Everbridge, Inc.
Q1 2019 Earnings Call Transcript

Published: 7 May 2019

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Everbridge 2019 Q1 Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Patrick Brickley, CFO. Mr. Brickley, you may begin, sir.

[Patrick Brickley:]

Good afternoon, and welcome to Everbridge's Earnings Conference Call for the First Quarter of 2019. This is Patrick Brickley, Senior Vice President and Chief Financial Officer of Everbridge. With me on the call today is Jaime Ellertson, CEO and Chairman. After the market closed today, we issued a press release with details regarding our first quarter results, which can be accessed on the Investor Relations section of our website at ir.everbridge.com. This call is being recorded, and a replay will be available on our IR website following the conclusion of the call.

[Jaime Ellertson:]

Thanks, Patrick, and welcome to those of you joining our first quarter earnings conference call. We delivered a strong start to 2019, with revenue of $42.8 million for the quarter, an increase of 40% from a year ago, and exceeding the top end of our guidance range. Our revenue upside fell to the bottom line to produce an adjusted EBITDA that was also better than our guidance. Our first quarter 2019 results were driven by our continued momentum with our most strategic product suite that we call Critical Event Management, as well as significant wins across all our key solutions and geographies. Our continued success is driven by consistent execution of our three-pronged growth strategy, anchored by our Population Alerting solutions, Mass Notification, Instant Communication and Population Alerting; followed by several of our newer applications such as IT Alerting and Safety Connection, which we've had great success selling into our large base of over 4,500 existing customers; and finally, the expansion of our strategic CEM Suite into the Global 1000 space. And in the first quarter, we saw strong proof points indicating how large an overall growth opportunity our CEM strategy represents for the future. As I stated in previous calls, we are still in the very early stages of our full CEM go-to-market rollout. Today, we sell CEM into the North American geography and only into the corporate and health care verticals, less than 50% of our total markets.

[Patrick Brickley:]

Thanks, Jamie. As this is my first conference call as CFO, I wanted to start off by saying that I'm looking forward to working closely with our investors and analysts. Philosophically, I plan to continue the deliberate and prudent approach that has led to the success we've had under Jamie and Ken Goldman's leadership over the past several years. In particular, under Ken's leadership, we have established a history of strong growth and more than delivering on our commitments. As someone new to the CFO role, continuing this trend of exceeding expectations is one of my highest priorities, and I plan to take great care to extend our track record of outperformance. Now let me provide more details on our financial performance in the first quarter, followed by our guidance for the second quarter and the year. Revenue in the first quarter was $42.8 million, above the high-end of our guidance range and an increase of 40% from a year ago. With careful cost management, our revenue upside sell to the bottom line to produce adjusted EBITDA that was also better than our guided range, coming in at a loss of $1.9 million. Consistent with the past several quarters, our dollar-based net retention rate remains above 110%, reflecting the significant value and satisfaction we provide to our customers. Total enterprise customer count from customers generating fees of $200 per month or more increased by a net of 110, and we ended the quarter with a total of 4,532 enterprise 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. Non-GAAP gross margin was 69% compared to 71% a year ago, primarily due to the purchase accounting impact on acquired deferred revenue from acquisitions. However, as always, keep in mind that gross margins can fluctuate from quarter-to-quarter and should not be considered indicative of any trends. Total operating expenses in the quarter were $33.5 million, an increase of 33% from a year ago, reflecting the combination of continued products and headcount investment in addition to incremental expenses of acquired businesses. As I mentioned, adjusted EBITDA loss was $1.9 million, which was better than our guided range and similar to our performance a year ago. Net loss in the first quarter was $4.7 million or negative $0.15 per basic share and was also better than our original guidance as well as our year-ago performance of a loss of $4.8 million or a negative $0.17 per basic share. On a GAAP basis, our net loss was $14.1 million and was also better than our guidance range. Turning to our balance sheet. We ended the quarter with $258.2 million in cash, cash equivalents, and short-term investments, compared to $105.5 million at the end of the fourth quarter, primarily due to proceeds of approximately $140 million from the equity offering we completed in January. Cash flow from operations during the first quarter was an inflow of $8.7 million with CapEx and capitalized software development cost of $4.8 million, our free cash flow during the quarter was $3.9 million. Total deferred revenue was $98.4 million at the end of the quarter, an increase of 39% from a year ago. As we have noted on prior calls, our deferred revenue balance at the end of any given quarter can vary due to a number of factors. As such, even though we have predominantly annual payment terms, deferred revenue is not always a meaningful indicator of the underlying momentum in our business from a quarterly perspective, though we believe it is directionally relevant on a longer trended basis. Now let me turn to our outlook for second quarter and our increased guidance for the year. As I indicated in my introduction, I plan to continue the deliberate and prudent approach that has enabled our historical success. At the same time, with increasing market momentum, a growing product lineup and an expanding go-to-market strategy, we are even more confident in our ability to deliver mid-30% growth in 2019. As I mentioned last quarter, April 1 marks the anniversary of our UMS acquisition, which means our growth in the second quarter will be all organic. Q2 will include perpetual license revenue from legacy UMS deals. However, contributions from perpetual revenue to total 2019 revenue will amount to less than 1%. Therefore, for the second quarter, we anticipate revenue of between $47.8 million and $48.1 million, representing growth of 33% to 34%, which, as I mentioned, is all organic. We anticipate adjusted EBITDA to be between negative $0.1 million and positive $0.2 million. We anticipate a non-GAAP net loss of between $3.0 million and $2.7 million or a loss of between negative $0.09 and negative $0.08 per share, based on $33.2 million basic weighted average shares outstanding. Stock-based compensation expense is expected to be approximately $9.2 million for the second quarter. For the full year, we are increasing our 2019 revenue guidance to a range of $196.4 million to $197.4 million, representing growth of 34%, which does not include the potential benefit of M&A, which occurred early in 2018 and 2017, but has not yet occurred in 2019. From a profitability perspective, we are raising our adjusted EBITDA guidance to the range of positive $4.2 million to $5.2 million. We now expect a non-GAAP net loss of between $9.4 million and $8.4 million for the full year 2019 or between negative $0.28 and negative $0.25 per share based on $33.4 million basic weighted average shares outstanding. This guidance assumes estimated stock-based compensation expenses of approximately $38 million for the year. In summary, we're off to a solid start for the year with results that exceeded our guidance ranges. We're increasingly optimistic about our prospects as a leading provider of Critical Event Management solutions as we expand our market leadership and further penetrate existing customers with additional technology, and this is reflected in our increased guidance for the year. Before we open the call up for questions, I'd like to also announce that we look forward to holding our second annual Analyst Meeting next month in New York, where we will provide more detail on our market opportunity and strategy to further penetrate the multibillion-dollar opportunity ahead of us. If you would like to attend and have not yet received an invitation, please reach out to our Investor Relations team. Now, operator, we'd like to open the call for questions.

[Operator:]

First question is from the line of Brad Sills from Bank of America. Your line is open.

[Brad Sills:]

Great. Thanks, guys. I wanted to ask about the new crisis management solution, and what you anticipate that doing to ASP for the critical event management suite?

[Jaime Ellertson:]

Sure. I mean, it's pretty simple. We had four products. This is a major product because it allows you to structure workflow so that standard operating procedures, those could be things like locking doors in a school campus with an active shooting situation or opening doors. It could be the communication, automated communication in the case of a middle-of-the-night tornado in the Midwest or a transportation or supply chain operations where you have to get out messages to people because a carrier or distributor is late or early with a set of goods in a - during a major event. And so the thousands of events that take place, the smaller actions you have to take in a large-scale event like we said, a major cyber-attack, a man-made event or a - or something like a cyclone or a tornado that affects a broad swath of your supply chain and your people, your facilities, there are hundreds and hundreds of tasks that you have to invoke. If you're doing those manually, and then firing off all the manual communications with a tool like our Mass Notifications, that can be very time-consuming. The Crisis Management product puts that into a workflow, allows you to integrate seamlessly into our visual environment, and then, automate those so the minute an event is spotted and it qualifies a break-in, again, a shooting, a severe weather event, you can automatically take those steps and therefore, reduce the risk to employees or people or to your operations. And so we think that's - in some sense, that's the most valuable application we have because it moves you from being responsive. I see an event that could affect my branch or my people or my executives traveling, now let me take some actions to a, wait a minute, the system, which never sleeps, in any size organization, could be a 500-person or 5,000-person company, up to a 400,000 global management consulting firm that spent $1.7 million, I would add, without purchasing Crisis Management yet because it wasn't available when they first moved into contract negotiations, it allows them to automate the entire process and move from being responsive to proactive. So at a minimum, 25%, 30% uplifts potentially in those CEM Suite products. So a product that used to sell with four applications at $340,000 can now be selling at $0.5 million or $600,000. And a customer spending $1.5 million could spend $2 million with the advent of that product. It really is a piece of glue that stitches together the core value proposition and moves organizations from responsive to - from reactive, excuse me, to proactive and automated.

[Brad Sills:]

Great. And then one more, if I may, please. It looks like you're getting some real nice sales and marketing leverage this quarter. What would you attribute that to? Do you feel like your sales productivity ramp is getting ahead of maybe where you had anticipated as you began hiring more enterprise reps? Is the deal sizes that are helping there? Any color on just what's driving sales productivity?

[Jaime Ellertson:]

Well, if you mean in the sense of large deals and the number of large deals, we stressed that we wanted to move from what we consider to be a very important, but historic core market of Mass Notification, which was a multimillion - billion-dollar market, but by no means the $25 billion, $30 billion, we claim today with CEM, into a much larger space, where we're delivering greater value, an integrated value proposition from a suite of products. As I stated in my remarks, an ERP-like sale, where you could sell a couple of million dollars to a large entity like a Fortune 1000, and you guys can do the math, right? If you can sell several hundreds of those, you get into the hundreds of millions of dollars of revenue from CEM. And so for us, it's getting the enterprise scale reps, more enterprise scale reps, and a better understanding on how to sell that value to C-level officers, which is a migration, quite honestly, we're still in the middle of. We're still making progress, we still have bumps in the road, but that's the migration that leads to a higher ASP on a continuous basis and record-setting sales like some of the CEM ones we mentioned in this call.

[Brad Sills:]

Great. Thanks, Jaime.

[Jaime Ellertson:]

You bet.

[Operator:]

Next question comes from the line of Tom Roderick from Stifel. Your line is open.

[Tom Roderick:]

Hi, guys. Thanks for taking my question. Jamie, I'd love to hear a little bit more about any changes in sales coverage around, which of your sales reps are able to sell CEM now? How much more you're opening that up to the broader sales group? And any changes in structure as you go-to-market with CEM as a whole?

[Jaime Ellertson:]

Well, I think that was - yes, its great question and it's a follow-on from the previous question, right? So we don't publish specific sales numbers or how much of our exact team is. But as I said, we only sell CEM today into the corporate and health care verticals. So we're not even touching the city, state and local governments, which have - obviously have a need. They - in some sense, governments are tasked with the protection of citizens and your safety and livelihood in a greater sense than corporations. We haven't moved CEM sales into that market at all, touching any of our public markets, and we do not sell it to - in the raw international markets, partly because we just wanted to remain focused and train a portion of the sales force, and then start to roll it out. We have said before, we started with our large account, our strategic account managers, which is a subset less than one third of our sales force last year when we talked about this, and then we've increasingly rolled it out to the broader group of AEs, the account executives that sell into corporate and the health care space, and we're seeing good results. But as we do that, we learn what it takes to learn how to sell higher and wider in an account, deliver that message to a C-suite executive instead of someone maybe that's managing emergency notification or business continuity. And do that with consistently better results. And so we've continued to say that this year, we're going to focus on primarily those two markets, which leave us about 50% yet to be trained, and then the product rolled out to. And to be honest, part of that this because we need to do all the blocking and tackling internationally to make those products ready, ready in a sense that we have all the - that we have 120 different threat data signals today in our package. And out of our geog, we have to expand that into the international markets, we have to also make sure the support and the partner landscape is also scaled and ready internationally. So in today's environment, it's about 50% of our sales force and going forward, we assume that next year, we will be ready to move into the international markets more broadly, and the state and potentially, some of the public markets next year as well. So that's kind of the road map to that and more specific details, we just haven't published those on a broad basis.

[Tom Roderick:]

Yes. Outstanding. Okay. Great. And then, sort of shifting over to the product side of things. You talked in the past about analytics being one of the upcoming modules for CEM. I think, in particular, you've got, maybe, even one customer that's sponsoring the build-out of that. Can you talk to us about the timing of that? And then, even just beyond that, as you think about opportunities on M&A, would we look more for some product build-outs on the M&A side? Or is it time to start thinking about customer expansions?

[Jaime Ellertson:]

Yes. No, that's a great question. So look, on the analytic side, nothing has changed. We didn't want to - we figure our earning comments are broad enough, at least, mine are broad enough that we didn't get in to all the products. But our analytics product is still on track for the second half. This first half, we were honestly very focused on crisis management. The CM products addition into the suite, because that does have the potential as the first question was posed to add another 20%, 25% on to an average CEM deal. Not every deal will be the same and the pricing will be a little bit different. But adding that substantive of application on top, we think we can obtain that type of value. And so that's a big deal. Analytics will follow in the second half and be just as large. As you mentioned, we do have an initial customer. We think that rounds out a lot of the core of the suite, and we continue to look at M&A to add to that. As Patrick said, roughly, when we guided to Q2 right now, we're guiding without the benefit of M&A, and we're lapping our previous large deals like UMS last year. But we continue to believe that we're a kind of mid-30s grower with another 5% to 7% of M&A. You just haven't seen us announce anything this year yet. And so keep your eyes peeled, that's a forward time period in the second half and what we most likely are going to focus on there, is continuing geographic expansion. We still think there's a huge opportunity to roll out internationally in a couple of markets and really continue that 100% plus kind of international growth as well as around a couple of our strategic products that could use some expansion or additional product capabilities. So those are two of the areas in addition to CEM expansion, but the CEM Suite looks like it's in pretty good shape this year with the addition of analytics in the second half.

[Tom Roderick:]

Outstanding, really helpful. Thank you

[Jaime Ellertson:]

You bet.

[Operator:]

Our next question comes from the line of Scott Berg from Needham. Your line is open.

[Scott Berg:]

Thank you, Patrick. Congrats on a great quarter. Thanks for taking my questions. Jaime, I guess, from a high level, your commentary in the quarter was really good, especially reflective of a seasonally kind of weaker quarter for software sales in Q1. Can you maybe comment on why Q1 was such a good quarter for you on a relative basis? We typically don't see that from other software companies.

[Jaime Ellertson:]

Wow, you've got me in an unusual position of being flustered. I think our performance was just what we anticipated and planned for. We just executed well, which is typically not myself, it's Patrick and what you're seeing as a strong team that continues to deliver kind of on our plan. We have said over, and over, and over again, we consider long-term, if you can build a SaaS business - SaaS scale in mid-30s and add on anywhere between five or six points in strategic M&A, you got a very powerful combination. And we did that and hit on all the numbers, with the exception of really announcing anything significant to mirror M&A success last year. And so we do believe that CEM is powering some good wins. And I don't want to cut it short, population alerting, I hope you get the tone I used on the call, is a strong performer right now, and we see a lot of opportunity out there, a lot of opportunity, and believe that's going to be strong contributor throughout this year. So with both engines kind of firing the big strategic engines and CEM firing with the biggest deals and a volume of rollout in the limited market penetration we have. And then, internationally, population alerting continue to fire. We kind of have those two engines backed up by mid-90s renewals and a good cross-sell engine into a very large and established space. And that's - the three of those are our growth pillars, and they continue to be - we continue to execute on them across the regions and the product sets, and that delivers results we're delivering. We don't consider anything unusual, but we certainly take the compliment, thank you.

[Scott Berg:]

Wonderful. Got it. And then I guess, another question on the CEM ASPs. I'll ask it a little bit different than Brad did, is now that you have several big deals under your belt a year later, and you just had your largest one, can you help us understand maybe how ASPs have trended from those first couple of sales to what you're seeing in the quarter here? Have they changed materially now that you're maybe more familiar selling in this package? Or are they kind of in line with what you've seen, just in general, in the last year and then maybe scale with population side at a customer?

[Jaime Ellertson:]

They are scaling. And they're scaling not because the product has changed that much. Although, in the time period, remember, when we started, we had three products in the CEM Suite. When we started last year's first quarter call, we had three products, Mass Notification or Incident Communication, they're interchangeable as the communication component. We had Safety Connection, and we had DCC, that was it. During the year, we added the risk data and now we've added the Crisis Management, and allows you to tie it all together and to automate the process. It's a much more powerful solution today. Our people understand how to sell it better so they can pitch higher and more broadly. And the result of that as we're seeing some very large opportunities, which just weren't there before. The other comments that we'd make is even with our position as the ERP of safety and security, we wouldn't tell you that every time we show up in the room that the Chief Security Officer or the Head of Business Continuity or even the Chief Risk Officer has the biggest budget in the company. Sometimes the guy running the sales or Patrick's equivalent, the CFO, or even the CEO, has the biggest budget, and he's got the ability to sign off on multi-million-dollar deals. Just remember, our deals that we're announcing are typically three year or longer year terms. So you're talking about a $5 million commitment to Everbridge with these big deals. And that has taken some time to get to the point, and in many cases, we show up in the first year or last year, we make the pitch and someone says to us, I love it, but I'm going to have to go get budget with you. Can you help me? And just like at an ERP place early on with SAP or Oracle, they had to work to get those budgets freed up and introduce an integrated planning solution to a major corporation. We're doing that early farming. We believe that puts us out in front in a very large multibillion dollar industry, and we are the name and the recognition and gain that recognition, but it does take a little bit of time. So you're seeing the ASP increase because we're getting more familiar with the sale, we're expanding the seats, the number of products in the suite, and then customers are finding budget and going with us, some of them taking a budget cycle to get through that. So three key reasons why that's expanding, and they're just - they're very normal. If you look at the ERP craze, our human capital management for the HR software guys, they did the exact same thing in their markets. That's why we're excited about CEM being an ERP-like opportunity longer term.

[Scott Berg:]

Super helpful. I'll jump in the queue. Thank you, again.

[Jaime Ellertson:]

You bet.

[Operator:]

Our next question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.

[Unidentified Analyst:]

Hi. It's Bhavin on for Brad. Thanks for taking my question and congrats on the great start to the year. I think following up on some of the earlier questions and as you see success with Critical Event Management and start expanding the offering to new geos and verticals, how should we think about the additional investments that might be required to expand into these areas, whether its additional sales people, offerings, et cetera?

[Jaime Ellertson:]

Yes, I mean I think we've planned out the expense - our normal expansion sales. The biggest thing that we had to do early on in CEM was take time to train and learn from customers. As we said, not everyone had the budget to spend $1 million with us day 1. We had to put the use cases and the references out there. As you're starting to see these $500 million, $700 million deals, even greater come in on a regular basis now on a - or I should say - so I'm saying it properly, a much more consistent basis. What you're seeing is a market mature. And as that market matures, it's not that difficult for us. Our core salespeople all learn the same products. Crisis Management, for instance, was born out of an acquisition we did almost two years ago in Sweden. So Europeans had, had Crisis Management for a while, ours is just a new version integrated with CEM. They get to see how we're selling in the U.S., so our international teams are going to be much more capable of ramping faster when we turn it on. Our preparation that's required is much more on the product side and making sure the data is ready and the support channels are ready for the international markets. So I don't think there's a big investment to roll out CEM internationally. We've just been, as Patrick said in his comments, I think a little measured and very careful and thoughtful in how we roll out the product, so we don't just splatter against the wall and then work on what sticks because customers in the new geography, if we didn't have the support, could take quite a bit of time, for example. So as we continue to roll out CEM, I don't think you'll see a large significant addition, I think you'll see the continuing incremental sale and marketing spend that we do as we grow our business, proportional to our growing business and desire to be increasingly adjusted EBITDA positive.

[Unidentified Analyst:]

That makes sense. And that's helpful. Just a quick follow-up. In terms of said ramp and the certification you got a few quarters ago, can you just give us some update on how that performed relative to expectations? I know you guys gave some metrics on the call, but anything additional in terms of pipeline and what you're seeing?

[Jaime Ellertson:]

I wish the Federal Government wasn't operating under a continuing resolution and under the threat of another tweet, but that's the world we live in today. And so our Fed team is pounding away, we're winning deals on account of a quarterly basis. But their rhythm is all in this one quarter at the end of their fiscal year. And as you saw in our last Q3, we kind of overdid that. And we warned everyone in advance like we warned you, do not grab on the seasonally high as the norm always. But that continues to be the way the Federal Government buys. They can't get budget under continuing resolution until they're about to lose it or they have to spend it, and then they purge it all within a given quarter. And so that deals just seem to be all - most of them, at least, seem to be lining up for a Q3 finish, and that's what we would anticipate and I've heard is the normal cycle for that market. Continues to grow, continues to show good progress, but it's - if we're going to follow the same cycle that almost everyone else in software and enterprise software does with the Federal Government.

[Operator:]

Our next question comes from the line of Eric Lemus from SunTrust.

[Eric Lemus:]

I just had one, and it follows up on the last question. Looking at your federal pipeline and how those deals are shaping up, do you think the - are those deals mostly just core Mass Notification deals? Or are you seeing those mostly as - or multiproduct-type deals?

[Jaime Ellertson:]

No, they're absolutely multiproduct deals. Of course, Mass Notification is our - is the most common product we're known for, we're the, I think, the global - acknowledged global market leader there. And in the U.S., there's still quite a bit of penetration opportunity for Mass Notification. But as we announced, I think it was U.S. Post Office who bought IT Alerting, a bunch of our wins this past quarter. One of the ones I mentioned was an IT Alerting win in the state and local space. That's starting to pick up steam because we had such a large penetration in Mass Notification, not necessarily the Federal Government, but the state and local. And so I think you'll continue to see a number of different products sold in the Federal Government. And some of the bigger opportunities are in military and other spaces. As we've alluded to, there's a number of projects ongoing there. And so again, in Q3, you could see that be a reasonably balanced stead of wins across the product set, certainly in terms of dollars if not in individual product wins. I would focus your attention on Population Alerting outside the U.S., which absolutely includes Mass Notification, but it's much more often led with our Location Based Alerting and Population Alerting solution as being just as a big contributor because there, we're calling on 50 Federal Governments at once with national population opportunities. There's over 30 in the EU. And I'd mention that in India alone, we're on our fourth state, each of one - each of which has the size of a Federal Government opportunity. And then in addition to that, other Southeast Asian opportunities. It's a pretty rich market right now, and we would be surprised if we didn't deliver this year. And as I said in my prepared remarks, I have high hopes for big results this year in Population Alerting to governments outside of the U.S. So when you think about how we're attacking the federal market, think about the Federal U.S. market, and then the federal international market. And I would argue the federal international market's substantially larger even so, a balanced opportunity set for us.

[Operator:]

The next question comes from the line of Sterling Auty with JPMorgan. Your line is open.

[Unidentified Analyst:]

Hi, guys. This is Matt Bronan for Sterling Auty tonight. Thanks for taking my question. The question I had is in terms of your Critical Event Management suite, what did you see in terms of upsell in the quarter by existing customers? And how many new customers are going to that level? Thanks.

[Jaime Ellertson:]

Yes, I think it's probably pretty balanced, . I think we had a number of wins. I talked about customers starting with Mass Notification in a large bank moving to Safety Connection Pro a year later, and then literally, one year later, moving to VCC and the entire suite. That's a great example of someone taking a journey. If we can do that with all 4,500 Mass Notification customers, we're going to be a damn big company in a couple of years. So that's the goal, it doesn't always happen that way, some like the big management consulting firm had a tiny - little, tiny fraction in their business - had a relationship with us, but for all intents and purposes, it was a new win. We had to sell everyone from the CSO and the CEO and down. In that case, they're spending millions and millions of dollars in committing over 400,000 employee workplace to Everbridge to help them manage critical events. So it was a mixed - about 50-50, that's what we want, right? We want to leverage the very large, very successful Mass Notification and Safety Connection customer base because that means there's a plentiful supply of upsells, that's why we keep hinting at - these customers have bought their second or third product but they're on the CEM path, and so that's fantastic. If you were Oracle back in the day, you wanted to sell financial general ledger but then you wanted to sell integrated resource planning, and then you wanted to sell the HR system, once they bought PeopleSoft. So it's a solution sale, same thing for us. Some began that journey, that brand new ones that are just being introduced. We introduced them to CEM, we don't start off selling Mass Notification, if we can help it, so that's how we go to market. But to an existing base of 4,500, it's our goal to upsell almost all of them over the next X number of years the complete suite, and that's how we'll get to the type of numbers that we aspire to as a SaaS vendor.

[Operator:]

Our next question comes from the line of Brian Peterson with Raymond James.

[Unidentified Analyst:]

Kevin here on for Brian. I wanted to ask about any changes you've been making across the Nixle platform. I think some of the tweaks there have encouraged users to migrate to some of your higher-tier offerings. And I was curious where you see yourselves in that process today. And what impact would you expect that to have on Mass Notification ASPs going forward?

[Jaime Ellertson:]

I don't - that product is a mature product for us. It is - it plays a spot in the market. We've always been concerned with - in any software market we entered to have the small and medium business size space protected. And so for very small sheriffs' departments, public safety agencies, we want to have a solution where they can start. And I'm frequently on the phone with some of those guys because they can be very impactful in terms of their message count or how they use the solution, have great stories. But they can be 20 sheriffs in a small rural town in the middle of New Mexico, they can't afford $10,000 or $20,000. But our price point that Nixle brings to bear, $5,000 or $3,500 a year with a multiyear contract is perfect for them. They began the journey there, they end up - being upsold in the Mass Notification and ultimately add Safety Connection or one of our other products, community alerting, something else and become a much larger customer. And the example of that journey is really the City of Los Angeles. The County of Los Angeles Sheriff started as a free user and moved to paid and before you know it, they're up to a $0.25 million a few years ago before they migrated to Everbridge. They principally migrate to Everbridge because the SLAs and the scale of which at that platform operates is built into its cost structure but also into its delivery capabilities. So with our Mass Notification solution, we just have the best, most - richest platform for critical communication and alerting in the - on the planet, and people will move to that when they have the size and nature of need that promotes that. But to start, Nixle continues to be a feeder system for us. We have over 3,000 Nixle users out there, local law enforcement police maybe 4,000 because I haven't checked the number lately, and they continue to be a very strong feeder system for Mass Notification. But it isn't one or the other because our Mass Notification product doesn't go down to that five in terms of budget. And again, most of those customers are on the public side of the markets.

[Operator:]

Our next question comes from the line of Will Power from Baird.

[Will Power:]

Yes, I just want to come back to the EU opportunity. It certainly seems like it could be significant over the next several years. And you addressed just part of this, Jaime, but how's the right way to think about how we should expect that pipeline to build? Does that get more back-end loaded just based on the deadlines that have been set? Or do you think we see that occur more ratably over the course of the next couple of years? And then the second piece of that is, describe what the competitive climate there looks like? Or the - have you seen any other cloud providers appear? Is it kind of one-off hardware-based solutions? What are you seeing on the competitive front there?

[Jaime Ellertson:]

Two great questions because it's a very important and as I've leaned into it a little bit here, a very - we think a very positive market this year. So the EU is on a roughly four years the director says until you have to have it all done and dusted in place, which if you start backing up means that most of these decisions will be made in the next 18 months from today from the summer. So we see it as an opportunity that's now - it's starting to affect us now, so we've made a commitment to grow our sales force and our Go-to-Market team and ramp our marketing into the EU. We continue to be the only player that's of scale, that's why we bring up things like The New York Times boasting about saving one million people because at scale, we don't know of anyone else that does what we do as consistently across multiple geographies across any type of event. It's one thing to have a - some sort of hardware-based solution that can blast a message, but not when you have four different languages you're having to deliver the message in and not when you want it to be delivered to virtually any handset so you can light up an entire city or nation. And that - the competition is almost nonexistent there, that's why we built out the roughly over 100 global patents in place, and it's why we feel so strongly. The numbers, I'm going to hold off to keep a little teaser out there for Patrick's announced Analyst Day because we're - we've had a number of requests around - so help us build that market out to show the opportunity, since we're primarily trying to win RFPs and influence people right now, and then we'll go into the winning stage next year. I would say if you attend our Analyst Day, we'll try to build that market bottoms up for you and tops down to give you a detailed feel, but probably too much to do in this call. I would watch for other significant wins where we continue to be highlighted as the player in this space because as Patrick's predecessor, Ken Goldman, used to say, "In this market, reputation and ability to deliver is not just okay, it can be in life or death." And so when you get that New York Times article saying, "You can potentially save one million people," that's not something anyone else can buy because they have a - they jumped into the market and say they're a cloud provider and they can do it. It's just - it - that's - it's not going to work that way. We do not believe the market's going to roll out that way. So big, solid footprint existing today, most reputable platform in the planet, continuing success at scale and continuing new wins and seated in a position that we are expanding our Go-to-Market to be in a position to win as many of those as we can over the next 18 months where we believe they'll be adjudicated and announced.

[Operator:]

Our next question comes from the line of the Dmitry Netis from Stephens.

[Ryan MacWilliams:]

This is Ryan MacWilliams on for Dmitry. I just have one question. It kind of goes off the last question, it might be for Patrick. Due to the lumpy nature of the Population Alerting deals and in the last quarter, you mentioned you had some in the hopper that couldn't hit us earlier this quarter, how are you guiding around the full year around the uncertain time of these deals? And are there any large wins baked in the second half guidance?

[Patrick Brickley:]

Yes. There are not any large wins baked into second half guidance. We are - we did acquire a number of deals that were in the pipeline that were - had been originally presented to prospects as perpetual, but we've been working very hard wherever possible to try to reframe those and convert those to a recurring model, and we've been successful on a number of those opportunities that are in flight. So we are not including any significant sort of material perpetual revenue in the second half guidance nor do we hope that we will ever have to guide to a lot of lumpiness in the future. And certainly, as a first-time CFO, the last thing I want to try to do is deal with our lumps from quarter-to-quarter. So working very hard to prevent that.

[Operator:]

Our next question comes from the line of Brent Bracelin from KeyBanc.

[Unidentified Analyst:]

This is Clarke on for Brent. Jaime, just on your - the metric of 55% of new sales still coming from Mass Notification, and then, I guess, floating that with the comment of you wouldn't like to sell with Mass Notification primarily, if you could help it, what could trend that metric up to be more to the new products SKU from here? And that's just really reflective of the new kind of customer acquisition engine? Or the distribution of CEM selling in the sales force? Any color on that would be really appreciated.

[Jaime Ellertson:]

Yes. Sure, Clarke. I appreciate the question. Yes. So it's - you've got it a little reversed though. So it's 45% came from Mass Notification and Incident Communication are core historic, our oldest products. 55% came from the newer products, which, at our - as of our 200 - 2016 IPO, we're somewhat brand-new Safety Connection and IT Alerting, things like that, now a Crisis Management and Visual Command Center. So 55% of all new in growth comes from the new products. And what I said was that's about where we want it, a 50-50 split, given that we've redefined Mass Notification as Population Alerting, so we're going to redefine it going forward here. Population Alerting to include Mass Notification, Incident Communication and the Population Alerting and Location Based Alerting solutions we acquired to UMS, which is really Mass Notification internationally in the one segment, which we'd like to be - we'd like to see healthy growth in that because otherwise, we're offsetting decline in one market with growth in another. On the other hand, we're up to slightly over 50% this last quarter, and in Q4, 55% of all new and growth coming from the newer products. And we think that's healthy CEM. It certainly pulls that up because a CEM sale includes Mass Notification, Safety Connection, Visual Command Center and typically, either risk data or now Crisis Management if they're buying all of them. As we had a couple customers buy everything in our suite this last quarter, and that increases the size. But so those should stay in a rough balance now because if one got too far out ahead of the other, you would - it would mean a decline, right? It would mean that you weren't able to grow your Mass Notification products anymore, including Population Alerting, and I don't foresee that as happening at all. And on the other hand, if the new in growth grew substantially faster than this, it would mean that CEM was gaining even better traction, which still could happen. It's more likely that the new and growth could go from 55% to 57% if we had a banner CEM quarter. But again, we're hoping to stay somewhere in that range where both are healthy and both are growing meaning that the percentage distribution stays roughly even. So that's how to think about that going forward.

[Operator:]

Our next question comes from the line of Mike Latimore from Northland Capital.

[Mike Latimore:]

Great. Yes, excellent quarter. I guess just on the EU mandate opportunity, you said most of the decision probably in the next 18 months. Do you foresee that to be sort of back-end loaded in terms of decision-making or relatively even over these - this time period?

[Jaime Ellertson:]

Too early to call. I would pay attention to our Population Alerting and the wins in that space, and that will give you increasing understanding of how we're doing in Population Alerting, in general. And like any other new market, it's a brand-new market, we do believe that 18 months is roughly correct because if you work backwards from the EU directive, you have to have the law in place in that time period. And a large nationwide system given we've implemented more than anyone else in the planet, you can't do in a year, it's not possible. It takes one year, 1.5 years to roll it out. So when you back that up from the 3.5 years that are left, you have had - you have to have made the decision in the next 18 months. And do we think everyone's going to be at the back half of that? Well, more probably in the back half than the front half. But other than that, we don't have a trending yet because we're just starting. What we do believe is it will happen in the next 18 months starting this - at the end of Q2 and moving forward through the end of 2020. And most deals will be decided by that point. And so then, you're rolling out for the next three years. And it's a large potential market with big countries being eight figure deals, it could be well in excess of $10 million, $20 million, and smaller deals being seven figure deals, they make a difference in our model no matter which year we're in. They - just a few of those can have a meaningful difference. So we're very focused on it. As I said, continue to focus on our - or we continue to focus on our - making that Population Alerting and Location Based Alerting solution the best in the planet, the most cost-effective and the best to be used and when we see opportunities like India where we're getting that type of press, that just makes it very difficult for others to compete with us with any type of bona fide that's even comparable in any way. So we're - we continue to move forward with that, and we'll have a little more detail on how we roll that out and how we see the dollars adding up in the addressable market at their Analyst Day in June.

[Mike Latimore:]

Great. And just last, how is the JARVISS deployment going?

[Jaime Ellertson:]

Good. It continues to move forward. A big project for us, it's gotten bigger since we've gone. And other than that, there's not - we've made no specific announcements around that. I did mention when I talked about federal, there are other DoD opportunities out there. As we said, there are some 18 other agencies. And so you can assume we're going after those aggressively, too. But there's still a lot of work to do around JARVISS and doing it. And it continues to be rolled out ever-expanding in the U.S. Army.

[Operator:]

As there are no more questions over the phone, I would now like to turn the conference back to Jaime Ellertson, company CEO.

[Jaime Ellertson:]

All right. Thanks, everyone, for joining our call today. We're, again, excited to exceed our financial directives. I think this is the 11th straight quarter since our 2016 IPO. So we, as Patrick said, are focused on a kind of rinse-and-repeat model here, and appreciate you joining. We think the first quarter results represent both a strong business environment for us, the strategy's working and most importantly, we're well positioned to continue to provide a return to shareholders in the future. Thanks for spending time with us. We look forward to seeing you on the road in the future. Bye-bye.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.