Yeah. Okay. I think we'll get started here. Thanks everyone for joining us here at J.P. Morgan's 51st annual TMC conference. With me today, we have EverCommerce's CFO, Marc Thompson. Marc, thanks so much for joining us here today. Thanks for having me. Yeah, really appreciate it. Maybe you can just spend a moment or two just to introduce the company and yourself to the audience. Sure. I joined the company in December of 2016, when Providence Strategic Growth, our largest investor, recapitalized the business, and we really began a new journey. I was previously heading up Oppenheimer's investment banking team, spent a number of years on Wall Street and some other operational roles. Super excited to join the company to really lean into their vision of becoming the leading service commerce platform, which we are today. Our mission is really to simplify and empower the lives of those business owners that support us every day through services they provide to us. We do that by offering vertically tailored business management solutions, which are really the solutions they interact with every day to help them run their business. We also sell them other solutions that help them grow their business, in the form of marketing technology solutions that help them generate demand and new customer acquisition for their own business. Of course, we help them with another range of solutions on the back end to retain and engage their customers so that they can drive retention. We have about 685,000 customers, more than that today. Have been growing quite nicely and really look at ourselves as across the arc of three big verticals, home services, health services, fitness and wellness. Again, really being that leading player today in terms of providing these services to small businesses. No, that's a great overview. You mentioned, you know, you really have three core verticals, EverPro for home services, EverHealth for health, and EverWell for fitness and wellness services. Can you maybe just elaborate on what you're seeing in terms of the demand trends within each of the core verticals? Sure. Obviously, the last couple of years has been, it's been interesting coming into COVID and then out of COVID. You know, far and away our largest vertical for us and the fastest growing is home services. It continues to be a wildly fragmented landscape. I mean, there are literally millions of contractors and home service providers doing a range of things, and just providing a range of services. That is probably the least penetrated from a technology standpoint. We just see a tremendous tailwind of the digitization of their work streams. Followed by health services, which is, I'll call it a more mature market. That's a market that actually has been experiencing a range of technology solutions in the physician practices and specialty practices that we serve, really starting with Obamacare. It's further penetrated. The growth profile there has moderated. It's gotten back to that pre-COVID sort of level, if you will. Really was doing that sort of through the second half of 2022 into this year. Continues to be a nice stable market. Fitness and wellness, for us, it's really a tale of two parts of that market. On the fitness side, that is a sector that we don't think has really fully recovered coming out of COVID. There's not as much new gym formation. Still rationalizing spend in those markets. On the wellness side, where we cater to salons and other beauty service providers and things like that, growth is actually quite nice. It continues to be very attractive and again, you know, at or better than pre-COVID levels actually. I guess, you know, within those verticals, you definitely are facing a few different competitors. You know, who do you typically compete with? You know, why is it so difficult to replicate, you know, your value proposition? Yeah. It's different by within each vertical. As I mentioned, home services, largest vertical, wildly fragmented, both in terms of workflows and services that folks are providing. It is our strong belief that, you know, what we do differently is meet them where they are, so our vertically tailored business management solutions. Landscapers need something different than roofers, who need something different than an HVAC contractor. Our belief is that when you show up with a business management solution that is tailored specifically to their needs. Then you're embedding things like digital payments so that they can get paid faster. You're cross-selling them other solutions, again, to help grow their business. That's really our competitive differentiator. Really, we are that place where they can come to us for each of those solutions, and we can bring it to them and meet them where they are. In terms of competition in that market, though, again, wildly fragmented. I would say the biggest competition in home services is inertia. I mean, there's still just a lot of paper and spreadsheets or a variety of different solutions. You know, at the higher end, there are other competitors. It's just not where we compete. Most of our companies or, excuse me, most of our customers, more than 80%, spend less than $2,000 a year with us, so we are very much at the lower end of the market. In the health services world, the competition there, again, well-established, more up-market providers of solutions, specifically for larger healthcare providers, hospitals, things like that. We're down in the physician practices, small physician practice, specialty practitioners and the like. There, you know, there are a range of other competitors, particularly around practice management and EMR, EHR. This is, these have been technologies that have been around for some time, particularly with the advent of Obamacare, and a lot of these practices have adopted and are using something. There again, what we're really trying to provide, and we're doing this through our branded EverHealth brand, really trying to bring together simplified solutions that help them manage their business. Lead with a practice management and a billing solution, combine it with a electronic medical record and health record, and then surround that with patient engagement solutions to again help them make a, create a better experience for their patients. Fitness and wellness, again, fitness is probably the most mature in terms of digitization. They figured out a long time ago, you should accept a credit card in a gym so that you can just continue to spend that monthly, 'cause customers like me will show up sporadically to experience that gym, and it's a great way to continue to get paid. In that particular sector. You'll see some bigger competitors who have been there for quite some time. You know, where we're playing again is really around providing that holistic experience to our customers so they have customer engagement solutions on the front end, member engagement solutions to be able to manage their membership base and even take payments along the way. Got it. You know, you mentioned payments a few times. I know that that has been a pretty strong growth lever for the business, and it at the same time also expands your addressable market opportunity. You know, really two questions: you know, how are you know, driving more acceleration of payments adoption within the business? How does that really expand, you know, your total addressable market? How should we think about that? Yeah. The opportunity for payments, I mean, as I said, more than 685,000 customers. I mean, we think this is the opportunity set, if you will, from a TPV standpoint. Today, we're currently processing, at the end of Q1, we'd mentioned, you know, we're at $11.1 billion annualized total payment volume. That represents about 10% of the total penetration of the market as we see it or that opportunity as we see it. There's a tremendous opportunity to lean in. I would remind everybody that payments for us is 95% gross margin. One of the most accretive things we can do, perhaps the most accretive thing we can do to grow our business and drive profitability is, monetize a customer who's already purchasing a business management solution, monetizing that with an embedded payment. huge opportunity, major focus of the company. We continue to put more wood behind that arrow because we see it as a tremendous growth driver and certainly one, that will lead to, bottom-line optimization as well, particularly through gross margin. The way we do that is look across our ecosystem, at each of these business management solutions, understand that point of engagement with the customer's customer, if you will, and create a seamless, integrated workflow so that they can get paid however they need to get paid, check, credit card, ACH, whatever the motion may be. Ensure that it is very easy for those the customer's customer, if you will, to create a payment, either at a point of sale or over time, with a recurring payment, what have you. We have a dedicated group within our ecosystem, EverCommerce Payments, which is a team of folks who have done this for years, driving adoption, not just new customers. Once you embed the solution, obviously you're looking to attract those new customers coming onto the platform to adopt payments, but also going back into the base and driving adoption there. Working with customers to expand wallet share by helping them understand how they need to get paid and make sure that they are able to get paid in a variety of different ways. If you think about a home contractor, you know, they might take a check, they might take a credit card, depending on the size of the job, it might be, you know, wire transfer. I mean, it could be a variety of different motions, but ensure that our customers have the ability to collect payments in whatever motion makes sense for their workflows and their customer base. Sort of you mentioned that within a year, customers typically spend less than $2,000. When they are adopting payments as another product, what is really the incremental ARPU uplift? Yeah -that they get from that? Well, it can be significant. If you think about some of our solutions, I mean, we have one solution that might be less than $10 a month, very simple, invoicing and estimating solution. It might be less than $10 a month for subscription. You think about, you know, if a customer takes, or if that particular customer is, who's using that solution, and they might be a home service contractor, and they might be billing out $5,000-$10,000 a year, and we're, you know, we're getting paid on that TPV. I mean, you could see a meaningful multiple of your subscription through the form of payments revenue because our take rate, which is, you know, up around 90 basis points right now, that just creates a very, very attractive revenue stream to complement what you're already getting paid on the subscription. Now that'll vary obviously by solution. That's the lower end, let's call it lower-end micro solution. We have obviously some solutions that are a few hundred dollars a month per seat where that math changes. But what we know every single time, very accretive motion to drive ARPU expansion meaningfully. Secondly, it also improves retention, right? Because the minute. We have about 10% of our customer base is taking more than one product. The vast majority of that are payments. We know that when a customer has the business management and the embedded payment capability, retention also goes up meaningfully on that customer. Got it. To that point, 10% of your customers are only taking more than one product. You've decided that that is one of the largest growth drivers of the business potentially going forward. Mm-hmm. What's required to, you know, not asking you to guide anything today, but, you know, how are you able to, you know, expand that, you know, or accelerate it to maybe 15% or 20%? What's the... At a high level. Yeah. I think, again, it's looking at within each of our solutions, and, you know, some of our solutions, you might have very high penetration of their existing customer base, high as in greater than 50%. Those would be solutions that have been more mature, where we've been at this motion for some period of time. Other solutions, which are newer, where we've just started driving adoption, it might be far lower than that. The opportunity set takes into consideration, all of the various solutions and their overall aggregate opportunity. The way in which you do it is engage with these customers, again, at the... For new customers, as they're coming in the door, you wanna make sure that they understand both the business management aspect, and then they understand that this can be coupled in, and make sure that they understand that overall value prop and drive adoption at the sale of the new customer. Within the existing base, we do marketing campaigns. Again, you know, we're digital acquisition is the way we drive growth in our business from a marketing standpoint. And digital interaction is also a way we continue to interact with our customers. A variety of different campaigns. You might do it through campaigns and pricing and bundling, might be drip campaigns, but a variety of different marketing methods to just ensure they understand this feature is available and they understand the value that it can drive to them and their business. I think as, just as part of the go-to-market playbook last quarter, you began to have a more consolidated EverHealth brand. Yeah. Can you just, you know, walk us through the benefits of this and what have you been seeing from, you know, the traction from customers? A couple things. One is the customer facing, which is the most important reason to do this, right? We talk about simplifying and power the lives of the business owners that are providing these services, while simplifying may mean simplifying the value prop, right? We have a number of different brands within health services, and by branding EverHealth, we're able to really simplify the value prop and sort of break it down into two components. One is lead with the business management solution. In that vertical market, the practice management solution and the billing solution, and then their electronic medical record solution, which are integrated in our ecosystem, that's where you land and then you want to expand with other solutions. It could be embedded payments, but it also could be another software-oriented solution, patient engagement, where you're interacting around scheduling, communication, text, so forth, with your customers to enhance an overall customer or patient experience in that case. By simplifying that, we're finding that obviously customers, you're just simplifying it when they come in the door, so their ability and time to buy is driven down, which is obviously an improvement for our customer acquisition. Again, I think, you know, thinking about the overall experience, they don't have to filter through a bunch of different brands. They are able to say, "Okay, I'm gonna go to EverHealth and I'm gonna get these two things," and then what's underneath the hood is less relevant, right? The second part of this is an economic part of the equation and real optimization in our business. Over time, we called this out on our last call because it is starting to happen, but it's a, it's a multi-year journey. There's really this notion of brand and product consolidation. As you have two or three or four different PM EMR solutions in that vertical, yes, some cater to specialty clinics, some cater to small physicians, et cetera. As you start to bring those together, you're gonna be able to drive real efficiency in the operation, for everything from customer acquisition, customer support, right on through the organization, kinda hitting every slot along the way in the organization, which over time will, we think streamline and create a lot of efficiency, which hopefully will be manifest in the bottom line improvements and expansion. Would you say that I guess, how should investors sort of track, you know, the improvement with that consolidation opportunity? I mean, you will look at OpEx as a percent of revenue is my guess the primary metric that investors will look at in terms of, let's call it efficiency gains at each of the lines. Sales and marketing and product development, you know, over the arc of time, you know, that is where you should see some of that. The G&A is a little bit different, but there's a component of that in the G&A as well. I mean, we think, you know, over time, we've been continually improving our G&A as a percent of revenue. I expect that to sort of methodically continue because as we've talked about really the last couple of years preparing for and going through the public offering and now being a public company, just investing in public company infrastructure and then infrastructure just to scale the business has been a big series of investments over the last couple of years. The growth of those will just moderate pretty dramatically, so we don't need, we don't expect that that spending curve will be the same. We would expect to get a different but a different form of leverage there. Some of that, again, over the mid to long term. Mm-hmm ...that optimization from brand and product consolidation, it'll hit that group as well, in the form of, you know, everything right on through the back end. Got it. Shifting gears here a little bit, just wanted to talk a little bit about the macro environment. At this point, as you're talking to customers and different partners, it seemed like last quarter that the macro environment, it seemed relatively consistent with- Yeah ... Q4 as well. Can you just help us get a better sense of what you're seeing and, you know, how are you sort of thinking about that as we think about the guidance for the year? Yeah. I mean, I think, Q3 and Q4 of last year is where we started to see some of the moderation, particularly around the marketing technology. In Q1, software and subscription grew 15% and the marketing technology grew 6%. I think that story is kind of the story of the last couple of quarters, and I expect that to be the story going forward, and that's kind of the way we've thought about guidance. I think, you know, again, back to the verticals, home services continues to perform nicely. I do think, you know, health services has moderated some, and I believe the fitness portion of fitness and wellness continues to be somewhat challenged. Our expectations there are very muted and very tempered, consistent with kind of what we saw exiting the last half of the year. you know, the other, the wellness portion of our fitness and wellness, while doing well, I mean, it's a smaller piece, so it's not gonna have as much of an effect. Just maybe related to that, I mean, obviously the company has quite a track record of doing M&A, different tuck-ins. You know, how has, you know, the macro environment really impacted, you know, the valuations from your purview? At this point, what is really the M&A philosophy going forward? The M&A, I mean, nothing's changed. We, you know, we have a very vibrant and active corp dev team. We're constantly looking, you know, at opportunities that will be strategically, financially, and operationally accretive for us. The market certainly backed up quite a bit in 2022 coming out of 2021 and sort of the correction that took place. What I would say is, you know, a lot of the solutions that we're looking to acquire and in terms of what we're looking to acquire, focuses on those business management solutions where we can pattern recognize, land with that, expand with the cross-sell of embedded payments and other solutions that we have to offer to be able to drive customer expansion and retention. So those solutions, vertically oriented obviously. Our experience in 2022 was that the disconnect in valuation, we were more disconnected in terms of valuation from a public market than they were as a private market, that disconnect really didn't solve itself. There's a ton of liquidity in the lower middle market, private equity world chasing some of these solutions. I think they are quite attractive targets for those types of investors. We never really saw valuations decline a lot. What has changed, obviously, for us is our valuation has changed, which has been helpful in bridging that gap, if you will, to a certain extent. you know, I think we see the market as improving gradually. What I can say is I think, you know, this first half of the year that we're in is just feeling quite a bit. It's feeling better. I don't want to say quite a bit. That's probably over my skis a bit, but it's feeling better than it did last year. We saw some gradual improvement through the year. Look, there continues to be a very, very fragmented universe of solutions out there. We're monitoring them constantly, and we are active, but we are very, very disciplined, and we have been as we've built the company to this scale, and we will continue to be. Maybe talking a little bit about just AI. It's coming up in every conversation here at the conference. There's just a lot of excitement around it in general. You know, I mean, how should investors really think about, you know, how artificial intelligence really applies to your business? I mean, do you see it as an opportunity? Do you see it as a threat? Just help us kind of get a better sense of it. I think we see it as an opportunity. It's really on both sides. I mean, you know, as I mentioned, digital customer acquisition, digital interaction with our customers, I mean, I was about to say we're a digital-first company. That's not really what I mean. The digital, you know, the digital motions, if you will, in our, in our Resonant within our model, which is what makes us unique, by the way. I mean, we don't believe you can be the leading service commerce platform catering to these customers spending less than $2,000 a year with you unless you are purpose-built for that mission. That will include a lot of digital interaction, whether it be acquisition, retention, engagement along the way. I'm not a technologist, but my belief is that'll create a really interesting set of opportunities for us. Obviously, same is true Resonant within our solutions that are out in the world. We're doing, like everybody else probably, testing and learning and figuring out how we can take advantage of some of that. I think there's a whole interesting set of opportunities there. Inward facing, you know, particularly as CFO, I mean, I think, again, I've got no crystal ball, but I would imagine there's gonna be a lot of opportunity for inward-facing applications of AI and generative AI that are gonna be very useful in driving more efficiency in a number of operations within, you know, things like accounting and finance and so forth. I think there's probably a lot of opportunity from an operational standpoint to take advantage of solutions that'll be on the come. We're obviously trying to learn about what those can be as well. You see it more as a way to internally integrate that into maybe your go-to-market playbook or... Both. Yeah. The- Yeah. Yeah. I think there's going to be internal opportunities where we can optimize our playbook, and it'll help to optimize our overall operational workflows and streamline operations internally. Then I do believe that, you know, customer-facing interaction and solutions will benefit as well. Got it. I think I'll take a quick pause here just to see if anyone has any questions. Someone with a microphone will be coming around. You can just raise your hand. Anyone has any? Nope. Okay. Yep, we can keep going on. Maybe if we can talk a little bit about the guidance for the year. The 2023 revenue guidance implies about 11% year-over-year growth at the midpoint. That's relatively in line with what you just reported in Q1. Can you just maybe elaborate on the seasonal trends of the business and just discuss some of the assumptions that's really baked into that growth? I think, look, first and foremost, I mean, you know, we said we've experienced headwind, and we're conscious of that, so I think we're always trying to be prudent with our guide and, you know, not put ourselves in a position where, you know, that would be uncomfortable later. We're always trying to be prudent with the way that we establish guidance to begin with. We are seeing, you know, a little bit of seasonality and trends, you know, coming off of last year, actually. First half last year was pretty strong. You know, it's a different, it is a different first half this year, so you're seeing some of that baked into the guidance as well. Got it. Would you say you're just taking an extra level of, you know, prudence and conservatism within the model? I think we always try to do that. Right. On the other side, for profitability, you know, EverCommerce is already a very profitable company, Adjusted EBITDA Margins of about 20%, gross margins in the mid-60s, R&D low teens, G&A in the mid-teens. As you think of that growth runway, how are you thinking of any margin expansion from here? Is there any low-hanging fruit, you know, within those lines? I think, first of all, you know, again, sort of consistent with our guidance and consistent with our macro view, we're actively managing our cost base. We did a very nice job of that. We beat our guidance, on the bottom line handily in Q1, that was really active cost management and being very disciplined in the way we continue to invest in the business. That theme will persist. When we think about, you know, points of leverage within the business with those various lines, I think about it, you know, in year and beyond, in year or so to sort of mid and longer term. You know, look, as we enact pricing actions, as we continue to drive payments, we grew payments 37% in Q1. You know, you'll start to see payments as a percent of revenue start to tick its way up. That and continuing to drive new customer acquisition around our SaaS solutions, that will just naturally start to continue, or I should say, that will continue the shift mix towards higher margin revenue stream. We expect that to continue. We'll. You know, some of that certainly would, you'd expect to happen through the year, but that's really a mid and long-term thing. On the OpEx side, and that's really what's driving gross margin. I mean, those are high margin opportunities which should fall through pretty nicely. I think on the OpEx piece, you know, we are pretty efficient in our customer acquisition and our sales and marketing spend. We wanna remain that way. you know, we will always be looking to optimize that. I think product development, same is true. We wanna continue to invest our products, and make sure that we're delivering best-in-class features for our customers across our range of verticals. I think we will continue to see leverage on the G&A line, really getting over the hump of a lot of investment to support not just the public company aspect of our business, but also to support just overall scalability. We've grown quite rapidly, as you know. We expect to continue to grow nicely, and it does require that we, or it has required that we have made significant investments. We think that the arc of that investment curve will change, and we should see leverage on that. I think too, within the guidance, there is some component of price increases that's being rolled in. Yeah. Last year, you know, I would have said the last couple of years, you know, price would have been 1%-2% of revenue lift. This year, I think, you know, think about that as being kind of 3%, I think. You know, we have always been priced to value. That's always been the approach we've taken. As we, have, you know, brought a lot of these solutions, under, you know, I'll say, you know, common leadership within our company, and as we've, as we have better understood price to value within each of the segments, we're taking advantage of not just driving, price, increases in different places, but driving them more pervasively across all of our solutions so that this year we should see a little bit of a bigger lift from that. Really trying to work to embed, you know, price increases into our contracting and things like that. A lot of the solutions, particularly those that we acquired, that was not their practice. They had never raised price, and they certainly weren't baking it in terms of annual, increases and things like that. really constantly working as appropriate with the customers and within each of these solution, sets to really make sure that we are keeping that top of mind. sort of how has been the customer feedback been so far? We've. ... the retention like state that is? Yeah. We always plan in a little bit more churn when we enact a pricing action. Candidly, we rarely see it. I mean. Mm-hmm you know, these are small businesses, particularly around the business management solutions. They're getting real value. They know that they're getting real value, which leads me as CFO to wonder, are we pricing to value enough? I think there are opportunities there, but look, it's important that we are deemed as delivering really solid value for a good price with our customers. Generally, we know how to manage that very effectively. You know, we like to do it in conjunction with adding value. I mean, when you're embedding payments or you're, you know, integrating a customer engagement solution, those are great times to meet the customer and say, "Here's an opportunity for us to add even more value," and, you know, bundle it into that action as well. There's a variety of different motions we can take. I would say, you know, overall, more pervasive, more focused, efforts around price this year in 2023 versus the last couple of years, where it was just on a more narrow part of the solution set. Got it. In addition to, you know, the M&A track record, you know, you recently just started doing more stock buybacks as well. How are you thinking about just your capital allocation priorities going forward? Yeah. You know, from the time we went public, we talked about efficiency of capital structure and, you know, our view of an appropriate capital structure. We are very comfortable managing the debt we have, even in this environment at increased prices. You know, we have taken measures to manage the cost of that debt. And, you know, our leverage ratio is about 3.2 turns under our credit agreements. We have said, as part of our financial policy going public, you know, we would operate, you know, anywhere in that sort of this ZIP code, and we would lever up to 4- 5 x for acquisitions. Nothing has changed on that front. I think the buybacks are really an example of point-in-time capital allocation. you know, last year, we did not see M&A opportunities that made sense to us. We are generating on an unlevered Adjusted Basis, more than $90 million of cash flow. felt like we wanted to put that to work and the stock buyback, it seems like a very attractive opportunity relative to others that we had in front of us. Got it. Makes sense. I'll just see if anyone else has any questions. No? Well, I think, you know, just last question from my end. You know, in your discussions with investors, where do you really see people underappreciating the story for EverCommerce? Where is the misinterpretation at this point, at a high level? I think, you know, there are not many public companies that are selling specifically to these SMBs and micro SMBs. I think, you know, particularly in a tougher economic climate, investors tend to shy away or assume that that customer is not as resilient. That's just not been our experience. I think a big part of that is, one, the value that we're delivering them. Again, business management, it's like ERP, right? It is the ERP of these little businesses that are providing a service. When you are embedding an ability to get paid frictionlessly, I mean, you're really making their lives quite a bit better. There's a tremendous amount of value that we're delivering. In that portion of our business, we've seen good resiliency, I mean, through some really interesting economic times in the last three years. You know, so I think there is that aspect. We believe, you know, these business management solutions in particular, you know, the customer could be experiencing a slowdown in their business, they're not getting rid of that. Now, they might get rid of something else, might be leads, and that's where we've seen softness in our business, has really been around that marketing technology piece. I think that is one thing, and I think the other is, you know, when you see businesses catering to this particular customer set, I think the next logical question is: Can they do that and grow, you know, grow durably and drive profitability? I think, you know, we've cracked the code on that, and I think, you know, we're proving that out real time. Our business is purpose-built to efficiently acquire these customers, efficiently engage with these customers, and again, drive value through multiple solutions at the customer level to really enhance value to them and obviously drive, you know, increase in growth and profitability to our business. I think, those are probably the two things I would suggest they've missed. Yeah. I think for a lot of investors, you know, given, you know, you do have that SMB exposure, at the same time, the software is extremely sticky. You know, it's really the plumbing and the, you know, the mission-critical nature of the software for these businesses that, you know, it's difficult for them to, you know, switch, right? There's a very high switching cost. Yes. Just like an enterprise. Well, I think with that, you know, that's all the time we have, but really appreciate you coming today, and thanks for joining us, everyone. Great. Thanks for having us. Thanks.