Everbridge (EVBG) Q4 2017 Earnings Conference Call Transcript

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Everbridge (NASDAQ: EVBG) Q4 2017 Earnings Conference CallFeb. 21, 2018 4:30 p.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Everbridge Q4 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require operator assistance, please press * then the 0 key on your touchtone telephone.

As a reminder, this call will be recorded. I'd now like to introduce your hosts for today's conference, Mr. Ken Goldman, chief financial officer. You may begin.

Ken Goldman -- Senior Vice President and Chief Financial Officer

Good afternoon, and welcome to Everbridge's Earnings Conference Call for the Fourth Quarter of 2017. This is Ken Goldman, senior vice president and chief financial officer of Everbridge. With me on the call today is Jaime Ellertson, CEO and chairman. After the market closed today, we issued a press release with details regarding our fourth-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.

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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 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 financial measures is included in our press release. Finally, at times in our prepared remarks 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, for his prepared remarks.

Jaime Ellertson -- Chief Executive Officer and Chairman

Thanks, Ken, and welcome to all of you joining our fourth-quarter 2017 earnings call. Our fourth-quarter performance represented a strong finish to a very strong year. Not only did we exceed our revenue and adjusted EBITDA guidance for the fourth quarter and the year, we also broke records for a number of our important metrics and set ourselves up for what we expect to be an equally successful 2018. Revenue in the fourth quarter was $29.2 million, representing a growth of 37% from a year ago, as we exceeded our guidance for the fifth straight quarter in our five quarters as a public company.

And we continue to balance top-line growth with improving profitability as we generated adjusted EBITDA of $1.8 million in the fourth quarter, also above our guidance range. Looking at the year as a whole, revenue was $104.4 million, an increase of 36% from 2016, and we generated a positive adjusted EBITDA of $0.1 million, considerably better than our initial expectations for the year. 2017 was an important year strategically, as we executed our expanded vision for critical event management, or as I will refer to it repeatedly, CEM, which was evident in our growing number of large new and growth multiproduct transactions. I want to remind you that our themes for driving longer-term growth remain: first, strong continued growth of our core Mass Notification business, led by our focus on large state and local government contracts, including our expansion into the federal market with our FedRAMP initiative, and the growth of our international presence; second, continued achievement of best-in-class renewals as well as driving an increasing number of multiproduct growth deals into our base of 3,700-plus enterprise customers; and third, our CEM suite strategy that provides an enterprisewide common operating environment for situational awareness and integrated response and collaboration across all critical-event types, which are driving greater strategic value and significantly larger customer relationships.

We believe our results in Q4 and for all of 2017 demonstrate this strategy is working. For the 2017 year, we achieved strong metrics, including our enterprise customer count reaching 3,711 customers, an increase of 506 from the end of 2016. Our new products grew to 46% of all new and gross sales in 2017, from products other than our core Mass Notification solution, up from 30% over sales in 2016. As an example of this success, I would highlight our Safety Connection solution, which racked up year-over-year growth of over 300%.

In parallel, we saw continued strong contribution from our multiproduct deals, climbing to 239, a significant jump over the previous year's total of 182, up 31%. This multiproduct success is also reflected in the large transactions we completed in 2017: a total of 61 six-figure or larger transactions, which was an almost 200% year-over-year increase. And we expanded our international footprint during the year with the addition of our Crisis Commander Nordics-based team in Europe as well as the opening of new offices in Asia with partners like International SOS. Overall, our strong business momentum for the previous three quarters came to a crescendo in our most recent quarterly results, where we, in Q4, signed 70 multiproduct deals at new and existing customers, compared to our trailing 12-month average of 60.

In Q4, we added 151 net new customers, slightly a larger number than in past but consistent with the strong Q4, establishing further expansion opportunities through a commission of greenfield and competitive wins. Key new logos in the quarter included names like Levi Strauss, Intuit, Airbus, Hilton, Blue Cross Blue Shield, and New York City, just to name a few. In addition to new wins, we continue to grow our existing relationships, with significant expansion deals at customers like Erickson, Scotiabank, and Noble Energy. Our strong quarterly results also included a record number of multiproduct deals, 70 in Q4, which is up from 54 in Q3 as well as higher than our 12- month trailing average of 60 multiproduct deals.

Increasing number of multiproduct deals is evidence of our ability to continue to grow our strategic value that we deliver to customers with our expanding suite of products. This increase in multiproduct deals also drove our number of deals valued at over $100,000 to a record 20-plus in Q4, more than doubling the number of $100,000 deals we had in Q3. Sales of new products, that is -- those newer products including Safety Connection, Safety Connection Pro, IT Alerting, Community Engagement, Crisis Commander, and CareConverge, but not including inorganic growth from Visual Command Center, continued to grow in Q4, achieving 46% of our total sales on a trailing 12-month basis. That's up from 42% in Q3 and 30% over last year's same quarter.

This metric demonstrates the health of our new product business and is evidence that we're capable of growing our quarter Mass Notification business, while at the same time expanding into adjacent markets with new products, even faster. And our international business continue to represent growth with approximately 10% for the year, meaning international grew at 36% over a year ago. Now let's review the fourth-quarter results in a little more detail. Our performance can be characterized by continued strong success with individual solutions, increased multiproduct and six-figure wins, growing momentum from our CEM suite.

In our core corporate market for Mass Notification, we signed numerous large new contracts, including major brand names like Levi Strauss that chose Everbridge because we could ensure communications to all employees across multiple use cases. Another large new corporate Mass Notification customer is one of the largest beverage distributors in the U.S, whose operations span almost every state and whose workforce is not only distributed but often mobile and, therefore, needed a very strong mobile application as part of the employee communication solution to keep its people safe and its business operations moving. Other new core Mass Notification wins in Q4 included brand names like Texas Instruments or Thermo Fisher, among others. Additionally in the quarter, we saw organizations such as leading energy provider, PSE&G, expand their use case from strictly emergency communications with a few hundred people to more operational critical events and employee communications to well over 10,000 employees across their enterprise.

Our government and education business also had a very strong quarter. During Q4, we closed perhaps the most talked-about city in the world when it comes to citizen safety and security, New York City. Our New York City win was particularly rewarding, as New York City is seen as the first to roll out Mass Notification in North America as well as perhaps the most sophisticated city when it comes to safety and security capabilities in the wake of 9/11 events. After building two highly customized solutions it is particularly gratifying that New York City chose to move away from them and choose Everbridge for its Mass Notification needs.

We believe this is an important signal to market that Everbridge's Mass Notification is the choice for public emergency notification, period. Other key public market wins in Q4 included a six-figure contract with the city most visibly affected by Hurricane Harvey, the city of Houston, which is the fourth-largest U.S. city. And moving on to statewide wins, we closed the state of Vermont and also the state of Tennessee.

Now to be fair, the state of Tennessee was not a full citizen deployment but it was a six-figure deal for all state employees. And perhaps more importantly, contractually this deal provides a structure for us to go after all citizens and municipalities, safety agencies, public universities, and hospitals in the entire state. In the related education space, we welcome Laureate International University, who is one of the largest educational organizations in the world with over 70 campuses in 23 countries and over 1 million students. Laureate chose Everbridge Mass Notification to coordinate the communication to all of its U.S.

campuses. Each of these wins was a result of a public, structured RFP and bid process, where we continue to win the vast majority of new opportunities based on our breadth of core product suite, our proven scale, and our reference-able reliability. Now allow me to turn to a few examples of our continued success with our new products, that's Safety Connection, IT Alerting, CareConverge, Community Engagement, Crisis Commander. And although VCC is not included in our definition of new product because we acquired it this year, it will be in Q1 of 2018 and forward.

In Q4, we witnessed an acceleration of market adoption for Safety Connection. 2017, Safety Connection sales grew by over 300% year over year. In Q4, specifically, we signed large six-figure Safety Connection Pro deals, which is a combination of MN, IC, and FC and VCC. Saw multiple product configuration with a large number of leading companies, including Comenity Servicing, a division of Allianz data card center, who required our geo fencing and dynamic location capabilities to locate and communicate to employees based on their exact locations versus their static offices or home addresses, features we were told do not exist in our competitors' solutions.

Intuit was another six-figure-plus Safety Connection Pro win, where they replaced a combination of legacy solutions because of our product's integrated with a variated external providers such as physical access control systems to identify the location of employees as they badge in and out of actual office locations as well as our dynamic location capability for traveling executives and our incident communication capability for rapid execution of communication with preprogrammed templates for critical events. Other notable new Safety Connection wins in Q4 included Adobe on the new side. And on the growth side, Exelon. Exelon, North America's leading operator of nuclear power plants, signed for a significant six-figure expansion of their MN usage, with the addition of Safety Connection Pro to enable a unified communication system across all their utilities in the U.S.

and to roll out specific lone-worker capabilities to keep workers safe in the field. Staying in the new product topic, we recorded numerous new IT Alerting wins in the quarter. And in Q3, many of these deals fell in the larger six-figure transaction category, including one of the largest payment processing companies in the U.S. They wanted to improve their IT incident-response process and chose Everbridge ITA because our feature breadth as well as global scale.

Another large new ITA Alerting win was Adient U.S, one of the largest automotive accessory manufactures in the world, who is looking to reduce response times for issues identified in their ITSM and ITOM systems by 45% and obtain a less than one-year ROI. On the growth side, we saw a very strong ROI example in one of our large financial accounts. This leading U.S. bank expanded past its MN usage with an ITA purchase based on $1 million-plus cost savings driven by our substantial ability to reduce incident response time across over 100 different incidents a year.

And now a few words about our newest solution, Visual Command Center, which we acquired when we completed the purchase of IDV in Q1 of this past year and is one of the anchor products in our CEM suite. In Q4, we continued to see evidence that CEM will help us execute our strategic goals with wins like our CEM expansion deal at Noble Energy. Noble Energy was already a VCC, Mass Notification, and IC customer, and purchased our Safety Connection Pro solution to integrate visualization of threats with dynamic location of people where our solution will provide, among other benefits, geo fencing capabilities to alert the security teams when individuals may enter areas of risk worldwide. Combined with our incident communication solution, this forms a single operating environment to keep employees safe and their business running, a strong example of a strategic win for the CEM suite.

On the new front, we were excited welcome Hilton as a new enterprise customer in Q4. The hospitality company will use our VCC solution to help respond to critical events worldwide where their properties and people could be impacted. Last, our largest Q4 deal was a top-three U.S. financial institution who expanded their implementation of Critical Event Management with a new seven-figure contract.

We also continue to see success with large healthcare customers like Blue Cross Blue Shield of Florida, who chose both our MN and ITA solutions for their almost-20,000 employees in a six-figure win during the quarter. Additional healthcare wins of the quarter included leading hospitals like Cryptos Health Systems, Trinity Mother Frances Health System, and MemorialCare, who all selected our CMS package for their institutions. At Memorial, their CIO led an initiative to comply with the new CMS regulations that require healthcare organizations to have an opportunity -- to have an automated emergency solution in place to communicate with off-property healthcare providers as well as the ability to utilize HIPAA-compliant patient communications during critical events affecting the entire organization. Finally, a word about our international partner efforts and the numbers in Q4.

During the quarter we closed a number of new and growth direct deals in Europe, including major new contract win with Erickson, the leading network and telecommunications company that chose Everbridge along with partner International SOS to provide communications to their roughly 25,000 employees around the globe when critical events pose a threat to life and safety. We also closed a deal with Arcadis, the global design, engineering, and consultation organization, another good example of a large multiproduct win, which included Mass Notification, IC, and Safety Connection Pro solutions, as well as partners International SOS and NC4 services. Other direct international deals in Q4 included BearingPoint in Germany, who chose our MN solution as well as Union Bank -- Union Overseas Bank and Sumitomo Corporation in Asia, who chose us for employee communications. Our partners were also very active in Q4, one example would be our tie-in partner who signed leading organizations like Leonardo SpA for one of the top aerospace companies who chose Everbridge for critical communications for their over 50,000 employees in over 175 locations around the world, as well as Fastweb, a leading Italian telecommunications and digital-services company.

A few other channel wins for Q4 would include partners like International SOS, who closed leading organizations like Cirque du Soleil and Universal Music Group to name just a few. With a very strong Q4 rolling up into a solid year overall, 2017 was a tremendously successful year for Everbridge, but also one where we established strategic and operational momentum for which we can continue to extend our success in the year ahead. Now allow me to close by talking about a few of our operational and strategic initiatives. As I stated earlier, we continue to focus on our strategic initiatives to support long-term growth of our core Mass Notification business.

And to that end, operationally we continue to make progress with our FedRAMP project as well as the expansion of our international business. We're in the final stages of gaining our FedRAMP accreditation. And we anticipate completion in the first half of this year. In parallel, we announced the opening of a new Washington, D.C.,-based federal sales office headed by an experienced federal market executive, Rodney Billingsley.

It's important to note that while FedRAMP certification opens new doors for us, we expect sales in the federal market to be relatively lengthy. As such our guidance for 2018 does not reflect much contribution from this market until late in the year. And more recently, we announced that we would be expanding our core international business with the announced offering for United Messaging System. UMS is the leading Mass Notification provider in Scandinavia, with over 1,000 customers across Europe and Asia.

UMS offers two distinct solutions to its customers. The first falls into the category of Mass Notification solutions and the second into the crisis-management area. Our offering intent is to acquire the entire issued share capital of UMS for NOK 1.37 per share in cash. The offer values the total share capital of UMS at approximately NOK 268 million, approximately USD 34 million on a fully diluted basis.

The board of directors at UMS has voiced a strong support for the transaction, and we have already received pre acceptances from almost 70% of the existing shareholders. Our current schedule suggests that this transaction will close in early to mid-second quarter. We are excited about the potential to successfully complete this transaction as a specific step toward executing our international growth strategy, as well as substantially supporting the expansion of our core Mass Notification platform. But more on our strategic intent for UMS after the close of the transaction.

Next, we've enhanced our products with new releases during the quarter to ensure our continued success in selling more multi-product and larger transactions. We recently announced substantial enhancements to our ITA Alerting solution with the delivery of smart orchestration technology, which will create market differentiation by delivering the ability for organizations to automate critical incident response across multiple IT processes using intelligent workflow automation. Specifically, we will provide advanced cognitive and machine learning techniques to drive automation that can enable multiple IT teams across global locations to communicate, collaborate, and orchestrate using a single unified platform in concert with their existing systems of management infrastructure. And last, as it relates to our strategy execution, we continue to see a positive market response for our CEM solution.

In 2018, we plan to accelerate CEM success by continuing to expand the value of our CEM suite: first, migrating our VCC solution to a full SaaS implementation by the midyear point; and second, by integrating some of our newest products into CEM such as IT Alerting solution in order to enhance our workflow automation within the platform for managing the complexities of critical-event response and help us drive more operational use cases within our CEM platform; and third, we'll deliver on our promise of adding a new product to our platform every 18 months with the introduction of crisis or, call it, event-management solution. This new crisis or event-management solution will help enhance the value we bring to our customers by expanding the specific activities and tasks an organization's able to manage prior to, during, and after a critical event in combination with the visualization, location, collaboration, and communication capabilities our suite already offers customers. With a base of over 3,700 enterprise accounts, we believe this new solution will provide our team a strong up-sell and cross-sell opportunity within our base, drive large initial ASPs, and enhance the value of our strategic CEM suite for the enterprise. To help us execute on these operational initiatives, we recently added Jim Totton to the role of EVP for product engineering and operations.

Jim is an experienced tech growth exec that has held senior positions at Red Hat, Dell, and Microsoft, and will add significant strength to our management team in the year ahead. And on the M&A front, we'll continue to be out on a lookout for acquisitions that may assist us in our expansion or acceleration into markets or just make sense on a buy-versus-build basis. Now I'd like to turn the call back over to Ken for details on our financial performance during the quarter and the year, and our outlook for 2018. Ken?

Ken Goldman -- Senior Vice President and Chief Financial Officer

Thanks, Jaime. I'll provide some more detail on our financial performance for the fourth quarter and the year and then discuss our outlook for 2018. Revenue in the fourth quarter grew 37% from a year ago to $29.2 million and was above the high end of our guidance range. This strong revenue performance helped produce adjusted EBITDA that was also above our guidance at $1.8 million, an increase from adjusted EBITDA of $400,000 just a year ago.

Our dollar-based net retention rate remains above 110%, reflecting the significant value and satisfaction we provide to our customers. Now I'd like to turn to 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 of 72.8%, an increase from 72.6% a year ago and was at the highest level we've seen over the last three years, primarily due to our strong revenue performance. While we're pleased with the upward trend as our business scales, please keep in mind that, as we have said in the past, gross margins can fluctuate from quarter to quarter. Total operating expenses were $21.2 million in the quarter, an increase from 30% from a year ago, reflecting the combination of continued product and investments and additional costs related to our acquisitions in late 2016 and early 2017. As I noted, adjusted EBITDA for the quarter was a gain of $1.8 million, an increase from $400,000 a year ago.

Net loss for the fourth quarter was approximately $500,000 or $0.02 per basic share with our guidance range -- within our guidance range, compared to a loss of approximately $900,000 or $0.03 per basic share in the year-ago quarter. Our net loss indicates -- includes two items that were not considered in our previous guidance. We incurred approximately $400,000 in net interest expenses related to our convertible-notes offering completed in the fourth quarter. And we incurred a one-time charge of approximately $100,000 of income tax expense related to the Tax Reform Act.

Looking at the year as a whole, revenue increased 36% to $104.4 million with larger deals, higher ASPs, and an increasing number of multiproduct transactions contributing to this growth. Gross margin was 71.9%, down slightly from 72.3% in 2016, largely related to the costs related to our Crisis Commander and IDV acquisitions as well as costs related to our transition to a new broadcast engine at the beginning of the year. Adjusted EBITDA for the year was a gain of $135,000, compared to just above break-even in 2016. While this increase is small in dollars, it represents a meaningful improvement from our expectations for a loss of $1.8 million to $2.8 million at the beginning of the year.

Turning to our balance sheet, we ended the quarter with $146 million in cash, cash equivalents, and short-term investments, an increase from $47.7 million at the end of the third quarter due primarily to the completion of a convertible-notes offering during the fourth quarter generating proceeds of $115 million, partially offset by $12.9 million for the purchase of a capped call. Total deferred revenue was $73.1 million at the end of the year, an increase of 39% compared to end of the prior year. As we've noted on prior calls, our deferred-revenue balance at the end of any quarter can vary due to a number of factors. As such, even though we predominantly annual payment terms deferred revenue was not always a meaningful indicator of the underlying momentum in our business from a quarterly perspective, though we believe it is directionally relevant over a longer-trended period.

Operating cash flow in the quarter was negative $484,000. Free cash flow was an outflow of $1.4 million for the quarter and an outflow of $3 million for the full year compared to an inflow of $3 million in 2016. The change in free cash flow is primarily due to the timing of certain customer payments which were received in January. Now let me turn to our outlook.

We made significant momentum in the marketplace in 2017, which we expect to continue in 2018. In addition, we're excited about extending our product portfolio and international footprint upon the completion of our tender offer for Unified Messaging Systems. At this juncture, we're confident that we'll be able to close on our acquisition of UMS in Q2 2018. And therefore, we're including the impact of UMS in our guidance today.

However, since we're still early into the process, there is some uncertainty as for our estimates for both top- and bottom-line impact. With that backtrack, for the full year 2018, we anticipate revenue of $135.6 million to $137.1 million, representing growth of 30% to 31%, including a contribution of $3.5 million to $4 million from UMS, after taking into account a partial year and the purchase accounting impact of acquired deferred revenue. From a profitability perspective, we managed effectively in 2017 to produce strong growth while also delivering positive adjusted EBITDA earlier than expected for the full year even with the continued investments in our business and the impacts of our Crisis Commander and IDV acquisitions a little over a year ago. In 2018, expect to maintain that same focus on balancing growth and profitability.

However, with the deferred-revenue impact from UMS, we expect the acquisition to negatively impact our profitable core business by approximately $4 million to $5 million. Therefore, we anticipate full-year adjusted EBITDA to be in the range of a loss to $4 million to $3 million. We expect a non-GAAP net loss of between $17.6 million and $16.6 million for the full year 2017 -- full year 2018, excuse me, or between 61 and -- negative $0.61 and negative $0.58 per share based on 28.8 million basic weighted share -- average shares outstanding. This includes the impact of an estimated $6.3 million in interest expense related to our convertible note.

This guidance assumes an estimated stock-based compensation expense of approximately $25.1 million for the year, with the increases from 2017 reflecting a number of recent executive hires and anticipated growth in staffing companywide. Now turning to the first quarter of 2018, which will not be impacted by our proposed UMS acquisition. We expect revenue to be between $29.4 million and $29.7 million, or a growth of 29% to 30%. Note that with the IDV acquisition in early Q1 of 2017, this growth is predominantly organic.

We anticipate an adjusted EBITDA loss of between $2.8 million and $2.5 million, which reflects the timing of certain expenses as well as costs incurred in the first quarter related to our acquisition of UMS. We anticipate a non-GAAP net loss of between $12.5 million and $12.2 million, or between $0.21 and $0.20 per share based on 28.5 million basic weighted average outstanding shares. Stock-based compensation expense is expected to be approximately $5.7 million for the first quarter. In summary, our strong fourth-quarter performance finished out a banner year for Everbridge, with record revenue and positive adjusted EBITDA ahead of our expectations.

We continue to see strong growth in core Mass Notification, further expansion within our existing customer base, and ongoing success attracting new customers to our Critical Event Management suite. We believe our proposed acquisition of UMS further enhances our position in the market as we continue to penetrate a multibillion-dollar global opportunity. With that, operator, we're now ready to open up the call for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press the * then the 1 key on your touchtone telephone. Please limit yourself to one question and to one follow-up. Again, if you would like to ask a question, press the * then the 1 key on your touchtone telephone.

And our first question comes from Brad Sills with Bank of America Merrill Lynch. Your line is open.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

OK, guys, thanks for taking my question. Wanted to ask about the state of Tennessee deal and just state deals in general. Are you -- who are you seeing competitively there? Is it still these kind of regional vendors that you've seen in the past or as you get into some of these bigger deals, is the competitive environment, your landscape changing at all?

Jaime Ellertson -- Chief Executive Officer and Chairman

Thanks, Brad. Yes, I mean the sticky -- our large -- we don't want to focus just on states. We would call it our large counties, cities. New York City can be as big a contract as any state in the U.S.

And several other cities and then states, of course, all fit into our public announced kind of market focus. And with three or four states down, there are quite a few left, probably 25-odd states that we're building a pipeline focused around. In most of those transactions we see a whole host of small to medium-sized Mass Notification vendors. Most of them based -- competing solely based on price.

And then as we said in the very public Florida bid, we saw everyone from AT&T and some of the big technology services companies to those same regional players that are big on price. So it has remained somewhat consistent. We hope, with the continuum of awards, it's very clear that we are the -- not only safe but reliable predictable solution that most large entities are using and so we are a good fit for the remaining states we have on our target list. And that's a robust pipeline.

But no significant change in competition.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, Jamie.

Jaime Ellertson -- Chief Executive Officer and Chairman

You bet.

Operator

Thank you. And our next question comes from Richard Davis with Canaccord. Your line is open.

Richard Davis -- Canaccord Genuity -- Analyst

Hey, thanks very much. So quick question -- so sometimes I get questions from investors about headcount growth, in this sense: and so you can have -- can you have multiple instantiations of, like say me, depending on the situation I'm in? So say I'm in an airport or at a concert or I guess now in Tennessee or something like that. And then -- and so the way to think about your addressable market is those multiple instantiations. And then the second question, I did get from someone that was kind of an interesting question, he said, "Look, is there a point where you'd have a single messaging identity? And if so, is that a good thing or a bad thing for you guys?"

Jaime Ellertson -- Chief Executive Officer and Chairman

Yeah, thanks, Richard. So first part of the question can you have multiple profiles, as it were, in our Everbridge environment. The answer is, typically we want to have you -- have one. But people pay more depending on how many products they're licensing.

So if you're licensing ITA or IT Alerting product and you're licensing Safety Connection Pro and you're licensing VCC and accessing all those products, you'd pay roughly a multiple of what you'd pay if you were just in our -- as a profile in Mass Notification. So we do want to create a single messaging profile if we can. We're up to now -- we've surpassed 200 million people within our database. So when you think about in U.S.

numbers, that's a substantial majority of the population and growing rapidly. And that will expand if we are able to successfully conclude our combination with UMS. But generally, we don't want to create two profiles because we want to simplify for an organization to buy our enterprise suite. When you buy that enterprise suite and you've already done the HR load and you're actually maybe doing a real-time or a daily update of your HR profiles for people, you don't want to have to do it 10 times for 10 products, you'd want to do it once, and have that be a central repository.

Often we find in large enterprise accounts, large financial institutions, manufacturers, technology companies, our profile is more robust than the HR system because in our case, the employee wants ours to be updated 100% and accurate because it could be for life-or-death reasons that you're getting a communication. So that's how we'd answer those two questions. First, we do create value with multiple applications, even though there's a single profile. We do charge a lot more for use of multiple applications.

But B, we do focus on a single profile to coordinate on the enterprise basis message. And that's a good thing, we think, for ourselves.

Richard Davis -- Canaccord Genuity -- Analyst

Got it. Super helpful. Thanks so much.

Jaime Ellertson -- Chief Executive Officer and Chairman

You bet.

Operator

Thank you. Our next question comes from Scott Berg with Needham. Your line is open.

Scott Berg -- Needham -- Analyst

Thank you, and congratulations on a good quarter. A couple from me. First of all, Jaime, can you go a little bit over the strategic rationale to bring UMS into the fold, maybe specifically from the product side or how it's going to help your geographic expansion [Inaudible] in the short term?

Jaime Ellertson -- Chief Executive Officer and Chairman

Sure. And thanks, Scott. Yes, I mean UMS, A, I've gotta reemphasize, it's not a closed transaction so we remain a little bit, we like to call ourselves a mature management team that's thoughtful and so you're going to hear relatively little till it closes. It clearly brings a combination of Mass Notification product set.

They have over 1,000 customers in Europe and Asia. And meaningful concentrations in places where we did not have geographic presence. So that's one of the strategic reasons for the purchase we've talked for a long time about. In some cases it's just cheaper to buy that than to build it out at our own dollar cost internationally.

And then they have another product category called Crisis Management. Not the same as I announced an intention to build on this call, crisis or event management workflow and management of the actual activities within a major critical event. But related, in that, it's a planning and resource tool that's used by major state agencies in the U.S., like Massachusetts, Virginia, Pennsylvania, and they're large transactions, anywhere between $0.25 million and $1 million. As well as internationally they've sold it to entire states to use as the fundamental crisis or event management toolset.

So we think that product will fold in nicely with our newly announced, as of today, crisis/event management solution that we'll come out with this year in the market. Other than that, and the geographic footprint that it adds to us with really smart people at UMS, we really don't have too much more to talk about until the deal closes. Once the deal closes and we are confident of things, we do have other substantive strategic rationale. But we'd like to wait until the deal closes to get into that.

Scott Berg -- Needham -- Analyst

Fair enough. Helpful. And I guess as a quick follow-up to Jaime, my hand started to hurt based on the metrics you were given early in your prescripted remarks, about the sales of kind of non-Mass Notification and the momentum you're having there. Could you refresh us maybe how many modules your average customer has today? How has that changed over the last 12 to, say, 24 months as you've had more success on non-Mass Notification modules? And maybe what's the right way to think about over the next couple of years?

Jaime Ellertson -- Chief Executive Officer and Chairman

Yes, well, first we've always had this moniker that we're -- we began in the emergency-notification space. And a simple way to think of us is just someone who sends a lot of messages. That really does us a disservice with our very much now enterprise suite and broadening strategic value to enterprises. So about a year ago, when we went public, we announced that we'd provide the metric for not just our core Mass Notification business, which at the time of going public was 80%, 85% of our revenue.

That has been offset by the dramatic increase in success of our new products, which are non-core, non-Mass Notification or instant communication, which is just the templated, automated version of Mass Notification. And those include Safety Connection Pro, Community Engagement, our CareConverge -- formerly Secure Messaging, -- VCC product this year, a number of the other new products. And so as you think of them, we're trying to give you a metric. The 46% today means that almost half of all new and growth sales, not renewals -- because that would be still substantially Mass Notification-driven -- but in the last four quarters, it's gone up every single -- the last five quarters, it's increased every single quarter, meaning we're selling more and more of our Mass Notification products.

And one of our strategic drivers with that broadening product set now, with the announcement of the new one, nine products across our suite, we want to sell more multiple products into the base. So we have 3,700 customers. The answer to your question is, we still have less than two on average across the all 3,700. And so there's a big opportunity to sell six or seven other products to the existing base.

I referenced a couple of very large sales, like Noble Energy and others today that we're selling multiple products into. That helps grow our business. As well as in the new accounts, we don't want to start with just a single product, we want to sell multiple products and grow the average transaction price. And a number I don't think I gave, or I may have given quickly, was ASP is up to over $40,000 at $43,000 or $44,000 per average deal.

And so that's been climbing steadily too. So that's the reason we talk about the new products, they're so important to us. And long term, as we add products, of course, we're increasing the TAM that we're going after and the ability to grow revenue on both the new and the growth side with those new products.

Scott Berg -- Needham -- Analyst

Thank you. Very helpful. I'll jump back in the queue.

Operator

Thank you. Our next question comes from Tom Roderick with Stifel. Your line is open.

Tom Roderick -- Stifel Nicolaus -- Analyst

Hey, gentlemen. Good afternoon. Thanks for taking my question. So, Jaime, I wanted to dig in a little bit more on the state deals and large city deals.

It just feels like the cadence of those deals is picking up. You've had more to talk about lately and it does -- it seems interesting that you seem to be picking up some steam there. Can you just talk a little bit about what might be driving that? Is there a bit of a critical mass element that's coming into play where cities talk to cities, states talk to states, and they're all trying to get on the same page and accelerate their own efforts? And then kind of second part of that is, how do you think about the pipeline for those larger transformative state and big-city deals as you look ahead into the rest of this year?

Jaime Ellertson -- Chief Executive Officer and Chairman

Yes, I really should just turn it over to you, Tom, because you basically gave the answer to the question. And the question, you're right, there's a certain amount of momentum, we do hope we don't take anything for granted. But well over a year ago, when we went public, we announced that we had a specific intention and focused effort within our state and local business. We hadn't announced the federal effort yet.

And that was to go after the larger state contracts because once we could land the state contract like state of Connecticut or state of Florida or state of Vermont, you do have an advantage going back in and kind of gaining the confidence and momentum within hospitals, other peace apps, the 911 centers, municipalities, or educational institutions, which often have to be in an emergency planning process all at the same time with the state. They have to have approved plans, typically by the state, driven down to the municipalities in some of those large population centers like major educational institutions. And so it does help us dramatically to win a state or a very large set of counties and then surround that effort. And we think about it that way because much like you see the mobile Verizon, AT&T competition map with saturation of mobile, if you pick the top 10 or 20 cities in the U.S.

and those regional areas, you would find most of the population. And our application on the Mass Notification basis for citizens is driven by the number of citizens you have in a county. That's how we price it. And so for a continuing period, we've -- as I said on the call, we have developed about a pipeline of about 25 targeted states, we continue to knock those down.

We try to do as many as we can in a given quarter. You will see highs and lows in that because they are long-term deals. They take between six months and one year to close, and often involve a thoughtful process to drive an RFP and then respond and win. And then as in New York City, believe it or not, we -- I think we announced New York state two quarters ago, we actually had already been verbally committed and won verbally New York City before New York state was announced.

But then it took almost nine months to go through the contracting process. Just validation and all the state control. So depending on the size of the opportunity, they take a bit of time. But we're pretty confident that we'll continue to deliver with that focused effort.

And we're probably equally as excited to drive -- that's to drive our core Mass Notification business -- about the federal opportunity. As I said, we'll finish accreditation in the next few months, we're in the final auditing processes now. And then that opens up a whole new market, which is certainly equal to a large number of the states, and are all state-like deals when you deal with a larger entity in the federal government on an enterprise basis. So the combination of those two things drive the sustainability of our core business so that with all the new growth, we're not replacing one growth vector with the other.

They're additive.

Tom Roderick -- Stifel Nicolaus -- Analyst

Excellent. Ken, possibly a related follow-up to that point. In your prepared remarks, you talked about cash flows being impacted somewhat negatively by collections that are slipping into January. So perhaps a few large customers pushing payments.

But did note that the accounts receivable and related DSO lines are higher than typical. Can you just talk a little bit with some more detail around what's driving some of those collections into January? And should we just expect a bit of a snap-back in cash flows from operations in Q1?

Ken Goldman -- Senior Vice President and Chief Financial Officer

Yes, you should expect a snap-back in Q1. We've already seen a recovery. Although, as you know, it can be sporadic. The reality is that we have a very, very low charge-off rate.

But if a customer decides to pay us on January 5 versus December 28, there's not a lot we can do about it. Our customers are very good about complying with the terms of their contracts. But this fourth quarter, we saw a couple of them just hold on to their cash, trying to improve their cash balance and then making payments as expected, early in January. Our DSO is basically in the normal range.

Again, very low charge-off. And with regard to accounts receivable, we had a strong Q4, so you would expect that. As you know from past discussions, we tend to be back-end-loaded into quarters, especially in Q4, for our corporate and healthcare business. And so that's going to push AR up.

We've talked about this on numerous calls in the past, that the metrics on the balance sheet, like deferred revenue, like accounts receivable are not necessarily indicative on an absolute basis in the quarter. But if you look at it over a four-quarter trend, you get a better sense of it.

Tom Roderick -- Stifel Nicolaus -- Analyst

Excellent. That's it for me. Thank you, guys.

Ken Goldman -- Senior Vice President and Chief Financial Officer

Thanks very much.

Jaime Ellertson -- Chief Executive Officer and Chairman

Thank you.

Operator

Thank you. Our next question comes from Brian Peterson with Raymond James. Your line is open.

Good evening, gentlemen. Thanks for taking the question and congrats on the quarter. So I just wanted to start on the UMS acquisition. Ken, you gave a lot of details, but if I think about the deal in terms of the margin impact in the second half of the year, I'm just curious, does that reflect, at least qualitatively, a significant investment from you guys in the region? Or would you say that's sort of the run rate of the existing operations?

Ken Goldman -- Senior Vice President and Chief Financial Officer

A little bit of both. I mean the reality is that although we've done a significant due diligence prior to making the offer, we haven't taken ownership yet. We can't see everything until we get in there. It's going to take a little bit of time to align it with our approach to doing business.

And as such, we are taking a conservative viewpoint when we give guidance. As I mentioned, we may fine-tune our guidance once we get into it. But for now, we feel comfortable to say we don't expect a dramatic change in our margins. But the biggest challenge that we have is not on the expense side, it's on the revenue haircut that unfortunately accounting regulations require we take.

Brian Peterson -- Raymond James -- Analyst

Got it. And maybe just one more. Obviously, you guys have had a lot of success with some of these larger public-sector contracts. As we think about those rolling into the P&L, is there any change with those where they could come on early in '18 or the middle of '18 or potentially do those get pushed into '19? I'm just curious how that's actually going to impact the P&L.

Thanks, guys.

Ken Goldman -- Senior Vice President and Chief Financial Officer

Well, remember that with all of our customers -- and we do daily revenue recognition, 1/365 per day -- and the timing of the signing of the contract, the specifics with regard to those larger deals, which tend to be potentially a longer, more involved implementation than our typical corporate sale, which can be up and running in a matter of hours. Again, you know us well enough at this point to know, we just -- I hate to keep using the term conservative, we take a conservative viewpoint in terms of revenue recognition. That said, the numbers we've given, we feel pretty comfortable are realistic. We always want to do better because we're extremely goal-oriented.

Brian Peterson -- Raymond James -- Analyst

Got it. Thanks, Ken.

Operator

Thank you. Our next question comes from Brent Bracelin with KeyBanc Capital Markets. Your line is open.

Clarke Jeffries -- KeyBanc Capital Markets -- Analyst

Hi, this is Clarke Jeffries on for Brent. I was hoping I could dig into the example you gave in the remarks about PSEG and the expansion of the use case from strictly emergency to more operational use. Is that something that you're seeing your customers ask for more, sort of how that relates to Smart Mark orchestration? It might not be the competency of an ITSM or an ITOM to have the kind of configurable communications that an organization might need, and so they would look to you for orchestrated communications to the right individuals in the organization?

Jaime Ellertson -- Chief Executive Officer and Chairman

Clarke, we're going to invite you back again. Don't tell Brent I said that but those are two great questions and it hits to part of our strategy. One, on Mass Notification in many cases, will sell a company, it could have been three, four years ago, it's been a customer for a while, Mass Notification. And they're checking a box to have an emergency communication capability for all the horrific events we see that are happening with increasing regularity, a hurricane, an earthquake, or a mass shooting.

But they only roll it out to, say, their business continuity players or certain people within the organization. That leaves a healthy base within our 3,700 customers, especially ones that were sold years ago, that we can take from a departmental deployment, which is what PSE&G, the large energy concern the East Coast had, and move them to a -- from a couple hundred users, to in their case, I think it's 12,300 for critical events and regular employee communications. And more and more we see that. That's a normal growth vector for us and a way we sustain continued growth in the large base, nearing now 3,711, nearing 4,000 enterprise accounts where we can grow them without even selling a new product.

Just better penetration of the core products. In the same way, with the ITA product and Smart Orchestration, yes, Smart Orchestration allows us to do a couple of things. One, it allows us to better target the right people faster to remediate an incident when a system outage happens. But Smart Orchestration also allows us to almost automate the response to draw up a workflow and use certain rules to take an action when something's down, like actually restarting a server because it qualifies that this has happened three times before.

And in this type of event, you don't risk any of your infrastructure by restarting the server. And so not only can the ITSM, the IT systems monitoring system, send us notification that something's down or not working. But we can then take that and when it's determined to be a certain type of incident, we can even automatically send a message to the right system that will reboot the system and bring it back online. And in that case, saving minutes, sometimes hours that could save businesses millions of dollars a year over a crude event.

So Smart Orchestration, yes, allows us to message better and more precisely, but in the future it allows us to do more automated process with rules and even as we said, cognitive ability to really make sure that remediation is dramatically reduced on major events.

Clarke Jeffries -- KeyBanc Capital Markets -- Analyst

Great. Thanks for the color.

Jaime Ellertson -- Chief Executive Officer and Chairman

You bet.

Operator

Thank you. Our next question comes from Mike Latimore with Northland Capital. Your line is open.

Mike Latimore -- Northland Capital -- Analyst

Yeah. All right, thanks a lot. Nice quarter. On the UMS acquisition, do you see that being applicable sort of evenly to government and enterprise, or is it more on one side of the vertical there?

Jaime Ellertson -- Chief Executive Officer and Chairman

The UMS customer base is broken down across both the -- their Mass Notification products come in a couple of different flavors, some are sold to major corporations like the oil and gas space in Norway or leading financial institutions. And then you can find them doing the entire population alerting for a small country somewhere. So in the Mass Notification space, it's both public and private as well as healthcare. They sell in all the verticals we do.

And so we think that's a good fit. And then on the kind of crisis management product, that's more planning and resources. And they sold that into leading states, entire state contracts which you could think about the reverse opportunity there -- if they've already sold in planning to a Massachusetts or Virginia, does that helps us seize an opportunity to go after the statewide contract? They have four or five of those in the U.S., I believe. Certainly, we know of Massachusetts, Pennsylvania, Virginia, and I think New Mexico.

So three or four at least. And then they have multiple ones in Asia where they've recently sold. And so they are a mix -- the crisis-management product is much more public in nature and sold to federal governments or state and local governments. And then the Mass Notification product is probably a pretty good balanced mix like ourselves.

Mike Latimore -- Northland Capital -- Analyst

All right. And then obviously momentum on the -- with state deals, large city deals this year organically, I guess, should we think about government growing as a percent of revenue? Or do you have a similar momentum on enterprise and governments stays at a similar percent of revenue over time?

Jaime Ellertson -- Chief Executive Officer and Chairman

Yes. Our strategy is outlined, the first strategic point in our plan out of our three major points is, we want to maintain our growth level with our core Mass Notification product. We don't break it out, but we do tell you that the new products are growing faster because they're smaller. We had a -- when we went public, as was stated earlier, $80 million-plus base of Mass Notification customers -- or 80%, excuse me, of our revenue was roughly Mass Notification.

So a very large portion of our base. We want that to continue to grow as it has over the past couple of years. Because then when we add new products in, that is really accelerating our growth instead of just offsetting a declining revenue base. So the large county, city, and state focus is to make sure we are growing that business in addition just to the normal-sized public contracts we sign every day.

The federal opportunity opening with FedRAMP is to make sure that base continues to grow and provides a growth platform for the company, which new products and the CEM suite can accelerate total growth in because it's not replacing revenue, it's purely additive. And ultimately, the international revenue and the partnership potentially with the UMS allows us to sustain that core Mass Notification base. So the strategy all along has been, keep that growing at current growth trajectory or slightly better, and then go after these new product areas with the new products and CEM to substantially accelerate us into -- in the last year, I think roughly 30%-plus.

Mike Latimore -- Northland Capital -- Analyst

Great. Yeah, thank you.

Jaime Ellertson -- Chief Executive Officer and Chairman

You bet.

Operator

Thank you. Our next question comes from Eric Lemus with SunTrust Robinson Humphreys. Your line is open.

Eric Lemus -- SunTrust Robinson Humphrey -- Analyst

Hey, guys. One just quick question from me. On VCC, any update on where you are in supporting a multitenant architecture?

Jaime Ellertson -- Chief Executive Officer and Chairman

Yes, I mentioned that as a strategy on CEM, we're dead on track, our team says. So I would always hedge that and say it could be a month or so off, but we're pretty much right on track with the delivery midyear. And that will enable us to sell on a single platform and CEM the VCC suite, Mass Notification, our instant communication and Safety Connection Pro for dynamic locations, all integrated into a single operating view for situational awareness, identification of location of people, travelers, field workers, people on a campus as well as communication-collaboration tools, all on one multi-instance -- single-instance multitenant platform. And it's I would just tell you it's on track.

Eric Lemus -- SunTrust Robinson Humphrey -- Analyst

Great. Thanks.

Operator

Thank you. And our next question comes from Michael Nemeroff with Crédit Suisse. Your line is open.

Michael Nemeroff -- Credit Suisse -- Analyst

Hey, guys. Congrats on a good quarter. You highlighted some strong partner-led wins in the quarter but how much revenue are channel partners driving to Everbridge, Federal Signal and International SOS? And how is that trended versus direct sales and how does that differ internationally versus domestically, let's say?

Jaime Ellertson -- Chief Executive Officer and Chairman

So we've kind of said, for probably the last four quarters, that it's been roughly 10%. And so that means it's been growing. This last year, at roughly 36% because we grew year over year at 36% and it kept pace. In the -- other than that, Michael, we haven't broken it down.

We don't break out partners versus channels. I would tell you, though, there is no question as we mature with some of these relationships, International SOS almost tripled the number of deals and referrals they brought to us. And we closed -- I mean, leading brands like Cirque du Soleil or Ericsson was a combination deal, multiple six-figure deal we did with them. So as time has progressed, our sales forces are working better together and we're closing deals.

We've started to close our first Asian deals, some of those with assistance of International SOS and other partners. And I didn't -- I can't in my prepared remarks, Ken clobbers me with the length of my script already. And so I didn't get into all the partner wins. But in Italy, just as a one-off somewhere picking a country, we closed two pretty sizable deals there, one for a 50,000-employee company, Leonardo, a leading aerospace company.

So we're seeing the partner momentum pick up slowly. It's still going to take us some time. One positive note with UMS is they have some strong partners as well. And we think that will be additive over time.

So I would look and certainly with UMS, you're going to see our international business grow and get more to steady-state growth. But right now, 36% year over year, which maintains about 10% of our total revenue. With UMS, it will be larger. And growing success with partners in the most recent quarter, just volume and transactions definitely up even though we don't break out exact numbers.

Michael Nemeroff -- Credit Suisse -- Analyst

That's helpful. Thanks, guys. Congrats on a good quarter.

Jaime Ellertson -- Chief Executive Officer and Chairman

You bet. Thanks, Michael.

Operator

Thank you. I'm showing no further questions at this time. I would like to turn the call back to Mr. Jaime Ellertson for any closing remarks.

Jaime Ellertson -- Chief Executive Officer and Chairman

Well, we just -- we appreciate everyone joining us for the call today. With our -- what we think is a very strong Q4 and full-year set of results we believe we've set ourself up, as I said, for a successful 2018. And we look forward to talking to you either at conferences or in calls in the future. Thanks very much for your attendance today.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.

Duration: 63 minutes

Call Participants:

Ken Goldman -- Senior Vice President and Chief Financial Officer

Jaime Ellertson -- Chief Executive Officer and Chairman

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Richard Davis -- Canaccord Genuity -- Analyst

Scott Berg -- Needham -- Analyst

Tom Roderick -- Stifel Nicolaus -- Analyst

Brian Peterson -- Raymond James -- Analyst

Clarke Jeffries -- KeyBanc Capital Markets -- Analyst

Mike Latimore -- Northland Capital -- Analyst

Eric Lemus -- SunTrust Robinson Humphrey -- Analyst

Michael Nemeroff -- Credit Suisse -- Analyst

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