EverCommerce Inc. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-40575

EverCommerce Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware			81-4063248
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3601 Walnut Street, Suite 400 Denver, Colorado			80205
(Address of principal executive offices)			(Zip Code)

(720) 647-4948

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.00001 par value	EVCM	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of May 6, 2022, there were 195,601,997 shares of the registrant’s common stock, par value $0.00001, outstanding.

TABLE OF CONTENTS


		Page
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three months ended March 31, 2022 and 2021	3
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited) for the three months ended March 31, 2022 and 2021
	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signatures		42

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth, future acquisitions and other capital expenditures and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, our limited operating history and evolving business; our recent growth rates may not be sustainable or indicative of future growth; we may not achieve profitability in the future; we may continue to experience significant quarterly and annual fluctuations in our operating results due to a number of factors, which makes our future operating results difficult to predict; we may reduce our rate of acquisitions and may be unsuccessful in achieving continued growth through acquisitions; revenues and profits generated through acquisitions may be less than anticipated, and we may fail to uncover all liabilities of acquisition targets; we may need to incur additional indebtedness or seek capital through new equity or debt financings, which may not be available to us on acceptable terms or at all; we may not be able to continue to expand our share of our existing vertical markets or expand into new vertical markets; we face intense competition in each of the industries in which we operate; the industries in which we operate are rapidly evolving and the market for technology-enabled services that empower SMBs is relatively immature and unproven; we are dependent on payment card networks and payment processors and if we fail to comply with the applicable requirements of our payment network or payment processors, they can seek to fine us, suspend us or terminate our registrations through our bank sponsors; the inability to keep pace with rapid developments and changes in the electronic payments market or are unable to introduce, develop and market new and enhanced versions of our software solutions; real or perceived errors, failures or bugs in our solutions; unauthorized disclosure, destruction or modification of data, disruption of our software or services or cyber breaches; our estimated total addressable market is subject to inherent challenges and uncertainties; actual or perceived inaccuracies in our operational metrics may harm our reputation; failure to effectively develop and expand our sales and marketing capabilities; failure to maintain and enhance our reputation and brand recognition; inability to retain current customers or to sell additional functionality and services to them may adversely affect our revenue growth; our systems and our third-party providers’ systems may fail or our third-party providers may discontinue providing their services or technology or to us specifically; faster growth of lower margin solutions and services than higher margin solutions and services; risks related to the COVID-19 pandemic; economic and political risks, including the business cycles of our clients and changes in the overall level of consumer and commercial spending; our ability to retain and hire skilled personnel; risks related to our indebtedness; risks related to the increasing focus on environmental sustainability and social initiatives; our ability to adequately protect or enforce our intellectual property and other proprietary rights; risk of patent, trademark and other intellectual property infringement claims; risks related to governmental regulation; risks related to our sponsor stockholders agreement and qualifying as a “controlled company” under the rules of The Nasdaq Stock Market; as well as the other factors described in our Annual Report on Form 10-K for the year ended December 31, 2021, as updated by our other filings with the SEC. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

EverCommerce Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share and share amounts)

(unaudited)


	March 31,		December 31,
	2022		2021

Assets
Current assets:
Cash and cash equivalents	$	101,201	$	93,993
Restricted cash	3,798		3,566
Accounts receivable, net of allowance for doubtful accounts of $2.1 million and $1.9 million at March 31, 2022 and December 31, 2021, respectively	42,318		40,514
Contract assets	12,861		11,039
Prepaid expenses and other current assets	26,304		22,505
Total current assets	186,482		171,617
Non-current assets:
Property and equipment, net	13,367		13,509
Capitalized software, net	26,357		24,000
Other non-current assets	21,036		24,296
Intangible assets, net	482,536		508,535
Goodwill	921,615		921,416
Total non-current assets	1,464,911		1,491,756
Total assets	$	1,651,393	$	1,663,373

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Balance Sheets (Continued)

(in thousands, except per share and share amounts)

(unaudited)


	March 31,		December 31,
	2022		2021

Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,195	$	10,325
Accrued expenses and other	53,735		49,340
Deferred revenue	27,075		22,992
Customer deposits	8,805		9,828
Current maturities of long-term debt	11,070		10,943
Total current liabilities	108,880		103,428
Non-current liabilities:
Deferred tax liability, net	7,747		17,862
Long-term deferred revenue	2,982		2,803
Long-term debt, net of current maturities and deferred financing costs	534,122		535,184
Other non-current liabilities	19,129		18,448
Total non-current liabilities	563,980		574,297
Total liabilities	672,860		677,725

Commitments and contingencies (Note 15)





Stockholders’ equity:
Preferred stock, $0.00001 par value, 50,000,000 shares authorized and no shares issued or outstanding as of March 31, 2022 and December 31, 2021	—		—
Common stock, $0.00001 par value, 2,000,000,000 shares authorized and 195,510,446 and 195,384,291 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	2		2
Accumulated other comprehensive loss	(2,431)		(1,767)
Additional paid-in capital	1,507,501		1,500,643
Accumulated deficit	(526,539)		(513,230)
Total stockholders’ equity	978,533		985,648
Total liabilities, convertible preferred stock and stockholders’ equity	$	1,651,393	$	1,663,373

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share and share amounts)

(unaudited)


	Three months ended March 31,
		2022		2021

Revenues:
Subscription and transaction fees		$	108,001	$	75,195
Marketing technology solutions		29,904		25,388
Other		5,671		4,323
Total revenues		143,576		104,906
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization presented separately below)		50,745		35,674
Sales and marketing		30,145		19,689
Product development		17,637		10,325
General and administrative		31,226		22,094
Depreciation and amortization		27,391		23,697
Total operating expenses		157,144		111,479
Operating loss		(13,568)		(6,573)
Interest and other expense, net		(5,478)		(12,949)

Net loss before income tax benefit		(19,046)		(19,522)
Income tax benefit		5,737		3,527
Net loss		$	(13,309)	$	(15,995)
Other comprehensive income:
Foreign currency translation gains (losses), net		(664)		543
Comprehensive loss		$	(13,973)	$	(15,452)

Net loss attributable to common stockholders:
Net loss		$	(13,309)	$	(15,995)
Adjustments to net loss (see Note 12)		—		(15,105)
Net loss attributable to common stockholders		$	(13,309)	$	(31,100)

Basic and diluted net loss per share attributable to common stockholders		$	(0.07)	$	(0.72)

Basic and diluted weighted-average shares of common stock outstanding used in computing net loss per share		195,432,404		43,231,295

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

(unaudited)


	Preferred Stock		Common Stock			Additional Paid-In Capital	Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
		Shares	Amount	Shares									Amount

Balance at December 31, 2021			—	$	—	195,384	$	2	$	1,500,643	$	(513,230)	$	(1,767)	$	985,648





Stock-based compensation			—	—		—	—		6,135		—		—		6,135
Stock option exercises			—	—		126	—		723		—		—		723

Foreign currency translation losses, net			—	—		—	—		—		—		(664)		(664)

Net loss			—	—		—	—		—		(13,309)		—		(13,309)
Balance at March 31, 2022			—	$	—	195,510	$	2	$	1,507,501	$	(526,539)	$	(2,431)	$	978,533


	Series B Convertible Preferred Stock			Series A Convertible Preferred Stock			Total Convertible Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount					Shares									Amount

Balance at December 31, 2020	72,226	$	745,046	44,958	$	163,264	$	908,310		43,074	$	—	$	40,564	$	(431,264)	$	1,546	$	(389,154)



Rollover equity in consideration of net assets acquired	—	—		—	—		—			45	—		416		—		—		416
Stock-based compensation	—	—		—	—		—			—	—		903		—		—		903
Stock option exercises	—	—		—	—		—			223	—		735		—		—		735


Foreign currency translation gains, net	—	—		—	—		—			—	—		—		—		543		543
Accretion of Series B convertible preferred stock to redemption value	—	15,105		—	—		15,105			—	—		(15,105)		—		—		(15,105)
Net loss	—	—		—	—		—			—	—		—		(15,995)		—		(15,995)
Balance at March 31, 2021	72,226	$	760,151	44,958	$	163,264	$	923,415		43,342	$	—	$	27,513	$	(447,259)	$	2,089	$	(417,657)

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three months ended March 31,
	2022		2021

Cash flows provided by (used in) operating activities:
Net loss	$	(13,309)	$	(15,995)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization	27,391		23,697
Amortization of discount on long-term debt	104		1,540
Amortization of deferred financing costs on long-term debt	229		59
Amortization of costs and fees on credit facility commitments	99		229
Deferred taxes	(5,990)		(3,429)
Bad debt expense	460		637
Paid-in-kind interest on long-term debt	107		99
Stock-based compensation expense	6,135		903
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	(2,261)		(4,715)
Prepaid expenses and other current assets	(5,717)		(776)
Other non-current assets	(691)		(2,039)
Accounts payable	(2,122)		1,471
Accrued expenses and other	3,498		(10,289)
Deferred revenue	4,240		5,143
Other long-term liabilities	681		(1,935)
Net cash provided by (used in) operating activities	12,854		(5,400)

Cash flows used in investing activities:
Purchases of property and equipment	(889)		(262)
Capitalization of software costs	(3,503)		(2,765)

Acquisition of companies, net of cash acquired	—		(69,117)
Net cash used in investing activities	(4,392)		(72,144)

The accompanying notes are an integral part of these condensed consolidated financial statements.

EverCommerce Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

(unaudited)


	Three months ended March 31,
	2022		2021

Cash flows provided by (used in) financing activities:
Payments on long-term debt	(1,375)		(2,015)
Proceeds from long-term debt	—		69,216

Exercise of stock options	723		735



Net cash provided by (used in) financing activities	(652)		67,936
Effect of foreign currency exchange rate changes on cash	(370)		196
Net increase (decrease) in cash and cash equivalents and restricted cash	7,440		(9,412)
Cash and cash equivalents and restricted cash:
Beginning of period	97,559		98,337
End of period	$	104,999	$	88,925

Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,943	$	10,837
Cash paid for income taxes	$	235	$	5

Supplemental disclosures of noncash investing and financing activities:
Rollover equity in consideration of net assets acquired	$	—	$	416

Accretion of Series B convertible preferred stock to redemption value	$	—	$	15,105

The accompanying notes are an integral part of these condensed consolidated financial statements.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 1. Nature of the Business

EverCommerce Inc. and subsidiaries (the “Company” or “EverCommerce”) is a leading provider of integrated software-as-a-service (“SaaS”) solutions or services for service-based small- and medium-sized businesses (“SMBs”). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. Today, the Company serves over 600,000 customers across three core verticals: Home Services; Health Services; and Fitness & Wellness Services. Within the core verticals, customers operate within numerous micro-verticals, ranging from home service professionals, such as construction contractors and home maintenance technicians, to physician practices and therapists in the Health Services industry, to personal trainers and salon owners in the Fitness & Wellness sectors. The platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly nuanced demands, as well as highly complementary solutions that complete end-to-end offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences. See Note 3 in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on acquired subsidiaries. The Company was incorporated in Delaware on September 29, 2016, and began operations on October 17, 2016 (Inception). The Company is headquartered in Denver, Colorado, and has operations across the United States, Canada, Jordan, United Kingdom, Australia and New Zealand. The Company changed its name from PaySimple Holdings, Inc. to EverCommerce Inc. as of December 14, 2020.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2021 and the related notes (“Annual Report on Form 10-K”). The December 31, 2021 condensed consolidated balance sheet was derived from our audited consolidated financial statements as of that date. Our unaudited interim condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the unaudited condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation. There have been no significant changes in accounting policies during the three months ended March 31, 2022 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2021 and the related notes.

The operating results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain amounts reported in the unaudited condensed consolidated financial statements, including the accompanying notes. The Company bases its estimates on historical factors, current circumstances, and the experience and judgment of management. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from those estimates. Significant estimates reflected in the consolidated financial statements include revenue recognition, allowance for doubtful accounts, valuation allowances with respect to deferred tax assets, assumptions underlying the fair value used in the calculation of stock-based compensation, valuation of intangible assets and goodwill and useful lives of tangible and intangible assets, among others.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Emerging Growth Company

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use the extended transition period under the JOBS Act until the earlier of the date that it is (i) no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The adoption dates are discussed below to reflect this election within the “Recently Issued Accounting Pronouncements” section.

Recently Issued Accounting Pronouncements not yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to improve financial reporting about leasing transactions. The ASU affects all companies that lease assets such as real estate and equipment for a period for more than 12 months, and will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The updated standard will be effective for annual reporting periods beginning after December 15, 2021 and interim periods the following year. The Company will adopt this standard in the fourth quarter of 2022. Based on management’s current assessment, the impact of adoption will result in an additional right-of-use asset and corresponding lease liability presented on the consolidated balance sheet, largely comprised of its future real estate lease obligations in Note 15 in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q along with any embedded leases in service contracts. Based on our assessment through March 31, 2022, we expect no material impact to the consolidated statements of operations and comprehensive loss; however, management’s analysis of the impact of adoption is not complete.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, which includes the Company’s accounts receivable and contract assets. This updated standard will be effective for annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends the guidance in ASC 805 to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. FASB’s objective in issuing the ASU is to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity and inconsistency related to both the recognition of an acquired contract liability and payment terms’ effects on subsequent revenue recognized by the acquirer. This updated standard will be effective for annual reporting periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating whether it will early adopt this standard. The impact of adoption is unknown as it will be based on any potential acquisitions consummated in the year of adoption.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 3. Acquisitions

2021 Acquisitions

During 2021 and in the three months ended March 31, 2021, the Company completed five and two business acquisitions, respectively, in conjunction with the execution of its long-term plans and objectives in building a service commerce platform supporting the success of SMBs. All of the acquisitions qualified as business combinations under ASC 805. Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition date fair values, with any excess consideration recognized as goodwill. Goodwill primarily represents the value associated with the assembled workforce, and expected synergies subsumed into goodwill.

Assets acquired and liabilities assumed in connection with each acquisition have been recorded at their fair values. Fair values were determined by management using the assistance of third-party valuation specialists. The valuation methods used to determine the fair value of intangible assets included the income approach—relief from royalty method for developed technology and trade name, the income approach—excess earnings method for customer relationships and the comparative business valuation method for non-compete agreements. A number of assumptions and estimates were involved in the application of these valuation methods, including revenue forecasts, expected competition, costs of revenues, obsolescence, tax rates, capital spending, discount rates and working capital changes. Cash flow forecasts were generally based on pre-acquisition forecasts coupled with estimated revenues and cost synergies available to a market participant.

The Company’s condensed consolidated statements of operations and comprehensive loss include $8.4 million of acquisition related transaction costs in general and administrative for acquisitions consummated in 2021, with $2.7 million incurred in the three months ended March 31, 2021.

Each acquisition allows for an adjustment to the purchase price to be made subsequent to the transaction closing date based on the actual amount of working capital and cash delivered to the Company. The consideration paid and purchase price allocations disclosed reflect the effects of these adjustments.

The allocation of purchase consideration related to certain 2021 acquisitions is considered preliminary.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed for each acquisition in 2021:


	Briostack		PulseM		MDTech		Timely		DrChrono		Total
	(in thousands)

Cash	$	34,441	$	34,430	$	15,751	$	99,820	$	181,919	$	366,361
Rollover equity	726		—		—		—		—		726

Total consideration	$	35,167	$	34,430	$	15,751	$	99,820	$	181,919	$	367,087

Net assets acquired:
Cash and cash equivalents	$	17	$	—	$	100	$	1,170	$	130	$	1,417
Accounts receivable, trade	156		—		175		290		3,344		3,965
Other receivables	222		151		48		95		149		665
Contract Assets	—		—		—		—		1,172		1,172
Prepaid expenses and other current assets	53		32		34		128		3,115		3,362
Property and equipment	22		4		16		219		226		487
Deposits and other long-term assets	144		3		—		52		23		222
Intangible—developed technology	1,360		2,380		1,640		7,014		8,480		20,874
Intangible—customer relationships	4,800		12,510		5,830		28,836		53,970		105,946
Intangible—trade name	390		260		200		1,414		3,250		5,514
Intangible—non-compete agreements	23		10		10		63		10		116
Goodwill	28,274		22,866		7,899		69,737		126,947		255,723
Deferred tax asset, net	1		—		2		3,397		—		3,400
Accounts payable	(33)		(113)		(44)		(230)		(2,749)		(3,169)
Other Current Liabilities	(28)		—		—		(670)		(2,086)		(2,784)
Accrued expenses and other	(206)		(99)		(116)		(940)		(2,948)		(4,309)
Deferred tax liability, net	—		(3,538)		—		(10,463)		(10,740)		(24,741)
Deferred revenue	(28)		(36)		(43)		(292)		(374)		(773)
Total net assets acquired	$	35,167	$	34,430	$	15,751	$	99,820	$	181,919	$	367,087

Briostack

On January 19, 2021, the Company acquired 100% of the interest of Briostack LLC dba Briostack (“Briostack”), a provider of operational management software to pest control businesses, for $35.2 million. Under the terms of the purchase agreement, certain members of Briostack received 45,454 shares of common stock rollover equity. The Company finalized the fair value of the shares at $0.7 million in the quarter ended June 30, 2021 by applying a market approach. The fair value of the rollover equity is reflected in the total consideration above.

PulseM

On March 17, 2021, the Company acquired 100% of the interest of Speetra, Inc. dba PulseM (“PulseM”), a provider of enterprise-level reputation management software for small businesses, for $34.4 million.

MDTech

On July 8, 2021, the Company acquired 100% of the interest of PM Ventures, LLC dba MDTech (“MDTech”), a provider of electronic charge capture solutions to physicians via its SaaS-based MD Coder application and suite of add-ons, for $15.8 million.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Timely

On July 8, 2021, the Company acquired 100% of the interest of Timely Ltd. (“Timely”), a booking and business management software company, for $99.8 million. Timely is based in New Zealand and has operations in the U.K. and Australia, as well.

DrChrono

On November 18, 2021, the Company acquired 100% of the interest of DrChrono Inc. (“DrChrono”), an electronic health record and practice management provider, for $181.9 million.

Pro Forma Results of Acquisitions (unaudited)

The following table presents unaudited pro forma consolidated results of operations for the three months ended March 31, 2022 and 2021, as if the aforementioned 2021 acquisitions had occurred as of January 1, 2021. The Company did not consummate any transactions during the three months ended March 31, 2022; accordingly, no adjustments have been made to the results reported for that period. The pro forma information includes the business combination accounting effects resulting from these acquisitions, including interest expense of $3.1 million for the three months ended March 31, 2021 to account for funds borrowed earlier, issuance of our common stock at earlier dates which impacts the calculation of basic and diluted net loss per share, removal of transaction costs of $2.7 million for the three months ended March 31, 2021 and additional amortization expense of $3.6 million for the three months ended March 31, 2021 resulting from the amortization of intangible assets beginning as of January 1, 2021. We prepared the pro forma financial information for the combined entities for comparative purposes only, and the information is not indicative of what actual results would have been if the acquisitions had occurred at the beginning of the periods presented, nor is the information intended to represent or be indicative of future results of operations.


	Three months ended March 31,
		2022 Pro Forma		2021 Pro Forma
		(in thousands, except per share amounts)
		(unaudited)

Total revenue		$	143,576	$	119,493
Net loss		$	(13,309)	$	(20,728)
Adjustments to net loss per share (see Note 12)		—		(15,105)
Net loss attributable to common stockholders		$	(13,309)	$	(35,833)

Basic and diluted net loss per share attributable to common stockholders		$	(0.07)	$	(0.83)


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 4. Revenue

Disaggregation of Revenue

The following tables present a disaggregation of our revenue from contracts with customers by revenue recognition pattern and geographical market:


	Three months ended March 31,
		2022		2021
		(in thousands)

By pattern of recognition (timing of transfer of services):
Point in time		$	12,106	$	11,253
Over time		131,470		93,653
Total		$	143,576	$	104,906
By geographical market:
United States		$	130,286	$	93,685
International		13,290		11,221
Total		$	143,576	$	104,906

Contract Balances

Supplemental balance sheet information related to contracts from customers as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Accounts receivables	$	42,318	$	40,514
Contract assets	$	12,861	$	11,039
Deferred revenue	$	27,075	$	22,992
Customer deposits	$	8,805	$	9,828
Long-term deferred revenue	$	2,982	$	2,803

Accounts receivable, net: Accounts receivable represent rights to consideration in exchange for products or services that have been transferred by us, when payment is unconditional and only the passage of time is required before payment is due.

Contract assets: Contract assets represent rights to consideration in exchange for products or services that have been transferred (i.e., the performance obligation or portion of the performance obligation has been satisfied), but payment is conditional on something other than the passage of time. These amounts typically relate to contracts that include on-premise licenses and professional services where the right to payment is not present until completion of the contract or achievement of specified milestones and the fair value of products or services transferred exceed this constraint.

Contract liabilities: Contract liabilities represent our obligation to transfer products or services to a customer for which consideration has been received in advance of the satisfaction of performance obligations. Short-term contract


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

liabilities are included within deferred revenue on the consolidated balance sheets. Long-term contract liabilities are included within long-term deferred revenue on the consolidated balance sheets. Revenue recognized from the contract liability balance at December 31, 2021 was $14.5 million for the three months ended March 31, 2022.

Customer deposits: Customer deposits relate to payments received in advance for contracts, which allow the customer to terminate a contract and receive a pro rata refund for the unused portion of payments received to date. In these arrangements, we have concluded there are no enforceable rights and obligations during the period in which the option to cancel is exercisable by the customer and therefore the consideration received is recorded as a customer deposit liability.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of unsatisfied or partially satisfied performance obligations within contracts with an original expected contract term that is greater than one year for which fulfillment of the contract has started as of the end of the reporting period. Variable consideration accounted for under the variable consideration allocation exception associated with unsatisfied performance obligations or an unsatisfied promise that forms part of a single performance obligation under application of the series guidance have been excluded. Remaining performance obligations generally relate to those which are stand-ready in nature, as found within the subscription and Marketing Technology Solutions revenue streams. The aggregate amount of transaction consideration allocated to remaining performance obligations as of March 31, 2022, was $24.6 million, which is comprised of contracts where the contract term under ASC 606 is in excess of one year. The Company expects to recognize approximately 53% of its remaining performance obligations as revenue within the next year, 27% of its remaining performance obligations as revenue the subsequent year, 10% of its remaining performance obligations as revenue in the third year, and the remainder during the two year period thereafter.

Cost to Obtain and Fulfill a Contract

The Company incurs certain costs to obtain contracts, principally sales and third-party commissions, which the Company capitalizes when the liability has been incurred if they are (i) incremental costs of obtaining a contract, (ii) expected to be recovered and (iii) have an expected amortization period that is greater than one year (as the Company has elected the practical expedient to expense any costs to obtain a contract when the liability is incurred if the amortization period of such costs would be one year or less).

Assets resulting from costs to obtain contracts are included within prepaid expenses and other current assets for short-term balances and other non-current assets for long-term balances on the Company’s consolidated balance sheets. The costs to obtain contracts are amortized over 5 years, which corresponds with the useful life of the related capitalized software. Short-term assets were $5.2 million and $4.8 million at March 31, 2022 and December 31, 2021, respectively, and long-term assets were $12.5 million and $11.9 million at March 31, 2022 and December 31, 2021, respectively. The Company recorded amortization expense of $1.3 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively, which is included in sales and marketing expense on the condensed consolidated statements of operations and comprehensive loss.

The Company has concluded that there are no other material costs incurred in fulfillment of customer contracts that are not accounted for under other GAAP, which meet the capitalization criteria under ASC 606 and FASB ASC Topic 340-40, Accounting for Other Assets and Deferred Costs (“ASC 340-40”). The Company has elected to account for shipping and handling activities as fulfillment activities and recognize the associated expense when the transfer of control of the product has occurred, as permitted under the shipping and handling activities practical expedient.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 5. Goodwill

Goodwill activity consisted of the following for the three months ended March 31, 2022 (in thousands):


Balance at December 31, 2021	$	921,416

Measurement period adjustments(1)	(73)
Effect of foreign currency exchange rate changes	272
Balance at March 31, 2022	$	921,615

(1)The $0.1 million of measurement period adjustments relate to acquisitions consummated during the year ended December 31, 2021.

Note 6. Intangible Assets

Intangible assets consisted of the following as of:


	March 31, 2022
	Useful Life	Gross Carrying Value		Accumulated Amortization		Net Book Value
	(in thousands)

Customer relationships	3-20 years	$	606,975	$	207,005	$	399,970
Developed technology	2-12 years	106,015		46,496		59,519
Trade name	3-10 years	38,189		15,845		22,344
Non-compete agreements	2-5 years	2,409		1,706		703
Total		$	753,588	$	271,052	$	482,536


	December 31, 2021
	Useful Life	Gross Carrying Value		Accumulated Amortization		Net Book Value
	(in thousands)

Customer relationships	3-20 years	$	607,625	$	187,556	$	420,069
Developed technology	2-12 years	106,162		42,215		63,947
Trade name	3-10 years	38,218		14,540		23,678
Non-compete agreements	2-5 years	2,409		1,568		841
Total		$	754,414	$	245,879	$	508,535

Amortization expense was $25.2 million and $22.0 million for the three months ended March 31, 2022 and 2021, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 7. Property and Equipment

Property and equipment consisted of the following as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Computer equipment and software	$	9,059	$	8,191
Furniture and fixtures	3,676		3,667
Leasehold improvements	12,030		12,032
Total property and equipment	24,765		23,890
Less accumulated depreciation	(11,398)		(10,381)
Property and equipment, net	$	13,367	$	13,509

Depreciation expense was $1.0 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively.

Note 8. Capitalized Software

Capitalized software consisted of the following as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Capitalized software	$	35,453	$	31,960
Less: accumulated amortization	(9,096)		(7,960)
Capitalized software, net	$	26,357	$	24,000

Amortization expense was $1.2 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 9. Long-Term Debt

Long-term debt consisted of the following as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

Term notes with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25% (3.75% at March 31, 2022) quarterly principal payments of 0.25% of original principal balance with balloon payment due July 2028	$	547,250	$	548,625
Revolver with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25% (3.71% at March 31, 2022), and outstanding balance due July 2026	—		—


Subordinated unsecured promissory note related to acquisition of Service Nation, Inc., interest paid-in-kind, interest rate at 8.5% with balloon payment due September 2022	2,927		2,866
Subordinated unsecured promissory note related to acquisition of Technique Fitness, Inc. D/B/A Club OS, interest paid-in-kind, interest rate at 7% with balloon payment due December 2022	2,701		2,655
Principal debt	552,878		554,146
Deferred financing costs on long-term debt	(5,597)		(5,826)
Discount on long-term debt	(2,089)		(2,193)
Total debt	545,192		546,127
Less current maturities	11,070		10,943
Long-term portion	$	534,122	$	535,184

On July 6, 2021, the Company entered into a credit facility (“Credit Agreement”) that includes term loans in an aggregate principal amount of $350.0 million (“Initial Term Loans”), a revolver with a capacity of $190.0 million (“Revolver”) and a sub-limit of the Revolver available for letters of credit up to an aggregate face amount of $20.0 million. The Initial Term Loans were used to retire the Company’s debt arrangements that were outstanding prior to the Initial Public Offering (“IPO”).

As of November 2021, the Company had $35.0 million outstanding under the Revolver, and borrowed the remaining capacity of the Revolver to fund the acquisition of DrChrono. Subsequently in the same month, the Company received additional term loans in an aggregate principal amount of $200.0 million (together with the Initial Term Loans, the “Term Loans”), the proceeds of which were used to repay the outstanding principal balance of the Revolver of $190.0 million and for general corporate purposes. The Initial Term Loans, Revolver and Additional Term Loans are collectively referred to herein as the (“Credit Facilities”).

The Company determines the fair value of long-term debt based on trading prices for its debt if available. As of March 31, 2022, the Company obtained trading prices for the term notes outstanding. However, as such trading prices require significant unobservable inputs to the pricing model, such instruments are classified as Level 2. If no such trading prices are available, the Company determines the fair value of long-term debt using discounted cash flows, applying current interest rates and current credit spreads, based on its own credit risk. The fair value amounts were approximately $545.9 million and $552.8 million as of March 31, 2022 and December 31, 2021, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

As of January 1, 2021, the Company also had outstanding subordinated promissory notes (“Legacy Subordinated Notes”) that included paid-in-kind (“PIK”) interest. The interest on the Legacy Subordinated Notes is all PIK and is due upon maturity. Total PIK interest was $0.1 million for each of the three months ended March 31, 2022 and 2021.

The Company’s Credit Facilities are subject to certain financial and nonfinancial covenants and is secured by substantially all assets of the Company. As of March 31, 2022, the Company was in compliance with all of its covenants.

Aggregate maturities of the Company’s debt for the years ending December 31 are as follows as of March 31, 2022 (in thousands):


Years ending December 31:
2022 (remaining nine months)	$	9,998
2023	5,500
2024	5,500
2025	5,500
2026	5,500
Thereafter	521,125
Total aggregate maturities of the Company’s debt	$	553,123

Included in aggregate maturities is future paid-in-kind interest totaling $0.2 million that will accrue over the term of the related debt.

Note 10. Equity

On May 5, 2021, the Company amended its Certificate of Incorporation (“Third Amended and Restated Certificate of Incorporation”) to increase the number of authorized shares of Preferred Stock from 125,000,000 shares to 140,000,000 shares of Preferred Stock, $0.00001 par value per share, of which 50,000,000 were designated as Series A, 75,000,000 were designated as Series B and 15,000,000 were designated as Series C as of such date. Each share of Series A, Series B and Series C could have been converted into common stock at any time, at the option of the holder, based on a prescribed formula set forth in the Company’s Third Amended and Restated Certificate of Incorporation. In the event of a liquidation, dissolution, winding up of the Company or other similar event, liquidation payments would have first been made to the holders of Series B, then to Series C, then to Series A. In May 2021, the Company issued 7.9 million shares of Series C for proceeds of $109.8 million net of issuance costs.

In accordance with ASC 480, Distinguishing Liabilities from Equity, if the carrying value of redeemable preferred stock is less than its redemption value, redeemable preferred stock shall be accreted to its redemption value if it is probable it will become redeemable. Prior to March 15, 2021, the Company concluded it was probable that the Series B would become redeemable due to the passage of time. However, after that date the Company concluded that it was no longer probable that the Series B would become redeemable due to the increased likelihood of a successful IPO prior to February 23, 2026. The Company’s Series B accruing dividends comprised a component of the redemption value of such stock. The Company recorded the accretion of Series B through March 15, 2021, by increasing its carrying value and recording a corresponding reduction of Additional Paid-In Capital in the amount of $15.1 million for the three months ended March 31, 2021.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Immediately prior to the closing of the IPO, the Company filed an Amended and Restated Certificate of Incorporation on July 6, 2021 with the Secretary of State of the State of Delaware to authorize the issuance up to 2,050,000,000 shares, par value $0.00001 per share, consisting of 2,000,000,000 shares of common stock and 50,000,000 shares of preferred stock. In connection with the IPO, all of the Company’s then outstanding convertible preferred stock converted into shares of common stock on a one-for-one basis. Upon conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock and additional paid-in capital.

Note 11. Stock-Based Compensation

In 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan provided for the granting of stock-based awards, including stock options, stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards, and other stock-based awards. In connection with the IPO, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO and, as a result of which, the Company can no longer make awards under the 2016 Plan. The 2021 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. The number of shares initially reserved for issuance under the 2021 Plan was 22,000,000 shares, inclusive of available shares previously reserved for issuance under the 2016 Plan. In addition, the number of shares reserved for issuance under the 2021 Plan is subject to an annual increase on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 3% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares as determined by the Company’s board of directors, provided that no more than 22,000,000 shares may be issued upon the exercise of incentive stock options. Based on the Company’s outstanding shares of common stock as of December 31, 2021, as of January 1, 2022 the number of shares reserved for issuance under the 2021 Plan increased by 5.9 million.

In connection with the IPO, the Company’s board of directors adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). For more information on the ESPP, refer to Note 11 in the Annual Report on Form 10-K.

The following table summarizes our restricted stock unit (“RSU”) and stock option activity for the three months ended March 31, 2022:


	RSUs	Options
	(in thousands)

Outstanding as of January 1, 2022	541	16,444
Granted	1,521	1,480
Vested or exercised	—	(126)
Cancelled or forfeited	(10)	(160)
Outstanding as of March 31, 2022	2,052	17,638

As of March 31, 2022, total unrecognized compensation expense was $25.3 million and $40.5 million related to outstanding restricted stock units and outstanding stock options, respectively.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Stock-based compensation expense was classified in the unaudited condensed consolidated statements of operations and comprehensive loss as follows:


	Three months ended March 31,
		2022		2021
		(in thousands)

Cost of revenues		$	82	$	1
Sales and marketing		328		29
Product development		392		33
General and administrative		5,333		840
Total stock-based compensation expense		$	6,135	$	903

Note 12. Net Loss Per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock as of:


	Three months ended March 31,
		2022		2021
		(in thousands except share and per share amounts)

Numerator:
Net loss		$	(13,309)	$	(15,995)

Accretion of Series B to redemption value		—		(15,105)


Numerator for basic and diluted EPS – net loss attributable to common stockholders		$	(13,309)	$	(31,100)

Denominator:
Denominator for basic and diluted EPS – weighted-average shares of common stock outstanding used in computing net loss per share		195,432,404		43,231,295

Basic and diluted net loss per share attributable to common stockholders		$	(0.07)	$	(0.72)

The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented due to their anti-dilutive effect as of:


	March 31,
	2022	2021

Outstanding options to purchase common stock and unvested RSUs	19,690,100	15,073,429
Outstanding convertible preferred stock (Series A and B)	—	117,183,540
Total anti-dilutive outstanding potential common stock	19,690,100	132,256,969


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 13. Fair Value of Financial Instruments

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

•Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

•Level 2: Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

•Level 3: Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Liabilities historically valued with Level 3 inputs on a recurring basis are contingent consideration.

The carrying value of cash and cash equivalents, accounts receivable, contract assets, contract liabilities and accounts payable approximate their fair value because of the short-term nature of these instruments.

There were no transfers between fair value measurement levels during the three months ended March 31, 2022 or 2021.

The following table presents information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of:


	March 31, 2022								Balance Sheet Classification
	Level 1		Level 2		Level 3		Total
	(in thousands)

Asset:
Money market	$	46,415	$	—	$	—	$	46,415	Cash equivalents


	December 31, 2021								Balance Sheet Classification
	Level 1		Level 2		Level 3		Total
	(in thousands)

Asset:
Money market	$	14,855	$	—	$	—	$	14,855	Cash equivalents
Liability:
Contingent consideration	$	—	$	—	$	675	$	675	Other current liabilities


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

The following is a reconciliation of the opening and closing balance for contingent consideration measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2022 (in thousands):


Opening balance	$	675

Fair value adjustments	(18)
Amounts settled through payment	(657)
Ending balance	$	—

Note 14. Income Taxes

Our provision for income taxes in interim periods is based on our estimated annual effective tax rate. We record cumulative adjustments in the quarter in which a change in the estimated annual effective rate is determined.

The income tax benefit was $5.7 million and $3.5 million for the three months ended March 31, 2022 and 2021, respectively. Our effective income tax rate was 30.1% and 18.1% for the three months ended March 31, 2022 and 2021, respectively.

The difference in the effective income tax rate was primarily driven by discrete items, including a California law change and an intercompany intellectual property sale in the three months ended March 31, 2022 and acquisition accounting in the three months ended March 31, 2021.

Note 15. Commitments and Contingencies

The Company is obligated under non-cancelable operating leases for office space expiring through 2030. Most of these leases include renewal options. Future minimum payments due under the existing lease agreements are as follows as of March 31, 2022 (in thousands):


Years ending December 31:
2022 (remaining nine months)	$	6,486
2023	6,526
2024	4,941
2025	4,705
2026	4,558
Thereafter	12,692
Total future minimum payments due	$	39,908

Included in the condensed consolidated statements of operations and comprehensive loss is total rent expense of approximately $2.6 million and $2.1 million for the three months ended March 31, 2022 and 2021, respectively.

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.


EverCommerce Inc.
March 31, 2022
Notes to Condensed Consolidated Financial Statements

Note 16. Geographic Areas

The following table sets forth long-lived assets by geographic area as of:


	March 31,		December 31,
	2022		2021
	(in thousands)

United States	$	37,105	$	34,906
International	$	2,619	$	2,603

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, references in this report to "EverCommerce Inc.," the “Company,” “we,” “us” and “our” refer to EverCommerce Inc. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report on Form 10-K”). Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

EverCommerce is a leading provider of integrated, vertically-tailored software-as-a-service (“SaaS”) solutions for service-based small- and medium-sized businesses (“service SMBs”). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. Today, we serve over 600,000 customers across three core verticals: Home Services; Health Services; and Fitness & Wellness Services. Within our core verticals, our customers operate within numerous micro-verticals, ranging from home service professionals, such as home improvement contractors and home maintenance technicians, to physician practices and therapists within Health Services, to personal trainers and salon owners within Fitness & Wellness. Our platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly specialized demands, as well as highly complementary solutions that complete end-to-end offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences.

We offer several vertically-tailored suites of solutions, each of which follows a similar and repeatable go-to-market playbook: offer a “system of action” Business Management Software that streamlines daily business workflows, integrate highly complementary, value-add adjacent solutions and complete gaps in the value chain to create end-to-end solutions. These solutions focus on addressing how service SMBs market their services, streamline operations and retain and engage their customers.

•Business Management Software: Our vertically-tailored Business Management Software is the system of action at the center of a service business’ operation, and is typically the point-of-entry and first solution adopted by a customer. Our software, designed to meet the day-to-day workflow needs of businesses in specific vertical end markets, streamlines front and back-office processes and provides polished customer-facing experiences. Using these offerings, service SMBs can focus on growing their customers, improving their services and driving more efficient operations.

•Billing & Payment Solutions: Our Billing & Payment Solutions provide integrated payments, billing and invoicing automation and business intelligence and analytics. Our omni-channel payments capabilities include point-of-sale, eCommerce, online bill payments, recurring billing, electronic invoicing and mobile payments. Supported payment types include credit card, debit card and Automated Clearing House processing. Our payments platform also provides a full suite of service commerce features, including customer management as well as cash flow reporting and analytics. These value-add features help small- and medium-sized businesses (“SMBs”) to ensure more timely billing and payments collection and provide improved cash flow visibility.

•Customer Engagement Applications: Our Customer Engagement Applications modernize how businesses engage and interact with customers by leveraging innovative, bespoke customer listening and communication solutions to improve the customer experience and increase retention. Our software provides customer listening capabilities with real-time customer surveying and analysis to allow standalone businesses and multi-location brands to receive voice of the customer insights and manage the customer experience lifecycle. These applications include: customer health scoring, customer support systems, real-time alerts, NPS-based

customer feedback collection, review generation and automation, reputation management, customer satisfaction surveying and a digital communication suite, among others. These tools help our customers gain actionable insights, increase customer loyalty and repeat purchases and improve customer experiences.

•Marketing Technology Solutions: Our Marketing Technology Solutions work with our Customer Engagement Applications to help customers build their businesses by invigorating marketing operations and improving return on investment across the customer lifecycle. These solutions help businesses to manage campaigns, generate quality leads, increase conversion and repeat sales, improve customer loyalty and provide a polished brand experience. Our solutions include: custom website design, development and hosting, responsive web design, marketing campaign design and management, search engine optimization (“SEO”), paid search and display advertising, social media and blog automation, call tracking, review monitoring and marketplace lead generation, among others.

We go to market with suites of solutions that are aligned to our three core verticals: (i) the EverPro suite of solutions in Home Services; (ii) the EverHealth suite of solutions within Health Services; and (iii) the EverWell suite of solutions in Fitness & Wellness Services. Within each suite, our Business Management Software – the system of action at the center of a service business’ operation – is typically the first solution adopted by a customer. This vertically-tailored point-of-entry provides us with an opportunity to cross-sell adjacent products, previously offered as fragmented and disjointed point solutions by other software providers. This “land and expand” strategy allows us to acquire customers with key foundational solutions and expand into offerings via product development and acquisitions that cover all workflows and power the full scope of our customers’ businesses. This results in a self-reinforcing flywheel effect, enabling us to drive value for our customers and, in turn, improve customer stickiness, increase our market share and fuel our growth.

We generate three types of revenue: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, (ii) Marketing Technology Solutions, which includes both recurring and re-occurring revenue streams and (iii) Other revenue which consists primarily of one-time revenue streams. Our recurring revenue generally consists of monthly, quarterly and annual software and maintenance subscriptions, transaction revenue associated with integrated payments and billing solutions and monthly contracts for Marketing Technology Solutions. Additionally, our re-occurring revenue includes revenue related to the sale of marketing campaigns and lead generation under contractual arrangements with customers.

Our business benefits from attractive unit economics. Approximately 95% of our revenue in the three months ended March 31, 2022 and 2021 was recurring or re-occurring, and we maintained an annualized net revenue retention rate of more than 100% for the quarter ended March 31, 2022. We believe the retention and growth of revenue from our existing customers is a helpful measure of the health of our business and our future growth prospects. Our ability to cross sell additional products and services to our existing customers can increase customer engagement with our suite of solutions and thus have a positive impact on our net pro forma revenue retention rate. For example, we have leveraged our land and expand strategy to cross sell solutions to our existing customers, which has supported our high net pro forma revenue retention rate by increasing customer utilization of our solutions, educating customers as to how our platform and synergies can support their businesses and, in turn, improving customer stickiness.

Our calculation of net pro forma revenue retention rate remains consistent with prior periods. This rate for any fiscal period includes the positive recurring and re-occurring revenue impacts of selling new solutions to existing customers and the negative impacts of contraction and attrition among this set of customers. Our net pro forma revenue retention rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of solutions, new acquisitions and our ability to retain our customers. Our calculation of net pro forma revenue retention rate may differ from similarly titled metrics presented by other companies.

We acquire companies to deepen our competitive moats in existing verticals, and enter new verticals and geographies. We have acquired 52 companies since our inception. We have an established framework for identification, execution, integration, and onboarding of targets, which leverages our significant acquisition experience and utilizes internal criteria for evaluating acquisition candidates and prospective businesses. We have developed and refined our internal criteria over time with our acquisitions, which has helped us to more readily identify attractive and complementary targets that can be efficiently onboarded. These acquired solutions can bring deep industry expertise and vertically-tailored software solutions that provide additional sources of growth. We believe that our methodology, track record, and reputation for sourcing, evaluating, and integrating acquisitions positions us as an “acquirer-of-choice” for potential targets.

Impact of COVID-19

The COVID-19 pandemic has caused economies, businesses, markets and communities around the globe to be disrupted, and in many cases, shut-down. In the interest of public health, many governments closed physical stores and business locations deemed to be non-essential, which caused increased unemployment levels and businesses to permanently close. Many SMBs have been adversely impacted by the COVID-19 pandemic, and as a result, certain of our business operations were negatively impacted, while others have benefited from customers shifting to technology-focused, digital-first business models. A McKinsey survey from October 2020 revealed that global business executives have accelerated the digitization of their customer and supply-chain interactions by as much as three to four years. Although we cannot predict when the United States and global economy will fully recover from the COVID-19 pandemic, we believe that our business is well positioned to be a partner-of-choice for new customers, to capitalize on the growing trend of digital transformation and to benefit from the revival of the SMB economy. Nevertheless, we do not have certainty that a full economic recovery will happen in the near future, and it is possible that the prolonging of the COVID-19 pandemic will adversely affect our business, financial condition and results of operations. For more information regarding the potential impact of the COVID-19 pandemic on our business, refer to Part II. Item 1A. “Risk Factors—Risks Related to our Business—The outbreak of the novel strain of coronavirus disease has impacted, and a future pandemic, epidemic or outbreak of an infectious disease in the United States could impact, our business, financial condition and results of operations, as well as the business or operations of third parties with whom we conduct business.”

Impact on Financial Performance

The COVID-19 pandemic negatively impacted our financial performance in the second quarter of 2020, and to a lesser degree thru the remainder of 2020 and 2021, due to the adverse impact the pandemic had on certain service SMBs. However, given the diversification of our business, the financial impact was primarily limited to declines in revenue attributable to customers in the Fitness & Wellness and Health Services verticals as many customers in those verticals were forced to close their business or limit operations. Due to the pandemic, in the three months ended June 30, 2020, our revenue declined from the three months ended March 31, 2020, excluding the impact of acquisitions closed in the first and second quarters of 2020. Throughout the second half of 2020 and for the year ended 2021, our revenues, excluding the impact of acquisitions closed within the respective periods, have increased as our customers and many service SMBs resumed operations and the impact of the pandemic has lessened.

Given that the COVID-19 pandemic continues to evolve, the extent to which it may further impact our financial condition, results of operations, or liquidity continues to be uncertain and difficult to predict. Any further impact is likely to vary by specific verticals, solutions and geographies, with the diversity of our customer base potentially moderating the overall effect. Our priority remains the safety of our employees, customers and the communities in which we live and operate. We continue to remain in close and regular contact with our employees, customers, business partners and communities to help navigate these challenging times.

Key Factors Affecting Our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges. For discussion of these factors, please see “Key Factors Affecting Our Performance” in the Management’s Discussion and Analysis section of our Annual Report on Form 10-K.

Key Business and Financial Metrics

In addition to our results and measures of performance determined in accordance with GAAP, we believe the following key business and non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions.

Pro Forma Revenue Growth Rate

Pro Forma Revenue Growth Rate is a key performance measure that our management uses to assess our consolidated operating performance over time. Management also uses this metric for planning and forecasting purposes.

Our year-over-year Pro Forma Revenue Growth Rate is calculated as though all acquisitions closed as of the end of the latest period were closed as of the first day of the prior year period presented. In calculating Pro Forma Revenue Growth Rate, we add the revenue from acquisitions for the reporting periods prior to the date of acquisition (including estimated purchase accounting adjustments) to our results of operations, and then calculate our revenue growth rate between the two reported periods. As a result, Pro Forma Revenue Growth Rate includes pro forma revenue from businesses acquired during the period, including revenue generated during periods when we did not yet own the acquired businesses. In including such pre-acquisition revenue, Pro Forma Revenue Growth Rate allows us to measure the underlying revenue growth of our business as it stands as of the end of the respective period, which we believe provides insight into our then-current operations. Pro Forma Revenue Growth Rate does not represent organic revenue generated by our business as it stood at the beginning of the respective period. Pro Forma Revenue Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had the acquisitions been consummated on the first day of the prior year period presented. We believe that this metric is useful to investors in analyzing our financial and operational performance period over period and evaluating the growth of our business, normalizing for the impact of acquisitions. This metric is particularly useful to management due to the number of acquired entities.

Our Pro Forma Revenue Growth rate was 20.2% for the three months ended March 31, 2022, reflective of the underlying growth in our business including new customers and providing more solutions to existing customers.

Non-GAAP Financial Measures

Adjusted Gross Profit

Adjusted Gross Profit is a key performance measure that our management uses to assess our operational performance, as it represents the results of revenues and direct costs, which are key components of our operations. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it reflects the gross profitability of our operations, and excludes the indirect costs associated with our sales and marketing, product development, general and administrative activities and depreciation and amortization, and the impact of our financing methods and income taxes.

We calculate Adjusted Gross Profit as gross profit (as defined below) adjusted to exclude depreciation and amortization allocated to cost of revenues. Adjusted Gross Profit should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss) or profitability. The following table presents a reconciliation of gross profit, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted Gross Profit on a consolidated basis.


	Three months ended March 31,
		2022			2021
		(in thousands)

Gross profit(1)		$	87,278	(2)	$	64,645	(3)
Depreciation and amortization		5,553			4,587
Adjusted gross profit		$	92,831		$	69,232

(1)Gross profit is calculated as total revenues less cost of revenues (exclusive of depreciation and amortization), amortization of developed technology, amortization of capitalized software and depreciation expense (allocated to cost of revenues).

(2)For the three months ended March 31, 2022, gross profit represents total revenues of $143.6 million less cost of revenues (exclusive of depreciation and amortization) of $50.7 million, amortization of developed technology of $4.2 million, amortization of capitalized software of $1.1 million and depreciation expense (allocated to cost of revenues) of $0.3 million.

(3)For the three months ended March 31, 2021, gross profit represents total revenues of $104.9 million less cost of revenues (exclusive of depreciation and amortization) of $35.7 million, amortization of developed technology of $3.4 million, amortization of capitalized software of $0.8 million and depreciation expense (allocated to cost of revenues) of $0.4 million.

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it provides a comparable overview of our operations across historical periods. In addition, we believe that providing Adjusted EBITDA, together with a reconciliation of net loss to Adjusted EBITDA, helps investors make comparisons between our company and other companies that may have different capital structures, different tax rates and/or different forms of employee compensation.

Adjusted EBITDA is used by our management team as an additional measure of our performance for purposes of business decision-making, including managing expenditures, and evaluating potential acquisitions. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of net income or income from continuing operations. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees. Our Management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, and may not be directly comparable to similarly titled metrics used by other companies.

We calculate Adjusted EBITDA as net loss adjusted to exclude interest and other expense, net, income tax benefit, depreciation and amortization, other amortization, acquisition related costs, stock-based compensation, and other non-recurring costs. Other amortization includes amortization for capitalized contract acquisition costs. Acquisition related costs are specific deal-related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. Other non-recurring costs are expenses such as system implementation costs and severance related to planned restructuring activities. Acquisition related costs and other non-recurring costs are excluded as they are not representative of our underlying operating performance. Adjusted EBITDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss). The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA on a consolidated basis.


	Three months ended March 31,
		2022		2021
		(in thousands)

Net loss		$	(13,309)	$	(15,995)
Adjusted to exclude the following:
Interest and other expense, net		5,478		12,949
Income tax benefit		(5,737)		(3,527)

Depreciation and amortization		27,391		23,697
Other amortization		942		600
Acquisition related costs		597		1,098
Stock-based compensation		6,135		903
Other non-recurring costs		1,465		1,585
Adjusted EBITDA		$	22,962	$	21,310

Description of Certain Components of Financial Data

Revenues

We derive our revenue from three primary sources which are described in detail below: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, (ii) Marketing Technology Solutions, which includes both recurring and re-occurring revenue streams and (iii) Other revenue, which consists primarily of the sale of distinct professional services and hardware. Our revenue recognition policies are discussed in more detail under “Critical Accounting Policies and Significant Judgments and Estimates.”

Subscription and Transaction Fees: Revenue includes (i) recurring monthly, quarterly and annual SaaS subscriptions and software license and maintenance fees from the sale of our Business Management, Customer Engagement, and Billing and Payment solutions; (ii) payment processing fees based on the transaction volumes processed through our integrated payment solutions and processing fees based on transaction volumes for our revenue cycle management, chronic care management and health insurance clearinghouse solutions and (iii) membership subscriptions and our share of rebates from suppliers generated though group purchasing programs. Our revenue from payment processing fees is recorded net of credit card and ACH processing and interchange charges in the month the services are performed.

Marketing Technology Solutions: Revenue includes (i) recurring revenues for managing digital advertising programs on behalf of our customers including website hosting, search engine management and optimization, social media

management and blog automation and (ii) re-occurring fees paid by service professionals for consumer leads generated by our various platforms.

Other: Revenue includes (i) consulting, implementation, training and other professional services; (ii) website development; (iii) revenue from various business development partnerships; (iv) event income and (v) hardware sales related to our business management or payment software solutions.

Cost of Revenues

Cost of revenue (exclusive of depreciation and amortization) consists of expenses related to delivering our services and products and providing support to our customers and includes employee costs and related overhead, customer credit card processing fees, targeted mail costs, third party fulfillment costs and software hosting expenses.

We expect that cost of revenue as a percentage of revenue will fluctuate from period to period based on a variety of factors, including the mix of revenue between subscription and transaction fees and marketing technology solutions, labor costs, third-party expenses and acquisitions. In particular, marketing technology solutions revenue generally has a higher cost of revenue as a percentage of revenue than our subscription and transaction fee revenue. For the three months ended March 31, 2022, revenue from subscription and transaction fees increased 43.6%, compared to the three months ended March 31, 2021, whereas marketing technology solutions revenue increased 17.8%. To the extent our marketing technology solutions revenue grows at a faster rate, whether by acquisition or otherwise, than our subscription and transaction fees revenue, it could negatively impact our cost of revenues as a percentage of revenue.

Sales and Marketing

Sales and marketing expense consist primarily of employee costs for our sales and marketing personnel, including salaries, benefits, bonuses, stock based compensation and sales commissions. Sales and marketing expenses also include advertising costs, travel-related expenses and costs to market and promote our products, direct customer acquisition costs, costs related to conferences and events and partner/broker commissions. Software and subscription services dedicated for use by our sales and marketing organization, and outside services contracted for sales and marketing purposes are also included in sales and marketing expense. Sales commissions that are incremental to obtaining a customer contract are deferred and amortized ratably over the estimated period of our relationship with that customer. We expect our sales and marketing expenses will increase on an absolute dollar basis for the foreseeable future as we continue to increase investments to support our growth. We also anticipate that sales and marketing expenses will increase as a percentage of revenue in the near and medium-term.

Product Development

Product development expense consists primarily of employee costs for our product development personnel, including salaries, benefits, stock-based compensation and bonuses. Product development expenses also include third-party outsourced technology costs incurred in developing our platforms, and computer equipment, software and subscription services dedicated for use by our product development organization. We expect our product development expenses to increase in absolute dollars and remain generally consistent as a percentage of revenue for the foreseeable future as we continue to dedicate substantial resources to develop, improve and expand the functionality of our solutions.

General and Administrative

General and administrative expense consists of employee costs for our executive leadership, accounting, finance, legal, human resources and other administrative personnel, including salaries, benefits, bonuses and stock-based compensation. General and administrative expenses also include external legal, accounting and other professional services fees, rent, software and subscription services dedicated for use by our general and administrative employees and other general corporate expenses. We expect general and administrative expense to increase on an absolute

dollar basis for the foreseeable future as we continue to increase investments to support our growth and due to increased costs as a result of being a public company. As we are able to further scale our operations in the future, we would expect that general and administrative expenses would decrease as a percentage of revenue.

Depreciation and Amortization

Depreciation and amortization primarily relate to intangible assets, property and equipment and capitalized software.

Interest and Other Expense, net

Interest and other expense, net, primarily consists of interest expense on long-term debt, net of interest income. It also includes amortization expense of financing costs and discounts, as well as realized and unrealized gains and losses.

Income Tax Benefit

We account for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires deferred tax assets and liabilities to be recognized for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at the expected tax rates for the periods in which the assets or liabilities will be realized, as well as for the expected tax benefit of net operating loss and tax credit carryforwards. Income taxes are recognized for the amount of taxes payable by the Company's corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

Results of Operations

The following tables summarize key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future. We operate as a single reportable segment to reflect the way our chief operating decision maker (“CODM”) reviews and assesses the performance of our business. For additional information concerning our accounting policies, see Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K.

Impact of Acquisitions

The comparability of our operating results is impacted by our business combinations and acquisitions. In our discussion of changes in our results of operations for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, we quantitatively disclose the impact of the growth in certain of our revenues where such discussions would be meaningful. Expense contributions from our recent acquisitions for each of the respective period comparisons generally were not separately identifiable due to the integration of these businesses into our existing operations, and as such the discussion is focused on major changes in components of costs.

Comparison of the three months ended March 31, 2022 and 2021


	Three months ended March 31,
		2022		2021
		(in thousands)

Revenues:
Subscription and transaction fees		$	108,001	$	75,195
Marketing technology solutions		29,904		25,388
Other		5,671		4,323
Total revenues		143,576		104,906
Operating expenses:
Cost of revenues(1) (exclusive of depreciation and amortization presented separately below)		50,745		35,674
Sales and marketing(1)		30,145		19,689
Product development(1)		17,637		10,325
General and administrative(1)		31,226		22,094
Depreciation and amortization		27,391		23,697
Total operating expenses		157,144		111,479
Operating loss		(13,568)		(6,573)
Interest and other expense, net		(5,478)		(12,949)

Net loss before income tax benefit		(19,046)		(19,522)
Income tax benefit		5,737		3,527
Net loss		$	(13,309)	$	(15,995)

(1)Includes stock-based compensation expense as follows:


	Three months ended March 31,
		2022		2021
		(in thousands)

Cost of revenues		$	82	$	1
Sales and marketing		328		29
Product development		392		33
General and administrative		5,333		840
Total stock-based compensation expense		$	6,135	$	903

Revenues


	Three months ended March 31,				Change
	2022		2021		Amount		%
	(dollars in thousands)

Revenues:
Subscription and transaction fees	$	108,001	$	75,195	$	32,806	43.6	%
Marketing technology solutions	29,904		25,388		4,516		17.8	%
Other	5,671		4,323		1,348		31.2	%
Total revenues	$	143,576	$	104,906	$	38,670	36.9	%

Revenues increased $38.7 million or 36.9% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This increase was primarily driven by increases in subscription and transaction fees of $32.8 million and marketing technology solutions of $4.5 million. The increase in subscription and transaction fees related to growth in our customer base, higher transaction volumes processed through our payments platform and revenue earned from acquisitions completed in 2021. The increase in marketing technology solutions related to growth in customers using our digital marketing applications and an increase in consumer leads generated by our platforms. Included in revenues for the three months ended March 31, 2022 is $17.0 million of revenue from acquisitions closed subsequent to March 31, 2021.

Cost of Revenues


	Three months ended March 31,						Change
	2022			2021			Amount		%
	(dollars in thousands)

Cost of revenues (exclusive of depreciation and amortization presented separately below)	$	50,745		$	35,674		$	15,071	42.2	%
Percentage of revenues	35.3		%	34.0		%

Cost of revenues increased by $15.1 million or 42.2% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This increase is predominantly related to the continued growth of the Company and is primarily comprised of an additional $4.1 million of media spend, $3.0 million of personnel and compensation expense, and $2.7 million of outsourced services and other miscellaneous expense, including but not

limited to, Application Programming Interface fees and hosting expense. As a percentage of revenue, cost of revenues was 35.3% and 34.0% for the three months ended March 31, 2022 and 2021, respectively.

Sales and Marketing


	Three months ended March 31,						Change
	2022			2021			Amount		%
	(dollars in thousands)

Sales and marketing	$	30,145		$	19,689		$	10,456	53.1	%
Percentage of revenues	21.0		%	18.8		%

Sales and marketing expenses increased by $10.5 million or 53.1% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This increase was primarily driven by an additional $6.0 million of personnel and compensation expense and $1.8 million of advertising spend, due to the continued investment in growth through personnel and various marketing channels. As a percentage of revenue, sales and marketing was 21.0% and 18.8% for the three months ended March 31, 2022 and 2021, respectively.

Product Development


	Three months ended March 31,						Change
	2022			2021			Amount		%
	(dollars in thousands)

Product development	$	17,637		$	10,325		$	7,312	70.8	%
Percentage of revenues	12.3		%	9.8		%

Product development expenses increased by $7.3 million or 70.8% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This increase was primarily driven by additional product development-related personnel expenses of $6.1 million, as a result of investments in our technology teams to support our various solutions as well as centralized security operations, information technology and cloud engineering. As a percentage of revenue, product development expenses were 12.3% and 9.8% for the three months ended March 31, 2022 and 2021, respectively.

General and Administrative


	Three months ended March 31,						Change
	2022			2021			Amount		%
	(dollars in thousands)

General and administrative	$	31,226		$	22,094		$	9,132	41.3	%
Percentage of revenues	21.7		%	21.1		%

General and administrative expenses increased by $9.1 million or 41.3% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This increase was primarily driven by an additional $4.5 million of stock-based compensation expense and $2.0 million of personnel and compensation expense, due to the continued investment in infrastructure required to support our rapid growth, scalable operations and being a public company. As a percentage of revenue, general and administrative expenses were 21.7% and 21.1% for the three months ended March 31, 2022 and 2021, respectively.

Depreciation and Amortization


	Three months ended March 31,						Change
	2022			2021			Amount		%
	(dollars in thousands)

Depreciation and amortization	$	27,391		$	23,697		$	3,694	15.6	%
Percentage of revenues	19.1		%	22.6		%

Depreciation and amortization increased by $3.7 million or 15.6% for the three months ended March 31, 2022, respectively, as compared to the corresponding period in 2021. This increase was primarily driven by an additional $3.2 million in intangible assets’ amortization as a result of intangible asset additions from our 2021 acquisitions. As a percentage of revenue, depreciation and amortization expenses were 19.1% and 22.6% for the three months ended March 31, 2022 and 2021, respectively.

Interest and Other Expense, net


	Three months ended March 31,						Change
	2022			2021			Amount		%
	(dollars in thousands)

Interest and other expense, net	$	5,478		$	12,949		$	(7,471)	(57.7)	%
Percentage of revenues	3.8		%	12.3		%

Interest and other expense, net, decreased by $7.5 million or 57.7% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This decrease was primarily due to an overall lower outstanding debt balance in 2022 compared to 2021, as well as a lower effective interest rate. As a percentage of revenue, interest and other expense were 3.8% and 12.3% for the three months ended March 31, 2022 and 2021, respectively.

Income Tax Benefit


	Three months ended March 31,						Change
	2022			2021			Amount		%
	(dollars in thousands)

Income tax benefit	$	5,737		$	3,527		$	2,210	62.7	%
Percentage of revenues	4.0		%	3.4		%

Income tax benefit increased by $2.2 million or 62.7% for the three months ended March 31, 2022, as compared to the corresponding period in 2021. This increase was primarily driven by discrete items, including a California law change and an intercompany intellectual property sale.

Liquidity and Capital Resources

To date, our primary sources of liquidity have been net cash provided by operating activities, proceeds from equity issuances and proceeds from long-term debt.

Our primary use of liquidity has been acquisitions of businesses. For a description of our recent acquisitions, see Note 3 in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Absent significant deterioration of market conditions, we expect that working capital requirements, capital expenditures, acquisitions, debt servicing and lease obligations will be our principal needs for liquidity going forward. During the year ended December 31, 2021, we completed five acquisitions for total consideration of $367.1 million.

As of March 31, 2022, we had cash, cash equivalents and restricted cash of $105.0 million, $190.0 million of available borrowing capacity under our Revolver (as defined below) and $547.3 million outstanding under our Term Loans (as defined below). We believe that our existing cash, cash equivalents and restricted cash, availability under our Credit Facilities, and our cash flows from operations will be sufficient to fund our working capital requirements and planned capital expenditures, and to service our debt obligations for at least the next twelve months. However, our future working capital requirements will depend on many factors, including our rate of revenue growth, the timing and size of future acquisitions, and the timing of introductions of new products and services. We expect to consummate acquisitions of complementary businesses in the future that could require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us, or at all. In particular, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected. See Part II, Item 1A.“Risk Factors.”

Cash Flows

The following table sets forth cash flow data for the periods indicated therein:


	Three months ended March 31,
	2022		2021
	(in thousands)

Net cash provided by (used in) operating activities	$	12,854	$	(5,400)
Net cash used in investing activities	(4,392)		(72,144)
Net cash provided by (used in) financing activities	(652)		67,936
Effect of foreign currency exchange rate changes on cash	(370)		196
Net increase (decrease) in cash, cash equivalents and restricted cash	$	7,440	$	(9,412)

Cash Flow from Operating Activities

During the three months ended March 31, 2022, net cash provided by operating activities consisted of net loss of $13.3 million, offset by net non-cash adjustments to net loss of $28.5 million and net changes in operating assets and liabilities of $2.4 million. Non-cash adjustments primarily consisted of depreciation and amortization of $27.4 million and stock-based compensation expense of $6.1 million, partially offset by deferred taxes of $6.0 million. Changes in working capital during the three months ended March 31, 2022 primarily included cash outflows from prepaid expenses and other current assets of $5.7 million, accounts receivable, net of $2.3 million and accounts payable of $2.1 million, partially offset by cash inflows of $4.2 million from deferred revenue and accrued expenses and other of $3.5 million.

During the three months ended March 31, 2021, net cash used in operating activities consisted of net loss of $16.0 million, offset by net non-cash adjustments to net loss of $23.7 million, and net changes in operating assets and liabilities of $13.1 million. Non-cash adjustments primarily consisted of depreciation and amortization of $23.7 million. Changes in working capital during the three months ended March 31, 2021 primarily included cash outflows from accrued expenses and other of $10.3 million and accounts receivable, net of $4.7 million, partially offset by cash inflows for deferred revenue of $5.1 million.

Cash Flow from Investing Activities

During the three months ended March 31, 2022, net cash used in investing activities was $4.4 million. The cash flow used was driven primarily by costs to develop software of $3.5 million. The remainder was primarily for purchases of property and equipment.

During the three months ended March 31, 2021, net cash used in investing activities was $72.1 million. The cash flow used was driven primarily by acquisition of companies, net of cash acquired, of $69.1 million. The remainder was primarily for purchases of property and equipment and costs to develop software.

Cash Flow from Financing Activities

During the three months ended March 31, 2022, net cash used in financing activities was $0.7 million. The cash flow used was driven by payments on long-term debt of $1.4 million, partially offset by the exercise of stock options of $0.7 million.

During the three months ended March 31, 2021, net cash provided by financing activities was $67.9 million. The cash flow provided was driven primarily by proceeds from long-term debt of $69.2 million. The proceeds from these financings were primarily used to fund acquisitions.

Credit Facilities

Prior to our Initial Public Offering (the “IPO”), subsidiaries of the Company were party to a credit facility that provided for (i) a term loan in an aggregate principal amount of $415.0 million (the “Legacy Term Loan”), (ii) commitments for delayed draw term loans up to an aggregate principal amount of $385.0 million (the “Legacy Delayed Draw Term Loans”), (iii) commitments for revolving loans up to an aggregate principal amount of $50.0 million (the “Legacy Revolver”), and (iv) a sub-limit of the Revolver available for letters of credit up to an aggregate face amount of $10.0 million, or the letters of credit (the Legacy Term Loan, Legacy Delayed Draw Term Loans and Legacy Revolver are referred to herein as the “Legacy Credit Facilities”).

In connection with our IPO, on July 6, 2021 we refinanced our Legacy Credit Facilities and EverCommerce Solutions Inc., as borrower, and EverCommerce Intermediate Inc. entered into a new credit agreement (the “Credit Agreement”) in an aggregate principal amount of $540.0 million, consisting of (i) an aggregate principal amount of $350.0 million (the “Initial Term Loans”), (ii) a revolver with a capacity of $190.0 million (the “Revolver”), and (iii) a sub-limit of the Revolver available for letters of credit up to an aggregate face amount of $20.0 million. We used the net proceeds of the Initial Term Loans and a portion of the funds available under our Revolver, together with the net proceeds from the IPO, to repay all amounts outstanding under our Legacy Credit Facilities. In November 2021, the Company drew an additional $155.0 million on the Revolver to fund an acquisition. Subsequently, in November 2021, the Company drew an additional $200.0 million (the “Additional Term Loans,” and collectively with the Initial Term Loans, the “Term Loans”) as permitted by the Credit Agreement. The Company used the proceeds of the Additional Term Loans to repay all amounts outstanding on the Revolver and for general corporate purposes. The Initial Term Loans, Revolver and Additional Term Loans are collectively referred to herein as the “Credit Facilities.”

Simultaneously with the execution of the Credit Facilities, we and various of our subsidiaries entered into a collateral agreement and guarantee agreement. Pursuant to the guarantee agreement, EverCommerce Intermediate Inc. and various of our subsidiaries are guarantors of the obligations under the Credit Facilities. Pursuant to the collateral agreement, the Credit Facilities are secured by liens on substantially all of our assets, including our intellectual property and the equity interests of our various subsidiaries, including EverCommerce Solutions Inc.

The Credit Facilities contain certain affirmative and negative covenants, including, among other things, restrictions on indebtedness, issuance of preferred equity interests, liens, fundamental changes and asset sales, investments, negative pledges, repurchases of stock, dividends and other distributions, and transactions with affiliates. In addition, we are subject to a financial covenant with respect to the Revolver whereby, if the aggregate principal amount of revolving loans (excluding letters of credit) outstanding on the last day of any fiscal quarter exceeds 35% of the aggregate commitments available under the Revolver, then our first lien leverage ratio as of the last day of such fiscal quarter must be 7.50 to 1.00 or less.

Borrowings under the Credit Facilities are available as ABR or Eurocurrency borrowings. ABR borrowings under the Credit Facilities accrue interest at an alternate base rate plus an applicable rate, and Eurocurrency borrowings accrue interest at an adjusted LIBOR rate plus an applicable rate. The ABR rate represents the greater of the prime rate, Federal Reserve Bank of New York rate plus ½ of 1%, and an adjusted LIBOR rate for a one month interest period plus 1%. The applicable rate for the Term Loans and the New Revolver loans is 3% for Eurocurrency borrowings and 2% for ABR Borrowings, in each case subject to change based on our first lien net leverage ratio.

With respect to ABR borrowings, interest payments are due on a quarterly basis on the last business day of each March, June, September and December. With respect to Eurocurrency borrowings, interest payments are due on the last business day of the interest period applicable to the borrowing and, in the case of a Eurocurrency borrowing with an interest period of more than three months’ duration, each day prior to the last day of such interest period that occurs at intervals of three months’ duration after the first day of such interest period.

The Revolver has a variable commitment fee, which is based on our first lien leverage ratio. We expect the commitment fee to range from 0.25% to 0.375% per annum. We are obligated to pay a fixed fronting fee for letters of credit of 0.125% per annum.

Amounts borrowed under the Revolver may be repaid and re-borrowed through maturity of the Revolver in July 2026. The Term Loans mature in July 2028. The Term Loans may be repaid or prepaid but may not be re-borrowed.

As of March 31, 2022, there was $547.3 million outstanding under our Credit Facilities, all of which was related to the Term Loans as no amounts were outstanding under the Revolver. The effective interest rate on the Term Loans was approximately 4.0% for the three months ended March 31, 2022.

As of March 31, 2022, we were in compliance with the covenants under the Credit Facilities.

Contractual Obligations

There have been no material changes to our contractual obligations as of March 31, 2022 from those disclosed in our Annual Report on Form 10-K.

Refer to Notes 9 and 15 in the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and notes thereto for a discussion of our debt and operating lease obligations, respectively.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenue and expenses during the reporting period.

Our critical accounting policies are described in Part II Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K. During the three months ended March 31, 2022, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 2 in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.

Election Under the Jumpstart Our Business Startups Act of 2012

The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies.

The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance. Our utilization of these transition periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the transition periods afforded under the JOBS Act.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to our disclosures regarding market risk as described in our Annual Report on Form 10-K under the heading Part II. Item 7A. “Quantitative and Qualitative Disclosures about Market Risk.”

Item 4. Controls and Procedures

Limitations on effectiveness of controls and procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of disclosure controls and procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various legal proceedings, claims, and governmental inspections, audits, or investigations that arise in the ordinary course of our business. We believe that the ultimate resolution of these matters would not be expected to have a material adverse effect on our business, financial condition, or operating results.

Item 1A. Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors disclosed in Part I. Item 1A “Risk Factors” of our Annual Report on Form 10-K. There have been no material changes to our risk factors from those included in our Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On May 3, 2022, Stone de Souza, the Chief Operating Officer of the Company, tendered his resignation from the Company, effective May 20, 2022.

On May 4, 2022, Shane Driggers began serving as the Chief Human Resources Officer of the Company.

Item 6. Exhibits

Incorporated by Reference

Filed/

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Furnished
Herewith

3.1

Amended and Restated Certificate of Incorporation of EverCommerce Inc

8-K

001-40575

3.1

7/9/2021

3.2

Amended and Restated Bylaws of EverCommerce Inc

8-K

001-40575

3.2

7/9/2021

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	EVERCOMMERCE INC.

Date: May 9, 2022	By:	/s/ Eric Remer
		Eric Remer
		Chief Executive Officer
		(Principal Executive Officer)


Date: May 9, 2022	By:	/s/ Marc Thompson
		Marc Thompson
		Chief Financial Officer
		(Principal Financial Officer)