EverCommerce Inc.

Previous wording

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "EverCommerce," the “Company,” “we,” “us” and “our” refer to EverCommerce Inc. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report on Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on March 14, 2024. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Current wording

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "EverCommerce," the “Company,” “we,” “us” and “our” refer to EverCommerce Inc. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report on Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on March 13, 2025. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise noted, disclosures within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations relate solely to the Company's continuing operations, which excludes the marketing technology disposal group.

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 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.

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, 2024, we served more than 740,000 customers primarily across three core verticals: EverPro for Home Services; EverHealth for Health Services; and EverWell for Wellness Services. Excluding the customers associated with marketing technology solutions, which we anticipate selling in the year ending December 31, 2025, we served more than 725,000 customers (see Note 3. Discontinued Operations 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

We offer several vertically-tailored suites of solutions, each of which follows a similar and repeatable go-to-market playbook: offer a “system of action” Business Management Software that streamlines daily business workflows, integrate highly complementary, value-add adjacent solutions and complete gaps in the value chain to create end-to-end solutions. These solutions focus on addressing how service SMBs market their services, streamline operations and retain and engage their customers.

Current wording

We offer several vertically-tailored suites of solutions, each of which follows a similar and repeatable go-to-market playbook: offer a “system of action” Business Management Software that streamlines daily business workflows, integrate highly complementary, value-add adjacent solutions and complete gaps in the value chain to create integrated solutions. These solutions focus on addressing how service SMBs market their services, streamline operations and retain and engage their customers.

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 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. 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

We generate three types of revenue: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, (ii) Marketing Technology Solutions, which includes both recurring and re-occurring revenue streams and (iii) Other revenue which consists primarily of one-time revenue streams. Our recurring revenue generally consists of monthly, quarterly and annual software and maintenance subscriptions, transaction revenue associated with integrated payments and billing solutions and monthly contracts for Marketing Technology Solutions. Additionally, our re-occurring revenue includes revenue related to the sale of marketing campaigns and lead generation under contractual arrangements with customers.

Current wording

Our continuing operations generate two types of revenue: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, and (ii) Other revenue, which consists primarily of one-time revenue streams. Our recurring revenue generally consists of monthly, quarterly and annual software and maintenance subscriptions and transaction revenue associated with integrated payments and billing solutions.

Previous 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.

Current wording

Our business benefits from attractive unit economics. Approximately 97% of our revenue was recurring or re-occurring in the three months ended March 31, 2025 and 2024, and we maintained an annualized net revenue retention rate from continuing operations of approximately 97% and 99% for the quarters ended March 31, 2025 and 2024, respectively. Our annualized pro forma net revenue retention rate was equal to the annualized net revenue retention rate for the quarters ended March 31, 2025 and 2024, 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. 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

The macroeconomic climate continues to see pressure from global developments such as international geopolitical conflict, terrorism, rising inflation, fluctuations in the value of the US Dollar, rising interest rates and supply chain disruptions. These developments have had and may continue to have an adverse effect on our revenues and demand for our products and services, as well as on our costs of doing business. We have taken and will continue to take actions to help mitigate the impact of these economic challenges, but there can be no assurance as to the effectiveness of our efforts going forward.

Current wording

The macroeconomic climate has seen in the recent years, and may continue to see, pressure from global developments such as international geopolitical conflicts, increased tariffs and proposed tariffs between the United States and other nations, trade restrictions and conflict, terrorism, pandemics or health crises, rising inflation, fluctuations in the value of the US Dollar, rising interest rates and supply chain disruptions. These developments have had and may continue to have an adverse effect on our revenues and demand for our products and services, as well as on our costs of doing business. We have taken and will continue to take actions to help mitigate the impact of these economic challenges, but there can be no assurance as to the effectiveness of our efforts going forward.

Previous 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.

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 months ended March 31, 2024, we recognized a loss of $4.8 million related to the disposal of North American Fitness, a goodwill impairment charge of $6.4 million representing the allocated goodwill to Fitness Solutions, which are included in loss on held for sale and impairments on our unaudited condensed consolidated statements of operations and comprehensive loss included in this Quarterly Report on Form 10-Q.

Previous wording

In addition to our results and measures of performance determined in accordance with generally accepted accounting principles in the United States (“GAAP”), we believe the following key business and non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions.

Current wording

In addition to our results and measures of performance determined in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we believe the following key business and non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions. Unless otherwise noted, all amounts, percentages and discussions below reflect only the results of operations and financial condition of our continuing operations (see Note 3. Discontinued Operations in this Quarterly Report on Form 10-Q).

Previous 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.

Current wording

Our Revenue Growth Rate was 3.2% for the three months ended March 31, 2025. 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

Previous wording

Gross profit is calculated as total revenue less cost of revenue (exclusive of depreciation and amortization), amortization of developed technology, amortization of capitalized software and depreciation expense (allocated to cost of revenues). We calculate Adjusted Gross Profit as gross profit adjusted to exclude non-cash charges of depreciation and amortization allocated to cost of revenues. Adjusted Gross Profit 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) or profitability.

Current wording

Gross profit is calculated as total revenue less cost of revenue (exclusive of depreciation and amortization), amortization of developed technology, amortization of capitalized software and depreciation expense (allocated to cost of revenues). We calculate Adjusted Gross Profit as gross profit adjusted to exclude non-cash charges of depreciation and amortization allocated to cost of revenues. Adjusted Gross Profit 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 U.S. GAAP measures of income (loss) or profitability.

Previous wording

The following table presents a reconciliation of gross profit, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted Gross Profit on a consolidated basis.

Current wording

The following table presents a reconciliation of gross profit, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted Gross Profit.

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 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).

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 or unusual 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 or unusual 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 or unusual 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 U.S. GAAP measures of income (loss).

Previous wording

The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA on a consolidated basis.

Current wording

The following table presents a reconciliation of net loss from continuing operations, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Adjusted EBITDA from continuing operations.

Previous wording

For additional information concerning our accounting policies, see Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in our Annual Report on Form 10-K.

Current wording

Each of the components of our financial results described below relate to continuing operations other than loss from discontinued operations, net of income tax. For additional information concerning our accounting policies, see Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in our Annual Report on Form 10-K.

Previous wording

We derive our revenue from three primary sources which are described in detail below: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, (ii) Marketing Technology Solutions, which includes both recurring and re-occurring revenue streams and (iii) Other revenue, which consists primarily of the sale of distinct professional services and hardware. Our revenue recognition policies are discussed in more detail below under“Critical Accounting Policies and Significant Judgments and Estimates.”

Current wording

We derive our revenue from two primary sources which are described in detail below: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, and (ii) Other revenue, which consists primarily of the sale of distinct professional services and hardware. Our revenue recognition policies are discussed in more detail below under“Critical Accounting Policies and Significant Judgments and Estimates.”

Previous wording

Other: Revenue includes (i) consulting, implementation, training and other professional services; (ii) website development; (iii) revenue from various business development partnerships; (iv) event income; and (v) hardware sales related to our business management or payment software solutions.

Current wording

Other: Revenue includes (i) consulting, implementation, training and other professional services; (ii) revenue from various business development partnerships; (iii) event income; and (iv) hardware sales related to our business management or payment software solutions.

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 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.

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 rate of growth of subscription and transaction fees, labor costs, third-party expenses and acquisitions and dispositions. For the three months ended March 31, 2025, revenue from subscription and transaction fees increased 3.3% compared to the prior year period.

Previous wording

Sales and marketing expense consists primarily of employee costs for our sales and marketing personnel, including salaries, benefits, bonuses, stock-based compensation and sales commissions. Sales and marketing expenses also include advertising costs, travel-related expenses and costs to market and promote our products, direct customer acquisition costs, costs related to conferences and events and partner/broker commissions. Software and subscription services dedicated for use by our sales and marketing organization, and outside services contracted for sales and marketing purposes are also included in sales and marketing expense. Sales commissions that are incremental to obtaining a customer contract are deferred and amortized ratably over the estimated period of our relationship with that customer. We expect our sales and marketing expenses will increase in absolute dollars for the foreseeable future as we continue to increase investments to support our growth.

Current wording

Sales and marketing expense consists primarily of employee costs for our sales and marketing personnel, including salaries, benefits, bonuses, stock-based compensation and sales commissions. Sales and marketing expenses also include advertising costs, travel-related expenses and costs to market and promote our products, direct customer acquisition costs, costs related to conferences and events and partner/broker commissions. Software and subscription services dedicated for use by our sales and marketing organization, and outside services contracted for sales and marketing purposes are also included in sales and marketing expense. Sales commissions that are incremental to obtaining a customer contract are deferred and amortized ratably over the estimated period of our relationship with that customer. We expect our sales and marketing expenses will increase in absolute dollars and may increase as a percentage of revenue for the foreseeable future as we continue to increase investments to support our growth.

Previous wording

Product development expense consists primarily of employee costs for our product development personnel, including salaries, benefits, stock-based compensation and bonuses. Product development expenses also include third-party outsourced technology costs incurred in developing our platforms, and computer equipment, software and subscription services dedicated for use by our product development organization. We expect our product development expenses to increase in absolute dollars for the foreseeable future as we continue to dedicate substantial resources to develop, improve and expand the functionality of our solutions.

Current wording

Product development expense consists primarily of employee costs for our product development personnel, including salaries, benefits, stock-based compensation and bonuses. Product development expenses also include third-party outsourced technology costs incurred in developing our platforms, and computer equipment, software and subscription services dedicated for use by our product development organization. We expect our product development expenses to increase in absolute dollars and increase as a percentage of revenue during 2025 as we continue to dedicate substantial resources to develop, improve and expand the functionality of our solutions.

Previous wording

General and administrative expense consists of employee costs for our executive leadership, accounting, finance, legal, human resources and other administrative personnel, including salaries, benefits, bonuses and stock-based compensation. General and administrative expenses also include external legal, accounting and other professional services fees, rent, software and subscription services dedicated for use by our general and administrative employees and other general corporate expenses. We expect general and administrative expense to increase on an absolute dollar basis for the foreseeable future as we continue to increase investments to support our growth and due to increased costs as a result of being a public company.

Current wording

General and administrative expense consists of employee costs for our executive leadership, accounting, finance, legal, human resources and other administrative personnel, including salaries, benefits, bonuses and stock-based compensation. General and administrative expenses also include external legal, accounting and other professional services fees, rent, software and subscription services dedicated for use by our general and administrative employees and other general corporate expenses. We expect general and administrative expense to increase on an absolute dollar basis for the foreseeable future due to increased costs as a result of being a public company. As we are able to further scale our operations in the future, we would expect that general and administrative expenses would decrease as a percentage of revenue.

Previous 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.

Current wording

Loss on held for sale represents the measurement of a disposal group at the lower of its carrying value or fair value less cost 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 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 during the three months ended March 31, 2024 (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

U.S. GAAP requires deferred tax assets and liabilities to be recognized for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at the expected tax rates for the periods in which the assets or liabilities will be realized, as well as for the expected tax (expense) benefit of net operating loss and tax credit carryforwards. Income taxes are recognized for the amount of taxes payable by the Company's corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

Current wording

U.S. GAAP requires deferred tax assets and liabilities to be recognized for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at the expected tax rates for the periods in which the assets or liabilities will be realized, as well as for the expected tax expense of net operating loss and tax credit carryforwards. Income taxes are recognized for the amount of taxes payable by the Company's corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

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 Fitness Solutions for all periods through the applicable 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 for all periods presented have been adjusted to reflect discontinued operations related to Marketing Technology Solutions and includes the operating results of Fitness Solutions for all periods through the applicable date of sale.

Previous wording

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

Current wording

Comparison of the three months ended March 31, 2025 and 2024

Previous wording

Comparison of the three and nine months ended September 30, 2024 and 2023 (percentage of revenue)

Current wording

Comparison of the three months ended March 31, 2025 and 2024 (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 nine months ended September 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 months ended March 31, 2025 compared to the same period in 2024.

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% 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.

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 22.9% for the three months ended March 31, 2024, to 21.9% for the three months ended March 31, 2025, an improvement of approximately 100 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 79.8% for the three months ended March 31, 2024 as compared to 78.2% for the three months ended March 31, 2025, an improvement of 220 basis points. A discussion on primary drivers of cost reductions resulting in improved margin follows in the subsequent sections.

Previous 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.

Current wording

Revenues increased $4.4 million, or 3.2%, for the three months ended March 31, 2025, as compared to the same period in 2024. The growth of revenue from subscription and transaction fees was 3.3% during the three months ended March 31, 2025, as compared to the prior year period, while other revenue was consistent with the prior year period. 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 fees revenue increase consists primarily of increases from (a) business management software and (b) billing and payment solutions. Business management software revenues drove a $4.0 million increase in subscription and transaction fees revenue for the three months ended March 31, 2025, 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 $0.4 million during the three months ended March 31, 2025. The increase in the three-month period was primarily due to higher transaction volumes processed through our payment platforms, partially offset by lower revenue due to the Fitness Solutions divestiture. Subscription and transaction fees revenue also includes pre-divestiture revenue from Fitness Solutions of $5.8 million for the three months ended March 31, 2024 (see Note 4. Fitness Solutions Disposition in this Quarterly Report on Form 10-Q). Other revenues were relatively consistent as compared to the prior year period.

Previous 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.

Current wording

General and administrative expenses decreased by $0.4 million, or 1.1%, for the three months ended March 31, 2025 as compared to the same period in 2024. As a percentage of revenue, general and administrative expenses decreased slightly in the three-month period from 23.0% to 22.0%, an improvement of 100 basis points, due to cost discipline through ongoing transformation initiatives.

Previous 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.

Current wording

Depreciation and amortization expenses decreased by $4.1 million, or 19.8%, for the three months ended March 31, 2025 as compared to the same period in 2024. 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 $3.8 million in lower intangible assets’ amortization and $0.3 million of property and equipment depreciation.

Previous 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.

Current wording

During the three months ended March 31, 2025, we recorded a $0.1 million working capital adjustment related to the disposal of Fitness Solutions. 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 months ended March 31, 2024, the North American Fitness transaction resulted in a loss on disposal of $4.8 million and a goodwill impairment charge of $6.4 million representing the allocated goodwill to Fitness Solutions. The three months ended March 31, 2024 included right-of-use lease asset impairments charges of $0.4 million. We did not have similar right-of-use lease asset impairment charges during the three months ended March 31, 2025.

Previous 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.

Current wording

Interest and other expense, net, increased by $7.0 million, or 120.3%, for the three months ended March 31, 2025 as compared to the same period in 2024 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 $3.9 million on interest rate swaps recorded during the three months ended March 31, 2025 as compared to an unrealized gain of $4.8 million in the comparative period. The increase was partially offset by a decrease of $1.9 million in interest expense as a result of lower variable base interest rates on the Company’s Credit Facilities (as defined below), the amendment to the Term Loan in the fourth quarter 2024 resulting in a reduction in margin and the removal of the credit spread adjustment, and the Third Swap executed in the third quarter 2024 to covert $125 million of the floating rate component of our Term Loan to a fixed rate (see Note 11. Long-Term Debt in this Quarterly report on Form 10-Q).

Previous 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.

Current wording

Income tax expense decreased by $5.4 million for the three months ended March 31, 2025 as compared to the corresponding period in 2024, with the change driven primarily by an increase in pre-tax book income from continuing operations and discrete items, including the sale of North American Fitness during the three months ended March 31, 2024.

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 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.

Current wording

We utilize liquidity for items such as strategic investments in the ongoing transformation of our business and infrastructure, business acquisitions and share repurchases authorized through our Repurchase Program (defined below). Absent significant deterioration of market conditions, we expect that working capital requirements, capital expenditures, acquisitions, the Company’s Repurchase Program, debt servicing and lease obligations will be our principal needs for liquidity going forward.

Previous 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.”

Current wording

As of March 31, 2025, we had cash, cash equivalents and restricted cash of $148.4 million, $190.0 million of available borrowing capacity under our Revolver (as defined below) and $530.8 million outstanding under our Term Loan (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

The following table sets forth cash flow data for the periods indicated therein:

Current wording

The following table sets forth cash flow data, inclusive of continuing and discontinued operations, for the periods indicated therein:

Previous 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.

Current wording

Net cash provided by operating activities was $30.7 million for the three months ended March 31, 2025, compared to $13.3 million for the three months ended March 31, 2024. 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 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.

Current wording

The increase in cash provided by operating activities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to lower costs as a result of our transformation and optimization initiatives comprised of a reduction in general overhead expenses, including personnel expenses, to support our business of $6.8 million, lower costs directly related to the delivery of our services and products of $6.1 million, lower interest payments of $2.0 million, higher cash collections from our subscription and transaction fees, which includes revenues from payment processing, of approximately $3.0 million and higher interest income of $0.4 million. These increases were partially offset by higher taxes of $0.9 million.

Previous 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.

Current wording

During the three months ended March 31, 2025, net cash used in investing activities of $5.6 million related primarily to costs to develop software of $5.1 million and $0.5 million for purchases of property and equipment.