EverCommerce Inc.
03/12/2026 | Press release | Distributed by Public on 03/12/2026 15:11
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless the context requires otherwise, references in this report to "EverCommerce Inc.," the "Company," "we," "us" and "our" refer to EverCommerce Inc. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise noted, disclosures within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations relate solely to the Company's continuing operations, which excludes marketing technology solutions.
Overview
EverCommerce is a leading provider of integrated, vertically-tailored software-as-a-service ("SaaS") solutions for service-based small- and medium-sized businesses ("service SMBs"). Our platform spans across the full lifecycle of interactions between consumers and service professionals with vertical-specific applications. As of December 31, 2025, we served more than 745,000 customers across three core verticals: EverPro for Home Services; EverHealth for Health Services; and EverWell for Wellness Services. Within our core verticals, our customers operate within numerous micro-verticals, ranging from home service professionals, such as home improvement contractors and home maintenance technicians, to physician practices and therapists within Health Services, to salon owners within Wellness. Our platform provides vertically-tailored SaaS solutions that address service SMBs' increasingly specialized demands, as well as highly complementary solutions that provide fully-integrated offerings, allowing service SMBs and EverCommerce to succeed in the market, and provide end consumers more convenient service experiences.
We offer several vertically-tailored suites of solutions, each of which follows a similar and repeatable go-to-market playbook: offer a "system of action" Business Management Software that streamlines daily business workflows, integrate highly complementary, value-add adjacent solutions and complete gaps in the value chain to create integrated solutions. These solutions focus on addressing how service SMBs market their services, streamline operations and retain and engage their customers.
•Business Management Software: Our vertically-tailored Business Management Software is the system of action at the center of a service business's operation, and is typically the point-of-entry and first solution adopted by a customer. Our software, designed to meet the day-to-day workflow needs of businesses in specific vertical end markets, streamlines front and back-office processes and provides polished customer-facing experiences. Using these offerings, service SMBs can deliver their services, streamline operations and focus on growing their customer base.
•Billing & Payment Solutions: Our Billing & Payment Solutions provide integrated payments, billing and invoicing automation and business intelligence and analytics. Our omni-channel payments capabilities include point-of-sale, eCommerce, online bill payments, recurring billing, electronic invoicing and mobile payments. Supported payment types include credit card, debit card and Automated Clearing House ("ACH") processing. Our payments platform also provides a full suite of service commerce features, including customer management as well as cash flow reporting and analytics. These value-add features help small- and medium-sized businesses ("SMBs") to ensure more timely billing and payments collection and provide improved cash flow visibility.
•Customer Experience Solutions: Our Customer Experience Solutions modernize how businesses engage and interact with customers by leveraging innovative, bespoke customer listening and communication solutions to improve the customer experience and increase retention. Our software provides customer listening capabilities with real-time customer surveying and analysis to allow standalone businesses and multi-location brands to receive VoC insights and manage the customer experience lifecycle. These applications include: customer health scoring, customer support systems, real-time alerts, NPS-based customer feedback collection, review generation and automation, reputation management, customer satisfaction surveying and a digital communication suite, among others. Additionally, the recent acquisition of ZyraTalk (as defined below) provides virtual assistant capabilities with an agentic automation platform. ZyraTalk offers production-ready fully autonomous AI agents and field service management systems designed for seamless integration across our Home Services solutions and improving the overall prospect and customer experience. Collectively, these tools help our customers gain actionable insights, increase customer loyalty and repeat purchases and improve customer experiences.
We go to market with suites of solutions that are aligned to our three core verticals. Within each suite, our Business Management Software - the system of action at the center of a service business' operation - is typically the first solution adopted by a customer. This vertically-tailored point-of-entry provides us with an opportunity to cross-sell adjacent products, previously offered as fragmented and disjointed point solutions by other software providers. This "land and expand" strategy allows us to acquire customers with key foundational solutions and expand into offerings via product development and acquisitions that cover all workflows and power the full scope of our customers' businesses. This results in a self-reinforcing flywheel effect, enabling us to drive value for our customers and, in turn, fuel growth, improve customer stickiness, and increase our market share.
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Our continuing operations generate two types of revenue: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams, and (ii) Other revenue, which consists primarily of one-time revenue streams. Our recurring revenue generally consists of monthly, quarterly and annual software and maintenance subscriptions and transaction revenue associated with integrated payments and billing solutions.
•Subscription and Transaction Fees revenue includes: (i) recurring monthly, quarterly and annual SaaS subscriptions and software license and maintenance fees from the sale of our Business Management and Customer Engagement solutions; (ii) Billing and Payment solutions - payment processing fees based on the transaction volumes processed through our integrated payment solutions and processing fees based on transaction volumes for our revenue cycle management, chronic care management and health insurance clearinghouse solutions; and (iii) membership subscriptions and our share of rebates from suppliers generated though group purchasing programs.
•Other revenue includes: (i) consulting, implementation, training and other professional services; (ii) website development; (iii) revenue from various business development partnerships; (iv) event income; and (v) hardware sales related to our business management or payment software solutions.
Our business benefits from attractive unit economics. Approximately 96%, 97% and 96% of our revenue was recurring or re-occurring in the years ended December 31, 2025, 2024 and 2023, respectively, and we maintained an annualized net revenue retention rate of approximately 96%, 91% and 93% for the quarters ended December 31, 2025, 2024 and 2023, respectively. Our annualized pro forma net revenue retention rate was equal to the annualized net revenue retention rate for all periods presented. Excluding marketing technology solutions, our annualized net revenue retention rate for our core software and payments solutions was approximately 96% and 98% for the quarters ended December 31, 2024 and 2023, respectively. We believe the retention and growth of revenue from our existing customers is a helpful measure of the health of our business and our future growth prospects. Our ability to cross sell additional products and services to our existing customers can increase customer engagement with our suite of solutions and thus have a positive impact on our net pro forma revenue retention rate. For example, we have leveraged our land and expand strategy to cross sell solutions to our existing customers, which has supported our high net pro forma revenue retention rate by increasing customer utilization of our solutions, educating customers as to how our platform and synergies can support their businesses and, in turn, improving customer stickiness.
We calculate our annualized net revenue retention rate based on the average of the annualized net revenue retention rate calculated for each month during the twelve-month period as of the most recent quarter end. Our calculation of net revenue retention rate for any fiscal period includes the positive recurring and re-occurring revenue impacts of selling new solutions to existing customers and the negative impacts of contraction and attrition among this set of customers. The annualized net revenue retention rate for a particular month is calculated as the recurring or re-occurring revenue gained/lost from existing customers, less the recurring or re-occurring revenue lost from cancelled customers as a percentage of total recurring or re-occurring revenue during the corresponding month of the prior year. For existing customers, we consider customers that existed 11 or more months prior to the current month and that do not have an end date (i.e., cancelled relationship) on or after the first day of the current month. For example, the recurring or re-occurring revenue gained/lost from existing customers in November 2025 is the difference between the recurring or re-occurring revenue generated in November 2025 and the same such revenue generated in November 2024, for customers with a start date prior to December 1, 2024 and no end date or cancelled relationship on or after November 1, 2025. For cancelled customers, we examine customers that cancelled their relationships on or after the first day of the month that is 12 months prior to the current month and before the first day of the current month. For example, the recurring or reoccurring revenue lost from cancelled customers in November 2025 is the difference between the recurring or re-occurring revenue generated in November 2025 and the same such revenue generated in November 2024, for customers that cancelled on or after November 1, 2024 and before November 1, 2025. The annualized pro forma net revenue retention is calculated as the annualized net revenue retention rate adjusted as though acquisitions and dispositions that were closed during the prior period presented were closed on the first day of such period presented. Our annualized net revenue retention rate and pro forma net revenue retention rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of solutions, new acquisitions and dispositions and our ability to retain our customers. Our calculation of annualized net revenue retention rate and annualized pro forma net revenue retention rate may differ from similarly titled metrics presented by other companies.
This rate for any fiscal period includes the positive recurring and re-occurring revenue impacts of selling new solutions to existing customers and the negative impacts of contraction and attrition among this set of customers. Our net pro forma revenue retention rate may fluctuate as a result of a number of factors, including the growing level of our revenue base, the level of penetration within our customer base, expansion of solutions, new acquisitions and our ability to retain our customers. Our calculation of net pro forma revenue retention rate may differ from similarly titled metrics presented by other companies.
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Impact of Macroeconomic Climate
The macroeconomic climate has seen in the recent years, and may continue to see, pressure from global developments such as international geopolitical conflicts, increased tariffs and proposed tariffs between the United States and other nations as well as uncertainty as to future tariffs, terrorism, pandemics or health crises, rising inflation, fluctuations in the value of the US Dollar, rising interest rates and supply chain disruptions. These developments have had and may continue to have an adverse effect on our revenues and demand for our products and services, as well as on our costs of doing business. We have taken and will continue to take actions to help mitigate the impact of these economic challenges, but there can be no assurance as to the effectiveness of our efforts going forward.
Sale of Marketing Technology Solutions
On October 31, 2025, we completed the sale of our marketing technology solutions business to Ignite Visibility for approximately $45.0 million in cash, subject to certain closing adjustments, as part of its previously announced strategic review (see Note 3. Acquisition and Dispositions included in this Annual Report on Form 10-K). We determined that our decision to sell marketing technology solutions met the criteria for classification as discontinued operations. As a result, the assets and liabilities of marketing technology solutions are presented as held for sale as of December 31, 2024 on our consolidated balance sheets and their operating results are presented as discontinued operations on our consolidated statements of operations and comprehensive income (loss) for all periods presented through the date of sale. During the year ended December 31, 2025, we recognized a loss of $1.1 million, related to the sale of marketing technology solutions and a goodwill impairment charge of $6.9 million, which are included in loss on sale and impairments within discontinued operations on our consolidated statements of operations and comprehensive income (loss). In connection with the sale, we entered into a transition services agreement ("TSA") with Ignite Visibility to provide services including information technology, finance, and accounting support. The income related to support services from the TSA is included in interest and other income (expense), net in our consolidated statements of operations and comprehensive income (loss).
Acquisition of ZyraTalk
On September 15, 2025, we acquired 100% of the interest of Joblyt LLC, dba ZyraTalk ("ZyraTalk"), an AI-powered customer engagement solution that combines virtual assistant capabilities with an agentic automation platform, for approximately $36.1 million in cash, not inclusive of up to an additional $6.5 million of contingent consideration, which could be paid over the next three years related to post-combination employment services (see Note 3. Acquisition and Dispositions included in this Annual Report on Form 10-K). The acquisition helps to establish us as an AI-driven innovator, beginning with near-term application in our Home Services vertical, EverPro, and we plan to extend ZyraTalk into broader opportunities across its other verticals.
Sale of Fitness Solutions
On March 13, 2024, we entered into definitive sale and purchase agreements to sell our fitness solutions, comprised of North American Fitness and UK Fitness ("Fitness Solutions"), to Jonas Software (see Note 3. Acquisition and Dispositions included in this Annual Report on Form 10-K). The sale of North American Fitness closed simultaneously with signing and the sale of UK Fitness closed July 1, 2024. The divestiture did not qualify for reporting as a discontinued operation and therefore, its results were included in our consolidated financial statements included in this Annual Report on Form 10-K through the applicable date of sale. During the year ended December 31, 2024, we recognized losses of $4.9 million related to the sale of Fitness Solutions, which are included in loss on sale and impairments on our consolidated statements of operations and comprehensive income (loss) included in this Annual Report on Form 10-K. During the year ended December 31, 2024, we recognized $6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions, which is included in loss on sale and impairments on the consolidated statements of operations and comprehensive income (loss) included in this Annual Report on Form 10-K.
Key Factors Affecting Our Performance
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges.
Acquiring New Customers
Sustaining our growth requires continued adoption of our solutions by new customers. Through organic growth of our business, the number of customers on our platform increased to approximately 745,000 at the end of 2025. Excluding the customers associated with the sale of our marketing technology solutions, we served more than 725,000 customers at the end of 2024 (see Note 3. Acquisition and Dispositions included in this Annual Report on Form 10-K). We will continue to invest in our efficient go-to-market strategy as we further penetrate our addressable markets. Our financial performance will depend in large part on the overall demand for our solutions from service SMBs.
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Expand Revenue and Margin from Existing Customers
We believe we have the opportunity to drive incremental revenue growth from our existing customer base through increased cross-selling and up-selling adjacent solutions. Our integrated SaaS solutions allow us to offer customers additional capabilities across their entire customer engagement lifecycle including digital payments and customer engagement. As we continue to develop, acquire and transform our solutions, we aim to continue adding value to our customers by displacing point-solution competitors and legacy, manual methods with our integrated digital offerings, increasing our revenue and improving customer experience and retention. A primary focus for revenue expansion focuses on cross-selling payments solutions to customers in an effort to prioritize margin growth. We also generate subscription revenue from cross-selling our Customer Engagement solutions across our customer base. The acquisition of ZyraTalk helps to establish our position as an AI-driven innovator with many in-production features that are being sold to third-party customers. We plan to add more innovative features and offerings to support our customers, beginning with integration into many EverPro systems of action with additional use cases across our other verticals. Collectively, these solutions increase customer loyalty, repeat purchases, improve customer experiences and help businesses to manage campaigns and generate quality leads.
Expanding into New Products and Micro-Verticals
Given our position in the service SMB ecosystem, as well as our relationships and level of engagement with our customers, we use insights gained through our customer relationships and lifecycle to identify additional solutions that are value-additive for our customers. These insights allow us to continually assess opportunities to develop or acquire solutions to further grow our business by expanding market share, cross-selling solutions and enhancing customer stickiness to improve customer retention. Additionally, we have completed acquisitions to enter new micro-verticals and geographies.
Continued Investment in Growth
We continue to drive awareness and generate demand for our solutions in order to acquire new customers and develop new service SMB relationships, as we believe that we still have a significant market opportunity ahead of us. We will continue to expand efforts to market our solutions directly to SMBs through online digital marketing, raising brand awareness at conferences and events, and other marketing channels. We believe this investment, coupled with our attractive unit economics, will enable us to grow our customer base and continue our strategy of profitable growth.
We intend to increase our investment in our solutions to maintain our position as a leading provider of integrated SaaS solutions for service SMBs. To drive adoption and increase penetration within our base, we will continue to introduce new features and upgrade our technology solutions. We believe that investment in technology development will contribute to our long-term growth, but may also negatively impact our short-term profitability.
In 2025, we continued to invest in scalable operations, including vertical market leadership, and necessary functions to support operating as a public company, including Sarbanes-Oxley compliance. Additionally, we continued to evaluate our suite of solutions and strategic options to drive investment in our highest growth solutions while simplifying our business to align with our transformation initiatives, including the divestiture of our marketing technology solutions. The recent acquisition of ZyraTalk was a strategic investment to advance the deployment of AI capabilities to our customers. In 2026 and beyond, incremental investments will be needed to support the ongoing transformation of our business and infrastructure, including Sarbanes-Oxley compliance. As part of our transformation initiatives, we expect to continue to evaluate our suite of solutions and may pursue divestitures of non-core assets and other strategic transactions.
We acquire companies to accelerate our position as a market leader, fill gaps within our vertically tailored solutions, deepen our competitive moats in existing verticals and enter new verticals and geographies. We have acquired 54 companies since our inception, the majority of which were completed prior to 2022. While our pace of acquisition has slowed, we continue to pursue growth through a mix of organic revenue expansion and acquisitions. We have an established framework for identification, execution, integration and onboarding of targets, which leverages our significant acquisition experience and utilizes internal criteria for evaluating acquisition candidates and prospective businesses. These acquired solutions can bring deep industry expertise and vertically-tailored software solutions that provide additional sources of growth. We believe that our methodology, track record and reputation for sourcing, evaluating and integrating acquisitions positions us as an "acquirer-of-choice" for potential targets.
Although we expect to continue to acquire companies and other assets in the future, such acquisitions pose a number of challenges and risks. For additional information, see Part I. Item 1A. "Risk Factors-Risks Related to Our Business-Our recent growth rates may not be sustainable or indicative of future growth," "-We may be unsuccessful in achieving our objectives through acquisitions, dispositions or other strategic transactions"and "-Revenues and profits generated through acquisitions may be less than anticipated, and we may fail to uncover all liabilities of acquisition targets through the due diligence process prior to an acquisition, resulting in unanticipated costs, losses or a decline in profits, as well as potential impairment charges. Claims against us relating to
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any acquisition may necessitate our seeking claims against the seller for which the seller may not indemnify us or that may exceed the seller's indemnification obligations."
Key Business and Financial Metrics
In addition to our results and measures of performance determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), we believe the following key business and non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions. The information presented in the following sections within Key Business and Financial Metrics is calculated on the basis of US GAAP results from continuing operations for all periods presented, which excludes discontinued operations, if any.
Revenue and Pro Forma Revenue Growth Rate
Pro Forma Revenue Growth Rate is a key performance measure that our management uses to assess our consolidated operating performance from continuing operations over time. Management also uses this metric for planning and forecasting purposes.
Our year-over-year Pro Forma Revenue Growth Rate is calculated as though all acquisitions and divestitures completed as of the end of the latest period were closed as of the first day of the prior year period presented. In calculating Pro Forma Revenue Growth Rate, we add the revenue from acquisitions for the reporting periods prior to the date of acquisition (including estimated purchase accounting adjustments) and exclude revenue from divestitures for the reporting periods prior to the date of divestiture, and then calculate our revenue growth rate between the two reported periods. As a result, Pro Forma Revenue Growth Rate includes pro forma revenue from businesses acquired and excludes revenue from businesses divested during the period, including revenue generated during periods when we did not yet own the acquired businesses and excludes revenue prior to the divestiture of the business. In including such pre-acquisition revenue and excluding pre-divestiture revenue, Pro Forma Revenue Growth Rate allows us to measure the underlying revenue growth of our business as it stands as of the end of the respective period, which we believe provides insight into our then-current operations. Pro Forma Revenue Growth Rate does not represent organic revenue generated by our business as it stood at the beginning of the respective period. Pro Forma Revenue Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had the acquisitions and divestitures been consummated on the first day of the prior year period presented. We believe that this metric is useful to investors in analyzing our financial and operational performance period over period and evaluating the growth of our business, normalizing for the impact of acquisitions and divestitures. This metric is particularly useful to management due to the number of acquired entities.
Our Revenue Growth Rate was 4.8% and 5.1% for the years ended December 31, 2025 and 2024 as compared to the prior year periods. Total revenues include post-acquisition revenue from ZyraTalk, which was acquired September 15, 2025 (see Note 3. Acquisition and Dispositions in this Annual Report on Form 10-K), of $1.2 million during the year ended December 31, 2025. Additionally, total revenues include pre-divestiture revenue from Fitness Solutions, which was divested in 2024 (see Note 3. Acquisition and Dispositions in this Annual Report on Form 10-K), of $8.1 and $23.7 million during the years ended December 31, 2024 and 2023, respectively. Total revenues also include post-acquisition revenue from Kickserv, which was acquired on August 10, 2023, of $3.0 million and $1.0 million during the years ended December 31, 2024 and 2023, respectively. Our Pro Forma Revenue Growth rate was 6.4% and 8.5% for the years ended December 31, 2025 and 2024, reflective of the underlying growth in our business as a result of new customers and providing more solutions to existing customers.
Non-GAAP Financial Measures
Adjusted Gross Profit
Gross profit is calculated as total revenue less cost of revenue (exclusive of depreciation and amortization), amortization of developed technology, amortization of capitalized software and depreciation expense (allocated to cost of revenues). We calculate Adjusted Gross Profit as gross profit adjusted to exclude non-cash charges of depreciation and amortization allocated to cost of revenues.
Adjusted Gross Profit is a key performance measure that our management uses to assess our operational performance, as it represents the results of revenues and direct costs, which are key components of our operations. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it reflects the gross profitability of our operations, and excludes the indirect costs associated with our sales and marketing, product development, general and administrative activities and depreciation and amortization and the impact of our financing methods and income taxes. Adjusted Gross Profit should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss) or profitability.
The following table presents a reconciliation of gross profit, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted Gross Profit on a consolidated basis.
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| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
|
Revenue
|
$ | 588,907 | $ | 562,185 | $ | 534,871 | |||||||||||
|
Cost of revenues (exclusive of depreciation and amortization)
|
132,063 | 124,787 | 127,405 | ||||||||||||||
|
Amortization of developed technology
|
7,627 | 10,747 | 14,418 | ||||||||||||||
|
Amortization of capitalized software
|
10,795 | 9,760 | 8,023 | ||||||||||||||
|
Depreciation expense allocated to cost of revenue
|
484 | 627 | 872 | ||||||||||||||
|
Gross profit
|
437,938 | 416,264 | 384,153 | ||||||||||||||
| Depreciation and amortization | 18,906 | 21,134 | 23,313 | ||||||||||||||
|
Adjusted gross profit from continuing operations
|
$ | 456,844 | $ | 437,398 | $ | 407,466 | |||||||||||
Adjusted EBITDA
Adjusted EBITDA is calculated as net income (loss) adjusted to exclude interest and other expense, net, income tax expense (benefit), depreciation and amortization, other amortization, stock-based compensation expense and transaction-related and other non-recurring or unusual costs. Other amortization includes amortization for capitalized contract acquisition costs. Transaction-related costs are specific deal-related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. Other non-recurring or unusual costs are expenses such as impairment charges, (gains) losses from divestitures, system implementation costs including amortization of cloud-based software implementation costs, executive separation costs, severance expense related to planned restructuring activities, and costs associated with integration and transformational improvements. Transaction-related and other non-recurring or unusual costs are excluded as they are not representative of our underlying operating performance.
Adjusted EBITDA is a key performance measure that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes. We believe that this non-GAAP financial measure is useful to investors and other interested parties in analyzing our financial performance because it provides a comparable overview of our operations across historical periods. In addition, we believe that providing Adjusted EBITDA, together with a reconciliation of net income (loss) to Adjusted EBITDA, helps investors make comparisons between our company and other companies that may have different capital structures, different tax rates and/or different forms of employee compensation. Adjusted EBITDA is used by our management team as an additional measure of our performance for purposes of business decision-making, including managing expenditures, and evaluating potential acquisitions. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our financial results that may not be shown solely by period-to-period comparisons of net income (loss) or income (loss) from continuing operations. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees. Our Management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, and may not be directly comparable to similarly titled metrics used by other companies. Adjusted EBITDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other GAAP measures of income (loss).
The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA on a consolidated basis.
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
|
Net income (loss) from continuing operations
|
$ | 18,204 | $ | (15,197) | $ | (50,705) | |||||||||||
| Adjusted to exclude the following: | |||||||||||||||||
|
Interest and other expense (income), net
|
38,091 | 35,560 | 46,408 | ||||||||||||||
|
Income tax expense
|
2,955 | 5,839 | 1,377 | ||||||||||||||
| Depreciation and amortization | 67,228 | 80,650 | 94,872 | ||||||||||||||
| Other amortization | 6,266 | 5,419 | 4,413 | ||||||||||||||
|
Stock-based compensation expense
|
27,929 | 25,730 | 24,991 | ||||||||||||||
|
Transaction-related and other non-recurring or unusual costs
|
19,837 | 26,355 | 17,528 | ||||||||||||||
|
Adjusted EBITDA from continuing operations
|
$ | 180,510 | $ | 164,356 | $ | 138,884 | |||||||||||
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Description of Certain Components of Financial Data
For additional information concerning our accounting policies, see Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.
Revenues
We derive our revenue from two primary sources which are described in detail below: (i) Subscription and Transaction Fees, which are primarily recurring revenue streams and (ii) Other revenue, which consists primarily of the sale of distinct professional services and hardware. Our revenue recognition policies are discussed in more detail under "Critical Accounting Estimates."
Subscription and Transaction Fees: Revenue includes (i) recurring monthly, quarterly and annual SaaS subscriptions and software license and maintenance fees from the sale of our Business Management and Customer Engagement solutions; (ii) Billing and payment solutions - payment processing fees based on the transaction volumes processed through our integrated payment solutions, and processing fees based on transaction volumes for our revenue cycle management, chronic care management and health insurance clearinghouse solutions; and (iii) membership subscriptions and our share of rebates from suppliers generated though group purchasing programs. Our revenue from payment processing fees is recorded net of credit card and ACH processing and interchange charges in the month the services are performed.
Other: Revenue includes (i) consulting, implementation, training and other professional services; (ii) website development; (iii) revenue from various business development partnerships; (iv) event income; and (v) hardware sales related to our business management or payment software solutions.
Cost of Revenues
Cost of revenue (exclusive of depreciation and amortization) consists of expenses related to delivering our services and products and providing support to our customers and includes employee costs and related overhead, customer credit card processing fees, targeted mail costs, third-party fulfillment costs and software hosting expenses.
We expect that cost of revenue as a percentage of revenue will fluctuate from period to period based on a variety of factors, including the rate of growth of subscription and transaction fees, labor costs, third-party expenses and acquisitions and dispositions. Revenue from subscription and transaction fees increased 4.4%, 5.4% and 11.9% for the years ended December 31, 2025, 2024 and 2023, respectively, compared to the prior year periods.
Sales and Marketing
Sales and marketing expense consists primarily of employee costs for our sales and marketing personnel, including salaries, benefits, bonuses, stock-based compensation and sales commissions. Sales and marketing expenses also include advertising costs, travel-related expenses and costs to market and promote our products, direct customer acquisition costs, costs related to conferences and events and partner/broker commissions. Software and subscription services dedicated for use by our sales and marketing organization, and outside services contracted for sales and marketing purposes are also included in sales and marketing expense. Sales commissions that are incremental to obtaining a customer contract are deferred and amortized ratably over the estimated period of our relationship with that customer. We expect our sales and marketing expenses will increase in absolute dollars and may increase as a percentage of revenue for the foreseeable future as we continue to increase investments to support our growth.
Product Development
Product development expense consists primarily of employee costs for our product development personnel, including salaries, benefits, stock-based compensation and bonuses. Product development expenses also include third-party outsourced technology costs incurred in developing our platforms, and computer equipment, software and subscription services dedicated for use by our product development organization. We expect our product development expenses to increase in absolute dollars and increase as a percentage of revenue during 2026 as we continue to dedicate substantial resources to develop, improve and expand the functionality of our solutions.
General and Administrative
General and administrative expense consists of employee costs for our executive leadership, accounting, finance, legal, human resources and other administrative personnel, including salaries, benefits, bonuses and stock-based compensation. General and administrative expenses also include external legal, accounting and other professional services fees, rent, software and subscription services dedicated for use by our general and administrative employees and other general corporate expenses. We expect general and administrative expense from continuing operations to increase on an absolute dollar basis for the foreseeable future due to costs as a result of being a public company. As we are able to further scale our operations in the future, we would expect that general and administrative expenses would decrease as a percentage of revenue.
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Depreciation and Amortization
Depreciation and amortization primarily relate to intangible assets, property and equipment and capitalized software.
Loss on Sale and Impairments
Loss on sale relates to the divestiture of marketing technology solutions and Fitness Solutions. Impairments include goodwill impairment charges and operating lease impairments related to the Company's decision to cease use of certain leased premises and sublease certain facilities.
Interest and Other Income (Expense), net
Interest and other income (expense), net, primarily consists of interest expense on long-term debt, net of interest income. It also includes amortization expense of financing costs and discounts, income from the TSA, as well as realized and unrealized gains and losses related to interest rate swap agreements.
Income Tax Expense
U.S. GAAP requires deferred tax assets and liabilities to be recognized for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at the expected tax rates for the periods in which the assets or liabilities will be realized, as well as for the expected tax (expense) benefit of net operating loss and tax credit carryforwards. Income taxes are recognized for the amount of taxes payable by the Company's corporate subsidiaries for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.
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Results of Operations
The following tables summarize key components of our results of operations for the years ended December 31, 2025, 2024 and 2023. The period-to-period comparison of our historical results are not necessarily indicative of our results of operations that may be expected in the future. The following comparative information for results of operations for all periods presented have been adjusted to reflect discontinued operations related to marketing technology solutions and includes the operating results of Fitness Solutions for all periods through the applicable date of sale.
Comparison of the years ended December 31, 2025, 2024 and 2023
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Subscription and transaction fees | $ | 566,915 | $ | 542,977 | $ | 515,119 | |||||||||||
| Other | 21,992 | 19,208 | 19,752 | ||||||||||||||
| Total revenues | 588,907 | 562,185 | 534,871 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
|
Cost of revenues (1)(exclusive of depreciation and amortization presented separately below)
|
132,063 | 124,787 | 127,405 | ||||||||||||||
|
Sales and marketing (1)
|
119,503 | 114,098 | 113,692 | ||||||||||||||
|
Product development (1)
|
79,018 | 76,179 | 72,144 | ||||||||||||||
|
General and administrative (1)
|
131,760 | 128,599 | 123,353 | ||||||||||||||
| Depreciation and amortization | 67,228 | 80,650 | 94,872 | ||||||||||||||
|
Loss on sale and impairments
|
85 | 11,670 | 6,325 | ||||||||||||||
| Total operating expenses | 529,657 | 535,983 | 537,791 | ||||||||||||||
|
Operating income
|
59,250 | 26,202 | (2,920) | ||||||||||||||
|
Interest and other income (expense), net
|
(38,091) | (35,560) | (46,408) | ||||||||||||||
|
Net income (loss) from continuing operations before income tax expense
|
21,159 | (9,358) | (49,328) | ||||||||||||||
|
Income tax expense
|
(2,955) | (5,839) | (1,377) | ||||||||||||||
|
Net income (loss) from continuing operations
|
$ | 18,204 | $ | (15,197) | $ | (50,705) | |||||||||||
(1)Includes stock-based compensation expense as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Cost of revenues | $ | 345 | $ | 387 | $ | 367 | |||||||||||
| Sales and marketing | 1,656 | 1,163 | 1,634 | ||||||||||||||
| Product development | 2,480 | 1,939 | 2,194 | ||||||||||||||
| General and administrative | 23,448 | 22,241 | 20,796 | ||||||||||||||
| Total stock-based compensation expense | $ | 27,929 | $ | 25,730 | $ | 24,991 | |||||||||||
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Comparison of the years ended December 31, 2025, 2024 and 2023 (percentage of revenue)
The following table provides the key components of operating costs within our results of operations as a percentage of revenue for the year ended December 31, 2025 compared to the same periods in 2024 and 2023.
| Year Ended December 31, | 2025 vs. 2024 | 2024 vs. 2023 | |||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
% Change
|
% Change
|
|||||||||||||||||||||||||
| Total Revenues | 100.0% | 100.0% | 100.0% | -% | -% | ||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization presented separately below) | 22.4 | % | 22.2 | % | 23.8 | % | 0.2 | % | (1.6) | % | |||||||||||||||||||
| Sales and marketing | 20.3 | % | 20.3 | % | 21.3 | % | - | % | (1.0) | % | |||||||||||||||||||
| Product development | 13.4 | % | 13.5 | % | 13.5 | % | (0.1) | % | - | % | |||||||||||||||||||
| General and administrative | 22.4 | % | 22.9 | % | 23.1 | % | (0.5) | % | (0.2) | % | |||||||||||||||||||
| Depreciation and amortization | 11.4 | % | 14.3 | % | 17.7 | % | (2.9) | % | (3.4) | % | |||||||||||||||||||
|
Loss on sale and impairments
|
- | % | 2.1 | % | 1.2 | % | (2.1) | % | 0.9 | % | |||||||||||||||||||
| Total operating expenses | 89.9 | % | 95.3 | % | 100.6 | % | (5.4) | % | (5.3) | % | |||||||||||||||||||
While revenue growth remains a key focus, we remain committed to continued expansion of gross margin, net income and Adjusted EBITDA through ongoing transformation initiatives.
2025 compared to 2024
As a percentage of revenue, cost of revenues increased from 22.2% for the year ended December 31, 2024 to 22.4% for the year ended December 31, 2025, an increase of approximately 20 basis points. Additionally, the combination of cost of revenue, sales and marketing, product development and general and administrative costs declined from 78.9% for the year ended December 31, 2024 to 78.5% for the year ended December 31, 2025, an improvement of approximately 40 basis points.
2024 compared to 2023
As a percentage of revenue, cost of revenues declined from 23.8% for the year ended December 31, 2023 to 22.2% for the year ended December 31, 2024, an improvement of approximately 160 basis points resulting in higher gross margin. Additionally, the combination of cost of revenue, sales and marketing, product development and general and administrative costs declined from 81.6% for the year ended December 31, 2023 to 78.9% for the year ended December 31, 2024, an improvement of approximately 270 basis points.
A discussion on primary drivers of cost reductions follows in the subsequent sections.
Revenues
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||
| Subscription and transaction fees | $ | 566,915 | $ | 542,977 | $ | 515,119 | $ | 23,938 | 4.4 | % | $ | 27,858 | 5.4 | % | |||||||||||||||||||||||||||
| Other | 21,992 | 19,208 | 19,752 | 2,784 | 14.5 | % | (544) | (2.8) | % | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 588,907 | $ | 562,185 | $ | 534,871 | $ | 26,722 | 4.8 | % | $ | 27,314 | 5.1 | % | |||||||||||||||||||||||||||
2025 compared to 2024
Revenues increased $26.7 million, or 4.8%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Revenues from subscription and transaction fees increased 4.4% and other revenue increased 14.5% during the year ended December 31, 2025, respectively, as compared to the prior year period. The majority of our revenue growth is attributable to the successful delivery of system of action capabilities to our SMBs in our verticals of home services, health and wellness. The subscription and transaction fees revenue increase consists primarily of increases from (a) business management software and (b) billing and payment solutions, partially offset by (c) revenues associated with our share of rebates from suppliers generated through
II-12
group purchase programs. Business management software revenues drove a $22.9 million increase in subscription and transaction fees revenue due to an expansion in our number of customers and certain price increases across our portfolio. Billing and payment solutions revenues drove an increase of $3.1 million, which was primarily due to higher transaction volumes processed through our payment platforms, partially offset by lower revenue due to the Fitness Solutions divestiture. Revenues associated with our share of rebates from suppliers generated through group purchasing programs declined by $2.1 million, which is more closely connected to macro-economic impacts than our core business management software. Subscription and transaction fees revenue also includes $1.2 million post-acquisition revenue from ZyraTalk for the year ended December 31, 2025, and pre-divestiture revenue from Fitness Solutions of $8.0 million for the year ended December 31, 2024 (see Note 3. Acquisition and Dispositions in this Annual Report on Form 10-K). Other revenues increased $2.8 million during the year ended December 31, 2025 driven by revenue related to project implementation and customer development services.
2024 compared to 2023
Revenues increased $27.3 million, or 5.1%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Revenues from subscription and transaction fees increased 5.4% and other revenue decreased 2.8% during the year ended December 31, 2024, respectively, as compared to the prior year period. The subscription and transaction revenue increases during the year ended December 31, 2024 consist primarily of increases from (a) business management software (b) billing and payment solutions and (c) revenues associated with our share of rebates from suppliers generated through group purchase programs. Business management software revenues drove a $20.7 million increase in subscription and transaction revenues due to an expansion in our number of customers and certain price increases across our portfolio. Billing and payment solutions revenues drove an increase of $3.3 million, which was primarily due to higher transaction volumes processed through our payment platforms, partially offset by lower revenue in 2024 due to the Fitness Solutions divestiture. Revenues associated with our share of rebates from suppliers generated through group purchasing programs increased $3.9 million due to growth of membership subscriptions in group purchasing programs. Subscription and transaction revenues also include $3.0 million and $1.0 million of post-acquisition revenue from Kickserv for the years ended December 31, 2024 and 2023, respectively, and pre-divestiture revenue from Fitness Solutions of $8.0 million and $23.3 million for the years ended December 31, 2024 and 2023, respectively (see Note 3. Acquisition and Dispositions in this Annual Report on Form 10-K). Other revenues decreased $0.5 million during the year ended December 31, 2024 driven by revenue related to project implementation and customer development services which did not recur in the current year.
Cost of Revenues
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization presented separately below) | $ | 132,063 | $ | 124,787 | $ | 127,405 | $ | 7,276 | 5.8 | % | $ | (2,618) | (2.1) | % | |||||||||||||||||||||||||||
2025 compared to 2024
Cost of revenues increased by $7.3 million, or 5.8%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was primarily driven by an additional $4.3 million in API fees and software hosting expenses, a $3.1 million increase in communication services expenses, $1.2 million in campaign mail and advertising expenses, $0.6 million in software and tools and $0.2 million in outsourced services, partially offset by a reduction of $2.6 million in clearinghouse fees.
2024 compared to 2023
Cost of revenues decreased by $2.6 million, or 2.1%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease is primarily comprised of a $4.2 million decrease in personnel and compensation expense, a $1.5 million reduction in clearinghouse fees, and $1.2 million in outsourced services, partially offset by a $3.7 million increase in API fees and software hosting expenses and $0.7 million in campaign mail and advertising expenses.
Sales and Marketing
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 119,503 | $ | 114,098 | $ | 113,692 | $ | 5,405 | 4.7 | % | $ | 406 | 0.4 | % | |||||||||||||||||||||||||||
II-13
2025 compared to 2024
Sales and marketing expenses increased by $5.4 million, or 4.7%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was driven primarily by an additional $7.0 million in personnel and compensation expense, a $1.1 million increase in consulting and outsourced services, and a $0.5 million increase in stock-based compensation. These increases were partially offset by a $1.7 million decrease in commissions related to volume from third-party channels associated with legacy payment platform solutions, a $1.0 million decrease in advertising, and $0.7 million decrease in software and tools.
2024 compared to 2023
Sales and marketing expenses increased by $0.4 million, or 0.4%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Sales and marketing expenses were relatively consistent compared to the prior year period and declined as a percentage of revenue by 100 basis points.
Product Development
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Product development | $ | 79,018 | $ | 76,179 | $ | 72,144 | $ | 2,839 | 3.7 | % | $ | 4,035 | 5.6 | % | |||||||||||||||||||||||||||
2025 compared to 2024
Product development expenses increased by $2.8 million, or 3.7%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was driven primarily by an additional $4.1 million in outsourced services as we continue to execute against our transformation strategy for cost optimization, $1.1 million of software and tools, driven by investments in our technology and teams to support our various solutions as well as centralized security operations, information technology and cloud engineering, and $0.5 million in higher stock-based compensation expense. These increases were partially offset by a $3.0 million reduction in personnel and compensation expenses.
2024 compared to 2023
Product development expenses increased by $4.0 million, or 5.6%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The increase was a result of an additional $2.3 million of personnel and compensation expense, $1.8 million of outsourced services, and $1.7 million of software and tools, driven by investments in our technology and teams to support our various solutions as well as centralized security operations, information technology and cloud engineering. The increase was partially offset by a $1.5 million decrease in professional fees and consulting expenses.
General and Administrative
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 131,760 | $ | 128,599 | $ | 123,353 | $ | 3,161 | 2.5 | % | $ | 5,246 | 4.3 | % | |||||||||||||||||||||||||||
2025 compared to 2024
General and administrative expenses increased by $3.2 million, or 2.5%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was driven primarily by an additional $3.5 million in outsourced services as we continue to execute against our transformation strategy for cost optimization, $2.2 million increase in professional and legal fees associated with acquisition and divestiture transaction-related activity during 2025, $1.5 million in software and tools, $1.2 million in bad debt expense and $1.2 million in stock-based compensation. These increases were partially offset by a $4.0 million reduction in personnel and compensation expense, a $2.0 million decrease in insurance expense, a $0.8 million decrease in facility expense. The increase in outsourced services is driven by cost optimization efforts utilizing third-party services enabling the reduction in personnel and compensation expense.
2024 compared to 2023
General and administrative expenses increased by $5.2 million, or 4.3%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The increase was driven primarily by an additional $3.8 million of personnel and compensation
II-14
expense, a $2.4 million increase in software and tools, a $1.8 million increase in outsourced services, and a $1.4 million increase in stock-based compensation expense, partially offset by a $2.4 million decrease in facility expense and $1.9 million decrease in bad debt expense.
Depreciation and Amortization
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 67,228 | $ | 80,650 | $ | 94,872 | $ | (13,422) | (16.6) | % | $ | (14,222) | (15.0) | % | |||||||||||||||||||||||||||
2025 compared to 2024
Depreciation and amortization expenses decreased by $13.4 million, or 16.6%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease was driven primarily by lower intangible assets' amortization due to the reduced rate of replacement assets resulting from a slowdown in business acquisitions. Specifically, the decrease was driven primarily by $13.9 million in lower intangible assets' amortization and a decrease of $0.6 million of property and equipment depreciation, partially offset by $1.0 million of additional capitalized software amortization.
2024 compared to 2023
Depreciation and amortization expenses decreased by $14.2 million, or 15.0%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The reduction in depreciation and amortization was driven primarily by the reduced rate of replacement assets resulting from a slowdown in business acquisitions. Specifically, the decrease was driven primarily by $15.1 million in lower intangible assets' amortization and a decrease of $0.9 million of property and equipment depreciation, partially offset by $1.7 million of additional capitalized software amortization.
Loss on Sale and Impairments
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023 | |||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change | % Change | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
|
Loss on sale and impairments
|
$ | 85 | $ | 11,670 | $ | 6,325 | $ | (11,585) | 100.0 | % | $ | 5,345 | 84.5 | % | |||||||||||||||||||||||||||
2025 compared to 2024
In March 2024, we entered into definitive sale and purchase agreements to sell our Fitness Solutions (see Note 3. Acquisition and Dispositions included in this Annual Report on Form 10-K). During the year ended December 31, 2025, we recorded a $0.1 million working capital adjustment related to the disposal of Fitness Solutions. During the year ended December 31, 2024, we recognized losses of $4.9 million related to the sale of Fitness Solutions and $6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions. Additionally, we ceased use of certain leased premises and subleased certain facilities resulting in an impairment charge of $0.4 million to impair the right-of-use lease assets to their fair value during the year ended December 31, 2024.
2024 compared to 2023
During the year ended December 31, 2024, we recognized losses of $4.9 million related to the sale of Fitness Solutions and $6.4 million of goodwill impairment charges representing the allocated goodwill to Fitness Solutions. During the fourth quarter 2023, we determined that the estimated fair value of our fitness asset group was insufficient to recover the net carrying value of the asset group resulting in an impairment of long-lived assets of approximately $5.1 million. Additionally, we ceased use of certain leased premises and subleased certain facilities resulting in an impairment charge of $0.4 million and $1.2 million to impair the right-of-use lease assets to their fair value during the years ended December 31, 2024 and 2023, respectively.
II-15
Interest and Other Income (Expense), net
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
|
Interest and other income (expense), net
|
$ | 38,091 | $ | 35,560 | $ | 46,408 | $ | 2,531 | 7.1 | % | $ | (10,848) | (23.4) | % | |||||||||||||||||||||||||||
2025 compared to 2024
Interest and other income (expense), net, increased by $2.5 million, or 7.1%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024 with the changes primarily driven by volatility of interest rates and foreign currency and the associated impact on the fair value of interest rate swaps. The increase for the year ended December 31, 2025 was driven by an unrealized loss of $6.2 million on interest rate swaps compared to an unrealized gain of $6.4 million in the comparative period, a year over year increase of $12.6 million as a result of the fair value change in interest rate swaps. This increase was partially offset by a decrease of $7.0 million in interest expense as a result of lower variable base interest rates on the Company's Credit Facilities, a $2.3 million decrease in unrealized foreign currency loss, $0.4 million of income related to support services provided under the TSA with Ignite Visibility, and a $0.3 million increase in interest income. The decline in interest expense is a result of lower variable base interest rates on the Company's Credit Facilities (as defined below), the amendments to the Term Loan (as defined below) in the fourth quarter 2024 and third quarter 2025, which resulted in a reduction in margin and the removal of the credit spread adjustment (see Note 10. Long-Term Debt included in this Annual Report on Form 10-K).
2024 compared to 2023
Interest and other income (expense), net, decreased by $10.8 million, or 23.4%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023 with the changes primarily driven by volatility of interest rates and the associated impact on the fair value of interest rate swaps. The decrease for the year ended December 31, 2024 was driven primarily by an unrealized gain of $6.4 million on interest rate swaps compared to an unrealized loss of $2.0 million in the comparative period, a $2.1 million increase in interest income, and a decrease of $1.9 million in interest expense as a result of lower variable base interest rates on the Company's Credit Facilities.
Income Tax Expense
| Year Ended December 31, |
2025 vs. 2024
|
2024 vs. 2023
|
|||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 |
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
|
Income tax expense
|
$ | (2,955) | $ | (5,839) | $ | (1,377) | $ | 2,884 | (49.4) | % | $ | (4,462) | 324.0 | % | |||||||||||||||||||||||||||
2025 compared to 2024
Income tax expense decreased by $2.9 million, or 49.4%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease was driven primarily by lower U.S. federal and state current tax expense resulting from enacted tax law changes, as well as the release of the valuation allowance on New Zealand deferred tax assets. These benefits were partially offset by higher income from continuing operations before taxes.
2024 compared to 2023
Income tax expense increased by $4.5 million, or 324.0%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, with the change driven primarily by an increase in U.S. federal and state income taxes and discrete items, including the sale of Fitness Solutions and the goodwill impairment of the marketing technology reporting unit.
Liquidity and Capital Resources
To date, our primary sources of liquidity have been net cash provided by operating activities, proceeds from equity issuances and proceeds from long-term debt.
We utilize liquidity for items such as strategic investments in the ongoing transformation of our business and infrastructure, our business acquisitions (such as our strategic acquisition of ZyraTalk in September 2025) and share repurchases authorized through our Repurchase Program. For a description of our recent acquisitions, see Note 3. Acquisition and Dispositions in the notes to the consolidated financial statements included in this Annual Report on Form 10-K. Absent significant deterioration of market conditions,
II-16
we expect that working capital requirements, capital expenditures, acquisitions, the Company's Repurchase Program (as defined below), debt servicing and lease obligations will be our principal needs for liquidity going forward.
As of December 31, 2025, we had cash, cash equivalents and restricted cash of $129.7 million, $155.0 million of available borrowing capacity under our Revolver (as defined below) and $526.6 million outstanding under our Term Loan (as defined below). We believe that our existing cash, cash equivalents and restricted cash, availability under our Credit Facilities, and our cash flows from operations will be sufficient to fund our working capital requirements and planned capital expenditures, and to service our debt obligations for at least the next twelve months. However, our future working capital requirements will depend on many factors, including our rate of revenue growth, the timing and size of future acquisitions, and the timing of introductions of new products and services. If needed, additional funds may not be available on terms favorable to us, or at all. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected. See Part I, Item 1A."Risk Factors."
Cash Flows
The following table sets forth cash flow data:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net cash provided by operating activities | $ | 111,456 | $ | 113,163 | $ | 104,605 | |||||||||||
| Net cash used in investing activities | (30,573) | (12,297) | (38,020) | ||||||||||||||
|
Net cash used in financing activities
|
(87,555) | (59,614) | (66,630) | ||||||||||||||
| Effect of foreign currency exchange rate changes on cash | 620 | (1,649) | 400 | ||||||||||||||
|
Net (decrease) increase in cash, cash equivalents and restricted cash
|
$ | (6,052) | $ | 39,603 | $ | 355 | |||||||||||
Cash Flow from Operating Activities
Net cash provided by operating activities was $111.5 million, $113.2 million, and $104.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. Changes in net cash provided by operating activities resulted primarily from cash received from net sales within our subscription and transaction fees. Other drivers of the changes in net cash provided by operating activities include payments for personnel expenses for our employees, costs related to delivering our services and products, partner commissions, advertising and interest on our long-term debt.
The decrease in cash provided by operating activities for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to a decrease in cash collections from our subscription and transaction fees and marketing technology solutions, which includes revenues from payment processing of approximately $22.4 million, and investments made to support the growth of our business including personnel expenses of $4.6 million, partially offset by lower costs as a result of our transformation and optimization initiatives comprised of lower costs related to the delivery of our services and products of $16.2 million, lower interest payments of $7.2 million, a decrease in taxes of $1.5 million, and higher interest income of $0.4 million.
The increase in cash provided for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to an increase in cash collections from our subscription and transaction fees and marketing technology solutions, which includes revenues from payment processing of approximately $28.0 million and higher interest income of $2.0 million, partially offset by investments made to support the growth of our business including personnel expenses of $13.8 million, an increase in costs directly related to the delivery of our services and products of $7.0 million, and an increase in taxes of $1.4 million.
Cash Flow from Investing Activities
During the year ended December 31, 2025, net cash used in investing activities of $30.6 million was related primarily to the acquisition of ZyraTalk, net of cash acquired, for approximately $35.8 million, costs to develop software of $29.6 million and $2.2 million for purchases of property and equipment, partially offset by proceeds from marketing technology solutions, net of transaction costs and cash sold for approximately $37.1 million.
During the year ended December 31, 2024, net cash used in investing activities of $12.3 million was related primarily to costs to develop software of $17.4 million and $1.5 million for purchases of property and equipment, partially offset by proceeds from the sale of Fitness Solutions, net of transaction costs, cash and restricted cash sold for approximately $6.6 million.
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During the year ended December 31, 2023, net cash used in investing activities of $38.0 million was related primarily to costs to develop software of $20.0 million, the acquisition of Kickserv, net of cash acquired, for approximately $15.0 million and $3.0 million for purchases of property and equipment.
Cash Flow from Financing Activities
During the year ended December 31, 2025, net cash used in financing activities of $87.6 million was related primarily to the repurchase and retirement of shares of our common stock of $85.1 million.
During the year ended December 31, 2024, net cash used in financing activities of $59.6 million was related primarily to the repurchase and retirement of shares of our common stock of $57.7 million.
During the year ended December 31, 2023, net cash used in financing activities of $66.6 million was related primarily to the repurchase and retirement of shares of our common stock of $67.3 million.
For additional information regarding our repurchase and retirement of shares of our common stock, refer to Note 11. Equity in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.
Credit Facilities
We are party to a credit agreement, as amended, that provides for one term loan for an aggregate principal amount of $529.4 million (the "Term Loan"), a revolver with a capacity of $155.0 million ("Revolver") and a sub-limit of the Revolver available for letters of credit up to an aggregate face amount of $20.0 million. These debt arrangements are collectively referred to herein as the "Credit Facilities".
Simultaneously with the execution of the Credit Facilities, we and various of our subsidiaries entered into a collateral agreement and guarantee agreement. Pursuant to the guarantee agreement, EverCommerce Intermediate Inc. and various of our subsidiaries are guarantors of the obligations under the Credit Facilities. Pursuant to the collateral agreement, the Credit Facilities are secured by liens on substantially all of our assets, including our intellectual property and the equity interests of our various subsidiaries, including EverCommerce Solutions Inc.
The Credit Facilities contain certain affirmative and negative covenants, including, among other things, restrictions on indebtedness, issuance of preferred equity interests, liens, fundamental changes and asset sales, investments, negative pledges, repurchases of stock, dividends and other distributions, and transactions with affiliates. In addition, we are subject to a financial covenant with respect to the Revolver whereby, if the aggregate principal amount of revolving loans (excluding letters of credit) outstanding on the last day of any fiscal quarter exceeds 35% of the aggregate commitments available under the Revolver, then our first lien leverage ratio as of the last day of such fiscal quarter must be 7.50 to 1.00 or less.
With respect to ABR borrowings, interest payments are due on a quarterly basis on the last business day of each March, June, September and December. With respect to Eurocurrency borrowings, interest payments are due on the last business day of the interest period applicable to the borrowing and, in the case of a Eurocurrency borrowing with an interest period of more than three months' duration, each day prior to the last day of such interest period that occurs at intervals of three months' duration after the first day of such interest period.
On December 13, 2024, the Company entered into an amendment (the "2024 Amendment") to the Credit Facilities to reduce the applicable margin and remove the credit spread adjustment from the existing Term Loan in its entirety in an aggregate principal amount of $533.5 million. Following the 2024 Amendment, the Term Loan bears interest, at the borrower's election, at (x) a forward-looking term rate based upon the secured overnight financing rate ("SOFR") (as defined in the Credit Facilities) plus an applicable margin of 2.50%, with a minimum forward-looking SOFR rate 0.50% or (y) Alternative Base Rate ("ABR) (as defined in the Credit Facilities) plus an applicable margin of 1.50%, with a minimum ABR of 1.50%, in each case, with no step-downs. The credit spread adjustment was removed in connection with the 2024 Amendment. The refinanced Term Loan priced at par and refinanced all of the existing term loans outstanding under the Credit Agreement immediately prior to giving effect to the 2024 Amendment.
Effective as of June 10, 2025, the Company entered into an additional amendment to the Credit Facilities (the "June 2025 Amendment") to reduce the commitments outstanding under the Revolver, extend the maturity of a portion of such commitments and reduce the applicable margin with respect to extended revolving loans. As a result of the June 2025 Amendment, commitments under the Revolver were reduced from $190.0 million to $155.0 million. With respect to $125.0 million of such commitments, (i) the maturity date was extended to January 6, 2028 and (ii) the applicable margin for (x) Term SOFR (as defined in the Credit Facilities) loans was reduced to 2.50% and (y) ABR (as defined in the Credit Facilities) loans was reduced to 1.50%, in each case, subject to a single 0.25% step-down based on the Company's first lien net leverage ratio. With respect to the remaining $30.0 million of such commitments, (i) the maturity date remains July 6, 2026 and (ii) the applicable margin was unchanged.
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Additionally, on July 29, 2025, the Company entered into an amendment to the Credit Facilities (the "July 2025 Amendment") to, among other things, refinance the existing Term Loan in an aggregate principal amount of $529.4 million. The July 2025 Amendment, among other things, (i) extends the maturity date of the Term Loan to July 6, 2031, and (ii) reduces the applicable margin by 25 basis points with respect to all term loans. The Term Loan bears interest, at the Borrower's election, at (x) Term SOFR (as defined in the Credit Agreement) plus an applicable margin of 2.25%, with a minimum Term SOFR rate of 0.50% or (y) ABR (as defined in the Credit Agreement) plus an applicable margin of 1.25%, with a minimum ABR of 1.50%, in each case, with no stepdowns. The refinanced Term Loan priced at par and refinanced the existing term loan outstanding under the Credit Agreement immediately prior to giving effect to the July 2025 Amendment.
Pursuant to the July 2025 Amendment, with respect to $125.0 million of commitments under the existing $155.0 million Revolver, (i) the maturity date was extended to July 29, 2030 and (ii) the applicable margin for (x) Term SOFR loans was reduced to 2.00% and (y) Alternate Base Rate loans was reduced to 1.00%, in each case, subject to a 25 basis points step-up based on the Company's first lien net leverage ratio. Other than the changes noted above, the terms and conditions of all commitments at closing as well as those extending beyond the original maturity date remain the same as the existing Revolver. Accordingly, $155.0 million of availability remains under the Revolver until July 6, 2026 and then reduces to $125.0 million through July 29, 2030.
We have entered into the following interest rate swap agreements in connection with our Credit Facilities to convert a portion of the floating rate component of the Term Loan from a floating rate to fixed rate:
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| October 31, 2022 | October 31, 2027 | 4.212 | % | $ | 200,000 | $ | (3,293) | |||||||||||||||||||
| March 31, 2023 | October 31, 2027 | 3.951 | % | $ | 100,000 | $ | (1,178) | |||||||||||||||||||
| September 20, 2024 | October 31, 2027 | 3.395 | % | $ | 125,000 | $ | (216) | |||||||||||||||||||
The Revolver has a variable commitment fee, which is based on our first lien leverage ratio. We expect the commitment fee to range from 0.25% to 0.375% per annum. We are obligated to pay a fixed fronting fee for letters of credit of 0.125% per annum.
Amounts borrowed under the Revolver may be repaid and re-borrowed through maturity of the Revolver in July 2030. The Term Loans mature in July 2031. The Term Loan may be repaid or prepaid but may not be re-borrowed.
As of December 31, 2025, there was $526.6 million outstanding under our Credit Facilities, all of which was related to the Term Loan as no amounts were outstanding under the Revolver. The effective interest rate on the Term Loan was approximately 6.32% for the year ended December 31, 2025, excluding the effect of any interest rate swap agreements.
As of December 31, 2025, we were in compliance with the financial covenants under the Credit Facilities.
Stock Repurchase Program
On June 14, 2022, our Board approved a stock repurchase program (as subsequently amended, the "Repurchase Program") with authorization to purchase up to $50.0 million in shares of the Company's common stock through the expiration of the program on December 21, 2022. On November 7, 2022, November 5, 2023, May 21, 2024, May 1, 2025, and November 4, 2025 our Board increased the authorization of the Repurchase Program by an additional $50.0 million in shares of the Company's common stock on each date for a total authorization to repurchase up to $300.0 million in shares of the Company's common stock, and most recently extended the expiration of the Repurchase Program through December 31, 2026. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at the Company's discretion, depending on market conditions and corporate needs. The Repurchase Program does not obligate the Company to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of the Board. The Company expects to fund repurchases with existing cash on hand.
The Company repurchased and retired 8.2 million shares of common stock for $85.6 million, including transaction fees and taxes, during the year ended December 31, 2025. As of December 31, 2025, $47.7 million remains available under the Repurchase Program.
Contractual Obligations
Refer to Notes 9. Leases, 10. Long-Term Debt and 17. Commitments and Contingencies in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of our operating lease, debt and contractual obligations, respectively.
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Critical Accounting Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
While our significant accounting policies are described in further detail in Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Revenues are derived from subscription and transaction fees, marketing technology solutions, and other revenues. We recognize revenue when our customers obtain control of goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. In determining the total consideration that we expect to receive, we include variable consideration only to the extent that it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty is resolved. There have not been any material changes during 2025 in the underlying estimates and assumptions in determining probability of variable consideration.
Subscription and Transaction Fees:
Subscription revenue primarily consists of the sale of SaaS offerings, software licenses and related support services and payment processing services.
The timing of revenue recognition within our software subscription services is dictated by the nature of the underlying performance obligation. SaaS offerings and license support services are generally recognized ratably over the contractual period that the services are delivered, beginning on the date our service is made available to customers, while on-premise perpetual or term licenses are generally recognized at the point in time when the software is made available to the customer to download or use. Subscription revenue-related contracts can be both short and long-term, with stated contract terms that range from one month to five years. Our contracts may contain termination for convenience provisions that allow the Company, customer or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a penalty.
Transaction fees relate to payment processing and group purchasing program administration services. In fulfillment of our payment processing services, we partner with third-party merchants and processors who assist us in fulfillment of our obligations to customers. We have concluded that we do not possess the ability to control the underlying services provided by third parties in the fulfillment of our obligations to customers and therefore recognize revenue net of interchange fees retained by the card issuing financial institutions and fees charged by payment networks. Transaction services contracts with customers are generally for a term of one month and automatically renew each month.
We also receive rebates from contracted suppliers in exchange for our program administration services. Rebates earned are based on a defined percentage of the purchase price of goods and services sold to members. Administration services contracts with customers are generally for an annual or monthly term and renew automatically upon lapse of the current term.
Other:
Other revenues generally consist of fees associated with the sale of distinct professional services and hardware. Contract terms for other revenue arrangements are generally short-term, with stated contract terms that are less than one year.
Our professional services associated with our subscription revenue generally relate to standard implementation, configuration, installation, or training services applied to both SaaS and on-premise deployment models. Professional service revenue is recognized over time as the services are performed, as the customer simultaneously receives and consumes the benefit of these services.
Performance Obligations and Standalone Selling Price:
Our contracts at times include the sale of multiple promised goods or services that have been determined to be distinct. The transaction price for contracts with multiple performance obligations is allocated based on the relative stand-alone selling price of each performance obligation within the contract.
Judgment can be involved when determining the stand-alone selling price of products and services. For the majority of the Company's SaaS, on-premise license and professional services, we establish a stand-alone selling price based on observable selling prices to similar classes of customers. If the stand-alone selling price is not observable through past transactions, we estimate the stand-alone selling price taking into consideration available information such as market conditions and internally approved pricing guidelines
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related to the performance obligation. As permitted under ASC 606, at times we have established the stand-alone selling price of performance obligations as a range and utilize this range to determine whether there is a discount that needs to be allocated based on the relative stand-alone selling price of the various performance obligations.
At contract inception, we perform a review of each performance obligation's selling price against the established stand-alone selling price range. If any performance obligations are priced outside of the established stand-alone selling price range, we reallocate the total transaction price to each performance obligation based on the relative stand-alone selling price for each performance. The established range is reassessed on a periodic basis when facts and circumstances surrounding these established ranges change.
Goodwill and Intangible Assets Recoverability
We perform an impairment test annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value of goodwill might not be fully recoverable. In accordance with applicable accounting guidance, a company can assess qualitative factors to determine whether it is necessary to perform a goodwill impairment test or may elect to proceed directly to a quantitative goodwill impairment test. For the year ended December 31, 2025, the Company performed an qualitative annual impairment assessment, which indicated that it was more likely than not that the estimated fair value was in excess of the net carrying value for each reporting unit. The qualitative annual impairment assessment for the year ended December 31, 2024 excluded the marketing technology reporting unit as discussed below. For the year ended December 31, 2023 the Company performed a quantitative assessment, which resulted in substantial excess of estimated fair value over net carrying value for each reporting unit. For the quantitative assessment, we use a weighted combination of a discounted cash flow model (known as the income approach) and comparisons to publicly traded companies engaged in similar businesses (known as the market approach). The income approach requires us to use a number of assumptions, including market factors specific to the business, the amount and timing of estimated future cash flows over an extended period of time, long-term growth rates for the business and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. As part of the market approach, we make judgments about the comparability of publicly traded companies engaged in similar businesses. For the qualitative assessments, we reviewed factors including macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, changes in any key personnel, any changes in composition of carrying amount of our assets and changes in our stock price. There were no reasonable changes to the methods and assumptions that would have resulted in an impairment. In the future, if there are material changes in the underlying estimates and assumptions pertaining to the impairment assessment, the financial statements could be materially impacted.
The Company performed a qualitative annual impairment assessment for the year ended December 31, 2024, which resulted in substantial excess of estimated fair value over net carrying value for each reporting unit, except for the marketing technology reporting unit as further described below. As a result of this qualitative assessment for the year ended December 31, 2024, we performed a further quantitative evaluation for the marketing technology reporting unit.
During the fourth quarter 2024, in conjunction with our review of strategic alternatives for our marketing technology solutions, and as a result of lower than expected financial performance and future forecasted growth rates we determined that the estimated fair value of our marketing technology reporting unit was insufficient to recover the net carrying value of the reporting unit resulting in an impairment of goodwill of approximately $28.1 million. Additionally, during the year ended December 31, 2025, we recognized a goodwill impairment charge of $6.9 million, related to the sale of marketing technology solutions (see Note 3. Acquisition and Dispositions included in this Annual Report on Form 10-K). In connection with the definitive sale and purchase agreements to sell our fitness solutions, we tested the goodwill balance for impairment as of March 31, 2024 and recognized a goodwill impairment of $6.4 million representing the allocated goodwill for Fitness Solutions (see Note 3. Acquisition and Dispositions included in this Annual Report on Form 10-K).
Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Indicators we reviewed included whether there was a significant decrease in market prices of our assets, a significant adverse change in the extent or manner in which our assets are being used, a significant adverse change in legal factors affecting our assets and a cash flow loss. During the fourth quarter 2023, we determined that the estimated fair value of our fitness asset group was insufficient to recover the net carrying value of the asset group resulting in an impairment of long-lived assets of approximately $5.1 million, of which $3.1 million was attributable to intangible assets. In the future, if there are material changes in the underlying estimates and assumptions pertaining to the impairment assessment, the financial statements could be materially impacted.
Income Taxes
Deferred income tax assets and liabilities are determined based upon the net tax effect of the differences between the financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income or loss in the years in which the differences are expected to be reversed. A valuation allowance is used to reduce some
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or all of the deferred tax assets if, based upon the weight of available evidence, it is more likely than not that those deferred tax assets will not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, recent financial operations and their associated valuation allowances, if any.
We recognize the tax benefit from an uncertain tax position only when it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.
The Company recorded a reduction of $0.3 million and an increase of $13.0 million in valuation allowance on our deferred tax assets in 2025 and 2024, respectively, using the aforementioned approach. The Company recorded $0.6 million and $0.1 million in unrecognized tax benefits for the years ended December 31, 2025 and 2024, respectively.
Valuation allowances are currently assessed based on scheduling the reversal of temporary differences, without consideration to future projections of income, given the Company's history of losses. This approach may change in the future, requiring the use of estimates or assumptions with regard to future taxable income in assessing the need for and quantum of valuation allowances.
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.
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