Everbridge - Q3 2021

Transcript

Operator (participant)

Hello, and welcome to the Everbridge Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. 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 Patrick Brickley, Chief Financial Officer. Please go ahead.

Patrick Brickley (EVP and CFO)

Good afternoon, and welcome to Everbridge's Earnings Conference Call for the Third Quarter 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 Meredith. 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 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 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 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?

David Meredith (CEO)

Thank you, Patrick, and thanks to all of you for joining us today. We delivered strong third quarter results that again exceeded our guidance for revenue and profitability. Revenue of $96.7 million increased 36% from a year ago, and both Adjusted EBITDA and non-GAAP net income were positive for the sixth quarter in a row. Our strategic CEM and public warning platforms continued 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 half a million dollars that we closed in the quarter. A record international mix driven by CEM deals, public warning wins, and existing customer expansions.

These strategic wins and expansions fueled our trailing twelve-month ASP that exceeded $100,000 for the second quarter in a row, increasing by 41% from a year ago. As greater numbers of the global population become vaccinated against COVID-19, organizations, schools, and governments continue to move towards plans for more normalized protocols. However, to avoid outbreaks 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-19. 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 U.S. and Australia, as well as an increasing number of digital threats, such as ransomware and other forms of cyberattacks 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. As a result, our CEM suite continues to be increasingly relevant, and in the third quarter, we saw key CEM wins both in North America and internationally across all of the major 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 $1.2 trillion 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. 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 to dispatchers at the time of a 911 call, and our E911 capabilities to help direct emergency responders to the exact location of someone seeking assistance through multi-line telephone systems. 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 secure collaboration for warnings across federal, state, local, and tribal governments during emergencies.

When coupled with our recently launched next generation version of our Resident Connection product, this enables local governments to reach a higher proportion of their residents in a critical event. Given our FedRAMP compliance status and growing footprint at all levels of governments, 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 expansion 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. 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, these 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 States Department of Commerce chose our CEM platform to address gaps with bureau communication and situational awareness. Our successful combination of xMatters 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. 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 five years ago. They had added Safety Connection two years ago, and in Q3, they expanded to 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 their 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.S. Department of Commerce CEM win, which was just one highlight from a very busy third quarter 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.

Among our federal wins in the quarter, the Muscogee (Creek) Nation Health System, which supports the fourth-largest Native American tribe in the United States, initially purchased Everbridge in February for 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 & Medicaid Services as a new federal customer. CMS will leverage Everbridge to notify employees of cybersecurity training and warnings, COVID-19 updates, safety and compliance protocols, important human resources information, and to measure employee engagement. The U.S. Department of Agriculture's Office of Homeland Security leads security, preparedness, and response efforts to ensure USDA employees and stakeholders are prepared to support the agency's mission. They selected Everbridge to enhance their risk intelligence monitoring of 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. 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.S. Attorney's Office, Middle District of Florida serves 35 counties across the state, which is over half the population of Florida, making the Middle District the second 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 their offices and employees. 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. During the quarter, we received notification that we won another of the top five most populous countries in the European Union, or EU, Spain, with a population of 47 million. Spain chose our cell broadcast solution in a competitive bid process. As the leading provider of hybrid public warning solutions with cell broadcast, location-based SMS, and other 5G 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 third quarter, we inked a significant expansion in the Netherlands, one of our countrywide public warning system. 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-19 pandemic and an intensely competitive hiring environment continue to create uncertainty in the overall market, our ability to generate positive non-GAAP profitability for six 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. Turning to our metrics for the third quarter, 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 third 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 one year ago.

As in the second quarter, our momentum with large transactions continued in Q3 with quarterly ASPs that moderated slightly from our record second quarter and resulted in trailing twelve-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. 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% one 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. 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 EMEA Cybersphere Center became our latest partner. Everbridge CEM Solutions will now be offered as part of Deloitte's EMEA Cybersphere Center's cloud-based detection and response services for government and commercial customers to enhance the protection and continuity of digital and physical operations. 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 wherever you are in hybrid work location policies. As employees begin returning to business travel, we see this interest accelerating. With ISO's recent publication of Standard 31030, 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 will provide medical, security, and travel assistance and advice to those in need and help keep people safe wherever they go. 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 third 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 the multi-billion-dollar opportunity we are pursuing. Now, I'll turn the call over to Patrick for more details on our third quarter financial performance and our guidance for Q4 and full year 2021. Patrick?

Patrick Brickley (EVP and CFO)

Thanks, David. We had a great third quarter with record revenue of $96.7 million, 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&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. Gross margin was 73.3%, 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 $68.7 million, an increase of 38% from a year ago, reflecting continued investments in our platform and our go-to-market strategy. Adjusted EBITDA was $4.9 million, 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 third quarter was $2.1 million or $0.05 per diluted share, compared to net income of $2.8 million or $0.08 per share a year ago. On a GAAP basis, our net loss was $28.7 million.

Turning to our balance sheet, we ended the quarter with $555 million in cash equivalents, restricted cash, and short-term investments, compared to $568.3 million 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 million, which will be reflected in our fourth quarter results. Operating cash flow was an outflow of $2.7 million, and free cash flow was an outflow of $7.5 million. Total deferred revenue was $214.1 million 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. We believe our trailing twelve-month performance is much more indicative of our overall business trends. Now, I'll turn to our guidance for the fourth quarter and full year, which includes the impact of our third quarter outperformance and our continued business momentum. Note that the anticipated impact from our Anvil acquisition on fourth quarter and full year revenue is not material.

For the fourth quarter, we anticipate revenue of between $102 million and $102.2 million, representing growth of 35%. We anticipate Adjusted EBITDA to be between negative $1.8 million and $1.4 million. We anticipate a non-GAAP net loss of between $7.8 million and $7.4 million, or a loss of between $0.20 and $0.19 per share based on 38.8 million basic and diluted weighted average shares outstanding. Stock-based compensation expense is expected to be approximately $20.9 million in the fourth quarter. For the full year, we are increasing our revenue guidance to a range of $367.6 million-$367.8 million, representing growth of 36%.

We anticipate Adjusted EBITDA will be in the range of $8.8 million-$9.2 million. We expect a non-GAAP net income of between $3.7 million and $4.1 million, or between $0.09 and $0.10 cents per share based on 39.5 million diluted weighted average shares outstanding. This guidance assumes estimated stock-based compensation expenses of approximately $66.5 million for the year.

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 third quarter and are well positioned to close out 2021 with excellent financial results. Now, operator, we'd like 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 telephone keypad. 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. Please limit yourself to an initial question and a follow-up. At this time, we will pause momentarily to assemble our roster. The first question comes from Scott Berg with Needham. Please go ahead.

Scott Berg (Managing Director and Senior Research Analyst)

Hi, David and Patrick, congrats on the good quarter. David, 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, you know, with your broader CEM package have had some success, you know, selling into or at least having some conversations on how you can help maybe mitigate some of those challenges out there today?

David Meredith (CEO)

Yeah, 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 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. 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 with.

Scott Berg (Managing Director and Senior Research Analyst)

Got it. Helpful. Then, Patrick, I wanted to see if you can give us a little detail on the Anvil Group acquisition. $161 million is certainly a sizable amount. Maybe some, you know, financial color on it in terms of, you know, trailing twelve-month revenues, expectations for impact in Q4, maybe how it's growing, et cetera.

Patrick Brickley (EVP and CFO)

Yeah, sure, Scott. The impact on Q4 is not material due to timing and deferred revenue haircut, et cetera. I think the color that I can provide at this point is that we anticipate approximately $5 million of acquired deferred revenue before impact of purchase accounting and haircut on that. We'll have, you know, more. We just closed this a couple days ago, so we'll have more to discuss on the next call. For now, in Q4, the impact is not material.

Scott Berg (Managing Director and Senior Research Analyst)

Helpful. Thanks for taking my questions, everyone.

David Meredith (CEO)

Thank you.

Patrick Brickley (EVP and CFO)

You bet. Thanks, Scott.

Operator (participant)

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

Sterling Auty (Managing Director)

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

David Meredith (CEO)

Sterling, hi. Thanks for the question. Yeah, we are getting closer to the EU mandate deadline at end of Q2 2022. 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, you know, with a much bigger deal than we had previously and expanding what we had with them. Obviously, Spain was a strategically important win. We still see additional activity on RFIs and RFPs. As far as the revenue, you know, 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 wanna jump in and talk about the metrics a little more as well.

Patrick Brickley (EVP and CFO)

Yeah. I mean, I think you basically covered it, David. We get these initial deals out of the gate. They rarely encompass the full opportunity with these countries. You know, sometimes they'll do a front end or part of the back end, but not the whole thing. We're excited that we continue to land deals. We're excited about the long game and the network effects that we've seen. These deals are important to establish a sort of an umbrella that we use to go ahead and roll up a lot of business within the geography. So far so good in terms of knocking these down and hopefully, you know, more to come.

Sterling Auty (Managing Director)

Then one follow-up. How would you kind of characterize from a high level the business momentum? Let me give you a little context. I think, you know, 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. Sometimes I think it's hard for us to understand how the different opportunities are being layered in, how the acquisitions like xMatters are kinda contributing. 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 a step back here in the quarter relative to what you saw over the last couple quarters?

David Meredith (CEO)

Well, I think that we're seeing some consistent trends which are one, 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. This quarter, we did an all-time record for more $500K+ deals than we'd ever done in the company's history.

And that helped to support, you know, a second consecutive quarter of six-figure ASPs. I think that's a good view into kind of the fact that customers are seeing this as being more important. That's a trend that I think I mentioned multiple earnings calls ago, and it's, you know, continued to develop. 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 wanna jump in?

Patrick Brickley (EVP and CFO)

Yeah. You saw continued improvements in our globalization, and with over 30% of our revenue coming from customers outside of the U.S. You know, a couple of years ago, that was single digits. 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 was a great result. You know, also sort of some of the timing of these deals will not always be linear. We didn't think that every quarter thereafter was gonna set a new record. As David mentioned, we've got a lot of continued success with CEM, and we anticipate more to come.

Sterling Auty (Managing Director)

Sounds good. Thank you, guys.

David Meredith (CEO)

Thank you, Sterling.

Operator (participant)

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

Matt Stotler (Equity Research Analyst of Software and SaaS)

Hey, guys. Thanks for taking the questions. Maybe just to start off with, you know, if I look back a year ago, you know, kinda Q2, Q3, Q4, you know, you were seeing a lot of, you know, obviously deals tied to some of the COVID-specific data feeds and products that you're providing, like COVID-19 Shield. You mentioned in the prepared remarks that you're seeing a lot of contribution kinda swinging back to non-COVID use cases, if you will.

Just as we annualize, you know, the deals where you did have those customers that were adopting maybe, you know, smaller kind of COVID-specific solutions or, you know, for those types of use cases, what do those conversations look like as you're, you know, trying to, you know, kind of, you know, either drive the upsell there or, you know, kind of expand their adoption of the platform more broadly? I'd love to get some more color on what those conversations look like.

David Meredith (CEO)

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. Once you do that, you load up their information into the system, and then immediately you've got several other use cases you can do with that. From you know, the first day, if we're coming in, like in my prepared remarks, I mentioned Muscogee Health is a customer that we originally sold vaccine distribution, and now they're using the platform for other ways to alert and inform their constituents. We've, I think, had pretty good success in being able to do that.

Now we're seeing, you know, 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 the platform around knowing where your people are and monitoring threats wherever they are, even if they're not at headquarters. That fits really well. But now there's more intense scrutiny on travel and the risks associated with travel now than we've ever seen. You heard me say, you know, a year and a half ago and a year ago that the travel risk management use case had pretty much completely dried up during COVID.

Now we're seeing that come back, you know, 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. Then you've got the ISO 31030 regulation that's or guideline that's come out recently, which people are trying to comply to. All that adds up to, you know, we're starting to see reopening of some of those use cases that we like to do, like travel risk management.

Matt Stotler (Equity Research Analyst of Software and SaaS)

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

David Meredith (CEO)

I think we'd expect to see maybe some benefits of that next year, or like you said, it could be longer by the time revenue flows in. They're 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. You know, 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. We see a lot of areas where potentially this could help to unlock some things. It's still very early, and it's something we'll have to continue to update you on as we go forward.

Matt Stotler (Equity Research Analyst of Software and SaaS)

Got it. Thanks then.

David Meredith (CEO)

Thank you.

Operator (participant)

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

Ryan MacWilliams (Software Equity Research Analyst)

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

David Meredith (CEO)

Yeah, 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, you know, we've gotten to the point where we have 67 of 67 counties, hundreds 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. We see it also with the countrywide deals. If we just do our normal things, you know, over the years that we'll develop.

What we've done is put together playbooks to try and accelerate what would happen naturally. 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. 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.

We're not just limiting it to the European Union, by the way. We're talking to countries all around the world. Obviously the EU mandate is an important catalyst there. More and more, you know, we're creating standards for how this should be done. Really, it makes sense for every country to have this type of capability, given the overall risk profile, whether it's coming from, you know, natural disasters, extreme weather events, cyber, all of it. It's an area that we're very excited about in terms of kind of building a moat around the business for the long term.

Ryan MacWilliams (Software Equity Research Analyst)

Thanks. Yeah. I think the New York City Housing Authority win kind of spoke to that.

Patrick Brickley (EVP and CFO)

Exactly.

Ryan MacWilliams (Software Equity Research Analyst)

You know, just on Patrick, from the billing standpoint, I know things can be really lumpy and, you know, you can't force countries to, you know, exactly do it the way you want. But, you know, just on billings in the quarter, any seasonality, anything to call out there versus the prior quarter, and then maybe, you know, RPO, you know, how that did in the quarter as well. Thank you.

Patrick Brickley (EVP and CFO)

Sure. Thanks, Ryan. Yeah, any individual quarter's 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, et cetera, will create noise. We'll continue to focus people towards if they really wanna 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.

That billing still doesn't include among the noise 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 countrywide wins, and that's an uninvoiced backlog of still sort of in the mid-teens of millions of dollars. The RPO is what we would encourage folks to look at before doing a billings calculation, and that is up year-over-year by 36%. The current version of subscription RPO is up 36%.

Ryan MacWilliams (Software Equity Research Analyst)

Thanks, guys.

Operator (participant)

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

Will Power (Senior Research Analyst)

Great. Thanks. I guess a couple of questions. You all referenced the, you know, the record number of 500,000+ deals. I'd love to just get more color on what's driving the increase in traction there seemingly each quarter. I mean, is it companies taking, you know, more modules? Is it tied to, you know, added distribution that has a greater up-market focus? Just would love to get more color as to what's driving the larger and larger deals.

David Meredith (CEO)

Yeah. Will, thank you. Great question. It's multiple factors. One is that we have been trying to sell higher into the organization. You know, if you start by selling into the C-suite, and you know, if we can sell into the board even, that helps. It helps you drive bigger deals. Two is various bundling strategies. You know, a lot of our competitors are selling point solutions. One way we compete and try to avoid competing on price is by putting together a bundle of capabilities that is difficult for them to match because they just don't have those capabilities. That's why you see we've been pretty aggressive with our strategic product roadmap building out into new adjacencies. I think that's been really helpful as we're going and trying to drive up the ASP.

You know, 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. It's a variety of factors, but it's clearly, you know, a trend if you look over the last several quarters, and it's something that, you know, we're gonna continue to try to do more and more of.

Will Power (Senior Research Analyst)

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

David Meredith (CEO)

Yeah, thank you. We have. You know, we had the world's leading best solution for location-based SMS version of public warning, and then we acquired one2many, which had the world's best solution for the cell broadcast modality of public warning. We've built an integrated hybrid front end that supports, you know, multiple modality public warning. We've filed for IP protection, and we have that. It's now patent approved. It's launched. It's going in with some of these new wins that we're getting. 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 5G and type of modalities. People wanna do multimedia messaging, that sort of thing.

For some of these countries, they wanna know that they're going with a partner who has the bench strength to actually get the solution integrated and delivered. These are very large scale, complex implementations in some cases. I think Australia is a great example where you know it's very public, it's very high profile for the country, and it was a big deal to go live with Australia this past quarter. It's you know very high stakes in terms of the use cases if you look at the bushfires and some of the other safety areas that this is used for in Australia.

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. We've gotten that feedback as well.

Will Power (Senior Research Analyst)

Okay, thank you.

David Meredith (CEO)

Thank you.

Operator (participant)

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

Parker Lane (Managing Director of Equity Research)

Hi, guys. Thanks for taking my question. I think it's been about six months since you acquired xMatters. 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 some of the capabilities you acquired in that deal.

David Meredith (CEO)

Yeah, 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. I think it's the wave of the future. You know, the line's 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 to physical. It makes sense to have one vendor partner that can support that across everything. I think people are resonating with the message. Obviously, with the xMatters 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. We're already doing integrations, right? 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. People are seeing the value of it coming together over time and giving us really positive feedback.

Parker Lane (Managing Director of Equity Research)

That's great. Then on the broader enterprise opportunity, you know, relative to pre-COVID, how have the sales pitches changed across the verticals you're playing in? I mean, some organizations are going back to you know, 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, you know, how you're communicating that in this new world?

David Meredith (CEO)

Yeah. One thing that stayed constant is the ROI. The ROI use cases are gonna sell well. You know, Forrester came in and did a study and talked to a bunch of our customers and said there's a, I think, a four-month payback period for CEM. If you can do ROIs that 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. More and more reliance on digital. The IT Alerting, CEM for digital in terms of, you know, reducing IT downtime is a very easy ROI case 'cause it's so expensive to have that downtime.

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

Parker Lane (Managing Director of Equity Research)

Very helpful. Thanks, David.

David Meredith (CEO)

Thank you.

Operator (participant)

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

John Martin (Managing Director)

Hi. Thanks for taking my question. This is John Martin on for Brian. David, I know that the partner channel's 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. Maybe give us a little more color on the broader efforts there and how those are progressing and where you think those efforts are as far as full potential of breadth of expansion there.

David Meredith (CEO)

Yeah. John, thanks for the question. We wanna have multiple routes to market and multiple ways to drive distribution in addition to just the direct sales force that we've always had. There are different categories of partners. We've got global system integrators, and we've got other product ecosystem partners. We have hundreds of integrations. Where we have a technical integration, we try to also turn that into a go-to-market partnership. We have the agent community, and then we have industry 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 plants, that sort of thing. All of these really help to drive overall deal flow and number of at-bats.

Sometimes it could just be a referral, and sometimes it's going in as a whole package deal. I think also we had a question earlier about big deals. In a lot of cases, you know, 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. 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.

For them, it's a natural extension to say, you know, 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. It's a good set. I think in terms of where we are in our overall progression, we've built out, you know, our partner portal and our processes and you know our whole way we support partners. You know, 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. I think it's still, you know, second or third inning in terms of what it could potentially be at the end.

John Martin (Managing Director)

Perfect. Thank you very much.

David Meredith (CEO)

Thank you.

Operator (participant)

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

Laurie Loth (Analyst)

Hi. Thanks for taking my question. This is actually Laurie Loth calling for Koji. I just want to follow up on that bundling comment previously. I was just wondering what is the current average product per customer, and could you remind us on how that has trended since IPO?

David Meredith (CEO)

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

Laurie Loth (Analyst)

Great. Thanks.

Operator (participant)

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

Brian Colley (VP of Equity Research in Cybersecurity and Infrastructure Software)

Hey, guys. Thanks for taking the question. I wanted to ask about xMatters. I'm curious how the increase in ransomware attacks is kinda impacting the pipeline for the xMatters solution. And also, how is xMatters performing from a top and bottom line perspective relative to your initial expectations?

David Meredith (CEO)

Yeah, thanks for the question, Brian. You know, we're not a cyber company. We don't compete with those companies. When a cyberattack does happen, it becomes a critical event. We really work hand in glove with the companies that sort of protect the endpoint. As you see an increase, that does affect things like digital operations. It affects IT downtime and overall productivity, and then that fits squarely in the CEM category.

It definitely allows us now to go have more robust and better conversations with well-funded personas like the CIO, CTO of an organization. From that perspective, it's been very helpful. Overall, we're not really breaking out the xMatters because we had an existing ITA business, and we're kind of put those things together. I think overall xMatters has been kind of what we expected. I don't know, Patrick, if there's more you wanna add on that.

Patrick Brickley (EVP and CFO)

No. To your point, it's performing as expected. We've, you know, 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.

Brian Colley (VP of Equity Research in Cybersecurity and Infrastructure Software)

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, you know, enterprise customers or other municipal customers?

David Meredith (CEO)

We're gonna go spread the word ASAP, and it just helps, you know, when you go and say that the country has done an extensive RFP process and we were selected and we're powering. I mean, we see it in United States, where we have several hundred municipalities and their fallback system is the federal government, which we also helped to power as well.

It's just a natural conversation, at least from a marketing and sales perspective, and sometimes there's other benefits as well. You know, it's probably in some of these countries we have better sales coverage than others. In some places we need to go and hire more salespeople to get better coverage. Where we have better sales coverage, like in Australia, you know, we are seeing deals starting to come through from that. In other places, we probably just need to hire some more salespeople.

Brian Colley (VP of Equity Research in Cybersecurity and Infrastructure Software)

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

Patrick Brickley (EVP and CFO)

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

Brian Colley (VP of Equity Research in Cybersecurity and Infrastructure Software)

Got it. Okay. Yep. Apologies. Thanks for the time, guys.

Patrick Brickley (EVP and CFO)

No worry.

David Meredith (CEO)

Thank you.

Operator (participant)

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

David Meredith (CEO)

Well, I just wanna 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 to penetrate the multi-billion-dollar opportunity we're addressing. We hope to see many of you at the Stephens and Credit Suisse conferences over the next few weeks. Thanks again. Bye-bye.

Operator (participant)

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