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

I think during the period of migration, you can expect ARPU to be a little bit lower. And then in the second year post that migration, probably more in line with SimplePractice’s ARPU. And then I think where there is upside is longer term, just given the high value of the psychiatry market itself, I think we’ll start to see ARPU trend higher in the out years there. Again, on the other side of the migration, we’ll start to see higher flow-through to the bottom line as well. So we’re really excited about the deal. We’re probably most excited just about the strategic value that we’re getting of moving more meaningfully into the psychiatry market, the features and functionality, the acceleration in our roadmap on e-prescribe, and then the value to multidisciplinary group practices in EAPs and MCOs is very much in line with the strategy that we’ve been executing on here for a while.

John Davis: Okay, great. And then one quick one for you, Bob. We’ve talked about the e-prescribe capability for a while. It’s been on the roadmap. I understand kind of going after mental health first and kind of getting this integrated is priority one. But how do you think about it opening up the ability to attack other sub-verticals within healthcare down the road?

Robert Bennett: Yes. So, it definitely is an asset, JD, for us as we move forward. I mean, think more out there a little bit for us because we’ve really got our hands full and in behavioral health and the other wellness verticals that we’re already in, in terms of growth for the next couple of years. But yes, e-prescribe will be something that will obviously get woven into our value proposition for medical specialties as we move forward.

John Davis: Okay. Thanks guys.

Cassandra Hudson: Thank you.

Operator: Thank you. Our next question will come from Jeff Van Rhee with Craig-Hallum. Your line is open.

Jeffrey Van Rhee: Great. Thanks for taking my questions. I’ve got a couple. First, maybe just on the Enterprise side, you talked about the size of deals increasing. I’m just curious, you talked about like the top of funnel and large deals. The large deals, is that a function of scalability increases in the product? Is it a change in focus on the sales side? Just talk about what’s driving you up into these larger deals maybe?

Robert Bennett: Yes. Hey Jeff, it’s Bob. The larger deals, yes, I mean we’re really – part of it is coming from partnerships, right, alliances that we’ve got with Guidewire, for example, we’d signed a large insurance Southern Farm in Mississippi. That’s another Guidewire referral that comes to us through our alliances. So, in some cases, it’s our move up market with alliances. So, for example, another Oracle deal as well that’s signed in the quarter. Part of it is, we’ve always had plenty of scale opportunities. The enhancements that we do make over time as we do go up market are necessary to satisfy the needs of those customers. We are true SaaS, single instance multi-tenanted. So, as other interested, more Enterprise style customers come along that are large, now that we’ve added those enhancements and features that are desired by those Enterprise customers, it gives us the ability to add the value and win those deals where previously we might not have been going after those.

So, I think that it’s both product – not really scale, but product enhancements as well as alliance driven.

Jeffrey Van Rhee: Got it. That’s helpful. And then in the incremental SMB wellness markets that you’re pursuing, anything to call out in terms of the trends of customer acquisition costs? I know you played with a lot of digital go-to-market and ways to approach those different verticals. Just as you’ve been tuning the models around CAC to then maybe step on the gas, any areas where you feel like you’ve kind of got it dialed in and are really pouring in a bit more expenditure there or just some thoughts on that?