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2021-09-24

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EngageSmart opens for trading at $37, up about 43.6% from IPO price

(Sept 23) EngageSmart Inc. opens for trading at $37, up about 43.6% from IPO price. Company Braintr

EngageSmart opens for trading at $37, up about 43.6% from IPO price

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Bennett, who has been with the firm since inception and was previously president of Sage Payment Solutions.\nThe company's primary offerings include:\n<ul>\n <li>SimplePractice - Wellness</li>\n <li>InvoiceCloud - Government, Utilities and Financial Services</li>\n <li>HealthPay24 - Healthcare</li>\n <li>DonorDrive - Non-profit and Corporate Fundraising</li>\n</ul>\nEngageSmart has received at least $451 million in equity investment from investors including General Atlantic and Summit Partners.\nCustomer Acquisition\nThe firm pursues both large enterprise customers and SMB customers via its direct sales force and online service.\nAs of June 30, 2021, the firm had served over 68,000 clients in the SMB market and more than 3,000 customers in its Enterprise Solutions segment.\nSelling and Marketing expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Selling and Marketing</td>\n <td>Expenses vs. Revenue</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Percentage</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>32.4%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>33.1%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>43.1%</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nThe Selling and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling and Marketing spend, dropped slightly to 1.1x in the most recent reporting period, as shown in the table below:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Selling and Marketing</td>\n <td>Efficiency Rate</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Multiple</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>1.1</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>1.3</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nThe Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.\nESMT's most recent calculation was 64% as of June 30, 2021, so the firm is performing well in this regard, per the table below:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Rule of 40</td>\n <td>Calculation</td>\n </tr>\n <tr>\n <td>Recent Rev. Growth %</td>\n <td>59%</td>\n </tr>\n <tr>\n <td>EBITDA %</td>\n <td>5%</td>\n </tr>\n <tr>\n <td>Total</td>\n <td>64%</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nThe firm's dollar-based net revenue retention rate for the year ended December 31, 2020, was 124%, a strong result.\nThe dollar-based net revenue retention rate metric measures how much additional revenue is generated over time from each cohort of customers, so that a figure over 100% means that the company is generating more revenue from the same customer cohort over time, indicating good product/market fit and efficient sales and marketing efforts.\nMarket &amp; Competition\nAccording to a 2021 marketresearch reportby Mordor Intelligence, the global market for customer engagement solutions was an estimated $15.5 billion in 2020 and is forecast to reach $30.9 billion by 2026.\nThis represents a forecast CAGR of 12.65% from 2021 to 2026.\nThe main drivers for this expected growth are a growth in technology solutions to improve the customer journey via any device they use to connect with businesses.\nAlso, a desire to reduce customer churn rate results in improved business financials and growing valuation.\nBelow is a chart showing the variation in customer churn rates in different industries in the U.S. in 2018:\n<img src=\"https://static.tigerbbs.com/f1066adb602d05e4e99630aacf61e1c5\" tg-width=\"1060\" tg-height=\"922\" referrerpolicy=\"no-referrer\">Major competitive or other industry participants include:\n<ul>\n <li>IBM(NYSE:IBM)</li>\n <li>Microsoft(NASDAQ:MSFT)</li>\n <li>Nuance(NASDAQ:NUAN)</li>\n <li>Oracle(NYSE:ORCL)</li>\n <li>Salesforce(NYSE:CRM)</li>\n <li>Avaya(NYSE:AVYA)</li>\n <li>Calabrio</li>\n <li>Aspect Software</li>\n <li>Genesys</li>\n <li>Verint Systems(NASDAQ:VRNT)</li>\n <li>NICE Ltd.(NASDAQ:NICE)</li>\n <li>OpenText</li>\n <li>Pegasystems(NASDAQ:PEGA)</li>\n <li>Others</li>\n</ul>\nFinancial Performance\nEngageSmart's recent financial results can be summarized as follows:\n<ul>\n <li>Growing topline revenue</li>\n <li>Increasing gross profit and high gross margin</li>\n <li>Growing operating profit and net income</li>\n <li>Increasing cash flow from operations</li>\n</ul>\nBelow are relevant financial results derived from the firm's registration statement:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Total Revenue</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Total Revenue</td>\n <td>% Variance vs. Prior</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 99,171,000</td>\n <td>58.6%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 146,557,000</td>\n <td>77.8%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ 82,432,000</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Gross Profit (Loss)</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Gross Profit (Loss)</td>\n <td>% Variance vs. Prior</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 73,673,000</td>\n <td>61.4%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 108,964,000</td>\n <td>89.2%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ 57,591,000</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Gross Margin</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Gross Margin</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>74.29%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>74.35%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>69.86%</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Operating Profit (Loss)</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Operating Profit (Loss)</td>\n <td>Operating Margin</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 5,001,000</td>\n <td>5.0%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 648,000</td>\n <td>0.4%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ (50,398,000)</td>\n <td>-61.1%</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Net Income (Loss)</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Net Income (Loss)</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 274,000</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ (6,678,000)</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ (53,598,000)</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Cash Flow From Operations</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Cash Flow From Operations</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 12,044,000</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 19,645,000</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ (1,427,000)</td>\n </tr>\n <tr></tr>\n <tr>\n <td>(Glossary Of Terms)</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nAs of June 30, 2021, EngageSmart had $31.8 million in cash and $151.8 million in total liabilities.\nFree cash flow during the twelve months ended June 30, 2021, was $25.2 million.\nIPO Details\nESMT intends to sell 13 million shares and selling shareholders will offer 1.55 million shares of common stock at a proposed midpoint price of $24.00 per share for gross proceeds of approximately $349 million, not including the sale of customary underwriter options.\nNew potential investor Dragoneer Investment Group has indicated an interest to purchase 2.1 million shares of the offering or about $50.4 million at the proposed midpoint price.\nAssuming a successful IPO at the midpoint of the proposed price range, the company's enterprise value at IPO (ex- underwriter options) would approximate $3.7 billion.\nExcluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 9.04%. A figure under 10% is generally considered a 'low float' stock which can be subject to significant price volatility.\nPer the firm's most recent regulatory filing, it plans to use the net proceeds as follows:\n<blockquote>\n We expect to use the net proceeds of this offering to repay in full the outstanding borrowings of approximately $114.2 million under our Credit Facilities. We currently intend to use the remaining net proceeds from this offering for general corporate purposes, including to fund our growth, acquire complementary businesses, products, services, or technologies, working capital, operating expenses, and capital expenditures.\n</blockquote>\n<blockquote>\n Source: SEC\n</blockquote>\nManagement's presentation of the company roadshow isavailable here.\nRegarding outstanding legal proceedings, management did not disclose any legal claims against the firm as of the regulatory filing date.\nListed underwriters of the IPO are JPMorgan, Goldman Sachs, BofA Securities, and other investment banks.\nValuation Metrics\nBelow is a table of the firm's relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Measure [TTM]</td>\n <td>Amount</td>\n </tr>\n <tr>\n <td>Market Capitalization at IPO</td>\n <td>$3,862,956,720</td>\n </tr>\n <tr>\n <td>Enterprise Value</td>\n <td>$3,656,695,720</td>\n </tr>\n <tr>\n <td>Price / Sales</td>\n <td>21.09</td>\n </tr>\n <tr>\n <td>EV / Revenue</td>\n <td>19.96</td>\n </tr>\n <tr>\n <td>EV / EBITDA</td>\n <td>377.37</td>\n </tr>\n <tr>\n <td>Earnings Per Share</td>\n <td>$0.00</td>\n </tr>\n <tr>\n <td>Float To Outstanding Shares Ratio</td>\n <td>9.04%</td>\n </tr>\n <tr>\n <td>Proposed IPO Midpoint Price per Share</td>\n <td>$24.00</td>\n </tr>\n <tr>\n <td>Net Free Cash Flow</td>\n <td>$25,236,000</td>\n </tr>\n <tr>\n <td>Free Cash Flow Yield Per Share</td>\n <td>0.65%</td>\n </tr>\n <tr>\n <td>Revenue Growth Rate</td>\n <td>58.59%</td>\n </tr>\n <tr></tr>\n </tbody>\n</table>\nSource: SEC\nAs a reference, a potential public comparable would be NICE Ltd.; shown below is a comparison of their primary valuation metrics:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Metric</td>\n <td>Nice Ltd.</td>\n <td>EngageSmart</td>\n <td>Variance</td>\n </tr>\n <tr>\n <td>Price / Sales</td>\n <td>11.01</td>\n <td>21.09</td>\n <td>91.5%</td>\n </tr>\n <tr>\n <td>EV / Revenue</td>\n <td>10.67</td>\n <td>19.96</td>\n <td>87.1%</td>\n </tr>\n <tr>\n <td>EV / EBITDA</td>\n <td>41.73</td>\n <td>377.37</td>\n <td>804.3%</td>\n </tr>\n <tr>\n <td>Earnings Per Share</td>\n <td>$3.05</td>\n <td>$0.00</td>\n <td>-100.0%</td>\n </tr>\n <tr>\n <td>Revenue Growth Rate</td>\n <td>5.3%</td>\n <td>58.59%</td>\n <td>1003.34%</td>\n </tr>\n <tr></tr>\n </tbody>\n</table>\n(S-1/A andSeeking Alpha)\nCommentary\nESMT is seeking public investment to pay down debt and for its general unspecified corporate growth plans.\nThe firm's financials show strong topline revenue growth and gross profit growth, operating profit and a swing to slight net profit along with growing cash flow from operations.\nFree cash flow for the twelve months ended June 30, 2021, was a solid $25.2 million.\nSelling and Marketing expenses as a percentage of total revenue have dropped as revenue has increased and its Selling and Marketing efficiency rate dropped to 1.1x in the most recent six-month reporting period.\nThe company's Rule of 40 performance was excellent and its dollar-based net revenue retention rate for the year ended December 31, 2020, was 124%, a strong result.\nThe market opportunity for providing customer engagement software to businesses is large and expected to double in size by the end of 2026, so the company will be helped by strong industry growth dynamics.\nJPMorgan is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 20.4% since their IPO. This is a mid-tier performance for all major underwriters during the period.\nThe primary risk to the company's outlook is the ability for larger firms to bundle some of their services into their existing offerings, resulting in downward pricing pressure and greater competition.\nAs for valuation, compared to partial competitor NICE, ESMT is growing revenue much faster and so its much higher revenue multiples would appear to be justified.\nAlso, the company is growing much faster than competitor Pegasystems, so seems to be taking market share from these and other companies in the customer engagement market.\nGiven the firm's strong growth and operating metrics versus its competitors, while the IPO isn't cheap, it is worth consideration.","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>EngageSmart opens for trading at $37, up about 43.6% from IPO price</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nEngageSmart opens for trading at $37, up about 43.6% from IPO price\n</h2>\n\n<h4 class=\"meta\">\n\n\n<a class=\"head\" href=\"https://laohu8.com/wemedia/1079075236\">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba);background-size:cover;\"></div>\n\n<div class=\"h-content\">\nTiger Newspress \n2021-09-23 23:41\n</div>\n\n</a>\n\n\n</h4>\n\n</header>\n<article>\n(Sept 23)&nbsp;<a href=\"https://laohu8.com/S/ESMT\">EngageSmart Inc.</a> opens for trading at $37, up about 43.6% from IPO price.\n<img src=\"https://static.tigerbbs.com/835bc9b4ff09e761852f27f75743b887\" tg-width=\"898\" tg-height=\"550\" referrerpolicy=\"no-referrer\">\nCompany\nBraintree, Massachusetts-based EngageSmart was founded to develop a platform that improves customer engagement tailored for certain industry verticals.\nManagement is headed by founder and CEO Robert P. Bennett, who has been with the firm since inception and was previously president of Sage Payment Solutions.\nThe company's primary offerings include:\n<ul>\n <li>SimplePractice - Wellness</li>\n <li>InvoiceCloud - Government, Utilities and Financial Services</li>\n <li>HealthPay24 - Healthcare</li>\n <li>DonorDrive - Non-profit and Corporate Fundraising</li>\n</ul>\nEngageSmart has received at least $451 million in equity investment from investors including General Atlantic and Summit Partners.\nCustomer Acquisition\nThe firm pursues both large enterprise customers and SMB customers via its direct sales force and online service.\nAs of June 30, 2021, the firm had served over 68,000 clients in the SMB market and more than 3,000 customers in its Enterprise Solutions segment.\nSelling and Marketing expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Selling and Marketing</td>\n <td>Expenses vs. Revenue</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Percentage</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>32.4%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>33.1%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>43.1%</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nThe Selling and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling and Marketing spend, dropped slightly to 1.1x in the most recent reporting period, as shown in the table below:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Selling and Marketing</td>\n <td>Efficiency Rate</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Multiple</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>1.1</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>1.3</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nThe Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.\nESMT's most recent calculation was 64% as of June 30, 2021, so the firm is performing well in this regard, per the table below:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Rule of 40</td>\n <td>Calculation</td>\n </tr>\n <tr>\n <td>Recent Rev. Growth %</td>\n <td>59%</td>\n </tr>\n <tr>\n <td>EBITDA %</td>\n <td>5%</td>\n </tr>\n <tr>\n <td>Total</td>\n <td>64%</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nThe firm's dollar-based net revenue retention rate for the year ended December 31, 2020, was 124%, a strong result.\nThe dollar-based net revenue retention rate metric measures how much additional revenue is generated over time from each cohort of customers, so that a figure over 100% means that the company is generating more revenue from the same customer cohort over time, indicating good product/market fit and efficient sales and marketing efforts.\nMarket &amp; Competition\nAccording to a 2021 marketresearch reportby Mordor Intelligence, the global market for customer engagement solutions was an estimated $15.5 billion in 2020 and is forecast to reach $30.9 billion by 2026.\nThis represents a forecast CAGR of 12.65% from 2021 to 2026.\nThe main drivers for this expected growth are a growth in technology solutions to improve the customer journey via any device they use to connect with businesses.\nAlso, a desire to reduce customer churn rate results in improved business financials and growing valuation.\nBelow is a chart showing the variation in customer churn rates in different industries in the U.S. in 2018:\n<img src=\"https://static.tigerbbs.com/f1066adb602d05e4e99630aacf61e1c5\" tg-width=\"1060\" tg-height=\"922\" referrerpolicy=\"no-referrer\">Major competitive or other industry participants include:\n<ul>\n <li>IBM(NYSE:IBM)</li>\n <li>Microsoft(NASDAQ:MSFT)</li>\n <li>Nuance(NASDAQ:NUAN)</li>\n <li>Oracle(NYSE:ORCL)</li>\n <li>Salesforce(NYSE:CRM)</li>\n <li>Avaya(NYSE:AVYA)</li>\n <li>Calabrio</li>\n <li>Aspect Software</li>\n <li>Genesys</li>\n <li>Verint Systems(NASDAQ:VRNT)</li>\n <li>NICE Ltd.(NASDAQ:NICE)</li>\n <li>OpenText</li>\n <li>Pegasystems(NASDAQ:PEGA)</li>\n <li>Others</li>\n</ul>\nFinancial Performance\nEngageSmart's recent financial results can be summarized as follows:\n<ul>\n <li>Growing topline revenue</li>\n <li>Increasing gross profit and high gross margin</li>\n <li>Growing operating profit and net income</li>\n <li>Increasing cash flow from operations</li>\n</ul>\nBelow are relevant financial results derived from the firm's registration statement:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Total Revenue</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Total Revenue</td>\n <td>% Variance vs. Prior</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 99,171,000</td>\n <td>58.6%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 146,557,000</td>\n <td>77.8%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ 82,432,000</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Gross Profit (Loss)</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Gross Profit (Loss)</td>\n <td>% Variance vs. Prior</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 73,673,000</td>\n <td>61.4%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 108,964,000</td>\n <td>89.2%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ 57,591,000</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Gross Margin</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Gross Margin</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>74.29%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>74.35%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>69.86%</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Operating Profit (Loss)</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Operating Profit (Loss)</td>\n <td>Operating Margin</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 5,001,000</td>\n <td>5.0%</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 648,000</td>\n <td>0.4%</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ (50,398,000)</td>\n <td>-61.1%</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Net Income (Loss)</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Net Income (Loss)</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 274,000</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ (6,678,000)</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ (53,598,000)</td>\n </tr>\n <tr></tr>\n <tr>\n <td>Cash Flow From Operations</td>\n </tr>\n <tr>\n <td>Period</td>\n <td>Cash Flow From Operations</td>\n </tr>\n <tr>\n <td>Six Mos. Ended June 30, 2021</td>\n <td>$ 12,044,000</td>\n </tr>\n <tr>\n <td>2020</td>\n <td>$ 19,645,000</td>\n </tr>\n <tr>\n <td>2019</td>\n <td>$ (1,427,000)</td>\n </tr>\n <tr></tr>\n <tr>\n <td>(Glossary Of Terms)</td>\n </tr>\n </tbody>\n</table>\nSource: SEC\nAs of June 30, 2021, EngageSmart had $31.8 million in cash and $151.8 million in total liabilities.\nFree cash flow during the twelve months ended June 30, 2021, was $25.2 million.\nIPO Details\nESMT intends to sell 13 million shares and selling shareholders will offer 1.55 million shares of common stock at a proposed midpoint price of $24.00 per share for gross proceeds of approximately $349 million, not including the sale of customary underwriter options.\nNew potential investor Dragoneer Investment Group has indicated an interest to purchase 2.1 million shares of the offering or about $50.4 million at the proposed midpoint price.\nAssuming a successful IPO at the midpoint of the proposed price range, the company's enterprise value at IPO (ex- underwriter options) would approximate $3.7 billion.\nExcluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 9.04%. A figure under 10% is generally considered a 'low float' stock which can be subject to significant price volatility.\nPer the firm's most recent regulatory filing, it plans to use the net proceeds as follows:\n<blockquote>\n We expect to use the net proceeds of this offering to repay in full the outstanding borrowings of approximately $114.2 million under our Credit Facilities. We currently intend to use the remaining net proceeds from this offering for general corporate purposes, including to fund our growth, acquire complementary businesses, products, services, or technologies, working capital, operating expenses, and capital expenditures.\n</blockquote>\n<blockquote>\n Source: SEC\n</blockquote>\nManagement's presentation of the company roadshow isavailable here.\nRegarding outstanding legal proceedings, management did not disclose any legal claims against the firm as of the regulatory filing date.\nListed underwriters of the IPO are JPMorgan, Goldman Sachs, BofA Securities, and other investment banks.\nValuation Metrics\nBelow is a table of the firm's relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Measure [TTM]</td>\n <td>Amount</td>\n </tr>\n <tr>\n <td>Market Capitalization at IPO</td>\n <td>$3,862,956,720</td>\n </tr>\n <tr>\n <td>Enterprise Value</td>\n <td>$3,656,695,720</td>\n </tr>\n <tr>\n <td>Price / Sales</td>\n <td>21.09</td>\n </tr>\n <tr>\n <td>EV / Revenue</td>\n <td>19.96</td>\n </tr>\n <tr>\n <td>EV / EBITDA</td>\n <td>377.37</td>\n </tr>\n <tr>\n <td>Earnings Per Share</td>\n <td>$0.00</td>\n </tr>\n <tr>\n <td>Float To Outstanding Shares Ratio</td>\n <td>9.04%</td>\n </tr>\n <tr>\n <td>Proposed IPO Midpoint Price per Share</td>\n <td>$24.00</td>\n </tr>\n <tr>\n <td>Net Free Cash Flow</td>\n <td>$25,236,000</td>\n </tr>\n <tr>\n <td>Free Cash Flow Yield Per Share</td>\n <td>0.65%</td>\n </tr>\n <tr>\n <td>Revenue Growth Rate</td>\n <td>58.59%</td>\n </tr>\n <tr></tr>\n </tbody>\n</table>\nSource: SEC\nAs a reference, a potential public comparable would be NICE Ltd.; shown below is a comparison of their primary valuation metrics:\n<table>\n <colgroup></colgroup>\n <tbody>\n <tr>\n <td>Metric</td>\n <td>Nice Ltd.</td>\n <td>EngageSmart</td>\n <td>Variance</td>\n </tr>\n <tr>\n <td>Price / Sales</td>\n <td>11.01</td>\n <td>21.09</td>\n <td>91.5%</td>\n </tr>\n <tr>\n <td>EV / Revenue</td>\n <td>10.67</td>\n <td>19.96</td>\n <td>87.1%</td>\n </tr>\n <tr>\n <td>EV / EBITDA</td>\n <td>41.73</td>\n <td>377.37</td>\n <td>804.3%</td>\n </tr>\n <tr>\n <td>Earnings Per Share</td>\n <td>$3.05</td>\n <td>$0.00</td>\n <td>-100.0%</td>\n </tr>\n <tr>\n <td>Revenue Growth Rate</td>\n <td>5.3%</td>\n <td>58.59%</td>\n <td>1003.34%</td>\n </tr>\n <tr></tr>\n </tbody>\n</table>\n(S-1/A andSeeking Alpha)\nCommentary\nESMT is seeking public investment to pay down debt and for its general unspecified corporate growth plans.\nThe firm's financials show strong topline revenue growth and gross profit growth, operating profit and a swing to slight net profit along with growing cash flow from operations.\nFree cash flow for the twelve months ended June 30, 2021, was a solid $25.2 million.\nSelling and Marketing expenses as a percentage of total revenue have dropped as revenue has increased and its Selling and Marketing efficiency rate dropped to 1.1x in the most recent six-month reporting period.\nThe company's Rule of 40 performance was excellent and its dollar-based net revenue retention rate for the year ended December 31, 2020, was 124%, a strong result.\nThe market opportunity for providing customer engagement software to businesses is large and expected to double in size by the end of 2026, so the company will be helped by strong industry growth dynamics.\nJPMorgan is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 20.4% since their IPO. This is a mid-tier performance for all major underwriters during the period.\nThe primary risk to the company's outlook is the ability for larger firms to bundle some of their services into their existing offerings, resulting in downward pricing pressure and greater competition.\nAs for valuation, compared to partial competitor NICE, ESMT is growing revenue much faster and so its much higher revenue multiples would appear to be justified.\nAlso, the company is growing much faster than competitor Pegasystems, so seems to be taking market share from these and other companies in the customer engagement market.\nGiven the firm's strong growth and operating metrics versus its competitors, while the IPO isn't cheap, it is worth consideration.\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"ESMT":"EngageSmart Inc."},"is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1159478468","content_text":"(Sept 23) EngageSmart Inc. opens for trading at $37, up about 43.6% from IPO price.\n\nCompany\nBraintree, Massachusetts-based EngageSmart was founded to develop a platform that improves customer engagement tailored for certain industry verticals.\nManagement is headed by founder and CEO Robert P. Bennett, who has been with the firm since inception and was previously president of Sage Payment Solutions.\nThe company's primary offerings include:\n\nSimplePractice - Wellness\nInvoiceCloud - Government, Utilities and Financial Services\nHealthPay24 - Healthcare\nDonorDrive - Non-profit and Corporate Fundraising\n\nEngageSmart has received at least $451 million in equity investment from investors including General Atlantic and Summit Partners.\nCustomer Acquisition\nThe firm pursues both large enterprise customers and SMB customers via its direct sales force and online service.\nAs of June 30, 2021, the firm had served over 68,000 clients in the SMB market and more than 3,000 customers in its Enterprise Solutions segment.\nSelling and Marketing expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:\n\n\n\n\nSelling and Marketing\nExpenses vs. Revenue\n\n\nPeriod\nPercentage\n\n\nSix Mos. Ended June 30, 2021\n32.4%\n\n\n2020\n33.1%\n\n\n2019\n43.1%\n\n\n\nSource: SEC\nThe Selling and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling and Marketing spend, dropped slightly to 1.1x in the most recent reporting period, as shown in the table below:\n\n\n\n\nSelling and Marketing\nEfficiency Rate\n\n\nPeriod\nMultiple\n\n\nSix Mos. Ended June 30, 2021\n1.1\n\n\n2020\n1.3\n\n\n\nSource: SEC\nThe Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.\nESMT's most recent calculation was 64% as of June 30, 2021, so the firm is performing well in this regard, per the table below:\n\n\n\n\nRule of 40\nCalculation\n\n\nRecent Rev. Growth %\n59%\n\n\nEBITDA %\n5%\n\n\nTotal\n64%\n\n\n\nSource: SEC\nThe firm's dollar-based net revenue retention rate for the year ended December 31, 2020, was 124%, a strong result.\nThe dollar-based net revenue retention rate metric measures how much additional revenue is generated over time from each cohort of customers, so that a figure over 100% means that the company is generating more revenue from the same customer cohort over time, indicating good product/market fit and efficient sales and marketing efforts.\nMarket & Competition\nAccording to a 2021 marketresearch reportby Mordor Intelligence, the global market for customer engagement solutions was an estimated $15.5 billion in 2020 and is forecast to reach $30.9 billion by 2026.\nThis represents a forecast CAGR of 12.65% from 2021 to 2026.\nThe main drivers for this expected growth are a growth in technology solutions to improve the customer journey via any device they use to connect with businesses.\nAlso, a desire to reduce customer churn rate results in improved business financials and growing valuation.\nBelow is a chart showing the variation in customer churn rates in different industries in the U.S. in 2018:\nMajor competitive or other industry participants include:\n\nIBM(NYSE:IBM)\nMicrosoft(NASDAQ:MSFT)\nNuance(NASDAQ:NUAN)\nOracle(NYSE:ORCL)\nSalesforce(NYSE:CRM)\nAvaya(NYSE:AVYA)\nCalabrio\nAspect Software\nGenesys\nVerint Systems(NASDAQ:VRNT)\nNICE Ltd.(NASDAQ:NICE)\nOpenText\nPegasystems(NASDAQ:PEGA)\nOthers\n\nFinancial Performance\nEngageSmart's recent financial results can be summarized as follows:\n\nGrowing topline revenue\nIncreasing gross profit and high gross margin\nGrowing operating profit and net income\nIncreasing cash flow from operations\n\nBelow are relevant financial results derived from the firm's registration statement:\n\n\n\n\nTotal Revenue\n\n\nPeriod\nTotal Revenue\n% Variance vs. Prior\n\n\nSix Mos. Ended June 30, 2021\n$ 99,171,000\n58.6%\n\n\n2020\n$ 146,557,000\n77.8%\n\n\n2019\n$ 82,432,000\n\n\n\nGross Profit (Loss)\n\n\nPeriod\nGross Profit (Loss)\n% Variance vs. Prior\n\n\nSix Mos. Ended June 30, 2021\n$ 73,673,000\n61.4%\n\n\n2020\n$ 108,964,000\n89.2%\n\n\n2019\n$ 57,591,000\n\n\n\nGross Margin\n\n\nPeriod\nGross Margin\n\n\nSix Mos. Ended June 30, 2021\n74.29%\n\n\n2020\n74.35%\n\n\n2019\n69.86%\n\n\n\nOperating Profit (Loss)\n\n\nPeriod\nOperating Profit (Loss)\nOperating Margin\n\n\nSix Mos. Ended June 30, 2021\n$ 5,001,000\n5.0%\n\n\n2020\n$ 648,000\n0.4%\n\n\n2019\n$ (50,398,000)\n-61.1%\n\n\n\nNet Income (Loss)\n\n\nPeriod\nNet Income (Loss)\n\n\nSix Mos. Ended June 30, 2021\n$ 274,000\n\n\n2020\n$ (6,678,000)\n\n\n2019\n$ (53,598,000)\n\n\n\nCash Flow From Operations\n\n\nPeriod\nCash Flow From Operations\n\n\nSix Mos. Ended June 30, 2021\n$ 12,044,000\n\n\n2020\n$ 19,645,000\n\n\n2019\n$ (1,427,000)\n\n\n\n(Glossary Of Terms)\n\n\n\nSource: SEC\nAs of June 30, 2021, EngageSmart had $31.8 million in cash and $151.8 million in total liabilities.\nFree cash flow during the twelve months ended June 30, 2021, was $25.2 million.\nIPO Details\nESMT intends to sell 13 million shares and selling shareholders will offer 1.55 million shares of common stock at a proposed midpoint price of $24.00 per share for gross proceeds of approximately $349 million, not including the sale of customary underwriter options.\nNew potential investor Dragoneer Investment Group has indicated an interest to purchase 2.1 million shares of the offering or about $50.4 million at the proposed midpoint price.\nAssuming a successful IPO at the midpoint of the proposed price range, the company's enterprise value at IPO (ex- underwriter options) would approximate $3.7 billion.\nExcluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 9.04%. A figure under 10% is generally considered a 'low float' stock which can be subject to significant price volatility.\nPer the firm's most recent regulatory filing, it plans to use the net proceeds as follows:\n\n We expect to use the net proceeds of this offering to repay in full the outstanding borrowings of approximately $114.2 million under our Credit Facilities. We currently intend to use the remaining net proceeds from this offering for general corporate purposes, including to fund our growth, acquire complementary businesses, products, services, or technologies, working capital, operating expenses, and capital expenditures.\n\n\n Source: SEC\n\nManagement's presentation of the company roadshow isavailable here.\nRegarding outstanding legal proceedings, management did not disclose any legal claims against the firm as of the regulatory filing date.\nListed underwriters of the IPO are JPMorgan, Goldman Sachs, BofA Securities, and other investment banks.\nValuation Metrics\nBelow is a table of the firm's relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:\n\n\n\n\nMeasure [TTM]\nAmount\n\n\nMarket Capitalization at IPO\n$3,862,956,720\n\n\nEnterprise Value\n$3,656,695,720\n\n\nPrice / Sales\n21.09\n\n\nEV / Revenue\n19.96\n\n\nEV / EBITDA\n377.37\n\n\nEarnings Per Share\n$0.00\n\n\nFloat To Outstanding Shares Ratio\n9.04%\n\n\nProposed IPO Midpoint Price per Share\n$24.00\n\n\nNet Free Cash Flow\n$25,236,000\n\n\nFree Cash Flow Yield Per Share\n0.65%\n\n\nRevenue Growth Rate\n58.59%\n\n\n\n\nSource: SEC\nAs a reference, a potential public comparable would be NICE Ltd.; shown below is a comparison of their primary valuation metrics:\n\n\n\n\nMetric\nNice Ltd.\nEngageSmart\nVariance\n\n\nPrice / Sales\n11.01\n21.09\n91.5%\n\n\nEV / Revenue\n10.67\n19.96\n87.1%\n\n\nEV / EBITDA\n41.73\n377.37\n804.3%\n\n\nEarnings Per Share\n$3.05\n$0.00\n-100.0%\n\n\nRevenue Growth Rate\n5.3%\n58.59%\n1003.34%\n\n\n\n\n(S-1/A andSeeking Alpha)\nCommentary\nESMT is seeking public investment to pay down debt and for its general unspecified corporate growth plans.\nThe firm's financials show strong topline revenue growth and gross profit growth, operating profit and a swing to slight net profit along with growing cash flow from operations.\nFree cash flow for the twelve months ended June 30, 2021, was a solid $25.2 million.\nSelling and Marketing expenses as a percentage of total revenue have dropped as revenue has increased and its Selling and Marketing efficiency rate dropped to 1.1x in the most recent six-month reporting period.\nThe company's Rule of 40 performance was excellent and its dollar-based net revenue retention rate for the year ended December 31, 2020, was 124%, a strong result.\nThe market opportunity for providing customer engagement software to businesses is large and expected to double in size by the end of 2026, so the company will be helped by strong industry growth dynamics.\nJPMorgan is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 20.4% since their IPO. This is a mid-tier performance for all major underwriters during the period.\nThe primary risk to the company's outlook is the ability for larger firms to bundle some of their services into their existing offerings, resulting in downward pricing pressure and greater competition.\nAs for valuation, compared to partial competitor NICE, ESMT is growing revenue much faster and so its much higher revenue multiples would appear to be justified.\nAlso, the company is growing much faster than competitor Pegasystems, so seems to be taking market share from these and other companies in the customer engagement market.\nGiven the firm's strong growth and operating metrics versus its competitors, while the IPO isn't cheap, it is worth consideration.","news_type":1},"isVote":1,"tweetType":1,"viewCount":292,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":12,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}