Everbridge, Inc.

Good day and welcome to the Everbridge fourth quarter 2021 earnings conference call. All participants will be in a 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 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. Please go ahead.

Thanks. Good afternoon and welcome to Everbridge's earnings conference call for the fourth quarter and full year 2021. This is Patrick Brickley, Executive Vice President and Chief Financial Officer of Everbridge and Interim Co-CEO. With me on today's call is Vernon Irvin, Executive Vice President, Chief Revenue Officer and Interim Co-CEO. 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. On today's call, Vernon will review our business highlights, and I will provide more details on the financial results. And then we will open up the call to Q&A. With that, let me turn the call over to Vernon.

Thank you, Patrick, and thanks to all of you for joining us today. As you know, Patrick and I are acting as co-CEOs while the company conducts a formal search for a CEO. We've engaged a search firm, but are optimizing for talent, not expediency. Since December, Patrick and I and the board and Everbridge executive team have conducted a holistic review of our strategy, operations, and execution. Everbridge has built a strong foundation as a leader in critical event management, and we're taking actions to improve on our strategic direction. Go-to-market execution and efficiency to ensure that we deliver solid, profitable growth and generate long-term value for our shareholders. On today's call, I'd like to discuss our fourth quarter results and outline actions that we're taking to refine our strategy in order to better focus and align our organizations to meet the multi-billion dollar opportunity we are pursuing. We'll be discussing how these improvements inform our guidance for 2022 and increase our ability to drive sustainable revenue growth while also meaningfully expanding our profitability and positive cash flows. Looking at our reported results, we delivered a solid fourth quarter revenue of $103 million, up 36% over Q4 2020, and adjusted EBITDA of $0.6 million. For the full year 2021, revenue was $368 million, up 36 percent from prior year, and adjusted EBITDA was $11 million, up 39 percent from 2020, reflecting our ability to drive leverage in our model. These are solid headline numbers driven in part by another strong quarter for critical event management that we refer to as CEM. However, before I dive further into the Q4 results, I want to make a few minutes to discuss elements of our recent execution that were not strong, as we would have liked, and the actions that we're taking currently to address these in 2022. As I noted on the onset beginning in December, our management team together with the Board conducted a comprehensive review of our strategy and operations. We identified specific elements performance from certain acquired technologies, including barrier to upsell and cross-sell from increased complexity and incomplete integrations and pushed out demand for travel-related solutions, as well as smaller deal size for international public warning wins that are having adverse impacts on business, our go-to-market strategy and sales organization. Informed by our review, we're taking decisive actions to address the root causes of these issues. Patrick will discuss in greater detail, but the net impact of these changes will be to simplify the business, which will result in no-term trade-off of revenue growth, but provide an attractive, sustainable, long-term growth trajectory and improve profitability and positive cash flow. The first item highlighted in my review relates to the number of acquisitions completed in 2020 and 2021, which will provide us with a stronger overall CEM solution to power our long-term growth. However, these products and businesses have created incremental product line complexity that produce integration challenges and have complicated our go-to-market efforts. With incomplete integration into our CEM platform, it's been harder for our customers to take advantage of our new technological capabilities and for our enterprise sales organization to execute on our land, adopt, and expand sales strategy. As a result, this year we'll be focusing on integrating and simplifying our CEM solutions to focus on key customer personas. In addition, we'll be de-emphasizing M&A this year, This focus on integration will allow us to simplify our product messaging strategy, as well as enable our enterprise team to more effectively sell our greatest asset, a more robust and integrated industry-leading CEM platform. The second area highlighted in our review involved the continued maturation of our international public warning marketplace. I should remind you that we define public safety as a combination of our core mass certification solutions and our successfully integrated international whole country public warning solutions. Both of these are industry-leading and being chosen by more U.S. states, federal and state agencies, and governments in multiple countries around the world than any of our competitors. However, recent international market activity has seen meaningful contraction in the size of countrywide deals as compared to the wins that we are seeing over the past couple of years. These deal-side contractions, coupled with the elongated public warning implementation timelines, suggest to us that our near-term wins for large and medium-sized countrywide public warning deals will be smaller than previously estimated. That said, we expect to continue our high win rates in public warning and the network effects that further expand the opportunity. So, let's explain the three main actions that were currently taken to improve the execution issues as well as the expected impact. First, we are pausing material new M&A and instead prioritizing development efforts to focus on accelerating product integrations across our existing acquired assets, allowing for greater competitive differentiation. product simplification and lower cost. For example, the strategic work we've done to integrate CNL IoT management and Snapcom's employee communication technologies into our CEM platform have both contributed to large CEM wins in 2021. To extend this success to other acquisitions, we already are accelerating the integration of our acquired digital IT solutions and our acquired travel risk management solutions into CEM. Next, we're simplifying our product offerings, moving from several dozen individual point products to focus on four strategic CEM solutions, each targeting a specific buyer persona with a unique and differentiated technology solution. CEM for Digital is a single package that solves problems CIOs face. CEM for business operations includes E911 and travel risk components to focus on enterprise resilience for chief risk officers. And CEM for people resilience serves the needs for chief security officers and their duty of care concerns. Finally, CEM for security helps CIOs and CSOs secure government and enterprise IoT assets to protect people and facilities. These integrations will significantly simplify our go-to-market process and drive higher productivity over time. In the short term, however, we expect this to create a revenue headwind as we deemphasize some small non-strategic point products. Last, in the public warning market, we're going to continue to leverage our industry-leading win rates to drive land and expand opportunities as well as apply increased focus towards driving network effects that multiply the opportunity inside a region once we start to penetrate it. As you expect, these factors impact our current 2022 revenue outlook, which Patrick will discuss in more detail. While these headwinds are disappointing, we believe that increasing our focus on product line integration and simplifying our enterprise go-to-market motion will better leverage our most productive, strategic, and mission-critical solutions to drive top-line growth that is attractive, sustainable, and meaningfully more profitable. So let's talk about our fourth quarter in a little more detail. Overall, we saw continued momentum in the core strategic opportunities with 19 new growth CEM deals around the world. Recent events that include the crisis in Ukraine, threats of cyberattacks, and criminals on global assets, the recent hostage incidents in the Texas synagogue, wildfires in the West Coast, and the ongoing global supply chain disruption highlight that our mission has never been more important. Everbridge continues to be involved in the most critical events around the world impacting both public and private organizations to keep people safe and businesses running. Organizations are responding to duty of care and desire for operational resilience by turning to Everbridge. In 2021, customers relied on Everbridge over 6 billion times throughout critical situations to ensure their most important assets were safe and continued ongoing operations. New customers that selected CEM in the fourth quarters included global customers such as U.S. software leader PTC and Leidos, the defense and aerospace leader formerly known as SAIC. Leidos is a Virginia-based defense, aviation, infotech, and biomedical research company that provides engineering systems integration and technical services. As a new Everbridge customer, Leidos selected CEM and crisis management offerings to bolster their business continuity and emergency management efforts before, during, and after potential crises. CEM was also selected by the largest online marketplace in South Korea, and a leading American bidding manufacturer, just to name a few examples. The bidding manufacturer selected CEM because of the value of its derived by applying our industry-leading situational awareness to accelerate its response to disruptions impacting its 5,000 team members, its 600-plus store locations, and assets moving between them. We also continue to track records of expanding relationships with existing customers, including a multiple global pharmaceutical leader who expanded their use of Everbridge CEM implementation. In addition, the largest bank in Canada, RBC Financial Group, and the U.S. Department of Treasury were among customers to increase their Everbridge commitment to become CEM customers. Specifically, the U.S. Department of Treasury, which is one of more than 80 federal agencies using Everbridge, upgraded our risk intelligence solutions to full CEM in order to have a robust common operating picture. with all Treasury locations. These transactions in Q4 represent our land and expand strategy, and we believe that we will simplify our CM packaging, messaging, and go-to-market will continue to expand this success in 2022. In the area of public warning, we believe we are well-positioned to continue winning a significant amount of public warning opportunities with our industry-leading platform. We will expect a slowdown in revenue growth from public warning this year as a result of smaller deal sizes. We believe we will see a continuation of our high win rates for all public warning opportunities as well as the resulting network effect opportunities will expand our growing presence in Europe and around the globe. We're already repeating that success we've seen in the U.S. like Florida, New York, as well as countries like Singapore, Norway, and Sweden, where we have since won more localized network effect deals, such as the city of Stockholm and the top employers within the city. As you'll recall, in the third quarter, we announced a countrywide public warning win in Spain. In the fourth quarter, global insurer MapFree, España, based in Spain with a presence in 45 countries, selected Everbridge's mass notification solution. Following our successful deployment of national public warning systems in the United Kingdom last year, in Q4 we secured several enterprise banking and local government customers throughout the country in cities including London, Bristol, and Cardiff. In India, the network effect from public warning contracts in four states led to contracts with NASDAQ listed global analytics and digital solutions giants like EXL India, as well as with Baja Financial, a financial services and insurance company with over 20,000 employees across 1,400 locations. These examples are powerful network effect illustrations why we remain optimistic that we can expand our public warning business globally and drive enormous strategic value from it, even with smaller countrywide wins now and in the future. Now turning to some more specific business metrics from the fourth quarter. We added 125 net new customers in the fourth quarter, ending the year with 6,135 enterprise customers. As I mentioned, 19 customers were selected, were either selected or expanded to our CEM platform, bringing the total number of CEM customers to 192. That's up 50% from a year ago. Our momentum with large transactions this year continued in Q4, resulting in a trilling 12-month ASP that were again above Contributing to ASP growth were 66 deals worth more than $100,000 per year, tying our record performance from a year ago. From a product mix perspective, 58% of our new and growth sales over the last four quarters came from new products, as we continue to see demand for our newer applications, as well as our core mass notification. Our international revenue mix was 34% of the quarter, and as we continue to win business both at home and abroad, compared to 28% a year ago, we expand our presence in every major region around the world. Our revenue mix by vertical remained relatively consistent, with 68% from corporate, 23% from local, state, and country-wide government, and 9% from healthcare. reflecting strong growth in corporate markets with increasing post-vaccine use cases. As always, we remind that these quarterly metrics can fluctuate, but that longer-term trend continues to reflect our overall business growth. For the year, our application has managed a record 6.9 billion critical interactions, demonstrating our scale, resiliency, and market leadership. So overall, the fourth quarter financial results were strong, driven by continued success of our core strategic market of CEM. However, there were some aspects of our business that are not performing as originally expected. Specifically, complexities introduced by rapidly expanding portfolio negatively impacted our enterprise go-to-market performance. This, coupled with our strategic public morning business experience lowering ASP, and longer implementation time is influencing our current revenue outlook for 2022. We've conducted our review, identified the core issues, and are taking immediate actions to pause material M&A, streamline, integrate, and reduce complexity, as I discussed. While this will create some near-term disruption, we strongly believe that with our market leadership and differentiated technologies, these actions will drive attractive, sustainable revenue growth with meaningful increase in profitability and positive cash flow. Now allow me to turn the call over to Patrick for more details on our financial results, our guidance for Q1, and our operational focus in 2022. Patrick? Thanks, Vernon.