. That's helpful color. And then on the M&A front, I guess, what are you guys seeing in terms of private valuations? And I guess, in terms of -- what are your priorities for M&A going forward?

Yeah. The priorities remain the same, be diligent and find opportunities that we think are going to add value to the overall ecosystem for EverCommerce and provide more value to our customers. I feel like I'm a broken record over the last sub quarters to be -- the dislocation between valuation and the private and public markets remains -- private market valuations remain kind of very healthy, really never took the kind of downward stream that some of the public -- large public comps have taken. So we've looked at a lot of things. There's been a few things that have been interesting. But for both fit or potential value, didn't make sense for us at this point.

That's helpful. Thanks for taking question, guys.

The next question comes from Bhavin Shah with Deutsche Bank. Please go ahead.

Hey, thanks for taking my question. I guess, Eric, just at a high level, just from a demand environment perspective, can you maybe just a little bit more elaborate on what you saw during 4Q and maybe what you're seeing at the end of the year in terms of the macro? Is it still mostly impacting the marketing side of the business? Or are you seeing some of that slower on the subscription side?

Really, on the marketing side of the business -- and I would say that has really flattened out in terms of -- the pullback we saw in Q3 really kind of relevel set, and that has kind of continued through Q4 and our expectation through Q1 and beyond. So it hasn't necessarily degregated worse than we had thought at the kind of Q3 time periods. But the other verticals we have not seen kind of segregation and acquisition or acquisition metrics at this point. So I think we're -- the marketplace that we're in, I think it sometimes gets lost big picture that we have almost 700,000 customers across a lot of different verticals. And we see a continued opportunity to grow in all the core verticals that we're in.

And then just maybe a little bit on the payment side. Clearly, your priorities for 2023, it sounds like there's more innovation to come. But just from a go-to-market perspective, like where is the low-hanging through where you can go after? What kind of customers are easiest to maybe move over to your payments platform?

The core focus of telematics is also, again, get you back to the home field service category that has been kind of a sweet spot for us. Embedding that into some of our core system-of-action software is Biomedica part of the sales process when new customers come on and then converting customers after the fact, as we talk about quite a bit and we talked about the less than -- just over 10% of our customers are taking for the one solution. That number continues to -- the numerator continues to grow on that. And so we will be focused on continuing selling those into those areas. We're also seeing opportunities in -- a lot of opportunities in our EverWell. The salon spa space is a big opportunity to provide payments. We have a leading salon software in New Zealand and Australia with operations in the UK as well, and we're rolling out a major payment program throughout their customer base. So we see the opportunities in the areas you would think where there's a demand, an obvious kind of payment as part of the interaction with the customer. Matt?

Yeah. I think you hit those points well. I think, again, from a strategy standpoint, really optimizing our marketing and sales motion and product packaging to drive more new adoption of the embedded payments and then deepening the integration and the payment workflow capabilities in those systems-of-action software to really drive more payment wallet share from those customers. Those strategies are tried and true, and we need to continue to execute those.

Super helpful. Thanks, again. Just last one quick one for Marc. Can you just talk about what's embedded from a macro perspective in terms of guidance? That's all for me. Thanks.

I think the trends that we saw coming out into the second half, I mean, that's certainly reflected forward. As Eric said, we really haven't seen a change there. That's really all that's in there, Bhav.

Yeah. We're not expecting things to get better, but we're really kind of expecting things to, at this point, maintain itself.

Our next question comes from Brad Reback with Stifel. Please go ahead.

Great. Thank you very much. Eric, you had mentioned being deliberate on price. Can you help us understand that?

Yeah. We have a lot of solutions in a lot of different verticals. And as you can imagine, some are on the lower end of the market. So we're sensitive to both our customers where they sit and also the value of buying them. And so we've been always price to value. As we add more value, we add additional price with increased inflation and costs that are real absorbed through some of our vendors. We've been more proactive in realizing where those opportunities exist. So when you you look at the models and you kind of see how both -- Q1 in general, that's just if you look at last year, it's just always our seasonally low quarter. But part of the growth throughout the year -- a lot of the growth, a good portion of the book growth is built in with price increases. We have some price increases that are both -- do at both the value we're providing and just a little bit of uptick on some inflation costs as well. So very confident in some of the kind of pricing that we're going to put into the market based upon the continued value we bring to our customers.

And so on that latter point, the fact that the guide includes some price increases, at the midpoint, you're at 10%, which is somewhat below sort of that mid-teens long-term target that you've laid out there. What are the takes on that or the puts? Why are we 500 basis points below with a price increase?

Yeah. I think the midpoint would put us pretty close to 12%, not 10%, but it's still below the kind of mid-teens standpoint. I think the two pieces of that puzzle is, number one, we're just being prudent. I think the last -- were just asked about what's built into the model. We still the model as continued general softness in the marketplace. And so we want to make sure that we put a guide out that we feel very comfortable with and very confident in our ability to achieve. So I think it'll be true in this point in the marketplace. And with the unknown macro that -- what may happen, we've built in both what we know we can sell the base, the price increase that we're going to put in there and with some modest growth on new acquisitions to allow us to achieve what we're putting out there what we think this opportunity to continue to grow on that as well.

Excellent. Thanks very much.

Our next question comes from Alex Sklar with Raymond James. Please go ahead.

Hi, thanks for taking the question. This is John on from Alex. Just one from us. Maybe a follow-up on the logo question from earlier. Can you maybe speak to linearity of those results throughout the year? Any notable differences quarter-to-quarter or maybe as you exited the year versus the beginning? Thanks again.

Linearity, could you just expand on that a little bit? Linearity on the top line, bottom line?

From a logo perspective start.

Yeah, logo perspective.

Yeah. Customer acquisition, customer account growth, yeah. And so I think you -- as we've talked about in the past, there definitely is some seasonality in the business in Q4 with kind of hitting a lot of the peak of that from a decel standpoint. So we do see that. And then kind of following a lot along with the financial seasonality, we see pick up back as we get into Q2 and Q3 being the stronger quarters from that perspective.

Thanks very much.

Our next question comes from Kirk Materne with Evercore ISI.

Hi, guys. This is actually Peter Burke [ph] on for Kirk. Congrats on a solid quarter here despite the continued challenging macro. I kind of want to turn back to the payments a little bit. It sounds like everything is going pretty well there, and TPV growth is solid. I don't believe you guys have quantified the revenue impact at this stage. So I'm just curious in light the commentary around how it's sort of a big piece in making up for some of the NRR weakness related to the marketing tech solutions, as you look forward, is that payments opportunity -- does that ultimately outpace the size of the market for the marketing tech solutions? Or I guess, just with a one or two-year view, curious how you see payments as a contributor to revenue?

Well, I think payments -- and the reason we continue to iterate that and discuss it in our -- both in the call, we've done in several quarters past is when you look at the $10.9 billion we're currently processing versus close to almost $100 billion opportunity that we have, we're at the very, very early stages of the opportunities. And we're creating the building systems and infrastructure, as Matt talked about, creating products to make that a -- not a onetime uptick, but really an ongoing opportunity for us. And we think about the ability to outpace, we don't necessarily look at it like that. But I do think on a general growth standpoint, sure, our payments will outpace our technology from a growth standpoint. But we do believe market technology is solid, will continue to scale. But the opportunity to scale payments even beyond what we've scaled it today we think is a very long-term opportunity. And the benefit of that as that actually happens, the margin profile of both of those businesses are quite different. The stickiness of both opportunities [Indiscernible] with distraction, as we've shown both on the slides and connected, increased ARPU, increase the stickiness, increases ultimately NRR. So we kind of feel very confident that, that motion that we're pushing towards, not either or but really and, will provide more value going forward. And Matt?

No. To your point, massive runway opportunity in payments and the the change in unit economics of a system-of-action customer with embedded payments is such a potential difference maker from an ARPU standpoint and from a retention standpoint that -- obviously, that's why you can see we're over-indexing on investments there.

That's very helpful color. I appreciate that a lot. Maybe if I can just follow up with one quick one. You mentioned cost control. Sounds like it's going to be a big focus if the growth side remains under a little bit of pressure in the near term. And you called out a little bit of a hiring freeze in 4Q. So I'm just curious how you feel about your capacity today from a sales and marketing perspective and sort of how you see that trending over the course of the year.

I think we have the infrastructure in place to manage the campaigns we want, but we look in terms of bringing things back based on certain economics. It's really some of our spend. And we have the ability, as we said before, to really bring that up or down based on the market conditions. So I think our ability to kind of press that down as we see things -- the market is increasing, allows us to kind of move swiftly with the market. You talked about our margins. I mean when we went public, we talked about a long-range version in that 25% to 30% EBITDA margin, and we still believe strongly in that increased operating leverage over the next several years.

Great. Thanks guys.

Thank you very much, for question.

[Operator Instructions] Our next question comes from Matt Hedberg with RBC Capital Markets.

For Matt Hedberg. Thanks for taking our question here. A follow-up to the payment questions and then a very helpful discussion in the Q&A here on payments. In the prepared remarks, you talked about expanding the payment team to drive adoption. Maybe where is some of that plan focused? Is it more around integrations on the product side or simply expanding reach and coverage?

Yeah. Thanks for the question. It's actually on both pieces of that puzzle. So we are expanding the team to allow us to embed more places within our ecosystem, but also the actual expertise to make sure we're providing best practices at every touch point. As you can imagine, we have -- with the amount of customers we have, the amount of customers we're acquiring and the touch points we have, it's really making sure that we utilize the experts that we have. And remember, one of our solutions which was paid simple and I would kind of call it EverCommerce Payments, we've been running that for 16-17-plus years. And so we have a lot of expertise making sure we beef up that team with the leadership as a great leader share of that organization to make sure that each of the solutions that we embed our payments in that we are integrating that in a way that it's going to provide the best value to the customer, the best work close for the customer and also the best ability for us to adopt that customer as a payment -- utilizing our payments. And so that's how we've really focused on our investment both on the technology workflow side as well as both fees human capital expertise side to make sure we are providing the best solutions for our customers.

That's great. Thanks.

One thing to note on that, and this kind of dovetails to your question with the question we just answered, it's important to note, when we talk about why we think payments is so important, we start from our view from the customer standpoint. We think when that customer embeds payments, it's just so much more value for them they collect payments faster. The customer is more valuable to us [Indiscernible] a bit. When you think about the margin abilities to upstream internally how that increases our ARPU and ultimately our gross margins, payments run around 95% gross margins versus you talked about the marketing services at less than that. So the opportunity for us to not only create pick your long-term customers but also increase our gross margin over time is as huge as we embed more of those payment solutions into our customers' workflow.

This concludes our question-and-answer session. I would like to turn the conference back over to Eric Remer for any closing remarks.

Thank you so much. Just to kind of reiterate, we're excited about how we -- the momentum we ended close of the year, both beat our revenue and EBITDA top end of the guidance. Produce going into next year is really as we continue to kind of harp on investing in both payments and cross-sell adoption to drive additional growth and retention, derisking some of the growth plans with some of the price increases that we talked about earlier. And as we focus on kind of going into '23, we remain committed to simplifying and powering the lives of our almost 700,000 customers by providing them really the best vertical software and solutions for their needs. Thank you very much for joining the call today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.