Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reported revenue exceeded the top-end of guidance range with 4.3% year-over-year growth.
- Pro forma revenue growth, excluding the North American fitness asset sold, was 6%.
- Adjusted EBITDA of $41.2 million beat the midpoint of guidance range, representing a 23.2% margin.
- Payments revenue, excluding the fitness solutions, grew 8% year-over-year.
- The Board increased share repurchase authorization by $50 million and extended the program to the end of 2025.
Negative Points
- Annualized net revenue retention (NRR) for core software payment solutions was 97%, down slightly on a sequential basis.
- Adjusted gross margin slightly decreased to 65.4% from 65.8% in Q2 2023.
- Levered free cash flow was down approximately $3.6 million or 16% year-over-year.
- Marketing technology solutions showed only 1.6% growth, indicating continued headwinds.
- The optimization savings are expected to have a more measurable impact starting in 2025, not immediately.
Q & A Highlights
Q: Marketing technology solutions returned to year-over-year growth after a couple of quarters of declines. How much of that was execution versus macro-related? And can you give an update on what you're seeing from a macro perspective and what's embedded in the guide?
A: The 1.6% growth in marketing technology this quarter is a mix of both execution and macro factors. We continue to execute well, but headwinds remain. Overall, macro trends have been stable, and this is reflected in our guidance for the rest of the year. β Marc Thompson, CFO and Eric Remer, CEO
Q: Payments revenue grew more in line with TPV growth this quarter, whereas previously it grew in excess of TPV growth. Why are they converging, and how should we think about this relationship going forward?
A: We continue to optimize our take rates through pricing and processor relationships. We expect opportunities for TPV growth and take rate expansion to continue over the long term. β Evan Berlin, COO
Q: How are the optimization initiatives trending relative to expectations, and will the CFO transition affect the timeline or resource allocation?
A: The optimization initiatives are on track, and the CFO transition will not affect our expectations. We have a strong team in place, and Ryan Siurek will ensure continuity. β Eric Remer, CEO and Matthew Feierstein, President
Q: Can you provide more detail on the net retention rate dynamics this quarter and expectations for the rest of the year?
A: The net retention rate was impacted by the anniversary of significant pricing increases in one of our high-velocity, lower ARPU solutions. We expect NRR to remain stable and potentially grow as our cross-sell and upsell motions mature. β Matthew Feierstein, President
Q: Should we think about the full-year revenue guide as excluding the revenue contribution from international operations?
A: Yes, the full-year revenue guidance excludes the fitness solutions. The third and fourth quarters will not include any contributions from these divested assets. β Brad Korch, SVP, Head of Investor Relations
Q: What are the drivers behind the growth in multi-solution customers, and why was the sequential net add lower than recent quarters?
A: The growth is driven by our focus on payments and new solutions like EverPro Edge. Quarter-over-quarter growth may vary due to the timing of product integrations, but year-over-year growth remains strong. β Matthew Feierstein, President
Q: Can you discuss the capital allocation strategy, particularly the focus on share repurchases versus acquisitions?
A: While private valuations are rationalizing, we believe investing in our own shares offers strong value. We will continue to look for accretive acquisitions but prioritize buybacks given current valuations. β Eric Remer, CEO
Q: Is there an opportunity to expand the point-of-sale technology used in Timely to other parts of the business?
A: Yes, we plan to deploy point-of-sale solutions across other top solutions over the next few quarters. This is a core part of our strategy to drive utilization and share of wallet expansion. β Evan Berlin, COO
Q: Are you seeing any increased price sensitivity from small business customers, and how do you view pricing as a long-term growth strategy?
A: We have not seen increased price sensitivity. We focus on a price-to-value ratio and will continue to use pricing as a lever based on the value we provide. β Matthew Feierstein, President
Q: Can you provide an update on the EverHealth consolidation and its progress relative to other optimization initiatives?
A: EverHealth has made significant progress, including new leadership and improved conversion rates. This serves as a model for our broader transformation efforts, particularly in EverPro. β Evan Berlin, COO and Matthew Feierstein, President
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
