Strong Customer Growth and Adoption Drive
Second Quarter Revenue Increase of 43% Company Raises Revenue
Guidance
- SMB Revenue up 56% fueled by new customer adds and
growth from existing customers
- Enterprise Revenue up 29% driven by strong go-lives and
digital adoption
EngageSmart, Inc. (NYSE: ESMT), a leading provider of vertically
tailored customer engagement software and integrated payments
solutions, today reported financial results for the second quarter
ended June 30, 2022.
"We are excited to report another strong quarter marked by high
growth and increased profitability,” said Bob Bennett, EngageSmart
CEO. “EngageSmart delivered revenue growth of 43% year over year
and Adjusted EBITDA of $12 million, driven by exceptional traction
in our vertically tailored SaaS solutions. Our continued success is
a result of our solid business model, our market leadership
position, and excellent execution by our dedicated team."
“New customer adds and an increase in average revenue per
customer fueled strong momentum across the business,” stated
Cassandra Hudson, CFO of EngageSmart. “SMB's impressive growth of
56% year over year, combined with Enterprise’s robust growth of 29%
year over year, highlight the value of our model as it delivers
durability, visibility, growth, and cash flow to fuel our flywheel.
Our results are driven by strong demand for our solutions, our
compelling market position in what we believe are resilient
verticals and our product leadership as measured by adoption and
retention. Looking ahead, we are enthusiastic about the significant
opportunity before us and continue to invest in our solutions to
unlock EngageSmart’s full potential.”
Second Quarter 2022 Financial and Business
Performance
- Total Revenue increased 43% to $73.9 million compared to
$51.7 million in the second quarter of 2021.
- SMB Revenue increased 56% to $40.8 million compared to
$26.1 million in the second quarter of 2021.
- Enterprise Revenue increased 29% to $33.0 million
compared to $25.6 million in the second quarter of 2021.
- Gross Profit was $56.1 million, representing 75.9% gross
margin, compared to $38.5 million, or 74.3% gross margin, for the
second quarter of 2021. Adjusted Gross Profit was $57.8 million,
representing 78.2% Adjusted Gross Profit Margin, compared to $40.1
million, or 77.4% Adjusted Gross Profit Margin, for the second
quarter of 2021.1
- Net Income was $6.9 million, representing 9.3% net
income margin, in the second quarter of 2022, compared to net loss
of $0.2 million, or 0.4% net loss margin, in the second quarter of
2021.
- Adjusted EBITDA was $12.0 million, representing 16.2%
Adjusted EBITDA Margin, compared to $7.8 million, or 15.0% Adjusted
EBITDA Margin, for the second quarter of 2021.1
- Cash and Cash Equivalents were $274.2 million as of June
30, 2022, compared to $254.3 million as of December 31, 2021.
- Total Number of Customers increased by 29% to 92.6
thousand as of June 30, 2022, compared to 71.8 thousand as of June
30, 2021.
- Total Transactions Processed increased 35% to 36.1
million compared to 26.6 million in the second quarter of
2021.
____________________
1Reconciliations of GAAP to non-GAAP
financial measures, including Adjusted Gross Profit, Adjusted Gross
Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin, as well
as definitions for the non-GAAP financial measures included in this
press release and the reasons for their use, are presented
below.
Financial Outlook
Q3'22
FY'22
Guidance
Guidance
Revenue (in millions)
$73.5 - $75.0
$295.0 - $297.5
Adjusted EBITDA (in millions)
$9.7 - $10.2
$42.5 - $43.5
With the information available as of August 4, 2022, we are
providing the above guidance for the third quarter and full year of
2022, based on current market conditions and expectations. This
guidance is subject to various important cautionary factors
referenced in the “Forward-Looking Statements” section below.
A reconciliation of Adjusted EBITDA guidance to net income
(loss) on a forward-looking basis cannot be provided without
unreasonable efforts, as we are unable to provide reconciling
information with respect to interest (income) expense, net,
(benefit from) provision for income taxes, depreciation,
amortization of intangible assets, transaction-related expenses,
the fair value adjustment of acquired deferred revenue, stock-based
compensation, and restructuring charges, all of which are
adjustments to Adjusted EBITDA.
Webcast and Conference Call Information
EngageSmart, Inc. (NYSE: ESMT), a leading provider of vertically
tailored customer engagement software and integrated payments
solutions, will report second quarter 2022 financial results before
the market opens on Thursday, August 4, 2022. Management will host
a conference call to discuss the results at 8:30 a.m. ET.
The conference call will be webcast live on EngageSmart’s
investor relations website at
https://investors.engagesmart.com/events-and-presentations/events/.
A replay will be available on the investor relations website
following the call.
For investors and analysts wishing to participate in the call,
the dial-in numbers are (800) 891-3840 for domestic callers and
(785) 424-1675 for international callers. The conference ID is
ENGAGESMART, and the program title is EngageSmart Q2 2022 Earnings
Call.
About EngageSmart
EngageSmart is a leading provider of vertically tailored
customer engagement software and integrated payments solutions. At
EngageSmart, our mission is to simplify customer and client
engagement to allow our customers to focus resources on initiatives
that improve their businesses and better serve their communities.
We offer single instance, multi-tenant, true Software-as-a-Service
(“SaaS”) vertical solutions, including SimplePractice,
InvoiceCloud, HealthPay24 and DonorDrive, that are designed to
simplify our customers’ engagement with their clients by driving
digital adoption and self-service. As of June 30, 2022, EngageSmart
serves more than 89,000 customers in the SMB Solutions segment and
more than 3,200 customers in the Enterprise Solutions segment
across several core verticals: Health & Wellness, Government,
Utilities, Financial Services, Healthcare and Giving. Our SaaS
solutions are purpose-built for each of our verticals, and they
simplify and automate mission-critical workflows such as
scheduling, client onboarding, client communication, paperless
billing, and electronic payment processing. Our solutions transform
our customers’ digital engagement and empower them to manage,
improve, and grow their businesses. For more information, visit
www.engagesmart.com and follow us on LinkedIn.
Forward-Looking Statements
Certain statements in this release are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 and are based on current expectations and
assumptions that are subject to risks and uncertainties. All
statements contained in this news release that do not relate to
matters of historical fact should be considered forward-looking
statements, and are generally identified by words such as “expect,”
“intend,” “anticipate,” “estimate,” “believe,” “future,” “could,”
“should,” “plan,” “aim,” and other similar expressions. These
forward-looking statements include, but are not limited to,
statements regarding anticipated financial performance and
financial position, including our financial outlook for the third
quarter, full year 2022 and thereafter, and other statements that
are not historical facts. These forward-looking statements are
neither promises nor guarantees, but involve risks and
uncertainties that may cause actual results to differ materially
from those contained in the forward-looking statements. Our actual
results could differ materially from those anticipated in these
forward-looking statements for many reasons, including, but not
limited to, the following: our inability to sustain our rapid
growth; failure to manage our infrastructure to support our future
growth; our risk management efforts not being effective to prevent
fraudulent activities; inability to attract new customers or
convert trial customers into paying customers; inability to
introduce new features or services successfully or to enhance our
solutions; declines in customer renewals or failure to convince
customers to broaden their use of solutions; inability to achieve
or sustain profitability; failure to adapt and respond effectively
to rapidly changing technology, evolving industry standards and
regulations and changing business needs, requirements or
preferences; real or perceived errors, failures or bugs in our
solutions; intense competition; lack of success in establishing,
growing or maintaining strategic partnerships; fluctuations in
quarterly operating results; future acquisitions and investments
diverting management’s attention and difficulties associated with
integrating such acquired businesses; general economic conditions
(including inflation and rising interest rates), both domestically
and internationally, as well as economic conditions affecting
industries in which our customers operate; the war in Ukraine;
concentration of revenue in our InvoiceCloud and SimplePractice
solutions; COVID-19 pandemic and its impact on our employees,
customers, partners, clients and other key stakeholders; legal and
regulatory risks; and technology and intellectual property-related
risks, among others.
Other important risk factors that could affect the outcome of
the events set forth in these statements and that could affect the
Company’s operating results and financial condition are discussed
in Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2021, and our subsequent Quarterly Reports on Form
10-Q, as updated by our future filings with the Securities and
Exchange Commission (“SEC”). Such statements are based on the
Company’s beliefs and assumptions and on information currently
available to the Company. The Company disclaims any obligation to
publicly update or revise any such forward-looking statements as a
result of developments occurring after the date of this document
except as required by law.
Non-GAAP Financial Measures
This press release includes certain performance metrics and
financial measures not based on GAAP, including Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross
Margin, and Non-GAAP Operating Expenses, as well as key business
metrics, including total Number of Customers and total Transactions
Processed.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit,
Adjusted Gross Margin, and Non-GAAP Operating Expenses are
supplemental measures of our performance that are not required by,
or presented in accordance with, GAAP and should not be considered
as an alternative to net income (loss), gross profit, and operating
expenses or any other performance measure derived in accordance
with GAAP.
We define Adjusted EBITDA as net income (loss) excluding
interest (income) expense, net; (benefit from) provision for income
taxes; depreciation; and amortization of intangible assets, as
further adjusted for transaction-related expenses, the fair value
adjustment of acquired deferred revenue, stock/equity-based
compensation, and restructuring charges. We define Adjusted EBITDA
Margin as Adjusted EBITDA divided by revenue plus the fair value
adjustment of acquired deferred revenue.
We define Adjusted Gross Profit as gross profit as adjusted for
the fair value adjustment of acquired deferred revenue,
amortization of intangible assets, stock/equity-based compensation,
and transaction-related expenses. We define Adjusted Gross Margin
as Adjusted Gross Profit divided by revenue plus the fair value
adjustment of acquired deferred revenue.
We define Non-GAAP Operating Expenses as GAAP operating expenses
excluding stock/equity-based compensation and transaction-related
expenses. We define Non-GAAP Operating Expenses as a percentage of
revenue as Non-GAAP Operating Expenses divided by revenue plus the
fair value adjustment of acquired deferred revenue.
We define Number of Customers as individuals or entities with
whom we directly contract to use our solutions.
We define Transactions Processed as the number of accepted
payment transactions, such as credit card and debit card
transactions, automated clearing house (“ACH”) payments, emerging
electronic payments, other communication, text messaging and
interactive voice response transactions, and other payment
transaction types, which are facilitated through our platform
during a given period. We believe Transactions Processed is a key
business metric for investors because it directly correlates with
transaction and usage-based revenue. We use Transactions Processed
to evaluate changes in transaction and usage-based revenue over
time.
We caution investors that amounts presented in accordance with
our definitions of Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Gross Profit, Adjusted Gross Margin, and Non-GAAP
Operating Expenses may not be comparable to similar measures
disclosed by our competitors because not all companies and analysts
calculate these non-GAAP financial measures in the same manner. We
present these non-GAAP financial measures because we consider these
metrics to be important supplemental measures of our performance
and believe they are frequently used by securities analysts,
investors, and other interested parties in the evaluation of
companies in our industry. Management believes that investors’
understanding of our performance is enhanced by including these
non-GAAP financial measures as a reasonable basis for comparing our
ongoing results of operations.
Non-GAAP financial measures assist management in assessing
operating performance by removing the impact of items not directly
resulting from our core operations, to present operating results on
a consistent basis. Management uses these non-GAAP financial
measures for planning purposes, including the preparation of our
internal annual operating budget and financial projections; to
evaluate the performance and effectiveness of our operational
strategies; and to evaluate our capacity to expand our business.
These non-GAAP financial measures have limitations as analytical
tools, and should not be considered in isolation, or as an
alternative to, or a substitute for net income, gross profit, and
operating expenses, or other financial statement data presented in
accordance with GAAP in our consolidated financial statements.
Disclosure
We disclose other items through a variety of disclosure channels
in order to achieve broad, non-exclusionary distribution of
information to the public. Some of the information distributed
through these disclosure channels may be considered material
information. Investors and others are encouraged to review the
information we make public in the locations below.* This list may
be updated from time to time.
*For information concerning EngageSmart and its products and
services, please visit: www.engagesmart.com
*For information provided to the investment community, including
news releases, events and presentations, and SEC filings, please
visit: investors.engagesmart.com/overview/default.aspx
*For information provided to the media, including news releases,
please visit: investors.engagesmart.com/news/default.aspx
*For additional information, please follow EngageSmart’s social
media accounts: www.twitter.com/engagesmartinc,
www.facebook.com/EngageSmartInc, and
www.linkedin.com/company/engagesmart
EngageSmart, Inc.
Condensed Consolidated
Statement of Operations
(Unaudited, in thousands,
except share and per share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Revenue
$
73,862
$
51,747
$
141,224
$
99,171
Cost of revenue
17,803
13,278
33,842
25,498
Gross profit
56,059
38,469
107,382
73,673
Operating expenses:
General and administrative
14,997
9,048
28,284
16,703
Selling and marketing
23,692
17,083
46,356
32,128
Research and development
10,993
7,822
21,033
14,815
Contingent consideration expense
—
11
—
213
Restructuring charges
—
89
—
89
Amortization of intangible assets
2,362
2,362
4,724
4,724
Total operating expenses
52,044
36,415
100,397
68,672
Income from operations
4,015
2,054
6,985
5,001
Other income (expense), net:
Interest expense, including related party
interest
(121
)
(2,295
)
(240
)
(4,600
)
Other income (expense), net
322
(37
)
350
(79
)
Total other income (expense), net
201
(2,332
)
110
(4,679
)
Income (loss) before income taxes
4,216
(278
)
7,095
322
(Benefit from) provision for income
taxes
(2,663
)
(67
)
(1,843
)
48
Net income (loss) and comprehensive income
(loss)
$
6,879
$
(211
)
$
8,938
$
274
Net income (loss) per share:
Basic
$
0.04
$
(0.00
)
$
0.05
$
0.00
Diluted
$
0.04
$
(0.00
)
$
0.05
$
0.00
Weighted-average number of common shares
outstanding:
Basic
162,991,881
147,857,518
162,569,871
147,778,379
Diluted
168,950,869
147,857,518
168,983,310
150,323,994
EngageSmart, Inc.
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
June 30, 2022
December 31, 2021
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
274,209
$
254,294
Accounts receivable, net of allowance for
credit losses of $289 and $203 as of June 30, 2022 and December 31,
2021, respectively
10,797
10,266
Unbilled receivables
4,557
3,441
Prepaid expenses and other current
assets
9,209
7,617
Total current assets
298,772
275,618
Operating lease right-of-use assets
29,113
—
Property and equipment, net
12,508
10,968
Goodwill
425,677
425,677
Acquired intangible assets, net
80,119
87,920
Other assets
4,581
3,811
Total assets
$
850,770
$
803,994
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
1,070
$
2,090
Accrued expenses and other current
liabilities
27,006
25,229
Contingent consideration liability
—
2,800
Deferred revenue
7,543
6,792
Operating lease liabilities
4,504
—
Total current liabilities
40,123
36,911
Long-term operating lease liabilities
29,728
—
Deferred income taxes
2,381
4,224
Deferred revenue, net of current
portion
213
232
Other long-term liabilities
189
5,528
Total liabilities
72,634
46,895
Stockholders' equity:
Preferred stock, par value $0.001 per
share, 10,000,000 shares authorized and no shares issued and
outstanding as of June 30, 2022 and December 31, 2021
—
—
Common stock, par value $0.001 per share,
650,000,000 shares authorized and 163,634,818 and 161,860,980
shares issued and outstanding as of June 30, 2022 and December 31,
2021, respectively
164
162
Additional paid-in capital
799,140
787,043
Accumulated stockholders' deficit
(21,168
)
(30,106
)
Total stockholders’ equity
778,136
757,099
Total liabilities and stockholders’
equity
$
850,770
$
803,994
EngageSmart, Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
Six Months Ended June
30,
2022
2021
Cash flows from operating
activities:
Net income
$
8,938
$
274
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
9,273
8,786
Stock/equity-based compensation
expense
6,314
560
Contingent consideration expense
—
213
Non-cash operating lease expense
2,279
—
Deferred income taxes
(1,843
)
48
Loss on disposal of property and
equipment
—
40
Non-cash interest expense
116
2,066
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets
(1,592
)
(1,499
)
Accounts receivable, net
(531
)
79
Unbilled receivables
(1,116
)
(1,176
)
Other assets
(886
)
(340
)
Accounts payable
(989
)
92
Accrued expenses and other current
liabilities
589
2,602
Deferred revenue
732
623
Operating lease liabilities
(2,873
)
—
Other long-term liabilities
27
(324
)
Net cash provided by operating
activities
18,438
12,044
Cash flows from investing
activities:
Purchases of property and equipment,
including costs capitalized for development of internal-use
software
(2,933
)
(2,189
)
Net cash used in investing activities
(2,933
)
(2,189
)
Cash flows from financing
activities:
Payment of debt issuance costs
(23
)
—
Payments of related party notes
—
(5,900
)
Payments of contingent consideration
(1,066
)
(1,868
)
Proceeds from exercise of
stock/equity-based options
5,588
848
Payments of taxes related to net share
settlement of equity awards
(266
)
—
Proceeds from issuance of common stock
under employee stock purchase plan
463
—
Payment of initial public offering
costs
(286
)
(524
)
Net cash provided by (used in) financing
activities
4,410
(7,444
)
Net increase in cash, cash equivalents and
restricted cash
19,915
2,411
Cash, cash equivalents and restricted cash
at beginning of period
254,594
29,650
Cash, cash equivalents and restricted cash
at end of period
$
274,509
$
32,061
Reconciliation of cash, cash
equivalents, and restricted cash:
Cash and cash equivalents
$
274,209
$
31,761
Restricted cash within other assets
300
300
Total cash, cash equivalents, and
restricted cash
$
274,509
$
32,061
EngageSmart, Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Reconciliation of GAAP Net Income (Loss) to Adjusted
EBITDA
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands, except
percentages)
Net income (loss)
$
6,879
$
(211
)
$
8,938
$
274
Net income (loss) margin
9.3
%
(0.4
)%
6.3
%
0.3
%
Adjustments:
(Benefit from) provision for income
taxes
(2,663
)
(67
)
(1,843
)
48
Interest (income) expense, net
(210
)
2,295
(122
)
4,600
Amortization of intangible assets
3,899
3,900
7,800
7,800
Depreciation
733
537
1,473
986
Fair value adjustment of acquired deferred
revenue
—
35
—
94
Stock/equity-based compensation
3,327
338
6,314
560
Restructuring charges
—
89
—
89
Transaction-related expense
—
848
(38
)
1,232
Adjusted EBITDA
$
11,965
$
7,764
$
22,522
$
15,683
Adjusted EBITDA Margin
16.2
%
15.0
%
15.9
%
15.8
%
Reconciliation of GAAP Gross Profit to Adjusted Gross
Profit
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands, except
percentages)
Gross profit
$
56,059
$
38,469
$
107,382
$
73,673
Gross margin
75.9
%
74.3
%
76.0
%
74.3
%
Adjustments:
Fair value adjustment of acquired deferred
revenue
—
35
—
94
Amortization of intangible assets
1,537
1,538
3,076
3,076
Stock/equity-based compensation
155
4
263
8
Transaction-related expense
—
25
—
52
Adjusted Gross Profit
$
57,751
$
40,071
$
110,721
$
76,903
Adjusted Gross Margin
78.2
%
77.4
%
78.4
%
77.5
%
Reconciliation of GAAP Operating Expenses to Non-GAAP
Operating Expenses
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands, except
percentages)
General and administrative expenses
$
14,997
$
9,048
$
28,284
$
16,703
General and administrative as a percentage
of revenue
20.3
%
17.5
%
20.0
%
16.8
%
Less:
Stock/equity-based compensation
(2,377
)
(270
)
(4,696
)
(454
)
Transaction-related expense
—
(805
)
38
(951
)
Non-GAAP general and administrative
expenses
$
12,620
$
7,973
$
23,626
$
15,298
Non-GAAP general and administrative as a
percentage of revenue
17.1
%
15.4
%
16.7
%
15.4
%
Selling and marketing expenses
$
23,692
$
17,083
$
46,356
$
32,128
Selling and marketing as a percentage of
revenue
32.1
%
33.0
%
32.8
%
32.4
%
Less:
Stock/equity-based compensation
(557
)
(40
)
(960
)
(63
)
Non-GAAP selling and marketing
expenses
$
23,135
$
17,043
$
45,396
$
32,065
Non-GAAP selling and marketing as a
percentage of revenue
31.3
%
32.9
%
32.1
%
32.3
%
Research and development expenses
$
10,993
$
7,822
$
21,033
$
14,815
Research and development as a percentage
of revenue
14.9
%
15.1
%
14.9
%
14.9
%
Less:
Stock/equity-based compensation
(238
)
(24
)
(395
)
(35
)
Transaction-related expense
—
(8
)
—
(17
)
Non-GAAP research and development
expenses
$
10,755
$
7,790
$
20,638
$
14,763
Non-GAAP research and development as a
percentage of revenue
14.6
%
15.0
%
14.6
%
14.9
%
Disaggregated Revenue
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands)
Enterprise Solutions
Transaction and usage-based
$
29,989
$
22,929
$
58,308
$
44,540
Subscription
2,156
1,890
4,237
3,717
Other
872
816
1,332
1,457
Total Enterprise Solutions revenue
33,017
25,635
63,877
49,714
SMB Solutions
Transaction and usage-based
11,237
8,164
22,264
15,304
Subscription
29,225
17,646
54,277
33,656
Other
383
302
806
497
Total SMB Solutions revenue
40,845
26,112
77,347
49,457
Total revenue
$
73,862
$
51,747
$
141,224
$
99,171
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803005932/en/
Investor Relations Josh Schmidt EngageSmart, Inc.
IR@engagesmart.com Press Nicole Bestard Quarter Horse PR
Engagesmart@qh-pr.com
EngageSmart (NYSE:ESMT)
Historical Stock Chart
From Jun 2024 to Jul 2024
EngageSmart (NYSE:ESMT)
Historical Stock Chart
From Jul 2023 to Jul 2024