EverCommerce Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 00 42 ) II- 23 Consolidated Balance Sheets as of December 31, 2024 and 2023 II- 24 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024, 2023 and 2022 II- 25 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 II- 26 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 II- 27 Notes to Consolidated Financial Statements II- 28 II-22 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of EverCommerce Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of EverCommerce Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. Denver, Colorado March 13, 2025 II-23 EverCommerce Inc. Consolidated Balance Sheets (in thousands, except per share and share amounts) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 135,782 $ 92,609 Restricted cash — 3,570 Accounts receivable, net of allowance for expected credit losses of $ 5.5 million and $ 6.2 million at December 31, 2024 and 2023, respectively 40,155 45,417 Contract assets 13,313 16,117 Prepaid expenses and other current assets 29,064 22,434 Total current assets 218,314 180,147 Property and equipment, net 6,658 9,734 Capitalized software, net 43,666 42,511 Other non-current assets 39,486 42,722 Intangible assets, net 226,840 315,519 Goodwill 886,304 927,431 Total assets $ 1,421,268 $ 1,518,064 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 8,041 $ 8,638 Accrued expenses and other 58,499 66,265 Deferred revenue 25,116 24,082 Customer deposits 13,570 12,891 Current maturities of long-term debt 5,500 5,500 Total current liabilities 110,726 117,376 Long-term debt, net of current maturities and deferred financing costs 522,442 526,696 Other non-current liabilities 37,274 47,956 Total liabilities 670,442 692,028 Commitments and contingencies (Note 17) Stockholders’ equity: Preferred stock, $ 0.00001 par value, 50,000,000 shares authorized and no shares issued or outstanding as of December 31, 2024 and 2023 — — Common stock, $ 0.00001 par value, 2,000,000,000 shares authorized and 183,725,236 and 186,934,031 shares issued and outstanding at December 31, 2024 and 2023, respectively 2 2 Accumulated other comprehensive loss ( 14,318 ) ( 8,017 ) Additional paid-in capital 1,426,206 1,454,026 Accumulated deficit ( 661,064 ) ( 619,975 ) Total stockholders’ equity 750,826 826,036 Total liabilities and stockholders’ equity $ 1,421,268 $ 1,518,064 The accompanying notes are an integral part of these consolidated financial statements. II-24 EverCommerce Inc. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share and share amounts) Year Ended December 31, 2024 2023 2022 Revenues: Subscription and transaction fees $ 548,344 $ 520,234 $ 465,345 Marketing technology solutions 129,271 133,162 134,596 Other 21,150 21,973 20,805 Total revenues 698,765 675,369 620,746 Operating expenses: Cost of revenues (exclusive of depreciation and amortization presented separately below) 228,379 231,007 217,375 Sales and marketing 122,505 123,561 119,059 Product development 79,673 75,614 71,622 General and administrative 139,423 132,235 132,483 Depreciation and amortization 88,824 104,201 110,801 Loss on sale and impairments 39,709 6,325 — Total operating expenses 698,513 672,943 651,340 Operating income (loss) 252 2,426 ( 30,594 ) Interest and other expense, net ( 35,559 ) ( 46,407 ) ( 33,902 ) Net loss before income tax (expense) benefit ( 35,307 ) ( 43,981 ) ( 64,496 ) Income tax (expense) benefit ( 5,782 ) ( 1,639 ) 4,680 Net loss ( 41,089 ) ( 45,620 ) ( 59,816 ) Other comprehensive (loss) gain: Foreign currency translation (loss) gain, net ( 6,301 ) 2,181 ( 8,431 ) Comprehensive loss $ ( 47,390 ) $ ( 43,439 ) $ ( 68,247 ) Basic and diluted net loss per share attributable to common stockholders $ ( 0.22 ) $ ( 0.24 ) $ ( 0.31 ) Basic and diluted weighted-average shares of common stock outstanding used in computing net loss per share 184,897,709 188,938,892 194,624,968 The accompanying notes are an integral part of these consolidated financial statements. II-25 EverCommerce Inc. Consolidated Statements of Stockholders’ Equity (in thousands) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity 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 loss, 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 Issuance of common stock for Employee Stock Purchase Plan 550 — 3,550 — — 3,550 Common stock issued upon vesting of restricted stock units 1,335 — — — — — Stock-based compensation — — 25,559 — — 25,559 Stock option exercises 482 — 2,603 — — 2,603 Repurchase and retirement of common stock including taxes ( 6,880 ) — ( 67,621 ) — — ( 67,621 ) Adoption of ASC 326, Current Expected Credit Losses — — — ( 1,309 ) — ( 1,309 ) Foreign currency translation gain, net — — — — 2,181 2,181 Net loss — — — ( 45,620 ) — ( 45,620 ) Balance at December 31, 2023 186,934 $ 2 $ 1,454,026 $ ( 619,975 ) $ ( 8,017 ) $ 826,036 Issuance of common stock for Employee Stock Purchase Plan 409 — 3,310 — — 3,310 Common stock issued upon vesting of restricted stock units, net of shares withheld for employee taxes 1,437 — ( 3,824 ) — — ( 3,824 ) Stock-based compensation — — 26,491 — — 26,491 Stock option exercises 653 — 4,112 — — 4,112 Repurchase and retirement of common stock, including taxes ( 5,708 ) — ( 57,909 ) — — ( 57,909 ) Foreign currency translation loss, net — — — — ( 7,298 ) ( 7,298 ) Disposition of Fitness Solutions — — — — 997 997 Net loss — — — ( 41,089 ) — ( 41,089 ) Balance at December 31, 2024 183,725 $ 2 $ 1,426,206 $ ( 661,064 ) $ ( 14,318 ) $ 750,826 The accompanying notes are an integral part of these consolidated financial statements. II-26 EverCommerce Inc. Consolidated Statements of Cash Flows (in thousands) Year ended December 31, 2024 2023 2022 Cash flows provided by operating activities: Net loss $ ( 41,089 ) $ ( 45,620 ) $ ( 59,816 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 88,824 104,201 110,801 Stock-based compensation 26,491 25,559 26,818 Deferred taxes 2,734 ( 1,657 ) ( 7,477 ) Amortization of deferred financing costs and non-cash interest 1,640 1,651 2,093 Loss on sale and impairments 39,720 6,325 — Bad debt expense 4,660 6,016 5,578 (Gain) loss on interest rate swap valuation adjustments ( 6,384 ) 1,996 2,893 Other non-cash items 2,403 742 1,854 Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable, net ( 319 ) ( 5,011 ) ( 13,206 ) Prepaid expenses and other current assets ( 2,230 ) ( 2,261 ) ( 3,823 ) Other non-current assets 1,987 4,183 4,937 Accounts payable ( 254 ) 179 ( 1,868 ) Accrued expenses and other ( 3,388 ) 10,423 3,076 Deferred revenue 1,760 868 160 Other non-current liabilities ( 3,392 ) ( 2,989 ) ( 7,218 ) Net cash provided by operating activities 113,163 104,605 64,802 Cash flows used in investing activities: Purchases of property and equipment ( 1,462 ) ( 3,037 ) ( 2,566 ) Capitalization of software costs ( 17,445 ) ( 20,043 ) ( 15,514 ) Proceeds from disposition of fitness solutions, net of transaction costs, cash and restricted cash 6,610 — — Acquisition, net of cash acquired — ( 14,940 ) — Net cash used in investing activities ( 12,297 ) ( 38,020 ) ( 18,080 ) Cash flows used in financing activities: Payments on long-term debt ( 5,500 ) ( 5,500 ) ( 9,500 ) Exercise of stock options 4,112 2,603 1,819 Proceeds from common stock issuance for Employee Stock Purchase Plan 3,310 3,550 3,366 Employee taxes paid for RSU withholdings ( 3,824 ) — — Repurchase and retirement of common stock ( 57,712 ) ( 67,283 ) ( 42,994 ) Net cash used in financing activities ( 59,614 ) ( 66,630 ) ( 47,309 ) Effect of foreign currency exchange rate changes on cash ( 1,649 ) 400 ( 1,148 ) Net increase (decrease) in cash and cash equivalents and restricted cash 39,603 355 ( 1,735 ) Cash, cash equivalents and restricted cash: Beginning of period 96,179 95,824 97,559 End of period $ 135,782 $ 96,179 $ 95,824 Supplemental disclosures of cash flow information: Cash paid for interest $ 45,548 $ 46,011 $ 30,077 Cash paid for income taxes $ 4,549 $ 3,107 $ 2,511 The accompanying notes are an integral part of these consolidated financial statements. II-27 EverCommerce Inc. Notes to Consolidated Financial Statements Note 1. Nature of the Business 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 small and medium sized businesses (“service SMBs”). Our platforms span across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. As of December 31, 2024, the Company served more than 740,000 customers across three core verticals: EverPro for Home Services; EverHealth for Health Services; and EverWell for Wellness Services. Within the core verticals, customers operate within numerous micro-verticals, ranging from home service professionals, such as construction contractors and home maintenance technicians, to physician practices and therapists in the Health Services industry, to salon owners in the Wellness sectors. The platform provides vertically-tailored SaaS solutions that address service SMBs’ increasingly nuanced demands, as well as highly complementary solutions that provide fully-integrated offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences. The Company is headquartered in Denver, Colorado, and has operations across the United States, Canada, Jordan, United Kingdom, Australia and New Zealand. Note 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements (collectively, the “financial statements”) include the operations of EverCommerce and all wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All material intercompany transactions have been eliminated in consolidation. On March 13, 2024, the Company entered into definitive sale and purchase agreements to sell our fitness solutions to Jonas Fitness Portfolio Holdco Inc. (“Jonas Software”) (see Note 3. Acquisitions and Dispositions). The sale of American Service Finance LLC., ASF Payment Solutions ULC and Technique Fitness Inc. (collectively, “North American Fitness”), closed simultaneous with signing. The sale of EverCommerce UK, including wholly-owned subsidiaries Fitii UK (MyPTHub and MyPTHub LLC) and ClubWise UK and its wholly-owned subsidiary ClubWise Australia (collectively, “UK Fitness” and together with North American Fitness, “Fitness Solutions”), closed on July 1, 2024. The divestiture did not qualify for reporting as a discontinued operation. As a result, our unaudited condensed consolidated financial statements include the results of North American Fitness and UK Fitness for all periods through the applicable date of sale. Use of Estimates The preparation of financial statements in conformity with U.S. 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. Significant items subject to such estimates include: valuing identified intangible assets and acquired goodwill and establishing estimated useful lives for intangible assets in connection with business combinations; the estimation of the recoverability of goodwill and other intangible assets; income tax uncertainties, including valuation allowance for deferred tax assets and value of any uncertain tax positions; recognizing bad debt expense from expected credit losses; recognizing stock-based compensation expens e and estimating standalone selling price, when applicable, for the allocation of transaction price when multiple performance obligations are included in a contract with a customer. We evaluate our estimates on an ongoing basis. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recognized revenue and expenses that are not readily apparent from other sources. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates and assumptions. Business Combinations The results of a business acquired in a business combination are included in the Company’s financial statements from the date of acquisition with the associated purchase price allocated to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Based on the nature of the businesses that the Company acquires, goodwill arising from acquisitions typically consists of synergies with previously acquired businesses and economies of scale resulting from centralizing shared service functions. Acquisition-related transaction costs are expensed in the period in which the costs are incurred. II-28 EverCommerce Inc. Notes to Consolidated Financial Statements Determining the fair value of assets acquired and liabilities assumed requires management to make significant judgments and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. Concentrations of Risk The Company maintains cash accounts at domestic and foreign financial institutions. At times and for cash maintained at domestic institutions, certain account balances may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage. The Company has not experienced any losses on such accounts, and management believes that the Company’s risk of loss is remote. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all. Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with an original maturity of three months or less when acquired to be cash equivalents. Restricted cash consists of funds that are contractually restricted as to usage or withdrawal. 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. Accounts Receivable, net Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for estimated credit losses inherent in its accounts receivable portfolio. In establishing the expected credit loss, management considers historical losses adjusted to take into account current market conditions and the customers’ financial condition, the amount of receivables in dispute and customer paying patterns. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Property and Equipment, net Property and equipment are recorded at cost, net of accumulated depreciation. Property and equipment acquired in purchase accounting are recorded at fair value at the date of acquisition. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives. Property and Equipment Estimated Useful Life Computer equipment and software 3 years Furniture and fixtures 5 years Leasehold improvements Lesser of estimated useful life or remaining lease term Upon disposition, the cost of disposed assets and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to earnings/loss. Capitalized Software, net 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 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. Determination of when the software has reached the application development stage is based upon completion of conceptual designs, evaluation of alternative designs and performance requirements. Costs of major enhancements to internal use software are capitalized while routine maintenance of existing software is charged to product development expense as incurred. The Company also capitalizes certain costs related to software developed for external use for which it plans to sell to customers, i.e. on-premise software to be installed on customer computers at the customer site. Costs incurred prior to reaching technological feasibility are charged to product development expense as incurred. Capitalization ceases when the product is available for general release to the customers. Such costs have not been material. The Company amortizes software costs, using the straight-line method, over its estimated useful life of five years . II-29 EverCommerce Inc. Notes to Consolidated Financial Statements Intangible Assets, net Intangible assets primarily consist of customer relationships which include government contracts, developed technology, trademarks and trade names and non-compete agreements, which are recorded at acquisition date fair value, less accumulated amortization. The Company determines the appropriate useful life of intangible assets by performing an analysis of expected cash flows of the acquired assets. Developed technology, trademarks and trade names and non-compete agreements acquired through acquisitions are amortized over their estimated useful lives using the straight-line method and customer relationship intangibles are amortized over their estimated useful lives using present value of future cash flows, which approximates the pattern in which the economic benefits are expected to be consumed. Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to undiscounted future net cash flows the asset is expected to generate or other appropriate measures of fair value. If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the asset exceeds its estimated fair value. Estimates of expected future cash flows represent management’s best estimate based on currently available information and reasonable and supportable assumptions. Any impairment recognized is permanent and may not be restored. Impairment of Long-Lived Assets During the fourth quarter of 2023, the Company evaluated the recoverability of our fitness asset group. As a result of our evaluation, we determined that the estimated fair value of our fitness asset group was insufficient to recover the net carrying value of the asset group resulting in an impairment charge of approximately $ 5.1 million during the three months ended December 31, 2023, of which $ 3.1 million related to intangible assets. Additionally, the Company ceased use of certain leased premises and subleased certain facilities resulting in an impairment charge of $ 1.2 million to impair the right-of-use lease assets to their fair value during the year ended December 31, 2023. The impairment charges are recorded in impairment expense on the consolidated statements of operations and comprehensive loss. There were no impairments of long-lived assets during the years ended December 31, 2024 and 2022 other than the abandonment of certain features of its capitalized software as more fully described in Note 8. Capitalized Software. Goodwill Goodwill represents the excess of purchase price over amounts allocated to identifiable assets acquired and liabilities assumed in business combinations. The carrying value of goodwill is evaluated for impairment at least annually or more frequently whenever events or changes in circumstances indicate the carrying value of these assets may not be recoverable. The Company performs an annual impairment review of its goodwill balance during the fourth quarter or more frequently if business factors indicate. Prior to performing a quantitative evaluation, an assessment of qualitative factors may be performed to determine whether it is more likely than not that the fair value of the reporting unit exceeds its carrying value. In the event the Company determines that it is more likely than not the carrying value of a reporting unit is higher than its estimated fair value, quantitative testing is performed comparing recorded values to estimated fair values. Alternatively, the Company may perform a quantitative assessment for the annual review of recoverability rather than a qualitative assessment. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, we will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. During 2024, we recognized $ 34.5 million of goodwill impairment charges, which are included in loss on sale and impairments on the consolidated statements of operations and comprehensive loss. During the fourth quarter of 2024, in conjunction with our review of strategic alternatives for our marketing technology solutions, the Company evaluated the recoverability of our marketing technology reporting unit. As a result of our evaluation, we determined that the estimated fair value of our marketing technology reporting unit was insufficient to recover the net carrying value of the reporting unit resulting in an impairment charge of approximately $ 28.1 million during the three months ended December 31, 2024 (see Note 20. Subsequent Event). Additionally, we recognized $ 6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions (see Note 3. Acquisitions and Dispositions). We did not incur any goodwill impairment losses during the years ended December 31, 2023 and 2022. Leases The Company adopted Accounting Standards Update (“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 over the non-cancelable lease term and is recorded to general and administrative expense on the statements of operations and comprehensive loss. Operating ROU lease assets are included in other non-current assets and operating lease liabilities are included in accrued expenses and other and other non-current liabilities on our consolidated balance sheets. II-30 EverCommerce Inc. Notes to Consolidated Financial Statements Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We do not recognize ROU lease assets and lease liabilities for leases with a term of 12 months or less. For all other leases, operating lease assets and liabilities are recognized at commencement based on the present value of lease payments over the lease term. 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. We also consider whether our service arrangements include the right to control the use of an asset. The ROU lease assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are adjusted for lease incentives. The Company’s leases do not provide a readily determinable implicit interest rate and we use our incremental borrowing rate to measure the lease liability and corresponding ROU lease assets. Our incremental borrowing rate is the rate of interest the Company would have to pay to borrow on a collateralized basis adjusted for market conditions and the length of the lease term. 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’s leases may include a non-lease component representing additional services transferred to the Company, such as common area maintenance for real estate. We elected the practical expedient to not separate lease from fixed non-lease components for our real estate leases. We account for the lease and fixed non-lease components of our operating ROU lease assets as a single lease component. 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 include options to extend or terminate a lease, which are recognized when it is reasonably certain that we 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 Deferred financing costs and discounts on long-term debt are capitalized and netted with long-term debt and amortized over the term of the related debt, using the effective interest method. Costs incurred in connection with the establishment of revolving credit facilities are capitalized and amortized over the term of the related facility period, using the straight-line method. Amortization of debt issuance costs, noncash discounts and other credit facility costs are included in interest expense on the consolidated statements of operations and comprehensive loss. Revenue Recognition In accordance with U.S. GAAP, the Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its contracts with customers: (i) identification of the contract with a customer; (ii) determination of whether the promised goods or services are performance obligations; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as each performance obligation is satisfied. 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 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. The Company maintains three primary categories of revenue sources: Subscription and Transaction Fees: Subscription revenue primarily consists of the sale of SaaS offerings or the sale of software licenses. Through the S aaS offerings and related support services, customers are granted access to a hosted software application over the contract period, generally ranging from one month to five years, 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. The software licenses are both perpetual, providing the customer with the right-of-use for an indefinite period, and term, which generally range for a defined period of time from one month to five years. Contracts may contain termination for convenience provisions that allow the Company, customer or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a penalty. The contract term for accounting purposes is determined to be the period in which parties to the contract have present enforceable rights and obligations, therefore the contract term for accounting purposes may II-31 EverCommerce Inc. Notes to Consolidated Financial Statements be shorter than the stated term. • SaaS and related support services : Revenues from the sale of hosted software applications and related support services are generally recognized ratably over the contractual period that the services are delivered, beginning on the date the service is made available to customers. 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 due upon receipt to 30 days. • License and related support services: Revenues from the sale of distinct on-premise licenses are generally recognized at the point in time when the software is made available to the customer to download or use. Revenues from the sale of license related support services are generally recognized ratably over the contractual period that the services are delivered. Within these arrangements, the Company is obligated to make the support services available continuously throughout the contract and the customer simultaneously receives and consumes the benefit of making these services available 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 due upon receipt to 30 days. The timing of revenue recognition may differ from the timing of invoicing customers due to the existence of these invoicing practices as well as the requirement to recognize revenue on a relative stand-alone selling price basis. Transaction fees relate to payment processing and group purchasing program administration services. In fulfillment of payment processing services, the Company partners with third-party merchants and processors who assist in the fulfillment of the Company’s obligations to customers. Payment processing services enable customers to accept payments via credit card, electronic check and other similar methods through facilitation of payment information within the cloud-based applications. 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. • Payment processing services: The Company has concluded that it does not possess the ability to control the underlying services provided by third parties in the fulfillment of its obligations to customers and therefore recognizes revenue net of interchange fees retained by the card issuing financial institutions and fees charged by payment networks. The Company recognizes revenue from these transaction services as the services are provided and ascribes the transaction consideration to the distinct services utilizing the variable consideration allocation exception. Payment for transaction services is received in arrears, typically within one month of when the services have been provided. Transaction services contracts with customers are generally for a term of one month and renew automatically each month. • Purchasing program administration services: The Company receives rebates from contracted suppliers in exchange for program administration services. Rebates earned are based on a defined percentage of the purchase price of goods and services sold to program members under the contract the Company has negotiated with its suppliers. Administration services contracts with customers are generally for an annual or monthly term and renew automatically upon lapse of the current term. Marketing Technology Solutions: Marketing technology solutions consist of digital advertising management and consumer connection services. Digital advertising management services include content creation, search engine optimization and paid media management services. The nature of the performance obligation within advertising management contracts is to stand-ready and provide management services on a continuous basis over the contract term. As a result, revenue associated with advertising management services is recognized on a ratable basis over the service period as the customer simultaneously receives and consumes the benefits of the management services evenly throughout the contract period . The Company typically earns a fixed recurring fee in exchange for advertising management services; however, in certain instances, the transaction consideration to which the Company is entitled may be variable. The Company applies the variable consideration allocation exception to these arrangements. Advertising management services are typically invoiced on a monthly basis either in arrears or in advance. Certain arrangements may be invoiced on a quarterly or annual basis. Consumer connection services relate to the sourcing and delivery of service requests from consumers to home service providers. Revenue for consumer connection services may be recognized at either a point-in-time or on an over-time basis as each connection is delivered. Revenue is derived from fees paid by service professionals for consumer matches. Fees associated with each consumer match generated may be either fixed price or variable. The variable consideration, subject to being constrained by Company estimates, is allocated to the connection from which it was derived. Payment for consumer connection services is received in arrears, typically within one month of when the services have been provided. The Company records a contract asset or unbilled receivable for this difference on the consolidated balance sheets. Marketing technology solutions service related contracts are typically short-term with stated contract terms that are less than one year. II-32 EverCommerce Inc. Notes to Consolidated Financial Statements Other: Other revenues generally consist of fees associated with the sale of distinct professional services, either in support of subscription revenue or marketing technology revenue, and hardware. Professional service offerings are typically sold as part of an arrangement for products or services included within subscription or marketing revenue. Professional services associated with subscription revenue generally relate to standard implementation, configuration, installation or training services applied to both SaaS and on-premise deployment models and those services associated with marketing technology are derived from website design, creation or enhancement services. Professional service revenue is recognized over time as the services are performed, as the customer simultaneously receives and consumes the benefit of these services. Professional service contracts are offered at either a fixed or a variable price and may be invoiced in advance or arrears of the services being provided. Standard payment terms for these arrangements range from due upon receipt to 30 days. Contract terms for other revenue arrangements are generally short-term, with stated contract terms that are less than one year. Performance Obligations and Standalone Selling Price: The Company’s contracts at times include the sale of multiple promised goods or services that have been determined to be distinct. The transaction price for contracts with multiple performance obligations is allocated based on the relative stand-alone selling price of each performance obligation within the contract. The Company’s contracts may include standard warranty or service level provisions that state promised goods and services will perform and operate in all material respects as defined in the respective agreements. The Company has determined that these represent assurance-type warranties, and the Company has not incurred any material costs as a result of such commitments. Cost to Obtain and Fulfill a Contract: The Company incurs certain costs to obtain contracts, principally sales, third-party commissions and third-party fulfillment fees, which the Company capitalizes when the liability has been incurred if they are (i) incremental costs of obtaining a contract, (ii) expected to be recovered and (iii) have an expected amortization period that is greater than one year (as the Company has elected the practical expedient to expense any costs to obtain a contract when the liability is incurred if the amortization period of such costs would be one year or less). Material Rights: The Company’s contracts with customers may include renewal or other options at stated prices. Determining whether these options provide the customer with a material right and therefore need to be accounted for as separate performance obligations requires judgment. The price of each option must be assessed to determine whether it is reflective of the stand-alone selling price or is reflective of a discount that the customer only received as a result of its prior purchase (a material right). Other considerations: 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. Cost of Revenues Cost of revenues consists of expenses related to delivering our services and products and providing support to our customers and includes employee costs and related overhead, customer credit card processing fees, targeted mail costs, third party fulfillment costs and software hosting expenses. Advertising We expense the cost of advertising as incurred, which is primarily for internet-based advertising to market our products and services. For the years ended December 31, 2024, 2023 and 2022, advertising expenses included in sales and marketing expenses on the consolidated statements of operations and comprehensive loss were $ 24.4 million, $ 23.7 million and $ 21.4 million, respectively. Stock-based Compensation We measure stock-based compensation awards made to employees and directors based on the estimated grant date fair value of the awards and recognize the compensation expense on a straight-line basis over the applicable service period. We use the Black-Scholes option-pricing model to estimate the fair value of options granted with time-based vesting and performance-based vesting terms, respectively, which requires the use of assumptions, including the fair value of the common stock, expected volatility, expected term, risk-free interest rate and expected dividends. We estimate expected volatility based on the historical volatility of our common stock. The expected term represents the estimated average period of time that the option will remain outstanding using the “simplified” II-33 EverCommerce Inc. Notes to Consolidated Financial Statements method that measures the expected term as the average of the vesting period and the contractual term. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the awards. The dividend yield assumption is based on history and the expectation of paying no dividends. We estimate forfeitures at the date of grant and adjust these estimates to actual forfeitures as they occur. These assumptions involve inherent uncertainties including market conditions and employee behavior that are generally outside of the Company’s control. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Income Taxes The Company is a C corporation for federal income tax purposes. Deferred taxes are provided whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 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 Tax Cuts and Jobs Act of 2017 ("TCJA") subjects a U.S. shareholder to current tax on global intangible low-taxed income ("GILTI") earned by foreign subsidiaries. The Company accounts for GILTI as a period cost as incurred. The Company records uncertain tax positions based on the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority when it is determined that the tax position will more likely than not be sustained on the basis of the technical merits of the position. When applicable, interest and penalties relating to any such uncertain tax positions are recorded as part of income tax expense. Comprehensive Loss Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. The Company includes cumulative foreign currency translation adjustments in comprehensive loss as described below. Net Loss per Share Attributable to Common Stockholders The Company computes basic net loss per share attributable to its common stockholders by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration of common stock equivalents. 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 shares of common stock are not assumed to have been issued if their effect is anti-dilutive. Foreign Currency Translation The functional currency of our foreign subsidiaries is primarily the local currency in which the entity is located. The financial results of all subsidiaries with a functional currency other than the U.S. dollar are translated into U.S. dollars upon consolidation. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the current exchange rate in effect as of the date of the consolidated balance sheets (the “Spot Rate”). Revenues and expenses are translated at the average exchange rates during the respective periods. Translation adjustments resulting from fluctuations in exchange rates are included in the cumulative currency translation adjustments in accumulated other comprehensive loss in stockholders’ equity. 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 subsidiaries that operate primarily in the U.S. dollar, foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at the Spot Rate in effect as of the date of the consolidated balance sheets. Non-monetary assets and liabilities are remeasured using historical exchange rates. Income and expense elements are remeasured at the average exchange rates during the respective periods in which the elements are recognized within the consolidated statements of operations and comprehensive loss. Emerging Growth Company As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use the extended transition period under the JOBS Act until the earlier of the date that it is (i) no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the financial statements may not be comparable to companies that comply with the new or revised accounting II-34 EverCommerce Inc. Notes to Consolidated Financial Statements pronouncements as of public company effective dates. The adoption dates are discussed below to reflect this election within the Recently Issued Accounting Pronouncements section. Recently Issued Accounting Pronouncements We evaluate all ASUs issued by the FASB for consideration of their applicability. ASUs not included in the disclosures in this report were assessed and determined to be either not applicable or are not expected to have a material impact on our consolidated financial statements. Accounting pronouncements issued and adopted In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting - Improving Reportable Segment Disclosures (Topic 280) . The update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the CODM, an amount and description of the composition of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application to all prior periods presented in the financial statements. The Company adopted this ASU for the year ending December 31, 2024, which resulted in Note 19. Segment Reporting included within the Notes to the Consolidated Financial Statements. Accounting pronouncements not yet adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . This update is intended to improve transparency of income tax disclosure by requiring consistent categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. The amendments in this update are effective for annual periods beginning after December 15, 2024 with early adoption permitted. The amendments in this update should be applied on a prospective basis with retrospective application permitted. The Company is currently evaluating the impact of adopting this update on its consolidated financial statements and disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) : Disaggregation of Income Statement Expenses , which requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Public companies will be required to disclose the amounts related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and selling expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting the amendments in this update on its consolidated financial statements and disclosures. Note 3. Acquisitions and Dispositions 2023 Acquisition On August 10, 2023, the Company acquired 100 % of the interest of Norman’s Dojo Inc. (“Kickserv”), a provider of field service management software for home service businesses for approximately $ 15.0 million in cash. The acquisition adds offerings for SMBs across diversified portfolios with an opportunity to capture a broader segment of new customers within the Home Services vertical. We accounted for the acquisition as a business combination under ASC 805, Business Combinations . Accordingly, the Company recorded identifiable assets acquired and liabilities assumed at their acquisition date estimated 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. The goodwill recognized as a result of the acquisition of Kickserv is not deductible for tax purposes. We measured the identifiable assets and liabilities assumed at their acquisition date estimated fair values separately from goodwill, which represent Level 3 fair value measurements as defined in ASC 820, Fair Value Measurement . The estimated fair values were determined by management using the assistance of third-party valuation specialists. The valuation methods used to determine the estimated fair value of intangible assets included the income approach—relief from royalty method for developed technology with an estimated useful life of five years , and the income approach—multi period excess earnings method for customer relationships with an estimated useful life of 13 years. 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, customer attrition II-35 EverCommerce Inc. Notes to Consolidated Financial Statements rates, 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. Each acquisition allows for an adjustment to the purchase price to be made subsequent to the transaction’s 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. The financial results of Kickserv since the closing through December 31, 2023, were not material to our consolidated financial statements, nor were they material to our prior period consolidated results on a pro forma basis. The following table summarizes the estimated fair values of consideration transferred, assets acquired and liabilities assumed at the acquisition date: August 10, 2023 (in thousands) Total consideration transferred: Cash $ 14,974 Net assets acquired: Prepaid expenses and other assets $ 51 Intangibles—definite lived 3,155 Goodwill 12,497 Accounts payable, accrued expenses and other ( 11 ) Deferred tax liability, net ( 397 ) Deferred revenue ( 274 ) Other non-current liabilities ( 47 ) Total net assets acquired $ 14,974 Fitness Solutions Disposition On March 13, 2024, the Company entered into definitive sale and purchase agreements to sell its fitness solutions to Jonas Software. The sale of North American Fitness closed simultaneously with signing and the sale of UK Fitness closed July 1, 2024. The divestiture did not qualify for discontinued operations. During the year ended December 31, 2024, the Company recognized losses of $ 4.9 million, related to the sale of Fitness Solutions, which are included in loss on sale and impairments on our consolidated statements of operations and comprehensive loss. Additionally, the Company recognized $ 6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions, which is included in loss on sale and impairments in the consolidated statements of operations and comprehensive loss. Note 4. Revenue Disaggregation of Revenue The following tables present a disaggregation of our revenue from contracts with customers by revenue recognition pattern and geographical market: Year Ended December 31, 2024 2023 2022 (in thousands) By pattern of recognition (timing of transfer of services): Point in time $ 56,545 $ 61,445 $ 56,056 Over time 642,220 613,924 564,690 Total $ 698,765 $ 675,369 $ 620,746 By Geographical Market: United States $ 636,566 $ 614,782 $ 567,041 International 62,199 60,587 53,705 Total $ 698,765 $ 675,369 $ 620,746 II-36 EverCommerce Inc. Notes to Consolidated Financial Statements Contract Balances Supplemental balance sheet information related to contracts from customers as of: December 31, 2024 2023 (in thousands) Accounts receivables $ 40,155 $ 45,417 Contract assets $ 13,313 $ 16,117 Deferred revenue $ 25,116 $ 24,082 Customer deposits $ 13,570 $ 12,891 Long-term deferred revenue $ 845 $ 2,168 Accounts receivable, net: Accounts receivable, net of allowance for expected credit losses, represent rights to consideration in exchange for products or services that have been transferred by us, when payment is unconditional and only the passage of time is required before payment is due. Contract assets: Contract assets represent rights to consideration in exchange for products or services that have been transferred (i.e., the performance obligation or portion of the performance obligation has been satisfied), but payment is conditional on something other than the passage of time. These amounts typically relate to contracts with the suppliers within our group purchasing programs for which payment is received at least one quarter in arrears from the service period. They also relate to contracts that include on-premise licenses and professional services where the right to payment is not present until completion of the contract or achievement of specified milestones and the fair value of products or services transferred exceed this constraint. These amounts typically relate to contracts that include on-premise licenses and professional services where the right to payment is not present until completion of the contract or achievement of specified milestones and the fair value of products or services transferred exceed this constraint. Contract liabilities : Contract liabilities, or deferred revenue, represent our obligation to transfer products or services to a customer for which consideration has been received in advance of the satisfaction of performance obligations. Long-term deferred revenue is included within other non-current liabilities on the consolidated balance sheets. Revenue recognized from the contract liability balance at December 31, 2023 was $ 24.1 million for the year ended December 31, 2024. Revenue recognized from the contract liability balance at December 31, 2022 was $ 22.9 million for the year ended December 31, 2023. Customer deposits : Customer deposits relate to payments received in advance for contracts, which allow the customer to terminate a contract and receive a pro rata refund for the unused portion of payments received to date. Accounts Receivable Activity in our allowance for expected credit losses is as follows for the years ended December 31, 2024 and 2023 (in thousands): December 31, 2024 2023 Allowances for expected credit losses, beginning of year $ 6,183 $ 4,670 Beginning balance adjustment due to implementation of the new credit loss standard — 1,309 Bad debt expense 4,660 6,016 Write-offs, net of recoveries ( 5,175 ) ( 5,812 ) Disposition of Fitness Solutions ( 141 ) — Allowance for expected credit losses, end of year $ 5,527 $ 6,183 Remaining Performance Obligations Remaining performance obligations represent the transaction price of unsatisfied or partially satisfied performance obligations within contracts with an original expected contract term that is greater than one year for which fulfillment of the contract has started as of the end of the reporting period. Contracts that include 30-day termination rights are considered to be contracts with a term of one month II-37 EverCommerce Inc. Notes to Consolidated Financial Statements and are therefore excluded from remaining performance obligations. Remaining performance obligations generally relate to those which are stand-ready in nature, as found within the subscription and marketing technology solutions revenue streams. The aggregate amount of transaction consideration allocated to remaining performance obligations as of December 31, 2024 was $ 20.2 million. The Company expects to recognize approximately 60 % of its remaining performance obligations as revenue within the next year, 29 % of its remaining performance obligations as revenue the subsequent year, 9 % of its remaining performance obligations as revenue in the third year, and the remainder during the two-year period thereafter. Cost to Obtain and Fulfill a Contract Assets resulting from costs to obtain contracts are included within prepaid expenses and other current assets for short-term balances and other non-current assets for long-term balances on the Company’s consolidated balance sheets. The costs to obtain contracts are amortized over five years , which corresponds with the useful life of the related technology. Short-term assets were $ 10.2 million and $ 8.6 million at December 31, 2024 and 2023, respectively, and long-term assets were $ 18.5 million and $ 17.9 million at December 31, 2024 and 2023, respectively. The Company recorded $ 6.7 million, $ 5.7 million and $ 4.3 million of amortization expense related to assets for the years ended December 31, 2024, 2023 and 2022, respectively, which is included in sales and marketing expense on the consolidated statements of operations and comprehensive loss, as well as $ 3.1 million, $ 2.3 million and $ 1.7 million, respectively, which is included in cost of revenues expense on the consolidated statements of operations and comprehensive loss. Note 5. Goodwill Goodwill activity for the years ended December 31, 2024 and 2023 (in thousands): Balance, January 1, 2023 $ 914,082 Acquired goodwill 12,497 Effect of foreign currency exchange rate changes 852 Balance, December 31, 2023 927,431 Impairments ( 34,468 ) Effect of foreign currency exchange rates ( 6,659 ) Balance, December 31, 2024 $ 886,304 During the fourth quarter of 2024, in conjunction with our review of strategic alternatives for our marketing technology solutions, the Company evaluated the recoverability of our marketing technology reporting unit and determined that the estimated fair value was insufficient to recover the net carrying value of the reporting unit resulting in an impairment charge of approximately $ 28.1 million during the three months ended December 31, 2024 (see Note 20. Subsequent Event). Additionally, we recognized $ 6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions (see Note 3. Acquisitions and Dispositions). Goodwill impairment charges are included in loss on sale and impairments on the consolidated statements of operations and comprehensive loss. There has been no other impairment of goodwill. Note 6. Intangible Assets Intangible assets consisted of the following as of: December 31, 2024 Useful Life Gross Carrying Value Accumulated Amortization Net Book Value (in thousands) Customer relationships 5 - 20 years $ 574,362 $ 376,010 $ 198,352 Developed technology 5 - 12 years 102,395 83,878 18,517 Trade names 3 - 10 years 37,287 27,325 9,962 Non-compete agreements 5 years 2,376 2,367 9 Total $ 716,420 $ 489,580 $ 226,840 II-38 EverCommerce Inc. Notes to Consolidated Financial Statements December 31, 2023 Useful Life Gross Carrying Value Accumulated Amortization Net Book Value (in thousands) Customer relationships (1) 3 - 20 years $ 605,908 $ 336,558 $ 269,350 Developed technology (1) 2 - 12 years 106,482 74,717 31,765 Trade names (1) 3 - 10 years 38,627 24,293 14,334 Non-compete agreements 2 - 5 years 2,408 2,338 70 Total $ 753,425 $ 437,906 $ 315,519 (1) During the quarter ended December 31, 2023, we recognized an impairment charge including $ 2.7 million of customer relationships, $ 0.3 million of developed technology and $ 0.1 million of trade names included in impairment expense on the consolidated statements of operations and comprehensive loss (see Note 2. Summary of Significant Accounting Policies). Amortization expense was $ 74.9 million, $ 91.2 million and $ 101.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. The weighted average remaining useful life of intangible assets acquired is 7.2 years, 8.6 years and 9.6 years for the years ended December 31, 2024, 2023 and 2022, 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. Amortization expense for the Company’s intangible assets are as follows (in thousands): Year Ended December 31, 2024 $ 59,206 2025 46,094 2026 35,372 2027 28,082 2028 19,651 Thereafter 38,435 Total amortization expense for the Company’s intangible assets $ 226,840 Note 7. Property and Equipment Property and equipment consisted of the following as of: December 31, 2024 2023 (in thousands) Computer equipment and software $ 12,002 $ 11,628 Furniture and fixtures 3,332 3,794 Leasehold improvements 10,565 11,756 Total property and equipment 25,899 27,178 Less accumulated depreciation ( 19,241 ) ( 17,444 ) Property and equipment, net $ 6,658 $ 9,734 Depreciation expense was $ 3.6 million, $ 4.6 million and $ 4.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. During the three months ended December 31, 2023, we recorded an impairment charge of $ 0.2 million to leasehold improvements, which is included in impairment expense on our consolidated statements of operations and comprehensive loss (see Note 2. Summary of Significant Accounting Policies). II-39 EverCommerce Inc. Notes to Consolidated Financial Statements Note 8. Capitalized Software Capitalized software consisted of the following as of: December 31, 2024 2023 (in thousands) Capitalized software $ 71,329 $ 64,137 Less accumulated amortization ( 27,663 ) ( 21,626 ) Capitalized software, net $ 43,666 $ 42,511 Amortization expense was $ 10.3 million, $ 8.4 million and $ 5.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. 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 years ended December 31, 2024, 2023 and 2022, we recorded a charge of $ 0.8 million, $ 0.6 million and $ 1.2 million, respectively, related to capitalized costs associated with abandoned projects, which were included in general and administrative expense on the consolidated statements of operations and comprehensive loss. During the three months ended December 31, 2023, we recorded an impairment charge of $ 1.1 million, which is included in impairment expense on our consolidated statements of operations and comprehensive loss (see Note 2. Summary of Significant Accounting Policies). Note 9. Leases The Company leases real estate from unrelated parties under operating lease agreements that have initial terms ranging from one year 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, 2024 2023 (in thousands) Operating lease cost $ 4,209 $ 6,419 Variable lease cost 2,434 2,046 Short-term lease cost 448 356 Total lease cost $ 7,091 $ 8,821 The Company ceased use of certain leased premises and subleased certain facilities resulting in impairment charges of $ 0.4 million and $ 1.2 million for the years ended December 31, 2024 and 2023, respectively, to impair ROU lease assets to their fair value. During the three months ended December 31, 2023, we recorded a $ 0.6 million impairment charge related to ROU lease assets, which is included in loss on sale and impairments on our consolidated statement of operations and comprehensive loss (see Note 2. Summary of Significant Accounting Policies). Supplemental cash flow information related to leases is as follows: Year Ended December 31, 2024 2023 (in thousands) Cash paid for operating lease liabilities $ 4,658 $ 6,218 Operating lease assets obtained in exchange for operating lease liabilities $ 1,078 $ 1,602 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: II-40 EverCommerce Inc. Notes to Consolidated Financial Statements Year Ended December 31, 2024 2023 (in thousands) Operating lease right-of-use assets $ 10,944 $ 15,861 Current operating lease liabilities 3,443 3,789 Long-term operating lease liabilities 13,568 19,400 Total operating lease liabilities $ 17,011 $ 23,189 At December 31, 2024 and 2023, the weighted average remaining lease term for operating leases was 4.93 years and 5.75 years, and the weighted average discount rate w as 5.2 % and 5.1 %, respectively. 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, 2024 is as follows (in thousands): Year ended December 31, 2025 $ 4,502 2026 4,294 2027 3,441 2028 2,773 2029 2,481 Thereafter 2,254 Total lease payments 19,745 Less: imputed interest 2,734 Total present value of lease liabilities $ 17,011 Note 10. Long-Term Debt Long-term debt consisted of the following as of : December 31, 2024 2023 (in thousands) Term notes with interest payable monthly, interest rate at Adjusted SOFR, plus an applicable margin of 2.50 % (1) ( 6.85701 % at December 31, 2024) quarterly principal payments of 0.25 % of original principal balance with balloon payment due July 2028 $ 532,125 $ 537,625 Revolver with interest payable monthly, interest rate at Adjusted SOFR, plus an applicable margin of 3.25 % ( 6.85701 % at December 31, 2024), and outstanding balance due July 2026 — — Principal debt 532,125 537,625 Deferred financing costs on long-term debt ( 3,069 ) ( 3,983 ) Discount on long-term debt ( 1,114 ) ( 1,446 ) Total debt 527,942 532,196 Less current maturities 5,500 5,500 Long-term portion $ 522,442 $ 526,696 (1) Prior to December 13, 2024, the applicable rate for the Term Loans was 3.00 % for Adjusted SOFR borrowings. See below for further details regarding the amendments to the Credit Facilities. The Company is party to a credit agreement, as amended, that provides for one term loan for an aggregate principal amount of $ 550.0 million (the “Term Loan”), a revolver with a capacity of $ 190.0 million (the “Revolver”) and a sub-limit of the Revolver available for letters of credit up to an aggregate face amount of $ 20.0 million. These debt arrangements are collectively referred to herein as the “Credit Facilities”. II-41 EverCommerce Inc. Notes to Consolidated Financial Statements Effective as of July 1, 2023, borrowings under the Credit Facilities bear interest at the Company’s option at ABR plus an applicable rate, or at a forward-looking term rate based upon the secured overnight financing rate (“SOFR”), plus (i) (a) with respect to the Term Loan, credit spread adjustments of 0.11448 %, 0.26161 %, 0.42826 % and 0.71513 % for interest periods of one, three, six and twelve months, respectively, and (b) with respect to revolving loans, adjusted SOFR of 0.0 % plus (ii) an applicable rate, in each case with such applicable rate based on the Company’s first lien net leverage ratio. The ABR represents the highest of the prime rate, Federal Reserve Bank of New York rate plus ½ of 1%, and the Adjusted SOFR for a one month interest period plus 1 %. On December 13, 2024, the Company entered into an amendment (the “Amendment”) to the Credit Facilities to reduce the applicable margin and remove the credit spread adjustment from the existing Term Loan in their entirety in an aggregate principal amount of $ 533.5 million. Following the Amendment, the Term Loan bears interest, at the borrower’s election, at (x) a forward-looking term rate based upon SOFR plus an applicable margin of 2.50 %, with a minimum forward-looking SOFR rate 0.50 % or (y) ABR plus an applicable margin of 1.50 %, with a minimum ABR of 1.50 %, in each case, with no step-downs. The credit spread adjustment was removed in connection with the Amendment. The refinanced Term Loan priced at par and refinanced all of the existing term loans outstanding under the Credit Agreement immediately prior to giving effect to the Amendment. The Company determines the fair value of long-term debt based on trading prices for its debt if available. As of December 31, 2024, the Company obtained trading prices for the term notes outstanding. However, as such trading prices require significant unobservable inputs to the pricing model, such instruments are classified as Level 2. The fair value amounts were approximately $ 537.4 million and $ 540.3 million as of December 31, 2024 and 2023, respectively. The Company has entered into the following interest rate swap agreements in connection with its Credit Facilities to convert a portion of the floating rate component of the Term Loan from a floating rate to fixed rate: Swap Effective Date Expiration Date Fixed Interest Rate Notional Amount Asset (Liability) Fair Value at December 31, 2024 (in thousands) (in thousands) Initial Swap October 31, 2022 October 31, 2027 4.212 % $ 200,000 $ ( 947 ) Second Swap March 31, 2023 October 31, 2027 3.951 % 100,000 232 Third Swap September 20, 2024 October 31, 2027 3.395 % 125,000 2,210 The Swap Agreements are accounted for as derivatives whereby the fair value of the contract is reported within the consolidated balance sheets, and related gains and losses resulting from changes in the fair value are reported in interest and other expense, net, in the statements of operations and comprehensive loss. As of December 31, 2024 the fair value of the Initial Swap was a liability of $ 0.9 million, while the fair value of the Second and Third Swaps were an asset of $ 2.4 million, which are reported in other non-current liabilities and other non-current assets, respectively, on the consolidated balance sheets. The related net gains and losses resulting from changes in fair value was a gain of $ 6.4 million and losses of $ 2.0 million and $ 2.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. 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, 2024, the Company was in compliance with all of its covenants. Aggregate maturities of the Company’s debt are as follows (in thousands): Year Ended December 31, 2025 $ 5,500 2026 5,500 2027 5,500 2028 515,625 2029 — Thereafter — Total aggregate maturities of the Company’s debt $ 532,125 Note 11. Equity 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. II-42 EverCommerce Inc. Notes to Consolidated Financial Statements Repurchase Program On June 14, 2022, our Board approved a stock repurchase program (as subsequently amended, the “Repurchase Program”) with authorization to purchase up to $ 50.0 million in shares of the Company’s common stock through the expiration of the program on December 21, 2022. On November 7, 2022, November 5, 2023, and May 21, 2024, our Board increased the authorization of the Repurchase Program by an additional $ 50.0 million in shares of the Company’s common stock on each date for a total authorization to repurchase up to $ 200.0 million in shares of the Company’s common stock, and most recently, extended the expiration of the Repurchase Program through December 31, 2025. On December 14, 2023, our Board approved a stock purchase agreement entered into between the Company and Eric Remer, Matt Feierstein, Marc Thompson, Sarah Jordan, Shane Driggers and Evan Berlin, who served as officers of the Company at the time of the agreement (collectively, the “Selling Stockholders”). On December 19, 2023, as part of our Repurchase Program, the Company repurchased an aggregate of 1,401,472 shares of common stock from the Selling Stockholders at a price of $ 9.82 per share, for an aggregate price of $ 13.8 million. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. The Repurchase Program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of the Board. The Company expects to fund repurchases with existing cash on hand. The Company repurchased and retired 5.7 million shares of common stock pursuant to the Repurchase Program for $ 57.7 million, including transaction fees and taxes, during the year ended December 31, 2024. As of December 31, 2024, $ 32.7 million remained available under the Repurchase Program. Note 12. Stock-Based Compensation In 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan provided for the granting of stock-based awards, including stock options, stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards and other stock-based awards. The 2016 Plan allowed for the granting of stock-based awards through January 17, 2027. In connection with the Initial Public Offering (“IPO”), the Company’s Board adopted, and the Company’s stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO and, as a result of which, the Company can no longer make awards under the 2016 Plan. The 2021 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. The number of shares initially reserved for issuance under the 2021 Plan was 22,000,000 shares, inclusive of available shares previously reserved for issuance under the 2016 Plan. 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, provided that no more than 22,000,000 shares may be issued upon the exercise of incentive stock options. Based on the number of outstanding shares of the Company’s common stock as of December 31, 2023, on January 1, 2024 the number of shares reserved for issuance under the 2021 Plan increased by 5.5 million. In August 2024, the Company adopted a "withhold to cover" program, which allows it to withhold common stock from employees in connection with the settlement of income tax withholding obligations arising from the vesting of restricted stock unit (“RSUs”) under the 2021 Plan. Stock options During the years ended December 31, 2024 and 2022, the Company granted time-based and performance-based stock options to employees and directors. Time-based options granted under the 2016 Plan vest 25 % after one year , and then monthly over the next three years . Time-based options granted to newly hired employees under the 2021 Plan generally vest 25 % after one year and then quarterly over the next three years . The vesting schedule for options granted to existing employees provides that the options vest ratably in quarterly installments over a period of four 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 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 Company did not grant stock options in 2023. 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 and expired 10 years from date of grant. For options outstanding following the IPO, there was a market condition based on the Company achieving a volume weighted average stock price ranging from $ 27.41 to $ 36.54 through June 2023, none of which vested. To date, $ 17.4 million of stock-based compensation expense has been recognized related to the market condition-based options. II-43 EverCommerce Inc. Notes to Consolidated Financial Statements The relevant data used to determine the value of the stock options is as follows: December 31, 2024 2023 (1) 2022 Weighted-average risk-free interest rate 1.89 % N/A 1.82 % Expected term in years 6.1 N/A 6.1 Weighted-average expected volatility 50 % N/A 50 % Expected dividends 0 % N/A 0 % (1) There were no stock options granted during 2023. A summary of stock option activity for the year ended December 31, 2024 is as follows: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term in Years Aggregate Intrinsic Value (in thousands except for exercise price and term in years) Outstanding balance at January 1, 2024 13,337 $ 10.03 6.27 $ 22,578 Granted 2,300 10.87 Exercised ( 653 ) 6.30 Cancelled ( 496 ) 13.19 Outstanding balance at December 31, 2024 14,488 $ 10.17 4.97 $ 19,294 Exercisable at December 31, 2024 11,745 $ 9.96 4.44 $ 19,072 The weighted-average grant date fair value of time-based stock options granted was $ 5.31 , nil , and $ 5.76 for the years ended December 31, 2024, 2023 and 2022, respectively. The total intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022 was $ 2.8 million, $ 2.2 million and $ 2.3 million, respectively. Compensation expense of $ 5.8 million, $ 11.5 million and $ 19.3 million was recognized in stock-based compensation for the years ended December 31, 2024, 2023 and 2022, respectively. The unrecognized compensation expense associated with outstanding time-based stock options at December 31, 2024 was $ 8.7 million, which is expected to be recognized over a weighted average period of 2.85 years. Restricted Stock Units During the years ended December 31, 2024, 2023 and 2022, the Company issued time vesting RSUs. The vesting schedule for awards granted to newly hired employees provides that the awards vest over a four-year period starting on the grant date, with 25 % of the awards vesting on the one-year anniversary, and then in equal quarterly installments for the subsequent three years . The vesting schedule for awards granted to existing employees provides that the awards vest ratably in quarterly installments over a period of four years . The Company records compensation expense for these awards on a straight-line basis, which approximates the service period. Compensation expense of $ 19.7 million, $ 12.8 million and $ 6.0 million related to these awards was recognized in the statements of operations and comprehensive loss for the years ended December 31, 2024, 2023 and 2022, respectively. The unrecognized compensation expense associated with the RSUs at December 31, 2024 was $ 35.2 million, which is expected to be recognized over a weighted average period of 2.74 years. The summary of time vesting restricted stock units activity for the year ended December 31, 2024 is as follows: Number of Units Weighted-Average Grant Date Fair Value (in thousands except for fair value) Unvested, restricted stock units at January 1, 2024 3,337 $ 10.70 Granted 3,408 9.92 Vested ( 1,789 ) 10.72 Forfeited ( 1,055 ) 10.04 Unvested, restricted stock units at December 31, 2024 3,901 $ 10.18 II-44 EverCommerce Inc. Notes to Consolidated Financial Statements 2021 Employee Stock Purchase Plan In connection with the IPO, the Company’s Board adopted the 2021 Employee Stock Purchase Plan. The ESPP is designed to allow eligible employees to purchase shares of our common stock, at periodic intervals, with their accumulated payroll deductions. The aggregate number of shares of common stock that were initially reserved for issuance under the ESPP is equal to the sum of (i) 4,500,000 shares and (ii) an annual increase on the first day of each calendar year beginning in 2022 and ending in and including 2031 equal to the lesser of (A) one percent ( 1 %) of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the Board; provided that in no event will more than 60,000,000 shares of our common stock be available for issuance under the ESPP. Compensation expense of $ 1.0 million, $ 1.3 million and $ 1.5 million related to the ESPP was recognized in the statements of operations and comprehensive loss for the years ended December 31, 2024, 2023 and 2022, respectively. Stock-based Compensation Expense Stock-based compensation expense was classified in the accompanying consolidated statements of operations and comprehensive loss as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Cost of revenues $ 461 $ 464 $ 373 Sales and marketing 1,184 1,672 1,503 Product development 2,055 2,273 1,854 General and administrative 22,791 21,150 23,088 Total stock-based compensation expense $ 26,491 $ 25,559 $ 26,818 Note 13. Net Loss Per Share Attributable to Common Stockholders The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock as of: Year Ended December 31, 2024 2023 2022 (in thousands except per share amounts) Numerator: Net loss attributable to common stockholders $ ( 41,089 ) $ ( 45,620 ) $ ( 59,816 ) Denominator: Weighted-average shares of common stock outstanding, basic and diluted 184,898 188,939 194,625 Basic and diluted net loss per share attributable to common stockholders $ ( 0.22 ) $ ( 0.24 ) $ ( 0.31 ) The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented due to their anti-dilutive effect: December 31, 2024 2023 2022 Outstanding stock options and unvested RSUs 18,390 16,674 18,959 Shares of common stock pursuant to ESPP 196 278 341 Total anti-dilutive outstanding potential common stock 18,586 16,952 19,300 II-45 EverCommerce Inc. Notes to Consolidated Financial Statements Note 14. Fair Value of Financial Instruments Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: • Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. • Level 2: 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 observable data for substantially the full term of the assets or liabilities. • Level 3: 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. 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. Our interest rate swaps are valued based upon interest yield curves, interest rate volatility and credit spreads. Our interest rate swaps are classified within Level 2 of the fair value hierarchy as all significant inputs are corroborated by observable data. There were no transfers between fair value measurement levels during the years ended December 31, 2024 and 2023. The following table presents information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of: December 31, 2024 Balance Sheet Classification Level 1 Level 2 Level 3 Total (in thousands) Asset: Money market $ 9,324 $ — $ — $ 9,324 Cash equivalents Interest rate swaps — 2,443 — 2,443 Other non-current assets Liability: Interest rate swaps $ — $ 947 $ — $ 947 Other non-current liabilities December 31, 2023 Balance Sheet Classification Level 1 Level 2 Level 3 Total (in thousands) Asset: Money market $ 764 $ — $ — $ 764 Cash equivalents Liability: Interest rate swap $ — $ 4,889 $ — $ 4,889 Other non-current liabilities Note 15. Retirement Plan Effective January 1, 2009, EverCommerce Inc. adopted a defined contribution savings plan under section 401(k) of the Internal Revenue Code (the “401(k)”). The 401(k) covers substantially all employees who meet minimum age and service requirements and allows participants to contribute a portion of their pre-tax and post-tax annual compensation in accordance with prescribed limits. The Company may make discretionary and/or matching contributions to the 401(k). The Company matched 100 % of employee contributions up to 4 % of eligible compensation. Employer matching contributions were $ 5.6 million, $ 5.3 million and $ 4.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. II-46 EverCommerce Inc. Notes to Consolidated Financial Statements Note 16. Income Taxes The components of our net loss before income tax (expense) benefit are as follows: Year Ended December 31, 2024 2023 2022 (in thousands) United States $ ( 46,156 ) $ ( 43,177 ) $ ( 59,134 ) International 10,849 ( 804 ) ( 5,362 ) Net loss before income tax (expense) benefit $ ( 35,307 ) $ ( 43,981 ) $ ( 64,496 ) As of December 31, 2024, a portion of our undistributed earnings from non-U.S. subsidiaries are intended to be indefinitely reinvested in non-U.S. operations, and therefore no U.S. deferred taxes have been recorded. As of December 31, 2024, there was no material unrecognized deferred tax liability related to countries where we are indefinitely reinvested. The remaining undistributed earnings from non-U.S. subsidiaries are not permanently reinvested, however, due to a combination of anticipated tax treatment and losses, no material deferred tax liability exists. The components of the provision for income taxes consists of the following: Year Ended December 31, 2024 2023 2022 (in thousands) Current: Federal $ 173 $ — $ — State 1,256 1,649 1,539 Foreign 1,335 1,647 1,258 Total current 2,764 3,296 2,797 Deferred: Federal ( 8,724 ) ( 4,376 ) ( 9,034 ) State ( 2,143 ) ( 2,368 ) ( 2,743 ) Foreign 289 ( 256 ) ( 11,235 ) Change in valuation allowance - United States 13,697 8,831 12,257 Change in valuation allowance - Foreign ( 101 ) ( 3,488 ) 3,278 Total deferred 3,018 ( 1,657 ) ( 7,477 ) Income tax expense (benefit) $ 5,782 $ 1,639 $ ( 4,680 ) II-47 EverCommerce Inc. Notes to Consolidated Financial Statements The Company’s deferred tax assets and liabilities, included in other non-current assets and other non-current liabilities on the consolidated balance sheets, related to temporary differences and operating loss carryforwards were as follows: December 31, 2024 2023 (in thousands) Deferred tax assets: Net operating losses $ 29,277 $ 35,484 163(j) interest limitation 33,187 27,143 Reserves and accrued expenses 6,571 8,175 Property and equipment depreciation 4,434 1,462 Stock-based compensation 2,802 3,193 Lease liability 4,240 5,837 Capital loss carryforward 10,795 — Other 2,974 2,589 Total deferred tax assets 94,280 83,883 Less: valuation allowance ( 64,870 ) ( 51,904 ) Net deferred tax assets 29,410 31,979 Deferred tax liabilities: Intangible assets ( 28,029 ) ( 29,263 ) Property and equipment depreciation ( 1,245 ) ( 1,288 ) Capitalized expenses ( 4,951 ) ( 4,678 ) Operating lease right-of-use assets ( 2,736 ) ( 3,963 ) Other ( 1,039 ) ( 364 ) Total deferred tax liabilities ( 38,000 ) ( 39,556 ) Net deferred tax liabilities $ ( 8,590 ) $ ( 7,577 ) The Company had net operating loss and tax credit carryforwards as of the financial statement date as follows: Amount Expiration Years (in thousands) Net operating losses, federal (Post December 31, 2017) $ 19,860 Indefinite Net operating losses, federal (Pre January 1, 2018) $ 210 2036 Net operating losses, state $ 7,459 Various Net operating losses, foreign $ 1,748 2038 - Indefinite Capital loss, federal $ 10,795 2029 Tax credits, federal $ 266 2037 Tax credits, foreign $ 294 Various 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 $ 64.9 million and $ 51.9 million as of December 31, 2024 and 2023, 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, 2024, will be accounted for as follows: $ 64.4 million will be recognized as a reduction of income tax expense and $ 0.4 million will be recorded as an increase in equity. II-48 EverCommerce Inc. Notes to Consolidated Financial Statements A reconciliation of our valuation allowance on deferred tax assets is as follows: Year Ended December 31, 2024 2023 (in thousands) Balance at beginning of period $ 51,904 $ 47,756 Additions to valuation allowance 12,992 5,342 Additions recorded in acquisition accounting — 216 Reductions recorded from sale of business ( 541 ) — Additions recorded as a decrease in equity 771 8 Reductions recorded as an increase in equity ( 256 ) ( 1,418 ) Balance at end of period $ 64,870 $ 51,904 The Company files income tax returns in the U.S. federal jurisdiction, Colorado, various other state jurisdictions, Canada, Jordan, the United Kingdom, Australia and New Zealand. The years open for audit vary depending on the tax jurisdiction. In the U.S., the Company's federal tax returns for the years before 2021 (year ended December 31, 2021) are no longer subject to audit. The net operating losses utilized during the open periods from select years prior to 2021 are subject to examination. The foreign jurisdictions statutes vary but are generally four years from assessment of the return. While management believes we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax regulations. Additionally, the recognition and measurement of certain tax benefits includes estimates and judgment by management and inherently includes subjectivity. 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 is as follows: Year Ended December 31, 2024 2023 (in thousands) Balance at beginning of period $ 531 $ 364 Gross additions based on tax positions related to the current year 57 167 Gross reductions based on tax positions related to prior years ( 38 ) — Balance at end of period $ 550 $ 531 As of December 31, 2024 and 2023, unrecognized tax benefits of $ 0.6 million and $ 0.5 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 statements 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 met. The approximate dollar value of tax expense related to the tax holiday was $ 0.1 million and $ 0.2 million as of December 31, 2024 and 2023, respectively. During the year ended December 31, 2023, we restructured the ownership of certain intellectual property, which resulted in an income tax benefit. During the year ended December 31, 2024, we sold Fitness Solutions as discussed in Note 3. Acquisitions and Dispositions, which resulted in an income tax benefit. II-49 EverCommerce Inc. Notes to Consolidated Financial Statements The income tax benefit differs from the expected tax benefit computed by applying the U.S. federal statutory rate to income before taxes as a result of the following: Year Ended December 31, 2024 2023 2022 (in thousands, except percentages) Benefit at U.S. statutory rate $ ( 7,414 ) 21.00 % $ ( 9,236 ) 21.00 % $ ( 13,544 ) 21.00 % Change in income tax resulting from: State income benefit, net of federal benefit ( 938 ) 2.66 ( 810 ) 1.84 ( 852 ) 1.32 Stock-based compensation 416 ( 1.18 ) 2,513 ( 5.71 ) 2,961 ( 4.59 ) Nondeductible compensation 1,863 ( 5.28 ) 876 ( 1.99 ) 163 ( 0.25 ) Nondeductible transaction costs — — 61 ( 0.14 ) — — Foreign rate differential 1,501 ( 4.25 ) 85 ( 0.19 ) ( 129 ) 0.20 Change in valuation allowance 12,992 ( 36.80 ) 5,342 ( 12.15 ) 15,648 ( 24.26 ) Intellectual property migration — — — — ( 8,805 ) 13.65 Change in deferred state income tax rate 633 ( 1.79 ) 193 ( 0.44 ) ( 65 ) 0.10 US taxation of foreign income 13 ( 0.04 ) 1,512 ( 3.44 ) — — Goodwill impairment 6,284 ( 17.80 ) — — — — Sale of fitness solutions ( 9,424 ) 26.69 — — — — Tax credits ( 546 ) 1.55 — — — — Other 402 ( 1.14 ) 1,103 ( 2.51 ) ( 57 ) 0.09 Income tax expense (benefit) $ 5,782 ( 16.38 ) % $ 1,639 ( 3.73 ) % $ ( 4,680 ) 7.26 % Note 17. Commitments and Contingencies 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, 2025 $ 12,544 2026 3,745 2027 2,625 2028 2,750 2029 687 Thereafter — Total future minimum payments due $ 22,351 From time to time, the Company is involved in various lawsuits and legal proceedings which arise in or outside the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Accruals for loss contingencies are recorded when a loss is probable, and the amount of such loss can be reasonably estimated. An adverse determination in one or more of these pending matters could have an adverse effect on the Company’s consolidated financial position, results of operations or cash flows. On January 31, 2024, plaintiff Vladimir Gusinsky Revocable Trust filed a putative class action lawsuit in the Court of Chancery of the State of Delaware against the Company, members of its Board of Directors (the “Board”) and the other parties to its sponsor stockholders agreement, dated June 30, 2021, Providence Strategic Growth II L.P., Providence Strategic Growth II-A L.P., SLA Eclipse Co-Invest, L.P., and SLA CM Eclipse Holdings, L.P. (collectively, the “Sponsor Stockholders”), captioned Vladimir Gusinsky Revocable Trust v. Eric Remer, Penny Baldwin, et. al., Case No. 2024-0077 (Del Ch.). The complaint generally alleges violations of Section 141(a) of the Delaware General Corporation Law (“DGCL”) by providing the Sponsor Stockholders with a veto right over the Board’s ability to hire or fire the Company’s Chief Executive Officer (the “CEO Approval Right”) on the basis that it unlawfully limits the Board’s authority to manage the business and affairs of the Company. The plaintiff seeks declaratory judgment that the CEO Approval Right is invalid and void, other declaratory and equitable relief for the class and/or the Company, attorneys’ and experts’ II-50 EverCommerce Inc. Notes to Consolidated Financial Statements witness fees and other costs and expenses, and other equitable relief. On June 14, 2024, the Company filed its opening brief in support of its Motion to Dismiss, and on July 15, 2024, Plaintiff opposed that motion. On July 16, 2024, the court entered a stipulation and order dismissing the director defendants from the action. On August 29, 2024, the remaining defendants, the Company and Sponsor Stockholders (collectively, “Defendants”), filed their reply in support of the Motion to Dismiss, and pursuant to a stipulation between the parties, Plaintiff filed a sur-reply on September 26, 2024, which Defendants filed a response to on October 10, 2024. On October 15, 2024, Defendants filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction, arguing that the claims alleged are not ripe for adjudication and on November 15, 2024 Plaintiff opposed that motion. On December 9, 2024, Defendants filed their reply in support of the Motion to Dismiss for Lack of Subject Matter Jurisdiction. On January 3, 2025, the Court entered a minute order deferring oral argument on the pending Motion to Dismiss until after the disposition of the appeal in Moelis & Company v. West Palm Beach Firefighters’ Pension Fund, Case No. 340, 2024 (Del. Supr.). The Company believes it has meritorious defenses to the claims of the plaintiff and members of the class and any liability for the alleged claims is not currently probable and the potential loss or range of loss is not reasonably estimable. The Company is party to additional legal proceedings incidental to its business. While the outcome of these additional matters could differ from management’s expectations, the Company does not believe that the resolution of such matters is reasonably likely to have a material effect on its results of operations or financial condition. The Company assesses the applicability of nexus in jurisdictions in which the Company sells products and services. As of December 31, 2024 and 2023, the Company recorded a liability in the amount of $ 10.7 million and $ 10.9 million, respectively, within current liabilities and other long-term liabilities as a provision for sales and use and gross receipts tax. 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. Note 18. Geographic Areas The following table sets forth long-lived assets by geographic area: December 31, 2024 2023 (in thousands) United States $ 40,252 $ 41,134 International $ 10,072 $ 11,111 Note 19. Segment Reporting The Company operates in a single reportable segment. The segment derives revenue from providing SaaS and other technology-based solutions to help service SMB’s optimize their operations, improve customer relationships and experience, and accelerate growth. The Company primarily focuses on three core vertical markets: EverPro for Home Services, EverHealth for Health Services, and EverWell for Wellness Services. The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. Based on being a single reportable segment company, the Company has disclosed net loss as its primary measure of profit or loss used by the CODM, which is reported on the consolidated statement of operations and comprehensive loss as net loss. The CODM is provided financial information inclusive of net loss, which is used to assess performance of the segment and decide how to allocate resources. The CODM uses net loss, among other metrics, to assist in evaluating the financial performance of the Company and monitoring budget versus actual results. The CODM does not review assets in evaluating segments results, and therefore, such information is not presented. The measure of segment assets is reported on the consolidated balance sheets as total assets. Disaggregated information is not used for assessing the performance of the Company or for making resource allocation decisions. The CODM reviews financial information presented on an aggregated and consolidated basis, together with revenue information of the three core vertical markets. The software and technology-based solutions provided by the Company are deployed and implemented to customers in a similar manner regardless of industry. See Notes 4. Revenue and 18. Geographic Areas for disaggregated information regarding the Company's revenues and long-lived assets by geography, respectively. II-51 EverCommerce Inc. Notes to Consolidated Financial Statements The following table provides segment information for revenues, net loss and significant expenses: Year Ended December 31, 2024 2023 2022 (in thousands) Total revenues $ 698,765 $ 675,369 $ 620,746 Less (1) : Employee expense 260,709 260,641 254,532 Lead generation, marketing and advertising 113,305 112,245 102,915 Communication services 22,291 29,232 29,137 Third-party commissions 21,328 22,609 21,411 Software, tools and hosting 59,219 49,997 44,534 Legal and professional fees 46,060 33,837 31,384 Loss on sale and impairments 39,709 6,325 — Other segment items (2) 47,068 53,856 56,626 Depreciation and amortization 88,824 104,201 110,801 Interest and other expense, net 35,559 46,407 33,902 Income tax expense (benefit) 5,782 1,639 ( 4,680 ) Total expenses 739,854 720,989 680,562 Net loss $ ( 41,089 ) $ ( 45,620 ) $ ( 59,816 ) (1) The significant expense categories and amounts align with information that is regularly reviewed by the CODM. (2) Other segment items include corporate overhead expenses, transaction-related and other non-recurring or unusual costs, facility expenses, bad debt and other miscellaneous cost of services. Year Ended December 31, 2024 2023 2022 (in thousands) Other Segment Disclosures Interest income $ ( 3,112 ) $ ( 1,024 ) $ ( 263 ) Interest expense 41,749 43,681 28,811 Other Significant Non-cash Items: Stock-based compensation 26,491 25,559 26,818 There are no reconciling items or adjustments between segment revenues, net loss, total assets and consolidated revenues, net loss and total assets. Note 20. Subsequent Event In late 2024, the Company began a process to review strategic alternatives for its marketing technology solutions. On March 5, the Board, in conjunction with Company management committed to a plan to sell the Company’s marketing technology solutions, which is expected to result in a sales transaction in 2025. The Company is currently engaged in an active program to sell its marketing technology solutions. As such, the Company will present marketing technology solutions as discontinued operations beginning with the first quarter 2025. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures None.