EverCommerce Inc. (EVCM) Q2 2024 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the EverCommerce's Second Quarter 2024 Earnings Call. My name is Brianna and I'll be your operator for today. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder, this conference call is being recorded today, Tuesday, August 6, 2024. 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 and 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; EverCommerce's incoming Chief Financial Officer and current Chief Accounting Officer, Ryan Siurek, and EverCommerce's Chief Operating Officer, Evan Berlin. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended June 30, 2024. 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. Before we discuss second quarter results, I'd like to once again highlight the presentation of results in KPIs included in the earnings call slides and our prepared comments. As discussed last quarter, we announced the sale of our four fitness industry solutions in early March. The sale of the two North American solutions closed simultaneously with deal signing on March 13 and the two international solutions closed on July 1. Our GAAP results included two North American solutions to the date of closing, although two international solutions are held-for-sale and continue to be reported on the results of operations through the second quarter of 2024. As a result, revenue growth rates are affected by the sale of the North American assets. Operational metrics such as customer count, TPV, and customers enabled for more than one solution that we will discuss today have all been adjusted to exclude the fitness solutions on a pro forma basis. I will now turn over to our CEO, Eric Remer. Please continue.

Thank you, Brad. On today's call, I will highlight second quarter 2024 results, dive into some key customer trends, discuss some case studies on our customer payment adoptions, and provide an update on our transformation and optimization initiatives before turning the call over to Marc to dive deeper into our financials. Turning to our second quarter highlights. Our reported revenue exceeded the top end of our guidance range with growth of 4.3% year-over-year. Pro forma revenue growth, which excludes the North American fitness asset sold in March, was 6%. Adjusted EBITDA of $41.2 million beat the mid-point of our guidance range, representing a 23.2% margin. Adjusted EBITDA margins expanded modestly year-over-year despite investments made into the business. Payments revenue excluding the fitness solutions grew 8% year-over-year, driven by our 8.4% growth in TPV. Driving payment adoptions continues to be a key element of our strategy, one that I will highlight with some case studies in a few moments. In the second quarter, our Board also increased our share repurchase authorization by $50 million and extended the program through the end of 2025. In the second quarter, we repurchased approximately 2.5 million shares for $24.1 million bringing our total repurchase since inception of our buybacks in mid-2022 to 15.6 million shares. At the end of second quarter, we had approximately $54 million remaining authorization. EverCommerce provides SaaS solutions for the service SMB economy. We offer tremendous value to our customers by providing solutions tailored to the unique workflows and interactions their various services require. Our software solutions not only provide the system of action necessary to run the daily business processes, but also the marketing solutions to attractive business, the building of payment solutions to collect effortlessly, and the customer experience solutions to create predictable and convenient experiences. Our solutions are cost effective, easy to implement, and purpose-built for the service businesses. We provide end-to-end solutions that our more than 690,000 customers need to compete and grow in a marketplace that is rapidly transforming. Exclude the North American fitness solutions we sold and including our Kickserv acquisition; we ended the quarter with $682 million in LTM revenue representing 7% growth. With a focus on balanced profitability, we generated 24.1% adjusted EBITDA margins on an LTM basis. Finally, we crossed over the $12 billion mark of annualized total payment volume, or TPV, a key metric for not just payments adoption, but for growth and profitability. We report our progress in payments adoption quarterly as a key measure of our land and expand strategy. We land with our core business management software and then upsell, cross-sell, our existing customer additional features, services and products, leading with payments our most mature cross-sell motion. This enhances the value that our customers receive from relationship with EverCommerce and drive additional revenue. At the end of the second quarter, 199,000 customers were enabled more than one solution, reflecting a 25% year-over-year growth. As we discussed when we introduced this metric, enabling customers for more than one solution is the first step in the funnel that leads to increased revenue, retention, and ultimately profitability of these customers. Once customers are enabled, the next action item for us is to help facilitate usage. In the case of payments, this entails getting our customers to actively process payments on our platform. We measured this step in the funnel as utilization. At the end of the second quarter, approximately 87,000 customers were actively utilizing more than one solution, reflecting a 60% year-over-year growth. Customers that purchased and utilized more than one solution are naturally some of our most profitable and stickiest customers. This is because we provided significant value to them in businesses. A positive byproduct of our cross-sell motion is strong net revenue retention. Looking back over the trailing 12 months, our annualized net revenue retention or NRR for core software payment solutions was 97%. While this is down slightly on a sequential basis, a major driver here was the anniversary of a price increase in one of our high velocity, lower ARPU solutions and not a measurable change in our customer churn dynamics. Embedded payments is our most accretive cross-sell opportunity and is a key component of EverCommerce's growth strategy. Year-over-year, our payments revenue, excluding the fitness solutions grew 8%, accounting for approximately 17% of overall revenue. We report our payments revenue on that basis and as a result payment revenue contributes approximately 95% gross margin and is a meaningful contributor to our overall adjusted EBITDA margin. Second quarter estimated annual total payments volume or TPV was approximately $12.1 billion, representing 8.4% year-over-year growth. We continue to invest and actively manage our onboarding programs to accelerate payment adoption, which we believe can accelerate payment revenue growth. These payment and cross-sell enabled metrics emphasize the good progress we are making, but we are still very much in the early innings of the story. To illustrate the impact continued progress can have on our business; we want to walk through two case studies, one on payment adoption and a second regarding growth opportunity for our newly launched EverPro Edge subscription adoption. Starting with the payments adoption at timely, which is our salon & spa software that's focused on the New Zealand, Australian and UK markets. Kindly the full service system of action software that allows salon owners to manage customer apartments, inventory, siloed scheduling and of course, taking payments. When we acquired this solution in late 2021 times initial use of case payments was for taking appointment deposits via the web. While this provided much needed service for our customers in these markets appointment deposits are as common as restaurant reservation deposits had become in the U.S., it did not allow for our customers to make payments for all their services. What our customers really needed was a point of sale solution that can be used within the salon to capture payments for salon services like haircuts, products sold in the store as well. So we invested to make that happen. We developed features within our software to handle these payments. We partnered with a new provider to offer point of sale terminals in salon. Given the nature of our SMB-focused business, these terminals needed to be self-provisioning and easy to use out of the box. After completing this new integration and ironing out the kinks of the point of sale device enablement, we've seen our TPV approximately double in just over a year. This is driven by both average annualized TPV per active processing customer growth over 50% and growth in customers enabled for payments processing from 41% to 52% of customers over the same time period. Our second case study is EverPro Edge. In the second half of 2023, we introduced our new EverPro Edge solution for existing joints customers. As we discussed on our March earnings call, EverPro Edge is a new solution that provides customers the opportunity to save, learn and grow, creating a community and trust your brand for engagement with them. EverPro Edge provides the opportunity for our customers to engage with educational content to help them improve their operations as well as earn cash back rebates at leading vendors where they may already be purchasing goods. Since the introduction of Edge, we have seen joined customers that join Edge grow their overall ARPU by approximately 3x. Given that the rebate portion of the Edge is nearly 100% margin, this ARPU growth also translated to significant margin expansion. Edge also enhances the value of these customers gained from the EverCommerce relationship and the rebates received can in some case offset the cost of the software for our customers. This is a true win-win and something we think can help us better grow and retain customers. A key component of our growth acceleration strategy is our transformation optimization program, about which I would like to provide a quick update. During the quarter, we made significant progress against a multi-quarter program. On the optimization side, we continue to validate saving opportunities, looking to consolidate spend across vendors and in some cases re-imagine how we allocate resources. Our transformation initiatives continue to align our business around EverHealth and EverPro customer verticals, ultimately giving these business units, the organizational structure, and support they need to accelerate growth. This includes simplifying our organizational structure and decommissioning legacy brands as well as investing in key sales and go-to-market gaps that have impacted our growth rate. During the quarter, we made some key sales and marketing initiative hires that are integral steps to achieving the vision. We also launched our first EverPro website that begins to consolidate those product brands in the same fashion we've discussed with EverHealth in the past. We've also begun to invest in common company-wide systems that will increase operational efficiencies aligned with our transformation efforts. We are doing the work now that we believe will enable us to accelerate growth to both enhance customer acquisition and improve cross-sell capabilities, and ultimately also drive better profitability. In the coming months, we expect to have additional new, exciting announcements as we continue to drive our transformation journey. Before I turn the call over to Marc, I'd like to quickly comment on the announcement we made today in conjunction with our earnings release. This afternoon we announced the appointment of Ryan Siurek as EverCommerce's new Chief Financial Officer, effective September 6. Ryan joined EverCommerce little over a year ago as a Chief Accounting Officer, and working closely with him over the last year has become clear that he has both the skills and the drive necessary to help us lead EverCommerce's next phase of growth. This is a bittersweet announcement though, as I'm excited to see Ryan step into this role. I'll miss working with Marc, who's been a strong partner to me and the EverCommerce leadership team over the past eight years. Now, I'll pass it over to Marc who will review our financial results in more detail as well as discuss third quarter and full year 2024 guidance.

Thanks, Eric. Total reported revenue in the second quarter was $177.4 million, up 4.3% from the prior year period and exceeding the top end of our guidance range. This was also the highest quarterly revenue on record, but in total reported revenue, subscription and transaction revenue was $137 million, up 5.2% from the prior year period, and revenue for marketing technology solutions was $35 million, up 1.6% from the prior year period. We managed the business for sustainable organic growth and selectively utilized strategic acquisitions to augment the trajectory of 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 and divestitures 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 or divestiture. We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business. For the second quarter of 2024, year-over-year pro forma revenue growth was 6%, while year-over-year pro forma subscription and transaction revenue growth was 7.3%. The solid performance in subscription and transaction revenue was largely due to continued execution of our growth strategy to provide customers our core system of action software solutions and driving expansion by promoting cross-sell and upsell opportunities leading with payments. While we believe that our marketing technology solutions are stabilizing amidst continuing headwinds, their results negatively impacted consolidated revenue growth in the second quarter. As Eric noted, we also exceeded the mid-point of our adjusted EBITDA guidance range. Second quarter adjusted EBITDA was $41.2 million, representing a 23.2% margin versus 22.8% in the second quarter of 2023, and 6.2% growth in adjusted EBITDA year-over-year. During the quarter, we were able to expand margins on a year-over-year basis while investing in the business, including making certain transformation-related investments Eric described. This quarter's adjusted EBITDA performance notably does not include a material amount of optimization savings, which we expect to start having a more measurable impact in 2025 and beyond. Adjusted gross profit in the quarter was $116.1 million, representing an adjusted gross margin of 65.4% versus 65.8% in Q2 2023. The slight decrease in gross margin on a year-over-year basis was largely due to the timing of revenue and cost of goods sold within the marketing technology solutions and not an indication of change within the core SaaS business. Now, I'll turn to adjusted operating expenses, which are reconciled in the appendix to this presentation. Overall, adjusted operating expenses declined from 43% to 42% in the quarter underscoring our focus on profitability as we scale and grow the business. Adjusted sales and marketing expense was $28.8 million, or 16.2% of revenue, down from 16.9% of revenue reported in the prior year period. Adjusted product development expense was $19.6 million, or 11% of revenue, up from the 10.4% reported in the prior year period, largely due to planned investments and maintenance in our products. Adjusted G&A expense was $26.5 million, or 14.9% of revenue, down from 15.7% of revenue in the prior year period. Adjusted G&A expenses declined both as a percent of revenue and in absolute dollars as we continue to optimize our operations. We continue to generate significant free cash flow as we invest to grow our business. Cash flow from operations for the quarter was $23.9 million as compared to $28.4 million in the prior year comparative quarter. Levered free cash flow was $19 million in the quarter, down approximately $3.6 million or 16% year-over-year, and was negatively impacted by the timing of working capital changes. For the trailing 12 months, levered free cash flow was $78.5 million, which represents an 11.4% margin and a 26.2% increase in levered free cash flow over the prior year, continuing to underscore the efficiency of our business and enhancing our balance sheet flexibility. Adjusted unlevered free cash flow was $30 million in the quarter and $121 million for the last 12 months, representing 11% and 22.7% year-over-year growth, respectively. Strong free cash flow generation is a deliberate goal for the EverCommerce team as it enables the flexibility to invest in our growing business while also enabling us to efficiently allocate capital across a spectrum of opportunities, including the outstanding buyback authorization of M&A prospects. In the second quarter, we repurchased approximately 2.5 million shares for a total cash consideration of approximately $24.1 million at an average price of $9.57 per share. Due to the Board's increased authorization that Eric mentioned, as of June 30, 2024, we had approximately $54 million remaining in our repurchase authorization that runs through year-end 2025. We ended the quarter with $87 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 as calculated per our credit facility at the end of the quarter was approximately 2.6x consistent with our financial policy. We had no material maturities until 2028. I'd now like to finish by discussing our outlook for the third quarter of 2024. For the third quarter of 2024, we expect total revenue of $172 million to $176 million and we expect adjusted EBITDA of $39 million to $42 million. We're leaving our full year 2024 guidance unchanged. We continue to expect revenue of $676 million to $696 million and adjusted EBITDA of $167 million to $176 million. Our guidance assumes flat year-over-year revenue trends within our marketing technology services business. Furthermore, we note that, as we said at the beginning of the year, 2024 will be a transition year in which we are making investments to support the transformation and continuing optimization of the business with an eye towards accelerating growth and increasing profitability. To that end, we'll continue to prioritize long-term value creation and seize opportunities to make accretive investments as they become actionable. Now, before we begin the question-and-answer portion of the call, I'd like to take a moment to thank Eric, Matt, our Board and the whole EverCommerce team for the opportunity to serve as CFO for the last seven-and-a-half years. It's been a true pleasure. While we've accomplished a lot during this time, I'm confident that the best is yet to come. Operator, we're now ready to take the first question.

Thank you. [Operator Instructions]. Our first question comes from Bhavin Shah of Deutsche Bank. Your line is now open.

Great. Thanks for taking my questions and Marc it's been great working with you. Just first of all, just it looks like marketing technology solutions kind of returned to year-over-year growth after a couple quarters declined. How much of that was kind of execution versus macro-related? And can you just broadly give us an update what you're seeing from a macro perspective and kind of what's embedded in the guide?

So Bhavin, I'm not sure that that came through as crisply, could you repeat the second half? I think you were asking about macro climate and impact on revenue and then I just didn't catch the second portion.

Yes. The first one, sorry, just did marketing technology solutions kind of return to year-over-year growth after a couple quarters of year-over-year decline. How much of that was execution versus macro and then just overall macro, what did you see in 2Q and kind of what's embedded for the rest of the year?

Got it. Sorry. Thank you. So marketing technology, the one for six, 1.6% growth this quarter versus I think slightly down quarter-over-quarter in Q1. I think look, on the margin it's a little bit of both. I think we continue to execute well, but the headwinds remain. So I don't really think much has changed. We continue to think we are stabilized. If you add the two quarters, first six months of the year, we're slightly down year-over-year, which is consistent with our guide, flat for the full year. In terms of macro trends for the full year, you want to comment on that…

Yes. Thanks, Bhavin. We're not seeing it. We check -- we kind of constantly watching this and really started at the top of the lead funnel all the way down to retention statistics. And to-date, everything has been fairly stable in terms of seeing any macro trends. So nothing has changed in the business from a kind of macro perspective and that's reflected in the guidance for the rest of the year.

Helpful. Just one quick follow-up. It looks like kind of payments revenue grew more in line with TPV growth this quarter, while previously kind of, it's been growing in excess of TPV growth. Any reason why they're converging today? And kind of how do we think about the relationship of both going forward?

Yes. Thanks, Bhavin. It’s Evan. Yes, I would just say, we talked about this, I think, last quarter in terms of take rate expansion and the control that we have over that, from both a pricing perspective to our customers and then our relationships with our processors, which we always work to optimize our costs. We continue to expect that there will be opportunities to expand TPV growth and ultimately take rate will kind of take care of itself as we have different program mix and utilization from our customers over a period of time. So we expect to have continued TPV growth and take rate expansion and optimization over the long-term.

Thanks very much for taking my questions.

Thank you. Our next question comes from Matthew Hedberg of RBC Capital Markets. Your line is now open.

Hey guys, this is Mike Richards on for Matt. Thanks for taking the question. Maybe on the optimization initiatives, how is that trended relative to your expectations now that we're a couple of quarters in, and then maybe with the CFO transition, does anything change here in terms of timeline or where we're allocating resources and investments? Thanks.

Yes, I'll start on the CFO side. I'll let Matt talk about kind of where we are in the optimization. The answer is no. Nothing changes in terms of our expectations of our continuation on the optimization as well as the transformation. Fortunately, Marc has built a really strong organization from top to bottom, and we're very fortunate to have Ryan Siurek, who's been serving as a CAO for the last year has had previous experience and we believe will make a very smooth transition and really follow through with all the work that both Marc and the rest of the team has done to kind of put the optimization and transformation in motion. So in terms of where we are on it, Matt, you want to talk about that?

Yes. I think we focused last year, sorry, last quarter really highlighting the focus on the EverHealth and EverPro verticals really giving leaders in these verticals the organizational structure and the support they need to accelerate growth. So things like simplifying our organizational structure, decommissioning legacy brands, investing in key sales and go-to-market gaps, things that have impacted growth rate, obviously that's where we are focused from a transformation perspective. During the quarter, we continue to work with our third-party change management rep to define our next steps. We've made some key hires within those verticals as well. So excited, I think we are where we thought we would be from a transformation perspective and from an optimization perspective, I think you heard our remarks during the opening of the call. We are also where we expect it to be with real impact that we'll see pull through in 2025.

Yes. Just to double click on that, I mean, Eric mentioned a couple of transformation-related expenses that hit this quarter and that's a little front end loaded, if you will. We'll start to see the thread through the efficiencies we believe in the back portion of the year and then carry into 2025. But as I said in my remarks, we haven't seen a lot of that yet. And really this is all positioning the exit the year into 2024.

Thanks, guys.

Thank you.

Thank you. Our next question comes from Ryan MacWilliams of Barclays. Your line is now open.

Hey guys, thanks for taking the question and congrats to Marc on a great run. Just to start, want to hear a little more detail on the puts and takes behind your net retention rate in the quarter? It seems like there was a pricing dynamic here on the comp basis. And then how should we think about what level NRR should stay at for the rest of this year?

Yes. From a puts and takes standpoint, I think you heard us mention this when we looked at -- when you look at the retention dynamics of the business in whole, we really saw a lot of consistency from that NRR perspective, obviously, we mentioned it last quarter. It continues to have impact from an anniversary of some larger pricing increases in one of our high velocity but lower ARPU solutions where we just won't see that quantum of pricing increase layer on top in this year. So we are seeing the impact of that anniversary and will likely for another quarter or so. But again with the stable retention dynamics, with our focus on cross-sell and upsell, our expectation is that NRR should stay in the neighborhood that it has been. And obviously, we've talked about the opportunity for that to continue to grow as our motions from a cross-sell perspective around payments around Edge are further integrated into the base of software customers, we obviously have opportunity to continue to take that up and north to the places that it has been and beyond.

Thanks. And then, for Marc, just on the full year revenue guide, should we think about it as for the second quarter, revenue came in above the range, but for the full year, you're taking out the revenue contribution from the international operations as a part of the guide or is there other things we should think about relation to the full year guide? Thanks.

Yes, yes. Ryan, I mean, the revenue guidance is -- this is Brad, the revenue guidance we've given all year doesn't include fitness full stop. So I think if you look at the press release, we've delineated exactly what the fitness contribution was in the quarter. And so that's how you should compare those. I mean, yes, for the third quarter and the fourth quarter, it does not include anything. Operator, ready for the next question.

Yes. Thank you. Our next question comes from Alexander Sklar of Raymond James. Your line is now open.

Thanks for taking the question. This is John on for Alex. I want to start with cross-sell, specifically on the multi-solution customers. Can you talk about some of the puts and takes driving the growth there? It's still up nicely year-on-year, but it looks like the net add sequentially was below recent quarters. So anything you flag there, maybe seasonality or changes in go-to-market or maybe the sales fitness there, just any color you could provide there.

No, I appreciate the question. Thanks, thanks for that. It certainly, I wouldn't call that necessarily seasonality. Obviously a key focus on payments. We know we have a lot of runway from a cross-sell payments -- cross-sell perspective from payments, so big focus there. You've heard us talk about EverPro Edge. That is again another value-add solution that can be cross-sold into our system of action software basis. We have our customer experience solutions where again opportunity exists and we are executing on programs to cross-sell their -- those there. So some of those products are somewhat still early in their lifecycle like Edge. And so the consistency of those quarter-over-quarter may not be the right measurement period from that perspective, i.e. for example, we are -- in Edge, there are two solutions that we've lost it -- launched integration with. It may take us several more quarters before the next two integrations are launched. But those are in planning and those will be executed. So as we bring more integrated products to market quarter-over-quarter growth may not be the best look year-over-year, certainly would be the best way to look at it.

Okay. That's helpful color there. And then on the TPV growth here, I'm curious if you can maybe quantify, I think last quarter you guys called out that the top five solutions there were trending nearly 30% of TPV, I think was driven from those solutions, and that was growing 20%. I'm just curious; you may speak to how that does have trended there. Just the amount of growth generated by those businesses.

Yes. The percentage of aggregate TPV remains relatively stable 28%. It was the same last quarter and our growth rate of those top five solutions from a TPV perspective was 22% year-over-year. And that's really in line with what we spoke to from last quarter. Like we spoke then, still holds true in this quarter. That's where the core focus, the core investment from a payments penetration standpoint is in those top five solutions.

Thank you. Our next question comes from Mason Marion of Jefferies. Your line is now open.

All right. Thanks for taking the questions. First, congrats to you, Ryan, on the promotion, and best of luck to you, Marc. So I'm going to touch on the capital allocation front. So, you divested several underperforming assets and have allocated more money to share repurchases. You've spoken about your increased focus on streamlining your current operations. We've heard from others that private valuations are starting to rationalize a bit. Can you talk about why this is the right time to focus more internally and allocate capital back into yourselves versus maybe externally and pursue more deals?

Yes. Thanks for the question. Look, we're always looking. We're constantly -- we have our pulse on the market, and although, they'll be rationalizing, they're still rationalizing from much higher points than we are currently trading. So from an accretive standpoint and a value standpoint that we think the underlying value of EverCommerce is, we and myself, the managing of the Board still strongly believe, it is a very good investment for shareholders to be investing in the buyback, so we'll continue to look at things even through our kind of transformation period. If something comes that makes sense economically and we think accretive to the organization will execute on that as well.

Great. And then you highlighted the point of sale traction within timely. Is there an opportunity to bring this technology to other parts of your business or GEOs?

Yes, absolutely. When we think about the other top solutions that Matt mentioned, we either have point of sale solutions in market at some level or we'll be deploying them over the course of the next handful of quarters. So we're in the early stages of those opportunities. But as you pointed out, the timely case studies, great example. We expect to get nearly 50% of our TPV by the end of the year from point of sale transactions at timely. And there's opportunity to do similar types of efforts in those other top solutions and other parts of our business that have been point of sale enabled for some time. So it's a core part of the strategy in terms of driving utilization and share of wallet expansion on a go-forward basis.

[Operator Instructions]. Our next question comes from Aaron Kimson of Citizens JMP. Your line is now open. Hello? All right. We will take our next caller Bill McNamara of Evercore ISI. Your line is now open.

Hi, this is Bill on for Kirk. Thanks for taking my question. Are you guys seeing any increased price sensitivity from small business customers? And how do you see pricing as a long-term strategy for growth?

Yes, sure. I'll start and others may want to add. I think we've expressed this in past quarters. We look at price from a price to value standpoint. So we certainly want to, as we continue to enhance the value of the software that we're providing to our end customers, prices is absolutely a lever that we've used in the past and we'll continue to use in the future based on that, that, that price to value ratio. To the first part of your question, we've not seen any increased sensitivity from that pricing standpoint. We've got a long history with multiples -- with the multiple solutions that we have with pricing increases in the market. We certainly understand when we do that what the expectations of feedback and/or churn might be. And we watch that data very closely. We've seen no changes quarter-over-quarter, year-over-year from a sensitivity standpoint with any actions we've done this year.

Great. Thanks for taking my questions.

Thank you. Our next question comes from Alexei Gogolev of J.P. Morgan. Your line is now open.

Hello everyone. You talked about some degradation of vendor management programs last quarter at mainly due to weaker macro. Have you seen any improvements there?

Sorry Alexei, we didn't catch the degradation that you were referring to that we had spoken to in the past quarter. Can you repeat?

Degradation of vendor management programs?

Are you referring to our EverPro Edge offering that we launched end of last year? We talked a little bit about in our Q1 call where we continue to see nice traction with that solution. That's part of what we obviously highlighted in Eric's case studies.

Okay.

Or perhaps, yes, yes.

I was referring to some of the handling that you've seen in some other management programs. But in terms of the dynamics that you are seeing on the R&D and S&M sales and marketing side, could you talk about how long should we expect to see the elevated sales and marketing level during that transition process?

I think in terms of sales and marketing expense, obviously, we tightly manage that and commensurate with growth and really do. It's very much part of the balancing growth and profitability motion. It has been relatively stable. I expect it to be operating in that range. Having said that, the organizational transformation initiatives we've been referring to that we've been developing into this year, and as we start to execute into the second half, along with some of the optimization initiatives, we do expect that we will continue to get more out of that investment and we will continue to drive growth investments where we need to drive into our best solutions where they offer the best revenue growth opportunities going forward. From a product development standpoint, it's very similar. We're investing obviously not just to keep our solutions current within the market, but also investing in new solutions such as EverPro Edge that we talked about at the end of last year and into this year, as well as continuing integrations of payments and so forth and other cross-sell initiatives, so that we would expect will continue to also be within a binge. But continuing to invest behind growth as we continue to try to reaccelerate that growth profile going into 2025.

Perfect. And if I could squeeze one more, please. Where would you say you are in the adoption curve for different customer groups in terms of payments? Obviously, on this call you've again highlighted loans as the front runners. But just curious on the how you're driving attach in your other verticals.

Yes. Listen, it depends on the vertical and it certainly depends on the solution within that. In certain places, we are further along the maturity of that based on the micro vertical and just the long-term necessity of payments in the workflow. So if you look at pest control software, for example, we have long -- that has long been embedded in the solution of the system of action software solution as a core part of the workflow and it's a requirement from that that end contractor. And penetration is definitely more on the mature side. You can compare that to other places where we're still really early on in the maturity curve. This could be a place where we have introduced payments to that workflow in a software within the last one to three years and we're still ramping those penetration efforts. So it varies across the portfolio and our management to that is really system of action software solution specific.

Perfect. Thank you very much for your answer.

Thank you. Our last question comes from Aaron Kimson of Citizens JMP. Your line is now open.

All right. Thanks so much guys. Talking to myself in here on mute earlier. I apologize. Can you give us an update on the EverHealth consolidation? Is that trending ahead of the rest of these optimization and brand consolidations where we won't see as much until 2025 and beyond given that you kind of started with EverHealth?

Hey Marc, let's go.

Was the question -- thanks, Aaron? Was it about EverPro or…

EverHealth.

The EverHealth, yes.

EverHealth.

So I think we've talked over the last couple of quarters about both the brand rollout and website optimizations. If you take a look at our core solutions, they're all by EverHealth, the sub products by EverHealth. We've invested over the past couple of months and bringing new leadership from a commercial go-to-market perspective, which has started to -- start to see the fruits of those investments from a conversion improvement perspective or increase in ASP, actually reduction in sales cycle time. And when you look at payment enablement attach on new customer acquisition, we increased that from the low-30s in Q1 to the mid-50s in Q2. So my answer would be we've seen good progress in terms of both the transformation and the optimization of how we are going to market and bringing those products into the market to deliver value to both new customers and the existing customers that continue to expand their share of wallet with us.

And I would just add, I think you asked, is that the -- when we think about the broader transformation program, does that follow EverHealth? And absolutely certain components of what we have done in EverHealth over the last year plus when you look to our other verticals, specifically EverPro operational consolidation like we've done at EverHealth, that's a model that we will follow brand consolidation, product consolidation will look different across our verticals, but certainly some form factors of what we've done in EverHealth will follow at EverPro.

That's very helpful. Thank you. And then maybe as a follow-up, I think, you all may have touched on this a bit, but are you seeing any increase in charge-offs or customers that are unable to pay on time? And then just if not, how do you approach that? It was a big theme on the Zoom info call last night and I love to hear how EverCommerce thinks about it.

So why don't I take a shot at that? I think for the most part our customers pay by credit card on a monthly subscription basis or obviously, we're paid on the payments motion in different ways, so we don't see a ton of that. And we really haven't seen any change where we do have receivables; we haven't seen any change in pattern of behavior amongst our small business customers.

Thank you. This now concludes the question-and-answer session. I would now like to turn it back to Eric Remer for closing remarks.

Thank you so much. We were pleased with our results and look forward to continuing our transformation optimization throughout this year and through 2025. And just want to have a following remark as this will be the last time Marc joins our earnings call. A genuine thank you for all the work you've done over the past almost eight years as an organization grew up with Marc and he's done an amazing job both providing value across organization and also building a legacy within his organization. So we have the ability to promote from within and have a really great leader to step up. So thank you Marc for all your contribution.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.