EverCommerce Inc

Previous wording

EverCommerce is a leading provider of integrated, vertically-tailored software-as-a-service (“SaaS”) solutions for service-based small- and medium-sized businesses (“service SMBs”). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. Today, we serve more than 708,000 customers across three core verticals: Home Services; Health Services; and Fitness & Wellness Services. Within our core verticals, our customers operate within numerous micro-verticals, ranging from home service professionals, such as home improvement contractors and home maintenance technicians, to physician practices and therapists within Health Services, to personal trainers and salon owners within Fitness & Wellness. Our platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly specialized demands, as well as highly complementary solutions that provide fully-integrated offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences.

Current wording

EverCommerce is a leading provider of integrated, vertically-tailored software-as-a-service (“SaaS”) solutions for service-based small- and medium-sized businesses (“service SMBs”). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. As of December 31, 2023, we served more than 708,000 customers across three core verticals: Home Services; Health Services; and Fitness & Wellness Services. Excluding the customers associated with the sale of our fitness assets, we served more than 690,000 (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q). Within our core verticals, our customers operate within numerous micro-verticals, ranging from home service professionals, such as home improvement contractors and home maintenance technicians, to physician practices and therapists within Health Services, to personal trainers and salon owners within Fitness & Wellness. Our platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly specialized demands, as well as highly complementary solutions that provide fully-integrated offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences.

Previous wording

Our business benefits from attractive unit economics. Approximately 97% of our revenue in the three months ended March 31, 2024 and 2023 was recurring or re-occurring, and we maintained an annualized net pro forma revenue retention rate of approximately 93% for the quarter ended March 31, 2024. Excluding our marketing technology solutions, our annualized net revenue retention rate for our core software and payments solutions was approximately 99% for the three months ended March 31, 2024. We believe the retention and growth of revenue from our existing customers is a helpful measure of the health of our business and our future growth prospects. Our ability to cross sell additional products and services to our existing customers can increase customer engagement with our suite of solutions and thus have a positive impact on our net pro forma revenue retention rate. For example, we have leveraged our land and expand strategy to cross sell solutions to our existing customers, which has supported our high net pro forma revenue retention rate by increasing customer utilization of our solutions, educating customers as to how our platform and synergies can support their businesses and, in turn, improving customer stickiness.

Current wording

Our business benefits from attractive unit economics. Approximately 97% and 95% of our revenue was recurring or re-occurring in the six months ended June 30, 2024 and 2023, respectively, and we maintained an annualized net revenue retention rate of approximately 92% and 98% for the quarters ended June 30, 2024 and 2023, respectively. Our annualized pro forma net revenue retention rate was equal to the annualized net revenue retention rate for the quarters ended June 30, 2024 and 2023, respectively, as the acquisitions and dispositions closed during the prior period were not material to our prior period unaudited condensed consolidated results on a proforma basis. Excluding our marketing technology solutions, our annualized net revenue retention rate for our core software and payments solutions was approximately 97% and 100% for the quarters ended June 30, 2024 and 2023, respectively. We believe the retention and growth of revenue from our existing customers is a helpful measure of the health of our business and our future growth prospects. Our ability to cross sell additional products and services to our existing customers can increase customer engagement with our suite of solutions and thus have a positive impact on our net pro forma revenue retention rate. For example, we have leveraged our land and expand strategy to cross sell solutions to our existing customers, which has supported our high net pro forma revenue retention rate by increasing customer utilization of our solutions, educating customers as to how our platform and synergies can support their businesses and, in turn, improving customer stickiness.

Previous wording

We calculate our monthly net pro forma revenue retention rate for a particular month as the recurring or re-occurring revenue gained/lost from existing customers, less the recurring or re-occurring revenue lost from cancelled customers, as a percentage of total recurring or re-occurring revenue 12 months prior, divided by 12. For existing customers, we consider customers that existed 11 or more months prior to the current month and that do not have an end date (i.e., cancelled relationship) on or after the first day of the current month. For example, the recurring or re-occurring revenue gained/lost from existing customers in November 2023 is the difference between the recurring or re-occurring revenue generated in November 2023 and the same such revenue generated in November 2022, for customers with a start date prior to December 1, 2022 and no end date or cancelled relationship on or after November 1, 2023. For cancelled customers, we examine customers that cancelled their relationships on or after the first day of the month that is 12 months prior to the current month and before the first day of the current month. For example, the recurring or re-occurring revenue lost from cancelled customers in November 2023 is the difference between the recurring or re-occurring revenue generated in November 2023 and the same such revenue generated in November 2022, for customers that cancelled on or after November 1, 2022 and before November 1, 2023. Net pro forma revenue retention is calculated as if acquisitions and dispositions that were closed during the prior period presented were closed on the first day of such period presented. Our calculation of net pro forma revenue retention rate for any fiscal period includes the positive recurring and re-occurring revenue impacts of selling new solutions to existing customers and the negative impacts of contraction and attrition among this set of customers. Our net pro forma revenue retention rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of solutions, new acquisitions and dispositions and our ability to retain our customers. Our calculation of net pro forma revenue retention rate may differ from similarly titled metrics presented by other companies.

Current wording

We calculate our annualized net revenue retention rate based on the average of the annualized net revenue retention rate calculated for each month during the twelve-month period as of the most recent quarter end. Our calculation of net revenue retention rate for any fiscal period includes the positive recurring and re-occurring revenue impacts of selling new solutions to existing customers and the negative impacts of contraction and attrition among this set of customers. The annualized net revenue retention rate for a particular month is calculated as the recurring or re-occurring revenue gained/lost from existing customers, less the recurring or re-occurring revenue lost from cancelled customers as a percentage of total recurring or re-occurring revenue during the corresponding month of the prior year. For existing customers, we consider customers that existed 11 or more months prior to the current month and that do not have an end date (i.e., cancelled relationship) on or after the first day of the current month. For example, the recurring or re-occurring revenue gained/lost from existing customers in November 2023 is the difference between the recurring or re-occurring revenue generated in November 2023 and the same such revenue generated in November 2022, for customers with a start date prior to December 1, 2022 and no end date or cancelled relationship on or after November 1, 2023. For cancelled customers, we examine customers that cancelled their relationships on or after the first day of the month that is 12 months prior to the current month and before the first day of the current month. For example, the recurring or re-occurring revenue lost from cancelled customers in November 2023 is the difference between the recurring or re-occurring revenue generated in November 2023 and the same such revenue generated in November 2022, for customers that cancelled on or after November 1, 2022 and before November 1, 2023. The annualized pro forma net revenue retention rate is calculated as the annualized net revenue retention rate adjusted as though acquisitions and dispositions that were closed during the prior period presented were closed on the first day of such period presented. Our annualized net revenue retention rate and pro forma net revenue retention rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of solutions, new acquisitions and dispositions and our ability to retain our customers. Our calculation of annualized net revenue retention rate and annualized pro forma net revenue retention rate may differ from similarly titled metrics presented by other companies.

Previous wording

On March 13, 2024, we entered into definitive sale and purchase agreements to sell our fitness solutions to Jonas Software (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q). The sale of North American Fitness closed simultaneously with signing. The sale of UK Fitness is subject to customer closing conditions and regulatory approval by the Financial Conduct Authority and is expected to close during the third quarter of 2024. The assets and liabilities of the UK Fitness disposal group are classified as held for sale and presented within other current assets and other current liabilities on our unaudited condensed consolidated balance sheets as of March 31, 2024. The divestiture did not qualify for reporting as a discontinued operation. As a result, our unaudited condensed consolidated financial statements include the results of North American Fitness for all periods through the date of sale, while the UK Fitness results are included in our results of operations. In connection with the sale of North American Fitness and the classification of assets and liabilities of UK Fitness as held for sale, we recognized a a loss of $4.8 million related to the disposal of North American Fitness, a goodwill impairment charge of $3.4 million representing the allocated goodwill to North American Fitness and a loss on assets held for sale of $2.6 million related to UK Fitness during the three months ended March 31, 2024, which are included within loss on held for sale and impairments on our unaudited condensed consolidated statements of operations and comprehensive loss.

Current wording

On March 13, 2024, we entered into definitive sale and purchase agreements to sell our fitness solutions to Jonas Software (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q). The sale of North American Fitness closed simultaneously with signing. The sale of UK Fitness closed July 1, 2024 (see Note 19. Subsequent Event in this Quarterly Report on Form 10-Q). The assets and liabilities of the UK Fitness disposal group are classified as held for sale and presented within other current assets and other current liabilities on our unaudited condensed consolidated balance sheets as of June 30, 2024. The divestiture did not qualify for reporting as a discontinued operation. As a result, our unaudited condensed consolidated financial statements include the results of North American Fitness for all periods through the date of sale, while the UK Fitness results are included in our results of operations for all periods presented. In connection with the sale of North American Fitness, we recognized losses of $0.2 million and $5.0 million during the three and six months ended June 30, 2024, respectively, related to the disposal of North American Fitness, and a goodwill impairment charge of $3.4 million representing the allocated goodwill to North American Fitness during the three months ended March 31, 2024, which are included within loss on held for sale and impairments on our unaudited condensed consolidated statements of operations and comprehensive loss. During the three and six months ended June 30, 2024, we measured the assets and liabilities of UK Fitness as held for sale at fair value less costs to sell and recognized losses of $0.3 million and $2.9 million, respectively, which are included within loss on held for sale and impairments on our unaudited condensed consolidated statements of operations and comprehensive loss. The loss during the three months ended June 30, 2024 was primarily due to an increase in our accrual of estimated costs to sell.

Previous wording

Our year-over-year Pro Forma Revenue Growth Rate is calculated as though all acquisitions and divestitures completed as of the end of the latest period were completed as of the first day of the prior year period presented. In calculating Pro Forma Revenue Growth Rate, we add the revenue from acquisitions for the reporting periods prior to the date of acquisition (including estimated purchase accounting adjustments) and exclude revenue from divestitures and held for sale assets for the reporting periods prior to the date of divestiture, and then calculate our revenue growth rate between the two reported periods. As a result, Pro Forma Revenue Growth Rate includes pro forma revenue from businesses acquired and excludes revenue from businesses divested of during the period, including revenue generated during periods when we did not yet own the acquired businesses and excludes revenue prior to the divestiture of the business. In including such pre-acquisition revenue and excluding pre-divestiture revenue, Pro Forma Revenue Growth Rate allows us to measure the underlying revenue growth of our business as it stands as of the end of the respective period, which we believe provides insight into our then-current operations. Pro Forma Revenue Growth Rate does not represent organic revenue generated by our business as it stood at the beginning of the respective period. Pro Forma Revenue Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had the acquisitions and divestitures been consummated on the first day of the prior year period presented. We believe that this metric is useful to investors in analyzing our financial and operational performance period over period and evaluating the growth of our business, normalizing for the impact of acquisitions and divestitures. This metric is particularly useful to management due to the number of acquired entities.

Current wording

Our year-over-year Pro Forma Revenue Growth Rate is calculated as though all acquisitions and divestitures completed as of the end of the latest period were completed as of the first day of the prior year period presented. In calculating Pro Forma Revenue Growth Rate, we add the revenue from acquisitions for the reporting periods prior to the date of acquisition (including estimated purchase accounting adjustments) and exclude revenue from divestitures for the reporting periods prior to the date of divestiture, and then calculate our revenue growth rate between the two reported periods. As a result, Pro Forma Revenue Growth Rate includes pro forma revenue from businesses acquired and excludes revenue from businesses divested of during the period, including revenue generated during periods when we did not yet own the acquired businesses and excludes revenue prior to the divestiture of the business. In including such pre-acquisition revenue and excluding pre-divestiture revenue, Pro Forma Revenue Growth Rate allows us to measure the underlying revenue growth of our business as it stands as of the end of the respective period, which we believe provides insight into our then-current operations. Pro Forma Revenue Growth Rate does not represent organic revenue generated by our business as it stood at the beginning of the respective period. Pro Forma Revenue Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had the acquisitions and divestitures been consummated on the first day of the prior year period presented. We believe that this metric is useful to investors in analyzing our financial and operational performance period over period and evaluating the growth of our business, normalizing for the impact of acquisitions and divestitures. This metric is particularly useful to management due to the number of acquired entities.

Previous wording

Our Pro Forma Revenue Growth rate was 5.7% for the three months ended March 31, 2024, reflective of the underlying growth in our business including new customers and providing more solutions to existing customers.

Current wording

Our Revenue Growth Rate was 4.3% and 4.9% for the three and six months ended June 30, 2024. Total revenues include post-acquisition revenue from Kickserv, which was acquired August 10, 2023 (see Note 3. Kickserv Acquisition in this Quarterly Report on Form 10-Q), of $0.7 million and $1.3 million during the three and six months ended June 30, 2024, respectively. Additionally, total revenues include pre-divestiture revenue from North American Fitness, which was divested in March 2024 (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q), of $3.3 million and $6.7 million during the three and six months ended June 30, 2023, respectively, and $2.7 million during the six months ended June 30, 2024. Our Pro Forma Revenue Growth rate was 6.0% and 5.8% for the three and six months ended June 30, 2024, respectively, reflective of the underlying growth in our business as a result of new customers and providing more solutions to existing customers.

Previous wording

Subscription and Transaction Fees: Revenue includes (i) recurring monthly, quarterly and annual SaaS subscriptions and software license and maintenance fees from the sale of our Business Management, Customer Experience and Billing and Payment solutions; (ii) payment processing fees based on the transaction volumes processed through our integrated payment solutions and processing fees based on transaction volumes for our revenue cycle management, chronic care management and health insurance clearinghouse solutions; and (iii) membership subscriptions and our share of rebates from suppliers generated though group purchasing programs. Our revenue from payment processing fees is recorded net of credit card and ACH processing and interchange charges in the month the services are performed.

Current wording

Subscription and Transaction Fees: Revenue includes (i) recurring monthly, quarterly and annual SaaS subscriptions and software license and maintenance fees from the sale of our Business Management, Customer Experience and Billing & Payment solutions; (ii) payment processing fees based on the transaction volumes processed through our integrated payment solutions and processing fees based on transaction volumes for our revenue cycle management, chronic care management and health insurance clearinghouse solutions; and (iii) membership subscriptions and our share of rebates from suppliers generated though group purchasing programs. Our revenue from payment processing fees is recorded net of credit card and ACH processing and interchange charges in the month the services are performed.

Previous wording

We expect that cost of revenue as a percentage of revenue will fluctuate from period to period based on a variety of factors, including the mix of revenue between subscription and transaction fees and marketing technology solutions, labor costs, third-party expenses and acquisitions and dispositions. In particular, marketing technology solutions revenue generally has a higher cost of revenue as a percentage of revenue than our subscription and transaction fee revenue. For the three months ended March 31, 2024, revenue from subscription and transaction fees increased 8.8%, and revenue from marketing technology solutions decreased 4.7% compared to the prior year period. To the extent our marketing technology solutions revenue grows at a faster rate, whether by acquisition or otherwise, than our subscription and transaction fees revenue, it could negatively impact our cost of revenues as a percentage of revenue.

Current wording

We expect that cost of revenue as a percentage of revenue will fluctuate from period to period based on a variety of factors, including the mix of revenue between subscription and transaction fees and marketing technology solutions, labor costs, third-party expenses and acquisitions and dispositions. In particular, marketing technology solutions revenue generally has a higher cost of revenue as a percentage of revenue than our subscription and transaction fee revenue. For the three and six months ended June 30, 2024, revenue from subscription and transaction fees increased 5.2% and 6.9%, respectively, and revenue from marketing technology solutions increased 1.6% and decreased 1.4%, respectively, compared to the prior year periods. To the extent our marketing technology solutions revenue grows at a faster rate, whether by acquisition or otherwise, than our subscription and transaction fees revenue, it could negatively impact our cost of revenues as a percentage of revenue.

Previous wording

Comparison of the three months ended March 31, 2024 and 2023

Current wording

Comparison of the three and six months ended June 30, 2024 and 2023

Previous wording

Comparison of the three months ended March 31, 2024 and 2023 (percentage of revenue)

Current wording

Comparison of the three and six months ended June 30, 2024 and 2023 (percentage of revenue)

Previous wording

The following table provides the key components of operating costs within our results of operations as a percentage of revenue for the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

The following table provides the key components of operating costs within our results of operations as a percentage of revenue for the three and six months ended June 30, 2024 compared to the same period in 2023.

Previous wording

While revenue growth remains a key focus, we remain committed to continued expansion of gross margin, net income and Adjusted EBITDA through ongoing transformation initiatives. As a percentage of revenue, cost of revenues declined from 34.7% to 33.4%, an improvement of approximately 130 basis points resulting in higher gross margin. Additionally, the combination of cost of revenue, sales and marketing, product development and general and administrative costs declined from 86.5% to 82.6%, an improvement of approximately 390 basis points. A discussion on primary drivers of cost reductions resulting in improved margin follows in the subsequent sections.

Current wording

While revenue growth remains a key focus, we remain committed to continued expansion of gross margin, net income and Adjusted EBITDA through ongoing transformation initiatives. As a percentage of revenue, the combination of cost of revenue, sales and marketing, product development and general and administrative costs declined in the six month period from 85.1% to 83.1%, an improvement of 200 basis points. A discussion on primary drivers of cost reductions resulting in improved margin follows in the subsequent sections.

Previous wording

Revenues increased $9.0 million, or 5.6%, for the three months ended March 31, 2024, as compared to the same period in 2023. This increase was driven primarily by an $8.3 million increase from subscription and transaction revenues due to an expansion in our number of customers and certain price increases across our portfolio. Total revenue includes revenue from our fitness solutions (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q), of $5.4 million and $6.0 million for the three months ended March 31, 2024 and 2023, respectively. Additionally, there was a $2.6 million increase due to higher transaction volumes processed through our payment platforms. The decline in marketing technology solutions revenues of $1.5 million resulted primarily from a reduction in demand driven by decreases in consumer spending. The decline in other revenue of $0.4 million was driven by revenue related to project implementation services during the three months ended March 31, 2023, which did not recur in the current year. The majority of our revenue growth is attributable to the successful delivery of system of action capabilities to our SMBs in our verticals of home services, health and wellness. The growth of revenue from subscription and transaction fees was 8.8%, partially offset by a reduction in marketing technology solutions and other revenues, which have experienced more volatility in revenue generation than the delivery of services through system of actions.

Current wording

Revenues increased $7.3 million, or 4.3%, and $16.3 million, or 4.9%, for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The growth of revenue from subscription and transaction fees was 5.2% and 6.9% during the three and six months ended June 30, 2024, respectively, as compared to the prior year periods, while the changes in marketing technology solutions and other revenues experienced more volatility in revenue generation than the delivery of services through our system of actions. The subscription and transaction revenue increases consist primarily of increases from (a) business management software and (b) billing and payment solutions. Business management software revenues drove a $6.0 million and $14.3 million increase in subscription and transaction revenues for the three and six months ended June 30, 2024, respectively, due to an expansion in our number of customers, certain price increases across our portfolio, and an increase in rebate revenue from contracted suppliers due to growth of membership subscriptions in group purchasing programs. Billing and payment solutions revenues drove an increase of $0.7 million and $3.3 million due to higher transaction volumes processed through our payment platforms during the three and six months ended June 30, 2024, respectively. Subscription and transaction revenues also include $0.7 million and $1.3 million of post-acquisition revenue from Kickserv for the three and six months ended June 30, 2024, respectively, and pre-divestiture revenue from North American Fitness of $3.3 million and $6.5 million for the three and six months ended June 30, 2023, and $2.6 million for the three months ended June 30, 2024, respectively (see Note 3. Kickserv Acquisition and Note 4. Disposition and Held for Sale, respectively, in this Quarterly Report on Form 10-Q). Marketing technology solutions revenues increased $0.6 million and decreased $0.9 million during the three and six months ended June 30, 2024, respectively. The increase in the three month period was primarily due to certain price increases and customer growth related to lead generation services, partially offset by a reduction in demand for digital advertising management services. The decrease in the six month period primarily resulted from a reduction in demand driven by decreases in consumer spending. Other revenues increased $0.1 million and decreased $0.4 million during the three and six months ended June 30, 2024, respectively. Other revenues were relatively flat for the three month period comparison, and the decrease in the six month period comparison was driven by revenue related to project implementation and customer development services which did not recur in the current year. The majority of our revenue growth is attributable to the successful delivery of system of action capabilities to our SMBs in our verticals of home services, health and wellness.

Previous wording

Cost of revenues increased by $0.8 million, or 1.5%, for the three months ended March 31, 2024 as compared to the same period in 2023. The increase is primarily comprised of an additional $1.8 million of lead generation and ad spend subject to resale to customers, $1.3 million of outsourced services, $0.7 million of application programming interface fees, and $0.4 million of software hosting expenses, partially offset by a $1.7 million decrease in communication services and a $1.3 million decrease in personnel and compensation expense.

Current wording

Cost of revenues increased by $3.2 million, or 5.4%, and $4.0 million, or 3.5%, for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The increase for the three month period was primarily comprised of an additional $2.6 million of lead generation and ad spend subject to resale to customers, $0.7 million of campaign mail expenses, $0.5 million of software hosting expenses, and $0.4 million of application programming interface fees, partially offset by a $1.1 million decrease in personnel and compensation expense, and a $0.5 million decrease in outsourced services. The increase for the six month period was primarily comprised of an additional $4.4 million of lead generation and ad spend subject to resale to customers, $1.1 million of application programming interface fees, $1.0 million of software hosting expenses, and $0.6 million of campaign mail expenses, partially offset by a $2.4 million decrease in personnel and compensation expense, and a $0.9 million decrease in communication services.

Previous wording

Product development expenses increased by $1.5 million, or 8.0%, for the three months ended March 31, 2024 as compared to the same period in 2023. The increase was a result of continued investment in our technology and teams to support our various solutions as well as centralized security operations, information technology and cloud engineering, driven by an additional $0.8 million of personnel and compensation expense, $0.4 million of software and tools expense, and $0.4 million of outsourced services.

Current wording

Product development expenses increased by $1.8 million, or 10.0%, and $3.3 million, or 9.0%, for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. These increases for the three and six months ended June 30, 2024 were a result of continued investment in our technology and teams to support our various solutions as well as centralized security operations, information technology and cloud engineering, driven by an additional $1.6 million and $2.4 million of personnel and compensation expense, respectively, and $0.5 million and $0.9 million of outsourced services, respectively.

Previous wording

Depreciation and amortization expenses decreased by $3.0 million, or 11.6%, for the three months ended March 31, 2024 as compared to the same period in 2023. The reduction in depreciation and amortization was driven primarily by the reduced rate of replacement assets resulting from a slowdown in business acquisitions. Specifically, these decreases were driven primarily by $3.8 million in intangible assets’ amortization, partially offset by $0.7 million of additional capitalized software amortization and $0.1 million of property and equipment depreciation.

Current wording

Depreciation and amortization expenses decreased by $4.1 million, or 15.6%, and $7.1 million, or 13.6%, for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The reduction in depreciation and amortization was driven primarily by the reduced rate of replacement assets resulting from a slowdown in business acquisitions. Specifically, these decreases for the three and six months ended June 30, 2024 were driven primarily by $4.3 million and $8.2 million in lower intangible assets’ amortization, respectively, partially offset by $0.4 and $1.1 million of additional capitalized software amortization, respectively.

Previous wording

Loss on held for sale and impairments increased by $10.2 million as compared to the same period in 2023. In March 2024, we entered into definitive sale and purchase agreements to sell our fitness solutions (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q). The North American Fitness transaction resulted in a loss on disposal of $4.8 million and a goodwill impairment charge of $3.4 million representing allocated goodwill. Additionally, we recognized a loss on held for sale of $2.6 million during the three months ended March 31, 2024, which represents the measurement of the UK Fitness disposal group at fair value less costs to sell. We did not have similar expenses during the three months ended March 31, 2023. These increases were partially offset by lower right-of-use lease asset impairments charges of $0.7 million as compared to the same period in 2023.

Current wording

Loss on held for sale and impairments increased by $0.5 million and $10.6 million for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. In March 2024, we entered into definitive sale and purchase agreements to sell our fitness solutions (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q). The North American Fitness transaction resulted in a loss on disposal of $0.2 million and $5.0 million during the three and six months ended June 30, 2024, respectively, and a goodwill impairment charge of $3.4 million representing allocated goodwill during the three months ended March 31, 2024. Additionally, we recognized a loss on held for sale of $0.3 million and $2.9 million during the three and six months ended June 30, 2024, respectively, which represents the measurement of the UK Fitness disposal group at fair value less costs to sell. We did not have similar expenses during the three and six months ended June 30, 2023. The increase for the six months ended June 30, 2024 was partially offset by lower right-of-use lease asset impairments charges of $0.7 million as compared to the same period in 2023.

Previous wording

Income tax expense increased by $5.6 million for the three months ended March 31, 2024 as compared to the corresponding period in 2023, with the change driven primarily by an increase in U.S. federal and state income taxes and discrete items, including the sale of North American Fitness during the three months ended March 31, 2024.

Current wording

Income tax expense increased by $2.8 million and $8.4 million for the three and six months ended June 30, 2024, respectively, as compared to the corresponding periods in 2023, with the change driven primarily by an increase in U.S. federal and state income taxes and discrete items, including the sale of North American Fitness during the six months ended June 30, 2024, and the release of a foreign valuation allowance in the three and six months ended June 30, 2023.

Previous wording

We utilize liquidity for items such as strategic investments in the ongoing transformation of our business and infrastructure, our recent business acquisition of Kickserv and share repurchases authorized through our Repurchase Program (defined below). For a description of our recent acquisitions, see Note 3. Acquisitions in our Annual Report on Form 10-K and Note 3. Kickserv Acquisition in this Quarterly Report on Form 10-Q. Absent significant deterioration of market conditions, we expect that working capital requirements, capital expenditures, acquisitions, the Repurchase Program, debt servicing and lease obligations will be our principal needs for liquidity going forward.

Current wording

We utilize liquidity for items such as strategic investments in the ongoing transformation of our business and infrastructure, our recent business acquisition of Kickserv and share repurchases authorized through our Repurchase Program (defined below). For a description of our recent acquisitions, see Note 3. Acquisitions in the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K and Note 3. Kickserv Acquisition in the notes to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q. Absent significant deterioration of market conditions, we expect that working capital requirements, capital expenditures, acquisitions, the Repurchase Program, debt servicing and lease obligations will be our principal needs for liquidity going forward.

Previous wording

As of March 31, 2024, we had cash, cash equivalents and restricted cash of $92.9 million, $190.0 million of available borrowing capacity under our Revolver (as defined below) and $536.3 million outstanding under our Term Loans (as defined below). We believe that our existing cash, cash equivalents and restricted cash, availability under our Credit Facilities, and our cash flows from operations will be sufficient to fund our working capital requirements and planned capital expenditures, and to service our debt obligations for at least the next twelve months. However, our future working capital requirements will depend on many factors, including our rate of revenue growth, the timing and size of future acquisitions, and the timing of introductions of new products and services. If needed, additional funds may not be available on terms favorable to us, or at all. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected. See Part II, Item 1A. “Risk Factors.”

Current wording

As of June 30, 2024, we had cash, cash equivalents and restricted cash, including cash and restricted cash classified as held for sale, of $90.0 million, $190.0 million of available borrowing capacity under our Revolver (as defined below) and $534.9 million outstanding under our Term Loans (as defined below). We believe that our existing cash, cash equivalents and restricted cash, availability under our Credit Facilities, and our cash flows from operations will be sufficient to fund our working capital requirements and planned capital expenditures, and to service our debt obligations for at least the next twelve months. However, our future working capital requirements will depend on many factors, including our rate of revenue growth, the timing and size of future acquisitions, and the timing of introductions of new products and services. If needed, additional funds may not be available on terms favorable to us, or at all. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected. See Part II, Item 1A. “Risk Factors.”

Previous wording

Net cash provided by operating activities was $13.3 million for the three months ended March 31, 2024, compared to $12.7 million for the three months ended March 31, 2023. Changes in net cash provided by operating activities resulted primarily from cash received from net sales within our subscription and transaction fees 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.

Current wording

Net cash provided by operating activities was $37.2 million for the six months ended June 30, 2024, compared to $41.1 million for the six months ended June 30, 2023. Changes in net cash provided by operating activities resulted primarily from cash received from net sales within our subscription and transaction fees 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.

Previous wording

The increase in cash provided by operating activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to higher cash collections from our subscription and transaction fees and marketing technology solutions of approximately $6.3 million, higher interest income of $0.6 million and lower interest payments of $0.3 million, partially offset by higher costs directly related to the delivery of our services and products of $4.3 million, higher investments made to support the growth of our business of $2.5 million and higher taxes of $0.5 million.

Current wording

The increase in cash provided by operating activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily due to higher cash collections from our subscription and transaction fees and marketing technology solutions of approximately $13.3 million, higher interest income of $1.0 million and lower interest payments of $0.5 million, partially offset by higher investments made to support the growth of our business of $8.8 million, higher costs directly related to the delivery of our services and products of $8.6 million, and higher taxes of $1.3 million.

Previous wording

During the three months ended March 31, 2024, net cash used in investing activities of $3.6 million related primarily to costs to develop software of $4.4 million and $0.4 million used for purchases of property and equipment, partially offset by proceeds from the sale of North American Fitness, net of transaction costs, cash and restricted cash sold for approximately $1.2 million.

Current wording

During the six months ended June 30, 2024, net cash used in investing activities of $8.5 million related primarily to costs to develop software of $8.7 million and $1.0 million used for purchases of property and equipment, partially offset by proceeds from the sale of North American Fitness, net of transaction costs, cash and restricted cash sold for approximately $1.2 million.

Previous wording

During the three months ended March 31, 2023, net cash used in investing activities of $4.9 million related primarily to costs to develop software of $4.4 million and the remainder was used primarily for purchases of property and equipment.

Current wording

During the six months ended June 30, 2023, net cash used in investing activities of $10.7 million related primarily to costs to develop software of $9.5 million and the remainder was used primarily for purchases of property and equipment.

Previous wording

During the three months ended March 31, 2024, net cash used in financing activities of $12.4 million related primarily to the repurchase and retirement of shares of our common stock of $12.1 million.

Current wording

During the six months ended June 30, 2024, net cash used in financing activities of $34.2 million related primarily to the repurchase and retirement of shares of our common stock of $36.0 million.

Previous wording

During the three months ended March 31, 2023, net cash used in financing activities of $30.4 million related primarily to the repurchase and retirement of shares of our common stock of $29.6 million.

Current wording

During the six months ended June 30, 2023, net cash used in financing activities of $39.8 million related primarily to the repurchase and retirement of shares of our common stock of $39.7 million.

Previous wording

As of March 31, 2024, there was $536.3 million outstanding under our Credit Facilities, all of which was related to the Term Loans as no amounts were outstanding under the Revolver. The effective interest rate on the Term Loans was approximately 8.4% for the three months ended March 31, 2024, excluding the effect of any interest rate swap agreements.

Current wording

As of June 30, 2024, there was $534.9 million outstanding under our Credit Facilities, all of which was related to the Term Loans as no amounts were outstanding under the Revolver. The effective interest rate on the Term Loans was approximately 8.4% for the three months ended June 30, 2024, excluding the effect of any interest rate swap agreements.

Previous wording

On June 14, 2022, our Board of Directors approved the stock repurchase program (as subsequently amended, the “Repurchase Program”) with authorization to purchase up to $50.0 million in shares of the Company’s common stock through the expiration of the program on December 21, 2022. On November 7, 2022, our Board of Directors approved an expansion of the Repurchase Program with authorization to purchase up to an additional $50.0 million in shares of the Company’s common stock ($100.0 million total) and an extension to the expiration of the Repurchase Program through December 31, 2023. On November 5, 2023, our Board approved an additional expansion of the Repurchase Program with authorization to purchase up to an additional $50.0 million in shares of the Company’s common stock (from $100.0 million to $150.0 million in total) and extended the expiration of the Repurchase Program through December 31, 2024. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. The Repurchase Program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of the Board. The Company expects to fund repurchases with existing cash on hand.

Current wording

On June 14, 2022, our Board of Directors approved the stock repurchase program (as subsequently amended, the “Repurchase Program”) with authorization to purchase up to $50.0 million in shares of the Company’s common stock through the expiration of the program on December 21, 2022. On November 7, 2022, November 5, 2023, and May 21, 2024, our Board increased the authorization of the Repurchase Program by an additional $50.0 million in shares of the Company’s common stock on each date for a total authorization to repurchase up to $200.0 million in shares of the Company’s common stock, and extended the expiration of the Repurchase Program most recently through December 31, 2025. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. The Repurchase Program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of the Board. The Company expects to fund repurchases with existing cash on hand.

Previous wording

The Company repurchased and retired 1.2 million shares of common stock for approximately $12.1 million, including transaction fees and taxes, during the three months ended March 31, 2024. As of March 31, 2024, $27.9 million remained available under the Repurchase Program.

Current wording

The Company repurchased and retired 2.5 million and 3.7 million shares of common stock for approximately $24.1 million and $36.3 million, including transaction fees and taxes, during the three and six months ended June 30, 2024. As of June 30, 2024, $54.0 million remained available under the Repurchase Program.

Previous wording

Our critical accounting policies are described in Part II Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K. During the three months ended March 31, 2024, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K.

Current wording

Our critical accounting policies are described in Part II Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K. During the six months ended June 30, 2024, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K.