Feb 21, 2018
Executives
Ken Goldman - Chief Financial Officer Jaime Ellertson - Chief Executive Officer and Chairman
Analysts
Brad Sills - Bank of America/Merrill Lynch Richard Davis - Canaccord Scott Berg - Needham Tom Roderick - Stifel Brian Peterson - Raymond James Clarke Jeffries - KeyBanc Capital Markets Mike Latimore - Northland Capital Eric Lemus - SunTrust Robinson Humphrey Michael Nemeroff - Credit Suisse
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. [Operator Instructions] As a reminder, this call will be recorded.
I would now like to introduce your host for today’s conference, Mr. Ken Goldman, Chief Financial Officer.
You may begin.
Ken Goldman
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 maybe considered forward-looking under federal securities laws.
These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These risks are summarized in the press release that we issued today.
For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC, including our recent 10-Q and 10-K filings. Also during the course of today’s call, we will refer to certain non-GAAP financial measures.
A reconciliation of GAAP to non-GAAP financial measures is included in our press release. Finally, at times in our prepared comments or responses to your questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results.
Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to Jaime for his prepared remarks.
Jaime Ellertson
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 and our five quarters as a public company and we continued to bounce 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 multi-product transactions. I want to remind you that our themes for driving longer term growth remained: 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 multi-product growth deals into our base of 3,700 plus enterprise customers; and third, our CEM suite strategy that provides an enterprise-wide common operating environment for situational awareness and integrated response and collaboration across all critical event types, which are driving greater strategic value and significant larger customer relationships.
We believe our results in Q4 and for all of 2017 demonstrate the 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 solutions 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 multi-product deals climbing to 239, a significant jump over the previous year’s total of 182, up 31%.
This multi-product 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 crescendo. In our most recent quarterly results where we in Q4 signed 70 multi-product deals at new and existing customers compared to our trailing 12-month average of 60.
In Q4 we added 151 net new customers, slightly larger number than in past but consistent with the strong Q4 establishing further expansion opportunities through a combination 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 continued to grow our existing relationships with significant expansion deals at customers like Erickson, Sisson Bank and Noble Energy. Our strong quarterly results also included a record number of multi-product deals, 70 in Q4, which is up from 54 in Q3 as well as higher than our 12 months trailing average of 60 multi-product deals.
The increasing number of multi-product 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 multi-product deals also drove our number of deals valued 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 digital 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 same quarter.
This metric demonstrates the health of our new products business and is evidence that we are 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 multi-product 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 shows Everbridge because we can ensure communications to all employees across multiple use cases. Another larger new corporate Mass Notification customers, one of the largest beverage distributors in the U.S.
whose operations span almost every state and its workforce is not only distributed, but often mobile and therefore needed a very strong mobile applications part of the employee communication solution to keep its people safe and its business operations moving. Other new core mass certification wins in Q4 included brand names like Texas Instruments or Thermo Fisher among others.
In addition in the quarter, we saw organizations such as leading energy provider PSEG 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 seeing us 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 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, 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 education organizations in the world with over 70 campuses in 23 countries and over 1 million students.
Lauriet chose Everbridge Mass Notification to coordinate 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 the new opportunities based on the breadth of core product suite, our proven scale and our referencable 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 community servicing, a division of Alliance 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 competitor’s solutions. Intuit was another six-figure plus Safety Connection Pro win, where they replaced the combination of legacy solutions because of our products integrated with a variety of 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 instant 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 rollout specific loan 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 of our future breadth as well as global scale. Another large new ITA Alerting win was Adent US, one of the largest automotive accessory manufacturers in the world, who was looking to reduce response times for issues identified in their ITSM and ITOM systems by 45% and obtain a less than 1 year ROI.
On the growth side, we saw 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 a $1 million plus cost savings driven by our substantial ability to reduce incident response time across over 400 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 in this past year and is one of the anchor products in our CEM suite.
In Q4, we continue to see evidence that CEM will help us execute our strategic goals with wins like CEM expansion deal at Noble Energy. Noble Energy was already a VCC mass notification and IC customer and purchased our Safety Connection Pro solutions 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 instant communication solution, this forms a single operating environment to keep employees safe and their business running, a strong example of the strategic win for the CEM suite. On the new front, we are excited to 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 the 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 BlueCross BlueShield 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 in the quarter included leading hospitals like Cryptos Health Systems, Trinity Mother Frances Health System and Memorial Care, who all selected our CMS package for their institutions. At Memorial, their CIO led initiative to comply with the new CMS regulations that require healthcare organizations to have an opportunity – to have an automated emergency solution 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 and partner efforts in 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 roughly 25,000 employees around the globe when critical events pose a threat to life and safety. We also close the deal with Archivist, the global design engineering consulting organization, another good example of a large multi-product 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 will be our tie-in partner who signed leading organizations like Leonardo, SBA, for one of the top aerospace companies who chose Everbridge for critical communications with 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 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 close by talking about a few of our operational and strategic initiatives.
As I said 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 expansion of our international business. We are 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 the new Washington DC based federal sales office, headed by an experienced federal market executive, Rodney Billingsley. It’s important to know that while FedRAMP certification opens new doors for us, we expect sales in the federal market to be relatively lengthy and as such our guidance for 2018 does not reflect much contribution from this market until late in the year.
And more recently we will announce that we would be expanding – we will 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 a thousand customers across Europe and Asia.
UMS offers two distinct solutions to its customers. First – 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 NOK1.37 per share in cash. The offer values the total share capital of UMS of approximately NOK268 million, approximately $34 million on a fully diluted basis.
The Board of Directors in UMS has voiced strong support for the transaction and we have already received pre-acceptances from almost 70% of the existing shareholders. Our current schedule suggested 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 towards 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 have 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 IT 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 our existing systems of management infrastructure. And last as it relates to our strategy execution we continue to see a positive market response for our CM solution.
In 2018 we plan to accelerate CM success by continuing to expand the value of our CM suite, first migrating our VCC solution to a full SaaS implementation by the mid-year 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 will 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 and organizations 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 the 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 larger 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 Totten 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 will continue to be on the 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 of our financial performance during the quarter and the year and our outlook for 2018.
Ken?
Ken Goldman
Thanks, Jaime. I will provide 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 help 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 for 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% increased from 72.6% a year ago and was at the highest level we have seen over the last 3 years primarily due to our strong revenue performance. While we are 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 and increased 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 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 includes two items that were not considered 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 multi-product 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 breakeven 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 the end of the prior year. As we have 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 with predominantly annual payment terms, deferred revenue was not always a meaningful indicator of the underlying momentum in our business from a quarterly perspective that 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 are excited about extending our product portfolio in the international footprint upon the completion of our tender offer for unified messaging systems.
At this juncture, we are confident that we will be able to close on our acquisition of UMS in Q2 2018 and therefore we are including the impact of UMS in our guidance today. However, since we are still early into this process, there is some uncertainty as to our estimates for both top and bottom line impact.
With that backdrop, 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 continued investments in our business and the impacts of our Crisis Commander and IDV acquisitions a little over a year ago.
In 2018, we 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 2018 or between negative $0.61 and negative $0.58 per share based on 28.8 million basic weighted 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 and 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 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 are now ready to open up the call to questions.
Operator
Thank you. [Operator Instructions] And our first question comes from 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 the State of Tennessee deal and just state deals in general. Who are you seeing you competitively there?
Is it still these kind of regional vendors that you have seen in the past or as you get into some of these bigger deals, is the competitive environment landscape changing at all?
Jaime Ellertson
Thanks Brad. Yes, I mean, our large – we don’t want to focus just in 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 3 or 4 states down, there are quite a few left, probably 25 odd states that we have been building a pipeline focused around.
In most of those transactions, we see a whole host of small and 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 continual 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
Great. Thanks, Jaime.
Jaime Ellertson
You bet.
Operator
Thank you. And our next question comes from Richard Davis with Canaccord.
Your line is open.
Richard Davis
Hi, thanks very much. So, a quick question, so sometimes I get questions from investors about the headcount growth in this sense and so you can have or can you have multiple instantiations of like say me depending on the situation I am in.
So say I am in an airport or at a concert or – and I guess now in Tennessee or something like that. And so the way to think about your addressable market is those multiple instantiations.
And then the second question I did get from someone kind of an interesting question, you said look, is there a point where you would have a single messaging identity and if so, is that a good thing or a bad thing for you guys?
Jaime Ellertson
Yes, thanks Richard. So, I mean, the first part of the question, can you have multiple profiles as if we are in our Everbridge environment.
The answer is typically we want to have you at one, but people pay more depending on how many products they are licensing. So, if you are licensing ITA, our ITA Learning product and you are licensing Safety Connection Pro and you are licensing VCC and accessing all those products, you pay roughly a multiple of what you pay if were just in our as a profile of Mass Notification.
So, we do want to create a single messaging profile if we can. We are up to now we have 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 were able to successfully conclude our combination with UMS, but generally we don’t want to create two profiles, because we want to simplify port organization by our enterprise suite when you buy that enterprise suite and you have already done the HR load and you are 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 would 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% accurate, because it could be for life or death reasons that you are getting a communication. So, that’s how we would answer those two questions.
First, we do create value with multiple applications even though there is a single profile we do charge a lot more for use of multiple applications, but we do focus on a single profile coordinate on the enterprise basis message and that’s a good thing we think for ourselves.
Richard Davis
Got it. That’s super helpful.
Thanks so much.
Jaime Ellertson
You bet.
Operator
Thank you. Our next question comes from Scott Berg with Needham.
Your line is open.
Scott Berg
Hi, Jaime and Ken. Congrats on the good quarter.
Couple from me. First of all, Jaime, can you go over a little bit more of 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 over EMEA in the short-term?
Jaime Ellertson
Sure and thanks Scott. Yes, I mean, UMS a) I have got to ramp, 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 are 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 have 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 we – as I announced an intention to build on this call a crisis or event management workflow and management of 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 there are large transactions anywhere between $0.25 million and $1 million as well as internationally that sold it to entire states to use as the fundamental crisis or event management toolset.
And so we think that product will fold in nicely with our newly announced as of today, crisis/event management solution that will 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 would like to wait until the deal closes to get into that.
Scott Berg
Fair enough. Thank you.
Helpful. I guess as a quick follow-up to Jaime, again started to hurt based on all the metrics you are given early in your pre-scripted remarks about the sales of kind of non-Mass Notification and the momentum you are 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 have had more success on non-Mass Notification modules and maybe what’s the right way to think about that over the next couple of years?
Jaime Ellertson
Yes. Well first, we have always had this moniker that we have began in the emergency notification space and a simple way to think of us is just someone who sends a lot of messages.
That’s really does as a disservice with our very much now enterprise suite and broadening strategic value to the enterprises. So, about a year ago when we went public, we announced that we would 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 a templated automated version of Mass Notification and those includes Safety Connection Pro, Community Engagement or CareConverge formerly Secure Messaging, VCC product this year, a number of the other new products. And so as you think of them we are trying to give you a metric the 46% today means that almost half of all new and gross sales, not renewals, because that would be still substantially Mass Notification driven.
But in the last four quarters, it’s gone up every – last 5 quarters it’s increased every single quarter meaning we are 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 9 products across our suite, we want to sell more multiple products into the base.
So, we have 3.700 customers answer to the question is we still have less than 2 on average across all 3,700 and so there is a big opportunity to sell 6 or 7 other products to the existing base. I referenced a couple of very large sales like Noble Energy and others today that we are selling multiple products in due 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, 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 are so important to us and long-term as we add products of course we are increasing the TAM that we are going after and the ability to grow revenue on both the new and the growth side with those new products.
Scott Berg
Thank you. Very helpful.
I will jump back into the queue.
Operator
Thank you. Our next question comes from Tom Roderick with Stifel.
Your line is open.
Tom Roderick
Hi, gentlemen. Good afternoon and thanks for taking my questions.
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 have had more to talk about lately and 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 bit of a critical mass element that’s coming into play, where cities to cities, states talk to states and they are 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
Yes, I really should turn it over you, Tom, because you basically gave the answer to the question. And the question, you are right there is 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 had 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 with 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 and 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. in those regional areas, you would find most 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 have 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 that take between 6 months and a 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, I think we announced New York state two quarters ago, we actually had already been verbally committed and one verbally New York City before New York state was announced, but then it took almost 9 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 are pretty confident that we will to drive deliver with that focused effort and we are probably equal as excited to drive that’s to drive our core Mass Notification business about the federal opportunity. As I said, we will finish accreditation in the next few months.
We are 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 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 are not replacing one growth vector with the other, they are additive.
Tom Roderick
Excellent. Ken, possibly related follow-up to that point, but 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 snapback in cash flows from operations in Q1?
Ken Goldman
Yes. You should expect a snapback in Q1.
We have already seen a recovery although as you know it can be sporadic. The reality is that we have very, very low charge-off rate, but if a customer decides to pay us on January 5 versus December 28, there is 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 ARR up.
We have 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 will get a better sense of it.
Tom Roderick
Excellent. That’s it for me.
Thank you, guys.
Jaime Ellertson
Thanks very much.
Ken Goldman
Thank you.
Operator
Thank you. Our next question comes from Brian Peterson with Raymond James.
Your line is open.
Brian Peterson
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 year, I am just curious does that reflects at least qualitatively a significant investment from you guys in the region or would you say that sort of the run rate of the existing operations?
Ken Goldman
A little bit of both, I mean the reality is that although we have done 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 made 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 deferred revenue haircut, but unfortunately on the accounting regulations required to take.
Brian Peterson
Got it. Thanks Ken.
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 the ‘19, I am just curious how that’s actually going to impact the P&L?
Thanks guys.
KenGoldman
Well, remember that with all of our customers we do daily revenue recognition one 365th 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 then in our typical corporate sale, which can be up and running in a matter of hours. Again, as well and up 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 have given, we feel pretty comfortable are realistic. We always want to do better, because we are extremely goal oriented.
Brian Peterson
Got it. Thanks Ken.
Operator
Thank you. Our next question comes from Brent Bracelin with KeyBanc Capital Markets.
Your line is open.
Clarke Jeffries
Hi, this is Clarke Jeffries on for Brent. I was hoping I could dig into the example you gave in the remarks PSEG and the expansion of the use case from strictly emergency to more operational use, is it something that you are seeing your customers asking for more and sort of how does that relates to Smart Orchestration, it might – it not be the competency of the – an ITSM or an ITOM to have the kind of configurable communications that an organization might need and so they will look to you for orchestrated communications to the right individuals in the organization?
Jaime Ellertson
Clarke, we are going to invite you back again. Don’t tell Brent, I said that, but those are two great questions and hits the part of our strategy.
One, on Mass Notification in many cases we will sell a company it could have been 3 years or 4 years ago, it’s been a customer for a while Mass Notification. And they are checking a box to have emergency communication capability for all the horrific events we see that happening with increasing regularity a hurricane, an earthquake or a mass shooting.
But they only rolled out to say their business continuity players are 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 is the large energy concern the East Coast had and move them from a couple of 100 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 in 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 is down like actually restarting a server, because it qualifies that this has happened 3x 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 is down or not working, but we can then take that once determined to be a certain type of incident we can even automatically send the message to the right system that will reboot the system and bring it back online and in that case saving minutes, sometimes hours that can save businesses millions of dollars a year over accrued events.
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
Great. Thank you for the color.
Jaime Ellertson
You bet.
Operator
Thank you. Our next question comes from Mike Latimore with Northland Capital.
Your line is open.
Mike Latimore
Yes, great. 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
The UMS customer base is broken down across both 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 solutions. And then you could find them doing the entire population alerting for a small country somewhere.
So, in the mass notification base, it’s both public and private as well as healthcare they sell on 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 have already sold in planning to Massachusetts or Virginia, does that help us see as an opportunity to go after the statewide contract.
They have 4 or 5 of those in the U.S. I believe, certainly we know of Massachusetts, Pennsylvania, Virginia and I think New Mexico.
So, 3 or 4 at least and then they have multiple ones in Asia, where they 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
Great. And then obviously momentum on with state deals, large city deals this year organically I guess should we think about government growing as a percent of revenue or we have similar momentum in the enterprise and government stays at a similar percent of revenue over time?
Jaime Ellertson
Yes, our strategy as 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 are smaller.
We had a – when we went public as it was stated earlier, $80 million plus base of Mass Notification customers or 80% excuse me of our revenue was roughly Mass Notification, so 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 everyday. 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 in CEM to substantially accelerate us in the last year I think roughly 30% plus.
Mike Latimore
Okay. Yes, thank you.
Jaime Ellertson
You bet.
Operator
Thank you. Our next question comes from Eric Lemus with SunTrust Robinson Humphrey.
Your line is open.
Eric Lemus
Hey, guys. One just quick question from me on VCC, any update on where you are in supporting a multi-tenant architecture?
Jaime Ellertson
Yes, I mentioned that as the strategy on CEM we are dead on track our team says. So I would always hedge that and say it could be a month or so off, but we are pretty much right on track with the delivery midyear and that will enable us to sell on a single platform in 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 campus as well as communication collaboration tools, all on one single instance multi-tenant platform and I would just tell you it’s on track.
Eric Lemus
Great. Thanks.
Operator
Thank you. And our next question comes from Michael Nemeroff with Credit Suisse.
Your line is open.
Michael Nemeroff
Hey, guys. Congrats on a good quarter.
You highlighted some strong partner led wins in the quarter, but how much revenue our channel partners driving to Everbridge, Federal Signal and the International SOS and how has that trended versus direct sales and how does that differ internationally versus domestically let’s say?
Jaime Ellertson
So we have 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.
Other than that Michael, we haven’t broken it down, we don’t breakout 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 Erickson was a combination deal multiple 6-figure deal we did with them. So as time has progressed, our sales forces are working better together and we are closing deals, we started to close our first Asian deals, some of those with the assistance of international SOS and other partners.
And I can’t in my prepared remarks, Ken clovers me with the length of my script already. And so I didn’t get into all our partner wins, but in Italy, just as – just a one-off some were picking a country.
We closed two good pretty sizable deals there, one for a 50,000 employee company, Leonardo, a leading aerospace company. So we are seeing the partner momentum pickup 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 are 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 breakout exact numbers.
Michael Nemeroff
That’s helpful. Thanks guys.
Congrats on a good quarter.
Jaime Ellertson
Thanks, Michael.
Operator
Thank you. I am showing no further questions at this time.
I’d like to turn the call back to Mr. Jaime Ellertson for any closing remarks.
Jaime Ellertson
Well, we appreciate everyone joining us for the call today what we think is a very strong Q4 and full year with set of results, we believe we set ourselves up as I said for successful 2018 and we look forward to talking to 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 conference.
You may all disconnect. Everyone have a great day.