Critical event management software company Everbridge (NASDAQ:EVBG) reported results in line with analyst expectations in Q2 FY2022 quarter, with revenue up 18.8% year on year to $102.9 million. The company expects that next quarter's revenue would be around $110.8 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Everbridge made a GAAP loss of $36.1 million, down on its loss of $33.8 million, in the same quarter last year.
Everbridge (EVBG) Q2 FY2022 Highlights:
- Revenue: $102.9 million vs analyst estimates of $102 million (0.94% beat)
- EPS (non-GAAP): $0.03 vs analyst estimates of -$0.12 ($0.15 beat)
- Revenue guidance for Q3 2022 is $110.8 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed revenue guidance for the full year, at $430.5 million at the midpoint
- Free cash flow was negative $13.9 million, down from positive free cash flow of $1.52 million in previous quarter
- Customers: 6,345, up from 6,224 in previous quarter
- Gross Margin (GAAP): 67.7%, in line with 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.
As you can see below, Everbridge's revenue growth has been strong over the last year, growing from quarterly revenue of $86.6 million, to $102.9 million.
This quarter, Everbridge's quarterly revenue was once again up 18.8% year on year. On top of that, revenue increased $2.61 million quarter on quarter, a strong improvement on the $2.45 million decrease in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.
Guidance for the next quarter indicates Everbridge is expecting revenue to grow 14.5% year on year to $110.8 million, slowing down from the 35.7% 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 15.8% over the next twelve months.
You can see below that Everbridge reported 6,345 customers at the end of the quarter, an increase of 121 on last quarter. That is a little better customer growth than last quarter and in line with what we have seen in previous quarters, demonstrating the company has the sales momentum required to drive continued growth. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is running smoothly.
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 67.7% in Q2.
That means that for every $1 in revenue the company had $0.67 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and we would like to see it start improving.
Cash Is King
If you follow 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 burned through $13.9 million in Q2, increasing the cash burn by 53.8% year on year.
Everbridge has burned through $16.4 million in cash over the last twelve months, resulting in a negative 4.07% free cash flow margin. This below average FCF margin is a result of Everbridge's need to invest in the business to continue penetrating its market.
Key Takeaways from Everbridge's Q2 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Everbridge’s balance sheet, but we note that with a market capitalization of $1.27 billion and more than $474.6 million in cash, the company has the capacity to continue to prioritise growth over profitability.
We enjoyed seeing Everbridge’s strong acceleration in customer growth this quarter. That feature of these results really stood out as a positive. Zooming out, we think this was a decent quarter, showing the company is staying on target. The company currently trades at $36.6 per share.
Is Now The Time?
When considering Everbridge, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. Although Everbridge is not a bad business, it probably wouldn't be one of our picks. Its revenue growth has been solid, though we don't expect it to maintain historical growth rates. But while its very efficient customer acquisition hints at the potential for strong profitability, the downside is that its gross margins aren't as good as other tech businesses we look at and its cash burn raises the question if it can sustainably maintain its growth.
Everbridge's price to sales ratio based on the next twelve months is 2.5x, suggesting that the market has lower expectations of the business, relative to the high growth tech stocks. In the end, beauty is in the eye of the beholder. While Everbridge wouldn't be our first pick, if you like the business, the shares are trading at a pretty interesting price point right now.
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