Third Quarter 2023 Revenue of $97.7 million, up
24% year over year
Third Quarter 2023 Net Income of $11.5 million
and Adjusted EBITDA of $18.8 million
Company enters into definitive agreement to be
acquired by Vista Equity Partners for approximately $4.0
billion
EngageSmart, Inc. (NYSE: ESMT), a leading provider of vertically
tailored customer engagement software and integrated payments
solutions, today reported financial results for the third quarter
ended September 30, 2023.
“Driven by persistent demand for our true SaaS solutions, we
delivered record revenue of $97.7 million, net income of $11.5
million and Adjusted EBITDA of $18.8 million in the third quarter,”
said Bob Bennett, EngageSmart CEO. “Our ability to successfully
scale our solutions reflects the strength of our business model,
our commitment to product leadership as measured by customer
adoption and retention, and our continued execution. We are proud
of our track record of revenue growth and expanding profitability
and believe the partnership with Vista Equity Partners ("Vista")
and General Atlantic will enable us to build upon our momentum and
capitalize on the ongoing need for business and consumer engagement
solutions with integrated payments."
“Our SMB solution is uniquely positioned to address the
escalating demand for mental health treatment by empowering
practitioners to treat more patients,” added Cassandra Hudson,
EngageSmart CFO. “Fueled by new customers and expansion from
existing customers, our SMB segment achieved third quarter revenue
growth of 29%. In our Enterprise segment, our commitment to
excellent user-centric experiences that drive digital adoption is
the catalyst for our success. We had a record bookings quarter,
signed our largest customer in company history, and, bolstered by
steady customer go-lives and high digital adoption, delivered
revenue growth of 18% despite the divestiture of our HealthPay24
solution."
Third Quarter 2023 Financial and Business Performance
- Total Revenue increased 24% to $97.7 million compared to
$78.8 million in the third quarter of 2022.
- SMB Revenue increased 29% to $55.5 million compared to
$42.9 million in the third quarter of 2022.
- Enterprise Revenue increased 18% to $42.3 million
compared to $35.9 million in the third quarter of 2022.
- Gross Profit was $75.9 million, representing 77.7% gross
margin, compared to $60.0 million, or 76.1% gross margin, for the
third quarter of 2022. Adjusted Gross Profit was $78.3 million,
representing 80.1% Adjusted Gross Margin, compared to $61.9
million, or 78.5% Adjusted Gross Margin, for the third quarter of
2022.1
- Net Income was $11.5 million, representing 11.8% net
income margin, compared to $6.8 million, or 8.6% net income margin,
in the third quarter of 2022.
- Adjusted EBITDA was $18.8 million, representing 19.3%
Adjusted EBITDA Margin, compared to $13.2 million, or 16.8%
Adjusted EBITDA Margin, for the third quarter of 2022.1
- Cash and Cash Equivalents were $366.0 million as of
September 30, 2023, compared to $311.8 million as of December 31,
2022.
- Total Number of Customers increased by 22% to 119.6
thousand as of September 30, 2023, compared to 97.8 thousand as of
September 30, 2022.
- Total Transactions Processed increased 13% to 42.5
million compared to 37.5 million in the third quarter of 2022.
____________________
1Reconciliations of GAAP to non-GAAP financial measures,
including Adjusted Gross Profit, Adjusted Gross Margin, Adjusted
EBITDA, and Adjusted EBITDA Margin, as well as definitions for the
non-GAAP financial measures included in this press release and the
reasons for their use, are presented below.
The financial statements and the Quarterly Report Form 10-Q are
available on the EngageSmart investor relations website,
https://investors.engagesmart.com, and on the U.S. Securities and
Exchange Commission website, www.sec.gov.
In light of the proposed transaction with Vista, which was
announced on October 23, 2023, EngageSmart will not host an
earnings conference call and is suspending its practice of
providing financial guidance. EngageSmart currently expects to
close the transaction in the first quarter of 2024.
About EngageSmart
EngageSmart is a leading provider of vertically tailored
customer engagement software and integrated payments solutions. At
EngageSmart, our mission is to simplify customer and client
engagement to allow our customers to focus resources on initiatives
that improve their businesses and better serve their communities.
EngageSmart offers single instance, multi-tenant, true
Software-as-a-Service (“SaaS”) vertical solutions, including
SimplePractice, InvoiceCloud, and DonorDrive, that are designed to
simplify our customers’ engagement with their clients by driving
digital adoption and self-service. As of September 30, 2023,
EngageSmart serves 116,200 customers in the SMB Solutions segment
and 3,400 customers in the Enterprise Solutions segment across
several core verticals: Health & Wellness, Government,
Utilities, Financial Services, and Giving. For more information,
visit www.engagesmart.com and follow us on LinkedIn.
Forward-Looking Statements
This communication includes certain “forward-looking statements”
within the meaning of, and subject to the safe harbor created by,
the federal securities laws, including statements related to the
proposed merger of EngageSmart with an affiliate of Vista (the
“Transaction”), including financial estimates and statements as to
the expected timing, completion and effects of the Transaction.
These forward-looking statements are based on EngageSmart’s current
expectations, estimates and projections regarding, among other
things, the expected date of closing of the Transaction and the
potential benefits thereof, its business and industry, management’s
beliefs and certain assumptions made by EngageSmart, all of which
are subject to change. Forward-looking statements often contain
words such as “expect,” “anticipate,” “intend,” “aims,” “plan,”
“believe,” “could,” “seek,” “see,” “will,” “may,” “would,” “might,”
“considered,” “potential,” “estimate,” “continue,” “likely,”
“expect,” “target” or similar expressions or the negatives of these
words or other comparable terminology that convey uncertainty of
future events or outcomes. By their nature, forward-looking
statements address matters that involve risks and uncertainties
because they relate to events and depend upon future circumstances
that may or may not occur, such as the consummation of the
Transaction and the anticipated benefits thereof. These and other
forward-looking statements are not guarantees of future results and
are subject to risks, uncertainties and assumptions that could
cause actual results to differ materially from those expressed in
any forward-looking statements. Important risk factors that may
cause such a difference include, but are not limited to: (i)
uncertainties related to the consummation of the Transaction; (ii)
EngageSmart’s ability to complete the Transaction, if at all, on
the anticipated terms and timing, including obtaining required
stockholder and regulatory approvals, and the satisfaction of other
conditions to the completion of the Transaction; (iii)
EngageSmart’s obligation to pay a termination fee under certain
circumstances if the Transaction is terminated; (iv) uncertainties
about the pendency of the Transaction and the effect of the
Transaction on employees, customers and other third parties who
deal with EngageSmart; (v) the impact of certain interim covenants
that EngageSmart is subject to under the Transaction agreement;
(vi) provisions in the Transaction agreement that limit
EngageSmart’s ability to pursue alternatives to the Transaction,
which might discourage a third party that has an interest in
acquiring all or a significant part of EngageSmart from considering
or proposing that acquisition; (vii) the fact that EngageSmart and
its directors and officers may be subject to lawsuits relating to
the Transaction; (viii) the substantial transaction-related costs
EngageSmart will continue to incur in connection with the
Transaction; (ix) EngageSmart’s efforts to complete the Transaction
could disrupt its relationships with third parties and employees,
divert management’s attention, or result in negative publicity or
legal proceedings; (x) the inability of stockholders to participate
in any further upside of EngageSmart’s business if the Transaction
is consummate; (xi) EngageSmart’s ability to retain and hire key
personnel; (xii) continued availability of capital and financing
and rating agency actions; (xiii) legislative, regulatory and
economic developments affecting EngageSmart’s business; (xiv)
general economic and market developments and conditions; (xv)
unpredictability and severity of catastrophic events, including but
not limited to acts of terrorism, pandemics, outbreaks of war or
hostilities, as well as EngageSmart’s response to any of the
aforementioned factors; (xvi) competitive responses to the
Transaction; (xvii) the risks and uncertainties pertaining to
EngageSmart’s business, including those set forth in Part I, Item
1A of EngageSmart’s most recent Annual Report on Form 10-K and Part
II, Item 1A of EngageSmart’s subsequent Quarterly Reports on Form
10-Q, as such risk factors may be amended, supplemented or
superseded from time to time by other reports filed by EngageSmart
with the SEC; and (xvii) the risks and uncertainties that will be
described in the Proxy Statement available from the sources
indicated below. Other risk factors that could cause actual results
to differ materially from those anticipated in these
forward-looking statements include, but are not limited to, the
following: our inability to sustain our growth; failure to manage
our infrastructure to support our future growth; our risk
management efforts not being effective to prevent fraudulent
activities; inability to attract new customers or convert trial
customers into paying customers; inability to introduce new
features or services successfully or to enhance our solutions;
declines in customer renewals or failure to convince customers to
broaden their use of solutions; inability to achieve or sustain
profitability; failure to adapt and respond effectively to rapidly
changing technology, evolving industry standards and regulations
and changing business needs, requirements or preferences; real or
perceived errors, failures or bugs in our solutions; intense
competition; lack of success in establishing, growing or
maintaining strategic partnerships; fluctuations in quarterly
operating results; general economic conditions (including inflation
and rising interest rates), both domestically and internationally,
as well as economic conditions affecting industries in which our
customers operate; concentration of revenue in our InvoiceCloud and
SimplePractice solutions; legal and regulatory risks; and
technology and intellectual property-related risks, among others.
These risks, as well as other risks associated with the
Transaction, will be more fully discussed in the Proxy Statement.
While the list of factors presented here is, and the list of
factors to be presented in the Proxy Statement will be, considered
representative, no such list should be considered a complete
statement of all potential risks and uncertainties. Unlisted
factors may present significant additional obstacles to the
realization of forward-looking statements. Consequences of material
differences in results as compared with those anticipated in the
forward-looking statements could include, among other things,
business disruption, operational problems, financial loss, legal
liability to third parties and similar risks, any of which could
have a material impact on EngageSmart’s financial condition,
results of operations, credit rating or liquidity. These
forward-looking statements speak only as of the date they are made,
and EngageSmart does not undertake to and specifically disclaims
any obligation to publicly release the results of any updates or
revisions to these forward-looking statements that may be made to
reflect future events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or
unanticipated events.
Non-GAAP Financial Measures
This press release includes certain performance metrics and
financial measures not based on GAAP, including Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross
Margin, Non-GAAP Operating Expenses, and Free Cash Flow, as well as
key business metrics, including total Number of Customers and total
Transactions Processed.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit,
Adjusted Gross Margin, Non-GAAP Operating Expenses, and Free Cash
Flow are supplemental measures of our performance that are not
required by, or presented in accordance with, GAAP and should not
be considered as an alternative to net income, net income margin,
gross profit, gross margin, operating expenses, net cash provided
by operating activities or any other performance measure derived in
accordance with GAAP.
We define Adjusted EBITDA as net income excluding interest
income (expense), net; provision for (benefit from) income taxes;
depreciation; and amortization of intangible assets, as further
adjusted for gain on sale of business, transaction-related expenses
and stock-based compensation. Transaction-related expenses
typically consist of direct costs related to acquisitions,
divestitures, and other strategic activities which are excluded
from our non-GAAP measures because they relate to specific
transactions which are not reflective of our ongoing operations. We
define Adjusted EBITDA Margin as Adjusted EBITDA divided by
revenue.
We define Adjusted Gross Profit as gross profit as adjusted for
amortization of intangible assets, stock-based compensation and
transaction-related expenses. We define Adjusted Gross Margin as
Adjusted Gross Profit divided by revenue.
We define Non-GAAP Operating Expenses as GAAP operating expenses
excluding stock-based compensation and transaction-related
expenses. We define Non-GAAP Operating Expenses as a percentage of
revenue as Non-GAAP Operating Expenses divided by revenue.
We define Free Cash Flow as net cash provided by operating
activities less purchases of property and equipment, including
costs capitalized for development of internal-use software.
We define Number of Customers as individuals or entities with
whom we directly contract to use our solutions.
We define Transactions Processed as the number of accepted
payment transactions, such as credit card and debit card
transactions, automated clearing house (“ACH”) payments, emerging
electronic payments, other communication, text messaging and
interactive voice response transactions, and other payment
transaction types, which are facilitated through our platform
during a given period. We believe Transactions Processed is a key
business metric for investors because it directly correlates with
transaction and usage-based revenue. We use Transactions Processed
to evaluate changes in transaction and usage-based revenue over
time.
We caution investors that amounts presented in accordance with
our definitions of Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Gross Profit, Adjusted Gross Margin, Non-GAAP Operating
Expenses, and Free Cash Flow may not be comparable to similar
measures disclosed by our competitors because not all companies and
analysts calculate these non-GAAP financial measures in the same
manner. We present these non-GAAP financial measures because we
consider these metrics to be important supplemental measures of our
performance and believe they are frequently used by securities
analysts, investors, and other interested parties in the evaluation
of companies in our industry. Management believes that investors’
understanding of our performance is enhanced by including these
non-GAAP financial measures as a reasonable basis for comparing our
ongoing results of operations.
Non-GAAP financial measures assist management in assessing
operating performance by removing the impact of items not directly
resulting from our core operations, to present operating results on
a consistent basis. Management uses these non-GAAP financial
measures for planning purposes, including the preparation of our
internal annual operating budget and financial projections; to
evaluate the performance and effectiveness of our operational
strategies; and to evaluate our capacity to expand our business.
These non-GAAP financial measures have limitations as analytical
tools, and should not be considered in isolation, or as an
alternative to, or a substitute for net income, net income margin,
gross profit, gross margin, operating expenses, net cash provided
by operating activities, or other financial statement data
presented in accordance with GAAP in our consolidated financial
statements.
Disclosure
We disclose information to the public concerning EngageSmart,
EngageSmart’s products and services, and other items through a
variety of disclosure channels in order to achieve broad,
non-exclusionary distribution of information to the public. Some of
the information distributed through these disclosure channels may
be considered material information. Investors and others are
encouraged to review the information we make public in the
locations below.* This list may be updated from time to time.
*For information concerning EngageSmart and its products and
services, please visit: www.engagesmart.com
*For information provided to the investment community, including
news releases, events and presentations, and SEC filings, please
visit: investors.engagesmart.com/overview/default.aspx
*For information provided to the media, including news releases,
please visit: investors.engagesmart.com/news/default.aspx
*For additional information, please follow EngageSmart’s social
media accounts: www.twitter.com/engagesmartinc,
www.facebook.com/EngageSmartInc, and
www.linkedin.com/company/engagesmart
Important Additional Information and Where to Find It
In connection with the Transaction, EngageSmart will file with
the SEC a Proxy Statement, the definitive version of which will be
sent or provided to Company stockholders. EngageSmart and
affiliates of EngageSmart intend to jointly file a transaction
statement on Schedule 13E-3 (the “Schedule 13E-3”). EngageSmart may
also file other documents with the SEC regarding the Transaction.
This document is not a substitute for the Proxy Statement, the
Schedule 13E-3 or any other document which EngageSmart may file
with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE
PROXY STATEMENT, THE SCHEDULE 13E-3 AND ANY OTHER RELEVANT
DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS
ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE TRANSACTION AND RELATED MATTERS. Investors
and security holders may obtain free copies of the Proxy Statement,
Schedule 13E-3 (when it is available) and other documents that are
filed or will be filed with the SEC by EngageSmart through the
website maintained by the SEC at www.sec.gov, EngageSmart’s website
at investors.EngageSmart.com or by contacting EngageSmart’s
Investor Relations Team at IR@engagesmart.com. The Transaction will
be implemented solely pursuant to the Merger Agreement dated as of
October 23, 2023, among EngageSmart, Icefall Parent, LLC (an
affiliate of Vista) and Icefall Merger Sub, Inc., which contains
the full terms and conditions of the Transaction.
Participants in the Solicitation
EngageSmart and certain of its directors, executive officers and
other employees may be deemed to be participants in the
solicitation of proxies from EngageSmart’s stockholders in
connection with the Transaction. Additional information regarding
the identity of the participants, including a description of their
direct or indirect interests, by security holdings or otherwise,
will be set forth in the Proxy Statement and other materials to be
filed with the SEC in connection with the Transaction (if and when
they become available). Information relating to the foregoing can
also be found in EngageSmart’s proxy statement for its 2023 annual
meeting of stockholders, which was filed with the SEC on April 5,
2023 (the “Annual Meeting Proxy Statement”). To the extent holdings
of securities by potential participants (or the identity of such
participants) have changed since the information printed in the
Annual Meeting Proxy Statement, such information has been or will
be reflected on EngageSmart’s Statements of Change in Ownership on
Forms 3 and 4 filed with the SEC. You may obtain free copies of
these documents using the sources indicated above.
EngageSmart, Inc.
Condensed Consolidated
Statement of Operations
(Unaudited, in thousands,
except share and per share amounts)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Revenue
$
97,732
$
78,796
$
280,573
$
220,020
Cost of revenue
21,821
18,845
64,357
52,687
Gross profit
75,911
59,951
216,216
167,333
Operating expenses:
General and administrative
18,218
13,986
48,081
42,270
Selling and marketing
33,596
25,906
93,143
72,262
Research and development
17,889
12,978
49,402
34,011
Gain on sale of business
(10,511
)
—
(10,511
)
—
Amortization of intangible assets
2,402
2,363
7,126
7,087
Total operating expenses
61,594
55,233
187,241
155,630
Income from operations
14,317
4,718
28,975
11,703
Other income (expense), net:
Interest expense
(135
)
(121
)
(375
)
(361
)
Other income, net
3,683
1,116
9,544
1,466
Total other income (expense), net
3,548
995
9,169
1,105
Income before income taxes
17,865
5,713
38,144
12,808
Provision for (benefit from) income
taxes
6,335
(1,057
)
18,152
(2,900
)
Net income and comprehensive income
$
11,530
$
6,770
$
19,992
$
15,708
Net income per share:
Basic
$
0.07
$
0.04
$
0.12
$
0.10
Diluted
$
0.07
$
0.04
$
0.12
$
0.09
Weighted-average number of shares
outstanding:
Basic
167,546,450
164,427,770
166,940,589
163,195,976
Diluted
170,269,392
169,222,794
170,049,993
169,064,015
EngageSmart, Inc.
Condensed Consolidated Balance
Sheets
(Unaudited, in thousands,
except share and per share amounts)
September 30, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
366,034
$
311,780
Accounts receivable, net of allowance for
credit losses of $184 and $228 as of September 30, 2023 and
December 31, 2022, respectively
10,672
10,971
Unbilled receivables
6,716
5,413
Prepaid expenses and other current
assets
13,076
13,680
Total current assets
396,498
341,844
Operating lease right-of-use assets
24,020
26,907
Property and equipment, net
17,788
14,328
Goodwill
423,406
425,677
Acquired intangible assets, net
61,462
72,319
Other assets
6,536
5,422
Total assets
$
929,710
$
886,497
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
1,457
$
1,229
Accrued expenses and other current
liabilities
43,697
38,423
Deferred revenue
9,126
8,237
Operating lease liabilities
4,837
4,632
Total current liabilities
59,117
52,521
Long-term operating lease liabilities
23,669
27,161
Deferred income taxes
657
1,322
Contingent consideration liability, net of
current portion
1,475
—
Deferred revenue, net of current
portion
345
335
Other long-term liabilities
2,214
186
Total liabilities
87,477
81,525
Stockholders' equity:
Preferred stock, par value $0.001 per
share, 10,000,000 shares authorized and no shares issued and
outstanding as of September 30, 2023 and December 31, 2022
—
—
Common stock, par value $0.001 per share,
650,000,000 shares authorized and 167,864,066 and 166,081,011
shares issued and outstanding as of September 30, 2023 and December
31, 2022, respectively
168
166
Additional paid-in capital
831,586
814,319
Retained earnings (accumulated
deficit)
10,479
(9,513
)
Total stockholders’ equity
842,233
804,972
Total liabilities and stockholders’
equity
$
929,710
$
886,497
EngageSmart, Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited, in
thousands)
Nine Months Ended September
30,
2023
2022
Cash flows from operating
activities:
Net income
$
19,992
$
15,708
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
14,838
13,989
Amortization of deferred costs
692
277
Stock-based compensation expense
16,618
10,112
Non-cash operating lease expense
3,496
3,385
Deferred income taxes
(665
)
(2,900
)
Loss on disposal of property and
equipment
503
22
Non-cash interest expense
175
175
Gain on sale of business
(10,511
)
—
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets
(440
)
(3,850
)
Accounts receivable, net
(1,102
)
(2,106
)
Unbilled receivables
(1,880
)
(2,281
)
Other assets
(1,735
)
(1,382
)
Accounts payable
362
(1,253
)
Accrued expenses and other current
liabilities
4,862
7,227
Deferred revenue
1,019
1,080
Operating lease liabilities
(3,886
)
(4,115
)
Other long-term liabilities
89
26
Net cash provided by operating
activities
42,427
34,114
Cash flows from investing
activities:
Acquisition of businesses, net of cash
acquired
(11,782
)
—
Proceeds from sale of business, net of
cash sold
30,027
—
Purchases of property and equipment,
including costs capitalized for development of internal-use
software
(7,069
)
(4,759
)
Net cash provided by (used in) investing
activities
11,176
(4,759
)
Cash flows from financing
activities:
Payment of debt issuance costs
—
(23
)
Payments of contingent consideration
—
(1,066
)
Proceeds from exercise of stock-based
options
3,844
11,187
Payments of taxes related to net share
settlement of equity awards
(4,174
)
(468
)
Proceeds from issuance of common stock
under employee stock purchase plan
981
463
Payment of initial public offering
costs
—
(286
)
Net cash provided by financing
activities
651
9,807
Net increase in cash, cash equivalents and
restricted cash
54,254
39,162
Cash, cash equivalents and restricted cash
at beginning of period
312,080
254,594
Cash, cash equivalents and restricted cash
at end of period
$
366,334
$
293,756
Reconciliation of cash, cash
equivalents, and restricted cash:
Cash and cash equivalents
$
366,034
$
293,456
Restricted cash within other assets
300
300
Total cash, cash equivalents, and
restricted cash
$
366,334
$
293,756
EngageSmart, Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited)
Reconciliation of GAAP Net Income to Adjusted
EBITDA
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands, except
percentages)
Net income
$
11,530
$
6,770
$
19,992
$
15,708
Net income margin
11.8
%
8.6
%
7.1
%
7.1
%
Adjustments:
Provision for (benefit from) income
taxes
6,335
(1,057
)
18,152
(2,900
)
Interest (income) expense, net
(3,555
)
(1,005
)
(9,180
)
(1,127
)
Amortization of intangible assets
3,954
3,900
11,754
11,700
Depreciation
1,061
816
3,084
2,289
Stock-based compensation
6,616
3,798
16,618
10,112
Gain on sale of business
(10,511
)
—
(10,511
)
—
Transaction-related expense
3,417
—
5,639
(38
)
Adjusted EBITDA
$
18,847
$
13,222
$
55,548
$
35,744
Adjusted EBITDA Margin
19.3
%
16.8
%
19.8
%
16.2
%
Reconciliation of GAAP
Gross Profit to Adjusted Gross Profit
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands, except
percentages)
Gross profit
$
75,911
$
59,951
$
216,216
$
167,333
Gross margin
77.7
%
76.1
%
77.1
%
76.1
%
Adjustments:
Amortization of intangible assets
1,552
1,537
4,628
4,613
Stock-based compensation
802
397
1,842
660
Transaction-related expense
4
—
4
—
Adjusted Gross Profit
$
78,269
$
61,885
$
222,690
$
172,606
Adjusted Gross Margin
80.1
%
78.5
%
79.4
%
78.5
%
Free
Cash Flow
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Net cash provided by operating
activities
$
17,502
$
15,676
$
42,427
$
34,114
Less:
Purchases of property and equipment,
including costs capitalized for development of internal-use
software
(2,373
)
(1,826
)
(7,069
)
(4,759
)
Free cash flow
$
15,129
$
13,850
$
35,358
$
29,355
Reconciliation of GAAP Operating Expenses to Non-GAAP
Operating Expenses
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands, except
percentages)
General and administrative expenses
$
18,218
$
13,986
$
48,081
$
42,270
General and administrative as a percentage
of revenue
18.6
%
17.7
%
17.1
%
19.2
%
Less:
Stock-based compensation
(2,958
)
(1,832
)
(8,009
)
(6,528
)
Transaction-related expense
(3,213
)
—
(5,403
)
38
Non-GAAP general and administrative
expenses
$
12,047
$
12,154
$
34,669
$
35,780
Non-GAAP general and administrative as a
percentage of revenue
12.3
%
15.4
%
12.4
%
16.3
%
Selling and marketing expenses
$
33,596
$
25,906
$
93,143
$
72,262
Selling and marketing as a percentage of
revenue
34.4
%
32.9
%
33.2
%
32.8
%
Less:
Stock-based compensation
(1,207
)
(869
)
(3,134
)
(1,829
)
Transaction-related expense
(62
)
—
(67
)
—
Non-GAAP selling and marketing
expenses
$
32,327
$
25,037
$
89,942
$
70,433
Non-GAAP selling and marketing as a
percentage of revenue
33.1
%
31.8
%
32.1
%
32.0
%
Research and development expenses
$
17,889
$
12,978
$
49,402
$
34,011
Research and development as a percentage
of revenue
18.3
%
16.5
%
17.6
%
15.5
%
Less:
Stock-based compensation
(1,649
)
(700
)
(3,633
)
(1,095
)
Transaction-related expense
(138
)
—
(165
)
—
Non-GAAP research and development
expenses
$
16,102
$
12,278
$
45,604
$
32,916
Non-GAAP research and development as a
percentage of revenue
16.5
%
15.6
%
16.3
%
15.0
%
Disaggregated Revenue
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Enterprise Solutions
Transaction and usage-based
$
39,783
$
32,620
$
113,337
$
90,928
Subscription
2,123
2,280
7,354
6,517
Other
345
966
1,513
2,298
Total Enterprise Solutions revenue
42,251
35,866
122,204
99,743
SMB Solutions
Transaction and usage-based
15,927
11,349
46,657
33,613
Subscription
39,289
31,216
110,821
85,493
Other
265
365
891
1,171
Total SMB Solutions revenue
55,481
42,930
158,369
120,277
Total revenue
$
97,732
$
78,796
$
280,573
$
220,020
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101903083/en/
Investor Relations Josh Schmidt EngageSmart, Inc.
IR@engagesmart.com
Press: Nicole Bestard Quarter Horse PR
Engagesmart@qh-pr.com
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