I think we're ready to get things going. I'm DJ Hines. I'm the Senior Software Analyst here at Canaccord. This is the 45th year we've had this event. We couldn't do it without the companies that come and bring all the great content, the investors that show up and support Canaccord, so we appreciate it. Thrilled to have Evercommerce here. We have CFO Ryan Surich. We're going to do this as a fireside chat, but if there are questions from the room, please feel free to interject, and we can work them into the conversation. But Ryan, maybe just to kick things off for people who may not know the Evercomer's story. Talk a little bit about the problems you solve, kind of the customers you work with, and the growth strategy for the business.
Yeah, I appreciate it, and thanks for having us here today. Yeah, we're in the software space, primarily looking at simplifying and empowering the lives of business owners that provide services that you see every day. We're in the home and field services space. We're in the healthcare space, and we have over 725,000 customers and we're trying to provide end-to-end software solutions that have embedded capabilities that will allow people to focus more on their customers and serving their customers rather than spending all of their time in kind of back office activities. So high efficiency and a focus on cross-sell and up-sell opportunities across the ecosystem where we have three primary verticals We call them EverPro, EverHealth, and EverWell with EverPro and EverHealth comprising mostly like 95% of our revenue with EverWell about 5%. And across that ecosystem, like I said, over 725,000 customers with a range of different software solutions, some of which are product-led and some of which are sales-led. and we have great opportunities in target markets that we're enjoying right now and pretty excited about what the future looks like.
Yeah, I mean, you said a couple times, but deserves emphasis. I mean, 725,000 customers is a massive base to work back into. So you guys just reported Q2 results, steady execution again. I think you guys are, I think I've written, it's a sleep at night stock because the numbers don't tend to move a whole lot, which is a good thing very very consistent what stood out to you coming out of Q2 you know what's working and kind of what still needs some work yeah
we're excited coming out of the first half of the year for the first quarter and for the second quarter we exceeded guidance from a revenue perspective exceeded guidance from an adjusted EBITDA perspective we liked the growth rates that we saw we had 7.4% growth from a revenue perspective on a year-over-year year basis adjusted EBITDA margins were 30% so we're pushing on you know rule 40 from from a total company perspective back half of the year our revenue guidance we we kept flat for the full year and we did actually increase the midpoint of guidance by about two and a half million for us for the full year yeah I mean we feel really good about where we're executing right now where we're focused on our execution is really in the embedded payment space from a cross-sell perspective and I think if you go back and take a look at what we disclose from an earnings point of view we focus a lot on payments and the upsell cross-sell capabilities there although that's not the only you know kind of additional product that we we can sell but if you look at the embedded base we have about 261 thousand customers that we identified as payment enabled that's about 36% of the total customer base and of that about 112,000 that have actually attached and utilizing and that's a leading indicator for us in terms of our ability to actually convert those folks into not only lead from a software perspective but once we lead actually close them on the payment capability because that enhances the overall margin profile from company perspective yeah in addition like we feel really good about where we stood from an overall liquidity perspective we're generating over 100 million in cash flow annually across the base of the entire portfolio and you know we continue to optimize the business overall we did an amended extend on our term loan B took that out an additional three years to give us more runway we have 150 million of cash on hand and ultimately we'll have 125 million revolving credit facility so we feel good from a liquidity point of view overall and from a capital allocation perspective we're investing in the business from that free cash flow point of view in the strategic areas of growth like payments like other product sales but also using our stock buyback
program as well yeah maybe we could zoom out and talk about kind of the core markets that you're serving and we'll focus on the two biggest ones which are ever pro and ever health um just what are the characteristics of those businesses what makes them a good target for ever commerce and you know what's the health of those markets today
well uh i would say first the size of the market from a tam point of view uh we focus predominantly on north america uh but for home and field services we see that as over a 69 billion dollar market for uh health care we see that as over a hundred billion dollar market and so we we have a lot of opportunity from a from a penetration perspective in the ever pro space for home and field services you know think of that as kind of the very small to medium-sized businesses for plumbers and electricians you know field services landscapers things of that nature, and we have a suite of solutions that we can offer to anyone from a one employee business to things like, you know, 10 employee business or a company that's got, you know, five to 10 trucks that wants to do field services and have an integrated motion from a software and solution perspective. And then flipping over to EverHealth, think of that as physician practice management organizations, EMR, PM-type software solutions that allows them to run their businesses more efficiently. Our objective is to, whether it's home services or from the healthcare perspective, enable those businesses to free up time to serve their customers in a much more efficient manner than we otherwise could. And so we're in the process, both with EverHealth and with EverPro, of going through kind of branding consolidation, consolidation from a stack perspective to basically offer these suites of solutions on a fully integrated basis that also enable payment capabilities and additional upsell and cross-sell capabilities as well.
Yeah. There's been a lot of changes to the business over the last, you know, 12 months or so, I'd say, whether it's investments, organic investments into the business or some structural changes, you know, the divestiture of the marketing business. Maybe we could talk a little bit about the rationale there. I know that process is still ongoing, but kind of why you exited that business and, you know, what the ongoing focus will be.
Yeah. So back in March, we disclosed that we were going to go through a process to sell the marketing technology business. It's a good business. It's just it doesn't really fit what we're looking for in terms of being a pure SaaS with embedded capability play, lower EBIT margins, and some more seasonality from a volatility perspective. So when you strip that out and you look at what we look like from a continuing operations perspective, it's a much more stable base in terms of what you would expect in terms of revenue growth on a year-on-year basis, as well as our ability to continue to enhance our EBITDA contribution going forward. So we are in process on that. We announced that back in March. We haven't disclosed any further updates on that, other than the fact that we still expect that we will have a transaction within 12 months from the announcement date, and that's still our intention.
Let's talk about some of the go-to-market investments you've been making and kind of what's driving those initiatives, what you're seeing, and kind of what the business will look like after those changes have been executed?
From a go-to-market perspective, our playbook, we want to lead with SaaS. We lead with the software capabilities, but essentially have automated flows that enable us to connect with customers on a payment basis immediately thereafter and not lose any leads. We have a front book, we have a back book, but prospectively, we want to make sure that we have automated processes in place that allow us to attach those capabilities from a payments perspective. And the reason that's important is because the margin profile and the retention profile on customers that have more than one product is pretty significantly different. I talked about the fact that we had 7.4% growth on a year-over-year basis from a revenue perspective, but if you look at our top five solutions of where we're actually spending the majority of our time and our investment dollars from a revenue perspective in total within software and within payments itself, those are double-digit growers. And so we find that to be something that is important for us to continue to focus in on. And if you look at, like, net retention, you know, we've disclosed 97% NRR, which is fine, and we want to continue to move that in the right direction, above 100%. But under the hood on that, if you look at the top five solutions and if you look at customers that actually take more than one product offering, the NRR on that is in excess of 100%. So that tells us that that continued strategy from an investment perspective really makes a lot of sense. And then you think about it in the context of what those additional product offerings can be in terms of additional add-on products like payments, like Everpro Edge, which is essentially a way for customers to get a rebate or education on how to grow their business. Those are very high EBITDA contribution products for us. that all flows down and allows us to continue to grow and have the expansion that I think that we said we would have from an IPO perspective and we've actually seen so far when we went out from an IPO point of view in 2021 our EBITDA margins were in the low 20s we've grown that to you know 30 percent we still think that there's runway to continue to have momentum there yeah you guys
appointed divisional CEOs right a leader of ever pro a leader of ever health I'm just curious like Any changes you've seen either from an execution or accountability standpoint? How important has that been?
It's hugely important. We kicked off a transformation and optimization program probably 18 months ago. As part of that transformation and optimization, we knew we were going to go from a centralized organizational view to a much more decentralized view, and the intent of which was to get much closer to the customers in order to execute on the strategy of growing the base from a software perspective and penetrating into the cross-sell opportunity. We're real pleased with what we've been able to accomplish in that short period of time. We've hired great leaders in Josh McCarter as a CEO of EverPro, who has a ton of experience from a software and payments perspective as a founder of a business as well as being a CEO of a public company for MindBody and a board member at Compass. And then Evan Berlin is the CEO of EverHealth, but Evan's got legacy history with the company, was formerly the chief operating officer of a company. A lot of really good history, not just on the company in total, but very specifically for a number of the solutions that were acquired from an EverHealth perspective. So he's running that business. Each of those individuals has spent the last, call it six to 12 months building out their teams. We have fully functional teams now that are equipped with chief technology officers, CRO, chief marketing officers, folks that are really going to be focused in on those areas of the business in order to execute our future strategy.
Yeah. I want to dig in on payments a little bit. We talked several times already around how important that is from a margin contribution standpoint as you execute against that cross-all opportunity. Just talk a little bit about the process of enablement and then driving utilization and some of the initiatives that you have underway to further enable the customer base.
Yeah. I mean, there's obviously top of funnel perspective going down ultimately to activating customers. It starts with payment enablement. This is why we give the stats that we do from an earnings perspective in terms of how many customers that we've enabled or grew from an enablement perspective and then how many are actually utilizing. As I said before, we had like 261,000 customers that were payment enabled. That was like a 32% year-over-year growth rate overall. So you can clearly tell that we are focused in this area. That represented roughly 36% of our overall customer base. And of that 261, we have 112,000 that are active customers. We also then need to focus in on expanding wallet share as well. And we're expanding wallet share and a number of key initiatives that we have by opening up that funnel to things like ACH and tap to pay and other methods of payment opportunity. And then we just have volume monetization, which is kind of our active management from a take rate point of view. I would say that the areas of focus in terms of investment from a payments perspective is making this a seamless opportunity for customers as they're onboarding. We have a lot of focus on automating the experience, making sure that there's not a swivel chair experience for customers. And we've made some really good strides in that capability. I'll give you one example that I think is worth noting, but is from the Service Fusion perspective, we've enabled Stripe PayConnect. And it now, with API feeds, allows our customers to basically onboard from a SaaS perspective with an additional, you know, a couple of pieces of information. We have API feeds that will go out to Stripe, and then within seconds, we can get authorization. And it's seamless from a customer perspective, whereas in other situations, you would have to go out to other portals, Stripe, PayPal, whatever it might be. And it just makes it a much simpler experience. Those are the automation opportunities that we see kind of continuing to accelerate the growth from a payments point of view in the future.
Yeah, yeah. I mean, that seamless ease of use, given the profile of the customer that you're working with, is critically important, right? Just being able to have that kind of one-click setup. What do you think the ceiling is on payments penetration over time? I mean, you have this massive customer base. I think you said 110,000 of over 700. Where could that go over time?
Well, I mean, we're sub 10% penetrated from a TPV perspective right now. When you start to think about just the initiatives that we're taking to enhance the capability from a payments perspective, as well as just expanding on the wallet share point of view, we haven't come up with kind of like what we think the cap could be, but we're well under penetrated in terms of what we think the capabilities are in that space. So that's why we're so focused there and in addition to kind of the contribution from an EBITDA margin perspective. So I would say that being sub 10% penetrated right now, if we can even double that, that would just be phenomenal from a growth rate perspective.
And we've talked about the profitability of the business, but maybe just a double click there, like how profitable is the payments revenue stream?
You know, payments, we give guidance from an average perspective, but, like, we account for that on a net basis. It's got 95% EBITDA contribution margins, and so it's one of the most profitable spaces that we can, you know, deploy our time and effort. Now, we will lead with the software. We have to, and that's kind of our strategy, lead with software, but quickly, you know, look at other products that can be enabled to enhance the overall margins, Which is why you're seeing the margin expansion that we have, as well as the other work that we're doing from a transformation and optimization point of view, because we're using the optimization opportunities here from a kind of cost perspective in order to fund the investment growth. Because we are very cost conscious and we want to make sure that while we are making investments, we're doing it in a way that from a capital perspective continues to allow us to generate a very solid free cash flow.
Yeah, yeah. As you said, the business has been nicely profitable for a long time, you know, $100 million in cash flow-ish a year. Balance sheet's in a good spot. No, we talked about that. How do you think about capital allocation? I mean, the business has been historically active with M&A. You have these organic investment initiatives, you're buying back stock. How do you balance it all?
um well we're definitely going to continue to be looking at M&A opportunities probably just not at the pace that we had uh previously I think you know it you know this but for the broader audience I mean 55 acquisitions roughly in maybe a two and a half year uh period um that was quite a clip it allowed us to put the portfolio together to form what is now ever pro ever health and ever well. But the acquisitions that we've had since then, KickServe as an example, those are kind of more surgical in nature. And I would say that as we see opportunities in the market, we're going to continue to look for opportunities that will advance us from a technology perspective and fit in particular with any gaps that we have from a software and solutions perspective. Combined with just the organic investment opportunities that we want to make sure that we can continue to fund. Payments, obviously, is the one that I've been talking about the most, but there's other opportunities as well. Everpro Edge, completely greenfield when we started this a couple years ago, and it's got over 1,000 customers on that. And so we're going to continue to expand and grow that. It helps our customers, it educates our customers, and it provides them an opportunity for rebates that honestly can help to offset or defease the cost of their software. So it essentially makes it a risk-free transaction.
Do you want to just explain what Edge does for folks who may not be familiar?
Edge does a lot of things, but it's a program that allows customers to get educated and grow their businesses. But while at the same time, it allows them to get rebates from a purchasing perspective, almost like a group buying organization, if you will. So through their opportunity to have purchases. We do this mainly through, right now it's through one of our PLG-led motion solutions called Joist, but it allows those customers to basically be able to utilize a buying platform through several vendors and then get rebates on the back end of that. We have another program as well that's associated with that. So we have, you know, that is an opportunity and that actually has a very solid contribution from a bit of margin perspective as well. And then you asked about stock buyback from a capital allocation perspective. We feel very good in terms of where we are overall from just a balance sheet capitalization point of view, but we also feel like we're quite undervalued in the market. So with $150 million of cash on the balance sheet and with the liquidity position that we're in, we feel that it's a good use of money to redeploy that to buy back stock. And we've expanded that program from $200 million to $250 million. At the end of the quarter, we had about $50 million in remaining capacity.
Yep, yep. We're 20 minutes in. I think this is the longest I've done a software presentation without bringing up AI, right? It seems like, obviously, that's a focal point for everyone these days. Let's talk about how you guys are thinking about AI, where you see opportunities in the base to kind of embed it into the product, the pain points you could serve for customers? How are you thinking about it?
Well, I mean, we have actually been using AI for years in different parts of our business, not all parts of our business. You know, lead scoring, you know, lead generation capabilities. We've been utilizing that in several parts. We see AI as being something that's going to be fundamental and core to our business, really across every space that is available, not only from a product perspective and engaging from a customer perspective and customer experience, but also just optimizing our back office as well. So we're continuing to develop in those spaces. I think we've seen huge success in some areas, customer experience as an example. We deployed an AI agent in one of our mobile solutions areas, and it's actually diverting 25% to 50% of calls successfully. and we've estimated it's like resulted in cost avoidance of over a couple hundred thousand dollars. So we're going to continue to embed and utilize AI. I would say from a product and engineering perspective, not only from a code point of view, but also just looking at the abilities that AI can serve our customers in the future as well. Because our customers are going to be wanting to further simplify their time and their allocation of resources. So the more that we can actually make automated within our systems of action, the better.
Yeah, yeah. Talk about the numbers for a second. So we've already kind of said reliable mid to high single-digital organic growth. You know, after the exit of the marketing business, big step up in profitability. You know, we have EBITDA margins north of 30%. Can you drive the EBITDA margins higher? is it dependent on payments or do we need to see a reacceleration and growth like how are you
thinking about the trajectory of margins from here we definitely feel that we can further expand margins we're at like roughly right now at the end of the quarter we we settled in at 30% I think our guidance overall for the year would come have us come in at roughly 29% we don't think that we're capped at all from from that perspective so we see more room to grow in terms of the existing EBITDA margins. Now, we don't give guidance on how far we think that can go. What do we need to believe to make that true? The revenue growth from a software perspective is fundamental, but we also think that the expansion from a payments perspective is critical. Being able to get further penetration into payments is what we now need to further demonstrate that we can execute on. We have good leading indicators. We need to back that up with with fundamental execution in the business. And now I think we're set up in a very positive way to be able to do that. We have a payments team that is dedicated to payments across all solutions, both for EverPro and EverHealth. And they're working inextricably with those businesses to identify the opportunities. And we prioritize our investments on that same basis of where we think we're going to get the most leverage.
Yeah, yeah. We're in our last minute here. In terms of what you think investors may underappreciate or misunderstand about the business, I mean, you already said, hey, we think our stock's cheap. We're putting our own money to work, buying it. What do you think folks are still missing with the Everkarma story? Like, what do you want the message to be coming out of here?
I think we've assembled quite a strong portfolio of solutions, and we generate a significant amount of free cash flow. and the way that we've been able to cost contain and transform simultaneously is quite important. I said we kind of initiated this transformation and optimization program, call it 18 months ago. We've essentially been kind of changing the business but not losing momentum in the business. And we are going to further focus on not only brand consolidation, each within EverHealth and EverPro, but continuing to make our systems of action easier for customers to utilize. I think people don't necessarily appreciate how much value we can bring to our end markets that will then drive value for the company from a continued free cash flow perspective and just ability to generate strong profitability. I think we've demonstrated that, and we're going to continue to do that as we kind of expand on the strategy.
Yeah, yeah. Well, it's a great story. As I said, you know, sleep at night stock, very reliable growth, High margins, expanding, pretty resilient end markets. So you guys are in a good spot. Thank you for doing this. I appreciate it. Thank you. Thanks, Ryan. Good job.