Q3 2020 Everbridge Inc Earnings Call
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Good day and welcome to the Everbridge third quarter earnings Conference call.
One of our views as of any subsequent date, we explicitly disclaim any obligation to update forward looking statements or our outlook.
Also during today's call, we were referred to certain non-GAAP financial measures.
Reconciliation of our gap to our non-GAAP financial measures is included in our press release with that let me turn the call over to Jamie to begin our prepared remarks Jamie.
Thanks, Joshua and thanks to all of you joy for joining us today.
We're excited to report financial results that not only beat our guidance, but also represented the largest revenue we've had in the company's history.
In fact, our third quarter results speed every one of our financial guidance metrics.
This performance reflects the value that we provide to companies and organizations in order to help protect their people assets and operations during critical events.
It also demonstrates the fact that the value and benefits of our solutions are elevated during what is the greatest critical that most of us are based in our lifetimes.
And I'm not speaking about the presidential election, but the Corona virus spend demick.
Our customers from public safety government health care organizations and major corporations are all faced with this rising global pandemic as well as other threats such as Hurricanes and wildfires we're.
We're proud to partner with all these organizations to keep the people safe and the businesses running.
During this unprecedented a period of critical that's our customers have relied on a robustness and scalability or see them solutions literally hundreds of millions of times to mitigate the impact these various critical depth.
As a result demand for critical that management for C. N as refer to it continues to be strong and a quarter with a dozen customers adopting R. C. E. M platform. We also saw a tremendous market demand for our new applications that are extensions of C. M. Such as returned to work on campus.
Contact tracing and COVID-19 shield, which collectively contributed to a record the results for our mix of sales from new products.
In fact in the third quarter alone more than three dozen organizations chose are returned to work on campus as well as our contact tracing solutions to keep people safe and operations running.
Our ability to deliver new solutions that help to mitigate the pandemic begins with a platform scruton scale augmented by our suite of C. E M applications.
We utilize applications such as safety connection right proximity tracing.
Acacia based tracing usually driven symptom checking.
Well in the state of this.
This makes our customers well positioned to realize the broader value of the C E N sweet overtime as.
As we have already seen happen in several cases.
These capabilities allow us triangulate around different data sources, and determine who might be at risk after an exposure.
Strong market response to these new applications reinforce our leadership position and the critical event national market.
In addition to strong market reception for a C. M solutions I'd like to highlight that this is the fifth straight quarter that our team led by C. E O. David Meredith have delivered financial results above our guidance ranges for revenue and profitability.
I'm confident that David and the team will continue to execute our plan and deliver increasing value for shareholders in the future.
As a result of a strong foundation and performance I'll be migrating my role from one of the executive chairman to a nonoperating role as chairman of the board at the end of this year.
As chairman I will remain committed to our vision of leading the growing multibillion dollar C a market.
I'm also steadfast in my support of our dedicated everybody <unk>.
And I'd like to add that this new role will provide me a bit more time to spend with my family as well as pursue my interest in establishing a new investment fund that will assist young growing software businesses and the new one in the region.
Now I'll pass the call over to David and Patrick to provide details of our small third quarter results and our outlook going forward David.
Thanks, Jamie on.
On behalf of the entire senior management team.
I want to thank you for your guidance and leadership.
Which provided instrumental support.
To our overall success in establishing ever bridge is it clear market leader.
I'm looking forward to continuing to work with you as chairman of the company going forward.
Now I'll turn into the results are momentum continued in the third quarter with strong top and bottom line performance.
In addition to record revenue, we posted our highest ever revenue be relative to guidance.
The most deals valued at more than $500000. The second highest number of six figure deals and the highest quarterly aspie in our history.
As well as our highest gross margin ever.
These results easily exceeded our third quarter guidance.
The combination of growing Covid, 19 cases, wildfires hurricanes and civil unrest that Jamie just spoke about all underscore the value of our critical it meant management solutions for corporations government entities and healthcare organizations.
During these unprecedented times are SaaS platform continues to demonstrate the capacity to successfully handle massive scale with a record volumes are solutions are working overtime to help keep people safe and operations running.
Our third quarter outperformance was broadbased and included numerous large C E M wins highly strategic government transactions and rapid adoption of our new return to work returned to campus contact tracing and COVID-19 Shield solutions.
In trouble times, both customers and prospects turn to best in class providers. As a result, they continue to turn to ever bridge due to our proven industry leadership.
This flight to quality remained evident in every bridge is third quarter results and validates the confidence in our outlook for the business.
Revenue in the third quarter was $71.3 million.
$2.6 million above the top end of our previous guidance of 68 $7 million, representing a year over year increase of 36%.
Our revenue upside flow through to operating profitability as we reported adjusted EBITDA, a $5.1 million, which was significantly above the high end of our guidance for adjusted EBITDA breakeven.
Are key business metrics for the quarter reflect our strong financial performance.
We added 125 net new enterprise customers in Q3, bringing our total enterprise customer count to 5467.
We continue to extend our cen momentum with a dozen customers adopting C. E M. In Q3 up 33% over the same quarter one year ago.
And our newest applications further leverage RCM capabilities ever Bridge control Center returned to work in campus contact tracing and COVID-19 shield, which collectively assist customers to safely mitigate the impact of COVID-19, as well as support their efforts to return to work.
And with over three dozen such deals in Q3 alone are <unk> applications continue to see escalating market adoption.
And Q3, we eclipsed the important milestone at 100 cm customers.
That said are impressive cei growth still represents a small fraction of our more than 5400 enterprise customers, providing considerable growth opportunities within our existing customer base, which compliments, our new customer acquisition activity.
Our average selling price on a trailing 12 month basis was 79000, I'm, sorry, $72900 up from $67500 in the second quarter of 2020.
[laughter].
This 8% sequential increase resulted from a record high hsp performance within the third quarter as we saw a significant number of large transactions.
And speaking of large transactions, we closed 43 six figure deals in the quarter up 48% from a year ago.
And the second highest number a six figure deals in our history among.
Among these we reached a new high watermark for the number of deals valued at more than $5 million per year. These large deals often included the expansion of a cen implementation by some of the best known brands in the World clearly illustrating the effectiveness of our land and expand strategy.
Which further highlighted our position as a visionary in critical event management.
The fall symposium featured discussions with over 50 world leaders, including Dr. Anthony for algae.
Dr. Sanjay Gupta, Cnn's Chief medical correspondent and top leaders from the centers for disease control and prevention.
Additionally, government leaders, such as former United States, President George W. Bush plus other public figures, such as governors and mayors as well as representatives from multiple European countries provided their perspectives.
The private sector was equally well represented with leading executives, including the Virgin group, Sir Richard Branson and other C level executives from capital one Coca Cola Ford Goldman Sachs Humana, IBCM, JP, Morgan Mayo clinic, and Siemens all speaking.
And sharing best practices during the symposium.
Events like these generate significant opportunities for new business and expansion conversations and we're seeing our sales pipeline swell as a result.
The general consensus from these experts highlighted that the COVID-19 pandemic will remain a serious threat deep into 2021. These.
These same experts also agreed that the ability to leverage technology can help mitigate the spread of the current of Rs and ensure a safer returned to work environment in the months ahead.
Companies and populations are facing the overlapping threats of COVID-19, and natural disasters like wildfires and hurricanes as well as the increased risk of cyber attacks due to a sharp increase in the number of largely home base Workforces.
And expanded their everbridge platform with a follow on six figure multiyear deal in the third quarter.
Our cm wins helped drive our higher ASP within the quarter and our record number of half million dollar deals clearly reflects the strategic value customers attribute to our cm solutions.
In addition to supporting our new customer metrics. These new applications represent a key part of our land and expand strategy and will continue to support our future growth prospects.
During the quarter. We saw continued demand from industry is heavily impacted by the COVID-19 pandemic.
Within the retail industry, the container store, which is the location, which is the nation's leading retailer of storage and organization products chose everbridge to rapidly assess and mitigate threats through our industry, leading risk intelligence and powerful mass notification capabilities.
Well.
The state of California added icy alerting to our statewide contract the state of Massachusetts increase the number of employees and contractors. They can reach and state buildings in an emergency and top USA. These such as New York in Nashville added additional ever bridge support and.
As a patient of launching a resident connection product.
In addition, current county, one of the most populous in Texas became a new customer in the quarter leveraging our resident connection product to communicate with citizens about recent COVID-19 test results testing site locations and other updates.
Network effects also work at the countrywide level not just at the state level.
Of new ecosystem deals in the future. This.
This important federal win also serves as further validation of our existing leadership position in the public warning to other countries around the world.
Our new federal sector wins in the quarter also included deals such as the six figure transaction with the US Department of defense as well as a broad deal with the Federal Communications Commission among others.
The FCC chose Everbridge mass notification to support the agency's internal continuity of operation of operations devolution pandemic and re constitution plans as well as day to day emergency management efforts.
I want to conclude by saying that we're excited about our performance in Q3.
With critical events, increasing globally in both number and severity and even overlapping one another.
Our critical event management solution provides a higher value proposition than ever before.
We remain proud of our leadership role in helping organizations and people overcome these adversities.
That said, we believe that we are still in the early days of penetrating the opportunity and we look forward to further extending our leadership position in the quarters and years ahead.
Now I will turn the call over to Patrick for more details on our third quarter financial performance and our guidance for Q4 and full year 2020, Patrick.
Patrick.
Thanks, David.
I will review our financial highlights from the third quarter, and then provide guidance for the fourth quarter and full year.
We extended our track record of strong growth in the third quarter and exceeded the high end of our guidance ranges.
Revenue in the third quarter was $71.3 million up 36% from a year ago and up 3% from our previous guidance.
Adjusted EBITDA for the quarter also exceeded our guidance at a gain of $5.1 million.
We continue to see net retention rate remained well above 110%, especially during the worldwide pandemic as we continue to provide significant value to our existing customers.
Looking at the details of our piano unless otherwise indicated I will be discussing income statement metrics on a non-GAAP basis.
Reconciliation of GAAP to non-GAAP measures has been provided in the earnings release, we issued earlier today.
Gross margin was 73.8%.
290 basis point improvement year over year, representing the highest gross margin since our IPO four years ago as.
As unit economics continue to improve as we scale.
For the trailing 12 months gross margin was 71% showing an improvement from 70% in the year ago metric.
Total operating expenses in the quarter were $49.8 million, an increase of 31% from a year ago, reflecting continued investments in our platform and our go to market strategy.
Adjusted EBITDA beat our guidance range at $5.1 million compared to $1.6 million a year ago.
Profitability outperformance was driven by revenue upside combined with the timing of investments in our growth that we still expect to make this year.
Year.
We are increasing our guidance for the year to take into account a better than expected third quarter performance combined with strong business momentum.
Customers and prospects are increasingly realizing the importance of critical event management as a key component of their safety and continuity strategies and this is resulting in a greater number of larger multi product wins.
You May Crestar, then one on your touch Jonestown if.
If you're using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
The first question today comes from Ryan Mcwilliams with Steven Please go ahead.
Thanks, and dreamy, it's been a pleasure and I bet things have been hectic. It at all for you. This year and this is just how you drew it up but.
Effects can work both ways if.
And this is almost network effects and reverse because.
The federal government works with so many other municipalities around the country and so many of those municipalities are already customers of ours.
Our reflected or will be reflected in billings and revenue.
Yeah, Matt Thanks for the question.
So yeah, we've been able to make progress on various projects.
From time to time as well.
When countries areas get locked down it has caused some delays, but overall I think we are dealing with it we're managing it we're making forward progress and we feel pretty good about that I think in the past Patrick's talked about.
A lot of our deals that we do don't show up in deferred and so.
We still have what I would call kind of a backlog of signed deals that are not in deferred.
You know somewhere in that low eight figure area that Patrick talked about before.
Charlie Thanks for the question I think one of the things you are seeing in our international results is we're adding and moving into new geographies. So a couple of years ago. We didnt have anything on in the Middle East and now we have over 60 customers there, including some really significant big deals big wins.
And I think.
Well, yes, as far as who we compete against I, probably don't know every competitor I know it was a formal RFP process I do know that were competitors.
As far as my understanding is some of the reasons why we won one is we have.
Most scalable resilient feature rich solution in the space, we have probably the most references.
We have many many customers as I mentioned earlier across the country that.
That already interface and plug into.
The federal agency and so.
Then right away, so well now that I've got on my information in here Here's five other use cases I can use it for so we feel very confident that we're building long term relationships.
In many cases, we're expanding existing relationships, but we've also made will drive some really good new logos some of which I mentioned in my prepared remarks from this and so we're we're pretty excited as the way I think it's just a good complement to our product and engineering team.
And just.
We added we added special data feeds tuition report around the election, so we continue to be.
Major municipalities and.
Then considering their options for this very critical solution of being able to protect citizens and message to them effectively. This is yet one more reason why it becomes a no brainer choose ever bridge because we are now the official in the only gateway to you know that very important.
Expand that footprint.
[noise] Thanks, Tom.
Yes.
This is an opportunity to expand to this larger footprint that that we're creating by virtue of that that federal win and.
The timing of the invoicing for those customer was by design from the outset of the contract. It was part of the relationship that we dealt with them as we worked through you know in terms that works for both parties and it is one yet another you can kind of large illustration of why.
As you know, we don't run the business to that metric of calculated billings, we don't guide to it I think running the business to that kind of metric.
Could could lead to outcomes that aren't as positive for shareholders. So, whereas you know, forcing terms that are a net negative to us just so that we can lineup the timing of invoicing.
To to you know make sure that each quarter looks a certain way we've never done that we never will and so like I said with disagreement that was by design and and and we've got a couple of others like that and then there are as you were referring to Tom sometimes there are customers, who will come in and say hey, we want to tweak it by a day and that will push it from one period to another.
Forward or backwards and we're always happy to do that in particular, when when we're working to expand that relationships. So you know again kind of know we don't focus on that quarterly billings metric and yes, we are excited.
Out ability to expand small customers large customers and when you know the the areas of the market that we haven't won yet as a result of this federal deal.
Yeah, great good good detail.
Our opportunities that were getting coming across the transom. So we think we're making progress there we still see a lot of a lot of opportunity to grow you've got system integrator partners.
We've got large global consultant fees, we've talked a lot about control risks, which helps us quite a bit internationally you got some regions, where we don't have as much sales force coverage, where we can work with our partners to get there lot of referral partners. We also have.
OEM.
Partner model, which has helped us to drive international deals as well so and then the agent community, we've talked about our partnering with the largest agent.
Entity till ours, which has over 4000 technology consultants and after initially doing that partnership in North America, we've actually expanded that with them internationally. So there's multiple different types of partnerships, we continue to grow that.
We recently announced Sci, which is a really interesting 10.
Technology company with a lot of good relationships and we're already starting to.
See additional opportunities come in the funnel from Sci and so we're pretty excited about that want them and I'm sure we'll be talking more about that in the future. Thank you.
The next question comes from Brad sales with Bank of America. Please go ahead.
Hi, This is I think sherri glow on for Brad Thanks for taking my question.
I know that you had a higher mix of deals last quarter that were lower deal sizes. I was wondering how this like this past quarter and eating the keybanc.
So again.
Yes, Jerry Thank you for the question actually we just had our best quarter ever in terms of ASP on the quarter. So on a trailing 12 month basis. It was up 8% sequentially from last quarter, but part of that was because of last quarter being in the mix, but just for this Q3 was that it was our best ever so that was.
Driven by as I mentioned, I think a 48% increase in the number of six figure deals, which is our second highest 43 of those deals second highest quarter ever and then we had our best quarter ever for a number of deals over 500000 recurring so when you put all that together it was a really really strong performance on.
ASP and a lot of that was part of this land and expand strategy, where we've got them in as a new logo and then immediately started cross selling and up selling to larger deals.
And led by CEO.
So so we feel good about it thank you.
The next question comes from Sterling Auty with JP Morgan. Please go ahead.
Hi. This is drew on for Sterling I was just wondering if you could provide some more color on what you're seeing around the new opportunity said, the countrywide alerting notification and yeah. Just anything you get on that would be great. Thank you.
Thank you drew.
So the EU mandate requires that the EU countries have a public warning solution in place by June of 2022.
And so we're driving education on that but short of that we do expect as we've always said to see pick up on those deals probably in second half of next year going into the first half of 2022 in terms of company countries responding to the mandate in the meantime, they're actively engaged in talking in educating and.
We have been we offset the M&A, which sets a lot of the best practices in Europe. They were also participating in our symposium recently and so we think the Eone a message is completely aligned with what we're doing which is.
Hybrid platform, where we can do best sell broadcast best location based SMS for a complete solution around how to do public warning for a country and so we think we're well position and that's sort of how we see the landscape right now.
This concludes our question and answer session I would now like to turn the call back over to David Meredith for any closing remarks.
Thank you I'd like to conclude by saying that we're excited about our performance in Q3 with critical events, increasing globally in both number and severity.
And even overlapping one another are critical event management solution provides a higher value proposition than ever before.
We remain proud of our leadership role in helping organizations and people overcome these adversities.
That said, we believe that we're still in the early days of penetrating that opportunity and we look forward to further extending our leadership position in the quarters in the years ahead.
Thanks.
We'll be attending the Sseven Needham Credit Suisse Wells Fargo, and you'll see us conferences this quarter and we welcome the opportunity to meet investors of these events. We look forward to speaking with you again soon thank you bye bye.
This conference has now concluded. Thank you for attending today's presentation you may now be.
Yeah.
Yeah.
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