Q1 2023 Everbridge Inc Earnings Call

Good morning, and welcome to the first quarter 'twenty to 'twenty three earnings conference call.

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Please note. This event is being recorded I would now like to turn the conference over to London I must be please go ahead.

Thank you Cassandra Thank you Albert and good morning, everyone and welcome to either bridges earnings call for the first quarter of 2020.

With me on today's call are purchased President and CEO , David Wagner, and executive Vice President and CFO , Patrick Brickley before market opened we issued our earnings release, which can be accessed on the Investor Relations section of our website at IR <unk> com.

This call is being recorded ended up they have to teleconference will be available on our IR page.

At the conclusion of today's event.

During today's call, we will make forward looking statements regarding future events or the financial performance of the company that involve certain risks and uncertainties. The company's actual results may differ materially from the projections described in such statements.

Actors that might cause such differences include but are not limited to those discussed in our forms 10-Q, and 10-K as well as other subsequent filings with the SEC information.

The information provided on this call reflects our perspective only as of today and should not be considered representative of our views as of any subsequent date.

We explicitly disclaim any obligation to update update any forward looking statements or outlook also during today's call. We will refer to certain non-GAAP financial measures a reconciliation of our GAAP to non-GAAP financial measures is included in our earnings press release, which you can find on our Investor Relations website.

This press release includes highlights from our first quarter of 2023. In addition to our financial results and outlook. After we review our business and financial highlights we will open the call for questions with that let me turn the call over to Dave Dave.

Thank you Don good morning, everyone and welcome to ever bridges earnings call for the first quarter of 2023.

I am pleased with the strong financial results that we released earlier this morning.

For the first quarter, we achieved revenue of 110 to $8 $3 million, an increase of seven 9% year over year, adjusted EBITDA of $15 $9 million, an increase of $13 $3 million from a year ago and annual recurring revenue of $388 million, which is up $4 million quarter.

Quarter, and 10% year over year.

The impact of our 2022 restructuring is evident in our financial results and we are continuing to improve our execution across the organization in the quarter, we had the opportunity to celebrate our company's 20th anniversary with some of our customers and partners in New York City, as we officially unveiled ever bridges a ball brand.

A special day that allowed us to highlight our long standing commitment to keeping people safe and organizations running.

In the two decades since the company's inception, we've captured a market leading share of the critical event management market and scaled our platform to reach billions of people globally.

We are honored the cat 6500 of the world's leading organizations as our customers, including 25 countries, who use us for their countrywide alerting systems.

One of the keys to our success is that we offer a comprehensive resilience platform that is incredibly powerful it has the ability to notify millions of people nearly instantaneously when a critical event occurs.

As many of you listening today are likely aware several weeks ago. There was an incident that occurred leading to an emergency test alert being sent out to the phones of many Florida state residents very early in the morning.

The real alert was the result of a human procedural error. It was not a failure of our software platform. Our software system delivered the message as designed and instructive. That's the good news. The bad news is a live message was inadvertently that to millions of residents cellphones instead of a notification.

<unk> sent only Florida broadcasters.

We regret the inconvenience. This task cause the residents of Florida, and we are committed to the state of Florida and to Florida Department of Emergency management as a partner as we are with all of our customers to continue to improve and ensure best practices are applied.

We further demonstrated this commitment as we agreed with that D. E M tourists and the early termination of our agreement and extend our contract through the end of the calendar year to ensure that the people of Florida are protected through the upcoming hurricane season. Our core mission is to keep people safe we remain focused on them.

Michigan is job one for the residents of Florida, and all of our customers globally.

Switching back to our results evidenced by our strong year over year, EBITDA growth and double digit a or our growth we are making solid progress on our long term growth and profitability goals as we execute toward the rule of 40 Accordingly, we remain confident in our financial outlook for the year, including delivery.

On our baseline, 6% to 7% revenue growth.

And $85 million and adjusted EBITDA in 2023, I will now I will turn the call over to our CFO Patrick Brickley to provide details on our financial results Patrick.

Thanks, Dave.

I'm pleased to report solid execution, which produced revenue and adjusted EBITDA that were above our guidance ranges.

As Dave mentioned, the strategic alignment program that we implemented during 2022 is continuing to show results as we pursue profitable organic growth.

I will now recap our results for the first quarter of 2023, followed by our outlook for the second quarter and full fiscal year.

For full details of our P&L and reconciliation of GAAP to non-GAAP measures. Please refer to our press release.

For the first quarter, our AAR are increased to $388 million up 10% year over year.

Revenue was $108 $3 million up 8% from a year ago and all organic.

Revenue from subscription services was $99 million also up 8% from a year ago, but down sequentially from $101 million in Q4 of 2020 to do two fewer calendar days in Q1, as well as timing of invoicing for subscription.

Services on some of our non SaaS contracts.

Our gross revenue retention rate remains healthy with Q1 performance that was moderately below recent peaks, but still notably higher than the gross revenue retention that we experienced in the year ago period.

We signed 43 deals over $100000 down from 56, a year ago.

Our average deal size in Q1 was lower than what we've seen in recent quarters. However, our volume of new and growth sales transactions increased year over year.

Our total customer count of 6500 is down sequentially by 13 and up 4% year over year.

The net decrease in customer count is due to the impact of the latest planned divestitures in end of life programs for noncore products, which we have been describing since early 2022.

During the first quarter, we otherwise saw relatively normal levels of logo adds and churn.

Our C E M customer count increased to 335 up 28 sequentially.

And up 64% year over year.

GAAP gross profit was $76 million, a margin of 75% compared to $69 million or 68% in the year ago period.

On an adjusted basis gross margin was 74, 5% compared to 72% a year ago, demonstrating growing efficiencies from platform integration and optimization.

GAAP net loss was $14 $6 million or negative <unk> 36 per share.

Compared to a net loss of $19 $1 million or negative <unk> 48 per share in the year ago period.

On an adjusted basis, we generated net income of $10 $8 million or diluted earnings per share of <unk> 25.

Compared to the year ago period in which we generated a net loss of $600000 or negative <unk> <unk> per share.

Adjusted EBITDA of $15 $9 million represented represented a 15% margin a significant improvement from the year ago period in which adjusted EBITDA was $2 $6 million or 3% margin.

Our Q1 2023 result reflects the substantial ongoing improvements to operational efficiency that we are making across our business in particular within sales and marketing gross margin and R&D.

Cash flow from operations was $26 million up from $7 $7 million in the year ago period.

Adjusted free cash flow was $20 million up from $1 $5 million in the year ago period.

The Q1 2023 result is adjusted for cash payments of $4 $1 million related to our 2022 strategic realignment program.

We ended Q1 with $224 million in cash cash equivalents and restricted cash up from $202 million, which we reported at the end of fiscal year 2022.

Now I'll turn to our guidance for the second quarter and full year for the second quarter, we anticipate revenue of between 110 and $110 $5 million representing growth of approximately 7%.

We anticipate a GAAP net loss of between $16, eight and $16 $3 million and non-GAAP net income of between 11, five and $12 million or diluted earnings per share of <unk> 26 to 27.

We expect adjusted EBITDA to be between $16, five and $17 $2 million as we continue to drive operating efficiencies and particular in the areas of sales and marketing R&D and G&A.

Our full year guidance remains unchanged as we continue to optimize several areas of the business.

We anticipate revenue to be in the range of $456 million to $462 million representing growth of 6% to 7% over 2022.

We expect a GAAP net loss of between 47, 6% and $45 6 million or negative $1 17 to $1 12 per share.

On a non-GAAP basis, we expect net income.

Between 65, 8% and $67 $8 million or between $1 48, and $1 52 per share.

We anticipate adjusted EBITDA will be in the range of $84 million to $86 million.

Representing an adjusted EBITDA margin of 18, 5% at the midpoint at.

At a high level. This outlook reflects roughly flat quarterly expense and therefore continuous quarterly improvement in adjusted EBITDA and adjusted EBITDA margin.

In summary, we delivered a solid quarter to start off the year as we progress through 2023, we remain focused on execution.

Driving profitable organic growth and maximizing return on our investments.

Looking further we believe we can deliver the targets laid out at our December 2022, Investor day, making steady progress towards the rule of 40 by 2027.

That concludes my prepared remarks, I'll now turn the call back over to Dave Dave.

Thanks, Patrick as our 10% year over year increase in our our.

Straits, we had a solid quarter in our recurring business our E. R. Our growth came from healthy gross retention and steady recurring bookings performance, especially for deals under 100 K in the quarter. We closed 43 deals over 100, K and four deals over 500, K, which was down from 56.

And eight respectively from the first quarter of 'twenty to 'twenty two.

We added 28, new CE M customers, an increase of 16 from 12 in Q1 2022, bringing our total to M customer out to 335, all top five C. M deal during the period were new customer wins.

Our top five new business accounts in the quarter were all under 500 K. They included three perpetual smart security deals two of which were in the government vertical in the United States and the third with the Port authority in the Middle East one with a state government mass notification deal and the fifth was an enterprise.

C M deal our total number of new logo deals, what's consistent with Q1, 2022 but the average deal size was down.

From the strong foundation, we built during our rebranding, including a refreshed web presence. We are executing focused digital programs and sales plays both to drive full CDM purchases as well as new customer sales of our point solutions, which provide easier on ramps and shortened sales cycles.

In turn we will lower the cost of acquisition and allow for future cross sell and up sell.

As customers experience the value, we bring to increasing the situational awareness, reducing the time to notification during a crisis and improving the quality of their communications during an incident.

To that end our top five growth deals in the quarter included a million dollar plus add ons to our U S government contract.

Million dollar plus add ons to a large U S medical insurance company the.

The remaining top three growth deals, where enterprise C L add ons and the pharmaceutical technology and financial services verticals.

Our number of add on growth deals was up more than 10% from Q1 'twenty to 'twenty two but the average deal size was down.

We also recently announced the successful deployment of our public warning technology in six different European countries over the past six months the wins in Germany, the United Kingdom, Spain, Denmark, Norway, and a stoney bring us to a total of 25 countries around the world.

Within the past several months each country has tested and implemented the ever bridge public safety technology to inform and protect a combined population of more than 200 million residents.

Now moving to product, we are increasing our investment in innovation and integration and we are leveraging AI and machine learning technology across our portfolio.

On risk intelligence, we are delivering improved tooling using innovative AI and ml solutions, so that our risk analysts can deliver context and relevance to our customers more efficiently.

We continue to enhance our digital ops insights product that we launched last quarter, which also uses AI and ml to enable incident commanders to understand the root cause of outages and resolve incidents faster.

And we're making steady progress advancing integrations into our core CDN platform, improving both user experience and speed of delivery for our enterprise customers.

Our strategy is to provide the most comprehensive end to end solution for critical event management over.

Over the course of the year, our customers will see a series of improvements as we simplify and streamline our user interface and workflow.

Our new Chief product Officer, Brian Bonnie brings a rich background in creating enterprise grade platforms from acquired assets and he has been focused on modernizing our platform with an emphasis on usability reliability and flexibility has experienced is already being felt as we align around a shared product vision and platform.

Protector.

In summary, the first quarter marked a solid start to the year as we delivered another sequential increase in <unk> and particularly strong growth in our adjusted EBITDA and cash flow. These results have us on track to achieve our long term operational and financial goals as we move through the second quarter. We are building a foundation.

Focused on delivering consistent profitable growth on our way to $1 billion in <unk> and we have a team strategy and resources in place to get that.

I look forward to updating you further on our progress in the coming quarters, we're now ready to open the call for questions Sondra.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your head since before passing to Keith.

To withdraw your question. Please press Star then two at.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Alex Sklar from Raymond James. Please go ahead.

Okay, great. Thank you.

I know, we don't have a ton of historical data on an IRR, but in terms of the 4 million kind of sequential growth versus Q1 should we think about Q1 being kind of seasonally slowest quarter in terms of whats implied within your guidance and then also just a clarification if Florida is still included in <unk>. Thank you.

Great question.

Yes Q1.

Yeah.

We would think about as a sequentially a lowest quarter we landed.

You know exactly where we planned in terms of the.

Healthy.

Gross retention.

And.

Eddie Stead.

Steady steady bookings, where we landed.

And in a good spot or a metric is still relatively new and as billings based so there are some.

Correlate variance as well based on timing of renewals and Theyre, all but we landed right where we expected in terms of the $4 million for state of Florida is still and it will be in there based on the current agreement through the end.

Of that calendar year end.

We're not counting on that for next year, but we are working really hard and we will continue to work really hard.

Yeah with the state of Florida.

On the the recompete of that that contract whether that happens in.

December or whether it happens in June of 2024.

Okay, great Great color, and then Patrick or Dave I don't know wants to take this one but can you just talk about what's driving the sub one belt 100000, K ASP. The bookings strength I'd be are these deals that are coming in below a threshold or or another solution and how are you thinking about deal sizes for the rest of the year.

Yes sure.

The deal size is.

You know unfortunately pretty consistently down across the board so that the new business volume was in terms of volume of deals is really consistent with a smaller deal size.

Our existing customer base was up but with also with smaller deal sizes.

There are a couple of things going on there.

Think that.

The current macro environment has customers being a little more careful about.

Add though.

Acknowledged your vertical in particular, we know about it.

The reduction in the reductions in head counts at many organizations. So we're seeing.

Buying pretty consistently across in smaller.

In smaller chunks.

And then the second piece is.

Kind of heard the first sentence after the end of.

My introductory remarks that the 2022 restructuring program.

Does have impacts that we're working through we reduced over 200 positions during the.

Fourth quarter, including.

Our quota bearing reps so we've got it.

We're adjusting to that.

The reduced resources and we made some really intentional changes.

We entered 2023 to focus on a R. R. As a priority and so that perpetual deals and just the nature of how their model as you know tend to be larger transactions and we have the.

The sellers focused on.

Subscription deals.

And focused on making sure they are meeting the customer where they are and.

With.

Retaining our focus on <unk> sales and BMO.

Being willing to meet the customers. If a point solution is the right way to bring them in for up sell and cross sell so we've got some transitional things.

Going on here in 2022 as well as.

As well as that slight macro headwinds.

Alright, thank you for that color.

The next question comes from Mike Walkley from Canaccord Genuity. Please go ahead.

Great. Thanks, Dave.

Start to Youre hitting our uses of cash and margin targets I just wanted to follow up on the Florida incident.

Changes in the competitive environment.

How do you feel about keeping your position and what.

Florida, plus other states as they come up for renewal given some of your competitors feel like Theres an opportunity to try to go after some market share with this event.

Yeah. So.

So I am I am certain that our competitors would be looking to take advantage of vast and they're good news again is that the platform performed.

As expected and we have the best scale ability delivery throughput of antibody in the market and so we think that.

Our success in that in in Florida in our success and National alerting that remains really strong you know the feedback we're getting.

For many of.

The customer growth in Florida.

It is really strong really supportive of the Arab bridge.

Yeah solution and so we're going to continue to service those.

Higher state of Florida Count.

With great diligence and rigorous and through the course of this year and.

Our existing customers really understand the process.

For issuing test messages alive messages and so that existing customers, it's pretty clear and.

Well, we're working aggressively.

No, both and are forming and existing customers and potential new customers of the power of our platform and.

It's capability. So I yeah, we we do expect lots of noise in the market offer this event and our job is going to be that.

To mitigate the negatives and really emphasize the positives.

Of all of our scalability in the in the.

Positives.

Yeah.

Building out even deeper relationships with our existing customers and new customers.

Great. Thanks, and just a quick follow up question just on the realigned sales force how do you feel about where they are now to execute on the intermediate plans and any products that you wanted to call out that added to the strong sequential <unk> growth that your customers are cheating. Thank you.

On the sales force thanks for asking that.

The good thing is our sales tenure is.

Improved markedly so even though they are.

And number of sales reps is down 16, or 17% year over year as we ended the year.

The 10 year is up and we had a really nice improvement Q1 over Q1.

And in terms of productivity per.

<unk>. So that's that part is executing.

As intended as you saw that in the numbers.

The CE am, albeit smaller.

Remains.

Uh huh.

Yes, it remains a real strength.

Continuing to see real strength with our <unk> 911.

Product, particularly here in.

In the U S. That's definitely a source of strength.

And in that product.

Thank you.

The next question comes from Matt Stotler from William Blair. Please go ahead.

Yeah. Thank you for taking the questions maybe wanted to just follow up on the CDM customer base, obviously noted smaller deal size, but a pretty healthy growth in GM customers.

I hope that pipeline looking forward.

Moving forward in this environment and then you mentioned I think top five new customer wins are you seeing an increasing portion of our new <unk> coming from new customers or is that still large enough at this point.

Yes, Yes C. M is still largely up Sally and were up quarter over quarter down sequentially as we would've expected and.

<unk> I would say that the pipeline remains.

Very healthy.

It remains.

The healthiest in that sub 500, K zone, so the big deal.

Consistent yes, Big deal Q3, Q4, Q I'm, sorry, Q1, Q4, Q1 seems consistent where the deal sizes.

Are not as large as they were our pipeline for perpetual.

Does include continued to include larger deals in the perpetual pipeline, but the <unk>.

Is is broad and balanced in that in.

Smaller and mid sized transactions.

Yeah.

Got it that's helpful. And then maybe one on the partner channel look to just maybe get an update on the your partner channel optimization initiatives, how it's impacting performance and then how you think about incremental opportunities in your ecosystem looking forward.

Yes, we bought tightens our partners those are a huge part of our strategy going forward.

We're focused on we're being more focused.

Since November focusing on key partnerships that we believe can really.

Move the needle on example of one of those key partnerships with Deloitte and Touche, where we're collaboratively rolling out.

Resilience workshops, where there.

Offering complementary.

Workshops reviews enterprise resilience and large.

Global enterprises.

With us and that's the example of a kind of partnership that we think can really move the needle.

We're continuing to build out distribution partnerships at the lower levels again, but in a more focused and a more focused way so the partner channel.

It is making good progress.

It's more focused and I think if you looked at the numbers the actual percentage of deals through the channel was down a.

A bit year over year as a result of that focus.

Got it very helpful. Thank you.

The next question comes from Brian calling from Stephens. Please go ahead.

Yeah.

Good morning, guys. Thanks for taking the questions.

In regards to the pathways to the platform strategy could you just provide an update on the progress you've made and kind of migrating the NC foreign risk intelligence customers and of course, the E M platform and how that's going relative to your expectations.

Thanks for that question.

It's going well, but slower than I had indicated last October . So it is a single digit movement in number of customers this year and what I talked about last quarters.

We've lowered our expectation as we've engaged with.

The timing is engaged with the customers are on Prem and.

Talk to them about.

Theyre just.

Remain customers with a strong bias towards on Prem as opposed to cloud, we don't want to prematurely.

Yeah cause a disruption.

Fraction to that to their preference. So the accounts that moved or are moving well, we're continuing to execute that program, but we're.

We're not expecting to be done at year end. This year, we expect it will stay extend.

Yeah.

Into next year as well.

Got it.

Thanks for that and then.

How should we think about the pace of AOR growth throughout the remainder of the year I'm. Just curious if we should expect you know relatively.

Relatively stable trends or a deceleration and then Patrick.

Patrick one for you I apologize if I missed it but I'm curious just what net retention rates look like for the quarter as well.

Okay.

In terms of the pace of growth.

The double digit growth, we're seeing in Q4 Q1, we think is healthy and where we.

We're focused on.

Maintaining our growth in that.

Yes in that neighborhood and consistent with our 6% to 7%.

Overall guide and <unk>.

Emphasis on the recurring piece and.

Yes.

And not a de emphasis.

Perpetual, but when you when you focus on one thing you are not focused on the other and so we're going to continue through the year see a focus.

On the AOR growth and continuing to execute on our pipeline of perpetual deals.

And this is Patrick in terms of.

Net revenue retention.

We're evolving our focus to annual recurring revenue that's the number one metric by which we are running the business and.

And not disc and we've we're retiring the net revenue retention.

Metric that we had been disclosing in the past because that was revenue based that was looking backwards.

It wasn't a base.

Some color on Q1.

You heard Dave and I mentioned in prepared remarks that we had healthy gross revenue retention.

Not quite at the peaks that we were experiencing in particular in Q4 of last year, but it was healthy gross revenue retention and keep one it's a large.

It's a large.

Dollar based quarter of renewals in Q1, and two we had a healthy result, and then on top of that in terms of growth I think you heard Dave say that the transaction volume was up but but we were notably down in deal size. So.

We had a pretty healthy net revenue retention quarter.

Building off the gross revenue retention.

Great Alright, thank you for the time gentlemen.

Thank you.

Our next question comes from Scott back from Needham. Please go ahead.

Hi, Dave and Patrick Thanks for taking my questions. Congrats on the good quarter.

I guess I got a couple of Patrick wanted to start with the off balance sheet backlog you talked about completing a number of large countrywide deals here in the quarter, how does that I guess shape up or size, maybe relative to <unk>.

The last three or four quarters.

Yeah.

<unk>.

I think.

When you think about the.

And it just pulling together a couple of dots.

As David mentioned and as I mentioned focus on <unk>.

Our focus on the recurring business that we think that that and doing that much more profitably drives long term shareholder value.

The perpetual deals in that backlog.

<unk> are still strategically important.

We arent.

We're shifting our focus towards the recurring so that backlog.

It is not as large as it has been and that also shows up in our full year revenue guide, where we're confident in our full year range and our ability to drive increasingly profitable organic growth, we're confident in the direction of our recurring business.

And in terms of nonrecurring in that backlog.

Perpetual bookings.

Have not continued to set new records.

And that creates a second half headwind to nonrecurring revenue.

Got it helpful and then Dave.

David gave a lot of color kind of around pipeline opportunities for the remainder of the year that was super helpful. But wanted to drill in maybe the composition of that a little bit last year or is it just kind of mentioned was big government year.

In particular with some of these large European countrywide deals amongst others. It still seems like you have a pretty healthy government pipeline, though.

Given some of the bookings commentary, but just overall, how do we think about the mix of your sales pipeline stay between maybe government and nongovernment versus a year ago at this time. Thank you.

I think as Patrick standing on perpetual.

We're not looking to set records in 2023 as compared to 2022 and so while it it's healthy.

It doesn't have six six European countries with 200 million residents.

In the pipeline on that on the other side of the pipeline that would be your answer your question no government.

Down a bit in terms of bookings and down in perpetual bookings in terms of the results you heard some really good the largest deal in the quarter was an up sell to a U S. Government contract, we had a couple of <unk>.

A nice smart security sales into the U S government so.

We had at the top.

Top five.

Mass notification win in a state government here in the U S. So the government vertical in the U S is strong and.

It's shaping up to be a slightly stronger year in North America relative to Europe last year with Europe had really really strong growth for us.

North American.

A slight shift towards north American being stronger than Europe , more broadly as a geographic answer to your question.

Excellent thanks for taking my questions.

The next question comes from Michael <unk> from less Fargo. Please go ahead.

Hi, This is Michael Berg on for Michael turn congrats on the quarter and start to the year I wanted to dig into the customer a quarter over quarter decline I know that was.

Due to divesting underway thing and you mentioned it was outside of that relatively in line with possibility of trying to think about on the 75 to 100 range and subsequently how much longer can we expect potential sequential declines or just under lining up customers from.

These transition thank you.

Yeah. This is patrik. Thanks for the question.

So we.

There were on the order of 90 or so customer logos in that.

Bucket of divestitures end of life etcetera in the quarter. So otherwise we would've been in sort of mid seventies in that range that <unk>.

You described and that's relatively normal activity for us.

And we still have when you look at the non core products that we are aiming to divest <unk> in the process of end of life Ing. There are still a few hundred customers in that bucket now that the average IRR of those customers is very low.

Most of them the majority of them are for digital.

But.

In terms of customer count.

There are still a few hundred so that'll continue to be a headwind to the timing of it will be will be.

We'll be a bit lumpy and we'll just continue to do what we've been doing which is call. It out when it has a meaningful impact on the change.

Thank you and one quick follow up last quarter, you mentioned that.

That's about $4 million is kind of been taken out of Q1 from the same cohort $4 million to $8 million over the course of this year is that are those numbers still the same as we stand today.

Yeah, that's right. So we made some incremental progress in Q1, so of that range of four to eight we're targeting we're still targeting upwards of eight and we've done four.

Roughly four as of March 31.

Yeah.

Thank you.

The next question comes on the telephone. Please go ahead.

Okay.

Okay, great. Thank you I guess, a couple of questions, maybe just to touch base on macro it sounds like youre seeing lower deal sizes, and perhaps I was partly tied to macro but.

I Wonder if you could just touch on what Youre seeing in terms of sales cycles, particularly with then.

You haven't seen much impact there and any differences maybe across.

Key geographies.

Yeah, so the lower deal sizes.

From one company, it's hard to fully unpack that the macro versus the micro.

We've shifted that comp plans this year again to focus on subscription deals and.

Yes, it's a focus on.

Okay.

And <unk> the sales force to meet the customer where they are and if a point product Onramp makes more sense then.

Being ready day, one for full fleet Yang to.

To make sure that the sales people arent along the gating sales cycles for larger deal sizes. So.

The sales cycle.

I'm not seeing any any change in the overall.

Sales cycle, the velocity as I said, especially on existing deals was up 10% year.

Year over year.

For Q1, and then regionally I already gave the color of that.

A little bit stronger North America relative to EMEA this year, largely having to do with the strength that the EMEA perpetual performance in public warning.

And 'twenty two that doesn't have as much opportunity in 'twenty three.

Okay and then.

Maybe just to tie that together with the.

The full year guidance maintained guidance you had some upside in Q1.

I assume that's a function of perhaps some conservatism maybe also layering into the smaller deal sizes, you're seeing or just maybe any thoughts on what youre expecting in the second half of the year versus maybe what you were expecting previously that help kind of frame the full year outlook.

Yes, I think on the positive side.

On the year I'm really pleased with the EBITDA and cash flow performance sustained one jets to repeat I think people recognize that.

Outperformance in earnings and cash I'm really pleased with the.

The execution that we had between November and through the end of March and then making that.

And making that happen I think that positions us.

Well with.

With this clear line of sight to the 85, we've been talking about.

Since since last October so.

So that all that all feels really good steady performance on the <unk> double digit growth.

Feels good the bookings for a perpetual large perpetual deals about the Q4 and Q1.

Was that what was lower and so that's what we're balancing.

And I think further just further derisking.

The year and lining it up to our focus on.

<unk>.

EBITDA and cash flow generation.

That makes sense. Thank you.

The next question comes from Kevin Kim from <unk> Securities. Please go ahead.

Yeah, Thanks, David Patrick in London, So my first question David.

Kind of relates a little bit too just the buyer behavior in terms of buying in smaller chunks I don't know if that surprised you or not but what I'm curious about is you know everything is kind of evolutionary or a journey.

How well have you find or collaborate were recalibrated, so to speak or tuned.

The selling motion of the product and packaging and just kind of farming motions to address what may be you know kind.

Kind of a new norm, which is buying in smaller chunks I'm just trying to understand if that's happened how well you've been able to react and then now just about volume and velocity going forward in dealing with the new environment and then at a cash flow question for Patrick.

Okay, Great. That's a great question I would say it's happening.

And so if we just go back and look at.

The focus on the rebrand and the messaging and that our new Chief marketing officer came in.

Executed and completed that project building a strong foundation.

That the marketing digital marketing muscles.

Being built at the same time, the rebranding who's being down but there were two things going on and of course, our new Chief revenue Officer, just joined on February 13. So.

We're in the process of.

Our building and strengthening those muscles, which are in my opinion, the right muscle spur.

<unk> fast to make sure that we're bringing customers in to the <unk> family to get the experience and generate.

Cross sell up sell so we're seeing.

Increasing.

Numbers of opportunities, where increase increasingly improving our our BTR flow the feedback loop and sales department that the tech stack.

But that is a process that I would still call beginning and.

And executing well I want to go back and re complement the sales force.

That.

The key Okay are we set back in last July when a very first joined was to get the tenure of the sales team up to steady the sales team and that has certainly happened we had at the North American sales kickoff got pushed off to early may and so as with all of our North American sellers and they're feeling good.

About the opportunity there feeling good about where the customers are in the journey feeling good about their ability to execute their plans for the year.

That's good to hear thanks, David and I guess Patrick up.

It looks like it was the highest reported ossia for operating cash flow in the history.

It looked like a or was a notable benefit to the business and and so what I'm curious about is for the full year. How do we think about like cash flow does that change your cash flow forecast.

And then anything you can share on kind of like EBITDA conversion to cash flow. Thank you.

Yeah. Thanks for the question Terry.

It's an important one as we continue to focus on driving cash flow and we did anticipate.

A seasonally high Q1, given all the renewals that we had in Q4 and in Q1 and therefore the collection of those invoices Q1, it's typically.

Really good operating and free cash flow quarter for us I know that wasn't exactly the case a year ago, but that was a bit of an anomaly.

So back back to normal this year in Q1 of 2023, and you should anticipate that seasonality continuing so Q2 will be lower.

By the end of Q1, we had collected a lot of those Q4 and Q1 renewals.

And so Q2 cash flow youll see being much lower and typically Q3, a little bit stronger than Q2, and Q4 backup too.

To much higher levels, so I try to model and Thats sort of trough and we're still thinking of full year free cash flow in the order of around $60 million.

That's great. Thank you you bet.

So the next question comes from Mike Latimore from Northland Capital markets. Please go ahead.

Great. Thanks very much.

In terms of your expectations for perpetual license. This year, how has that changed since the start of the year.

And then the second question just is on the the mass notification business, how did that perform in the stable.

The decline in growing a little bit.

So great Great question, when we did the bridge in Investor Day, we are talking about flat perpetual all year over year. When you when you Digest, our guide and look out to the second half Youll see that were not.

I can't say exactly perhaps but we're not we're allowed.

Allowing for that not to be flat and we had $31 million I think in perpetual revenue in the second half.

Next of last year end.

We're not.

Our guidance allows for that not to be flat. So I guess by definition when you roll through our guide.

I think you'll see that we're we're navigating risk adjusting the perpetual doesn't mean, it's not going to happen.

But that's where.

You'll see us risk adjusting the.

The outlook.

Got it and then on mass notification is that great great real steady real steady.

I'm really pleased with the work we're doing.

In mass notification and Thats one of the things when you hear me talk about the point product.

As companies.

Yes think about immature their ability to.

Certainly predict respond and recover from critical events.

Mass notification is is the most common starting point and the most common.

<unk> ramps. So we start a nice steady performance in that part of the business, we're using that as the cross sell engine.

Continues as cross sell engine for.

For <unk>, so I feel like the company is putting a lot more focus in that core than we had maybe this time last year and I think thats got past dividends.

Great. Okay. Thank you.

The last question comes from Koji Ikeda from Bank of America. Please go ahead.

Hi, Hello. This is George <unk> on for <unk>. Thanks for taking my question.

I understand.

With that you know you've reiterated the full year guide.

You've highlighted some macro headwinds headwinds that are kind of showing up in terms of.

Decreasing deal sizes, but higher volumes.

It sounds like this is kind of the new normal for for a while and.

I was wondering.

In terms of being able to achieve your ALR goals given the smaller deal sizes could you provide a little bit more color on on on what it is that youre doing to incentivize higher volumes.

Yes sure.

That that the key driver.

First of all which I mentioned is the maturation and tenure of the sales force and so.

Getting that that steadied aligned.

The year over year Q1.

Performance of the sales force.

Me comp that we were intentional confidence as it were intentional in the design of the comp plan.

<unk>.

Yes Ted.

Increased territory size.

To allow higher opportunity for sellers to make their targets not.

Not to deemphasize elephant hunting and emphasizing again meeting the customer where they are in their journey towards CE am whether that CGM ready today or whether that's beginning with a point product and moving forward. So those intentional most.

<unk> intentionally.

<unk> on an.

Retention of our sellers focused on SaaS selling motions that increase velocity are the key things that are in place and with John coming in he's really.

My experience with them has really.

Adapt at match and go to market motions to to add to the market need in the different yes.

Sub.

Sub segments of our market and so I expect to see improving over the course of the next several quarters improving sales plays to optimize that digital.

Digital marketing, which is so to me so key in.

And I mean, the customers again, where they are so we've got a lot of intentionality.

In our process that we are beginning to execute to.

To continue to drive velocity.

Okay.

That's very helpful.

Then if I could ask one more question.

Could you.

I'm thinking about kind of your 1000 customers at an average of 250 <unk> target in the long term.

Would you be able to kind of speak to what's the uplift.

For E M platform customers versus customers, who aren't using the <unk> platform.

Yes, we gave good color on that I thought at the Investor Day, where our average <unk> I'd have to go back and give me exactly out within $2000.

$455000 is the average <unk> of our of our.

Customers over 250, and so it's a meaningful uplift in our overall deal size when we move a customer from.

Mass notification to CES, and we're talking 200, 300% increase in the ASP and Thats what were.

That's what we're driving to do another little piece of color, we're measuring a focusing on what percent of our <unk> from those customers over 250 K in it it moved up marginally like 20 basis points quarter over quarter. So we're continuing to.

As we see that the intentionality with which we work.

End of life thing some of that.

Small acquired products with small customers that upsell to improve our focus on on CE.

Despite.

The deal sizes being down the number of customers on the percentage from over 250 is continuing to improve.

That's very helpful. Thank you.

This concludes our question and answer session I would now like to turn the conference back over to the management for any closing remarks.

Well thank you all for.

Joining us on the earnings call I look forward to speaking with many of the analysts and many of our shareholders.

The coming days and weeks and look forward to updating you all again.

In early August after our Q2 results were published thank you very much have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines Goodbye.

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