Everbridge Q3 2022 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2021

There are 10 speakers on the call.

Operator

Hello, and welcome to the Everbridge Third Quarter 2021 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Patrick Brickley, Chief Financial Officer.

Operator

Please go ahead.

Speaker 1

Good afternoon, and welcome to Everbridge's earnings conference call for the Q3 of 2021. This is Patrick Brickley, Executive Vice President and Chief Financial Officer of Everbridge. With me on today's call is our CEO, David Merida. After the market closed, we issued our earnings release, which can be accessed on the Investor Relations section of our website at ir. Everbridge.com.

Speaker 1

This call is being recorded and a replay of the teleconference will be available on our IR 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 such differences include, but are not limited to, those discussed in our Forms 10Q and 10 ks as well as other subsequent filings with the SEC. 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.

Speaker 1

We explicitly disclaim any obligation to update any forward looking statements or our outlook. Also during today's call, we will refer to certain non GAAP financial measures. A reconciliation of our GAAP to non GAAP financial measures is included in our press release. With that, let me turn the call over to David for his prepared remarks. David?

Speaker 2

Thank you, Patrick, and thanks to all of you for joining us today. We delivered strong 3rd quarter results That again exceeded our guidance for revenue and profitability. Revenue of $96,700,000 increased 36% from a year ago and both adjusted EBITDA and non GAAP net income were positive for the 6th quarter in a row. Our strategic CEM and public warning platforms continue to be chosen by large enterprises across the globe to keep people safe And their organizations running as evidenced by our record number of deals valued at more than $500,000 that we closed in the quarter And a record international mix driven by CEM deals, public warning wins and existing customer expansions. These strategic wins and expansions fueled our trailing 12 month ASP that exceeded $100,000 for the 2nd quarter in a row, increasing by 41% from a year ago.

Speaker 2

As greater numbers of the global population become vaccinated against COVID-nineteen, organizations, Schools and governments continue to move towards plans for more normalized protocols. However, to avoid Breaks that could impact people and operations as well as meet guidelines and requirements promulgated by various governmental and health organizations globally. They will need solutions to manage the continuing risks related to COVID-nineteen. Additionally, most enterprises continue to feel the effect of both natural and man made critical events such as the forest fires that have impacted the Western As well as an increasing number of digital threats such as ransomware and other forms of cyber attacks and IT outages that can impact their people and processes. Furthermore, the global supply chain faces massive disruption, which can be mitigated in part by Critical Event Management.

Speaker 2

As a result, our CEM suite continues to be increasingly relevant And in the Q3, we saw key CEM wins both in North America and internationally across all of the markets we target, Corporate, Government and Healthcare. We also recently extended our CEM certification program internationally To further establish ourselves as the clear leader in setting the standards for best practices against which organizations will be evaluated globally. Before I get into the highlights of the quarter, I want to acknowledge an important national development here in the United States. The recent passage by Congress of the historic $1,200,000,000,000 infrastructure package presents a potential catalyst To unlocking funding opportunities and accelerating projects with federal, state and local governments for our CEM for public safety solutions. Our capabilities can provide increased resiliency across a variety of strategically important categories such as the modernization of the nation's emergency 911 and national warning systems.

Speaker 2

We continue to demonstrate our expertise and leadership in these areas with recent launches of new products and feature enhancements such as Everbridge 911 Connect and our recently announced integration with RapidSOS for providing more contextual data As we announced yesterday, Cisco's WebEx calling and UCM Cloud platforms can now leverage this E911 capability as well. Additionally, Everbridge public alerting systems can help support continuous When coupled with our recently launched next generation version of our resident connection product, this enables local governments to reach a higher proportion Given our FedRAMP compliance status and growing footprint at all levels of government, Everbridge remains well positioned to benefit from increasing investments in infrastructure. Focusing now on our Q3 results, we saw continued strength in our critical event management business with key new and growth CEM deals around the globe. New customers in the quarter included North American game developer, Ubisoft and medical technology leader, Stryker, both of whom chose broad CEM Suites and leading international organizations such as one of the world's largest IT services companies based in India, who is also implementing our CEM suite. This important new win creates further opportunities within this large international IT leader as well as positions us to expand our CEM presence in India where we have already had tremendous success with the widespread adoption of our public warning solutions.

Speaker 2

In parallel, We continue to see existing public warning and mass notification customers among our over 6,000 customers upgrade onto our CEM platform. In Q3, the CEM expansions included global banking giant Citizens Financial as well as one of the largest global professional services firms who has the potential to further expand in the future. Healthcare leader Hackensack Meridian Health, a top ranked hospital system in New Jersey, Who is already an IT alerting and wayfinding customer expanded to become a CEM customer in the quarter. Finally, in the government market, the United State's Department of Commerce chose our CEM platform to address gaps with Bureau Communication and Situational Awareness. Our successful combination of X Matters into our larger suite of CEM for digital offerings extends our capability to Support both digital and physical risks across a single pane of glass.

Speaker 2

This very powerful proposition differentiates us in the market. It also strengthens our broader land and expand sales motion, which leverages our full product portfolio to accelerate customer adoption and sell deeper into the enterprise. Social media giant Twitter is a great example of executing on this land and expand strategy. Twitter initially purchased Mass Notification 5 years ago. They had added Safety Connection 2 years ago.

Speaker 2

And in Q3, they at the CEM and will incorporate numerous data feeds to their fusion center, integrating digital and physical security. Pharma leader Takeda demonstrates an additional example of fusion centers driving our land and expand strategy with their commitment to further build out Global Security Operations Center with CEM. Of course, winning new customers that have the potential to expand over time is an Important element of this strategy as well. Some of these new customers in the quarter included pharma leaders Merck and Teva, Global Accounting Leader BDO and Automotive Retailer Discount Tire. On top of our U.

Speaker 2

S. Department of Commerce CEM win, which was just One highlight from a very busy Q3 for government business. We signed several growth transactions with federal departments and agencies in the U. S. And also closed a number of international deals.

Speaker 2

Among our federal wins in the quarter, the Muskogee Creek Nation Health System, Which supports the 4th largest Native American tribe in the United States initially purchased Everbridge in February for a vaccine distribution. In Q3, they expanded the contract to improve communications with their patients as well. We are also happy to welcome the Centers for Medicare and Medicaid Services as a new federal customer. CMS will leverage Everbridge to notify employees of cybersecurity training and warnings, COVID-nineteen updates, Safety and compliance protocols, important human resources information and to measure employee engagement. The U.

Speaker 2

S. Department of Agriculture's Office of Homeland Security leads security preparedness and response efforts to ensure USDA employees and stakeholders Key locations, both domestic and international to keep ahead of any potential threats to the USDA. The Food and Drug Administration or FDA will be leveraging Everbridge Risk Center to monitor their physical locations across the globe to help ensure they have no gaps in situational awareness. Additionally, the Office of Protective Intelligence of the U. S.

Speaker 2

Marshals Service is following in the footsteps of the U. S. Courts in their protective services efforts. With Everbridge, the Marshals service can gather hyper relevant data and insights to detect and protect from new and evolving threats. The U.

Speaker 2

S. Attorney's Middle District of Florida serves 35 counties across the state, is over half the population of Florida, making the middle district the 2nd most populous U. S. Attorney district in the nation. Last quarter, they expanded their use of Everbridge Risk Center and added more locations to monitor, collect and analyze threat data to better respond to potential risks in In addition to our CEM and related progress, we recorded a number of important public warning wins to expand our global leadership position in this category.

Speaker 2

During the quarter, we received notification that we won another of the top 5 most populous countries in the European Union or EU. Spain with a population of 47,000,000. Spain shows our cell broadcast solution in a competitive bid process. As the leading provider of hybrid public warning With cell broadcast, location based SMS and other 5 gs compliant modalities across both government front ends And carrier back ends, we are increasingly seeing opportunities to leverage our land and expand strategy in public warning as we've done successfully with CEM. For example, in the Q3, we inked a significant expansion in the Netherlands, one of our countrywide public with our countrywide public warning system.

Speaker 2

At the same time, network effects where municipalities within a country also adopt Everbridge can multiply the number of opportunities as we've seen in Norway, Sweden, Singapore and other countries. Our recent highly visible go live in Australia further highlights our ability to support large scale Complex countrywide deployments that are having real impact for serious threats that countries are facing right now And further emphasizes that Everbridge represents the most reliable choice for countries still looking for a public warning solution partner. Allow me to pivot from our strong top line results to our overall execution, balancing both growth and profitability That delivered positive adjusted EBITDA that was also above our guidance range. Although the COVID-nineteen pandemic And an intensely competitive hiring environment continue to create uncertainty in the overall market. Our ability to generate positive non GAAP profitability for 6 quarters in a row gives us confidence in the long term efficiencies that we'll increasingly be able to leverage as we continue to grow the business.

Speaker 2

Turning to our metrics for the Q3, our performance again illustrates the success of our CEM strategy with large new customer wins, Multi product expansions and triple digit ASPs. We added 120 net new enterprise customers in the 3rd quarter, Raising our total enterprise customer count to 6,010. 15 customers either selected or expanded to our CEM platform, bringing the total number of CEM customers to 173, a 57% increase in the number of CEM customers from 1 year ago. As in the Q2, our momentum with large transactions continued in Q3 with quarterly ASPs that moderated slightly from our record second quarter and resulted in trailing 12 month ASPs that were again above 100,000 an increase of more than 40% from a year ago. Contributing to this ASP growth were 45 deals worth more than $100,000 per year And another record for the number of deals valued at more than $500,000 per year.

Speaker 2

From a product mix perspective, 63% of new and growth sales over the last four quarters came from new products as we continue to see demand for our newer applications. Our international business also continued to post strong growth results in Q3 with a record 32% of total revenue coming from outside the U. S. Compared to 27% 1 year ago as we expand our presence in every major region of the world. Our revenue mix by vertical was relatively consistent with past quarters at 67% from corporate, 24% from local state and countrywide government and 9% from healthcare reflecting strong growth in the corporate market with increasingly Post vaccine use cases.

Speaker 2

As always, we remind you that quarterly metrics can fluctuate, but that the longer term trends continue to reflect Our overall business growth. These outstanding metrics demonstrate the growing market acceptance of our overall CEM strategy as well as our ability to close larger transactions from our pipeline as organizations increasingly embrace CEM to address numerous High ROI or return on investment use cases. Other operational highlights from Q3 include our progress with our partner channel, which continues to be a valuable driver of business activity. Just a few weeks ago, Deloitte's Cybersecurity Center for the EMEA regions became our latest partner. Everbridge CEM solutions will now be offered as part of Deloitte's EMEA Cybersphere Centers Cloud Based Detect and Response Services for government and commercial customers to enhance the protection and continuity of digital and physical operations.

Speaker 2

During our last call, we introduced the CEM Certification Program with Discover, Goldman Sachs, NBCUniversal, Dow and Alexion Among the first Fortune 500 Leaders earning the prestigious Best in Enterprise Resilience designation. Since our last call, Financial Services Leaders Finastra and Comerica Bank, pharmaceutical leader Takeda and international advertising firm Dentsu have joined those organizations ranked as best in enterprise resilience with some leveraging this certification to distinguish and promote their own brands. We recently extended our international CEM certification momentum with global industry leader Siemens representing another of the latest Organizations outside North America to earn this prestigious designation. Turning to continued innovation, last quarter I mentioned that organizations are finding that our travel risk management solutions including Safety Connection are perfectly suited for work from home work from wherever you are and hybrid work location policies. As employees begin returning to business travel, we see this Interest accelerating.

Speaker 2

With ISO's recent publication of Standard 3,130, enterprises are looking to adopt its guidelines on how to manage risks for organizations and their travelers, including threat detection, risk assessment and prevention and mitigation strategies. Everbridge remains very well positioned from increased interest and attention to travel related risk. In fact, Just as organizations are improving their formulation of playbooks for managing traveler and remote work risk, we are accelerating the execution of our strategic product roadmap to bring additional travel risk management capabilities in house, building on our 20 years of critical event management and risk intelligence leadership. In order to accelerate our success, we completed a tuck in acquisition of partner Anvil Group a few days ago. The combination of Anvil's Riskmatics platform With CEM, we'll provide medical, security and travel assistance and advice to those in need and help keep people safe wherever they go.

Speaker 2

This strategic acquisition further extends our position as the leader in critical event management and risk intelligence, which is especially timely with today's evolving travel and remote work location trends. In summary, we continued our momentum in the 3rd quarter with results that were above our guidance ranges. As our business scales, we keep driving incremental margin improvements and we're excited that we have continued to generate strong top line growth while also increasing profitability. We look forward to closing out a record year as we leverage our leadership position in the market to keep penetrating Now, I'll turn the call over to Patrick for more details on our Q3 financial performance and our guidance for Q4 and full year 2021. Patrick?

Speaker 1

Thanks, David. We had a great Q3 with record revenue of $96,700,000 an increase of 36% from a year ago and above the high end of our guidance range. Our net retention rate continues to track above 110%, reflecting continued customer satisfaction combined with demand for additional Everbridge technology at existing customers. Looking at the details of our P and L, 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.

Speaker 1

Gross margin was 73.3 percent, relatively consistent from a year ago with the impact of growth investments offset by efficiencies from greater scale. Total operating expenses in the quarter were $68,700,000 an increase of 38% from a year ago, reflecting Investments in our platform and our go to market strategy. Adjusted EBITDA was $4,900,000 well above the high end of our guidance range due primarily to the revenue upside in the quarter and to a degree from a more challenging hiring environment as well. Net income in the Q3 was $2,100,000 or $0.05 per diluted share compared to net income of $2,800,000 or $0.08 per share a year ago. On a GAAP basis, our net loss was $28,700,000 Turning to our balance sheet.

Speaker 1

We ended the quarter with $555,000,000 in cash, cash equivalents, restricted cash and short term investments, compared to $568,300,000 at the end of the second quarter, reflecting seasonal cash flow patterns during the quarter. Note that our cash balances do not reflect our strategic acquisition of Anvil Group for approximately $161,000,000 which will be reflected in our 4th quarter results. Operating cash flow was an outflow of $2,700,000 and free cash flow was an outflow of $7,500,000 Total deferred revenue was $214,100,000 at the end of the quarter, an increase of 44% from a year ago. As we note every quarter, our deferred revenue balance at the end of any given quarter can vary due to a number of factors, including the timing of significant new contracts and the timing of annual billings for new and existing customers. As such, the change in deferred revenue in any given quarter is not an accurate indicator of the underlying momentum in our business.

Speaker 1

We believe our trailing 12 month performance is much more indicative of our overall business trends. Now I'll turn to our guidance for the Q4 and full year, which includes the impact of our Q3 outperformance and our continued business momentum. Note that the anticipated impact from our Anvil acquisition on 4th quarter and full year revenue For the Q4, we anticipate revenue of between $102,000,000 $102,200,000 representing growth of 35%. We anticipate adjusted EBITDA to be between negative $1,800,000 $1,400,000 We anticipate a non GAAP net loss of between $7,800,000 $7,400,000 or a loss of between $0.20 $0.19 per share based on 38,800,000 basic and diluted weighted average shares outstanding. Stock based compensation expense is expected to be approximately $900,000 in the 4th quarter.

Speaker 1

For the full year, we are increasing our revenue guidance to a range of 367.6 to $367,800,000 representing growth of 36%. We anticipate adjusted EBITDA will be in the range of $8,800,000 to 9 point We expect a non GAAP net income of between $3,700,000 $4,100,000 or between $0.09 and $0.10 per share based on 39,500,000 diluted weighted average shares outstanding. This guidance assumes estimated stock based compensation expenses of approximately $66,500,000 for the year. And we continue to anticipate that free cash flow will be approximately breakeven and perhaps slightly positive for the year. In summary, we delivered a strong Q3 and are well positioned to close out 2021 with excellent financial results.

Speaker 1

Now, operator, we'd like to turn the call open for questions.

Operator

We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. The first question comes from Scott Berg with Needham. Please go ahead.

Speaker 3

Hi, David and Patrick. Congrats on the good quarter. David, I just wanted to start kind of high level. I think some of the global supply chain issues are in the news every other day or every other minute at least it seems. Is that a scenario that you guys, with your broader CEM package have had some success Selling into or at least having some conversations on how you can help maybe mitigate some of those challenges out there today?

Speaker 2

Yes, Scott, thanks for your comments and the question. Supply chain is definitely one of the modules of CEM that we launched a few years ago and we have some major global brands that are using the CEM platform. When you think about CEM, it's the ability to keep track of everything you care about and that's your people, your Operations, your offices, your supply chain, also your supply routes, and then being able to and your brand and reputation and then being able to overlay that To know what are any possible threats that are coming that could disrupt that. So it's a perfect scenario for CEM and it's definitely something that our customers are dealing with and we're trying to help them

Speaker 3

Got it. Helpful. And then, Patrick, wanted to see if you can give us a little detail on the Hansel Group acquisition, $161,000,000 is certainly a sizable amount, maybe some financial color on it in terms of trailing 12 month revenues, expectations Impact in Q4, maybe how it's growing, etcetera.

Speaker 1

Yes, sure, Scott. So the impact on Q4 is not material due to timing and deferred revenue haircut, etcetera. I think the color that I can provide at this point is that we anticipate approximately $5,000,000 of Acquired deferred revenue before the impact of purchase accounting and haircut on that. So we'll have more we just closed this a couple of days ago, so we'll have more to discuss on the next call. But for now, in Q4, it's the impact is not material.

Operator

The next question comes from Sterling Auty with JPMorgan. Please go ahead.

Speaker 4

Yes. Yes, thanks. Hi, guys. Wanted to dive into the EU opportunity. You've had significant traction there.

Speaker 4

Can you give us a sense of where you are in the penetration of that opportunity? And when Or how should we think about the revenue ramp associated with the deals that you've already closed?

Speaker 2

Sterling, hi. Thanks for the question. Yes, we are getting closer to the EU mandate deadline of end of Q2 2022. And as we've always said and expected that more of the activity would be back end loaded. We did have to do a full Competitive bid process for the Netherlands, but we came out of that with a much bigger deal than we had previously and expanding what we had with them.

Speaker 2

Obviously, Spain was a strategically important win. We still see additional activity on RFI's and RFPs. As far as the revenue, the timing on these can vary in terms of how soon they get implemented and that sort of thing. The best of our knowledge, the numbers are kind of baked into our guidance that we're giving. Patrick, feel free if you want to jump in and talk about the metrics a little more as well.

Speaker 1

Yes. I mean, I think you basically covered it, David. They we get these initial deals out of the gate. They rarely encompass the full opportunity with these countries. Sometimes they'll do a front end or part of the back end, but not the whole thing.

Speaker 1

So we're excited that we continue to land deals. We're excited about the long game And roll up a lot of business within the geographies. So, so far so good in terms of knocking these down and hopefully more to come.

Speaker 4

And then one follow-up, how would you kind of characterize from a high level the business momentum? And let me give you a little context. I think Investors are looking at the results that you had a couple of quarters ago, where it was just evident that it was just extremely strong. And sometimes I think it's hard for us to understand how the different opportunities are being layered in, how the acquisitions like X Matters So would you just from a high level say that the momentum in the business is as good, stronger or maybe took a little bit of

Speaker 2

We're seeing some consistent trends, which are 1, we're selling up higher into the organization. There's an increased awareness of the importance of CEM and we're doing a better job of bundling Together our different CEM capabilities into deals and that's manifesting itself in the ASPs And the large deals. So this quarter, we did an all time record for more 500 ks plus deals than we'd ever done in the company's history. And that helped to support 2nd consecutive quarter of 6 figure ASPs. So I think that's a good View into kind of the fact that customers are seeing this as being more important.

Speaker 2

And that's a trend that I think I mentioned multiple earnings calls ago and It's continued to develop. So I think from that perspective, it speaks to the importance of CEM and the momentum that we have with the business. I don't know, Patrick, you want to jump in?

Speaker 5

Yes.

Speaker 1

You saw continued improvement in our globalization and With over 30% of our revenue coming from customers outside of the U. S, a couple of years ago that was single digits. So we're continuing to make progress in a lot of different areas. I think we said last quarter when the CEM addition count was around 19, I believe it was, that we thought that that It was a great result, but also sort of some of the timing of these deals will not always be linear. And we didn't think that every quarter thereafter was going to set a new record.

Speaker 1

So, as David mentioned, we've got A lot of continued success with CEM, and we anticipate more to come.

Speaker 4

Sounds good. Thank you, guys.

Speaker 2

Thank you, Sterling.

Operator

The next question comes from Matt Mr. Stoler with William Blair. Please go ahead.

Speaker 6

Hey, guys. Thanks for taking the questions. Maybe just to start off with, if I look back a year ago, kind of Q2, Q3, Q4, You were seeing a lot of, obviously, deals tied to some of the COVID specific data feeds and the products that you're providing at COVID Shield. You mentioned in the prepared remarks that you're seeing a lot of contribution kind of swinging back to non COVID use cases, if you will. But Just as we annualize the deals where you did have those customers that were adopting maybe smaller kind of COVID specific Solutions are for those types of use cases.

Speaker 6

What are those conversations look like as you're trying to kind of Either drive the upsell there or kind of expand their adoption of the platform more broadly. I'd love to get some more color on what those conversations look like.

Speaker 2

Yes. So it's a great question. Thanks, Matt. When we sell a use case around COVID, I mean, they're still buying Safety Connection or modules from the core CEM platform. And so once you do Then you load up their information into the system and then immediately you've got several other use cases you can do with that.

Speaker 2

So, from the 1st day, if we're coming in In my prepared remarks, I mentioned, Muskogee Health is a customer that we originally sold vaccine distribution and now they're The platform for other ways to alert and inform their constituents. So We've, I think, had pretty good success in being able to do that. And now we're seeing with reopening, There are some things that are the same where you're seeing a lot of workplace of the future type of initiatives, which play really well to our platform. We've always built a platform around Knowing where your people are and monitoring threats wherever they are, even if they're not at headquarters. So that fits really well.

Speaker 2

But now there's more intense scrutiny on travel and the risks associated with travel now than we've ever seen. So, and I've and you heard me say a year and a half ago and a year ago that The Travelers Management use case had pretty much completely dried up during COVID. And now we're seeing that come back Really strong, where people are starting to travel again and then also companies are having to go through and really look at how do they manage the risk of people traveling. And you've got the ISO 3,130 regulation that's or guideline that's come out recently, which people are trying to comply to. So all that adds up to we're starting to see reopening of some of those use cases that we like to do like Travel Risk Management.

Speaker 2

Right.

Speaker 6

Got it. That's helpful. And then maybe one just kind of looking at the comment on the infrastructure bill passed, obviously, an interesting opportunity is There's increased funding for some of these initiatives that you guys will participate and benefit from. But obviously, I mean, governments, there's a Kind of a large bureaucracy, maybe a little slower moving. So I mean, as you're thinking about what that could mean and how that might layer in going forward, I mean, what are your thoughts on Timing and what that might actually look like as it starts to layer into the business?

Speaker 2

I think we would I would think we expect to see Maybe some benefits of that next year, or like you said, it could be longer by the time revenue flows in. But there are just projects that sometimes the federal government helps to fund it And that enables the state to move forward with something. Obviously, the 911 infrastructure, there's a lot of opportunity to improve that. And then continue to modernize the messaging. We won an important deal to help power the front end for the Presidential alerting system for the United States, there's still other things that could be done there.

Speaker 2

So, we see a lot of areas where potentially this could help to unlock some It's still very early and it's something we'll have to continue to update you on as we go forward.

Speaker 4

Got it. Thanks again. Thank you.

Operator

The next question comes from Ryan McWilliams with Barclays. Please go ahead.

Speaker 4

Hey, guys. Thanks for taking the question. So David, after staying in a number of public warning wins in Europe so far, how do you plan around building Around these opportunities to capture the enterprise wins in these now Everbridge covered geographies?

Speaker 2

Yes, Ryan, thank you for the question. We've learned over the years, for example, in the state of Florida, when we won the statewide deal for the state of Florida, Over the years, we've gotten to the point where we have 67 to 67 counties, 100 of cities, over 60 corporations, Airports, train stations, universities, healthcare facilities. We built a regional resiliency ecosystem Around that statewide deal and it's very value added for our customers to be part of that ecosystem. And we're seeing it now in California and New York and some of the other statewide Deals that we've won. And we see it also with the Countrywide deals.

Speaker 2

So if we just do our normal things over the years that will develop. And what we've done is put together playbooks to try and accelerate what will happen what would happen naturally. So in some of the countries we've already won, we're running tests and doing different types of outreach to try to accelerate this network effect That we can get when we win the countrywide or the statewide mass notification deal. So, we do have plays that we're running on that And I think we're getting better and we're learning and it's something we're really optimistic about as we go into the future. And we're not just limiting it to the European Union by the way.

Speaker 2

I mean, we're talking to countries all around the world. And so obviously the EU mandate is an important catalyst there. But in See the EU mandate is an important catalyst there, but more and more we're creating standards for how this should be done and really it makes sense for every country To have this type of capability given the overall risk profile, whether it's coming from natural disasters, extreme weather events, Cyber, all of it. So it's an area that we're very excited about in terms of kind of building a mode around the business for the long term.

Speaker 4

Thanks. Yes, I think the New York City Housing Authority, Wynn, kind of spoke to that. Exactly. And then just on, Patrick, from the billing standpoint, I know things can be really lumpy and you can't force countries to exactly do it the way you want. But Just on the length in the quarter, any seasonality, anything to call out there versus the prior quarter?

Speaker 4

And then maybe RPO, How that did in the quarter as well? Thank you.

Speaker 1

Sure. Thanks, Ryan. Any Individual quarters calculation of billings will be subject to a lot of noise. Seasonality can sometimes play a part, but just the timing of transactions and the renewal of the transactions, etcetera, will create noise. So we'll continue to Focus people towards that they really want to look at billings, which is not a great metric for understanding our business, we'd say look at the trailing twelve Month change in billings, which was up 42% year over year.

Speaker 1

That billings still doesn't include amongst the noise or the things that don't even show up in billings are the Deals that we've signed in the quarter that we've not yet invoiced for and that includes some of the country wide wins and that's an uninvoiced backlog of That's still sort of in the mid teens of 1,000,000 of dollars. And the RPO is what we would encourage folks To look at before doing a billings calculation, that is up year over year by 36%, The current version of subscription RTI is up 36%.

Speaker 2

Thanks guys.

Operator

The next question comes from Will Power with Baird. Please go ahead.

Speaker 5

Great, thanks. I guess a couple of questions. You all referenced the record number of 500,000 plus deals. I'd love to just get more color on what's driving the increasing traction there, seemingly each quarter. I mean, is it Companies taking more modules, is it tied to added distribution that has a greater upmarket focus?

Speaker 5

Just would love to get more color as to What's driving the larger and larger deals?

Speaker 2

Yes, Will, thank you. Great question. So it's multiple factors. One is that we have been trying to sell higher into the organization. So if you start by selling into the C suite, and If we can into the Board even, that helps, it helps you drive bigger deals.

Speaker 2

2 is, various bundling strategies. A lot of our competitors are selling point solutions. And so one way we compete and try to avoid competing on price is by Together a bundle of capabilities that is difficult for them to match because they just don't have those capabilities. And that's why you see we've been pretty aggressive with our Strategic product roadmap building out into new adjacencies. And I think that's been really helpful as we're going and trying to drive up the ASP.

Speaker 2

And then also there's just a higher awareness level of the importance of critical event management and overall resilience In an organization coming out of COVID, and I think that does help us quite a bit. So it's a variety of factors, but it's clearly A trend if you look over the last several quarters and it's something that we're going to continue to try to do more and more of. Okay.

Speaker 5

And then I want to ask you a question on the EU front. I guess maybe Spain in particular, it looked like a really nice win. I know you noted That was a competitive process. I want just some more color as to what you think set you apart from the other competitors, both the front end And back end, and as you think about competition for some of these other EU deals, how might those differ from what you perhaps saw in Spain or not?

Speaker 2

Yes. Thank you. So we have we had the world's leading best solution for Location based SMS version of public warning. And then we acquired One TO Many, which had the world's best solution for the self broadcast modality of public warning. And we've built an integrated hybrid front end that supports multiple modality public warning And we filed for IP protection and we have that, it's now patent approved.

Speaker 2

It's launched, it's going in with some of these new wins that we're getting. And so that we think we have the best in our opinion, we think we have the best product. We think strategically by having a hybrid platform that supports all modalities, That helps. We have more integrations than anybody, particularly around 5 gs type of modalities. People want to do multimedia messaging, that sort of thing.

Speaker 2

And then for some of these countries, they want to know that they're going with a partner who has the bench strength To actually get the solution integrated and delivered. So these are very large scale complex implementations in some cases. And I think Australia is a great example where It's very public. It's very high profile for the country and it was a big deal to get the to go live with Australia this past quarter. And it's very high stakes in terms of the use cases.

Speaker 2

If you look at the bushfires and some of the other safety areas that this is used for in Australia. So I think the fact that we've got so many implementations, I think we're sort of the safe choice and we can also be relied upon to help Really manage and drive the implementation in a timely manner and we've gotten that feedback as well.

Speaker 6

Okay. Thank you.

Speaker 2

Thank you.

Operator

The next question comes from Parker Lane with Stifel. Please go ahead.

Speaker 7

Hi, guys. Thanks for taking my question. I think it's been about 6 months since you acquired X Matters. Love to hear about The joint selling motion between your own IT Alerting solution and xMatters and the progress of some of your existing customers taking on The capabilities you acquired in that deal.

Speaker 2

Yes, Parker, thanks for the question. We're getting great feedback on this concept of a digital physical fusion center where you can manage your risks Across both with a single pane of glass and a common operating system. And I think it's the wave of the future. And the lines blurring, you see Something starts with a ransomware attack and all of a sudden people can't get gas at the gas station, and it goes back and forth physical to digital, digital to physical. So it makes sense to have one vendor partner that can support that across everything.

Speaker 2

So I think people are resonating with the message. Obviously, with the X Matters platform, it was many years of development, really nice system, interface, Functionality, use cases, digital operations, it really adds a lot of capability to what we were doing with our IT alerting. And we're already doing integrations, right. So we've got that integrated now with our crisis management module. We've got it integrated with our employee communications module, Integrated with our Visual Command Center.

Speaker 2

So, people are seeing the value of it coming together over time and giving us really positive feedback. Great.

Speaker 7

And then on the broader enterprise opportunity, Relative to pre COVID, how have the sales pitches changed across the verticals you're playing? And I mean, some organizations are going back To the office, others are doing fully remote workforces going forward. Can you just talk about how that actual sales pitch has changed in the value proposition you're Trying to drive for customers, how you're communicating that in this new world?

Speaker 2

Yes. So one thing that stayed constant is The ROI, so the ROI use cases are going to sell well. Forrester came in and did The study and talked to a bunch of our customers and said there's a, I think a 4 month payback period for CEM. So If you can do our eyes and help to enable revenue or help them to run their business more efficiently, and then you kind of fund the insurance policy piece of it, That's really compelling. As our retail customers have been reopening their stores, we've been helping them with that, that's enabling their revenue.

Speaker 2

More and more reliance on digital. So the IT alluring, CEM for digital in terms of Reducing IT downtime is a very easy ROI case because it's so expensive to have that downtime. So that's really important. As far as specific use cases, definitely now people are very focused on workplace of the future. There's a lot of competition For talent and hiring and companies are having to be more flexible in terms of how they support their workforce and let them Work remotely and have hybrid models from that perspective.

Speaker 2

And definitely our system built around Safety Connection It's really built to do that. So the Workplace of the Future initiatives play really well with what we're doing and we're definitely emphasizing that in the sales. And then Most recently, we're seeing in just recent weeks and last few months travel, business travel is coming back with a vengeance. And people want to make sure that they're doing everything they can to mitigate risks around business travel. So that's an area we see a lot of opportunity in.

Speaker 7

Very helpful. Thanks, David.

Speaker 2

Thank you.

Operator

The next question comes from Brian Peterson with Raymond James. Please go ahead.

Speaker 4

Hi, thanks for taking my question. This is John Massino on for Brian. David, I know that the partner channel has been something that's gotten A lot larger focus since you've joined, and it's good to see Deloitte added as a partner in EMEA. But maybe give us a little more color on the broader efforts there and how those are progressing? And where do you think those efforts are as far as full potential of breadth of expansion there?

Speaker 2

Yes, John, thanks for the question. We want to have multiple routes to market and multiple ways to drive distribution In addition to just the direct sales force that we've always had. So, there are different categories of partners. We've got Global System Integrators and we've got other product ecosystem partners. We have 100 and 100 of And so where we have a technical integration, we try to also turn that into a go to market partnership.

Speaker 2

We have the agent community. And then We have, energy vertical specific partners. For example, we announced a partnership a few quarters ago where we're going and helping with critical infrastructure around nuclear power That sort of thing. So all of these really help to drive overall deal flow and number of at bats. And so Sometimes it could just be a referral and sometimes it's going in as a whole package deal.

Speaker 2

And I think also we had a question earlier about big deals. In a lot of cases, Some of these deals are bigger than our average deal. For example, our largest contract is State of California and that came as part of a partner deal With a global partner, in a couple of cases now we've gotten partners to sign up for reasonably significant annual minimum commitments And that always helps too and it shows their confidence and their ability to help sell what we have. And then more and more you're seeing we're partnering with Professional services type firms where there's very little overlap, but they're going in on a consultative basis and helping Advise Enterprises and then for them it's a natural extension to say, a lot of these best practices are supported by this Industry leading SaaS platform from Everbridge. And by putting that in, you can make a lot of these improvements.

Speaker 2

So it's a good fit. I think in terms of where we are in our overall progression, And we've built out our partner portal and our processes and our whole way we support partners. That all had to be stood up Over the last year or so, now I think we expect to see it start to accelerate more, but I think it's still 2nd 2nd or third inning in terms of what it could potentially be at the end.

Speaker 4

Perfect. Thank you very much.

Speaker 2

Thank you.

Operator

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

Speaker 8

Hi, thanks for taking my questions. This is actually Laurie Lort calling for Koji. Just want to follow-up on that Found a link comment previously. So I was wondering what is the current average product per customer? And Could you remind us how that has trended since IPO?

Speaker 2

Hi, Laurie. Thank you for the question. Yes, we think it's a big Growth opportunity for us, the average number of products per customer is a little below 2. So We probably have 11 different products that we could be selling. So we see a lot of opportunity now with over 6,000 enterprise customers To cross sell and up sell, and so we see that as a big growth driver for us going forward.

Speaker 2

Thank you.

Speaker 8

Great. Thanks.

Operator

The next question comes from Brian Collier with Stephens. Please go ahead.

Speaker 9

Hey guys, thanks for taking the question. So I wanted to ask about X Matters. I'm curious how The increase in ransomware attacks is kind of impacting the pipeline for the X Matters solution. And also how is X Matters Forming from a top and bottom line perspective relative to your initial expectations.

Speaker 2

Yes. Thanks for the question, Brian. We're not a cyber company. We don't compete with those companies, but When a cyber attack does happen, it becomes a critical event. And so we really work hand in glove With the companies that sort of protect the endpoint.

Speaker 2

So as you see an increase, that does affect Things like digital operations, it affects IT uptime and overall productivity and then that just squarely in the CEM category. So It definitely allows us now to go have more robust and better conversations with well funded personas like the CIO, CTO of an organization. So from that perspective, it's been very helpful. Overall, we're not really breaking out the X Matters, We had an existing ITA business and we're kind of put those things together. But I think overall X Matters has been kind of what we expected.

Speaker 2

I don't know, Patrick, if there's more you want to add on that.

Speaker 1

No, to your point, it's performing As expected, we've integrated the people. We've integrated the sales. We've integrated the funnels. We're integrating the technology. So we don't break it out, but so far so good.

Speaker 9

Got it. That's helpful. On the public warning side, I'm curious how quickly do you think some of these larger wins like Spain will translate into expansion wins within the country with Enterprise customers or other municipal customers.

Speaker 2

Well, We're going to go spread the word ASAP and it just helps when you go and say that the country has Done an extensive RFP process and we were selected and we're powering and I mean we see it in United States where we have Several 100 municipalities and their fallback system is the federal government, which we also help to power as well. And so It's just a natural conversation at least from a marketing and sales perspective and sometimes there's other benefits as well. It's probably in some of these countries, we have better sales coverage than others. So in some places, we need to go and hire more salespeople to get better coverage. Where we have better sales coverage like in Australia, we are seeing deals starting to come through from that.

Speaker 2

And then in other places, we

Speaker 9

Got it. Patrick, just a quick house Keeping question for you. Can you provide the breakdown of professional services revenue versus software license and subscription?

Speaker 1

I can. That's in our 10 Q, which we filed concurrently. And I could follow-up with you after that, but it's definitely it's been published to our website and filed with SEC.

Speaker 9

Okay. Yes, apologies. Thanks for the time guys.

Speaker 1

No worries.

Speaker 2

Thank you.

Operator

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

Speaker 2

Well, I just want to thank everyone for joining our call today. We're excited about our consistent execution, which drove results that exceeded our guidance, and we're looking forward to closing out a record year as we continue to leverage our market leadership

Operator

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

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Everbridge Q3 2022
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