EverCommerce Inc

NASDAQ:EVCM

Earnings Call Analysis

Steady Growth and Strategic Focus

EverCommerce achieved 4.3% revenue growth in Q2 2024, exceeding guidance. After divesting North American fitness solutions, pro forma growth was 6%. Payments revenue saw an 8% year-over-year increase, pushing total payment volume to $12.1 billion. Adjusted EBITDA hit $41.2 million, representing a 23.2% margin. Looking ahead, Q3 revenue is expected between $172 million and $176 million, with full-year guidance holding at $676 million to $696 million. With ongoing optimization and transformational initiatives, EverCommerce aims to further improve profitability and growth.

Strong Financial Performance in Q2 2024

In the second quarter of 2024, EverCommerce reported a revenue of $177.4 million, marking a 4.3% year-over-year increase and exceeding their previous guidance. This growth includes a notable pro forma revenue growth rate of 6%, adjusted to account for the divestiture of their North American fitness solutions agreed upon earlier this year. Meanwhile, subscription and transaction revenue grew by 5.2%, driven by continued customer adoption of core software solutions. Adjusted EBITDA for the quarter was $41.2 million, a 6.2% increase from the prior year, resulting in a strong adjusted EBITDA margin of 23.2%.

Paid Advertising and Marketing Solutions Insights

Revenue from Marketing Technology Solutions saw a modest increase of 1.6% compared to the prior year, suggesting stabilization after recent declines. However, retaining customers and managing perceptions in this sector remains vital during a challenging macroeconomic environment. This segment is projected to remain flat year-over-year as companies navigate fiscal constraints.

Success of Payment Solutions Driving Revenue Growth

The company's payment revenue, which excludes the divested fitness solutions, grew by 8%, significantly contributing to overall performance. EverCommerce observed an 8.4% growth in total payment volume (TPV), crossing over the $12 billion mark. The firm has increasingly focused on helping its small and mid-sized business customers leverage payment solutions effectively, with a concerted effort to enhance transaction capabilities and expand services offered.

Strategic Share Buybacks and Cash Management

EverCommerce's board increased its share repurchase authorization by $50 million, now totaling approximately $104 million available through 2025. In Q2 alone, the company bought back 2.5 million shares for about $24.1 million. Maintaining a strong liquidity position, the firm ended the quarter with $87 million in cash while having $190 million available through a revolver, positioning itself well for future investments.

Guidance and Future Outlook

For the third quarter, EverCommerce expects revenue between $172 million and $176 million and adjusted EBITDA of $39 million to $42 million. Moreover, the full-year guidance remains unchanged with anticipated revenues of $676 million to $696 million, showcasing a commitment to long-term operational transformation and optimization initiatives aimed at driving profitability. As the company continues its equipment line rollouts, especially EverPro Edge, it anticipates a positive impact on customer engagement and revenue generation.

Focus on Customer Retention and Cross-Selling Strategies

The focus on expanding customer relationship value is evident in the growth of customers enabled for multiple solutions, up 25% year-over-year. Notably, EverCommerce's net revenue retention (NRR) for core software payment solutions stands at a commendable 97%, despite facing headwinds from previous pricing adjustments. This indicates a generally stable retention pattern among existing customers, affirming the value derived from integrated solution offerings.

Operational Efficiency Initiatives

In an ongoing effort to bolster operational efficiencies, EverCommerce is undergoing transformation initiatives that emphasize optimizing processes and enhancing product offerings within the EverHealth and EverPro verticals. They aim to streamline structures and improve customer acquisition methodologies in line with growth strategies. Implementation of common company-wide systems is anticipated to solidify these efforts moving forward.

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for standing by, and welcome to the EverCommerce's Second Quarter 2024 Earnings Call. My name is Briana, and I will be your operator for today. [Operator Instructions]



And I would now like to turn the conference over to Brad Korch, SVP and Head of Investor Relations for EverCommerce. Please go ahead.

[Bradley Korch, executive]

Good afternoon, and thank you for joining. Today's call will be led by Eric Remer, EverCommerce's Chairman and Chief Executive Officer; and Marc Thompson, EverCommerce's Chief Financial Officer. Joining them for the Q&A portion of the call is EverCommerce's President, Matt Feierstein, EverCommerce's incoming Chief Financial Officer and current Chief Accounting Officer, Ryan Siurek; and EverCommerce's Chief Operating Officer, Evan Berlin.



This call is being webcast with a slide presentation that reviews the key financial and operating results for the 3 months ended June 30, 2024. For a link to a live or replay webcast, please visit the Investor Relations section of the EverCommerce website, www.evercommerce.com. The slide presentation and earnings release are also directly available on the site.



Please turn to Page 2 of our earnings call presentation while I review our safe harbor statement. Statements made on this call and contained in the earnings materials available on our website that are not historical in nature may constitute forward-looking statements. Such statements are based on the current expectations and beliefs of management. Actual results may differ materially from these forward-looking statements due to risks and uncertainties as 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 our earnings call presentation.



Before we discuss second quarter results, I would like to once again highlight the presentation of results and KPIs included in the earnings call slides and our prepared comments. As discussed last quarter, we announced the sale of our 4 fitness industry solutions in early March. The sale of the 2 North American solutions closed simultaneous with deal signing on March 13 and the 2 international solutions closed on July 1.



Our GAAP results included 2 North American solutions through the date of closing. Our 2 international solutions are held for sale and continue to be reported on our results of operations through the second quarter of 2024. As a result, revenue growth rates are affected by the sales of North American assets.



Operational metrics such as customer count, TPV and customers enable for more than one solution that we will discuss today have all been adjusted to exclusive fitness solutions on a Pro Forma basis.



I will now turn it over to our CEO, Eric Remer. Please continue.

[Eric Remer, executive]

Thank you, Brad. On today's call, I will highlight second quarter 2024 results, dive into some key customer trends, discuss some case studies on our customer payment adoptions and provide an update on our transformation and optimization initiatives before turning the call over to Marc to go deeper into our financials.



Turning to our second quarter highlights. Our reported revenue exceeded the top end of our guidance range with growth of 4.3% year-over-year. Pro Forma revenue growth, which excludes the North American fitness assets sold in March was 6%. Adjusted EBITDA of $41.2 million beat the midpoint of our guidance range, representing a 23.2% margin. Adjusted EBITDA margins expanded modestly year-over-year despite investments based on the business.



Payment's revenue, excluding the fitness solutions, grew 8% year-over-year, driven by our 8.4% growth in TPV. Driving payments adoption continues to be a key element of our strategy, one that I will highlight with some case studies in a few moments.



In the second quarter, our board also increased our share repurchase authorization by $50 million and extended the program through the end of 2025. In the second quarter, we repurchased approximately 2.5 million shares for $24.1 million, bringing our total repurchase since inception of our buybacks in mid-2022 to 15.6 million shares. At the end of second quarter, we had approximately $54 million remaining authorization.



EverCommerce provides SaaS solutions to the service SMB economy. We offer tremendous value to our customers by providing solutions tailored to unique workflows and interactions that various services require. Our software solutions not only provide a system of action necessary to run the daily business processes, but also the marketing solutions to attract the business, the building of payment solutions to collect effortlessly and the customer experience solution to create predictable and convenient experiences.



Our solutions are cost effective, easy to implement and purpose-built for the service businesses. We provide end-to-end solutions that are more than 690,000 customers need to compete and grow in a marketplace that is rapidly transforming.



Excluding the North American fitness solutions, we've sold and including our Kickserv acquisition, we ended the quarter with $682 million in LTM revenue, representing 7% growth. With a focus on balanced profitability, we generate 24.1% adjusted EBITDA margin on an LTM basis.



Finally, we crossed over the $12 billion mark of annualized total payment volume, or TPV, a key metric for not just payment adoption, but for growth and profitability. We report our progress in payments adoption quarterly as a key measure of our [indiscernible] expense strategy. We land with our core business management software, net upsell and cross-sell, our existing customer additional features, services and products, leading with payments are most mature cross-sell motion. This enhances the value that our customers receive in relationship with EverCommerce, and drive additional revenue.



At the end of the second quarter, 199,000 customers were enabled to more than one solution, reflecting a 25% year-over-year growth. As we discussed when we introduced this metric, enabling customers to more than one solution is the first step in the funnel that leads to increased revenue, retention and ultimately profitability of these customers.



Once customers are enabled, the next action for us is to help facilitate usage. In the case of payments, this is helping our customers to actively process payments on our platform. We measure this step in the funnel as utilization. At the end of the second quarter, approximately 87,000 customers were actively utilizing more than one solution, reflecting a 16% year-over-year growth.



Customers that purchase and utilize more than one solution are naturally some of our most profitable and stickiest customers. This is because we have provided significant value to them in their businesses. A positive byproduct of our cross-sell motion is strong net revenue retention. Looking back over the trailing 12 months, our annualized net revenue retention, or NRR for core software payment solutions was 97%. While this is down slightly on a sequential basis, a major driver here was the anniversary for price increase in one of our high velocity, lower ARPU solution and not a measurable change in our customer churn dynamics.



Embedded payments is the most accretive cross-sell opportunity and is a key component of EverCommerce's growth strategy. Year-over-year, our payments revenue, excluding the fitness solutions grew 8%, accounting for approximately 17% of overall revenue. We report our payments revenue on a net basis, and as a result, payment revenue contributed approximately 95% gross margin as a meaningful contributor to overall adjusted EBITDA margin.



Second quarter estimated annual total payment volume or TPV was approximately $12.1 billion, representing 8.4% year-over-year growth. We continue to invest and actively manage our onboarding program to accelerate payment adoption, which we believe can accelerate payments revenue growth. These payment and cross-sell enabled metrics exercise the good progress we are making, but we are still very much in the early innings of the story.



To illustrate the impact of continued progress to have in our business, we want to walk through 2 case studies: one on payment adoption and a second regarding the growth opportunity of our newly launched EverPro Edge subscription adoption.



Starting with the payment's adoption of Timely, which is our salon and spa software that's focused on New Zealand, Australian and U.K. markets. Timely is a full-service [indiscernible] software that allows [indiscernible] manage customer appointment, inventory, stylist scheduling and, of course, taking payments. We acquired this solution on late 2021, Timely's initial use of case payments was for taking appointment deposits via the web. While this provided much needed service for our customers in these markets, the [indiscernible] deposits are as common as restaurant reservation deposits have become in the U.S. It did not allow for our customers to take payments for all their services.



What our customers really needed was a point-of-sale solution that could be used within the salon to capture payments for salon services like haircuts, products sold in the store as well. So we invested to make that happen. We developed features within our software to handle these payments. We partnered with a new provider to offer a point-of-sale terminal in salon.



Given the nature of our SMB-focused business, these terminals needed to be self-provisioning and easy-to-use out-of-box. After completing this new integration and [indiscernible] for the point-of-sale device enablement, we've seen our TPV approximately double just over a year. This is driven by both average annualized TPV per active process and customer growth of over 50% and growth in customers enabled for payments processing from 41% to 52% of customers over the same time period.



Our second case study is EverPro Edge. In the second half of 2023, we introduced our new EverPro Edge solution for existing [ joyous ] customers. As we discussed at our March earnings call, EverPro Edge is a new solution that provides customers the opportunity to save, learn and grow, create a community and trusted brand for engaging with them.



EverPro Edge provides the opportunity for our customers to engage with educational content to help them improve their operations as well as their cash track rebates of leading vendors where they may already be purchasing goods. Since the introduction of Edge, we have seen joyous customers that joined Edge grow their overall ARPU by approximately 3x. Given that the rebate portion of the Edge is nearly 100% margin, this ARPU growth also translated into significant margin expansion.



Edge also hits as a value of these customers gained from the EverCommerce relationship and the rebates received because in some case offset the cost of the software for our customers. This is a true win-win and something we think can help us better grow and retain customers.



A key component of our growth acceleration strategy is our transformation optimization program, about which I would like to provide a quick update. During the quarter, we made significant progress against a multi-quarter program. On the optimization side, we continue to validate saving opportunities, looking to consolidate spend across vendors and in some cases, we imagine how we allocate resources. Our transformation initiatives continue to align our business around EverHealth and EverPro customer verticals, ultimately giving these business units, the organizational structure and support they need to accelerate growth. This includes simplifying our organizational structure and decommissioning legacy brands as well as investing in key sales and go-to-market gaps that have impacted our growth rate.



During the quarter, we made some key sales and market position hires that are integral steps to achieving the vision. We also launched our first EverPro website that begins to consolidate those product brands in the same fashion we discussed with EverHealth in the past.



We've also begun to invest in common company-wide systems that will increase operational efficiencies aligned with our transformation efforts. We are doing the work now that we believe will enable us to accelerate growth to both enhance customer acquisition and improve cross-sell capabilities and ultimately also drive better profitability. In the coming months, we expect to have additional new excited announcements as we continue to drive our transformation journey.



Before I turn the call over to Marc, I'd like to quickly comment on the announcement we made today in conjunction with our earnings release. This afternoon, we announced the appointment of Ryan Siurek as EverCommerce's new Chief Financial Officer, effective September 6. Ryan joined EverCommerce a little over a year ago as a Chief Accounting Officer and working closely with him over the last year has become clear that he has both the skills and the drive necessary to help us lead EverCommerce's next phase of growth. This is a bittersweet announcement though, as I'm excited to see Ryan step into this role. I will miss working with Marc, who has been a strong partner to me in the EverCommerce leadership team over the past 8 years.



Now I'll pass it over to Marc, who will review our financial results in more detail as well as discuss third quarter and full year 2021 guidance.

[Marc Thompson, executive]

Thanks, Eric. Total reported revenue in the second quarter was $177.4 million, up 4.3% from the prior year period and exceeding the top end of our guidance range. This was also the highest quarterly revenue on record. Within total reported revenue, subscription and transaction revenue was $137 million, up 5.2% from the prior year period, and revenue from Marketing Technology Solutions was $35 million, up 1.6% from the prior year period. We managed the business for sustainable organic growth and selectively utilized strategic acquisitions to augment the trajectory of this growth. As a result, we believe it's important for investors to evaluate our business growth on a Pro Forma basis, which is how we measure and manage the business internally.



We calculate our Pro Forma revenue growth as though all acquisitions and divestitures closed as of the end of the latest period were closed as of the first day of the prior year period, including before the time we completed the acquisition or divestiture. We believe the Pro Forma growth rate provides the best insight into the underlying growth dynamics of our business. For the second quarter of 2024, year-over-year Pro Forma revenue growth was 6%, while year-over-year Pro Forma subscription and transaction revenue growth was 7.3%.



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. While we believe that our Marketing Technology Solutions are stabilizing amidst continuing headwinds, the results negatively impacted consolidated revenue growth in the second quarter.



As Eric noted, we also exceeded the midpoint of our adjusted EBITDA guidance range. Second quarter adjusted EBITDA was $41.2 million, representing a 23.2% margin versus 22.8% in the second quarter of 2023 and 6.2% growth in adjusted EBITDA year-over-year. During the quarter, we were able to expand margins on a year-over-year basis while investing in the business, including making certain transformation-related investments that are described.



This quarter's adjusted EBITDA performance notably does not include a material amount of optimization savings, which we expect to start having a more measurable impact in 2025 and beyond. Adjusted gross profit in the quarter was $116.1 million, representing an adjusted gross margin of 65.4% versus 65.8% in Q2 2023. The slight decrease in gross margin on a year-over-year basis was largely due to the timing of revenue and cost of goods sold within the Marketing Technology Solutions and not an indication of change within the core SaaS business.



Now I'll turn to adjusted operating expenses, which are reconciled in the appendix to this presentation. Overall, adjusted operating expenses declined from 43% to 42% in the quarter, underscoring our focus on profitability as we scale and grow the business. Adjusted sales and marketing expense was $28.8 million or 16.2% of revenue, down from 16.9% of revenue reported in the prior year period. Adjusted product development expense was $19.6 million or 11% of revenue, up from the 10.4% reported in the prior year period, largely due to planned investments in maintenance in our products.



Adjusted G&A expense was $26.5 million or 14.9% of revenue, down from 15.7% of revenue in the prior year period. Adjusted G&A expenses declined both as a percent of revenue and in absolute dollars as we continue to optimize our operations. We continue to generate significant free cash flow as we invest to grow our business. Cash flow from operations for the quarter was $23.9 million as compared to $28.4 million in the prior year comparative quarter.



Levered free cash flow was $19 million in the quarter, down approximately $3.6 million or 16% year-over-year and was negatively impacted by the timing of working capital changes. For the trailing 12 months, levered free cash flow was $78.5 million, which represents an 11.4% margin and a 26.2% increase in levered free cash flow over the prior year, continuing to underscore the efficiency of our business and enhancing our balance sheet flexibility.



Adjusted unlevered free cash flow was $30 million in the quarter and $121 million for the last 12 months, representing 11% and 22.7% year-over-year growth, respectively. Strong free cash flow generation is the deliberate goal for the EverCommerce team as it enables the flexibility to invest in our growing business while also enabling us to efficiently allocate capital across a spectrum of opportunities, including the outstanding buyback authorization of M&A prospects.



In the second quarter, we repurchased approximately 2.5 million shares for a total cash consideration of approximately $24.1 billion at an average price of $9.57 per share. Due to the Board's increased authorization that Eric mentioned, as of June 30, 2024, we had approximately $54 million remaining in our repurchase authorization that runs through year-end 2025.



We ended the quarter with $87 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 2.6x, consistent with our financial policy. We have no material maturities until 2028.



I'd now like to finish by discussing our outlook for the third quarter of 2024. In the third quarter of 2024, we expect total revenue of $172 million to $176 million, and we expect adjusted EBITDA of $39 million to $42 million. We're leaving our full year 2024 guidance unchanged. We continue to expect revenue of $676 million to $696 million and adjusted EBITDA of $167 million to $176 million. Our guidance assumes flat year-over-year revenue trends within our marketing and technology services business.



Furthermore, we note that as we said at the beginning of the year, 2024 will be a transition year in which we are making investments to support the transformation and continuing optimization of the business with an eye towards accelerating growth and increasing profitability. To that end, we'll continue to prioritize long-term value creation and seize opportunities to make accretive investments as they become actionable.



Now before we begin the question-and-answer portion of the call, I'd like to take a moment to thank Eric, Matt, our Board and all of our commerce team for the opportunity to serve as CFO for the last 7.5 years. It's been a true pleasure. While we've accomplished a lot during this time, I'm confident that the best is yet to come.



Operator, we're now ready to take the first question.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Bhavin Shah of Deutsche Bank.

[Bhavin Shah, analyst]

First of all, just looks Marketing Technology Solutions kind of returned to year-over-year growth after a couple of quarters of declines. How much of that was kind of execution versus macro related? And can you just broadly give us an update what you're seeing from a macro perspective and kind of looking that as a guidance?

[Marc Thompson, executive]

So Bhavin I'm not sure that, that came through as crisply. Could you repeat the second half? I think you were asking about macro climate and its impact on revenue? And then I just didn't catch the second portion.

[Bhavin Shah, analyst]

The first one, sorry, the Marketing Technology Solutions kind of returned to year-over-year growth after couple of quarters of year-over-year decline. How much of that was execution versus macro? And then just overall macro, what do you see in 2Q and kind of what's embedded for the rest of the year?

[Marc Thompson, executive]

So Marketing Technology, the 1.6% growth this quarter versus, I think, slightly down quarter-over-quarter in Q1. I think, look, on the margin, it's a little bit of both. I think we continue to execute well, but the headwinds remain. So I don't really think much has changed. We continue to think we are stabilized. If you add the 2 quarters, first 6 months of the year were slightly down year-over-year, which is consistent with our guide flat for the full year.



In terms of macro trends for the full year, do you want to comment on that?

[Eric Remer, executive]

We're not seeing -- we checked and we're kind of constantly watching it. So we really started at the top of the lead funnel all the way down to retention statistics. And to date, everything has been fairly stable in terms of seeing any macro trends. So nothing has changed in the business from a kind of macro perspective and that's reflected in the guidance for the rest of the year.

[Bhavin Shah, analyst]

Just one quick follow-up. It looks like kind of payments revenue grew more in line with TPV growth this quarter, while previously kind of it's been growing in excess of TPV growth. Any reason why they're converting today? And kind of how do we think about the relationship of both going forward?

[Evan Berlin, executive]

Yes, I would just say, we talked about this. I think, last quarter in terms of take rate expansion and the control that we have over that from both a pricing perspective to our customers and then our relationships with our processors, which we always work to optimize our costs. We continue to expect that there will be opportunities to expand TPV growth, and ultimately, take rate will kind of take care of itself as we have different program mix and utilization from our customers over a period of time. So we expect to have continued TPV growth and take rate expansion and optimization over the long term.

[Operator]

Our next question comes from Matthew Hedberg of RBC Capital Markets.

[Matthew Hedberg, analyst]

This is Mike Richard on for Matt. Maybe on the optimization initiatives, how has that trended relative to your expectations, now there were a couple of quarters in? And then maybe with the CFO transition, does anything change here in terms of time line or where we're allocating resources and investments?

[Eric Remer, executive]

I'll start on the CFO side, and I'll let Matt talk about kind of where we are in the optimization. The answer is no, nothing changes in terms of our expectations of our continuation on the optimization as well as the transformation. Fortunately, Marc has built a really strong organization from top to bottom, and we're very fortunate to have Ryan Siurek, who's been serving as a CEO for the last year, has had previous experience and we believe will make a very smooth transition and really follow through with all the work that both Marc and the rest of the team have done to kind of put the optimization and transformation in motion.



So in terms of where we are on it, Matt, do you want to talk about that?

[Matthew Feierstein, executive]

I -- we focused last year -- sorry, last quarter, really highlighting the focus on the EverHealth and EverPro verticals, really giving leaders in these verticals the organizational structure and the support they need to accelerate growth. So things like simplifying our organizational structure, decommissioning legacy brands, investing in key sales and go-to-market gaps, things that have impacted growth rate. Obviously, that's where we are focused from a transformation perspective.



During the quarter, we continue to work with our third-party change management rep to define our next steps. We've made some key hires within those verticals as well. So excited. I think we are where we thought we would be from a transformation perspective.



And from an optimization perspective, I think you heard our remarks during the opening of the call. We are also where we expected to be with real impact that we'll see pull-through in '25.

[Marc Thompson, executive]

And just to double click on it, I mean, Eric mentioned a couple of transformation-related expenses that hit this quarter and that's a little front-end loaded, if you will. We'll start to see the thread through the efficiencies, we believe, in the back portion of the year and then carry into 2025. But as I said in my remarks, we haven't seen a lot of that yet. And really, this is all positioning to exit the year into 2025.

[Operator]

Our next question comes from Ryan MacWilliams of Barclays.

[Ryan MacWilliams, analyst]

Just to start, I'd love to hear a little more detail on the puts and takes behind your net retention rate in the quarter? It seems like there was a pricing dynamic here on the comp basis. And then how should we think about what level NRR could stay at for the rest of this year?

[Evan Berlin, executive]

From a puts and takes standpoint, I think you heard us mention this when we look at -- when you look at the retention dynamics of the business in whole, we really saw a lot of consistency from that NRR perspective. Obviously, we mentioned it last quarter, it continues to have impact from the anniversary of some larger pricing increases in one of our high velocity but lower ARPU solutions where we just won't see that quantum of pricing increase layer on top in this year. So we are seeing the impact of that anniversary. And we'll likely for another quarter or so.



But again, with the stable retention dynamics with our focus on cross-sell and upsell, our expectation is that NRR should stay in this the neighborhood that it has been. And obviously, we've talked about the opportunity for that to continue to grow as our motions from a cross-sell perspective around payments, around Edge are further integrated into the base of software customers.



We obviously have opportunity to continue to take that up and north to the places that it has been and beyond.

[Ryan MacWilliams, analyst]

And then for Marc, just on the full year revenue guide. Should we think about it as for the second quarter, revenue came in above the range. But for the full year, you're taking out the revenue contribution from the international operations as a part of the guide? Or is there other things we should think about in relation to the full year guide?

[Bradley Korch, executive]

The revenue guidance we've given all year doesn't include fitness full stuff. So I think if you look at the press release, we've delineated exactly what the fitness contribution was in the quarter, and so that's how you should compare to those. And then yes, for the third quarter and the fourth quarter, it's designed for [ anything ].

[Operator]

Our next question comes from Alexander Sklar of Raymond James.

[Alexander Sklar, analyst]

This is John on for Alex. I want to start with cross-sell, specifically on the multi-solution customers. Can you talk about some of the puts and takes driving the growth there? It's still up nicely year-on-year, but it looks like the net adds sequentially was below recent quarters. So anything you flag there, maybe seasonality or changes in go-to-market or maybe the sale -- there? Just any color you can provide there?

[Marc Thompson, executive]

It's certainly -- I wouldn't call that necessarily seasonality. Obviously, a key focus on payments. We know we have a lot of runways from a cross-sell payments -- cross-sell perspective from payments. So a big focus there. You've heard us talk about EverPro Edge. That is, again, another value-add solution that can be cross-sold into our system of action software bases. We have our customer experience solutions where, again, opportunity exists, and we are executing on programs to cross-sell those there.



So some of those products are somewhat still early in their life cycle, like Edge. And so the consistency of those quarter-over-quarter may not be the right measurement period from that perspective, i.e., for example, we are in -- Edge, there are 2 solutions that we've launched this integration with. It may take us several more quarters before the next 2 integrations are launched, but those are in planning and those will be executed.



So as we bring more integrated products to market quarter-over-quarter growth may not be the best look year-over-year, certainly would be the best way to look at it.

[Alexander Sklar, analyst]

And then on the TPV growth here, I'm curious if you can maybe quantify. I think last quarter, you guys called out with the top 5 solution. They were trending nearly 30% of TPV, I think, was driven from those solutions, and that was growing 20%. I'm just curious if you could guys speak to how that does have trended there just the amount of growth generated by those businesses?

[Marc Thompson, executive]

The percentage of aggregate TPV remains relatively stable at 28%. It was the same last quarter and our growth rate of those top 5 solutions from a TPV perspective was 22% year-over-year, and that's really in line with what we spoke to from last quarter. Like we spoke then still holds true in this quarter. That's sort of the core focus, the core investment from a payment's penetration standpoint is in those top 5 solutions.

[Operator]

Our next question comes from Mason Marion of Jefferies.

[Mason Marion, analyst]

First, congrats to you, Ryan, on the promotion and best of luck to you, Marc. So I'm going to touch on the capital allocation front. So you divested several underperforming assets and have allocated more money to share repurchases. You've spoken about your increased focus on streamlining your current operations. We've heard from others that private valuations are starting to rationalize a bit. Can you talk about why this is the right time to focus more internally and allocate capital back in yourselves versus maybe externally and pursue more deals?

[Eric Remer, executive]

Yes, look, we're always looking. We're constantly -- we have our pulse on the market and although they'll be rationalizing, they're still rationalizing from much higher points than we are currently trading. So from an accretive standpoint and a value standpoint, that we think the underlying value of EverCommerce is, [indiscernible] myself, the management team, and the Board still strongly believe it is a very good investment for shareholders to be investing in the buyback. So we'll continue to look at things even through our kind of transformation period if something comes that makes sense economically, and we think accretive to the organization, we'll execute on that as well.

[Mason Marion, analyst]

And then you highlighted the point-of-sale traction within Timely. Is there an opportunity to bring this technology to other parts of your business or [ geos ]?

[Evan Berlin, executive]

Yes, absolutely. When we think about the other top solutions that Matt mentioned, we either have point-of-sale solutions in market at some level or we'll be deploying them over the course of the next handful of quarters. So we're in the early stages of those opportunities. But as you pointed out, the timely case study is a great example. We expect to get nearly 50% of our TPV by the end of the year from point-of-sale transactions at Timely and there's opportunity to do similar types of efforts in those other top solutions and other parts of our business that have been point-of-sale enabled for some time. So it's a core part of the strategy in terms of driving utilization and share of wallet expansion on a go-forward basis.

[Operator]

Our next question comes from [ Will McNamara ] of Evercore ISI.

[William McNamara, analyst]

This is Joan on for Kirk. Are you guys seeing any increased price sensitivity from small business customers? And how do you see pricing as a long-term strategy for growth?

[Marc Thompson, executive]

I think we've expressed this in past quarters, we look at price from a price to value standpoint. So we certainly want to -- as we continue to enhance the value of the software that we're providing to our end customers, price is absolutely a lever that we've used in the past, and we'll continue to use in the future based on that price-to-value ratio.



To the first part of your question, we've not seen any increased sensitivity from that pricing standpoint. We've got a long history with the multiple solutions that we have with pricing increases in the market. We certainly understand when we do that what the expectations of feedback and/or churn might be. And we watch that data very closely. We've seen no changes quarter-over-quarter, year-over-year from a sensitivity standpoint with any actions we've done this year.

[Operator]

Our next question comes from Alexei Gogolev of JPMorgan.

[Alexei Gogolev, analyst]

You talked about some degradation of vendor management program last quarter, mainly due to weaker macro. Have you seen any improvements there?

[Evan Berlin, executive]

Sorry, Alex, we didn't catch the degradation that you were referring to that we had spoken to in the past quarter. Can you repeat?

[Alexei Gogolev, analyst]

Degradation of vendor management program.

[Marc Thompson, executive]

Are you referring to our EverPro Edge offering that we launched end of last year? We talked a little bit about it in our Q1 call where we continue to see nice traction with that solution. That's part of what we obviously highlighted in Eric's case studies.

[Alexei Gogolev, analyst]

I was referring to some of the headwinds that you've seen in some other management programs. But in terms of the dynamics that you are seeing on the R&D and S&M, sales and marketing side. Could you talk about how long should we expect to see the elevated to the marketing level during that transition process?

[Marc Thompson, executive]

I think in terms of sales and marketing expense, obviously, we tightly manage that and [indiscernible] with growth and really do is very much part of the balancing growth and profitability motion. It has been relatively stable. I expect it to be operating in that range. Having said that, the organizational transformation initiatives we've been referring to that we've been developing into this year and as we start to execute into the second half along with some of the optimization initiatives. We do expect that we will continue to get more out of that investment. And we will continue to drive growth investments where we need to drive into our best solutions wherever they offer the best revenue growth opportunities going forward.



From a product development standpoint, it's very similar. We're investing, obviously, not just to keep our solutions current within the market, but also investing in new solutions such as EverPro Edge that we talked about at the end of last year and into this year as well as continuing integration of payments and so forth and other cross-sell initiatives.



So that we would expect will continue to also be within a band, but continuing to invest behind growth as we continue to try to reaccelerate that growth profile going into '25.

[Alexei Gogolev, analyst]

Where would you say you are in the adoption curve for different customer groups in terms of payments? Obviously, on this call, you've again highlighted loans as the front runners. But just curious on how you're driving attach in your other vertical?

[Evan Berlin, executive]

Listen, it depends on the vertical, and it certainly depends on the solution within that. In certain places, we are further along the maturity of that based on the micro vertical and just the long-term necessity of payments in the workflow. So if you look at test control software, for example, we have -- that has long been embedded in the solution of the system of action software solution as a core part of the workflow, and it's a requirement from that end contractor.



And penetration is definitely more on the mature side. You can compare that to other places where we're still really early on in the maturity curve. This could be a place where we have introduced payments to that workflow in a software within the last 1 to 3 years, and we're still ramping those penetration efforts. So it varies across the portfolio and our management to that is really system of action software solution specific.

[Operator]

Our last question comes from Aaron Kimson of Citizens JMP.

[Aaron Kimson, analyst]

Can you give us an update on the EverHealth consolidation? Is that trending ahead of the rest of these optimization and brand consolidations where we won't see as much until 2025 and beyond, given that you kind of started with EverHealth?

[Evan Berlin, executive]

Was it about EverPro or EverHealth?

[Aaron Kimson, analyst]

EverHealth.

[Evan Berlin, executive]

So I think we've talked over the last couple of quarters about both the brand rollout and website optimization. If you take a look at our core solutions, they're all by EverHealth, the sub products by EverHealth. We've invested over the past couple of months in bringing new leadership from a commercial go-to-market perspective, which has started to -- we started to see the fruits of those investments from a conversion improvement perspective or increase in ASP and actually a reduction in sales cycle time.



And when you look at payment enablement attach on new customer acquisition, we increased that from the low 30s in Q1 to the mid-50s in Q2. So my answer would be we've seen good progress in terms of both the transformation and the optimization of how we are going to market and bringing those products into the market to deliver value to both new customers and the existing customers that continue to expand their share of wallet with us.

[Marc Thompson, executive]

And I would just add, I think you asked, is that -- when we think about the broader transformation program, does that follow EverHealth? And absolutely certain components of what we have done in EverHealth over the last year plus when you look to our other verticals, specifically EverPro, operational consolidation like we've done at EverHealth, that's a model that we will follow brand consolidation. Product consolidation will look different across our verticals, but certainly, some form factors of what we've done in EverHealth will follow at EverPro.

[Aaron Kimson, analyst]

I think Will may have touched on this a bit. But are you seeing any increase in charge-offs or customers that are unable to pay on time? And then just if not, -- how do you approach that? It was a good theme on the Zoom [ info call last night.] and I'd love to hear how EverCommerce thinks about it?

[Evan Berlin, executive]

I think for the most part, our customers pay like credit card on a monthly subscription basis or obviously, we're paid on the payments function in different ways. So we don't see a ton of that, and we really haven't seen any change where we do have receivables. We haven't seen any change in pattern of behavior amongst our small business customers.

[Operator]

This now concludes the question-and-answer session. I would now like to turn it back to Eric Remer for closing remarks.

[Eric Remer, executive]

Thank you so much. We are pleased with our results and look forward to continuing our transformation optimization throughout this year and through '25. And I just want to have a following remark as this will be the last time Marc joins our earnings calls. Gentleman, thank you for all the work you have done over the past almost 8 years as an organization grew up with marketing. He has done an amazing job both providing value across the organization and also building a legacy within its organization. So we have the ability to promote from within and have a really great leader to step up. So thank you, Marc, for all your contribution.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.