EverCommerce Inc. Q1 FY2024 Earnings Call

Thank you for standing by, and welcome to EverCommerce First Quarter 2024 Earnings Call. My name is Marvin and I'll be your operator for today. As a reminder, this conference call is being recorded today, Thursday, May 9, 2024. Now I'd 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; 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 3 months ended March 31, 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 where I'll review our safe harbor statement. Statements made in 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 first quarter results, I'd like to highlight the presentation of results and 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. While the two international solutions are expected to close in the third quarter, they have been classified as held for sale prospectively from the date of signing. As we also discussed last quarter, the revenue guidance given excluded the fitness solutions, and we noted that the EBITDA contribution of these solutions was near zero. As a result, the revenue, revenue growth, and 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, except where specifically noted as GAAP-reported revenue. We will continue this basis of presentation for the remainder of the year. I will now turn it over to our CEO, Eric Remer. Please continue.

Thank you, Brad. On today's call, I will highlight first quarter 2024 results, discuss EverCommerce's presence in the SMB market, our continued strategic transformation optimization initiatives, and finally end with a discussion of our key customer trends before turning the call over to Marc to dive deeper into our financials. Turning to our first quarter results. Our Q1 reported revenue exceeded the top end of our guidance range with growth of 6% year-over-year. Within this, core subscription and transaction revenue grew 9%. Adjusted EBITDA grew 28% year-over-year, beating the top end of the guidance range and exceeded the midpoint of guidance by $3.9 million. Adjusted EBITDA margins expanded more than 420 basis points to 24% compared to 19.8% in the first quarter of 2023. With continued growth and profitability, we are creating the opportunity to invest in our higher growth, higher margin, large market opportunities. Payments revenue grew 11% year-over-year, driven by 9% growth in TPV and modest take rate expansion. Driving payments adoption continues to be a key element of our strategy. Last week was National Small Business Week, and given that, I wanted to take a few moments to highlight the scale of our customer base, all that we do to support our customers and the tremendous market opportunity in front of us. Service-based businesses are the backbone of the economy and small businesses employ the majority of service professionals. There are more than 450 million service-based small businesses globally, which translates to a total addressable market of well over $1 trillion. EverCommerce provides business management software that supports end-to-end business processes for service SMBs. Our SaaS solutions support highly specialized workflows in each of our verticals, enabling our customers to automate manual processes, generate new business, and create more loyal customers. We enhanced the value of our business management solutions by upselling and cross-selling additional features, such as robust payment integration, customer engagement solutions, lead generation, and group buying programs. The products and services we provide are focused on the biggest areas of opportunity. The global addressable market for our business management software solutions is $900 billion, and payment processing represents an additional $200 billion. Moreover, in most cases, the opportunity in front of us is greenfield. We estimate that the penetration of service SMB market with fully integrated software solutions is in the very low-double-digits. We continue to focus on simplifying the lives of those service providers to support us every single day. Our goal has always been to empower the rapidly growing and evolving SMB market. EverCommerce offers tremendous value to our customers by providing solutions tailored to the unique workflows and interactions that various services require. Our software solutions not only provide a system of action necessary to run the daily business processes, but also the marketing solutions to attract the business, the building of payment solutions to collect effortlessly, and the customer experience solutions to create predictable convenient experiences. Our solutions are cost-effective, easy to implement, and purpose-built for service businesses. We provide end-to-end solutions that our customers need to compete and grow in a marketplace that is rapidly transforming. As we discussed last quarter, we're taking steps to transform and optimize our operations. In the fourth quarter 2023, we engaged a third-party adviser to help us assess our operations and identify specific initiatives and strategies to simplify, optimize, and better scale our operations with an eye towards sharpening the customer-centric, vertical market focus that will better position us to accelerate growth. With respect to the optimization, defined initiatives will provide a long runway for continued margin expansion and free cash flow generation. Embedded in our 2024 guide is just a small fraction of the overall expected benefit, which should phase in the full run rate by the end of 2026. These initiatives include optimizing third-party vendor spend, which will continue through the end of the year, as well as operationalizing other significant cost-saving opportunities. These savings will not only fund key growth investments, but also allow us to continue to deliver long-term margin expansion and significant cash flow generation over the coming years.

Thanks, Eric. Total reported revenue in the first quarter was $170.1 million, up 5.6% from the prior-year period. Within total reported revenue, subscription and transaction revenue was $134.7 million, up 8.8% from the prior-year period, and revenue from Marketing Technology Solutions was $30.3 million, a decrease of 4.7% from the prior-year period. We managed the business for sustainable organic growth and selectively utilize strategic acquisitions to augment the trajectory of this growth. As a result, we believe it is 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 first quarter of 2024, pro forma revenue was $164.7 million, up 5.7% year-over-year. Pro forma subscription and transaction revenue was $129.4 million, up 9.1% year-over-year. 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 martech solutions are stabilizing amidst continuing headwinds, their results negatively impacted consolidated revenue growth in the first quarter. Excluding martech, pro forma revenue growth would have been 8.3%. As Eric noted, we also exceeded the top end of our adjusted EBITDA guidance range. First quarter adjusted EBITDA was $40.9 million, representing a 24% margin versus 19.8% in the first quarter of 2023 and 28% growth in adjusted EBITDA year-over-year. Adjusted EBITDA outperformance in the quarter was underscored by our focus on actively managing our operating expenses, driving operating leverage, and cash flow generation. Adjusted gross profit in the quarter was $113.3 million, representing an adjusted gross margin of 66.6% versus 65.3% in Q1 2023. The increase in gross margin is partially attributable to an increasing mix of higher-margin payments revenue and a decreasing mix of lower-margin marketing technology solutions revenue. Now turning to operating expenses, which are reconciled in the appendix of this presentation. Adjusted sales and marketing expense was $27.7 million or 16.3% of revenue, down from 18.1% of revenue reported in the prior-year period. There was a timing benefit to sales and marketing expenses in the first quarter, which we expect to increase for the remainder of the year. Adjusted product development expense was $19.6 million, or 11.5% of revenue, in line with the prior-year period. Adjusted G&A expense was $25.1 million, or 14.8% of revenue, down from 16.1% 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. Levered free cash flow was $8.5 million in the quarter. This was up approximately $600,000, or 7.9% year-over-year. Levered free cash flow growth was negatively impacted by the timing of items related to the sale of the fitness solutions and certain working capital items. For the trailing 12 months, levered free cash flow was $82.1 million, which represents a 12% margin and a 78.2% increase in levered free cash flow over the prior year, continuing to underscore the efficiency of our business, enhancing our balance sheet flexibility. Adjusted unlevered free cash flow was $29.8 million in the quarter and $118 million for the last 12 months, representing 27.4% and 25.7% year-over-year growth, respectively. Strong free cash flow generation allows us to continue to invest in our growing business and deliver strong returns to our shareholders. It also allows us to efficiently allocate capital across a spectrum of opportunities, including the outstanding buyback authorization and M&A prospects. In the first quarter, we repurchased approximately 1.2 million shares for a total cash consideration of approximately $12.1 million at an average price of $9.65 per share. As of March 31, 2024, we had approximately $27.9 million remaining on our repurchase authorization that runs through year-end 2024. We ended the quarter with $90 million in cash and cash equivalents, excluding cash and cash equivalents related to our international fitness solutions, 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 for our credit facility at the end of the quarter was approximately 2.5x, consistent with our financial policy. We have no material maturities until 2028. I'd like to finish by discussing our outlook for the second quarter of 2024. For the second quarter of 2024, we expect total revenue of $169.5 million to $173.5 million, and we expect adjusted EBITDA of $39 million to $42 million. We are 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 near 0 growth in our Marketing Technology Solutions business on a full year basis. Before we begin the question-and-answer portion of the call, I want to once again thank the EverCommerce team for their efforts in delivering both top- and bottom-line results that exceeded expectations, and I want to thank all of you for participating on today's call. Our focus is on continuing to execute our strategic priorities and deliver consistent profitable growth that we believe can generate significant value for our shareholders.

Our first question comes from Bhavin Shah of Deutsche Bank.

It's Nick on for Bob this evening. I guess to start us off, Eric, can you give us some insight into what you're seeing in the overall macro environment? Anything stand out as changing or particularly getting better or worse?

Thanks, Nick, for the question. To date, we've actually - it's been kind of from a pipeline that's kind of we measure the macro. We have enough quantity of pipeline coming through. It's really been business as usual. We haven't seen anything material, both from the tailwinds or headwinds. So I'll let Matt add to that. But from today, at least for the first quarter and as we see here today, it's kind of similar to what we saw from Q4 through Q1.

Yes. I would echo Eric's comments. Certainly, stability. As we look at our demand trends, no significant changes quarter-over-quarter or towards historical periods, and we kind of see that throughout all of our funnel metrics that we would typically see any macro impact across. So definitely, I echo Eric's remarks on stability.

Got it. And then just as a follow-up. I mean, with the beat in the quarter and the full year guide left unchanged, is there anything we should be thinking about for how you're thinking about guiding for the rest of the year? Anything changed that we should be thinking about just as we look toward the back half of the year?

This is Marc, Nick. I'll take that question. So I think guidance starts with being prudent, first and foremost. And I don't think we see anything for the balance of the year that's different than we saw when we issued that guidance, which wasn't that long ago. I think as it relates specifically to EBITDA, there's probably some real timing in there just from getting into the year with respect to timing of investments that we have planned for the year, which is part of what you're seeing in our Q2 guidance.

Our next question comes from the line of Samad Samana of Jefferies.

Marketing technology declined compared to last year, but perhaps not as severely as we had anticipated. Are there any significant trends to highlight from the quarter? Are you beginning to notice positive signs in this area, or do you expect it to continue facing challenges for the foreseeable future?

Thanks for the question. I think nothing has really changed since I'll say the last two quarters of the year. So when we reported year-end results, we talked about a persistent headwind but also stabilizing operations against that headwind. And I think that's what we continue to see. It is down quarter-over-quarter, or excuse me, year-over-year, but that is consistent with what we had expected and obviously consistent with our guidance. To your last point, though, I do think part of our language around stabilization does include seeing some green shoots. We are starting to see a lift in demand activity in pockets that have been more dormant, particularly in the first half of last year and the back half of the prior year. So I think that stabilization amidst continuing headwind is kind of the way we think about the business. We've again been trying to be prudent in our guidance for the year, flat year-over-year, to make sure that's consistent with trends we're seeing, and we'll adjust if we see things different.

Understood. And then last quarter, you discussed steps you were taking to streamline and reorient the organization with a sharper focus on your core verticals. Can you talk about some of the progress you're making here? Any key milestones you've reached and what else needs to be done?

Yes, I would love to discuss that. As we mentioned last quarter, we've been focused on EverHealth for some time, and it's where we've made the most progress in our journey. We're pleased with how far we've come as we work towards a more consolidated state. Last quarter, we highlighted that the consolidation from a product perspective allows us to market more of the EverHealth stack more effectively. We also noted that our new sales average selling prices increased by about 13% year-over-year. While we're still early in the process in other areas of our vertical transformation, we're making organizational progress and preparing for consolidation in those other verticals. I'm very pleased with the progress in EverHealth, as it serves as a guiding example for our future efforts across the organization.

Our next question comes from the line of Matt Hedberg of RBC Capital Markets.

This is Simran on for Matt Hedberg. Congrats on the quarter. I have one just for either Eric or Marc. On some of the mandated payments you did last year, can you give us an update on how that worked out? And then more broadly, can you just speak to payment traction overall and what you're seeing in the business?

Do you want to take it, Marc?

Well, why don't I pass over to you? Matt is going to take that.

Yes, I will, and Evan was introduced on the call; he'll follow me. From a mandate perspective, that's accurate, and Evan will discuss some specifics. We are pleased with the progress and the mandates we tested in the second half of the year. We are doing that across several other programs in the first half of this year, and that will continue into the second half as well. We believe payment mandates are one strategic initiative we have to enhance the payment enablement rate of our software customers, which is key for us from a payment perspective. We are also focused on taking those payment-enabled merchants and driving them to a higher level of processing, increasing our share of their available wallet. We aim to achieve this by expanding our payments product ecosystem so we can assist our customers in accessing more of their payment capabilities. As for the mandates and other initiatives, they are doing well for us in terms of payment penetration. Evan?

Yes. Thanks, Matt. I would just add to that, that we rolled out a specific mandate strategy against one of our main programs in 2023. We've expanded that set of tests and initiatives to eight programs across the ecosystem in our 2024 plan. So expanding not only the specifics around what we're doing with each program, but actually taking those learnings from one specific program and applying that to many more components of the ecosystem. So we are well into that execution today in Q2.

To conclude on that question, we have been observing a consistent impact on our consolidated results, particularly evident in the increasing percentage of payments relative to revenue over the past four to six quarters. Additionally, our gross margin has also shown improvement during this same period. This progress is a clear indication of these programs being effectively implemented.

Our next question comes from the line of Alexander Sklar of Raymond James.

Great. Eric, maybe a multipart question here, but can you just elaborate a little bit more on the potential magnitude of some of the transformation initiatives you referenced in the prepared remarks? Is that on top of some of the brand consolidation activity that's already been in progress? How many of your solutions or maybe a percentage of revenue are you kind of looking at in terms of ranges that might be subject to those efforts?

I appreciate the question. We're not providing guidance on the overall savings or any acceleration at this time. However, I can say that our transformation activities have impacted every part of the company. Every solution, including both field solutions and our centralized operations, is being examined for opportunities to streamline costs. We are collaborating with third-party vendors to reduce expenses and working on brand consolidation to maximize the value of our marketing spending. We are seeing benefits across the board, not only in terms of cost but also in how we operate and organize the business. We are focusing considerable time, as mentioned by Matt, on organizing EverHealth, EverPro, and EverWell more effectively to bring our sales, product, and customer-centric teams closer to the customer. We believe this will enhance the value of our products, improve our ability to provide value to our customers, and help generate more revenue and profits for the organization.

Okay. Great. I guess we'll look for more to come there. And then maybe this is for you, Eric, as well, or Matt, but I just want to dig into the go-to-market motion a little bit more for the nearly 200,000 customers that are enabled for multi-solution. I know we talked about payments and a kind of a separate payment team in general. But can you talk about the team broadly that's focused on selling kind of multi-solution? And are those mostly self-serve kind of as far as enabling that second piece, or is it really a good percentage coming from direct effort?

There is definitely a good amount of self-service enablement. We are trying to enhance our consolidation efforts, which are central to our goals at EverCommerce. We want to provide more upfront value tailored to our customers' operations. However, we will allocate the necessary resources, whether in product development or through direct follow-up in sales, customer success, or support, to introduce those additional products. It's a mix that varies depending on the solution. Some solutions are more product-led growth, relying on self-service, while others involve more sales involvement or a heavier sales pipeline, including customer success interactions. This approach will help us expand our customer base significantly, aiming for a larger percentage of our software customers to adopt multiple products.

Our next question comes from the line of Ryan MacWilliams of Barclays.

Eric and Matt, this is Damien calling for Ryan MacWilliams. It's great to see the ongoing emphasis on strengths while enhancing operational efficiencies. I'm curious if you could explain the current demand in the core business and what you're observing regarding new logo acquisition in the SMB sector. Are there any notable changes in demand for Pro or Health services?

Matt, do you want to take that?

Yes. Thanks for the question, Evan. I would say no, as Eric discussed earlier, we haven't observed any change in demand. In some of our core solutions, we've noticed accelerated sales cycles in the first quarter compared to last year. Additionally, we've experienced increased average revenue per user as we've continued to implement both price increases and effective bundling, as Matt mentioned, in an effort to promote multiple solutions at the point of sale. Overall, we've seen solid trends in that regard.

Perfect. And then maybe could you describe what is implied in the guidance in terms of macro? And then maybe what is required to reach the top end of the range? I'm just curious how to get there.

Well, why don't I start? So let's start with something we've said is absolutely implied in the macro, which is martech, which we have in flat year-over-year, obviously, bringing down consolidated growth rates overall. And there, I should have said earlier, while we see stabilization against a persistent headwind, our team is executing well there. We are certainly trying to position ourselves, not only take advantage of green shoots, but also upside opportunities that we think may present themselves through the second half of the year, particularly based on investments that are being self-funded within the operation against a variety of initiatives that we think will both reduce volatility of the revenue streams in that solution set as well as drive some increased profitability. So that's that piece. On what's implied on the guidance on the other side is really continuing to lean into those really big trends that we see around embedded solutions. That is leading with payments first and foremost, driving investments in the right parts of the organization. Some of that, what Eric referred to around our transformation initiatives, is designed to really sharpen that focus. So we're putting our dollars in the right places. And when you look at our top solutions, they're all growing well in excess of our current growth rates. And those are the primary drivers of both revenue growth rate, software growth rate and TPV growth, and we're going to continue to lean into those. We're not assuming anything different from a macro perspective. But what we've built into our guide is our continuing investments in those initiatives and really driving execution against those initiatives. I think we might want to add a little bit more color on that, anybody?

Our next question comes from the line of Alexei Gogolev of J.P. Morgan.

Hello, everyone. Could I ask you to provide a bit more color around the level of payments attached and in which solutions are you seeing the greatest attach level?

Yes, I'll start and Evan can certainly follow. When you think about payments attached, our core systems of action we see really a mid-30s attach rate from that perspective. So nice progress, but obviously real opportunities. Those attach rates really vary based on the maturity of payment programs, how long they've been there, in certain cases, how deeply embedded payments are into the workflow of that solution. So that could differ in home improvement versus pest control. In EverPro, obviously, we see a great opportunity and many of our existing programs are in EverPro. Obviously, that differs a little bit from EverHealth, where we do have payment programs, but you have the insurance pay side of that as well. So when you think about which solutions, think about within EverPro and across our EverPro environment, that's in both up and down in terms of really our downmarket solutions and our upmarket solutions, opportunities and execution against the payments opportunity there.

I would just add, one of the solutions within EverPro, we've been very focused on driving payments attach on new customer acquisition. And from last year, Q1, we were at 30%. This quarter, we were at 41%. So I think this underscores not only the importance of executing against that and ensuring we have the right value proposition and the right selling motion, sales-led and product-led, but really ensuring that once we get those customers enabled for payments that we can ultimately drive their activation, utilization and expanding share of wallet as we've talked about before with the right product workflows embedded inside. So we continue to work on that, as Matt said, across EverPro and EverHealth and EverWell, but good progress in Q1.

Great. And another question on payments. Could you maybe comment on what you see as midterm normalized level for payment revenue growth? Because, would it be fair to say that 11% in Q1, obviously, that multiple deceleration versus what we've seen last year? So how are you thinking about it in the midterm?

Let me provide some context. We've discussed this in our previous call. For the past four quarters leading into this year, we had some one-time incentives related to payments that boosted the revenue growth rate. When we adjust for that, it aligns more closely with the current figures. This remains a significant focus in our investment strategy. I will let Evan discuss the mid- to long-term outlook. However, we have several initiatives underway where we are investing, and we certainly aim to generate some positive momentum from our current position.

And this is Matt. I'll continue from there. We've mentioned previously that a part of our total payment volume is within a more developed portfolio that is expanding at a slower pace. Currently, 28% of our total payment volume is derived from our top five largest opportunities. These opportunities are growing at a rate of 23% year-over-year from a total payment volume perspective, and all are under 10% penetrated in terms of overall opportunity. We will need to navigate some of that maturity in the portfolio. However, as you look toward the near and long term, these top five solutions and their faster growth will contribute to accelerating our growth rate in the future.

Our next question comes from the line of Clarke Jeffries of Piper Sandler.

Two for me. The first is, I was curious to hear the third-party adviser that you hired in assessing the operations, the full run rate will be at the end of 2026. So I'm just curious about the different buckets there. What could be sooner? What will take more than a year to sort of transact on? And in aggregate across the different categories, is this a relatively linear path to the full run rate, or is it bunched up in the kind of near term or back end?

I'll take that question, Clarke. There are numerous initiatives in play, so I'll summarize them. The concept of optimization has been a primary focus over the last quarter and will continue for the rest of the year. We're concentrating on improving third-party spending management, given our significant expense base, which exceeds $250 million. This presents a considerable opportunity that will be tackled in stages. We will address some substantial items that will take effect this year and then fully materialize next year and beyond. Some early aspects of optimization include reviewing spending for 2025 as we approach year-end, which will carry over into 2026. Many of these initiatives are expected to start becoming evident in the second half of this year as we begin operationalizing them. They will pertain to our business operations related to various transformation efforts such as organizational alignment and brand and product consolidation. These initiatives are expected to facilitate ongoing optimization, beginning as early as late this year and continuing into 2025, which is why we discuss the timeline in this manner. Our aim is to finish 2025 at a full run rate. As of May, we've maintained our initial timeline of 18 to 24 months, and based on the current progress, there’s nothing to suggest that this outlook has changed, as mentioned earlier by Matt during the call regarding our various initiatives.

Yes. Perfect. Certainly helpful. I appreciate across these different buckets, tools, assets, products, operations, there's a lot...

There is a lot.

Second question is just, could you remind us about the seasonality of payments or whether or not you would expect revenue to continue to outpace TPV for most of this year? I think in the prior question about the step-up, but if I think about the sort of implied take rate just off of that high-level view, it looks pretty healthy. Is that something you could see continue, or is there any kind of seasonal notion from Q1 to Q4 to point out in terms of implied take rate as we look at it?

One thing to note is that when considering the take rate opportunity, Matt mentioned that 28% of our top five solutions account for 28% of our total payment volume, and this is growing at 23%. The take rate on these specific solutions is significantly higher than that of the rest of our portfolio. As this continues to grow, we anticipate further opportunities to increase our take rate both throughout this year and in the future.

Yes. And again, Evan can add more details. When considering take rate and seasonality, I focus on the solutions where payment integrations are occurring. In terms of seasonality in EverPro, we’ve mentioned that Q2 and Q3 are typically high points, while Q4 and Q1 experience some seasonality. Therefore, we will observe payment volumes fluctuate, and we tend to have larger net take rates in those programs, which may introduce some seasonality in the take rates. However, I wouldn't say that any specific program has inherent seasonality in the take rate. It's more about the dynamics of the portfolio that could result in that.

Yes. The only thing I'd add is just the price increases that we generally put in the ground from a payments perspective have gone into the ground over the past quarter or so. So that's there for the rest of the year. And at least from a pricing perspective, you won't see additional take rate expansion across '24.

Our next question comes from Bill McNamara of Evercore.

On for Perk tonight. I just wanted to follow up and ask, since spinning off the fitness solutions business, how are you thinking about potential acquisitions in the future?

Thank you for the question. Our approach hasn't really changed. We will continue to seek opportunities in categories that we believe have significant growth potential. We're committed to exploring these areas. Similar to our last acquisition, Kickserv at our EverPro group, which we identified as a relevant opportunity in the marketplace, we will be cautious and ensure that any prospects align with our organization's goals. At this time, we are prioritizing internal growth over mergers and acquisitions, but we are consistently reviewing potential deals. If we find an opportunity that we believe will benefit the organization, we will pursue it.

I'm showing no further questions at this time. I would now like to turn it back to CEO, Eric Remer, for closing remarks.

Well, thank you. We had a really solid quarter. We remain extremely excited, as we talked about several times, by the transformation optimization initiatives we are executing throughout the company. We expect to see the benefits of those initiatives and the work we're doing throughout the rest of this year and really end the year accelerating into 2025. Thank you, all, for joining the call today.

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