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EverCommerce Continues Growth Investments Despite Higher Operating Loss (NASDAQ:EVCM)

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A quick overview of EverCommerce

EverCommerce (NASDAQ:EVCM) went public in July 2021, raising approximately $325 million in gross proceeds from an IPO at a price of $17.00 per share.

The company provides business management SaaS software for service businesses in a variety of verticals.

Given a possible “stagflation” economy with rising interest rates, companies like EVCM that cannot make a meaningful step toward operating breakeven can stay at a discount.

So I’m waiting for EVCM in the short term.

Introducing EverCommerce

EverCommerce, based in Denver, Colorado, was founded to develop a platform that provides vertically integrated software to small and medium-sized businesses in the health, wellness, and other home services industries.

Management is led by founder and CEO Eric Remer, who was previously co-founder and CEO of PaySimple, now part of EverCommerce.

The company’s main offerings include:

  • Marketing technology solutions

  • Customer Engagement Apps

  • Billing and payment solutions

  • Business Management

The main verticals of the company are:

  • Home services

  • Health services

  • Fitness and well-being

  • Other

The company pursues a “land and expand” marketing strategy for its potential customers and places a strong emphasis on cross-selling its offerings to gain maximum share of wallet and customer buy-in.

EverCommerce Market and Competition

According to a 2020 market research report, the global SMB IT spend market was estimated at $610 billion in 2020 and is expected to reach $824 billion by 2027.

This represents a projected CAGR of 7% from 2020 to 2027.

Additionally, China is expected to remain the fastest growing region in percentage terms over the period.

Major competitors or other industry participants include:

  • Salesforce (CRM)

  • Intuit (INTU)

  • Square (SQ)

  • HubSpot (HUBS)

  • Manual processes

  • Vertically oriented competitors

Recent Financial Performance of EverCommerce

  • Total revenue per quarter increased steadily:

Total turnover over 5 quarters

Total revenue over 5 quarters (looking for Alpha)

  • Gross profit per quarter plateaued in the last quarter:

Gross profit over 5 quarters

Gross profit over 5 quarters (looking for Alpha)

  • Selling, G&A expenses as a percentage of total revenue per quarter evolved according to the following table:

Sales over 5 quarters, G&A % of turnover

5 Quarter Sales, G&A % Revenue (Seeking Alpha)

  • Operating losses by quarter worsened in the last reporting period:

Operating result for the 5 quarters

5th Quarter Operating Result (Seeking Alpha)

  • Earnings per share (diluted) improved towards break-even:

5 quarters of earnings per share

5 Quarter Earnings Per Share (Seeking Alpha)

(All data in the graphs above are in accordance with GAAP)

Over the past 12 months, EVCM’s stock price has fallen 36.1% compared to the US S&P 500 index decline of around 6.8%, as shown in the chart below :

52 week stock prices

52 week stock price (seeking alpha)

Rating and other metrics for EverCommerce

Below is a table of relevant capitalization and valuation figures for the company:



Enterprise value


Market capitalization


Enterprise Value / Sales [TTM]


Revenue growth rate [TTM]


Operating cash flow [TTM]


Earnings per share (fully diluted)


(Source – Alpha Research)

For reference, a relevant partial audience comparable would be HubSpot (HUBA); Below is a comparison of their main evaluation metrics:





Enterprise Value / Sales [TTM]




Operating cash flow [TTM]




Revenue growth rate




(Source – Alpha Research)

A full comparison of the two companies’ performance metrics can be viewed here.

The Rule of 40 is a software industry rule of thumb that states that as long as the combined revenue growth rate and EBITDA percentage rate are equal to or greater than 40%, the company is on a trajectory acceptable growth/EBITDA.

EVCM’s most recent GAAP Rule of 40 calculation was 57% in Q1 2022, so the company has achieved impressive results in this regard, according to the chart below:

Rule of 40 – GAAP


Recent Rev. Growth %






(Source – Alpha Research)

EverCommerce Review

In its latest earnings call (Source – Seeking Alpha), covering Q1 2022 results, management highlighted that its revenue and Adjusted EBITDA results are above the high end of its previous guidance range.

Founder and CEO Eric Remer also reiterated the previous “long-term strategy of balancing growth and profitability”, however, given its growing GAAP operating losses, it’s hard to see that happening.

Of course, many companies like to state “adjusted” numbers, which are more favorable to their definition of profitability.

The company focuses on three main verticals, home services, health services, and fitness and wellness services, seeking to automate and optimize small businesses that are often underserved by IT options .

Management reported an “average annualized net revenue retention” of more than 100%, meaning negative net churn. This is an impressive result considering the company’s large customer base which had more than 617,000 customers at the end of 2021.

As for its financial results, revenue was up 37% year-over-year, mostly driven by organic growth, although the company continues to make “selective” acquisitions as desired.

The first quarter adjusted EBITDA margin was 16%, double that of the same period last year.

However, the GAAP operating loss was the highest in the last 5 quarters, due to higher SG&A and R&D expenses.

For the balance sheet, the company ended the quarter with $101 million in cash and cash equivalents plus $190 million of capacity on its revolving line of credit. EVCM generated $12.0 million in free cash flow during the quarter.

Looking ahead, management has slightly increased its revenue and adjusted EBITDA guidance for the full year 2022 and is excluding potential M&A activity for the remainder of 2022.

On the valuation side, the market values ​​EVCM at an EV/Sales multiple of around 5.4x.

The SaaS Capital Index of publicly held SaaS software companies showed an EV/Average Revenue multiple of around 7.5x as of June 30, 2022, as shown in the chart here:

SaaS Capital Index

SaaS Capital Index (SaaS Capital)

Thus, by comparison, EVCM is currently valued by the market at a discount to the SaaS Capital Index, at least as of June 30, 2022.

The main risk to the company’s outlook is a potential macroeconomic slowdown or recession, which could slow sales cycles and lower its revenue growth estimates.

A potential upside catalyst for the stock could include continued success in upselling its customer base to its payment services features.

With the market valuing EVCM at a discount to its peers, interested and patient investors may see the possibility of a bargain buy at its current price.

However, the company is producing increasing operating losses which continue to be penalized by the market due to a rising cost of capital environment, which lowers valuation multiples accordingly.

Given a possible “stagflation” economy with rising interest rates, companies like EVCM that cannot make a meaningful step toward operating breakeven can stay at a discount.

So I’m on hold for EVCM in the near term until it can generate growth while substantially reducing operating losses.

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