United States securities and exchange commission logo
July 28, 2021
Charles Kallenbach
General Counsel
EngageSmart, LLC
30 Braintree Hill Office Park, Suite 101
Braintree, Massachusetts 02184
Re: EngageSmart, LLC
Draft Registration
Statement on Form S-1
Submitted June 30,
2021
CIK No. 0001863105
Dear Mr. Kallenbach:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Overview, page 1
1. Please disclose the
actual number of small and medium sized business and enterprise
customers for all
periods presented. Further, clarify how you define enterprise businesses
and small and
medium-sized business.
Risk Factors
If we are unsuccessful in establishing, growing or maintaining strategic
partnerships..., page 21
2. Please tell us if your
business is substantially dependent on any of your strategic partners.
If so, please disclose
the name of the strategic partner, discuss the material terms of your
Charles Kallenbach
EngageSmart, LLC
July 28, 2021
Page 2
agreements with it, and file such agreements as exhibits to the
registration statement.
Refer to Item 601(b)(10)(ii)(B) of Regulation S-K.
We derive most of our revenue from InvoiceCloud and SimplePractice, page 24
3. Please disclose the percentage of your revenue generated from
InvoiceCloud and
SimplePractice for each period presented in your financial statements.
A portion of our revenue is generated by sales to government organizations...,
page 34
4. Please disclose the percentage of your revenue generated from sales to
U.S. state and local
governments for each period presented in your financial statements.
If we fail to meet our service level commitments..., page 35
5. Please revise to address the extent to which you have historically
experienced failures to
meet service level commitments and the impact of any failures, if
material.
EngageSmart, LLC, and upon its formation, EngageSmart, Inc., do not generate
any revenue...,
page 64
6. Please include in the prospectus summary a corporate organization
chart that shows your
operating subsidiaries.
Management's discussion and analysis of financial condition and results of
operations
Our Business Segments, page 85
7. Please disclose the rate at which you convert trial users of your
SimplePractice solution
into paid subscribers for each period presented in your financial
statements.
Our revenue model, page 85
8. Please revise to explain, as you do in your risk factors on page 34,
that your revenue is
sensitive to shifts in payment methods. To the extent that shifts in
payments methods
materially impacted results of operations for any of the periods
presented, please revise
your MD&A discussion beginning on page 94 accordingly.
Adjusted EBITDA and Adjusted EBITDA Margin, page 89
9. To avoid giving undue prominence to non-GAAP measures, please move this
discussion
so that it appears after the discussion of GAAP results from operations.
Additionally,
FirstName LastNameCharles Kallenbach
please revise your tables of Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted
Comapany
GrossNameEngageSmart,
Profit and AdjustedLLCGross Profit to include, with equal or
greater prominence, the
July 28,most
2021directly
Page 2comparable GAAP measure for each.
FirstName LastName
Charles Kallenbach
FirstName LastNameCharles Kallenbach
EngageSmart, LLC
Comapany
July NameEngageSmart, LLC
28, 2021
July 28,
Page 3 2021 Page 3
FirstName LastName
Key business metric and non-GAAP financial measures, page 89
10. You disclose that the Transactions Processed metric is useful because
it directly correlates
with transaction and usage-based revenues. To provide better context
to investors, please
revise to quantify the amount of transaction and usage-based revenue
recognized during
each of the periods presented.
Revenue, page 94
11. Please revise to separately quantify the extent to which the increase
in customers and
transaction count was attributable to organic growth as compared to
recent acquisitions.
Please refer to Item 303(a)(3) of Regulation S-K.
Segment information, page 95
12. You indicate that the changes in your Enterprise Solutions and SMB
Solutions revenues
were driven by multiple factors. To the extent possible, please revise
to provide
quantification regarding the impact of each factor. For example,
please revise to quantify
the number of new customers added in the Enterprise Solutions segment
and their impact
to the increase in revenues. Please refer to Item 303(a)(3) of
Regulation S-K.
13. We note on page F-38 that your CODM uses Adjusted EBITDA from
reportable segments
to make resource allocation decisions and evaluate segment
performance. When this
measure is presented outside of the segment footnote, it represents a
non-GAAP financial
measure. Please revise your disclosure to identify Adjusted EBITDA as
a non-GAAP
measure and provide the disclosures required by Item 10(e) of
Regulation S-K. Please
refer to Question 104.04 of our April 4, 2018 Compliance and
Disclosure Interpretations
on Non-GAAP Financial Measures.
Management, page 124
14. Please disclose if any of your directors were nominated or serve based
on any
arrangement or understanding with major shareholders. In this regard,
we note that Mr.
Stamas is affiliated with General Atlantic and Mr. Hamilton is
affiliated with Summit
Partners. Refer to Item 401(a) of Regulation S-K.
Audited Financial Statements
3. Revenue, page F-18
15. Please tell us how you considered disaggregating revenue derived from
subscriptions
separate from transaction and usage-based fees. Please refer to ASC
606-10-50-5 and
ASC 606-10-55-89 through 55-91.
14. Commitments and Contingencies, page F-35
16. Please revise to clarify if this IPO would be considered an Exit Event
that would trigger
the recognition of compensation expense for your CVR awards. Similarly
revise your
Charles Kallenbach
EngageSmart, LLC
July 28, 2021
Page 4
disclosures on page F-33 to clarify if the performance condition
associated with your
unvested awards is expected to be achieved upon completion of this IPO.
If so, please
revise both your MD&A and pro formas to quantify (to the extent possible)
the amount of
stock-based compensation expense associated with these awards that you
expect to
recognize upon closing of the IPO.
19. Subsequent Events, page F-40
17. Please provide us with a breakdown of all stock-based compensation awards
granted to
date during 2021 including the fair value of the underlying stock used to
value such
awards. To the extent there were any significant fluctuations in the fair
values, please
describe for us the factors that contributed to such fluctuations,
including any intervening
events within the company or changes in your valuation assumptions or
methodology.
General
18. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Lisa Etheredge, Staff Accountant, at (202) 551-3424 or
Robert Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have
questions
regarding comments on the financial statements and related matters. Please
contact Matthew
Crispino, Staff Attorney, at (202) 551-3456 or Jan Woo, Legal Branch Chief, at
(202) 551-
3453 with any other questions.
Sincerely,
FirstName LastNameCharles Kallenbach
Division of
Corporation Finance
Comapany NameEngageSmart, LLC
Office of
Technology
July 28, 2021 Page 4
cc: Ian D. Schuman
FirstName LastName