EngageSmart

Prospectus summary

Prospectus summary This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus. You should carefully consider, among other things, the sections titled “Risk factors,” “Cautionary note regarding forward-looking statements” and “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

Our mission

Our mission is to simplify customer and client engagement.

Overview

We are a leading provider of vertically-tailored customer engagement software and integrated payments capabilities. We offer single instance, multi-tenant, true Software-as-a-Service (“SaaS”) vertical solutions that are designed to simplify our customers’ engagement with their clients by driving digital adoption and self-service. As of June 30, 2021, we served over 68,000 customers in the SMB Solutions segment and over 3,000 customers in the Enterprise Solutions segment across five core verticals: Health & Wellness, Government, Utilities, Financial Services, and Giving. Our SaaS solutions are purpose-built for each vertical we serve and they simplify and automate mission-critical workflows such as scheduling, client onboarding, client communication, paperless billing, and electronic payment processing. In 2020, we estimate over 26 million consumers interacted with an EngageSmart solution. Our solutions transform our customers’ digital engagement and empower them to manage, improve, and grow their businesses.

We believe the end-markets we serve are burdened by legacy systems and processes that result in operational inefficiencies and relatively low digital adoption from consumers. At the same time, consumers increasingly demand the convenient self-service capabilities and intuitive, frictionless, and personalized digital experiences that have become commonplace in other industries. Existing solutions in our end-markets are often built on legacy, hosted, or on-premises infrastructure that can lack the flexibility, scalability, and integrations required to provide advanced digital engagement capabilities. This has created a tremendous opportunity for our solutions to improve the customer experience by either replacing or augmenting the information systems used by our customers. Our ability to leverage our true SaaS solutions to innovate quickly and deliver enhancements to our customers on an ongoing basis is a key competitive advantage. This allows us to consistently innovate to increase digital adoption and add value for our clients.

We believe our solutions address a massive market opportunity today. We estimate the revenue opportunity for our current solutions was approximately $28 billion in the United States in 2020. Our verticals are large, underpenetrated, and generally non-cyclical with significant whitespace, low digital adoption, and growing usage of software and payments. Many verticals are only just beginning their digital journeys, providing an attractive runway for growth.

Today, our vertically-tailored SaaS solutions include:

We sell our solutions through an efficient and diversified go-to-market strategy that includes digital marketing, direct sales, and strategic partnerships. As a product with self-service onboarding, SimplePractice is primarily distributed through inbound interest resulting from search engine optimization, word-of-mouth, paid customer referrals, and search engine marketing. For our solutions in our Enterprise Solutions segment, InvoiceCloud, HealthPay24, and DonorDrive, we go-to-market with a direct sales force, often in conjunction with strategic partners, such as back-end software providers, that provide lead generation and selling support. Our Enterprise products integrate directly with our customers’ back-end core systems, and we have over 300 unique integrations to customer billing and client management systems. These channel partnerships and deep integrations provide us greater reach into our vertical markets with pre-qualified leads that drive highly efficient sales processes and result in longer-term sticky customer relationships.

EngageSmart is a people-first organization with a unique culture centered on talent, vertical domain expertise, customer focus, product leadership, and efficient go-to-market strategies. We believe our people give us a competitive advantage, and we think of our customers, partners, and employees as our people. We promote a servant leadership model that places customers at the top of our organizational chart. We believe the best leaders empower their teams to excel and enable their customers to win. Our employee Net Promoter Score of 72 for 2020 is a reflection of our employees’ sense of empowerment and engagement. Engaged employees are imperative to achieving excellent customer service and strong company performance.

Our success in helping our customers simplify, streamline, and grow their businesses has allowed us to achieve significant growth. For the Predecessor 2019 Period, the Successor 2019 Period, and the year ended December 31, 2020, we generated revenue of $8.2 million, $74.3 million and $146.6 million, respectively and for the six months ended June 30, 2020 and 2021, we generated revenue of $62.5 million and $99.2 million, respectively. For the Predecessor 2019 Period, the Successor 2019 Period, and the year ended December 31, 2020, we had total net loss of $39.1 million, $14.5 million and $6.7 million, respectively and for the six months ended June 30, 2020 and 2021, we had total net (loss) income of $(6.4) million and $0.3 million, respectively. Our Adjusted EBITDA was $(0.1) million, $4.5 million, and $22.0 million for the Predecessor 2019 Period, the Successor 2019 Period and for the year ended December 31, 2020 and $5.3 million and $15.7 million for the six months ended June 30, 2020 and 2021, respectively. See “—Summary consolidated financial and operating information—Key business metric and non-GAAP financial measures” for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Our industry

We believe a number of key trends are contributing to the adoption of modern, vertically-tailored business management software, customer engagement applications, and billing and payment solutions, including:

Limitations of existing solutions

Today, our customers are increasingly turning to their software vendors to drive digital adoption, deliver self-service capabilities, and improve the consumer experience. However, the offerings available in the market often fail to meet the needs of our customers and have some or all of the following limitations:

Our market opportunity

We are dedicated to helping our customers simplify, streamline, and grow their businesses. We believe our solutions address a massive market opportunity. We estimate the revenue opportunity for our current solutions to be approximately $28 billion: $10 billion addressed by solutions in our SMB Solutions segment and $18 billion addressed by solutions in our Enterprise Solutions segment.

We derive our revenue opportunity in our SMB Solutions segment by taking the total number of health and wellness clinicians addressed by our SimplePractice solution using data from the Bureau of Labor Statistics and multiplying by the total spend opportunity per customer based on the current prevailing market price.

We derive our revenue opportunity in our Enterprise Solutions segment by taking the total number of bills per year in the United States, as estimated by Aite Group, and multiplying by our average revenue per transaction. The verticals that are currently included in our Enterprise total addressable market are Health & Wellness, Government, Utilities, Financial Services, and Giving.

We believe our market will expand as we continue to help businesses and organizations increase their digital adoption and provide the technology that enables them to do so. In our SMB Solutions and Enterprise Solutions segments, we expect our average revenue per customer to increase as our customers grow and increase their digital adoption and as we expand the breadth of our solutions.

What sets us apart

We believe we have a differentiated position in the market, built on the following strengths:

Our culture

At EngageSmart, we believe our culture is a competitive differentiator that drives our success. Our culture is built on four pillars: love, agency, connection, and impact.

Servant leadership permeates our organization and underpins our growth mindset. We believe the best leaders empower their teams to excel. Our employees feel empowered to respond rapidly, innovate quickly, and build effectively, enabling us to maintain product leadership and help our customers win in the marketplace.

Our employee NPS score of 72 for 2020 is a reflection of our employees’ sense of empowerment and engagement. We strive to hire exceptionally talented people who embrace our culture because it is critical to our success; it sets us apart and allows us to win.

Our growth strategies

We are focused on growing and scaling our business in a rapid yet sustainable and disciplined fashion. We intend to drive significant growth by executing the following key strategies:

Summary risk factors

Investing in our common stock involves substantial risk. Our ability to execute our strategy is also subject to certain risks. The risks described under the heading “Risk factors” in this prospectus may cause us not to realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects:

Our corporate information

We were initially formed as Hancock Parent, LLC, a Delaware limited liability company, on December 7, 2018. On January 24, 2020, Hancock Parent, LLC changed its name to EngageSmart, LLC. Prior to the closing of this offering, EngageSmart, LLC intends to convert into a Delaware corporation pursuant to a statutory conversion and will change its name to EngageSmart, Inc. See “Corporate Conversion.” Our principal executive offices are located at 30 Braintree Hill Office Park, Suite 101, Braintree, Massachusetts 02184, and our telephone number is (781) 848-3733. Our corporate website address is www.engagesmart.com. Information contained on, or accessible through, our website shall not be deemed incorporated into and is not a part of this prospectus or the registration statement of which it forms a part. We have included our website in this prospectus solely as an inactive textual reference.

Corporate Conversion

We currently operate as a Delaware limited liability company under the name EngageSmart, LLC. Prior to the closing of this offering, EngageSmart, LLC intends to convert into a Delaware corporation pursuant to a statutory conversion and will change its name to EngageSmart, Inc. In this prospectus, we refer to all transactions related to our conversion to a corporation as the “Corporate Conversion.” As a result of the Corporate Conversion, all holders of LLC Shares will become holders of shares of common stock of EngageSmart, Inc. The number of shares of our common stock that holders of LLC Shares will be entitled to receive in the Corporate Conversion will be based on their relative rights as set forth in our limited liability company agreement.

The purpose of the Corporate Conversion is to reorganize our structure so that the entity that is offering our common stock to the public in this offering is a corporation rather than a limited liability company and so that our existing investors will own our common stock rather than equity interests in a limited liability company. For further information regarding the Corporate Conversion, see “Corporate Conversion.”

Ownership structure

The diagram below depicts our organizational structure after giving effect to the Corporate Conversion.

Our Principal Stockholder

General Atlantic is a leading global growth equity firm providing capital and strategic support for growth companies. Drawing from more than 40 years of experience investing in over 400 global growth companies, General Atlantic partners with entrepreneurs and management teams who are building leading, high-growth businesses. As of June 30, 2021, the firm had more than $65 billion in assets under management and focuses on investments across five sectors, including consumer, financial services, healthcare, life sciences and technology.

Following this offering, General Atlantic will control approximately % of the combined voting power of our outstanding common stock (or % if the underwriters exercise their option to purchase additional shares in full). As a result, General Atlantic will control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and by-laws and the approval of any merger or sale of substantially all of our assets.

Because General Atlantic will control more than 50% of the combined voting power of our outstanding common stock, we will be a “controlled company” under the corporate governance rules for the NYSE. Therefore, we will be permitted to elect not to comply with certain corporate governance requirements. See “Risk factors—Risks related to this offering and the ownership of our common stock—We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.”

In addition, we will enter into a stockholders’ agreement (the “Stockholders Agreement”) that will provide General Atlantic and Summit with the right to nominate a specified number of our directors and certain consent rights, in each case subject to certain ownership thresholds. See “Principal and selling stockholders” and “Certain relationships and related party transactions—Stockholders’ Agreement” for additional information.

Implications of being an emerging growth company

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year following the fifth anniversary of the consummation of this offering, (2) the last day of the fiscal year in which we have total annual gross revenues of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

Accordingly, the information contained herein may be different than the information you receive from our competitors that are public companies or other public companies in which you hold stock.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and therefore, we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.

The offering

The principal purposes of this offering are to increase our capitalization and financial flexibility and create a public market for our common stock. We expect to use approximately $ million of the net proceeds of this offering (or $ million if the underwriters exercise their option to purchase additional shares in full) to repay in full the outstanding borrowings of $ million, net of fees, 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. We do not have agreements or commitments for any material acquisitions or investments at this time. We will have broad discretion over the uses of any net proceeds in this offering to be used for general corporate purposes. We will not receive any proceeds from the sale of shares of common stock offered by the selling stockholders. See the section titled “Use of proceeds” for additional information.

The number of shares of our common stock to be outstanding after this offering is based on shares of our common stock outstanding as of June 30, 2021, after giving effect to the Corporate Conversion, and excludes:

Unless otherwise indicated, all information contained in this prospectus, including the number of shares of our common stock that will be outstanding after this offering, assumes or gives effect to:

Summary consolidated financial and operating information

The following tables present the summary historical consolidated financial and other data for the periods indicated. The summary consolidated statements of operations data and statements of cash flows data for the period from January 1, 2019 through February 10, 2019 (“Predecessor 2019 Period”), the period from February 11, 2019 through December 31, 2019 (“Successor 2019 Period”) and the year ended December 31, 2020, and the summary consolidated balance sheet data as of December 31, 2020 are derived from the audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statement of operations data for the six months ended June 30, 2020 and 2021, and the consolidated balance sheet data as of June 30, 2021, from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as our annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the unaudited interim condensed consolidated financial statements. The results of operations for the periods presented below are not necessarily indicative of the results to be expected for any future period and our interim results are not necessarily indicative of results that may be expected for the full year. This data should be read in conjunction with, and is qualified in its entirety by reference to, the “Management’s discussion and analysis of financial condition and results of operations” and “Capitalization” sections of this prospectus and our audited consolidated financial statements and notes thereto for the periods and dates indicated included elsewhere in this prospectus.

Key business metric and non-GAAP financial measures:

In addition to the measures presented in our consolidated financial statements, we use the following key business metric and non-GAAP financial measures to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions. The following table summarizes our key performance indicator and non-GAAP financial measures for each period presented below, which are unaudited.

We define Adjusted EBITDA as net (loss) income excluding interest expense, net; provision (benefit) for income taxes; depreciation; and amortization of intangible assets, as further adjusted for transaction-related expenses, fair value adjustment of acquired deferred revenue, stock/equity-based compensation, and restructuring charges. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue plus the fair value adjustment of acquired deferred revenue. We define Adjusted Gross Profit as gross profit as adjusted for fair value adjustment of acquired deferred revenue, depreciation, amortization, stock/equity-based compensation, and transaction-related expenses. We define Adjusted Gross Margin as Adjusted Gross Profit divided by revenue plus the fair value adjustment of acquired deferred revenue. We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, and Adjusted Gross Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, and Adjusted Gross Margin in the same manner. We present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, and Adjusted Gross Margin because we consider these metrics to be an important supplemental measures of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, and Adjusted Gross Margin:

By providing these non-GAAP financial measures, together with a reconciliation to the most directly comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, and Adjusted Gross Margin have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net loss, gross profit, or other financial statement data presented in our consolidated financial statements as indicators of financial performance. Some of the limitations are: