Q2 2023 EverCommerce Inc Earnings Call
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Thank you for standing by and welcome to ever Commerce, the second quarter 2023 earnings call. My name is Michelle and I will be your operator for today at this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question.
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As a reminder, this conference is being recorded today Monday August .
2023.
And I would now like to turn the conference over to Brad CT Senior Vice President and head of Investor Relations for ever Commerce. Please go ahead.
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, with Chief Financial Officer joining.
Joining them for the Q&A portion of the call is ever Congresses, President Matt Fierstein. It's.
This call is being webcast with a slide presentation that reviews, the key financial and operating results for three months ended June 32023.
For a link to the live or replay webcast. Please visit the Investor Relations section of the upper Commerce website, www dot ever Commerce Dot com the.
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 material available on our website that are not historical in nature may constitute forward looking statements.
Such statements are based on our current expectations and beliefs of management.
Actual results may differ materially from these forward looking statements due to risks and uncertainties that are described in more detail in our filings with the SEC.
We undertake no obligation to publicly update or revise these forward looking statements except as required by law.
We will also refer to certain non-GAAP financial measures to provide additional information to you our investors.
A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and on our earnings call presentation.
I will now turn it over to our CEO Eric Creamer. Please continue.
Thank you Brad on today's call I will highlight second quarter results discuss key customer trends and metrics before turning the call over to Marc to dive deeper into our financials.
Ever Commerce continues a strong start to 2023 with solid revenue growth, particularly within our software payment solution and a very robust adjusted EBITDA beat the top end of the second quarter guidance.
We achieved strong bottom line performance by doubling down on balancing growth and profitability do you bought the active management of our cost base with a focus on efficiency, we delivered 22% adjusted EBITDA margins, while supporting 13% year over year subscription and transaction revenue growth, which includes our core software payment solutions and 8% year over year total revenue growth with.
Upside to profitability, we are creating the opportunity to incrementally invest in areas that can accelerate growth in 2024 and beyond.
In addition to efficiently growing our customer base, our strategy is to lead with our core system of action SaaS solution, and then upsell cross sell additional solutions and features to enhance customer value, while driving customer expansion of revenue growth forever Commerce.
Payments is the best illustration of this strategy during the second quarter, our payments revenue grew 32% year over year.
Ever Commerce provides Berkeley tailored and then SaaS solutions that support the highly diverse workflows, our customer interactions and professionals at home services health services, and fitness and wellness services used to automate manual processes generate new business and create more loyal customers.
As a leading service commerce platform will provide a system of action software across many micro verticals, which in turn drive the workflow to help our customers generate new business fulfill services matters data the operation there.
Customers.
Upselling and cross selling our existing customers additional features services and products is not only important for ARPA growth is important because it enhances the value our customers receive on the relationship with ever commerce, which ultimately translates to lower churn and higher retention.
For several quarters, we've disclosed the number of customers that are utilizing more than one solution.
As a data point and continue to measure we believe a metric that is even more reflective of our current cross sell progress is the number of customers that have contracted in a market for more than one solution.
Well this is a measurement that tracks progress slightly higher the funnel of customer revenue realization for areas like payments enablement, specifically and marks a critical milestone the customer's journey towards the integrated set of solutions to power more of their business.
As of the end of second quarter, while we continue to see expansion of customers utilizing more than one solution to approximately 75000. The number of customers that are contracted that bought it for two or more products grew 29% year over year to approximately 162000.
And with over 685000 total ever commerce customers as at the beginning of 2023, we continue to have a very large a better opportunity to continue to grow this pace of multi solution customers.
Finally, when looking back over the trailing 12 months, our annualized net revenue retention or IRR for our core software payment solutions remains above 100%.
Embedded payments is our most mature and accretive cross sell solution and is a key element of our land and expand strategy.
Year over year payment revenue grew 32% contributing to our margin expansion given its gross margin profile.
Additionally payments revenue as a percent of total revenue grew by 300 basis points over the past 12 months.
Second quarter annualized total payment volume or PPV was approximately $11 $4 billion, representing 13% year over year crop.
We expect PPV and overall payments revenue to grow as we continue to a better payment solutions into our course of action.
Accelerating payments attachment and utilization are key elements of our long term growth plan and we continue to see success throughout our course of action solutions.
We are actively testing and implementing new strategic initiatives designed to increase the cash flow payment capabilities drive more payment enabled customers to active processes and further increase the wallet share of customers that are already processing.
And lastly, I want to briefly touch upon our current progress integrating generate of AI into our business operations.
<unk> solutions provide to end customers as well as within our development of our products and services to support our customers and operational scalability.
As an example in Q2, we launched an AI driven capabilities within our survey products that create significant efficiencies for our customers now at the analyze interpret and act upon large quantities of raw and unstructured survey feedback.
These insights allow customers to more quickly and efficiently implement programs to accelerate revenue as well as generate recommendations for risk mitigation from negative feedback.
Early customer feedback has been incredibly positive relative to even greater efficiency that our solutions cannot bring to their operation.
We are excited about this early progress we will continue to leverage AI to drive greater efficiencies in our operation, even more innovative and impactful offerings to our customers.
Now I will pass over to Mark who will review our financial results in more detail as well as provide third quarter and updated full year 2023 guidance.
Total revenue in the second quarter was $170 1 million up eight 1% from the prior year period within total revenue subscription and transaction revenue was $130 3 million up 12, 7% from the prior year period and revenue from marketing technology solutions.
$34 5 million down 2% from the prior year period.
The strong performance in subscription and transaction revenue and 12, 7% growth and in line with our long term targets was largely due to the solid execution of our growth strategy to provide customers a core system of action software solutions and driving expansion by promoting cross sell and up sell opportunities leading with payments since the second half.
2022, we've seen headwinds to growth in our marketing technology solutions and while those continued through the second quarter. We are starting to see early signs of stabilization.
The end of the second quarter LTM revenue was $661 1 billion up 15, 2% year over year on a reported basis and 11, 7% on a pro forma basis. As a reminder, we calculate on a pro forma revenue growth all acquisitions closed as of the end of the latest period, we are closed.
The first day of the prior year period, including before at 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 reported growth rates for Q2 is equivalent to our pro forma growth rate because we did not complete any acquisitions during the relevant churns.
Second quarter, adjusted EBITDA was $38 8 million, representing a 22, 8% margin versus 19, 6% in the second quarter of 2022, and 26, 2% growth year over year. Additionally, LTM adjusted EBITDA was $136 1 million representing a 22.
9% margin.
In the second quarter, we're clearly delivering towards our full year 2023 objectives by exceeding guidance and achieving record EBITDA margins adjusted EBITDA performance in the quarter was underscored by our focus on actively managing our operating expenses driving operating leverage and cash flow generation.
Timing and pacing of investments through the first half was a more modest factor and you expect to make targeted investments in the back half of the year that should enable us to enter 2024 on a solid growth footing. For example, one area of incremental investment as resources to accelerate payment adoption among our systems of action software solutions.
Adjusted gross profit in the quarter was $111 9 million, representing an adjusted gross margin was 65, 8% versus 65% in Q2 2022.
LTM adjusted gross profit was $425 9 million, representing an adjusted gross margin was 65, 4% the increase in gross margins, partially attributable to an increasing mix of higher margin payments revenue.
And now turning to operating expenses adjusted sales and marketing expense was $28 7 million or 16, 9% of revenue down from 18, 2% of revenue in the prior year period.
Absolute adjusted sales and marketing expenses were approximately flat year over year due to a combination of optimization and economies of scale.
Adjusted product development expense was $17 7 million or 10, 4% of revenue down from 10, 8% of revenue reported in the prior year period.
Absolute adjusted product development expense grew four 7% year over year as we continue to invest in our solutions.
Adjusted G&A expense was $26 6 million or 15, 7% of revenue down from 16, 5% of revenue in the prior year period as we anniversary the investments made in 2021 and 2022 to support our public company infrastructure, we are beginning to see meaningful operating leverage.
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 $27 1 million, representing 21, 2% year over year growth and a 15, 9% margin.
The last 12 months, our adjusted Unlevered free cash flow was $97 5 million.
Levered free cash flow, which accounts not only for debt service, but also various working capital adjustments was $22 6 million in the quarter. This is up approximately $16 1 million year over year due to both growth and operating income and changes in working capital for.
For the trailing 12 months Levered free cash flow was $62 2 million continuing to underscore our balance sheet flexibility.
Strong free cash flow generation allows us to continue to invest in our growing business and delivered strong returns to our shareholders. It also allows us to efficiently allocate capital across the spectrum of opportunities, including the outstanding buyback authorization and M&A prospects.
In the second quarter, we repurchased approximately 900000 shares for a total cash consideration of approximately $10 million at an average price of $11 10 per share.
We ended the quarter with $83 1 million in cash and cash equivalents and we maintain $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 two nine times consistent with our financial policy, we have no material maturities.
Until 2028.
I'd like to finish by providing our outlook for the remainder of 2023, beginning with the third quarter.
So Q3, we expect total revenue of 174 $278 million and we expect adjusted EBITDA of $34 five to $37 5 million.
Our full year 2023 revenue guidance remains $680 to $700 million and we are raising our adjusted EBITDA guidance again by an additional $5 million to a $142 million to $148 million as we noted on our first quarter call continuing to execute our growth strategies price increase as the new product introduction.
<unk> are expected to support growth and strong margins throughout the year.
Our 2023 outlook does not include any potential impact of M&A activity that could take place before we begin the question and answer portion of the call I want to thank the entire ever commerce team for their efforts in delivering these strong results. Our focus continues to be optimizing our operations managing costs effectively and delivering on our strategic priorities operate.
We're now ready to begin the question and answer section of the call.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
The first question comes from Kirk <unk> with Evercore. Your line is open.
Yes, thanks very much Eric.
Eric I was wondering if you just talk about the level of activity with you all in your customer base this quarter, maybe versus the prior two quarters just in terms of.
Pipeline generation, how are you feeling about sort of top of funnel activity realized marketing is still a bit challenged but just kind of curious if youre seeing anything from a macro perspective that makes you feel perhaps a little better heading into the second half of the year. If it's still about the same.
Yes, Thanks, Kirk I appreciate the question.
Yes, I think you hit it.
Felt pretty good going into Q2, we saw some things specifically in the marketing service part, which is why we guided where we guided and achieved what we achieve but I think the stabilization both in that part and the continued consistency in the pipelines.
That we're seeing in the core business software and payments really remains.
No.
In right on plan, so we feel really good about the second half.
And I think that's kind of showing the guidance when I look at that.
Yes, I think you nailed that.
Yes.
<unk> core software and payments specifically the systems of action.
Yes.
The addition of payments to that.
From a top of funnel perspective, we see opportunities also double down on investments in those core areas, where we see large end market lots of opportunity strong unit economics.
<unk>.
Exactly where we expect it to be with opportunities in the second half to continue to drive top of funnel activities beyond where they are today.
One thing to add just to answer that specifically from a macro perspective in the core verticals that we serve we're not seeing that.
Any.
Continued degradation that you might have saw last year.
That's great and then just one follow up for you you mentioned, obviously some spend that was supposed to have been the first half's going into second half.
I guess, just how should we interpret sort of the EBITDA guidance for the back out or the implied I guess for the fourth quarter.
Adjusted EBITDA guidance somewhat flattish versus <unk> is that just spend that you are maybe holding back on the first quarter coming out of the model and how do you think about just sort of operating leverage in general. Thanks.
I'll start and then if you think about again, we raised after first quarter, we raised again after second quarter.
We feel really good about where we are right now and I think we've been prudent throughout the year, obviously, we still live in a volatile world and we want to be consistent and conservative and prudent as we look to the second.
We have now.
I mean exactly occurred coming out of last year. The world is obviously changing before us and we wanted to make sure that we are actively managing our spend and pace of investment through the year I think we've done a great job in the first half gives us the opportunity to.
If the gas pedal on some initiatives that are really going to underscore underscore the core growth strategies.
<unk> enablement all of that sort of stuff, so feeling as though.
It's time to put a little bit more into the back half to make sure that we continue to set ourselves up for a nice 24 and beyond.
Thank you all.
Please standby for the next question.
The next question comes from Brad Reback with Stifel. Your line is open.
Great. Thanks very much.
I believe it was during remarks prepared remarks, he talked about accelerated investment in payments adoption in the back half of the year can you maybe walk through what youre going to do differently going forward versus what you've done to try to help drive that linkage.
Yes.
Again I don't think this is all that different from the things that we've talked about in prior quarters, but.
From an attachment standpoint.
As you think from a top of funnel down strategic standpoint, continuing to drive incremental resources fronts.
Welcome to our <unk> products, but also where there can be some outbound sales efforts into the software customer base to drive that process. You go down the funnel in terms of converting more of our payment enabled users into active processing users looking at outbound customer success resources that we have been testing.
Have metrics around and now have the ability to say this is where we should double down from incremental resources from that perspective, as well and then as you go further down funnel both to get more people actively processing and expand wallet share looking at opportunities to like we've talked about in past quarters expand.
Base of payment enablement product.
Landscape throughout the ecosystem. So those are all areas, where we are looking at and actively no for two H that investment incremental investments on top will help really.
Drive.
Our execution on those strategies and Brian . Thanks for the question one more thing to add to that we have implemented a payment mandate two of our solutions.
One of the mandated as of August 1st and one was in kind of.
Early Q2, and so where does that take some time to kind of rollout those mandates, but those are positive things that we've kind of implemented in the some of them just got implemented literally last week. So we're excited about the things that macro drop in addition to some mandates are putting into our software solutions.
Great and then on Eric on the monetization side.
Is that going to be direct or more indirect and so much as that will help support future price increases broadly across the product portfolio.
Yes, I think Brad both ultimately I think what Eric spoke to was incremental monetization, but certainly there will be indirect monetization via Jeff.
More firepower behind some of the products that we're able to bring to market. So we see the opportunity for both in Eric's example, was really an incremental monetization opportunity and we didn't talk about much because I'm sure every company has different pieces of that puzzle, but we utilize and we've been utilizing AI capabilities internally or operate.
So for quite some time and with the increased access we implemented some of those a different operation.
Capabilities internally that we'll start seeing hopefully some additional value proposition.
Sure.
Great. Thanks very much.
Please go ahead and please.
Please standby for the next question.
The next question comes from Alexander Sklar with Raymond James Your line is open.
Hi, Thanks for taking the question. This is John on for Alex Eric.
Eric or Matt I know pricing has really been more of a lever this year that you've been looking to push versus prior years I'm. Just curious on any metrics you can give on price elasticity to date, if you could maybe share the percent of your base have seen an increase in maybe from a retention dynamics around the world.
Yes. This is mark Alex.
Sorry.
So.
Thanks.
One.
We come into each year with a series of pricing actions planned in for the year and we've executed against most of those have and Youre really we expect to see continuing.
Impact from that through the year, but overall, we kind of talked about circa 3% for the year I think that's very much the way we think about that in terms of churn. We historically always plan that into our internal plans and quite honestly execute quite well through those and never really see that mature.
Realize the way we planned so we tend to be pretty conservative in our outlook on that internally.
And I have really not seen any real impact from that committee of the pricing actions that have been taken thus far in the first half.
And I think Thats the best the best metric you mentioned elasticity, that's probably our best metric.
He is actually our expected anticipated churn with all of them are running lower than where we expected.
Matt that more from an elasticity standpoint that would be.
And the opportunity as you look at the 24th.
To maintain our <unk> increase.
<unk> into 'twenty four.
Yeah.
Okay. Thanks, that's really helpful color there and then I know, we only get logo growth annually, but I'm just curious if theres been any changes in terms of the vertical or micro verticals driving the growth that you've seen so far this year through July .
It's been pretty consistent across the board.
One area that we talk about and we've talked about before our fitness kind of category. It's been a laggard in the industry is starting to gain some of that.
Planet Fitness, just came out and said, they're starting to see some growth in stores, but in general the market has just been slow to recover from Covid. That's the one area within the ecosystem that we serve.
So it all kind of a lack of growth, but the rest of it's pretty consistent pretty across the board.
Thank you very much.
Please standby for the next question.
The next question comes from Bobby Shah with Deutsche Bank. Your line is open.
Great. Thanks for taking my question just wanted to follow up on an earlier comment you made about kind of mandating payments across to your solutions, what's been the customer reception to that and how long will that take to play out throughout.
Throughout that customer base are those two respective customer bases.
Yes, so the mandate I'll, let mechanism specific mandate was really driven.
You can kind of convert to our payments, we had about 35% in that specific vertical specific solutions utilizing it. So we went out to the back book.
Yes.
Take our payments that's great otherwise create significant price increase if you don't take it and so.
Good plan, so people might be that attrition against that attrition has been significantly lower than we had expected.
<unk> has been very positive it takes some time.
Specific in terms of the time.
The rollout and then ultimately has seen the value of that yes.
It took to Eric's point, there's really three outcomes from that two two that we'd like one that we really like where do you have more people will sign up and take payments and start utilizing that the second is locked into paying an incremental amount for the software and the third is obviously, we don't want this at all they may choose to leave the solution.
Starting from the back forward again churn when we model. It against these mandates has been lower than we expected.
Incremental take rate against some of these mandates have been in place for several quarters. One that we just started this quarter, we're kind of right, where we expect it to be.
Incremental folks taking payments, which is which is good and again folks that say, we don't want to opt in to this and are taking the price increase again, we've just seen.
Less than expected churn against that so we feel good about the execution of the mandates that we've done to date.
Certainly a strategy that will continue to use across the portfolio.
And I think because of the way it rolls out you get them to say, yes, you sign them up a transition of payments they start processing.
As you're going through a base of thousands of customers Youll start seeing the benefit of that in 2024.
That makes sense and is this something you can kind of rollout through the rest of the year kind of core business solutions or is this something that's more on a case by case basis.
Every every solutions a little bit different but there is we definitely are choosing the ones that we think have the greatest opportunity and the greatest upside first.
As you can imagine you're potentially underwriting several thousand.
Customers picking among the payments you want to be thoughtful about the rollout. So we don't think these will be doing these other kind of.
In a bespoke process, but we think we have several others that we could be doing a similar.
Activities to you as well.
Super helpful. Thanks for taking my questions.
Please standby for the next question.
Please standby for the next question.
The next question comes from Erin Kimpton with JMP. Your line is open.
Hey, guys I know, we're probably still two quarters away from an initial 24 guide how do investors get comfortable with the organic revenue growth rate ex price increases for 2004 and beyond.
If you look at kind of where we are and obviously given that guidance, yet, but I think we're pretty comfortable with where we feel the second half of the year. It's all in and we're seeing positive trends on the on the way.
Up from there so I think when we look at some of the laggard dragging down business right now some of them you talked about the fitness and we talked about market services.
Fortunately, it's becoming much apartment business I think we talked about in his.
Opening payments as a percentage of total revenue increased 300 basis points year over year, and we expect that to also continue to grow.
Overall payments growth.
The areas of business that are becoming a larger part of the business or the business, that's growing faster cross dock and.
We expect to make continue to make investments in those and continue to make those a large part business. So as we look for the rest of the year with a lot of confidence and then 2024, obviously, we'll wait until we see.
Yes, the year goes from a macro standpoint, but we feel pretty confident in terms of our ability to continue to ramp our growth rates.
At an higher than current levels.
That's very helpful. Thank you and then just stepping back I mean.
At the tier market as a public company last month, the stock hasn't really worked from the $17 IPO price, but overall, you've executed pretty well right.
You say, you think but one or two things the street's dovetails to appreciate two years as a public company.
Yes, Doug I think I think the people that are following us I think you I. Appreciate it I think we have other challenges that we're dealing with from a tactical standpoint that that really doesn't know the operations I think we've done a really good job for operational standpoint, but I think it still gets underappreciated the scale of the operations and the customer base that we are.
Palin.
Overall, approximately 700000 active customers utilizing our solutions as we talked about today over 160000 has signed up for an odd border for more than one of those solutions and our ability to continually sell more products and services into this very very fertile base.
<unk> is extremely exciting Matt touched upon.
The things, we're doing with payments perspective, not only as payments incredibly accretive from a growth and margin perspective, but it is incredibly accretive from a value perspective to our customer base as we begin to put more resources on.
Both.
Internally, and then outbound reaching as customers to get them utilizing our solutions more effectively from a payments perspective, the economic upside from that perspective is extremely extremely high and we're just we haven't really built that into our models as we're starting to see that comp I don't think thats been appreciated externally industry perspective, yet.
Awesome. Thank you.
Please standby for the next question.
The next question comes from Clarke Jeffries with Piper Sandler Your line is open.
Hello. Thank you for taking the question I wanted to ask about that disclosure around enabled and utilize that utilization in the customer base can you help us think through how those buckets work how the enabled flows into the utilized and maybe how much opportunity is left to add to that enabled bucket rather than the overall low.
It goes.
You can have large systems of action that may not have that payment's enablement or sort of add on functionality to really offer that enablement.
To the customer.
Yes, Thanks Clarke I'll start with just how would you define it properly and then Matt can talk about the specifics so.
Reasonably open that we kind of brought that statistic up because it really is a better leading indicator of how we're doing in terms of getting people will.
When we say enabled youre right enabled is even higher so we need to integrate the payment solutions into software. So they even have the opportunity to take it and then we're actually talking about we say enabled they enabled sign up and on boarded so they've actually said, yes, I want it and then that third statistic that we've been giving is the utilization so.
The statistic that we kind of brought up.
Today that we're going to be giving going forward is that middle one so they've been enabled in terms of the integration is now signed up and on boarded.
We've yet to get them fully utilized or heavy utilized that particular months taxes of our statistics on that yes, I mean, I think it makes a great point, we really think it's just a better leading indicator to where we are with multi product ultimately getting to multi product utilization powering more of our customers' businesses with the integrated suite of solutions that we have so.
Again, as Eric talked about obviously getting people contract and onboard in for that second solution and then from a strategy perspective.
Ensuring that again thinking about the payments world, where we've just done the most first we're focused on the go to market motions in marketing sales thats going to drive payment attachment, we talked about some of the strategic initiatives like mandating payments, that's going to help us achieve that we've talked about kind of adding outbound sales such as the complement product led growth funnels in product messaging.
Again once that's enabled really we go to our next strategy efforts, which are focused much further down the customer engagement funnel, so dragging them into for our payments customer active processes expanding their wallet share initiatives like proactive customer success engagement, yes, those outbound touches adding more.
Product real estate to the payment integrations, and frankly that could be adding more.
Product real estate to empty any integration, that's going to drive that multi product utilization. So again really thats, how we think about it again.
It's a these are these are numbers that will continue to publish going forward, but we think really the right indicators of where we are in that journey to meet the product utilization.
Perfect and just to clarify.
Is any part of it a discretionary choice of the customer or is it really just duration.
We'll move towards that utilizing bucket over time and more time dependent rather than discretionary and then just a separate question for mark.
You mentioned stabilization marketing any way you could further clarify whether stabilization means.
Return to positive year over year growth or any way you could bracket subscription and transaction growth in the second half of the year. So we know the kind of balanced between.
The segments in the second half.
Yes, the first part of it yes.
Yes, I can take the first part.
Do you think about it from a customer engagement funnel and they're obviously, making the choice within our go to market motions to engage with that second product again.
We will use payments as that example, and of course, we've got to go through the process of getting them contracted onboard it and we're going to deploy our next set of strategy and resource resources behind that to turn that payment attach customer that enabled customer until.
So utilizing customer so I wouldn't necessarily.
That's not discretion is just the next step in that engagement.
The question is Matt it's a proactive decision that they are making and 160000 people have made that decision to do that so it wasn't it's not a default number to be very clear.
Our opportunity is.
To get those people, who have made that decision to follow through with that decision to ultimately utilize it. So it's good that they made the decision we've made it available they've signed up and now we want them to utilize 100% not a default.
Good afternoon.
So they made the choice that they wanted that integrated suite and in many cases, we bought four it's almost.
Illogical to not utilize it in some scenarios just in some of the workflows that we have and just you're dealing with small businesses and they are busy a lot of things going on.
It's a nurse or more than anything else and so we feel very strongly that we have the opportunity to continue to penetrate.
The base of customers, we have had a much higher level.
Made really good progress a lot of progress to come.
The second part of your question, Yes, I think on the second.
In part look we don't we don't break our revenue guidance on the pieces when we say stabilized.
I think you should take that to mean.
What we've seen in the last couple of quarters.
Consistent with what we expect to see in the second half and that's all baked into our guidance going forward.
I was just sort of leave it at that.
Alright, Thank you for all the clarification.
Please standby for the next question.
The next question comes from Jeremy Sadler with Jefferies. Your line is open.
Hey, guys. This is Jeremy on first of all thanks for taking my questions.
So I guess first one is kind of a two parter I guess as you continue to drive attachment of embedded payments, it's kind of hard to parse out the seasonality can you maybe kind of give us some color into what the seasonality of TPB as steady state environment and then also.
You mentioned that take rate expansion again, I guess, what levers levers that you're pulling to drive that great expansion and kind of how much more is there to go there.
Yes, I mean, I think we can talk to the first part seasonality.
Think we've described it across the business.
Particularly if you think about the largest part of our TPB being in home services Q4, and Q1 would represent the lower end of that seasonality. There is also some just calendaring and Q4 across the whole payments landscape. When you think about November and December and shorter business days that plays into it. So we typically think about Q4 and Q1.
As the lower end from a seasonality perspective, when it comes to payments in Q2, and Q3 and specifically in home services, where there is a lot more activity.
We typically see the higher end of TPB from a seasonality perspective. There second question I believe was about take rate and things that we can continue to do expand that obviously, we're happy about the expansion of take rate over the last 18 months I think we've talked about this last quarter. There is a variety of things that we do from a pricing and packaging some of it.
Is frankly, just mix of our payment space as well as we're driving more and more attachment and utilization.
Some of our higher take rate solution, specifically in home services, we have seen take rate expansion just in aggregate go up but obviously from our end we have opportunities to a just.
Grow the expanse of payment capabilities within our integrated systems of action that allows us to continue to obviously add more value to the end customer, but also commensurate price the value from that perspective.
And lastly, we continue to have opportunities with our end.
And providers for as we continue to scale, creating scale and the economic relationship from a take rate standpoint, and those those contractual arrangements.
Got it Thats useful color. The rest of mine are asked thanks for taking my question.
Thank you and bye for our next question.
The next question comes from Dan Bergstrom with RBC capital Your line is open.
Okay, Stanford's or for Matt Hedberg, Thanks for taking our question.
I never ever health, that's been a couple of quarters now with the rebrand I know we're early in a long process here, but anything to point out around initial customer reception to the changes.
Is it accelerating customer adoption.
It's been extremely positive.
<unk> brand is kind of a soft launched.
Kind of.
And overhead brand for the.
You know kind of our health group within the organization it'll be really officially launched really in Q1 end of Q1 of next year as we're going to really go to market really with one Brad and consolidate all the parts of it I think we'll start seeing even more efficiencies.
Both the operations and even.
Hopefully.
Increased upsell on the selling part of it as well.
To date.
The response has been very positive we've been selling these solutions again under one organization sort of looks like a very simple upsell cross sell full service.
Solutions for our customers, which they generally appreciate <unk> and.
Connect the dots themselves at other partners, where they have many point solutions versus one whole solution.
The early feedback has been positive we've seen consistent growth in that category.
When we launch it fully next year I think it will be an uptick hopefully in growth but definitely.
The minimum and operational efficacy and efficiency that will get.
Yes.
I think it played out the way we have expected it to.
From an external standpoint to Eric's point, the reception has been really really positive and from an internal standpoint, and ultimately to come.
Basically standpoint, it really has set us up for that multi product sales so think about it.
RPM is the base system of action, but having those active integrations for integrated insurance clearinghouse in claims.
Integrated patient pay and now integrated customer.
Patient engagement solutions.
Really becoming more active in those MRP and it is exactly what our customers want they don't want multiple.
They don't want multiple providers and us being able to drive that to market more and more and more over time again thats part of the receptivity that we've got from our end customers. So excited about where we are and to Eric's point, there's a lot more progress to come over the next year.
That's great I appreciate the color. Thanks.
Okay.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
The next question comes from Aman <unk> Glynn with Barclays. Your line is open.
Hi, This is Dan Kaufman on for Ryan <unk> Barclays can you just broadly describe how S&P has fared in <unk> and what manages management is factoring in for 2023 guidance in terms of macro thanks.
Yes.
Thank you for the question I think everything we can only speak to the F&B is the verticals that we serve in the verticals. We serve are pretty resilient. If you think about the <unk>.
The healthcare customers, we serve in the home service customer service representative.
The vast majority of our customers.
They're very resilient.
Seeing no degradation in both growth and.
Pipeline going to customers that we serve and we're expecting a similar trajectory in the second half of the year so not necessarily.
Greece should decrease but really along the same lines you've been seeing for the last couple of quarters.
Got it okay. Thanks.
At this time.
Not showing any further questions I.
I would now like to turn the call back to Eric <unk> for closing remarks.
Thank you very much Eric.
Commerce had another consistent quarter of Seaton expectations, the market opportunity for our software and solutions continue to grow and we remain extremely excited about our new position in the marketplace to capitalize that opportunity. We appreciate you all joining the call today and we'll speak to you next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
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