Critical event management software company Everbridge (NASDAQ:EVBG) announced better-than-expected results in the Q3 FY2021 quarter, with revenue up 35.7% year on year to $96.7 million. Guidance for next quarter's revenue was $102.1 million at the midpoint, which is 2% above the analyst consensus. Everbridge made a GAAP loss of $28.6 million, down on its loss of $24.2 million, in the same quarter last year.
Everbridge (EVBG) Q3 FY2021 Highlights:
- Revenue: $96.7 million vs analyst estimates of $94.2 million (2.6% beat)
- EPS (non-GAAP): $0.05 vs analyst estimates of -$0.14 ($0.19 beat)
- Revenue guidance for Q4 2021 is $102.1 million at the midpoint, above analyst estimates of $100.1 million
- Free cash flow was negative $7.52 million, compared to negative free cash flow of -$9.04 million in previous quarter
- Customers: 6,010, up from 5,890 in previous quarter
- Gross Margin (GAAP): 68.6%, down from 70.6% 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 organizations 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.
Climate change is expected to result in an increasing number of extreme weather events, globally, impacting both supply chains and personal security. This in turn increases the need for automated systems for critical events, meaning that there should be an increasing demand for software such as Everbridge.
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 very strong over the last year, growing from quarterly revenue of $71.2 million, to $96.7 million.
And unsurprisingly, this was another great quarter for Everbridge with revenue up an absolutely stunning 35.7% year on year. On top of that, revenue increased $10 million quarter on quarter, a very strong improvement on the $4.43 million increase in Q2 2021, and a sign of acceleration of growth.
Analysts covering the company are expecting the revenues to grow 27% over the next twelve months, although estimates are likely to change post earnings.
You can see below that Everbridge reported 6,010 customers at the end of the quarter, an increase of 120 on last quarter. That is a bit 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 68.6% 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 it has been going down over the last year, which is probably the opposite direction shareholders would like to see it go.
Key Takeaways from Everbridge's Q3 Results
With a market capitalization of $6.07 billion Everbridge is among smaller companies, but its more than $546.5 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
We enjoyed seeing Everbridge’s impressive revenue growth this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, there was a slight slowdown in customer growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. But the market was likely expecting more and the company is down 4.36% on the results and currently trades at $152.00 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 we have other favorites, we understand the arguments that Everbridge is not a bad business. Its revenue growth has been strong. And while its gross margins aren't as good as other tech businesses we look at, the good news is its strong free cash flow generation gives it re-investment options.
Everbridge's price to sales ratio based on the next twelve months is 14.1x, suggesting that the market is expecting more moderate growth, relative to the hottest tech stocks. We don't really see a big opportunity in the stock at the moment, but in the end beauty is in the eye of the beholder. And if you like the company, it seems that Everbridge doesn't trade at a completely unreasonable price point.
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