EngageSmart Announces Fourth Quarter and Full Year 2022 Results

EngageSmart, Inc. (NYSE: ESMT), a leading provider of vertically tailored customer engagement software and integrated payments solutions, today reported financial results for the fourth quarter and full year ended December 31, 2022.

“Our fourth quarter results again exceeded our revenue and Adjusted EBITDA guidance, closing out a phenomenal year of outperformance,” said Bob Bennett, EngageSmart CEO. “Robust customer demand and strong execution across our business segments drove record annual revenue of $303.9 million, representing 41% year-over-year growth, all organic, and record net income of $20.6 million and record annual Adjusted EBITDA of $49.3 million. Our dedication to simplifying customer and client engagement is resonating with customers, our products are gaining market share, and we are expanding our footprint across all verticals.”

“We delivered outstanding profitable growth, as we leveraged our proven customer-focused product leadership strategy, our deep vertical expertise, our strategic alliances, and our highly motivated teammates to drive product innovation and extend our market leadership,” stated Cassandra Hudson, EngageSmart CFO. “Our SMB segment is uniquely positioned to address the shortage of mental health professionals and the high demand for care. Driven by new customer adds, a favorable subscription mix, and the successful pricing and packaging changes, SMB achieved annual revenue growth of 52% in 2022. Our Enterprise segment continues to benefit from secular tailwinds, stemming from the need for organizations to digitize their operations. Fueled by customer go-lives and high digital adoption with existing customers, Enterprise exceeded our expectations and delivered annual revenue growth of 29%. Heading into 2023, we look forward to capitalizing on the underlying momentum in both segments of our business, supported by our strong balance sheet, highly profitable business model, and resilience to macro pressures.”

Fourth Quarter 2022 Financial and Business Performance

• Total Revenue increased 36% to $83.9 million compared to $61.6 million in the fourth quarter of 2021.
• SMB Revenue increased 45% to $45.2 million compared to $31.1 million in the fourth quarter of 2021.
• Enterprise Revenue increased 27% to $38.7 million compared to $30.6 million in the fourth quarter of 2021.
• Gross Profit was $64.7 million, representing 77.2% gross margin, compared to $46.2 million, or 75.0% gross margin, for the fourth quarter of 2021. Adjusted Gross Profit was $66.7 million, representing 79.5% Adjusted Gross Margin, compared to $48.0 million, or 77.8% Adjusted Gross Margin, for the fourth quarter of 2021.¹
• Net Income was $4.9 million, representing 5.8% net income margin, in the fourth quarter of 2022, compared to net loss of $0.9 million, or 1.5% net loss margin, in the fourth quarter of 2021.
• Adjusted EBITDA was $13.6 million, representing 16.2% Adjusted EBITDA Margin, compared to $6.3 million, or 10.2% Adjusted EBITDA Margin, for the fourth quarter of 2021.¹
• Total Transactions Processed increased 25% to 38.9 million compared to 31.2 million in the fourth quarter of 2021.

Full Year 2022 Financial and Business Performance

• Total Revenue increased 41% to $303.9 million compared to $216.3 million in the prior year.
• SMB Revenue increased 52% to $165.5 million compared to $108.7 million in the prior year.
• Enterprise Revenue increased 29% to $138.5 million compared to $107.5 million in the prior year.
• Gross Profit was $232.1 million, representing 76.4% gross margin, compared to $161.2 million, or 74.5% gross margin, in the prior year. Adjusted Gross Profit was $239.3 million, representing 78.8% Adjusted Gross Margin, compared to $167.9 million, or 77.6% Adjusted Gross Margin, in the prior year.¹
• Net Income was $20.6 million, representing 6.8% net income margin, compared to a net loss of $9.0 million, or 4.1% net loss margin, in the prior year.
• Adjusted EBITDA was $49.3 million, representing 16.2% Adjusted EBITDA Margin, compared to $30.6 million, or 14.2% Adjusted EBITDA Margin, in the prior year.¹
• Total Transactions Processed increased 32% to 146.8 million compared to 111.4 million in the prior year.
• Total Number of Customers increased 24% to 102,700 as of December 31, 2022, compared to 83,000 as of December 31, 2021.
• Cash and Cash Equivalents were $311.8 million as of December 31, 2022, compared to $254.3 million as of December 31, 2021.

2022 Business Highlights

EngageSmart and its vertically tailored solutions achieved industry recognition:

• EngageSmart named one of the fastest-growing companies in North America on the 2022 Deloitte Technology Fast 500™.
• EngageSmart named a winner of the Top Workplaces USA 2022 Award.
• EngageSmart named a winner of the Top Workplaces for Compensation & Benefits, Employee Well-Being, Innovation, Leadership, Purpose & Values, and Work-Life Flexibility in 2022.
• SimplePractice honored as Gold Stevie® Award Winner in the 2022 Stevie Awards for Great Employers and named to Built-In’s 2022 Best Places to Work Awards.
• DonorDrive named Salesforce’s 2022 Nonprofit Product Partner of the Year.

Vertical expertise and product innovation drive strong market leadership across verticals:

• SimplePractice launched SimplePractice Enterprise, an API integration for Employee Assistance Programs and Managed Care Organizations that connects to practitioners’ SimplePractice accounts and creates a streamlined referral process for providers.
• InvoiceCloud launched functionalities that remove friction and enhance the customer experience, including data management tools that enable data-driven decision making.
• DonorDrive added new features to its mobile charity fundraising app to further simplify fundraising and boost supporter engagement.

EngageSmart added Scott Semel, Senior Vice President, General Counsel, to the Leadership Team and added Ian Knox, Chief Product Officer at SimplePractice.

Financial Outlook

With the information available as of February 9, 2023, we are providing the above guidance for the first quarter and full year of 2023, based on current market conditions and expectations. This guidance is subject to various important cautionary factors referenced in the “Forward-Looking Statements” section below.

We do not provide a reconciliation of Adjusted EBITDA guidance to net income (loss) on a forward-looking basis due to difficulty in predicting certain items excluded from this non-GAAP financial measure; specifically, stock-based compensation, provision for (benefit from) income taxes, transaction-related expenses, and restructuring charges. We expect the variability of these excluded items may have a significant, and potentially unpredictable impact on our future GAAP financial results.

Webcast and Conference Call Information

EngageSmart, Inc. (NYSE: ESMT), a leading provider of vertically tailored customer engagement software and integrated payments solutions, will report fourth quarter and full year 2022 financial results before the market opens on Thursday, February 9, 2023. Management will host a conference call to discuss the results at 8:30 a.m. ET.

The conference call will be webcast live on EngageSmart’s investor relations website at https://investors.engagesmart.com/events-and-presentations/events/. A replay will be available on the investor relations website following the call.

For investors and analysts wishing to participate in the call, the dial-in numbers are (800) 225-9448 for domestic callers and (203) 518-9708 for international callers. The conference ID is ENGAGESMART, and the program title is EngageSmart Q4 2022 Earnings Call

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