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

Cassandra Hudson: I mean, we continue to see really strong trends on the new customer acquisition side for SimplePractice, both within behavioral health and in the new expansion specialties, primarily SLP and OT is where we see that growth. I do think this year, we’ve really been fine-tuning that model, and that’s playing out in the results. Second quarter gross customer adds exceeded our expectations. Then we saw an acceleration in adds from Q1, which we don’t typically see. So I think that was very positive. We’re continuing to dial up the investment where it makes sense. But I think, by and large, we have the model down for these markets.

Jeffrey Van Rhee: Got it. Okay, great. Thanks.

Operator: Thank you. Our next question will come from Tien-Tsin Huang with JPMorgan. Your line is open.

Tien-Tsin Huang: Hi, good morning. Thanks for all the detail here. I just want to ask on Enterprise and heard about the backlog in the pipeline and whatnot, but are implementation timetables changing at all? Any signs of lengthening? I know in the broad IT services space, I’ve been asking this question quite a bit because we’re seeing some cancellations and delays. So I’m curious if that’s relevant here.

Cassandra Hudson: I would say no, actually. Certainly, through the first half of this year, we’ve seen really strong go-lives. We haven’t seen any change in the trend as it relates to go-lives. I mean there is always that ebb and flow that happens with deals going live earlier, deals pushing out for a variety of reasons. We manage through that very well. So I wouldn’t say we’ve seen any change there.

Tien-Tsin Huang: Perfect. And then just quickly on Luminello, just in terms of your diligence and how you know this asset in general. Can you just give a little bit more of your familiarity with it to go ahead and do the deal?

Robert Bennett: Sure. A founder that had a very similar outlook to our – the founder of SimplePractice, very customer-centric, actually a practicing psychiatrist that was frustrated with the tools available for practice management and felt that he could build something better, and he did. And remarkably similar culture and customer-centric approach to the market, very nice platform, has a few enhancements for psychiatry specifically, that will also help us as we bind them into a single solution, the SimplePractice solution, to enable better work with groups and with – well, certainly e-prescribe being a major one. So we just think it’s the best of both worlds opportunity, very strong customer – strong loyal customer base and similar, I guess, momentum to SimplePractice, albeit a smaller subset because there aren’t as many psychiatrists as there are mental health professionals, if you will, and wellness professionals.

Tien-Tsin Huang: Right. That sounds promising. Thank you.

Operator: Thank you. Our next question will come from Bob Napoli with William Blair. Your line is open.

Robert Napoli: Thank you for the follow-up. Just on the Enterprise business, calling out momentum in insurance and tax. Can you give maybe just some color on the mix of Enterprise, what is the size of insurance and tax versus other key verticals today?

Cassandra Hudson: I mean, I would say our core government utility market is by far the largest. Today, insurance is – it’s growing very fast. So, we don’t break out necessarily the components there, but I think insurance is going to be a meaningful business for us over time. And we’re really starting to pick up scale there.

Robert Bennett: Sorry, Bob. I was going to add that tax is something that we were in early. And to Cassandra’s point, it is – the utilities still seem to drive it. But we’ve been in the tax business for a long time, and we love the product market fit there. So we see that as a growth opportunity as well.

Robert Napoli: Great. And I always get asked, I know this – we talked about this a lot, but I still get asked a lot about why – what is the Enterprise business or InvoiceCloud doing that is allowing it to have higher adoption rates than its competitors?