Q2 2023 Everbridge Inc Earnings Call

August 8, 2023

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

With me on today's call are ever bridge, President and CEO David Wagner.

Decorative vice President and CFO Patrick Brickley.

Hello, and welcome to the Arab Redshank second quarters 2008 earnings Conference call.

Before the market opened we issued our earnings release, which can be accessed on the Investor Relations section of our website at IR Dot ever bridge Dot Com. This call is being recorded and a replay of the teleconference will be available on our <unk>.

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After todays presentation, there will be an opportunity to ask questions.

A question you May Press Star, then one and you touched on phone.

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Mr Relations website at the conclusion of today's event.

Please note today's event is being recorded.

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.

I would now a chunk conference over to your host today, Jeff Young Mr. Young. Please go ahead.

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

The company's actual results may differ materially from the projections described in such statements.

With me on today's call are ever bridge, President and CEO , David Wagner, and executive Vice President and CFO Patrick Brickley.

Factors that might cause 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.

Before the market opened we issued our earnings release, which can be accessed on the Investor Relations section of our website at IR dot ever bridge Dot com.

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 any forward looking statements or our outlook.

This call is being recorded and a replay of the teleconference will be available on our Investor Relations website.

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 gesture as described in such statements.

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.

Factors that might cause 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.

Our earnings press release includes highlights from our second 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.

Thanks, Jeff Good morning, everyone and welcome to ABA brings an earnings call the second quarter of 2023.

We delivered solid financial results for the quarter, which we released earlier this morning.

Second quarter, we achieved revenue of $110 6 million, an increase of 7% year over year.

During today's call, we will refer to certain non-GAAP financial measures are.

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.

Adjusted EBITDA of $18 $3 million, an increase of $13 $5 million from a year ago and annual recurring revenue $395 million.

Up $7 million quarter over quarter, a 9% year over year.

These solid results reflect the work the team is doing to improve our overall operating efficiency as we execute to our long term objectives.

I'd just rather my first anniversary of our brands and as I reflect on the year I am proud of the progress. We have made we are much more aligned as an organization. We have focused our product development efforts on our core CDN platform and we've achieved several key delivery milestones that are improving customer.

Yeah, Good morning, everyone and welcome to double digit earnings call for the second quarter of 2023.

We delivered solid financial results for the quarter, which we released earlier this morning for.

For the second quarter, we achieved revenue of $110 6 million.

An increase of 7% year over year.

Value satisfaction.

We have simplified and streamlined our go to market, reducing our non-GAAP <unk> expense by 9% year over year for the first half, which is a major contributor to the increase in trailing 12 months adjusted EBITDA from $12 $8 million in the year ago period.

Adjusted EBITDA of $18 $3 million, an increase of $13 $5 million from a year ago and annual recurring revenue $395 million.

$7 million quarter over quarter, a 9% year over year.

These solid results reflect the work the team is doing to improve our overall operating efficiency as we execute to our long term objectives.

$68 $9 million. This last 12 month period.

And over the past 12 months, we've reduced our net debt by approximately $61 million $287 million.

I just felt right in my first anniversary with all of our brands and as I reflect on the year I am.

I am deeply grateful the work we've done together at one of our brands to achieve these goals and to deliver the result noted it Bob.

Are important for our longer term growth.

These accomplishments notwithstanding we are continuing to experience lower overall bookings in last year, primarily in deals of greater than 250 gas.

Our product development efforts on our core CDN platform and we've achieved several key delivery milestones that are improving customer value and satisfaction.

On the positive side based on our continuing momentum in smaller transactions the strength of our net retention and careful cost containment, we remain on track to deliver $85 million and adjusted EBITDA in 2023 and are on track with our long term model of reaching the rule of 40 by 2027.

We have simplified and streamlined our go to market, reducing our non-GAAP sales expense by 9% year over year for the first half, which is a major contributor to the increase in trailing 12 months adjusted EBITDA from $12 $8 million in the year ago period.

Today ever bridges, delivering organizational resilience at a global level in a way that none of our competition.

$68 $9 million. This last 12 month period.

And our customers need our solutions more than ever.

Other events and social ramps are increasing in both frequency and intensity globally and boards of directors and investors alike are working for their management teams to be increasingly proactive managing the impact of these risks with our people and business operations.

And over the past 12 months, we've reduced our net debt by approximately $61 million to $287 million.

I am deeply grateful for the work we've done together as one of our brands to achieve these goals and to deliver the result noted above.

With our strong customer base of leading enterprises and governments, we are becoming synonymous with resilience and our customers are sharing with US every day incredible stories of resolve of continuity of lives saved and assets protected now I will turn the call over to our CFO after quickly provide detail.

Which are important for our longer term growth.

These accomplishments notwithstanding we are continuing to experience lower overall bookings in last year.

Marilee in deals of greater than 250 K.

On the positive side based on continuing momentum in smaller transactions.

Okay.

Sure.

Thanks, David.

<unk> of our net retention and careful cost containment, we remain on track to deliver $85 million and adjusted EBITDA in 2023 and are on track with our long term model of reaching the rule of 40 by 2027.

I am pleased to report solid execution, which produced revenue at the high end and adjusted EBITDA above the high end of our guidance range. The strategic alignment program that we implemented during 2022 to streamline our operation is continuing to deliver profitable organic growth.

Today ever bridges, delivering organizational resilience at a global level in a way that none of our competition plan.

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

And our customers need our solutions more than ever.

Weather events, and social unrest are increasing in both frequency and intensity globally and boards of directors and investors alike are working for their management teams to be increasingly proactive managing the impact of these risks with our people and business operations.

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

For the second quarter, our IRR increased to $395 million up 9% year over year.

Revenue was $110 $6 million up 7% from a year ago revenue from subscription services was $102 million up 8%.

Our strong customer base of leading enterprises and governments, we are becoming synonymous with resilience and our customers are sharing with US every day incredible stories of resolve of continuity of lives saved and assets protected.

Our gross revenue retention rates remained within our target range and meaningfully higher than the gross revenue retention that we experienced in the year ago period.

Now I will turn the call over to our CFO after swiftly to provide detail.

Paul.

Sure.

We signed 50 deals over $100000.

Thanks, David.

I'm pleased to report solid execution, which produced revenue at the high end and adjusted EBITDA above the high end of our guidance range. The strategic alignment program that we implemented during 2022 to streamline our operation is continuing to deliver profitable organic growth.

Down from 63, a year ago.

In Q1, our average deal size in Q2 was lower than what we've seen in recent quarters.

Our <unk> customer count increased to 373 up 38 sequentially and up 67% year over year.

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

We continue to see healthy year over year improvements in our profitability and cash flow.

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

Reflecting the substantial ongoing improvements that we're making to operational efficiency across all areas of our business and in particular within sales and marketing and research and development.

For the second quarter are increased.

Increased to $395 million up 9% year over year.

GAAP gross profit was $77 $5 million.

Revenue was $110 $6 million up 7% from a year ago revenue from subscription services was $102 million up 8%.

Our margin of 70% compared to the year ago period's results of $69 7 million or 68% margin.

On an adjusted basis gross margin was 74% compared to 73% a year ago.

Our gross revenue retention rates remained within our target range and meaningfully higher than the gross revenue retention that we experienced in the year ago period.

Demonstrating growing efficiencies from platform integration and optimization.

We signed 50 deals over $100000 down from 63, a year ago.

GAAP net loss was $15 1 million or negative <unk> 37 per share compared to the year ago period in which we generated a net loss of $36 2 million.

Like in Q1, our average deal size in Q2 was lower than what we've seen in recent quarters.

Our negative <unk> 91 per share.

Our <unk> customer count increased to 373 up 38 sequentially and up 67% year over year.

On an adjusted basis, we generated net income of $13 4 million.

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Diluted earnings per share.

We continue to see healthy year over year improvements in our profitability and cash flow.

Compared to the year ago period in which we generated net income of $1 5 million or.

Reflecting the substantial ongoing improvements that we're making to operational efficiency across all areas of our business and in particular within sales and marketing and research and development.

Four three.

Our adjusted EBITDA of $18 $3 million represents a 17% margin a significant improvement from the year ago period in which adjusted EBITDA was $4 8 million.

GAAP gross profit was $77 5 million a margin of 70% compared to the year ago period's results of $69 7 million or 68% margin.

5%.

Cash flow from operations was an inflow of $5 $4 million.

Compared to the year ago period, and which we had an outflow of $9 9 million.

On an adjusted basis gross margin was 74% compared to 73% a year ago, demonstrating growing efficiencies from platform integration and optimization.

We note that the second quarter tends to be our seasonally slowest for invoicing and cash collection.

GAAP net loss was $15 1 million or negative <unk> 37 per share compared to the year ago period in which we generated a net loss of $36 2 million or.

Adjusted free cash flow was an inflow of $1 6 million.

Compared to the year ago period, and which we had an outflow of $7 6 million.

Were negative <unk> 91 per share.

We ended Q2 with $222 million in cash cash equivalents and restricted cash up from $202 million at the end of 2020.

On an adjusted basis, we generated net income of $13 4 million.

Or <unk> 31.

Diluted earnings per share.

Before I turn to our guidance for the third quarter and full year I'd like to recap the deliberate changes we've made to our go to market over the past year.

Compared to the year ago period in which we generated net income of $1 5 million or.

Four three.

Our adjusted EBITDA of $18 $3 million represents a 17% margin a significant improvement from the year ago period in which adjusted EBITDA was $4 8 million or <unk>.

The intended outcomes of these changes are reflected in our second half guidance.

First at our Investor Day in December 2022.

We discussed our strategy to focus on recurring revenue.

5%.

Cash flow from operations was an inflow of $5 4 million compared to the year ago period, and which we had an outflow of $9 9 million.

And we introduced <unk> as a key metric both internally and externally to represent the increased okay.

Second we changed sales incentives in favor of selling subscription services, rather than nonrecurring revenue such as perpetual licenses and associated professional services.

We note that the second quarter tends to be our seasonally slowest for invoicing and cash collection.

Adjusted free cash flow was an inflow of $1 6 million.

We've talked on prior quarterly calls about the inherent uncertainty in the timing of perpetual license deal.

<unk> for the year ago period, and which we had an outflow of $7 6 million.

Yeah.

We ended Q2 with $222 million in cash cash equivalents and restricted cash up from $202 million at the end of 2020.

And our cautious view on the second half of this year.

This follows two record years of nonrecurring revenue driven by the EU public safety mandates.

And in particular, the second half of 2022.

Before I turn to our guidance for the third quarter and full year I'd like to recap the deliberate changes we've made to our go to market over the past year.

Included our highest two quarters ever for nonrecurring revenue.

Over $30 million of nonrecurring revenue in that period.

The intended outcomes of these changes are reflected in our second half guidance.

Considering these factors as.

As well as the slower sales of large deals due to a softer macro environment that Dave described earlier.

First at our Investor Day in December 2022, we discussed our strategy to focus on recurring revenue.

We are lowering our expectations for nonrecurring revenue in the second half of 2023.

And we introduced a R R. As a key metric both internally and externally to represented increased okay.

In addition in the third quarter, we have taken expense actions, which we expect will reduce our cost structure in the second half by an additional 1% to one $5 million per quarter.

Second we changed sales incentives in favor of selling subscription services, rather than nonrecurring revenue such as perpetual licenses and associated professional services.

Which allows us to reaffirm our adjusted EBIT target of $85 million.

Despite the reduced revenue expectations.

We've talked on prior quarterly calls about the inherent uncertainty in the timing of perpetual license deal.

So for the third quarter, we anticipate revenue of between $113 five and $114 million.

And our cautious view on the second half of this year.

Representing year over year growth of 2%.

This follows two record years of nonrecurring revenue driven by the EU public safety mandates.

This rate of growth is largely a reflection of the year over year decline that we anticipated and onetime revenue.

And in particular, the second half of 2022.

We anticipate a GAAP net loss of between $9, four and $8 9 million and non-GAAP net income of between 18, five and $98 million.

Included our highest two quarters ever for nonrecurring revenue.

Over $30 million of nonrecurring revenue in that period.

Considering these factors as.

Four of diluted earnings per share of <unk>, 42% to 43%.

As well as the slower sales of large deals due to a softer macro environment that Dave described earlier.

We expect adjusted EBITDA to be between 23% and 23 $5 million.

We are lowering our expectations for nonrecurring revenue in the second half of 2023.

<unk> of 20% at the midpoint.

As we continue to drive efficiencies in our operating expense.

In addition in the third quarter, we have taken expense actions, which we expect will reduce our cost structure in the second half by an additional 1% to one $5 million per quarter.

For the full year 2023, we anticipate revenue to be in the range of $450 million to $452 million.

<unk> growth of 4% to 5% over 2022.

Which allows us to reaffirm our adjusted EBIT target of $85 million.

Again this rate of growth is largely a reflection of the year over year decline that we anticipate and onetime revenue.

Despite the reduced revenue expectations.

So for the third quarter, we anticipate revenue of between $113, five and $114 million representing year over year growth of 2%.

We expect a GAAP net loss of between <unk>, 43, 7% and $41 7 million.

Were a negative $1 seven $1 per share.

This rate of growth is largely a reflection of the year over year decline that we anticipate and onetime revenue.

Sure.

On a non-GAAP basis, we expect net income of between 65, 8% and $67 8 million.

We anticipate a GAAP net loss of between $9, four and $8 9 million and non-GAAP net income of between 18, five and $90 million.

We're between $1 48, and $1 52 per diluted share.

We remain confident in delivering adjusted EBITDA in the range of $84 million to $86 million.

Four of diluted earnings per share of <unk>, 42% to 43%.

We expect adjusted EBITDA to be between 23% and $23 5 million.

Presenting an adjusted EBIT margin of 19% at the midpoint of $85 million.

Our margin of 20% at the midpoint.

This outlook reflects the quarterly expense savings noted above.

As we continue to drive efficiencies in our operating expense.

And keeps us on our trend of continuous year over year improvement in quarterly adjusted EBITDA and adjusted EBIT margin.

For the full year 2023, we anticipate revenue to be in the range of $450 million to $452 million reps.

In summary, we delivered a solid first half.

Representing growth of 4% to 5% over 2022.

As we progressed through 2023, we remain focused on execution.

Again this rate of growth is largely a reflection of the year over year decline that we anticipate and onetime revenue.

Driving profitable organic growth.

Our <unk>.

And maximizing return on our investment.

We expect a GAAP net loss of between $43 7 million and $41 7 million or.

Looking further we are confident we can deliver the targets laid out at our December 2022 Investor day.

Were a negative $1 seven $1 per share.

Making disciplined growth first investment and making steady progress towards the rule of 40% by 2020.

Yes.

On a non-GAAP basis, we expect net income of between 65, 8% and $67 8 million.

I'll now turn the call back over to date.

Or between $1 48, and $1 52 per diluted share.

Thanks, Patrick and down 9% year over year increase in <unk> demonstrate we continued to grow nicely in a difficult macro environment.

We remain confident in delivering adjusted EBITDA in the range of $84 million to $86 million.

In Q2, we closed 50 deals over 100 K fixed.

Presenting an adjusted EBIT margin of 19% at the midpoint of $85 million.

Fixed from last quarter and down <unk> <unk> from Q2 of last year. We closed one deal over 500, K down from three last quarter and 12 in Q2 looks like.

This outlook reflects the quarterly expense savings noted above.

And keeps us on our trend of continuous year over year improvement in quarterly adjusted EBITDA and adjusted EBIT margin.

Our overall transaction size remained steady from Q1 into Q2 and is down nearly 40% year over year.

In summary, we delivered a solid first half.

However, our accelerated digital marketing program have enabled us to either be overwhelmed.

As we progress through 2023, we remain focused on execution.

Driving profitable organic growth.

100 <unk>.

Sure.

And maximizing return on our investments.

Representatives expand across multiple industries, we added 38, new customers an increase of 10 from last quarter and an increase of 18, 90% Q2 right.

Looking further we are confident we can deliver the targets laid out at our December 2022 Investor day.

Making disciplined growth first investment and making steady progress towards the rule of 40% by 2027.

Bringing our total customer count to $300.

Four of the top five <unk> during the period for new customer wins.

I'll now turn the call back over to Dave.

Thanks, Patrick is down 9% year over year increase in Arrow demonstrate we continued to grow nicely in a difficult macro environment.

Our top five new deals included <unk> do in North America, and Western Europe .

One perpetual public warning deal in Canada, and one Red Sky D 911 win.

In Q2, we closed 50 deals over 100 K fixed.

Fixed from last quarter and down <unk> <unk> from Q2 of last year, we closed one deal over 500, K down from three last quarter as well in Q2.

Our total number of new logo deal increased on both a sequential and year over year basis.

Our top five growth deals in the quarter included a $500000 plus add on for existing <unk>.

Sue.

Our overall transaction size remained steady.

Customer.

Q1 to Q2 and is down nearly 40% year over year.

Yeah.

There were two additional <unk> in the top five.

Our accelerated digital marketing programs have enabled us to drive greater deal velocity.

On smart security add ons in the financial vertical and the other a risk intelligence.

And the technology.

100 <unk>.

The final two points product gross yield one for digital operations at a major retailer and the other an E 91 more add on.

Representing success across multiple industries, we added 38, new customers an increase of 10 from last quarter, and an increase of 18 or 90% Q to Q.

A number of add on growth deals was up slightly from last quarter and down about 10% Q2 two.

Bringing our total customer count 300, okay great.

Sue.

Four of the top five E. M. D also both periods for new customer wins.

From a retention perspective Q2 was solid we saw.

Got you and retention in North America.

Our top five new deals included E M deal do in North America, and one in Europe .

The relative weakness.

Internationally.

From a go to market perspective, notwithstanding the cost efficiencies. Patrick noted earlier, we are leaning you either partnered with digital marketing pipeline. Please.

One perpetual public warning deal in Canada, and one Red Sky D 911 win.

Our total number of new logo deal increased on both a sequential and year over year basis.

We are focusing on program that highlights the value of maturing our customers' resilience posture to help motivate them to buy more.

Our top five growth deals in the quarter included a $500000 plus add ons to existing <unk> customers.

We are also providing dedicated support each individual sales reps to help them optimize their success.

Great.

There were two additional <unk> in the top five.

We are pleased that more than three quarters of our sellers now have one year or more of tenure.

One a smart security add ons in the financial vertical and the other a risk intelligence.

As they continue to develop we are optimistic that our productivity continues to improve.

Technology.

The final two points product gross yield one for digital operation at a major retailer and the other an E 91 more add on.

Finally, we are working to optimize our pricing.

We're aligned value in both new customer wins and growth.

Davidson.

A number of add on growth deals was up slightly from last quarter and down about 10% Q2.

Moving to product we executed on several key technology milestones in the quarter toward our goal of a truly integrated E. M platform as we discussed at Investor Day.

Two.

From a retention perspective, our Q2 results we saw.

In Q2, we delivered a major enhancement to our critical event management analysis and correlation engine.

Got you and retention in North America.

The relative weakness.

Our customers are now able to apply more complex workflows and variable alerting thresholds, allowing them to.

Internationally.

From a go to market perspective, notwithstanding the cost efficiency as Patrick noted earlier, we are leaning you eat them.

Even further.

Marketing pipeline reach we.

As we continue to innovate and relaunched everbright.

We are focusing on program that highlights the value of maturing our customers' reliance posture.

<unk> Ramel protector, which is now the email.

This move that travel waste management customers not only receive standard travel risk information.

Motivate them to buy more.

We are also providing dedicated support each individual sales reps to help them optimize their success.

Also have access to the same high end risk intelligence and single pane of glass as our CEO customers.

Yeah.

We are pleased that more than three quarters of our sellers now have one year or more of tenure.

Ever break travel protector is available standalone product.

As they continue to develop we are optimistic that our productivity continues to improve.

Add ons gap and overtime, we will transition to handle customers.

Product.

Finally, we are working to optimize our pricing to better align value in both new customer wins and growth.

We are also modernizing the user experience across the board for our core CDN.

<unk> 360, our new integrated platform experience, featuring a refreshed mfa's simplified workflows.

David.

Moving to product we executed on several key technology milestones in the quarter toward our goal of a truly integrated E. M platform as we discussed at Investor Day.

<unk>. Thank you raised across the bank and database lock.

Still early in July .

In Q2, we delivered a major enhancement for our critical event management analysis and correlation engine.

Their feedback has been universally positive.

We'll continue to rollout <unk> research.

Our customers are now able to apply more complex workflows and variable alerting thresholds, allowing them to buy into that so even further.

Our young.

Customers over the rest of the year and we expect to release new features on a rolling basis.

Finally, I'd like to turn.

As we continue to innovate and relaunched.

Journeys <unk>.

<unk> set a product with us to help people keep people safe during that King's coronation, the largest beliefs operation in the history of it.

<unk> traveled protector, which is now to EMEA.

This move that travel waste management customers not only with the standard travel risk information.

<unk> Kingdom over 29000 police officers relied on data from over 50000 cameras and devices with access managed banking 12.

Also have access to the same high end risk intelligence and single clinical out as our customers.

Ever break travel protector is available standalone product.

Ever branch was proud to help provide accessible actionable situational awareness, we have such a high profile public events.

Add ons gap and overtime, we will transition to handle customers.

Carl.

We are also modernizing the user experience across the board for our core CEO .

In summary in the second quarter, we delivered another solid performance as we sequentially increased there are and further expanded our adjusted EBITDA margin.

<unk> 360, our new integrated platform experience, featuring a refreshed mfa's simplified workflows.

While we are navigating through a challenging macro environment, we are making meaningful enhancements to our core <unk> platform and are making disciplined growth first investments that are allowing us to make steady progress on our short term increases in efficiency profitability and cash flow.

<unk>. Thank you raised across the banking database Lawrenceville early July .

Their feedback has been universally positive.

We'll continue to rollout ever bridge three six.

<unk> customers over the rest of the year and we expect to release new features on a rolling basis.

Our long term goal to reach the rule of $40 20 points better.

Okay.

Finally, I'd like to turn current securities a controlled set of product was used to help people keep people safe during that King's coronation the largest police operation in the history of the United Kingdom over 29000 police officers relied on data from over 50000.

I look forward to updating you on our progress in the coming quarters. We are now ready to open the call for questions.

Yes. Thank you at this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speakerphone, please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

And cameras and devices with access managed by control.

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

Ever bridge was proud to help provide accessible actionable situational awareness.

And the first question comes from Alex Sklar with Raymond James.

A high profile public events.

In summary in the <unk>.

Second quarter, we delivered another solid performance as we sequentially increased bear our and further expanded our adjusted EBITDA margin.

Some more color on what that factors from a subscription growth standpoint relative to what you are baking in last quarter.

Yes, that's a great question.

The large deal.

Challenges, we've been having are across both perpetual and subscription.

Subscription primarily.

Our long term goal to reach the rule of 40 by 2027.

Actual deals end up being more of the larger deals, but the same large deal phenomenon is.

I look forward to updating you on our progress in the coming quarters. We are now ready to open the call for questions.

Impacting.

<unk> bookings for recurring as well as we think about.

Thank you at this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

For the year and our previous full year guidance of 6% to 7% with one time slot.

Speakerphone, please pick up your handset before pressing the keys.

Your question. Please press Star then two.

Obviously now.

And we have pause momentarily to assemble the roster.

We're calling it a one time down.

And the first question comes from Alex Sklar with Raymond James.

Year over year, and we're seeing the obstruction.

Great. Thank you, David or Patrick I, just wanted to better understand the second half of the year growth Guide, which I think implies you exit the year at about 1% growth I. Appreciate all the color on the nonrecurring pressure, but can you just give us some more color on what that factors subscription growth standpoint relative to what you are baking in last quarter.

Down a little bit, but not much of a subscription that is holding the hand relative to that beginning of the year outlook.

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Bob.

In the 6% to 7% range.

Really the one time write down obviously, we would love for us.

Thanks.

<unk> recurring deals to be here that would've been bolstering our.

Yes, that's a great question.

The large deal.

Our growth and subscription revenue growth further.

Challenges, we've been having or cross both perpetual and.

But anyway relative to how we saw the year playing out in our guidance.

Subscription primarily.

Really all the other onetime side.

Actual deals end up being more of the larger deals, but the same large deal phenomenon is.

Okay, great color.

Comment on deal velocity.

Impacting the.

The script and mostly offsetting the large deal phenomenon.

<unk> bookings for recurring as well as we think about.

Yeah.

Okay, and then just a two part question on the sales force and go to market you talked about the changes there John has been in the seat for just about six months now what can you tell us about the changes you're making as part of this new cost structure referenced on the call.

For the year and our previous full year guidance of 6% to 7% with one time loss.

Obviously now.

We're calling it a one time down.

And then separately you referenced optimizing pricing can you just elaborate a little bit more on what that entails.

Year over year, and we're seeing the obstruction.

Yeah on the.

Yes.

Down a little bit, but not much of a subscription that is holding the hand relative to that beginning of the year outlook.

Yes.

Yes, so John definitely had the angle.

Yes, Patrick.

We wanted to.

Hum.

Bob.

In the 6% to 7% range.

Cost savings measures that were taken early this quarter a lot of those.

Really the one time write down obviously, we would love for us.

Our <unk>.

Recurring deals to be here that would've been bolstering, our AOR growth and subscription revenue growth further.

Mark at largely around spans and layers.

Improving overall efficiency.

But anyway relative to how we saw the year playing out in our guidance.

And the good news side, our sales tenure is improving and so we're really pleased by that.

Really at all by the onetime side.

Okay, great color.

Alright.

For the first time since I've been here are year over year tenured sales productivity went down and so that obviously the large deal phenomenon impacts that productivity, but.

Comment on deal velocity.

Scripted mostly offsetting the large deal phenomenon.

Yeah.

Okay, and then just a two part question on the sales force and go to market you talked about some changes there John has been in the seat for just about six months now what can you tell us about the changes you're making as part of this new cost structure referenced on the call.

Really focused on helping each seller.

Some productive in their roles at improving our productivity so John and his management team are really focused.

And then separately you referenced optimizing pricing can you just elaborate a little bit more on what that entails.

An individual seller with a focus on getting a little more tiger segmentation.

Yeah.

And how are sellers approach the market both in the sales organization.

Sure.

Yes.

Yes, so John definitely has it is a it's b angle here.

And their collaboration with marketing team and aligning up.

Patrick alluded to.

Those programs.

Cost savings measures that were taken early this quarter.

<unk>.

John delivering.

More efficient go to market organization and aligning go to market organization.

A lot of those are.

And the go to market largely around spans and layers and.

And and as I alluded to last quarter.

Improving overall efficiency.

There's still work to do I do believe that the majority of what we're experiencing macro trends obviously have work to do.

On the good news side, our sales tenure is improving and so we're really pleased.

Buyback.

In our own four walls as well.

Right.

For the first time since I've been here are year over year tenured sales productivity went down and so that obviously the large deal phenomenon impacts about productivity, but.

Okay, great. Thank you.

Thank you and the next question comes from Matt Stotler with William Blair.

Hey, Thanks for taking my questions.

Really focused on help that each seller.

Maybe start with multi part question on average deal size.

Become productive in their roles at improving our productivity so John and his management team are really focused.

He noted that.

You remain kind of lower than we've seen historically in the quarter.

An individual seller with a focus on getting a little more tiger segmentation.

Gil scrutiny and challenge is very clear.

I mean, just better understand if youre seeing new deals.

How are sellers approach the market.

Come in smaller customers and reducing spend or if this is an indication that maybe you're seeing more success at the lower end of the market versus the enterprise.

Both on the sales organization.

In their collaboration with the marketing team and are lining up.

Those programs.

Any additional color there would be helpful.

Let's see.

Okay.

John delivering.

Yes, it's across the board.

More efficient go to market organization and aligning go to market organization.

The new customer deal size down 40% in the existing customer deal sizes, 40% if I take.

And as I alluded to last quarter.

There's still work to do I do believe that the majority of what we're experiencing macro trends obviously have work to do.

Thanks, a lot.

A little bit of.

There are at least Q1 to Q2 deal size was similar so we didn't see a further drop off in.

In our own four walls as well.

Deal size, although it's pretty meaningful year over year, when you break it down.

Okay, great. Thank you.

Thank you and the next question comes from Matt Stotler with William Blair.

It's pretty meaningful numbers in the over 500 K deal size.

Hey, Thanks for taking my questions.

It's largely.

Starting with multi part question on average deal size.

The impact of those large those.

Large deals not being in the flow that's driving the average deal size down.

So you noted that.

Remain kind of lower than what you've seen historically in the quarter large deal scrutiny and challenges is very clear we want to just better understand if youre seeing new deals.

I do think that and that's why I focused on switching topics now to the mid market is one of the focus areas.

Debt.

Youll come in smaller customers are reducing spend or if this is an indication that maybe you're seeing more success at the lower end of the market versus the enterprise.

That we're moving into as more of a mid market focus we enjoy a very large or very strong penetration in large enterprises, especially here in North America, and the cross selling motion to that basis is a really important part of what we're doing but from a new customer perspective, where.

Any additional color there would be helpful.

Yes.

Yes, it's across the board.

The new customer deal size down 40% in the existing customer deal sizes, 40%.

We're really dial in on that at 10 <unk>.

<unk> 49000 employee enterprise still large company.

Take.

I guess.

But we are down.

A little bit of.

<unk> segment from where we got stuck.

Yes.

Bad or that at least Q1 to Q2 deal size was similar so we didn't see a further drop off in <unk>.

The lion's share of that.

Got it that's helpful and then.

Deal size, although it's pretty meaningful year over year, when you break it down.

As a follow up.

The drop in sales force productivity year over year associated with the large deal challenges how.

So it's pretty meaningful numbers in the over 500 K deal size.

How are you thinking about head count and hiring for the rest of the year I think at the beginning of the year you were playing to be flattish.

It's largely.

The impact of those large.

Is there a situation, where you can flex that up or down, especially given kind of alert productivity there.

Large deals not being in the flow that's driving the average deal size down.

I do think that and that's why I focused on switching topics now to the mid market that is one of the focus areas.

Yeah.

We call them.

Disciplined growth first decisions that were focusing on in this one we have not made with finality for for next year.

That were.

That we're moving into as more of a midmarket focus we enjoy a berry are very strong penetration in large enterprises, especially here in North America.

As I said in the script.

We are really pleased that our sale.

Cross selling motion to that basis is a really important part of what we're doing but from a new customer perspective, where.

Our retention has gone up.

So a good level now.

We're really dial in on that attend.

Not fully surprising way.

49000 employee enterprise still large company.

Folks are turned on many.

Total through their first 12 month period, not all of them are reached and the productivity.

But we are down one segment from where we've done that.

It's a challenging environment that we would expect.

The lion's share of that.

As I said, we're leaning in.

Got it that's helpful and then.

Sales manager to the seller.

As a follow up.

You noted the drop in sales force productivity year over year associated with the large deal challenges.

Marketing support to seller to make sure that we're supporting our salespeople.

In their transition from there.

How are you thinking about head count and hiring for the rest of the year I think at the beginning of the year you were playing to be flattish.

So early early.

With the company for 10 years, and so there's definitely a training exercise and sales management exercise.

Is there a situation, where you can flex that up or down, especially given kind of alert productivity there.

A rig or two.

To help drive that productivity higher.

Yeah.

We call them.

Got it thanks again.

Disciplined growth first decisions that were focusing on in this one we have not made with finality for for next year.

Thank you and the next question comes from Brian Colley with Stephens.

Hi, guys. Thanks for taking my question.

So I'm curious on the on the implied guidance.

As I said in the script.

We are really pleased that our sale.

For <unk> of 1% I'm curious kind of how we should think about.

Our retention has gone up to a good level now.

And 1% for <unk> I'm curious, how we should think of <unk> growth in the context.

Not fully surprising way.

<unk> guidance.

Folks are turning many.

Maybe if you could kind of quantify the reduction.

Turtle through their first 12 month period, not all of them are reached and the productivity.

How much of it was.

Subscription and how much was the nonrecurring piece.

It's a challenging environment that we would expect.

As I said, we're leaning in.

And also how you feel about your ability to kind of reaccelerate growth into next year.

Sales manager to the seller.

Mark will support to seller to make sure that we're supporting our salespeople.

Good morning, Brian that's a great question.

In their transition from there.

And you can hear from our commentary again relative to the way we saw the year and I don't know exactly what you have in your model or the others, but from the commentary we gave at the beginning of the year, 6% to 7% growth.

Early.

With the company for 10 years, and so there's definitely a training exercise and sales management exercise.

A rig or two.

To help drive that productivity higher.

With with one time flat. Obviously, then we are planning to seven 8%.

Got it thanks again.

With the one times flat with the way we were kind of looking at the year when we started talking about it.

Thank you and the next question comes from Brian Colley with Stephens.

10 months ago.

Hi, guys. Thanks for taking my question.

So I'm curious on the on the implied guidance.

We're running in that in the.

<unk> on subscription on subscription revenue growth.

For <unk> of 1% Q.

Theres, not a lot, but a little bit.

Curious kind of how we should think about.

Little bit of noise at the year over year over year compares.

Yes.

And 1% for <unk> I'm curious, how we should think of AOR growth in the context.

And the way we were paying us it's not up.

<unk> guidance and maybe if you could kind of quantify.

Last year, but I.

When you take were.

The reduction how.

How much of it was subscription and how much was the.

We're saying, 4% to 5% now with the <unk>.

A nonrecurring piece.

Primarily onetime down so.

And also how you feel about your ability to kind of reaccelerate growth into next year.

It's primarily one time that may be 100 basis points out of that.

And the subscription side.

Good morning, Brian that's a great question.

It's the one time when using the word onetime more carefully Patrick and I both use it more carefully.

The perpetual software deal also drive a good bit appear and so on.

We say one time.

Where we're putting the PFS associated with those license deals into the same.

With with one time flat, obviously that we're planning for 78%.

And to the same let's say incentive.

But anyway. So okay. So it's not just a perpetual but is that one time.

With the one times flat with the way we were kind of looking at the year when we started talking about it.

The majority of that.

Nine months ago.

Shortfall from the way we saw the year in our guide.

We're running in that in the sevens on subscription on subscription revenue growth.

What we see.

Okay.

Got it that's super helpful. Thank you.

Jim.

And in terms of.

There is not a lot, but a little bit.

Little bit of noise at the year on year over year compares.

The reduction I'm also curious if theres any specific verticals or.

And the way we were famous itself up.

Areas of the business from a product perspective.

Last year, but you know I would when.

When youre, saying the O'brien.

When you take were.

Yeah.

We're saying, 4% to 5% now with the.

You know you've known me for a while I'm raw data in spreadsheets and roll around in my bed at night on exactly that question. It is the strangest thing it is large deal across the board.

Nearly one time down so it's.

It's primarily one time that maybe 100 basis points out of that.

On the subscription side.

Ill go through it.

It's the one time and I've been using the word onetime more carefully Patrick and I both use it more carefully.

The only ways from Sunday and the metrics, we're giving you are the metrics that matter. It is the yoga over 250 K.

Perpetual software deal also drive a good bit of PFS.

Deals over $500 million debt.

We say one time.

We're putting the pf associated with W license deals for the same.

They have slowed down and the velocity.

Im certainly pleased on the new business side.

Into the same space.

Our our new business generation, both in terms of number of deals in total with five we were.

Anyway. So okay. So it's not just a perpetual but one time is where the majority.

The shortfall from the way we saw the year on our guide.

Off in <unk>.

Existing customer transactions, I think that about 10% year over year.

What we're seeing today.

Got it that's super helpful. Thank you.

But it's that.

<unk>.

In terms of.

There is no real specific one thing I'll point out.

The reduction I'm also curious if theres any specific <unk>.

And then I went I'm wrong around at night thinking about this stuff.

Verticals or.

Areas of the business from a product perspective.

The state of Florida, our sled business was solid.

Or you're saying, though Brian .

This led business was solid this quarter. So that's not even what I would like to point out Brian .

Yeah.

You know you've known me for a while I'm wrong done, David and spreadsheets and roll around in my bed at night on exactly that question. It is the strangest thing it is large deal across the board.

Brian is there across the board.

Slowdown largely intact.

Great.

Thank you for that and just just a housekeeping question.

Through a familiar ways from Sunday and the metrics, we're giving you our the metrics.

Did you all report a total enterprise customer count or is that something that you're not reporting anymore.

That matter it is deals over 250, K Q3 deals over $500 million that.

Yeah.

It ran roughly in place from the last quarter, Brian We had.

They have slow down.

Similar to what you saw last quarter.

Velocity.

Im certainly pleased on the new business side.

We had headwinds related to as we continue to end of sale end of life shutdown noncore assets.

Our new business generation, both in terms of number of deals in total with five we were.

Without that headwind, we would have added a net roughly 70.

Off in <unk>.

Okay.

Existing customer transactions as I said about 10% year over year.

Okay.

Perfect. Thank you for the time gentlemen.

But its that Theres no theres no real specific one thing I'll point out.

Thank you Beth.

Thank you and the next question comes from Scott Berg with Needham.

And then I want them all around at night thinking about this stuff.

The state of Florida, our slide business with solid our sled business was solid this quarter. So that's not even what I brought out.

Hi, everyone. Good morning, and thanks for taking my questions I have a couple.

Dave you've obviously spoken a lot about the onetime revenues that are down, especially in the government.

Brian is the across the board.

Slowdown a larger transaction.

I guess kind of verticals or at least that's my assumption, it's heavy in the government verticals, but.

Great.

Thank you for that and just a housekeeping question.

The change of win rates, there any pricing pressure or is this just really a continued reflection of those deals just arent ready to.

<unk>.

Did you all report the total enterprise customer count or is that something that you're not reporting any more.

Have decisions made on or just not in the pipeline in general Thank you.

Yeah.

It ran roughly in place from the last quarter, Brian We had.

Yes.

On the government side is.

Similar to what you saw last quarter.

Again, it's a slowdown in their decisioning process as I've talked to you okay.

<unk>.

We had headwinds related to as we continue to end of sale end of life shut down non core assets.

A couple of.

Close network people with it.

Without that headwind, we would have added a net roughly 70.

Companies with similar spaces Theyre seeing the same thing.

With that.

Specially.

Yeah.

In Europe , getting a larger commitment so if a slowdown we do have a couple of nice opportunities.

Okay.

Thank you for the time gentlemen.

Thank you Beth.

And you know in the second half, but the way.

Thank you and the next question comes from Scott Berg with Needham.

Yeah, the way things are going.

Hi, everyone. Good morning, Thanks for taking my questions I have.

We're adjusting the full year to reflect that.

Couple.

For a big deal environment for the rest of the year.

Dave you've obviously spoken a lot about the one time revenues that are down, especially the government.

Got it helpful. And then my follow up question is on the CGM deals. The number of deals continues to trend higher year over year, we know the pricing is down as the kind of package.

I guess kind of verticals or at least that's my assumption, it's heavy in the government verticals, but.

Any change of.

When rates there any pricing pressure or is this just really a continued reflection of those deals just arent ready to.

Maybe a little bit smaller just take drive that initial footprint with some customers, but how should we think about the combination of them.

Have decisions made on or just not in the pipeline in general Thank you.

Modules that are comprising these deals it sounds like youre seeing a shift of customers.

Yes.

Customers historically bought within the <unk> universe.

On the government side it is.

Maybe what their purchase each day is that maybe the right view or are you seeing combinations that are maybe noteworthy.

It's a slowdown I know decisioning processes I talked to him.

A couple of.

Close network people in.

So it's one of the things.

And that companies of similar spaces are seeing the same thing.

Remain very positive on so when I roll through that.

Specially.

In Europe , getting a larger commitment so if a slowdown we do have a couple of nice opportunities.

The gross retention in larger customers remains a real strength for us Scott.

In the second half, but the way.

The opportunity to cross sell and up sell those accounts as we move but yet.

Yeah, the way things are going.

Yes.

We are adjusting the full year to reflect that.

The attach add on focus the growth focus.

For a big deal environment for the rest of the year.

Yeah.

Really strong.

Got it helpful. And then my follow up question is on the CIM deals. The number of deals continues to trend higher year over year, we know the pricing is down as the kind of package.

Big movement in the CGM journey go.

It's from.

Mass notification, which improves your resilient posture.

And maybe a little bit smaller just to drive that initial footprint customers, but how should we think about the combination of them.

Steve.

Yes, much more responsive in a critical of that.

<unk>.

Of modules that are comprising these deals it sounds like youre seeing a shift of customers.

Digitalization risk component.

Risk.

Intelligence to part of the product, that's a really big step up.

Customers, just historically bought within the <unk> universe.

In CGM journey.

Maybe what their purchase each day that may be the right view or are you seeing combinations that are maybe noteworthy.

And so we're doing a better job feeding that smaller.

And.

And then allowing the assets and contracts to grow over time that would have been in the past and that's.

So it's one of the things.

Remain very positive on so when I roll through that.

I alluded to earlier.

We're targeting that.

The gross retention in larger customers remains a real strength for us.

Mid market, but that 10000 to 49000.

User enterprise.

Especially on the new customer side, because we've got such great penetration already in.

The opportunity to cross sell and up sell those accounts as we move but yet.

It organizations ability.

<unk>.

The attach add on focus the growth focus.

Thank you and the next question comes from Michael Berg with Wells Fargo.

Yeah.

Really strong.

Alright, Thanks for taking my question I just wanted to follow on to Scott's question earlier on the large deals.

Big movement in the <unk> journey.

It goes from there.

Mass notification, which improves your resilient posture.

Relative to Q1 would you characterize the environment and the macro environment is getting meaningfully worse and or some of these deals that are slowing down or these deals you still expect to close either later in the year or potentially the next thank you.

Yeah, Steve.

Sure.

Yes, much more responsive in a critical of that.

Add the visualization risk component risk.

Intelligent component of the product, that's a really big step up.

That's a great question.

On the.

So Q1 Q2 Q1.

In CGM journey.

And so we're doing a.

With relatively steady.

Better job seeding that smaller.

<unk>.

Steady on the deal size decline, which is the number one thing that we're concerned about.

And.

And then allowing the assets and contracts to grow over time that we have that in the past and that's.

Put a positive spin on it we had won over $1 billion deal.

So I alluded to earlier.

Q1, and none over Q2.

We're targeting net if not mid market, but that 10000 to 49000.

We had banner.

Banner.

User enterprise.

Volume in the stock.

And especially on the new customer wins side, because we've got such great penetration already.

We have long identified in Q2 Q1.

And then.

An organization's ability.

But we were down at Q2 over Q2 in number of attraction.

Good morning.

Yeah.

Transactions into installed base so.

Thank you.

And the next question comes from Michael Berg with Wells Fargo.

I call it.

Set in Q2.

From Q1, not a deterioration.

Alright, Thanks for taking my question I just wanted to follow on to Scott's question earlier on the large deals.

The last two weeks of June were.

Yeah.

Great.

Less than we had expected and so.

That was a challenge and we have been.

We have some of those interests into this quarter.

Again, as we stand back from the year.

That's a great question.

Q1, Q2 Q1.

We're seeing we saw Q2 relatively steady from Q1.

With relatively steady.

Perhaps.

Adjusting.

Steady on the deal size decline, which is the number one thing that we're concerned about.

Okay.

For fiscal environment.

They put a positive spin on it we had won over $1 billion deal.

Got it thank you and a quick follow up did you say that the perpetual deals is impacting quarterly revenue by 1% to one 5 million in the second half.

In Q1, and none over Q2.

So we had.

Banner.

Yeah.

No.

Volume in the stock.

What we did say on the one to one 5 million that was in Patrick.

And the smaller deal size in Q2 Q1.

That's.

And then.

Proactive cost.

But we were down at Q2 over Q2 in a number of attractive.

Last week, we made an early July that's really going to help you bridge that.

Transactions into installed base so I.

The EBITDA guide.

If you look at that.

I'd call it.

Round numbers $8 million down revenue guide, how you're holding that how youre holding the 85 while that.

Set in Q2.

From Q1, not a deterioration.

Yes, the 8 million part of that is professional services. So you don't have full margin, 75% margin you're at $6 million.

The last two weeks of June were.

Yes.

Great.

Than we had expected and so.

And.

One five for quarter cost savings.

That was a challenge and we have been.

<unk> and then the cost discipline that we have been evidenced.

Florida, we have some of those interests into this quarter.

Through the first half, enabling our EBITDA beat both Q1 and Q2 that discipline.

Again, as we stand back from the year.

We're seeing.

Q2 relatively steady from Q1.

<unk> through an <unk>.

Let's say on a path for that EBIT guide despite shortfall.

Adjusting.

Okay.

For fiscal environment.

Short fall.

Revenue.

Got it. Thank you and then a quick follow up did you say that the perpetual deals is impacting quarterly revenue by 1% to one 5 million in the second half.

Helpful. Thank you.

Thank you and our next question comes from Ryan Macwilliams with Barclays.

No.

Hey, guys. Thanks for taking the question just one more on large deals love to hear your opinion on how much of the headwind to these deals is an ever purchased control versus macro like do you think of our bridge is just more later cycle for software purchasing and it just takes some time to work through the cycle.

What we did say on the one to $1 5 million dozen Patrick's script that.

Proactive cost adjustments, we made in early July that's really going to help you bridge the.

The EBITDA guide.

If you look at that.

The macro improves.

<unk> numbers $8 million down revenue guide high hold in that how you're holding the 85 while that.

Bookings for some of these sales efficiency metrics to improve.

Yes, Hi, Ryan Good question again, one that I've been turned around.

Yes, the 8 million part of that is professional services. So you don't have full margin, 75% margin you're at $6 million.

Eric Spreadsheets.

And in my bed at night.

To answer your question I feel like a 70 30.

And.

One and a half a quarter cost savings objective.

730 macro micro that.

<unk> and then the cost discipline that we have been evidenced.

Company specific things.

Through the first half, enabling our EBITDA would be in both Q1 and Q2 that discipline.

We are.

License based on contact and so.

<unk> through an <unk>.

Those contracts are primarily employees and we're focused in.

Let's say on a path for that EBIT guide despite shortfall.

And the over 50000 employee vertical in those companies.

Shortfall.

Revenue.

Helpful. Thank you.

They are hiring at the rate they were <unk>.

Thank you and our next question comes from Ryan Macwilliams with Barclays.

Do expect third company to be the strongest coming back out of this turnaround but.

Hey, guys. Thanks for taking the question just one more on large deals, but love to hear your opinion on like how much of the headwind to these deals is an ever purchased control versus macro like do you think of our bridge is just more later cycle for software purchasing and it could just take some time to work through the cycle and.

Everybody has taken a turn on.

On profitability and.

I think as they get to a second term of the crime because youre, suggesting they start to look at really driving productivity and we have really strong ROI metrics.

The macro improves so that's good.

We are in our core customer base.

Bookings and some of these sales with the same metrics.

Efficiency that they get from their security operators.

Yes, Hi, Ryan Good question again, one that I've been turned around.

Implementing a critical event management platform are really strong I think it returned back towards which software is going to make our teams more productive.

Eric Spreadsheets.

The rest of my bed at night.

And really drive productivity gains I think we're gonna be it up or down in a good spot.

To answer your question I feel like a 70 30.

730 macro to micro that.

Sorry for that.

I appreciate that.

Company specific things.

Please proceed to <unk> sales still doing well from an individual product perspective anything to call out on the momentum for mass notification and safety connection.

We are.

License based on contact and so.

Those contracts are primarily employees and we're focused in.

One of the things that I'm pleased about year over year, Patrick alluded to it.

And the over 50000 employee vertical in those companies.

Gross retention.

Is improving especially in the mass notification side, we've got.

They are hiring at the rate they were <unk>.

Do expect companies to be the strongest coming back out of this turnaround but.

We got that.

Uh huh.

The improvement from negative growth.

Everybody has taken a turn on.

On profitability and.

So slightly positive growth.

Crude year over year, so that's a trend I'm actually pleased with.

I think as they get to a second term of the crime as you're suggesting and start to look at really driving productivity and we have really strong ROI metrics.

I should.

And maybe I overemphasized, but I feel like I should emphasize more the really great work that our product teams are doing.

We are in our core customer base.

Started with that.

Efficiencies as they get from their security operators.

Our premise that desktop focus on investing on our core.

We implemented a critical event management platform are really strong so I think it return back towards with software, it's going to make our teams more productive.

Is the right approach and we're getting really good feedback with the investments and the improvements we're making.

And really drive the productivity gains I think we're going to be enough.

Driving more value for our existing customers that that is a bright spot for me.

Again on a good spot.

Sorry for that.

And how we're executing to deliver.

I appreciate that.

Please proceed to <unk> sales still doing well from an individual product perspective anything to call out on the momentum for mass notification and safety connection.

I appreciate the color thanks, guys.

Thank you and the next question comes from Mike Latimore with Northland capital markets.

Great. Thanks.

And one of the things that I'm I'm pleased about year over year, Patrick alluded to it.

How about just the pipeline growth.

Okay.

Is it growing nicely as the pipeline slowed just overall pipeline growth.

Gross retention.

Is improving especially in the mass notification side, we've got.

Yes.

Pipeline is the macro.

We got that.

It is not going well because we're the bigger deals arent there.

The improvement from negative growth.

The velocity.

So slightly positive growth.

The velocity is it.

At maintaining or maybe even slightly improved especially on the on the new deal side and so thats what were late demand, where you want to sell what customers want to buy and the customers are wanting to buy it.

<unk> year over year, so that's a trend I'm actually pleased with.

I should.

Maybe I overemphasized, but I feel like I should emphasize more the really great work that our product teams are doing we started with the.

I guess the fun stuff.

So smaller amounts right now.

Our premise that desktop focus on investing on our core is.

And the <unk> deal Count obviously strong.

Is the right approach and we're getting really good feedback with the investments and the improvements we're making.

How many of those were upsells into kind of the global 2000.

Driving more value for our existing customers that that is a bright spot for me.

How has that pattern playing out here.

Yeah.

And and how we're executing to deliver.

That's a good question I don't have that in front of me.

I'm looking at the deal last.

Appreciate the color thanks, guys.

That said were.

Thank you and the next question comes from Mike Latimore with Northland capital markets.

We are very very nicely penetrated in north American enterprise with over 50 sounds like there are there are more to win but our penetration rates there and the new logos are.

Great. Thanks.

How about just the pipeline growth.

Okay.

Is it growing nicely because the pipeline slowed just overall pipeline growth.

And the next year down.

Seismic out for sure.

Yes.

Pipeline is the macro.

Okay.

He is not going well because we're the bigger deals arent there.

Just on mass notification it sounds like a little bit of growth there.

Which is good is that.

The velocity.

Yeah.

The velocity is it.

What would cause that is that just more focus is it a pricing changes that product enhancements.

At maintaining or maybe even slightly improved especially on the on the new deal side and so that's what we're laying demand where you want to sell what customers want to buy and the customers are wanting to buy.

Okay.

Primarily focus which has manifested itself first in the product organization. We've taken time as I said to go back and make sure that that segment of the market.

Yes, the fun stuff.

So smaller amounts right now.

We are.

Okay.

The CE deals kind of obviously strong.

Yes, we're investing there.

How many of those were upsells into kind of the global 2000.

To make sure that we retain and grow the core customers. We've got some really nice things have been lessened and carefully.

How has that pattern playing out here.

The county.

That's a good question I don't have that in front of me.

Counting emergency managers across the country Edward.

Yeah.

We are building improvement.

From looking at the.

The deal last.

In our core flagship product and.

As Ive said were.

We're very very nicely penetrated in North American enterprise with over 50000 like there are there are more to win but our penetration rates there and the new logos are.

I'm really proud really proud of the work that the team has done.

Yes.

Double down there were tightened in.

The integrations with other parts of the platform to make it even easier to use.

And the next tier down.

The size of account for sure.

Where is that putting some other types of map.

Okay. Thanks.

Okay, and just on mass notification it sounds like a little bit of growth there.

Thank you and the next question comes from Kash Rangan with Goldman Sachs.

Which is good is that.

What what would cause that is that just more focus is that our pricing changes that product sampling.

Hey, guys. This is jacob on for cash and for taking the question I wanted to ask how many of these T M deals and I apologize touched on earlier, but how many of the C M deals.

Okay.

Primarily focus which has manifested itself first in our product organization. We've taken time as I said to go back and make sure that that segment of the market.

Or P. M additions this quarter were a result of upselling from the existing customer base versus net new customers.

And then if we could maybe touch on the dynamic around.

Hum.

We are.

The International segment, it seems like it's been a little bit of weakness.

Yes, we're investing there.

For the last few quarters, so anything you're seeing there.

To make sure that we retain and grow the core customers. We've got some really nice things have been lessened and carefully.

Might be willing to call out.

Yes that new <unk>, all together, a little bit of a bright spot smaller, but the new deals or fixed percentage of rentals by top five I think three of the top five.

The county.

County emergency managers across the country Edward.

We are building improvement.

In our core flagship product and.

Transactions, new transactions worst <unk>.

Joining me I'm really I'm proud really proud of the work that the team has done.

That's.

Something I feel good about.

International.

The double down there were tightened in.

Yes, I think it's no secret that.

The integrations with other parts of the platform to make it even easier to use.

You have.

Its own challenges, especially the U K, where we have a good bit of business.

We're definitely putting some other types of map.

Okay. Thanks.

We're solid there.

Yes.

Thank you and the next question comes from Kash Rangan with Goldman Sachs.

But not the same level of growth that we're seeing in prior years again, we've been more disciplined with our investments, particularly.

Hey, guys. This is jacob on for cash and for taking the question I wanted to ask how many of these <unk> deals and I apologize just a touch on earlier, but how many of the C M deals.

Internationally, where.

We were.

Her.

Yeah, our overinvest, that's a strong word, but we we're investing heavily to penetrate those market because it will make a more disciplined.

Additions this quarter were a result of upselling from the existing customer base versus net new customers.

CAC based investments we have been.

And then if we could maybe touch on the dynamic around.

Adjusting international.

The International segment, it seems like it's been a little bit of weakness.

A little bit more than North America.

For the last few quarters, so anything you're seeing there.

Sounds good thank you.

Might be willing to call out.

Thank you and this concludes our question and answer session I would like to return the Florida management for any closing comments.

Yes that new <unk> altogether are a little bit of a bright spot smaller, but the new deals or fixed percentage of all of my top five I think three of the top five.

Thank you Keith and thank you everybody for joining us on our second quarter call, Patrick and I in line that will be a very active and especially the next two or three days with investors and some profit activity look forward to connecting with.

Transactions, new transactions worst <unk>.

<unk>.

That's something I feel good about.

International.

With many of you.

I think it's no secret that.

And the next 72 hours and hopefully all of you again in 90 days when we report our third quarter results.

<unk> has.

Its own challenges, especially the U K, where we have a good bit of business.

Have a great day.

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

We're solid there.

But not the same level of growth that we're seeing in prior years again, we've been more disciplined with our investments, particularly.

Internationally, where.

We were.

Yes, our Overinvest is a strong word, but we were invested heavily penetrated those markets because it will make a more disciplined.

CAC based investments we have been.

Adjusting international.

A little bit more than North America.

Sounds good thank you.

Thank you and this concludes our question and answer session I would like to return the Florida management for any closing comments.

Thank you Keith and thank you everybody for joining us on our second quarter call Patrik and I and line that will be a very active and especially the next two or three days with investors and some conference activity look forward to connecting.

With many of you in the next 72 hours.

Hopefully all of you again in 90 days when we report our third quarter results.

Great day.

Thank you. The conference has now concluded thank you for attending today's presentation.

Since your lines.

Goodbye.

[music].

Hello, and welcome to the Arrow Branch, Inc. Second quarter 2023 earnings Conference call.

All participants will be in listen only mode.

Should you need assistance, placing a conference specialist by pressing the star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

A question you May Press Star, then one and you touched on phone.

Sorry. Your question. Please press Star then two.

Please note today's event is being recorded.

I would now a chunk conference over to your host today, Jeff Young Mr. Young. Please go ahead.

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

With me on today's call are ever bridge, President and CEO , David Wagner, and executive Vice President and CFO Patrick Brickley.

Before the market opened we issued our earnings release, which can be accessed on the Investor Relations section of our website at IR dot ever bridge Dot com.

This call is being recorded and a replay of the teleconference will be available on our Investor Relations website 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.

Factors that might cause 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.

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 any forward looking statements or our outlook.

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.

Thanks, Jeff Good morning, everyone and welcome to our bridge an earnings call for the second quarter of 2023.

We delivered solid financial results for the quarter, which we released earlier. This morning for the second quarter, we achieved revenue of $110 6 million, an increase of 7% year over year.

<unk> EBITDA of $18 $3 million, an increase of $13 $5 million from a year ago and annual recurring revenue $395 million.

Up $7 million quarter over quarter, a 9% year over year.

These solid results reflect the work the team is doing to improve our overall operating efficiency as we execute to our long term objectives.

Value and satisfaction.

$68 9 million.

This last 12 month period.

And over the past 12 months, we've reduced our net debt by approximately $61 million to $287 million.

I am deeply grateful to work we've done together at one of our brands to achieve these goals and to deliver the result noted above.

Which are important for our longer term growth.

These accomplishments notwithstanding we are continuing to experience lower overall bookings in last year.

Marilee in deals of greater than 250 <unk>.

On the positive side based on our continuing momentum in smaller transactions.

Today ever break is delivering organizational resilience at a global level in a way that none of our competition.

And our customers need our solutions more than ever.

Our strong customer base of leading enterprises and governments, we are becoming synonymous with resilience and our customers are sharing with US every day incredible stores the resolve of continuity of lives saved and assets protected.

Now I will turn the call over to our CFO after firstly provide detail.

Sure.

Thanks, David.

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

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

For the second quarter, our IRR increased to $395 million up 9% year over year.

Revenue was $110 6 million up 7% from a year ago revenue from subscription services was $102 million up 8%.

Our gross revenue retention rate remained within our target range and meaningfully higher than the gross revenue retention that we experienced in the year ago period.

We signed 58 deals over $100000.

<unk> from <unk> 63, a year ago.

In Q1, our average deal size in Q2 was lower than what we've seen in recent quarters.

Our <unk> customer count increased to 373 up 38 sequentially and up 67% year over year.

We continue to see healthy year over year improvements in our profitability and cash flow, reflecting the substantial ongoing improvements that we're making to operational efficiency across all areas of our business and in particular within sales and marketing and research and development.

GAAP gross profit was $77 5 million on.

Our margin of 70% compared to the year ago period's results of $69 7 million or 68% margin.

On an adjusted basis gross margin was 74% compared to 73% a year ago, demonstrating growing efficiencies from platform integration and optimization.

GAAP net loss was $15 1 million or negative <unk> 37 per share.

<unk> to the year ago period in which we generated a net loss of $36 2 million.

Our negative <unk> 91 per share.

On an adjusted basis, we generated net income of $13 4 million.

Or <unk> 31.

Diluted earnings per share.

Compared to the year ago period in which we generated net income of $1 5 million.

Or <unk>.

Our adjusted EBITDA of $18 $3 million represents a 17% margin a significant improvement from the year ago period in which adjusted EBITDA was $4 8 million.

Our 5% target.

Cash flow from operations was an inflow of $5 4 million <unk>.

Compared to the year ago period, and which we had an outflow of $9 9 million.

We note that the second quarter tends to be our seasonally slowest for invoicing and cash collection.

Adjusted free cash flow was an inflow of $1 6 million.

Compared to the year ago period, and which we had an outflow of $7 6 million.

We ended Q2 with $222 million in cash cash equivalents and restricted cash up from $202 million at the end of 2020.

Before I turn to our guidance for the third quarter and full year I'd like to recap the deliberate changes we've made to our go to market over the past year.

The intended outcomes of these changes are reflected in our second half guidance.

First at our Investor Day in December 2022, we discussed our strategy to focus on recurring revenue.

And we introduced <unk> as a key metric both internally and externally to represent the increased okay.

Second we changed sales incentives in favor of selling subscription services, rather than nonrecurring revenue such as perpetual licenses and associated professional services.

We've talked on prior quarterly calls about the inherent uncertainty in the timing of perpetual license deal and.

And our cautious view on the second half of this year.

This follows two record years of nonrecurring revenue driven by the EU public safety mandate.

And in particular, the second half of 2022.

Included our highest two quarters ever for nonrecurring revenue.

Over $30 million of nonrecurring revenue in that period.

Considering these factors as.

As well as the slower sales of large deals due to a softer macro environment that Dave described earlier.

We are lowering our expectations for nonrecurring revenue in the second half of 2023.

In addition in the third quarter, we have taken expense actions, which we expect will reduce our cost structure in the second half by an additional 1% to $1 $5 million per quarter.

Which allows us to reaffirm our adjusted EBIT target of $85 million.

Despite the reduced revenue expectations.

So for the third quarter, we anticipate revenue of between $113 five and $114 million.

Representing year over year growth of 2%.

This rate of growth is largely a reflection of the year over year decline that we anticipate in onetime revenue.

We anticipate a GAAP net loss of between $9, four and $8 9 million and non-GAAP net income of between 18, five and $98 million.

Four of diluted earnings per share of <unk>, 42% to 43%.

We expect adjusted EBITDA to be between 23% and $23 $5 million.

Margin of 20% at the midpoint.

As we continue to drive efficiencies in our operating expense.

For the full year 2023, we anticipate revenue to be in the range of $450 million to $452 million.

<unk> growth of 4% to 5% over 2022.

Again this rate of growth is largely a reflection of the year over year decline that we anticipate and onetime revenue.

We expect a GAAP net loss of between <unk>, 43, 7% and $41 7 million.

Were a negative $1 seven $1.

Sure.

On a non-GAAP basis, we expect net income of between 65, 8% and $67 8 million.

We're between $1 48, and $1 52 per diluted share.

We remain confident in delivering adjusted EBITDA in the range of $84 million to $86 million.

Representing an adjusted EBIT margin of 19% at the midpoint of $85 million.

This outlook reflects the quarterly expense savings noted above.

And keeps us on our trend of continuous year over year improvement in quarterly adjusted EBITDA and adjusted EBIT margin.

In summary, we delivered a solid first half.

As we progressed through 2023, we remain focused on execution.

Driving profitable organic growth.

Sure.

And maximizing return on our investments.

Looking further we are confident we can deliver the targets laid out at our December 2022 Investor day.

Making disciplined growth first investment and making steady progress towards the rule of 40% by 2020.

I will now turn the call back over to date.

Thanks, Patrick.

Our 9% year over year increase in Arrow demonstrate we continued to grow nicely in a difficult macro environment.

In Q2, we closed 50 deals over 100 K fixed.

Fixed from last quarter and down <unk> <unk> from Q2 of last year, we closed one deal over 500, K down from three last quarter and 12 in Q2.

Our overall transaction size remained steady from Q1 to Q2 and is down nearly 40% year over year.

However, our accelerated digital marketing program have enabled us to drive greater deal velocity.

100.

Representing success across multiple industries, we added 38, new tem customers, an increase of 10 from last quarter and an increase of 18, 90% Q to Q.

Bringing our total customer count 300 right.

Four of the top five <unk> during the period for new customers.

Our top five new deals included <unk> do in North America, and one in Europe .

One perpetual public warning deal in Canada, and one Red Sky D 911 win.

Our total number of new logo deal increased on both a sequential and year over year basis.

Our top five growth deals in the quarter included a $500000 plus add on for existing <unk> customers.

Great.

There were two additional <unk> in the top five.

One smart securely add on in the financial vertical and the other a risk intelligence.

Technology stack.

The final two points product gross yield.

One for digital operations at a major retailer and the other an E 91 more add on.

A number of add on growth deals was up slightly from last quarter and down about 10% of Q2 right.

Yes.

From a retention perspective, our Q2 with solid restocked driven retention in North America.

The relative weakness.

Internationally.

From a go to market perspective, notwithstanding the cost efficiencies Patrick noted earlier, we are leaning in even partnered with digital marketing pipeline. Please.

We are focusing on program highlights the value of maturing our customers' resilience posture.

Motivate them to buy more.

We are also providing dedicated support each individual sales ramp to help them optimize their success.

We are pleased that more than three quarters of our sellers now have one year or more.

As they continue to develop we are optimistic that our productivity continues to improve.

Finally, we are working to optimize our pricing.

We're aligned value in both new customer wins and growth.

Facility.

Moving to product we executed on several key technology milestones in the quarter toward our goal of a truly integrated E. M platform as we discussed at Investor Day.

In Q2, we delivered a major enhancement to our critical event management analysis and correlation engine.

Our customers are now able to apply more complex workflows and variable alerting thresholds, allowing them to sell.

Even further.

As we continue to integrate endgame, we launched.

<unk> Ronald protector, which is now the email.

This move that travel waste management customers not only with the standard travel risk information.

Also have access to the same high end risk intelligence and single pane of glass as our CEO customers.

Ever break travel protector is available standalone product.

Add ons gap and overtime, we will transition to Enzo com.

Carl.

We are also modernizing the user experience across the board for our core CEO .

<unk> 360, our new integrated platform experience, featuring a refreshed mfa's simplified workflows.

<unk>. Thank you raised across the banking database Lawrenceville early July .

Their feedback has been universally positive.

We'll continue to rollout ever bridge three six.

Our young.

Customers over the rest of the year and we expect to release new features on a rolling basis.

Finally, I'd like to turn current Securities our control center product with us to help people keep people safe during the King's Coronation the largest police operation in the history of it.

His kingdom over 29000 police officers relied on data from over 50000 cameras and devices with access managed by control Center.

Ever branch was proud to help provide acceptable actionable situational awareness during such a high profile public events.

In summary in the second quarter, we delivered another solid performance as we sequentially increase there are and further expanded our adjusted EBIT margin.

Our long term goal to reach the rule of 40 by 2027.

Look forward to updating you on our progress in the coming quarters. We are now ready to open the call for questions. Yes. Thank you at this time, we will begin the question and answer session question question. You May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

Your question. Please press Star then two.

This time, we have pause momentarily to assemble the roster.

And the first question comes from Alex Sklar with Raymond James.

Great. Thank you, David or Patrick I, just wanted to better understand the second half of the year growth Guide, which I think implies you exit the year at about 1% growth I. Appreciate all the color on the nonrecurring pressure, but can you just give us some more color on what that factors most subscription growth standpoint relative to what you are baking in last quarter.

Thanks.

Yes, that's a great question.

The large deal.

Challenges, we've been having across both perpetual and subscription.

Subscription primarily.

Actual deals end up being more of the larger deals, but the same large deal phenomenon is.

Impacting the.

<unk> bookings for recurring as well as we think about.

For the year and our previous full year guidance of 6% to 7% with one time loss.

Obviously now.

Sure.

On the one time down.

Year over year, and we're seeing the subscription.

Down a little bit, but not much of a subscription that has hold EMEA relative to that beginning of the year outlook.

<unk>.

Bob.

In the 6% to 7% range.

Really the one time write down obviously, we would love for us.

Large deal recurring deals to be here that would've been bolstering our.

Our growth and subscription revenue growth further.

But anyway relative to how we saw the year playing out in our guide.

Really at all by the onetime side.

Okay, great color.

Comment on deal velocity.

Subscription, mostly offsetting the large deal phenomenon.

Okay, and then just a two part question on the sales force and go to market you talked about some changes there John has been in the seat.

For just about six months now what can you tell us about the changes you're making as part of this new cost structure referenced in the call.

And then separately you referenced optimizing pricing can you just elaborate a little bit more about that and build.

Yes.

Yes, <unk> definitely has it's b angle here.

Patrick alluded to.

Cost savings measures that were taken early this quarter.

A lot of those are.

We are in the go to market largely around spans and layers and.

Improving overall efficiency.

On the good news side, our sales tenure is improving and so we're really pleased by that.

Right.

For the first time since I've been here are year over year tenured sales productivity went down.

So that obviously, the large deal phenomenon impacts that productivity, but.

We really focused on helping each seller.

Some productive in their roles at improving the productivity So John and his management team are really focused.

An individual seller with a focus on getting a little more tiger segmentation.

And how are sellers approach the market both in the sales organization.

And their collaboration with marketing.

Aligning up.

Those programs.

<unk>.

John delivering.

More efficient go to market organization and aligning go to market organization.

And and as I alluded to last quarter.

There is still work to do I do believe that the majority of what we're experiencing is the macro trends obviously have work to do.

In our own four walls as well.

Okay, great. Thank you.

Thank you and the next question comes from Matt Stotler with William Blair.

Hi, there thanks for taking my questions.

Maybe starting with multi part question on average deal size.

Yes.

You remain kind of lower than what you've seen historically in the quarter.

Gil scrutiny and challenge is very clear.

I guess better understand if youre seeing new deals.

Come in smaller customers are reducing spend or if this is an indication that maybe you're seeing more success at the lower end of the market versus the enterprise.

Any additional color there would be helpful.

Yes, it's across the board.

New customer deal size down 40% in the existing customer deal sizes, 40%.

<unk>.

Yes.

A little bit of.

Yes.

There are at least Q1 to Q2 deal size was similar so we didn't see a further drop off.

And deal size, although it's pretty meaningful year over year, when you break it down.

It's pretty meaningful numbers in the over 500 K.

Deal size.

It is.

Largely.

The impact of those large.

Large deals not being in the flow that's driving the average deal size down.

Sure.

I do think that and that's why I focused on switching topics now to the mid market.

He is one of the focus areas.

<unk>.

That we're moving into as more of a midmarket focus we enjoy a very large or very strong penetration in large enterprises, especially here in North America.

Cross selling motion to that basis is a really important part of what we're doing but from a new customer perspective.

We're really dialing in on the 10th.

49000 employee enterprise still large company.

But yes down one segment from where we've got that.

The lion's share of that.

Got it that's helpful and then.

As a follow up.

You noted the drop in sales force productivity year over year associated with the large deal challenges.

How are you thinking about head count and hiring for the rest of the year I think at the beginning of the year you were playing to be flattish.

Is there a situation, where you can flex that up or down, especially given kind of alert productivity there.

Yeah.

We call them.

Disciplined growth first decisions that were focusing on in this one we have not made with finality for for next year.

As I said in the script.

We are really pleased that our sale.

Our retention has gone up to.

So a good level now.

Not fully surprising way.

Folks are turning many.

Turtles through their first 12 month period, not all of them are reached and the productivity.

It's a challenging environment that we would expect as I can.

We're leaning in.

Sales manager to seller.

<unk> support to sellers to make sure that we're supporting our salespeople.

In their transition from.

Early.

Currently with the company for 10 years, and so there's definitely a training exercise and sales management exercise that.

Buying a rig or two.

To help drive that productivity higher.

Got it thanks again.

Thank you and the next question comes from Brian Colley with Stephens.

Hi, guys. Thanks for taking my question.

So I'm curious on the on the implied guidance.

For <unk> of 1% I'm curious kind of how we should think about.

Yes.

And 1% for <unk> I'm curious, how we should think of <unk> growth in the context.

The updated guidance and maybe if you could kind of quantify.

The reduction.

Much of it was subscription.

Subscription and how much was it.

The nonrecurring piece.

And also how you feel about your ability to kind of reaccelerate growth into next year.

Good morning, Brian that's a great question.

With with one time flat, obviously that we're planning roughly 8%.

With the one time plot with the way we were kind of looking at the year when we start talking about it.

Nine of 10 months ago.

Got it.

Run in in the Sevens on subscription on subscription revenue growth.

Theres, not a lot, but a little bit.

A little bit of noise at the year on year over year compares.

And the way, we are playing with some stuff up.

Last year, but when.

When you take were.

We're saying, 4% to 5% now with the.

Nearly one time down so it's.

It's primarily one time that maybe 100 basis points out of that.

On the subscription side.

It's the one time and I've been using the word onetime more carefully Patrick and I both use it more carefully.

Petzel software deal also drive a good bit of PFS.

So let me say one time.

Where we're putting the pf associated with those license deals for the same.

And to this day.

You bet.

Anyway. So okay. So it's not just a perpetual but one time is where the majority of the.

Shortfall from the way we saw the year in our guide.

Yeah.

We see it today.

Got it that's super helpful. Thank you.

And in terms of.

The reduction I am also curious if there is any specific verticals or.

Areas of the business from a product perspective.

Or you're saying no Brian overall in Iraq.

Yep.

You know you've known me for a while I'm raw data in spreadsheets and roll around in my bed at night on exactly that question. It is the strangest thing it is large deal across the board.

I'll go through it.

All your ways from Sunday and the metrics, we're giving you are the metrics that matter. It is deals over 250 K.

Deals over $500 million debt.

They have slow down.

Philosophy.

Im certainly pleased on the new business side.

Our new business generation, both in terms of number of deals.

In total with five.

We're.

Off in <unk>.

Existing customer transactions as I said about 10% year over year.

But its that Theres no theres no real specific one thing I'll point out.

And then I want him all around at night thinking about this stuff.

The state of Florida, our slide business with solid.

This led business was solid this quarter. So that's not even what I would point out Brian is the across the board.

Slowdown a larger transaction.

Great.

Thank you for that and just a housekeeping question.

<unk>.

Did you all report the total enterprise customer count or is that something you're not reporting any more.

It ran roughly in place from the last quarter, Brian We had.

Similar to what you saw last quarter.

We.

We had headwinds related to as we continue to end of sale in the plant shutdown noncore assets.

Without that headwind, we would have added a net roughly 70.

Okay.

Perfect. Thank you for the time gentlemen.

Thank you Beth.

Thank you and the next question comes from Scott Berg with Needham.

Hi, everyone. Good morning, and thanks for taking my questions I have a couple.

Dave you've obviously spoken a lot about the onetime revenues that are down, especially the government.

I guess kind of verticals or at least that's my assumption is heavy and the government verticals, but.

Any change of.

When rates there any pricing pressure or is this just really good continue to reflection of those deals just arent ready to.

Decisions made on or just not in the pipeline in general Thank you.

Yes.

On the government side it is.

Again, it's a slowdown in their decisioning processes I talked to you okay.

A couple of.

Close network people.

Companies with similar spaces Theyre seeing the same four especially.

In Europe , getting a larger commitment so it's a slowdown we do have a couple of nice opportunities.

In the second half, but the way.

Yeah, the way things are going.

Yes.

We are adjusting the full year to reflect that.

The big deal environment through the rest of the year.

Got it helpful. And then my follow up question is on the CIM deals the number of deals continues to trend higher year over year.

Pricing is down.

Kind of package size, maybe a little bit smaller just to drive that initial footprint with some customers, but how should we think about the combination of them.

Modules that are comprising these deals it sounds like youre seeing a shift of customers.

Customers historically bought within the <unk> deal.

Maybe what their purchase each day as that may be the right view or combinations that are maybe noteworthy.

One of the things.

Remain very positive on so when I roll through that.

The gross retention in larger customers remains a real strength for us.

The opportunity to cross sell and up sell with those accounts as we move but yet.

The attach add on focus the growth focus.

Yeah.

Really strong the big movement in the <unk> journey.

Goes from.

Mass notification, which improves your resilient posture.

Yes.

Sure.

Yes, much more responsive in a critical on that to add the visualization risk component risk.

Intelligence to part of the product, that's a really big step up.

In <unk> journey.

And so we're doing a better job leading that smaller.

And.

And then allowing the assets and contracts to grow over time that would have been in the past and.

I alluded to earlier.

Targeting that.

Mid market, but that 10000 to 49000.

User enterprise.

Especially on the new customer insights because we've got such great penetration already.

And organizations ability at this point.

Thank you and the next question comes from Michael Berg with Wells Fargo.

Alright, Thanks for taking my question I just wanted to follow on to Scott's question earlier on the large deals.

That's a great question.

Q1, Q2 Q1.

With relatively steady.

Steady for us.

Steady on the deal size decline, which is the number one thing that we're concerned about.

They put a positive spin on it we had won over $1 billion deal.

In Q1, and none over Q2.

So we had.

Banner.

Yeah.

Volume in the stock.

And the smaller deal size in Q2 than Q1.

Yes.

But we were down at Q2 over Q2 in a number of attractive.

Transactions into installed base so.

I call it.

Steady Q2.

From Q1, not a deterioration.

Last two weeks of June were.

Yes.

Great.

Less than we had expected and so.

That was a challenge and we have been.

Florida, we have some of those interests into this quarter.

Again, as we stand back from the year.

We're seeing we saw.

Q2 relatively steady from Q1.

Adjusting for expected tougher.

Tougher fiscal environment.

Got it thank you and a quick follow up did you say that the perpetual deals is impacting quarterly revenue by 1% to one 5 million in the second half.

No.

What we did say on the one to one 5 million that was in Patrick.

That's <unk>.

Proactive cost adjustments, we made in early July that's really going to help you bridge.

The EBITDA guide.

If you look at that.

Round numbers $8 million down revenue guide, how you're holding that how youre holding the 85 while that.

The $8 million part of that is professional services. So you don't have full margin, 75% margin you are at $6 million.

And.

One five per quarter cost savings against the three of that and then the cost discipline that we have been evidenced.

Through the first half, enabling our EBITDA be in both Q1 and Q2 that discipline.

It is through an <unk>.

Let's say on a path for that EBIT guide despite.

Shortfall.

Revenue.

Helpful. Thank you.

Thank you and the next question comes from Ryan Macwilliams with Barclays.

Hey, guys. Thanks for taking question just one more on large deals.

To hear your opinion on how much of the headwind to these deals is an ever purchased control versus macro like do you think of our bridge is just more later cycle for software purchasing and it just takes some time to work through the cycle and for macro improves to then get bookings and some of these sales efficiency metrics to improve.

Yes, Hi, Ryan Good question again, one that I've been turned around.

Eric Spreadsheets.

And in my bed at night.

To answer your question I feel like it's 70 30.

730 macro micro that.

Company specific things.

Yes.

We are.

License based on contact and so.

Those contracts are primarily employees and we're focused in.

In the over 50 barrels of employee vertical in those companies.

They are hiring at the rate they were.

We do expect third company to be the strongest coming back out of this turnaround but.

Everybody has taken a turn.

On.

Our profitability and.

I think it gets her second term of the crime because youre, suggesting they start to look at really driving productivity and we have really strong.

ROI metrics.

We are in our core customer base.

They get from their security operators by implementing a critical event management platform are really strong I think it returned back towards which software it's going to make our teams more productive.

And really drive productivity gains.

And in a good spot.

Through this.

I appreciate that.

Please proceed to <unk> sales still doing well from an individual product perspective.

Callout on the momentum for mass notification and safety connection.

One of the things that I'm pleased about year over year, Patrick alluded to it.

Gross retention.

Is improving especially in the mass notification side, we've got.

We've got that.

The improvement from negative growth.

So slightly positive growth.

Through year over year, so that's a trend I'm actually pleased with.

I should.

And maybe I overemphasized, but I feel like I should emphasize more the really great work that our product teams are doing.

Started with the.

Our premise that desktop focus on investing on our core.

Is the right approach and we're getting really good feedback with the investments and the improvements we're making.

Driving more value for our existing customers that that is a bright spot for me.

And and how we're executing to deliver.

Here's some color okay.

Thank you and our next question comes from Mike Latimore with Northland capital markets.

Great. Thanks.

How about just the pipeline growth.

Okay.

Is it growing nicely because the pipeline slowed just overall pipeline growth.

Yes.

Pipeline is the macro.

He is not going well because we're the bigger deals arent there.

A loss of <unk>.

The velocity is it.

At maintaining or maybe even slightly improved especially on the on the new side and so that's what really demand where you want to sell what customers want to buy and the customers are wanting to buy it.

Yes.

So smaller amounts right now.

Okay.

The CE and deal count obviously strong.

How many of those were upsells into kind of the global 2000.

How has that pattern playing out here.

That's a good question I don't have that in front of me.

From looking at the.

The deal last.

As Ive said were.

We're very very nicely penetrated in North American enterprise with over 50000 like there are there are more to land, but our penetration rates there and the new logos are.

And the next year down.

The size of account for sure.

Okay, and just on mass notification it sounds like a little bit of growth there.

Which is good is that.

What would cause that is that just more focus is at a pricing changes that product enhancements.

Okay.

Primarily focus which has manifested itself first in the product organization. We've taken time as I said to go back and make sure that that segment of the market.

Hum.

We are.

Yes, we're investing there.

Make sure that we retain and grow the core customers, but that's a really nice things ive been listening carefully.

The county.

Counting emergency managers across the country at work.

We're building improvement.

Our core flagship product and.

Joining me I'm really I'm proud really proud of the work that the team has done.

The double down there were tightened in.

The integrations with other parts of the platform to make it even easier to use.

We're definitely getting some some attachment.

Okay. Thanks.

Okay.

Thank you and the next question comes from Kash Rangan with Goldman Sachs.

Hey, guys. This is jacob on for cash and for taking the question I wanted to ask how many of these <unk> deals and I apologize touched on earlier, but how many of those deals.

Her.

Additions this quarter were a result of upselling from the existing customer base versus net new customers.

And then if we could maybe touch on the dynamic around.

The International segment, it seems like it's been a little bit of weakness.

The last few quarters, so anything you're seeing there.

Uh huh.

It might be willing to call out.

Yes that new.

<unk> again is a little bit of a bright spot smaller, but the new deals or percentage of rentals like top five I think three of the top five.

Transactions, new transactions worst <unk>.

Thats.

That's something I feel good about.

International.

Yes, I think it's no secret that.

<unk> has.

Its own challenges, especially the U K, where we have a good bit of business.

We're solid there.

But not the same level of growth that we're seeing in prior years again, we've been more disciplined with our investments, particularly.

Internationally, where.

We were.

Yeah, our Overinvest is a strong word, but we were invested heavily penetrated those markets because it will make a more disciplined.

CAC based investments we have been.

Adjusting international.

A little bit more than North America.

Sounds good thank you.

Thank you and this concludes our question and answer session I would like to return the Florida management for any closing comments.

Thank you Keith and thank you everybody for joining us on our second quarter call, Patrick and I in line that will be a very active and especially in the next two or three days with investors and some conference activity look forward to connecting.

With many of you in the next 72 hours.

Hopefully all of you again in 90 days when we report our third quarter results.

A great day.

Thank you. The conference has now concluded thank you for attending today's presentation.

Since your lines.

Q2 2023 Everbridge Inc Earnings Call

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