Everbridge Inc (EVBG) 2020 Q1 法說會逐字稿

Good morning. My name is Jake, and I'll be your conference operator today.

At this time, I would now like to welcome everyone to the Everbridge first quarter earnings conference Call. (Operator Instructions)

I will now turn the call over to your host, Patrick Brickley. Sir, please go ahead.

Good afternoon, and welcome to Everbridge's Earnings Conference Call for the First Quarter of 2020. 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 first 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. Jaime?

Thanks, Patrick, and thanks to all of you joining our first quarter 2020 earnings call today. I'd like to kick off my short prepared remarks by recognizing all the public safety first responders and medical professionals that continue to keep us safe from this global pandemic. In many ways, this is the largest critical event in recent history, with total loss of life now exceeding 225,000 and economic costs now estimated at over $4 trillion. The breadth of the pandemic is unprecedented. It has affected every facet of our global economy from small businesses to large Fortune 500 organizations: their employees, their physical assets like offices, stores or plants, their supply chains and even their customers. Organizations faced an incredible challenge. As Jamie Dimon, CEO of JPMorgan recently stated, "The country was not prepared." And further, he suggested that what we actually need is a "pandemic playbook."

In fact, our critical event management suite forms the modern-day playbook for everything from active shootings to hurricanes to pandemics. Our first quarter's strong performance, where our financial results easily exceeded our guidance ranges, continue to demonstrate the rapid adoption of our critical event management solutions. We're grateful that so many organizations are deploying it to monitor the direct impact of the virus on the things they care about most, to automate and orchestrate their response to the virus and to communicate the information needed by people to access services and remain safe from the virus.

In the quarter, we saw numerous new CEM deployments for COVID-19 use cases as well as existing customers, including the most impacted cities and states, supporting hundreds of thousands to tens of millions of citizens as well as numerous multinational corporations focused on their employees across the globe.

Since early January, we have witnessed a significant spike in the use of CEM, with hundreds of millions of COVID-19-related messages delivered since the middle of March, and we're gratified that both our team and our technology has met this challenge, delivering service levels that are multiple times greater than any event in our organization's history. For example, we've been able to go from initial contact to functioning CEM solution for large new customers in as little as 48 hours, and we continued to see strong renewal activity, including from customers in markets that are disproportionately impacted by the pandemic, such as retail and travel.

The use cases range from communicating critical information to large populations like New York City or Florida, to organizations managing individual employee infections, where contact tracing and proper quarantine measures are critical to their continuing operations. Given the overwhelming need of many of our core markets from health care to government to corporations, it is not surprising that we continue to deliver strong business results. But perhaps more important than helping Everbridge to exceed its financial targets, this pandemic has driven a fundamental awareness of CEM as a category, effectively becoming a catalyst for all organizations to deploy critical event management.

Over the past 3 months, our existing and prospective customers have moved from discussing why they might need CEM or how they would justify such a solution to requesting the best practices as to how to implement the CEM playbook immediately. The buyers have moved from being a single resilience or security professional to often including a C-level officer responsible for the organization's most valued assets. This pandemic has firmly raised the priority of resiliency or safety solutions to ensure any organization's assets, from people to business operations, can be sustained throughout such a global critical event.

And our leadership position in this over $40 billion addressable market has never been more clear. We define this market. We developed the first integrated CEM suite. We have successfully deployed at many of the most prominent organizations. And now with our packages like our COVID Shield solution, we have effectively written the playbook for critical event management such as a pandemic to keep people safe and their businesses running.

We believe the rapid market recognition that this pandemic has ushered in will enable us to accelerate our leadership of this important market as well as execute our overall growth plans well into the future. And like so many of the past significant natural events that we discussed in previous calls, such as hurricanes, the recovery from a major critical event often involves more work than the event itself.

The coronavirus pandemic will be no different. Getting back to normal will require almost every organization to be able to limit gatherings for workplaces to safe social distancing guidelines, monitoring travel for people to ensure their routes do not take them into areas where they may be infected or have become infected, identifying those employees whom with proper testing are found to be infected and then by a contact tracing, utilizing our CEM capabilities to gather and analyze people, assets and sensor data or pass information in the workplace, such as specific physical access controls at plants, buildings or stores, down to specific floors or meeting room locations, as well as our ability to monitor those who are more mobile or even travel information for those making longer journeys, all to enable organizations to rapidly take action to communicate and quarantine those impacted, for their safety and to ensure that the business operations can be maintained. And importantly, our CEM solutions provide these functions for organizations of one to hundreds of thousands of people globally at scale and predictably, a service which others -- other providers cannot match.

Although it is most likely obvious to all of you, the coronavirus is a very strong use case for CEM. Unfortunately, it is not the only one. As we move forward, we are more committed than ever to ensure all organizations, both public and private, acquire and can implement a critical event playbook to ensure that during the next critical event, be it a natural disaster or a man-made one, they can keep their people safe and the businesses running.

Moving forward, our CEM strategy and our strong first quarter financial performance positions us well to achieve our increased expectations for 2020. And we believe our new IoT sensor management functionality, coupled with enhanced population warning capabilities further extend our market leadership and help us accelerate our countrywide wins as we look ahead.

In closing, I must mention that, again, the tremendous efforts of our team, beginning with David Meredith, our CEO, and the leadership team, and supported every day by our entire employee population to serve and support the broader first responder community during this pandemic. As one example of our support of public safety organizations, our team came together with Blue Trident Foundation, the charitable organization, to target a $250,000 donation for the CDC Foundation. With the continued rapid adoption of CEM as a must-have solution for all organizations and the proof points of our growing customer base and strong financial results, we are well positioned for ongoing success.

Now allow me to pass the call over to David to provide details on our Q1 performance and how we see the rest of the year playing out. David?

Thanks, Jaime. I'm proud of how our team stepped up to the challenges created by the COVID-19 pandemic for our customers, as well as our team's ability to serve those customers during this difficult time of great need. We are a mission-driven company, and our mission is to keep people safe and organizations running during critical events. This mission has never been more important than it is today.

The COVID-19 pandemic is what we consider to be a black swan, an unexpected event that changes everything. But ultimately, it was obvious in hindsight. Unlike many other critical events, COVID-19 is global. It's happening everywhere at the same time and it's persistent. It's not like a hurricane or a power outage that lasts one weekend or one week. It's continuous and it's a pervasive disruptor across all of the markets that we serve, especially our heroic 3,700 first responder customers.

We have frequently talked about the almost $500 billion of economic losses each year due to critical events, which frames our addressable market of over $40 billion. As Jaime mentioned, COVID-19 is now estimated to cause over $4 trillion in economic loss this year alone, and we have responded accordingly. Despite all-time high usage of our solutions, our systems have scaled effectively and efficiently, just as they were designed to do. And of course, our SaaS operating model translates very well to getting customers implemented remotely, with the exception of a minority of our deals such as large countrywide systems. I am extremely proud of Everbridgers, who are working harder than ever and living our mission.

In Q1, we launched our new turnkey COVID-19 Shield solution, which helps to protect employees and maintain customer operations throughout the pandemic. And now as most corporations have successfully instituted variations of work-from-home initiatives, we are helping customers evaluate return-to-work strategies for implementation in the months ahead.

With that backdrop, as you might expect, we saw an uptick in new customer interest during the quarter. Many of these customers had already been evaluating our platform and the COVID-19 crisis accelerated the completion of some transactions that we had expected to close later in the year. Existing customers also further recognize the value of our platform and expanded their deployments in the first quarter to help keep people safe and their businesses running. As a result, our first quarter revenue of $58.9 million exceeded the high end of our guidance range. We also exceeded our profitability guidance, even though we saw a combination of historically high volumes across all aspects of our platform as well as a dramatic increase in the number of inbound customer requests for support as they look to leverage our platform across new use cases.

In Q1, our adjusted EBITDA loss of $4.8 million in the quarter beat the top end of our guidance by more than $700,000.

Turning to some of the details. As I mentioned, our strong first quarter results were characterized by a significant number of new customers as well as by very strong renewal and expansion activity at existing customers, all supported by the growing awareness of critical event management solutions as a must-have solution for these challenging times.

Looking at our first quarter performance, we outperformed on almost every one of our key metrics. We added a strong 194 net new enterprise customers in Q1, bringing our total enterprise customer count to 5,218. Over the long term, we will continue to target 125 net new customer additions each quarter. During Q1, these new customers selected our suite and multiproduct packages at the highest rates in our history, with results for both up dramatically over the previous year. Our multiproduct deal count of 129 grew by over 40% from a year ago, and we achieved a near record level of $100,000-plus transactions, 40 of them, up 82%, as well as the number of deals over $200,000 increasing by 110% year-over-year.

We had another good quarter for CEM with 10 additional CEM customers, up from 7 new customers a year ago. While our total number of CEM customers has doubled in just 1 year, we still have 98% of our over 5,000 enterprise customers yet to upgrade to our full CEM suite. Average selling price for the last 4 quarters increased to almost $74,000 in the first quarter from $71,000 a year ago.

A combination of our healthy large deal volumes as well as our continued CEM success, supported this increase in our ASP. And we continue to see contributions to our growth from both our newer products and our core products, with 53% of new and gross sales over the last 4 quarters coming from new products in Q1. This healthy balance of our historic mass notification and population warning solutions and our continuing CEM success supports the long-term growth of our business.

Our international business continued its recent success and represented 20% of our record Q1 revenue.

Finally, our revenue mix by vertical was consistent with recent history: coming in at 59% from corporate; 29% from local, state and countrywide government; and 12% from health care, indicating that our growth remains broad-based. While these metrics all represent continued progress in driving our growth, we want to remind you that these quarterly metrics can fluctuate, especially after a strong first quarter like this one. But our optimism and confidence are clearly substantiated by these metrics.

Now allow me to provide a little more detail in the form of market and customer stories behind our strong Q1 metrics. To begin, it's clear that customers are using our platform to help keep people safe and manage their business operations during a rapidly changing environment.

In fact, Q1 represented the highest customer engagement levels in our history. Customers are heavily depending on all the applications within our CEM platform. For example, our large corporate customers, such as a global package delivery and shipping company, relied on our Visual Command Center and Safety Connection solutions to understand and respond to data regarding quarantines, shelter-in-place orders, production stoppages and air travel restrictions, both to keep their employees safe as well as to keep their global delivery business operating by managing deliveries differently in quarantine areas, as just one example.

Our new CEM wins include additional industry and category leaders who are selecting Everbridge and are willing to go public with their decision, as Goldman Sachs and others did in Q4. First quarter CEM highlights include global networking powerhouse Cisco, important not only because they selected our full CEM suite to keep people safe and their business running, but also because they represent another high-profile success from our growing channels partner initiative. In addition, Bristol-Myers Squibb, the pharmaceutical leader with 300 locations and 50,000 employees, became a new Everbridge customer in the first quarter by choosing CEM in a multiyear deal.

Other new CEM customers in the quarter included a leading multinational cybersecurity company, a Fortune 50 technology company operating in 70 countries, a top 3 commercial real estate services company, a Fortune 500 technology company, one of the world's leading discount retailers, a 4,000-employee aerospace contractor, one of the largest pharmaceutical companies in the world and an international science and technology company.

In addition to CEM wins in the quarter, we continue to see new customers choose our other products and expand relationships at a record pace, including organizations like Lincoln Financial Group, Kellogg Brown & Root, Blackstone Consulting, and National Grid, who selected our Mass Notification, Incident Communications and Risk Center solutions.

Q1's new customers came from multiple verticals as well, including education, where we recorded wins at leading institutions like Cal State Fullerton, College of Charleston and Florida State University. We also expanded relationships with Fordham University, MIT and Texas A&M. Our momentum was even more pronounced in the public sector, where we saw strong new and growth activity matched by record levels of engagement as the pandemic activity escalated towards the end of the quarter. In fact, one of the primary drivers of adoption for major cities like New York and Boston is our solutions' scale and multilingual capabilities, a combination which cannot be matched by smaller competitors.

Additionally, our customers are using Everbridge to support at-risk segments of their population, such as several counties in Florida that are performing routine health checks for their elderly populations and directing them to needed assistance when appropriate. In the first quarter, we signed several government wins on multiple continents, including with Bergen, the second largest city in Norway, and we expanded our relationship with the state of Odisha in India. Additionally, early in the second quarter, we announced a win with the health directorate of the country of Norway, which we were able to deploy in just 9 days.

Within our broad government market segment, we saw strong activity in the U.S. federal market in Q1. Contracts included growth deals to support one of our largest customers, the U.S. Army's JARVISS program, which leverages our technology to assess and respond to COVID-19 in over 400 military locations across more than 70 countries. Other new contract examples include the U.S. Department of the Interior, who administers our National Park Service. And at the state level, we announced another significant statewide deal for the Commonwealth of Massachusetts, which we highlighted at our recent virtual Analyst Day event. The state's selection of Everbridge is important because it marks another highly competitive win as well as the jurisdiction that we are headquartered in, and our team is proud to be the statewide solution. Almost immediately after our rapid implementation of the Massachusetts solution, we saw the governor of Massachusetts naming Everbridge multiple times in public speeches as an important partner to the state in mitigating the coronavirus pandemic.

Other states and cities also leveraged the Everbridge platform, such as New York, who has been a customer for more than 2 years, and dramatically increased their usage to address COVID since the virus' arrival. This engagement helps drive the continuation of network effects in New York. And in the first quarter, we signed an expansion with the New York City Council, a new business at the New York City Department of Education, who is leveraging our platform to communicate with parents to ensure students have all the equipment they need to be successful and to coordinate delivery, if necessary.

Other examples of our network effect were evident in states like Minnesota, with their Department of Human Services and Department of Veteran Affairs signed up; New Jersey, where the state's Department of Treasury became a customer; California, where new customers such as the City of Santa Monica, the county of Alameda and the Los Angeles Board of Supervisors all became new customers.

Interestingly, our first quarter public sector growth was not limited to our traditional public safety buyer, with new contracts coming in from organizations like the Cook County Department of Public Health in Illinois, the second largest county in the United States. And new use cases like the state of Vermont, who disclosed the use of Everbridge in early April to enable secure and remote legislative voting while following social distancing protocols, an example we think other legislative bodies could also leverage.

While our momentum with new wins and existing customer expansions was impressive in the quarter, customers in certain verticals are certainly struggling, such as hospitality and some retail. We continue to support these customers and are monitoring how they and we could be impacted in the longer term. That said, it's notable that during Q1, we saw these customers continue to prioritize and, in some cases, expand their Everbridge relationships as the COVID-19 pandemic accelerated. For example, we closed a new deal for Risk Center with one of the global oil companies in one of our shortest sales cycles ever, just 24 hours, as the company realized they needed a solution immediately to help manage their response to COVID-19 across their diverse global footprint.

In the retail space, one of the leading American luxury department stores added our Risk Center solution to their Everbridge implementation to assist them in monitoring the spread of the COVID-19 virus. Another retail example would be one of the world's largest discount retailers, which I mentioned earlier, who upgraded their existing Risk Center solution to CEM by adding VCC and Crisis Management in a 6-figure growth deal. This retailer had been considering CEM for over 12 months, and the escalating COVID-19 crisis helped them realize how important it is to have a comprehensive solution in place to protect all of their employees and operations.

And in the travel market, one of the world's leading hotel chains renewed their relationship in a multiyear deal as well as a large Las Vegas-based hotel group, who also signed a sizable renewal in the quarter. The fact that these corporations are prioritizing their Everbridge deployments at this time demonstrates that we are increasingly viewed as a must-have capability for corporations, even those facing severe business challenges from COVID-19.

Now a few words about the technology tuck-in acquisition that we completed near the end of Q1. In March, we announced the most scalable, comprehensive public warning system for entire countries. Our solution enables countries or regions to use multiple modalities such as location-based mobile alerting, cell broadcast technology and group-based mobile alerts to communicate to the entirety of an impacted region, including both residents and visitors. In support of this strategy, we announced the acquisition of one2many in late March, which we discussed at our recent analyst meeting. one2many has been instrumental in establishing the standards for population warning with cell broadcasting, and previously partnered with Everbridge on countrywide wins in Sweden and Greece. We are now better positioned than ever to lead this market in the years ahead and to achieve our target of reaching 3 billion people around the globe by 2024.

In summary, I am pleased with our team's dedication and expertise to quickly respond to the increased demand we see across our company as we help customers respond to the COVID-19 pandemic. This tragedy highlights the importance of our platform to our customers and prospects, and accelerates adoption by customers who are in the evaluation process. We look forward to continuing to enhance and expand our capabilities, to reinforce our position as the industry standard for excellence and to further extend our leadership in this multimillion-dollar market.

Now I will turn the call over to Patrick for more details on our first quarter financial performance and our guidance for Q2 and full year 2020. Patrick?

Thanks, David. I will review our financial highlights from the first quarter and then provide guidance for the second quarter and the full year. Our first quarter was characterized by strength in all our target markets and across the applications of our platform, with particularly strong net customer additions. Revenue in the first quarter was $58.9 million, up 38% from a year ago and exceeding our guidance. Adjusted EBITDA for the quarter also exceeded our guidance at a loss of negative $4.8 million.

Our dollar-based net retention rate remains consistently above 110%, as we continue to provide significant value to our existing customers. The first quarter was characterized by a record 194 net enterprise customer additions amid the early days of the COVID-19 pandemic. As a result, we had over 5,200 enterprise customers at the end of the quarter. Of course, as you might expect, this number of net customer adds put some downward pressure on average deal size, but this impact was largely offset by strong metrics for deals over $100,000, which numbered 40 in the 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 66.8%, down a little over 2 percentage points, as we had forewarned might happen temporarily due to the cost of partial delivery of one countrywide deployment as well as accelerated implementation efforts, increased COVID-related volumes and the impact of recent acquisitions. As always, keep in mind that quarterly gross margins may fluctuate from period-to-period and may not be considered indicative of any longer-term trends.

Total operating expenses in the quarter were $46.6 million, an increase of 39% from a year ago, reflecting continued investments in our platform and our go-to-market strategy. Adjusted EBITDA beat our guidance range at a loss that was better than guidance at $4.8 million compared to a loss of $1.9 million in the year ago period. Net income in the first quarter was a loss of $5.5 million or $0.16 per share compared to a net loss of $3.5 million or $0.11 per share a year ago. Note that to be more in line with peer reporting, non-GAAP net loss now adds back the accretion of interest on our convertible notes. This was not considered in our prior reconciliation to guidance. Including this noncash expense, non-GAAP net loss would have been $10.9 million or $0.32 per share, which was better than our guidance range, compared to a net loss of $4.7 million or $0.15 per share a year ago. On a GAAP basis, our net loss was $25.4 million, also better than our guidance range.

Turning to our balance sheet. We ended the quarter with $506.5 million in cash, cash equivalents, restricted cash and short-term investments compared to $539.7 million at the end of the fourth quarter, reflecting the impact of the 3 tuck-in acquisitions we completed during the quarter. Free cash flow was an outflow of $1.7 million in the first quarter compared to an inflow of $3.9 million a year ago. Total deferred revenue was $145.5 million at the end of the quarter, an increase of 48% from a year ago. As always, we will note again that our deferred revenue balance at the end of any given quarter can vary due to a number of factors, including the timing of significant new contracts and the timing of annual billing for new and existing customers. As such, the change in deferred revenue on a quarterly basis is not always a meaningful indicator of the underlying momentum in our business, though we believe its growth is directionally relevant on a longer-term basis.

Now let me turn to our outlook for second quarter and the year. After a record first quarter, we remain optimistic about our expectations for the year. At the same time, while customer activity has been strong amid the worldwide pandemic, customers in certain verticals such as travel and retail could see some pressure in the quarters ahead, even though these customers continue to prioritize critical event management in the first quarter. Similarly, there is increased uncertainty around the timing of some large countrywide deployments, which could have a direct impact on the timing of revenue recognition over the next 2 quarters.

Our guidance considers our strong first quarter performance, increased uncertainty within some market segments and a very small revenue contribution from our acquisition of one2many, which was not considered in prior guidance. one2many represents an important acquisition that will be particularly strategic as EU countries explore countrywide population warning systems next year. For the remainder of 2020, we expect the revenue contribution from one2many to be relatively immaterial, less than $1 million. From an expense perspective, the one2many acquisition will put near-term pressure on profitability. But we expect this headwind to turn into a tailwind in 2021.

With that backdrop, for the second quarter, we anticipate revenue of between $62.9 million and $63.3 million, representing growth of 30% to 31%. We anticipate adjusted EBITDA to be a loss of between $4.2 million and $3.8 million. We anticipate a non-GAAP net loss of between $7.4 million and $7.0 million, or a loss of between $0.22 and $0.20 per share based on 34.3 million basic and diluted weighted average shares outstanding.

Stock-based compensation expense is expected to be approximately $11.4 million in the second quarter.

For the full year, we now expect revenue to be in the range of $261.5 to $263.5 million, representing growth of 30% to 31%. We continue to anticipate adjusted EBITDA to be in the range of $6 million to $7 million. We expect a non-GAAP net loss of between $6.6 million and $5.6 million, or between $0.19 and $0.16 per share based on 34.3 million basic and diluted weighted average shares outstanding. This guidance assumes estimated stock-based compensation expenses of approximately $49.8 million for the year. And we continue to anticipate that free cash flow will be approximately breakeven and perhaps slightly positive for the year.

In summary, amid a global pandemic, our mission to help keep people safe and businesses running has never been more important. We are proud of the contributions we were able to make to our customers and their constituents. As the unqualified leader in critical event management, it's gratifying to realize we are making a crucial difference in people's lives. Our momentum in the first quarter leaves us well positioned to deliver a strong performance in 2020 and beyond as we continue to serve the multibillion-dollar opportunity ahead of us.

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

(Operator Instructions) And we have a question from Scott Berg.

This is Josh on for Scott. Congrats on the strong quarter. Maybe just starting out, given what's going on in Norway with the strong messaging on the platforms, curious about the comment about the delay in deployments for some countrywide deals and how that shapes up versus your prior expectations. Maybe we can get some more color on that.

Josh, thank you. This is David. Appreciate the question. Yes, we were really pleased in Norway. We had the 2 largest carriers, and we were reaching about 90% of the population. And the Norway health directorate wanted to expand that to 100% and add 1 more carrier, and we were able to get that done in 9 days, which is record time. And we're very proud of our team and of the good work being done by the government in Norway.

I should mention one of the benefits that we have, being able to work with so many countries around the world and so many states, is we're really able to see best practices and have so many different use cases. So Norway is a great example. If you look at what they're doing in their numbers, they're doing a fantastic job mitigating the coronavirus, and they're very aggressively using our platform to help keep their population informed. They were able to send out messages to the entire population of almost 5.5 million people at the same time with no message congestion. They're able to use the platform to communicate with their citizens who are traveling in other countries and trying to get back to Norway and help them. They're able to communicate to visitors that are in the country and do that in multiple languages, 6 or 7 languages, I think, the last big message they sent out. And they're also using the platform to help with social distancing and having municipalities throughout the country be able to use the platform.

And if they have an incident zone where they want to make sure that it's not getting too dense in terms of people per square feet, they're able to message the people, let them know, but do it in a way that protects the privacy of those people with no personal identifying information being used. So it's incredibly powerful what the government in Norway is doing with our platform, and we're very proud to be partnering with them. And I'm absolutely convinced that it's saving lives.

To your question, there are other projects going on and in some cases, those projects -- the vast majority of our business is SaaS, and we're able to implement remotely, and we've had great success with that through this coronavirus period so far. But we do have a few projects where you do have to get on-site and do work. And those projects, there's always the potential that they could get delayed, and that's why we wanted to give you a heads-up because in that case, it might move from one quarter to the other, and something that we're managing very closely and we feel good about, but we wanted to mention it.

Okay. Great. And then just a follow-up. How should we think about hiring for the year? Did you guys front-load hires in January and February, given the strong Q-over-Q increase in sales and marketing and initial momentum for the year? And should we assume a slowdown for the balance of the year, kind of given the macro outlook?

Patrick, do you want to start with that?

Sure. Yes, Josh. So we did do our typical front-loading of hiring for the year. We've -- we always try to get far ahead on our sales capacity, and we ended Q1 with most of our capacity built out for 2021 because we want those reps to be able to learn and be able to sell the platform throughout this year so that they are contributing at 100% productivity in 2021. So yes, you'll see typical seasonality in our adjusted EBITDA in Q1, and that will improve during the course of the year.

We have a question from Sterling Auty.

I want to -- help me balance out the commentary. On one hand, you've got the fast start program, which is amazing. And then you've got, to your point on some of the countrywide, maybe some delays because you can't get on site. What is kind of the average implementation that you think you are going to experience through this environment? The reason why I ask is with that deferred revenue, which was so strong in the quarter, help us kind of think about the timing of the waterfall of how that will fall into revenue through the year.

Well, I'll just make a general comment that the vast majority of our business is a cloud-based SaaS business. And so we're able to implement remotely and quickly and our customers are more motivated than usual. But this is an unusual time, and there's all kinds of different customers and different circumstances, and there are some edge cases. But Patrick, do you want to comment on kind of the average assumptions?

Yes. I think, Sterling, we're really excited about the growing backlog as well as our growing pipeline. And as David said, 98% plus of our business is SaaS. So we anticipate that we'll be able to continue to implement as quickly as customers are able to implement. We just -- as we sit here looking at the uncertainty that some of our customers are experiencing, we just -- we want to take a prudent approach here. And if things continue to fall into -- to waterfall into revenue as they have historically, then that will be the strength that we can use to potentially outperform expectations. But as we sit here today, we just want to take a prudent approach and provide some prudent guidance.

I think that makes sense. And the one follow-up question would be around the exposure to those hard-hit industries. Companies like ServiceNow, it's 20%, they disclosed. Five9 disclosed 15%. Where is your level of exposure to those hardest-hit industries?

We're trying to stay very close to our customers. And I can tell you, we had inbound call volume and engagement from our customer base like we've never seen in our history. And we actually -- speaking of implementation, I mean we were throwing a lot of implementation research because people wanted to get up and running quickly. And you'll see some of that. The -- as we commented in the prepared remarks, we were really pleased to see that even in some of the hard-hit industries, we've got customers signing growth deals, signing new deals, signing multiyear renewals. So we're going to keep a close eye on that. But so far, so good.

Yes. And maybe just one added comment, Sterling. When you think about what we have talked about since our IPO, which is that our top 3 markets by vertical -- or a general corporate, which makes up Fortune 1000, not primarily retail and travel, for instance, banks, financial institutions, major tech companies, very large manufacturers, then government and health care, you can -- you have to go past the 80% of our employee population to get into verticals that are the most severely hit. And as David said, we're a core system that those people are using during the pandemic to not only manage the impact but also for base communication, critical communication. So it's not a phone call generally out to customers or something you think of that is maybe something you could or couldn't turn off; it's their lifeline to employees and their supply chains, as an example. So we've seen relatively little pushback there. But as a direct answer to your question, those affected verticals are not in our top 5.

We have a question from Matt Stotler.

Great to see the strong results. Just a few quick ones for me today. So we'd love to go through kind of what you're seeing in terms of spend from new versus existing customers. It sounds like there was a healthy pull into the first quarter, at least the conversations that were going on and acceleration there of things that were in the pipeline. So I would like to get any commentary on kind of the -- what net revenue retention looked like in the quarter. And then looking at guidance, how much of the thought process and guidance is based on revenue coming from that existing base versus new customers coming into the business?

Yes. Thanks, Matt. This is David. I'll start by saying it was a very strong quarter really across every geography and every segment. So good renewals, good growth, good new customers coming in. And we've got some amazing new logos that we added, some of which we talked about in the prepared remarks. As far as the net retention, I think we typically say it's over 110%. And again, it was over 110%. So I just, I would say, overall, very balanced, very strong quarter. Patrick, if you want to add anything?

Yes. And strong backlog and strong pipeline of both new and growth deals. So we are humming on all cylinders. But -- so when you ask directly about guidance, I would just say we're also -- we're trying to take a prudent approach here because no one could have predicted each of the past 6 or 7 weeks, and I'm just worried that it's hard to predict the next few weeks, but we do head into it with strong momentum. And we expect to keep going with good progress.

Right. Right. That's helpful. And then I think when you mentioned Cisco in the prepared remarks, you mentioned it was a partner-driven win. We'd love to dig into how that deal came about, what the -- where the partner played a part in that go-to-market? And just maybe digging it out a little bit.

Yes. Generally, we've talked about the fact that we're going to increase our routes to market with partners. There's multiple varieties of partners. So system integrators, for example, we won our largest deal in our history with a system integrator partnership in California. The master agent/sub agent community, and that's an area where we hired an experienced executive who's been doing that for several years and come in with a lot of relationships and getting that stood up now. We have OEM partnerships that have been successful in recent years that we continue to work with.

And then services based firms, for example, like Control Risks. We talked about the fact that they actually created -- they've been around for 45 years. They're in with a lot of Fortune 500, Global 2000, and they've created a critical management practice area which is based on best practices on essentially how to use our platform, which is just another validation point around CEM becoming bigger and more relevant and a category that more people are aware of. As far as the specific Cisco deal, I don't think we're disclosing the details about how that came about, but it definitely did come through a partner. And we'll go back and see if we can share more at an upcoming Investor Day, if that's okay.

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Hello, is this me?

Yes, we can hear you. Go ahead.

Brad Zelnick with Crédit Suisse. Sorry, guys, I didn't hear the intro. Congrats. As we think about the pipeline, David, for both Population Alerting and CEM, to what extent is the pandemic serving to pull demand forward, accelerating the existing deals that were in the pipe versus actually creating the new opportunities that haven't been in the universe whatsoever?

Yes. Brad, thanks for the question. I think the answer is both. We've said for a long time that really every Fortune 500 company should have Critical Event Management Platform. Every state, city, country should have it. Every health care. And you had some companies that were forward-thinking, but it was really an issue. It's not a question of if you would need it, but when and what type of critical event and how prepared you could be. And I think just the awareness level of this now -- we used to be, we would go talk to the Chief Security Officer or the Chief Risk Officer, and they loved us and thought we were great. And then we have to work with them to help get funding and to try to get in front of the Board and get in front of the CEO. Well, now every CEO in the world is focused on figuring this out. And when they have to move their entire workforce to work from home, they're calling us and saying, hey, help us manage this transition, help us keep track of our employees, they're all remote now, and all the things that we do and we've been doing for years. And we're doing it for countries, and we're doing it for 1,500 health care providers and throughout.

So I think there's a general increase in the overall level of awareness. And I think that's kind of flowing through all the different opportunities. We do these thought leadership roundtables, virtual roundtables. And we're getting 3,000 people showing up. We're doing an event on the Road to Recovery for coronavirus. And I don't know if you noticed, we announced today a Return to Work set of software solutions, leveraging our CEM platform for businesses and governments. So we're going to talk a lot about that. We've got a virtual event, a C-level event coming up in May. And we've got Dr. Scott Gottlieb, who ran the FDA. He's a leading expert on coronavirus now, one of our keynotes, and General Colin Powell is, obviously, a great leader. And we have C-level executives from Accenture and Biogen and the CEO of the CDC Foundation. So we're just -- it is just another level of awareness of the C-suite. And so I think that really goes across everything.

Great. Maybe if I could just ask a follow-up. How should we think about the puts and takes around countrywide adoption given the pandemic and the comments that you made in your prepared remarks? And does this change the timing of when we should see the EU adopt a solution? How are those conversations progressing since COVID-19 emerged?

Well, I think it's still too early to tell. On the one hand, I think we can help. And this Return to Work solution that we just launched, really puts a finer point on it because it's directed for businesses and how businesses can help kind of take control of their own destiny, but also for countries and for states and cities. So we're going to probably be talking more about this Norway example because I think it's amazing what they're doing in Norway, and it's definitely having an impact. And we are seeing increased RFI activity. But on the one hand, I think there's more interest. On the other hand, everyone is putting out fires. So you don't really know how that's all going to net out. I think we have to keep tracking it monthly. But we're not really assuming -- we haven't made any assumptions about moving our expected time line to the deals, but it's possible that it could change.

Our next question comes from Ryan MacWilliams with Stephens Inc.

So just on individual Mass Notification sales, has there been any impact to go-to-market as a result of the shift to remote work, like are customers holding off until they're back in the office? Or is it more difficult selling without being on site? Or on the other hand, have you seen this increase due to COVID?

Well, there are cross currents because on the one hand, you can't go do a physical sales call for sales calls for the most part, and conferences have all been canceled. And that does make it more difficult and does increase friction, I think, for everybody that's trying to sell anything. On the other hand, I think we're clearly demonstrating that we're countercyclical. And we have solutions that are very relevant to the problems that everyone's dealing with right now. And we think that probably is helping us. And we've been very quick to pivot.

We launched the COVID Shield Quick-Start Templates, which I think were great conversation starters to get us in and have a broader discussion about CEM. And the network effects continue to help as well. I mean you look at we had New York state, we had New York City and in the middle of everything that's going on there. And those state and city employees are working around the clock to try to protect their people. And I have a great deal of respect for what they're doing. And we're honored to be able to support them. And New York came back and said, hey, can you also help us with our education department. It ended up being a new win we had in the quarter. And we're really happy to do that and even when schools out.

So I think -- net-net, I think we're just getting -- we're very busy. We're getting a lot of engagement, and we're working harder than we've ever worked. And the system is producing at volumes that are much higher than we've ever had to produce at. But this is why we built a scalable cloud-based system, and it's working the way it's supposed to.

Perfect. I appreciate the color there. And then, Patrick, on the one2many acquisition, would it be fair to consider their historical revenue primarily as license based? And did they have any significant contracts deferred that are coming over?

Yes. Ryan, thank you. So one2many was an important strategic acquisition for us, extending our population warning capabilities, and we did not acquire them to drive near-term revenue contribution, but rather for that longer-term strategic potential. They historically had a revenue run rate of around $3 million. To your point, their business model is different. It was largely on-prem and really, their continued revenue is support and maintenance. So -- which, as with other acquisitions, for our accounting for one2many, the purchase accounting takes a huge bite out of whatever run rate they had. And that's why for 2020, we expect to see less than $1 million contribution to Everbridge. But of course, we're very excited about its longer-term potential as it cements our position as the leader in public warning.

Perfect. And congrats on a great quarter.

Thanks.

We have a question from Brad Sills with Bank of America.

You had some nice wins in California this quarter in some cities there. I guess my question is, what has been the relationship between states and cities? I mean obviously, you see some pull-through effect. But how correlated is that? I mean you win a state and then you expect to win some of these municipalities over time. How important is it for municipalities to be on the same system? Do they interact also with the state government? Just trying to think going forward, what that would mean for some of these newer state wins.

Yes. I think there's no question. Thank you for the question. There's no doubt, I think it's proven that we talk about that network effect that when we win the state, over time, we add the cities and the municipalities and we're able to grow that. We saw it in Florida at a very advanced stage. We see it in Connecticut, we're seeing it in New York, we're seeing it in California. We're seeing it now in countries, I mean in Norway and Singapore and other places. So network effect is a real moat around the business. It allows us to grow and expand and extend. And one of the things now is it's just sort of happened organically in the past, and now we're putting together playbooks to say how can we accelerate that.

Got it. And then one more, if I may, please. You mentioned some increased volume here due to COVID. Is the use case changing here because of the pandemic? In other words, are companies using your system to communicate more often with employees than, say, in the past? This is not just about critical event, but this is about regular communication as kind of a change there?

Yes.

Our next question comes from David Hynes with Canaccord.

Congrats on the momentum. So look, obviously, we've seen the big tech companies are getting into contact tracing as the economy restarts. I guess I'm curious, how do you see the alerting side of this playing out? Is there an opportunity for Everbridge in there? And then I guess the flip side of that would be, does it make you nervous at all that the big guys like Google and Apple are now paying a lot more attention to location-based alerting programs?

Yes. It's a great question. As I said, the awareness level has gone way up. We're getting a lot of tailwinds as a result of the opportunity to leverage our capabilities to help our customers. And it is attracting attention. I think it validates the importance of what we're doing. It validates that this is a category that critical that management is a must-have category, as Jaime was saying. And more often than not, we're partnering with those companies. And I think we fit and play really well with them. So it's something we monitor closely. We're still the leader in the space by a lot. We have 550 million people protected by our platform, and that's growing very rapidly. So this is what you expect to happen as this category matures and gets bigger, and it's a good thing.

And then Patrick, what's your (inaudible)

Yes. We might even add that imitation is the most sincere form of flattery, certainly, when you invent the space as we did. We invented, we had the first critical event management suite. And we're not talking about just alerting there. We're talking about everything from -- let's use the pandemic as an example and discussions on things like contact tracing. Contact tracing is a very specific technology, typically going to be discussed as deployed on a mobile phone. We're talking about all the assets of a corporation, from their offices, their branches, their manufacturing plants, their employees' home locations or travel locations and understanding, in a dynamic environment, where the virus is infecting or impacting those assets and then giving you the ability to trace backwards as to "John Smith went on a trip to Asia because he had to meet some sales requirements, and he came back and it turns out he's infected. Which offices, which branches, which meetings was he in with the other employees, so that I can quickly quarantine the individual, protect other individuals that need to go into quarantine and importantly, keep my business running at the same time."

And without that broad, scalable platform that David talked about, no one has an ability to do that comprehensively. Our background is not only inventing and designing that full suite of tools, enables the company not only to protect its employees during a pandemic, but after as they get in the process of going back to work.

So as David said, love the fact that other people are saying they're going to build pieces and parts of critical event management. Today, given our scale, the fact that we're being deployed to talk to and keep safe almost 2/3 of the U.S. population, it is a form of flattery, but not a direct competitor.

Yes. Very helpful color. And look, I don't think anyone is debating that you guys are the category or thought leaders in this space. Patrick, maybe one quick follow-up for you. The 194 net adds, how many were COVID Shield? And what's the ASP on those Quick-Start sales?

Yes. Thanks for the question. We don't break out count of sales for any individual product necessarily except for CEM. But it was a robust result for Q1 as well as a strong pipeline as we enter Q2. The ASP on those will vary. Just like the rest of our products, there is a platform fee, and then there's volume-based pricing on top of that. Overall, they -- on average, they were slightly below that ASP that we reported for the trailing 12, but there were certainly plenty that were above that as well.

Our next question comes from Brian Peterson with Raymond James.

And congrats on the strong results. So just wanted to get some clarity on the guidance or one thing that you guys said there, because it sounds like there's an assumption that there may be some delayed implementations of large deals. Can you expand on that a little bit? I mean obviously, you guys are doing more for a lot of customers than giving them an umbrella in a rainstorm. But we're hearing about 24-hour sales cycles and millions of messages. I'm just curious why customers -- why wouldn't they want to get this up and running ASAP?

Yes. Thanks for the question, Brian. As David said, they're cross currents. We've had some customers who said, can you please accelerate, let's pull this in and get us turned on quickly. And we were able to achieve that. We even had an inbound from one of our account managers regarding a large retail customer. And I thought, here we go, this is the -- here comes a request for some sort of late payment. But instead they were upgrading to CEM to help them manage proactively through their spinning down of operations and then in time, spinning them back up. So we've had those tales, but then we've also had the opposite where some customers are just overwhelmed. Even in some of the strongest segments, they're overwhelmed in these early days of the COVID situation.

So as we sit here today, we just want to take a prudent point of view despite the very strong backlog that you can see on our balance sheet. And despite a robust pipeline, we just want to take a prudent approach to guidance. We are raising for the year, and we hope to continue to have strong performance for each quarter for the rest of the year.

And Brad, we also need to call out the simple fact that in some of our larger transactions like population warning where we have multi-month implementations, some of those implementations are being impacted because we just can't go on-premises. So a few of the acquired and primarily population warning, but a combination of those 2 categories are a new take on premise implementations, and we assume those will move forward rapidly once the nation gets back to work, but those are also impacted. So as Patrick said and David said, it's a balance of those mixed together, and that would cause us to be our natural conservative, or as Patrick's saying, prudent selves when it comes to forward guidance.

Understood. That's great color, guys. And maybe just one more for me. Patrick, I know that the expenses or the linearity on the EBITDA migration isn't what we had expected. Any help on how that's looking in the second quarter and why that's going to ramp up in the back half of the year?

Yes, we are maintaining our full year outlook for adjusted EBITDA to be an improvement year-over-year, same with non-GAAP net loss, so no change overall for the year. In the near term, we -- with some of those accelerated implementations with some of the additional volumes where we anticipate that we will have a bit more expense than we had originally intended for Q2. But that's okay because we've got some leverage to absorb that and get through the year with continued strong growth and continued improvement on the bottom line which, as you know, it's very important for us to achieve.

We have a question from Terry Tillman with SunTrust.

This is actually Nick on for Terry. I was wondering if you guys can talk about some of the success you've seen with recent acquisitions aside from one2many, like NC4 and the IoT acquisitions. Has performance so far been ahead of initial expectations for these? Or -- if you could provide any color around those?

Yes. Thanks for the question. This is Patrick. For the tuck-in acquisitions that we've done this year, it's too early. We will say that for NC4, which we acquired in the second half of 2019, that the strategic value of that is playing out in spades. When you look at CEM, it's a comprehensive platform that starts with risk data, and it needs to be actionable. There's a lot of data out there, and it's very noisy and it's very imprecise. But NC4 very uniquely is able to provide very unique, very actionable data. It's very geo-precise and provides a lot of value to our customers.

And so as we got through the end of last year and through Q1 of 2020, we've seen great uptick within our existing customer base as well as with new logos because we've been able to amplify their -- the sales force that's bringing NC4 data to market. We've packaged it in with our full risk intel solution. So we don't actually break it out or sell it stand-alone anymore. And of course, it's also included when we sell CEM. So I'd say that the strategic value of that acquisition has been really strong, just as strong as we expected, if not a little bit stronger in this environment.

And then I would add to that, that the 2 acquisitions we completed early in the year were, as you mentioned, IoT there, sensors and capability to connect to other digital devices within the company to understand, for instance, where people are in what locations, meeting rooms, things like that and coordinate all that information into the CEM platform. Because those are technology tuck-ins and because they are in the general markets of corporate and health care, you can assume that those are, a, they were -- they're tuck-ins so they're nonmaterial and substantially included in our guidance going into the year already. But those aren't knocking the ball out of the park, principally because they are involved in markets like health care where things are shut down right now.

The one2many acquisition that David highlighted again in his comments for this call, remember that happened closer to the back half of the quarter. And it's just now being integrated. That's very strategic to our population warning platform. It combines the world's most recognized cell broadcast solution with our state-of-the-art text-based and location-based text and alerting solution and Mass Notification. And that's just starting now. So that's too little and too small to make a material difference in any way. But that's just a little bit of added color, so you can understand where we are with those things. And as Patrick said, agree that NC4 is by far the larger one and the one that's had time now to perform and add to results.

Final question comes from Will Power with Baird.

Great. Okay. I guess let me start with actually the follow-up. I mean it clearly sounds like very good trends overall. You've been in some of the harder-hit areas. But I wonder, I guess, Patrick, probably for you, if there's any quantification you could provide around any kind of nonpayment trends you might be seeing? What's kind of contemplated in full year guidance on that front? What are you kind of assuming might happen in the back half of the year, particularly in some of those harder-hit areas?

Thanks, Will. This is Patrick. So we have -- we do have customers in industries that are directly impacted: transportation, retail, hospitals. Health care is 10% of our revenue. And while certain of them are accelerating new deals and upsells in order to manage through the operational impact of COVID more effectively, a very small number have already made requests for financial flexibility. We believe that as the most robust and most scalable platform with the broadest and deepest technology, that we're going to continue to represent a significant value to customers.

And we have a really well diversified book of business with no single point of [failing] with failure. We've not had any customers at this point that are unable to make any payments. So it's a strong trend so far, Will, but this is -- we learn something new every day in the context of this pandemic. So we just want to -- and rather than giving you any specific quantification, we just want to be prudent and cautious and manage through this with what we hope to be continued strong performance. So I'll decline to quantify anything specific there and just expect that we'll manage through it.

Okay. All right. And then the other thing I wanted to ask about was the announcement on the voting application in Vermont. I just -- it sounds like a really unique and interesting opportunity. And I guess, a, kind of curious how much customization, if any kind of went into that? And I guess, b, are there opportunities to kind of, I guess, export that to other states where you have relationships? We assume like that could be something that could be in demand elsewhere. So just maybe to get a little more color on that product.

Yes. We're very excited about that use case. It's another high-profile proof point of the trust that folks can put into Everbridge to manage through their most critical operations, including voting. And we do anticipate that, that will be a really strong value-add as we work across other state-wide opportunities with our existing state customers and with our existing state and local installed base. That will make us that much stickier when folks are relying on our platform, not just for messaging and managing risks, but to actually get the business of the legislature done. So we're excited. Hopefully, more to come on that.

Thank you. I will now turn the call back over to Patrick Brickley for any closing comments or remarks.

Well, thanks, everyone, and thank you for joining our call today. While the world is going through a tragic event, we are proud that our technology is demonstrating its value and helping keep people safe and businesses running amid this global pandemic. We remain well positioned to continue expanding our capabilities to serve a growing number of customers worldwide and to provide additional technology and data for our existing customers. We look forward to speaking with you again soon, including at several upcoming virtual investor conferences. Thanks again. Bye-bye.

Thank you.

Thank you, everyone, for joining. You may now disconnect.