EngageSmart, LLC (ESMT) Q4 2021 Earnings Call Transcript

EngageSmart, LLC (ESMT)
Q4 2021 Earnings Call
Feb 15, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening. Thank you for attending today's EngageSmart Q4 2021 earnings call. My name is Selena, and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

[Operator instructions] I'll now turn the call over to Josh Schmidt from EngageSmart. Josh? 

Josh Schmidt -- Investor Relations

Thank you and good evening. With me on today's call are Bob Bennett, chief executive officer; and Cassandra Hudson, chief financial officer. Our earnings press release, supplemental presentation, and associated Form 8-K can be found at investors.engagesmart.com. Within the supplemental presentation, we are providing a more detailed breakout of our revenue by segment into the following categories: subscription, transaction, usage-based fees, and other.

During this call, we will be discussing certain forward-looking information. Actual results could differ materially from those contemplated by these forward-looking statements. Please refer to the risk factors section of our quarterly report on Form 10-Q and other SEC filings for more information on the risks regarding these forward-looking statements and risk factors associated with our business. All metrics discussed during this call are non-GAAP, unless otherwise noted.

A reconciliation of non-GAAP metrics to the nearest GAAP metric can be found in our earnings press release and supplemental presentation, both of which are available on the investor relations section of our website. This call is being webcast live and will be available for replay on our website at investor.engagemart.com. I would now like to turn the call over to our CEO, Bob Bennett. 

Bob Bennett -- Chief Executive Officer

Thank you, Josh. Welcome, everyone, and thank you for joining us. We are excited to host our fourth quarter and fiscal 2021 earnings call on the heels of a strong quarter and an outstanding year. Delivering on our mission of simplifying customer and client engagement can be directly attributed to our customers, our partners, and our employees.

And I remain humbled by their contributions and continued commitment to EngageSmart's success. Before digging deeper into the details of our performance, I'd like to share with you a few of the highlights that we are really proud of. We've seen tremendous customer growth of 39% year over year in our SMB segment, where we now serve over 79,000 customers. Our strong organic customer growth is primarily driven by word-of-mouth and the strength of our end-to-end product suite.

For example, one of our dietitian group customers was able to eliminate four separate vendor solutions in favor of simple practice. The improved efficiency enabled each dietician in the practice to see an additional patient each day. At the same time, we are driving continued innovation across our solutions. For example, we added mobile app payment features and introduced integrated diagnosing codes, which simplifies case management and documentation while driving cost base.

We are serving more verticals today than ever before and are focusing on several high-growth areas. We plan to further invest in these verticals and drive customization of features for a fit that becomes unparalleled in the market. And in our enterprise segment, we are experiencing great traction as we serve over 3,100 customers across our three solutions. We are seeing strong organic growth driven by product innovation, partnerships, and our focus on having a leading value proposition.

This includes e-payments and other options to help customers get paid faster, easier, and without paper. For InvoiceCloud, the largest revenue contributor in the enterprise segment, we provide multiple payment alternatives for all our billers, including PayPal, Venmo, and others in a space where the market is still largely running on checks. We are excited that our progress has been recognized with a shortlisting of InvoiceCloud by the Cloud Award in the category of best cloud payment finance or billing solution. In our DonorDrive solution, we are honored to support fantastic charities such as Extra Life, a one-of-a-kind 24-hour gaming marathon benefiting Children's Miracle Network Hospitals.

We are helping them raise huge amounts of money through the advanced social features found in our technology. We helped Extra Life raise over $3 million in donation in a single weekend. Stories like these get us excited to be part of EngageSmart. If you recall, we founded EngageSmart because activities like paying bills, scheduling appointments, onboarding new patients, and client communication shouldn't be that hard.

We've come a long way. Today, we are driving digital adoption in a $28 billion market. Customers are increasingly adopting our offerings to drive digital adoption and self-service as a simplified engagement with their clients. Why? Because EngageSmart Solutions help improve their businesses, lower operating expenses, and reduce wasted time.

Turning to financial headlines for the fourth quarter and full year. EngageSmart delivered another quarter of record revenue performance. Total revenue in the quarter increased by 37% year over year to $61.6 million, driven by strong revenue growth of 55% in our SMB segment and 23% in our enterprise segment. For the full year 2021, total revenue was $216.3 million, an increase of 48% from the prior year.

In the SMB segment, we delivered incredible annual year-over-year growth of 74% and in the enterprise segment annual revenue grew 28%. Cassandra will review our financials in more detail later. But first, let me give you a high-level update on our progress and execution in our SMB and enterprise segments. SimplePractice now serves 10 wellness vertical markets, including mental health, speech-language pathology, occupational therapy, nutrition, chiropractic, and physical therapy among others.

While our roots are in mental health, our newer markets are high-growth engines for our SMB segment, and we intend to increase our investment in product and marketing to drive growth in these markets in 2022 and beyond. Practitioners across these wellness markets are attracted to SimplePractice because it offers an integrated solution for business management; simplifying tasks like scheduling appointments, documenting cases, deploying telehealth, billing and payments, collections, and insurance claims management. This is a high-growth space, and COVID accelerated its growth. Patient visits continue to grow as the pandemic begins to wane.

We believe the tremendous SMB customer growth we experienced is a result of increased technology adoption that was catalyzed by the pandemic and has now become a secular shift in behavior. Now turning to our enterprise segment. Our enterprise business brings together vertical-specific engagement capabilities with a modern digital commerce experience. We have more than 3100 customers across government, utilities, healthcare, financial services, corporate and nonprofit giving, all using our InvoiceCloud, HealthPay24, and DonorDrive solutions.

We saw excellent momentum in the fourth quarter and the full year driven by strengthened customer win, go-live, and the continued adoption of our digital solutions. During the fourth quarter, we saw a strong new customer acquisition fueled by our growing network of alliance partners in our core verticals. One example of the traction we're seeing with our alliance partners is InvoiceCloud's partnership with Harris Utilities Group. InvoiceCloud is the largest payments partner for Harris Utilities Group and that partnership continues to expand with the launch of the SilverBlaze customer engagement portal solution by Harris.

Hundreds of mutual customers benefit from our Harris partnership, including the city of Arlington, Texas, who has been working on driving paperless billing and online payment adoption. The city of Arlington, since working with us, has already realized an estimated 60% decrease in payment-related calls and $30,000 in annual savings in printing cost alone. Advantages such as these underscore the great value that our enterprise product and the leadership teams are bringing to the market. Speaking of leadership, we're particularly excited about the new addition of Kevin O'Brien, who will be leading this business as president of enterprise to build upon our clear, steady success in this space.

Kevin comes to us from PTC and brings an excellent track record of leadership and product and go-to-market that will be valuable for our enterprise solutions. Looking forward, the market for customer engagement and online bill payment software remains vast and organizations are becoming increasingly aware that driving digital self-service and providing customers with multiple ways to pay has been proven to reduce late or loss payments and to increase customer satisfaction overall. With that, I'll turn the call over to our CFO, Cassandra Hudson. Cassandra?

Cassandra Hudson -- Chief Financial Officer

Thank you, Bob. I appreciate everyone joining us today for our Q4 and full year 2021 earnings call. We delivered excellent Q4 results, which well exceeded the guidance we provided on our last earnings call for revenue and adjusted EBITDA. Total revenue for Q4 was $61.6 million, representing an increase of 37% year over year.

The two key metrics driving our strong revenue results are total customer count and transactions processed. As of the end of Q4 2021, our total customer count increased by 23,000 to 83,000 total customers, which grew 37% and was mainly as a result of new customers acquired within our SMB segment. Similarly, we saw 41% growth in transactions processed by our solutions year over year was 31.2 million transactions in Q4 2021, compared to 22.1 million in Q4 2020. We also saw continued strength in our net revenue retention rate, which was 119% for 2021, driven by our SMB customers continuing to add licenses for additional practitioners and increased utilization of our payment solutions.

In addition, our net revenue retention rate is fueled by growth in digital payment adoption for existing customers within the enterprise segment. Our SMB segment continues to perform exceptionally well with fourth quarter revenue coming in at $31.1 million, representing 55% year-over-year growth. Subscription revenue of $21.2 million, grew 48%, driven by continued growth in new customer adds and add-on licenses for additional practitioners. Transaction and usage-based revenue of $9.5 million grew 68% as our customers continue to process more transactions on our platform.

Our enterprise segment also delivered strong results with reported revenue of $30.6 million, representing 23% year-over-year growth. Our enterprise revenue growth was impacted by a one-time hardware sale of $700,000 that occurred in Q4 2020, associated with the migration of customers from legacy on-prem solutions to our HealthPay24 SaaS platform. The vast majority of the revenue in our enterprise segment is derived from transaction and usage-based fees, which grew 28% in Q4 2021. To provide further color on the topline and address the market interest in COVID in our quarterly growth compares, I want to share the following, as well as outline growth drivers that we see for 2022.

For EngageSmart, COVID accelerated our top-line growth rate in 2020 across both segments of our business. With respect to SMB, we were in a great position to serve the immediate increase in demand that we saw from mental health practitioners at the outset of the pandemic. We had elevated levels of new customer adds in Q2 and Q3 of 2020 as practitioners quickly added digital capabilities and solutions in a mostly virtual world and have been stable over the last five quarters. In addition, we saw higher revenue from existing customers as they added practitioners to their practices and processed more payments through us.

We believe coming out of COVID, our SMB segment will continue to benefit from strong secular tailwinds in digitalization and technology adoption. For enterprise, the need for contactless payments drove an improvement in the rate of digital payment adoption across our InvoiceCloud customer base, accelerating growth from existing customers throughout 2025. Now that things have normalized, we expect more consistent top-line growth rates in 2022 as we move on from COVID comparison. In terms of secular growth drivers for our business, the tailwinds remain highly attractive.

In SMB, the wellness markets we serve today are large and relatively untapped. We remain confident that SimplePractice tailwinds will continue to benefit from high demand for digital transformation within our target market, low competition, strong reception for our SimplePractice offering, and a high LTV to CAC ratio that can be dialed into investments to drive growth. Our COVID silver lining is that we have a larger installed base for SimplePractice that has a pattern of adding license subscriptions and payment transaction volumes as their businesses grow. It also means a larger base of customers who provide word-of-mouth referrals, which is a major source to feed our top of funnel trials.

Another growth opportunity in our SimplePractice business is the continued build-out and innovation of our product suite as we further tailor it to suit the nine new practice areas we now address. As Bob illustrated with dietitian example, we are in a position to advance our offerings to further innovate on new features to serve distinct vertical needs. This should positively impact top of funnel activity. Finally, we are rolling out new pricing and packaging, including an entry-level option that we believe should help attract more practitioners to our solutions.

We have incorporated our telehealth offering into the higher-tiered packages to better align with the needs of our customers. For enterprise, new customer go-lives will continue to be a core driver of our growth as we expect a meaningful portion of our '22 growth to come from billers going live within the year, as well as the full year impact of customers that went live in 2021. Transaction growth with our existing billers, driven by increased digital payment adoption, will also continue to contribute to our growth in 2022. Now moving on to margins.

Our adjusted gross margins for Q4 2021 decreased to 78% from 79% in Q4 of 2020, driven by the migration to a new improved telehealth backend provider in early 2021 and additional licensing costs incurred in Q4 2021, both for our SMB segments. Sales and marketing expenses increased $7.8 million to $21.5 million, driven by our continued investments for growth in new customer acquisition with increased investment in our SMB segment as we target new channels and broaden our brand to reach customers within our 10 wellness markets. R&D expenses increased $3.6 million to $9.3 million, driven by our investment in engineering headcount focused on new product development within our SMB segment, as well as enhancing our existing solutions to maintain product leadership. G&A costs increased $2.9 million to $11.5 million due to absorbing public company operating costs following our initial public offering in September.

Adjusted EBITDA was $6.3 million for the quarter, representing 10.2% margin, compared to $7.8 million or 17.4% margin in the fourth quarter of 2020. As a reminder, we experienced a meaningful improvement in profitability in 2020, driven by our strong SMB revenue growth, as well as a temporary easing in our spending levels due to COVID. While we have since ramped our investment spend and are investing heavily in product development and sales and marketing to drive revenue growth. Given the opportunities we see in the marketplace, we continue to remain highly profitable.

Moving to the balance sheet. as of December 31, 2021, we had $254.3 million in cash and cash equivalents. During the fourth quarter, our change in cash was mainly related to free cash flow of $2.7 million, offset by the payment of $2.4 million of costs associated with our initial public offering. With that, I'll move on to our outlook for the first quarter and full year of 2022.

For Q1, we expect revenue in the range of $61 million to $62.5 million, which implies 30% growth year over year at the midpoint of our range. We expect adjusted EBITDA in the range of $5.4 million and $6.2 million, which represents an adjusted EBITDA margin of 9.4% at the midpoint. For the full year, we expect revenue to be in the range of $280 million and $285 million or revenue growth of approximately 31%. For adjusted EBITDA, for the full year, we expect to be in the range of $29 million and $31 million, which represents an adjusted EBITDA margin of roughly 10.6% as we continue to invest to drive growth and maintain product leadership.

As you adjust your models, please keep the following in mind. We typically see a step down in revenue in Q1 on a sequential basis in our Enterprise segment due to the timing of transactions in Q4 associated with tax billing within InvoiceCloud and the concentration of large fundraising events for DonorDrive. We expect that sales and marketing spend will increase meaningfully as a percentage of revenue as we invest within SMB to drive top of funnel, continue building with SimplePractice brand across all the wellness markets we serve, and continue to add sales capacity within the Enterprise segment. We expect R&D spend will increase as a percentage of revenue driven by our investment in innovation to maintain products leadership.

We expect G&A cost to decrease as a percentage of revenue after fully absorbing public company operating costs in the second half of 2022 and we expect depreciation to increase approximately 20% year over year, driven by an increase in capitalized software costs. Given the opportunities we have in our current markets and our track record of success, we continue to target top-line growth rates at or above 30% for the next several years. From a long-term perspective, we are targeting EBITDA margins of 30% or higher comprised of growth margins within the 80% to 82% range, sales and marketing expenses of 25% to 30% which will vary based on overall revenue growth, R&D of 12% to 15% given our focus on maintaining overall product leadership, in G&A in the 8% to 10% range that we've realized back-office efficiencies and economies of scale. I'll now turn the call back over to Bob for closing comments. 

Bob Bennett -- Chief Executive Officer

Thank you, Cassandra. In summary, we are excited about the record results we delivered in our first year as a public company, including a strong finish in Q4. Our solutions have high adoption rates rooted in excellent customer affinity, as evidenced by customer count, trial conversion, transaction volume, net revenue retention, and third-party awards. EngageSmart success will continue to be driven by three simple factors: first, our proven customer-focused playbook driven by A players.

Companies are simply groups of people organized around a common surface. We are proud to have incredible talent across the entire organization. Second product leadership as measured by adoption. Customers don't want to regularly make system changes.

They want to work with someone who sets the bar and maintains product leadership as judged by adoption that's EngageSmart. Third, our large market and runway. We are still in very early innings and have captured less than 1% of market share and we have the best SaaS solutions in our verticals. We continue to be excited about the future.

We are focused on delighting our customers, growing our business, and creating shareholder value while we make a positive impact in the world. We appreciate you all joining us on this call. Thank you very much. 

Questions & Answers:

Operator

[Operator instructions] We will pause here briefly as questions are registered. The first question comes from Bhavin Shah with Deutsche Bank. Please proceed. 

Bhavin Shah -- Deutsche Bank -- Analyst

Great. Thanks for taking my question and congrats on a strong end for 2021. Just first for Cassandra. Cassandra just in terms of your fiscal '22 guidance, any thoughts on how we should think about the performance of SMB versus enterprise going forward? And in particular, how should we think about the recent price changes as SimplePractice kind of flow-through model.

I mean, by your math, it could imply meaningful ARPU? But any additional color would be appreciated. 

Cassandra Hudson -- Chief Financial Officer

So, in terms of the guide for 2022, we're not guiding at the segment level, but our total revenue guidance for both Q1 and the full year 2022 implies 30% growth or higher at the midpoint of our range. And that assumes stable growth continuing from both segments. Continued strength in terms of revenue growth from SMB well above the fleet average of our total revenue growth and then kind of consistent growth rate from the enterprise segment with what we've been seeing in the back half of 2021. And then in terms of contribution from SimplePractice on the pricing side, it's early days still, I would say we've just released our rolled out pricing to new customers and are transitioning pricing for existing customers over the first half of this year.

For us, those changes I think put us in a good position to serve and drive better customer acquisition on the lower end with the introduction to an entry-level offering that we didn't have previously. And then we've also incorporated telehealth into the offering on the higher price tier. So, for us, in terms of revenue contribution for existing customers, we see an impact of about 5% to 10% in terms of increased ARPU expansion overall, that's our current expectation, but more to come, like I said, early days. 

Bhavin Shah -- Deutsche Bank -- Analyst

That's very helpful and I appreciate the additional color. Just a quick follow-up maybe for Bob. Just as we think about the non-additional verticals in SimplePractice, where do you think are the low-hanging fruit of it? Which verticals do you see yourself having the most success over the next coming quarters to years? And how much will kind of having the starter package really help catalyze adoption there? 

Bob Bennett -- Chief Executive Officer

Yeah, so, I think that we're still seeing very strong inroads in mental health, of course, but the new professions of speech language pathology, occupational therapy, Capterra recently listed us as a high scorer for massage therapy as well. Those are well underway and we're seeing conversion rates in the mid to high 30% there right now with very strong retention similar to our mental health. So, I think that those three will continue to be high chargers for us, but we are continuing to push forward in others like physical therapy, nutrition, dietitians. acupuncture, physical -- sorry chiropractor.

So, where intent, we're going to get them all. We're on our way.

Bhavin Shah -- Deutsche Bank -- Analyst

Perfect, helpful. Congrats, again. Thank you. Thanks for taking the question.

Bob Bennett -- Chief Executive Officer

You bet.

Operator

Thank you, Bhavin. The next question comes from John Davis with Raymond James. Please proceed. 

John Davis -- Raymond James -- Analyst

Hi, good afternoon, guys. Maybe quickly, Bob, start, you have $250 million or so on the cash on the balance sheet, valuations across everywhere seem to be coming down. So, I want to ask two questions on capital allocation. One is, what's the top of the list, have you seen kind of the bid-ask spread normalize? And then two, thoughts on kind of DonorDrive and HealthPay24, do those assets fit strategically -- are there assets you could buy to accelerate the growth there just given kind of the relatively and material part of revenue? Just thoughts there would be helpful. 

Bob Bennett -- Chief Executive Officer

So yeah, the bid and ask, I'm not sure that there's been such a compression or normalization yet between bids and asks, but we're certainly in the market now with our Alan Canzano as the EVP of corp dev and strategy. So, we're looking around mapping and evaluating several different things, some of which are -- could be impactful in our emerging businesses like HealthPay24 or DonorDrive. Too early to say where we go there yet, but we're active. And yes, we know we've got the capital and the currency to be able to be active, we plan to be. 

John Davis -- Raymond James -- Analyst

And then Cassandra, just as we -- two things I want to touch on in regards to kind of the guide one to the '22 and one to the longer-term guide. So, on '22, if I just look at 1Q guide and kind of fill in the rest of the year, anything to call out from a cadence or seasonality perspective? I mean, it appears that you're kind of in the high single-digit growth sequentially throughout the year to kind of the midpoint of the guide. So just curious there any calls out in kind of the latter part of the years? And then bigger picture, 80% to 82% gross margins, 30% plus EBITDA margin, not trying to pin you down, like how do we think more on the gross margin side? Is this something we can see 50 to 100 basis points a year? And then how do you think about letting kind of some of the top-line upside slowing down to the bottom line or EBITDA if and when that would happen in '22? 

Cassandra Hudson -- Chief Financial Officer

So, I guess, first on the seasonality question. The SMB business is pretty smooth from a sequential perspective. Where we do have a better seasonality is more on the enterprise side. So to the point of your question, Q4 is a pretty big quarter for us within enterprise.

For revenue, there's a concentration of tax billing with an InvoiceCloud that occurs in that period and also a concentration of events within DonorDrive. So, we do see a sequential step down actually between Q4 and Q1 as a result of that seasonality. Otherwise, it is pretty stable and smooth from a total revenue perspective. And then on the long-term side, first on gross margins, I think it will be a couple of years out here before we see that level of expansion.

We're pretty well optimized today on the margin. I think where you'll see the upside coming from is higher price points, I think, for us in the future and then further optimization on the customer support delivery side. Those are kind of our two big levers to drive the margin expansion. And then EBITDA, I would say, in terms of achieving that 30% target is a little bit longer out and really depends on the opportunities we see right now.

We have huge opportunities to drive top-line growth. That's where we're focused. To the extent that that changes, we'll obviously think a little bit differently about how quickly we get to that target EBITDA margin. 

John Davis -- Raymond James -- Analyst

Just quickly the follow-up. If we were to see upside of the top line, you guys anticipate spending that in kind of holding the EBITDA guide? Or should we kind of expect that you would see some higher EBITDA if we were to get top-line upside this year? 

Cassandra Hudson -- Chief Financial Officer

We'll largely be reinvesting for growth this year in those two main areas that I mentioned on the call. So, reinvesting in terms of marketing predominantly on the SMB side and then kind of continuing to invest in our product road map.

John Davis -- Raymond James -- Analyst

OK, very helpful. Thanks.

Cassandra Hudson -- Chief Financial Officer

Thank you.

Operator

Thank you, Sterling. The next question comes from Bob Napoli with William Blair. Please proceed.

Bob Napoli -- William Blair -- Analyst

Thank you. Good afternoon, Bob and Cassandra. Nice job on the quarter, really good to see.

Cassandra Hudson -- Chief Financial Officer

Thanks, Bob.

Bob Napoli -- William Blair -- Analyst

So, in the SMB segment, what percentage today -- can you remind me what percentage or remind us what percentage is mental health? And as you look out over the next five to 10 years, if you would, I guess or 3% to 5% maybe, what do you think the other verticals organically would -- what is the opportunity? What would you expect that mix to look like over time? 

Cassandra Hudson -- Chief Financial Officer

So today, the SMB business with SimplePractice is predominantly mental health. So, we think north of 90% mental health and then less than 10% for the additional specialties. So, the additional specialties are nascent today, but that's where we're seeing pretty fast growth and expect to continue to drive faster growth there over the next several years. So, we'll see that mix shift up.

I couldn't tell you with any precision today on where that would get to, but certainly, we'll start to see additional specialties pick up more share. I do think it will be concentrated in the verticals that we know we're getting strong traction today. So, speech language pathology, occupational therapist, massage therapy, and then also physical therapy. 

Bob Napoli -- William Blair -- Analyst

And you are ramping up marketing in that part of the business. Can you give any -- give us some color on kind of the trends in LTV to CAC or the -- any different trends in the conversion rates from free to use to paying customers? And does it vary -- do those LTVs and conversion rates vary much by vertical?

Cassandra Hudson -- Chief Financial Officer

So, on an LTV to CAC basis, certainly, we're highly efficient in mental health for SMB. So, we do see higher CAC for the additional verticals, but we're looking to -- we'll look to optimize those over the next several years. For 2022, I think we're kind of deliberately investing for growth and expect to take down our LTV to CAC ratios a little bit as a result, but still in a highly -- still a highly efficient model, think higher than 10 times LTV to CAC ratio is less than 12 months on payback, so it makes perfect sense to do. And I think another thing that we're doing in the year is really investing heavily in broadening the brand, so that we're speaking more holistically beyond mental health to all of these different wellness verticals.

So, those are kind of the two main areas of focus from a marketing perspective. 

Bob Napoli -- William Blair -- Analyst

And then just lastly, any update on Monarch. The monetization of Monarch is -- what is the strategy behind Monarch? Does that have a chance to become a material part of the business? 

Bob Bennett -- Chief Executive Officer

So we still -- we're still in early stages. It's becoming more and more evident that it's a really critical piece of the puzzle for us to drive organic growth, really of new trials right now in mental health, but ultimately across all of our specialties for clinicians. No plans to create material revenue from it in 2022, Bob, but we are -- we do have some interesting enterprise pilots going on that are proving out to be very effective for us to drive appointments, good solid traction. It's going to be a great long-term play for us.

Bob Napoli -- William Blair -- Analyst

Great, thank you. Thanks, Bob. Thanks, Cassandra. I appreciate it.

Cassandra Hudson -- Chief Financial Officer

Thank you.

Operator

Thank you, Bob. The next question comes from Scott Berg with Needham and Company. Please proceed.

Scott Berg -- Needham and Company -- Analyst

Hi, congrats on the quarter and thanks for taking my questions. I have two. Let's start with the SimplePractice business. I saw the change in pricing.

From what you've seen early so far from customers, how should we think about the acquisition or kind of cadence around pricing going forward? Do you see the new pricing really as an opportunity just to capture maybe some customers on the low-end that previously didn't, maybe didn't attach to the platform or maybe some of your customers that were likely to buy anyways may take a lower price point, but then be more apt to kind of get upsell or on the higher price points as their life with the company goes forward? 

Cassandra Hudson -- Chief Financial Officer

Scott, thanks for the question. So certainly, still early days on the pricing change for SimplePractice. Motivation there really was around having the starter packet to address customers who are -- or sorry, practitioners who are earlier in their life cycle. So, really capturing a segment of the market that we're not really getting today.

And then also just kind of realigning the value of our offerings that have kind of been sold in add-on fashion up until now to the needs of our customers. So, we've woven telehealth into the higher-priced offerings. I don't think you'll see us -- we're not going to be programmatic about pricing. It really will be in line with features and rollout of features to our customers.

So, not something that you'll expect from us every year or anything like that.

Scott Berg -- Needham and Company -- Analyst

And then my follow-up is on the enterprise business. It looks like -- or I guess, transactions in general, price -- transaction volume was up 41% year over year, but revenues were up roughly 36%, if our math is correct there. How should we think about pricing around your payment services there? Are they pretty stable at this point? Or should we maybe expect some further changes, whether that's up or down over the course of the next 12 months? Thank you.

Cassandra Hudson -- Chief Financial Officer

Pricing in the enterprise segment has been very stable. I wouldn't expect anything in the way of changes, at least as it relates to 2022.

Scott Berg -- Needham and Company -- Analyst

Great. That's all we have. Thank you.

Cassandra Hudson -- Chief Financial Officer

Thank you.

Operator

Thank you, Scott. The next question comes from Ashwin Shirvaikar with Citigroup. Please proceed.

Ashwin Shirvaikar -- Citi -- Analyst

Hey, Bob. Hi, Cassandra. Good results and outlook and appreciate all the detail.

Cassandra Hudson -- Chief Financial Officer

Thank you.

Ashwin Shirvaikar -- Citi -- Analyst

So, I guess the first question I have is if you could provide some idea of the baseline, right? When you have practitioners come in today, my understanding is most of them go into what used to be known as Pro and is now Plus. Is that still the case that you're seeing? And is it a revenue split you could provide between solo versus group? And I guess let me stop there. Any sort of metrics or granularity that helps us form a baseline of what the situation is today and then we can talk about the pricing, I guess. 

Cassandra Hudson -- Chief Financial Officer

It's early in the pricing rollout. So, a bit tough for us to say what the actual mix between all of the product sensing ultimately will be. What I will tell you is we've seen really strong utilization of our higher-priced offerings across our existing customer base today. So, you're talking 79,000 customers, the overwhelming majority of them were using our higher-priced offering before we rolled out these new offerings.

So, our expectation is that based on the features in each one of those packages that will skew more heavily to the two higher-priced offerings and that on the starter pack, we'll be picking up clinicians that we hadn't otherwise been seeing who are much earlier in their journey and don't necessarily need or aren't planning on using the fully featured option right away, but then ultimately, they'll upgrade into that. In terms of solo versus group, again, pretty stable trends there. We have 1.6 clinicians on average per customer and we've seen that tick up over the past two years or so. So, pretty stable trends overall, and we've seen strong uptake from groups, which has been great to see. 

Ashwin Shirvaikar -- Citi -- Analyst

And just moving to the enterprise side. I guess there's been a couple of management changes. What should we expect from that? And could you also comment on sort of the pipeline of large accounts that are considering the solutions there now particularly for InvoiceCloud? 

Bob Bennett -- Chief Executive Officer

We are super excited about Kevin O'Brien coming in. He's got a great background in go-to-market, product and alliance-led go-to-market strategies, both with PTC and with Oracle. At PTC, he managed over $400 million in revenue in the product line that he had. So, super excited about that as the new President of our Enterprise Solutions.

And I would say that we are doing really well with some decent-sized accounts. We actually -- you may remember that we had a new alliance with Guidewire in the insurance segment that I think we announced in 2021. We have already -- we've already closed the largest financial services deal that we've ever had with -- as a Guidewire -- with the Guidewire partner. So, we're off to the races.

That gate is now open. So, we're really excited about our migration up the enterprise chain, and I think we've got pretty prospects there.

Ashwin Shirvaikar -- Citi -- Analyst

Awesome. Great to hear. Thank you.

Cassandra Hudson -- Chief Financial Officer

Thank you.

Operator

Thank you, Ashwin. The next question comes from Terry Tillman with Truist. Please proceed.

Terry Tillman -- Truist Securities -- Analyst

Yeah. Hi, Bob and Cassandra. I'll echo the congratulations. I'm going to keep myself reined in, I'm just going to ask two questions.

Actually, one like almost a two-part, so maybe it's two and a half questions, I hope that's OK. I think first, I'm going to ask on the enterprise side. I think you all talked about outbound campaigns. I'm curious, it's kind of like a same-store sales question.

How much of your customer base is starting to use outbound campaigns? And what kind of lift is that creating in terms of getting more folks to do paperless billing and payments as opposed to maybe just kind of natural expansion or a citizen or somebody that's going to add another online payment service or etc.? I'm just curious kind of like what you see from those different angles on how same-store sales grow? And then I had a follow-up.

Bob Bennett -- Chief Executive Officer

The outbound campaigns are really targeted at delinquent payables, right, or receivables. So, they typically -- and we use -- outbound campaigns are directed through our IVR, Interactive Voice Response system that makes a phone call and you may have forgotten, but your bill is late or your payment is late, click one to hear your bounds, click two to make a payment. So, I think the lift is -- it's meaningful. It's early stages for us because we rolled it out in sort of the second half of last year.

But I would say it is incremental, not hugely material, Terry. I don't know if that helps. 

Terry Tillman -- Truist Securities -- Analyst

It definitely helps. And just a follow-up question. I know Cassandra was talking earlier about kind of a conscious decision to probably bring down the LTV to CAC in 2022, as there's some incremental spending maybe from branding. One thing I'm curious about though, you have this proven water mouth that's amazing in terms of how that drives the customer growth and conversions paid customers.

But is there any kind of testing and learning of other kind of top-of-funnel go-to-market activities you're thinking about in '22? 

Cassandra Hudson -- Chief Financial Officer

I think you'll see us still remain very focused on targeted digital marketing efforts. We certainly spent a fair bit of time in Q4, testing new marketing programs and channels. We'll continue to do some of that today. But I think, by and large, we've found a very efficient go-to-market motion for us on the SMB side.

So, we're more or less doubling down on that and really investing in the brand and going after our additional specialty markets a little bit more deliberately. But beyond that, nothing terribly new or different from the model we have today. 

Operator

Thank you, Terry. The next question comes from Jason Kupferberg with Bank of America. Please proceed.

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, guys. I wanted to just start with NRR, really strong here in 2021. I think you said 119%.

How should we think about that trending in 2022? Do you think you can stay in this kind of triple-digit zone? 

Cassandra Hudson -- Chief Financial Officer

I think we'll see pretty stable trends there. We still see a lot of opportunity to expand ARPU on the SMB side, so that naturally, we'll keep NRR elevated. Also, with the pricing and packaging change, we're expecting that to have a positive impact on ARPU, so that will certainly play into it a little bit and then continued pretty stable growth on the adoption side of things for enterprise. So, pretty stable with what we saw in 2021. 

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

And just on the margins, how much of a headwind are you expecting in 2022 from having like a full year of public company costs? I'm just kind of looking at year over year and I know there's going to be some decline at least at the midpoint 2022 versus 2021, but I'm assuming some of it is just a function of having a full year of absorbing those costs? 

Cassandra Hudson -- Chief Financial Officer

That's exactly right. So, we started incurring public company costs in Q4 largely of this past year. So, with the full year impact of that, you're looking at an incremental roughly $7 million to $8 million hitting the P&L. 

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Seven million dollars to $8 million incremental year over year in '22? 

Cassandra Hudson -- Chief Financial Officer

Correct. 

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

OK, great. Thank you, guys.

Cassandra Hudson -- Chief Financial Officer

Thank you.

Bob Bennett -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from Josh Beck with KeyBanc. Please proceed.

Unknown speaker

Hey, guys. This is Maddie on for Josh. Thanks for taking my question. The first question that I have for you is with clinics opening back up in-person, how you're seeing that effect on your telehealth and where you see that going in the future? And then my second question is any sort of color around payback trends that you're seeing across the businesses? 

Bob Bennett -- Chief Executive Officer

I'm going to say that the -- we are really not seeing any material change or deviation in the mix of new clinicians taking on the product and telehealth and so forth. We have sort of been bundled a little bit and we include telehealth in our top bundle, which has a lot of other things as well. So, we can't be completely sure that they're taking it for telehealth only. But we think that telehealth is a new normal, frankly, going forward for mental health clinicians for sure.

It's just -- they're all -- they're serving clients all across the country now based on their specialty. So, I think that we're pretty solid on telehealth for the future. 

Cassandra Hudson -- Chief Financial Officer

And then I think the second part of your question was on payback periods. So, in terms of sales and marketing efficiency, we certainly did increase the level of investment in Q4, so saw paybacks dip slightly. And we're expecting them to dip slightly again in 2022, as we invest to drive top-line growth, in particular on the SMB side of the business. So, that's where we're putting our investment.

You still see payback periods less than 12 months in the SMB space by far. So, that's kind of what we're using as our guide today.

Unknown speaker

Awesome. Thank you, guys.

Cassandra Hudson -- Chief Financial Officer

Thank you.

Operator

Thank you, Maddie. We have a follow-up from Sterling Auty. Please proceed.

Sterling Auty -- JPMorgan Chase and Company -- Analyst

Yeah. Thanks, guys. Actually, it's not a follow-up. Thanks for squeezing me in for my first question.

Just wanted to know, on the enterprise side, you talked about new customers ramping being a big part of '22 growth. Can you talk about what you saw in terms of sales cycles in the enterprise business in the fourth quarter and what the pipeline looks like for '22? 

Cassandra Hudson -- Chief Financial Officer

So, from a sales cycle perspective for enterprise, they vary between three and nine months generally. And then we have an implementation cycle kind of somewhere in the six to nine months, pretty stable trends there. I don't know, Bob, anything you'd add. 

Bob Bennett -- Chief Executive Officer

No, I think that we had a good quarter for bookings and go-lives. We had a really good second half, frankly. So, I think that no real surprises, kind of a steady cadence. 

Sterling Auty -- JPMorgan Chase and Company -- Analyst

And then one follow-up on the enterprise side. Are you seeing your customers do anything to further promote adoption and usage? I would imagine the pandemic, obviously, was a huge driver to that adoption. But are there any kind of communication email programs or other things that you're seeing that are helping drive further adoption maybe into the base that they just couldn't get during the pandemic? 

Bob Bennett -- Chief Executive Officer

I think that we do provide a lot of guidance to our customers to help them understand opportunities for increasing digital adoption, online payment adoption. As you know, our -- on the InvoiceCloud side, our billers perfect world is 100% online payment, preferably through autopay and 100% paperless billings. So, we provide a lot of tips that help them get there and actually work with them to run marketing programs that absolutely drive -- drives higher adoption.

Sterling Auty -- JPMorgan Chase and Company -- Analyst

Got it. Thank you.

Cassandra Hudson -- Chief Financial Officer

Thanks, Sterling.

Operator

Thank you, Sterling. We have another follow-up from Bob Napoli. Please proceed.

Bob Napoli -- William Blair -- Analyst

Thank you for the follow-up. Just on enterprise as well. I think, Bob, last quarter, you had explained enterprise is just dipping their toe into the consumer finance and insurance segment, and you signed a major customer in Guidewire? How large, first of all, is consumer finance and insurance in enterprise? And how big is the opportunity? And do you have a pipeline there? 

Bob Bennett -- Chief Executive Officer

So, much stronger pipeline in insurance to take them in reverse order, Bob. But we have a strong pipeline -- certainly, have a strong pipeline in insurance, driven by our alliances -- our alliance partners in insurance. And I would say that in consumer finance, we have a handful of consumer finance customers, but we have so much pipeline and activity going on in insurance that we're much more focused on that because it's happening right now. We're delivering live.

It's got a very strong product-market fit there on the part of the gate, which we also have in consumer finance. In terms of the size of the market, consumer finance is probably the largest vertical that we have. And so we're early days there. We will get to it.

We're already in it, but we will get bigger in it as we move forward. So, that's also an opportunity for us to look around and see if there are any inorganic opportunities as well. 

Bob Napoli -- William Blair -- Analyst

And is there any -- in consumer finance, is it targeted toward like auto loan repayments or mortgage repayments or any specific sector? 

Bob Bennett -- Chief Executive Officer

Primarily auto loan. I think auto loans and general lending. There's some -- we're also in discussions with some mortgage finance and so forth. But on the consumer finance side, it's been primarily auto. 

Bob Napoli -- William Blair -- Analyst

Great, thank you. Appreciate it.

Operator

Thank you, Mr. Napoli. There are no additional questions registered at this time. So, I'll pass the conference to Bob for closing remarks. 

Bob Bennett -- Chief Executive Officer

Thank you. And thank you for all your questions. It's great to hear your voices again. It has been quite a year.

EngageSmart delivered outstanding results in our first year as a public company with 48% annual revenue growth. Momentum across the business drove another quarter of record revenue performance. Standouts are the strong customer growth numbers and exceptional customer retention. Overall, our positioning continues to be compelling as we address a huge market opportunity as product leaders in the markets we're focused on today.

Thank you all for joining us. We look forward to speaking with you again at the Bank of America Electronic Payment Symposium on March 21 and on our Q1 call later this spring. Thank you.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Josh Schmidt -- Investor Relations

Bob Bennett -- Chief Executive Officer

Cassandra Hudson -- Chief Financial Officer

Bhavin Shah -- Deutsche Bank -- Analyst

John Davis -- Raymond James -- Analyst

Bob Napoli -- William Blair -- Analyst

Scott Berg -- Needham and Company -- Analyst

Ashwin Shirvaikar -- Citi -- Analyst

Terry Tillman -- Truist Securities -- Analyst

Jason Kupferberg -- Bank of America Merrill Lynch -- Analyst

Unknown speaker

Sterling Auty -- JPMorgan Chase and Company -- Analyst

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