EngageSmart - Q4 2021
February 15, 2022
Transcript
Operator (participant)
Good evening. Thank you for attending today's EngageSmart Q4 2021 earnings call. My name is Selena, and I will be your moderator. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone keypad. I'll now turn the call over to Josh Schmidt from EngageSmart. Josh?
Josh Schmidt (SVP of Finance and Investor Relations)
Thank you and good evening. With me on today's call are Bob Bennett, Chief Executive Officer, and Cassandra Hudson, Chief Financial Officer. Our earnings press release, supplemental presentation, and associated Form 8-K can be found at investors.engagesmart.com. Within the supplemental presentation, we are providing a more detailed breakout of our revenue by segment into the following categories, Subscription, Transaction and Usage-based Fees, and other. During this call, we will be discussing certain forward-looking information. Actual results could differ materially from those contemplated by these forward-looking statements. Please refer to the Risk Factors section of our quarterly report on Form 10-Q and other SEC filings for more information on the risks regarding these forward-looking statements and risk factors associated with our business. All metrics discussed during this call are non-GAAP unless otherwise noted.
A reconciliation of non-GAAP metrics to the nearest GAAP metric can be found in our earnings press release and supplemental presentation, both of which are available on the Investor Relations section of our website. This call is being webcast live and will be available for replay on our website at investors.engagesmart.com. I would now like to turn the call over to our CEO, Bob Bennett.
Bob Bennett (CEO)
Thank you, Josh. Welcome, everyone, and thank you for joining us. We are excited to host our fourth quarter and fiscal 2021 earnings call on the heels of a strong quarter and an outstanding year. Delivering on our mission of simplifying customer and client engagement can be directly attributed to our customers, our partners, and our employees, and I remain humbled by their contributions and continued commitment to EngageSmart's success. Before digging deeper into the details of our performance, I'd like to share with you a few of the highlights that we are really proud of. We've seen tremendous customer growth of 39% year-over-year in our SMB segment, where we now serve over 79,000 customers. Our strong organic customer growth is primarily driven by word of mouth and the strength of our end-to-end product suite.
For example, one of our dietitian group customers was able to eliminate four separate vendor solutions in favor of SimplePractice. The improved efficiency enabled each dietitian in the practice to see an additional patient each day. At the same time, we are driving continued innovation across our solutions. For example, we added mobile app payment features and introduced integrated diagnostic codes, which simplifies case management and documentation while driving cost savings. We are serving more verticals today than ever before and are focusing on several high-growth areas. We plan to further invest in these verticals and drive customization of features for a fit that becomes unparalleled in the market. In our enterprise segment, we are experiencing great traction as we serve over 3,100 customers across our three solutions.
We are seeing strong organic growth driven by product innovation, partnerships, and our focus on having a leading value proposition. This includes e-payments and other options to help customers get paid faster, easier, and without paper. For InvoiceCloud, the largest revenue contributor in the enterprise segment, we provide multiple payment alternatives for all our billers, including PayPal, Venmo, and others, in a space where the market is still largely running on checks. We are excited that our progress has been recognized with a shortlisting of InvoiceCloud by the Cloud Awards in the category of Best Cloud Payment, Finance or Billing Solution. In our DonorDrive solution, we are honored to support fantastic charities such as Extra Life, a one-of-a-kind 24-hour gaming marathon benefiting Children's Miracle Network Hospitals. We are helping them raise huge amounts of money through the advanced social features found in our technology.
We helped Extra Life raise over $3 million in donations in a single weekend. Stories like these get us excited to be part of EngageSmart. If you recall, we founded EngageSmart because activities like paying bills, scheduling appointments, onboarding new patients, and client communication shouldn't be that hard. We've come a long way. Today, we are driving digital adoption in a $28 billion market. Customers are increasingly adopting our offerings to drive digital adoption and self-service as they simplify engagement with their clients. Why? Because EngageSmart solutions help improve their businesses, lower operating expenses, and reduce wasted time. Turning to financial highlights for the fourth quarter and full-year, EngageSmart delivered another quarter of record revenue performance.
Total revenue in the quarter increased by 37% year-over-year to $61.6 million, driven by strong revenue growth of 55% in our SMB segment and 23% in our enterprise segment. For the full-year 2021, total revenue was $216.3 million, an increase of 48% from the prior-year. In the SMB segment, we delivered incredible annual year-over-year growth of 74%, and in the enterprise segment, annual revenue grew 28%. Cassandra will review our financials in more detail later, but first, let me give you a high-level update on our progress and execution in our SMB and enterprise, in our SMB and enterprise segments. SimplePractice now serves 10 wellness vertical markets, including mental health, Speech-Language Pathology, Occupational Therapy, Nutrition, Chiropractic, and Physical Therapy, among others.
While our roots are in mental health, our newer markets are high growth engines for our SMB segment, and we intend to increase our investment in product and marketing to drive growth in these markets. Practitioners across these wellness markets are attracted to SimplePractice's solution for business management, scheduling appointments, documenting cases, deploying telehealth, billing and payment management. This is a high-growth management. This is a high-growth that's growth. Patient visits continue to grow as the pandemic begins. SMB customer growth we experience is a result of increased technology adoption that was catalyzed by the pandemic and has now become a secular shift in behavior. Enterprise segment. Our enterprise specific engagement capabilities with a modern digital commerce experience.
We have more than 31 utilities, healthcare, financial services, corporate and nonprofit giving, all using our InvoiceCloud, HealthPay24, and DonorDrive solutions. We saw excellent momentum in the fourth quarter and the full-year go live, and the continued go live and the continued adoption of our digital solutions. During the fourth quarter, we saw strong new customer acquisition, alliance partners in our core verticals. One example of the traction we're seeing with our alliance partners is Harris Utilities Group. InvoiceCloud is the largest payments partner for Harris Utilities Group, and that partnership continues to expand with the launch of the SilverBlaze customer engagement. Hundreds of mutual customers benefit from our Harris partnership, including the City of Arlington, Texas, who has been working on driving budgets.
The City of Arlington, since working with us, has already realized an estimated 60% decrease in payment-related calls and $30,000 in annual savings in printing costs alone. Advantages such as these underscore the great value our leadership teams are bringing to the market. Speaking of leadership, we're particularly excited about the new addition of Kevin O'Brien, who will be leading this business as President of Enterprise Solutions to build upon our base. Kevin comes to us from PTC and brings an excellent track record of leadership in product and go-to-market that will be valuable for our enterprise solutions. Looking forward, the market for customer engagement and online bill payment software remains vast.
Increasingly aware that driving digital self-service and providing customers with multiple ways to pay has been proven to reduce late or lost payments and to increase customer satisfaction overall. With that, I'll turn the call to Cassandra Hudson.
Cassandra Hudson (CFO)
Thank you, Bob. I appreciate everyone joining us today for our Q4 and full-year 2021 earnings call. We delivered excellent Q4 results, which well exceeded the guidance we provided on our last earnings call for revenue and Adjusted EBITDA. Total revenue for Q4 was $61.6 million, representing an increase of—the two key metrics driving our strong revenue results are total customer count and transactions processed. As of the end of Q4 2021, our total customer count increased by 23,000 to 83,000 total customers, which grew 37% and was mainly as a result of new customers acquired within our SMB segment. Similarly, we saw 41% growth in transactions processed by our solutions year-over-year, with 31.2 million transactions in Q4 2021 compared to 22.1 million in Q4 2020.
We also saw continued strength in our Net Revenue Retention rate, which was 119% for 2021, driven by our SMB customers continuing to add licenses for additional practitioners and increased utilization of our payment solutions. In addition, our Net Revenue Retention rate is fueled by growth in digital payment adoption for existing customers within the enterprise segment. Our SMB segment continues to perform exceptionally well, with fourth quarter revenue coming in at $31.1 million, representing 65% year-over-year growth. Subscription revenue of $21.2 million grew 48%, driven by continued growth in new customer adds and add-on licenses for additional practitioners. Transaction and usage-based revenue of $9.5 million grew 68% as our customers continue to process more transactions on our platform.
Our enterprise segment also delivered strong results, with reported revenue of $30.6 million, representing 23% year-over-year growth. Our enterprise revenue growth was impacted by a one-time hardware sale of $700,000 that occurred in Q4 2020, associated with the migration of customers from legacy on-prem solutions to our HealthPay24 SaaS platform. The vast majority of the revenue in our enterprise segment is derived from transaction and usage-based fees, which grew 28% in Q4 2021. To provide further color on the top line and address the market interest in COVID and our quarterly growth compares, I want to share the following as well as outline growth drivers that we see for 2022.
For EngageSmart, COVID accelerated our top line growth rate in 2020 across both segments of our business. With respect to SMB, we were in a great position to serve the immediate increase in demand that we saw from mental health practitioners at the outset of the pandemic. We had elevated levels of new customer adds in Q2 and Q3 of 2020 as practitioners quickly added digital in a mostly virtual world. They have been stable over the last five quarters. In addition, we saw higher revenue from existing customers as they added practitioners to their practices and processed more payments through us. We believe coming out of COVID, our SMB segment will continue to benefit from strong secular tailwinds in digitization and technology adoption.
Contactless payments drove an improvement in the rate of digital payment adoption across our InvoiceCloud customer base, accelerating growth from existing customers throughout 2020. Now that things have normalized, we expect more consistent top line growth rates in 2022 as we move on from COVID comparisons. In terms of secular growth drivers for our business, the tailwinds remain highly attractive. In SMB, the wellness markets we serve today are large and relatively untapped. We remain confident that SimplePractice tailwinds will continue to benefit from high demand for digital transformation within our target market, low churn for our SimplePractice offering, and a high LTV to CAC ratio that can be dialed into investments to drive growth.
Our COVID silver lining is that we have a larger install base for SimplePractice that has a pattern of adding license subscriptions and payment transaction volumes as their businesses grow. It also means a larger base of customers who provide word of mouth referrals, which is a major source. Another growth opportunity in our SimplePractice business is the continued build out and innovation of our product suite as we further tailor it to suit the nine new practice areas we now address. As Bob illustrated with his dietitian example, we are in a position to advance our offerings and further innovate on new features to serve distinct vertical needs. This should positively impact top-of-funnel activity. Finally, we are rolling out new pricing and packaging, including an entry-level option that we believe should help attract more practitioners to our solution.
We have incorporated our telehealth offering into the higher tiered packages to better align with the needs of our customers. For enterprise, new customer go lives will continue to be a core driver of our growth as we expect a meaningful portion of our 2022 growth to come from billers going live within the year as well as the full-year in 2021. Transaction growth with our existing billers driven by increased digital payment adoption will also continue to contribute to our growth in 2022. Now moving on to margins. Our adjusted gross margin for Q4 2021 decreased to 78% from 79%, driven by the migration to a new improved telehealth back-end provider in early 2021 and additional licensing costs incurred in Q4 2021.
Selling expenses increased $7.8 million, driven by our continued investment for growth in new customer acquisition segment as we target new channels and broaden our brand to reach customers. R&D expenses increased $3.6 million to $9.3 million, driven by our investment in engineering headcount focused on new product development as well as enhancing our existing solutions. G&A costs increased $2.9 million, absorbing public company operating offering in September. Adjusted EBITDA was $6.3 million for the quarter, representing 10.2% or 17.4% margin in the fourth quarter of 2020. Meaningful improvement in profitability in 2020, driven by, as well as a temporary easing in our spending levels due to COVID. While we have since ramped up our investment spend and are investing heavily in product to drive revenue growth. Given the opportunities we see in the marketplace, we continue to remain highly profitable. Moving to the balance sheet. As of December, $254.3 million in cash and cash equivalents.
During the fourth quarter, our change in cash was mainly related to free cash flow of $2.7 million, offset by the payment of $2.4 million of costs associated with our initial public offering. With that, I'll move on to our outlook of 2022. For Q1, we expect revenue in the range of $61 million to $62.5 million, which implies $5 million, which implies we are at the midpoint of our range. We expect Adjusted EBITDA in the range of $5.4 million to $6.2 million, which represents an Adjusted EBITDA at the midpoint.
For the full-year $280 million and $285 million, or revenue growth of approximately 31%. We expect to be in the range of $29 million and $31 million, which represents an Adjusted EBITDA margin of roughly 10.6% as we continue to invest to drive growth and maintain product leadership. As you adjust your models, please keep the following in mind. We typically see a step down in revenue in our enterprise segment due to the timing of transactions in Q4 associated with tax billing within InvoiceCloud and the concentration of large fundraising events for DonorDrive.
We expect that sales and marketing spend will increase meaningfully as a percentage to drive top-of-funnel, control the wellness markets we serve, and continue to add sales capacity. We expect R&D spend will increase as a percentage of revenue driven by our leadership. We expect G&A costs to decrease as a percentage of revenue after fully absorbing public company operating costs in the second half of 2022. We expect depreciation to increase approximately 20% year-over-year, driven by an increase in capitalized software costs. Given the opportunities we have in our current markets and our track record of success, we continue to target top line growth rates at or above 30% for the next several years.
From a long-term perspective, we are targeting EBITDA margins of 30% or higher, comprised of gross margins within the 80% to 82% range, sales and marketing expenses of 25% to 30%, R&D of 12% to 15%, given our focus on maintaining overall product leadership, and G&A in the 8% to 10% fees and economies of scale. I'll now turn the call back over to Bob for closing comments.
Bob Bennett (CEO)
In summary, we are excited about the record results we delivered in our first year as a public company, including a strong finish in Q4. Our solutions have high adoption. Our solutions have high adoption affinity, as evidenced by customer counts, trial conversions, transaction volume, and third-party awards. EngageSmart's success will continue to be driven by three simple factors: customer-focused playbook driven by A players. The groups of people organized around a common purpose. We are proud to have incredible talent across the entire organization. Second, product leadership as measured by adoption. Customers don't want to regularly make system changes, and maintains product leadership. EngageSmart.
Third, we are still in very early innings and have captured less than 1% of market share, and we have the best SaaS solution. We're excited about the future. We are focused on delighting our customers, growing our business, and creating shareholder value while we make a positive impact in the world. We appreciate you all joining us on this call. Thank you very much.
Operator (participant)
If you like to ask your questions press the star follow by one on your telephone keypad. The first question comes from Bhavin Shah with Deutsche Bank.
Bhavin Shah (Director of Software Equity Research)
Great. Thanks for taking my question as we wrap up a strong end to 2021. Just for guidance, any thoughts on how we should think about the performance of SMB versus enterprise going forward, and since it is a SimplePractice kind of flow-through model, an enterprise model. Any color would be appreciated.
Cassandra Hudson (CFO)
Great. Thanks, Bhavin, and good to connect with you again. So in terms of the guidance for 2022, you know, we're not guiding at the segment level, but our total revenue guidance for both Q1 and the full-year 2022 implies, you know, 30% growth or higher at the midpoint of our. Assume stable growth continuing from both segments. Continued strength in terms of revenue growth from SMB, well above the fleet average. Then kind of consistent growth rates from the enterprise segment with what we've been seeing in the back half of 2021.
In terms of contribution from, you know, early days still, I would say we've just released our rolled out pricing to new customers and are transitioning pricing for existing customers over the first half of this year. You know, those changes, I think, put us in a good position to serve better customer acquisition on the lower end with the introduction to an entry-level offering that we didn't have previously. We've also incorporated telehealth into here.
You know, for us, in terms of revenue contribution, for existing customers, we see an impact of about 5%-10% in terms of increased ARPU, in terms of increased ARPU expectation, but more to come, like I said, early days.
Bhavin Shah (Director of Software Equity Research)
That's very helpful, and I appreciate the additional color. Just a quick follow-up, maybe for Bob. Just as we think about the nine additional verticals in SimplePractice, where do you think are the low-hanging fruit of which verticals do you see yourself having the most success over the next coming quarters to years? How much will kind of having the starter package really help catalyze adoption there?
Bob Bennett (CEO)
Oh, thanks, Bhavin. That's a good question. Yeah. I think strong inroads in mental health, of course, but the new professions of, you know, Speech-Language Pathology, Occupational Therapy. Capterra recently listed us as a high scorer for massage therapy as well. Those are well underway, and we're seeing, you know, conversion rates in the mid-30s% to high 30s% there right now, and very strong retention similar to our mental health. I think that those three will continue to be high chargers for us. We are continuing to push forward in others like physical therapy and nutrition, dietitians. Acupuncture or so. We're going to get them all. We're on our way.
Bhavin Shah (Director of Software Equity Research)
Perfect. Helpful. Congrats again. Thank you. Thanks for taking my questions.
Cassandra Hudson (CFO)
Thanks.
Bob Bennett (CEO)
You bet.
Operator (participant)
Thank you, Bhavin. The next question comes from John Davis with Raymond James. Please proceed.
John Davis (Managing Director and Equity Research Analyst of Payments and Financial Technology)
Hey, good afternoon, guys. Maybe quickly, Bob, start, you have $250 million or so on cash on the balance sheet valuation. There seems to be coming down. Tom, capital allocation. One is what's at the top of the list? Have you seen the top of the list? Have you seen kind of bid-ask spread normalize? What's on kind of DonorDrive and HealthPay24? Do those assets fit strategically? Are there assets you could buy to accelerate the growth there, just given kind of the relatively immaterial part of revenue? Just thoughts there would be helpful.
Bob Bennett (CEO)
Hey, John. Nice to hear from you. Yeah, the bid and ask, you know, I'm not sure that there's been a such a compression or normalization yet between bids and asks, but we're certainly in the market now as the EVP of corp dev and we're looking around mapping and evaluating several different things, some of which could be impactful in our emerging businesses like HealthPay24, DonorDrive. Too early to say where we go there yet, but we're active and yeah, we know we've got the capital and the currency to be able to be active. We plan to be.
John Davis (Managing Director and Equity Research Analyst of Payments and Financial Technology)
Cassandra, two things I want to touch on in regards to kind of the guide, one is 2022. If I just look at 2022, you know, the 2021, 2022 guide and kind of call out from a cadence or seasonality perspective, I mean, it appears that you kind of need high single-digit growth sequentially throughout the year to kind of get to a good point. If it falls out in, you know, kind of the latter part of the year. Bigger picture, you know, 88% gross margins, 30+%. Gross margins 30+% down. Like, how do we think more on the gross margin down?
Like, how do we think more on the gross margin side? Is this something we can see? Sure. How do you think about letting kind of some of the top line upside slow to EBITDA if and when that would happen?
Cassandra Hudson (CFO)
Sure. Thanks, John. You know, I guess first on the seasonality question, the business is pretty smooth from a sequential perspective. You know, where we do have a bit of seasonality is when, to the point of your question, sure. For us, within enterprise, for revenue, there's concentration of tax billing within InvoiceCloud that occurs in that period and also within DonorDrive. So, you know, we do see a sequential step down actually between Q4 seasonality. Otherwise it is pretty stable in total revenue perspective.
On the long-term side, you know, first on gross margins, you know, I think it will be a couple years out here before we see that level of expansion. We're pretty well optimized today on the margin. I think where you'll see the upside coming from is you know, higher price points, I think, for us in the future. And then further optimization on the customer support delivery side. Those are kind of our two big levers to drive the margin expansion. And then, you know, EBITDA, I would say in terms of achieving that 30% target is a little bit longer out and really depends on the opportunities we see. Right now, we have huge opportunities to drive top line growth.
That's where we're focused. You know, to the extent that changes, we'll obviously get to that target.
John Davis (Managing Director and Equity Research Analyst of Payments and Financial Technology)
Okay. Just quickly though, how do you guys anticipate spending that and kind of holding to the EBITDA guide, or should we kind of if we were to get top line upside this year?
Cassandra Hudson (CFO)
Yeah. Well, it will largely be reinvesting for growth this year in those two main areas that I mentioned on the call. In terms of marketing predominantly on the SMB side, that's in our product roadmap.
John Davis (Managing Director and Equity Research Analyst of Payments and Financial Technology)
Okay. Very helpful. Thanks.
Cassandra Hudson (CFO)
Thank you.
Operator (participant)
Thank you, Sterling. The next question comes from Bob Napoli with William Blair. Please proceed.
Bob Napoli (Senior Director of Private Wealth Management)
Thank you. Good afternoon, Bob and Cassandra. Nice job on the quarter. Really good to see.
Cassandra Hudson (CFO)
Thanks, Bob.
Bob Napoli (Senior Director of Private Wealth Management)
In the SMB segment, what percentage today can you remind me what percentage or remind us what percentage is mental health? And as you look out over the next five to 10 years, if you would, I guess, or three to five maybe, what do you think the other verticals organic what is the opportunity? What is the opportunity? What would you expect that mix to look like?
Cassandra Hudson (CFO)
Sure. Thanks for the question. You know, today the SMB business with health, so think north of 90% mental health, percent for the additional specialties. You know, the additional specialties are nascent today, but that's where we're seeing pretty fast growth, and expect to continue to drive faster growth there over the next several years. We'll see that mix shift up. You know, I couldn't tell you with any precision today on where that would get to, but certainly we'll start to see additional specialties take up more share. I do think it'll be concentrated in the verticals that we know are getting strong traction today. Speech-Language Pathology, Occupational Therapists, Massage Therapy, and then also Physical Therapy.
Bob Napoli (Senior Director of Private Wealth Management)
Thank you. You are ramping up marketing in that part of the business. Can you give us some color on kind of trends in LTV to CAC or any different trends in the conversion rates from free to use to paying customers? Do those LTVs and conversion rates vary much by vertical?
Cassandra Hudson (CFO)
Sure. You know, on an LTV to CAC basis, certainly we're highly efficient in mental health for SMB. We do see higher polls that we're looking to. We'll look to optimize those over the next several years. For 2022, we're kind of deliberately investing for growth and expect to take down result, but still in a high result, but still in a highly efficient model. 10x LTV to CAC ratios, less than 12 months on payback, so makes perfect sense to do.
You know, I think another thing that we're doing in the year is really the brand, so that we're, you know, speaking more holistically beyond mental health to all of these different wellness verticals. Those are kind of the two main areas of focus from a marketing perspective.
Bob Napoli (Senior Director of Private Wealth Management)
Just lastly, any update on the monetization of Monarch? You know, what is the strategy behind Monarch? Does that have a chance to become a material part of the business?
Bob Bennett (CEO)
We still, you know, we're still in the early stages. It's becoming more and more evident that it's a really critical piece of the puzzle for us to drive, you know, organic growth really of new trials or, you know, right now in mental health, but ultimately across all for clinicians. No plans to revenue from it in 2020. We do have some interesting what's going on that are proving out to be very effective for us to drive appointments. Good solid traction play for us.
Bob Napoli (Senior Director of Private Wealth Management)
Great. Thank you. Thanks, Bob. Thanks, Cassandra. Appreciate it.
Cassandra Hudson (CFO)
Thank you.
Operator (participant)
The next question comes from Scott Berg with Needham and Company. Please proceed.
Scott Berg (Managing Director and Senior Research Analyst)
Hi, everyone. Congrats on the great quarter, and thanks for taking my questions. I have two. I saw the change in ARPU so far from customers. How should ARPU so far from customers. Kinda, you know, cadence around the new pricing, you know, really is an opportunity just to capture maybe some customers maybe didn't attach to the platform or maybe some of your, you know, customers that were likely to buy at this point, but then, you know, be more apt to kind of, you know, get upsell or, you know, on the higher price points as their life with the company goes forward.
Cassandra Hudson (CFO)
Certainly still early days for SimplePractice. You know, motivation there really was at having the starter practitioners who are earlier and steadily capturing a segment of the market that we're not really getting. Just kind of realigning the value of our offerings that have kind of been sold and add to the needs of our customers. We've woven telehealth into the higher priced offerings. You know, I don't think you'll see us, you know, we're not gonna be programmatic about pricing. It really will be in line with our rollout of future features to our customers. Not something that, you know, you'll expect from us every year or anything like that.
Scott Berg (Managing Director and Senior Research Analyst)
Got it. Helpful. My follow-up is on the enterprise business. Let's say general price year-over-year, but revenues were up roughly. Correct there. How can we think about pricing around your, you know, your payment services there? Are they pretty stable at this point? Or should we maybe expect some further changes whether that's, you know, up to.
Cassandra Hudson (CFO)
Yep. Pricing in the enterprise segment has. You know, I wouldn't expect anything in the way of changes at least as it relates—
Scott Berg (Managing Director and Senior Research Analyst)
Great. That's all we have. Thank you.
Cassandra Hudson (CFO)
Thank you.
Operator (participant)
Thank you, Scott. The next question comes from Ashwin Shirvaikar with Citigroup. Please proceed.
Ashwin Shirvaikar (Managing Director)
Hello. Hi, Cassandra. Good results and outlook. I appreciate all the detail.
Cassandra Hudson (CFO)
Thank you.
Ashwin Shirvaikar (Managing Director)
I guess the first question I have is if you guys could provide some, you know, some idea of the baseline, right? When you have practitioners come in and go into what used to be known as Pro and is now Plus that you're seeing. Is there a revenue split you could provide between solo versus group? You know, I guess let me start there. Any sort of metrics or granularity that calculation is today, and then we can talk about the pricing, I guess.
Cassandra Hudson (CFO)
Sure. It's early in the pricing rollout, so a bit tough for us to say what the actual mix between all of the products since. What I will tell you is we've seen really strong utilization of our higher-priced offerings across our existing customer base today, where the overwhelming majority of them were using our higher-priced offering before we rolled out these new offerings.
Our expectation is that, you know, based on the features in each one of those packages, that will skew more heavily to that on the starter pack options that we hadn't otherwise in their journey and don't necessarily need or, you know, aren't planning on using the fully featured option right away, but that ultimately they'll upgrade in solo versus group. You know, again, pretty stable trends there. We have 1.6 clinicians on average per customer. We've seen that tick up over, you know. Pretty stable trends overall, and we've seen strong uptake from groups.
Ashwin Shirvaikar (Managing Director)
Got it. Just moving to the enterprise side, I guess, there's been a couple of management changes. What should we expect from this? What should we expect from that? Could you also comment on sort of the pipeline of large accounts, considering the solutions there now, particularly for InvoiceCloud?
Bob Bennett (CEO)
Yeah. Thanks for that question. Right. We are super excited about Kevin O'Brien coming in. He's got a great background in go-to-market products and strategies, both with PTC at PTC. He managed over a new and existing product line that he had. The President of our Enterprise Solutions, doing really well with some decent-sized accounts. We actually, you may remember this with Guidewire and the insurance. I think we announced on the 8-K in 2021.
We have already the largest financial services deal that we've ever had with a Guidewire partner. We're off to the races. That gate is now open. We're really excited about our migration up the enterprise chain, and I think we've got great prospects there.
Ashwin Shirvaikar (Managing Director)
Awesome. Great.
Cassandra Hudson (CFO)
Thank you. Thank you.
Operator (participant)
The next question comes from Terry Tillman with Truist. Please proceed.
Terry Tillman (Managing Director)
Yeah. Hi. Hi, Bob and Cassandra. I'll echo the congratulations. Two questions. Actually one, like almost a two-part, so maybe it's two and a half questions. Hope that's okay. I think first I'm gonna ask on the enterprise side. I know, I think y'all talked about outbound campaigns. Question. How much of your customer base is starting to use outbound campaigns, and what kind of lift is that creating in terms of getting more folks to do paperless billing and payments as opposed to maybe just kind of natural expansion, say, a customer or somebody's gonna, you know, add another online payment service or et cetera. I'm just curious kind of like what you see from those different angles on how same-store sales grows.
Bob Bennett (CEO)
Right. The campaigns are really targeted at delinquent payables, right, or receivables. They typically, and we use, you know, outbound campaigns are directed through our IVR, interactive voice response system, that makes a phone call and, "No, you may have forgotten, but your bill is late," or, "Your payment is late, you know, click to make a payment." I think that the lift is, you know, it's meaningful because we rolled it out in, you know, sort of the second half of last year. I would say it is, you know, incremental. I don't know if that helps.
Terry Tillman (Managing Director)
It definitely helps. Yeah, just a follow-up question. I know Cassandra was talking earlier about, you know, a kind of a conscious decision to probably bring down the LTV to CAC. You know, in 2022, is there some incremental spending, maybe some branding? One thing I'm sure of, moat is amazing in terms of how that drives the customer growth and conversion to paid customers. But is there any kind of testing and learning of other kind of top-of-funnel go-to-market activities you're thinking about in 2022?
Cassandra Hudson (CFO)
Thanks, Terry, for the question. You know, I think you'll see us still remain very focused on targeted digital marketing efforts. You know, we certainly spent a fair bit of time in Q4 testing new marketing programs and channels. We'll continue to do some of that today, but I think it's a very efficient go-to-market motion for us on the SMB side. You know, we're more or less doubling down on that and really investing in the brand and going after our additional specialty markets a little bit more deliberately. You know, but beyond that, nothing terribly new or different from.
Operator (participant)
Thank you, Terry. The next question comes from Jason Kupferberg with Bank of America. Please proceed.
Jason Kupferberg (Senior Equity Research Analyst)
Great. Thanks, guys. I wanted to just start with NRR really strong here in 2021. I think you said 119%. How should we think about that trending in 2022? Do you think triple digits zone?
Cassandra Hudson (CFO)
Yeah. Thanks, Jason. You know, I think we'll see pretty stable trends there. You know we still see a lot of opportunity to expand ARPU on the SMB side, so that naturally will keep NRR elevated. Also, with the pricing and packaging change, we're expecting that to have a positive impact on ARPU, so that will certainly play into it, a little bit. Continued pretty stable growth on the adoption side of things for enterprise. You know, pretty stable with what we saw in 2021.
Jason Kupferberg (Senior Equity Research Analyst)
Right. Okay. Just on the margins, how much of a headwind are you expecting in 2022 from having, like, a full-year of public company costs? I'm just kind of looking at, you know, year-over-year, and I know there's gonna be some decline, you know, at least at the midpoint, 2022 versus 2021, but I'm assuming some of it is just a function of having a full-year of absorbing those costs.
Cassandra Hudson (CFO)
Sure. That's exactly right. We started incurring public company costs in Q4, largely of this past year. With the full-year impact of that, you're looking at an incremental, you know, roughly $7 million-$8 million hitting the P&L.
Jason Kupferberg (Senior Equity Research Analyst)
$7 million to $8 million incremental year-over-year in 2022?
Cassandra Hudson (CFO)
Correct.
Jason Kupferberg (Senior Equity Research Analyst)
Okay, great. Thank you, guys.
Cassandra Hudson (CFO)
Thank you.
Bob Bennett (CEO)
Thank you.
Operator (participant)
Thank you, Jason. The next question comes from Josh Beck with KeyBanc. Please proceed.
Maddie Schappel (Research Analyst)
Hey, guys. This is Maddie on for Josh. The first question that I have for you is, you know, with clinics opening back up in person, how you're seeing that affect your telehealth and where you see that going in the future. My second question is any sort of color on the businesses. Thanks.
Bob Bennett (CEO)
Thanks, Maddie. I'm gonna say that we're really not seeing any material change or deviation in the mix of, you know, new clinicians taking on the product and telehealth and so forth. We have sort of fee bundled a little bit, and we include telehealth in our top bundle, which has a lot of other things as well, so we can't be completely sure that they're taking it for telehealth only. But we think that telehealth is a new normal, frankly, you know, going forward for mental health clinicians, for sure. It's just, you know, they're all serving clients all across the country now based on their specialty. I think that we're pretty solid on telehealth for the future.
Cassandra Hudson (CFO)
I think the second part of your question was on payback periods. You know, in terms of sales and marketing efficiency, we certainly did increase the level of investment in Q4. You know, saw paybacks dip, you know, slightly. You know, we're expecting them to dip slightly again in 2022 as we invest to drive top line growth in particular on the SMB side of the business. You know, that's where we're putting our investment. You know, you still see payback periods less than 12 months in the SMB space, by far. That's kind of what we're using as our guide today.
Maddie Schappel (Research Analyst)
Awesome. Thank you, guys.
Cassandra Hudson (CFO)
Thank you.
Operator (participant)
Thank you, Maddie. We have a follow-up from Sterling Auty. Please proceed.
Sterling Auty (Managing Director)
Yeah. Thanks, guys. Actually, it's not a follow-up. Thanks for squeezing me in for my first question. Just wanted to know, on the enterprise side, you talked about, you know, new customers ramping being a big part of 2022 growth. Can you talk about what you saw in terms of sales cycles in the enterprise business in the fourth quarter and what the pipeline looks like for 2022?
Cassandra Hudson (CFO)
From a sales cycle perspective for enterprise, you know, they vary between three to nine months generally. We have an implementation cycle kind of somewhere in the six to nine months. Pretty stable trends there. I don't know, Bob, anything you'd add?
Bob Bennett (CEO)
No, I think that, you know, we had a, you know, good quarter for bookings and, you know, go lives. You know, we've had a really good second half, frankly. I think that no real surprises, kind of a steady cadence.
Sterling Auty (Managing Director)
Great. One follow-up on that enterprise side, are you seeing your customers do anything to further promote adoption and usage? I would imagine the pandemic obviously was a huge, you know, driver to that adoption. Are there any kind of communication email programs or other things that you're seeing that are helping drive further adoption yet during the pandemic?
Bob Bennett (CEO)
Good question, Sterling. I think that we do provide a lot of guidance to our customers to help them understand opportunities for increasing digital adoption, online payment adoption. You know, as you know, in the InvoiceCloud side, our biller's perfect world is 100% online payment, preferably through auto pay and 100% paperless billing. You know, we provide a lot of tips that help them get there and, you know, actually work with them to run marketing programs that absolutely drive higher adoption.
Sterling Auty (Managing Director)
Got it. Thank you.
Bob Bennett (CEO)
Yeah.
Cassandra Hudson (CFO)
Thanks, Sterling.
Operator (participant)
Thank you, Sterling. We have another follow-up from Bob Napoli. Please proceed.
Bob Napoli (Senior Director of Private Wealth Management)
Thank you for the follow-up. Just on Bob, last quarter, you had explained enterprise is just dipping their toe into the consumer finance and insurance segment in Guidewire. How large, first of all, is consumer finance and insurance in Enterprise, and how big is the opportunity, and do you have a pipeline there?
Bob Bennett (CEO)
Much stronger pipeline and in insurance to take them in reverse order, Bob. We have a strong pipeline in insurance driven by our alliances, you know, our alliance partners in insurance. I would say that on consumer finance, we have a handful of consumer finance customers, but we have so much pipeline and activity going on in insurance that we're much more focused on that because it's happening. You know, it's got a very strong product market fit there. Strong product market fit there, consumer finance. In terms of the size of the markets, consumer finance is probably the largest vertical that we have. You know, so we're already in it, but we'll get bigger in it as we move forward.
We'll get bigger in it as we move forward for us to look around and see if there are any inorganic opportunities as well.
Bob Napoli (Senior Director of Private Wealth Management)
Thanks. Is there any end consumer finance? Is it targeted towards like auto loan repayments, specific sector and-
Bob Bennett (CEO)
Really auto loans. I think auto loans and general lending. There's some, you know—we're also, you know, in discussions with some mortgage finance and so forth, but on the consumer finance side, it's been primary.
Bob Napoli (Senior Director of Private Wealth Management)
Great. Thank you. Appreciate it.
Bob Bennett (CEO)
Yeah.
Operator (participant)
Thank you, Mr. Napoli. There are no additional questions registered at this time, so I'll pass the conference to Bob for closing remarks.
Bob Bennett (CEO)
Thank you. Thank you for all your questions. It's great to hear your voices again. It has been quite a year in our first year as a public company with 48% annual revenue growth. Momentum across the business drove another quarter of record revenue performance. Standouts are the strong customer growth numbers and exceptional customer retention continues to be compelling as we address a huge market opportunity as product leaders in the markets we're focused on today. Looking forward to speaking with you again at the Bank of America Electronic Payments Symposium on March 21 and on our Q1 call later this spring. Thank you.
Operator (participant)
That concludes the EngageSmart Q4 2021 earnings call. Thank you for your participation. You may now disconnect your line.