Q3 2022 EverCommerce Inc Earnings Call
Thank you for standing by and welcome to the Evercore Emerson for fiscal year 2022 third quarter earnings call. My name is cole and I'll be your operator for today.
Require assistance during todays presentation. Please press Star then zero to reach an operator and after todays prepared remarks, there will be an opportunity to ask question to ask a question you May Press Star then one.
And as a reminder, this conference call is being recorded today Thursday November 10 2022.
Now I would like to turn the conference over to Brad Court, SVP and head of Investor Relations for ever Commerce. Please go ahead Sir.
Good afternoon, and thank you for joining today's call will be led by Eric Reamer ever Commerce, as Chairman and Chief Executive Officer, and Mark Thompson ever Commerce, as Chief Financial Officer.
Joining them for the Q&A portion of the call is ever Commerce, President Matt Fierstein.
This call is being webcast with a slide presentation that reviews, the key financial and operating results for three months ended September 32022 for a link to the live or replay webcast. Please visit the Investor Relations section of the ever Commerce website, www dot ever Commerce Dot com.
The slide presentation and earnings release are also directly available on the site.
Please turn to page two 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 and 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.
Undertakes 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 to provide additional information to you our investors our reconciliations of non-GAAP to GAAP historical measures is provided in both our earnings press release and earnings call presentation, I will now turn the presentation over to our CEO Eric Reamer.
Thank you Brad on today's call I will highlight third quarter results discuss key customer trends and metrics before turning the call over to mark to dive deeper into our financials.
Ever Commerce remains on pace to deliver mid double digit growth combined with solid profitability for the full year, despite increased macroeconomic headwinds, particularly affecting our marketing service solutions, which I will discuss further in a moment.
For the quarter, our reported year over year revenue growth of 23% and normalizing for the effects of M&A, our pro forma revenue growth of 13% for the quarter on an LTM basis, our year over year pro forma revenue growth was 18%.
Continue to operate the business balancing growth and profitability for the third quarter, our adjusted EBITA and adjusted Unlevered free cash flow margin were approximately steady at 19% and 14% respectively.
Customer payments growth are a key part of our business strategy, our total payment volume or PPV grew 22% year over year as we continue to see increased uptake of payments processing was that core vertical system of action.
Our annualized net revenue retention or <unk> was 100% in the quarter.
Finally, we are announcing today that this week our board of directors authorized an increased extension of our share repurchase program double the amount to $100 million and extending the program through year end 2023.
As you look through our public equity is trading we continue to think that utilize our excess cash flow to invest in our own business is a very accretive use of capital. We continue to believe ever commerce has a massive opportunity to drive the digitization of the service economy, which is still in the early innings and will provide us a strong tailwind to fuel growth for years to come.
As a quick reminder, that brookhouse provides vertically tailored and SaaS.
SaaS solutions that support highly diverse workflows and customer interactions that professionals at home services health services, and fitness and wellness services used to automate manual processes generate new business and create more loyal customers.
Ever Commerce offers tremendous value to our customers by providing solutions tailored to the unique workflows and interactions that at these various services require.
At the core we provide system of action software across many micro verticals. This is the ERP at the smaller service based businesses and the way in which each of our customers generates new business field services manage day to day operations and engage with their customers.
Our software solutions not only provide the system of actions necessary to run their daily processes, but also the marketing solutions to attract new business billing and payment solutions to collect effortlessly and the customer experience solutions to create predictable and convenient experiences are.
Our solutions are cost effective easy to implement and purpose built for service businesses. We truly provide end to end solutions that our customers need to compete and grow in a marketplace that is rapidly transforming.
For the past few quarters I've talked about the diversity of our customer base across many different micro verticals and the critical nature of our software solutions for these customers, we serve well over 600000 paying customers across three main verticals and many sub particles. Our customers are focused on selling services not goods and many of those services are essential even recessionary times.
<unk>.
Although we remain very positive about the growth prospects resiliency of our business. We fell short of our goals in this quarter I want to take a few moments to discuss what drove this and what we're doing about it.
What happened in the third quarter.
I noted on our second quarter earnings call that we were starting to see some pressure in our marketing service solutions, particularly lead generation.
We have factored this into our guidance. However, these trends worsened during the third quarter as a reminder, our marketing service solutions of approximately 23% of total revenue and our complementary solution to our core value proposition, which is providing vertical software solutions towards service SMB customer.
In the third quarter, our core vertical SaaS solutions and payment solutions continue to perform as expected aided by the diversity of our business and essential nature of this software provides.
So what are we doing in order to address current market conditions, our fourth quarter guidance contemplates an extend the trends I just discussed.
Operationally, we are re prioritizing investments in areas that drive the most growth while also taking actions to reduce costs and deliver against our goal of balanced growth and profitability. We will begin to see the effect of our cost saving measures in the first quarter of 2023.
We won't be providing 2023 guidance until we report our fourth quarter 2020 results, but I want to comment Directionally on 2023.
Assuming a continuation of the macro headwind discussing the isolated pockets of our business. We would expect 2020 revenue growth in the area of what we've currently been experiencing.
Turning to slide seven let me once again highlight our key customer payment kpis.
We continue to focus our efforts on the land and expand nature of our selling core systems of action software to our customers and upselling them on new features and cross selling them, a new capabilities, such as payments and customer engagement solutions, we measure our cross sell progress, but looking at the growth in the number of customers. They are taking more than one solution.
We ended the quarter with more than 70000 of our customers using more than one solution, a 30% increase year over year, just over 10% of our total customer base is taking more than one solution, providing a long runway for continued growth and expansion.
Embedded payments is our most mature add on solution consumers have come to expect payment for products or services to be digital easy to use mobile friendly and secure.
For business owners, a seamless payments processing means higher conversion rates better efficiency accelerated cash receipts and increased revenue.
Ever Commerce payment solutions provide an intuitive front end experience for consumers and is totally embedded with our various software applications.
We measure report our total payment volume quarterly and we ended the quarter with an annualized PPV of approximately $10 5 billion, which represents a 22% year over year growth.
We expect <unk> to grow as we continue to embed our payment solutions into our core system of action.
Embedded payments as a key lever for future growth and not only provides ample opportunity to support continued organic growth, but also provides better customer economics as customers, who embed payments you have higher <unk> and improved retention, we will continue to prioritize the integration and revenue expansion of our payment and adjacent market and customer experience solutions.
Across our entire solution set.
I'd like to end my prepared remarks today by highlighting one solution not only illustrates the critical nature of our software solutions, but also calls attention to how ever Commerce software provides essential service wondering if needed most.
Bruce snap ever pros roofing measurement estimating software solution enables contractors to measure using aerial imagery saving time and money is these contractors build estimates roofing projects.
First step is offered as a paid subscription product that our customers view as critical to their daily workflows.
Groups that provides a very unique service to communities when they need it most with natural disasters strike ever commerce and roof snap partnered with axiom and the Army Corps of engineers to help those affected shelter in their homes, providing roof measurements from before the disaster roof. Snap provides the army corp of generic with measurements that they can use to apply blue tarps.
That could help matters.
Once installed these terms to allow affected families to shelter in place freeing up services and housing for those who cannot stay in their homes in 2021 roof snap provided over 24000 measurements for disaster victims in October 2022 alone group's net provider of a 13000 measurements for houses affected by Hurricane Ian.
We are really proud of our <unk> team for all the great work they do.
Now I'll pass it over to Mark.
Thanks, Eric Today, I'll review, our third quarter fiscal 2022 results provide our outlook for the fourth quarter and also update our full year fiscal 2022 guidance.
Revenue in the third quarter was $158 1 million up 23% from the prior year period.
Within total revenue subscription and transaction fees were $120 1 million up 31% from the prior year period, and marketing technology solutions were $36 3 million up 15% from the prior year period.
During the third quarter. The U S. Dollar continued to strengthen further from the rates used when we provided guidance. We estimate that this strengthening caused a $200000 headwind in the third quarter. Please also note that the third quarter revenue includes a post acquisition reclassification of Dr. Corona revenue the details of which are shown on.
Mid elevens.
We manage our business for sustainable organic growth and selectively utilize strategic acquisitions to augment this growth as a result, we believe it's important for investors to evaluate our business growth on a pro forma basis, which is how we measure and manage the business internally.
We calculate our pro forma revenue growth 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, including before the time, we completed the acquisition. We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business.
Our year over year pro forma growth rate for the third quarter was approximately 13%, while our year over year LTM pro forma growth rate was approximately 18%.
As Eric mentioned, we have and will continue to prioritize balance growth and profitability third quarter. Adjusted EBITDA was $30 2 million, representing a 19, 1% margin as a reminder of the year over year change in adjusted EBITDA margin is reflective of our investments in growth and scalable operations the impact of public company.
Costs and the dilution that was expected from the Doctor Toronto acquisition.
Adjusted gross profit in the quarter was $105 million, representing an adjusted gross margin of 63, 5% during the quarter the timing of certain product level expenses resulted in a lower adjusted gross profit margin. We expect second half 2022 gross margin to be in line with the first half gross margin.
Now turning to operating expenses.
Adjusted sales and marketing expenses were $28 million or 17, 7% of revenue down from 18, 9% of revenue in the prior year period.
Adjusted product development costs were $18 million or 11, 4% of revenue up from nine 7% of revenue in the prior year period. This.
This increase reflects the investments in our technology teams and development programs to support growth of our various solutions as well as centralized security operations information technology and cloud engineering.
Adjusted G&A expense was $24 3 million or 15, 4% of revenue slightly down from 15, 5% of revenue in the prior year period.
We continue to invest in scalable operations and public company infrastructure, but now that we're over one year past our IPO. The heaviest of this investment is behind US as we continue to grow and leverage our centralized operating model, which aggregates. Many functions at our headquarters we expect to see operating leverage in our G&A expenses.
We continue to generate significant free cash flow as we invest to grow our business. Our adjusted Unlevered free cash flow for the quarter was $22 million, representing one 3% year over year growth and a 13, 9% margin.
On a last 12 month basis, our adjusted Unlevered free cash flow was $81 $4 million Levered free cash flow, which accounts not only for debt service, but also various working capital adjustments was $9 1 million in the quarter.
On a last 12 month basis, Levered free cash flow of $44 million underscores our balance sheet flexibility.
The balance sheet flexibility allows us options as we look to efficiently allocate capital in our business our strong free cash flow generation allows us to operate our business with an optimal capital structure that includes modest levels of leverage which ultimately allows us to deliver enhanced equity returns to our shareholders Lastly.
Last quarter, we discussed the $50 million share repurchase authorization that our board provided in mid June in the third quarter, we repurchased one 8 million shares for a total cash consideration of $19 2 million, including the shares repurchased in June we have bought back approximately $2 1 million shares for $21 9 million.
As Eric noted earlier this week, our board announced an upsizing and extension of our share repurchase program. Our updated share repurchase authorization is for up to $100 million through December 31, 2023.
We ended the quarter with $91 5 million in cash and cash equivalents. So we maintain a $190 million of undrawn capacity on our revolver.
Our debt is a combination of floating and fixed rate and total net leverage as calculated per our credit facility at the end of the quarter was approximately three seven times consistent with our financial policy.
We have no material maturities until 2028.
I'd like to finish by providing our outlook beginning with the fourth quarter for.
For Q4 revenue, we expect total revenue of 157% to $159 million and we expect adjusted EBITDA of $32 million to $33 million or.
Our year to date results plus this fourth quarter guide results and full year of 2022 guidance of $616 million to $618 million for revenue and $116 million to $117 million for adjusted EBITDA.
Our guidance reflects the lower than expected third quarter results and more importantly reflects the trend line of softness in pockets of our business through year end. Our guidance also includes the impact of foreign exchange rate fluctuations on our business just under 5% of total revenues are denominated in currencies other than the U S dollar, namely the New Zealand dollar.
The British pound and the Canadian dollar we.
We estimate the recent strength in the U S. Dollar has created an additional $500000 headwind to fourth quarter 2022 revenue compared to the ratios when we provided guidance in August .
Our updated full year 2022 guidance, while lower than previous guidance still represents approximately 15% year over year pro forma growth at the midpoint.
Our 2022 outlook does not include any potential impact of M&A activity that could take place.
In summary in the third quarter, we saw strong performance in the majority of our business, but expanded macroeconomic headwinds within pockets of our business resulted in revenue growth that while still in the low to mid double digits fell short of expectations. As we look ahead, we believe the core of our business vertical SaaS solutions and payment services is quite resilient.
We intend to focus both on investing in the areas of our business that will produce the best growth and returns, but also double down on cost controls in order to balance growth with profitability. We believe ever commerce is well positioned to be a primary beneficiary of the digital transformation that is just getting underway amongst service SMB companies.
Our focus is on continuing to execute our strategic priorities and deliver consistent profitable growth that we believe can generate significant value for our shareholders. Operator, we're now ready to begin the question and answer section of the call.
Thank you and we will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the key.
Your question. Please press Star then two.
First question today will come from Kirk <unk> with Evercore. Please go ahead.
Yes, Thanks, guys, Eric I appreciate the commentary on the business I guess, just can you give us some idea why yes. Some of the challenges <unk> seen in marketing you don't think spillover, perhaps into the core side of the business or payments I would imagine the concern is that people see that getting hit and then that.
Sort of flows through to other pockets can you just give us some insight or how youre thinking about that and sort of try to derisk that from from sort of impacting your guidance going forward.
Yes. Thank you for the question I appreciate that and that.
You think about the business and we kind of continue to reiterate the core business in the course of action, which is the vertical business management software and we provide service to their small businesses. Those are kind of core workflows. These businesses. These are kind of the essential services for these organizations. We've also embedded payments, which is kind of pretty core to the.
It workflows as we expanded that out we added additional solutions like marketing services.
And although it's a very great value add it really is kind of a complementary tool to the core of what they are ultimately doing that business is very different than the core solution that is businesses.
Business is kind of pull back and we've seen this in other much larger marketing service companies with Google or Facebook or other organizations that are generating some sort of advertising that.
With that part of the business could fit when you look at the other side of the business, what you're really seeing.
Nothing material in business as usual as expected on the core business. It is because that is that kind of core essential work close to those organizations and where we haven't got it came in that doesn't get pulled out that just began again getting paid getting people paid more effectively and faster remains core to the business as well.
Okay, and I don't know if you want to take this one or maybe market.
Are you guys thinking about are there any things that customers are asking for in terms of billing terms or anything like that that you all are having to sort of adjust for as it relates to like free cash flow as we head into the fourth quarter I assume the answer is no but I was just wondering if you could just talk about sort of.
No timing on cash flow those kind of type of thanks. Thanks guys.
Yeah, I'll start and Mark can add yeah. Thanks, Curt again, but now it's been again, we're dealing with a lot of small businesses that are.
Small dollars, our multi basin and we Havent had an extended terms or.
That type of billing procedures for any of our customers today correct.
And our next question will come from Simona with Jefferies.
Go ahead.
Hey, guys. Thanks for taking my question. This is Jeremy Taylor on personal lines.
I guess first step so it's good to see that 30% year over year increase in customers, taking more than one product.
10% of the base is kind of a downward to take from the 11% last quarter.
Are you seeing kind of a change in customer behavior or are there any products that customers are taking less ads.
Yeah, I'll start with that actually the percentage is always a little skewed because that is kind of a good thing that the customer base is growing so as an overall percentage as we continue to bring on new customers. Although we are not reporting new customer growth at this point in time, we do on an annual basis as you can see if the percentage goes down the overall cost per base continues to kind of.
So we're really focused again on how many new customers and help the customers existing customers. We can take additional products and services and that number has continued to grow and the percentage actually just provides us the ability to internally a longer runway to kind of penetrate that base.
Ralph.
If your question is no we haven't really seen anything material on our core customers utilizing our course of actions in terms of change in behavior or their needs.
Utilizing solutions today.
Alright.
Got you.
And then you mentioned in your opening remarks that you are kind of re prioritizing spend your most growth our highest growth areas. I guess can you kind of I guess elaborate on that a little bit where are you seeing the most growth and kind of is there any where there's kind of a weaker than in other areas or I don't know if thats put up by micro vertical.
Yes.
The core system of actions or where the growth is most part and it really.
However, pro which is our kind of Homefield service.
Category.
That category performed well pre COVID-19 through Covid post Covid and continues to perform well similarly with ever health is the one area within our.
Overall kind of course of actions we've mentioned several times that lagged the rest of the business from a growth perspective, it definitely in the fitness and it kind of every well specifically in the fitness related solutions software solutions and really that is really tied to many of them just not achieved kind of their pre COVID-19 levels. The ulta.
Jim that utilize the software and so that is the one area in the overall ecosystem that has probably lagged the rest of the global business.
Understood. Thanks for taking my question guys.
Yeah.
And once again, if you would like to ask a question. Please press Star then one.
And welcome to Matt Hedberg with RBC capital markets. Please go ahead.
Great guys. Thanks for taking my question Eric.
Maybe just to put a final point on the lead Gen business. Obviously, it seems like there is a macro element there but are there things that you guys are doing internally sort of what you can control.
Boost that business a bit.
Yes. Thanks, Matt appreciate the question I'm going to let Matt take the.
Paul This question.
Thats great question.
And as we've seen that.
Quarter over quarter continued to decrease in those advertising budgets and their corresponding spend the things that we can do we're obviously diversify so continuing to expand that advertiser base and we have that large embedded opportunity within our own ecosystem to do so we can continue to expand efforts into categories that are currently less impacted than some of our tradition.
Discretionary category, So I E essentially field services categories like plumbing, great expansion opportunity and then obviously from a medium to longer term opportunity to continue to diversify our traffic sources that we.
Used to essentially sell the leads out to our customers. So continuing to build demand in our organic traffic capabilities through <unk> efforts really helps us de risk across the base of how we do that business.
Got it that's super helpful. Thanks for that and then maybe I guess.
Eric Marc.
Alright.
But Eric you made a comment I think you said.
We haven't guided for 'twenty, three yet, but I think you suggested.
Kind of near where the business is growing organically now I just wanted to see.
Can you maybe put a finer point on that is that assuming I think industry, 13% organically this quarter.
That kind of what we're thinking like that range or is it maybe just.
Maybe just a little bit more clarification on what you what you meant by that.
Yes, I think Matt because as Mark I.
I think the.
The way to think about it is first of all.
<unk>.
But Eric described on the call was really assuming these headwinds continue we'd be growing in the same area. So the 13% you're referring to.
Certainly in that areas.
Okay.
Got it thanks, a lot team.
And our next question will come from Ryan Macwilliams with Barclays. Please go ahead.
Hey, guys. Thanks for the question how should we think about the net retention level going forward or headwinds here, driven by increased customer churn or customer staying with ever commerce, but reducing their marketing spend.
Thanks, Todd net revenue retention remains approximate 100% and we think that will maintain that in that level and we think of opportunity from that over time again, the marketing service customers are.
Type of customer than your core system of action I mean, they are built into the whole hour anyway, but they don't know and in fact, it gives us much less of those customers that were on the courses of action.
We'll have some we haven't seen a lot of attrition from those customers pull back on overall spend though.
Tell me leads is still by our services, it's just not buying as much as high a level. So we do not expect it.
The pullback, we've not seen that although.
If you can pull back in Q3, we have not seen any degradation to MRI.
Sure.
From that category or the overall business at all.
I would say, we still feel really strongly about the drivers of growth towards that towards that metric going forward, obviously payments as Eric talked about payments is so critical to the system of action embedding that in that and that's so key from an operational efficiency standpoint truly why customers using our systems of action even.
May flop to that even tighter in.
Any tighter time, so we still feel like the levers to drive and are are very strong in the business and excited to continue to do the work that we have to.
It maintained and expanded.
I appreciate the color there and good to hear about the opportunity for increased operation operating leverage from here. So you guys have strong margins today, but is there any way you could cut spend and are you seeing any improvement in trends for your sales and marketing expenses. So things like maybe the spend on Google Adwords getting better or worse.
Yeah, I'll start, Matt and Mark jump in to date in the second part of the question it's been nothing material.
So I think with the remainder of the efficacy of our ability to acquire customers at levels that make sense in some of our historical levels.
Over time, I'll, let mark talk about the kind of increased leverage in the business.
We see a lot of opportunities and as we continue talking to 'twenty three.
And growth.
It's a little bit in Q3 and kind of into 'twenty. Three we think we can expand continue to expand our operating leverage across the business.
Yes, I think.
And just to add to that.
We've talked about this before.
We're now a quarter beyond one year out from the IPO. So we're starting to see ourselves.
Hit the top of the Crescendo, if you will on public company costs. As an example, we would expect to start to see some operating leverage on the G&A side related to those and then there is other things within the overall operation that are all part of the short to mid term, which include things like brand consolidation, which can drive a lot of efficiencies throughout the operation both at the product.
Level and certainly right on through the sales and marketing those things are longer arc.
So mid to long term marks but that those are the types of things, we'll be continuing to focus on as we operate.
Appreciate the color thanks, guys.
Okay.
And our next question will come from Pat Walraven.
JMP Securities. Please go ahead.
Oh, great. Thank you very much.
So mark do you have.
$550 million of debt the.
The interest rate is adjusted LIBOR, plus three in a quarter right.
So now you are paying over 7% on $550 million $40 million of earn interest.
So just how do you hire rates play into your guidance strategy.
How does it play into how you think about making acquisitions.
How does it play into thinking about the stock buybacks I mean at some point should you just pay down more of the debt.
Good to hear your thoughts.
So it's a great question. Thanks.
For asking it in the quarter.
We did exercise a swap on $200 million of debt to fix the rate there to mitigate that interest rate exposure youre thinking about I think as we've talked about before.
Comfortable operating the business with this level of leverage.
Does the board and the management team together to think about allocation of capital. We certainly have built into our model cost of capital as we move forward thinking about the various.
Things like that and what I would just say as we maintain a very strong balance sheet. We do have what we consider to be a very manageable amount of leverage in the business.
And it does de risk that somewhat.
But also going forward, we always have a $190 million untapped revolver to the extent that we would ever need that for things like M&A or something else.
And then Pat just to add to that.
Okay.
Just to add some more perspective, as we increase the buyback with the board continues to kind of look at the business.
And just the allocation of capital and value creation for shareholders itself at this moment to offer the best utilization of capital.
You could generate cash flow.
We have a long runway and very diversified base of customers. So we feel very comfortable with our ability to continue to generate cash flow and actually increase that and that can be utilized for different things in the future as well a couple of them one of the values that M&A or things of that nature, but we think at this time. It was a very good use of capital and that was pointed out overall board decision.
Okay got it sounds like you guys are given a lot of thought and then Eric.
It's been a little colder in California, We just had the guy come and fix our furnace today. So.
I remember last quarter, you said break fix it should provide resilience and that makes sense to me.
Thanks, sure that point of view as investors I really didn't think about this marketing side of it and I'm. Just wondering was it a surprise to you too or was it not a surprise that the marketing business fell off so fast.
We budgeted as I've mentioned in the Q2 earnings call that we started to see some designation in the market.
Part of the business.
And so we saw that happening and clearly we put that into our numbers.
And we thought we had.
Brought that out enough Vincent we saw and it wasn't really into the second half of Q3 that we're starting to see that kind of pulled out a little bit further and unfortunately in that business.
It doesn't have to make with things.
Things pull back a.
A couple of million dollars.
Huge in the scheme of things, but in terms of our budget in terms of the guidance. It actually makes a difference obviously as you know and so that degradation could happen fast people stop they stopped spending and we felt a little bit that in Q3.
For our business, which is obviously the vast majority of our business did just much more predictability as you talked about from a break and fix it. So we were little bit surprised by the.
The overall kind of degradation in the second half, but we've kind of put that in budget for that in Q4.
Okay, great. Thank you guys.
And our next question will come from Bobby Shah with Deutsche Bank. Please go ahead.
Great. Thanks for taking my question I guess, just sticking on the marketing side can you guys provide some insight I guess in a normalized environment, what the seasonality of this business should be front from from a quality perspective, as we just think about the impact going forward or the potential impact going forward.
The question was seasonality in the market.
Marketing wise, yet, yes, I mean in a normalized environment, we typically see Q4 and into early Q1 is the trough periods in Q2 into Q3 as the typically higher periods.
Okay. That's helpful. There and then just a customer acquisition cost just given the evolving backdrop have you seen any change in terms of.
The ability and the pricing kind of acquire new customers.
Dave.
Not materially increase or as you asked earlier decrease in the cost of acquisition for customers.
We're pretty used to kind of playing in a world where we advertise in multiple channels, where you used to cost fluctuation and Thats just part of the game on how we manage it obviously.
Digital is a core competency and it's something we're used to seeing that the tariff point no. We have not seen significant fluctuations outside of the normal of what we manage.
Super helpful. Just a last quick one for me just in terms of the CTV growth has slowed down a little bit in terms of the year over year growth rate, even sequentially and looking at it relative to prior periods are you seeing anything changing in the underlying metrics in terms of the health of your customers and their ability to attract and consumers and they are willing to pay.
That's changing.
Concerned or worried at all.
No not at all it's a great question and I think if you look at.
The courses of action integrated payments, which represented almost 75% of our business, it's really been a for the most part.
<unk> seen no degradation in either attrition or IRR or anything like that I think again you.
You called out.
The marketing services that was the one area that we saw degradation in Q2, a little bit obviously, a little bit more in Q3 and I talked about earlier in earlier question the only area within the kind of.
Core customer base and it hasnt necessarily.
Been an increase.
Churn were lowered NR, but kind of a slowed growth rate is really in that fitness.
Our fitness software within that group.
And that's really just driven by kind of fitness world in general just has not recovered from kind of pre COVID-19 levels as we have a lot of opportunity within our fitness.
Really big deals that we penetrated do you still feel really good about the opportunity of definitely lagged the overall other software.
Solutions, we provide.
That's super helpful. Eric Thanks for taking my question.
Thank you very much.
And this concludes our question and answer session I would like to turn the conference back over to Eric Greenberg for any closing remarks.
Great. Thank you so much look although we will generally disappointed we would not achieve our objective for the quarter. We remain very excited and extremely bullish about the future prospects of our commerce. The digitization of the service economy is just beginning and ever commerce truly at the leading software enabling their digital transformation.
Thank you so much.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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