EXECUTIVE PRIVLEDGE: MY TAKE
Sep16 IPO company w/fairly strong performance/potential in a space where there appears to be very little competition. Pure SaaS playing in crisis management and communication space, with impressive list of top line cliental and solid retention rate.
Investments into additional product markets (which appear to be complimentary and proving out but it is early days) have delayed the company from meeting long-term model goals for Adjusted EBITA Margins… something to watch.
I’m happy to have undertaken the analysis because it proved out that the company has some red flags that need closely monitored - as well as - proved useful in digging into the numbers versus trusting screeners. In short, it is not a bad company, but it was not as great of steal as I once thought. Will continue to watch and appreciate any feedback and input.
Thanks to Ray for letting my steal his template and manipulate it
- Just a Fool
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COMPANY PROFILE: EVERBRIDGE (EVBG)
According to the company, Everbridge is a global software company that provides enterprise software applications that automate and accelerate organizations’ operational response to critical events in order to keep people safe and businesses running faster. During public safety threats such as active shooter situations, terrorist attacks or severe weather conditions, as well as critical business events such as IT outages, cyber-attacks or other incidents such as product recalls or supply-chain interruptions, over 3,500 global customers rely on the company’s SaaS-based platform to quickly and reliably aggregate and assess threat data, locate people at risk and responders able to assist, automate the execution of pre-defined communications processes, and track progress on executing response plans.
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CURRENT FINANCIAL STATUS
EVBG
MARKET CAP $ 1.41 B
Employees 581
52-WK HIGH 53.42
PRICE 7/09/18 48.90
52-WK LOW 21.56
Price Change since IPO 320%
Price Change Y-T-D 65.2%
EV/EBITDA (mrq) N/A
P/E N/A
EV/Sales (ttm) 12.2
P/S (ttm) 7.9
Since its IPO on 11/17/2017, the Everbridge stock price has realized a substantial 320% gain in 2 years. At its IPO, Everbridge carried a EV/S of 6.7x, which has grown to 12.2x today.
SAUL SCREENER
PASS Large Addressable Market (TAM): $45B in 2020
PASS TAM that is expected to grow significantly (TAM): 20% CAGR
PASS Products that customers love: https://www.everbridge.com/customers/ - Testimonials
PASS Strong Dollar Expansion Rate: 112%
PASS A lot of reoccuring revenue: 97% of all revenue is reoccurring with 2+ year contracts and 95% retention rate
PASS Small Market cap, preferably less than $10B: $1.4 B
FAIL High Margins: 72% margins could be improved
FAIL: Growing Profitability: Acquisitions have resulted in negative EBITA and EPS trending
PASS: Light Asset Models: SaaS play
PASS: Not a ton of stock comp: Extremely low
FAIL: High inside ownership: ~13% inside ownership
Here’a company that
- was started following the September 11th attacks in response to the lack of mass notifications
- In 2012 began expanding into the market to provide mass notifications
- In 2014 recognized as the Leader in Gartner’s last Emergency Mass Notification Systems Magic Quadrant; “ We believe Everbridge provides the powerful, easy-to-use solutions to help you deliver mass notifications for emergencies, STEMI alerts, code alerts, IT incident response, HIPAA-compliant messaging and much more."
- Went public on the NASDAQ in 09/2016
-since its IPO, has realized YoY revenue growth of 31%, 36%, and 34% for 2016, 2017 and Q1 ’18, respectively. The company guidance and financial outlook for the FY’18 the company guidance expects 34% YoY revenue growth.
-since IPO has been acquiring companies to diversify product offerings and build moat around critical event management, all folding into SaaS model
02/2018 - United Messaging Systems
01/2017 - IDV Solutions
12/2016 - Crisis Commander
This company came to my attention via the BVP cloud index (https://www.bvp.com/strategy/cloud-computing/index), when I noticed that it had a low EV/S ration, yet had a 40% efficiency score. (Note, this research reveals that perhaps something with the EV/S is off on the BVP)
Finally, directly from their Investor Day held on June 14, 2018
- 96% of revenue is recurring subscription
- 95% client retention rate
- 110%+ annual revenue retention rate
- 2 year average length of customer contract ($1 spent to acquire $1 first year revenue, $0.06 for retaining subsequent years)
- Non-Mass notification bookings (TTM basis) grew 48% from Q1 ’17 to Q1’18
- Number of multi-product deals signed grew 30% from 54 to 70
- 7 straight quarters of exceeding guidance
- Recent purchase of UMS ($33.6 M) expands Everbridge reach to 1,200 customers in Northern Europe, as well as, major public safety agencies in Virginia, Georgia, Mass., West Beghal, and the U.S. Navy
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COMPANY DETAILS
The company’s platform sent over 2 billion messages in 2017, and offers the ability to reach more than 200 countries and territories with secure delivery to over 100 different communication devices. The company’s critical communications and enterprise safety applications include Mass Notification, Incident Management, Safety Connection™, IT Alerting, Visual Command Center®, Crisis Commander®, Community Engagement™ and Secure Messaging.
Active Clients
https://www.everbridge.com/customers/ - Testimonials
Period Active Clients
(in thousands)
Q1 ’18 3,811
Q3 ’17 3,560
Q1 ’17 3,318
Q4 ’16 3,205
Q4 ’11 867
Everbridge has grown their customers 867 in 2011 to a total of 3,811 customers at the end of Q1 2018.
They have expanded to:
• 25 of the 25 busiest North American airports
• 4 of the 4 largest global CPA firms
• 9 of the 10 largest investment banks
• 9 of the 10 largest U.S. cities
• 6 of the 10 global auto makers
• 6 of the 10 largest global consulting firms
• 6 of the 10 largest high tech companies (NVIDIA, Hulu, Rackspace)
• 5 of the 10 largest health insurers
PRODUCTS AND MARKETS
Everbridge was founded based on Mass Notification services and has expanded since 2011 to adjust to the larger critical event management markets, offering products falling under three markets (TAM included):
https://seekingalpha.com/article/4181999-everbridge-evbg-inv… - Investor Day Presentation
Mass Notification & Incident Management
2015 TAM: $2.5B
2020 TAM: $6.4B (+20% CAGR)
• Mass Notification
• Incident Management
• Secure Messaging
• Community Engagement
• UMS LBAS
IT and IoT Alerting
2015 TAM: $3.5B
2020 TAM: $10.7B (+25% CAGR)
• IT Alerting
• IoT
Critical Event Management
2015 TAM: $14.9B
2020 TAM: $29.0B (+14% CAGR)
• Critical Event Data
• Visual Command Center
• Crisis Commander
• Safety Connection
Everbridge is currently focused on the organic upsell potential for Critical Event Management, specifically with Corporate and HealthCare customers. Everbridge reports that Critical Event Management (CEM) deals range from $210-$1,400K, giving them a $1.8 B opportunity across 2,660 current customers.
DIVERSIFYING PRODUCT OFFERINGS
Everbridge has been finding success diversifying from Mass Notification through results:
MN New Products
Q4 ’14 98% 2%
Q1 ’15 94% 6%
Q2 ’15 88% 12%
Q3 ’15 83% 17%
Q4 ’15 78% 22%
Q1 ’16 74% 26%
Q2 ’16 73% 27%
Q3 ’16 72% 28%
Q4 ’16 70% 30%
Q1 ’17 67% 33%
Q2 ’17 60% 40%
Q3 ’17 58% 42%
Q4 ’17 54% 46%
Q1 ’18 51% 49%
Everbridge has seen increases in # of signed multi-product deals per quarter
Q1 ’17 54
Q2 ’18 70
Everbridge has seen growth in $100,000+ deals
Q1 ’17 4
Q2 ’18 19
Everbridge is seeing acceleration in Non-Mass bookings
Q1 ’17 33% of bookings
Q2 ’18 49% of bookings (48% growth)
CORPORATE FINANCIALS
Corporate financials for Everbridge (EVBG) indicate the following:
• Solid and stable growth in YoY revenue and share price;
• Since its IPO, generally operates with negative adjusted EBITA related to new product development and acquisition
• Stables gross margins at 70%-72% over the recent past 5 quarters;
• Stable capital structure.
Revenue, Net Income, EPS
Cost of Gross Net Diluted
FY REVENUE Change Revenue Margin Income Change EPS YoY
($M) YoY ($M) % ($M) YoY
2015 $58.7 38% $21.3 70% -10.8 -1700% -0.39
2016 $76.9 31% $25.3 72% -11.3 -4.3% -0.68 -74%
2017 $104.4 36% $34.5 72% -19.6 -74% -0.70 -3%
MARGINS
Q3’18 gross margin was 43.6%, compared to 43.0% in Q3’17, an increase of 60 basis points. This improvement was largely driven by a lower inventory reserve expense as a result of improvements to their inventory management capabilities. This was partially offset by a year-over-year increase in shipping and freight expenses and to a lesser extent shrink.
MARGINS ADJ Sales &
GROSS Marketing R&D G&A Adjusted EBITA
2015 70% 44% 19% 18% -6%
2016 72% 44% 19% 15% 0%
2017 72% 43% 20% 15% 0%
Targets 77-82% 37-39% 14-16% 8-10% 23-25%
http://phx.corporate-ir.net/External.File?t=1&item=VHlwZ…
Key Metrics - Retention Rate
Everbridge runs a nearly pure SaaS shop which is focused a land and expand model, often relying on Mass Notification subscriptions to be the “land” and then trying to “expand” critical event management. This will be something to track moving forward, if they are successful, we should see these retention rates begin to grow, along with the growth of the customer base.
Period Revenue Retention Rate
2013 112%
2014 111%
2015 112%
2016 112%
2017 112%
CAPITAL STRUCTURES
Everbridge has an okay current ratio, largely driven by acquisitions over the past several years
CAPITAL STRUCTURE
Cash & cash equivalents (mrq) $145.96 M
Working Capital $183.46 M
Current Ratio (mrq) 2.1
LT Debt (mrq) $89.48M
Stockholders’ Equity $ 55.99 M
Stock-Based Compensation (SBC)
SBC/revenue ratios are favorably very low.
Period SBC SBC/Revenue
($M)
FY 2017 $0.578 0.5%
FY 2016 $0.180 0.2%
CORPORATE GUIDANCE
The Everbridge guidance and financial outlook for Q2 2018 and for the fiscal year 2018, ending on December 31, 2018 are as follows:
Q2-2018
Net Revenue $34.0-34.3 million
Adjusted EPS -0.23 - 0.22
FY 2018
Revenue $138.7 - 139.8 million. 34% YoY growth
Adjusted EBITDA -0.59 - 0.57
CORPORATE MANAGEMENT
CEO Jaime Ellertson will be transitioning to Executive Chairman of the board over the next 12-18 months as Everbridge will begin searching for a successor.
SUMMARY
For TA experts:
https://www.barchart.com/stocks/quotes/EVBG/cheat-sheet
Q1 Results and Guidance:
https://finance.yahoo.com/news/everbridge-1q-earnings-snapsh…
Latest 10-K (2017)