EverCommerce Inc. (EVCM) Q4 2021 Earnings Call Transcript

EverCommerce Inc. (EVCM -0.22%)
Q4 2021 Earnings Call
Mar 14, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to EverCommerce fiscal year 2021 fourth quarter earnings call. My name is Carmen, and I will be your operator for today. [Operator instructions]. As a reminder, this conference call is being recorded today, Monday, March 14, 2022.

And now I would like to turn the conference over to Brad Korch, senior vice president and head of investor relations for EverCommerce. Please go ahead.

Brad Korch -- Senior Vice President of Investor Relations

Good afternoon, and thank you for joining. Today's call will be led by Eric Remer, EverCommerce's chairman and chief executive officer; and Mark Thompson, EverCommerce's chief financial officer. Joining them for the Q&A portion of the call is EverCommerce's president, Matt Feierstein. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months and year ended December 31, 2021.

For a link to the live or replay webcast, please visit the investor relations section of the ever commerce website, www.evercommerce.com. The slide presentation and earnings release are also directly available on the site. Please turn to Page 2 of our earnings call presentation while I review our safe harbor statement. Statements made on this call and contained in the earnings materials available on our website that are not historical in nature may constitute forward-looking statements.

Such statements are based on the current expectations and beliefs of management. Actual results may differ materially from these forward-looking statements due to risks and uncertainties that are described in more detail in our filings with the SEC. We undertake no obligation to publicly update or revise these forward-looking statements, except as required by law. We will also refer to certain non-GAAP financial measures to provide additional information to you, our investors.

A reconciliation of non-GAAP to GAAP historical measures is provided in both our earnings press release and our earnings call presentation. I will now turn the presentation over to our CEO, Eric Remer.

Eric Remer -- Chairman and Chief Executive Officer

Thank you, Brad. I'm excited to share with you that EverCommerce reported excellent fourth quarter results that capped a great year for the company and exceeded revenue and EBITDA guidance. EverCommerce is delivering on its strategy to be a leading provider of service commerce solutions, simplifying and powering the lives of business owners across the globe. On today's call, I will summarize our investment business highlight fourth quarter results and discuss our key priorities for 2022 before turning our call over to Mark to dive deeper into our financials.

EverCommerce provides tailored end-to-end SaaS solutions that support the highly diverse workflows and customer interactions at professionals and home services, health services, and fitness and wellness services need to automate manual processes, generate new business and create more loyal customers. We had the first set of over 600,000 global customers, EverCommerce is leading the digital transformation of the service economy. EverCommerce generates nearly $0.5 billion in annual revenue. Further, we are among an elite group of growth-focused software companies that balance durable growth with sustainable profitability.

We grew revenue 45% in 2021, which is inclusive of 21% pro forma organic growth. We did this while maintaining 22% adjusted EBITDA margins. Supporting this growth and profitability are strong customer economics, illustrated through a high LTV CAC ratio. We have a massive market opportunity with one of the largest addressable markets in the software and technology.

There were over 400 billion SMBs and over a $1 trillion market opportunity globally. In the U.S. alone, with a vast majority of our businesses, there is an over $0.5 trillion opportunity and more than 30 million businesses. Services are the backbone of the U.S.

economy, accounting for 77% of U.S. GDP and small businesses employ the majority of service professionals. By focusing and serving the vast community of service businesses that support consumers, homeowners, patients and members in local communities, EverCommerce is transforming the service economy. EverCommerce offers tremendous value to our customers by providing solutions tailored to the unique workflows and interactions through various service types require a plumber, to a doctor to obstructor the way which they generate new business, fulfill services, manage day-to-day operations and engage with customers is very unique.

Our software solutions not only provide a system of actions necessary to run our customers' daily business processes, but also the marketing solutions to attract new businesses, the building of payment solutions to collect effortlessly and the customer engagement solutions to create predictable and convenient experiences. Our solutions are cost effective, easy to implement and purpose-built for service businesses. We truly provide end-to-end solutions that these businesses need to compete and grow in a marketplace that is rapidly transforming. Looking at our key verticals, which are home services, health services and fitness and wellness services, all of them independently have very large TAMs.

Even with the growth we've experienced, globally penetrated less than 1% of the market and domestically just over 1%. As you know, we are focused on penetrating these verticals through a deliberate and tiered marketing and brand strategy that maximizes the legacy benefits of our solutions brands while building awareness and consolidated customer focus for EverPro, EverHealth and EverWell brands in their respective target verticals. Continued investment in these brands and consolidation of acquired brands enhance our cross-sell effectiveness customer experience and overall scalability. Our strong performance in the fourth quarter and for the full year validates our strategy.

In the fourth quarter, we reported 47% year-over-year revenue growth which included 24% pro forma organic growth. For the year, we drove more than 20% customer growth, and our total payment volume, or TPV, increased 21%. We balance our durable growth with sustained profitability and free cash flow generation. In the fourth quarter, we reported 22% adjusted EBITDA margins and 16% adjusted unlevered free cash flow margins.

Our operational momentum continued to accelerate with great progress on our onboarding of DrChrono and other solutions acquired in 2021; continued centralization of operational functions integration of solutions and operational platforms and investment in brand consolidations have supported both new customer acquisition and ARPU expansion. We also continue to make the investments necessary to sustain our growth scale operations and operate as a public company. As I mentioned earlier, we have a large base of diverse customers. We ended the year with approximately 617,000 customers, an increase of more than 20% year-over-year.

One of the powerful levers in our business model is the massive embedded opportunity to provide additional integrated solutions into our vertical software systems of actions, facilitate an up-sell and cross-sell with our customers. For the full year, we estimate that the average solutions ARPU stand at approximately 15% compared to the prior year. On an annualized basis, our net revenue retention was approximately 100% in Q4. We ended the year with more than 55,000 of our customers using more than one solution from Ever Commerce and more than 25% increase year over year.

We've barely scratched the surface of our estimated $5 billion embedded annual revenue opportunity. I'd like to spend a moment to drill deeper to the specific opportunity we have with the integrated billing and payment solutions, facilitating a frictionless payment process is mission-critical for any small business. Consumers have come to expect payments for products or services to be digital, easy-to-use, mobile-friendly and secured. For business owners, a seamless payment process meets higher conversion rates better efficiency accelerated cash receipts and increased revenue.

Ever Commerce Payment Solutions provide intuitive front-end experience for consumers and is tightly embedded within our various software applications. Increasingly, we see our customers embracing this powerful combination. We ended 2021 with an annualized total payment volume of TPV of approximately $9.1 billion. which represents a 21% growth since we first published this metric as part of our S-1 for the period ended March 31, 2021.

Facilitating the continued integration and revenue expansion of payment and adjacent marketing and customer engagement solutions for your cross-sell is a top priority for us. To support the durability of our growth, we have successfully augmented organic growth with a number of acquisitions that expand our market reach with additional systems of actions that can provide new opportunity for customer acquisition and ARPU expansion. We've developed a proven M&A playbook that allows us to quickly onboard new solutions expand growth momentum and deploy best practices. Our recent acquisition of DrChrono and leading SaaS practice management EHR and billing solution that serves more than 4,600 independent practices and 13,000 providers across various medical specialties is a great example of our M&A strategy in action.

It is accretive to our organic growth profile and significantly expands our market reach and penetration in a key vertical market. In the five months since we acquired DrChrono, we have fully onboarded this solution, and we are already seeing early positive results cross-selling among ever house solutions. We're actively investing in product enhancements in 2022 to fully capitalize on the growth opportunity with DrChrono while also driving better-than-expected cost optimization results as we leverage our centralized operating model. While DrChrono still provides a headwind to adjusted EBITDA margin in 2022, we expect it to be adjusted EBITDA neutral this year versus an adjusted EBITDA loss of approximately $4.5 million in 2021 on a pro forma basis.

We expect it to be a positive contributor to consolidated adjusted EBITDA in 2023 and beyond as the steps we've taken positions the solution well for strong revenue and profitability growth going forward. DrChrono is a great example of the types of acquisitions we will pursue. As always, we have a very active funnel of M&A opportunities that we are evaluating through acquisition framework. However, as we have stated several times in the past, we view M&A as a complement or highly predictable organic growth model, which allows us to remain very disciplined and only pursue opportunities that both enhance the overall EverCommerce ecosystem and our economic profile.

Looking ahead, we have several key priorities for our business in 2022. We will continue to invest in building trust and awareness of our ever family of brands into respective verticals. And the continued scale in our marketing, sales and customer success engines to maintain at least a 15% to 20% organic growth for the foreseeable future. We will invest in product development and build and optimize solutions support new feature launches and maintain market competitiveness.

We will advance our scalable operations initiatives, including systems and organizational consolidation to drive increased profitability and operating leverage over time. and we plan to selectively utilize M&A to expand capabilities and penetrate target market segments as we augment our organic growth engine. Now I'll pass things over to Marc.

Marc Thompson -- Chief Financial Officer

Thanks, Eric. Today, I'll review our fourth quarter fiscal 2021 results in detail and provide our outlook for the first quarter and full year of fiscal 2022. As Eric said, we're very pleased with our fourth quarter results, having exceeded the high end of our guidance range for both revenue and adjusted EBITDA, underscoring a really strong finish to the year and continuing momentum in our business. Total revenue in the fourth quarter was $135.6 million, up 47% from the prior-year period and above the high end of our original guidance.

Within total revenue, subscription and transaction fees were $99.7 million, up 55% from the prior-year period and marketing technology solutions were $29.3 million, up 24% from the prior year period. Q4 includes approximately $4.5 million of revenue from DrChrono, which closed on November 18. We manage the business for sustainable organic growth and utilize strategic acquisitions to augment this growth. As a result, we believe it's important for investors to evaluate our business growth on a pro forma basis which is how we measure and manage the business internally.

We calculate our pro forma revenue growth as though all acquisitions closed as of the end of the latest period were closed as of the first day of the prior-year period, including before the time we completed the acquisition. We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business. We are very pleased with our pro forma growth rate, which was 24% year over year in the fourth quarter and 21% for the full year. We experienced good growth across all three of our core verticals and our various products.

As Eric noted, we drove this growth while maintaining solid profitability. Fourth quarter adjusted EBITDA was $29.3 million, representing a 21.6% margin. This is above the high end of our Q4 guidance, having grown adjusted EBITDA 33% year over year. The year-over-year change in adjusted EBITDA margin is reflective of our investments in growth and scalable operations and the impact of public company costs.

Adjusted gross profit in the quarter was $92.7 million, representing an adjusted gross margin of 68.4% with the seasonally higher adjusted gross margin reported in Q4 2020. Turning to operating expenses. Sales and marketing expenses were $26.1 million or 19.3% of revenue, up from 15.2% of revenue in the prior year period. This increase was primarily driven by continued investments in growth through our various marketing channels and personnel.

Product development costs were $14.5 million or 10.7% of revenue, up from 8.8% of revenue in the prior-year period. This increase was due to investments in additions to our technology teams to support our various solutions, as well as centralized security operations, information technology and cloud engineering. G&A expense was $30.3 million or 22.3% of revenue, down from 33.3% of revenue in the prior-year period due to lower acquisition-related expenses. We continue to make significant investments in our centralized operating model and in our public company infrastructure.

Our centralized operating model aggregates many of the functions of our various operating units, including most G&A functions, and we believe is a key component of driving operating leverage over time. Not only are we balancing our high growth of profitability, but we are also generating substantial free cash flow. Looking at Slide 17, we're highlighting two free cash flow measures for the first time, the reconciliations of which are in the appendix of our earnings presentation. Our adjusted unlevered free cash flow for the quarter was $22.3 million, representing greater than 50% year-over-year growth and a healthy 15.8% margin.

On a full-year basis, our adjusted unlevered free cash flow of $77.3 million was approximately four times our annualized pro forma cash interest expense. Our strong balance sheet provides us great flexibility. We ended the quarter with $94 million in cash and cash equivalents and debt of $554 million. Total net leverage as calculated per our credit facility at the end of the quarter was approximately 3.7 times, consistent with our financial policy.

We have a fully undrawn revolver with $190 million of available capacity. We have no material maturities until 2028. I'd now like to finish by providing our outlook, beginning with the first quarter. For Q1 revenue, we expect total revenue of $140 million to $141 million, and we expect adjusted EBITDA of $21.5 million to $22 million.

For the full year fiscal 2022, we expect total revenue of $619 million to $625 million and adjusted EBITDA of $122 million to $124 million. Our 2022 outlook does not include any potential impact of M&A activity that could take place throughout the year. Our adjusted EBITDA guidance implies 20% margins for the full year 2022 and includes planned incremental public company costs as well as the beforementioned headwind from the DrChrono acquisition, which closed on November 18 of last year and negatively impacted adjusted EBITDA by $1.4 million in the fourth quarter. As Eric noted, we expect that DrChrono will be breakeven in 2022 and contribute positively to EBITDA in 2023 and beyond.

This cadence of margin expansion for onboarded solutions is consistent with our historical results and multiple other solutions that we have acquired and onboarded. Implied adjusted EBITDA margin also includes more than $6 million in incremental public company costs in 2022 as compared to 2021. Many of these investments are front-end loaded throughout the year, and we expect margins to accelerate throughout the year. To wrap up, EverCommerce's fourth quarter performance reflected strong momentum across our whole business.

Our organic revenue growth and profitability exceeded the rule of 40 and illustrate the strength of our durable business model. we believe EverCommerce is well-positioned to be a primary beneficiary of the digital transformation that is just getting underway among service SMB companies. Our focus is on continuing to execute on our strategic priorities that deliver consistent profitable growth that we believe can generate significant value for our shareholders. Operator, we're now ready to begin the Q&A section of the call.

Questions & Answers:

Operator

Thank you. [Operator instructions] We have a question from the line of Kirk Materne with Evercore ISI. Your line is open.

Kirk Materne -- Evercore ISI -- Analyst

Yes, thanks very much. Eric, can you just give us some sense of kind of what you're seeing out in the environment. These days, you guys obviously have a huge base of small business customers. And I think there's just a lot of questions about how things like inflation are playing into sort of demand for our customers.

And just how are you guys thinking about that as we head into '22, knowing this is still a big opportunity to sort of add a lot of new customers and take ARPU up as well.

Eric Remer -- Chairman and Chief Executive Officer

Well, Kirk, thanks for the question. I appreciate that. And we think about that, as you can imagine. And as we look at our core customers, we are really in kind of essential services.

If you think of the categories we serve from kind of our home services the customers that we're serving, most of them are doing break and fix it, so that kind of core plumbing electrical HVAC, but we don't see much impact on whether inflation goes up or things of that nature. Similar with our health services, you're dealing with kind of core medical and things that are going to continue regardless of some bumps in the economy. In the last category, kind of the fitness and wellness again, because we're dealing on that kind of smaller side of things, we have customers like Anytime Fitness. And at $10 a month, we don't see our kind of businesses being impacted greatly, it's really kind of smaller cost services that we -- as we look at our customer base, ultimately not be affected.

And just to take a step back and you bring up a really good question as we look at the overall world, with over 600,000 plus customers, not just in three verticals, but really in almost 35 verticals, five business lines and multiple revenue streams, things are going to happen across the ecosystem, as you can imagine, as we saw COVID that we feel really insulated against whatever may come our way.

Kirk Materne -- Evercore ISI -- Analyst

That's great. And then just one really quick follow-up for you. Obviously, we've seen valuations in the public market get hammered over the last couple of months or a few months. how does that impact, if at all, sort of your strategy around M&A, meaning are you seeing valuations changed in the private market? Kind of how do you -- does that impact anything? I raise you guys have a very long-term view, but just curious if it's impacting your discussions in any way.

Thanks.

Eric Remer -- Chairman and Chief Executive Officer

Yes. No, another good question. And we look at -- we're constantly tracking the marketplace. We have a large pipeline that we're constantly interacting with.

And I do think right now, you bring up a great point, there is a disconnection between public market valuations and private market valuations. So it allows us to be patient as we kind of kicked off in the call with organic growth, the core focus of the business and our belief that we'll maintain that for years to come, it gives us the kind of the discipline, the ability to be disciplined and make sure what we find in the marketplace makes sense for us both now and the future. So I think over the long term, we'll continue to look at great opportunities. But again, they need to make sense for the organization, and we'll focus on the kind of core economics of the business until we see the M&A markets and the privates kind of come back to us.

Kirk Materne -- Evercore ISI -- Analyst

Thank you.

Operator

Your next question comes from Brad Reback with Stifel. Your line is open.

Brad Reback -- Stifel Financial Corp. -- Analyst

Great. Thanks very much. Eric, as we think about total payment volume through the system, is there an opportunity for that to grow meaningfully faster than pro forma revenue growth as you drive attach?

Eric Remer -- Chairman and Chief Executive Officer

Hey Brad, thank you for the question. I'll let Matt take that one.

Matt Feierstein -- President

Yes. I think, again, we're happy with that 21% year-over-year growth of annualized TPV to $9.1 billion. You said that were meaningful. I certainly think we see the opportunity to continue to push the gas on this embedded TPV payments opportunity.

33% of our applicable software systems of action customers have attached to payments today. So as you've heard us say, we're still really in the early innings as we're able to meaningfully drive that attach rate and the utilization of payments, I definitely think we believe we can continue to drive that at 20-plus percent and beyond. So the opportunities there. Some of those bases are penetrated already, so they aren't going to be growing at the same base.

But as we get new opportunities like the DrChrono opportunity, like the timely opportunity that from our recent acquisitions over the last year, those represent faster growers that can help the TPV grow quicker.

Brad Reback -- Stifel Financial Corp. -- Analyst

That's great. Thanks very much.

Operator

Your next question comes from Sterling Auty with JPMorgan. Your line is open.

Sterling Auty -- JPMorgan Chase and Company -- Analyst

Yes. Thanks. Hi, guys. I want to go back to earlier line of question.

I think it was mainly Kirk that was asking it kind of on the macro side. But I ask it this way, we're looking at the number of new businesses being formed in the U.S. declining year over year, still probably above pre-pandemic rates, but help investors understand -- when you look at your companies, your brands getting new customers, is business formation an important part of it? Or are you picking up businesses a little bit later than that early?

Eric Remer -- Chairman and Chief Executive Officer

Thanks, Sterling. Great to talk to you. We're a little bit after that. So I think the very, very early that new business that is just kind of getting LLC or C.Corp.

We're going we're to most likely be on a little bit the next stage of that growth. And you think about the wind behind the sales that we're seeing in the categories, home service, that TAM grew 17% last year. health services is just getting its feedback from a couple of year pandemic. And as you know, in the fines and wellness, that was not that we hit in 2020 and started to respond into 2021.

And so the core verticals that we are serving, we're both seeing both acceleration and then getting back to kind of business as usual. So that early, early part of that business formation won't affect us, and we haven't seen effect on our business at this point.

Sterling Auty -- JPMorgan Chase and Company -- Analyst

All right. Great. And then one follow-up. When thinking about the margin improvement, you talked about some of the integrations and integrating some of the acquisition, etc.

Can you maybe go a little bit deeper in terms of what are some of the things that you're doing on maybe not like DrChrono but maybe the last cohort of acquisitions -- what are some of the steps that you're taking? What kind of benefits are you seeing at the EBITDA line?

Marc Thompson -- Chief Financial Officer

Yes, Sterling, it's Marc. It's a great question. And we -- when we look forward over the longer term, we can see a lot of levers to really drive operating leverage in the business. And it's really kind of throughout the operational motion of the business.

But the centralized operating platform starts there really, right? I mean by virtue of being able to onboard solutions and really drive efficiency across that complete base, whether it be business operations, growth engagement right on through the traditional G&A functions we're going to see consistent improvement there, particularly beyond '22 as we get over the hump of a full year of public company infrastructure in place and as we continue to make investments in scalable operations, to really drive growth well beyond where we are today. But one good example of that is brand consolidation, and I use that word actually in two ways. In the short term, what that has meant as we've acquired 52 solutions. We are operating roughly half of that in terms of solution or operational P&Ls internally.

So that allows us to combine different organizations within the go-to-market framework and certainly leverage that centralized platform over a smaller number of businesses. So there's some real efficiency glean there. And then over the very long term, one of the things I think you're going to start to see, and we've talked about this on prior calls, is actual brand consolidation as we think about starting to lean into things like our EverPro brand going forward, EverHealth, EverWell and so forth. We are in the early innings, we believe, of really driving operating leverage throughout the sort of stack, if you will.

But this will be a big year of kind of continuing to get over that hump, and we really look forward to driving leverage beyond.

Sterling Auty -- JPMorgan Chase and Company -- Analyst

Makes sense. Thank you.

Operator

Your next question comes from Matt Hedberg with RBC Capital Markets. Your line is open.

Dan Bergstrom -- RBC Capital Markets --- Analyst

Dan Bergstrom from Matt Hedberg. See organic growth for the year, 21%, slightly above that targeted 15% to 20% range. Really great to see that. Maybe what were some of the keys for the year that led you to outperform that range?

Matt Feierstein -- President

Yes. Thanks for your question, Matt. Again, when you go back to our organic growth, we consistently go back to -- to really two things. There's new customer acquisition, as you know, incredibly large focus of ours.

We're excited about our ability to continue to acquire customers at the rate that we had previously and as you could see by our customer growth over the course of the year, 20% year-over-year growth. So getting those customers into the ecosystem, think about it as growth lever on. And gross lever too, we've consistently gone back to that massive embedded opportunity with that 600,000-plus now customer base. And when you think about that opportunity, we really think about upsell and cross-sell.

And again, you've heard us, we're in the early innings of that cross-sell, upsell expansion has been a rhythm that we've continued to perfect further and further as we brought the ecosystem together. So that embedded customer-base opportunity along with new customer acquisitions really continue to be the drivers of that organic growth.

Dan Bergstrom -- RBC Capital Markets --- Analyst

That's great. And then on that cross-sell, you provided us with the 55,000 customer number in the press release or the press release in the presentation of customers using more than one solution. Is that something that we should see from you maybe quarterly, annually going forward? And then is there a comparison to last year or maybe a way to think about customers using more than one solution now versus a year ago?

Matt Feierstein -- President

Yes. I think we're -- that is something we are absolutely tracking from a very focused standpoint, I think you could expect to see us update that at least annually, from that perspective. I think you had a second component to your question.

Eric Remer -- Chairman and Chief Executive Officer

I think the second component was, I think we said in the script where we talked earlier, that was a growth of 25% year over year.

Dan Bergstrom -- RBC Capital Markets --- Analyst

Great. Thanks.

Operator

And your next question comes from Bhavin Shah with Deutsche Bank. Your line is open.

Bhavin Shah -- Deutsche Bank -- Analyst

Great. Thanks for taking my questions. Just continuing on that line of question on pro forma revenue growth, which remains aggressive. Can you just maybe dive into what you're seeing from a vertical perspective as you think about there to be different adverts in terms of headwinds or more likely tailwinds that you're seeing on the core verticals?

Marc Thompson -- Chief Financial Officer

So the question was -- I just want to make sure I get the question right, Bob, and it's Marc, and thanks for the question. So you're asking about vertical breakdown. Is that what you're asking? You broke up a little bit.

Bhavin Shah -- Deutsche Bank -- Analyst

Yes, just qualitatively, what you're seeing between EverPro, EverHealth and EverWell, whether it's puts and takes. I know, COVID obviously, Everwell has had some starts in copout any initial insight would be great.

Eric Remer -- Chairman and Chief Executive Officer

Yes. If you look at the three verticals, and I touched on this a little earlier. We have EverPro has really been kind of -- it's the majority of our business, just under 60% of our business, and it's really been consistent all through -- even through 2020 and that kind of continued its growth in 2021. The TAM continues to grow.

You think the homeowners continue to invest in their homes. Homeownership continues to grow. And just as more break-and-fix if that exists, and we believe that market will continue to maintain itself. When you look at the Health Services we're in a lot of -- it's a variety, but we're a lot of health, specialty medical.

Specialty Medical really shut down in early 2020 started to come back throughout 2020 and into 2021. And we're seeing outside of a few headwinds in various pockets of the nation. In 2021 really began its kind of pre-COVID levels, and we feel pretty good about its consistency. And the last one was in fitness and wellness, which was the biggest hit in 2020.

By the end of 2021, outside of, again, a little -- some kind of headwinds in certain pockets and geographies specifically overseas, we have some facilities in both U.K., Australia, New Zealand, where they shut down on various parts of the country. For COVID, for the most part, you're seeing that fully rebound. I think Planet Fitness came out and said that their gyms now at about a 97% pre-COVID levels. And so we're kind of getting back to pre-corporate levels, and we expect that to continue.

Bhavin Shah -- Deutsche Bank -- Analyst

Thanks for that commentary. Just a quick follow-up. Just when you talked earlier about leveraging the central platform, you guys launched EverConnect late last year. Can you maybe talk about what you're seeing thus far as you simplified the product portfolio and you drive better branding, what are you able to see from a cross-sell perspective and what you've seen thus far in 2022?

Matt Feierstein -- President

Yes, it's a great question, and thanks for that, Bhavin. The ever brands, that is obviously a core thesis of ours that the underlying consolidations of our solutions and the utilization of those upper brands really from -- and bringing together the service experiences with them will enable a better customer experience more effective cross-sell opportunities and a more efficient go-to-market expansion in those markets that we serve. We announced Ever Connect in Q4 still in the very, very early innings, but have gotten some nice early wins of that consolidated brand and operational approach. I think we've discussed with you all in the past that a little bit further along to going to market with our ever health brand.

And again, also seeing some nice wins from a new customer acquisition and an early cross-sell from their early cross an easier early cross-sell integration of our integrated clearinghouse of our payments and our patient engagement solutions. So again, early innings, but we're seeing the evidence of nice wins on that strategy thus far.

Bhavin Shah -- Deutsche Bank -- Analyst

Thanks for taking my questions.

Operator

Your next question comes from Samad Samana with Jefferies. Your line is open.

Samad Samana -- Jefferies -- Analyst

Hi, good afternoon. Thanks for taking my questions. Maybe one in terms of as your SMB customers kind of respond to or react to, let's call it, a slightly different working environment than where we were prior to the anemic. Are there any new products or features that they're asking you for that we should think about? Or how do you think about your product development road map to maybe capitalize on this different environment for SMBs that they're currently having to deal with?

Eric Remer -- Chairman and Chief Executive Officer

I'll start and Matt kind of kick off, and I'll just give you -- thanks for the question, and I'll give you kind of a couple of scenarios. And obviously, we're developing products on a daily basis for a variety of different needs. But you're seeing more and more needs that it kind of came out of what we needed in COVID and how they're going to expand. I'll give you a good example of that.

During COVID, our health service in our ever Health Group, we developed a virtual waiting room. Nobody wanted to sit in the waiting room with someone next who got COVID. But you know who else we don't want to sit next to someone who's got the flu. So things like that, that have been kind of developed for certain scenarios have been actually kind of expanded kind of the post-COVID world, and we think that's going to continue.

Matt, do you want to give a couple of examples well?

Matt Feierstein -- President

Yes. I think Eric hit on that. I think the trends that we saw in COVID around opportunities are ones that we continue to invest in. I think some of what you're talking about is also just core to our thesis of a as our current situation and current headwinds that our businesses are facing our software, our core software only becomes more and more important to our businesses.

It is critical from an efficiency standpoint to how they run their businesses is they have tightness in supply chain or in labor our software only becomes more and more important. So we're continuing to invest in upgrades in those existing products. We are focused on unlocking more wallet share through product integrations like we've talked about from payments or customer engagement or just continued incremental feature development. That's going to allow us to open up new segments in the micro verticals we're in and drive further new customer acquisitions.

So I wouldn't say there's a massive departure now. I think Eric spoke to some of the innovations that we have under touring COVID, but as we look out and see what headwinds these businesses are facing today, we think that's very central to the core thesis of our product.

Samad Samana -- Jefferies -- Analyst

Great. And then Marc, maybe just a financial question for you. Just when I think about the -- I appreciate the color around the additional expenses for operating as a public company. And I know you gave the EBITDA guidance.

But how should we think about maybe the traditional relationship between the EBITDA conversion to free cash flow? Should that should that be similar to prior years? Or is there anything we need to know from like a working capital timing perspective that may change that? Just when we're thinking about cash flow in 2022, is it fair to assume kind of normal conversion?

Marc Thompson -- Chief Financial Officer

Yes. Thanks, Samad. Nothing's really changed there. In fact, I think the investor deck that we put together kind of breaks out the two cash flow metrics for the first time.

And I think that the adjusted unlevered free cash flow really highlights that. I think when you do the math on that, you'll see conversion that in line with what we've talked about previously. So really no change there and don't expect that going forward.

Samad Samana -- Jefferies -- Analyst

OK. Great. Thanks for taking my question.

Operator

Your next question comes from Ryan MacWilliams with Barclays. Your line is open.

Ryan MacWilliams -- Barclays -- Analyst

Thanks for taking my question. Marc, would you mind refreshing us on the seasonality you may have seen in the quarter? It looks like for the fourth quarter, it's a stronger quarter for free cash flow and then a weaker quarter on the revenue side for Marketing Technology Solutions, just low some guidance there. Thanks.

Marc Thompson -- Chief Financial Officer

Yes. So on the cash flow piece, working capital swings toward the end of the year, you saw the same thing in the fourth quarter of last year. So that's really just working capital fluctuations there that tend to be end of year type stuff. I think more probably more importantly, just the cadence of the business and seasonality.

As we've talked about before, marketing technology, firstly, it's pretty heavily exposed to our EverPro verticals, so across the home services category. So you do see some seasonality there. And that's really what drives Q4 in sort of a softer Q4 and Q1. The middle quarters Q2 and Q3 are certainly seasonally up there on that line.

Ryan MacWilliams -- Barclays -- Analyst

Perfect. And then how are you thinking about improving net retention from here? It was nice to see that tick up in the quarter. And I know you don't guide to that metric, but like are you planning for incremental contribution from existing customers and improving that retention in this full year '22 guidance? Thanks.

Matt Feierstein -- President

Yes. That's a great question and I appreciate that, Ryan. We're certainly happy with the continued improvement. We see that continue to expand through -- two main means really the by the upsell of the consumption of the additional value-added features that our customers are a utilizing as well as through that purchase and consumption of that -- of those additional products that really cross-sell where we can provide that necessary and really desired integrated end-to-end customer experience that's going to support those cross-sell and expansion opportunities.

Ryan MacWilliams -- Barclays -- Analyst

I should be going. Thanks.

Operator

Your next question comes from Alex Sklar with Raymond James. Your line is open.

Alex Sklar -- Raymond James -- Analyst

Thanks. I want to follow up on your answer to that last question. You've got about 15% of your base taking more than one product. Can you just talk about some of the initiatives you're working on to drive that cross-sell higher?

Matt Feierstein -- President

Yes, absolutely. Obviously, you've heard us talk about payments. Payments is critical. And again, it all really does start with the system of action driving that cross-sell.

So we are highly focused on continuing to really build out those systems as action, broaden the circumference of features that they have specifically through integrating and completing those end-to-end experiences that our customers desire. So if that system of action doesn't have payments, -- we're going to add payments if that workflow opportunity makes sense, we're going to add our customer engagement solutions, and we have various where those workflow opportunities make sense. And we're going to look for kind of adjacent, I'll call it, light integration of marketing technology solutions into those into those systems of actions as well. As you've heard us talk about, I believe it was last quarter, we did bring on Stone de Souza, our COO, that really his mantra thinking about organic grow through the lens of customer expansion and cross-sell and upsell.

So lots of opportunities and certainly a very, very high focus throughout the organization and leadership on that.

Alex Sklar -- Raymond James -- Analyst

Got it. That's helpful color. And then how should we think about -- so those customers that cohort of customers that are taking multiple products, how does the economics look from those in terms of either NRR or lifetime value? I'm just curious kind of what we should expect as you do that get to a higher level of cross-sell.

Matt Feierstein -- President

Yes. It's still early on from a cohort basis. So I think we'll be able to provide you more metrics as we go on there from a lifetime value perspective, and from an NRR expected. Obviously, from an LTV standpoint, this is all about stickiness.

So as we further fill out the customer value chain, our expectation is that, that will continue to be stickier and stickier that customer drive their lifetime longer. That obviously has a positive increase on the NRR. But obviously, we're also expanding their spend with us. That expansion of spend has really nice positive impact on our NRR and will also continue to be a driver of how we see that improve into the future.

So they really do both go together from a metric growth standpoint.

Alex Sklar -- Raymond James -- Analyst

OK. Thank you.

Operator

And your next question comes from Pat Walravens with JMP Securities. Your line is open.

Pat Walravens -- JMP Securities -- Analyst

Great. Thank you. -- and let me add my congratulations. So my question number one is, did MyPTHub achieve their earn-out?

Eric Remer -- Chairman and Chief Executive Officer

Yes. Sorry. It did not. I apologize.

I'm sorry. What was going on with that? They didn't meet their objectives to hit the earn-out, Pat.

Marc Thompson -- Chief Financial Officer

The business didn't perform to the expectations that the earn out, which were stretched goals. So I think that's probably the right way to think about it.

Eric Remer -- Chairman and Chief Executive Officer

And Pat, just to add to that, I mean, of the just we've done, I think we've had 3 earnouts, and that was one most recent, and we rarely do that we just create some misalignment in general. And so the vast majority of the dollars expected to pay are usually on an upfront basis. And if there is any earnout, it's the bridge gap and there's going to be a pretty hefty bridge to kind of cover. So we're happy to pay them out when they get them, but we really kind of put them in play.

Pat Walravens -- JMP Securities -- Analyst

So this is not a big part of the mechanism, right?

Eric Remer -- Chairman and Chief Executive Officer

No, not at all. We really just like candidly, the operational lack of alignment. So I really try to avoid them. When we onboard these solutions, -- it's really critical that we bring them on.

And from day one, start to operate to the plan that we put in place. So if we have an earn-out structure, it does create sort of disincentives, if you will, at certain parts of that operational motion. So we really would prefer have everybody aligned operating to the plan we put in place during diligence and take that to say one of close.

Pat Walravens -- JMP Securities -- Analyst

All right. Great. And then Marc, just sort of a quick follow-up for you. As you look at the balance sheet right now, are there any sort of key points you would make for investors? And are there any places where you can optimize things?

Marc Thompson -- Chief Financial Officer

It's a great question, Pat. I mean first of all, from a cap structure standpoint, as I mentioned in my opening remarks, I mean, we feel like the balance sheet is quite strong. We're operating right within the financial policy we've set out continue to generate cash, feel good about that. From a working capital standpoint, I mean, you know the business, we don't create a lot of deferred revenue.

This is mostly monthly set. So that also positively impacts AR. You can always turn the screws on things like collections and optimize that. I'll be very candid and say we're operating at a level that I think is accessible, but we are folks that are very interested in continuous improvement.

And actually have teams focused on that kind of stuff, as well as day in and day out.

Pat Walravens -- JMP Securities -- Analyst

All right, great. Thank you both.

Operator

And our next question comes from DJ Hynes with Canaccord. Your line is open.

D.J. Hynes -- Canaccord Genuity -- Analyst

Hey guys, thanks for taking my question. Eric, where do you think you are in terms of customer awareness with respect to all the horizontal tech solutions that you have in the portfolio, right? I mean 9% of customers using more than one product. There's lots of wood to chop there. How do you get people aware that you're selling new services?

Eric Remer -- Chairman and Chief Executive Officer

Yes. I mean, again, I think we're in the early innings. Every different solution is a little bit different. The longer the solutions in part of the ecosystem, the more aware they are of it.

And I think what ends up happen is, as you onboard solution, you start you integrate for the new customers to start onboard much quicker, so you get a real quick -- you start getting an uptick on new cost for acquisition. At the same time, you're going back to the existing base and you're selling through to that base as well. So it is a heavy -- one of the benefits and we're able to kind of acquire customers very cost effectively, which gives us great LTV to CAC, 85% of our new cost or acquisition is they buy self-serve them onboard self-serve and they use self-serve, that's amazing. -- it provides us opportunities to kind of get people on board quickly on upsell, sell-through a lot of in product marketing in the flow of the product to make it where it makes sense.

And so when you're doing things like that, it just has to be part of that ecosystem part of that flow. And so it's, again, early innings, and it takes time to fully penetrate that. But we've been doing this for quite some time. There's been historical penetrations we've had at PaySimple, we've integrated into third parties.

And we've got up to 90-plus percent on payment sell-through. So we know we've seen that kind of progress. And it just takes time to kind of fully penetrate. Anything to add there, Matt?

Matt Feierstein -- President

No, I think the most important part at the end is that really that -- it's that integration into that core system of action software that is that driver. Without that, getting them aware of multiple products is certainly difficult. So we've certainly made the most progress from a payment standpoint and as we have brought more solutions from our customer engagement and where possible, to integrate marketing technology. Those solutions into the ecosystem, you will see our progress continue to quicken over time.

But to Eric's point, it takes time and intentionality around how you package and promote the products.

D.J. Hynes -- Canaccord Genuity -- Analyst

Yes. OK. That's helpful. And then, Mark, a follow-up for you.

If for whatever reason you had to put a pause on M&A activity for a year or so, what would happen to the financial model?

Marc Thompson -- Chief Financial Officer

Not much. I mean honestly, we -- our whole financial model, right? We don't include M&A in the guidance that we provided. So everything we're doing is really all about driving the organic growth initiatives and the bottom line profitability objectives that we've set. We -- if we were to not do M&A we would -- a small team of folks who are focused on, I mean small team, they would be doing actually a lot of different strategic things inside because that is not their only job.

So they do other things with respect to channel development and things like that. So to be candid, at the scale we're at, if we were to not do that, I don't think it would really impact the financial model at all going forward the way we've advertised.

Eric Remer -- Chairman and Chief Executive Officer

And I would just add to that. I think the kind of core operations of the team would probably tell you, if we didn't do M&A for whatever reason for a period of time if the economics didn't access your business, you would have more resources focused on the kind of core solutions we have today and you would probably see additional both growth and operating leverage in the core business. So I think the I think M&A is going to continue to be complementary, I continue to be an opportunity that we'll see, but we're very confident in the business to be on today that will not only maintain its existing growth, but I think there would be opportunities to potentially accelerate as well.

D.J. Hynes -- Canaccord Genuity -- Analyst

Perfect. Thank you guys for the comments.

Operator

And your last question comes from Clarke Jeffries with Piper Sandler. Your line is open.

Clarke Jeffries -- Piper Sandler -- Analyst

Thank you for taking the questions. First is kind of multipart for Mark. Just to get a sense on sales and marketing, exiting here, growing faster than revenue you remind us really what the main categories of spend in sales and marketing are today? And maybe what the trend line might be for that line item over the next 12 months? Is it possible that more closely converge with revenue growth and sort of what might be the spend level that's essential for the growth plan in the guidance here?

Marc Thompson -- Chief Financial Officer

Thanks, Clarke, and it's a good question. And I think you're thinking about it going forward correctly. I think look, we've been exceeding the growth objectives, and we've been investing in sales and marketing to do that. We have a giant market opportunity ahead of us, and we're executing well and we want to continue to hit the gas pedal.

I think the comparison to '20 was the year we throttled down obviously, right, with codes hitting us really in March. And then Q2 1 of the beauties of the digital marketing model that we have is that we can throttle down and we did. So I think the comparison is a little tough when you see that kind of growth. I think we started to see growth return in the second half of '20, and we started to invest in that.

So as you look at the sales and marketing line as a percent of revenue in the second half, start to see it move up and it's been doing that continuously forward. But I think the way you're thinking about it going forward is a pretty good proxy.

Clarke Jeffries -- Piper Sandler -- Analyst

Great. And then maybe an additional point of color in terms of -- is there a way you could contextualize what your hiring needs are for the next year to hit the growth plan? A lot of companies are working through labor shortages and retaining talent -- anything you'd comment on your strategy and the sort of hiring needs for the next year?

Matt Feierstein -- President

Yes. I mean from a contextualization standpoint, again, we understand what we need. It's built into our plan and ultimately, the guidance like all companies, Obviously, hiring remains extremely competitive. And to date in 2022 is probably running a little bit behind plan.

We don't expect in any way for this to impact our growth objectives. And over the last year, just for a little bit more color, we've really continued to advance the executional capabilities of our people experience organization and really what that people platform is. We're focused on critical scale initiatives and talent acquisition. That includes both recruiting and onboarding, employee engagement and development.

and employee retention to really help us combat those current conditions. So we're certainly aware of what it is. It's built into our plan, and we're executing against that plan today.

Clarke Jeffries -- Piper Sandler -- Analyst

[inaudible]

Operator

Thank you. And this concludes our Q&A session. I will turn the call back to Eric Rimer, our CEO, for final remarks.

Eric Remer -- Chairman and Chief Executive Officer

Well, thank you all for joining us today. I also want to thank the entire ever commerce Global team for a really great fourth quarter as well as an amazing 2021. The collective energy effort and focus of the team makes everything we do happen. As we enable the digitization of the service economy as a leading service commerce cloud in the world, we will continue to focus on simplifying and power the lives of business owners, providing them the best software and solutions to make their businesses more successful.

Again, thanks so much for joining today.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Brad Korch -- Senior Vice President of Investor Relations

Eric Remer -- Chairman and Chief Executive Officer

Marc Thompson -- Chief Financial Officer

Kirk Materne -- Evercore ISI -- Analyst

Brad Reback -- Stifel Financial Corp. -- Analyst

Matt Feierstein -- President

Sterling Auty -- JPMorgan Chase and Company -- Analyst

Dan Bergstrom -- RBC Capital Markets --- Analyst

Bhavin Shah -- Deutsche Bank -- Analyst

Samad Samana -- Jefferies -- Analyst

Ryan MacWilliams -- Barclays -- Analyst

Alex Sklar -- Raymond James -- Analyst

Pat Walravens -- JMP Securities -- Analyst

D.J. Hynes -- Canaccord Genuity -- Analyst

Clarke Jeffries -- Piper Sandler -- Analyst

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