Q2 2019 Earnings Call
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Good afternoon, ladies and gentlemen, and welcome.
Everbridge Inc. second quarter 2019 earnings conference call.
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As a reminder, this conference call is being recorded.
I would now like to turn the conference over to host Patrick Wrigley CFO . Please go ahead Sir.
Good afternoon, and welcome to ever Bridges earnings Conference call for the second quarter of 2019. This is Patrick Buckley Senior Vice President and Chief Financial Officer of Everbridge with me on the call today are Jamie Ellertson Executive Chairman.
And David Meredith E Oh.
After the market close today, we issued a press release with details regarding our second quarter results, which can be accessed on the Investor Relations section of our website at <unk> Dot Everbridge Dot com.
This call is being recorded and a replay will be available on our IR website. Following the conclusion of the call.
During today's call, we will make statements related to our business that may be considered forward looking under federal Securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date.
We disclaim any obligation to update any forward looking statements or outlook.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
These risks are summarized in the press release that we issued today.
For a further discussion of the material risks and other important factors that could affect our actual results. Please refer to our filings with the FTC, including our recent 10-Q and 10-K filings.
Also during the course of today's call, we will refer to certain non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in our press release.
Finally at times in our prepared comments or responses to your questions. We may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results.
Please be advised that we may or may not continue to provide this additional detail in the future.
With that let me turn the call over to Jamie and David for their prepared remarks.
Thanks, Patrick and thanks to all those joining our Q2 2019 earnings call today.
Today I'm, joining the call as our executive Chairman, a new role I took on as of David Meritas, joining everbridge as CEO on July 15th.
I will do the majority of the presentation today, given I held the CEO role for all of Q2.
And for our next quarter's call I will switch seats with David and he will address all the Q3 operating results with Patrick covering financial details and I'll refocus on a few strategic topics.
During Q2 and continue into July we have been very busy.
Q2 marks the twelveth consecutive quarter of exceeding our guidance.
As we continue to expand our leadership and the critical that management market revenue in the second quarter of 48.4 million was up 35% from a year ago and beat the top end of our guidance by $300000. Our revenue upside flowed straight to the bottom line with adjusted EBITDA coming in at <unk> point Fourmillion also well ahead of guidance.
Before I begin my review of our Q2 highlights I feel compelled to mentioned the terrible acts of violence that occurred in America over the past few days.
We are deeply saddened by these events.
With an increasing number of often deadly critical events affecting all of US we believe our mission at Everbridge provided the best technology and people focused on keeping people safe and business is running.
It is more relevant and important than ever before.
We have numerous customers in both the affected areas of El Paso, Texas in Dayton, Ohio, and our teams continue to support and provide out rich outreach during this difficult time.
Now let me proceed with a review of some of the most important activities occurring in Q2 that position us to further capitalize on the growth opportunities ahead.
During the second quarter, we had a big win for our population morning solution with a countrywide Australia deal. This win was.
Completed compound complemented by multiple new and expansion population warning projects in Asia, and Europe , our best New sales quarter since acquire you a mess all of which support our strong international growth trends, the very real opportunity for population warning going forward.
And in June we announced introduced David Meredith to all of you attending our second analyst day event in New York City, Dave has now aboard an active engaged in running the business I'll ask David to share some of his impressions. After his first few weeks as CEO in a moment.
Given the identification of risks and threats.
Our critical first step and identifying potentially impactful events for our customers. The richness of risk in threat data sources has always been key to our fundamental cm value proposition.
To further extend our leadership in risk data, we announced on Friday of this last week, our latest acquisition NC for to bring together the best risk and threat data solutions with the leading integrated CGM platform I'll get into more detail on this later, but we're excited about both the strategic benefits of this acquisition as well as the compelling financial synergies, we expect to achieve.
During the second quarter, all three components of our growth strategy made important contributions to our results. The success, our critical that management or CMS I may refer to it platform is increasingly driving new and gross sales were in the early stages of what we believe is a large growth market, where every quarter. We continue to provide key proof points or the potential for long term market expansion.
We signed the largest number of new and grossi m. deals ever at Q at eight in Q2.
As we previously mentioned to date.
Staggered our initial Seatme go to market effort, primarily focused on North America, corporate and healthcare spaces and these verticals produced a growing number of new customer transactions in Q2.
We also were polled into additional markets and geographies during Q2 in response to specific customer requests for CES.
The first was our international win in Asia at the overseas Chinese banking Corporation or owes CBC, which is one of the big three Singapore in banks, all of whom have become customers in the last two years as well as our first cm win in public transportation market with New York Metropolitan Transit Authority, the largest municipal transfer transfer organization. The us in the second largest in the world with over 10 million passengers.
Per workday.
We believe this pull into new markets.
That we are not yet proactively addressing provides a positive glimpse at the broader opportunity ahead of us as RCM go to market strategy expands in 2020.
Our second growth driver is the continued success of population alerting, including our population warning.
And core mass notification applications in the second quarter, we sign marquee deals like the country of Australia, a very large multibillion dollar per year multi year population warning deal as wells mass notification deals with two new top 25 us cities.
Our third quarter, our third growth driver is our almost 4700 enterprise customer base with whom we saw continued high retention rates in Q2, as well solid momentum with our cross and upsell success, including significant growth deals such as Whirlpool Thomson Reuters and intended.
Now a few key metrics in addition to our strong cm wins in the quarter. Our Q2 results show continued progress on all our key financial metrics we added.
A record number our second highest number of net new enterprise wins at 135 in Q2, ending the quarter 4667.
Our average selling price for these customers over the trailing four quarters also grew reaching $79000 in the second quarter of 72% from 46000 a year ago.
As previously mentioned, we added eight new cm customers in the quarter contributing to our overall ASP growth were 88 multi product deals that we signed in Q2 compared with 82, a year ago. During Q2, we signed 30 deals valued at over $100000 per year up 36% over Q2 2018.
And 50%, 57% of all new and growth sales were from new products compared to 46% a year ago.
Our international business continues to grow at a very healthy pace, representing now 23% of total revenue in the quarter compared to 19% a year ago.
Our revenue mix was fairly consistent in Q2 at 55% for corporate vertical 33% for local state and federal government and 12% for health care as we continue to see growth from all our vertical markets.
Well every one of our quarterly metrics continue to improve in Q2, some achieving new records and want to remind you that given the very large deals involved in RCM and public warning business. This quarter metrics can fluctuate, but the long term trends are clearly going in the right direction.
Now let me provide some additional color on the deal activity that helped drive the strong metrics.
The cm marketplace, we saw several important trends and events that occurred in Q2. This past quarter marks the first time, we saw customers pull us into new markets, both geographies and new verticals, where we had previously not targeted are actively sold RCM solution. First example was New York Metropolitan Transit Authority, the largest transit authority in North America, which sought out RCM platform and selected Everbridge critical that management, marking the first time, we have sold into this historically strong public.
State and local government market.
The second example would be our sale to CBC in Singapore, where the bank request or platform again by name a head of our international launch in 2020.
Both of these examples demonstrate our leadership position in this rapidly expanding market as well as our platform differentiation versus other point solutions and in Q2, we saw new customers like the largest resort gaming company in the West Coast to chose RCM solution driven by a brand new use case.
This large hospital organization wanted to enhance the security and safety.
Hospitality excuse me organization wanted to enhance the security and safety of their over 5000 mobile employees, including housekeepers and crew working across their large resort property at all hours of the night RCM solution powered by visual Command Center, VCC and safety connection will enable the security and operations teams to immediately identify employees that have triggered a panic button no their exact location and then respond.
All to help keep workers safe.
And this new use case is important because it's driven by the surge in wearable devices, a specific growing IAH to safety and security market driven by a growing body of regulatory requirements that mandate industries like hospitality to provide panic button or remote safety solutions for mobile and remote workers legislation requiring hotels to provide panic devices to protect and hotel employees has already been signed in large states like New Jersey in Washington, as well as being adopted in cities like Chicago, Miami Beach in Sacramento to name a few.
The last trend I'd like to highlight is the inclusion of our newest application crisis management and our new cm deals.
Customers like Labcorp and no CBC among others chose crisis management as a component of their new cm purchase as well as existing customers like Red hat, who added cm to an existing implementation.
The release of Cm crisis management in Q1 marks the fifth application RCM Sweet added to our risk data Visual command center mass notification and safety connection applications totaled five apps and RCM solution, which drove an increase sales price of between 10 and 25% in these new cm deals.
In Q2.
These trends helped us in closing our growth win in Singapore with those CBC. The second largest bank in southeast Asia, who had a DCC to their existing implementation. The six figure transaction on those CBC represents our first VCC and cm customer in Asia.
Our win at the New York Mtpa was a new business deal with a value of over $500000 in annual contract value Everbridge now serves all five of the busiest transit agencies North America. We believe this important new customer win was facilitated by the network effect of our strong existing presence in the Tri State area, where we already have numerous public safety and government implementations from statewide deals in New York in Connecticut to leading cities and states departments across the region.
In addition to these Q2 cm deals we closed several other important wins, including.
Contracts with organizations like momentum worldwide, a leading global advertising and marketing agency with employees located around the world, who hosts and staffs global marketing events in diverse locations.
Labcorp in S&P, 500 company and worlds, leading health diagnostic company, who purchased our complete suite, a cm solutions as well as one of the largest providers electronic design automation Soffer, who is also a top 20 software company worldwide.
Notably all of these wins, both new and growth deals represented six figure transactions.
Now little color on our population alerting business I remind you. This category includes our mass notification instant communication community engagement and primarily for international markets, our public warning solutions.
The second quarter was highlighted by our country wide win in Australia, a public warning solution will be used to power emergency alert, Australia, providing population, let alerting to help reach the country's over 25 million residents and approximately 9 million annual visitors in a multi year multi million dollar contract.
This initial award includes our public warning front end, which will be connected to each of the three principal Australian carriers location based infrastructure applications. However, in Australia is case only telstra.
As a carrier has an existing location based alerting solution in place.
Providing everbridge the opportunity to up sell two of the carriers.
Our location based solutions.
Our location based or L. bass solution as I refer to in the future.
So can significantly grow this overall new customer relationship.
During the quarter, we added several other new and growth population alerting wins across all our markets, including corporate health care government Education International first speaking of the potential for our combined population alerting and location based alerting opportunities, we closed our fourth Singapore and carrier for our joint pass an L. best solution.
We will enable this carrier to analyze and identify specific mobile devices connected to its network in an affected area and then communicate by a two way SMS messages in multiple different languages during an emergency situation.
This past and L. best deal came in at over a $1 million in Q2.
We also closed several new deals for secondary population warning use cases within countries, who had already purchased our core pass or L. best solutions, beginning with Singapore's Ministry of home Affairs that we utilize the existing solution to work with the department of immigration to protect visitors.
And in the Nordics from attend Corporation will be leveraging our Oslo L. bass implementation to notify its large employee population related to safety concerns.
In North America, New population alerting wins with our mass notification instant communication and community engagement solutions included a multinational electronics Corporation, who is focused on standardizing their critical communications across multiple divisions for the organization.
Similarly, another leading high Tech organization in the semiconductor space chose Everbridge, and then and I see to automate their playbooks and provide best in class communication to the over 300 global facilities and 40000, plus employees other corporate and community engagement wins other corporate Massification and community engagement wins in this category included large growth deals with name brands like Whirlpool, who committed to a 300000 dollar annual contract value expansion of the current implementation door dash, who rolled out mass notification as well as numerous other leading financial organizations manufacturers as well as large service organizations in healthcare, We signed New York City Health and Hospital Corporation, the largest municipal health system in the us with over 60000 employees and 1.4 million patients for an ACB over 300000 tower health, a 1200 bed health system, serving over 2.5 million people in Pennsylvania raise children Hospital, San Diego and Mercy Hospital in Chicago to name, but a few.
In the state and local government category, we had a very busy Q2 close a number of new top 25 cities in the quarter like Nashville, one of the 10 fastest growing cities in North America, as well as collateral Colorado's capital and most populous city Denver.
In addition, other major cities included Saint Louis We also continued our success with major state agencies with names like New Jersey Department of Treasury, who along with the state police Homeland security and the department of Environmental protection are spearheading a statewide communication solution.
New York.
Which I've already mentioned broadest wins like the New York Mtpa and the New York Municipal Health Corp, and finally in Florida.
Wins that Florida Department of Corrections and the Department official Wildlife Conservation Commission became our 14th and 15th respective state agencies to select and implement Everbridge mass notification.
Q2 was a strong example of our network effect were existing customers like the state of New York The City of New York and all the public transportation airports can positively influence our ability to win additional customers or Florida, where we are rapidly rolling up the entire state government leveraging our statewide implementation.
Additional public market wins included agencies like Hawaii Department of airports, Texas Workforce Commission, Virginia State police swells top as well as top county is like three more North Carolina counties. Following our recent success in signing the most populous county, North Carolina last year as well as cities like subject, Virginia and liquid in California.
And the final state local government segment higher education, we signed new customers such as Tulane University as part of a proactive campus safety initiative as well as University of North, Texas system, Caslen University, and Saint Mary College to name a few.
At the federal level are fed ramp authorization continue to be a key driver of our success during the quarter, we continue to expand into the federal and defense space with a safety connection contract at the U.S. Nuclear regulatory Commission.
The NRC chose Everbridge for both critical communications end mobile safety trap travelers and field personnel and other federal win was the Bureau of safety and environmental enforcement is responsible for boating safety.
Protecting the environment and conserving resources.
Offshore through vigorous regulatory oversight enforcement agency with a large number of field inspectors was a good fit with our dynamic location capabilities that enable the notification of mobile personnel whenever and wherever a critical that happens.
One more example of our federal market success was one of the largest leading government solution integrators, who sought out and emergency notification solution given our strong track record mass notification and this consulting organizations diverse and field based mobile workforce, we were able to upsize. This win into a six figure MN and safety connection deal where fed ramp authorization was again, a key factor and finally, one last example in the federal market would be the Marin.
VA Medical center, who moved over from a competitor to Everbridge to leverage safety connection.
Now some color on our most successful applications like visual command center safety connection and IP, alerting, which continue to grow rapidly in Q2, including impressive gains with our VCC solution that achieved 129% growth over the same period a year ago.
Keep it alerting wins in Q2 included one of the largest credit rating agencies in the U.S.
A leading hotel brand.
Christ Hospital system, it's an added in Cincinnati, where this over 500 bed facility spread across over 100 locations in Ohio stopped a competitive process and instead selected our integrated critical communications solution, including IP alerting and approach that resonated with the upper management.
Our overall IP alerting business grew 41% year over year.
Our VCC and safety connection businesses continue to grow rapidly in part fueled by inclusion cm deals for VCC recent quarter wins included the previously mentioned momentum.
Labcorp, Eurochem Ta and LCB, where the customer specifically added HVCC to an existing and then I see I see implementation in a six figure deal as well as customers like Thomson Reuter, who added DCC on a standalone basis.
On the safety connection side, we posted strong new and gross sales that were up 59% on a trailing 12 month basis, including net new wins.
Like the Canadian Imperial Bank, and commerce or CBC, one of the big five Canadian banks with over 40000 employees for an over $200000 HCV deal, including men and safety connection and a leading mass media and entertainment conglomerate also existing customer who wanted to optimize the security business programs and consolidate multiple systems into one single platform again, resulting in another $200000 plus growth deal.
Another new safety connection win was with the Nexus, a leading life Sciences organization and one final safety connection highlight would be one of the largest us companies specializing in tree pruning and vegetation management for utilities and government agencies asked blood tree experts employs over 34000 people. Many in remote field locations that can be impacted by everything from the rapid onset of inclement weather to broader dangers like wildfire.
Ultimately our ability to help inform and protect employees in these remote locations depending on the severity of an incident made us the right choice for this employer.
Now allow me to turn to our international segment, where we continued our string of strong results. In addition to the population alerting wins already mentioned, we saw a key wins in Europe with Edinburgh Airport, a leading banking software company.
The department of digital culture media and sport in the UK as well as booking dot com in the Netherlands.
A leading conglomerate Omari, Saudi Arabia, and group Bimbo, one of the largest companies in Mexico, who became a customer of everbridge by selecting safety connection and IP alerting to be deployed across thousands of personnel in more than 10 global locations. All examples of new Europe , Middle East and Latin American new customer wins.
In addition to these new wins, we also saw numerous upsale our growth transactions with organizations like Vocalink purchase of our IP alerting solution for crisis management solution selling into existing customers like Prudential and Europe clear in the UK in the Scandinavian market wins with every and Norwegian Air and in Southern Europe , We saw significant expansion of our relationship with Airbus who added safety connection in the second quarter in Asia, we saw wins at leading organizations like adequate insurance for MN SP power selecting safety connection or CLP.
As a cross sale example.
All of these new and growth transactions combined with our strong population alerting wins lead us to a continuation of our rapid expansion in our international business in Q2.
Shifting gears to our recently announced acquisition of NC for as I mentioned in my introductory comments. This is a strategic deal.
As we have previously stated our M&A activity would focus on targets that could broaden or deepen our CRM platform.
Org geographic Trent.
Targets that can accelerate our growth in the new markets. The NC for acquisition accomplishes the former combination of energy for real time threat intelligence and analysts teams with Everbridge is market, leading CRM platform creates the industry's only end to end threat assessment and incident communications and management platform for reducing the impact of internal and external threats to employees and assets to keep people safe and business is running.
Now a few more specifics about the strategic nature of the transaction first and see for as a company, we know well as we've been strong partners for more than 10 years and today count over 150 joint customers.
Second and C delivers a combination of thousands of the most trustworthy threat data sources from across the globe with an experienced team of over 40 incident analysts to create the industry's leading source of verified data and hyper local threat intelligence.
NC for generates nearly 700 incident reports and more than 27000 geotagging.
Alert each day for many of the world's largest businesses global organizations and government agencies, including over 100 of the Fortune 500, a key target market for CEO .
Our CFO value proposition begins with the ability to identify risk or threat event either manmade.
Or natural disaster.
That could impact our customers assets people are locations and C broad coverage of the risk and threat landscape enables RCM customers to identify the events that matter to the most and begin remediation efforts faster to protect their people operations and brands ultimately driving a better ROI for cm with our largest customers.
Going forward, we will combine our existing global intelligence operations.
And risk intelligence solution with a substantially larger NC for real time threat intelligence analysts teams together and see forward Everbridge will provide the most comprehensive solution for enterprises and government agencies to reduce the time to know.
That a critical that is occurred through to a remediation all from an integrated single platform cm.
With the total deal size of approximately 83 million. This transaction is our largest M&A transaction to date as our press release stated the largest business component of this overall transactions been closed. However, additional components are not expected to be closed until the end of the third quarter.
The acquisition upon completion is expected to be accretive to everbridge as non-GAAP financial results within 12 months and we plan on providing further financial details after completion of the entire transaction concluding my comments on the acquisition I'd like to emphasize that we believe NC forward the real.
Accelerant for our business with over 100 of the Fortune 500 customers already on the contract. This combination can help introduce cm and drive continued penetration into our most strategic market.
Now turning to a few operational comments from Q2, I must say our biggest operational news occurred in June as we announced our new CEO David Meritor. Many of you have heard and met David at our June Analyst day event, but for those of you new to the story David is an accomplished tech exec, who most recently served as CEO of a multi billion dollar cloud leader rack space.
Which I might add is a satisfied customer of everbridge.
His earlier career also includes numerous high growth smaller organizations as well as a number of scale billion dollar plus successes a key reason why I believe David is the right person for the job to lead Everbridge is continuing growth story with David's arrival I have moved into my role new role as executive Chairman of Everbridge and allow me to stress one key management point, we now have one person driving our bus and managing all day to day operations average and Thats David.
I remain committed everbridge success, but we'll do so as executive chairman assessing David with a strategy with a particular focus on M&A and leading our board of directors.
David has already hit the ground running I'd like to share some of his thoughts after nearly a month the helm David over to you.
Thanks, Jamie.
Good evening, everyone and for those analysts and investors, whom I met at the Everbridge analyst day, it's good to reconnect and to everyone else I look forward to meeting you at a future industry or Investor Conference.
As Jamie began this past weekend was a somber reminder of the impact and frequency of critical events around the world.
The Everbridge mission is committed to help our customers and users prepare for and mitigate these events to keep people safe and their business is running.
I can say that after a few weeks here.
Im even more convinced about the importance of our mission.
The scope of our opportunity and the talent of the Everbridge team.
First one of the things that usually harder to tell before you actually start working somewhere is what the cultural fit is like and how the company has values and mission will mess with your own as it relates both to day to day activities as well as to long term thinking.
On that front I can now say that we are 100% in alignment on the job at hand, and the entire leadership team is committed to our core mission of keeping people safe and businesses running even during the most extreme events.
That's been evident in our results to date and I expect that our momentum will only strengthen overtime.
And my view of Everbridge as fulsome as it's been developed over the last few years as both the customer and now as the new CEO .
As a customer I got to see Everbridge his capabilities.
Not only to give us peace of mind, but also in action at the time of crisis.
It was in that latter moment that I really experience and appreciated the power of the Everbridge platform.
And those initial customer impressions were submitted further when I did a fair amount of due diligence to get to know what I would be in for.
In speaking with the board the senior leadership team and most importantly, a number of existing customers.
I began to appreciate not only the critical nature of our work at Everbridge and protecting people assets businesses and their processes, but also the size of the opportunity.
And finally, a few words about that opportunity.
When you look at many of the high growth Tech companies in the market today, you often see a single large market opportunity driving the long term success of the entity.
I am excited that Everbridge has a multifaceted growth engine that begins with the customer base that renews at industry, leading levels and enables net retention of 110% plus.
In other words, a solid base to support growth.
In addition to this healthy customer base, we have three avenues of growth.
First the simple cross sell and up sell of nine software applications into our base that currently averages less than two products per customer.
Second.
Our very large population warning opportunity that is just beginning to hit its stride with new countrywide opportunities like Australia, and Singapore in Q2, well ahead of the massive you opportunity available to us in 2020 and beyond.
And finally.
Our most strategic opportunity cm.
Where we continue to expand our solutions suite and establish our position as the de facto leader in this important new multibillion dollar global market.
For all of these reasons and because of the quality and commitment of the team I've met thus far it everbridge I can tell you we have a truly special opportunity going forward to continue to build long term value.
Now, let me turn things back over to Jamie.
Thanks, David.
Finally, before I pass the call to Patrick I wanted also mentioned that in Q2, we received the prestigious ISO 27001 certification International standard outlining best practices for information Security management systems. This certification demonstrates everbridge as global commitment to a repeatable continuously improving risk based security program. We also announced that Everbridge is the only us headquartered emerged in education provider to obtain Germanys C. Five compliance standard and accreditation for cloud operations.
In summary.
In Q2, we delivered another strong quarter with results that exceeded our guidance driven by some exciting new trends accelerating the demand for our most strategic platform cm combined with continued strong execution around our global population alerting business. Both internationally with large population warning wins, such as Australia, Singapore, and the Nordics, but equally with core emend wins in leading top cities and counties in North America. Our Q2 results also illustrated growing deal sizes, increasing multi product wins and of course record number of CME deals and finally, our NC for acquisition further strengthens our leadership position in this market and we are better positioned than ever to capitalize on the multi billion dollar opportunity. We set ahead of US now I will turn the call over to Patrick for more details on our financial performance and our forward guidance Patrick.
Thanks, Jamie.
I will provide some financial highlights from the second quarter, and then review our guidance for the third quarter and the full year.
Revenue in the second quarter was $48.4 million, an increase of 35% from a year ago and above the high end of our guidance range with the anniversary of our USS acquisition at the beginning of April our growth in the quarter was primarily organic as we balance investing in our future growth with managing costs. Our revenue Overperformance went directly to the bottom line with adjusted EBITDA that was also above the top end of our guidance range at positive zero point $4 million.
Our growth continues to be driven by new customer additions larger deal sizes and expanding relationships with existing customers.
Our dollar based net retention rate remains above 110%, reflecting the significant value and satisfaction, we provide to our customers. We ended the quarter with 4667 enterprise customers an increase of 135 from the end of the first quarter.
Looking at the details of our piano unless otherwise indicated I will be discussing income statement metrics on a non-GAAP basis.
A reconciliation of GAAP to non-GAAP measures has been provided in the earnings release, we issued earlier today.
Gross margin was 71.1% roughly in line with gross margin of 71.5% a year ago, but an improvement of over 200 basis points from the first quarter due to the combination of a smaller purchase accounting impact on acquired deferred revenue and improving efficiencies with scale.
As always keep in mind that individual quarterly gross margins may fluctuate from time to time and should not be considered indicative of any trends.
Total operating expenses in the quarter were $36.4 million, an increase of 24% from year ago, reflecting the combination of continued product and headcount investments. In addition to incremental expenses of acquired businesses.
Offset by improving operating leverage.
Expenses in the second quarter included approximately $350000 in M&A related costs.
As I mentioned adjusted EBITDA was a positive zero point $4 million compared to a loss of negative $1.8 million in the year ago period and was above our guided range, even after those M&A related costs.
Net loss in the second quarter was negative $2.4 million or negative seven cents per basic share, which was also better than our guidance and an improvement from our year ago net loss of negative $5.1 million or negative 18 cents per basic share.
On a GAAP basis, our net loss was negative $12.1 million also better than our guidance range and our performance in the year ago quarter.
Turning to our balance sheet, we ended the quarter with $238.6 million in cash cash equivalents and short term investments.
Compared to $258.3 million at the end of the first quarter.
Primarily due to a free cash outflow of negative $15.2 million in the quarter consistent with historic seasonal trends.
Total deferred revenue was $98.8 million.
At the end of the quarter, an increase of 19%.
From a year ago.
As we've noted on prior calls our deferred revenue balance at the end of any given quarter can vary due to a number of factors as such deferred revenue is not always a meaningful indicator of the underlying momentum in our business from a quarterly perspective, though we believe its upward trajectory is directionally relevant on a longer term basis.
Note that our balance sheet at the end of the second quarter does not include the impact of our NC for acquisition, which was just announced.
As Jamie indicated we are acquiring NC for for approximately $83 million made up of approximately $52 million in cash and approximately 321000 shares of our common stock.
Jamie has reviewed the strategic highlights of the acquisition of course, we expect the acquisition to provide significant financial benefits as well.
The acquisition includes NC fours risks center and emergency operations Center solutions as well as the NC for brand, but does not include NC for cyber security or law enforcement solutions.
Given that certain components of the transaction will not be finalized until the end of the third quarter and that purchase accounting cannot be completed until then we will not be updating our guidance for the acquisition until our third quarter call.
That said as we indicated in our press release last week, we expect the transaction to be accretive to non-GAAP financial results within 12 months.
Now, let me turn to our outlook for third quarter, and our increased guidance for the year.
We had a solid first half and are optimistic about the second half of the year our outlook for the rest of the year includes a minimal contribution to revenue for known and see for contract.
Most of which will be recognized in Q4 at the same time, we started incurring expenses related to NC for this month, which are also considered in our guidance.
We expect this near term profitability headwind to turn into a tailwind within the next 12 months.
And we expect the transaction to ultimately be a healthy contributor to our overall profitability as we realized synergies we will provide additional color on the anticipated impact of the NC for acquisition during our third quarter earnings call. Following the transaction is anticipated full close near the end of the third quarter combined with the Finalization of the purchase accounting impact on acquired deferred revenue.
Given that we have yet to completely close the NC for transaction and with our CEO transition in process. This quarter. We wanted to continue our prudent and mature approach to forward insight with the third quarter guidance of we anticipate revenue of between 51.3 and $51.6 million representing growth of 32% to 33%.
We anticipate adjusted EBITDA to be between $1.2 million and $1.5 million, including the impact of acquisition costs and a partial quarter of expenses for incentive for.
We anticipate a non-GAAP net loss of between negative 2.1, and negative $1.8 million or a loss of between negative six and negative five cents per share based on 33.2 million basic weighted average shares outstanding.
Stock based compensation expense is expected to be approximately $11 million in the third quarter.
For the full year, we are increasing our revenue guidance to a range of $198.4 million to $199.0 million representing growth of 35% based on our strong second quarter performance continued momentum and a minimal contribution from NC for based on known contracts.
From a profitability perspective, we are maintaining our adjusted EBITDA guidance in the range of $4.2 million to $5.2 million.
While this range is consistent with prior guidance the expenses related to the NC for acquisition could result in adjusted EBITDA towards the lower part of this range.
We now expect a non-GAAP net loss of between negative 8.4, and negative $7.4 million for the full year 2019 or between negative 0.25, and negative zero point to two cents.
Per share based on 33.4 million basic weighted average shares outstanding.
This guidance assumes estimated stock based compensation expenses of approximately $37.5 million for the year.
In summary, we are happy to have extended our track record for exceeding guidance with strong top and bottom line results in the second quarter.
We are optimistic about the second half of the year and are excited about both the strategic and financial benefits, we expect to achieve from acquisitions events before as we further strengthened our leadership position in the critical event communication market.
Now operator, we'd like to open the call for questions.
Ladies and gentlemen, if you have questions at this time.
Press Star.
No one telephone keypad again, ladies and gentlemen for questions at this time.
So as far as the number one.
Ken Starr wants to ask a question.
Our first question comes from the line of Brad Sills from Bank of America Merrill Lynch. Your line is open.
Hi, This is sherry well on for Brad I was just wondering about if you could provide more color on deferred revenue this quarter and could this be attributed to the lumpiness.
Yes, we this is Patrick we.
Okay repeat what we always say.
Look we can encourage folks to look at our deferred revenue on a trailing 12 month basis and there have been times in the past where.
It's been very high in other times were very low and that occurs for a variety of reasons, but again, if you look at it over a trailing 12 month basis, it's directionally indicative.
As as as Patrick said, the comment we'll share and the detail we've given multiple times that we sign these large contracts. The implementation those contracts result in revenue that becomes lumpy last quarter I think at one of our highest ever and we warned you that that was some just some timing benefit and that flows into this quarter, where you may have seen some last quarter, but that it doesn't fall into this quarter, so with population warning.
Multi multi million dollar contracts as well as the very large cm contracts, we announced last quarter to $1.7 million of the consulting firm as an example, just one contract. It's it all comes down to timing of revenue and we caution you to look at any one quarter and look at the trailing 12 to get a sense of where we're at.
Got it thank you.
That.
Our next question comes from the line.
Brad Zelnick from credit Suisse. Your line is open.
Great. Thanks, so much for taking the questions and congrats on all the recent success.
Jamie just for starters, you mentioned you have a long standing relationship with NC forward, you know them very well.
Why is now the right time to buy it in and what are you getting owning the business versus continuing to partner.
Yes, so I mean, I outlined the two or three points as well as the partnership points. So first.
You know, we know them very well, we do have 150 joint customers, but they actually have more fortune 500 customers at a 100 than we have and so.
Thats, an accelerant to CGM because that's our that is the most core of our strategic market approach there.
And then when you think about CTM, managing a crisis and remediating the impact on either people or your business.
Operations process assets it all starts with risk data.
And since we have an integrated approach there it doesn't make much sense to say go to someone else to do the risks data, but come back to us.
To run the platform.
And in many cases that market, we believe long term would become competitive but more importantly, we believe NSC four is an accelerant to our business. So it's it's pretty simple we knew them well.
We like the business it was a privately owned business and so when the opportunity came.
That we believed could accelerate CTM, which is again our number one M&A area to focus on is accelerating cm, either with new product or new ways to go to market.
We just felt that it was kind of a no brainer because its cm all starts to identifying a risk or a threat to the business as people are assets.
Thanks that makes sense and it sounds like a very strong integrated value proposition and if I could just follow up Patrick.
You made several comments about the impact to the full year, but a little bit of confusion still at least on my part and appreciating. It in Q3 that you expect to bear expense, but no revenue and with that maybe if you can explain how are these contracts booked what's the typical duration.
Mike do they not have.
Agreements that should flow to revenue in Q3. This is a bit confusing anymore color would be helpful. Thanks.
Sure, Yes, so just because its closing in multiple pieces and we're not going to be done with the analysis of the revenue. We wanted to provide only minimal contribution from that in our guidance and.
Generally speaking, they're largely a SaaS business so.
But we'll we'll understand that increasingly as we get through the closing through the purchase accounting in the meantime, the comment about the bottom line is a.
Just like in Q2, and we had to absorb material M&A related costs, we're still absorbing those in Q3, so thats reflected in our guidance and then.
We just want to give ourselves a little bit of a wide berth here in terms of the net impact on the bottom line.
Of the NC for acquisition, assuming that the first couple of quarters with an assumed deferred revenue haircut will put pressure on the bottom line. So we want to get ahead of that with this guidance and like we said well we'll update you during the next quarter's earnings call.
Okay, great. Thanks, so much.
You bet. Thank you.
Our next question comes from the line of Brian .
From Raymond James Your line is open.
Hi, Thanks for taking the question. So Jamie just just wanted to expand on your federal the federal market opportunity a little bit you mentioned a couple of wins this quarter I'm curious how many of those deal sizes in the sales cycles compared to your initial expectations for that market.
I think there.
Well roughly in line I would say in general you know, it's a it's a new market for us.
It's probably not the fastest growing market that we jumped into because we're we're writing a huge way with population alerting and the deals or even larger obviously its larger to close an entire country like Australia versus a department of of one government, but they're large deals they take a little bit lower but they're worth it we're working multiples at any given time.
In the off quarters, which our Q1 two and four.
In the federal space, because they have one big quarter year, and everything lumps that one quarter spending, especially when the governments being run on continuing resolutions they can't purchase and till the end of the budget year.
As we've mentioned multiple times. So we this quarter had a good quarter multiple.
Medium sized opportunities and were working on a couple of large opportunities those large opportunities range anything from a quarter million like a very very large and our safety connection deal all the way up to CGM type sizes, which could be a half a million to a million dollars. Those are the if you remember.
Online largest online retailer or.
A big Technology company, they're large purchases at the at the at the very high end around $1 million for us.
Huge store or.
Something like that so they are they are tracking in that direction and we feel good about it we've got another quarter to go fed ramp is no doubt we're still one of only two people in the fed ramp business, our competitors continue to experience problems.
Both the one that's certified and the ones that aren't and so that continues leave the door open and we're we're continuing to March four in that business and its probably meeting our expectation if if may be a little bit behind so we give ourselves a little bit of room, there again sticking with patricks mature and prudent approach.
Got it and maybe one quick follow up just Jamie you mentioned kind of a focus on M&A I know we have in four come online later this year, just just thoughts about.
The pace of M&A activity going forward and what products or markets. You may look to address thank you.
Yeah, I think David and I are aligned that we're pretty bullish on M&A I would mentioned at the end NC for deal was a fraction of our valuation. So when we can when we can find than we'd tell you and talk about M&A over time. It is bloody hard in a market thats been run up as far as this this equity market capital market has been.
But when you can find transactions at you know a third of your market value.
Or half of your market value and they are we believe strategic those those are good deals and we want to continue to make them. We thought we used a prudent approach in how we mixed stock and cash to both protect stock and use stock at what we believe is a a fair value point at least it also keeps the seller engaged with us.
And so going forward, we have to do two things. The same reason you've given us credit for these acquisitions. The past we'd ask you to give us credit for this one which is we will make sure. It gets implemented and is delivering on our financial commitments in other words is accretive to our results and I think you'll see that in the first couple of quarters. We just have to get two quarters past and then in peril, you can bet that.
My new job on David's behalf is on that on the day basis is working on identifying other strategic opportunities to accelerate cm or to expand geographically. We are our international business certainly is growing as fast as any of our businesses and we want to continue that momentum given the huge opportunity in population will warning in Europe .
But but make no mistake with deals that we've seen in Singapore, we have deals in Latin America that we're working now in other parts of Asia and Africa. There is a significant opportunity outside of the EU for population warning and where we can open up those markets and leverage that opportunity and our unique differentiation. Then we will seek to do that as well. So those still remain the key to key topics and as long as we can ensure we deliver on behalf of shareholders with these acquisitions will continue to do that it's part of our model, We've said forever right, 3% to 7% kind of depending on the year. This year I'd point out that our M&A was done very late right. It's it's only going to really contribute.
By Q4, because of the full closing of the business. So.
Last year, we did in Q1.
So there is a difference in timing and we'd like to get ahead of that if we can.
Our next question comes from the line of Sterling Auty from JP Morgan Your line is open.
Yes, Thanks, Hi, guys I apologize if you covered some of those folks jumping between calls.
I think you made some comments around the short term deferred revenue deferred revenue, but there's a lot of hyper sensitivity in the market around the billings number in particular and just looking at the the calculated billings.
Why shouldn't that be an indication of the health of the business and.
Why in your case do you think perhaps maybe it's not a great metric for investors to be focused on.
Yeah, well so and this is Patrick we would say that it is.
A relevant indicator of the health of our business. When you look at it on a trailing 12 month basis. When you look back over our history Sterling at any individual given quarter you'll.
We'll see.
Up 9% year over year, you will see up 60% year over year and it does bounce around.
There are a variety of reasons for that it tends to be due in part to just the timing of contract renewals and when those invoices, sometimes move in and out of different quarters, but on a trailing 12 month basis.
Which we've always encourage folks to look at as a relative indicator directionally appropriate.
We think that that is still the case.
With with these results as well.
They only have to look back orders.
Q4 was a lower than normal number even though it was our Q4 it wasn't an indicative of bookings. It was indicative of the timing of contracts Q1 was one of our highest ever and then Q2 was a little bit lower again. So you have we've said this since going public and we've been we've beat this drum mercilessly is absolutely an indicator Jeff look at over a trailing four quarter or you get misguided by one single quarter potentially.
Yes, no I think that makes sense and look and see for just given the business structure.
Can you help me better understand the gross margin there and what the gross margin impacts might be moving forward.
Well so our initial view of that Sterling is that its roughly in line with our own.
More to be determined as as we really are able to dig in at once we close the entire transaction but.
That's our best guess no major change Sterling, it's not like it's going to be we don't anticipate any way that it will be a.
Material drag nor necessarily a material boost in the near term.
But we do see a plenty of synergies with that business and overtime, we do expect to see some improvement both in terms of gross margin as well as adjusted EBITDA for sure.
Thank you.
Our next question comes from the line of Bob Evans from William Blair. Your line is open.
Hey, guys. Thanks for taking my call and appreciate it.
I guess I just had a first question on the C.M. space.
As we think about that market expansion is still relatively early days you know roughly 50 customers, but can you talk about like updates also room nights.
Think about expanding the selling motions into our sales force and then obviously expanding the selling motion outside the original vertical focus or North America corporate health care outside the <unk>, how should we think about that we'd love to get some color on that thank you.
Yeah, I mean, you know we've been very deliberate with CEO , Jim we did not want to get out in front of our skis because.
If you if you follow it we have five applications all of them have to be certified for the market and then as we just talked about risk data for Insys is different what people care about different markets in the state and local.
Space, you know, they're not focused on water main breaks in local fires in other geographies, they're only concern hyperbole with their specific geography versus and cities don't happen to necessarily care about any other city in the world. If your corporate you really care about all your locations and you could have as I mentioned on the call 300 to a thousand global locations, if not 10000, and therefore concerned with a lot of things virtually anywhere there's a bang going on in the world and so because of that with the yeah.
CTM solution.
We have gone into the market focused on corporate making sure. We're fit for purpose got scale and got Referenceable customers as you mentioned with a customer base on the order of whatever it is today, adding or a new customers in Q2, we've gotten to enough that we have referenceable customers and now what's important is ahead of preparing for the international launch and the opening of new verticals in the U.S. friends and state and local is 30% of our business and we do not sell CGM there.
That's a that's a great.
On ramp for us as we convert those accounts over to Everbridge.
Into the state and local as well so we have a number of.
People pulling us into new markets International state and local and some of the other geographies transportation in state and locals will city governments and then in combined with the NC for component that will we will close later this quarter. We will we believe will have an on ramp in 2020.
And with a growing salesforce and the Referenceable scalable deals that we've already closed we think we'll be in better shape to continue to grow that as we grow our overall business. So CGM should continue to be the largest deals we closed other than population alerting countrywide deals and it should continue to be one of our most strategic markets because we continue to add products to that suite as well.
Got it very helpful. I guess quick.
Short term question here for Us and I guess was there any pull it.
There is obviously a lumpiness in billings, we totally get how these contracts work.
But was there any pull in a quarter over the phone last quarter as think about how the billings number works would love some color on that thank you.
Well as we said, we don't get individually and look at it over four quarters, but we absolutely said if you look at our specific script from last quarter. We said all time high were telling you that you got to watch it because.
Good.
On a pointed out.
And we did last quarter and that was because some things came into revenue at the extreme ended the quarter that probably should have been in this quarter. So that creates a balloon in the bookings the deferred revenue for last quarter and in this quarter. Since those are already in last quarter, you get less going this quarter.
And so you just you just have to look at it over four quarters, but other than normal timing of deals and the very large deals that get lumpy for us and if they don't close exactly when we want them to that's your that your explanation for the Lumpiness in the up and down quarters and it's the same explanation, we've been giving sense literally I think our second quarter, we decided to start pointed out because we can see it was going to trip us up if we didnt get in front of it so.
Common answer Weve, given it for 12 straight quarters or give it to you again today just look at it trailing I really appreciate it.
Absolutely I appreciate it and I think you just need to be classified again. So thank you. Thanks for taking my questions and congrats.
You bet. Thank you.
Our next question comes from the line.
Tom Roderick from Stifel.
Your line is open.
Hi, guys. Thank you for taking my questions. So Jamie I wanted to just ask a little bit more hear about and see for into the makeup of the of the team and where some of the synergies can come from you sort of pointedly mentioned that the valuation I think came in at a fraction of your own valuation. So that suggests you got to you got a pretty good deal on a property, but perhaps there's some some mitigating factors on the business model and the growth profile could be a little bit slower than your own can you just speak a little bit towards what we ought to expect to see when you know when you do integrate the financials is this a company that was growing a bit slower than yours and you felt like you could accelerate the growth rate given your distribution and sort of relative to.
The notion of analysts teams in threat intelligence analysts teams being a part of the model is there a higher mix of professional services or consulting revenue in the NC for model that we ought to sort of expect to brace for when it's integrated into the model.
No and no.
So I mean, all first deal value, yes, I should say and then professional services no. So on the deal value. All we can tell you is that.
I think it was asking the question as a good analyst would do Tom but a different way.
We don't have the we're not share the full details we close everything because we got to do the deferred accounting everything else but.
We're not shy to say that that we have historically purchase things at what we believe are prudent and sensible levels, we will not it's hard for us to chase in our business.
You know that 10 times, the 15 times businesses.
And it makes it a very difficult M&A environment right because everyone wants at least your multiple if you're trading at 12 or 14, if not googles multiple trading at 30, and so those are that makes it a tough market and therefore, you don't find companies that are many quality unless there's something that's holding them back in this case think of it as a private enterprise that was driven specifically to provide value to the owner. So it was risk adverse I can tell you that they have a total salesforce of four people.
You know, we're going to be able to pull that into our broad 100, plus sales team and we think make pretty good hey out of that so we believe that there's definite upside as there was a new en masse. It's a model you've heard Patrick say, we'd like to rinse repeat once we find those patterns. We don't think we have to be.
Rocket scientist to find something new that no one can figure out each time so in this case.
It was a business managed by a private owner who did it for different purposes.
Very wealthy and could do it the way they wanted to do it we will be able to apply better go to market leverage and we have dramatic synergy because we're already in summer accounts, but they are very much in our sweet spot for cm. So we see acceleration for cm with this our largest deals.
On the corporate side.
And then.
On the on the the model it is essentially a pure SaaS business like we are there 95 mid nineties.
Subscription.
And so depending on getting through the close we'll be able to announce a little bit of insight into more synergies.
But they are even in similar locations to us there in Washington, D.C. area, that's where our GR risks data businesses base and then they're an outlay and as you know that's where our former headquarters was and we have one of our largest offices. So we believe we have good synergies.
There appear subscription business, we will we'll do a lot to migrate them onto our single platform.
And so we believe we will have some savings there long term, but we want to get through the close here at the end of Q3, and then we'll give you that guidance as we move into Q4 and start to see the the revenue going into our model versus having to guess at it right now.
Good I got it Thats really helpful. Patrick we've talked about this at the analyst day briefly I think maybe a little bit of additive time might have given you. Some additive information, perhaps so it's it seems as though the Australia deal did not in fact come in on a perpetual license basis and no big Spike in perpetual license this quarter.
How are you doing sort of getting through the mechanics of the model as you look at these population alerting deals both on the front end and on the back end to try and structure. These deals on a pure subscription basis as opposed to adding up.
Some spikes in the model.
Yes, there so any time, we did do we did recognize some revenue in Q2 and in particular as we kick off the.
The deployment of the front and which will.
Persist over the next few quarters, we'll be recognizing some.
Implementation revenue and then we'll have the license revenue kick in next year for the front end and as we guide for next year will provide some more color on that both in terms of magnitude and timing.
Got it okay, I'll I'll keep checking in thank you.
Thank you thanks.
Our next question comes from the line of Brent.
From Keybanc capital your line is open.
One quick one for Jamie not follow up for Patrick Jamie Fed ramp you're now kind of one year end.
And now we're heading into the seasonally strongest kind of fiscal year end for the government can you provide any sort of color relative to kind of RFP activity.
You know around kind of the fed.
Now that Youve, Ken had fed ramp approval for about a year and had lots of sales reps I'm sure is trying to solicit some opportunities for you there.
And then again one for Patrick Thanks.
Yes, my answer even quicker because of I think I've already addressed this but it's just the I would stick with the same answer which is.
Of course, we've seen because of a fed team now.
And a slight uptick in both RFP is that we're getting to or agencies.
We are announcing more deals you've seen more deal flow that specifically related to the federal whether its NRC or a different agency or a large system integrator and I think but the big quarters Q3, and so that's that's yet to come and we are certainly working on large deals for Q3. So we're more news to follow would be the answer yes progress being made and more news to follow.
Great and then Patrick as a follow up obviously everyone's asking here on deferred revenue you guys had been warning us about large deals, but just looking back over the last three years. This is only the second quarter I think deferred revenue was down sequentially. So my question. Just clarification was the was the Australia deal I know there are some contract terms, there, but but was the Australia large deal was that in deferred or because of the contract terms. It wasn't in deferred this quarter.
There is.
A little bit in deferred as of the end of the quarter.
Got it so, but but nowhere near the size of that contract that you added.
No no no no.
Okay Thats all I wanted to ask their of helpful clarification. Thank you.
You bet.
Our next question comes from the line of will power from Baird. Your line is open.
Great. Thank you guys just a couple of quick ones, maybe Patrick close the condition that need as well as you looked at the full year revenue guidance, which was raised can you provide any further color as to how much that was attributed in Q4 versus <unk>.
As for trends.
Well, Oh, we have to guess a little bit at this point. So I would just say, it's it's not and it's not a lot.
But.
What we in particular tried to do is stick to our.
Scripts, which is.
We've said that we are.
Low to mid Thirtys organic rotary layer on 3% to 7% of M&A on top of that and if we can end the year in the mid to upper thirtys than we feel good about that financially in particular with improving bottom line results and so you see how weve guided for the remainder of the year and you more to come on the Q3 call.
Okay, Alright, and maybe just to bring David and quickly I appreciate the.
The comments earlier on cultural fit key growth priorities, but would love to kind of hear what your focus areas are over the next couple of months.
Yes, Thanks will.
In meaning with the team and been very busy.
The strategy looks right on.
So we're going to look at how we execute and how we continue to scale the business to new Heights.
So.
Main focus execution, we talked about the growth areas continuing to cross sell and up sell the base.
Positioning ourselves for the big population alerting wins in the EU and winning deals in the meantime in Asia Pac.
And then the CEO I am I getting tremendous feedback and with his NC for acquisition actually had customers, reaching out proactively where both companies are there and the feedback has been very positive on that so.
Using that as an accelerant.
To move faster on the CPM as well so I don't have any big strategy changes at this time.
Okay, great. Thanks.
Thank you.
And ladies and gentlemen, this set of questions. At this time. Please press Star then the number one telephone keypad.
Next question comes from the line of Terry Tillman from Suntrust.
Your line is open.
Hey, Thanks for taking my question. Good afternoon, gentlemen, I guess my first question's on billing setting I'm getting up.
Hi, there.
I want to ask first about Cm, then I want to follow up on Germany in terms of C.
Expectation wise is this business young enough and non seasonal enough that we just continue to see the ramp a new.
Business volume each quarter and how do you feel about the calibre of your sales team selling CRM at this point.
Well I think yes, and then some and then good right. Yes, we believe that CMS is going to continue to ramp there's a it's a healthy pipeline we're working some very.
Strategic and important transactions and we've shown you that the deals are getting kind of larger as we grow and the numbers getting larger now they're big deals when you're only doing eight and a quarter or six in the quarter.
We could do six deals in the quarter as we pointed out before thrilled 2 million dollar deals will double what we did this quarter with eight deals so.
Be careful because those large top end deals population alerting cm can be lumpy, but but those are that's going well and we would expect you to consider to see us publish and demonstrate real market success and growing market success as we.
Scale, the cm and the salespeople scale it.
On the on the pure sales side, we probably would just reiterate what we said in the past one of our challenges is to make sure. We're we're getting through our enterprise sales transition, which means we're bringing on new salespeople and upgrading that team and as we do that internally, we got to make sure. We continue to have enough people focused on that well, we still have enough people focused on the blocking and tackling a person internationally that selling population alerting we don't want to take his eye off the ball of a $20 million countrywide deal to go sell RCM deals. So the salesforce is segmented for most of those groups and as we roll out the products that hopefully allow us to scale the salesforce add to it with new stronger people, while we mature and grow our existing people. That's a that's a that's a continuing challenge for us as we go into next year, but we feel good about it.
Okay, and just a follow up question was on Germany or Deutsche slot.
In terms of.
I thought it was interesting youre talking about your security certification in Germany.
I guess, what do we what are what's the take away from that in terms of expectations for CN business. There are public sector business, just a little bit more color on Germany. Thank you.
Yes, I think we mentioned that because as we've rolled out our full stack in Germany and have capabilities in Europe , Germany. The UK now and it may be seen as a separate country pretty soon I don't know but.
And the rest of Europe is a is a is a very strong potential market for us.
Those two and France being the three largest economies there right. So naturally we're going to focus on those markets as we brought cm and our broad product suite.
You know and key customer wins like Airbus or some of the others that we mentioned internationally are key to us because that allows us a footprint in our 500 plus customer base in Europe to grow into C.M., just as we've done in the U.S.. So I Wouldnt I, we mentioned, Germany, because it's some of the strictest privacy requirements all of Europe .
And if you meet that you can do anywhere and remember regionally like in dock.
Germany, Switzerland, Austria, the dramatic speaking countries. As an example, you often if you don't have a local capability and host locally you can't sell even a SaaS.
Product are ours is spread in multiple centers throughout Europe , and so we believe we cover Europe well.
With some of the larger opportunities, we certainly will be not prohibited by having that but the local regional players. The largest players we can come Pete with on the point solution that the guys that are selling mass notification in Germany or crisis management as a point solution in Europe somewhere cannot compete with us that has a global reach for those larger enterprises and doesn't want to go with a solely German player or solely French player and that's where our public size and nature as well as our global reach and a.
Hey, the accreditation like the German one comes in to to be meaningful not just because we're going after Germany of course, we are with its large.
You know GDP, but it's more that we want to be able to sell pan European Euro customers.
And Thats, where we have a distinct advantage, we meet the toughest privacy and security requirements, while having a distributed scalable global platform that really none of our competitors can match and it's all a single pane of glass when it comes to CES.
So next year is a big year for us in Europe with that infrastructure and with CN.
There are no further questions at this time I would now like to turn back the call to Jamie Ellertson.
Chairman.
Well, thanks for joining and listening to our ER positive results, where we exceeded our guidance on this quarter and we look forward to seeing you at an investor conference or an industry event in the near future. Thanks again for joining bye bye.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day.
You may all disconnect.