Everbridge - Q2 2022

Transcript

Operator (participant)

Good day, and welcome to the Everbridge, Inc.'s Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nandan Amladi, Investor Relations. Please go ahead.

Nandan Amladi (VP of Investor Relations)

Good afternoon, and welcome to Everbridge's Earnings Call for the Second Quarter of 2022. This is Nandan Amladi, Vice President of Investor Relations. With me on today's call are Dave Wagner, our new CEO, Vernon Irvin, Executive Vice President and Chief Revenue Officer, and Patrick Brickley, Executive Vice President and Chief Financial Officer. 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. 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 involves 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 10-Q and 10-K, 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. We explicitly disclaim any obligation to update any forward-looking statements or outlook. Also, during today's call, we will refer to certain non-GAAP financial measures. A reconciliation of our GAAP to non-GAAP financial measures is included in our earnings press release, which you can find on our investor relations website. Our earnings press release, which crossed the wires after market close, included highlights from our second quarter in addition to the financial results and outlook.

After we review our business and financial highlights, we will open the call to your questions. With that, let me turn the call over to Dave.

Dave Wagner (CEO)

Thank you, Nandan. I am excited to join Everbridge as Chief Executive Officer at this important moment in the company's evolution. Everbridge is a pioneer and is the clear industry leader in critical event management and public warning. Everbridge offers powerful solutions for positive change with the ability to keep people safe and businesses running smoothly. We have opportunities ahead of us in both the near and long term to grow this business, improve our efficiencies, and create shareholder value. I would like to take a quick moment to introduce myself. I have been working at B2B software companies for nearly 30 years, and I have been fortunate to be on teams that have created more than $2 billion in shareholder value. I have been part of an IPO, a go private, and two sales to strategic buyers.

Most recently, as CEO of ZixCorp, we grew revenue, EBITDA, and enterprise value each by more than 400% over less than six years. This growth was both organic and inorganic. We completed and integrated seven acquisitions successfully. In short, the teams I've led have created value in a range of ways, and I look forward to creating value with the team at Everbridge. In the near term, the team and I continue to focus on executing four strategic priorities. First, we are simplifying our product offerings and our go-to-market channels to improve sales productivity and drive organic growth. Second, we are focused on extending our global leadership in public safety systems with our industry-leading platform to enable our proven network effect. Third, we are working on strategic product integrations, making it easier for customers to adopt new solutions while extending the differentiation of our platform.

Finally, we are increasing overall efficiencies and increasing profitability across the company. Everything the leadership team and I are doing is focused on improving momentum, creating value for our customers, increasing profitability, and increasing shareholder value. As Vernon and Patrick will share, the team is demonstrating progress on each of our focus areas. Our second quarter results are an affirmation that our strategy is working and that our execution is improving. As I am quickly coming up to speed, I am impressed with the level of commitment our team members have to both our mission and to our customers. Enterprises and governments are increasingly focused on resilience. As a result, our customers are relying on our solutions more than ever. I look forward to partnering with Patrick, Vernon, and the entire Everbridge team to build on our commitment to growth, improving profitability, and increasing shareholder value.

I will now turn the call over to Vernon to review our business highlights.

Vernon Irvin (EVP and CRO)

Thank you, Dave, and thanks to all of you for joining us today. We delivered solid second quarter results and increased large enterprise deal momentum, demonstrating that our recent actions to streamline, integrate, and reduce complexity across our product portfolio are beginning to pay off for our customers.

Our second quarter results came in ahead of expectations with revenue of $103 million, up 19% from a year ago, and adjusted EBITDA of $4.8 million. Let me give you a few examples of our success during the quarter. Our persona-based solution pillars are gaining traction with our enterprise customers. As a reminder, these four strategic CEM pillars are our Digital Operations, Business Operations, People Resilience, and Smart Security. The breadth and depth of our platform is unmatched in our industry. We added 121 enterprise customers and 20 CEM customers and grew many more, including a leading Fortune 500 industrial firm, a leading pipeline company in the North American energy market, and six major financial institutions. Our deal sizes continue to grow.

We signed 63 deals over $100,000, five deals over $1 million, demonstrating our persona-based selling is gaining traction. In public safety, we demonstrated the power of network effect by growing business with several of our existing national customers. In Germany, we won the third major mobile network operator to deploy our public warning Cell Broadcast technology, expanding our reach to over 70% of mobile subscribers across Germany. In Peru, we delivered a successful national test of their early warning messaging system. The system, which uses Everbridge public warning platform, was activated across more than 22 million mobile phones. In Iceland, the first country to win our Best in Resilience designation, the government uses our system to warn all hikers and travelers of dangers around volcanic eruptions.

In higher education, we renewed and grew our presence in several top universities to better protect their student community at nationally ranked West Coast schools, including USC and UCLA, and two Ivy League schools. On the integration front, travel risk management and critical event management are now a single SaaS solution called Everbridge Assist, powered by Anvil. As the hybrid workforce redefines duty of care, we remain well positioned with the market's only end-to-end solution that combines people resilience and travel risk management. Another example is the launch of Service Intelligence, part of the digital operations platform built around xMatters. We can now provide IT responders with advanced analytics and dynamic runbook automation for faster recovery and reduced business impact. Our Risk Guide team continues to execute well, bringing in several six-figure E911 deals with enterprises and state and local agencies, many through partners.

Another focus area to drive our long-term growth is bolstering our go-to-market programs by building out channel and reseller partnerships, supplementing our direct sales with indirect sales. In the second quarter, over a third of our new and growth business during the quarter, particularly internationally, came through the expanded channel network, up from just around 10% a year ago. In fact, some of the largest deals are now being led by channel partners, including the German mobile operator and a leading industrial Fortune 500 firm. We also expanded our channel presence in Mexico through a partnership with Grupo Siayec, a leading provider of digital and physical security solutions. Finally, on the industry front, our Best in Resilience program now includes Humana, Exact Sciences, Johnson Controls, and the latest brand to achieve this prestigious certification.

A resilient organization ensures that employees, assets, resources, and communities are protected from and prepared to mitigate the impact of critical events. During the quarter, our enterprise IT and cyber resilience solution, xMatters, was named a leader and sole outperformer in the 2022 GigaOm Radar Report for Incident and Task Management Solutions. The report evaluates service providers based on a range of key criteria, including their technical capabilities, product roadmap, innovation, and ability to execute. In summary, we have made measurable progress on our priorities in the first half of 2022. As we look ahead to second half of the year, we expect that our simplification strategy to make our CEM bundles easier to buy while continuing to drive growth. Increasing profitability is being delivered by a combination of more efficient selling and larger deal sizes.

Now, allow me to turn the call over to Patrick for more details on our financial results, as well as our guidance for Q3 and the rest of 2022. Patrick, over to you.

Patrick Brickley (EVP and CFO)

Thanks, Vernon. At the halfway point in the year, we have delivered on our growth and profitability targets, and we have achieved planned milestones related to our strategic realignment of resources. We are on track to achieve mid-teens adjusted EBITDA margins exiting this year. We remain focused on driving sustainable revenue growth with increasing profitability. I'm pleased to see solid execution that produced revenue and adjusted EBITDA that were above our guidance range. Revenue in the second quarter was $103 million, up 19% from a year ago. During the quarter, we experienced over $1 million of revenue headwinds related to foreign exchange, and we anticipate those headwinds will continue for the remainder of this year. Adjusted EBITDA was $4.8 million, which reflects improving operating leverage as well as execution of the strategic realignment program that we initiated in May.

Through June 30th, we incurred nearly $10 million of expense related to the strategic realignment, and we remain on track to hit our stated overall realignment targets of investing $13 million-$21 million in order to reduce annual run rate expense by $13 million-$18 million. We ended the quarter with a cash balance of $475 million. For full details of our P&L and reconciliation of GAAP to non-GAAP measures, please refer to our press release. Total deferred revenue was $233 million, up from $210 million a year ago, but down sequentially from $246 million at March 31st, 2022, reflecting the usual organic seasonality of our business.

Note that deferred revenue at June 30th, 2021 was positively impacted by the acquisition of xMatters, which brought $34 million of deferred revenue on its opening balance sheet. Total remaining performance obligations from subscription and other contracts was $443 million, while current remaining performance obligations was $279 million. Our net retention rate continues to track at or above 110%, reflecting continued customer satisfaction, combined with demand for additional Everbridge technology to expand within the existing customer base. Our momentum with large transactions continued in Q2, resulting in trailing 12-month ASPs that were again above $100,000. Additional business metrics can be found in our investor relations presentation posted on our website. Now I'll turn to guidance for the third quarter and full year.

For the third quarter, we anticipate revenue of between $110.6 million and $111 million, representing growth of 14%-15%. Adjusted EBITDA will be between $13.5 million and $13.9 million, and we anticipate non-GAAP net income of between $7.5 million and $7.9 million or between $0.16 and $0.17 per diluted share. For the full year, we are reiterating our revenue guidance range of $428.2 million-$432.8 million, representing growth of 16%-17%. This outlook assumes more than $1 million of foreign exchange impact in each of Q3 and Q4, similar to what we experienced in Q2.

We anticipate adjusted EBITDA will be in the range of $37 million-$39 million, more than tripling from 2021 and representing an adjusted EBITDA margin of 9%. Further, we expect to exit the year with adjusted EBITDA margins in the mid-teens. We expect non-GAAP net income of between $15.7 million-$17.7 million, or between $0.33-$0.38 per diluted share based on 47 million diluted weighted average shares outstanding. In summary, we delivered a solid performance in the second quarter. As we progress through 2022, we are very focused on execution, driving organic revenue growth and maximizing return on our investments. Looking further, we believe we can deliver sustainable top line growth with improving profitability and positive cash flow, which can generate significant long-term value for all of our stakeholders.

Now, operator, we are ready to open the call for questions.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Michael Turrin with Wells Fargo Securities. Please go ahead.

Michael Turrin (Managing Director and Senior Software Equity Research Analyst)

Hey there. Thanks. Appreciate you taking the question, Dave. Congrats on joining. I think the first question for me is just I'm curious if there are any changes in buying behavior you're seeing or hearing. A number of software companies talk about elongation of sales cycles. We know there is a critical need for your solution. Wondering if there's anything with the bundling strategy or anything you're seeing from a targeted industry perspective or elsewhere that could suggest any change there at all.

Vernon Irvin (EVP and CRO)

Hello, Michael. This is Vernon Irvin. Thank you for the question. We've observed in our business that resiliency and business continuity continue to be at the forefront and concern of most of our enterprise and public sector customers. We haven't seen any notable headwinds due to global economic conditions. Again, I think resiliency and business continuity seems to be top of mind for customers, but we keep a watchful eye in the marketplace.

Michael Turrin (Managing Director and Senior Software Equity Research Analyst)

That's helpful. Just one on the metrics, if I may as well. I know billings is not the best indicator, given you've talked about timing or other impacts. Appreciate the reminder on xMatters on the year-ago compare, but it's down sequentially, again here in the second quarter, which is maybe counter to some of the commentary around deal sizes and the increase there. Just any impacts to be mindful of, whether it's duration or transition-related impacts you can just bring our attention to, and anything you can just add if there's any indication of where those could stabilize, I think is helpful. Thank you.

Patrick Brickley (EVP and CFO)

Yeah, that's a metric that we don't run the business to. In terms of just sort of zooming out and looking at the progress that we're making, we're continuing to see signs of progress in sales productivity. We're also continuing to execute on a strategic realignment, which part of that is de-emphasizing and shedding non-core technology and customers and revenue that relate to that.

Dave Wagner (CEO)

If I could interrupt. You know, Patrick and I spoke, I think about and just to remind you that the Q1 to Q2 is sequentially, you know, organic would be the way the billing cycle of our government customers works. That being down sequentially, organically Q1 to Q2 is not inconsistent with the trend the business has had for a long time.

Michael Turrin (Managing Director and Senior Software Equity Research Analyst)

Helpful. Thank you.

Operator (participant)

Our next question comes from Ryan MacWilliams with Barclays. Please go ahead with your question.

Ryan MacWilliams (Software Equity Research Analyst)

Hearing about your strategy objectives, what would you say are some things Everbridge can improve on for the rest of this year? How do you think about what a healthy growth profile for Everbridge can look like, over time?

Dave Wagner (CEO)

Those are great questions. When I talk to the board members and looked at the outside-in things myself, the four strategic priorities that the team is already working on, I think are the absolute right things to do, right? Simplifying our products to drive the organic sales velocity, focusing on those networks of the public safety with the network effects. Vernon gave some nice examples there. Making it easier, building paths to platform for more and more of our customers, and then increasing our efficiency. I think these are the right things to be focused on. These are things that I come to Everbridge with experience that hopefully I'm expecting to be able to help the team further improve in these areas.

That's what we have our head down, focusing on now. As we do, though, the sustainable growth opportunity, which I think remains strong, we'll get a much better indication of what that looks like a couple quarters in.

Ryan MacWilliams (Software Equity Research Analyst)

Appreciate the color. Just on bookings linearity, any changes to bookings as we move through the second quarter and then into July as well? Also, do you see any changes in churn in the second quarter? Thanks.

Vernon Irvin (EVP and CRO)

Yeah, no, we track linearity pretty closely on bookings, and I think we continue to see that the strategy that Dave just laid out, you know, continues to provide us with the right strategy and the right runway to continue to maintain our momentum. So I don't have any further comment on that. What was the second part of the question? I'm sorry.

Michael Turrin (Managing Director and Senior Software Equity Research Analyst)

Any changes in churn?

Vernon Irvin (EVP and CRO)

No, I think we also see sort of continued trends in the business as well, but no additional comment on churn.

Ryan MacWilliams (Software Equity Research Analyst)

Okay. Excited to see the more details of what's coming next. Thanks, guys.

Vernon Irvin (EVP and CRO)

Yep.

Operator (participant)

Our next question comes from Scott Berg with Needham. Please go ahead with your question.

Scott Berg (Managing Director and Senior Research Analyst)

Hi, everyone. Congrats on the quarter, and thanks for taking my questions. I echo the welcome Dave comments.

Dave Wagner (CEO)

Thank you, Scott.

Scott Berg (Managing Director and Senior Research Analyst)

You bet. Vernon, wanted to start with, you know, what you're seeing with your enterprise corporate customers today in terms of general demand trends. If you look at the business today versus maybe, you know, right before the pandemic, I know contract ACV sizes are increasing a little bit, but how are those customers buying your solutions differently today versus maybe two and a half years ago?

Vernon Irvin (EVP and CRO)

Yeah, look, I think the importance of resiliency and business continuity is top of mind for lots of large corporations around the world. That has given us the ability to be able to position our platform strategically with a lot of those large enterprise and public organizations. As a result of that, we obviously aligned our new pillar strategy to make sure we made a buying journey very simple for our customers to understand it, and we build it by persona. From our perspective, we think that the importance of resiliency and business continuity align with the simplification of the strategy that Dave talked about. The pillar strategy, I think is very timely. As we were able to show this quarter and a little last quarter, we're starting to see early progress there. It is early.

It's only been a few months, but we are seeing early evidence that the platform and pillar strategy is allowing customers to see sort of their journey as they align the importance of resiliency and business continuity with Everbridge CEM.

Scott Berg (Managing Director and Senior Research Analyst)

Great. From a follow-up perspective, I wanted to touch on the business coming out of EU with the mandate there on population alerting and such. You know, how should we think about that opportunity today? Kinda where are we in the process? I think most of us understand that, you know, a lot of those selection cycles are supposed to be done this year with the original timeframe. You know, as you sign another telco within Germany, is that opportunity maybe 50%, 60%, 70% through the buying decisions, you know, for what those customers are doing? Or is there maybe, you know, more to come here in the second half into 2023 for Everbridge? Thank you.

Vernon Irvin (EVP and CRO)

Yeah, the public warning business for us in the EU, Everbridge, I think, has been able to demonstrate that its Cell Broadcast public warning platform is one of the best in the industry, particularly with our front end. We're proud that we were able to win the largest country in the EU, with Germany, and a recent win we announced in the second quarter. You know, to give you sort of a feel for further opportunities, there are significant over 12 different European country RFPs and RFIs that we continue to compete for. But many of the large countries like obviously Spain, the U.K., and Germany have picked Everbridge for its ability to be able to warn its citizens and duty of care for its country.

There are, you know, still, you know, close to 10 other European countries that we are positioned with in the marketplace. Because it's a global business, we also have a number of countries that are outside the EU that we'll continue to pursue as well in Asia-Pac and Africa and the Middle East.

Scott Berg (Managing Director and Senior Research Analyst)

Thanks. Congrats again.

Vernon Irvin (EVP and CRO)

Thank you.

Operator (participant)

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

Speaker 13

Hi, thanks for taking my question. Just one from us. First, David, congrats on joining the team. Looking forward to working with you. I was wondering how you are thinking about the current sales capacity in order to reach your near-term growth. Are you sticking with your hiring plan from the beginning of this year, or has timing changed? And are there any other changes on your go-to-market strategy that you are currently evaluating to drive the higher efficiency this year?

Vernon Irvin (EVP and CRO)

Yeah, look, our primary directive is to continue as a growth company. We continue to be active in making sure that we hire our go-to-market teams, particularly our sales organizations, around the world. That is a top priority. We also continue, as Dave talked about and Patrick talked about, continue to also wanna improve our bottom line, so we're mindful of making sure we operate efficiently. Most of the growth and go-to-market, we continue to make those investments. One of the pivots that we have made, Laurie, is, as I said in the prepared remarks, we continue to pivot, more and more also to our indirect channels. We think there are more efficient cost structures there, more effective velocity in winning large deals around the world.

You'll continue to hear progress as it relates to sort of making sure that indirect becomes a more prominent part of our business as we've seen some significant progress, particularly outside of the United States. If there's a one point of clarification around go-to-market would be that, I think that indirect will continue to strengthen and allow us to produce a more efficient bottom line on our go-to-market.

Speaker 13

Yeah, that's helpful. Thank you.

Operator (participant)

Again, if you have a question, please press star then one. Our next question comes from Brian Peterson with Raymond James. Please go ahead.

Brian Peterson (Managing Director and Senior Equity Research Analyst)

Hi, gentlemen. Thanks for taking the question. David, welcome to the call. Look forward to working with you. Patrick, I do wanna follow up on billings. I know it's not the favorite topic. I know you don't run the business to that metric, but, you know, we've seen some quarters of volatility. Is there any way you could just comment, you know, on how maybe internal bookings compared versus expectations? Again, I know billings isn't the perfect metric, but like, you know, we just wanna make sure we're getting the right kinda read-through here because it sounds like the qualitative commentary on, you know, the enterprise and everything you're trying to do is really going well. Just wanna make sure we're on the same page here.

Patrick Brickley (EVP and CFO)

Yeah. Seasonally, Q2 is the softest quarter for a number of metrics. Now, we had a solid Q2, but when you look at externally calculated metrics like billings and you adjust for in the quarters where we have acquired deferred revenue, when you adjust for that, looking back over time, you'll see that Q2 has historically been sequentially down from Q1 on that metric and then, you know, jumps back up in Q3 and Q4. That's that pattern has always been there, and we would anticipate that that will continue this year as well.

Brian Peterson (Managing Director and Senior Equity Research Analyst)

Got it. Maybe just a follow-up on the guide, just clarifying. It sounds like the guide kind of embeds an incremental $3 million in FX headwinds. Is that right? Maybe any color on sort of broader macro assumptions that you have in the updated outlook? Thanks, guys.

Patrick Brickley (EVP and CFO)

Yeah. That's it, Brian. At a high level, you heard Vernon talk about trends. Of course, we're trying to be prudent with our guidance, as always. You know, we've got a few moving parts, but we're excited. You know, we think that we're on track and we're making progress in terms of continuing to focus the business on long-term sustainable organic growth. Good progress to date. We've got more work to do.

Brian Peterson (Managing Director and Senior Equity Research Analyst)

Got it. Thank you.

Dave Wagner (CEO)

Yeah, Brian, thank you for the kind welcome. You know, look forward to working with you as well. I appreciate you being, you know, clear on that on the, you know, FX headwinds that we've incorporated into the guide.

Operator (participant)

Our next question comes from Brian Colley with Stephens. Please go ahead.

Brian Colley (Analyst)

Hi, guys. Thanks for taking my question. Dave, congratulations on the new position.

Dave Wagner (CEO)

Thanks, Brian.

Brian Colley (Analyst)

Vernon, I'm curious, just as I look at the new bundles, kinda which categories are you seeing the most success today?

Vernon Irvin (EVP and CRO)

A couple of them, particularly. The answer almost regionally, but certainly, the People Resilience is the one that we can point to. Also the Business Operations pillar is pretty strong for us. Last but not least, we're seeing some nice momentum on our Smart Security platform. One of the largest financial institutions in the United States signed a pretty significant seven-figure deal with us. Those are the three that are resonating pretty well. You know, we also have a mindful eye on the digital opportunity too, right? As companies are pivoting more and more of their business operations where we think physical and digital are merging together. We think CEM for digital is a very prominent place that we're excited about, obviously leveraging the xMatters asset.

Brian Colley (Analyst)

Got it. That's helpful. Thank you. Then also wanted to ask about the EU. Can you just give an update on what you're seeing in terms of top-down, you know, network effect type business in some of the larger countries that you've won recently?

Vernon Irvin (EVP and CRO)

Yeah. As you know, we have, when I think about the recent win in Spain, we also were able to win one of the largest financial institutions that's based in Spain. That's a really good example of leveraging the network effects. We believe that the strategic relationship that we started with in Germany with Siemens, you know, was instrumental in making sure that we were able to go to the country of Germany and leverage that significant win there, where we announced the latest country there. There are, you know, a couple of real good examples where winning the country helps pull in enterprise or winning the.

I'm sorry, winning the country helps you with enterprise or having a large enterprise helps you win the country. Network effects is absolutely something that we'll stay focused on.

Brian Colley (Analyst)

Got it. I appreciate that. I'll leave it there.

Operator (participant)

Thank you. Our next question comes from Parker Lane with Stifel. Please go ahead.

Matthew Kikkert (Equity Research Associate)

Hi, this is Matthew Kikkert for Parker. Thanks a lot for taking my questions. Dave, welcome to the team.

Dave Wagner (CEO)

Thanks, Matthew.

Matthew Kikkert (Equity Research Associate)

Yeah. First off, I wanted to start with the competitive landscape. Have you seen any competitive challenges and pricing pressures continuing internationally? Or are you seeing these start to dissipate?

Vernon Irvin (EVP and CRO)

If the question is specifically internationally and not domestically, I'll answer it, Matthew, internationally. We sort of run two product categories. Obviously, our world-class Everbridge CEM SaaS platform that we operate in. We have a variety of products and capabilities that compete there in the marketplace. We don't see competition at the CEM level, where we're able to deliver the single pane of glass for resiliency and business continuity. At the individual product level, call it Mass Notification or Risk Intelligence, there are a number of individual players that we compete with in those marketplaces.

As I speak about our public warning platform, Everbridge has been very successful and dominant in our win rate and our ability to be able to address the EU mandate on public warning. We don't see any big competitors. There are some smaller competitors that are very, very price-oriented. The reality is, when we're able to speak to customers about our LB-SMS and our public warning platform with Cell Broadcast, plus the front end, it does provide a nice competitive moat for us. There are very small public warning competitors, and there are also smaller competitors in the resiliency business continuity, but not at the CEM level, if that makes sense.

Matthew Kikkert (Equity Research Associate)

Okay, that makes sense. Thank you. Secondly, I wanna zoom out a little bit. What changes and new perspectives do you expect coming from the addition of Dave as the CEO? Then specifically for you, Dave, what attracted you to the position at Everbridge?

Dave Wagner (CEO)

Yeah. I'll take that both halves of it. You know, in terms of changes, you know, I see the strategy that we're on, you know, improving go-to-market efficiency, tightly integrated products, making these paths to platform through product and easier product integration, improving our profitability. These are things that need to be done. The team's on the right track. We're making progress against these objectives, and we're gonna continue to focus on moving those forward. You know, I'm really excited to join Everbridge. It's a clear leader and an important part of the market with a very clear mission and purpose that ultimately results in saving lives. I'm finding a really deep commitment among the employee base to the mission.

I'm deeply committed to that. To that mission as well. Then I look at it, you know, from when I'm joining the shareholder value creation opportunity here, I think is really good. We're gonna continue to focus on, you know, driving the growth and making sure that we're increasing our profitability at the same time, which I think as we do that, it's gonna, you know, be good for, you know, our customers, our colleagues, and our shareholders alike.

Matthew Kikkert (Equity Research Associate)

Great. Thank you very much.

Operator (participant)

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

Matt Stotler (Research Analyst)

Hey. Hey, everybody. Dave, good to meet you virtually. Look forward to working together going forward. Thank you for taking the questions. I guess first one, just a question on large deal pipeline. You obviously seem to be pretty healthy in the quarter. Something we've seen in prior slowdowns is a you know, kind of a shift in customer buying patterns towards you know, kinda smaller you know, kinda high near term ROI, low risk deployments versus large purchase decisions. Is that something that you're seeing today?

Is that, you know, on the other hand, as you move to a bundled approach, do you still have the ability to kinda sell these, you know, smaller, you know, high near term ROI solutions that customers may look for if we do have more of a slowdown on the back half?

Vernon Irvin (EVP and CRO)

Yeah. Excellent question. Thanks for asking that, Matt. You know, one of the things that we positioned as part of our pillar strategy was obviously a journey map to be able to go to a large enterprise or a public safety company and give them the ability to on-ramp on their way to a journey to CEM.

Each of the packages that we've rolled out has a level called Essentials, which is the sort of low end of the marketplace, where a customer can sign up for our Risk Intelligence solutions or our Mass Notification or some workflow design products we have, and then be able to very quickly migrate up to the next level, which is what we call our standard package, where they could then sort of add another set of services around our Control Center or Mass Notification. Obviously, full-blown CEM is the advanced product where, you know, now you're looking for holistic security for internal, external, digital, as well as physical threats and, you know, become a full CEM customer.

I think that optionality that we rolled out in the marketplace gives customers a journey map to say, "Hey, look, due to economic conditions, we like the journey for CEM, but we're gonna just start with the essential package." You know, we think we are an existing customer that's already essential, but migrate to intermediate and to advanced. That strategy again got rolled out pretty early on, but we're seeing indications that was the right direction to go in.

Matt Stotler (Research Analyst)

Gotcha. It's very helpful. Then just one follow-up. You know, you've talked historically about this, you know, kinda eight-figure backlog that in prior periods had been, you know, kind of, expanding or increasing a little bit. Any update on what that looks like and whether that's still increasing or decreasing in size?

Dave Wagner (CEO)

Hey, Matt Stotler, it's Patrick Brickley. No material change this quarter relative to last quarter. The sort of what we delivered in revenue, we replaced with sales.

Matt Stotler (Research Analyst)

Got it. Thanks again.

Dave Wagner (CEO)

You bet.

Operator (participant)

Again, if you have a question, please press star then one. Our next question comes from Stuart Goldberg with Kettle Hill. Please go ahead with your question.

Stuart Goldberg (Senior Analyst)

Hey, guys. Thanks for taking the question. Wanted to know about the channel partners. What other details can you talk about for the quarter? What have you learned about realized pricing through the channel partners, if anything, at this point?

Vernon Irvin (EVP and CRO)

Yeah, absolutely. Thank you for the question, Stuart. This is Vernon Irvin again. One of the things that we do see when we engage the partner organization is greater deal velocity. Part of what we hear from customers is they have strategic partners themselves, whether they're system integrators or consultancies. Some of the partners we announced, Booz Allen and PricewaterhouseCoopers, Deloitte, and Atos, Control Risks. Most of those companies that I mentioned have their own business continuity practice and have had them with the C-suite for quite some time. What we're finding then is what's been lacking is an actual solution to deliver resiliency from a digital transformation perspective, and that is what the CEM platform does.

Aligning our CEM platform with these large consultancies or SIs is again the ability to connect with their C-level relationships, which is the velocity component, with our platform, CEM. The combination of two are ones that we're seeing are partnered together. Last but not least, I would say the pricing isn't a topic. We're doing these things at market rates, and there is no differentiation in the pricing from with using our partners.

Stuart Goldberg (Senior Analyst)

Great. Thanks.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to Dave Wagner, CEO, for any closing remarks.

Dave Wagner (CEO)

Thank you all for joining Everbridge's second quarter earnings call. We look forward to meeting with many of you during the quarter and speaking with most of you again, as we give our update after Q3. Thank you very much and have a good evening.

Operator (participant)

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