Q2 2021 EverCommerce Inc Earnings Call

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Good day, and thank you for standing by.

Welcome to the era Commerce incorporated second quarter 2021 earnings conference call as a true all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded.

And we require any further assistance. Please press star zero and would now like to hand, the conference over to your Speaker today, Brian Day. Please begin sir.

Good afternoon, and welcome to ever Commerce as earnings conference call from the second quarter of fiscal year, 2020, 1 which ended on June 30th on the call with me today is Eric Reamer, Eric how ever Commerce, as Chief Executive Officer, and Mark Thompson ever Commerce, and Chief Financial Officer.

And complete disclosure of our results can be found on our press release issued today, which is available on the Investor Relations section of our website.

Today's call is being recorded and a replay will be available following conclusion of the call.

Statements made on this call may include forward looking statements regarding our financial results products customer demand operations the impact of COVID-19 on our business and other matters.

These statements are subject to risks uncertainties and assumptions and are based on management's current expectations as of today and.

It may not be updated and the future. Therefore, these statements should not be relied upon as representing our views as of any subsequent date.

In addition to any risks that we highlight during the call important factors that may affect our future results are described on most recent SEC reports and today's earnings press release.

We will also refer to certain non-GAAP financial measures to provide additional information to investors our.

A reconciliation of non-GAAP to GAAP historical measures is provided in our press release and Investor presentation, which are posted on our Investor Relations website at investors start ever Commerce Dot com with.

But the primary day, which is being depreciation and amortization stock based compensation and acquisition related costs and other nonrecurring costs.

In terms of the agenda for today's call Eric will provide a quick overview of our second quarter results as.

As well as review our market opportunity and growth strategy.

Mark will then provide an overview of our financial model a detailed review of our second quarter results and provide our guidance for the third quarter and full year 2021.

With that let me turn the call over to Eric.

Thank you Brian.

Welcome everyone to ever Commerce's second quarter financial results call, our first as a publicly traded company.

And our successful IPO was an important milestone for the company.

Hence as our ability to deliver on our mission.

Howard the service economy with software solutions that digitally transformed millions of small service based businesses around the world.

1 trillion dollar global market opportunity is massive and made up of commerce physicians on remodel or us and wellness professionals that support our lives every day.

We believe our growth strategy and suite of tailored modern SaaS solutions uniquely positions us to penetrate this large fragmented landscape.

With our rapidly growing customer base of over halfway and SMB service providers across more than 200 countries. We have only just begun.

Let's begin with a few highlights of our Q2 financial results, which were strong both in terms of revenue and adjusted EBITDA.

We reported total revenue of $121.1 million up 53% year over year.

Adjusted EBITDA of $27.6 million, representing a 23% margin.

Since this is our first call as a public company I would like to start by spending a few minutes, providing overview of the business our strategy and the opportunity ahead for ever Commerce.

First for those of you who are new to our story and commerce as a leading service commerce platform, we provide vertically tailored integrated SaaS solutions that transform and to end business and consumer experiences and.

And the last 5 years, our business has grown by a factor of 20, and we're just scratching the surface on the opportunity.

Let me step back and highlight what we're seeing and the marketplace today.

First the services to the market is huge and 77% of U S. GDP is generated by service businesses.

40% of U S. GDP is generated by Smbs and approximately 50 million people are currently employed by service industries.

The vast majority of service businesses that support our homes, our health and wellbeing are small businesses and their customers, we as consumers no longer want to deal with paper based processes and invoices you on convenient digitally.

Yes.

And the next generation of business owners, who are more tech savvy understand the benefits of digital solutions are increasingly integrating technology into the everyday operations of their business.

The service SMB market is underpenetrated with only 9% of our target customers utilizing and and solutions to run their businesses.

This is the large part because existing solutions can't meet the unique needs of SMB service owners.

Custom solutions like ERP, and historically been primarily built for large enterprises and our non affordable.

And these broad solutions also tend to lack of specialization required to meet the specific needs of the service industries and.

<unk> solutions, which have grown and popularity such as workflow marketing and customer engagement often lack the integration to create seamless end to end solution.

These limitations have stunted technology adoption for service based on all businesses, who lack the budget and resources to customize it connected solutions themselves.

Ever Commerce has taken a differentiated approach to the market by creating vertical tailored solutions to solve specific business problems for SMB service companies.

Our solution center on the system of action that drives that service business is daily operation.

From a field service management solution that manages work orders and deploy technicians to onsite jobs and their service areas. Our practice management solutions that support day to day operations for small medical practices.

We then integrate horizontal solutions, including payment processing digital market and lead generation and customer engagement applications to credit and then experience for both the consumer and the business.

The improvement of the consumer's experience increases on loyalty and gross revenue for small businesses, while the digital transformation of the business improves efficiency at the same time.

As these businesses grow and they can adapt more solutions and features increase and our <unk> and our customer lifetime value.

This organic growth flywheel that fuels the growth of ever commerce.

Finally to increase our speed to market and maximize the vertical tailored features of our software we have built and M&A engine to find acquire and onboard best of breed solutions into our essential ecosystem.

This inorganic.

Increases velocity of vertical and geographic penetration, while providing value add complementary solutions for our customers.

We are currently focused on 3 specific verticals within the service SMB market, which we believe represent particularly attractive growth opportunities.

The home service vertical at 59 billion North American market opportunity is focused on several key industries, including field services home improvement and remodeling and security alarm specialized service professionals.

The health service vertical and 84 billion North American market opportunity is focused on supporting the digital transformation and improved patient engagement of small and medium sized physician and especially care practices.

The fitness and wellness vertical a $21 billion north American market opportunity and our industry. Most impacted by the pandemic is focused on recovering industries of single and multi location fitness and structural dance and Salon and spa professionals.

We've rapidly scale the business and the past 5 years generating $407 million of revenue over the past 12 months ending June 32021.

Our strategy to drive future growth is supported by our massive underpenetrated market opportunity and built upon our scaled operations and dual organic and inorganic growth engines.

First we are focused on new customer acquisition and cross sell upsell to our more than 500000 customers within our current product portfolio.

We're at the early stages of driving growth with the solutions, we have today and believe it can generate strong consistent organic growth.

Second we expect to continue to execute on our successful M&A strategy to acquire additional solutions that expand the value we deliver to customers you've executed on 51 transaction and the past 5 years and have developed a highly repeatable and scalable Onboarding program that leverages, our expertise and operations paint.

<unk> and digital marketing to augment the vertically tailored software can provide.

The service S&P and software market is highly fragmented.

Our ability to efficiently acquire and scale. These solutions has enabled us to generate value for both customers and our shareholders I'll provide some details on what are our recent acquisitions and a moment.

Turning to our second quarter results in more detail, we had a strong performance across our solutions I'd like to spend a moment review and the trends that we're seeing and each of our 3 core verticals.

And the home services vertical are ever pro brand represents a suite of solutions, such as field service management and alarm monitoring software that provide the vertically tailored solutions needed for specialty home technicians and contractors.

This vertical continues to perform well and was our fastest growing and the quarter.

Rising home prices low interest rates and durable trend at work from home has driven demand for skilled services like contractors, plumbers and HVAC and landscape professionals to name a few.

Small businesses and these markets are experiencing high demand for the services and are looking for simple to use yet powerful technology that can help them to capture and manage this demand and provide the experience that customers expect.

This dynamic, which we expect to continue drove strong interest and adoption across our <unk> solutions and the second quarter.

And the health service vertical are ever health brand represents a suite of solutions, such as electronic health record and practice management solutions that help physicians and practitioners provide more efficient more engaged patient care.

This vertical also had a strong quarter and has benefited from the rise of personalization and consumers Asian, and health care as well as the growing popularity of telemedicine.

We are seeing particular strength with our patient engagement solutions, which provide convenient digital experiences for sketch on apartments and seemed reminders access and medical records test results and providing 20% of and access to their health information.

Youre seeing physician practices embraced our technology and new opportunities to create deepen and improve care and patient relationships.

And the fitness and wellness vertical are ever well brand represents a suite of solutions, such as member and facilities management, and Salon and Spa management needed for fitness and wellness professionals to automate scheduling and client services.

This vertical showed continued improvement and the second quarter, but certain micro verticals continue to feel the impact of COVID-19.

Many fitness providers remain under pressure as their consumers are only gradually begun to return to in person classes following extended closures.

Conversely, our salon beauty and wellness areas are rebounding very well and are back to pre COVID-19 trends the.

And the trends, we are seeing and fitness and wellness are highly localized and impacted by vaccination and contagion rates as well as government mandates.

We recently expanded our penetration and fitness and wellness with the acquisition of timely a global appointment booking a business management software company that is used by sought spas and salons and the U K, Australia and New Zealand.

Timely has built a strong business serving more than 50000 beauty professionals, who book more than 30 million appointments annually.

Highly is a great example of our M&A strategy at work.

The system of action solution that broadens, our penetration and the existing vertical and expands our global reach has growth opportunities leveraging our current digital marketing expertise and provides another avenue to integrate our existing payment solution.

Let me wrap up by reiterating how excited we are at the way the business is performing.

And we executed well against all of our strategic goals and the second quarter and meaningful accelerated topline growth.

With the successful completion of our IPO. We are now fully focused on expanding our growth both organically and through strategic acquisitions.

We believe we have clearly established ever commerce and its industry tailored brands as a software platforms of choice for service Smbs, which is 1 of the largest opportunities and the entire software market we.

We are confident and our ability to be the primary winner in this market and build a much larger increasingly profitable business over time.

We are enabling the digital transformation of the service economy and provide unique access to the next generation of leading SaaS platforms that are serving the vertical and micro vertical SMB service businesses.

I'll now turn it over and our CFO Mark Thompson Mark over to you.

Thanks, Eric today ill provide an overview of our financial model review of our second quarter fiscal 2021 results and also provide our outlook for the third quarter and full year fiscal 2020.1.

As far as ever Commerce has a highly recurring and reoccurring revenue model that consists of recurring SaaS and subscription and transaction solutions and reoccurring marketing technology and services subscription and transaction revenue represents about 70% of our total revenue today and included within this is our is our payments business, which is.

14% of our overall revenue we expect this segment to continue to drive the majority of our growth going forward and.

The other meaningful component of revenue as our marketing technology solutions, which is primarily focused on lead generation and other solutions that help our customers grow their customer bases. This reoccurring revenue represents about 25% of the business today.

Given more than half of our revenue is generated within our home services vertical we do experience some seasonality and our consolidated results with Q4 and Q1 being the most impacted quarters.

Underscoring our focus on delivering our SMB customers valuable solutions and a great customer experience, we have realized the stable average monthly net revenue retention rate above 99% and each of the last 8 quarters.

Now with that background, let's turn to turn to our second quarter results in detail.

<unk> revenue and the second quarter was $121.1 billion up 53% from the prior year period within total revenue subscription and transaction fees were $85.1 billion up.

Up 64% from the prior year period, and marketing technology solutions were $32 million up 38% from the prior year period.

As Eric discussed M&A as a core part of our growth strategy. As a result, we believe it's also important for investors to evaluate our business growth on a pro forma basis, which is how we measure and manage the business internally we.

We calculate our pro forma revenue growth as though all acquisitions closed as of the end of the latest period. We are closed as of the first day of the prior year period, thereby including results prior to our ownership. We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business our pro forma growth rate for Q2.

2 was 31% year over year and 21% for the year to date period versus 2020.

While our performance in Q2 was very strong it did benefit from lower Q2 comps as Q2.2020 was the period when we felt the most impact from Covid.

Overall, we were pleased with the strong recovery and continued improvement and growth across the business during the quarter growth trends across all 3 end markets strengthened during the quarter and our marketing technology and solutions continue to see strong momentum now let's review the income statement and more detail as a reminder, unless otherwise noted all metrics on <unk>.

Non-GAAP and we've provided a reconciliation of GAAP to non-GAAP metrics, and our press release and Investor presentation adjust.

Adjusted gross profit and the quarter was $80.2 million or and adjusted gross margin of 66% compared to an adjusted gross margin of 63% in the second quarter and fiscal 2020, reflecting a mix of about 70% of revenue from subscription and transaction revenue versus about 66% in Q2.

2020.

Now turning to operating expenses sales and marketing expenses were $22 million or 18% of revenue up from 13% of revenue and the prior year period. This increase was primarily driven by continued investments and growth through our various marketing channels and personnel.

<unk> development costs were $12 million or 10% of revenue up from 8% of revenue and the prior year period. This increase was due to investments and additions to our technology teams to support our various solutions as well and centralized security operations information technology and cloud engineering.

G&A expense was $18.7 million or 15% of revenue down from 18% and the prior year period. Our business is built around our centralized operating model, which aggregates many of the functions of our various operating units at headquarters. This has been a key component of our ability to scale as quickly as we have we will continue to invest and the.

Infrastructure to support our rapid growth scalable operations and being a public company. We expect that these investments, particularly the investments related to being a public company, we will accelerate and the second half of 2021 following the completion of our IPO and early July.

Q2, adjusted EBITDA was $27.6 million, which was an increase of $8.1 million or 42% from the year ago period.

Adjusted EBITDA margin was 23% down 1% versus the year ago quarter, but quite strong considering our investments and growth and scalable operations, we expect adjusted EBITDA and related margin to reducing Q3 given.

And that was in Q3, and as we continue to invest and growth opportunities and scalable operation in the second half.

On a GAAP basis, our Q2 net loss was $24.3 million or a loss of 56 cents per share based on weighted average basic shares outstanding of $43.7 million.

On a GAAP basis, our Q2 loss from operations was $10.8 million.

Turning to the balance sheet and cash flow, we ended the quarter with $202.6 million and cash cash equivalents and restricted cash total debt at the end of the quarter was $766 million total net leverage as calculated per our credit facility at the end of the quarter was approximately 4.3 times using credit agreement defined adjusted.

And that EBITDA.

Subsequent to the end of the quarter, we successfully completed our IPO, which raised net proceeds of $347.8 million, including the exercise of the over allotment option as well as the 75 million concurrent private placement by silver Lake and.

And in addition, we successfully completed a term loan b financing, which lowers our cost of debt by approximately 225 basis points and put in place and $190 million revolving credit facility.

Adjusted for the net proceeds from the equity financings and our recent debt refinancing our as adjusted net leverage at the end of Q2 would have been approximately 1.4 times using credit agreement defined adjusted EBITDA.

As adjusted net leverage does not reflect the use of cash for timely which was approximately $99.9 million. Our long term target is to run the business with net leverage of approximately 2.5 to 3.5 times credit agreement defined adjusted EBITDA and lever up to 4 to 4.5 times to fund acquisitions.

<unk>.

Our financial profile and balance sheet and as a strategic asset for the company, ensuring we have significant capital available to deploy to invest and organic and inorganic growth initiatives.

I'd like to finish by providing our outlook beginning with the third quarter.

Please note that our outlook for Q3 and the full year 2021 includes our acquisition of timely, but the outlook excludes any impact from M&A, which was not completed by the end of Q2 as we have previously indicated we will report the contribution from acquisitions in the period in which they are acquired so we expect the disc.

Our Q3 acquisitions during our Q3 earnings call.

For Q3, we expect total revenue of $122 million to $124 million and we expect adjusted EBITDA of $23 million to $24 million and for the full year fiscal 2021, we expect total revenue of $471 million to $474 million and we expect adjusted.

EBITDA of $100 million to 102 million a.

A few things to keep in mind as you consider our guidance for the remainder of the year.

First our businesses are performing at a high level and is tracking ahead of our prior expectations for the year and particular, we're pleased with the momentum across our business, notably in our ever pro and ever health verticals.

Second pro forma growth in Q2 on a percentage basis was aided by lower comps because Q2 of last year was the most difficult operating quarter from a COVID-19 perspective, while we continue to see strong business activity the pro forma growth rates and the second half of 2020, 1 will be lower than our Q2 pro forma growth rate because we began to see.

The improvements and our business in the third and fourth quarters of 2023.

Third we continue to see headwinds from Covid, particularly and our fitness and wellness vertical where we're selling and Australia, New Zealand and the U K all of which had been experiencing shutdowns and other COVID-19 related challenges, while we have not seen any material impact to our business yet from this most recent delta Varian wave. It is something we're closely monitoring.

To summarize ever Commerce is performing well on both our core drivers organic growth and acquisitions. Our results reflect the accelerating desire for Digitization from service Smbs and this is a trend that we expect to benefit our business for years to come we believe we have the ability to deliver and attractive combination of strong.

Top line growth and improving profitability in the coming years, which we are confident can generate meaningful value for shareholders.

That we'd like to open up the call for Q&A operator.

Thank you.

To ask a question you will need to press star 1 on your telephone.

Your question. Please press the pound key.

Please standby and while we compile the Q&A roster.

Our first question comes from Sterling Auty.

P. Morgan your line is open.

Yeah. Thanks, Hi, guys. So looking at the improvement and the pro forma growth year to date to 21% you did mentioned and easy compares but within the areas of improvement can you Peel back the onion, a little bit more and give us a sense, which of the verticals solve the bigger improvement and that pro forma growth.

And why.

Thanks for the question Sterling. This is mark why don't I start with that and as you know we don't break out vertical performance.

But it's fair to say that each of the vertical performed well and through the quarter and for the year to date period, and we feel quite positive about the growth drivers across each of the verticals including growth of.

Growth from new customer acquisition, upsell cross sell et cetera.

Alright, Great and then 1 follow up would be when you look at the new guidance for the full year.

Help us understand to what extent or to what magnitude is their contributions from timely and medical design that we're not already reflected in street models.

So timely which is and our outlook I think and.

And the street models and the tech is not and as we.

Discussed previously about the cadence and which we won't operate.

And we'll report on M&A.

And we report on the period in which it was acquired so in Q3, we would expect to report on a contribution from and day tech as well as the forward contribution.

And the outlook changes going forward.

Understood. Thank you.

Thank you. Thank you next question.

Our next question comes from Greg Rosslyn with Piper Sandler Your line is open.

Thank you and good afternoon, and maybe 1 for Eric and 1 for Mark if I could Eric.

And to get your view around the international opportunity.

Timely acquisition, clearly signals, a greater appetite to expand internationally how is the integration of timely going so far and is that changing how you're thinking about attacking the international market either.

More constantly and more aggressively or maybe pausing and given some of the delta variant can.

Can be happening out there.

Brad Thank you for the question.

So.

And I'll take the first part in terms of what we're looking at I'll, let Matt Fierstein. Our President is also joined US talk about the integration of timely thus far so yes, we've been actually pretty active timely as our including Canada, probably are our seventh international acquisition, we have UK, Australia, Amman, Jordan and Nike and.

And we're seeing opportunities.

Both in western and eastern Europe as well. So we're we've been pretty proactive looking at opportunities to expand on the existing verticals geography, and potentially go into new verticals into new geographies and so we're excited we think the opportunities that we see abroad often.

Better prices and some and domestic so we continue to be opportunistic and looking for those opportunities and it turns on the integration of timely and I'm going to pass it over to Matt and walked through we are so far right.

So with all of our acquisitions were.

Immediately began on boarding the acquired solutions into our centralized operating platform and that includes our operational infrastructure functions like finance and accounting legal HR and talent acquisition as well as our growth function is really focused on marketing product strategy and go to market and general management and Lisa Cigna.

Significant focus areas for the first 90 to 120 days, obviously based on the solution type and with timely that's a solution that we're going to remain focused on as a discreet system of action business management software on boarding priorities are also focused really on embedding our marketing and growth teams and really identifying and actioning those horizontal integrations or enhancement.

And like payments and like customer engagement.

Helpful color, there I guess mark for you.

I wanted to go back to the pro forma growth it really stood out here in the quarter pretty sharp acceleration I know you can't talk and don't discuss kind of the vertical breakout quarter to quarter, but did you see a meaningful uplift occur.

Cross tied to cross sell or payment attach rate or was it really just and.

Year compare with Q2 being the first quarter, where you saw from SMB churn and challenges tied to Covid last year any color there would be helpful.

I think look I think the business.

Absolutely continue to accelerate and positive way kind of across all fronts, but no question. We benefited from from an easier compare in Q2, just given that that was the period for us with and which Covid impacted us the most.

Got it and Super helpful. That's all I had thank you.

And.

Thank you and our next question comes from Matt Hedberg with RBC capital markets. Your line is open.

Oh, Hey, guys. Thanks for taking my questions.

Maybe I'll start Eric.

In your prepared remarks, you noted I think the payment is 14% of revenue.

Can you give us a sense for the penetration and your base and and when.

You add that what does that typically do.

Wallet spend with the customer.

Yeah. Thanks, Thanks, Matt I appreciate the question, Matt you want to take that 1 yes, absolutely so.

And I think we've said this on the path from a volume perspective, when you think about that that $7.5 billion on.

PPV and that we had for <unk>.

Through the.

And the end of 2020 was about a 10% penetration on a volume standpoint, when you think about it on a customer location standpoint, and we look at the applicable business management system of action customer bases and that penetration in terms of attach rate is about 30%.

Got it thanks, Matt that's helpful. And then maybe just a quick 1 for Mark.

You gave a revenue and EBITDA guidance, but I'm wondering if you could help us with with a share count that we should assume for private and <unk> and a possible full year.

And from a non-GAAP perspective.

So.

Obviously in Q2 guide Peel away from completes.

So the share counts.

Going forward.

And Q3 pro forma for the IPO.

Going to be on.

The range of $197 million.

Got it thanks, a lot guys congrats on the quarter.

Okay.

Thank you Matt.

Thank you. Our next question comes from Smart <unk> with Jefferies. Your line is now open.

Hi, good evening and thanks for taking my questions and congrats on the first quarter out of the gate. So.

1 of the things that I wanted to ask about is obviously ever commerce is great and attracting new customers and I am curious I know it hasnt been.

And that long since the IPO, but I'm curious as you think about maybe the brand itself. If you if you're starting to see any branding benefits from being public and just generally how maybe even zooming out from that how the top of the funnel is looking and conversion.

Given some of the uncertainties in the background. Obviously your results are great and I'm curious if you are seeing better activity at the top of the funnel.

I'll take the first part and I'll hand, it over to Matt.

Little early to get the benefit of being public and that's fine. So I don't think we ever Commerce brand is has popped internationally, yet, but I think the opportunity to continue to invest and both the sub brands have a pro ever well ever health. We think we'll start seeing some benefit of that down the road and I want to talk about the pipeline.

And I would just add to that final point and we've spoke about this and the past you've talked about the brand and historically through today, we've really been utilizing those solution brands. We are taking to market more of this kind of ever brand approach at the macro level, which really is helping us from today on position that more complete value chain of integrated solutions and potential customers.

We are excited about seeing the potential impacts of that from a conversion standpoint, we've talked about it before digital really remains our core channel from that scalability and productivity perspective, approximately 80% of new customer acquisition comes from digital and digital really continued to perform well through the beginning of the year through Q2.

And it's been and organizational core competency for over 16 years.

Our go to market inception, with a simple.

Again, as we think about that go to market, we're complementing it with channels like partnership and we're excited about the return to in person and industry trade shows and events and these are really efficient and valuable channel if theyre going to help us continue to create.

Awareness and generate interest and our solutions with those Smbs in addition to digital so.

Digital continues to perform really really well from a conversion standpoint and <unk>.

And definitely underpinned that strong customer acquisition growth and Q2.

Great and then maybe just a follow up on the M&A side I know, that's an important part of the company strategy and you mentioned it earlier as well.

Think about maybe your primary focus verticals.

And given that there they're recovering somewhat unevenly is that influencing maybe what the M&A strategy strategy will be and a short term or should we think about it is wherever it is most opportune and tennis day, just maybe thinking about the impact of the reopening on on how Youre thinking about your M&A strategy.

And it's a great question, and we think about internally quite a bit if I step back just a second and.

And talk about how we look at M&A, we look to buy companies for 3 main reasons number 1 expanding capabilities and existing verticals and secondly look to expand geographic.

<unk> and existing verticals and then third look to enter new verticals and so as we're looking at really at that question on the top 2 it's a little bit more opportunistic EBIT, though obviously the fitness wellness has been the industry most affected and we're incredibly excited with the timely acquisition that we just made both in the geographical again, even if you would.

And as we all know has been partially shut down we think the long term prospects of that opportunity within the spas and salons is huge so we'll be opportunistic looking for great opportunities and all of our core verticals.

Sure.

Great. Thanks, again for taking my questions and great start to the to the public period.

Thank you so much.

Thank you. Our next question comes from Bob and Shah with Deutsche Bank. Your line is now open.

Okay, great. Thanks for taking my question and congrats on the IPO and the strong second quarter I got 1 from matter or Eric can you just maybe talk about the progress you've made cross selling your solutions during the quarter and how should we think about that timeline of really pushing those ever brands that you just spoke about.

Yes I.

I would say I'll start from the back to the from from a timeline perspective.

As you can appreciate brand transition is a long term journey.

And certainly not a destination. So we're going to be very specific about how we do that certainly test and learn and to that to continue to take advantage of the brand and a strong brand equity we have and those solutions brands, but at the same time.

Look for us.

All of the advantages that we can get out of that ever brand approach, which is going to drive more of that integrated sale more multi product sales from that perspective, so again.

I would say think of that more as a long term journey across the course of learning and.

Call. It 12 to 18 months over that period of time.

The second question was.

Well. Thank you everyone just.

Just on your ability to.

And.

Absolutely.

<unk> growth driver and in Q2, we continued to see nice progress from a cross sell perspective on payments integration that is where we had coming into the quarter.

The most on that.

And I was under our tire to date and we continue to make really really strong progress on from that perspective, our integrations from a customer engagement application standpoint, and continue to improve which helped us to really kind of start that cross sell and mark spoke to in his remarks strong performance from our marketing technology sell Amp standpoint, and we saw benefit from cross sell there as well.

Perfect. Thanks, so much and congrats again.

Thanks, Bob.

Okay.

Our next question comes from Brad Reback with Stifel. Your line is now open.

Great. Thanks, very much historically, you guys have only used cash pretty much to do your acquisitions.

The IPO here do you think that changes how you think about paying for deals.

Yes, I think.

We've obviously, a combination of cash and cash and debt and we have used equity to some extent as rollover as part of our deals I think and it's similar fashion I think the companies that we've been talking to you going forward will be interested and our equity as well I think cash will become the still become the primary but the opportunity.

To supplement that and make a deal more appealing to potential sellers, we would we would consider utilizing equity as well.

That's great and then Mark maybe 2 quick ones for you, obviously big revenue upside and the quarter just trying to figure out if there was any incremental inorganic there versus original expectations and then looking forward to the back half of the year, how conservative have you been with the potential for the Delta variant to cause and.

Additional headwinds.

So there was no M&A completed in Q2, so there's none of that and the and the results and in terms of your second question.

Brad with respect to the Delta variants I think.

We have absolutely factored COVID-19 into our into our outlook and the second half we've certainly been through this before.

And we have factored that into our outlook with some conservatism and the second half.

Great. Thank you.

And.

Thank you our net.

Question comes from DJ Hynes from Canaccord. Your line is now open.

Hey, guys. Congrats on a good start here I wanted to ask another question on cross sell and I don't know if its for Eric or Matt, but how much is self serve.

Versus what Youre actively selling in other words like what do push versus pull dynamics look there looked like there and then is there a typical timeframe. After you execute and acquisition, where you start to see the most momentum on the cross sell from.

Yes, thanks for the question Vijay.

Okay.

I'll start with from a timeframe standpoint, it's going to vary by solution. So depending upon the level of integration of that kind of horizontal component.

And then when we get to that customer base or as that customer comes on board that could change that could be different so foreign entity for 1 of our business management system of action.

Solutions that already has integrated payments and that cross sell could happen.

And immediately that could be a time on sale. We're at very very fast follow up and the first 30 to 60 to 90 days.

It is an add on piece of functionality that we integrate later, obviously that cross sell could happen a little bit later and that customer's journey.

And part of that question was.

<unk>.

And just push versus pull dynamics and how much would act on short selling versus sell so thank you for reminding me that I get so excited about the first part.

And honestly DJ evolve, we do both push versus pull we're obviously looking at indicators from our customer data standpoint, when it might set and might make sense to introduce a second or third product and 1 of our customers from that perspective, we're going to be looking at data and actually pushing that that could be and products that can be.

Follow up from a customer a sales rep and from a coal perspective, we will also find customers that are coming to us after they've gone started on a on a business management software and have seen have.

Integrated themselves into the core workflows of that and then rather than seeing the availability to add another efficiency driver like integrated payments and they can be coming to us directly as well. So it's it's a bit of full yes, yes. Okay. It makes sense and then maybe a quick follow up from Mark just how do you think about EBITDA to cash conversion ratios you have targets.

And there and how might those changes the business scales.

So.

Thanks for the question and.

We think of conversion of adjusted EBITDA and cash flow to be and that 70% to 80% range and thats been fairly consistent over time, I don't really expect that to change and we do look at that internally.

As a more and more or less on normalized way to look at our cash flow generation.

Because obviously, we have some significant fluctuations quarter to quarter, given the M&A, yes, perfect. Thank you guys.

Thank you.

Thank you. Our next question comes from Brian Peterson with Raymond James Your line is open.

Thanks for taking my question and congrats on the strong results. So maybe 1 from me just just on the IPO as a branding event and I know some on kind of ask from a customer perspective, I'm curious if thats changed anything on the M&A side or are you guys seen as a great destination for potential targets or anything thats happened and the pipeline. There are curious to get your thoughts. Thanks.

Yes, Thanks, Brian and I think I would like to believe we are deemed as a positive destination prior to the IPO and I will say that we've gotten a lot of the at least some of the pipeline that we've been working with kind of pre IPO definitely got their attention and got some additional inbound.

Discussions from groups that we had been in contact with so I think it was a positive event for us.

And kind of showed we were.

And related related to scale and opportunity and growth and allowed us to tell the story more publicly to somebody's organization. So I think it was definitely a positive event and we've seen some of the benefits of that already.

Great. Thank you.

Thank you and our next.

Question comes from Kurt Mccarney with Evercore. Your line is open.

Hi, yes, thanks, very much Eric was kind of curious when we look at your sort of horizontal solutions and the attach rates are those generally proportional with sort of the sizes of the.

The specific verticals, whether it's ever ever pro ever Alka ever well I was just kind of curious how we should think about sort of the adoption rate of those horizontals and solutions. If 1 maybe is ahead of the game on others and and then how do you think about balancing that meaning when you or buildings or your go to market playbook for each 1 of those businesses are there certain ones that you.

I want to focus payments on heavier than the others. I know you don't want again to make detailed switch phy and if you're just talking about this like more and more.

And at a higher level, but just any thoughts on that would be helpful. Thanks.

Great. Thanks for the question Kirk.

And on a high level, and then Matt and Mark and it could jump in.

The answer is yes, each individual vertical has its own.

Its own different ways of doing business. So if you just think from the health Division.

And that would not be a core place that youre going to penetrate major payments because you're dealing with a lot of more traditional claims processing vs. Epic pro payments would be a much more obvious attachment similar with slides and Jim and so based on the verticals to go after each individual horizontal solution will make more sense based upon how those busy.

And as workflows and how those businesses actually do business that went on.

Added to that.

From a proportionate standpoint, I'd just based on the size of our ecosystem.

And you're spot on that really proportionately when you think about something like integrated payments, it's going to follow the proportions of the business as a whole today.

And I think the same follows 4.

The marketing technology solution today, and Thats over index for home services deal, but they are horizontal and we call on that for a specific reason, we tend to be able to drive those across each of the verticals, but it's a great question Kurt.

Okay, and then just on maybe follow up along the M&A lines. When you bring on and M&A solution do you push harder with that from sort of a go to market perspective in terms of what you spend on that digitally right. After you buy it meaning is there a sort of a fast push with some of those or do you just let it serve and.

And on natural and I was just kind of curious when you bring these really good technologies on a much bigger distribution platform do you try to gun it upfront to try to get more awareness and adoption and upfront or is it something that's sort of I'm sure and maybe it depends on the answers maybe it depends but I was just kind of curious how you handle that as you bring on a new productivity.

The market more broadly.

Well.

Again, a great question and we don't let anything just naturally do anything because if we do that nothing really happened. So it is attractive.

And the proactive.

<unk> and we go through the diligence that we have a very detailed plan that our growth engagement team puts in place prior to closing the acquisition often what happens Kirk as we close the deal most of the companies you bind our subscale businesses, who don't have the infrastructure in place to go big right away. So the first thing, we're often doing is creating infrastructure recapture and lead generation.

And tracking mechanisms. So once those are in place we can actually put the pedal to the metal and go fast with those organizations.

And organizations on a more sophisticated and the infrastructures in place. They just didn't have the sophistication on the Astra digital marketing, we can be much more aggressive and earlier timeframe. So we're very thoughtful about making sure prior to making very big proactive investments and those new acquisitions, we've invested and the backend infrastructure to capture the demand and capture the.

Believes and ultimately the conversion of those sales.

Thanks, very much congrats on the quarter.

Thanks Sarah.

As a reminder, Thats star 1 to ask a question. Our next question comes from Pat <unk> with JMP. Your line is open.

Great. Thank you and let me add my congratulations.

Eric Let me maybe go sort of big picture here since we're on to your first quarter outlook.

Click company, what do you think are the top 2 or 3 strategic imperatives for you over the next.

12 months so of all the things you have to do what are the what are the top 2 or 3 most important ones.

Well I'll take it on I'll start on a bigger picture and then I'll go down to more specifics on on a bigger picture, we want to stay at the forefront of the acceleration of the digitization of the surface economies. So everything we're doing is focused on how do we make sure that we have the software and solutions that allow the service base Smbs that we provide value to both.

Domestically and abroad B most successful so within that internally I think as we've talked about a couple of times already from <unk>.

Panic standpoint, the 2 biggest opportunities are to increase the new customer acquisition, and then secondly, which will remain probably our biggest opportunity for several years to come the upsell cross sell opportunity and 2 over half million customer base, and so that that and those other 2 kind of internal organic and I'd, probably lean a little bit on just the.

On the long runway of the.

Upsell cross sell and sell.

<unk> from an M&A perspective, which is kind of a core focus us.

Was asked earlier about how our how the branding of being public we think we are getting a little bit.

<unk> and being public now and some of the M&A opportunities that we've been looking at and so making sure that we are selectively looking at those opportunities that we think are going to drive the most kind of long term value to the to our overall ecosystem and finding those right customers and the right acquisitions.

Acquisitions to join the ecosystem. So that's how I'd really look at it both from an organic perspective and inorganic those would be really the 3 main priorities of the company.

And thank you.

Thank you.

And at this time Im showing no further questions and the queue I would like to hand, the conference back over to Mr. Eric <unk> for closing comments.

Well again I appreciate everyones time and I appreciate the questions that were asked as as you said on the remarks earlier, we're incredibly excited about.

And the performance of the quarter, but.

As we look forward, we do feel we are the leading provider of.

And the solutions that are really digitizing the service economy, and we expect to stay on the forefront of that process and creating the integrated <unk> solutions that make the service F&B.

We serve more successful and that really is that the core and the vision and really the.

The goal of the company that we work on every single day, So im really to close up again and thank you again for everyone. Joining the call today and we look forward to talking to you again real soon.

This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day goodbye.

Goodbye.

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