Everbridge Inc (EVBG) 2019 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Everbridge Inc. Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Patrick Brickley, CFO. Please go ahead, sir.

Good afternoon, and welcome to Everbridge's earnings conference call for the second quarter of 2019. This is Patrick Brickley, Senior Vice President and Chief Financial Officer of Everbridge. With me on the call today are Jaime Ellertson, Executive Chairman; and David Meredith, CEO.

After the market closed today, we issued a press release with details regarding our second 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.

During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These risks are summarized in the press release that we issued today. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC, including our recent 10-Q and 10-K filings.

Also, during the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release.

Finally, at times in our prepared comments or responses to your questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future.

With that, let me turn the call over to Jaime and David for their prepared remarks.

Thanks, Patrick, and thanks to all those joining our Q2 2019 earnings call today. Today, I'm joining the call as our Executive Chairman, a new role I took on as of David Meredith's joining Everbridge as CEO on July 15. I will do the majority of the presentation today, given I held the CEO role for all of Q2. And for our next quarter's call, I will switch seats with David and he will address all the Q3 operating results, with Patrick covering financial details, and I'll refocus on a few strategic topics.

During Q2 and continuing end of July, we've been very busy. Q2 marks the 12th consecutive quarter of exceeding our guidance as we continue to expand on our leadership in the critical event management market. Revenue in the second quarter of $48.4 million was up 35% from a year ago and beat the top end of our guidance by $300,000. Our revenue upside flowed straight to the bottom line, with adjusted EBITDA coming in at $0.4 million, also well ahead of guidance.

Before I begin my review of our Q2 highlights, I feel compelled to mention the terrible acts of violence that occurred in America over the past few days. We are deeply saddened by these events. With an increasing number of often deadly critical events affecting all of us, we believe our mission at Everbridge of providing the best technology and people focused on keeping people safe and businesses running is more relevant and important than ever before. We have numerous customers in both the affected areas of El Paso, Texas and Dayton, Ohio, and our teams continue to support and provide outreach during this difficult time.

Now let me proceed with a review of some of the most important activities occurring in Q2 that position us to further capitalize on the growth opportunities ahead.

During the second quarter, we had a big win for our population warning solution with the countrywide Australia deal. This win was completed -- complemented by multiple new and expansion population warning projects in Asia and Europe, our best new sales quarter since acquiring UMS, all of which support our strong international growth trends in the very real opportunity for population warning going forward.

And in June, we announced -- introduced David Meredith to all of you attending our second Analyst Day event in New York City. David is now on board and actively engaged in running the business. I'll ask David to share some of his impressions after his first few weeks as CEO in a moment.

Given the identification of risks and threats, our critical first step in identifying potentially impactful events for our customers, the richness of risk and threat data sources has always been key to our fundamental CEM value proposition. To further extend our leadership in risk data, we announced, on Friday of this last week, our latest acquisition, NC4, to bring together the best risk and threat data solutions with the leading integrated CEM platform.

I'll get into more detail on this later, but we're excited about both the strategic benefits of this acquisition as well as the compelling financial synergies we expect to achieve.

During the second quarter, all 3 components of our growth strategy made important contributions to our results and success. Our Critical Event Management, or CEM, as I may refer to it, platform is increasingly driving new and growth sales. We're in the early stages of what we believe is a large growth market, where every quarter we continue to provide key proof points of the potential for long-term market expansion. We signed the largest number of new and growth CEM deals ever at 8 in Q2.

As we previously mentioned, to date, we have staggered our initial CEM go-to-market effort primarily focused on North America corporate and health care spaces, and these verticals produced a growing number of new customer transactions in Q2.

We also were pulled into additional markets and geographies during Q2 in response to specific customer requests for CEM. The first was our international win in Asia at the Overseas Chinese Banking Corporation, or OCBC, which is one of the Big 3 Singaporean banks, all of whom have become customers in the last 2 years as well as our first CEM win in public transportation market with New York Metropolitan Transit Authority, the largest municipal transport organization in the U.S., and the second largest in the world, with over 10 million passengers per workday.

We believe this pull into new markets that we are not yet proactively addressing provides a positive glimpse at the broader opportunity ahead of us as our CEM go-to-market strategy expands in 2020. Our second growth driver is the continued success of population alerting, including our population warning and core Mass Notification applications.

In the second quarter, we signed marquee deals like the country of Australia, a very large multi-million dollar per year, multi-year population warning deal as well as Mass Notification deals with 2 new top 25 U.S. cities.

Our third quarter -- our third growth driver is our almost 4,700 enterprise customer base with whom we saw continued high retention rates in Q2 as well as solid momentum with our cross and upsell success, including significant growth deals such as Whirlpool, Thomson Reuters and Nintendo.

Now a few key metrics in addition to our strong CEM wins in the quarter. Our Q2 results show continued progress on all our key financial metrics. We added a record number or our second highest number of net new enterprise wins at 135 in Q2, ending the quarter at 4,667. Our average selling price for these customers over the trailing 4 quarters also grew, reaching $79,000 in the second quarter, up 72% from $46,000 a year ago.

As previously mentioned, we added 8 new CEM customers in the quarter, contributing to our overall ASP growth worth 88 multiproduct deals that we signed in Q2 compared with 82 a year ago. During Q2, we signed 30 deals valued at over $100,000 per year, up 36% over Q2 of 2018, and 50% -- 57% of all new and growth sales were from new products compared to 46% a year ago.

Our international business continues to grow at a very healthy pace, representing now 23% of total revenue in the quarter compared to 19% a year ago. Our revenue mix was fairly consistent in Q2 at 55% for our corporate vertical, 33% for local state and federal government, and 12% for health care, as we continue to see growth from all our vertical markets.

While every one of our quarterly metrics continue to improve in Q2, some achieving new records, I want to remind you that given the very large deals involved in our CEM and Public Warning business, these quarterly metrics can fluctuate, but the long-term trends are clearly going in the right direction. Now let me provide some additional color on the deal activity that help drive these strong metrics.

In the CEM marketplace, we saw several important trends and events that occurred in Q2. This past quarter marks the first time we saw customers pull us into new markets, both geographies and new verticals, where we had previously not targeted or actively sold our CEM solution. First example is New York Metropolitan Transit Authority, the largest transit authority in North America, which sought out our CEM platform and selected Everbridge Critical Event Management, marking the first time we have sold into this historically strong public state and local government market.

The second example would be our sale to OCBC of Singapore, where the bank requested our platform again by name, ahead of our international launch in 2020. Both of these examples demonstrate our leadership position as rapidly expanding market as well as our platform differentiation versus other point solutions.

And in Q2, we saw new customers, like the largest resort and gaming company in the West Coast, who chose our CEM solution driven by a brand-new use case. This large hospital organization wanted to enhance the security and safety -- hospitality, excuse me, organization -- wanted to enhance the security and safety of their over 5,000 mobile employees, including housekeepers and crew working across their large resort property at all hours of the night.

Our CEM solution, powered by Visual Command Center, VCC and Safety Connection, will enable the security and operations teams to immediately identify employees that have triggered a panic button, know their exact location and then respond, all to help keep workers safe.

And as new used case is important because it's driven by the surge in wearable devices, a specific growing IoT safety and security market, driven by a growing body of regulatory requirements that mandate industries like hospitality to provide panic button or remote safety solutions for mobile and remote workers. Legislation requiring hotels to provide panic devices to protect the hotel employees has already been signed in large states like New Jersey and Washington as well as being adopted in cities like Chicago, Miami Beach, and Sacramento, to name a few.

The last trend I'd like to highlight is the inclusion of our newest application, Crisis Management, in our new CEM deals. Customers like LabCorp and OCBC, among others, chose Crisis Management as a component of their new CEM purchase as well as existing customers like Red Hat, who added CEM to an existing implementation. The release of CM, Crisis Management, in Q1, marks the fifth application in our CEM suite added to our risk data, Visual Command Center, Mass Notification and Safety Connection applications, a total of 5 apps in our CM solution, which drove an increase sales price of between 10% and 25% in these new CEM deals.

In Q2, these trends helped us in closing our growth win in Singapore with OCBC, the second largest bank in Southeast Asia, who added VCC to their existing implementation. The 6-figure transaction of OCBC represents our first VCC and CEM customer in Asia.

Our win at the New York MTA was a new business deal with a value of over $500,000 in annual contract value. Everbridge now serves all 5 of the busiest transit agencies in North America. We believe this important new customer win was facilitated by the network effect of our strong existing presence in the tri-state area, where we already have numerous public safety and government implementations from the statewide deals in New York and Connecticut, to leading cities and states -- departments across the region.

In addition to these Q2 CEM deals, we closed several other important wins, including contracts with organizations like Momentum Worldwide, a leading global advertising and marketing agency with employees located around the world, who hosts and staffs global marketing events in diverse locations; LabCorp, an S&P 500 company and world's leading health diagnostic company, who purchased our complete suite of CEM solutions as well as one of the largest providers of electronic design automation software, who is also a top 20 software company worldwide. Notably, all of these wins, both new and growth deals, represented 6-figure transactions.

Now a little color on our population alerting business. I remind you this category includes our Mass Notification, Incident Communications, Community Engagement, and primarily for international markets, our Public Warning solutions. The second quarter was highlighted by our countrywide win in Australia, a Public Warning solution will be used to power Emergency Alert Australia, providing population-wide alerting to help reach the country's over 25 million residents and approximately 9 million annual visitors in a multiyear, multi-million dollar contract.

This initial award includes our Public Warning front end, which will be connected to each of the 3 principal Australian carriers' location-based infrastructure applications. However, in Australia's case, only Telstra as a carrier has an existing location-based alerting solution in place, providing Everbridge the opportunity to upsell 2 other carriers, our location-based solution. Our location-based or LBAS solution, as our further in the future, can significantly grow this, overall, new customer relationship.

During the quarter, we added several other new and growth population alerting wins across all our markets, including corporate, health care, government, education and international.

First, speaking of the potential for a combined Population Alerting and Location Based Alerting opportunities. We closed our fourth Singaporean carrier for our joint PAS and LBAS solution. We will enable this carrier to analyze and identify specific mobile devices connected to its network in an affected area, and then communicate via 2-way SMS messages in multiple different languages during an emergency situation. This PAS and LBAS deal came in at over $1 million in Q2.

We also closed several new deals for secondary population warning use cases within countries who had already purchased our core pass or LBAS solutions, beginning with Singapore's Ministry of Home Affairs that will utilize the existing solution to work with the Department of Immigration to protect visitors, and in the Nordics, [Pharmaton] Corporation will be leveraging our Oslo LBAS implementation to notify its large employee population related to safety concerns.

In North America, new population alerting wins with our Mass Notification Incident Communication and Community Engagement solutions, included a multinational electronics corporation, who is focused on standardizing their critical communications across multiple divisions for the organization, similarly another leading high-tech organization in the semiconductor space chose Everbridge MN and IC to automate their playbooks and provide best-in-class communication to their over 300 global facilities and 40,000-plus employees.

Other corporate and Community Engagement wins -- other corporate Mass Notification and Community Engagement wins in this category included large growth deals with named brands, like Whirlpool, who committed to a $300,000 annual contract value expansion of their current implementation; Doordash, who rolled out Mass Notification as well as numerous other leading financial organizations, manufacturers as well as large service organizations.

In health care, we signed New York City Health and Hospital Corporation, the largest municipal health system in the U.S. with over 60,000 employees and 1.4 million patients for an ACV over $300,000; Tower Health, a 1,200 bed health system serving over 2.5 million people in Pennsylvania; Rady's Children Hospital in San Diego; and Mercy Hospital in Chicago, to name but a few.

In the state and local government category, we had a very busy Q2. We closed a number of new top 25 cities in the quarter, like Nashville, one of the 10 fastest-growing cities in North America as well as Colorado's capital and most populous city, Denver.

In addition, other major cities included St. Louis. We also continued our success with major state agencies with names like the New Jersey Department of Treasury, whom along with the State Police, Homeland Security, and the Department of Environmental Protection, are spearheading a statewide communication solution. New York, which I've already mentioned, brought us wins like the New York MTA and the New York Municipal Health Corp. And finally, in Florida, wins at Florida Department of Corrections and the Department of Fish and Wildlife Conservation Commission became our 14th and 15th respective state agencies to select and implement Everbridge Mass Notification.

Q2 was a strong example of our network effect where existing customers like the State of New York, the City of New York, and all the public transportation and airports can positively influence our ability to win addition customers or Florida, where we are rapidly rolling up the entire state government, leveraging our statewide implementation.

Additional public market wins included agencies like Hawaii Department of Airports, Texas Workforce Commission, Virginia State Police as well as top counties, like 3 more North Carolina counties following a recent success in signing the most populous counties in North Carolina last year as well as cities like Suffolk, Virginia and La Quinta, California.

And the final state and local government segment, higher education. We signed new customers such as Tulane University as part of a proactive campus safety initiative, as well as the University of North Texas System, Castleton University, and Saint Mary College, to name a few.

At the federal level, our FedRAMP authorization continue to be a key driver of our success. During the quarter, we continue to expand into the federal and defense space, with a Safety Connection contract at the U.S. Nuclear and Regulatory Commission. The NRC chose Everbridge for both critical communications and mobile safety travelers and field personnel.

Another federal win was the Bureau of Safety and Environmental Enforcement, which was responsible for promoting safety, protecting the environment, and conserving resources offshore through vigorous regulatory oversight enforcement. The agency with a large number of field inspectors was a good fit with our dynamic location capabilities that enable the notification of mobile personnel whenever and wherever a critical event happens.

One more example of our federal market success was one of the largest leading government solution integrators who sought out an emergency notification solution given our strong track record, Mass Notification, and this consulting organization's diverse and field-base mobile workforce, we were able to upsize this win into a 6-figure MN and Safety Connection deal, where our FedRAMP authorization was, again, a key factor.

And finally, one last example on the federal market would be the Marion VA Medical Center, who moved over from a competitor to Everbridge to leverage safety connections.

Now some color on our most successful applications, like Visual Command Center, Safety Connection and IT Alerting, which continued to grow rapidly in Q2, including impressive gains with our VCC solution that achieved 129% growth over the same period a year ago.

Key IT Alerting wins in Q2 included one of the largest credit rating agencies in the U.S., a leading hotel brand, Christ Hospital System in Cincinnati, where this over 500-bed facility spread across over 100 locations in Ohio stopped a competitive process and instead selected our integrated critical communication solution, including IT Alerting, an approach that resonated with upper management.

Our overall IT Alerting business grew 41% year-over-year. Our VCC and Safety Connection businesses continue to grow rapidly, in part fueled by inclusion CEM deals. For VCC, recent quarter wins included the previously mentioned momentum, LabCorp, New York MTA, and OCB, where the customer specifically added VCCs to an existing MN/IC, SC implementation in a 6-figure deal, as well as customers like Thomson Reuters, who added VCC on a standalone basis.

On the Safety Connection side, we posted strong new and growth sales that were up 59% on a trailing 12-month basis, including net new wins like the Canadian Imperial Bank of Commerce or CIBC, one of the big 5 Canadian banks with over 40,000 employees for an over $200,000 ACV deal, including MN and Safety Connection, and a leading mass media and entertainment conglomerate, also an existing customer, who wanted to optimize the security and business programs and consolidate multiple systems into one single platform. Again, resulting in another $200,000-plus growth deal.

Another new Safety Connection win was with AveXis, a leading's life sciences organization. And one final Safety Connection to highlight would be one of the largest U.S. companies specializing in tree pruning and vegetation management for utilities and government agencies. Asplundh Tree Experts employs over 34,000 people, many in remote field locations that can be impacted by everything from the rapid onset of inclement weather, to broader dangers like wildfire. Ultimately, our ability to help inform and protect employees in these remote locations, depending on the severity of an incident, made us the right choice for this employer.

Now allow me to turn to our international segment, where we continued our string of strong results. In addition to the population alerting wins already mentioned, we saw key wins in Europe, with Edinburgh Airport; a leading banking software company; the Department of Digital Culture, Media and Sport in the U.K.; as well as Booking.com in the Netherlands, a leading conglomerate, Almarai Saudi Arabia; and Group Bimbo, one of the largest companies in Mexico, who became a customer of Everbridge by selecting Safety Connection and IT Alerting to be deployed across thousands of personnel in more than 10 global locations. All examples of new Europe, Middle East and Latin America new customer wins.

In addition to these new wins, we also saw numerous upsale or growth transactions with organizations like Vocalink's purchase of our IT Alerting solution. Our Crisis Management solution selling to existing customers like Prudential and Euroclear in the U.K. In the Scandinavian market, wins with EVRY and Norwegian Air, and in Southern Europe, we saw significant expansion of our relationship with Airbus, who added Safety Connection in the second quarter. In Asia, we saw wins at leading organizations like Etiqa Insurance for MN, SP Power, selecting Safety Connection, or CLP as a cross-sale example.

All of these new and growth transactions, combined with our strong population alerting wins lead us to a continuation of our rapid expansion in our international business in Q2.

Shifting gears to our recent announced acquisition of NC4. As I mentioned in my introductory comments, this is a strategic deal. As we've previously stated, our M&A activity would focus on targets that could broaden or deepen our CEM platform or geographic targets that could accelerate our growth into new markets.

The NC4 acquisition accomplishes the former. A combination of NC4's real time threat intelligence and analyst teams' with Everbridge's market-leading CEM platform creates the industry's only end-to-end threat assessment and incident communications and management platform for reducing the impact of internal and external threats to employees and assets, to keep people safe and businesses running.

Now a few more specifics about the strategic nature of the transaction. First, NC4 is a company we know well as we've been strong partners for more than 10 years, and today count over 150 joint customers.

Second, NC4 delivers a combination of thousands of the most trustworthy threat data sources from across the globe with an experienced team of over 40 incident analysts to create the industry's leading source of verified data and hyper local threat intelligence.

NC4 generates nearly 700 incident reports and more than 27,000 geotagged alert each day from many of the world's largest businesses, global organizations and government agencies, including over 100 of the Fortune 500, a key target market for CEM. Our CEM value proposition begins with the ability to identify risk or threat event, either man-made or natural disaster, that could impact a customer's asset, people or locations.

NC4's broad coverage of the risk and threat landscape enables our CEM customers to identify the events that matter to them most and began remediation efforts faster to protect their people, operations and brands, ultimately driving a better ROI for CEM with our largest customers.

Going forward, we'll combine our existing global intelligence operations and risk intelligence solution with a substantially larger NC4 real time threat intelligence and analyst teams. Together, NC4 and Everbridge will provide the most comprehensive solution for enterprises and government agencies to reduce the time to know that a critical event has occurred through to remediation, all from an integrated single platform, CEM.

With a total deal size of approximately $83 million, this transaction is our largest M&A transaction to date. As our press release stated, the largest business component of this overall transaction has been closed. However, additional components are not expected to be closed until the end of the third quarter.

The acquisition upon completion is expected to be accretive to Everbridge's non-GAAP financial results within 12 months, and we plan on providing further financial details after completion of the entire transaction. Concluding my comments on the acquisition, I'd like to emphasize that we believe NC4 will be real accelerant for our business, with over 100 of the Fortune 500 customers already under contract, this combination can help introduce CEM and drive continued penetration into our most strategic market.

Now turning to a few operational comments from Q2, I must say our biggest operational news occurred in June as we announced our new CEO, David Meredith. Many of you have heard and met David at our June Analyst Day event. But for those of you new to the story, David is an accomplished tech executive who most recently served as CEO of a multi-billion dollar cloud leader, Rackspace, which I might add is a satisfied customer of Everbridge.

His earlier career also includes numerous high-growth, smaller organizations as well as a number of scaled billion dollar plus successes, a key reason why I believe David is the right person for the job to lead Everbridge's continuing growth story. With David's arrival, I have moved into my new role as Executive Chairman of Everbridge. And allow me to stress one key management point. We now have one person driving our bus and managing all day-to-day operations at Everbridge, and that's David.

I remain committed to Everbridge's success, but will do so as Executive Chairman, assisting David with our strategy, with a particular focus on M&A and leading our Board of Directors.

David has already hit the ground running and he'd like to share some of his thoughts, after nearly a month at the helm. David, over to you.

Thanks, Jaime. Good evening, everyone. And for those analysts and investors whom I met at the Everbridge Analyst Day, it's good to reconnect. And to everyone else, I look forward to meeting you at a future industry or investor conference. As Jaime began, this past weekend was a somber reminder of the impact and frequency of critical events around the world. The Everbridge mission is committed to help our customers and users prepare for and mitigate these events, to keep people safe and their businesses running. I can say that after a few weeks here, I'm even more convinced about the importance of our mission, the scope of our opportunity, and the talent of the Everbridge team.

First, one of the things that's usually harder to tell before you actually start working somewhere, is what the cultural fit is like, and how the company's values and mission will mess with your own as it relates both to day-to-day activities as well as to long-term thinking. On that front, I can now say that we are 100% in alignment on the job at hand, and the entire leadership team is committed to our core mission of keeping people safe and businesses running, even during the most extreme events.

That's been evident in our results to date, and I expect that our momentum will only strengthen over time. And my view of Everbridge is fulsome, as it's been developed over the last few years as both a customer and now as the new CEO. As a customer, I got to see Everbridge's capabilities. Not only to give us peace of mind, but also in action at the time of crisis. It was in that latter moment that I really experienced and appreciated the power of the Everbridge platform. And those initial customer impressions were cemented further when I did a fair amount of due diligence to get to know what I would be in for. And speaking with the Board, the senior leadership team, and most importantly, a number of existing customers, I began to appreciate not only the critical nature of our work at Everbridge in protecting people, assets, businesses and their processes, but also the size of the opportunity.

And finally, a few words about that opportunity. When you look at many of the high-growth tech companies in the market today, you often see a single large market opportunity driving the long-term success of the entity.

I'm excited that Everbridge has a multifaceted growth engine that begins with a customer base that renews that industry-leading levels and enables net retention of 110% plus. In other words, a solid base to support growth.

In addition to this healthy customer base, we have 3 avenues of growth. First, the simple cross sell and upsell of 9 software applications into our base that currently averages less than 2 products per customer.

Second, our very large population warning opportunity that is just beginning to hit its stride with new countrywide opportunities like Australia and Singapore in Q2, well ahead of the massive EU opportunity available to us in 2020 and beyond.

And finally, our most strategic opportunity, CEM, where we continue to expand our solution suite and establish our position as the de facto leader in this important, new, multibillion dollar global market.

For all of these reasons and because of the quality and commitment of the team I've met thus far at Everbridge, I can tell you, we have a truly special opportunity going forward to continue to build long-term value.

Now let me turn things back over to Jaime.

Thanks, David. Now finally, before I pass the call to Patrick, I wanted to also mention that in Q2, we receive the prestigious ISO 27001 certification, international standard outlining best practices for Information Security Management Systems. This certification demonstrates Everbridge's global commitment to our repeatable, continuously improving, risk-based security program.

We also announced that Everbridge is the only U.S.-headquartered emergency notification provider to obtain Germany's C5 Compliance Standard and accreditation of our cloud operations.

In summary, in Q2, we delivered another strong quarter with the results that exceeded our guidance, driven by some exciting new trends accelerating the demand for our most strategic platform, CEM, combined with continued strong execution around our Global Population Alerting business, both internationally, with large population warning wins, such as Australia, Singapore, and the Nordics. But equally with core MN wins in leading top cities and counties in North America. Our Q2 results also illustrated growing deal sizes, increasing multiproduct wins, and of course, record number of CEM deals.

And finally, our NC4 acquisition further strengthens our leadership position in this market, and we are better positioned than ever to capitalize on the multibillion dollar opportunity we just had ahead of us.

Now I'll turn the call over to Patrick for more details on our financial performance and our forward guidance. Patrick?

Thanks, Jaime. I will provide some financial highlights from the second quarter, and then review our guidance for the third quarter and the full year.

Revenue in the second quarter was $48.4 million, an increase of 35% from a year ago and above the high end of our guidance range. With the anniversary of our UMS acquisition at the beginning of April, our growth in the quarter was primarily organic as we balance investing in our future growth with managing costs, our revenue overperformance went directly to the bottom line, with adjusted EBITDA that was also above the top end of our guidance range at positive $0.4 million.

Our growth continues to be driven by new customer additions, larger deal sizes and expanding relationships with existing customers. Our dollar-based net retention rate remains above 110%, reflecting the significant value and satisfaction we provide to our customers. We ended the quarter with 4,667 enterprise customers, an increase of 135 from the end of the first quarter.

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.

Gross margin was 71.1%, roughly in line with gross margin of 71.5% a year ago, but an improvement of over 200 basis points from the first quarter due to the combination of a smaller purchase accounting impact on acquired deferred revenue and improving efficiencies with scale. As always, keep in mind that individual quarterly gross margins may fluctuate from time to time and should not be considered indicative of any trends.

Total operating expenses in the quarter were $36.4 million, an increase of 24% from a year ago, reflecting the combination of continued product and headcount investments in addition to incremental expenses of acquired businesses, offset by improving operating leverage. Expenses in the second quarter included approximately $350,000 in M&A-related cost. As I mentioned, adjusted EBITDA was a positive $0.4 million compared to a loss of negative $1.8 million in the year-ago period, and was above our guided range even after those M&A-related costs.

Net loss in the second quarter was negative $2.4 million or a negative $0.07 per basic share, which was also better than our guidance and an improvement from our year ago net loss of negative $5.1 million or negative $0.18 per basic share. On a GAAP basis, our net loss was negative $12.1 million, also better than our guidance range and our performance in the year ago quarter.

Turning to our balance sheet. We ended the quarter with $238.6 million in cash, cash equivalents and short-term investments compared to $258.3 million at the end of the first quarter, primarily due to a free cash outflow of negative $15.2 million in the quarter consistent with historic seasonal trends. Total deferred revenue was $98 million at the end of the quarter, an increase of 19% 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, deferred revenue is not always a meaningful indicator of the underlying momentum in our business from a quarterly perspective. Though we believe its upward trajectory is directionally relevant on a longer-term basis.

Note that our balance sheet at the end of the second quarter does not include the impact of our NC4 acquisition, which was just announced. As Jaime indicated, we are acquiring NC4 for approximately $83 million made up of approximately $52 million in cash and approximately 321,000 shares of our common stock. Jaime has reviewed the strategic highlights of the acquisition. Of course, we expect the acquisition to provide significant financial benefits as well.

The acquisition includes NC4's risk center and emergency operations center solutions as well as the NC4 brand, but does not include NC4 cybersecurity or law enforcement solutions. Given that certain components of the transaction will not be finalized until the end of the third quarter, and that purchase accounting cannot be completed until then, we will not be updating our guidance for the acquisition until our third quarter call. That said, as we indicated in our press release last week, we expect the transaction to be accretive to non-GAAP financial results within 12 months.

Now let me turn to our outlook for third quarter and our increased guidance for the year. We had a solid first half and are optimistic about the second half of the year. Our outlook for the rest of the year includes a minimal contribution to revenue for known NC4 contracts, most of which will be recognized in Q4. At the same time, we started incurring expenses related to NC4 this month, which are also considered in our guidance.

We expect this near-term profitability headwind to turn into a tailwind within the next 12 months. And we expect the transaction to ultimately be a healthy contributor to our overall profitability as we realize synergies. We will provide additional color on the anticipated impact of the NC4 acquisition during our third quarter earnings call, following the transaction's anticipated full close near the end of the third quarter, combined with the finalization of the purchase accounting impact on acquired deferred revenue.

Given that we have yet to completely close the NC4 transaction and with our CEO transition in process this quarter, we wanted to continue our prudent and mature approach to forward insight with the third quarter guidance of: we anticipate revenue of between $51.3 million and $51.6 million, representing growth of 32% to 33%; we anticipate adjusted EBITDA to be between $1.2 million and $1.5 million, including the impact of acquisition costs and a partial quarter of expenses for NC4; we anticipate a non-GAAP net loss of between negative $2.1 million and negative $1.8 million or a loss of between negative $0.06 and negative $0.05 per share based on 33.2 million basic weighted average shares outstanding; stock-based compensation expense is expected to be approximately $11 million in the third quarter.

For the full year, we are increasing our revenue guidance to a range of $198.4 million to $199.0 million, representing growth of 35% based on our strong second quarter performance, continued momentum and a minimal contribution from NC4 based on known contracts. From a profitability perspective, we are maintaining our adjusted EBITDA guidance in the range of $4.2 million to $5.2 million. While this range is consistent with prior guidance, the expenses related to the NC4 acquisition could result in adjusted EBITDA towards the lower part of this range. We now expect a non-GAAP net loss of between negative $8.4 million and negative $7.4 million for the full year 2019 or between negative $0.25 and negative $0.22 per share based on 33.4 million basic weighted average shares outstanding. This guidance assumes estimated stock-based compensation expenses of approximately $37.5 million for the year.

In summary, we're happy to have extended our track record for exceeding guidance with strong top and bottom line results in the second quarter. We are optimistic about the second half of the year and are excited about both the strategic and financial benefits we expect to achieve from our acquisition of NC4 as we further strengthen our leadership position in the critical event communication market.

Now operator, we'd like to open the call for questions.

(Operator Instructions) Our first question comes from the line of Brad Sills from Bank of America Merrill Lynch.

This is Sherry Guo on for Brad. I was just wondering about if you could provide more color on deferred revenue, a little light this quarter. Could this be attributed to lumpiness?

Yes. We -- this is Patrick. We'll repeat what we always say. Look, we encourage folks to look at our deferred revenue on a trailing 12 months basis, and there have been times in the past where it's been very high and other times where it's very low, and that occurs for a variety of reasons. But again, if you look at it over a trailing 12-month basis, it's directionally indicative.

As Patrick said, the comment we'll share and the detail we've given multiple times is that we signed these large contracts, the implementation of those contracts result in revenue becomes lumpy. Last quarter, we, I think, had one of our highest ever, and we warned you that, that was just some timing benefit and that flows through this quarter, where you may have seen some last quarter, but it doesn't flow into this quarter.

So with population warning, multi-million dollar contracts as well as the very large CEM contracts we announced last quarter of $1.7 million with the consulting firm as an example just for one contract, it all comes down to timing of revenue. And we caution you to look at any one quarter and look at the trailing 12 to get a sense of where we're at.

Our next question comes from the line of Brad Zelnick from Crédit Suisse.

Congrats on all the recent success. Jaime, just for starters, you mentioned you have a long-standing relationship with NC4. You know them very well. Why is now the right time to buy it in? And what do you get in owning the business versus continuing to partner?

Yes. So I mean, I'll outline 2 or 3 points as well as the partnership points. So first, we know them very well. We do have 150 joint customers. But they actually have more Fortune 500 customers at 100 than we have. And so that's an accelerant to CEM because that's our -- that is the most core of our strategic market approach there. And then when you think about CEM managing a crisis and remediating the impact on either people or your business operations, process, assets, it all starts with risk data. And since we had an integrated approach there, it doesn't make much sense to say go to someone else to do the risk data, but come back to us to run the platform. And in many cases, that market, we believe, long term would become competitive. But more importantly, we believe NC4 is an accelerant to our business.

So it's pretty simple. We knew them well. We like the business. It was a privately-owned business. And so when the opportunity came that we believed could accelerate CEM, which is again our #1 M&A area to focus on is accelerating CEM either with new product or new ways to go-to-market, we just felt that it was kind of a no-brainer because CEM all starts to identifying a risk or threat to the businesses, people or assets.

It makes sense, and it sounds like a very strong integrated value proposition. And if I could just follow up, Patrick, you made several comments about the impact to the full year. But a little bit of confusion still, at least on my part, in appreciating, is it in Q3 that you expect to bear expense but no revenue? And with that maybe if you can explain how are these contracts booked? What's the typical duration, like do they not have agreements that should flow to revenue in Q3? It's a bit confusing. Any more color would be helpful.

Sure. Yes, so just because it's closing in multiple pieces and we're not going to be done with the analysis of the revenue, we wanted to provide only minimal contribution from that in our guidance. And generally speaking, they're largely a SaaS business. So -- but we'll understand that increasingly as we get through the close and through the purchase accounting.

In the meantime, the comment about the bottom line is, A, just like in Q2, when we had to absorb material M&A-related costs, we are still absorbing those in Q3. So that's reflected in our guidance. And then we just want to give ourselves a little bit of a wide berth here in terms of the net impact on the bottom line of the NC4 acquisition, assuming that the first couple of quarters with an assumed deferred revenue haircut will put pressure on the bottom line. So we wanted to get ahead of that with this guidance. And like we said, we'll update you during the next quarter's earnings call.

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

So Jaime, just wanted to expand on you FedRAMP, the federal market opportunity a little bit. You mentioned a couple wins this quarter. I'm curious how are those deal sizes in the sales cycles compared to your initial expectations in that market?

I think they're roughly in line, I would say, in general. It's a new market for us. It's probably not the fastest-growing market that we jumped into because we're riding a huge wave with population alerting and the deals are even largely. Obviously, it's larger to close an entire country like Australia versus a department of one government. But they're large deals. They take a little bit long, but they're worth it. We're working multiples at any given time.

In the off quarters, which are Q1, 2 and 4 in the federal space because they have one big quarter a year and everything lumps in that one quarter, especially when the government's being run on continuing resolutions, they can't purchase until the end of the budget year as we've mentioned multiple times. So we -- this quarter had a good quarter, multiple medium-sized opportunities, and we're working on a couple large opportunities. Those large opportunities range anything from $0.25 million, like a very, very large MN or Safety Connection deal, all the way up to CEM type sizes, which could be $0.5 million to $1 million. Those are the -- if you remember, online -- largest online retailer or a big technology company, their large purchases at the very high end are around $1 million for us, huge store or something like that.

So they're tracking in that direction, and we feel good about it. We've got another quarter to go. FedRAMP is no doubt. We're still 1 of only 2 people in the FedRAMP business. Our competitors continue to experience problems, both the one that's certified and the ones that aren't. And so that continues to leave the door open, and we're continuing to march forward in that business and it's probably meeting our expectation, if maybe a little bit behind so we give ourselves a little bit of room there, again, sticking with Patrick's mature and prudent approach

Got it. And maybe one quick follow-up. Just Jaime, you mentioned kind of a focus on M&A. I know we have NC4 come online later this year. Just thoughts about the pace of M&A activity going forward, and what products or markets you may look to address?

Yes. I think David and I are aligned that we're pretty bullish on M&A. I would mention that the NC4 deal was a fraction of our valuation. So when we can find and we tell you and talk about M&A all the time, it is bloody hard in a market that's been run up as far as this equity market, capital market has been. But when you can find transactions at 1/3 of your market value or half of your market value and they are, we believe, strategic, those are good deals, and we want to continue to make them. We thought we use the prudent approach in how we mix stock and cash to both protect stock and use stock at what we believe is a fair value point at least. It also keeps the seller engaged with us.

And so going forward, we have to do 2 things. The same reason you've given us credit for these acquisitions in the past. We'd ask you to give us credit for this one, which is we'll make sure it gets implemented and it's delivering on our financial commitments. In other words, it's accretive to our results. And I think you'll see that in the first couple quarters. We just have to get 2 quarters past. And then in parallel, you can bet that my new job on David's behalf is on a day basis is working on identifying other strategic opportunities to accelerate CEM or to expand geographically.

Our international business certainly is growing as fast as any of our businesses and we want to continue that momentum given the huge opportunity in population warning in Europe. But make no mistake with deals like we've seen in Singapore, we have deals in Latin America that we're working now, in other parts of Asia and Africa, there is a significant opportunity outside of the EU for population warning and where we can open up those markets and leverage that opportunity and our unique differentiation, then we'll seek to do that as well. So those still remain the 2 key topics.

And as long as we can ensure we deliver on behalf of shareholders with these acquisitions, we'll continue to do them as part of our model. We said forever, right, 3% to 7% kind of depending on the year. This year, I'd point out that our M&A was done very late, right? It's only going to really contribute by Q4 because of the full closing of the business. So last year, we did it in Q1. So there is a difference in timing, and we like to get ahead of that if we can.

Our next question comes from the line of Sterling Auty from JPMorgan.

I apologize if you covered some of this because I was jumping between calls. I think you made some comments around the short-term deferred revenue or deferred revenue, but there's a lot of hypersensitivity in the market around the billings number in particular and just looking at the calculated billings. Why shouldn't that be an indication of the health of the business? And why, in your case, do you think perhaps, maybe it's not a great metric for investors to be focused on?

Yes. So this is Patrick. We would say that it is a relevant indicator of the health of our business when you look at it on a trailing 12-month basis. When you look back over our history, Sterling, at any individual given quarter, you'll see up 9% year-over-year, you'll see up 60% year-over-year, and it does bounce around. There are a variety of reasons for that. It tends to be due in part to just the timing of contract renewals and when those invoices sometimes move in and out of different quarters. But on a trailing 12-month basis, which we've always encourage folks to look at as a relative indicator, directionally appropriate. We think that, that is still the case with these results as well.

You only have to look back 3 quarters. Q4 was a lower than normal number even though it was our Q4. It wasn't indicative of bookings. It was indicative of the timing of contracts. Q1 was one of our highest ever and then Q2 was a little bit lower again. So you have -- we have said this since going public and we've been -- we've beaten this drum mercilessly, it's absolutely an indicator, but you have to look at over a trailing 4 quarter or you get misguided by one single quarter potentially.

Yes. No, I think that makes sense. And looking at NC4 just given the business structure, can you help me better understand the gross margin there and what the gross margin impacts might be moving forward?

Well, so our initial view of that, Sterling, is that it's roughly in line with our own. More to be determined as we really are able to dig in once we've closed the entire transaction. But that's our best guess. No major change, Sterling. It's not like it's going to be -- we don't anticipate any way that it'll be a material drag nor necessarily a material boost in the near term. But we do see plenty of synergies with that business, and over time, we do expect to see some improvement both in terms of gross margin as well as adjusted EBITDA for sure.

Our next question comes from the line of Bhavan Suri from William Blair.

I guess I just had a first question on the CEM space. As we think about that market expansion is still relatively early days, roughly 50 customers. But can you talk about like updated thoughts on where you might think about expanding the selling motion to the entire sales force and then obviously expand the selling motion outside the original vertical portfolio, so North America corporate health care outside that. How should we think about that? Would love to get some color on that.

Yes. I mean we've been very deliberate with CEM. We did not want to get out in front of our skis because if you follow it, we have 5 applications, all of them have to be certified for the market. And then as we just talked about, risk data, for instance, is different what people care about in different markets. In the state and local space, they're not focused on water main breaks and local fires in other geographies. They're only concern hyperly with their specific geography versus -- and cities don't happen to necessary care about any other city in the world. If you're a corporate, you really care about all your locations and you could have, as I mentioned on the call, 300 to 1,000 global locations, if not 10,000 and therefore, concerned with a lot of things virtually anywhere there is a bang going on in the world.

And so because of that with the CEM solution, we have gone into the market focused on corporate, making sure we're fit for purpose, got scale and got referenceable customers. As you mentioned, with a customer base in the order of whatever it is today, adding our new customers in Q2, we've gotten to enough that we have referenceable customers. And now what's important is ahead of preparing for the international launch and the opening of new verticals in the U.S., for instance, state and local is 30% of our business and we do not sell CEM there. That's a great opportunity.

I might add that one of the businesses we're still closing with NC4 is called E Team, and they are an emergency management solution that's been sold into some of the largest cities in North America and provides an on-ramp for us as we convert those accounts over to Everbridge into the state and local as well.

So we have a number of people pulling us into new markets, international, state and local and some of the other geographies, transportation in state and local as well city governments. And then in combined with the NC4 component that we'll close later this quarter, we believe we'll have an on-ramp in 2020 and with the growing sales force and the referenceable, scalable deals that we've already closed, we think we'll be in better shape to continue to grow that as we grow our overall business. So CEM should continue to be the largest deals we close other than population or in countrywide deals. And it should continue to be one of our most strategic markets because we continue to add products to that suite as well.

Got it. That was really helpful. I guess a quick short-term question here or a type of question I guess, was there any pull? Like there is obviously lumpiness in billings. We totally get how these contracts work. But was there any pull in the quarter or were there pull in last quarter as we just think about how the billing number works? Would love some color on that.

Well, as we said, we don't give individually, you look at it over 4 quarters, but we absolutely said if you look at our specific script from last quarter, we said all-time high. We're telling you that you got to watch it because it's quite good when it's good. I didn't want to point it out, we did last quarter and that was because some things came in to revenue at the extreme end of the quarter that probably should have been in this quarter. So that creates a balloon in the bookings, the deferred revenue for last quarter. And in this quarter, since those are already in last quarter, you get less going this quarter. And so you just have to look at it over 4 quarters.

But other than normal timing of deals and the very large deals that get lumpy for us and if they don't close exactly when we want them to, that's your explanation for the lumpiness in the up and down quarters. And it's the same explanation we've been giving since literally, I think, our second quarter we decided to start pointing out because we could see it was going to trip us up if we didn't get in front of it. So common answer we've given it for 12 straight quarters, we're giving it to again today, just look at it trailing [4 quarter].

Our next question comes from the line of Tom Roderick from Stifel.

So Jaime, I wanted to just ask a little bit more here about NC4 and sort of the make up of the team and where are some of the synergies can come from. You sort of pointedly mentioned that the valuation, I think, came in at a fraction of your own valuation. So that suggests you got a pretty good deal on a property. But perhaps there's some mitigating factors on the business model or the growth profile could be a little bit slower than your own. Can you just speak a little bit towards what we ought to expect to see when you do integrate the financials? Is this a company that was growing a bit slower than yours and you felt like you could accelerate the growth rate given your distribution?

And sort of relative to the notion of analyst teams and threat intelligence analyst teams being a part of the model, is there a higher mix of professional services or consulting revenue in the NC4 model that we ought to sort of expect to embrace forward when it's integrated into the model?

No and no. So I mean well, first, the deal value, yes, I should say and then professional services, no. So on the deal value, all we can tell you is that, I think you're just asking the question as a good analyst would do, Tom, but a different way. We don't have the -- we are going to share the full details when we close everything because we got to do the deferred accounting and everything else. But we're not shy to say that we have historically purchased things that what we believe are prudent and sensible levels. We will not -- it's hard for us to chase in our business the 10x, the 15x businesses. And it makes it a very difficult M&A environment, right, because everyone wants to at least your multiple if you're trading at 12 or 14, if not Google's multiple trading at 30. And so those are-- that makes it a tough market. And therefore, you don't find companies that are of any quality unless there's something that's holding them back.

In this case, think of it as a private enterprise that was driven specifically to provide value to the owner. So it was risk adverse. I can tell you that they had a total sales force of 4 people. We're going to be able to pull that into our broad 100-plus sales team, and we think make pretty good hay out of that. So we believe that there's definite upside as there was in UMS. It's a model. You've heard Patrick say, we like to rinse and repeat. Once we find those patterns, we don't think we have to be rocket scientists and find something new that no one can figure out each time.

So in this case, it was a business managed by a private owner who did it for different purposes. Very wealthy and could do it the way they wanted to do it. We will be able to apply better go-to-market leverage and we have dramatic synergy because we're already in similar accounts, but they're very much in our sweet spot for CEM. So we see acceleration for CEM with us, our largest deals on the corporate side. And then on the model, it is essentially a pure SaaS business like we are there, 95, mid-90s subscription. And so depending on getting through the close, we'll be able to announce a little bit of insight into more synergies. But they're in even similar locations to us. They're in Washington, D.C. area. That's where our [RGAC], our risk data business is based, and then they're in L.A. And as you know, that's where our former headquarters was, and we have one of our largest offices.

So we believe we have good synergies. They're a pure subscription business. We will do a lot to migrate them on to our single platform. And so we believe we'll have some savings there long term. But we want to get through the close here at the end of Q3 and then we'll give you that guidance as we move into Q4 and start to see the revenue going into our model versus having to guess at it right now.

Good. I got it. That's really helpful. Patrick, we talked about this at the Analyst Day briefly. I think maybe a little bit of additive time might have given you some additive information, perhaps. So it seems as though the Australia deal did not, in fact, come in on a perpetual license basis. So no big spike in perpetual license this quarter. How are you doing sort of getting through the mechanics of the model as you look at these population alerting deals, both on the front end and on the back end, to try and structure these deals on a pure subscription basis as opposed to adding some spikes in the model?

Yes. There -- so -- hey, Tom, we did do -- we did recognize some revenue in Q2 and in particular as we kick off the deployment of the front end, which will persist over the next few quarters. We'll be recognizing some implementation revenue, and then we'll have the license revenue kick in next year for the front end. And as we guide for next year, we'll provide some more color on that, both in terms of magnitude and timing.

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

One quick one for Jaime and a follow-up for Patrick. Jaime, FedRAMP, you're now kind of 1-year in, and now we're heading into the seasonally strongest kind of fiscal year-end for the government. Can you provide any sort of color relative to kind of RFP activity around kind of the Fed now that you've again had FedRAMP approval for about a year and had lots of sales reps, I'm sure it's trying to solicit some opportunities for you there? And then again one follow-up for Patrick.

Yes. My answer will be quick -- as I think I've already addressed this. But it's just -- I would stick with the same answer, which is, of course, we've seen because of a Fed team now, a slight uptick in both RFPs that we're getting to or agencies. We are announcing more deals. You've seen more deal flow that's specifically related to the federal, whether it's NRC or a different agency or a large system integrator. And I think -- but the big quarter's Q3, and so that's yet to come, and we're certainly working on large deals for Q3. So more news to follow would be the answer. Yes, progress being made and more news to follow.

Great. And then Patrick as a follow-up. Obviously, everyone is asking here on deferred revenue. You guys have been warning us about large deals. But just looking back over the last 3 years, this is only the second quarter, I think, deferred revenue was down sequentially. So my question, just clarification, was the Australia deal -- I know there's some contract terms there, but was the Australia large deal, was that in deferred or because of the contract terms, it wasn't in deferred this quarter?

There is a little bit in deferred as of the end of the quarter.

Got it. So -- but nowhere near the size of the contract that you had it?

No, no, no.

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

Yes. Just a couple of quick ones. Maybe Patrick a clarification for me as well. As you looked at the full year revenue guidance, which was raised, can you provide any further color as to how much of that was attributed to NC4 versus core trends?

Well, we have to guess a little bit at this point. So I will just say it's not a lot. But what we, in particular, try to do is stick to our script, which is we've said that we're a low- to mid-30s organic grown. We layer on 3% to 7% of M&A on top of that. And if we can end the year in the mid-to-upper 30s, then we feel good about that financially and particularly with improving bottom line results. And so you see how we've guided for the remainder of the year and more to come on the Q3 call.

Okay. All right. And maybe just to bring in David quickly. I appreciate the comments earlier on cultural fit and key growth priorities. But we love to kind of hear what your focus areas are over the next couple of months?

Yes. Thanks, Will. And meeting with the team, and I've been very busy. The strategy looks right on. So we're going to look at how we execute and how we continue to scale the business to new heights. So main focus execution, when you talked about the growth areas, continuing to cross sell and upsell the base, positioning ourselves to the big population alerting wins in the EU and winning deals in the meantime in Asia Pac. And then the CEM, getting tremendous feedback and with this NC4 acquisition, actually we had customers reaching out proactively where both companies are there and the feedback has been very positive on that. So using that as an accelerant to move faster on the CEM as well. So I don't have any big strategy change at this time.

(Operator Instructions) Next question comes from line of Terry Tillman from SunTrust.

I guess my first question is on billing. No, I'm kidding, I'm kidding. I wanted to ask first about CEM and then I wanted to follow-up on Germany. In terms of CEM, expectation-wise, is this business young enough and nonseasonal enough that we just continue to see the ramp in new business volume each quarter? And how do you feel about the caliber of your sales teams selling CEM at this point?

Well, I think yes, and then some and then good, right? Yes, we believe that CEM is going to continue to ramp. There is a -- it's a healthy pipeline. We're working some very strategic and important transactions, and we've shown you that the deals are getting kind of larger as we grow and the number is getting larger. They're big deals when you're only doing 8 in a quarter or 6 in a quarter, we could do 6 deals in a quarter, as we pointed out before. They're all $2 million deals. We'll double what we did this quarter with 8 deals. So be careful because those large top-end deals, population alerting, CEM can be lumpy. But those are -- that's going well, and we would expect you to consider to see us publish and demonstrate real market success and growing market success as we scale the CEM and the salespeople scale it.

On the pure sales side, we probably would just reiterate what we said in the past. One of our challenges is to make sure we're getting through our enterprise sales transition, which means we're bringing on new salespeople and upgrading that team. And as we do that internally, we got to make sure we continue to have enough people focused on that while we still have enough people focused on the blocking and tackling. Personally internationally that selling population alerting, we don't want to take this eye off the ball of a $20 million countrywide deal to go sell a CEM deal. So the sales force is segmented for most of those groups. And as we rollout the products that hopefully will allow us to scale the sales force, add to it with new stronger people while we mature and grow our existing people. And that's a continuing challenge for us as we go into next year, but we feel good about it.

Okay. And just the follow-up question was on Germany or Deutschland. In terms of -- I thought it was interesting you all talking about your security certification in Germany. I guess what's our takeaway from that in terms of expectations for CEM business there or public sector business? Just a little bit more color on Germany.

I think -- we mentioned that because as we rolled out our full stack in Germany and have capabilities in Europe, Germany, the U.K. now and it maybe seen as a separate country pretty soon, I don't know, but -- and the rest of Europe is a very strong potential market for us. Those 2 and France being the 3 largest economies there, right? So naturally, we're going to focus on those markets as we rollout CEM and our broad product suite. And the key customer wins, like Airbus or some of the others that we mentioned internationally, are key to us because that allows us a footprint in our 500-plus customer base in Europe to grow in the CEM just as we've done in the U.S.

So I wouldn't -- we mentioned Germany because it's some of the strictest privacy requirements all of Europe. And if you meet that, you can do anywhere. And remember, regionally, like in DACH, Germany, Switzerland, Austria, the Germanic-speaking countries as an example, you often -- if you don't have a local capability and host locally, you can't sell even a SaaS product. Ours is spread in multiple centers throughout Europe. And so we believe we cover Europe well with some of the larger opportunities. We certainly will not be prohibited by having that. But the local regional players, the largest players we compete with on the point solution, the guys that are selling mass certification in Germany or Crisis Management as a point solution in Europe somewhere cannot compete with us that has a global reach for those larger enterprises and doesn't want to go with a solely German player or solely French player. And that's where our public size and nature as well as our global reach and accreditation like the German one comes in to be meaningful, not just because we're going after Germany. Of course, we are with its large GDP. But it's more that we want to be able to sell pan-European Euro customers and that's where we have a distinct advantage.

We meet the toughest privacy and security requirements while having a distributed scalable global platform that really none of our competitors can match, and it's all a single pane of glass when it comes to CEM. So next year is a big year for us in Europe with that infrastructure and with CEM.

There are no further questions at this time. I would now like to turn back the call to Jaime Ellertson, Chairman.

Well, thanks for joining and listening to our positive results where we've exceeded our guidance on this quarter, and we look forward to seeing you at an investor conference or industry event in the near future. Thanks again for joining. Bye-bye.

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