Correspondence 0001140361-22-047015 from EverCommerce Inc. (EVCM) (CIK 0001853145) (EVCM)
EverCommerce Inc. (EVCM) (CIK 0001853145)
Date: Dec. 27, 2022 · CIK: 0001853145 · Accession: 0001140361-22-047015
AI Filing Summary & Sentiment
File numbers found in text: 001-40575
Letter
December 27, 2022
VIA EDGAR
Office of Finance
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention:
Kathleen Collins, Accounting Branch Chief
Brittany Ebbertt, Senior Staff Accountant
Re:
EverCommerce Inc.
Form 10-K for Fiscal Year Ended December 31, 2021
Filed March 15, 2022
Form 8-K Furnished on November 10, 2022
File No. 001-40575
To the addressees set forth above:
This letter is in response to the comment letter, dated December 12, 2022 (the “Comment Letter”), from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC”) regarding the above-referenced Form 10-K (the “Form 10-K”) for the fiscal year ended December 31, 2021, filed on March 15, 2022 and Form 8-K (the “Form 8-K”) furnished on November 10, 2022. For your convenience, we have set forth each comment of the Staff from the Comment Letter in bold and italics below and provided our response below each comment. Unless otherwise indicated, capitalized terms used herein have the meanings assigned to them in the Form 10-K or Form 8-K.
Form 10-K for Fiscal Year Ended December 31, 2021
Management’s Discuss and Analysis of Financial Condition and Results of Operations
Overview, page II-3
1.
We note your disclosure that the calculation of net pro forma revenue retention rate remains consistent with prior periods. In filings where you discuss this measure, please revise to disclose how this measure is calculated.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that in future filings where net pro forma revenue retention rate is discussed, we will disclose how the measure is calculated, which disclosure will be substantially similar to the disclosure provided on page 70 of our Prospectus forming a part of our Registration Statement on Form S-1 filed with the SEC on June 28, 2021.
Key Factors Affecting our Performance
Acquiring New Customers, page II-7
2.
We note that acquiring new customers is a key factor affecting your performance. Considering the number of acquisitions in recent fiscal years, please revise to disclose the number of customers obtained through business acquisitions in each period to add context to your discussion that your platform increased from over 500,000 customers at December 31, 2020 to over 600,000 at year-end 2021. We refer you to your response to comment 1 in your May 28, 2021 letter.
EverCommerce | 3601 Walnut Street, Suite 400, Denver, CO 80205 | evercommerce.com
December 27, 2022
Page 2
Response: The Company respectfully acknowledges the Staff’s comment and confirms that in future filings covering a reporting period in which the Company has made business acquisitions, we will include in our disclosure the number of customers obtained through business acquisitions in such period.
Results of Operations
Revenues, page II-14
3.
Please revise to provide a more thorough discussion, including quantifying the amounts, of each factor impacting fluctuations in both your subscription and transaction fees revenue and marketing technology revenue, including the amount of revenue recognized in the current year that relates to acquisitions completed in each period, as appropriate. Also, for fluctuations due to the growth of your customer base, please identify the number of customers acquired through business acquisitions versus those obtained organically. In addition, provide quantified information regarding the transaction volumes processed through your payment platform to add context to the impact of such measure on your revenue growth. We refer you to your responses to comment 18 in your May 10, 2021 letter, and comment 8 in the your May 28, 2021 letter.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that in future filings, we will provide a more thorough discussion, including quantifying the amounts, of each factor impacting fluctuations in both subscription and transaction fees revenue and marketing technology revenue, including the amount of revenue recognized in the current year that relates to acquisitions completed in each period, as appropriate. Additionally, the Company confirms that in future filings covering a reporting period in which the Company has made business acquisitions, for fluctuations due to the growth of our customer base, we will identify the number of customers acquired through business acquisitions versus those obtained organically. The Company respectfully believes that providing transaction volumes processed through its payment platform does not provide meaningful context to our revenue growth because it does not break out payments as a component of revenue.
Liquidity and Capital Resources, page II-18
4.
Revise to include the reasons for the change in amounts impacting your cash flow. In this regard, your discussion should not merely repeat numerical data contained in the financial statements. Refer to Instruction 2 to paragraph (b) in Item 303 of Regulation S-K.
Response: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future analysis of changes in amounts impacting cash flow to focus on factors that actually impact cash, as opposed to discussing non-cash items and changes in net income. Please see the following example of the type of disclosure regarding the net change in cash provided by operating activities that we would provide in future periods:
Net cash provided by operating activities was $[ ● ] million for the year ended December 31, 20[ ● ], compared to $[ ● ] million for the year ended December 31, 20[ ● ]. Changes in net cash provided by (used in) operating activities result primarily from cash received from net sales within our subscription and transaction and marketing technology solutions. Other drivers of the changes in net cash provided by operating activities include payments for personnel expenses for our employees, costs related to delivering our services and products, partner commissions, advertising and interest on our long-term debt.
The decrease in cash provided for the year ended December 31, 20[ ● ] compared to the year ended December 31, 20[ ● ] was primarily due to investments made to support the growth of our business including personnel expenses, higher advertising and partner commissions of $[ ● ] million and $[ ● ] million, respectively, in addition to higher prepaid expenses of $[ ● ] million due to the timing of payments. These increases were partially offset by higher cash collections from subscription and transaction fees and our marketing technology solutions of $[ ● ] million.
December 27, 2022
Page 3
Critical Accounting Estimates, page II-21
5.
Please enhance your disclosure to provide qualitative and quantitative information necessary to understand the estimation and uncertainty in your critical accounting estimates, to the extent material and reasonably available. Also, discuss how much each estimate and/or assumption has changed over a relevant period, and the sensitivity of the reported amounts to the methods, assumptions and estimates underlying its calculation. Refer to Item 303(b)(3) of Regulation S-K.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that, in future filings, we will revise our disclosures regarding critical accounting estimates, to the extent material and reasonably available, and revise the use of estimates disclosure to include qualitative and quantitative discussion of the changes between periods and the sensitivity of reported amounts to changes in methods, assumptions, and estimates underlying its calculation, as suggested by the Staff. An example of the type of such disclosures related to our critical accounting policies and the use of estimates that we expect to be generally consistent with future filings is attached hereto as Exhibit A.
Business Combinations, page II-23
6.
Please tell us, and revise to disclose, whether you performed a qualitative or quantitative test for purposes of assessing goodwill for impairment. If a qualitative test was performed, disclose whether you determined that it is not more likely than not that the fair value of any reporting unit was less than the respective carrying amounts, including goodwill. If a quantitative test was performed, tell us and revise to clarify whether the fair value of the reporting unit(s) significantly exceeds the carrying value. To the extent any reporting unit is at risk of impairment, revise to disclose the percentage by which the fair value exceeded the carrying value and describe any potential events and/or changes in circumstances that could reasonably be expected to negatively affect any key assumptions.
Response: The Company respectfully acknowledges the Staff’s comment and advises the Staff that for the Company’s annual impairment assessment for the year ended December 31, 2021, the Company performed a qualitative assessment and concluded that it was more likely than not that the fair value of each of its reporting units was more than the respective related carrying amounts and, as such, did not perform any quantitative tests. The Company confirms that we will revise our disclosures regarding goodwill impairment assessments in future filings to disclose whether we performed a qualitative or quantitative test. An example of the type of such disclosures related to our goodwill impairment assessments is attached hereto as Exhibit A under the heading “Business Combinations, Goodwill and Intangible Assets.” In addition, to the extent any reporting unit is at risk of impairment, we will disclose the percentage by which the fair value exceeded the carrying value and describe any potential events and/or changes in circumstances that could reasonably be expected to negatively affect any key assumptions.
Form 8-K Furnished on November 10, 2022
Exhibit 99.1, page 1
7.
We note you present the percentage increase in adjusted EBITDA in the financial highlights. Please revise to disclose the percentage increase in the comparable GAAP measure of net income with equal or greater prominence. Refer to Question 102.10 of the Non-GAAP C&DIs.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that, to the extent we disclose the percentage increase or decrease in adjusted EBITDA in future filings, we will include the percentage increase or decrease in the comparable GAAP measure of net income (loss) with equal or greater prominence.
* * * *
December 27, 2022
Page 4
We hope that the foregoing has been responsive to the Staff’s comments and look forward to resolving any outstanding issues as quickly as possible. Please do not hesitate to contact me at marc@evercommerce.com with any questions or further comments you may have regarding this filing or if you wish to discuss the above.
Sincerely,
/s/ Marc Thompson
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December 27, 2022
VIA EDGAR
Office of Finance
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention:
Kathleen Collins, Accounting Branch Chief
Brittany Ebbertt, Senior Staff Accountant
Re:
EverCommerce Inc.
Form 10-K for Fiscal Year Ended December 31, 2021
Filed March 15, 2022
Form 8-K Furnished on November 10, 2022
File No. 001-40575
To the addressees set forth above:
This letter is in response to the comment letter, dated December 12, 2022 (the “Comment Letter”), from the staff of the Division of
Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC”) regarding the above-referenced Form 10-K
(the “Form 10-K”) for the fiscal year ended December 31, 2021, filed on March 15, 2022 and Form 8-K (the “Form 8-K”) furnished on
November 10, 2022. For your convenience, we have set forth each comment of the Staff from the Comment Letter in bold and italics below and provided our response below each comment. Unless otherwise indicated, capitalized terms used herein have the
meanings assigned to them in the Form 10-K or Form 8-K.
Form 10-K for Fiscal Year Ended December 31, 2021
Management’s Discuss and Analysis of Financial Condition and Results of Operations
Overview, page II-3
1.
We note your disclosure that the calculation of net pro forma revenue retention rate remains consistent with prior periods. In filings where you discuss this measure, please revise to disclose how this measure is calculated.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that in future filings where net pro forma revenue retention rate is discussed, we will disclose how the
measure is calculated, which disclosure will be substantially similar to the disclosure provided on page 70 of our Prospectus forming a part of our Registration Statement on Form S-1 filed with the SEC on June 28, 2021.
Key Factors Affecting our Performance
Acquiring New Customers, page II-7
2.
We note that acquiring new customers is a key factor affecting your performance. Considering the number of acquisitions in recent
fiscal years, please revise to disclose the number of customers obtained through business acquisitions in each period to add context to your discussion that your platform increased from over 500,000 customers at December 31, 2020 to over
600,000 at year-end 2021. We refer you to your response to comment 1 in your May 28, 2021 letter.
EverCommerce | 3601 Walnut Street, Suite 400, Denver, CO 80205 | evercommerce.com
December 27, 2022
Page 2
Response: The Company respectfully acknowledges the Staff’s comment and confirms that in future filings covering a reporting period in which the Company has made business acquisitions, we will
include in our disclosure the number of customers obtained through business acquisitions in such period.
Results of Operations
Revenues, page II-14
3.
Please revise to provide a more thorough discussion, including quantifying the amounts, of each factor impacting fluctuations in both your
subscription and transaction fees revenue and marketing technology revenue, including the amount of revenue recognized in the current year that relates to acquisitions completed in each period, as appropriate. Also, for fluctuations due to
the growth of your customer base, please identify the number of customers acquired through business acquisitions versus those obtained organically. In addition, provide quantified information regarding the transaction volumes processed
through your payment platform to add context to the impact of such measure on your revenue growth. We refer you to your responses to comment 18 in your May 10, 2021 letter, and comment 8 in the your May 28, 2021 letter.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that in future filings, we will provide a more thorough discussion, including quantifying the amounts, of each
factor impacting fluctuations in both subscription and transaction fees revenue and marketing technology revenue, including the amount of revenue recognized in the current year that relates to acquisitions completed in each period, as appropriate.
Additionally, the Company confirms that in future filings covering a reporting period in which the Company has made business acquisitions, for fluctuations due to the growth of our customer base, we will identify the number of customers acquired
through business acquisitions versus those obtained organically. The Company respectfully believes that providing transaction volumes processed through its payment platform does not provide meaningful context to our revenue growth because it does not
break out payments as a component of revenue.
Liquidity and Capital Resources, page II-18
4.
Revise to include the reasons for the change in amounts impacting your cash flow. In this regard, your discussion should not merely repeat numerical
data contained in the financial statements. Refer to Instruction 2 to paragraph (b) in Item 303 of Regulation S-K.
Response: The Company respectfully acknowledges the Staff’s comment and advises the Staff that it will revise its future analysis of changes in amounts impacting cash flow to focus on factors
that actually impact cash, as opposed to discussing non-cash items and changes in net income. Please see the following example of the type of disclosure regarding the net change in cash provided by operating activities that we would provide in future
periods:
Net cash provided by operating activities was $[ ● ] million for the year ended December 31, 20[ ● ], compared to $[ ● ] million for the year ended December 31, 20[ ● ]. Changes in net cash provided
by (used in) operating activities result primarily from cash received from net sales within our subscription and transaction and marketing technology solutions. Other drivers of the changes in net cash provided by operating activities include
payments for personnel expenses for our employees, costs related to delivering our services and products, partner commissions, advertising and interest on our long-term debt.
The decrease in cash provided for the year ended December 31, 20[ ● ] compared to the year ended December 31, 20[ ● ] was primarily due to investments made to support the growth of our business
including personnel expenses, higher advertising and partner commissions of $[ ● ] million and $[ ● ] million, respectively, in addition to higher prepaid expenses of $[ ● ] million due to the timing of payments. These increases were partially offset
by higher cash collections from subscription and transaction fees and our marketing technology solutions of $[ ● ] million.
December 27, 2022
Page 3
Critical Accounting Estimates, page II-21
5.
Please enhance your disclosure to provide qualitative and quantitative information necessary to understand the estimation and uncertainty in your
critical accounting estimates, to the extent material and reasonably available. Also, discuss how much each estimate and/or assumption has changed over a relevant period, and the sensitivity of the reported amounts to the methods,
assumptions and estimates underlying its calculation. Refer to Item 303(b)(3) of Regulation S-K.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that, in future filings, we will revise our disclosures regarding critical accounting estimates, to the extent
material and reasonably available, and revise the use of estimates disclosure to include qualitative and quantitative discussion of the changes between periods and the sensitivity of reported amounts to changes in methods, assumptions, and estimates
underlying its calculation, as suggested by the Staff. An example of the type of such disclosures related to our critical accounting policies and the use of estimates that we expect to be generally consistent with future filings is attached hereto as
Exhibit A.
Business Combinations, page II-23
6.
Please tell us, and revise to disclose, whether you performed a qualitative or quantitative test for purposes of assessing goodwill for
impairment. If a qualitative test was performed, disclose whether you determined that it is not more likely than not that the fair value of any reporting unit was less than the respective carrying amounts, including goodwill. If a
quantitative test was performed, tell us and revise to clarify whether the fair value of the reporting unit(s) significantly exceeds the carrying value. To the extent any reporting unit is at risk of impairment, revise to disclose the
percentage by which the fair value exceeded the carrying value and describe any potential events and/or changes in circumstances that could reasonably be expected to negatively affect any key assumptions.
Response: The Company respectfully acknowledges the Staff’s comment and advises the Staff that for the Company’s annual impairment assessment for the year ended December 31, 2021, the Company
performed a qualitative assessment and concluded that it was more likely than not that the fair value of each of its reporting units was more than the respective related carrying amounts and, as such, did not perform any quantitative tests. The
Company confirms that we will revise our disclosures regarding goodwill impairment assessments in future filings to disclose whether we performed a qualitative or quantitative test. An example of the type of such disclosures related to our goodwill
impairment assessments is attached hereto as Exhibit A under the heading “Business Combinations, Goodwill and Intangible Assets.” In addition, to the extent any reporting unit is at risk of impairment, we will disclose the percentage by which the fair value exceeded the carrying value and describe any potential events and/or changes in
circumstances that could reasonably be expected to negatively affect any key assumptions.
Form 8-K Furnished on November 10, 2022
Exhibit 99.1, page 1
7.
We note you present the percentage increase in adjusted EBITDA in the financial highlights. Please revise to disclose the percentage increase in
the comparable GAAP measure of net income with equal or greater prominence. Refer to Question 102.10 of the Non-GAAP C&DIs.
Response: The Company respectfully acknowledges the Staff’s comment and confirms that, to the extent we disclose the percentage increase or decrease in adjusted EBITDA in future filings, we
will include the percentage increase or decrease in the comparable GAAP measure of net income (loss) with equal or greater prominence.
* * * *
December 27, 2022
Page 4
We hope that the foregoing has been responsive to the Staff’s comments and look forward to resolving any outstanding issues as quickly as possible. Please do not hesitate to contact me at marc@evercommerce.com with any
questions or further comments you may have regarding this filing or if you wish to discuss the above.
Sincerely,
/s/ Marc Thompson
Chief Financial Officer
EverCommerce Inc.
cc:
Eric Remer, Chief Executive Officer, EverCommerce Inc.
Lisa Storey, General Counsel, EverCommerce Inc.
Exhibit A
Critical Accounting Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect
certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
While our significant accounting policies are described in further detail in Note 2 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K, we believe that
the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Revenues are derived from subscription and transaction fees, marketing technology solutions, and other revenues. We recognize revenue when our customers obtain control of goods or services in an
amount that reflects the consideration that we expect to receive in exchange for those goods or services. In determining the total consideration that we expect to receive, we include variable consideration only to the extent that it is probable
that a significant reversal of cumulative revenue will not occur when the uncertainty is resolved. Consideration subject to a constraint on revenue recognition has not been significant. Additionally, there have not been material changes in these
estimates or assumptions pertaining to constraints on revenue recognition over the reporting periods presented. In the future, if there are material changes in the underlying estimates and assumptions pertaining to constraints on revenue
recognition, the financial statements could be materially impacted.
Subscription and Transaction Fees:
Subscription revenue primarily consists of the sale of SaaS offerings, software licenses and related support services and payment processing services.
The timing of revenue recognition within our software subscription services is dictated by the nature of the underlying performance obligation. Our SaaS offerings and license support services are
generally recognized ratably over the contractual period that the services are delivered, beginning on the date our service is made available to customers. Revenues generated from the sale of on-premise perpetual or term licenses are generally
recognized at the point in time when the software is made available to the customer to download or use. Subscription revenue related contracts can be both short and long-term, with stated contract terms that range from one month to five years. Our
contracts may contain termination for convenience provisions that allow the Company, customer or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a penalty.
Transaction fees relate to payment processing and group purchasing program administration services. In fulfillment of our payment processing services, we partner with third-party merchants and
processors who assist us in fulfillment of our obligations to customers. We have concluded that we do not possess the ability to control the underlying services provided by third parties in the fulfillment of our obligations to customers and
therefore recognize revenue net of interchange fees retained by the card issuing financial institutions and fees charged by payment networks. Transaction services contracts with customers are generally for a term of one month and automatically
renew each month.
We also receive rebates from contracted suppliers in exchange for our program administration serv