What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-03-15 · 314 added, 525 removed, 1048 unchanged (44% of the section changed)

14 unchanged sentences

generally accepted accounting principles.

Adoption of ASU No.

As discussed in Note 9 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended December 31, 2022 due to the adoption of ASU No.

Basis for Opinion

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Total current assets 180,587 171,617

Non-current assets:

Property and equipment, net 11,930 13,509

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Goodwill 914,082 921,416

Total non-current assets 1,491,756 1,183,756

Total assets $ 1,591,728 $ 1,663,373

The accompanying notes are an integral part of these consolidated financial statements.

EverCommerce Inc.

Consolidated Balance Sheets (Cont’d)

(in thousands, except per share and share amounts)

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current liabilities:

5 unchanged sentences

Total current liabilities 105,081 103,428

Non-current liabilities:

Deferred tax liability, net 17,862 10,766

Long-term deferred revenue 2,803 2,297

Long-term debt, net of current maturities and deferred financing costs 530,946 535,184

Other non-current liabilities 49,008 39,113

Total non-current liabilities 574,297 721,727

Total liabilities 685,035 677,725

Commitments and contingencies (Note 17)

Convertible Preferred Stock:

Series B convertible preferred stock, $ 0.00001 par value, no shares authorized, issued or outstanding as of December 31, 2021;

75,000,000 shares authorized and 72,225,754 shares issued and outstanding (liquidation preference of $ 745.0 million) as of December 31, 2020

Series A convertible preferred stock, $ 0.00001 par value, no shares authorized, issued or outstanding as of December 31, 2021;

50,000,000 shares authorized and 44,957,786 shares issued and outstanding (liquidation preference of $ 163.3 million) as of December 31, 2020

Total convertible preferred stock — 908,310

Stockholders’ equity (deficit):

Preferred stock, $ 0.00001 par value, 50,000,000 shares authorized and no shares issued or outstanding as of December 31, 2021

Common stock, $ 0.00001 par value, 2,000,000,000 and 185,000,000 shares authorized and 195,384,291 and 43,073,327 shares issued and outstanding at December 31, 2021 and 2020, respectively

Accumulated other comprehensive income (loss) ( 1,767 ) 1,546

Stockholders’ equity:

Preferred stock, $ 0.00001 par value, 50,000,000 shares authorized and no shares issued or outstanding as of December 31, 2022 and 2021

Common stock, $ 0.00001 par value, 2,000,000,000 shares authorized and 191,447,237 and 195,384,291 shares issued and outstanding at December 31, 2022 and 2021, respectively

Accumulated other comprehensive loss ( 10,198 ) ( 1,767 )

Additional paid-in capital 1,489,935 1,500,643

Accumulated deficit ( 573,046 ) ( 513,230 )

Total stockholders’ equity (deficit) 985,648 ( 389,154 )

Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 1,663,373 $ 1,327,584

Total stockholders’ equity 906,693 985,648

Total liabilities and stockholders’ equity $ 1,591,728 $ 1,663,373

The accompanying notes are an integral part of these consolidated financial statements.

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EverCommerce Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

Series B Convertible Preferred Stock Series A Convertible Preferred Stock Total Convertible Preferred Stock Common Stock Additional

Series B Convertible Preferred Stock Series C Convertible Preferred Stock Series A Convertible Preferred Stock Total Convertible Preferred Stock Preferred Stock Common Stock Additional

Paid-In Capital Accumulated

Deficit Accumulated Other

Comprehensive

(Loss) Income Total

Stockholders’ Deficit

Shares Amount Shares Amount Shares Amount

Comprehensive Income Total

Stockholders’ Equity (Deficit)

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at January 1, 2020

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Issuance of Series B convertible preferred stock 16,467 150,250 — — — — 150,250 — — — — — — — —

Equity issuance costs, net of tax benefit — ( 23,815 ) — — ( 23,815 ) — — ( 601 ) — — ( 601 )

Conversion of Preferred A to Common — — ( 61,343 ) ( 221,255 ) ( 221,255 ) 61,343 1 298,126 ( 76,872 ) — 221,255

Conversion of Common to Preferred B 38,000 347,094 — — 347,094 ( 38,000 ) ( 1 ) ( 184,680 ) ( 162,413 ) — ( 347,094 )

Equity issuance costs — ( 80 ) — — — — ( 80 ) — — — — — — — —

Rollover equity in consideration of net assets acquired — — — — — — — — — 222 — 1,319 — — 1,319

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Stock option exercises — — — — — — — — — 84 — 206 — — 206

Repurchase of common stock — — — — — ( 2,573 ) — ( 23,508 ) — — ( 23,508 )

Foreign currency translation gains, net — — — — — — — — — — — — — 1,204 1,204

4 unchanged sentences

EverCommerce Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Cont’d) (in thousands)

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Cont’d)

(in thousands)

Series B Convertible Preferred Stock Series C Convertible Preferred Stock Series A Convertible Preferred Stock Total Convertible Preferred Stock Preferred Stock Common Stock Additional

2 unchanged sentences

Comprehensive

(Loss) Income Total

Stockholders’ Equity (Deficit)

2 unchanged sentences

72,226 $ 745,046 — $ — 44,958 $ 163,264 $ 908,310 — $ — 43,074 $ — $ 40,564 $ ( 431,264 ) $ 1,546 $ ( 389,154 )

Issuance of Series B convertible preferred stock 16,467 150,250 — — — — 150,250 — — — — — — — —

Equity issuance costs — ( 80 ) — — — — ( 80 ) — — — — — — — —

Rollover equity in consideration of net assets acquired — — — — — — — — — 222 — 1,319 — — 1,319

Stock-based compensation — — — — — — — — — 2,037 — 10,721 — — 10,721

Stock option exercises — — — — — — — — — 84 — 206 — — 206

Foreign currency translation gains, net — — — — — — — — — — — — — 1,204 1,204

Accretion of Series B convertible preferred stock to redemption value — 15,105 — — — — 15,105 — — — — ( 15,105 ) — — ( 15,105 )

Net loss — — — — — — — — — — — — ( 59,954 ) — ( 59,954 )

Balance at December 31, 2020

72,226 745,046 — — 44,958 163,264 908,310 — — 43,074 — 40,564 ( 431,264 ) 1,546 ( 389,154 )

Accretion of Series B convertible preferred stock to redemption value — 15,105 — — — — 15,105 — — — — ( 15,105 ) — — ( 15,105 )

Issuance of convertible preferred stock, net — — 7,857 109,782 109,782 — — — — — — — —

13 unchanged sentences

EverCommerce Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Cont’d)

(in thousands)

Series B Convertible Preferred Stock Series C Convertible Preferred Stock Series A Convertible Preferred Stock Total Convertible Preferred Stock Preferred Stock Common Stock Additional

Paid-In Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders’ Equity (Deficit)

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at January 1, 2022 — $ — — $ — — $ — — — $ — 195,384 $ 2 $ 1,500,643 $ ( 513,230 ) $ ( 1,767 ) $ 985,648

Issuance of common stock for Employee Stock Purchase Plan — — — — — — — — — 502 — 3,366 — — 3,366

Common stock issued upon vesting of restricted stock units — — — — — — — 162 — — — — —

Stock-based compensation — — — — — — — — — — — 26,818 — — 26,818

Stock option exercises — — — — — — — — — 351 — 1,819 — — 1,819

Repurchase and retirement of common stock — — — — — — — — — ( 4,952 ) — ( 42,994 ) — — ( 42,994 )

Release of valuation allowance related to prior equity transactions — — — — — — — — — — — 283 — — 283

Foreign currency translation losses, net — — — — — — — — — — — — — ( 8,431 ) ( 8,431 )

Net loss — — — — — — — — — — — — ( 59,816 ) — ( 59,816 )

Balance at December 31, 2022

— $ — — $ — — $ — $ — — $ — 191,447 $ 2 $ 1,489,935 $ ( 573,046 ) $ ( 10,198 ) $ 906,693

The accompanying notes are an integral part of these consolidated financial statements.

EverCommerce Inc.

Consolidated Statements of Cash Flows

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2022 2021 2020

Cash flows provided by (used in) operating activities:

Cash flows provided by operating activities:

Net loss $ ( 59,816 ) $ ( 81,966 ) $ ( 59,954 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Loss on debt extinguishment 28,714 — 7,235

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 110,801 101,437 76,844

Impairment of capitalized software 700 — —

Amortization of discount on long-term debt 3,412 3,899 2,031

Amortization of deferred financing costs on long-term debt 523 195 1,404

Amortization of costs and fees on credit facility commitments 496 1,917 1,276

Stock-based compensation 26,818 22,095 10,721

Deferred taxes ( 7,477 ) ( 12,026 ) ( 4,314 )

Amortization of deferred financing costs and non-cash interest 2,093 4,843 6,393

Bad debt expense 5,578 2,044 1,715

Paid-in-kind interest on long-term debt 412 382 1,356

Stock-based compensation 22,095 10,721 30,079

Loss on debt extinguishment — 28,714 —

Other non-cash items 4,747 700 —

Changes in operating assets and liabilities, net of effects of acquisitions:

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Deferred revenue 160 8,646 1,957

Customer deposits and other long-term liabilities 2,391 9,005 10,218

Net cash provided by (used in) operating activities 37,482 57,539 ( 613 )

Other non-current liabilities ( 7,218 ) 2,088 4,279

Net cash provided by operating activities 64,802 37,482 57,539

Cash flows used in investing activities:

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2022 2021 2020

Cash flows provided by financing activities:

Payments on long-term debt, net of discount ( 1,028,457 ) ( 55,891 ) ( 474,895 )

Cash flows provided by (used in) financing activities:

Payments on debt ( 9,500 ) ( 1,028,457 ) ( 55,891 )

Proceeds from long-term debt — 850,966 314,668

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Proceeds from common stock issuance, net — 415,708 —

Repurchase of stock — — ( 23,508 )

Net cash provided by financing activities 341,183 401,850 309,674

Proceeds from common stock issuance for Employee Stock Purchase Plan 3,366 — —

Repurchase and retirement of common stock ( 42,994 ) — —

Net cash provided by (used in) financing activities ( 47,309 ) 341,183 401,850

Effect of foreign currency exchange rate changes on cash ( 1,148 ) 224 ( 87 )

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Accretion of Series B preferred stock to redemption value $ — $ 15,105 $ 67,811

Capital expenditures acquired, included in accounts payable $ — $ — $ 1,630

The accompanying notes are an integral part of these consolidated financial statements.

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EverCommerce Inc.

and subsidiaries (the “Company” or “EverCommerce”) is a leading provider of integrated software-as-a-service (“SaaS”) solutions or services for service-based SMBs.

and subsidiaries (the “Company” or “EverCommerce”) is a leading provider of integrated software-as-a-service (“SaaS”) solutions or services for service-based small- and medium-sized businesses (“service SMBs”).

Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications.

Today, the Company serves over 600,000 customers across three core verticals:

Today, the Company serves more than 685,000 customers across three core verticals:

Home Services;

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The platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly nuanced demands, as well as highly complementary solutions that complete end-to-end offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences.

See Note 3 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information on acquired subsidiaries.

The Company was incorporated in Delaware on September 29, 2016, and began operations on October 17, 2016 (Inception).

The Company is headquartered in Denver, Colorado, and has operations across the United States, Canada, Jordan, United Kingdom, Australia and New Zealand.

The Company changed its name from PaySimple Holdings, Inc.

to EverCommerce Inc.

as of December 14, 2020.

Initial Public Offering

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On July 29, 2021, the IPO underwriters fully exercised their over-allotment option, resulting in the sale of an additional 2.8 million shares at the IPO price of $ 17.00 per share and after underwriter discounts, net proceeds were $ 43.9 million.

In connection with the IPO, the Company’s outstanding convertible preferred stock converted into shares of common stock on a one-for-one basis (see Note 10 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K).

In connection with the IPO, the Company’s outstanding convertible preferred stock converted into shares of common stock on a one-for-one basis (see Note 11).

Upon conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock and additional paid-in capital.

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All material intercompany transactions have been eliminated upon consolidation.

Reclassifications

The Company reclassified the presentation of payments on long-term debt within the cash flows provided by financing activities section of the consolidated statements of cash flows for the year ended December 31, 2019.

This reclassification had no effect on previously reported results of operations, retained earnings or cash flows provided by financing activities.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Concentrations of Risk

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The Company has not experienced any losses on such accounts, and management believes that the Company’s risk of loss is remote.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments.

The Company is not exposed to significant market risk.

Segment Information

The Company’s Chief Operating Decision Maker (“CODM”), its Chief Executive Officer (“CEO”), reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Accordingly, the Company has determined that it operates in a single reportable segment.

Since the Company operates in one segment, all required financial segment information can be found in the financial statements.

See Notes 4 and 18 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for disaggregated information regarding the Company's revenues and long-lived assets by geography, respectively.

See Notes 4 and 18 for disaggregated information regarding the Company's revenues and long-lived assets by geography, respectively.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management 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.

Estimates are subject to uncertainties due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and affect items such as valuing identified intangible assets and acquired goodwill, establishing estimated useful lives for long-lived assets, determining the appropriate valuation allowance for deferred tax assets, recognizing stock-based compensation expense and estimating contract assets and standalone selling prices used in allocating revenue to performance obligations.

Estimates are subject to uncertainties due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and affect items such as valuing identified intangible assets and acquired goodwill and establishing estimated useful lives for intangible assets in connection with business combinations, performing impairment assessments of intangible assets and goodwill, determining the appropriate valuation allowance for deferred tax assets and value of any uncertain tax positions, recognizing stock-based compensation expense and estimating consideration subject to constraint on revenue recognition.

On an ongoing basis, management evaluates these estimates, judgments and assumptions.

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Acquisition-related transaction costs are expensed in the period in which the costs are incurred.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Cash and Cash Equivalents and Restricted Cash

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Restricted cash relates to cash collected from our customers’ clients that will be remitted to our customers subsequent to period-end, generally within a time period no longer than one month.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Accounts Receivable, net

Trade accounts receivable are recorded at the invoiced amount and do not bear interest.

Amounts collected on trade accounts receivable are included in net cash provided by (used in) operating activities in the consolidated statements of cash flows.

The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio.

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Any impairment recognized is permanent and may not be restored.

The Company did not identify any indicators of impairment for the years ended December 31, 2021, 2020 and 2019, other than the abandonment of certain features of its capitalized software as more fully described in Note 8 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.

The Company did not identify any indicators of impairment for the years ended December 31, 2022, 2021 and 2020, other than the abandonment of certain features of its capitalized software as more fully described in Note 8.

Capitalized Software, net

In accordance with ASC Subtopic 350-40, Internal Use Software , the Company capitalizes certain costs related to software developed for internal use for which it has no plans to market externally.

Internal use software includes the

EverCommerce Inc.

Notes to Consolidated Financial Statements

software used for the Company’s SaaS offerings.

Internal use software includes the software used for the Company’s SaaS offerings.

The Company expenses the costs of developing computer software until the software has reached the application development stage and capitalizes all costs incurred from that time until the software has been placed in service, at which time amortization of the capitalized costs begins.

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Costs incurred prior to reaching technological feasibility are charged to product development expense as incurred.

Once technological feasibility is reached, additional development costs incurred are capitalized.

Once technological feasibility is reached, additional development costs

EverCommerce Inc.

Notes to Consolidated Financial Statements

incurred are capitalized.

Technological feasibility is demonstrated by the completion of the product design and when all high-risk development issues have been resolved.

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If the estimated fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not impaired.

However, if the estimated fair value of the reporting unit is lower than the carrying amount of the net assets assigned

However, if the estimated fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the estimated fair value.

Besides goodwill, the Company has no other intangible assets with indefinite lives.

The Company performed annual qualitative goodwill impairment assessments in 2022, 2021 and 2020 and concluded that it was more likely than not that the fair value of the reporting units were more than their related carrying amounts and as such did not identify any goodwill impairment during the years ended December 31, 2022, 2021 and 2020.

EverCommerce Inc.

Notes to Consolidated Financial Statements

to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the estimated fair value.

Besides goodwill, the Company has no other intangible assets with indefinite lives.

The Company’s annual impairment assessment did not identify any goodwill impairment during the years ended December 31, 2021, 2020 and 2019.

The Company adopted ASU 2016-02, Leases (Topic 842) as of January 1, 2022 and recognized right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet representing the rights and obligations created by those leases and disclosed key information about leasing arrangements.

Lease expense is recognized on a straight-line basis and recorded to general and administrative in the statement of operations and comprehensive loss.

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations.

The Company also considers whether its service arrangements include the right to control the use of an asset.

The Company used its incremental borrowing rate to determine the present value of lease payments, as the Company’s leases do not have a readily determinable implicit discount rate.

The incremental borrowing rate is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term an amount in a similar economic environment.

Judgement is applied in assessing factors such as Company-specific credit risk, lease term, nature and quality of the underlying collateral, currency, and economic environment in determining the incremental borrowing rate to apply to each lease.

The Company does not recognize ROU assets and lease liabilities for leases with a term of twelve months or less.

For all other leases, the Company recognizes ROU assets and lease liabilities based on the present value of lease payments over the lease term at the commencement date of the lease.

The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by any lease incentives.

The Company’s leases may include a non-lease component representing additional services transferred to the Company, such as common area maintenance for real estate.

The Company made an accounting policy election to not separate non-lease components from lease components for its real estate leases;

rather the Company will account for each lease component and the non-lease components associated with that lease component as a single lease component.

However, the non-lease components are usually variable in nature and recorded in variable lease expense in the period incurred.

Future lease payments may include fixed rent escalation clauses or payments that depend on an index (such as the consumer price index) measured using the index or applicable rate at lease commencement.

Subsequent changes in index and other periodic market-rate adjustments to base rent are recorded in variable lease expense in the period incurred.

In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor, or both parties.

These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise that option.

The Company’s leases generally do not contain any material restrictive covenants or residual value guarantees.

The Company does not have any leases classified as finance leases.

Deferred Financing and Credit Facility Costs

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The Company accounted for its Series A Convertible Preferred Stock (“Series A”), Series B Convertible Preferred Stock (“Series B”) and Series C Convertible Preferred Stock (“Series C”) shares subject to possible redemption in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity .

Series A shares, Series B shares and Series C shares were conditionally redeemable preferred stock shares (with redemption rights that were either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) that were classified as Convertible Preferred Stock separate from the stockholders’ equity (deficit) section of the Company’s consolidated balance sheets.

EverCommerce Inc.

Notes to Consolidated Financial Statements

equity (deficit) section of the Company’s consolidated balance sheets.

The Series A shares and Series C shares were redeemable upon the occurrence of uncertain events not solely within the Company’s control and these uncertain events were deemed not probable.

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At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract to determine if they are distinct and represent a performance obligation.

The Company then allocates the transaction price to the respective performance obligations, and recognize revenue when (or as) the performance obligations are satisfied.

The Company then allocates the transaction price to the respective performance obligations, and recognizes revenue when (or as) the performance obligations are satisfied.

The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services.

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Subscription revenue primarily consists of the sale of SaaS offerings or the sale of software licenses.

EverCommerce Inc.

Notes to Consolidated Financial Statements

S aaS offerings and related support services, customers are granted access to a hosted software application over the contract period without a contractual right to possession of the software.

Through the S aaS offerings and related support services, customers are granted access to a hosted software application over the contract period without a contractual right to possession of the software.

Alternatively, through the sale of software licenses the customer is provided with a right to use software that provides functionality to the customer on a stand-alone basis, and related support services, which include telephone/technical support, when-and-if available software updates and, in certain instances, hosting services.

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Revenue is recognized ratably because the customer simultaneously receives and consumes the benefits of the services throughout the contract period.

Contracts are generally fixed price and may be invoiced on a monthly, quarterly or annual basis, with standard payment terms ranging from 30 to 60 days.

Contracts are generally

EverCommerce Inc.

Notes to Consolidated Financial Statements

fixed price and may be invoiced on a monthly, quarterly or annual basis, with standard payment terms ranging from 30 to 60 days.

The timing of revenue recognition may differ from the timing of invoicing to customers.

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Group purchasing program administration services relate to facilitation of group purchasing programs for members through which the Company aggregates member purchasing power to negotiate pricing discounts with suppliers.

The Company has determined that the nature of the payment processing and administration services is a stand-ready obligation whereby the

EverCommerce Inc.

Notes to Consolidated Financial Statements

Company stands ready to either arrange for the processing of transactions or stands ready to provide members with access to the group purchasing program on a continuous basis throughout the contract term.

The Company has determined that the nature of the payment processing and administration services is a stand-ready obligation whereby the Company stands ready to either arrange for the processing of transactions or stands ready to provide members with access to the group purchasing program on a continuous basis throughout the contract term.

• Payment processing services:

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Rebates earned are based on a defined percentage of the purchase price of goods and services sold to members under the contract the Company has negotiated with its suppliers.

The amount of revenue recognized from these administration services is greater than the consideration received from customers given payment for these services are received in arrears, typically within a quarter from when the underlying services were provided.

The Company recognize a contract asset on the consolidated balance sheets until payment has been received.

The amount of revenue recognized from these administration services is greater than the consideration received from customers given payment for these services are received in arrears, typically

EverCommerce Inc.

Notes to Consolidated Financial Statements

within a quarter from when the underlying services were provided.

The Company recognizes a contract asset on the consolidated balance sheets until payment has been received.

Administration services contracts with customers are generally for an annual or monthly term and renew automatically upon lapse of the current term.

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Marketing technology solutions service related contracts are typically short-term with stated contract terms that are less than one year.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Other revenues generally consist of fees associated with the sale of distinct professional services and hardware.

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Contract terms for other revenue arrangements are generally short-term, with stated contract terms that are less than one year.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Performance Obligations and Standalone Selling Price:

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Revenue is recorded at the net sales price, which is the transaction price, and includes estimates of variable consideration.

The amount of variable consideration that is included in the transaction price may be constrained, and

EverCommerce Inc.

Notes to Consolidated Financial Statements

is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty is resolved.

The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty is resolved.

The transaction consideration within the Company’s contracts may be entirely variable or contain a variable component.

9 unchanged sentences

Transaction consideration allocated to the material right is recognized over the expected renewal period, which begins at the end of the initial contractual term and is generally five years.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Significant financing component:

3 unchanged sentences

The Company has elected a policy to exclude from the transaction price all sales taxes assessed by governmental authorities and as a result, revenue is presented net of tax.

The Company has elected to account for shipping and handling activities as fulfillment activities and recognize the associated expense when the transfer of control of the product has occurred, as permitted under the shipping and handling activities practical expedient.

Cost of Revenues

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Stock-based Compensation

The Company follows ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), with respect to stock-

EverCommerce Inc.

Notes to Consolidated Financial Statements

based compensation.

The Company follows ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), with respect to stock-based compensation.

Stock-based compensation, including grants of stock options and restricted stock units, are valued at fair value on the date of grant and are generally expensed on a straight-line basis over the applicable service period.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of options granted with time-based vesting.

The following inputs are considered in estimating the fair value:

The Company uses the Black-Scholes option-pricing model and a binomial lattice model to estimate the fair value of options granted with time-based vesting and market-based vesting terms, respectively.

The following inputs to the Black-Scholes option-pricing model are considered in estimating the fair value:

the fair value of the common stock, expected volatility, expected term, risk-free interest rate and expected dividends.

The Company does not have a sufficient third-party history of market prices of its common stock, and as such volatility is estimated, using historical volatilities of comparable public entities for the valuation of its stock options.

At the point when the Company has sufficient and meaningful trading history of its stock, it will calculate volatility based on its own trading history.

For the Company’s 2021 Employee Stock Purchase Plan (the “ESPP”) (refer to Note 11 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K), the term of the ESPP is short enough given the six month purchase window that the Company uses its historical trading history as an input for the Black-Scholes calculation to support the value of the ESPP.

At the point when the Company has sufficient and meaningful trading history of its stock, as is the case for the Company’s 2021 Employee Stock Purchase Plan (the “ESPP”) (refer to Note 12), it will calculate volatility based on its own trading history.

The expected term represents the estimated average period of time that the option will remain outstanding.

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Stock-based compensation expense, when recognized in the financial statements, is based on awards that are ultimately expected to vest.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The Company is a C corporation for federal income tax purposes.

3 unchanged sentences

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company's total provision for taxes includes income taxes on the Company's corporate subsidiaries.

The Company records uncertain tax positions in accordance with ASC Topic 740, Income Taxes (“ASC 740”), on the basis of a two-step process in which (i) it is determined whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

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The Company computes net loss per share attributable to its common stockholders using the two-class method required for participating securities, which determines net loss per common share and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires income available to common stockholders for the period to be allocated between common stock and

EverCommerce Inc.

Notes to Consolidated Financial Statements

participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends, but did not contractually require the holders of such shares to participate in the Company’s losses.

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Diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Refer to Note 12 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion.

Foreign Currency Translation

5 unchanged sentences

The gains and losses from foreign currency translation of these subsidiaries’ financial statements are recorded directly as a separate component of stockholders’ deficit and represent the majority of the balance within accumulated other comprehensive income on the consolidated balance sheets.

The functional currencies of the Company’s significant foreign operations include the Canadian dollar, Great British Pound and New Zealand dollar.

The functional currencies of the Company’s significant foreign operations include the Canadian dollar, Great British Pound, Australian dollar and New Zealand dollar.

For the Company’s foreign subsidiaries that operate primarily in the U.S.

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Non-monetary assets and liabilities are remeasured using historical exchange rates.

Income and expense elements are remeasured using average exchange rates in effect during the period in which the elements are recognized within the consolidated statements of operations and comprehensive loss.

Income and expense

EverCommerce Inc.

Notes to Consolidated Financial Statements

elements are remeasured using average exchange rates in effect during the period in which the elements are recognized within the consolidated statements of operations and comprehensive loss.

Emerging Growth Company

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Accounting pronouncements issued and adopted

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740);

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

This ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

The Company adopted this ASU for the year ended December 31, 2021 and it did not have a material impact on its financial statements.

In August 2020, the FASB issued ASU No.

2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

ASU 2020-06 eliminates the cash conversion and beneficial conversation feature models in ASC 470-20 that require an issuer of certain convertible debt and preferred stock to separately account for embedded conversion features as a component of equity.

EverCommerce Inc.

Notes to Consolidated Financial Statements

an issuer will account for these securities as a single unit of account, unless the conversion feature meets certain criteria.

As further discussed in Note 10 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K, the Company issued Series C Convertible Preferred Stock (“Series C”) during the year ended December 31, 2021.

As a result of adopting ASU 2020-06, the Company was not required to determine whether bifurcation of an embedded conversion feature from the host instruments was necessary.

In February 2016, the FASB issued ASU 2016-02, Leases (“ Topic 842”) to improve financial reporting about leasing transactions.

This ASU amends and supersedes existing lease accounting guidance and is intended to increase transparency and comparability among organizations by recognizing right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet representing the rights and obligations created by those leases, and requiring disclosure of key information about leasing arrangements.

The Company adopted the new lease standard as of January 1, 2022 using the optional transition method to the modified retrospective approach which eliminates the requirement to restate the prior period financial statements.

Under this transition provision, results for annual reporting periods beginning on January 1, 2022 are presented under Topic 842, while prior period amounts continue to be reported and disclosed in accordance with the Company’s legacy guidance under ASC Topic 840, Leases .

A number of practical expedients and policy elections are available under the new guidance.

The Company elected the "package of practical expedients" permitted under the transition guidance, which among other things, did not require reassessment of whether contracts entered into prior to January 1, 2022 are or contain leases, and has carried forward its initial determination of the historical lease classification for existing leases.

The Company has not elected to adopt the “hindsight” practical expedient, and therefore will measure the ROU asset and lease liability using the remaining portion of the lease term at adoption on January 1, 2022.

Adoption of Topic 842 resulted in the recording of ROU assets and lease liabilities related to the Company’s operating leases of approximately $ 28.3 million and $ 34.8 million, respectively, on January 1, 2022.

In addition, upon transition, we eliminated deferred rent liabilities of $ 7.5 million, prepaid rent of $ 0.4 million and other non-current assets of $ 0.6 million.

The adoption of the new lease standard did not materially impact our consolidated statement of operations and comprehensive loss or consolidated statement of cash flows and did not result in a cumulative-effect adjustment to the opening balance of retained earnings.

Accounting pronouncements not yet adopted

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU 2016-02”), which is intended to improve financial reporting about leasing transactions.

The ASU affects all companies that lease assets such as real estate and equipment for a period for more than 12 months, and will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases.

The updated standard will be effective for annual reporting periods beginning after December 15, 2021.

Based on management’s current assessment, the impact of adoption will result in an additional right-of-use asset and corresponding lease liability presented on the consolidated balance sheet, largely comprised of its future real estate lease obligations in Note 16 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K along with any embedded leases in service contracts.

Based on our assessment through December 31, 2021, we expect no material impact to the consolidated statement of operations and comprehensive loss;

however, management’s analysis of the impact of adoption is not complete.

In June 2016, the FASB issued ASU No.

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This updated standard will be effective for annual reporting periods beginning after December 15, 2022.

The Company is currently evaluating the impact the adoption of this standard will have on its financial statements.

The Company has completed evaluating the impact the adoption of this standard will have on its financial statements and has concluded the impact will not be material to the consolidated financial statements.

In October 2021, the FASB issued ASU No.

2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 606) (“ASU 2021-08”), which amends the guidance in ASC 805 to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 606) (“ASU 2021-08”), which amends the guidance in ASC 805 to require that an

EverCommerce Inc.

Notes to Consolidated Financial Statements

acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The FASB’s objective in issuing the ASU is to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity and inconsistency related to both the recognition of an acquired contract liability and payments terms’ effects on subsequent revenue recognized by the acquirer.

This updated standard will be effective for annual reporting periods beginning after December 15, 2022.

Early adoption is permitted.

The Company is currently evaluating whether it will early adopt this standard.

This updated standard is effective for annual reporting periods beginning after December 15, 2022.

The impact of adoption is unknown as it will be based on any potential acquisitions consummated in the year of adoption.

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The valuation methods used to determine the fair value of intangible assets included the income approach—relief from royalty method for developed technology and trade name, the income approach—excess earnings method for customer relationships and the comparative business valuation method for non-compete agreements.

A number of assumptions

EverCommerce Inc.

Notes to Consolidated Financial Statements

and estimates were involved in the application of these valuation methods, including revenue forecasts, expected competition, costs of revenues, obsolescence, tax rates, capital spending, discount rates and working capital changes.

A number of assumptions and estimates were involved in the application of these valuation methods, including revenue forecasts, expected competition, costs of revenues, obsolescence, tax rates, capital spending, discount rates and working capital changes.

Cash flow forecasts were generally based on pre-acquisition forecasts coupled with estimated revenues and cost synergies available to a market participant.

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The consideration paid and purchase price allocations disclosed reflect the effects of these adjustments.

The allocation of purchase consideration related to certain 2021 acquisitions is considered preliminary with provisional amounts related to tax-related and other items.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed for each acquisition in 2021:

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Total net assets acquired $ 35,167 $ 34,430 $ 15,751 $ 99,820 $ 181,919 $ 367,087

EverCommerce Inc.

Notes to Consolidated Financial Statements

On January 19, 2021, the Company acquired 100 % of the interest of Briostack LLC dba Briostack (“Briostack”), a provider of operational management software to pest control businesses, for $ 35.2 million.

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dba PulseM (“PulseM”), a provider of enterprise-level reputation management software for small businesses, for $ 34.4 million.

On July 8, 2021, the Company acquired 100 % of the interest of PM Ventures, LLC dba MDTech (“MDTech”), a provider of electronic charge capture solutions to physicians via its SaaS-based MD Coder application and suite of add-ons, for $ 15.8 million.

EverCommerce Inc.

Notes to Consolidated Financial Statements

add-ons, for $ 15.8 million.

On July 8, 2021, the Company acquired 100 % of the interest of Timely Ltd.

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2020 Acquisitions

During 2020, the Company completed 9 business acquisitions in conjunction with the execution of its long-term plans and objectives in building a service commerce platform supporting the success of SMBs.

During 2020, the Company completed nine business acquisitions in conjunction with the execution of its long-term plans and objectives in building a service commerce platform supporting the success of SMBs.

All of the acquisitions qualified as business combinations under ASC 805.

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For the year ended December 31, 2020 the Company recognized revenue of $ 62.3 million related to acquisitions consummated in 2020.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Each acquisition allows for an adjustment to the purchase price to be made subsequent to the transaction closing date based on the actual amount of working capital and cash delivered to the Company.

The consideration paid and purchase price allocations disclosed reflect the effects of these adjustments.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed for each acquisition in 2020:

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On January 6, 2020, the Company acquired 100 % of the interest of Azar, LLC and Alnashmi for Digital Marketing, LLC (“Remodeling”), an online platform that connects homeowners with home improvement companies, for $ 28.4 million.

Under the terms of the purchase agreement, the Company is required to pay the seller an earnout based on achieving $ 6.6 million and $ 5.0 million of total revenue during calendar years ended 2020 and 2019, respectively.

The earnout amount will be $ 2.0 million per year, if the target is met;

no consideration will be paid if the target is not met.

At the acquisition date, the Company determined the fair value of the earnout to be $ 2.5 million and has included the amount in the total consideration above.

Under the terms of the purchase agreement, the Company was required to pay the seller an earnout based on achieving $ 6.6 million and $ 5.0 million of total revenue during calendar years ended 2021 and 2020, respectively.

The earnout amount would have been $ 2.0 million per year, if the target was met;

no consideration would have been paid if the target was not met.

At the acquisition date, the Company determined the fair value of the earnout to be $ 2.5 million and included the amount in the total consideration above.

The 2020 earnout target was met and the earnout of $ 2.0 million was paid in 2021.

At December 31, 2020, the Company concluded that the 2020 earnout target was not met and released the remaining liability with a corresponding gain of $ 0.5 million recorded in general and administrative expense on the consolidated statements of operations and comprehensive loss.

At December 31, 2021, the Company concluded that the 2021 earnout target was not met and released the remaining liability with a corresponding gain of $ 0.5 million recorded in general and administrative on the consolidated statements of operations and comprehensive loss.

On January 16, 2020, the Company acquired 100 % of the interest of Qiigo, LLC (“Qiigo”), a local marketing agent that builds brand unity and helps national brands and their franchises boost their qualified leads, for $ 22.2 million.

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On November 18, 2020, the Company acquired 100 % of the interest of Fitii, Limited and Fitii LLC (collectively “My PT Hub”), a provider of software that enables gym and health club customers to improve monthly collections, generate new business, enhance member engagement, increase retention and automate business processes, for $ 11.7 million.

Under the terms of the purchase agreement, the Company is required to pay the seller an earnout based on achieving $ 4.6 million of total revenue during calendar year end 2021.

The earnout amount will be $ 1.0 million, if the target is met;

no consideration will be paid if the target is not met.

At the acquisition date, the Company determined the fair value of the earnout to be $ 1.0 million and has included the amount in the total consideration above.

At December 31, 2021, the Company concluded that the earnout target was not met and released the remaining liability with a corresponding gain of $ 1.0 million recorded in general and administrative expense on the consolidated statements of operations and comprehensive loss.

Under the terms of the purchase agreement, the Company was required to pay the seller an earnout based on achieving $ 4.6 million of total revenue during calendar year end 2021.

The earnout amount would have been $ 1.0 million, if the target was met;

no consideration would have been paid if the target was not met.

At the acquisition date, the Company determined the fair value of the earnout to be $ 1.0 million and included the amount in the total consideration above.

At December 31, 2021, the Company concluded that the earnout target was not met and released the remaining liability with a corresponding gain of $ 1.0 million recorded in general and administrative on the consolidated statements of operations and comprehensive loss.

On December 16, 2020, the Company acquired 100 % of the interest of Updox, LLC (“Updox”), a provider of a healthcare customer relationship management solution, for $ 143.1 million.

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With respect to total goodwill recognized for the business acquisitions consummated during the year ended December 31, 2020, the Company expects that $ 167.1 million of goodwill with be deductible for income tax purposes.

2019 Acquisitions

During 2019, the Company completed 13 business acquisitions in conjunction with the execution of its long-term plans and objectives in building a service commerce platform supporting the success of SMBs.

All of the acquisitions qualified as business combinations under ASC 805.

Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition date fair values, with any excess consideration recognized as goodwill.

Goodwill primarily represents the value associated with the assembled workforce, and expected synergies subsumed into goodwill.

Assets acquired and liabilities assumed in connection with each acquisition have been recorded at their fair values.

Fair values were determined by management using the assistance of third-party valuation specialists.

The valuation methods used to determine the fair value of intangible assets included the income approach—relief from royalty method for developed technology and trade name, the income approach— excess earnings method for customer relationships including government contracts and the comparative business valuation method for non-compete agreements.

A Monte Carlo simulation was used as the valuation method to determine the fair value of earnout liabilities.

Cash flow forecasts were generally based on pre-acquisition forecasts coupled with estimated revenues and cost synergies available to a market participant.

The Company’s consolidated statements of operations and comprehensive loss include $ 14.1 million of acquisition related transaction costs within general and administrative for acquisitions consummated in 2019.

For the year ended December 31, 2019 the Company recognized revenue of $ 60.8 million million related to acquisitions consummated in 2019.

Each acquisition allows for an adjustment to the purchase price to be made subsequent to the transaction closing date based on the actual amount of working capital and cash delivered to the Company.

The consideration paid and purchase price allocations disclosed reflect the effects of these adjustments.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed for each acquisition in 2019:

AllMeds Secure Global Solutions HSR-FL Saber Marketing Studio Director

(in thousands)

Cash $ 30,305 $ 9,319 $ 971 $ 627 $ 47,445

Rollover equity — — — — —

Fair value of earnout — — — — —

Total consideration $ 30,305 $ 9,319 $ 971 $ 627 $ 47,445

Net assets acquired:

Cash and cash equivalents $ 113 $ 38 $ — $ — $ 325

Accounts receivable, trade 1,144 780 40 1 —

Contract assets 143 172 28 23 244

Prepaid expenses and other current assets 2,083 102 — 2 11

Property and equipment 76 47 — — —

Other non-current assets 1 89 — — —

Intangible—developed technology 3,068 600 — — 950

Intangible—customer relationships 14,868 4,000 1,017 707 20,150

Intangible—trade name 775 300 — — 300

Intangible—non-compete agreements 8 — — — 130

Goodwill 15,646 3,359 212 143 25,803

Deferred tax asset, net — 2 — 5 1

Accounts payable ( 488 ) ( 6 ) — — —

Accrued expenses and other ( 3,901 ) ( 49 ) — — ( 305 )

Deferred revenue ( 808 ) ( 115 ) — ( 254 ) ( 25 )

Customer deposits — — ( 326 ) — ( 139 )

Deferred tax liability, net ( 2,423 ) — — — —

Total net assets acquired $ 30,305 $ 9,319 $ 971 $ 627 $ 47,445

EverCommerce Inc.

Notes to Consolidated Financial Statements

33 Mile Radius eProvider Solutions CollaborateMD Security Information Systems American Service Finance

(in thousands)

Cash $ 9,199 $ 8,808 $ 76,197 $ 67,246 $ 33,179

Rollover equity 359 — — — —

Fair value of earnout — — — 62 —

Total consideration $ 9,558 $ 8,808 $ 76,197 $ 67,308 $ 33,179

Net assets acquired:

Cash and cash equivalents $ 228 $ — $ 232 $ 145 $ 2,530

Accounts receivable, trade 18 352 175 1,608 85

Contract assets — — 35 216 —

Prepaid expenses and other current assets 60 32 929 115 566

Property and equipment — — 1,205 46 1,793

Other non-current assets 3 1 101 — 277

Intangible—developed technology 480 800 6,100 4,450 350

Intangible—customer relationships 5,440 4,200 28,800 3,400 10,600

Intangible—trade name 170 200 800 600 450

Intangible—non-compete agreements 50 50 80 — —

Intangible—government contracts — — — 28,600 —

Goodwill 3,460 3,312 40,196 29,171 19,717

Deferred tax asset, net — — — 15 —

Accounts payable ( 37 ) ( 25 ) ( 227 ) ( 3 ) —

Accrued expenses and other ( 314 ) ( 114 ) ( 2,202 ) ( 238 ) ( 3,189 )

Deferred revenue — — — ( 570 ) —

Customer deposits — — ( 27 ) ( 247 ) —

Total net assets acquired $ 9,558 $ 8,808 $ 76,197 $ 67,308 $ 33,179

EverCommerce Inc.

Notes to Consolidated Financial Statements

Jimmy Marketing Clubwise Roofsnap Total

(in thousands)

Cash $ 7,077 $ 15,454 $ 10,049 $ 315,876

Rollover equity — 1,377 — 1,736

Fair value of earnout — 1,782 — 1,844

Total consideration $ 7,077 $ 18,613 $ 10,049 $ 319,456

Net assets acquired:

Cash and cash equivalents $ — $ 1,428 $ 383 $ 5,422

Accounts receivable, trade 134 68 — 4,405

Contract assets 15 — — 876

Prepaid expenses and other current assets 410 236 20 4,566

Property and equipment — 153 22 3,342

Other non-current assets — — — 472

Intangible—developed technology — 1,613 760 19,171

Intangible—customer relationships 3,390 9,032 4,470 110,074

Intangible—trade name 120 323 60 4,098

Intangible—non-compete agreements 150 13 100 581

Intangible—government contracts — — — 28,600

Goodwill 3,491 9,409 4,491 158,410

Deferred tax asset, net 1 — 3 27

Accounts payable ( 3 ) ( 82 ) — ( 871 )

Accrued expenses and other ( 492 ) ( 1,708 ) ( 185 ) ( 12,697 )

Deferred revenue ( 100 ) — ( 75 ) ( 1,947 )

Customer deposits ( 39 ) — — ( 778 )

Deferred tax liability, net — ( 1,872 ) — ( 4,295 )

Total net assets acquired $ 7,077 $ 18,613 $ 10,049 $ 319,456

On January 9, 2019, the Company acquired 100 % of the voting equity interest of AllMeds, Inc., a provider of offerings to enable its customers, physician practices, to offload and automate manual processes, optimize operational efficiency and improve claim submission and reimbursement processes, for $ 30.3 million.

Secure Global Solutions

On January 16, 2019, the Company acquired 100 % of the voting equity interest of Secure Global Solutions, LLC, a provider of central station automation and network solutions for the alarm monitoring industry, for $ 9.3 million.

On January 18, 2019, the Company acquired certain assets of Home Services Review of Florida, Inc.

(“HSR-FL”), a provider of homeowner referral services for home improvement and repair services through an annual printed Homeowner Referral Guidebook and associated web site and mobile applications, for $ 1.0 million.

Saber Marketing

On January 22, 2019, the Company acquired certain assets and liabilities of Saber Marketing Group, LLC, a

EverCommerce Inc.

Notes to Consolidated Financial Statements

provider of homeowner referral services for home improvement and repair services through an annual printed Homeowner Referral Guidebook and associated web site and mobile applications, for $ 0.6 million.

Studio Director

On February 14, 2019, the Company acquired 100 % of the voting equity interest of OnVision Solutions, Inc., dba The Studio Director (“Studio Director”), a provider of cloud-based Business Management Software solutions for children’s activities centers to more effectively and efficiently run the centers’ businesses, for $ 47.4 million.

33 Mile Radius

On February 21, 2019, the Company acquired 100 % of the voting equity interest of 33 Mile Radius LLC, a provider of customer leads to disaster mitigation contractors to help them generate revenue and grow their businesses, for $ 9.6 million.

Under the terms of the purchase agreement, certain members of 33 Mile Radius LLC received 180,574 shares of common stock rollover equity.

The Company assessed the fair value of the shares at $ 0.4 million by applying a market approach.

The fair value of the rollover equity is reflected in the total consideration above.

eProvider Solutions

On March 1, 2019, the Company acquired 100 % of the voting equity interest of eProvider Solutions, LLC, an insurance clearinghouse that provides cloud-based claims processing software and services to connect healthcare institutions and providers with patients and insurance payors, for $ 8.8 million.

CollaborateMD

On March 19, 2019, the Company acquired 100 % of the voting equity interest of CollaborateMD, Inc., a leading SaaS-based provider of practice management and medical billings solutions to small-to-medium sized physician practices and outsourced medical billings companies, for $ 76.2 million.

Security Information Systems

On June 11, 2019, the Company acquired 100 % of the voting equity interest of Security Information Systems, Inc., a provider of central station alarm monitoring and dispatch platform solutions to customers in the security and defense industries, for $ 67.3 million.

American Service Finance

On August 20, 2019, the Company acquired certain assets and liabilities of American Service Finance Corporation, a provider of payment and billing solutions for health clubs, fitness clubs and martial arts studios, for $ 33.2 million.

Jimmy Marketing

On August 20, 2019, the Company acquired 100 % of the voting equity interest of JE2000, LLC dba Jimmy Marketing, a provider of performance marketing and lead generation solutions that allow companies in the medical services industry to maximize patient intake and retention, for $ 7.1 million.

On October 25, 2019, the Company acquired 100 % of the voting equity interest of ClubWise Software Limited and ClubWise Software Pty.

Ltd (collectively “ClubWise”), a provider of software that enables gym and health club customers to improve monthly collections, generate new business, enhance member engagement, increase retention and automate business processes to improve efficiency, for $ 18.6 million.

Under the terms of the purchase agreement, certain stockholders of ClubWise received 283,286 shares of common stock rollover equity.

The Company assessed the fair value of the shares at $ 1.4 million by applying a market approach.

The fair value of the rollover equity is reflected in the total consideration above.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Under the terms of the purchase agreement, the Company is required to pay the seller an earnout of up to $ 2.0 million.

The earnout is based on the acquired entity achieving $ 5.4 million of total revenue during calendar years 2020 and 2021.

The 2020 earnout target was met and the earnout of $ 1.3 million was paid in 2021.

If the revenue target is met for 2021, the payment to the sellers will be $ 0.7 million.

At the acquisition date, the Company determined the fair value of the earnout to be $ 1.8 million and has included the amount in the total consideration above.

At December 31, 2020, the Company re-evaluated the fair value of the earnout and concluded that it remained $ 1.8 million.

During 2021, the Company concluded that the 2020 earnout target was met and increased the liability with a corresponding loss of $ 0.9 million recorded in general and administrative expense on the consolidated statements of operations and comprehensive loss.

At December 31, 2021, the Company has re-evaluated the fair value of the earnout and concluded that it remains $ 0.7 million.

On December 27, 2019, the Company acquired 100 % of the voting equity interest of RoofSnap LLC, a provider of roof measuring and estimating solutions to small, individual and commercial contractors and independent adjusters, for $ 10.0 million.

With respect to total goodwill recognized for the business acquisitions consummated during the year ended December 31, 2019, the Company expects that $ 133.3 million of goodwill will be deductible for income tax purposes.

Pro Forma Results of Acquisitions (unaudited)

The following table presents unaudited pro forma consolidated results of operations for the years ended December 31, 2021 and 2020 as if the aforementioned 2021 and 2020 acquisitions had occurred as of January 1, 2020.

The pro forma information includes the business combination accounting effects resulting from these acquisitions, including interest expense of $ 8.2 million, $ 23.1 million and $ 43.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, to account for funds borrowed earlier, issuance of our common shares at earlier dates which impacts the calculation of basic and diluted net loss per share, removal of transaction costs of $ 8.4 million, $ 15.6 million and $ 14.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, and additional amortization of $ 9.6 million, $ 24.1 million and $ 43.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, resulting from the amortization of intangible assets beginning as of January 1, 2019.

The pro forma information includes the business combination accounting effects resulting from these acquisitions, including interest expense of $ 17.1 million and $ 48.3 million for the years ended December 31, 2021 and 2020, respectively, to account for funds borrowed earlier, issuance of our common shares at earlier dates which impacts the calculation of basic and diluted net loss per share, removal of transaction costs of $ 8.4 million and $ 15.6 million for the years ended December 31, 2021 and 2020, respectively, and additional amortization of $ 9.6 million and $ 24.1 million for the years ended December 31, 2021 and 2020, respectively, resulting from the amortization of intangible assets beginning as of January 1, 2020.

We prepared the pro forma financial information for the combined entities for comparative purposes only, and the information is not indicative of what actual results would have been if the acquisitions had occurred at the beginning of the periods presented, nor is the information intended to represent or be indicative of future results of operations.

Year ended December 31,

(in thousands, except per share amounts)

(in thousands, except per

share amounts)

Total revenue $ 536,936 $ 442,095

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Short-term contract liabilities are included within deferred revenue on the consolidated balance sheets.

Long-term contract liabilities are included within long-term deferred revenue on the consolidated balance sheets.

Long-term contract liabilities are included within other non-current liabilities on the consolidated balance sheets.

Revenue recognized from the

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Additions 255,723

Measurement period adjustments (1)

Effect of foreign currency exchange rate changes ( 2,751 )

Balance, December 31, 2021

Additions 255,723

Measurement period adjustments (1)

1 unchanged sentence

Balance, December 31, 2022

(1) The $ 0.6 million and $ 0.3 million of measurement period adjustments relate to acquisitions consummated during the years ended December 31, 2021 and 2020, respectively.

Intangible Assets

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Amortization expense was $ 101.0 million, $ 93.4 million and $ 70.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The weighted average useful life of intangible assets acquired is 10.5 years, 11.4 years and 13.2 years for the years ended December 31, 2021, 2020 and 2019, respectively.

In determining the useful life for each category of intangible asset, the Company considered the following:

the expected use of the intangible, the longevity of the brand and considerations for obsolescence, demand, competition and other economic factors.

The weighted average remaining useful life of intangible assets acquired is 9.6 years , 10.5 years and 11.4 years for the years ended December 31, 2022, 2021 and 2020, respectively.

EverCommerce Inc.

Notes to Consolidated Financial Statements

In determining the useful life for each category of intangible asset, the Company considered the following:

the expected use of the intangible, the longevity of the brand and considerations for obsolescence, demand, competition and other economic factors.

Amortization expense for the Company’s intangible assets are as follows (in thousands):

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Property and equipment, net $ 11,930 $ 13,509

Depreciation expense was $ 4.1 million, $ 4.0 million and $ 1.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Depreciation expense was $ 4.1 million for each of the years ended December 31, 2022 and 2021 and $ 4.0 million for the year ended December 31, 2020 .

Capitalized Software

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During the ordinary course of business, the Company may determine that certain capitalized features of its software will no longer be used either internally or to deliver value to its customers.

During the year ended December 31, 2021 the Company recorded a charge to general and administrative expense on the accompanying consolidated statements of operations and comprehensive loss for $ 0.7 million related to capitalized features no longer expected to be used.

During the years ended December 31, 2022, 2021 and 2020 the Company recorded a charge to general and administrative expense on

EverCommerce Inc.

Notes to Consolidated Financial Statements

the accompanying consolidated statements of operations and comprehensive loss for $ 1.2 million, $ 0.7 million and nil , respectively, related to capitalized features no longer expected to be used.

The Company leases real estate from unrelated parties under operating lease agreements that have initial terms ranging from one to 11 years.

Some leases include one or more options to renew, generally at our sole discretion, of five additional years each.

The components of lease expense are as follows:

Year ended December 31, 2022

(in thousands)

Operating lease cost $ 7,859

Variable lease cost 1,495

Short-term lease cost 340

Total lease cost $ 9,694

Included in the consolidated statements of operations and comprehensive loss is total rent expense of $ 9.7 million and $ 8.9 million for the years ended December 31, 2021 and 2020, respectively.

Supplemental cash flow information related to leases is as follows:

Year ended December 31, 2022

(in thousands)

Cash paid for amounts included in measurement of lease liabilities:

Operating cash outflows - payments on operating leases $ 8,010

Right-of-use assets obtained in exchange for new lease obligations:

Operating leases $ 772

Supplemental balance sheet information, included in other non-current assets , accrued expenses and other and other non-current liabilities on the consolidated balance sheet, related to leases is as follows:

Year ended December 31, 2022

(in thousands)

Operating lease right-of-use assets $ 21,756

Current operating lease liabilities 5,239

Long-term operating lease liabilities 22,500

Total operating lease liabilities $ 27,739

At December 31, 2022, the weighted average remaining lease term for operating leases was 6.34 years and the weighted average discount rate w as 4.8 %.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the balance sheet as of December 31, 2022 is as follows (in thousands):

Year ended December 31,

Thereafter 8,555

Total lease payments 32,889

imputed interest 5,150

Total present value of lease liabilities $ 27,739

A summary of the future minimum lease commitments for all non-cancelable operating lease agreements were as follows as of December 31, 2021 (in thousands):

Year ended December 31,

Thereafter 12,692

Total future minimum payments due $ 41,476

EverCommerce Inc.

Notes to Consolidated Financial Statements

Long-term debt

1 unchanged sentence

(in thousands)

Term notes with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25 % ( 3.50 % at December 31, 2021) quarterly principal payments of 0.25 % of original principal balance with balloon payment due July 2028

Term notes with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25 % ( 7.32 % at December 31, 2022) plus quarterly principal payments of 0.25 % of original principal balance with balloon payment due July 2028

$ 543,125 $ 548,625

Revolver with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 3.25 % ( 7.63 % at December 31, 2022), and outstanding balance due July 2026

Term notes with interest payable monthly, interest rate at Adjusted LIBOR or Alternative Base Rate, plus an applicable margin of 5.50 % ( 5.65 % at December 31, 2020) quarterly principal payments of 0.25 % of original principal balance with balloon payment due August 2025

Asset purchase agreement related to acquisition of Service Nation, Inc., zero -interest unsecured debt (effective interest of 10 %) with principal payments due monthly through February 2021

Subordinated unsecured promissory note related to acquisition of Service Nation, Inc., interest paid-in-kind, interest rate at 8.5 % with balloon payment due September 2022

7 unchanged sentences

Long-term portion $ 530,946 $ 535,184

In connection with the IPO on July 6, 2021, the Company entered into a credit facility (“Credit Agreement”) that includes term loans in an aggregate principal amount of $ 350.0 million (“Initial Term Loans”), a revolver with a capacity of $ 190.0 million (“Revolver”) and a sub-limit of the Revolver available for letters of credit up to an aggregate face amount of $ 20.0 million.

The Initial Term Loans were used to retire the Company’s debt arrangements that were outstanding prior to the IPO.

A loss on debt extinguishment related to the refinancing of the Company’s debt arrangements was recorded during the year ended December 31, 2021 totaling $ 28.7 million.

As of December 31, 2021, the Company also had outstanding subordinated promissory notes (“Legacy Subordinated Notes”) that included paid-in-kind interest.

The remaining Legacy Subordinated Notes outstanding principal and paid-in-kind interest were fully repaid during the year ended December 31, 2022.

As of November 2021, the Company had $ 35.0 million outstanding under the Revolver, and borrowed the remaining capacity of the Revolver to fund the acquisition of DrChrono.

Subsequently in the same month, the Company received additional term loans in an aggregate principal amount of $ 200.0 million (“Additional Term Loans” and together with the Initial Term Loans, the “Term Loans”), the proceeds of which were used to repay the outstanding principal balance of the Revolver of $ 190.0 million and for general corporate purposes.

The Initial Term Loans, Revolver and Additional Term Loans are collectively referred to herein as the (“Credit Facilities”).

The Term Loans have a term of seven years , and quarterly payments of principal of $ 1.4 million and interest in arrears.

The Revolver has a term of five years .

Borrowings under the Credit Facilities will be available as alternate base rate (“ABR”) or Eurocurrency borrowings.

ABR borrowings under the Credit Facilities accrue interest at an alternate base rate plus an applicable rate, and Eurocurrency borrowings accrue interest at an adjusted LIBOR rate plus an applicable rate.

The ABR rate represents the greater of the prime rate, Federal Reserve Bank of New York rate plus one half of 1%, and an adjusted LIBOR rate for a one month interest period plus 1 %.

At the time of

EverCommerce Inc.

Notes to Consolidated Financial Statements

origination, the applicable rate for the Term Loans and the Revolver was 3 % for Eurocurrency borrowings and 2 % for ABR borrowings, in each case subject to change based on the Company’s first lien net leverage ratio, as defined in the Credit Facilities.

The Company determines the fair value of long-term debt based on trading prices for its debt if available.

2 unchanged sentences

If no such trading prices are available, the Company determines the fair value of long-term debt using discounted cash flows, applying current interest rates and current credit spreads, based on its own credit risk.

The fair value amounts were $ 552.8 million and $ 710.3 million as of December 31, 2021 and 2020, respectively.

As of January 1, 2019, the Company issued notes in the amount of $ 143.0 million through Equity Sponsors (“ES Notes”).

The ES Notes required monthly payments of principal and interest.

Interest rates on the ES Notes were floating based on one month LIBOR plus a spread of 8.25 %.

The Company also had outstanding term notes payable (“Legacy Term Notes”) and subordinated promissory notes (“Legacy Subordinated Notes”) that included paid-in-kind (“PIK”) interest.

The PIK interest on the legacy Term Notes bore an interest rate of 1.75 % and was accrued on the last business day of each quarter.

The interest on the Legacy Subordinated Notes was all PIK and was due upon maturity.

Total PIK interest was $ 0.4 million, $ 0.4 million and $ 1.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

EverCommerce Inc.

Notes to Consolidated Financial Statements

In August 2019, the Company entered into a credit agreement under which the Company obtained (i) a term loan of $ 415.0 million (“Term Loan”), (ii) commitments for delayed draw term loans (“DDTLs”) up to $ 135.0 million and commitments for revolving loans (“Revolver”) up to $ 50.0 million including commitments for the issuance of up to $ 10.0 million of letters of credit (together, the “Credit Facility”).

During the year ended December 31, 2019 the Company received proceeds of $ 39.2 million in connection with the DDTLs.

The Company used proceeds from the Credit Facility to repay the outstanding balance of the ES Notes and Legacy Term Notes.

The Company concluded that the transaction qualified as an extinguishment of the ES Notes and Legacy Term Notes.

In connection therewith, the Company recorded a loss on debt extinguishment of $ 15.5 million in the consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2020, the Company entered into an amendment to the Credit Facility which provided an incremental commitment for additional DDTLs of $ 250.0 million, resulting in a total commitment for DDTLs of $ 385.0 million.

The incremental commitment DDTLs bear the same terms and conditions as the original DDTLs within the Credit Facility.

During the years ended December 31, 2021 and 2020, the Company received proceeds of $ 69.2 million and $ 264.7 million, net of discounts on long-term debt of $ 2.9 million and $ 9.0 million, respectively, in connection with the DDTLs.

The Company paid commitment fees on the revolver at a variable rate that ranged from 0.375 % to 0.50 % per annum (based on the Company’s most recent first lien leverage ratio) and the incremental delayed draw unused commitments of 1.5 % per annum paid quarterly in arrears.

In March 2020, the Company borrowed $ 50.0 million under the revolver at rates ranging from 5.68 % to 6.25 %.

The Company repaid the revolver in full in September 2020 and no balance was outstanding at December 31, 2020.

In connection with the IPO, the Company refinanced the Credit Facility on July 6, 2021.

The Company entered into a new credit facility (“New Credit Facility”) that initially included term loans in an aggregate principal amount of $ 350.0 million (“Initial New Term Loans”) and a revolver with a capacity of $ 190.0 million (“New Revolver”), of which it borrowed $ 79.0 million upon closing.

The proceeds from the Initial New Term Loans and New Revolver were used in conjunction with the proceeds from the IPO to retire the existing Credit Facility.

In August 2021, the Company repaid $ 44.0 million of the outstanding balance of the New Revolver.

In November 2021, the Company borrowed an additional $ 155.0 million on the New Revolver to fund the acquisition of DrChrono, which is more fully described in Note 3 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.

Additionally, the Company received additional term loans in November 2021, in an aggregate principal amount of $ 200.0 million (“Additional New Term Loans,” and together with the Initial New Term Loans, the “New Term Loans”), as permitted under the New Credit Facility.

The proceeds of the Additional New Term Loans were used to pay the outstanding principal balance of the New Revolver of $ 190.0 million and for general corporate purposes.

The New Term Loans have a term of seven years , and quarterly payments of principal of $ 1.4 million and interest in arrears.

The New Revolver has a term of five years .

Borrowings under the New Credit Facility will be available as alternate base rate (“ABD”) or Eurocurrency borrowings.

ABR borrowings under the New Credit Facility accrue interest at an alternate base rate plus an applicable rate, and Eurocurrency borrowings accrue interest at an adjusted LIBOR rate plus an applicable rate.

The ABR rate represents the greater of the prime rate, Federal Reserve Bank of New York rate plus one half of 1%, and an adjusted LIBOR rate for a one month interest period plus 1 %.

At the time of origination, the applicable rate for the New Term Loans and the New Revolver was 3 % for Eurocurrency borrowings and 2 % for ABR borrowings, in each case subject to changed based on the Company’s first lien net leverage ratio, as defined in the New Credit Facility.

The Company concluded that the refinance qualified as an extinguishment of the existing Credit Facility.

In connection therewith, the Company recorded a loss on debt extinguishment of $ 28.7 million during the year ended December 31, 2021.

The outstanding balance of the New Credit Facility at December 31, 2021 of $ 548.6 million is comprised entirely of New Term Loans, with no amount outstanding on the New Revolver.

The outstanding balance of the Credit Facility at December 31, 2020 of $ 721.0 million was comprised of $ 409.8 million related to the Term Loan and $ 311.2 million related to the aggregate DDTLs.

The outstanding balance of the Legacy Subordinated Notes was $ 5.1 million at each of December 31, 2021 and 2020.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The Company’s New Credit Facility is subject to certain financial and nonfinancial covenants and is secured by substantially all assets of the Company.

The fair value amounts were approximately $ 531.6 million and $ 552.8 million as of December 31, 2022 and December 31, 2021, respectively.

Effective October 31, 2022, the Company 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 Term Loans from a floating rate to a fixed rate (the “Swap Agreement”).

The Swap Agreement has a term of 5 years with a fixed rate in the agreement of 4.2295 %.

As of December 31, 2022 the floating rate of the Term Loans was 4.07 % and the effective interest rate was 7.32 % including an applicable fixed margin of 3.25 %.

The Swap Agreement is accounted for as a derivative whereby the fair value of the contract is reported in other non-current assets or other non-current liabilities on the consolidated balance sheet, and gains and losses resulting from changes in the fair value are reported in interest and other expense, net, in the statement of operations and comprehensive loss.

As of December 31, 2022 the fair value of the Swap Agreement was a liability of $ 2.9 million and reported in other non-current liabilities on the consolidated balance sheet.

The Company’s Credit Facilities are subject to certain financial and nonfinancial covenants and are secured by substantially all assets of the Company.

As of December 31, 2022, the Company was in compliance with all of its covenants.

1 unchanged sentence

Year ended December 31,

2022 $ 11,373

Thereafter 515,625

Total aggregate maturities of the Company’s debt $ 543,125

Included in aggregate maturities is future paid-in-kind interest totaling $ 0.4 million that will accrue over the term of the related debt.

On August 23, 2019 the Company entered into an agreement to sell a minority interest in the Company.

As part of the transaction, 59.2 million Series A shares were converted into common stock.

In addition, certain employees converted 2.1 million Series A shares into common stock.

As a result of this transaction, the Company recorded a deemed dividend distribution of $ 76.9 million.

Subsequently, 32.9 million shares of common stock were sold for cash and also common stock shares were converted into Series B shares resulting in 5.2 million shares of Series B issued.

Due to the Company’s involvement with the transaction and as the fair value of the Series B shares was greater than the fair value of the common stock exchanged, the Company recorded $ 29.0 million in additional stock-based compensation expense for the year ended December 31, 2019 within general and administrative on the consolidated statements of operations and comprehensive loss.

Certain shares of common stock were then converted into shares of newly issued Series B shares on a 1:1 basis resulting in 32.8 million Series B shares being issued.

Concurrently, the Company sold 17.7 million of additional shares of Series B at a per share price of $ 9.14 and in October 2019, sold 0.1 million shares of Series B for no additional consideration.

The Series B shares issued were initially recorded in convertible preferred stock at fair value, less issuance costs, and subsequently adjusted to their redemption value at each reporting period.

As a result of this transaction, the Company recorded a deemed dividend distribution of $ 162.4 million.

Concurrently, the Company repurchased shares of its common stock for $ 9.14 per share, including shares issued upon the exercise of stock options in a cashless exercise and shares issued upon the conversion of Series A shares.

The Company repurchased 2.6 million shares, net of cash paid to the holders of the common stock for $ 23.5 million.

Issuance costs incurred as a result of the August 2019 transaction were $ 25.1 million for the year ended December 31, 2019 and were allocated between the issuance of the Series B shares and repurchase of common stock based on the relative fair value of the shares issued and repurchased.

The costs related to Series B share issuances were reflected as a reduction to convertible preferred stock and the costs related to the repurchase of common stock were reflected as a reduction to additional paid-in capital.

In September 2020 and October 2020, the Company sold 5.8 million and 10.6 million shares of Series B preferred stock, respectively, at a per share price of $ 9.12 .

Upon issuance, the Series B shares were recorded in convertible preferred stock and subsequently adjusted to their redemption value as of December 31, 2020.

Costs incurred as a

EverCommerce Inc.

Notes to Consolidated Financial Statements

result of issuing the Series B shares were $ 0.1 million for the year ended December 31, 2020 and were reflected as a decrease to convertible preferred stock.

The Series A shares were redeemable upon a deemed liquidation event not solely within the Company’s control.

The redemption price would have been the cash or value of the property, rights or securities paid or distributed upon a deemed liquidation event.

Prior to the Second Amended and Restated Certificate of Incorporation, Series A preferred stock holders were entitled to cumulative dividends that accrued at an annual rate of 4 % of the Series A preferred stock original issue price, compounded annually.

The Series A preferred stock holders were not entitled to accrue additional dividends after August 23, 2019.

The Series B shares were redeemable upon a deemed liquidation event not solely within the Company’s control or upon written notice from a majority of the holders of Series B shares at any time on or after February 23, 2026.

The redemption price was prescribed in the Company’s Second Amended and Restated Certificate of Incorporation, and was based on inputs including, but not limited to, the original issuance price of the Series B shares, accrued dividends whether or not declared and the fair value of common stock.

Series B holders were entitled to cumulative dividends that accrued at an annual rate of 10 % of the Series B share original issue price (as adjusted in accordance with the Company’s Second Amended and Restated Certificate of Incorporation), compounded annually.

The original issue price for the Series B shares issued ranged from $ 9.12 per share to $ 9.14 per share.

Accumulated and undeclared Series B preferred dividends were $ 101.1 million and $ 86.0 million as of July 6, 2021 (the date on which the Series B converted to common) and December 31, 2020, respectively.

Such dividends would have been payable only upon the occurrence of a deemed liquidation event or voluntary or involuntary dissolution, liquidation or winding up of the Company without certain consents required by the organizational documents of the Company.

In accordance with ASC 480, Distinguishing Liabilities from Equity, if the carrying value of redeemable preferred stock is less than its redemption value, redeemable preferred stock shall be accreted to its redemption value if it is probable it will become redeemable.

Prior to March 15, 2021, the Company concluded it was probable that the Series B would become redeemable due to the passage of time.

However, after that date the Company concluded that it was no longer probable that the Series B would become redeemable due to the increased likelihood of a successful IPO prior to February 23, 2025.

The Company’s Series B accruing dividends comprised a component of the redemption value of such stock.

The Company recorded the accretion of Series B through March 15, 2021, by increasing its carrying value and recording a corresponding reduction of additional paid-in capital by $ 15.1 million and $ 67.8 million for the years ended December 31, 2021 and 2020, respectively.

Prior to the effectiveness of the Amended and and Restated Certification of Incorporation on July 6, 2021 the Company was authorized to issue 140,000,000 shares of preferred stock, $ 0.00001 par value per share, of which 50,000,000 were designated as Series A, 75,000,000 were designated as Series B and 15,000,000 were designated as Series C as of such date.

On May 5, 2021, the Company amended its Certificate of Incorporation (“Third Amended and Restated Certificate of Incorporation”) to increase the number of authorized shares of Preferred Stock from 125,000,000 shares to 140,000,000 shares of Preferred Stock, $ 0.00001 par value per share, of which 50,000,000 were designated as Series A, 75,000,000 were designated as Series B and 15,000,000 were designated as Series C as of such date.

Each share of Series A, Series B and Series C could have been converted into common stock at any time, at the option of the holder, based on a prescribed formula set forth in the Company’s Third Amended and Restated Certificate of Incorporation.

In the event of a liquidation, dissolution, winding up of the Company or other similar event, liquidation payments would have first been made to the holders of Series B, then to Series C, and then to Series A.

In May 2021, the Company issued 7.9 million shares of Series C for proceeds of $ 109.8 million net of issuance costs.

The Series C shares were redeemable upon a deemed liquidation event not solely within the Company’s control.

The redemption price would have been the cash or value of the property, rights or securities paid or distributed upon a deemed liquidation event.

Immediately prior to the closing of the IPO, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on July 6, 2021 to authorize the issuance of up to

Prior to March 15, 2021, the Company concluded it was probable that the Series B would become redeemable due to the passage of time.

However, after that date the Company concluded that it was no longer probable that the Series B would become redeemable due to the increased likelihood of a

EverCommerce Inc.

Notes to Consolidated Financial Statements

2,050,000,000 shares, par value $ 0.00001 per share, consisting of 2,000,000,000 shares of common stock and 50,000,000 shares of preferred stock.

On July 6, 2021, the Company completed its IPO which resulted in the issuance of common stock and conversion of preferred stock into common stock on a one-for-one basis.

successful IPO prior to February 23, 2025.

The Company’s Series B accruing dividends comprised a component of the redemption value of such stock.

The Company recorded the accretion of Series B through March 15, 2021, by increasing its carrying value and recording a corresponding reduction of additional paid-in capital in the amount of $ 15.1 million and $ 67.8 million for the years ended December 31, 2021 and 2020, respectively.

Immediately prior to the closing of the IPO on July 6, 2021, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to authorize the issuance of up to 2,050,000,000 shares, par value $ 0.00001 per share, consisting of 2,000,000,000 shares of common stock and 50,000,000 shares of preferred stock.

In connection with the IPO, all of the Company’s then outstanding convertible preferred stock converted into shares of common stock on a one -for-one basis.

Upon conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock and additional paid-in capital.

See further discussion in Note 2 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.

On June 14, 2022, our Board of Directors approved a stock repurchase program (the “Repurchase Program”) with authorization to purchase up to $ 50.0 million in shares of the Company’s common stock through the expiration of the program on December 21, 2022.

On November 7, 2022, our Board of Directors approved an expansion of the Repurchase Program with authorization to purchase up to an additional $ 50.0 million in shares of the Company’s common stock ($ 100.0 million total) and an extension to the expiration of the Repurchase Program through December 31, 2023.

Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs.

This program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of the Board of Directors.

The Company expects to fund repurchases with existing cash on hand.

The Company repurchased and retired 4,951,966 shares of common stock for $ 43.0 million, including transaction fees, during the year ended December 31, 2022.

Stock-Based Compensation

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In addition, the number of shares reserved for issuance under the 2021 Plan is subject to an annual increase on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 3 % of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares as determined by the Company’s board of directors, provided that no more than 22,000,000 shares may be issued upon the exercise of incentive stock options.

Based on the Company’s outstanding shares of common stock as of December 31, 2021, on January 1, 2022 the number of shares reserved for issuance under the 2021 Plan increased by 5.9 million.

Stock options

1 unchanged sentence

Time-based options granted under the 2016 Plan vest 25 % after one year , and then monthly over the next three years whereas time-based options granted under the 2021 Plan vest 25 % after one year and then quarterly over the next three years .

Time-based options granted under both the 2016 Plan and the 2021 Plan expire 10 years from date of grant and carry an exercise price equal to the fair market value at the date of grant as determined by the Company’s board of directors for options granted under the 2016 Plan and an exercise price equal to the closing price of the Company’s stock at the date of grant for options granted under the 2021 Plan.

The overwhelming majority of performance-based options granted prior to the IPO had vesting conditions as follows:

Time-based options granted under both the 2016 Plan and the 2021 Plan expire 10 years from date of grant and carry an exercise price equal to the fair market value at the date

EverCommerce Inc.

Notes to Consolidated Financial Statements

of grant as determined by the Company’s board of directors for options granted under the 2016 Plan and an exercise price equal to the closing price of the Company’s stock at the date of grant for options granted under the 2021 Plan.

The overwhelming majority of performance-based options were granted prior to the IPO and had vesting conditions as follows:

50 % of a holder’s award would have vested upon a change in control or an initial public offering if the per share cash price received in connection with such change in control or the per share offering price in such initial public offering was at least $ 27.41 , and the other 50 % of the holder’s award would have vested upon a change in control or an initial public offering if the per share cash price received in connection with such change in control or the per share offering price in such initial public offering was at least $ 36.54 .

The performance-based options generally carried an exercise price equal to the fair market value at the date of grant as determined by the board of directors and expired 10 years from date of grant.

In connection with the IPO, the Company modified the performance-based stock options to market condition-based options such that 50 % of a holder’s award will vest if the market price for the Company’s stock reaches and maintains a volume weighted average stock price of $ 27.41 , and the other 50 % of the holder’s award will vest if the market price for the Company’s stock reaches and maintains a volume weighted average stock price of $ 36.54 .

In connection with the IPO, the Company modified the performance-based stock options to be market condition-based options such that 50 % of a holder’s award will vest if the market price for the Company’s stock reaches and maintains a volume weighted average stock price of $ 27.41 , and the other 50 % of the holder’s award will vest if the market price for the Company’s stock reaches and maintains a volume weighted average stock price of $ 36.54 .

Each tranche of options is eligible to vest if the applicable volume weighted average stock price goal is achieved during the first measurement period of January through March of 2023, and if such goal(s) are not achieved during such period, then the tranche(s) of options are again eligible to vest during a second measurement period of April through June 2023.

To date, $ 14.9 million of stock-based compensation expense has been recognized related to the market condition-based options.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The relevant data used to determine the value of the stock options is as follows:

22 unchanged sentences

The total intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 2.3 million, $ 2.1 million and $ 0.1 million, respectively.

Compensation expense of $ 11.1 million, $ 3.1 million and $ 0.3 million was recognized in stock-based compensation for the years ended December 31, 2021, 2020 and 2019, respectively.

Compensation expense is recorded in the consolidated statements of operations and comprehensive loss and classified based on the award recipient’s department in the Company (see table below for breakout of expense within the expense line items in the consolidated statements of operations and comprehensive loss).

Compensation expense of $ 19.3 million, $ 11.1 million and $ 3.1 million was recognized in stock-based

EverCommerce Inc.

Notes to Consolidated Financial Statements

compensation for the years ended December 31, 2022, 2021 and 2020, respectively.

The unrecognized compensation expense associated with outstanding time-based stock options at December 31, 2022 was $ 20.8 million, which is expected to be recognized over a weighted average period of 3.6 years.

The unrecognized compensation expense associated with outstanding market condition-based stock options at December 31, 2022 was $ 2.5 million, which is expected to be recognized on a straight-line basis over the next 3 months.

Certain immaterial related tax benefits of the stock-based compensation expense and exercise of stock options have been recognized in the statement of operations and comprehensive loss for the years ended December 31, 2021 and 2020.

Restricted Stock Awards

During 2017, the Company granted 3.9 million time vesting restricted stock awards.

During 2017, the Company granted 3.9 million time vesting restricted stock awards (“RSAs”).

The awards vested over a four-year period starting on October 17, 2016.

1 unchanged sentence

The Company recorded compensation expense for these awards on a straight-line basis over the vesting period, which approximated the service period.

Compensation expense of $ 0.6 million and $ 0.7 million related to these awards was recognized in general and administrative in the statement of operations and comprehensive loss for the years ended December 31, 2020 and 2019.

All such restricted stock awards were fully vested as of December 31, 2020.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The Company also granted 1.6 million shares of funding restricted stock awards during the year ended December 31, 2018.

The Company also granted 1.6 million shares of funding RSAs during the year ended December 31, 2018.

The funding awards only vested in the instances in which the majority owners or the Company purchased preferred stock.

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In connection with these contributions, the funding RSAs were modified, and 0.6 million and 18 thousand, respectively, of funding RSAs vested at $ 17.00 per share.

Compensation expense of $ 9.7 million and $ 7.0 million related to funding RSAs was recognized in general and administrative in the statement of operations and comprehensive loss for the years ended December 31, 2021 and 2020, respectively.

Compensation expense of nil , $ 9.7 million and $ 7.0 million related to funding RSAs was recognized in general and administrative in the statement of operations and comprehensive loss for the years ended December 31, 2022, 2021 and 2020, respectively.

In connection with the IPO, all remaining unvested funding awards were cancelled.

The summary of funding restricted stock awards activity for the years ended December 31, 2021 and 2020, is as follows:

Awards Weighted-Average

Grant Date Fair Value

(in thousands except for fair value)

Unvested, restricted stock awards at January 1, 2021

Vested ( 571 ) 17.00

Forfeited ( 1,457 ) 17.00

Unvested, restricted stock awards at December 31, 2021

Restricted Stock Units

During the year ended December 31, 2021, the Company issued 0.6 million time vesting restricted stock units (“RSUs”).

On the grant date the awards were valued at $ 17.00 per share totaling $ 9.6 million.

During the year ended December 31, 2022 and 2021, the Company issued time vesting restricted stock units (“RSUs”).

The awards vest over a four-year period starting on the date of grant, with 25 % of the awards vesting on the one-year anniversary, and then in equal quarterly installments for the subsequent three years .

The Company records compensation expense for these awards on a straight-line basis, which approximates the service period.

Compensation expense of $ 1.2 million related to these awards was recognized in the statement of operations and comprehensive loss for the year ended December 31, 2021 and was classified based on the award recipient’s department in the Company.

The unrecognized compensation expense associated with the RSUs at December 31, 2021 was $ 8.1 million, which is expected to be recognized over a weighted average period of 3.5 years.

Compensation expense of $ 6.0 million and $ 1.2 million related to these awards was recognized in the statement of operations and comprehensive loss for the years ended December 31, 2022 and 2021, respectively.

The unrecognized compensation expense associated with the RSUs at December 31, 2022 was $ 20.2 million, which is expected to be recognized over a weighted average perio d of 3.01 years.

EverCommerce Inc.

6 unchanged sentences

Granted 1,931 11.44

Vested ( 162 ) 17.00

Forfeited ( 288 ) 12.89

Unvested, restricted stock units at December 31, 2022

2,022 $ 12.27

2021 Employee Stock Purchase Plan

5 unchanged sentences

provided that in no event will more than 60,000,000 shares of our common stock be available for issuance under the Section 423 component of the ESPP.

Compensation expense of $ 0.1 million related to the ESPP was recognized in the statement of operations and comprehensive loss for the year ended December 31, 2021 and classified based on the award recipient’s department in the Company.

Compensation expense of $ 1.5 million and $ 0.1 million related to the ESPP was recognized in the statement of operations and comprehensive loss for the years ended December 31, 2022 and 2021, respectively.

Stock-based Compensation Expense

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Net loss $ ( 59,816 ) $ ( 81,966 ) $ ( 59,954 )

Undeclared Series A dividends — — ( 4,532 )

Accretion of Series B to redemption value — ( 15,105 ) ( 67,811 )

Deemed dividend - non-employee sale of shares to the Company — — ( 3,393 )

Deemed dividend - Series A and B stock exchange — — ( 239,285 )

Numerator for basic and diluted EPS – net loss attributable to common stockholders $ ( 59,816 ) $ ( 97,071 ) $ ( 127,765 )

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Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by

The Company has no assets or liabilities valued with Level 2 inputs.

EverCommerce Inc.

Notes to Consolidated Financial Statements

observable data for substantially the full term of the assets or liabilities.

The Company has no assets or liabilities valued with Level 2 inputs.

Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Liabilities historically valued with Level 3 inputs on a recurring basis are contingent consideration.

The carrying value of cash and cash equivalents, accounts receivable, contract assets and accounts payable approximate their fair value because of the short-term nature of these instruments.

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The following table presents information about the Company's financial assets and liabilities measured at fair value on a recurring basis:

December 31, 2021

December 31, 2022 Balance Sheet Classification

Level 1 Level 2 Level 3 Total

(in thousands)

Money market $ 14,855 $ — $ — $ 14,855

Contingent consideration $ — $ — $ 675 $ 675

December 31, 2020

Money market $ 6,568 $ — $ — $ 6,568 Cash equivalents

Interest swap rate $ — $ 2,893 $ — $ 2,893 Other non-current liabilities

December 31, 2021 Balance Sheet Classification

Level 1 Level 2 Level 3 Total

(in thousands)

Money market $ 15,802 $ — $ — $ 15,802

Contingent consideration $ — $ — $ 2,911 $ 2,911

Money market $ 14,855 $ — $ — $ 14,855 Cash equivalents

Contingent consideration $ — $ — $ 675 $ 675 Other current liabilities

The following is a reconciliation of the opening and closing balance for contingent consideration measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2022 (in thousands):

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Ending balance $ —

Fair value adjustments made during the years ended December 31, 2021 and 2020, result primarily from revisions to whether revenue targets were achieved or expected to be achieved.

The net gains of $ 0.9 million and $ 0.5 million for the years ended December 31, 2021 and 2020, respectively, are presented in general and administrative in the statements of operations and comprehensive loss.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Retirement Plan

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The Company may make discretionary and/or matching contributions to the 401(k).

The Company began making discretionary employer contributions effective January 1, 2020 equal to 25 % of employee contributions up to 8 % and contributed $ 1.5 million and $ 1.0 million for the years ended December 31, 2021 and 2020, respectively.

No contributions were matched and no discretionary contributions were made during the year ended December 31, 2019.

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.

As such, the Company's total provision for taxes includes income taxes on the Company's corporate subsidiaries.

The Company began making discretionary employer contributions effective January 1, 2020 equal to 25 % of employee contributions up to 8 % and increased this contribution to 100 % of employee contributions up to 4 % effective January 1, 2022 and contributed $ 4.8 million, $ 1.5 million and $ 1.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The components of our net loss before income tax benefit are as follows:

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$ ( 64,496 ) $ ( 92,017 ) $ ( 63,584 )

We account for income taxes in accordance with ASC 740.

ASC 740 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 benefit of net operating loss and tax credit carryforwards.

A valuation allowance was recorded against deferred tax assets that management assessed realization is not “more likely than not.” As of December 31, 2021, a portion of our undistributed earnings from non-U.S.

As of December 31, 2022, a portion of our undistributed earnings from non-U.S.

subsidiaries are intended to be indefinitely reinvested in non-U.S.

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subsidiaries are not permanently reinvested, however, due to a combination of anticipated tax treatment and losses, no material deferred tax liability exists.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The components of the provision for income taxes consists of the following:

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State ( 2,743 ) ( 2,263 ) ( 2,104 )

Foreign ( 11,235 ) ( 3,436 ) ( 1,878 )

Change in valuation allowance - United States 12,257 6,342 8,392

Change in valuation allowance - Foreign 3,278 78 269

Foreign ( 3,436 ) ( 1,878 ) ( 1,451 )

Total deferred ( 7,477 ) ( 12,026 ) ( 4,314 )

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Notes to Consolidated Financial Statements

The Company’s deferred tax assets and liabilities related to temporary differences and operating loss carryforwards were as follows:

The Company’s deferred tax assets and liabilities, included in other non-current liabilities on the consolidated balance sheets, related to temporary differences and operating loss carryforwards were as follows:

(in thousands)

Deferred tax assets:

Accounts receivable reserve $ 434 $ 224

Net operating losses $ 44,545 $ 50,059

163(j) interest limitation 23,363 19,698

Reserves and accrued expenses 7,258 5,592

Property and equipment depreciation 2,526 1,469

Tax credits 975 371

Accrued expenses 827 213

Stock-based compensation 3,753 1,531

Accrued payroll 2,208 2,870

Sales tax reserve 2,122 1,469

Deferred rent — 1,839

Deferred revenue 425 362

Lease liability 7,053 —

Other 2,555 1,793

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Property and equipment depreciation ( 5,056 ) ( 6,956 )

Unrealized foreign exchange ( 726 ) ( 33 )

Capitalized expenses ( 3,804 ) ( 3,091 )

Accounts receivable ( 118 ) —

Operating lease right-of-use assets ( 5,434 ) —

Other ( 614 ) ( 844 )

Total deferred tax liabilities ( 52,988 ) ( 68,727 )

9 unchanged sentences

Tax credits, foreign $ 260 Various

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not".

In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon

Management has not considered future projections of income in this analysis due to the Company’s history of losses.

The Company has determined that it is more likely than not that a portion of the deferred tax assets will not be realized and has recorded a valuation allowance of $ 47.8 million and $ 31.1 million as of December 31, 2022 and 2021, respectively, against the deferred tax assets.

If the Company’s assumptions change and we determine that we will be able to realize these deferred tax assets, the tax benefits related to any reversal of the valuation allowance on

EverCommerce Inc.

Notes to Consolidated Financial Statements

the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and planning strategies in making this assessment.

The Company has determined that it is more likely than not that a portion of the deferred tax assets will not be realized and has recorded a valuation allowance of $ 31.1 million and $ 16.5 million as of December 31, 2021 and 2020, respectively, against the deferred tax assets.

If the Company’s assumptions change and we determine that we will be able to realize these deferred tax assets, the tax benefits related to any reversal of the valuation allowance on deferred tax assets as of December 31, 2021, will be accounted for as follows:

deferred tax assets as of December 31, 2022, will be accounted for as follows:

$ 44.8 million will be recognized as a reduction of income tax expense and $ 3.0 million will be recorded as an increase in equity.

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Accordingly, additional provision on federal, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits as of December 31, 2021, is as follows (in thousands):

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

Year ended December 31,

(in thousands)

Balance at beginning of period $ 134 $ —

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Balance at end of period $ 364 $ 134

As of December 31, 2021, unrecognized tax benefits of $ 0.1 million were recorded in other long-term liabilities, which would impact the annual effective tax rate if recognized.

As of December 31, 2022 and 2021, unrecognized tax benefits of $ 0.4 million and $ 0.1 million, respectively, were recorded in other long-term liabilities, which would impact the annual effective tax rate if recognized.

The Company recognizes interest and penalties, if any, related to unrecognized tax positions in the provision for income taxes in the accompanying consolidated statement of operations and comprehensive loss.

The Company does not expect a significant increase or decrease in unrecognized tax benefits over the next twelve months.

The Company, through its foreign subsidiary Alnashmi Digital Marketing, LLC, provides exported technology services, the profits of which are exempt from income tax through December 31, 2025 according to the provisions of the article (9/A/4) of Regulation Number 106 of the 2016 Regulations.

So long as the services are exported outside of Jordan, they originate in Jordan and there are no other services within the exported services, the qualifications are

EverCommerce Inc.

Notes to Consolidated Financial Statements

So long as the services are exported outside of Jordan, they originate in Jordan and there are no other services within the exported services, the qualifications are met.

The approximate dollar value of tax expense related to the tax holiday as of December 31, 2021 is $ 0.2 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law making several changes to the Internal Revenue Code.

The changes include, but are not limited to:

increasing the limitation on the amount of deductible interest expense, allowing companies to carry-back certain net operating losses and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income.

The tax law changes in the CARES Act had an immaterial impact on the Company’s income tax provision during the year ended December 31, 2020.

The Company elected to defer the payment of $ 3.5 million of payroll taxes under the CARES Act.

Under this election $ 1.8 million was paid on December 31, 2021, with the remainder payable on December 31, 2022.

The approximate dollar value of tax expense related to the tax holiday was $ 0.3 million and $ 0.2 million as of December 31, 2022 and 2021, respectively.

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy.

Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our financial statements.

During the year ended December 31, 2022, we restructured the ownership of certain intellectual property, which resulted in an income tax benefit.

The income tax benefit differs from the expected tax benefit computed by applying the U.S.

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Nondeductible transaction costs — — 509 ( 0.55 ) 480 ( 0.75 )

Change in deferred state tax rate ( 6 ) 0.01 552 ( 0.87 ) ( 1,384 ) 1.26

Foreign rate differential ( 129 ) 0.20 ( 613 ) 0.67 ( 268 ) 0.42

Change in valuation allowance 15,648 ( 24.26 ) 6,420 ( 6.98 ) 8,661 ( 13.62 )

Tax credits — — ( 55 ) 0.09 ( 136 ) 0.12

Change in foreign deferred rate 550 ( 0.60 ) — — — —

Intellectual property migration ( 8,805 ) 13.65 — — — —

Other ( 122 ) 0.19 1,556 ( 1.69 ) 965 ( 1.52 )

Income tax benefit $ ( 4,680 ) 7.26 % $ ( 10,051 ) 10.93 % $ ( 3,630 ) 5.71 %

EverCommerce Inc.

Notes to Consolidated Financial Statements

Commitments and Contingencies

The Company is obligated under non-cancelable operating leases for office space and office machines expiring through 2030.

Most of these leases include renewal options.

Future minimum payments due under the existing lease agreements are as follows (in thousands):

The Company has non-cancelable contractual purchase obligations incurred in the normal course of business to help deliver our services and products and provide support to our customers.

These contracts with vendors primarily relate to software service, targeted mail costs, third party fulfillment costs and software hosting.

Unrecognized future minimum payments due under these agreements are as follows (in thousands):

Year ended December 31,

2023 $ 12,608

Thereafter 688

Total future minimum payments due $ 41,125

Included in the consolidated statements of operations and comprehensive loss is total rent expense of $ 9.7 million, $ 8.9 million and $ 6.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

In the ordinary course of business, the Company enters into contractual arrangements with customers, suppliers, business partners and other parties pursuant to which it provides warranties and indemnities of varying scope and terms, including, but not limited to, indemnification for losses or claims suffered or incurred in connection with its services, breach of representations or covenants, intellectual property infringement or other claims and warranties regarding system performance or availability.

In the event of such an indemnification obligation, payment may be conditional on the other party providing notice or otherwise making a claim pursuant to the terms specified in the particular contract.

Further, the Company’s obligations under these contracts may be limited in terms of time and/or amount, and in some instances, it may also have recourse against third parties for such obligations.

The Company has not recorded any liability for these indemnifications in the accompanying consolidated balance sheets;

however, the Company accrues losses for any known contingent liability, including those that may arise from these provisions, when the obligation is both probable and reasonably estimable.

The Company records an accrual for contingent liabilities when a loss is both probable and reasonably estimable.

If some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued.

When no amount within a range of loss appears to be a better estimate than any other amount, the lowest amount in the range is accrued.

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

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We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

EverCommerce Inc.

Notes to Consolidated Financial Statements

The Company assesses the applicability of nexus in jurisdictions in which the Company sells products and services.

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In connection with the Company's accounting for acquisitions, the Company has recorded liabilities and corresponding provisional escrow or indemnity receivables within the purchase price allocations for instances in which the Company is indemnified for tax matters.

The Company has no indirect or direct guarantees of others;

rather, the Company has cross guarantees among the Company and its wholly owned subsidiaries related to its outstanding long-term debt obligations.

EverCommerce Inc.

Notes to Consolidated Financial Statements

Related Parties

As disclosed in Note 9 in the notes to the consolidated financial statements included in this Annual Report on Form 10-K, the Company issued two promissory notes, the Legacy Subordinated Notes, to two former owners of acquired businesses in conjunction with acquisition activity during 2017.

Such former owners subsequently became employees of the Company post acquisition.

As of April 1, 2020, one of the owners is no longer an employee of the Company.

The Company has various leases or subleases with employees of the Company.

No material amounts were incurred or paid for the years ended December 31, 2021, 2020 and 2019 or due or owed as of December 31, 2021 or 2020.

Geographic Areas

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Subsequent Events

Effective January 1, 2022, the Company began making discretionary employer contributions to the 401(k) equal to 100 % of employee contributions up to 4 %.

On March 14, 2023, the Company entered into an 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 Term Loans from a floating rate to a fixed rate.

This swap agreement is effective March 31, 2023 and has a term of approximately 4.5 years with a fixed rate in the agreement of 3.969 %.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data