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spk07: 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.
spk01: 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.
spk03: 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.
spk01: As Vernon said, our board and management team are in alignment on the initiatives we are putting in place to focus on CEM growth through integration and simplification, and on optimizing our approach to the public warning strategic opportunity. This is important work for the company, and we are being very thoughtful on the potential short-term headwinds. Currently, we estimate a total impact on revenue of $32 million this year, which is reflected in our guidance. While these actions are disruptive in the short term, we believe this will ultimately enable the company to deliver attractive, sustainable, profitable revenue growth and long-term value for our shareholders. Let me break this down a bit more. First, as we discussed with the volume of M&A in 2020 and 2021, we now offer the broadest and deepest set of technologies in our market. However, these additions have created complexity for the business seen in product, back office, and go-to-market headwinds that are obstacles to sales growth. Removing these headwinds by accelerating integration work will be our focus in the first half of this year. At the same time, we are using this opportunity to de-emphasize certain smaller, non-strategic products that don't fit cleanly into our CEM and public warning focus areas. While these products do deliver some standalone revenue, they are a distraction to our primary focus and negatively impact our sellers' overall productivity. We estimate that impact from these combined factors to be roughly a $17 million headwind to 2022 revenue. This is based on work we've done in the last couple of months, as well as our Q4 sales performance, some of which was not considered in our preliminary guidance for the year. Second, in the public warning market, additional clarity on recent countrywide pricing trends in certain markets, and elongated implementation timelines is where we expect the other $15 million of headwind in 2022 versus our previous expectations. We are taking decisive actions to address these two areas over the next few quarters. I'm confident the result of these actions will be to focus on building sustainable long-term growth. At the same time, This will enable us to be much more profitable, with a meaningful increase in adjusted EBITDA in 2022 on both a dollar basis as well as on a margin basis, and should also position us for strong margin leverage beyond this year. With that backdrop, let me summarize our guidance for the first quarter and full year. For the full year, we anticipate revenue to be in the range of $426 to $432 million, and representing growth of 15 to 17%. We anticipate adjusted EBITDA will be in the range of $33 to $35 million, tripling from 2021, and representing an initial adjusted EBITDA margin of 8%. We expect a non-GAAP net income of between $10.2 and $12.2 million, or between $0.22 and $0.26 per share, based on 47 million diluted weighted average shares outstanding. For the first quarter, we anticipate revenue of between $98.8 and $99 million, representing growth of 20%. We anticipate adjusted EBITDA will be between negative 1.9 and negative $1.5 million. And we anticipate a non-GAAP net loss of between negative 7.1 and negative $6.7 million, or a loss of between 18 and 17 cents per share. One important note about our Q1 revenue guidance. Many public warning deals are recognized upfront upon implementation. We completed a number of implementation milestones and recognized that corresponding revenue in Q4. Due to this timing, we expect revenue from public warning to be down sequentially in Q1, and this impact is reflected in our first quarter guidance. Before we open up the call for Q&A, let me quickly run through a recap of Q4 and full-year performance. 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. Q4 by itself was solid, with revenue of nearly $103 million, up 36% from a year ago, while gross margin increased to almost 74%. reflecting leverage as our business scales. 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. Adjusted EBITDA for the quarter was $572,000, and net loss was negative $2.1 million. On a gap basis, our net loss was negative $10.5 million. For the full year 2021, total revenue increased 36% to $368 million, with growth margin improving 130 basis points to 73%. Finally, adjusted EBITDA grew to $11.2 million for the year, an increase of 39% from 2020. As I said earlier, we expect to significantly increase profitability in 2022, as efficiencies are realized. Our balance sheet continues to be very healthy. We ended Q4 with nearly $493 million in cash, cash equivalents, and restricted cash, reflecting the impact of the cash paid to acquire Anvil offset by positive operating cash flow of $10 million. From a capital allocation perspective, we are focused on organic investment opportunities in 2022, consistent with the key programs that Vernon and I have discussed. Therefore, we do not currently anticipate significant use for M&A. We will evaluate other opportunities to deploy capital, including repurchases of stock or convertible debt, as the year progresses. In summary, we delivered a strong performance in the fourth quarter and all of 2021. As we look to 2022, we are very focused on execution, driving organic growth, and maximizing past investments. Looking further, we believe we can deliver attractive, 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're ready to open the call for questions.
spk07: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. We please ask you limit yourself to one question and one follow-up. If you have additional questions, you may re-enter the question queue. At this time, we will pause momentarily to assemble our roster. And the first question will come from Terry Tillman with Truist. Please go ahead.
spk11: Yeah, thanks for taking my questions. Good afternoon, Vernon and Patrick. The first question is on the – I do appreciate you breaking out the two key areas of this big revenue shortfall, $15 million in public warning market side. I wanted to focus on that first. It seems like public warning systems are more important than ever internationally. So is this a struggle to articulate the value of what you all have? Because you brought a lot together here in terms of the platform capabilities. So is there just a struggle to articulate the value of Is there any kind of competition dynamics that are just kind of creating price dynamics, or is there budget issues? Just anything more you can share on the international side with public warning, and then I'll add a follow-up.
spk01: Hey, Terry. It's Patrick. Yeah, recently we've seen a contraction in deal sizes, in part because of competitive behavior, where a range of competitors are seemingly overcommitting and undercharging in selected markets. to secure share, which we believe is unsustainable over the midterm. And that contraction in deal sizes has been exacerbated by lingering effects of COVID, which has elongated implementation timelines. We feel that we continue to be very well positioned to win long term because we have the technology and the reliability and the referenceability necessary for critical applications. In addition, this is a strategic opportunity for us and helps us to lay a foundation for network effects. So we still see a tremendous strategic opportunity for us here despite these recent trends in the market.
spk11: Okay, just thanks for that, Patrick. To follow up, maybe Vernon, for you in terms of there is a meaningful increase in EBITDA, so I guess that's a constructive dynamic and you're going to pause the M&A. But confidence in terms of stabilizing, you know, kind of the go-to-market side and, like, what's going on with the sales capacity? You know, how is the churn of the sales team? And are you, you know, investing less in sales headcount? And had you been over capacity? Just more on just trying to understand the stability of the sales force amid these various actions and initiatives. Thank you.
spk03: Sure. And thank you, Terry. As I said in my prepared presentation, comments in terms of areas of complexity. We had a number of acquisitions, obviously, throughout the year, and that really added to the complexity of both the back office and the product platform. That complexity was extended to our customers and to our sellers. And as a result of that, obviously, we saw slow sales results in Q4. And as I said also in my prepared comments, one of the things that we're doing now is prioritizing the integration of those technologies so that we could actually also take those key differentiated assets and provide a differentiation in the marketplace with a set of very nice bundles that are persona-based. So if you're a CIO or a CSO or a CHRO, you now have a bundle of solutions that are part of Everbridge CEM solutions. And what that's going to do is make it simpler for our sellers to sell. It's going to make it simpler for our customers to buy. And we believe that that pivot is going to be very important for sustainable long-term growth for the company. And that's work that both Patrick and I kicked off of a couple months ago.
spk07: Thank you. And the next question will come from Ryan McWilliam with Barclays. Please go ahead.
spk04: Thanks for taking the question. Patrick, you had the initial guide of 20% to 23% at the time of David's departure, and it looks like a solid fourth quarter. Can you just talk about maybe what changed in December, like some puts and takes from the review that now has shifted every bridge of strategy to focusing on EBITDA profitability and less on revenue growth and acquisitions? And is there any changes on how you view the growth rates in your core massification and CEM end markets?
spk01: Hey, Ryan. Thanks for the question. Yeah, in December, we provided preliminary guidance that was based on the model and strategy in place at the time. And since then, Vernon and I and the board have taken a hard look at what we are doing well and what needs improvement. And the actions that we're taking to integrate recent acquisitions, simplify the CEM solution, optimize our approach to public warning, these are all going to drive more moderate near-term growth, but also higher profitability. And we think a mid-term growth profile that remains strong and attractive, and again, with significant profitability. We've done our bottoms-up planning to come to this view and have a strong confidence in our guidance.
spk04: No, I appreciate that color. And then towards the end of last year, you had the acquisition of Anvil for $160 million. Could you just help us out with maybe how fast that was growing, what that revenue contribution might be for this year? And then when it comes to which point solutions you're planning to de-emphasize, any more color there, and have any particular acquisitions maybe underperformed your expectations? Thanks, guys.
spk01: Sure. As it relates to Anvil, Anvil is largely services-driven in terms of revenue growth. With COVID and the impact on business travel market, Anvil's performance hasn't been as strong as it was historically, nor nearly as strong as we believe it will be as business travel returns. As we look at 2022, there could be some upside related to Anvil if business travel returns relatively quickly. And in terms of the rationalization, we're not gonna necessarily unpack what we're doing and go through a specific inventory of those products. We just say that for context, A number of the acquisitions that we did came with very strategic and core technology for us as we built out the CEM platform, and sometimes came with some non-core technology. It's those non-core technology pieces that we're focused on right now. As we de-emphasize those, we'll work hard to minimize the impact on affected customers, but naturally we anticipate that this is going to have a small impact on gross retention this year. Which will we will laugh and we'll have out of the system in 2023 Appreciate the color.
spk07: Okay Thank you in the next question will come from Brian Peterson with Raymond James, please go ahead Brian please go ahead perhaps your line is muted on your end your line is open
spk05: Sorry about that, guys. Confused with the mute button again. But, hey, thanks for taking the question. So, Patrick, I wanted to follow up on that last question in terms of the $17 million impact. Could you maybe give us a little bit more color specifically on what you're doing with those products? So are those basically getting end-of-life and so the customers will essentially be turned off? And when is that actually happening as we're thinking about 2022? Or should that linearity hit in the first quarter, first half? Or just how should we be modeling that impact?
spk01: Yeah, well, so first, hey, Brian, thanks for the question. The $17 million headwind that we're associating with M&A really is twofold. There's the go-to-market impact, and there's the rationalization impact. And so just to break those down, in terms of go-to-market, we were well down a path of selling dozens of solutions that were not always tightly integrated. We were selling them to multiple buyers, and as Vernon said, that was confusing to customers and to our sellers. So the action that we're taking there to remedy that is we're focusing on integrating the acquisitions, we're simplifying our go-to-market, we're aligning and upgrading our back office to make it a lot easier to do business with and within Everbridge. And so the impact of that and it's part of the 17 million. That showed up in second half sales, especially in Q4. And the other aspect of the 17 million is the rationalization. And as I said, for acquisitions to work well, it requires that you integrate the acquired products onto your platform, as well as rationalize the smaller components that are not a good strategic fit. And in 2022, we're focused on accelerating both. of those, and so it's a limited portion of the headwind that's due to rationalization, and that work is already underway, and that's going to – it's already underway in Q1, and it'll progress throughout the year.
spk05: Okay, got it. Maybe just a follow-up on pricing. I know you guys mentioned for some of the public warning solutions you're seeing price points that are maybe lower than expected. I'd be curious, how are things looking maybe outside of that in terms of mass notification or CEM? I'd just be curious to get an update on pricing trends there. Thank you.
spk03: Yeah, so I think when we think about public warning, as we said earlier, that we still have the leading platform for providing, you know, countrywide alerting for all of our customers, and that's – That is shown as a result of our ability to continue to win both large and medium-sized country deals. We also have continued to also win a fair amount of state-local deals in mass notification and our resident connect and some of our other Everbridge suite solutions. And so as it relates to our public safety products, most of the price compression we've seen is actually in the international market. public warning specifically, but overall public safety pricing is holding up pretty well. That pricing pressure is evident in the fact that they're highly competitive bids with lots of competitors and a pretty rigorous RFP process. And even though that is the case, we continue to win them because we've got the leading platform, but clearly has put pressure on the pricing for our international public warning business.
spk01: Yeah, and otherwise, just to jump in, we're not seeing pricing pressure in our primary growth engine of critical event management, in particular as we continue to migrate towards more operational use cases. That continues to progress well.
spk05: Understood. Thank you.
spk01: You bet.
spk07: And the next question is from Matt Stotler with William Blair. Please go ahead.
spk10: Hey, Vernon. Hey, Patrick. Thanks for taking the questions. Maybe start with one on the pipeline. So obviously a lot of things changing, management turnover, some strategic decisions being made, which seem to make a lot of sense. From a pipeline perspective, obviously you like to push the focus away from billings, but on a trillion-12-month basis, I mean, billings growth was consistent in Q4 relative to the year-over-year growth we saw in Q3 and Q2, which I think is, you know, Impressive considering the, you know, maybe inefficiencies that you talked about and the impact that had on selling in Q4. So, you know, we'd like to maybe just dig into what you're seeing in the pipeline, you know, both with, you know, customers that are either coming up for renewal or, you know, new deals. I mean, and just kind of balance these two things where the trailing 12-month billing performance and the billing performance in the quarter specifically seems to be doing relatively well, but also you have these, you know, changes upcoming. I would love to get some more color there.
spk01: Yeah, thanks, Matt. I'll go first and then I'll turn it over to Vernon. As you know, I'm a broken record on the billings metric and have recently been suggesting that folks pay more attention to current RPO, which you'll see in our 10K, but the growth year over year in current RPO was about 24%, which I think is is probably a better indicator of backlog and is reflected in our guidance going forward. But you also asked about pipeline. I'll turn it over to Vernon to talk about that.
spk03: Thanks, Patrick. And thanks, Matt, for the question. Look, our direction around simplifying our product platform is allowing us to get more proficient and also more efficient around speaking to our customers and our sales folks. So as I think about the CEM packages that Debra Burch has, CEM for digital, focused on the CIO persona, allows us to very succinctly be able to communicate to what their use case and need is for that persona, simplifies the go-to-market for our sales folks, and be able to actually fully utilize the pipeline we've got in place for that. And then our second, and equally as important, is our CEM for digital. people resilience. Enabling CHROs for business continuity and security professionals in their organizations really gives us the opportunity to leverage that bundle of solutions for that particular persona. And as I round out some of the top four, seeing it for business ops really helps us from a business continuity perspective and risk management. And we're really excited about that opportunity for the marketplace. And then last but not least, seeing it for smart security really enables the CSOs and other security leaders to take full advantage of those pipelines and those solutions in a very simple bundle. And what is really attractive about it is we've got entry-level capabilities in each of the bundles. So we can sell a set of solutions that are easy to enter but allows our customers to be able to migrate up to a full CEM solution. So again, simplifying the platform, making it usable for our customers and more consumable while at the same time creating a great deal of simplicity and simplification not only in go-to-market, but in comp plans and the way we do business is something that both Patrick and I are excited about for 2022. Got it, got it.
spk10: That's helpful. And then just a follow-up on the partner ecosystem. Obviously, building that out has been a core focus for the past couple of years. How are you thinking about the initiatives there going forward, how those learn to the strategy for 2022 and beyond. And, you know, any initial or early feedback from your customers on the, you know, the bundling and strategic changes that you're making?
spk03: Yeah, I think the, when we talk to our customers and we try to do that pretty often in our top sales folks, we are now very actively being able to now what I call operationalize the partnerships that got signed last year. We're excited about those partnerships, both in Americas, in EMEA, and in Asia-Pac, are now beginning to work very closely together with our direct and indirect sales organization. So reactions to the bundling, the packaging, the feedback from the partners has been very, very good and received very well in the fact that now they can simplify what they have to deliver to their customers. Many of our partners that we sign whether it be Deloitte or PWC, are having meaningful conversations at the C-level with many of our existing customers around resilience. And CEM empowers resilience. And so these CEM bundles really align very nicely with what's going on in the marketplace and with our partners.
spk10: Got it. Thanks again. Yep. Yvette?
spk07: And the next question will be from Scott Berg with Needham. Please go ahead.
spk06: Hi, everyone. Congrats on continuing momentum, and thanks for taking my questions here. I guess the first question I have been asked many times in the last 45 minutes is trying to understand the timing of when all this happened. Someone else in the Q&A alluded to kind of what happened in the last two months here. Patrick, but when we think about the timing and when you saw some of these changes happen, how should we think about the last two months unfolding? And I say that in the context of, I know conversations I had with yourself and the prior CEO suggested you all had kind of seen some of these smaller public warning deals, these countrywide deals now for at least a little bit of time frame. It doesn't seem like it was completely new in the last maybe eight or nine weeks. Thank you.
spk01: Yeah, sure. Hey, Scott. It's Patrick. With public warning, we had seen pricing sort of all over the place. And we've shared that. But what we've seen recently is just a narrowing of that trend to just smaller dollar deals and much smaller than what we've experienced in the past. And as Vernon was describing, the The purchasing dynamics, you know, there's a timeline. It's very public. A lot of folks are jumping in. I think potentially overcommitting, that kind of thing. So as we got through the end of the year and came into 2022 and looked towards this looming deadline, we just see more and more price pressure. And... And so, you know, it just is what it is. It's a global opportunity for us. It's still very strategic. We're still very excited about it because it's a long game. But, you know, that's just something that's going to come in a lot lower than our previous expectations, for sure.
spk06: Okay. Fair enough. And then a follow-up question is on the integration process. Lots of acquisitions I've seen have had different challenges or opportunities in the integration process. given the review that you've done recently and the expectation that this is kind of a, we'll call it the year of the integration, how should we all view your progress there in particular? What are you thinking for timelines on some of these integration needs? Is this a one month, one quarter, one year type of scenario? Help us understand that. And then when you get to the other side, how will we see it outside of just general bookings and maybe pipeline commentary? Thank you.
spk01: Yeah, well, We'll keep you updated as we go through this. We're excited to go through this. Vernon and I jumped on this quickly as an opportunity to do some great things for the business for the long run to drive much more sustainable and profitable growth. So the actions that we're taking are going to take a few quarters. We've set out initial guidance for the year, both top and bottom line. I think we make progress, and as the success materializes, we'll continue to update guidance. And as any other developments occur, we'll share those as well on these quarterly calls. I'm sure we'll get plenty of questions and plenty of opportunities to provide updates. Great, thanks for taking my questions.
spk06: You bet.
spk07: The next question will be from Michael Turin with Wells Fargo. Please go ahead.
spk02: Hi, this is Michael Baragon from Michael Turin. I wanted to follow up on Terry's question from the top. Given the recent change in the international global macro dynamics, is there anything that maybe has happened or changes in conversations given what is perceived as an incrementally higher need and could lead to quicker implementation times for the public warning systems internationally that may not have been incorporating the guidance, or how should we think about how current events are playing out for that part of your business?
spk03: Yeah. Hi, Michael. Thank you for the question. We're certainly seeing that our public warning go-to-market is certainly extended to throughout obviously the EU mandate, but now expanding outside into other parts of the world. They are still highly competitive and RFP oriented, but we think we've got an amazing platform and solution for that. And I think overall, I think a lot of countries are thinking about their resilience plans. And so I can say that the pipeline is steady. and the team is micro-focused on making sure we win our fair share of the competitive wins. But we haven't seen, I think, if I'm answering your question properly, we haven't seen that the current marketplaces change much. I think there's just some regulatory mandates in Europe that we've won our fair share of, and we think there's more to come. And then outside of the media marketplace, we are running into other opportunities that we think we'll be very successful in.
spk02: Thank you. And a quick follow-up. When you run into competition, how can we think about the competitive landscape? Is it a bunch of regional smaller vendors or large tech companies that investors may be familiar with, or how can we think about who these competitors are?
spk01: Yeah, I'll jump in first. Our primary competition continues to be some version of sort of buy local, but that said, more and more folks jump into these and it just runs a gamut of sort of large technology companies with sort of aged telco and other technology to really small companies that don't have much referenceability in the space. So these RFP processes run quick. They run hot. And in some of them, especially in previous quarters, the RFP might really geared towards price over technology, but we're still able to win despite being higher priced. We're just seeing more and more RFPs weigh even more and more to price as we get towards the deadline, at least for the EU mandate.
spk03: Yeah, it's important to understand the differentiation in our platform. We also not only address public warning, but self-broadcast. which is an advanced technology, and I think the combination of the two are integrated. We did that integration work on a timely matter, and I think that has made us pretty differentiated, which is why I think many of our customers are selecting our solution, albeit in a hyper-competitive marketplace.
spk07: Thank you. Yep. And the next question will come from Will Power with Baird. Please go ahead.
spk09: Hey guys, this is Charlie Ehrlich on for Will. Thanks for taking the question. I just wanted to ask again about the population alerting pricing pressure. It seems like you guys feel competitors are lowering their prices a little bit too much, but I guess I'm wondering if you think it makes sense for you, given your network effects and whatnot, to also lower prices to win a deal, or would you rather sort of hold firm on pricing? Just love to hear about your philosophy on that.
spk01: Yeah, well, thanks Charlie for the question. That is a dynamic that we've been navigating for the past few quarters. As we mentioned earlier, we've seen pricing sort of all over the place. We've seen large prices. We've seen small prices. It is a strategic opportunity for us. And more often than not, we are determined to compete. And sometimes we can alleviate the pricing pressure by just getting to the right people and explaining our technology and the referenceability. No one has the referenceability that we do, no one has the technology that we do. That said, we've just seen some recent ones where it sure seems like overreaching on price. And there is a limit to which we'll participate in some of those opportunities. You know, if at the end of the day we look at the country and determine that that could be a significant player, a significant growth lever for us over the next few years, then, you know, we'll think hard about it. If instead it's a country that may not be a Tier 1 opportunity for us, then, you know, we may decide not to follow the competition there.
spk03: You know, I'll add some additional color, Charlie. The way we're starting to think about that, given the level of competition, is you can think of our winning these public warning deals as a sort of tip of the spear. We talk often about this network effects program where you can land a big country and do the work that we did at Spain, where we won the country of Spain, but then quickly went and won some additional mass notification business, part of the Everbridge suite in that country. So from our perspective, we think that... landing those deals are important. They will continue to be very highly competitive. But if we do our jobs with our product simplification, we think we'll be able to, you know, increase our network effects over the long term.
spk09: Okay, that's helpful. Then just last question for me. Can you help us with the revenue and the profit linearity through the year, you know, as you're making these operational changes? Should we maybe expect Q1 profit to be the trough for the year or Q2 or or any help on any of that would be great.
spk01: Yeah. The profitability will grow throughout the year. And, you know, we would expect that by the time we're exiting 2022, we'll have an adjusted EBITDA margin of, you know, in the neighborhood of roughly 15%. And, you know, with free cashflow, you know, following right behind that. But that's, As we go through this simplification and rationalization, we'll be repurposing our resources, most of which are fungible. Throughout the year, we'll be working towards doing more with what we've got, and that'll show up in leverage across the model, whether it's continued improvement on adjusted gross margin, or G&A as examples, and certainly in sales and marketing, which 2021 was in the neighborhood of 40% of revenue, and you'll see that as Vernon and team are doing a great job of simplifying our go-to-market, we anticipate that it'll be more productive and more cost-efficient, and that'll show up in our sales and marketing expense as a percent of revenue throughout the year.
spk09: Very helpful. Thanks, guys. You bet.
spk07: And the next question comes from Parker Lane with Stifel. Please go ahead.
spk08: Hi, Vernon. I'm Patrick. This is Matthew Kickert. I'm for Parker. First off, could you talk a bit about the recent collaboration that you announced with Brown and Brown? What do you envision is the opportunity there as you start to expand into assisting the PNC insurance base?
spk03: Yeah, I think... The relationship with Brown and Brown is a really interesting partnership. We think that when you think about resilience and organizations or countries that need to look after the duty of care for their citizens or employees or assets, obviously these companies underwrite those countries and those companies. And having a platform that powers resilience, like our CEM platform, is a really nice fit together with Brown and Brown and going to market to make sure that there is digital transformations that are powering resilience, if you will. And so therefore, there is an opportunity to obviously benefit from more flexible rates, better options with Brown and Brown. So that partnership feels very natural for us. It's early, obviously. We just announced it. But we're looking forward to working very closely with them in the marketplace.
spk08: Okay, great. And then secondly, how do you expect international expansion to kind of trend in the coming years? Outside of public warning, which products do you think have the highest potential over there?
spk03: Well, again, I have to go back to sort of prepare remarks around the CEM packages. You know, one of the things that Patrick and I have done, you know, to prepare for 2022 and certainly at PIV in the last couple of months, The first thing is pause on the M&A activity. Secondly, let's get the integration work done around the front office and back office and the product complexity out of the system with these bundles. Those bundles are going to be extended to our international marketplaces, whether it be CEM for smart city or CEM for business continuity or CEM for digital. Those CEM bundles, simplified bundles, are going to be made available to all of our markets, both in Latin America and in EMEA and throughout the Americas. So, again, I think the fact that we prioritize, you know, again, pausing on the M&A activity but focused on making sure that the product integration simplicity gets completed for our customers is going to provide benefits worldwide for our customers.
spk08: Okay, makes sense. Thanks a lot for taking my questions.
spk06: You bet. You're welcome.
spk07: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Patrick Brickley for any closing remarks.
spk01: Thank you for joining our call today. We look forward to further advancing our position in the market in 2022 with more efficiency, focus, and clarity. And we look forward to speaking with you again. Thanks again. Goodbye.
spk07: Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
spk01: All right, thank you.
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