Continued Business Momentum Drives First
Quarter Revenue Growth of 42% Company Raises Revenue Guidance
- SMB Revenue up 56% fueled by new customer adds and
expansion with existing customers
- Enterprise Revenue up 28% driven by strong go-lives and
high adoption rates
EngageSmart, Inc. (NYSE: ESMT), a leading provider of vertically
tailored customer engagement software and integrated payments
solutions, today reported financial results for the first quarter
ended March 31, 2022.
“EngageSmart had an exceptionally strong start to fiscal year
2022, delivering yet another quarter of record revenue with 42%
year-over-year total revenue growth,” said Bob Bennett, EngageSmart
CEO. “We continued to see excellent traction in our vertically
tailored SaaS solutions, which was driven by robust customer growth
and retention. This is a testament to the strength of our business
model and our market leadership position in customer engagement
software and integrated payments.”
“Businesses move to automation and self-service capabilities
with EngageSmart because our digital solutions provide intuitive
and frictionless consumer experiences, accelerate the adoption of
modern self-service, and meet vertical-specific software needs,”
stated Cassandra Hudson, EngageSmart CFO. “In the SMB segment, we
delivered 56% year-over-year revenue growth, fueled by new customer
adds and expansion with existing customers. We are tailoring our
SimplePractice solution to suit our newer verticals and already are
seeing strong uptake with speech-language pathologists,
occupational therapists, and dietitians. In the Enterprise segment,
revenue grew 28% year-over-year. We had a strong quarter with the
number of new customers going live on our platform; and our focus
on product innovation and improving the customer experience
continues to drive high digital adoption rates. Looking ahead, we
plan to capitalize on the strong demand for our solutions and the
huge market opportunity before us to continue driving profitable
growth.”
First Quarter 2022 Financial and Business Performance
- Total Revenue increased 42% to $67.4 million compared to
$47.4 million in the first quarter of 2021.
- SMB Revenue increased 56% to $36.5 million compared to
$23.3 million in the first quarter of 2021.
- Enterprise Revenue increased 28% to $30.9 million
compared to $24.1 million in the first quarter of 2021.
- Gross Profit was $51.3 million, representing 76.2% gross
margin, compared to $35.2 million, or 74.2% gross margin, for the
first quarter of 2021. Adjusted Gross Profit was $53.0 million,
representing 78.6% Adjusted Gross Profit Margin, compared to $36.8
million, or 77.6% Adjusted Gross Profit Margin, for the first
quarter of 2021.1
- Net Income was $2.1 million, representing 3.1% net
income margin, in the first quarter of 2022, compared to net income
of $0.5 million, or 1.0% net income margin, in the first quarter of
2021.
- Adjusted EBITDA was $10.6 million, representing 15.7%
Adjusted EBITDA Margin, compared to $7.9 million, or 16.7% Adjusted
EBITDA Margin, for the first quarter of 2021.1
- Cash and Cash Equivalents were $256.2 million as of
March 31, 2022, compared to $254.3 million as of December 31,
2021.
- Total Number of Customers increased by 32% to 87.8
thousand as of March 31, 2022, compared to 66.6 thousand as of
March 31, 2021.
- Total Transactions Processed increased 38% to 34.3
million compared to the 24.9 million in the first 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
Q2'22
FY'22
Guidance
Guidance
Revenue (in millions)
$69.0 - $70.5
$290.0 - $294.0
Adjusted EBITDA (in millions)
$8.9 - $9.6
$38.0 - $40.0
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 expense, net, provision for
(benefit from) income taxes, depreciation, amortization of
intangible assets, transaction-related expenses, fair value
adjustment of acquired deferred revenue, and stock-based
compensation, 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 first quarter 2022 financial results before
the market opens on Thursday, May 5, 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 (866) 518-6930 for domestic callers and
(203) 518-9822 for international callers. The conference ID is
ENGAGESMART, and the program title is EngageSmart Q1 2022 Earnings
Call.
About EngageSmart
EngageSmart (NYSE: ESMT) 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 March 31, 2022,
EngageSmart serves more than 84,000 customers in the SMB Solutions
segment and more than 3,100 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 second
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), both domestically and internationally, as
well as economic conditions affecting industries in which our
customers operate; 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, 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, gross profit, and operating
expenses or any other performance measure derived in accordance
with GAAP.
We define Adjusted EBITDA as net income excluding interest
expense, net; 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, and stock/equity-based compensation. 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.
EngageSmart, Inc.
Condensed Consolidated
Statement of Operations
(Unaudited, in thousands,
except share and per share amounts)
Three Months Ended March
31,
2022
2021
Revenue
$
67,362
$
47,424
Cost of revenue
16,039
12,220
Gross profit
51,323
35,204
Operating expenses:
General and administrative
13,287
7,655
Selling and marketing
22,664
15,045
Research and development
10,040
6,993
Contingent consideration expense
—
202
Amortization of intangible assets
2,362
2,362
Total operating expenses
48,353
32,257
Income from operations
2,970
2,947
Other income (expense), net:
Interest expense, including related party
interest
(119
)
(2,305
)
Other income (expense), net
28
(42
)
Total other income (expense), net
(91
)
(2,347
)
Income before income taxes
2,879
600
Provision for income taxes
820
115
Net income and comprehensive income
$
2,059
$
485
Net income per share:
Basic
$
0.01
$
0.00
Diluted
$
0.01
$
0.00
Weighted-average number of common shares
outstanding:
Basic
162,143,171
147,698,362
Diluted
169,016,112
149,631,870
EngageSmart, Inc.
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
March 31, 2022
December 31, 2021
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
256,190
$
254,294
Accounts receivable, net of allowance for
credit losses of $176 and $203 as of March 31, 2022 and December
31, 2021, respectively
9,854
10,266
Unbilled receivables
5,098
3,441
Prepaid expenses and other current
assets
9,331
7,617
Total current assets
280,473
275,618
Operating lease right-of-use assets
30,257
—
Property and equipment, net
11,659
10,968
Goodwill
425,677
425,677
Acquired intangible assets, net
84,019
87,920
Other assets
4,163
3,811
Total assets
$
836,248
$
803,994
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
595
$
2,090
Accrued expenses and other current
liabilities
23,198
25,229
Contingent consideration liability
—
2,800
Deferred revenue
7,637
6,792
Operating lease liabilities
4,464
—
Total current liabilities
35,894
36,911
Long-term operating lease liabilities
30,979
—
Deferred income taxes
5,044
4,224
Deferred revenue, net of current
portion
233
232
Other long-term liabilities
188
5,528
Total liabilities
72,338
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 March 31, 2022 and December 31, 2021
—
—
Common stock, par value $0.001 per share,
650,000,000 shares authorized and 162,434,392 and 161,860,980
shares issued and outstanding as of March 31, 2022 and December 31,
2021, respectively
162
162
Additional paid-in capital
791,795
787,043
Accumulated stockholders' deficit
(28,047
)
(30,106
)
Total stockholders’ equity
763,910
757,099
Total liabilities and stockholders’
equity
$
836,248
$
803,994
EngageSmart, Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
Three Months Ended March
31,
2022
2021
Cash flows from operating
activities:
Net income
$
2,059
$
485
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
4,641
4,349
Stock/equity-based compensation
expense
2,987
222
Contingent consideration expense
—
202
Non-cash operating lease expense
1,135
—
Deferred income taxes
820
115
Non-cash interest expense
58
1,059
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets
(1,714
)
(1,277
)
Accounts receivable, net
412
531
Unbilled receivables
(1,657
)
(984
)
Other assets
(410
)
(104
)
Accounts payable
(1,415
)
(259
)
Accrued expenses and other current
liabilities
(3,385
)
(15
)
Deferred revenue
846
642
Operating lease liabilities
(1,662
)
—
Other long-term liabilities
26
12
Net cash provided by operating
activities
2,741
4,978
Cash flows from investing
activities:
Purchases of property and equipment,
including costs capitalized for development of internal-use
software
(1,509
)
(1,313
)
Net cash used in investing activities
(1,509
)
(1,313
)
Cash flows from financing
activities:
Payment of debt issuance costs
(23
)
—
Payments of related party notes
—
(5,900
)
Payments of contingent consideration
(1,066
)
—
Proceeds from exercise of
stock/equity-based options
1,897
552
Payments of taxes related to net share
settlement of equity awards
(132
)
—
Payment of initial public offering
costs
(12
)
—
Net cash provided by (used in) financing
activities
664
(5,348
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
1,896
(1,683
)
Cash, cash equivalents and restricted cash
at beginning of period
254,594
29,650
Cash, cash equivalents and restricted cash
at end of period
$
256,490
$
27,967
Reconciliation of cash, cash
equivalents, and restricted cash:
Cash and cash equivalents
$
256,190
$
27,667
Restricted cash within other assets
300
300
Total cash, cash equivalents, and
restricted cash
$
256,490
$
27,967
EngageSmart, Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Reconciliation of GAAP Net Income to Adjusted
EBITDA
Three Months Ended March
31,
2022
2021
(in thousands, except
percentages)
Net income
$
2,059
$
485
Net income margin
3.1
%
1.0
%
Adjustments:
Provision for income taxes
820
115
Interest expense, net
88
2,305
Amortization of intangible assets
3,901
3,900
Depreciation
740
449
Fair value adjustment of acquired deferred
revenue
—
59
Stock/equity-based compensation
2,987
222
Transaction-related expense
(38
)
384
Adjusted EBITDA
$
10,557
$
7,919
Adjusted EBITDA Margin
15.7
%
16.7
%
Reconciliation of GAAP Gross Profit to Adjusted Gross
Profit
Three Months Ended March
31,
2022
2021
(in thousands, except
percentages)
Gross profit
$
51,323
$
35,204
Gross margin
76.2
%
74.2
%
Adjustments:
Fair value adjustment of acquired deferred
revenue
—
59
Amortization of intangible assets
1,539
1,538
Stock/equity-based compensation
108
4
Transaction-related expense
—
27
Adjusted Gross Profit
$
52,970
$
36,832
Adjusted Gross Margin
78.6
%
77.6
%
Reconciliation of GAAP Operating Expenses to Non-GAAP
Operating Expenses
Three Months Ended March
31,
2022
2021
(in thousands, except
percentages)
General and administrative expenses
$
13,287
$
7,655
General and administrative as a percentage
of revenue
19.7
%
16.1
%
Less:
Stock/equity-based compensation
(2,319
)
(184
)
Transaction-related expense
38
(146
)
Non-GAAP general and administrative
expenses
$
11,006
$
7,325
Non-GAAP general and administrative as a
percentage of revenue
16.3
%
15.4
%
Selling and marketing expenses
$
22,664
$
15,045
Selling and marketing as a percentage of
revenue
33.6
%
31.7
%
Less:
Stock/equity-based compensation
(403
)
(23
)
Non-GAAP selling and marketing
expenses
$
22,261
$
15,022
Non-GAAP selling and marketing as a
percentage of revenue
33.0
%
31.6
%
Research and development expenses
$
10,040
$
6,993
Research and development as a percentage
of revenue
14.9
%
14.7
%
Less:
Stock/equity-based compensation
(157
)
(11
)
Transaction-related expense
—
(9
)
Non-GAAP research and development
expenses
$
9,883
$
6,973
Non-GAAP research and development as a
percentage of revenue
14.7
%
14.7
%
Disaggregated Revenue
Three Months Ended March
31,
2022
2021
(in thousands)
Enterprise Solutions
Transaction and usage-based
$
28,319
$
21,611
Subscription
2,081
1,827
Other
460
641
Total Enterprise Solutions revenue
30,860
24,079
SMB Solutions
Transaction and usage-based
11,027
7,140
Subscription
25,052
16,010
Other
423
195
Total SMB Solutions revenue
36,502
23,345
Total revenue
$
67,362
$
47,424
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220505005288/en/
Investor Relations: Josh Schmidt EngageSmart, Inc.
IR@engagesmart.com
Press: Nicole Bestard Quarter Horse PR
Engagesmart@qh-pr.com
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