May 9, 2017
Executives
Kenneth Goldman - SVP and CFO Jaime Ellertson - Chairman and CEO
Analysts
Michael Nemeroff - Credit Suisse Terry Tillman - Raymond James Scott Berg - Needham and Co. Richard Davis - Canaccord Brent Bracelin - Pacific Crest Securities Brad Sills - Bank of America Merrill Lynch Dmitry Netis - William Blair
Operator
Good day, ladies and gentlemen and welcome to the Everbridge First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.
[Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr.
Kenneth Goldman, Chief Financial Officer. Sir, you may begin.
Kenneth Goldman
Good afternoon and welcome to Everbridge's earnings conference call for the first quarter 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 the 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 as of today and should not be considered representative of our views on 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 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 on a quarterly result.
Please be advised that we may or may not continue to provide this additional detail in future. With that, let me turn the call over to Jaime for his prepared remarks.
Jaime Ellertson
Thanks, Ken and welcome to all of you that are joining our first quarter of 2017 earnings call. We're off to a solid start in 2017 with both revenue and adjusted EBITDA coming in above the guidance for the first quarter.
Revenue of $22.8 million increased 34% from a year ago. We benefited from a combination of strong underlying fundamental performance in our core and new product offerings and were moderately better than contribution through our recent acquisition.
And on our strong revenue performance combined with our balanced approach to expenses, it resulted in adjusted EBITDA that was meaningfully better than our guidance for the quarter. Our Q1 results represent a solid confirmation of both the continued strength in our core mass notification business as well as market validation of our new products such as safety connection and IT Alerting, that increasingly contribute to our success by enabling multi product sales and a growing ASP.
Our market momentum is driven by three main factors; first the growing awareness severity and costs associated with the currents or critical events that can threaten the safety of people and disrupt the operations of organizations. Second, the rising dependency on IT services making 24/7 availability, a requirement for corporations, governments and other organizations, and third the increasingly mobile and distributed workforce, which makes it more challenging to protect and locate employees impacted by critical events.
In response to these market factors, we've announced our critical event management or CEM platform, which provides organizations the ability to manage and respond to relevant threats or major events that occur. Then by identifying the intersection of these threats and the events on the organizations people assets or brand, CEM provides a context to take action that is effectively managing the incident with the appropriate standard operating procedures or implementing different forms of communication and collaboration all to ensure the safety of people and the continued operation of businesses.
As we look ahead to the remainder of 2017, we see momentum building for our critical event management strategy and our ability to capitalize on a very large addressable market. In the first quarter, growth was driven by increasing demand for SaaS platform from both new and existing customers including those who joined us through our January acquisition of IDB Solutions.
We added 113 net new customers during the first quarter, which is in line with our expected range in addition we continue to see momentum signing new multi-product deals. In the first quarter, we signed 54 such deals which represent a meaningful increase over the 41 multi product deals completed in the same period one year ago.
And a total of 54 multi product deals in Q1 also increases our trailing 12 month average to 49. Now before I proceed, allow me to take a moment to remind you of how we are defining multi product deals.
As I stated last quarter, this multi-product deal metric is an important goal in our 2017 business plan and a key barometer for the success of our long term growth strategy. The metric is comprised of all new and growth transactions we complete in a quarter that includes more than one product that means that we only include deals into our strong base of 3,000 plus customers growth deals if they're purchasing a new product that has not been previously subscribed to and now have two or more products from Everbridge.
And for new deals, we only include customers that purchased two or more products on day one. In Q1 we drove many of these multi product wins to the creation of new multi-product bundles that are targeted at specific vertical market such as our corporate vertical.
One example of these new solution bundles is our Safety Connection Pro which combines our safety connection mass notification and incident management solutions into one offering to enable organizations to automate the process reaching employees regardless of where they are. Allow me to provide a few representative wins from Q1 to illustrate how these product bundles or multi product deals are driving larger transactions.
On the large enterprise end of the scale, let's talk about MasterCard, a household brand in the financial services space with its namesake credit card offering. MasterCard purchased our Safety Connection Pro multi product bundle and will be rolling it out to all their employees worldwide that means two of the top three credit card businesses are now Everbridge customers.
And sticking with the theme of large enterprises, One Oklahoma a Fortune 200 diversified energy company purchased 4 of our platform products, Safety Connection Pro bundle again that includes mass notification and safety connection as well as IT Alerting for a multi 6 figure transaction. One Oklahoma will be using our solution for everything from scheduling crew call outs to IT service restoration.
Just in case you're asking yourself if we can only accomplish these multi product or bundled sales at the large end of the market, allow me to illustrate our success at the other end of the market beginning with a small New York City based technology company focused on business process and compliance automation with just over 100 employees who was an existing Everbridge mass notification customer and purchased both our Safety Connection and Crisis Commander solutions to move from a single product user to three product user resulting increase in annual spend of 10x. Another small enterprise multi product win Ascent Resources and all production service company, it was looking for basic emergency notification capabilities and tell the Everbridge team demonstrated how our Safety Connection Pro solution could not only provide emergency notification to the employees, but also system and supporting their lone workers out in the field by providing dynamic locations as they perform service on various distributed oil pads.
As a result we're able to expand the basic emergency notification win into a multi-product safety connection pro deal at over 300% the size of our original proposal. You can see from these examples, our focus on increasing ASP's by driving multi product deals is off to a very strong start in 2017.
In addition, our standalone version of safety connection achieved the strongest results since its introduction one year ago by delivering more than 100% quarter over quarter increase in total new and gross sales in Q1. During the quarter, we closed standalone Safety Connection deals with leading brands and organizations like Hulu and indeed.com.
Indeed one of the world's' largest a fast growing job sites, chose our mass notification solutions after running a very competitive purchasing process. And then came back to us in less than two months and doubled their employee headcount as well as added our Safety Connection Pro solution for all employees increasing both the number of employees covered by our mass notification solution as well as the number of product they subscribe to from one to four.
Most importantly they increased their overall spend by 300% in three months. In Q1 we saw other leading organizations purchase Safety Connection including names like Voloom, NVIDIA, Eatsy and BB&P [ph] to name but a few.
Ultimately we believe that growing demand to manage the physical safety and security of increasingly mobile workforce will continue to drive our successful Safety Connection and when combined with our very substantial growing customer base or our core mass notification application will provide a strong foundation for sales of our expanded critical event management platform. Our CEM platform is comprised of the integration of our recently purchased visual command center from IDV for threat assessment and visualization.
Our Safety Connection solution for dynamic location of people and assets impacted and our Incident Management and mass notification solutions or process automation and communication and collaboration. Everbridge Critical Event Management is unique in its ability to provide enterprises a single pane of glass solution for managing the growing number of threats that impact organizations and create risk for the people and operations everyday around the globe.
Today we provide our CEM Solution with basic integrations between our products based on our longstanding partnership between Everbridge and IDV. And as I previously stated, we plan to have a more advanced integration in the market by early next year.
For the first quarter, we introduced our CEM strategy into a number of key customers and prospects and had been very encouraged by the initial response. We'll keep you updated on our progress for CEM over the course of this year.
And speaking of specific product success, allow me to provide you a few examples of the key customer wins for our other major products during the recent quarter. For our core mass notification solution, we closed new logos including leading technology firms as Oracle, who purchased a company wide deployment resulting in a multi 6 figure deal and Cadence System as well as other organizations like Zions Bank, MIT, Johnson County North Carolina, Texas A&M, Cubic Corporation, BJ Wholesale Club and our second pro football team, the Buffalo Bills.
For IT Alerting solution, we had new logos is like Numora, an existing mass notification customer rolled out our IT Alerting across the large financial services organization resulting in a 250% increase in their annual spend with Everbridge as well as a number of other leading organizations like Ameriprise, University of Minnesota, Credit Suisse, Mount Sinai Hospital, Olympus Corporation and Tel Labs [ph] to name just a few. And our next level communication solution added leading county government organizations such as Brown County Minnesota, Lake County North Carolina and Yuba City California.
Finally our newest solutions, Visual Command Center and Crisis Commander added new customers like Medtronic's and Sony pictures respectively. Additionally we continue to see success with our major vertical markets efforts in the government space where we signed new cities like Lansing, Michigan, new counties like Saint Louis County in Minnesota, new transportation organizations like Spokane International Airport and Metropolitan Transportation Commission of California, and new state agencies like the West Virginia Division of Homeland Security and Emergency Management.
As we previously stated, we have a number of pending bids and contract activities with certain states in major metropolitan areas and expect to announce some significant contract awards in the next 60 days. Internationally, we signed a number of new customers across several different geographies from -- construction in Germany, to Vale Oil in Saudi Arabia and Sumitomo Chemical in Japan.
In addition two deals stand out from the Q1 international tally, first Airbus industries moved from a small initial deployment of our mass notification in the US to a global rollout of safety connection managed out of their headquarters in France for their 70,000 employees. The Airbus win is notable because the company is one of the world's largest aviation manufacturers and they already possess a mass notification solution to one of their existing subsidiaries.
This contract expands Airbus annual spend with Everbridge by over 400%. One other interesting new international customer in Q1 was the Metropolitan Police service in the UK.
London's Metropolitan Police employs around 31,000 officers covering area of 620 square miles and a population of over 7 million people. They chose Everbridge to enable the delivery of time sensitive information on criminals and terrorists activity directly into their over 1500 police vehicles across London.
Now that's a mobile app. During the first quarter we also continue to witness success with our land and expand strategy.
Through many ongoing customer rollouts as well as the addition of new products and existing customers. Including examples like existing state local government customer CALTRANS that California Department Transportation moving from two existing divisional implementations and mass notification to all 12 division statewide focus on communications for routing employees safety and business interruptions.
For corporate customer, American Airlines expanding from a headquarters base deployment of mass notification to a global roll out of safety connection resulting in another multi 6 figure deal. For pharmaceutical customer Biogen, my recently mentioned added safety connection late last year and Q1 extend their use of our platform of the role of our IT alerting solution.
Biogen now uses 4 of our platform products up from just one less than two years ago. And finally in the healthcare space the second largest children's hospital in the US Philadelphia Children's, expanded the usage of Everbridge by acquiring both our IT Alerting and our new CMS emergency preparedness solution doubling the total investment in Everbridge annually.
As I mentioned earlier bundled multi product sales made up a growing portion of new deals in the first quarter. Our ability to land these larger transactions as a result of investments, we've made in our newer products.
The first quarter new products accounted for 32% of all new and growth product sales on a trailing 12 month basis. The continued growth in this metric reflects our investment in developing new and enhanced solutions to cross sell and to create new entry points to customers beyond the core mass notification applications.
Now before I close and turn it back over to Ken, I'd like to highlight just a few of the other operationally significant accomplishments by the business in Q1. We completed our largest infrastructure project over the past several years with the deployment of our new core communications engine featuring our new generation architecture.
This new architecture allows our communication engine to provide up to 100 times greater performance scale of throughput than the previous generation. It makes use so that they have software to find infrastructure capabilities that allow us not only to scale up and down rapidly but also to deploy complete new engines anywhere in the world automatically within minutes.
This allows us to deal even more efficiently with high global or local concentrated demand anywhere in the world on a variety of infrastructure providers. And given the customer adoption of our growth in community engagement products, we also expanded and strengthened the infrastructure that supports our CE modules including our next level solution during the quarter.
We also completed the migration of substantially all of the former vocal iModus customers that's our UK acquisition. On to the Everbrige suite and shut down the iModus solution allowing us to reduce the cost of our European operations.
And towards the end of the quarter, we released groundbreaking safety capabilities for our mobile application Contactbridge. This new mobile application allows us to leverage the timely and targeted information from the over 9,000 vetted public safety agents that use Everbridge to offer trusted relevant and geographically targeted alerts and advisories to residents or visitors whether in a neighborhood or state level.
We're focused on becoming the number one mobile safety application in North America. In summary we believe our strong start to 2017 positions us well for the remainder of the year.
We continue to execute on our new customer as well as land and expand strategy to drive our growing number of multi product wins that include both our core mass notification application and our new applications like IT Alerting safety connection and community engagement. Additionally we're excited about the enthusiastic response to our critical event management platform, which we believe elevates our value proposition and expands our market opportunity further contributing to our long term success.
Now I'd like to turn the call back over to Ken for details on our financial performance during the quarter.
Kenneth Goldman
Thanks Jamie. I'll provide some more detail on our financial performance for the first quarter and then provide you with our outlook for the second quarter and the year.
First quarter revenue of $22.8 million was above the high end of our guidance range and represented growth of 34% from a year ago. As Jamie noted, revenue upside was due to the strong underlying momentum of our business as well as better than expected contribution from our recent acquisitions.
During the first quarter, our dollar base net retention rate remained above 110% and was well above that figure even if you exclude the large customers that into the mix the year ago. The combination of revenue upside and lower than expected expenses doing part to more backend waited hiring led to adjusted EBITDA loss of $2.3 million which was more than a $1 million better than our guidance.
While we won't provide a break out on a regular basis, it's important to note that as we anticipated our core business excluding IDV would have been adjusted EBITDA positive in the quarter. Now I'd like to turn the details of our P&L.
Unless otherwise indicated, I will be discussing income statement metrics on a non GAAP basis. A reconciliation of gap to non GAAP measures has been provided in the earnings release we issued earlier today.
As Jamie already mentioned, we completed the transition to a new broadcast engine in the first quarter and encouraged certain one-time costs, which resulted in a gross margin of 70% compared to 71.8% a year ago. As we previously indicated, gross margins may fluctuate on a quarter to quarter basis.
However, we believe that we can continue to drive gradual improvements in gross margins on a longer term basis as our business scales. Total operating expenses were $20 million in the quarter an increase of 41% from a year ago reflecting continued product and infrastructure investments to support our long-term growth as well as the increased headcount related ongoing investments associated with our recent acquisitions.
As I noted, adjusted EBITDA for the quarter was a loss of $2.3 million compared to a loss of $800,000 a year ago. Net loss for the first quarter was $4 million compared to loss of $1.7 million a year ago based on 27.2 million basic and diluted weighted average shares outstanding, net loss per share was $0.15 for the first quarter also better than our expectations.
Turning to our balance sheet, we ended the quarter with $39.7 million in cash and cash equivalents with the decrease from $60.8 million at the end of the fourth quarter mainly due to payments for our IDV Solutions acquisition. Note that the proceeds from the small number of primary shares Everbridge sold during our following transaction in April which generated $10.4 million in net proceeds are not included in our cash balances at the end of the first quarter.
Total differed revenue was $55.9 million at the end of the quarter, which was up 35% compared to the end of the year ago quarter. As we've noted on prior calls, our deferred revenue balance at the end of any given quarter can vary due to the number of factors as such even though we have predominately annual payment terms deferred revenue is not always a meaningful indicator of the underlying momentum in our business from quarterly perspective and we believe it is directly relevant over a longer term trended period.
Operating cash flow for the quarter was $1.5 million. Free cash flow was essentially breakeven at an outflow of $251,000 for the quarter.
Now let me turn to our outlook. Our increased revenue and adjusted EBITDA expectations for the year reflect our strong start to the year.
For the second quarter of 2017, we expect revenue to be between $24.4 million to $24.6 million. We anticipate an adjusted EBITDA loss of between $700,000 and $500,000.
Adjusted EBITDA guidance assumes an estimated stock-based compensation expense or approximately $1.1 million for the second quarter. We anticipate a non-GAAP net loss of between $2.2 million and $2 million or between -8 cents and -7 cents per share based on 27.8 million basic weighted average shares outstanding.
For the full year we anticipate revenue to be in the range of $101 million to $102 million representing year over year growth of 31% to 33%. We're anticipating an adjusted EBITDA loss of between $2.1 million and $1.3 million for the full year 2017, which includes positive adjusted EBITDA for our core business offset by losses from our acquisition earlier this year to the impact of purchase accounting.
We expect a non-GAAP net loss of between $8.8 million and $8 million for the full year or between -32 cents and -29 cents per share based on $27.7 million basic weighted average shares outstanding. In summary, we're pleased with our strong start to 2017 and are optimistic as we look forward towards the rest of 2017.
We believe we're well positioned to meet the increasing demand for Critical Event Management and enterprise safety applications and capitalize on that large multi-billion dollar opportunity. With that operator can we now open the call up to questions please?
Operator
[Operator Instructions] Our first question comes from the line of Michael Nemeroff with Credit Suisse. Your line is open.
Michael Nemeroff
Hi guys. Thanks for taking my questions.
Congrats on a very strong quarter start off the year.
Kenneth Goldman
Thanks Michael.
Michael Nemeroff
Jamie just your reference in your prepared remarks some large contracts, statewide contracts or bigger contracts sort of coming down the line. I'm just curious are those multi product deals, I mean do you know that now and if so could you maybe just give us an indication of what are the types of products in addition to just mass notification, that some of the statewide deals are looking at?
Jaime Ellertson
Yes, in most cases what we sell into the state and local market in general city, county or state or federal agency tends to be first and foremost the mass notification product, it's 80% of the deals and then Community Engagement that's often sold its been now sold into all three of our three largest city, county or state organizations and into many of the counties but we have a lot more to go on that base. And then there is there are some as I mentioned in this call that are buying IT Alerting.
Now those are the three primary products and in most cases the bids were putting out there for the large statewide or major city or metropolitan area did involve community engagement and mass notification. But it depends on when the bid was initially started some of them a year ago when community engagement was new and might not have it in or while it was started more recently.
So you should expect a minimum obviously, it's going to be mass notification as the anchor app. And more than likely, if there's a secondary application the likely one is communication.
Michael Nemeroff
Great, and then I think I may have missed it, did you give the number of multi product deals and then of those multi product deals are those primarily being sold direct or any of them coming through the channel? And then the last question is on the IDV acquisition and whether that's tracking to your expectations or any surprises there?
Thanks.
Jaime Ellertson
Yeah, so on. Now I'm going to have to backtrack.
On the first question multi product, we did give that number is 54 and we are careful to emphasize the definition we obviously are talking about both leveraging the base getting the base to buy two and three products so that's only counted when they're buying a second or third product. Obviously and knew that knew they have to be buying two products and that's a definition of 54.
In terms of who purchased the - who is selling the multi-product deals that's almost exclusively are a base. We're getting referrals in for some multi product deals but that's very early because the channel is only a few years old and is just learning today to sell either some safety connection in the case of international SOS and that's why you will see some there but more a mass notification.
So historically, you should assume that those are single product and it's going to take us little longer to train them. And then your last one was IDV and the expectations.
Yes, I would say IDV is the purchase accounting is kind of all over the place and that's just mildly settling down now. They got off to our first quarter, our concentration there is trying to retain focus, introduce the concept of CEM without stalling their deals which were already in progress and we would hope to come back to you in Q2 and start to show early signs of success.
We can introduce the concept of CEM, because we already have an integration between IDV's visual command center and safety connection mass notification, incident management which is what makes up our CEM platform. But it is not a pure SaaS single incident multi-tenant platform until early next year as we've stated previously.
So we'll have to see what results we get out in Q2 and Q3. This year was primarily meant to be an introduction year and early adopters and so you should -- if we get win that would show that there's even more traction we thought early on.
Michael Nemeroff
Great, thanks very much.
Jaime Ellertson
You bet.
Operator
Our next question comes from the line of Terry Tillman with Raymond James. Your line is open.
Terry Tillman
Hi, good afternoon gentlemen. Thanks for taking my questions and great job on the quarter.
Jaime Ellertson
Thanks Terry.
Terry Tillman
I guess seeing as it relates - hi. As it relates to IDV, you were talked about, at least some of the precedent had been feels it will be 7 to 8 times your ASP.
And I guess I'm just curious as you are looking at some of these opportunities in your top 20 or top 25 accounts to sell that product into or any new business that was signed in 1Q. Are you -- given that you now own this business, are you seeing those kind ASP is much higher play now or just an update on pricing around that product?
Jaime Ellertson
Yes. So what I've said before just to clarify it is CEM would be substantially higher, IDV is a more expensive product, it roughly sells in that the magnitude of 100,000 to 200,000 often a 250,000 or 300,000.
But in the ballpark between there and we don't have enough experience and it's a small subset of clients that we don't want to generalize. But certainly it's a magnitude larger 3, 4, 5 times larger than our ASP for mass notification.
And in combination the CEM suite would be selling for 5 to 10 times our ASP for mass notification. So its substantial when we can combine them itself I mean up sell and drives our ASP and we've said over and over again that doing the math, we think it's easier to get to a substantial continued growth size in terms of total revenue for selling a $0.25 million, $0.50 million, $0.75 million solution to the enterprise customers than it is to sell $30,000 to $100,000.
Terry Tillman
Okay.
Jaime Ellertson
We do believe that the early indications from customers and I would hope to have good strong examples of the loose integration which again is not that tight integration will have when everyone on the exacting same SaaS platform 100% same code base early next year, single instance multi-tenant platform which we promised for early next year. But we've already gotten integration, and as we're introducing that in and have opportunities merging they are coming in meaningfully larger than anything we have seen here to date for the company.
So the ASP driven by CEM or the combination of let's just take Safety Connection Pro which is our state mass notification, incident management and safety connection with VCC, visual command center that is coming in at a meaningfully higher number. An order of magnitude three or 4 than anything we've seen on a one or two products sale in the past.
Terry Tillman
Okay. And yes, you talked about a milestone in terms of that rearchitected platform, you I think mentioned 100 times improved performance, I guess I'm just curious about have you been selling that new platform update in recent sales cycles or is that still something more of a future and is it doing anything in terms of win rate or just improving the competitive less, which I know you are strong competitively.
But just a little bit more color on how you leverage the performance improvement with the platform itself?
Jaime Ellertson
Yes. So the platform itself allows really three things, it allows our continued scale and performance substantially ahead of anyone in our environment which is, if you're presenting yourself as the market leader the grill of the space, the guy that you should always go to it but the full peace you decision then you need to be out in front.
So we consider part of that table stakes and will continue to innovate and lead the market with access absolutely superior performance technology reliability. That is something that we just believe is required.
The second piece though is as we move to multiple products, we need that performance and speed because in some products the magnitude of the number of communications, the number of business processes, the number of transactions looking at for instance distributed workers around the world and updating that literally instantaneously and then messaging those that are affected by the event. If you're talking about hundreds of thousands of employees per corporation having multiple corporations, you can see the big data problem we've experienced.
So we built it out to support the growing set of products and have the same scale for them and then lastly by getting to that point with the performance we can scale not only globally but cost wise. So we'll provide a benefit we think both for international and larger scaled enterprise customers certainly as they move to CEM and we end up doing all the critical event management for a major corporation, the examples and the likes of which we've mentioned on calls previously those household names.
And then secondly, it can drive down our cost because it's a more efficient platform. So for all three of those reasons, we do think it's an advantage.
We do not make a big deal about it, but we have a branding campaign around our new technology and that does enter into sales cycles on a regular basis. I would model up our numbers based on that, I would assume that that's how we're going to maintain our best in class win rate and continued renewal rates as well as continued growth rates we're projecting.
As a result of not necessarily try to increment that up and build it into a better outcome in the future. We just think that's something we have to do and ensure that we can get to the numbers we're already guiding to.
Terry Tillman
Got it, and just maybe one last one for Ken. As it relates to I think on the last call you talked about and you said it's still very preliminary, but they are probably be more than a 50% write down on the deferred revenue from the acquisition or at least the IDV acquisition.
Did it end up being notably different the assumption around the write down? Thank you.
Kenneth Goldman
Not significantly different about what we expected. There was a lot of complexity around it and at the time of the last call, we were still working with the outside auditors.
But I would say the end result was consistent with what we expected.
Terry Tillman
Great, thanks.
Operator
Our next question comes from the line of Scott Berg with Needham. Your line is open.
Scott Berg
Hi Jamie and Ken. Congrats on great quarter and thanks for taking my questions.
I have two quick ones. First of all Ken I know you talked about the quarter being little bit positive without the two acquisitions in the quarter.
So can you give us some color on maybe what the revenue contributions were? Thank you.
Kenneth Goldman
Scott I'd love to, but it's something that we're not doing at this point in time. We've said in prior earnings calls that we will break out a product or a business unit when it gets to over $10 million in recurring revenue but at the present time we're trying to be very careful in not to go into segment reporting.
Scott Berg
Sure, fair enough. And then I guess the follow-up question Jamie would be on general multi product sales in the quarter.
I know you had talked about some of the product deal there in the pipeline, but what you saw in the quarter where customers buying anything meaningfully different in terms of those additional non mass notification modules versus maybe what we see in the last couple of quarters. Absolutely, and I indicated that safety connection and Safety Connect Pro, I don't want to use that probably.
But probably were considered on fire 100% quarter over quarter growth, they did very very well and that is the disruptive product, we've had net new. It changes that market in physical security and employ - mobile employ management at a fundamental basis.
It allows you to understand where all your employees are traveling in the field, in service engagements at home and when an event happens in the corporation not get caught off guard with the question of who's affected. And that's something in major corporations that happens every day.
When you combine that with visual command center, the ability to contextualize all the threats and all the incoming information, we think we have a powerful combination that leads to CEM or critical event management. So in the quarter, what I think we saw was an increasing number of customers saying, yes I seem mass notification that's interesting I need that it's a check in the box no major or even small corporation really does business and says I can't get all my people quickly with the relevant affirmation that's kind of a must have.
What we're seeing different over the past two to three quarters is the mounting desire and the growing need to say where are all my employees when something happens not just to communicate but are they affected, otherwise I'm sending out a mass notification every time and so a lot of people that are historically here for as I use the example small and large enterprises find just mass notification, if not tough for our reps to step them up and sell them 2x to 3x more with Safety Connection Pro. The automation a standard processes and standard operating procedures which is incident management solution, called incident management and safety connection, which gives you that dynamic location capacity are they on Wi-Fi are they in the building on the floor three or they left location campus, where they are traveling today are they in Paris.
When something happens, elections disrupting business or a terrorist or a shooting event on Westminster bridge that type of thing. And also we would say, it's taken a little bit of time but they are sales force is getting the hang of it, right?
So they are selling more multi product deals that ever before and learning to introduce the multiple products day one and sell division instead of just pay. Where are the market leaders, the mass notification, everyone from [indiscernible] to everyone sells so buy this for month.
It's now expanding into an area where we have virtually no competitor Safety Connection, stress the word no competitors today and we're disrupting a market and that's a much better place to be in combination with mass notification. So sorry for the long waited answer, but it helps you really understand what's changed over the last couple of quarters with our sales methodologies leaving some of the success with multi product sales.
Scott Berg
Now that's very helpful, but that's all I have at the moment. Thank you for taking my question.
Kenneth Goldman
You bet. Thank you.
Operator
Our next question is from the line of Richard Davis with Cannacord. Your line is open.
Richard Davis
Hi thanks very much. One of the questions I had kind of derived from some of the comments you made, so are you guys on track for sales hiring so far this year and the corollary is just because you mentioned you're kind of becoming the standard to the industry.
So you want to be involved in all the paper off in the other words just trying to triangulate around capacity to handle all this good news? Thanks.
Jaime Ellertson
Simple answer Richard is yes. I think what we are doing that's abnormal and we certainly believe are tracking to where we need to be in terms of yield and professional sales capability both in the US and internationally.
Richard Davis
Okay. Perfect and the up sales, are you still keeping that within the existing sales people or do you foresee a need to have up an up sell team?
Jaime Ellertson
That's a good question today we break our sales force into only three groups, strategic count reps which have a very finite and specific knowledge of accounts and are expected to be closing multi 6 figure transactions for instance the large Oracle win was completed by one of our top performing sales executives who only has a finite number of accounts and we would hope those guys are from quarter to quarter closing larger transactions because of that that very directed nature. And then we have AE's, the account executive the geographic or vertical market remake increasingly we are moving to vertical market organization because it allows our reps to understand solutions selling more and we'll continue to add there but hopefully train them more on the vertical market specialty they need to understand to be able to sell those solutions and those higher enterprise dollar solutions into the vertical but those are net new people and then we have our account managers that sell into the base and they are segmented to some extent into pure growth people and in some markets just renew people and then there's some combination of those.
But other than those three groups those are the three we have, we don't have an up sell team yet, but we are breaking out some of our verticals into focused efforts around pure up sells and they have no, almost no renewal responsibility and then some that have a combination of renewal and up sell to get just some of that focus which I think you're alluding to.
Richard Davis
Got it. That's helpful color.
Okay, well. Thanks.
Jaime Ellertson
Tom, you want to go ahead?
Unidentified Analyst
Sure, why not. Hang on, I'll even borrow Richard's phone here, how does that sound.
You don't even need a Safety Connection product for this I can tell you exactly where he is sitting. Alright, I'll jump in.
I wanted to ask you a follow-up on safety connection here. Just in that, I mean you guys have got nice traction there on that.
Your announcement with Hulu earlier this quarter and I think it was for us MasterCard this quarter for safety connection trial. But can you just talk a little bit more about again sort of the up sell process, it's a little bit of a non-traditional sale that you're going after the physical security market, but is that in fact churning out the up sell relative to for mass notification does it require different types of sales reps go after that sale.
Just maybe you could provide some anecdotal evidence relative to what you're seeing there in that market. Thanks.
Jaime Ellertson
Sure, so in terms of helping you understand the safety connection say we would tell you that out of our big product categories, you know community engagement is the big product, secondary products sold into now the state and local government. It enables people to do community alignment and key word often for events as we've discussed in the past like the Papal event we just type in.
The [indiscernible] to AAA 777 then get all the relevant information or Mardi Gras which we supported at the last year's Superbowl. So that's a product that sold traditionally there and is pretty much aligned pretty easy for the state and local team to sell that, because it fits well within this area when you talk about police and local issues community engagement.
On the corporate side there are two principal products that have really gotten scale, one is IT Alerting, we'd argue that that one is a little bit more difficult sale and that's why we broke off and announced the hiring of Vick recently as the GM of our IT Alerting business because the IT professional is different than the business continuity, emergency manager, the security officer. Chief Security Officer, Chief Risk Officer.
So I would argue that's the one sale that requires a little more focus for us because you have to be IT cumbersome and cumbersome in this IPS and systems like PMC service now et cetera. On the safety connections side, it's actually pretty nicely line set, we often have sold in about a third of the time and the Chief Security Officers own the risk, the emergency response or the business continuity function or the cold mingle.
They let us sit together often reporting up to a Chief Risk Officer or CFO again a common ground for us and someone we used to sell it to. So although we sell safety connection more to the CSO than the business continuity emergency planning guy, within a corporate environment very similar track and that's why you're seeing probably even faster traction than we've had with IT Alerting in total gross dollars although we're not projecting, we can tell you that.
That product is growing fast and we said that over the last two calls, because it's very much in line sale. We go into business continuity, the HR Director for travel.
The person in charge of security CSO or the risk officer and someone we're becoming very comfortable with. So I think you'll continue to see that movement, critical event management is squarely sold into that exact same place.
The only extension is the supply chain guy, the guy that owns worldwide supply chain that can be affected by events and hits the bottom line, so we find that a good ROI. But other than that, we're going to be selling to the Chief Risk Officer, Chief Security Officer, business continuity and emergency and travel guys.
That is the target market and the one we're comfortable with today hence the success with safety connection.
Unidentified Analyst
Excellent. Ken quick one for you just in terms of the gross margins on the quarter.
Can you just give us a sense as to what the impact IDV had on the quarter for gross margins and then how we ought to think about the trajectory that number going after the rest of the year? Thanks and I'll give Richard his headphones back here.
Jaime Ellertson
Okay. And Tom, I'm sorry that's another one of those that we're not going to break out the details by product or by business unit at this point in time.
All we can tell you is that we are working towards a longer term gross margin model consistent with what we talked about at the time of the IPO. But for now as we reported this quarter, we believe the cost that we incurred in completing the new broadcast engine we're effectively one-time, but we reserve the right from quarter to quarter to make investments as we see fit.
As you know we don't guide to a particular gross margin and we're very happy with the trend that we've seen historically in terms of the gross margin being maintained. As we've talked about, we're in the enviable position that in order for our gross margin to grow we don't need to make any fundamental changes in the business that will happen with volume including our cost of goods sold or three things, it's the cost of internally developed software amortized to our cost of goods sold.
It's the cost of our datacenters and the people who run them and it's the cost of message delivery all of those costs are effectively step functions that go down as revenue increases or volume increases. So for us to be able to increase our gross margins, we don't have to make any changes but we do have an infrastructure that is able to support substantially more business and that's part of why we're successful.
Unidentified Analyst
Got it, perfect. Appreciate all the help and we'll chat with you soon.
Thank you very much.
Jaime Ellertson
Thanks, Tom.
Operator
Our next question is from the line of Brent Bracelin with Pacific Crest. Your line is open.
Brent Bracelin
Thanks for taking the question. Jamie a couple of here for you, what's the relative deal size for multi-product versus standalone, one?
And then two, if you look at the 54 multi product deals this quarter are you seeing a bigger contribution from last quarter from new customers or upgrade the installed base?
Jaime Ellertson
Fair question. So on the multi-product deal size, it is turning towards two.
We haven't gotten one that fixes it to the trailing 12 just yet, but it's probably about closing in on doubling now. It's much higher than our current because by default you're getting some discount like you would in an enterprise suite from Oracle or from SAP or from Microsoft with office for them buying more than one product at a time.
But in our case it substantially drives, we've historically talked about 10% to 20% discount when they're buying multiple products versus buying them individually. And so whatever it's been we've been in the range of 20% to 30% I think at the IPO.
Then you'd be talking about a meaningful increase almost doubling that when you're buying multi products.
Brent Bracelin
Makes sense.
Jaime Ellertson
Because there are so many we'll have to focus by next quarter, we might have enough quarter of it. Enough quarters of it to start to get to an average.
What we intend to want to not do with deferred, whether it's good or bad or deferred revenue balance, we try to remind you that it goes up in quarters, it goes down you got to look on a trailing 12 you get an average that's meaningful. We just don't cherry pick, to give you a good quarter then forget about mentioning what's the bad quarter.
So we'll look forward to next quarter trying to have some increased numbers on that potentially. Where we're selling newer growth by default you're almost always going to have the base because the base is 3200, 3300 customers and it's a lot easier to sell with the base then it is net-new.
The first quarter we mentioned multi product deals, we kind of only talked about new and it's not fair because we're going to get half or even slightly over half into the base given the size of the base. Right now, it's probably 60-40 base to new but that's just to the answer is just my guess.
I don't have that specific metric in front to view. But it is clearly easier to sell to our base because we have established our reputation.
And if we can sell net-new at anywhere close to half you should be selling more to the base because, again you have a relationship and the same problem exists in a net-new account in most cases that does across our enterprise base.
Brent Bracelin
Makes sense. And then last follow-up for you Jamie.
The local and state opportunity, what size and scope of the opportunity there, I mean who is your primary competitor and what's driving the RFP activity so far this year.
Jaime Ellertson
Well, we said on our I think first earnings call that because it wasn't too far after we announced the Florida win that these large 6 figure and 7 figure transactions probably the average of the state or major city like Washington DC, the national capital region or state of Florida Connecticut, they probably average in the $1.5 million range and these $1 million or large 6 bigger deals, that are significantly larger than any else, we see in a market by themselves because they buy everything upfront for all citizens. So it's by default shutting everything upfront in the contract.
We see more activity because of our success with Florida and Washington DC as the standard bearer we prove that that would ultimately provide a coordinated communication. To a large geographic area of citizen population, whether that's a national capital region or an entire state that's affected by a hurricane.
So right now, we've mentioned before that we have everything from I think Tennessee and Louisiana and Arizona and New York, they're a bunch of them out there and all we're trying to do is make sure no one shocked if the results on those larger transactions it's often can be $1 million or above lean our way. That would make sense this year given the number of them.
Other than that we're going to stay away from any forward statements or getting ahead of our skis, because we'll want to announce them as they are publicly released. But assume that some of them can happen interim quarter because once they get out, they get out then there is nothing we can do to stop them.
But that's all I can say about them right now that there are more this year than they've ever been by a large factor and they're very advanced as said on some these past calls. They will be announced this year, so there's no question there will be wins or losses this year, we can't win all and we'd hope for as many as we can get on the larger side of that given our success already in that large metro or state type of opportunity.
Brent Bracelin
Great, very helpful. Last question from me for Ken here.
Just on the gross margins, I mean you talked about the new platform, broadcast engine add to the gross margin this quarter. Specifically as you think about those investments in software, data centers, message delivery is this largely a one quarter kind of a big investment and then we can start to see some leverage going forward off that or should be expected a drag for a couple quarters relative to those capacity investments you're making.
Kenneth Goldman
Well, so with the statement I made before which I said that we don't want to commit to not being able to make appropriate investments going forward. For the most part, what we just saw was the end of a large amount of investment.
Keep in mind we probably discussed with you before that our preference is always to put cost behind us rather than mortgage our future so wherever possible, we prefer not to capitalize any more than we have to under GAAP. But it's a balancing act.
Clearly we want to drive gross margin and we can do that. We also want to invest to be able to scale the business, which we're doing and some of the investments that we make for instance in the infrastructure end up yielding a significantly higher gross margin going forward, because we were doing for instance our cost of message delivery which we did a couple of years ago when we moved from primarily analog based architecture to digital based message delivery.
So, I guess that's a long-winded way of saying, we'll never say never, but for the most part those costs were periodic, but if we do them again, it's not that we weren't able to manage them, so we made the decision to make another investment going forward.
Brent Bracelin
Very helpful. Thank you.
Operator
Our next question comes from the line of Brad Sills with Bank of America Merrill Lynch. Your line is open.
Brad Sills
Hey guys. Thanks for taking my question.
I wanted to ask about international, how were results in Europe and Asia and then plans for expansion in those regions please?
Jaime Ellertson
I think the results were positive and especially the larger accounts getting some traction with larger accounts. I want to caution you, it's still a small portion of our business, so we don't want to get out in front of our skis as we tend to try not to do.
There with the international SOS partnership and some additional partnerships we have been nurturing, we probably will continue to see names and wins that we would attribute to our partners and ourselves combining for success. But this year is still all about getting traction in both Asia and other parts of Europe and U.K.
where we traditionally have had you know our base of business. So, we would think it's going to continue.
We'd also suggest that, this quarter was a good result, but we don't want to beat the drum too much. It was mainly a good result, because we saw large multiproduct wins moving forward and expansion both in net new one with the new one was a growth and that's the important thing that that team has the experience now and has the right combination of people on it so they can regularly deliver those.
But it's still roughly a 10% portion of business. So, still lot of upside there as we mature it and build out those partnerships.
Brad Sills
Great. Thanks.
And then one more if I could please on some of those state deals that you've mentioned. I mean why now, I think you seem more bullish on these deals?
You feel its platform-related with IDV and some of the other investments you made. They'd kind view Everbridge as a scalable enterprise class.
I know you've had history there already. But I guess my question is really, what's changing in the business to kind of bring more success at least in the pipeline for some of these deals?
Jaime Ellertson
That one is pretty simple actually. I mean even on our roadshow as a public - going out as a public entity, a lot of people scratch their head and said, mass Notification, as we get it is the public company and not to profound ourselves, but we've concerned about that for the last couple of years and clearly started investing two or three year ago what we consider to be an enterprise scale platform that's why the new architecture engine, that's why moving from you know analog to digital, all those transitions and we believe that although our core mass notification market is clearly growing at a rate consistent with our business still, give or take a couple of percentage points up or down in any given quarter and big wins or small wins that the way forward is a much more elevated value proposition that goes beyond just communicating with employees or key constituents.
Citizens, customers of the companies or employees and we have slowly mapped that out to be you know the thing that has commonality in our business when bad stuff happens or big stuff happens, it can be the Pope visiting, which is not a bad thing, or it can be a terrorist or an active shooter or a hurricane or tornado, our system gets used at scale with success worldwide et cetera. And to expand that, we want to help the operational management of those event, what we call critical events.
And so, going forward, I think the thing that's happened is was Safety Connection, Safety Connection Pro, the combination of those products. We're seeing people say, yes, you have something unique pass mass notification, I'm willing to spend two, three, four times what I would traditionally with mass notification.
That's why the Ascent you know corporation example was important, because we sold them and proposed originally mass notification, that's what they said in their request for proposal they wanted, what they bought was something it cost them three to four times that and involved four of our products instead of one of our products mass notification. And they did that because they had employees like most companies today.
That were scattered all around their geographic remit which is four or five different states in the Midwest and half the time, they don't know where those people are, because they move from oil pad to oil pad through the day servicing things and how many major corporations had people out in the field on a daily basis, not just traveling executives, just sales reps out or service reps out, servicing equipment or account. And so we believe that as that - the physical barrier to an office with all of your little employee bodies inside, that you know the phrase, that Elvis has left the building is true with employees.
They are outside that and they need to have tools and an overall capability to understand when bad things happens, who is effected in my organization regardless of their location and then do something about it to manage successfully through to ensure that people's lives aren't impacted. In other words safety or the business operation is sustained, so it can continue to make a profit and run.
And that larger remit is resonating. We can tell you that we would hope to soon just through the loose association we have with visual command center the IDV product and the Safety Connection Pro product mass notification into the management Safety Connection be able to show you wins that were already recording at the enterprise level.
That's what we're starting to present to selected customers, because it's not all going to be done to the end of the year or next year, we're saying we're going to do it selectively, but we're starting to see that and that's what customers are buying often, when they are buying Safety Connection Pro. It's not much of a step to go to Safety Connection pro at $200,000 or $300,000 then add IDV at $100,000 to $200,000 as we said their ASP is then and you now have a $0.5 million enterprise sale.
That takes two things, it takes the product set that we've done and the integration, more integration will make it easier. It takes a market that is no different than a core market.
Bad things happening, effecting organizations globally, it takes the companies trying to say, I want to consolidate that into a single-pane of glass and we see that more and more at leading large enterprises, be they literally healthcare state and local or corporate, but we're focusing on corporate first and then we have to train our reps to be able to sell that enterprise class. But that is a transition, that's occurring in the market.
We think it results in Q1 are very demonstrable in the form that they are proving that we can sell a larger multi-product sale, and it's moved from just mass notification into the mass notification and safety and incident management. And if we can now put visual command center together with that, then we have a n ASP's that's demonstrably higher as we start off with I think either Michael or Terry asked the question, but that it is stepping up meaningfully and it's going to be much larger.
And it's a key for us to get to much larger total revenue dollars on an annualized basis, because lot easier to sell $0.5 million deals to get to that magic number than it is to sell $30,000 or $50,000 deals. So, that's the migration that's happening.
It's the reasoning, it's the momentum behind it and you know the best thing we can do is obviously in future calls, our Q2 call, Q3 call be able to show you just as we give you examples today, specific examples of that success occurring with wins.
Brad Sills
Great. Thanks Jamie.
Jaime Ellertson
You bet.
Operator
And our last question is from Dmitry Netis with William Blair& Co. Your line is open.
Dmitry Netis
Thank you for squeezing me in. Congrats guy on a nice quarter.
Most of my questions have been asked. You are certainly showing very nice progress both on mass notification side of things as well as this new application Safety Connection.
Back to the mass notification market, as you said you are in the IPO, there was a lot of concerns how fast that market is growing, the size of that pontifical market, you certainly demonstrate pretty good success there. But, Jamie, I think you said you are expecting the growth out of this market somewhere in that - let say you are growing in a 30% to 32% range plus minus couple of points.
So, is that kind of how you are thinking about the growth rate of this market and is this for you mostly a replacement market or is this much - see much of a greenfield opportunity is there. What's the mix of the deals look like as you go into the core mass notification market?
And then secondarily on that same topic, just this competition topic goes, what are you seeing out of the kind of competitors in that four market, with CodeRED for example, emerging with [indiscernible]. Are they getting any more aggressive or not?
What are some of the smaller SaaS vendors you see more or less of them and you just kind of touch on that point as well? Thank you.
Jaime Ellertson
I can be pretty quick with that because, in terms of the growth rate for mass notification, you do have to remember that as we sell more product to them as we create multi-product bundles, you do discount a little bit to get three product sold and an ASP that's maybe twice the size of your original ASP. So there is some internal cannibalization you do in any suite sale and we're certainly going to see some of that.
What we've said historically is the growth rate for Mass notification was in the 20s, mid-20s or higher and given the mix of sales in the quarter, it can go slightly up or down. But it's support of our overall growth rate at 30% plus and we don't see and we haven't since our IPOs seen any dramatic change in that.
You will see, if we do a - I could think of as the question was brought up in this call a big SLG deal, state and local government deal, you know a big city or country or state, all of a sudden have balloons like it did last year with State of Florida, so that kind of goes up and down because we have bigger, the biggest deals we can do on those historically, because they buy everything upfront would be those mass state and local deals. And so, the growth rate mass notification is consistent with where it's been roughly speaking, and it gets cannibalized little bit, the more and more multi-product deals we do and the more we push customers to buy a lot more dollars, but then we have to appropriate the dollars between.
And in terms of that, the mix, you also have to remember that it's - or the maturity of the market I would tell you just that you know it's certainly less greenfield the day than it was six quarters or four quarter ago, because the fact of the matter is, it's a - a market matures every year. I would also tell you though that in the Fortune 1,000 everyone has some notification, but guess what, Oracle had nothing.
You know pure greenfield, so who would have thought that you'd get that size corporation, in fact both the leading tech examples I gave you had nothing before we got into this quarter, the two of our largest deals in the quarter. So, you - it is a market that if you point it out the top 1,000, you'd expect 70% to have something or 80%.
But as you go down market, it's very much more greenfield. So, it depends on the space of the markets you are going today hasn't changed substantially and we're still very large opportunity there and then you go outside the U.S.
and it's probably the inverse, right, it's 80% greenfield and only 20% applied with the exception of their largest companies. I go into Fortune 500 internationally all the time that are based outside the U.S.
and they are purchasing their first mass notification, because that market usually trails the U.S. by two to three years.
And your last question competition. You know I think our success that gets a lot of investment in the space, so we've seen some pretty good sized investment in this space, but when you - I hate to use the analogy, but when you have two companies that are solely focused for instance, one in the example you use, one was historic state and local, and on the smaller side of the business and was in corporate, very small you know a fraction of our size and very small fraction, probably less than 10% and you put it together, you get kind of disorganized organization that basically becomes an opportunity for us to peel of their largest customers.
So, we tend to like it when people in our core space and we're the acknowledged leader emerging, because it allows us to gain opportunity at their largest customers. It's disruption in their own base and it creates an opportunity for sale.
And from that, we would have nothing to say other that, you've got some people in the market that have a little more money because of investing, but their core technology has not changed. We still have a lead on IP and on fundamentally what's patented and unique in this space and our acknowledged leadership, I think whether you ask them or talk to general technology pundits in the market has changed one iota.
So, there is not much that's changed in competition. Hopefully, that answers your question, I think.
Dmitry Netis
Absolutely it does Jamie. I appreciate that perspective and keep up the good work gentlemen.
Jaime Ellertson
Thanks Dmitry.
Kenneth Goldman
Thanks everyone.
Jaime Ellertson
Operator, any other questions?
Operator
I'm not showing any further questions at this time.
Kenneth Goldman
Well, with that, well thank you for participating in our Q1 conference call. And look forward to talking to you soon.
Thank you, operator. That completes the call.
Jaime Ellertson
Thanks everyone.
Operator
Ladies and gentlemen, this does conclude the program. You may now disconnect.
Everyone have a great day.