Q3 2024 EverCommerce Inc Earnings Call
Okay.
Thank you for standing by and welcome to ever Commerce's third quarter 2024 earnings call. My name is Stacey 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 during the session you will need.
Press Star one one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one one again as a reminder, this conference call is being recorded today Tuesday November 12, 2024, I would now like to turn the conference over to Brad courts.
Brad courts: Senior VP and head of Investor Relations at Evercore, but go ahead.
Brad courts: 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 Ryan Surat ever Commerce, as Chief Financial Officer, joining them for the Q&A portion of the call is ever Commerce as President Matt fire.
Brad courts: Time.
Brad courts: And ever Commerce to Chief operating Officer, Adam Berlin.
Speaker Change: This call is being webcast with a presentation that reviews, the key financial and operating results for the three months ended September 32024 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.
Speaker Change: The slide presentation and earnings release are also directly available on the site.
Speaker Change: 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 our current expectations and beliefs of management and actual results may differ materially from historically statements due to risks and uncertainties are described in more detail in our filings.
Speaker Change: The SEC, we undertake no obligation to publicly update or revise these forward looking statements except as required by law.
Speaker Change: We will also refer to certain non-GAAP financial measures in our comments today, a reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and our earnings call presentation.
Speaker Change: Before we discuss third quarter results I would like to once again highlight the presentation of results and Kpis, including many earnings call slides and our prepared comments as discussed last quarter, we announced the sale of our fitness products, which consisted of four software solutions in early March.
Speaker Change: The sale of the two North American solutions closed simultaneous with deal signing on March 13th and the two international solutions closed on July 1st.
Speaker Change: Our third quarter GAAP results do not include any contribution from the fitness solutions, but GAAP year over year comparisons are impacted due to the inclusion of solution revenue in 2023.
Speaker Change: Pro forma growth as defined in our materials and filings is adjusted to exclude set us.
Speaker Change: Operational metrics, such as customer counts CTV customers enabled for more than one solution that we will discuss today have been adjusted to exclude the fitness solutions on a pro forma basis for comparability purposes.
Speaker Change: I'll now turn our call over to our CEO Eric Kramer. Please continue.
Eric Kramer: Thank you Brad on today's call I will highlight third quarter 2024 results and trends as well I'll provide an update on our transformation optimization initiatives before turning the call over to Ryan to dive deeper into our financial performance.
Eric Kramer: Our third quarter reported revenue exceeded the top end of our guidance range.
Eric Kramer: GAAP revenue increased 9% year over year and on a pro forma basis, which adjust for the sell fitness revenue increased four 3% year over year.
Eric Kramer: Adjusted EBITDA of $44 $5 million beat the top end of the guidance range, representing 25, 3% margin.
Eric Kramer: Adjusted EBITDA margin expanded 140 basis points year over year.
Eric Kramer: Payments revenue, excluding the fitness solutions grew six 7% year over year, driven by an eight 4% growth in PPD.
Eric Kramer: Finally, we continue to make good progress against our transformation optimization goals, including the hiring of a key leader of ever pro vertical well introduce in a moment.
Eric Kramer: Ever Commerce provide SaaS solutions to service the S&P economy, we offer tremendous value to our customers by providing solutions tailored to the unique workflows the interaction with the various services required.
Eric Kramer: Our software solutions not only provide the system of action necessary to run the daily business processes, but also the marketing solutions to attract new business billing and payment solutions to collect effortlessly.
Customer experience solutions to create predictable and convenient experiences.
Eric Kramer: Our solutions are cost effective easy to implement and purpose built for the service businesses.
Eric Kramer: We provide end to end solutions that are more than 690000 customers need to compete and grow in a marketplace that is rapidly transforming.
Eric Kramer: On a pro forma basis, we ended the quarter with $679 $2 million in LTM revenue, representing a five 1% year over year growth.
Eric Kramer: Subscription and transaction revenue grew eight 6% year over year on an LTM pro forma basis.
Eric Kramer: Also on an LTM basis, we generated 24, 5% adjusted EBITDA margin, which is approximately 240 basis points of margin expansion year over year.
Eric Kramer: Finally, our annualized TPB expanded 12 of $12 4 billion.
Eric Kramer: A key driver of payments growth and profitability.
Eric Kramer: We continue to play, it's our highest priority internally a transformation and optimization initiatives.
Our transformation efforts are intended to optimize long term growth and profitability bring decision, making closer to our customer needs.
Eric Kramer: And key go to market opportunities.
Eric Kramer: We did make progress as we announce these efforts first on the transformation front. We are focused on improvements are ever pro vertical through operational changes to organizational structure, including hiring exceptional seasoned leader and centralizing functions, such as sales marketing and product development to be dedicated to each key vertical.
Eric Kramer: To that end, we are announcing the recent hiring of a strong new leader Forever Pro Josh Macarthur.
Eric Kramer: Josh brings 25 years of technology experience ever Commerce, spattered ecommerce vertical SaaS consumer marketplaces and integrated Fintech.
Josh served as CEO of mind body, a leading technology platform for the fitness wellness and beauty industries.
Eric Kramer: I forget the company through the COVID-19, pandemic and acquired wellness Unicorn class passed in 2021.
Eric Kramer: Josh also currently serves on the board of Compass.
Eric Kramer: Experienced Josh brings co founder CEO and board member of startup pre IPO and public SaaS companies will be instrumental our transformation capitalize the market opportunities and ultimately accelerating growth wherever appropriate Nicole.
A parallel initiative of transportation is optimization with optimization, we identified and execute discrete cost save initiatives that we expect will provide a runway for long term margin expansion and free cash flow generation.
Eric Kramer: But in the near term will allow for funding of key growth initiatives.
Eric Kramer: Over the last three months, we continue to create and execute operational plans should identify savings opportunities.
Eric Kramer: Initiatives range from deconsolidation of third party vendors or contracts rationalization of our real estate footprint optimization of our hosting assesses and consolidation of our PPL partners.
Eric Kramer: Accelerating payment option is a high priority at ever Commerce, we often talked about our strategy Atlanta with our core business management software that upsell and cross selling our existing customers additional features services and products leading with payments.
As you progress along the transformation journey, particularly with reorganization could ever proud. This cross sell upsell motion will transition over time to one that we stopped business management software that includes embedded payments.
Eric Kramer: We believe this will further enhance the value of our customers receive from the relationship with ever Commerce, while also driving additional revenue and margin expansion.
Eric Kramer: At the end of the third quarter, approximately 212000 customers were able to more than one solution reflect a 25% year over year growth.
As we discussed we introduced this metric enabling customers to more than one solution is the first step in the fall of the leads to increased revenue retention and ultimately profitability of these customers.
Eric Kramer: Once customers, we enable the next action for US is to facilitate usage in the case of payments. This is getting our customers to actively processed on our platform.
Eric Kramer: We measure this step in the funnel as utilization.
Eric Kramer: At the end of the third quarter, approximately 88000 customers were actively utilizing more than one solution, reflecting 13% year over year growth.
Eric Kramer: Customers that purchase and utilize more than one solution are naturally server more profitable stickier customers.
Eric Kramer: As a result, the effect of more customers, taking payments or other add on features and services.
Net revenue retention.
Eric Kramer: Looking back over the trailing 12 months, our annualized net revenue retention or IRR for our core software and payment solutions with 96%.
Eric Kramer: Similar to last quarter, a driver of reduced <unk> continues to be the anniversary of a price increase in two of our high velocity lower ARPA solutions and not a measurable change in our customer churn dynamics.
Eric Kramer: Year over year, our payments revenue on a pro forma basis grew six 7%.
Eric Kramer: Accounting for approximately 17% of overall revenue.
Eric Kramer: We report our payments revenue on a net basis as a result payments revenue contributes approximately 95% gross margin and as a meaningful contributor to our overall adjusted EBITDA margin.
Eric Kramer: Third quarter estimated annualized total payment volume or <unk> was approximately $12 $4 billion, representing eight 4% year over year growth.
Eric Kramer: We continue to invest it accurately manage our on boarding programs to accelerate payments adoption, which we believe can accelerate payments revenue growth.
Eric Kramer: Now I'll pass it over to Ryan, who will review our financial results more detail as well as provide fourth quarter 2020 for guidance.
Ryan Surat: Thanks, Eric.
Ryan Surat: Reported revenue in the third quarter was $176 3 million up 9% from the prior year period.
Within total reported revenue subscription and transaction revenue was $137 6 million up three 7% from the prior year period and.
Ryan Surat: And marketing technology solutions revenue was $34 4 million down six 7% from the prior year period.
Ryan Surat: We manage the business for sustainable organic growth and selectively utilize strategic acquisitions or divestitures to augment the trajectory of this growth.
Ryan Surat: As a result, we believe it is important for investors to also evaluate our growth on a pro forma basis.
Which is how we measure and manage the business internally.
Ryan Surat: Calculate our pro forma revenue growth as though all acquisitions and divestitures that were completed as of the end of the latest periods were closed as of the first day of the prior year period.
Ryan Surat: We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business.
Ryan Surat: For Q3, 2024 year over year pro forma revenue growth was four 3% while year over year pro forma subscription and transaction revenue growth was eight 3% the.
Ryan Surat: The primary difference between actual and pro forma revenue growth rate is attributable to the sale of our fitness solutions.
Ryan Surat: The solid performance in subscription and transaction revenue was largely due to continued execution of our growth strategy to provide customers. Our core system of action software solutions and driving expansion by promoting cross sell and upsell opportunities leading with payments.
Ryan Surat: Our marketing technology solutions revenue was below our internal expectations.
Ryan Surat: While we are likely to end the fiscal year with year over year declines in this revenue line versus our expectation for approximately flat revenue at the beginning of the year outperformance in other high margin areas of the business have made up the difference.
Speaker Change: As Eric noted, we also exceeded the top end of our adjusted EBIT guidance range third quarter. Adjusted EBITDA was $44 5 million, representing a 25, 3% margin versus 23, 9% in Q3, 2023, which is six 5% growth year over year.
Speaker Change: While revenue mix and to a lesser extent cost savings initiatives had a positive impact on margins during the quarter. They were also aided by the timing of certain transformation investments that we now expect to occur in the fourth quarter.
Speaker Change: Adjusted gross profit was $117 million, representing an adjusted gross margin of 66, 4% versus 64, 8% in Q3 2023.
Speaker Change: Adjusted gross profit improved largely as a result of a positive mix shift in the business.
Speaker Change: As a percentage of revenue payments and rebate revenue both of which have 95% plus gross margin profiles grew compared to the decline in marketing technology, which carries a lower gross margin profile.
Speaker Change: Now turning to adjusted operating expenses, which are reconciled in the appendix to this presentation overall adjusted operating expenses modestly increased from 49% to 41, 1% for the quarter on a year over year basis, while improving on an LTM basis from 43, 5% to 41, 9%.
Speaker Change: Representing our approach to balance the amount and timing of investments made in our solutions.
Speaker Change: We maintain our focus on improvement in customer satisfaction and acquisition, while also highly focused on cost discipline and the functional support areas.
Speaker Change: Now turning to some key liquidity measures, we continue to generate significant free cash flow as we invest to grow our business cash flow from operations for the quarter was $27 5 million as compared to $27 4 million in Q3, 2023, Levered free cash flow was $23 million in the quarter and for the trailing.
Speaker Change: 12 month period, we generated more than $80 million and Levered free cash flow.
Adjusted Unlevered free cash flow was $35 5 million in the quarter and $125 1 million for the last 12 months, representing 13, 2% and 15, 9% year over year growth respectively.
Speaker Change: We ended the quarter with $102 million in cash and cash equivalents and we maintain a $190 million of undrawn capacity on our revolver.
Speaker Change: We have $533 5 million of debt outstanding as of the end of the quarter, which matures in July 2028.
Speaker Change: Our total net leverage as calculated for our credit facility at the end of the quarter was approximately two five times consistent with our financial policy.
Speaker Change: During the quarter, we executed another interest rate swap for a notional amount of $125 million at a fixed rate of $3, 395% with an expiration date of October 31, 2027, as we continue to proactively manage our interest rate exposure.
Speaker Change: Together with our previous two swaps, we now have $425 million of notional swaps at a weighted average rate of 391% for the floating rate component of our interest cost.
Speaker Change: We continue to view strong free cash flow generation is a key priority for the company.
Speaker Change: We are able to invest in our growing business, while also allowing us to efficiently allocate capital across a spectrum of opportunities, including the outstanding buyback authorization and M&A prospects.
Speaker Change: In the third quarter, we repurchased approximately one 4 million shares for $14 6 million at an average price of $10 77 per share.
Speaker Change: Based on the Board's increased authorization that was mentioned last quarter as of September 32024, we had approximately $39 $4 million.
Speaker Change: The remaining in our repurchase authorization that runs through year end 2025.
Speaker Change: I would now like to finish by discussing our outlook for the fourth quarter.
Speaker Change: For the fourth quarter of 2024, we expect total revenue of $168 million to $172 million and we expect adjusted EBITDA of $43 million to $46 million.
Speaker Change: Our full year guidance remains unchanged at the midpoint with the given fourth quarter ranges.
Speaker Change: As a reminder, please note that the full year guidance given previously excluded the sold fitness assets.
Speaker Change: Operator, we are now ready to take the first question.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Our first question comes from Matt Hedberg with RBC, Matt go ahead with your question.
Matt Hedberg: Great. Thank you very much guys. Thanks for the time two questions maybe the first one Eric.
Speaker Change: It really does seem like the cross sell opportunity now is significant, especially when youre thinking about higher wallet share can.
Speaker Change: Can you talk about some specific initiatives that the company is doing from a go to market or a marketing perspective that could yield even even better cross sell optimization as we look forward.
Yes, Thanks, Matt It's a great question I'll give a high level I'll, let Matt and if you kind of take some of the details what are the one of the things that we are really excited about that we touched upon this during our last call is something we call edge edge is a program that we utilized from a previous one of the solutions currently.
Speaker Change: One that provides kind of rewards and benefits to some of our some of our customers specifically in the contracting space. We launched this into one of our solutions had really really positive kind of penetration and now we've launched it into a couple of other solutions and we're seeing a significant uptick from that I'll, let Pat talk about are you talking about that yes, Matt its great question.
Pat: So one thing I'd say just on the execution front, we've really.
Pat: Focused on integrated sales motion when we think about core systems of action with integrated payments with reputation management and edge solution as Eric said, where we have one team focused on selling that all of those integrated solutions at the point of sale.
Pat: Rolled that out in multiple parts of our business both in ever pro and the never health and really starting to see quarter on quarter.
Pat: In Q3.
Pat: <unk> growth and new payments attach new customer attached to payments for our new customers and we will continue to execute that in this quarter and into 2025.
Pat: <unk> edge is a key component to that as is.
Pat: Our payments and our reputation management solutions.
Speaker Change: That's great and that's really kind.
Speaker Change: Dovetailed into the second question, you sort of because it really felt like new payment flows.
Speaker Change: Excuse me just cross selling channel, but payments has always been a key catalysts and I think this year is obviously a bit of a transition year from.
Speaker Change: From a business perspective, and I guess, when we think to 2025 muscle on an organic and a pro forma basis.
Speaker Change: How would you sort of rank the most important catalyst for organic Reacceleration obviously.
Speaker Change: A big part of that but is there a way to kind of think about like some guardrails.
Speaker Change: Guardrails on 25 kind of organic growth and the potential for Reacceleration.
Speaker Change: Thanks, Matt for the question, we're not we're not giving guidance at this point to 25, but I will say that we are all the investments in a lot of that we talked about the transformation optimization, we've gone through 'twenty four we believe it sets us up for.
Speaker Change: A reacceleration more towards the back half of 'twenty, five and into 26 I think the.
Speaker Change: The things to answer your question, specifically, we are still going after massive markets. We have approximately 700000 customers and that is a very small portion of the markets. We're going after so it starts with everything we do is start at the top of the funnel, we have to execute more effectively bringing in new customers in all of our solutions, which as Evan just touched upon.
Speaker Change: We started to see some additional pick up on that and then secondly, what we've done as integrated our organizations that we talk about getting more vertical the sales flow from bringing on the new customer to getting the attach on whether thats payments or other solutions. If we do it upfront on the sale, which we've now integrated sales process the chat.
Speaker Change: As of that that customer taking more than one solution and utilize more what the solution is significantly higher. So you put a lot of effort into that and the third thing I'll say is we will continue to go back to one of the biggest opportunities as you're looking at A&P is still to penetrate further in the payment opportunity we have a massive.
Speaker Change: We see the amount of payments that run through our system through the invoices that better sent out we are getting a fraction of that of that wallet share at this point and so we have spent a lot of time a lot of energy a lot of effort by reorganizing our go to market with payments reorganizing how we are selling that and reorganized the team as a whole and we're super excited about starting to see.
Speaker Change: They'll start to pull through and out of that.
Speaker Change: No.
Speaker Change: Thank you, Neil but to Eric's point, Matt It starts with our system of action software they're in there they're really good software is in really strong markets and narrowing our go to market all the way through new customer acquisition further embedding additional solutions.
Speaker Change: And again, ensuring that our customers have.
Speaker Change: Everything that they need to continue to grow with us.
Speaker Change: That is the driver of that has been the driver and that will be the driver as we go forward in the future to organic growth.
Speaker Change: Great guys comprehensive answer thanks best of luck.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Brian Mcwilliams with Barclays. Ryan Go ahead with your question.
Speaker Change: Hey, guys Zaman carbon off Bronco items. Thanks second question just curious if there are any changes in the broader F&B purchasing environment that you'd call out in <unk>.
Speaker Change: And hadn't been arity looked throughout the quarter.
Speaker Change: Can you repeat the last question.
Speaker Change: Just a question on linearity throughout the quarter there are any changes to your call.
Speaker Change: I'll take the first piece.
Speaker Change: Really no changes quarter on quarter, we've talked about.
Speaker Change: Continued ASP expansion, which we did a nice job of.
Speaker Change: New customer acquisition in the quarter and then from a sales cycle perspective, we continue to see flat to even compressed sales cycles.
Speaker Change: In our core solutions, so really pleased with the progress there in Q3.
Speaker Change: Got it and then maybe a question for Ryan after acting as the new CFO for two months are there any strategic changes that you might look to make over the next 12 months or are there any key metrics or changes the guidance philosophy urethane.
Speaker Change: Okay, No key changes in terms of metrics or things of that nature. Those are things that we really think about as we go into the 2025.
Speaker Change: Budget season in guidance that we would give.
Speaker Change: With regard to focus areas. It is going to continue to be the areas that we have.
Speaker Change: Put time and effort into the transformation and optimization that Eric mentioned on the front end and the.
Speaker Change: Really the embedded functionality.
Speaker Change: We've referred to previously cross sell up sell but it's embedded functionality that we look to in the.
Speaker Change: In 2025 that is a key focus just because of the opportunity that presents from the margin profile perspective.
Speaker Change: Got it thanks guys.
Speaker Change: Thank you.
Our next question comes from DJ Hynes with kind of Korea T. J go ahead with your question.
Speaker Change: Hey, guys. Thanks for taking the question. So the metric that stood out to me, Eric and Matt in the quarter was the.
Speaker Change: Nice growth in enablement of customers at more than one product can you just talk about what's driving that new initiatives their strategies to keep the momentum going any color there would be helpful.
Speaker Change: Yes, I think Kevin hit on it in his.
Speaker Change: When he answered his question upfront that bill thinking about that integrated sales motion. So the integrated go to market motion not that we didn't do it before but really doubling down our focus on that sales rep talking about that system of action software, but in that same go to market motion speaking about those embedded offerings that we have whether that's <unk>.
Speaker Change: Payments, whether thats edge, whether thats.
Speaker Change: As he spoke about some of our customer experience solution really ensuring that at through that first touch with that new customer through that new customer acquisition process do they get the sense of the full breadth of the offering of what we can do in any of our solutions, whether it be ever health that will grow over well et cetera. So that integrated sales motion is key and I think.
Speaker Change: You're starting to see that pull through in the way we sell.
Speaker Change: Sell upfront and embed solutions along the way.
Speaker Change: Yes, okay.
Speaker Change: And then maybe a follow up on the ever pro side of the business first congrats to you guys and Josh for getting him on board the team it sounds like a great hire.
Speaker Change: The question I have the consolidation of the trades that.
Speaker Change: We are seeing in the space, obviously, it's largely been private equity led is that reaching down into your segment of the market.
Speaker Change: If so with Evercore versus a net winner or loser from that trend.
Speaker Change: Yes, Thanks, Steve It's a great question I think in general the answer is no. We're playing in the market. We have a lot of smaller contractors you know call it.
Speaker Change: A lot of solos.
Speaker Change: At the maximum 10 trucks, but mostly in that.
Speaker Change: <unk> hundred 10 standpoint, and those are not really the.
Speaker Change: In the markets that the PE firms are looking to consolidate.
Speaker Change: The most part those are not the ones that they're consolidating so we are not doing a lot utilizing our customers from that perspective, it's a very large market and you cant consolidate every one of those because theres just a lot of one offs in the areas, where we have a little bit bigger than some of our software is like service fusion.
Speaker Change: That's an opportunity for us that we think we benefit we think we have a really good solution and when the when the P firms Dubai, those which has really been nominal to this point in terms of any type of attrition.
Speaker Change: Attrition, we think we have an offer we have a product that provides them value across their portfolios. If it makes sense and so we haven't seen much of it from that perspective, but I think if that starts coming to our higher end of our customers I think we're well positioned to take advantage of it.
Speaker Change: Yes.
Speaker Change: Okay. Thank you guys.
Speaker Change: Thanks Vijay.
Speaker Change: Our next question comes from Alex Sklar with Raymond James Alex Go ahead with your question.
Alex Sklar: Great. Thank you just wanted to follow up either matter, even probably just some of your commentary on top of funnel growth for new customers for the third quarter I mean any changes from the first half of the year on that and then just given some of the organizational changes taking place how should we think about the potential for you to be kind of more tactical on a solution by solution.
Alex Sklar: Either in terms of senior digital marketing efforts, our actual rep hiring.
Speaker Change: Yes, I think we stated before I think we've seen a lot of consistency in Q3 from an acquisition standpoint relative to the consistency. We've expressed in past calls from a customer acquisition standpoint, the demand environment hasn't changed we've been able to successfully continue to execute our go.
Speaker Change: Marketing initiatives as we expect it to an uncertain cases beyond that so we were certainly pleased with go to market new customer acquisition activity in Q3, the second part of the question.
Speaker Change: Can you ask one more time.
Yes, just the idea that you've got some more vertical alignment with some of the organizational changes and just being more tactical on funnel growth either on a solution by solution basis or on a micro vertical basis, just more empowering.
The localized liters.
Speaker Change: Yes.
Speaker Change: We look at the work that we've done from a transformation as helping us get closer to the customer and those micro verticals getting more of our functional groups sitting together versus a matrix approach, where we had a centralized marketing team, but then the rest of the go to market teams sitting in the vertical putting all of those teams together and we feel really strongly about that.
Actually seen that across all of our health as we've driven operational consolidation are super excited as we are driving operational consolidation and an ever pro to reap the execution benefits of getting more of our resources sitting together closer to the customer and actually driving better conversion in our in our go to market processes.
Speaker Change: Okay, Great and then I'm not sure what to take US an excellent maybe you Ryan but just in terms of the spend optimization effort six or so months in you talked about the $250 million of third party costs, where do you stand today in terms of the visibility on potential savings and any any biggest near term opportunities to call out.
Yes, we've looked at a lot of different areas, where we've done a lot of work in.
Speaker Change: The real estate portfolio consolidation. We're also working a lot with the kind of vendor consolidation from a procurement perspective. There is a number of key areas that we're that we're looking to we're not disclosing any particular numbers right now from a savings target perspective, as we get into the 2025 budget process. We may have more visibility to provide but I would say that we have a very strong.
Speaker Change: Tory are areas that we're working on currently and beginning to execute on those in relatively quick succession.
Speaker Change: Alex I think you can see some of that pull through and some of the margin improvement throughout the year as well we've had this year.
Speaker Change: Great. Thank you all.
Speaker Change: And our next question.
Speaker Change: Our next question comes from Erin Kimpton.
Speaker Change: With citizens J P M.
Speaker Change: Great. Thanks for the question going off of Alex's question, a little bit.
Speaker Change: Would you say the company than what the ongoing business optimization from kind of a go to market perspective, driving the top line as well as from an efficiency perspective on the cost side as one piece further along than the other or do you think about them as one and the same.
Speaker Change: Yes.
Eric Kramer: Eric It's a great question I think we're working on those in parallel parallel pass essentially so when you think about the.
Eric Kramer: The two pieces deposits that we really have broken them up from a transformation organized the teams as Matt says to get the decision makers closer to the customer bringing on great leadership to run <unk>.
Eric Kramer: <unk> as we just talked about Josh as really as a business unit from that perspective, so it could actually make decisions.
Eric Kramer: Holistically within that every vertical at.
Eric Kramer: At the same time, while we're doing that.
Eric Kramer: We're focusing on some of the optimization category is that.
Brian Mcwilliams: Brian just discussed and so.
Brian Mcwilliams: Our hope is these things are happening in parallel we will increase our go to market increase our top line. While we are managing our cost structure I think we put it in some of our.
Brian Mcwilliams: We talked about it in the in the opening that as we go into 'twenty five a lot of those cost savings are going to help us reinvest in the business in the short term to accelerate growth and so we look at them.
Brian Mcwilliams: Kind of go together, because one is going to fuel the other.
I would just add to that I think Brian said, it well, we have a strong inventory of opportunity and I think that exists both from a transformation the opposite optimization side. So I think we in certain places started to reap the benefits in both of those areas, but they are still exists a strong inventory of opportunity for us to continue to optimize the business on both fronts.
I'd think of them as like multiple parallel paths, we're not waiting on one for another like we have the go to market activities that are going on from a pro and an ever health perspective contemporaneously with the work that we're doing both on transformation and optimization. So we have basically spun up multiple teams all working kind of in concert with one another but not waiting on any.
Brian Mcwilliams: One particular piece.
Speaker Change: Thanks for that and then maybe a follow up for Brian given it's your first call as CFO. What's the single most important metric that you think investors should focus on when assessing ever commerce over the medium term is a long time.
Speaker Change: I don't know that Theres actually one.
Brian Mcwilliams: One metric that I could point to specifically.
Speaker Change: <unk> that we.
Brian Mcwilliams: Online really.
Brian Mcwilliams: Overall in the presentation I think are the ones that we find most important as we run the business from a management perspective, I think the pro forma metrics that we provide on a growth rate point of view are important.
Brian Mcwilliams: We rationalize those obviously for things that we think need to be adjusted on a growth basis.
Brian Mcwilliams: I also think that <unk>.
Brian Mcwilliams: Looking at the performance of the individual revenue line items is quite important and we're seeing very strong results from our subscription and transaction point of view and I would focus on that really is the core activities and the core solutions from <unk> and never held those those are very important to us on a long term basis.
And I would add just one more the metric that we introduced a few quarters ago. It's talking about the amount of customers that have been signed up to utilize more of the one solution that is kind of a precursor to our ability to get them utilizing more than one solution and once that happens we have a long history of understanding that these customers will spend more and they won't be with.
US longer so it's a really good kind of prelude to what we believe is going to happen in the future.
Speaker Change: Thank you guys.
Speaker Change: Thank you Andrew.
Speaker Change: As a reminder to ask a question you will need to press Star One line on your telephone and wait for your name to be announced to withdraw your question Press Star one again.
Speaker Change: Our next question comes from Clark Jefferies Piper Sandler Clark go ahead with your question.
Clark Jefferies: Hello, Thank you for taking the question.
Eric you made a couple references to this I wanted to ask around the new organizational structure to ever pro.
Clark Jefferies: It sounds like.
Clark Jefferies: <unk> the structure to make the decision making closer to the customer needs is really to overcome the biggest obstacle to additional upselling, which as customer awareness.
Speaker Change: I was wondering if there's anything else that's top of mind within the new organizational structure.
Speaker Change: Do you think it lends to R&D, working better or sales and marketing working better or is it really about.
Speaker Change: Finding signal from noise off of more than 690000 customers and making sure. They're all aware of what your what you have available as a portfolio.
Speaker Change: Yes, thanks for the question.
Speaker Change: It's kind of all of the above I think the first thing is.
Speaker Change: The last thing you said is yes, obviously more focused in one specific area from a leadership standpoint provides.
Speaker Change: Better understanding of what's happening, but we feel strongly it's not just the overall signals. It's the things you talked about so we've actually.
Speaker Change: Historically, you've had a centralized marketing team that has helped all of our verticals and all the solutions go to market.
Speaker Change: With an ever pro now that is a fully focused vertical focused marketing organization within within the department. Similarly, with R&D R&D, although they were kind of at the solution level. It was kind of led from a both individuals that back up to kind of essential the R&D resources within ever pro will be.
Speaker Change: <unk> R&D resources can be utilized to the needs of that organization and so the focus for Josh is ability to kind of take those resources put them, where the best opportunities are within that ever pro vertical and make sure we're maximizing our investments in <unk> and <unk>.
Speaker Change: R&D and so it is much more of the former than the latter, but we feel very strongly in this direction were taken across the organization.
Speaker Change: Perfect and then.
Speaker Change: Just a follow up around NR.
Could you maybe remind us about the relative headwind related to some of those pricing changes.
Speaker Change: Like on an adjusted basis has that trough and stabilized and then I think also just the context of what that was historically so that when we think about the next year or may be an environment, where there might be better economic growth tailwind what would be the general range that you would consider as normal or.
Speaker Change: Normal.
Speaker Change: Expansionary kind of rates from that metric. Thank you.
Speaker Change: Yes.
Speaker Change: I wanted to start I think taken out as we have and often speak to NR without marketing technology solutions, just given the campaign based nature of them versus a recurrent standpoint.
Speaker Change: <unk> had in previous periods.
Speaker Change: Looking at 99% to 100% that revenue retention in certain quarters, just a little beyond that.
Speaker Change: Well as you heard us speak to and we've spoken to it in past quarters. The anniversary of a really large pricing action that just would not be repeated in two of our lower <unk> solutions.
Speaker Change: We saw the benefit of a from a growth standpoint in 2022 and through the end of 2023, we're watching that.
Speaker Change: <unk>.
Speaker Change: From a non repetitive standpoint, where the anniversary of that happened through the end of 2024, So we measure.
Speaker Change: On an LTM basis are you actually see the impact over that over a longer period of time I think we are actually we are starting to see that.
Speaker Change: Rise again, but those that do.
Speaker Change: That is the core driver of that reduction from the 99 to a 100% IRR to that 90, 697% that we've reported the last two quarters.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Our next question comes from Bill Mcnamara of Evercore ISI Bill go ahead with your question.
Speaker Change: Hi, This is bill on for Kirk and thanks for taking my question.
Speaker Change: Given interest rate cuts in the political landscape has your perspective on the M&A environment changed at all since last quarter.
Speaker Change: Thanks for the question.
Speaker Change: It really hasnt changed several years, but we are always going to be looking for opportunities to maximize the value of the organization and that can mean from an M&A acquisition or divestiture standpoint, and so we take all those factors into account as you looked at anything.
And if we see something that is going to make sense for us organizationally again, whether that's from a acquisition or divestiture standpoint, we will proceed accordingly.
Speaker Change: Great and then with the decentralization of sales marketing and product development do you see this as requiring an increase in head count or retraining any personnel to hit full productivity.
Speaker Change: Yes.
Speaker Change: We don't certainly on the second part of your question.
Speaker Change: Not a real issue from a retraining standpoint.
Speaker Change: And when we look at this from a personnel standpoint, I think they are.
Speaker Change: Just looking on its space no not not from an incremental standpoint, there may be places, where we have to add personnel, where there werent. They werent there before there may be opportunities for.
Speaker Change: Personnel to actually consolidated in certain places so on a net net basis, we don't we don't look at that from a.
Speaker Change: A large required change to head count.
Speaker Change: Alright, Thank you for taking my questions.
Speaker Change: This concludes the question and answer session I would now like to turn it back to Eric <unk> for closing remarks.
Eric Kramer: Well. Thank you all for participating the call today, we're incredibly excited about the progress we're making in both our transformation optimization programs as well as the results. We shared with you today I want to once again, thank the entire ever commerce team for their hard work and thank you all of you for your support.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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