Critical event management software company Everbridge (NASDAQ:EVBG) reported results in line with analyst expectations in Q3 FY2022 quarter, with revenue up 15.1% year on year to $111.4 million. The company expects that next quarter's revenue would be around $116.2 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Everbridge made a GAAP loss of $22 million, improving on its loss of $28.6 million, in the same quarter last year.
Everbridge (EVBG) Q3 FY2022 Highlights:
- Revenue: $111.4 million vs analyst estimates of $110.7 million (small beat)
- EPS (non-GAAP): $0.27 vs analyst estimates of $0.16 ($0.11 beat)
- Revenue guidance for Q4 2022 is $116.2 million at the midpoint, roughly in line with what analysts were expecting
- Free cash flow of $13.6 million, up from negative free cash flow of $13.9 million in previous quarter
- Customers: 6,417, up from 6,345 in previous quarter
- Gross Margin (GAAP): 68.1%, 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 two years, growing from quarterly revenue of $71.2 million in Q3 FY2020, to $111.4 million.
This quarter, Everbridge's quarterly revenue was once again up 15.1% year on year. We can see that the company increased revenue by $8.41 million quarter on quarter. That's a solid improvement on the $2.61 million increase in Q2 2022, so shareholders should appreciate the re-acceleration of growth.
Guidance for the next quarter indicates Everbridge is expecting revenue to grow 13% year on year to $116.2 million, slowing down from the 36% 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 13.9% over the next twelve months.
You can see below that Everbridge reported 6,417 customers at the end of the quarter, an increase of 72 on last quarter. That is a little slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.
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 68.1% in Q3.
That means that for every $1 in revenue the company had $0.68 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's free cash flow came in at $13.6 million in Q3, turning positive year on year.
Everbridge has generated $4.76 million in free cash flow over the last twelve months, 1.14% of revenues. This FCF margin is a result of Everbridge asset lite business model, and provides it with at least some cash to invest in the business without depending on capital markets.
Key Takeaways from Everbridge's Q3 Results
With a market capitalization of $993.3 million Everbridge is among smaller companies, but its more than $486.9 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
It was good to see Everbridge produce strong free cash flow. On the other hand, it was unfortunate to see the slowdown in customer growth and revenue growth is bit slower these days. Overall, this quarter's results were mostly in-line, showing the company is staying on target. The company is flat on the results and currently trades at $25.00 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. 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, 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 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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