Thank you for standing by, and welcome to EverCommerce First Quarter 2024 Earnings Call. My name is [ Marvin ] and I'll be your operator for today. [Operator Instructions] As a reminder, this conference call is being recorded today, Thursday, May 9, 2024.

Now I'd now like to turn the conference over to Brad Korch, SVP and Head of Investor Relations for EverCommerce. Please go ahead. .

Good afternoon, and thank you for joining. Today's call will be led by Eric Remer, EverCommerce's Chairman and Chief Executive Officer; and Marc Thompson, EverCommerce's Chief Financial Officer. Joining them for the Q&A portion of the call is EverCommerce's President, Matt Feierstein; and EverCommerce's Chief Operating Officer, Evan Berlin.

This call is being webcast with a slide presentation that reviews the key financial and operating results for the 3 months ended March 31, 2024. For a link to the live or replay webcast, please visit the Investor Relations section of the EverCommerce 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 where I'll review our safe harbor statement.

Statements made in 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.

Before we discuss first quarter results, I'd like to highlight the presentation of results and KPIs included in the earnings call slides and our prepared comments. As discussed last quarter, we announced the sale of our 4 fitness industry solutions in early March. The sale of the 2 North American solutions closed simultaneously with deal signing.

While the 2 international solutions are expected to close in the third quarter, they have been classified as held for sale prospectively from the date of signing. As we also discussed last quarter, the revenue guidance given excluded the fitness solutions, and we noted that the EBITDA contribution of these solutions was near zero.

As a result, the revenue, revenue growth, and operational metrics such as customer count, TPV, and customers enabled for more than one solution that we will discuss today have all been adjusted to exclude the fitness solutions on a pro forma basis, except where specifically noted as GAAP-reported revenue.

We will continue this basis of presentation for the remainder of the year. I will now turn it over to our CEO, Eric Remer. Please continue. .

Thank you, Brad. On today's call, I will highlight first quarter 2024 results, discuss EverCommerce's presence in the SMB market, our continued strategic transformation optimization initiatives, and finally end with a discussion of our key customer trends before turning the call over to Marc to dive deeper into our financials.

Turning to our first quarter results. Our Q1 reported revenue exceeded the top end of our guidance range with growth of 6% year-over-year. Within this, core subscription and transaction revenue grew 9%. Adjusted EBITDA grew 28% year-over-year, beating the top end of the guidance range and exceeded the midpoint of guidance by $3.9 million.

Adjusted EBITDA margins expanded more than 420 basis points to 24% compared to 19.8% in the first quarter of 2023. With continued growth and profitability, we are creating the opportunity to invest in our higher growth, higher margin, large market opportunities.

Payments revenue grew 11% year-over-year, driven by 9% growth in TPV and modest take rate expansion. Driving payments adoption continues to be a key element of our strategy.

Last week was National Small Business Week, and given that, I wanted to take a few moments to highlight the scale of our customer base, all that we do to support our customers and the tremendous market opportunity in front of us. Service-based business is a backbone of the economy and small businesses employ the majority of service professionals.

There are more than 450 million service-based small businesses globally, which translates to a total addressable market of well over $1 trillion. EverCommerce provides business management software that supports end-to-end business processes for service SMBs.

Our SaaS solutions support highly specialized workflows in each of our verticals, enabling our customers to automate manual processes, generate new business, and create more loyal customers.

We enhanced the value of our business management solutions by upselling and cross-selling additional features, such as robust payment integration, customer engagement solutions, lead generation, and group buying programs. The products and services we provide are focused on the biggest areas of opportunity.

The global addressable market for our business management software solutions is $900 billion, and the payment processing represents an additional $200 billion. Moreover, in most cases, the opportunity in front of us is greenfield.

We estimate that the penetration of service SMB market with fully integrated software solution is in the very low-double-digits. We continue to focus on simplifying the lives of those service providers to support us every single day. Our goal has always been to empower the rapidly growing and evolving SMB market.

EverCommerce offers tremendous value to our customers by providing solutions tailored to the unique workflows and interactions that various services require.

Our software solutions not only provide a system of action necessary to run the daily business processes, but also the marketing solutions to attract the business, the building of payment solutions to collect effortlessly, and the customer experience solutions to create predictable convenient experiences.

Our solutions are cost-effective, easy to implement, and purpose-built for service businesses. We provide end-to-end solutions that our customers need to compete and grow in a marketplace that is rapidly transforming. As we discussed last quarter, we're taking steps to transform and optimize our operations.

In the fourth quarter 2023, we engaged a third-party adviser to help us assess our operations and identify specific initiatives and strategies to simplify, optimize, and better scale our operations with an eye towards sharpening the customer-centric, vertical market focus that will better position us to accelerate growth.

With respect to the optimization, defined initiatives will provide a long runway for continued margin expansion and free cash flow generation. Embedded in our 2024 guide is just a small fraction of the overall expected benefit, which should phase in the full run rate by the end of 2026.

These initiatives include optimizing third-party vendor spend, which will continue through the end of the year, as well as operationalizing other significant cost-saving opportunities.

These savings will not only fund key growth investments, but also allow us to continue to deliver long-term margin expansion and significant cash flow generation over the coming years. With our transformation initiatives, we'll be taking the lessons learned from our ongoing EverHealth consolidation and apply them to the rest of the company.

This includes simplifying our organization structure and sunsetting certain legacy brands as well as investing in key sales and go-to-market gaps that have impacted our growth rate. Given our focus on executing these initiatives, we expect 2024 to be a transition year.

While growth may be more temporary, we will work to further expand margins and profitability. A portion of our efficiency gains will be used to reinvest in our products with the goal to accelerate growth in 2025 and beyond. Turning back to our first quarter highlights. We continue to progress well against our land and expand strategy.

We land with a core business management software and then upsell, cross-sell our existing customers' additional features, services and products. This enhances the value of our customers receive from the relationship with EverCommerce, and drives additional revenue. The KPIs we regularly share in our earnings calls illustrate our progress.

As a reminder, these KPIs have been restated in both our current and year-ago periods to exclude our fitness solutions. As of the end of the first quarter, we continue to see an increase in the customers utilizing more than one solution to approximately 83,000.

In addition, the number of customers that have contracted and onboarded for 2 or more products from 27% year-over-year to approximately 191,000. The payments-enabled customers in this cohort represent a significant near-term opportunity for payment processing and payment revenue growth for EverCommerce.

Customers that purchase and utilize more than one solution are naturally some of our most profitable and sickest customers. This is because we've provided significant value to them and their businesses. This fact presents itself through the strong net revenue retention.

Looking back over the trailing 12 months, our annualized net revenue retention, or NRR, for core software payment solutions was 99%. Embedded payments is our most accretive cross-sell solution and stands to be a long-term driver for EverCommerce's revenue growth and margin expansion.

Year-over-year, our pro forma payments revenue grew 11%, accounting for approximately 17% of overall revenue. We report our payments revenue on a net basis, and as a result, payments revenue contributes approximately 95% gross margin and is a meaningful contributor to our overall adjusted EBITDA margin expansion.

First quarter annualized total payment volume, or TPV, was approximately $11.7 billion, representing 9% year-over-year growth. We expect TPV and the overall payments revenue to grow as we continue to embed our payment solutions in our core system of action.

Now I'll pass it over to Marc, who will review our financial results in more detail as well as provide second quarter and full year 2024 guidance. .

Thanks, Eric. Total reported revenue in the first quarter was $170.1 million, up 5.6% from the prior-year period. Within total reported revenue, subscription and transaction revenue was $134.7 million, up 8.8% from the prior-year period, and revenue from Marketing Technology Solutions was $30.3 million, a decrease of 4.7% from the prior-year period.

We managed the business for sustainable organic growth and selectively utilize strategic acquisitions to augment the trajectory of this growth. As a result, we believe it is 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 and divestitures 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 or divestiture.

We believe the pro forma growth rate provides the best insight into the underlying growth dynamics of our business. For the first quarter of 2024, pro forma revenue was $164.7 million, up 5.7% year-over-year. Pro forma subscription and transaction revenue was $129.4 million, up 9.1% year-over-year.

The solid performance in subscription and transaction revenue was largely due to continued execution of our growth strategy to provide customers our core system of action software solutions and driving expansion by promoting cross-sell and upsell opportunities, leading with payments.

While we believe that our martech solutions are stabilizing amidst continuing headwinds, their results negatively impacted consolidated revenue growth in the first quarter. Excluding martech, pro forma revenue growth would have been 8.3%. As Eric noted, we also exceeded the top end of our adjusted EBITDA guidance range.

First quarter adjusted EBITDA was $40.9 million, representing a 24% margin versus 19.8% in the first quarter of 2023 and 28% growth in adjusted EBITDA year-over-year. Adjusted EBITDA outperformance in the quarter was underscored by our focus on actively managing our operating expenses, driving operating leverage and cash flow generation.

Adjusted gross profit in the quarter was $113.3 million, representing an adjusted gross margin of 66.6% versus 65.3% in Q1 2023. The increase in gross margin is partially attributable to an increasing mix of higher-margin payments revenue and a decreasing mix of lower-margin marketing technology solutions revenue.

Now turning to operating expenses, which are reconciled in the appendix of this presentation. Adjusted sales and marketing expense was $27.7 million or 16.3% of revenue, down from 18.1% of revenue reported in the prior-year period.

There was a timing benefit to sales and marketing expenses in the first quarter, which we expect to increase for the remainder of the year. Adjusted product development expense was $19.6 million, or 11.5% of revenue, in line with the prior-year period.

Adjusted G&A expense was $25.1 million, or 14.8% of revenue, down from 16.1% of revenue in the prior-year period. Adjusted G&A expenses declined both as a percent of revenue and in absolute dollars as we continue to optimize our operations. We continue to generate significant free cash flow as we invest to grow our business.

Levered free cash flow was $8.5 million in the quarter. This was up approximately $600,000, or 7.9% year-over-year. Levered free cash flow growth was negatively impacted by the timing of items related to the sale of the fitness solutions and certain working capital items.

For the trailing 12 months, levered free cash flow was $82.1 million, which represents a 12% margin and a 78.2% increase in levered free cash flow over the prior year, continuing to underscore the efficiency of our business, enhancing our balance sheet flexibility.

Adjusted unlevered free cash flow was $29.8 million in the quarter and $118 million for the last 12 months, representing 27.4% and 25.7% year-over-year growth, respectively. Strong free cash flow generation allows us to continue to invest in our growing business and deliver strong returns to our shareholders.

It also allows us to efficiently allocate capital across a spectrum of opportunities, including the outstanding buyback authorization and M&A prospects. In the first quarter, we repurchased approximately 1.2 million shares for a total cash consideration of approximately $12.1 million at an average price of $9.65 per share.

As of March 31, 2024, we had approximately $27.9 million remaining on our repurchase authorization that runs through year-end 2024. We ended the quarter with $90 million in cash and cash equivalents, excluding cash and cash equivalents related to our international fitness solutions, and we maintain $190 million of undrawn capacity on our revolver.

Our debt is a combination of floating and fixed rate and total net leverage as calculated for our credit facility at the end of the quarter was approximately 2.5x, consistent with our financial policy. We have no material maturities until 2028. I'd like to finish by discussing our outlook for the second quarter of 2024.

For the second quarter of 2024, we expect total revenue of $169.5 million to $173.5 million, and we expect adjusted EBITDA of $39 million to $42 million. We are leaving our full year 2024 guidance unchanged. We continue to expect revenue of $676 million to $696 million and adjusted EBITDA of $167 million to $176 million.

Our guidance assumes near 0 growth in our Marketing Technology Solutions business on a full year basis.

Before we begin the question-and-answer portion of the call, I want to once again thank the EverCommerce team for their efforts in delivering both top- and bottom-line results that exceeded expectations, and I want to thank all of you for participating on today's call.

Our focus is on continuing to execute our strategic priorities and deliver consistent profitable growth that we believe can generate significant value for our shareholders. Operator, we're now ready to begin the question-and-answer section of the call. .

[Operator Instructions] Our first question comes from the line of Bhavin Shah of Deutsche Bank. .

It's [ Nick ] on for Bob this evening.

I guess to start us off, Eric, can you give us some insight into what you're seeing in the overall macro environment? Anything stand out as changing or particularly getting better or worse?.

Thanks, Nick, for the question. To date, we've actually -- it's been kind of from a pipeline that's kind of we measure the macro. We have enough kind of quantity of pipeline coming through. It's really been kind of business as usual. We haven't seen anything material, both from the tailwinds or headwinds. So I'll let Matt add to that.

But from to date, at least your first quarter and as we see here today, it's kind of similar as we saw in Q4 through Q1. .

Yes. I would echo Eric's comments. Certainly, stability. As we look at our demand trends, no significant changes quarter-over-quarter or towards historical periods, and we kind of see that throughout all of our funnel metrics that we would typically see any macro impact across. So definitely, echo Eric's remarks on stability. .

Got it. And then just as a follow-up.

I mean, with the beat in the quarter and the full year guide left unchanged, is there anything we should be thinking about for how you're thinking about guiding for the rest of the year? Anything changed that we should be thinking about just as sort of we look at the -- towards the back half of the year?.

This is Marc, Nick. I'll take that question. So I think guidance starts with being prudent, first and foremost. And I don't think we see anything for the balance of the year that's different than we saw when we issued that guidance, which wasn't that long ago.

I think as it relates specifically to EBITDA, there's probably some real timing in there just from getting into the year with respect to timing of investments that we have planned for the year, which is part of what you're seeing in our Q2 guidance. .

Our next question comes from the line of Samad Samana of Jefferies. .

This is [Indiscernible] on for Samad. So marketing technology was down year-over-year, but perhaps not as much as we expected.

Any notable trend to call out throughout the quarter? Are you starting to see green shoots in this segment, or are you expecting it to remain under pressure for some time?.

So thanks for the question. I think nothing has really changed since I'll say the last 2 quarters of the year. So when we reported year-end results, we talked about a persistent headwind but also stabilizing operation against that headwind. And I think that's what we continue to see.

It is down quarter-over-quarter, or excuse me, year-over-year, but that is consistent with what we had expected and obviously consistent with our guide. To your last point, though, I do think part of our language around stabilization does include seeing some green shoots.

We are starting to see a lift in demand activity in pockets that have been more dormant, particularly in the first half of last year and the back half of the prior year. So I think that stabilization amidst continuing headwind is kind of the way we think about the business.

We've again been trying to be prudent in our guide for the year, flat year-over-year, to make sure that's consistent with trends we're seeing, and we'll adjust if we see things different. .

Understood. And then last quarter, you discussed steps you were taking to streamline and reorient the organization with a sharper focus on your core verticals.

Can you talk about some of the progress you're making here? Any key milestones you've reached and what else needs to be done?.

Yes. Definitely, I would love to. Obviously, I think, again, we -- I think last quarter, as we talked about this, from a -- certainly from that vertical perspective, we've been talking to you about EverHealth for some time. And obviously, that's where we're furthest along in that journey. I'd say we're pleased with our progress.

We continue to move towards that consolidated state. I think last quarter, we -- as an example of some of the benefits of consolidation, with that consolidation from a product perspective, really being able to sell through to customers in one go-to-market motion, more of the EverHealth stack.

I believe last quarter, we mentioned new sales ASPs up by about 13% quarter-over-quarter, or actually year-over-year. And so again, progress like that, again, nice progress in EverHealth. We're still in the early innings in other places of our vertical transformation.

So I wouldn't say necessarily any key milestones that are reportable in a similar way to EverHealth, but really making progress from an organizational standpoint, really orienting around that move towards that vertical transformation and doing the, I'd call it, preplanning to consolidation in other verticals outside of EverHealth.

But really, again, I can't stress enough, very pleased with our progress in EverHealth consolidation as the kind of the beacon for where we'll go with the rest of the organization. .

Our next question comes from the line of Matt Hedberg of RBC Capital Markets. .

This is Simran on for Matt Hedberg. Congrats on the quarter. I have one just for either Eric or Marc.

On some of the mandated payments you did last year, can you give us an update on how that worked out? And then more broadly, can you just speak to payment traction overall and what you're seeing in the business?.

Do you want to take it, Marc?.

Well, why don't I pass over to you? Matt is going to take that. .

Yes, I will, and Evan here was introduced on the call, he'll follow me. From a mandate perspective, yes, that's accurate, and Evan will follow on with some of the specifics. But pleased with the progress and the mandates that we tested in the back half of the year.

We are doing that across several other programs in the front half of this year, and that will continue into the back half as well.

We think payments mandates is certainly one strategic initiative in the quiver we have in terms of enable -- driving that payment enablement rate of our software customers, which, again, is obviously what we call top of the funnel from a payment standpoint.

We're obviously also focused on taking those payment-enabled merchants, driving them into a greater level of processing, opening the wallet share so that once they start processing, we're getting more of their available wallet, obviously, doing that through things like expanding our payments product ecosystem so that we can meet -- we can help our customers meet their customers where they are in terms of accessing more of their payments capability.

So quarter -- and again, I'll let Evan speak to some of the specifics on the mandate progress. But yes, mandates and other initiatives are obviously going well for us from a payments penetration standpoint.

Evan?.

Yes. Thanks, Matt. I would just add to that, that we rolled out a specific mandate strategy against one of our main programs in 2023. We've expanded that set of tests and initiatives to 8 programs across the ecosystem in our 2024 plan.

So expanding not only the specifics around what we're doing with each program, but actually taking those learnings from one specific program and applying that to many more components of the ecosystem. So we are well into that execution today in Q2. .

And then just to sort of wrap on that question.

From a consolidated results perspective, you're starting to see that -- not starting to, you continue to see that pull through into our results, really is reflected as payments as an overall percent of revenue, which has been increasing over the last 4 to 6 quarters as well as our gross margin, which also has been increasing over the last 4 to 6 quarters.

That really is the manifestation of these programs in action. .

Our next question comes from the line of Alexander Sklar of Raymond James. .

Great.

Eric, maybe a multipart question here, but can you just elaborate a little bit more on the potential magnitude of some of the transformation initiatives you referenced in the prepared remarks? Is that on top of some of the brand consolidation activity that's already been in progress? How many of your solutions or maybe a percentage of revenue are you kind of looking at in terms of ranges that might be subject to those efforts?.

I appreciate the question. We're not giving guidance on kind of the full savings or some acceleration at this point. But I can say the transformation activities really touched every part of the company.

Every solution, both field solutions as well as our centralized operations as we're looking at opportunities within our existing ecosystem to streamline our costs, working with third-party vendors to reduce costs and then working with the variety, as you talked about the brand, to consolidate those brands to get more value on the marketing spend that we're actually having.

So we're seeing value truly across the board and not just on cost side of things, but also how we operate and how we organize around the business.

We're spending a lot of time focus as we talked about -- as Matt just talked about, in EverHealth, in EverPro, and in EverWell organizing the business more effectively so we can get our sales and our product and our customer-centric people closer to the customer.

We think that's going to have better value on the products we build, our ability to provide more value to our customers, and also to generate more revenue and more profits for the organization. .

Okay. Great. I guess we'll look for more to come there. And then maybe this is for you, Eric, as well, or Matt, but I just want to dig into the go-to-market motion a little bit more for the nearly 200,000 customers that are enabled for multi-solution. I know we talked about payments and a kind of a separate payment team in general.

But can you talk about the team broadly that's focused on selling kind of multi-solution? And are those mostly self-serve kind of as far as enabling that second piece, or is it really a good percentage coming from kind of direct effort?.

There is definitely a good deal of self-serve enablement for sure, kind of going back to front there. But certainly, we're not -- whether it's self-serve, and that's at the initial time of purchase, obviously, we're trying to throw our consolidation efforts.

Again, core to what we're trying to do at EverCommerce, which is still more of the value chains of our custom of our customers' operations, we want to do more of that upfront.

But we will put the appropriate resources, whether that's in product or direct engagement through follow-up sales efforts, follow-up customer success, follow-up customer support to add those second products as well. So it's certainly a mix. It depends on the solution to your point. Some of our solutions are definitely PLG.

We're going to rely on more of a self-service touch. Other of them are certainly more sales-assisted or a heavier sales pipeline in those cases from truck to back in the sales process or through customer success touches.

That's how we're going to drive the go-to-market on the expansion of that 190,000 out in the future, too, to obviously, a greater number and a greater percent of our overall software customers taking multiple products. .

Our next question comes from the line of Ryan MacWilliams of Barclays. .

Eric and Matt, this is [ Damien ] calling on on for Ryan MacWilliams. Great to see the continued focus on the strengths while improving the operational efficiencies. Just curious if you could describe like the core business demand right now and maybe what you're seeing from a new logo perspective within SMBs.

Any relative changes to call out in demand for Pro or Health?.

Matt, do you want to take that?.

Yes. Thanks for the question, [ Evan ]. I would say no, as Eric talked about earlier, we really haven't seen any change in demand. We've seen in some of our core solutions, accelerated sales cycles across Q1 versus last year.

And we've seen that with increased ARPU as we've continued to drive home not only price increases, but also effective bundling, to Matt's point, around trying to drive more than one solution at the point of sale. So we've seen pretty solid trends there. .

Perfect. And then maybe could you describe what is implied in the guidance in terms of macro? And then maybe what is required to reach the top end of the range? I'm just curious how to get there. .

Well, why don't I start? So I mean let's start with something we've said is absolutely implied in the macro, which is martech, which we have in flat year-over-year, obviously, bringing down consolidated growth rates overall.

And there, I should have said earlier, while we see stabilization against sort of a persistent headwind, our team is executing well there.

We are certainly trying to position ourselves, not only take advantage of green shoots, but also upside opportunities that we think may present themselves through the second half of the year, particularly based on investments that are being self-funded within the operation against a variety of initiatives that we think will both reduce volatility of the revenue streams in that solution or set as well as drive some increased profitability.

So that's that piece. On the -- what's implied on the guide on the other side is really continuing to lean into those really big trends that we see around embedded solutions. That is leading with payments first and foremost, driving investments in the right parts of the organization.

Some of that, what Eric referred to around our transformation initiatives, is designed to really sharpen that focus. So we're putting our dollars in the right places. And when you look at our top solutions, they're all growing well in excess of our current growth rates.

And those are the primary drivers of both revenue growth rate, software growth rate and TPV growth, and we're going to continue to lean into those. We're not assuming anything different from a macro perspective.

But we're -- what we've built into our guide is our continuing investments in those initiatives and really driving execution against those initiatives.

I think we might want to add a little bit more color on that, anybody?.

Our next question comes from the line of Alexei Gogolev of J.P. Morgan. .

Hello, everyone.

Could I ask you to provide a bit more color around the level of payments attached and in which solutions are you seeing the greatest attach level?.

Yes, I'll start and Evan can certainly follow. When you think about payments attached, our core systems of action we see really a mid-30s attach rate from that perspective. So nice progress, but obviously real opportunities.

Those attach rates really vary based on the maturity of payment programs, how long they've been there, in certain cases, how deeply embedded payments are into the workflow of that solution. So that could differ in home improvement versus pest control.

In EverPro, obviously, we see a great opportunity and many, many of -- a lot of our existing programs are in EverPro. Obviously, that differs a little bit from EverHealth, where we do have payment programs, but you have the insurance pay side of that as well.

So when you think about which solutions, think about within EverPro and across our EverPro environment, that's in both up and down in terms of really our downmarket solutions and our upmarket solutions, opportunities and execution against the payments opportunity there.

So that spans from home improvement all the way through break/fix and field services.

Evan, anything to add?.

I would just add, one of the solutions within EverPro, we've been very focused on driving payments attach on new customer acquisition. And from last year, Q1, we were at 30%. This quarter, we were at 41%.

So I think this underscores not only the importance of executing against that and ensuring we have the right value proposition and the right selling motion, sales-led and product-led, but really ensuring that once we get those customers enabled for payments that we can ultimately drive their activation, utilization and expanding share of wallet as we've talked about before with the right product workflows embedded inside.

So we continue to work on that, as Matt said, across EverPro and EverHealth and EverWell, but good progress in Q1. .

Great. And another question on payments.

Could you maybe comment on what you see as midterm normalized level for payment revenue growth? Because, would it be fair to say that 11% in Q1, obviously, that multiple deceleration versus what we've seen last year? So how are you thinking about it in the midterm?.

Let me start just contextually. Remember, we've talked about this on our last call in the last quarter. We had -- for the prior 4 quarters coming into the year, we had some onetime incentives on the payment side that escalated the revenue growth rate. So when you normalize for that, it looks a lot closer to where it is today.

I think obviously, this remains a key focus within our investment strategy. So I won't -- I'll let Evan comment on the sort of mid- to longer-term. But I think we have a number of initiatives in place where we're investing against that and certainly hope to create some upside from where we are today. .

And this is Matt. I'll just follow on with that. I think we've talked about in the past that a portion of our TPV is in more mature portfolio that is growing at a lower rate. We would point out that 28% of our aggregate TPV today is in our top 5 largest opportunities.

Those opportunities together are growing at 23% year-over-year from a TPV perspective and all of them are sub-10% penetrated from a total opportunity standpoint. So that -- we'll have to grow through some of that maturity in the portfolio.

But as you think into the nearer and the long term, those top 5 solutions and our opportunity and the fact that they're growing faster will help us accelerate growth rate out into the future. .

Our next question comes from the line of Clarke Jeffries of Piper Sandler. .

Two for me. The first is, I was curious to hear the third-party adviser that you hired in assessing the operations, the full run rate will be at the end of 2026. So just curious about the different buckets there.

What could be sooner? What will take more than a year to sort of transact on? And in aggregate across the different categories, is this a relatively linear path to the full run rate, or is it bunched up in kind of the near term or back end? And then one follow-up. .

Why don't I take that one, Clarke? And that -- there are a lot of different initiatives. So I'll try to distill it up. I think the word optimization really applies to focus has been really in the last quarter and obviously through the balance of the year.

And the blocking and tackling initiatives around driving better third-party spend management which against an expense base of our $250-plus million third-party expense, that creates a significant opportunity. That will happen in chunks.

There will be some big rocks that will attack, which will start to run through this year and then annualize in the next year and beyond. So those will be some of the early components of optimization, things like looking at some of the spend for '25 as we exit the year, those will obviously transpire through '25 and into '26.

A lot of the initiatives, though, again, which I think will start to appear probably in the second half of this year as we start to operationalize them, they will relate to the way in which we're doing business related to transformation initiatives of a variety of forms, organizational alignment, brand and product consolidation, et cetera.

Those initiatives will drive continuing optimization, I think, really beginning -- early as beginning at the end of this year and really into '25, which is why the timeline is really the way we kind of talk about it. But I think the goal is really to be exiting '25 on that kind of full run rate basis.

So if you think about where we are at a point in time here in May, and we're looking really -- we've said originally, this was kind of 18 to 24 months, we don't see anything that's really different today just based on progress, as Matt alluded to earlier in the call against a number of these initiatives that are in place.

And there are a lot of these in place. .

Yes. Perfect. Certainly helpful. I appreciate across these different buckets, tools, assets, products, operations, there's a lot... .

There is a lot. .

...being put into that. Second question is just, could you remind us about the seasonality of payments or whether or not you would expect revenue to continue to outpace TPV for most of this year? I think in the prior question about the step-up, but if I think about the sort of implied take rate just off of that high-level view, looks pretty healthy.

Is that something you could see continue, or is there any kind of seasonal notion from Q1 to Q4 to point out in terms of like implied take rate as we look at it?.

One thing to know -- I'll let Matt discuss seasonality. But when you think about the take rate opportunity, Matt discussed 28% of our top 5 solutions represent 28% of our TPV, and that's growing at 23%. Those specific solutions, our take rate on those solutions are significantly higher than the rest of the portfolio.

So as that continues to grow, we expect to see additional opportunities to grow our take rate both through this year and beyond. .

Yes. And again, [ Evan ], can chime in with other details. I mean, I think when you think about take rate and a seasonality per se, I really go back to the solutions where we're actually -- where the payment integrations are happening.

And some of those when you think about seasonality and EverPro, per se, we've talked about just across the swap of those businesses, Q2 and Q3 being the high point, Q4 and Q1 having some seasonality.

So we will see payment volumes kind of ebb and flow there, where we happen to have kind of, let's say, larger net take rates in those programs that perhaps could create some seasonality in take rates there. But I would not say within any given program, there's any seasonality to the take rate.

It's just kind of the portfolio dynamics that could create that. .

Yes. The only thing I'd add is just the price increases that we generally put in the ground from a payments perspective have gone into the ground over the past quarter or so. So that's there for the rest of the year. And at least from a pricing perspective, you won't see additional take rate expansion across '24. .

[Operator Instructions] Our next question comes from the line of Bill McNamara of Evercore. .

On for [ Perk ] tonight.

I just wanted to follow up and ask, since spinning off the fitness solutions business, how are you thinking about potential acquisitions in the future?.

Well, thank you for the question. Yes, we're -- the thought process hasn't changed really throughout. We'll continue to look at opportunities, obviously, in categories that we feel that have long runways and we're double down. And just like our last acquisition was Kickserv at our EverPro group, we saw an opportunity to get for the marketplace.

And so I think we'll be prudent, making sure that it makes sense for the organization. And given kind of all the other activities we're doing, we are prioritizing internal growth versus M&A at this moment in time. But we're looking at deal flow on a regular basis.

And if we find something that we think is going to be accretive to the organization, we will pursue that. .

I'm showing no further questions at this time. I would now like to turn it back to CEO, Eric Remer, for closing remarks. .

Well, thank you. We had a really solid quarter. We remained extremely excited, as we talked about several times, by the transformation optimization initiatives we are executing throughout the company. We expect to see the benefits of those initiatives the work we're doing throughout the rest of this year and really end the year accelerating into 2025.

Thank you, all, for joining the call today. .

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect..