Critical event management software company Everbridge (NASDAQ:EVBG) reported results ahead of analyst expectations in the Q1 FY2023 quarter, with revenue up 7.86% year on year to $108.3 million. The company expects that next quarter's revenue would be around $110.3 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Everbridge made a GAAP loss of $14.6 million, improving on its loss of $19.1 million, in the same quarter last year.
Everbridge (EVBG) Q1 FY2023 Highlights:
- Revenue: $108.3 million vs analyst estimates of $106.5 million (1.7% beat)
- EPS (non-GAAP): $0.25 vs analyst estimates of $0.13 ($0.12 beat)
- Revenue guidance for Q2 2023 is $110.3 million at the midpoint, above analyst estimates of $109.3 million
- The company reconfirmed revenue guidance for the full year, at $459 million at the midpoint
- Free cash flow of $15.9 million, up from $387 thousand in previous quarter
- Customers: 6,500, down from 6,513 in previous quarter
- Gross Margin (GAAP): 70.5%, up from 68.3% same quarter last year
Founded as a reaction to the catastrophic events of 9/11, Everbridge (NASDAQ:EVBG) supplies software that helps governments and businesses keep people and infrastructure safe in emergencies.
From school shootings to storm surges, Everbridge can help organisations automate the initiation of incident response, alert people to threats via their phones, and proactively assess risk levels before critical events emerge. Importantly, the Everbridge private network allows groups of customers to opt in to share data on a confidential basis with each other around specific problems or critical events. This means that Everbridge’s platform becomes more valuable as more organizations use it.
Everbridge gains competitive advantage as more customers anonymously share data with each other, so it’s important that it continues to win more customers. And the more Everbridge is deployed by varied customers, the more data and opportunities it has to help streamline responses, and derive insights about how critical events can be better managed in the future.
The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.
Everbridge has global market penetration but it faces competition from established firms like Juvare, which owns WebEOC, an extremely widely used emergency management software. And there are a plethora of smaller competitors in mass notification, though Everbridge’s cell broadcast and location-based SMS solutions cannot be replicated by all of them.
Sales Growth
As you can see below, Everbridge's revenue growth has been strong over the last two years, growing from quarterly revenue of $82.2 million in Q1 FY2021, to $108.3 million.
Everbridge's quarterly revenue was only up 7.86% year on year, which might disappoint some shareholders. And the revenue actually decreased by $8.86 million in Q1, compared to $5.73 million increase in Q4 2022. However, the sales also similarly dropped a year ago and management is guiding for revenue to rebound in the coming quarter, which might hint at an emerging seasonal pattern.
Guidance for the next quarter indicates Everbridge is expecting revenue to grow 7.05% year on year to $110.3 million, slowing down from the 18.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 6.2% over the next twelve months.
Customer Growth
You can see below that Everbridge reported 6,500 customers at the end of the quarter, a decrease of 13 on last quarter. That is slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing down.
Profitability
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Everbridge's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 70.5% in Q1.
That means that for every $1 in revenue the company had $0.70 left to spend on developing new products, marketing & sales and the general administrative overhead. Trending up over the last year this is around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.
Cash Is King
If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Everbridge's free cash flow came in at $15.9 million in Q1, up 0.94 thousand% year on year.
Everbridge has generated $16 million in free cash flow over the last twelve months, a decent 3.64% of revenues. This FCF margin is a result of Everbridge asset lite business model, and provides it with optionality and decent amount of cash to invest in the business.
Key Takeaways from Everbridge's Q1 Results
With a market capitalization of $985.8 million Everbridge is among smaller companies, but its more than $220.9 million in cash and positive free cash flow over the last twelve months give us confidence that Everbridge has the resources it needs to pursue a high growth business strategy.
Everbridge topped analysts’ revenue expectations this quarter, even if just narrowly. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was unfortunate to see the slowdown in customer growth and revenue decreased in absolute numbers. Overall, this quarter's results were not the best we've seen from Everbridge. The company is up 3.53% on the results and currently trades at $25.22 per share.
Is Now The Time?
Everbridge may have had a bad quarter, but investors should also consider its valuation and business qualities, when assessing the investment opportunity. We cheer for everyone who is making the lives of others easier through technology, but in case of Everbridge we will be cheering from the sidelines. Its revenue growth has been solid, though we don't expect it to maintain historical growth rates. But while its ability to generate free cash flow avoids a dependency on capital markets, unfortunately its gross margins aren't as good as other tech businesses we look at.
Everbridge's price to sales ratio based on the next twelve months is 2.1x, suggesting that the market does have lower expectations of the business, relative to the high growth tech stocks. While we have no doubt one can find things to like about the company, and the price is not completely unreasonable, we think that at the moment there might be better opportunities in the market.
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