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. 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.

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 Wellness Services. Excluding the customers associated with the sale of our fitness assets, we served more than 690,000 customers (see Note 4. Fitness Solutions Disposition 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 salon owners within 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

•Customer Experience Solutions: Our Customer Experience Solutions modernize how businesses engage and interact with customers by leveraging innovative, bespoke customer listening and communication solutions to improve the customer experience and increase retention. Our software provides customer listening capabilities with real-time customer surveying and analysis to allow standalone businesses and multi-location brands to receive voice of the customer (“VoC”) insights and manage the customer experience lifecycle. These applications include: customer health scoring, customer support systems, real-time alerts, Net Promoter Score-based customer feedback collection, review generation and automation, reputation management, customer satisfaction surveying and a digital communication suite, among others. These tools help our customers gain actionable insights, increase customer loyalty and repeat purchases and improve customer experiences.

Current wording

•Customer Experience Solutions: Our Customer Experience Solutions modernize how businesses engage and interact with customers by leveraging innovative, bespoke customer listening and communication solutions to improve the customer experience and increase retention. Our software provides customer listening capabilities with real-time customer surveying and analysis to allow standalone businesses and multi-location brands to receive voice of the customer insights and manage the customer experience lifecycle. These applications include: customer health scoring, customer support systems, real-time alerts, Net Promoter Score-based customer feedback collection, review generation and automation, reputation management, customer satisfaction surveying and a digital communication suite, among others. These tools help our customers gain actionable insights, increase customer loyalty and repeat purchases and improve customer experiences.

Previous wording

•Marketing Technology Solutions: Our Marketing Technology Solutions work with our Customer Experience Solutions to help customers build their businesses by invigorating marketing operations and improving return on investment across the customer lifecycle. These solutions help businesses to manage campaigns, generate quality leads, increase conversion and repeat sales, improve customer loyalty and provide a polished brand experience. Our solutions include: custom website design, development and hosting, responsive web design, marketing campaign design and management, search engine optimization (“SEO”), paid search and display advertising, social media and blog automation, call tracking, review monitoring and marketplace lead generation, among others.

Current wording

•Marketing Technology Solutions: Our Marketing Technology Solutions work with our Customer Experience Solutions to help customers build their businesses by invigorating marketing operations and improving return on investment across the customer lifecycle. These solutions help businesses to manage campaigns, generate quality leads, increase conversion and repeat sales, improve customer loyalty and provide a polished brand experience. Our solutions include: custom website design, development and hosting, responsive web design, marketing campaign design and management, search engine optimization, paid search and display advertising, social media and blog automation, call tracking, review monitoring and marketplace lead generation, among others.

Previous wording

We go to market with suites of solutions that are aligned to our three core verticals: (i) the EverPro suite of solutions in Home Services; (ii) the EverHealth suite of solutions within Health Services; and (iii) the EverWell suite of solutions in Fitness & Wellness Services. Within each suite, our Business Management Software – the system of action at the center of a service business’ operation – is typically the first solution adopted by a customer. This vertically-tailored point-of-entry provides us with an opportunity to cross-sell adjacent products, previously offered as fragmented and disjointed point solutions by other software providers. This “land and expand” strategy allows us to acquire customers with key foundational solutions and expand into offerings via product development and acquisitions that cover all workflows and power the full scope of our customers’ businesses. This results in a self-reinforcing flywheel effect, enabling us to drive value for our customers and, in turn, improve customer stickiness, increase our market share and fuel our growth.

Current wording

We go to market with suites of solutions that are aligned to our three core verticals: (i) the EverPro suite of solutions in Home Services; (ii) the EverHealth suite of solutions within Health Services; and (iii) the EverWell suite of solutions in Wellness Services. Within each suite, our Business Management Software – the system of action at the center of a service business’ operation – is typically the first solution adopted by a customer. This vertically-tailored point-of-entry provides us with an opportunity to cross-sell adjacent products, previously offered as fragmented and disjointed point solutions by other software providers. This “land and expand” strategy allows us to acquire customers with key foundational solutions and expand into offerings via product development and acquisitions that cover all workflows and power the full scope of our customers’ businesses. This results in a self-reinforcing flywheel effect, enabling us to drive value for our customers and, in turn, improve customer stickiness, increase our market share and fuel our growth.

Previous 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.

Current wording

Our business benefits from attractive unit economics. Approximately 97% and 95% of our revenue was recurring or re-occurring in the nine months ended September 30, 2024 and 2023, respectively, and we maintained an annualized net revenue retention rate of approximately 91% and 97% for the quarters ended September 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 September 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 96% and 100% for the quarters ended September 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

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.

Current wording

On March 13, 2024, we entered into definitive sale and purchase agreements to sell our fitness solutions, comprised of North American Fitness and UK Fitness (“Fitness Solutions”), to Jonas Software (see Note 4. Fitness Solutions Disposition in this Quarterly Report on Form 10-Q). The sale of North American Fitness closed simultaneously with signing and the sale of UK Fitness closed July 1, 2024. The divestiture did not qualify for reporting as a discontinued operation and therefore, its results were included in our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q through the applicable date of sale. During the three and nine months ended September 30, 2024, we recognized losses of $0.1 million and $5.0 million, respectively, related to the sale of Fitness Solutions, which are included in loss on sale and impairments on our unaudited condensed consolidated statements of operations and comprehensive loss included in this Quarterly Report on Form 10-Q. During the nine months ended September 30, 2024, we recognized $6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions, which is included in loss on sale and impairments on the unaudited condensed consolidated statements of operations and comprehensive loss included in this Quarterly Report on Form 10-Q.

Previous 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.

Current wording

Our Revenue Growth Rate was 0.9% and 3.5% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in the prior year. 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 $2.0 million during the three and nine months ended September 30, 2024, respectively. Additionally, total revenues include pre-divestiture revenue from Fitness Solutions, which was divested in 2024 (see Note 4. Fitness Solutions Disposition in this Quarterly Report on Form 10-Q), of $6.0 million and $17.8 million during the three and nine months ended September 30, 2023, respectively, and $8.2 million during the nine months ended September 30, 2024. Our Pro Forma Revenue Growth rate was 4.3% and 5.3% for the three and nine months ended September 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

Adjusted EBITDA is calculated as net loss adjusted to exclude interest and other expense, net, income tax expense (benefit), depreciation and amortization, other amortization, stock-based compensation, and transaction-related and other non-recurring costs. Other amortization includes amortization for capitalized contract acquisition costs. Transaction-related costs are specific deal-related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. Other non-recurring costs are expenses such as impairment charges, (gains) losses from disposition and assets held for sale, system implementation costs, severance expense related to planned restructuring activities, and costs associated with integration and transformation improvements. Transaction-related and other non-recurring costs are excluded as they are not representative of our underlying operating performance. Adjusted EBITDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss).

Current wording

Adjusted EBITDA is calculated as net loss adjusted to exclude interest and other expense, net, income tax expense (benefit), depreciation and amortization, other amortization, stock-based compensation, and transaction-related and other non-recurring costs. Other amortization includes amortization for capitalized contract acquisition costs. Transaction-related costs are specific deal-related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. Other non-recurring costs are expenses such as impairment charges, (gains) losses from divestitures, system implementation costs, executive separation costs, severance expense related to planned restructuring activities, and costs associated with integration and transformation improvements. Transaction-related and other non-recurring costs are excluded as they are not representative of our underlying operating performance. Adjusted EBITDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss).

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 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.

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 nine months ended September 30, 2024, revenue from subscription and transaction fees increased 3.7% and 5.8%, respectively, and revenue from marketing technology solutions decreased 6.7% and 3.3%, 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

Loss on held for sale represents the measurement of the UK Fitness disposal group at the lower of its carrying value or fair value less costs to sell in the period the held for sale criteria are met, and subsequent remeasurement each reporting period the disposal group remains classified as held for sale. Impairments include a goodwill impairment charge representing the allocated goodwill to North American Fitness, and a loss on disposition from the sale of North American Fitness representing the difference between the consideration received and the net carrying amount of the assets sold and transaction costs (see Note 4. Disposition and Held for Sale in this Quarterly Report on Form 10-Q). Impairments also include operating lease impairments related to the Company’s decision to cease use of certain leased premises and sublease certain facilities.

Current wording

Loss on sale relates to the divestiture of Fitness Solutions. Impairments include a goodwill impairment charge representing the allocated goodwill to Fitness Solutions (see Note 4. Fitness Solutions Disposition in this Quarterly Report on Form 10-Q). Impairments also include operating lease impairments related to the Company’s decision to cease use of certain leased premises and sublease certain facilities.

Previous wording

The following tables summarize key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of our results of operations that may be expected in the future. The following comparative information for results of operations includes the results of North American Fitness for all periods through the date of sale.

Current wording

The following tables summarize key components of our results of operations for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of our results of operations that may be expected in the future. The following comparative information for results of operations includes the results of Fitness Solutions for all periods through the applicable date of sale.

Previous wording

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

Current wording

Comparison of the three and nine months ended September 30, 2024 and 2023

Previous wording

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

Current wording

Comparison of the three and nine months ended September 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 and six months ended June 30, 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 nine months ended September 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, 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.

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, cost of revenues declined from 34.7% for the nine months ended September 30, 2023 to 33.9% for the nine months ended September 30, 2024, an improvement of approximately 80 basis points resulting in higher gross margin. As a percentage of revenue, the combination of cost of revenue, sales and marketing, product development and general and administrative costs declined from 83.8% for the nine months ended September 30, 2023 to 82.7% for the nine months ended September 30, 2024, an improvement of 110 basis points. A discussion on primary drivers of cost reductions resulting in improved margin follows in the subsequent sections.

Previous 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.

Current wording

Revenues increased $1.5 million, or 0.9%, and $17.8 million, or 3.5%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The growth of revenue from subscription and transaction fees was 3.7% and 5.8% during the three and nine months ended September 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 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 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 $5.2 million and $19.5 million increase in subscription and transaction revenues for the three and nine months ended September 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 a decrease of $0.3 million and an increase of $3.0 million during the three and nine months ended September 30, 2024, respectively. The decrease in the three-month period was primarily due to the Fitness Solutions divestiture, partially offset by higher transaction volumes processed through our payment platforms. The increase in the nine-month period was due to higher transaction volumes processed through our payment platforms, partially offset by lower revenue due to the Fitness Solutions divestiture. Subscription and transaction revenues also include $0.7 million and $2.0 million of post-acquisition revenue from Kickserv for the three and nine months ended September 30, 2024, respectively, and pre-divestiture revenue from Fitness Solutions of $5.9 million and $17.6 million for the three and nine months ended September 30, 2023, respectively (see Note 3. Kickserv Acquisition and Note 4. Fitness Solutions Disposition, respectively, in this Quarterly Report on Form 10-Q). Marketing technology solutions revenues decreased $2.5 million and $3.4 million during the three and nine months ended September 30, 2024, respectively. The decrease in the three and nine-month periods was primarily due to a reduction in demand driven by decreases in consumer spending, partially offset by certain price increases and customer growth related to lead generation services. Other revenues decreased $0.9 million and $1.3 million during the three and nine months ended September 30, 2024, respectively. Other revenues decreased in the three and nine-month periods driven by revenue related to project implementation and customer development …

Excerpt shortened here; the source contains the full paragraph.

Previous 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.

Current wording

Cost of revenues decreased by $2.2 million, or 3.6%, and increased by $1.8 million, or 1.0%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The decrease for the three-month period was primarily comprised of a $1.7 million reduction in lead generation and ad spend subject to resale to customers, $1.5 million decrease in personnel and compensation expense, and a $0.5 million decrease in communication services, partially offset by a $0.8 million increase in software hosting expenses, $0.5 million increase in application programming interface fees, and $0.3 million increase in campaign mail expenses. The increase for the nine-month period was primarily comprised of an additional $2.7 million of lead generation and ad spend subject to resale to customers, $1.7 million of software hosting expenses, $1.6 million of application programming interface fees, and $0.9 million of campaign mail expenses, partially offset by a $4.0 million decrease in personnel and compensation expense, and a $1.4 million decrease in communication services.

Previous wording

General and administrative expenses increased by $0.6 million, or 1.6%, and $0.5 million, or 0.7%, for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. General and administrative expenses were relatively consistent in the three and six month periods as compared to the prior year periods. As a percentage of revenue, general and administrative costs declined in the three month period from 20.6% to 20.1%, an improvement of approximately 40 basis points, and in the six month period from 20.8% to 20.0%, an improvement of 80 basis points, due to cost discipline through ongoing transformation initiatives.

Current wording

Sales and marketing expenses increased by $0.5 million, or 1.6%, and decreased $0.4 million, or 0.4%, for the three and nine months ended September 30, 2024, respectively as compared to the same periods in 2023. As a percentage of revenue, sales and marketing expenses increased slightly in the three-month period from 17.2% to 17.3%, while in the nine-month period decreased from 18.1% to 17.4%, an improvement of 70 basis points, due to cost discipline through ongoing transformation initiatives.

Previous 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.

Current wording

Product development expenses increased by $0.8 million, or 4.0%, and $4.1 million, or 7.3%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increase for the three-month period was driven primarily by an additional $0.7 million of outsourced services. The increase for the nine-month period 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 $2.4 million of personnel and compensation expense, and $1.7 million of outsourced services.

Previous 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.

Current wording

Depreciation and amortization expenses decreased by $4.0 million, or 15.5%, and $11.1 million, or 14.2%, for the three and nine months ended September 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. The decrease for the three-month period was driven primarily by $3.9 million in lower intangible assets’ amortization. The decrease for the nine-month period was driven primarily by $12.1 million in lower intangible assets’ amortization, and $0.5 million of property and equipment depreciation, partially offset by $1.5 million of additional capitalized software amortization.

Previous 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.

Current wording

In March 2024, we entered into definitive sale and purchase agreements to sell our Fitness Solutions (see Note 4. Fitness Solutions Disposition in this Quarterly Report on Form 10-Q). During the three and nine months ended September 30, 2024, we recognized losses of $0.1 million and $5.0 million, respectively, related to the sale of Fitness Solutions. During the nine months ended September 30, 2024, we recognized $6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions. We did not have similar expenses during the three and nine months ended September 30, 2023. The increase for the three and nine months ended September 30, 2024, were partially offset by lower right-of-use lease asset impairments charges of $0.1 million and $1.1 million, respectively, as compared to the same period in 2023.

Previous wording

Interest and other expense, net, increased by $4.8 million, or 100.6%, and decreased $4.6 million, or 23.1%, for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023, with the changes primarily driven by volatility of interest rates on interest rate swaps. For the three month period, the increase was driven primarily by a decrease of $5.4 million in unrealized gains recorded on the interest rate swaps, partially offset by a $0.4 million increase in interest income. For the six month period, the decrease was driven primarily by an increase of $3.7 million in unrealized gains recorded on the interest rate swaps, and a $1.0 million increase in interest income.

Current wording

Interest and other expense, net, increased by $11.7 million, or 175.0%, and increased $7.1 million, or 26.5%, for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 with the changes primarily driven by volatility of interest rates. The increase for the three-month period was driven primarily by an unrealized loss of $8.1 million on interest rate swaps recorded during three months ended September 30, 2024 as compared to an unrealized gain of $4.5 million in the comparative period, partially offset by a decrease of $0.6 million in interest expense as a result of lower variable base interest rates on the Company’s Credit Facilities (as defined below), and a $0.5 million increase in interest income. The increase for the nine-month period was driven primarily by an unrealized loss of $2.3 million on interest rate swaps recorded during the nine months ended September 30, 2024 as compared to an unrealized gain of $6.6 million in the comparative period, partially offset by a $1.4 million increase in interest income, and a decrease of $0.6 million in interest expense as a result of lower variable base interest rates on the Company’s Credit Facilities.

Previous 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.

Current wording

Income tax expense increased by $0.5 million and $8.9 million for the three and nine months ended September 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 nine months ended September 30, 2024, and the release of a foreign valuation allowance in the three and nine months ended September 30, 2023.

Previous 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.”

Current wording

As of September 30, 2024, we had cash, cash equivalents and restricted cash of $101.6 million, $190.0 million of available borrowing capacity under our Revolver (as defined below) and $533.5 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 $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.

Current wording

Net cash provided by operating activities was $64.8 million for the nine months ended September 30, 2024, compared to $68.6 million for the nine months ended September 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 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.

Current wording

The decrease in cash provided by operating activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due to higher costs directly related to the delivery of our services and products of $11.1 million, higher investments made to support the growth of our business of $4.7 million, higher other expenses and timing of payments of $1.4 million, higher taxes of $0.9 million and higher interest payments of $0.6 million, partially offset by higher cash collections from our subscription and transaction fees and marketing technology solutions of approximately $13.5 million and higher interest income of $1.4 million.

Previous 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.

Current wording

During the nine months ended September 30, 2024, net cash used in investing activities of $7.7 million related primarily to costs to develop software of $13.1 million and $1.2 million used for purchases of property and equipment, partially offset by proceeds from the sale of Fitness Solutions, net of transaction costs, cash and restricted cash sold for approximately $6.6 million.

Previous 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.

Current wording

During the nine months ended September 30, 2023, net cash used in investing activities of $31.8 million related primarily to the acquisition of Kickserv, net of cash acquired, for approximately $15.0 million, costs to develop software of $14.7 million and the remainder was used primarily for purchases of property and equipment.

Previous 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.

Current wording

During the nine months ended September 30, 2024, net cash used in financing activities of $51.3 million related primarily to the repurchase and retirement of shares of our common stock of $50.6 million.

Previous 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.

Current wording

During the nine months ended September 30, 2023, net cash used in financing activities of $41.6 million related primarily to the repurchase and retirement of shares of our common stock of $41.3 million.

Previous wording

Effective as of July 1, 2023, borrowings under the Credit Facilities bear interest at the Company’s option at ABR plus an applicable rate, or at a forward-looking term rate based upon the secured overnight financing rate (“SOFR”), plus (i) (a) with respect to Term Loans, credit spread adjustments of 0.11448%, 0.26161%, 0.42826% and 0.71513% for interest periods of one, three, six and twelve months, respectively, and (b) with respect to revolving loans, a credit spread adjustment of 0.0% (“Adjusted SOFR”) plus (ii) an applicable rate, in each case with such applicable rate based on the Company’s first lien net leverage ratio. The ABR represents the highest of the prime rate, Federal Reserve Bank of New York rate plus ½ of 1%, and the Adjusted SOFR for a one month interest period plus 1%. The applicable rate for the Term Loans and the Revolver is 3.0% for Adjusted SOFR borrowings and 2.0% for ABR borrowings, in each case subject to change based on our first lien net leverage ratio.

Current wording

Effective as of July 1, 2023, borrowings under the Credit Facilities bear interest at our option at ABR plus an applicable rate, or at a forward-looking term rate based upon the secured overnight financing rate (“SOFR”), plus (i) (a) with respect to Term Loans, credit spread adjustments of 0.11448%, 0.26161%, 0.42826% and 0.71513% for interest periods of one, three, six and twelve months, respectively, and (b) with respect to revolving loans, a credit spread adjustment of 0.0% (“Adjusted SOFR”) plus (ii) an applicable rate, in each case with such applicable rate based on our first lien net leverage ratio. The ABR represents the highest of the prime rate, Federal Reserve Bank of New York rate plus ½ of 1%, and the Adjusted SOFR for a one month interest period plus 1%. The applicable rate for the Term Loans and the Revolver is 3.0% for Adjusted SOFR borrowings and 2.0% for ABR borrowings, in each case subject to change based on our first lien net leverage ratio.

Previous wording

Effective October 31, 2022, we entered into an interest rate swap agreement in connection with the Company’s Credit Facilities for a notional amount of $200.0 million to convert a portion of the floating rate component of the Term Loans from a floating rate to a fixed rate (the “Initial Swap”). The Initial Swap has a term of five years with a fixed rate in the agreement of 4.212%, as amended in June 2023. Additionally, effective March 31, 2023, the Company entered into a second interest rate swap agreement in connection with the Company’s Credit Facilities for a notional amount of $100.0 million to convert a portion of the floating rate component of the Term Loans from a floating rate to a fixed rate (the “Second Swap”). The Second Swap has a term of approximately 4.5 years with a fixed rate in the agreement of 3.951%, as amended in June 2023.

Current wording

We have entered into the following interest rate swap agreements in connection with our Credit Facilities to convert a portion of the floating rate component of the Term Loans from a floating rate to fixed rate:

Previous 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.

Current wording

As of September 30, 2024, there was $533.5 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 8.0% for the three months ended September 30, 2024, excluding the effect of any interest rate swap agreements.

Previous 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.

Current wording

The Company repurchased and retired 1.4 million and 5.1 million shares of common stock for approximately $14.6 million and $50.9 million, including transaction fees and taxes, during the three and nine months ended September 30, 2024. As of September 30, 2024, $39.4 million remained available under the Repurchase Program.

Previous wording

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.

Current wording

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.

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 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.

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 nine months ended September 30, 2024, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K.