EngageSmart, Inc. (NYSE:ESMT) Q2 2023 Earnings Call Transcript

Cassandra Hudson: Sure, no problem. I mean, the pricing change went into effect in late March. I think the reaction was – went very smoothly, I guess. The rollout has been very smoothly. We haven’t really seen an increase in churn, which we’re always watching for. So I think it was largely a non-event for us, especially as you think about comparing it to the pricing and packaging change that we did last year, which was far more disruptive. So, I think, very positive. For us, the real key to our payments offering is the integration into our overall platform and investing in that integration and the billing capabilities and reporting capabilities for our practitioners adds a lot of value. And so, to continue to make those investments, that’s why we made the price increase. So we’re certainly providing value, and obviously charging for the value that we provide in return.

Robert Napoli: Great. Thank you.

Operator: Thank you. Our next question will come from Ashwin Shirvaikar with Citi. Ashwin, please make sure that you’re not self-muted. All right, we’ll go to the next question, Jason Kupferberg with Bank of America. Your line is open.

Tyler DuPont: Good morning, Bob and Cassandra. This is Tyler DuPont on for Jason. Thanks for taking the question. So just to start off and just to make sure that I’m on the same page here. Could you just spend a minute or two walking through the pieces of guidance, particularly with respect to the acquisition and divestitures, sort of when exactly is HealthPay24 and Luminello expected to close? Is that supposed to be simultaneous? So, just any sort of clarity there would be appreciated?

Cassandra Hudson: Sure. Thanks, Tyler, for the questions. And yes, there is some moving pieces this quarter, so appreciate the follow-up. So, both acquisitions closed as of yesterday. And so as a result – at least as it relates to HealthPay, we’ve removed revenue and adjusted EBITDA associated with that business as of today, effectively, and that is factored in our guidance. And, just to reiterate, that was about $5 million in revenue that we removed in the back half of this year and about $1 million in adjusted EBITDA. In terms of [Tahoe], we are operating under a license and TSA arrangement for this year with them, and we’re really focused on the migration effort associated with rolling out an enhanced solution that meets the needs of both customers.

So that’s our focus for the back half of this year and moving into next year. So we don’t expect material contributions from that business while we’re making those investments and focusing on that migration plan. And really excited more about the strategic value of Tahoe just given it really moves us more meaningfully into the high-value psychiatry space, gives us more features and functionality, especially e-prescribe, which, as you know, was a roadmap item for us, so it certainly accelerates that for us. I think makes us more attractive to multidisciplinary group practices where they often have prescribers and non-prescribers coordinating care together and increases our value on SimplePractice Enterprise. So for EAPs and MCOs providing access to care for patients who require medication.

So for us, it’s a very strategic deal. Looking forward to the value that it will bring to us on the other side of the migration and later in 2024.

Tyler DuPont: Okay. That’s helpful, Cassandra. And then as a follow-up, it just looks like this was another impressive quarter for growth within Enterprise. Growth was like, I believe, right around 25% versus customer growth of 7%. So when looking at the drivers here, are you seeing that led by increased transactions in ARPU or sort of any dynamics there that we should pay attention to? Sort of tangentially to that, if you could just speak to the trends you’re seeing in Enterprise as a whole now sort of ex- HealthPay?