EverCommerce Inc. (EVCM) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to EverCommerce's Second Quarter 2026 Earnings Call. My name is Carmen, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded today, August 5, 2026. And I would now like to turn the conference over to Ryan Siurek, Chief Financial Officer for EverCommerce. Please go ahead.

Good afternoon, and thank you for joining. Joining me on today's call is Eric Remer, EverCommerce's Chairman and Chief Executive Officer. This call is being webcast with a slide presentation that reviews the key financial and operating results for the 3 months ended June 30, 2026. For a link to the live or replay webcast, please visit the Investor Relations section of the EverCommerce website, www.evercommerce.com. The slide presentation and earnings release are also directly available on the site. Please turn to Page 2 of our earnings call presentation while I review our safe harbor statement. Statements made on this call and contained in the earnings materials available on our website that are not historical in nature may constitute forward-looking statements. Such statements are based on the current expectations and beliefs of management. Actual results may differ materially from these forward-looking statements due to risks and uncertainties that are described in more detail in our filings with the SEC. We undertake no obligation to publicly update or revise these forward-looking statements, except as required by law. We will also refer to certain non-GAAP financial measures in our comments today. A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and our earnings call presentation. As a quick reminder, we closed on the sale of the Marketing Technology business on October 31 last year. Our commentary today will center on the continuing operations of our business focused on our EverPro, EverHealth and EverWell verticals. All financial and operating metric results and year-over-year comparisons are presented related to continuing operations, except for cash flow metrics or unless otherwise specified. I will now turn it over to our CEO, Eric Remer. Please continue.

Thank you, Ryan. Before we begin, I'd like to share an important leadership update. As announced this afternoon, after nearly 2 decades leading EverCommerce, I made the decision to step down as CEO, who will continue to serve on the Board of Directors. Effective August 6, Alex Goor will begin serving as Chief Executive Officer and member of the Board of Directors. Building EverCommerce has been the privilege of my professional life. Together, we've grown from a start-up as a public company, serving more than 745,000 customers across our EverPro, EverHealth and EverWell businesses. I'm incredibly proud of what we've built and deeply grateful for the commitment of our employees to simplify and empowering the lives of our customers. I believe this is the right time for both me and EverCommerce to begin our next chapter. The company has a strong foundation, differentiated vertical businesses and a significant opportunity to create even greater value for our customers, our employees and our shareholders. I look forward to supporting Alex and the company as EverCommerce continues to execute on its mission to simplify the lives of small businesses and drive long-term value for our shareholders. Alex will be available as part of our Q&A session at the end of the call. Turning to performance. We delivered a solid quarter with revenue results in line with our midpoint of guidance and adjusted EBITDA exceeding the top end of our guidance range while continuing to invest in the strategic priorities that will support accelerated growth in the second half of 2026 and beyond. During the second quarter, EverCommerce generated revenue of $152 million, consistent with the midpoint of our guidance range, representing a 2.7% year-over-year growth. Adjusted EBITDA for the quarter of $44.5 million exceeded the top end of our guidance range, representing a margin of 29.3%. Our cross-sell motion continues to expand. In the second quarter, we saw approximately 26% growth in customers utilizing more than one solution. EverCommerce is building AI-powered workflows for service SMBs. We offer tremendous value to our customers by providing the system of action necessary to run their businesses with tailored unique workflows, provide end-to-end solutions to more than 745,000 customers across our 3 major verticals, EverPro for home field services, EverHealth for medical practices and EverWell for wellness service providers, with the 2 former verticals representing approximately 95% of consolidated revenue. Our large customer base represented a significant opportunity to expand value through integrated payments, intelligent automation and AI-driven workflows. On a pro forma basis, for the last 12 months, we generated $599 million of revenue, representing 3.7% year-over-year growth. We also generated a 29.4% adjusted EBITDA margin and $13 billion of total payments volume, or TPV, each on an LTM basis. Our payment strategy focuses on enabling payments at the point of initial SaaS sale while also driving cross-sell into our existing customer base. Investments into onboarding automation and customer success are helping grow activation and utilization. At the end of the second quarter, 314,000 customers were enabled for more than one solution, reflecting 20% year-over-year growth. At the end of the second quarter, approximately 140,000 customers were actively utilizing more than one solution, reflecting 26% year-over-year growth. Over the trailing 12 months, net revenue retention was 94%, with multi-solution customers continue to generate NRR above 100%. The slight reduction in reported NRR was impacted by declining third-party partner revenue within our legacy payments business and other horizontal add-ons such as our customer experience products. We continue to put much of our focus and investment on our fast-growing solutions, and we continue to see outsized payment revenue growth in those 6 solutions. In our top 6 solutions, TPV grew 16.4% year-over-year and now represents 36% of total TPV, up from 31% in the second quarter of 2025. Payments revenue within our top 6 solutions grew 8.5% year-over-year, now representing over 48.5% of total payments revenue. Highlighting the payments performance in our growth solutions is important because this is where we are focusing our investments. The cross-sell metrics I highlighted a moment ago are largely due to the gains in our top 6 solutions. The remainder of our payments business drives meaningful cash flow generation at lower growth. As a reminder, we report our payments revenue on a net basis, and therefore, it incrementally contributes approximately 95% gross margin within our core solutions. As such, payments revenue growth is a meaningful contributor to overall adjusted EBITDA margin expansion. Now I'll pass it over to Ryan, who will review our financial results in more detail as well as provide third quarter and full year 2026 guidance.

Thanks, Eric. Total reported revenue in the second quarter was $152 million, up 2.7% from the prior year period. Subscription and transaction revenue, our primary recurring revenue base was $147.4 million. Pro forma revenue adjusted for the acquisition of ZyraTalk, which closed in Q3 2025, was $599 million on an LTM basis, an increase of 3.7% and $152 million for the quarter, an increase of 2%, both on a year-over-year basis. Adjusted gross profit in the quarter was $119.5 million, representing an adjusted gross margin of 78.6%. Second quarter adjusted EBITDA was $44.5 million with an adjusted EBITDA margin of 29.3%. Now turning to adjusted operating expenses, which are reconciled in the appendix to this presentation. For the quarter, adjusted operating expenses were slightly higher year-over-year as a percentage of revenue, increasing from 47.1% to 49.3%, representing targeted growth investments across sales, marketing and product development, which include ZyraTalk costs on the post-acquisition period only. These increases for investments and acquisition were partially offset by continued cost discipline. For the LTM period as a percentage of revenue, adjusted expenses increased from 47.3% to 48.4% Next, I'll turn to some key liquidity measures, which include cash flow from continuing operations. We continue to generate significant free cash flow as we invest to grow our businesses, including in our AI-powered products. It's important to note that the cash flow metrics shown on Slide 11 and that I'm about to discuss include the cash generated from the divested Marketing Technology Solutions business through October 31, 2025, and as such, year-over-year comparisons and quarterly trending are not fully comparable. Cash flow from operations for the quarter was $28.5 million as compared to the prior year of $27 million. Levered free cash flow was $19.5 million for the quarter and for the trailing 12-month period, we generated more than $71.7 million. Adjusted unlevered free cash flow was $28.7 million in the quarter and $115.4 million for the last 12 months. We ended the quarter with $133 million in cash and cash equivalents and $155 million of undrawn capacity on our revolver, which did step down to $125 million in July 2026. As of June 30, we have $524 million of debt outstanding. Our total net leverage as calculated for our credit facility was approximately 2.2x, reflecting operational performance and free cash generation. This leverage position, together with our liquidity profile, provides meaningful flexibility to pursue our capital allocation priorities. We have $425 million of notional swaps at a weighted average rate of 3.91% that effectively hedge the floating rate component of our interest costs through October 2027. Our long-term debt does not mature until July 2031, while our undrawn revolver capacity provides availability through July 2030, providing us with runway and financial flexibility for the foreseeable future. In terms of capital allocation, in addition to our focus on AI investments, in the second quarter, we repurchased approximately 1.4 million shares for $14.8 million at an average price of $10.32 per share. Based on the shares repurchased through June 30, 2026, approximately $19.2 million remains under our existing $300 million share repurchase authorization through the end of 2026. I would now like to finish by discussing our outlook for the third quarter and full year of 2026. For the third quarter of 2026, we expect total revenue of $151.5 million to $154.5 million and adjusted EBITDA of $44 million to $46 million. We maintain our full year 2026 guidance from March and continue to expect revenue of $612 million to $632 million and adjusted EBITDA of $183 million to $191 million. Based on our current outlook, however, we now expect full year results to trend toward the lower end of our guidance ranges. This outlook primarily reflects slower-than-expected new customer acquisition in certain EverPro solutions with an expectation of increasing growth from Q3 to Q4 through improved customer acquisition, pricing actions, disciplined expense management and consistency in customer retention. I'd like to briefly address the previously announced CEO transition. The Board and management remain aligned on the company's long-term strategy and growth opportunities. We expect to further explore opportunities to accelerate long-term growth, which could include changes to investment pacing, go-to-market initiatives and capital allocation priorities. We look forward to sharing more regarding these priorities after the transition is complete. I would now like to welcome Alex Goor, EverCommerce's incoming CEO; Matt Feierstein, EverCommerce's President and the CEO of EverPro; and Evan Berlin, the CEO of EverHealth, for the Q&A portion of the call. Operator, we are now ready to begin the question-and-answer session.

[Operator Instructions] Our first question comes from the line of Bhavin Shah with Deutsche Bank.

Eric, it's been a pleasure working with you. Maybe first for Alex. Alex, now that you're going to be stepping into the role, kind of can you just talk about what attracted you to EverCommerce? I know it's very early, but like what are the opportunities that you see ahead?

Yes, I'm very excited to be here and to meet all of you on the phone as well. I mean this is a very healthy company financially with a lot of really great opportunities, really great strong business units and great people. So I think I look at it and I say, I think we can take what we're doing and really accelerate growth, and we have a lot of potential.

Got it. And then maybe a follow-up for the rest of the team. Just in terms of -- you talked about the guide for the full year being at the lower end of the range and part of that is new customer acquisition kind of trending slightly below. Like what drives the confidence in that reacceleration in 4Q? What are the changes that you're making to ensure that you're able to get back to where you were? And what else are you thinking about in terms of improving execution as we head into the back half of the year?

Bhavin, this is Ryan. A couple of things. It will probably be a couple of us to think the answer here. First, -- with regard to the guide for Q3 and Q4, as we talked about last period, a portion of that is pricing related. A portion of that is really from the organic portions of the business. I would say that from a Q3 to Q4 perspective, we would expect the pricing elements to have relatively high confidence. We put some of those in place currently. We're putting those in Q2, and we put some in place in Q3. Most of the full impact of the pricing increases that we have across various solutions will have their full capabilities in Q4 from a value perspective in terms of revenue. So those are in action and working appropriately. On the organic side of the business, I would say that, that ramps through the year with the more significant portion of that coming through in Q4, but still only a portion of the total growth from a Q4 perspective. If you look at the guide and what we achieved from a Q2 perspective, I would look at it in the context of roughly a 2% increase in growth for Q2, ramping to based on the midpoint of the guide for Q3, 3% and probably at the low end of the guidance range you can infer on the total amount to a little over 5.5% for Q4. On the activities from a go-to-market perspective and new customer acquisition, I think I'll just ask Matt to take that portion of the question.

Yes, for sure. To start, our customer acquisition fundamentals really do remain strong and healthy today. We've got strong end markets. We've got durable customer demand. We've got differentiated products. Like others have noted, there is evolving AI-driven search behavior that has created some headwinds on some organic acquisition in certain product lines in the first half of the year. We are executing against a comprehensive plan that includes technical optimization, AI-focused content, authority building initiatives to improve visibility, position ourselves well as search continues to evolve. We're very confident as we move into H2. We're already starting to see some leading indicators of that work that is impacting those organic traffic trends back in the direction that we'll make improvements in the back half of the year.

Our next question is from Saket Kalia with Barclays.

Okay. Maybe on that note, actually, right, just to build on the last line of questioning. Eric, maybe for you, why was now the right time to maybe step aside and make a change? And relatedly, Alex, of course, once you get settled in, get to know where the men's room is and all that stuff, where do you want to focus your energies as you get settled in?

Well, I appreciate the question. I'll kick it off. It's been over 20 years. Last year it was 20 years. I kind of had a circle that would be a good time. The opportunity to go into '26 made a lot of sense for where the business was at that time. And I've been talking to the Board for a little bit about when it would make sense, what the timing would make sense. And I think the business is in a really great space. We have 2 strong verticals, the opportunity to bring on talent with Alex through relationships that he previously had. So the combination all came together at the right time and was really a smooth transition for everyone. We have great leadership moving forward, great team that's still going to be here and an opportunity for me to take the next step in my own journey.

And I'm excited, thanks for welcoming. I'm really going to spend the next 90 days or so trying to get to know the business on a very, very detailed level. But my presumption is that wherever I can bring technology to bear in strengthening our execution and basically doing what we do, but trying to do it in a better and more optimized way will be the near-term path to greater growth. I think there are a lot of possibilities with this company that we'll have. But short term, I think it's going to be really with an eye to applying technology.

Got it. Got it. That makes sense. Ryan, maybe for my follow-up for you, I'd love to just dig in a little bit more just into the mix shift within the payments business. It's clear that the top 6 solutions are continuing to grow. Maybe the other side of that question is, where do you see the bottom on the other payments business, if that makes sense?

Well, we're not looking at that really more as a bottom. We're looking at that as kind of a continued ability to fund the top 6 solutions. They're cash flow accretive, Saket, and we continue to generate real cash flow from that business. at relatively strong margins as well. I would say our focus has been to spend as little capital as possible, but to maintain that cash flow from an overall revenue perspective while we're investing that cash in the top 6 solutions. So in our minds, it's not one or the other. It's both. We want to really continue to maintain what we have from the base perspective in the legacy payments platforms, while we're also growing the top 6. And we continue to have success in the growth in the top 6, which is exactly part of the strategy.

Our next question is from Aaron Kimson with Citizens.

I think the first one is a good follow-up on Saket's question there. Can you talk about what drove the legacy payment solution back to year-over-year growth in 2Q? And any visibility you have into it going forward?

When you talk -- sorry, say it one more time in terms of the legacy payments, I didn't hear it on our end.