All right, good morning everybody. Welcome to the 2024 Citizens JMP Tech Conference. I'm Aaron Kimson, a VP on the software equity research team here at Citizens JMP. Really excited to be here with Brad Korch, SVP and Head of Investor Relations at EverCommerce. Brad, how are you doing? Great, Aaron. Thanks for having us. Yeah, it's funny. I was thinking about it. Last year, you, Evan, and I, I think we're on this same stage in this same room. And very— My last one. Pat got up and Ryan— That's right. He was supposed to be on a different one. He didn't. He figured it out midway through. But yeah, last one on Tuesday, now we're the first one on Monday, so full circle. So we can go ahead and get started. Maybe just first thing, can you give us a brief history of EverCommerce, back to Eric founding the company as PaySimple, to the IPO in 2021, to where we are today? Yeah, no, absolutely. Look, before I go through the history, just to give you the one-liner, EverCommerce is a vertical SaaS provider focused on providing business management software to service SMBs. We service, last time reported, about 685,000 customers in the space. And to understand the evolution of EverCommerce, it's important to go back to, like you said, PaySimple. So Eric Remer, our founder and CEO, founded a company called PaySimple back in 2006. What PaySimple was, was a thin kind of piece of software, horizontal, focused on the SMB, to basically help them send invoices and get paid. And over the years, there were some thin applications added to that, but it was not a fully robust piece of software, or fulsome in terms of a mini-ERP, right? When you look at the evolution of PaySimple from 2006 to 2016, when EverCommerce was sort of recapitalized and founded, what Eric and team realized was those customers were getting increasingly sophisticated as time went on. They kept asking for things like, "Well, can you do inventory? Can you do fleet tracking? Can you do all these other features that this piece of software was not built to handle?" Certainly, it had some calendaring, and it could send invoices, and it can get paid and track customers, but not those other things. So the business case that was founded, or the business case that was put forth as they recapitalized, was how do you basically offer that ERP for those businesses, right? How do you build a piece of software that allows these generally unsophisticated SMBs to fully manage their business end to end? And then when you do that, you earn the right to take payments, right? And you basically decommoditize the payments layer and make it integral to those workflows. So 2016, Providence Strategic Growth came in, helped fund the company. And from 2016 to now, 50+ acquisitions to basically add a lot of different pieces of software, focused each of them on different microverticals. And so EverCommerce today roughly has three main customer verticals. So EverPro, which is our home field services vertical, think HVAC, plumber, our contractors, security alarm, pest control, et cetera. And within each of those microverticals, there are specific workflows, specific pieces of software that kind of help those customers manage their end-to-end business. Then there's EverHealth, which focuses on kind of smaller physician practices. Think one to five to 10 doctors, not your giant healthcare conglomerates. And then EverWell, which is really two different pieces within there. There's a wellness aspect that's salon and spa. And then there's a fitness aspect, which is both kind of specialty fitness and some bigger box fitness customers within there as well. That's a great overview. Thank you so much. So maybe going back to the payments piece a little bit, that was your biggest priority in 2023, was driving increased payments adoption. Can you help us understand where you are in terms of payments penetration within those 685,000 customers today? Where you'd like to get to, and maybe some of the key learnings you've had since restructuring the payments team early last year? Yeah, of course. I mean, payments are important to our company, not just because it's where we were founded, but it solves a critical pain point for our customers, right? When you're an SMB, getting paid is just critical. It's probably the most important part of your business. And so for our customers, us providing payments as part of those workflows provides tremendous value. Our payments engine is baked directly into these workflows. It simplifies their daily lives to get paid. And because of this, for us, payments makes the software stickier. SMBs, in general, have a higher-churn profile, but if you have the financial engine kind of flowing through this software, it certainly makes it a lot more sticky. And so as we sit here today with, like I said, 685,000 customers as we last reported, we're about 11% penetrated of our existing base. And the reason for that is when you've done 50+ acquisitions over six or seven years, it just takes time to get the workflows embedded, to get customers to take it, et cetera, et cetera. And so as we look at our business, and as Aaron said, it was a key strategic priority in 2023 to accelerate payments adoption. I think sorry. Really, basically, it's very important for us to increase payments adoption because you've got 95%+ gross margins of our business, and it's a tremendous embedded opportunity. So what Aaron said, as we increased the efforts that we did last year in payments, we reorganized the team. We gave them a mandate to basically cover all of payments. We tested and learned a bunch of different strategies to increase payments adoption with pretty good success. I think entering last year, in one of our solutions, we tested into a payments mandate. So customers that were not taking payments, how do we basically mandate that through either a price increase or taking payments? And that was successful. So we rolled that out more broadly towards the end of the summer in one of our bigger solutions, and we'll continue to do that. We also, sorry, I'm just somebody's trying to talk. We also implemented some strategies to just grab some water. Implement some strategies to, sorry, I'm not feeling well. Maybe just go on to the next question, and I'll come back. Yeah, yeah. Maybe stepping back a little bit to a high level. So you have service-based SMB customers across these three different verticals. Broadly speaking, how would you describe the health of your service-based SMB customers? In general, I'd say pretty good. We talked about some softness in our martech and our fitness solutions last quarter, and we had some transactional weakness as well. But 18 months into what we call the current economic environment, we are certainly not seeing increased churn. Our customers are robust. We're definitely seeing the increased our SaaS solutions continue to be the sticky ERP that we expect them to be. Got it. And then so you grew revenue 11% in 3Q23, which you haven't reported 4Q yet. You're reporting a week from Thursday. I've got you growing 7% in the fourth quarter, 8% in 2024. What's it going to take for revenue growth to stay in the double digits in the coming years? And how much of it do you feel is kind of within your control versus partially driven by the macro and the environment for your SMB customers? Yeah, I mean, as you know, EverCommerce is not a one or two product company. And our customer profiles vary as much as our product profiles when you look across different verticals and different solutions. So when you look at consolidated revenue growth, you really do need to peel the onion back a layer or two to fully understand not just what the drivers of current performance are, but how they could change in the future. So we've talked a little bit throughout the last year on our martech and fitness businesses, some of the pressures that we've seen there. And over the first nine months of 2023, martech represented just over 20% of revenue, but it only grew about 1.5%. Fitness represented another 3.5% of revenue, and it also grew about 3.5%. So if you have nearly a quarter of your business with very little growth, you intuitively must know that there are other areas of the business that are growing well in excess of our consolidated growth rate. That leads me to kind of two points. One is what we are focused on. So we're focused on putting our investments on the areas that can accelerate growth the most. This includes not just M&A, but our go-to-market and our product investments. And I think as you look over the next year, you'll see us more and more begin to talk about the makeup of our business so you can better understand how we think about shareholder value creation given the components of our business. Of course, we will do what we can to improve the growth of our lower growth solutions like martech and fitness. In these cases, an improving macro environment could be a tailwind if that were to materialize. It's also important to understand that these businesses may naturally become smaller and smaller components of EverCommerce, which mathematically can accelerate growth over time. Oh, that's interesting to think about, yeah. And then I want to touch on churn. So maybe first within just the overall context of tough environment for SMBs right now and the structural piece of it, but then also churn and how it's trended relative to what you planned when you started. You did some price increases last year, and then the forced payment adoption initiatives you talked about as well. Yeah, I mean, look, given the nature of our customer base, as we talked about before, churn is definitely a factor as we think about gross customer acquisition and the interplay of the two on revenue growth. Customer churn for us, as we defined it, tends to be in the mid-20% range on an annual basis. This hasn't moved much really since our early days in PaySimple, and it hasn't moved really at all over the last couple of years. Of course, as customers take additional solution-like payments and they grow with us and they embed our software into their businesses, churn rate declines and our net revenue retention expands. Look, as price increases and payments mandates, as we've implemented price increases and payments mandates over the last year, we tend to do much better than what we had modeled for churn. Why? Because our software is sticky. Our customers tend to find value in it, and we tend to be thoughtful about pricing to value. Got it. And then in August 2023, you guys did your first acquisition in a little while. You bought Kickserv for about $15 million. Now that you're six months past the acquisition, how are things going there in terms of both driving payments attachment and then accelerating the go-to-market was part of the thesis there? Yeah, no, look, Kickserv, it was a very small acquisition, and on balance, it's meeting our expectations to date. I would say its results are largely immaterial to our revenue at this point, but the overall revenue was kind of within our expectations. Just to peel back the onion a little bit there, I'd say our customer growth with this acquisition, we could do a little bit better than we have been. But in the pricing, we've done a little bit better, and so revenue has sort of netted out. In terms of payments adoption, I think it's just too early to really report on that. Understood. And then in the most recent 10-Q, right, you project a potential increase in sales and marketing as a percentage of revenue, R&D basically flat, G&A eventually coming down, which makes sense. Can you talk a little bit about any current or planned go-to-market investments and what they might look like between headcount, advertising, et cetera? Yeah, I mean, if you look at the 10-Q, it says we expect absolute dollars to increase and maybe as a percent of revenue. What I'd say is I wouldn't take that to read that we expect a huge incremental investment, but we will invest in our go-to-market engine because we are focused on accelerating growth. If you look at overall expenses, certainly we've expanded margins a lot this year. G&A has come down tremendously as a percent of revenue. 2021 and 2022 is where you saw step function increases as part of going public. Look, within sales and marketing, we'll continue to make investments around our go-to-market, testing and learning, finding new diversifying our channels to look for ways to accelerate growth. You didn't ask about us specifically, but for product development, we will continue to spend, add features, and value for our customers. This will allow for the opportunity to have not just additional customer growth, but the lever to pull price increases as we provide more value. I think for both sales and marketing and product development, these costs, a lot of them are people. People costs are a big part of our business, but it could also be some third-party spend, add dollars, et cetera. Understood. Last year, you announced you were consolidating a number of your healthcare solutions all under one brand, EverHealth. Can you help us think about the opportunity there and maybe what the next steps on that journey are in 2024? Yeah, no, of course. I'm really excited about the EverHealth consolidation, and there's really sort of two main benefits that I see. The first, and probably the more important, is that it's really transformative from a customer and go-to-market perspective. These solutions that we acquired over the years largely offer complementary features that a physician's office needs: practice management, electronic medical records, patient engagement, et cetera. But with the consolidation and rebranding of EverHealth, we are moving from these being sold as add-on solutions and towards feature sets within one single ERP for the small physician practice. This largely doesn't exist today. There's not a lot of competitors. And coming to market with a very differentiated product and our early testing has resonated quite well with our customers. So I think there's just a lot of potential there to really accelerate growth and really provide value to our customers. The second important part of this is it allows us to continue our path of cost optimization. It's simply much cheaper to operate things like one website, one sales force, one customer care organization than many. And so, look, part of the reason that we saw margins expand so much last year, a component of that was EverHealth, right? And that will hopefully continue. In terms of milestones and where we're looking ahead, EverHealth will probably have the kind of more formal launch by the middle of this year. And we continue to do work in-house today on the front-end systems, back-end systems, and then the product development work to get the solutions to work as one. That's super helpful, Color. Then maybe one more on the payments side, and then I'll open it up to the audience. Just on the payments side, how do you think about your mode there? Is it you're mission critical? You're providing the critical vertical software. Is it something where you have to maintain that mode over time, or once you earn the right to take payments, you have the right to take payments as long as that business stays in business? Yeah, I mean, look, there's always a competition. Something else can come across. But if you go back to where I started the conversation, it really was the core thesis of EverCommerce that when you own the workflows, like the day-to-day workflows of these businesses, you own the right to take a payment, right? And if you think about a plumber that wakes up every morning, whether he's using an iPad or his computer or his phone, he's got his full schedule. He's got his inventory, his routes, where his trucks are, his payment information, customer interactions, all there. It just makes sense to send and take the payment there as well. Yep. All right, I'll open it up to the audience. If anyone has any questions, feel free. I'm curious about the share purchases. There's not a lot of free float. Would you ever buy back shares from the private equity folks, or is it all kind of public float that you're buying stock in? I mean, I'll never say never to anything. But if you look at kind of why there is no free float and where we are today, it's a belief by the management team, and I can't speak for them, but I would believe the PE owners as well that the stock is undervalued. And their actions to date, 2+ or 2.5 years post-IPO of not doing a secondary, not selling shares, that they're probably not in the business of selling at these levels. All right, we can talk about the balance sheet a little bit if no one else has questions. So can you walk us through the balance sheet at a high level here? How much of the debt's fixed? How much is floating? And then if we see rate cuts later in the year, for every 25 basis points of rate cut, how does that affect your free cash flow? Yeah, so look, it's a single facility. It's a $500 million Term Loan B facility. And it's effectively $300 million of that $550 million is effectively hedged through swaps that we bought. So it leaves you with $250 million that's floating. Rough math, 25 basis points, it's a little over $600K annual impact to cash. Got it. And then kind of related to Andrew's question, I guess, can you help us think through your capital allocation philosophy at this time? You have $16 million left on your buyback as of September 30th, the last time you reported results, $87 million in cash, $530 million in debt, like you just said. You're generating about $77 million in free cash flow in my model in 2023. What's the right way to think about paying down debt versus an expanded repurchase plan at these share prices? Yeah, well, and just to clarify, we did upsize the buyback last quarter. So there was $66 million outstanding as of the end of September 30th. Look, we're generating significant free cash flow, so we do think about capital allocation a lot, and we think about it as a point-in-time decision. Look, at any time we could use free cash flow for organic investments in the business, additional M&A, share repurchases, or debt retirement. It really just depends on our view of accretion at that time. Look, today, we continue to believe that share repurchases, back to Andrew's question, the point I made, are the best use of the bulk of our excess free cash flow today. But that doesn't mean that we couldn't use it for M&A or something else in the future. Got it, and that's a good segue into just how you're thinking about M&A at this time, right? What are you seeing with private market valuations, and how would you describe the company's appetite? You did the 50-plus acquisitions. You did DrChrono, which was a big one, but I think that was, what, November of 2021, and then nothing until Kickserv in August of 2023. So where are you at there? Yeah, I mean, to answer your question reverse, I mean, not much has changed over the last several months in terms of the environment. There's still a little bit of a gap between public and private multiples, a bigger gap between our multiple as well. And so there's activity. We're always looking at stuff. But I think what we've really enjoyed over the last, call it, 18 months has been the ability to really focus on our core internal operations, things like the EverHealth consolidation, focusing on payments acceleration, et cetera. And so, look, we'll be opportunistic. I think there's room for us to continue to be more active in M&A. I think we feel like we're good at it. We're good at integrating these entities, and there's a lot of them out there. And so we'll be opportunistic and continue to look. When you think about, well, where would we do that in the near term, it's more likely to be in the existing verticals that we're in. There tends to be a lot of additional micro verticals, particularly in the home field services space. I think with EverHealth, we feel like we have the core of what we need. There could be some more. But finding additional workflows, being able to target additional customers with our system as action, that would certainly be interesting to us. Got it. All right, so we've got just a few minutes left. I'll turn it over to the audience one more time, and if not, I've got a few more questions as well. Go ahead, Owen. Yeah, do you mind talking about the competitive environments and kind of how you differentiate your product? Yeah, I mean, it really depends. This is a story of our company. It depends a little bit by vertical and where you are. I would say in the home field services space, the EverPro, which is about half our business, there are point solutions out there. But if you ask who is the bigger player in this space, it may be us. We compete in pieces, but a lot of times, we're competing with inertia. I mean, these are unsophisticated sole proprietorships in many cases that are moving from pen and paper to something else. And so there's not as much competition there. In EverHealth, and one of the reasons that we're excited about the consolidation and what I talked about, the kind of suite of services, is that you've got your big guys way up top, your Epic and your Cerner. But when you get down market, there are uncoordinated point solutions, right? And so we see competition there, but we think we can have a better moat around our product. When you get to fitness and wellness, there's where there's a lot more competition, right? You've got bigger customers in many cases. You've got people like Mindbody and some others that are out there competing. So there we do see more competition. And then go ahead, Andrew. When you look at sort of the M&A you could do in each vertical, what's the average multiple by vertical? We don't disclose the multiple. I mean, and it really does vary. These businesses, in some cases, they have no marketing engine. They have no sale. There's just a wide range. And so we look at it. Some are producing cash. Some are burning cash. Some we have to put a lot of cost on to facilitate growth in that business. Some we can take cost out. So it just does vary. Is the health business like 5x-6x sales and then the service business 3x-4x sales in private markets? I have not thought about it in terms of verticals and different multiples. I mean, they all tend to have been in that single-digit range, low and high. But it's really more the profile of those businesses that impacts the multiple. All right, well, I think that's a pretty good spot to leave it. So thanks so much for the time today, Brad, and that's a good start. Yeah, thank you.