Aug 6, 2018
Executives
Kenneth Goldman - CFO, SVP & Treasurer Jaime Ellertson - Chairman & CEO Robert Hughes - President, Go-to-Market James Totton - EVP, Product Management, Engineering & Operations
Analysts
Bradley Sills - Bank of America Merrill Lynch Dmitry Netis - William Blair & Company Richard Davis - Canaccord Genuity Limited Eric Lemus - SunTrust Robinson Humphrey Kevin Ruth - Raymond James Thomas Roderick - Stifel, Nicolaus & Company Brad Zelnick - Crédit Suisse
Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Everbridge Inc.
Second Quarter 2018 Earnings Conference Call. [Operator Instructions].
As a reminder, this conference call is being recorded. I would now like to introduce your host for today's presentation, Mr.
Ken Goldman, Senior Vice President and Chief Financial Officer. Sir, please begin.
Kenneth Goldman
Good afternoon, and welcome to Everbridge's earnings call for the second quarter of 2018. This is Ken Goldman, Senior Vice President, Chief Financial Officer of Everbridge.
With me on the call today are Jaime Ellertson, CEO and Chairman; Bob Hughes, President Go-to-Market; and Jim Totton Executive Vice President Product Management Engineering and Operations. After the market closed today, we issued a press release with details regarding our second 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 only our reviews as of today and should not be considered representative of our reviews as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook.
Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These results are summarized in the press release that we issued today.
For further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC, including our recent 10-K and 10-Q filings. Also during the course of today's call, we will refer to certain non-GAAP financial measures.
A reconciliation of GAAP to non-GAAP measures is included in our press release. Finally, at the times in our prepared remarks or responses to your questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results.
Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to Jaimie for his prepared remarks.
Jaime Ellertson
Thanks, Ken, and welcome to all of you joining our second quarter 2018 earnings call. Our second quarter performance reflects our accelerating momentum as we execute customer growth strategies.
Q2 revenue of $35.8 million represented a growth of over 43% from a year ago, and we again balanced very strong revenue growth with better-than-anticipated profitability, generating an adjusted EBITDA loss of $1.8 million in the second quarter, which was ahead of our guidance. The broad drivers for our strong beat include above-planned new and gross sales for our core Mass Notification solution, continued strong traction with our new products, accelerating market acceptance of our CEM suite and the continued expansion of our international business, both organically and supplemented by the inclusion of our acquired UMS business.
Additionally, North American - America, we significantly increased the size of our opportunity in the government market having achieved FedRAMP authorization in early June. But more on that achievement a little bit later.
Overall, we are particularly pleased to have delivered eight consecutive quarter of better-than-expected results in the time since our IPO in 2016. We believe these results quite simply are proof that our growth strategy is working.
Beginning with our first growth pillar, maximizing our customer retention as well as expanding our products suite to accelerate cross sales and increase our ASP. In the second quarter, we achieved another solid retention quarter with now more than 4,000 enterprise customers, and we saw dramatic success with our efforts to close larger, more strategic enterprise solutions with a record-setting number of six-figure deals, including a dramatic increase in the number of $200,000-plus, up 33% year-over-year.
Our multiproduct deal volume also continue to grow, achieving a record 82 multiproduct transactions in Q2, a 37% increase from last year. In combination to these strong results continued to drive our driving ASP, which at $45,000-plus is up 7% year-over-year.
In the quarter, we also expanded our product suite by completing the integration of a new risk data-as-a-service offering for one of our previously acquired assets. More about this offering later.
Our second quarter results also illustrate our success with our second key growth pillar, ensuring the growth of our core notification business by driving continued success in North America in both our state and local government and corporate markets as well as expanding into new markets and geographies worldwide. Quite frankly, our core Mass Notification business had a very, very strong showing this past quarter.
We saw real success with our programs to drive new large city, county and state deals with large new customer wins like the city of Austin, Texas, and the 11 surrounding counties for total contract value of over $700,000. Another win in Texas was Harris County, the third-largest county in the U.S.
in another multi-multi-figure six-figure deal. In the New York state, we won a six-figure multiproduct deal with Nassau County in a competitive takeaway.
And we saw New York alert go live. Our previously announced multiyear, multimillion dollar comparable with the state of New York continues to be rolled out, and we expect it to be a growing contributor to our SLG revenue as we look forward.
Our recent success with New York State and New York City helped us enable our network effect and contributed our Nassau County win, where multiple Everbridge customers can share critical alerts and information directly between themselves as well as a concentration of users creates strong referential selling opportunities. Our strong showing in state and local government translated to other related markets like the education space, where we saw new wins at large institutions like Mississippi State, High Point in Eastern New Mexico Universities.
On the corporate side, we enjoyed similar success with impressive wins across leading enterprises, including marquee wins at the North America's largest company by revenue, selecting our core Mass Notification and Safety Connection solutions for an initial rollout. And large tech players like Polycom Analog Devices and [indiscernible] as well as leading financial services organization like Barret Gold and First Data.
All selecting Everbridge Mass Notification in Q2. Internationally, we continue to see acceleration in our results as our international revenue grew by over 170% year-over-year to equate to 19% of our overall revenue.
From a strong combination of faster organic growth plus nearly a full quarter of contribution from UMS business. Our broad geographic expansion was powered by new wins such as high-speed two, which shows Safety Connection for U.S.
larger infrastructure project that will connect the cities of London, Birmingham, Manchester and Leeds. In Asia, our team landed new product winds like CLP, the largest utility in Hong Kong, which selected Everbridge Mass Notification and secure messaging solution.
Additional notable international wins in the second quarter included DBS Bank in Singapore, a whole delis in the Netherlands, CGG in France and companies like Poker Stars and the government of the Isle of Man in the U.K. And we made great progress with UMS business internationally.
Upon completion of UMS acquisition earlier in the quarter, we streamlined their operations, including implementing a more focused go-to-market effort. These actions began to pay dividends in Q2, with several whole country population alerting solution project wins, including a six-figure deal for a smaller European nation in Europe as well as better-than-expected UMS core Mass Notification results from the Scandinavian market, including incremental organic growth over previous periods.
Our core M&A goals include looking for highly-differentiated technology that can expendable platform and/or opportunities that help us gain access any markets. For example, new geographies or a new end-user market.
In the case of UMS, it looks like, and it's still early, we may achieve both of these M&A goals. Looking forward, the advantage of our unique population alerting solution has, with large countrywide opportunities, combined with synergies our organizations have in the Mass Notification market paints a very positive outlook for our future international growth.
To further help us ensure we can sustain our international momentum, we expanded our European operations during the first quarter in the Netherlands with new sales, support and office infrastructure in this key continental market. And on the topic of market expansion, in North America, our recent FedRAMP authorization will enable us to more easily serve the large U.S.
government market, a market estimate to be twice the size of our existing state and local government opportunity. Our Everbridge Federal group is open for business with new offices earlier this year and aggressively working to land large new opportunities.
More on our federal effort and FedRAMP by Jim Totton, our VP of Product Management Engineering and Operations, later in today's comments. Now onto our third strategic pillar, our Critical Event Management suite experience continues growth and market acceptance in Q2.
We closed a record number of new CEM customers in Q2, up 60% from Q1, with average contract value of over 5x company-wide ASP. And our CEM success in Q2 was across numerous corporate segments including oil and gas, retail, high tech, financial services and healthcare, with most new wins being Fortune 500 companies.
These new customers are focused on implementing an enterprise-wide common operating environment that will provide situational awareness, integrative incident and operational response and communications and collaboration to enable them to ensure the safety of their employees and avoid unnecessary business impact during a wide range of critical events that affect their organizations everyday. In Q2, leading healthcare organizations like Alexa and leading financial institutions like American Family Insurance chose multiproduct CEM solutions.
One of our most notable new CEM wins was the leading online marketplace eBay. eBay was already in existing Mass Notification and IT Alerting customer.
And in Q2, chose our Safety Connection and VCC solutions in a large six-figure deal. With this win, eBay is now a user of 4 of our 5 top application solutions.
On the technology side, or product development teams made progress by introducing our new risk data as a service, or RDAS, offering. Our first enhanced risk data solution that includes multiple threat, reference and contextual fees for a variety of public and proprietary sources in a single integrated flexible package.
Our RDAS is comprised of our numerous existing risk data sources, including over [indiscernible] local law enforcement events, our multiple weather data providers, from national weather data to leading source like WTD and AccuWeather to social media and other government threat data providers. And last week, we completed the purchase of Risk Map, a provider of machine learning, crowd-sourced intelligence, social media, local and global media coverage and dark web information to identify and track risk events.
This combination of data and people allows us to have a broad geographic coverage, while efficiently balancing speed, accuracy and completeness of any risk information that is shared with our customers. This efficiency will also allow us to make this offering available to a much broader set of customers and prospects who would otherwise have been priced out of more traditional risk data offerings.
And just after the close of the quarter, we released our VCC product as a complete multi-tenant SaaS, that's single instance solution. Our VCC solution was built to leverage both the full capabilities of our global resilient and scalable multi-tenant SaaS platform as well as integrate with our entire suite of CEM applications like Mass Notification, instant communication and Safety Connection.
And also adhere to our philosophy of extreme configurability and self-service. This approach enables us to dramatically reduce the time and effort that it takes to deploy the solution and fully on board customers.
This is important because it allows us to make VCC SaaS available to a much broader set of prospects and customers unlike the previous version of VCC, which was mostly targeted to Fortune 5000. In short, VCC SaaS will enable the full suite to be easier to deploy across our entire customer base.
Now allow me to provide a little more detail on the strong Q2 performance and business trends. In Q2, we added 120 net-new enterprise customers, not including new customers through our UMS acquisition.
In Q2, the 82 multiproduct deals that I mentioned earlier helped to raise our trailing 12-month average to 69 multiproduct deals per quarter. This increasing number of multiproduct deals demonstrates our ability to increase the strategic value we deliver to new and existing customers with our expanding suite of products and in parallel, drive larger ASPs.
We also saw a strong contribution from our new products such as Safety Connection and IT Alerting, which together represented 46% of new and gross sale in the quarter. And you'll notice, that while this is a meaningful increase from the 36% of new and gross sale from a year ago, it represents a slight decline from the 49% in the first quarter from new products, for the first time since our IPO, due to the very strong Mass Notification performance in the second quarter.
Given our continue Mass Notification momentum combined with the market expansion opportunities in the federal market, accelerating international success, where MN is often the first product we sell, we accept to see healthy - we expect to see healthy growth in both the core MN and new product categories, with each category driving roughly between 40% to 50% of new and gross sales for the foreseeable future. On an individual product basis, new and gross sales of Safety Connection grew by over 85% on a trailing 12-month basis and ITA sales climbed 35% on a similar trailing 12-month basis.
Safety Connection, which is disrupting the physical safety marketplace and addressing needs of increasing mobile workforce worldwide continues to our fastest-growing product with numerous new wins our corporate and healthcare verticals. Lastly, our revenue mix of 54% for corporate, 31% for state and local government and 15% for healthcare remain roughly consistent with previous quarters.
However, as I previously mentioned, international grew strongly to reach 19% of overall revenue. In summary, these very strong Q2 results illustrate our ability to engage and penetrate a large and growing addressable market.
On a recent Analyst Day, we provided a detailed build of our current $45 billion TAM. And our continued momentum in core Mass Notification business our newly expanded federal market opportunity, continuing success in our international business, including our acquired businesses like UMS, all led by the strong traction of our most strategic solution, CEM that is generating gives us confidence that we have a blueprint to maintain our growth momentum in the quarters to come.
Now I'd like to turn the call over to Bob Hughes, Everbridge President Go-to-Market to discuss specific color on the go-to-market success in Q2. Bob?
Robert Hughes
Thanks, Jaime. Our go-to-market strategy is focused on expanding Mass Notification deals, cross-selling new products, increasing the number of multiproduct deals, advancing our CEM vision and growing our international presence.
I'd like to highlight some of our successes from the second quarter that demonstrate our strong execution. Starting with Mass Notification.
In the second quarter, we signed a number of large new Mass Notification deals with strong results in the government market. We signed numerous six-figure deals at the county and state level.
Many of these transactions will benefit from a network effect stemming from the relationships we already have in place in given geographies, enabling the sharing of data within a region. For example, in the second quarter, we signed the Florida Department of Transportation in a six-figure deal as a Mass Notification customer.
With more than 120,000 miles of roads, 12,000 bridges and 18 million registered motor vehicles, the Florida DOT clearly has a need for a flexible and redundant incident communication solution. Last fall, during Hurricane Irma, countless organizations across the state of Florida leveraged Everbridge.
But what really got the attention of Florida Department of Transportation was the Florida Turnpike use of Everbridge to manage the largest evacuation in state history, with nearly 7 million people making their way north as the storm approached. In June, coinciding with the start of a new hurricane season, the Florida DOT selected Everbridge for implementation across all districts and assets statewide, providing a single communication platform to both manage daily operations and be prepared for major incidents in the future.
Another result of the network effect in Florida is a win this quarter at the Florida Department of Environmental Protection and an additional win at the Florida Agency for State Technology, quickly expanding the number of state agencies that will benefit from Everbridge in Florida. And a final example of our ability to leverage wins across the region is the Talahaasi International Airport, which we also closed in Q2.
Another notable win in the government market is NASA's Michoud Assembly Facility. NASA [indiscernible] represents the third NASA facility to choose Everbridge, along with NASA Deep Space Center and the Jet Propulsion Laboratory at Caltech.
At the [indiscernible] assembly located in New Orleans, NASA chose Everbridge Mass Notification to communicate with staff during critical events and community engagement to engage with visitors to the facility. In our corporate market, new substantive MN - Mass Notification Safety Connection and ITA wins included a significant expansion of our relationships with one of the Top 4 gaming and resort companies, operating over 50 casinos and hotels around the world.
This major casino and hotel operator started their relationship with Everbridge by deploying our IT Alerting. After the Las Vegas shooting in October of last year, they decided to implement an effective way to account for and to communicate with staff in the event of future emergencies.
In Q2, they expanded their relationship with Everbridge in a six-figure deal to add Mass Notification, Safety Connection and internet communication for their 65,000 global employees. In addition, a multibillion-dollar women's clothing retailer chose Everbridge IT Alerting in Q2 to display some incumbent and due to our ability to implement a single platform tool to communicate life safety issues for all their employees.
They also chose our Mass Notification and incident communication application. This six-figure deal illustrates the leverage of a broad platform offering that can easily integrate with other tools and provide a comprehensive critical communication infrastructure.
Successes in the second quarter also included multiproduct wins and expansions as customers and prospects embraced our CEM vision. In addition to the CEM wins Jaime already mentioned, we also entered into a new CEM deal as part of our initial relationship with a Fortune 500 operator with over 45,000 restaurants in 135 countries.
This major restaurant chain shows the combination of Visual Command Center, Mass Notification and incident communication to better anticipate and respond to critical events that can disrupt operations. Their initial six-figure transaction only covers 3% of their employees and 1% of their restaurants, and we believe they will represent a significant expansion opportunity for Everbridge over time.
Moving overseas, I'm excited to discuss our international expansion opportunity since we believe the market opportunity outside of the United States may be even larger than the opportunity within the U.S. And while growing fast, we are currently just scratching the surface of the sizable international market.
In addition to winning a nationwide deal with a small country in Europe as Jaime discussed, we also expanded a countrywide deal in Sweden, enabling the entire population to receive location-based alerts during a crisis. Also in the second quarter, the world's largest offshore drilling contractor headquartered in Europe and with offices in 20 countries, selected the powerful combination of Everbridge Mass Notification and Visual Command Center in a six-figure deal to ensure the physical security of its global workforce and the business continuity of its operations.
Another great initial customer win leveraging both products. In summary, our second quarter performance reflects continued momentum in executing on our multiple growth strategies, and we're more excited than ever about the opportunities ahead, including our ability to expand our addressable market.
While I have a number of federal agency wins such as those with NASA that I mentioned, leveraging FedRAMP authorization will significantly expand the government opportunity at the federal level. For more details on that, let me pass the call over to Jim Totton, our VP of Product Management, Engineering and Operations.
Jim?
James Totton
Thanks, Bob. I was very excited to join Everbridge this February to lead our product teams as Executive Vice President of Product Management and Engineering and Operations.
Over the past two decades, I have held operational executive leadership roles at Red Hat, Microsoft and Dell, and I'm excited to bring my experience to contribute to Everbridge's growthin the years ahead. As Jaime mentioned, we recently received the final FedRAMP authorization, further differentiating Everbridge in the federal market.
This was a multiyear effort involving thousands of person hours to ensure compliance with 325 controls, demonstrating the security of the Everbridge suite delivers, backed by an independent audit and ultimately authorized by the Program Management Office. This is an accomplishment only achieved by a select group of companies and now qualifies us to be officially listed on the FedRAMP marketplace, the central repository where federal agencies can select technology solutions.
Not only is this important in that it will further open up the federal market for us, it also reinforces the security and scale of our platform for other markets, including corporate and other government opportunities. We continue to be optimistic that we will sign our first FedRAMP enabled federal contracts in the coming quarters.
Though due to the nature of FASB revenue recognition, you won't see meaningful revenue impact until 2019. And second, I would like to share an update on one of our most significant investment areas in our platform, which is internally called Project Atlas.
As Jaime and Bob discussed, due to the increasingly global nature of our business, we have continued our investments in the scale and automation of the deployment and management of our infrastructure. techniques like texting such as infrastructure as code.
This increase our agility and time-to-market in scaling our infrastructure globally. Further, this supports additional ability to scale on demand in markets needing additional capacity at key moments.
These projects are key examples of our continued innovation and investment in technology with 85 global patents and counting, along with the most scaled, reliable and global infrastructure in order to continue to support our strong market success. Now I'll turn the call over to Ken for details on our financial performance and increased guidance for the year.
Ken?
Kenneth Goldman
Thanks, Jim. I'll provide some more details on our financial performance for the second quarter and then discuss our outlook for the third quarter and full year 2018.
Revenue in the second quarter grew 43% from a year ago to $35.8 million and it was above the high end of our guidance due to the strong organic performance with our recently acquired UMS acquisition also performing better than anticipated. Revenue upside in the quarter helped generate adjusted EBITDA that also exceeded our guidance at a loss of $1.8 million compared to an adjusted EBITDA loss of $100,000 a year ago.
Our dollar-based net retention rate remains above 110%, reflecting the significant value and satisfaction that we provide to our customers. In looking at our total customer count metric, with the addition of UMS, we are increasing the threshold of enterprise customers from $100 per month to $200 per month.
This has the combined effect of reducing our organic enterprise customer count but also as customers acquired from UMS as well as net new organic customers from the second quarter. On this basis, we ended the second quarter with 4,158 enterprise customers compared to 3,539 at the end of the first quarter.
Now turning 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. Non-GAAP gross margin of 71.5% decreased from 72.5% a year ago due to the purchase accounting impact on acquired different revenue from recent acquisitions.
We expect gross margins to continue to improve as this purchase accounting impact diminishes in the quarters ahead, however, as always, please keep in mind that gross margins can fluctuation not fluctuate from quarter-to-quarter. Total operating expenses were $29.3 million in this quarter, an increase of 49% from a year ago, reflecting the combination of continued product investments along with the expenses of acquired businesses.
In addition, due to recent changes in accounting regulations, we can no longer capitalize expenses related to M&A transactions and therefore, our second quarter expenses included costs related to our requisitions that would have previously been capitalized. As I indicated, adjusted EBITDA loss for the quarter was $1.8 million and better than our guidance range.
Net loss in the second quarter was $5.1 million or $0.18 per basic share and was also better than our guidance compared to a loss of $1.5 million or $0.05 per basic share in the year ago quarter. Note that on a GAAP basis, we had a bigger net loss in the second quarter than our guidance range due to the higher-than-anticipated stock-based compensation expense for the second quarter.
As the vesting of these performance stock units is triggered by shareprice come, our stock-based compensation expense in the quarter was considerably higher than anticipated when we provided guidance due to our stock price more than doubling in the last 12 months and increasing more than 30% during the second quarter. Turning to our balance sheet, we ended the quarter with $106 million in cash, cash equivalents and short-term investments, a decrease from $152.1 million at the end of the first quarter, due primarily to the approximately $35 million in payments to complete our acquisition of UMS and operating cash outflows of $9 million due to timing matters and $2.2 million in capital expenditures and capital for development costs.
Total deferred revenue was $82.5 million at the end of the quarter, an increase of 38% from a year ago. As we've noted on prior calls, our deferred revenue balance at the end of any quarter can vary greatly due to a number of factors including seasonality, in which the first quarter represents our smallest quarter for renewals and the fourth quarter being our largest.
As such, even though have predominantly annual payment terms, deferred revenue is not always a meaningful indicator of the underlying momentum in our business from a quarterly perspective that we believe it is directly relevant over a longer trended period. Now let me turn to the outlook.
We had a solid first half of 2018 and remain optimistic about the balance of the year. With that backdrop, for the third quarter of 2018, we anticipate revenue of between $37.9 million and $38.2 million, representing growth of 39% to 40%.
We anticipate an adjusted EBITDA to be between negative $200,000 and positive $100,000. We anticipate a non-GAAP net loss of between $3.7 million and $3.4 million or a loss of between $0.13 and $0.12 per share based on 29.4 million basic weighted average shares outstanding.
Stock-based compensation is expected to be between $3.9 million and $4.1 million for the third quarter. For the full year 2018, we are raising our revenue guidance to the range of $143.7 million to $144.3 million, an increase of $4.8 million at the midpoint from our prior guidance, representing growth of 38% from a year ago.
This increase in guidance reflects our better-than-expected organic results, further supported by raised revenue expectations from UMS from faster-than-anticipated traction in that business and smaller-than-anticipated purchase accounting impact on the acquired deferred revenue. As such, we now expect UMS to contribute between $5 million and $6 million to our 2018 revenue.
From a profitability perspective, we now anticipate full year adjusted EBITDA to be in the range of a loss of $3.4 million to $2.8 million. We expect a non-GAAP net loss of between $17 million and $16.3 million for the full year 2018 or between negative $0.58 and negative $0.56 per share based on 29.3 million basic weighted average shares outstanding.
This includes the impact of an estimated $5.1 million in net interest expense related primarily to our convertible notes. This guidance assumes an estimated stock-based compensation expense of approximately $28 million for the year.
In summary, we have delivered better-than-expected performance in the second quarter with positive and encouraging results across our business. We are enthusiastic about our ability to drive growth from our core Mass Notification business, newer products, expanding market opportunity within our FedRAMP authorization and accelerating international businesses as we expand our ability to continue to capture increasing share of the larger opportunity that our Critical Event Management solutions address.
With that, operator, let me turn the call back over to Jaime for some additional remarks.
Jaime Ellertson
Thanks, Ken. As you can see, our strong second quarter performance, growing market momentum and expanding global opportunities give us confidence in raising our full year revenue expectations.
We are more excited than ever about the opportunities ahead of Everbridge, and we are advancing towards our goal in a thoughtful manner. The additions of Bob, Jim and other executives to our team give me great confidence in our ability to execute our strategy and drive continued strong growth as we look ahead.
We've also expanded our Board of Directors with the recent addition of Alison Dean as the CEO of iRobot, further enhancing with directors who have been instrumental in scaling larger technology businesses. And as we announced in June, we're in the early process of a identifying a new CEO, enabling me to transition to the role of Executive Chairman.
We'll be evaluating both internal and external candidates and have deliberately set a long time line for this transition, in order to allow for a thoughtfully executed process over the 1.5 years. In summary, we're very excited about our second quarter performance and believe we've set the stage for continued success in cementing our leadership position in this very large and dynamic market.
Now, operator, would you please open the call for questions?
Operator
[Operator Instructions]. Our first question or comment comes from the line of Richard Davis from Canaccord.
Richard Davis
Congratulations on navigating the FedRAMP certification process. So two questions arise when I think about that because I don't know that space as well.
So one, if you announce a win, do you have to put that contact for common from competitive bidders? Because sometimes that can happen with other companies.
And then second, are you going after these opportunities mostly on your own or there's a lot - there are groups of professional services firms that focus on government agencies that can kind of help you navigate through there. And to what extent does that make sense for you to do that now or in the future?
Jaime Ellertson
We don't know - every contract is different, Richard, so it's tough to create a broad generalization. But the FedRAMP certification is more about getting federal market departments and organizations the comfort that we're qualified and meet a level of certification around security and ability to operate at the government specification anything else.
And it smooths that ability to bid. More and more, we're seeing the average bid come out saying we require FedRAMP certification or we want to you're in the process and going to receive it quickly, and we're one of only two vendors in the market that up with the website you can check.
So we don't know the processes that requires that but everyone is different. We believe that it's just going to, as we said, open the ability for us to bid on a substantially larger number of standard proposals.
Obviously, if there are more than two vendors, then they can compete. But there aren't today, there are only two.
And then on the second side, yes, we work with multiple system integrators and partners as well as go direct. So that's a simple answer.
Operator
Our next question or comment comes from the line of Brad Zelnick with Crédit Suisse.
Brad Zelnick
I wanted to get a little bit more on Critical Event Management Platform. Just given the premium ASP, the strong value proposition, the great momentum you're seeing and the overall market opportunity that at all represents.
You talked about a massive - I think it was 45,000 restaurant win globally and that's just tremendous. But as we think about the forward opportunity, are there specific verticals that you can call out as being more ripe than others?
And how do you see this market evolving over time to eventually getting inbound RFPs and live budgeted projects that are showing up at your doorstep?
Jaime Ellertson
Yes. I'll make some comments and see if Bob wants to follow-up with some specific comments even around situations that we closed this past quarter.
In general, we announced our Critical Event Management strategy basically a year ago and have only been in that space for several quarters. So it is new to us.
We started with three products. Announced that by the end of this year, we'll introduce a fourth critical management, crisis management application, which is the ability to manage the full incident and the tasks related in these complex larger incidents.
We have seen the ASP grow in almost every quarter and the number of deals. But as Bob pointed out at our Analyst Day and on the last call, we have less than 10% penetration to Fortune 500.
I was [bullied] by the fact that we saw almost all of our wins this past quarter, I think, the majority of them were with Fortune 500 like the large restaurant, eBay and others. And so we think that is a very significant market.
We're in the early stages because we invented the space. So are we starting to see people come to us with blank RP, say we're not building the RFP, we're just going to put Everbridge in and you tell us what the price is.
It's not quite the market yet but it is a very much larger winner or represented properly as a way for a company to get on to a common operating platform for the most significant effect there either the safety of the employees or their operations. We're the only provide the claims to have that selection.
And as we grow in success, no doubt, the market will respond and will come to us more and more with the opportunity. Instead of us building the market, the market will come to us.
Same thing that happened in salesforce or CRM, same thing that happened in the ERP space, we believe, ultimately. And we do have a leadership position there.
Bob, any comments on individual wins in markets?
Robert Hughes
Yes. Sure.
Just to pick up on the question on the vertical markets. As we talked about it at the Analyst Day, we have a growing total addressable market.
So we've been in this process of evolving much more toward a vertical go-to-market organization. That journey is a very thoughtful evolution.
And obviously, we're looking very closely at wins within vertical then look at that is that a vertical that we - or can we replicate that win? How do we leverage the ROI, build in a new case study and what success will build out that on full-blown vertical.
Had we done that with obviously state level government or public sector, which is a combination of federal state level government. We have a focus on the high-tech medical.
Financial services. But that example I cited there in retail, that actually came out of a large win we had - I should say, a large use case that involved during one of the hurricanes, where we saw a retailer Everbridge leverage our technology to both make sure when a store was adequately staffed, resource, in terms of telling employees to stay home and others was that was going to be impacted, load up on both the supplies and the employees to generate revenue and keep their products available in other locations.
So we said let's target anyone that looks like in terms of number - large number of branches in that use case, and we went after this type of customer that I was referring to. I can't use the name.
And yes, that resulted in a win. So taking that, we would look at that closely and see how many other companies look and behave like that, what was the specific use case and does this actually make sense?
So that will be a journey that we'll run. We're going to go after it very cautiously, but we analyze every transaction that comes in, win or loss.
Jaime Ellertson
And Brad, just getting back to your original question. We, in launching CEM, have only targeted our corporate and healthcare spaces.
We haven't gone after any other market. We do not actively sell it in their state and local government today, even though there's a clear need.
And former VCC customers exist in that space, very large ones. We have not focused on our international market.
We don't sell it right now into markets like transportation. Multiple other places where we can go.
So we're in the early stage of CEM expansion. It's growing very well.
But as we expand, as we presented at our Analyst Day, if we just sold it to the bulk of our existing customer base, it would allow us to grow our business substantially. And so still early days.
Brad Zelnick
If I could just sneak a quick one for Ken on cash flow. Ken, I think on a crude payroll and employee-related liabilities, we were a little bit off there.
Can you just give us a little bit of puts and takes and timing issues as it relates to cash flow and where we stand for the full year?
Kenneth Goldman
Yes. So on a full year basis, we expect cash flow to be roughly neutral.
But from quarter-to-quarter, depending on what day the last day of the quarter is, when payroll taxes may be due. And in particular, in Q2, because of the stock-based comps charges that we took, there are lot of payroll taxes due by both employees and by us as employer.
And that skews things a little bit more this quarter than you would normally see.
Operator
Our next question or comment comes from the line of Tom Roderick from Stifel.
Thomas Roderick
I wanted to ask a little bit here just about UMS. And if I look at the international contribution quarter-on-quarter, it seems like it more than doubled so fantastic result there.
Tying that back to Ken, your comment that you're only expecting $5 million to $6 million for the year on UMS, it tells us that something organically is going really well in international markets as well not just the acquisition. I was hoping if you could talk a little bit more about that.
Is this predominantly Mass Notification on the core side that is really starting to make waves? Perhaps you could talk about some of the markets internationally inside and outside of Europe that are generating the results outside of the UMS?
Jaime Ellertson
Yes. Tom, this is Jaime.
Happy to jump on that and again, Bob may follow-up with a comment or two. In general, as we said, we had organic results - remember, I kind of signaled this last quarter.
We did almost 60% growth. And in last quarter's prepared remarks, I said our international business grew by more than 60% year-over-year without UMS.
So our core business is growing, for the first time, substantially faster than North America. And that's to be expected, if we get our act together, have new management and the product traction is there, plus the multiproduct traction is there, which are the two big drivers.
We're starting to see, as you see, the deal color elaborated on in these quarters that, in Asia and Europe, Continental Europe, the reason I gave you four different countries with specific examples was it's across-the-board. We're seeing Mass Notification, but not just Mass Notification, someone's buying Mass Notification and Safety Connection or safety - Mass Notification and ITA or secure messaging and Mass Notification like the CLP win.
So with multiproduct, that sales force is getting it now like we did in the U.S., they're a little bit behind us. But as Bob said, that's a market that's equal to our entire North American market, which means - and we believe it could be larger with the drivers systemic there.
So we're seeing that across-the-board. And then you add to that UMS and you get this performance of up from last quarter substantially to this quarter and over double.
Thomas Roderick
Fantastic. Tying UMS into that, you've landed a countrywide win in Sweden.
Sounds like you landed another smaller European nation. So fantastic sort of add into that portfolio.
Is there a nice cross-sell opportunity as you go countrywide? Obviously, Mass Notification and related products here in the states have been fantastic on a statewide level and government as well.
What's the cross-sell potential as you sort of look countrywide with some of the UMS offerings?
Jaime Ellertson
As I expanded on it last quarter, you get - if you win a country, it's pretty hard for anybody else. You kind of suck the oxygen out for everybody else.
No one gets traction. Because who's going to want to buy a secondary solution that's not aligned with the federal government or the primary governmental solution.
So we have that same referential network effect of buying patterns from customers we see when we win a country, much easier to sell to large corporate, large healthcare, large oil and gas or transportation, airlines, airports, things when you've won the national opportunity. It's early days.
This last quarter, we actually even had another major capital environment start on a pilot project with [indiscernible]. So we're seeing a little bit of pick up in the population alerting business.
There's no question that leads us to the opportunity to cross-sell and up-sell our strength, which is the corporate market and general use of Mass Notification that can be aligned and integrated. And long-term in our product roadmap, population alerting integrates with a, say, corporate user of Mass Notification.
Operator
Our next question or comment comes from the line of Terry Tillman from Sun Trust.
Eric Lemus
This is Eric Lemus on for Terry. I wanted to follow-up on the FedRAMP authorization and congrats again in finally reaching that.
But if you look at those deals earlier on, most of the deals going to be Mass Notification deals. And then if so, how do you see the landscape?
Is it more of a rep from the place our greenfield opportunities out there?
Robert Hughes
This is Bob. Good question.
We see it is a large opportunity on both sides. There is a - there has been - or there is an established competitor in the space so some of those contractors will come it just scratching the surface as well as the totals public sector market.
So as Jimmy mentioned, having that certification really differentiates us from a lot of other companies the market in the public sector but as well in the corporate. It's a great kind of seal of approval.
But we believe the opportunity there on the outside of that competitors base is larger than what they have, so we're very excited about. And as we mentioned, we're just at the beginning, but I'm very optimistic about what's - how that market will produce throughout the remainder of this year.
Operator
Our next question or comment comes from the line of Brad Sills from Bank of America.
Bradley Sills
Just a follow-up on UMS, the success you're seeing there. To what extent would you attribute the upside this quarter to perhaps some positive reception to having UMS now part of the broader Everbridge stack?
I mean, is there interest, at least, maybe not in the current signings but in the pipeline to add other components outside of the of just the core you UMS offering?
Jaime Ellertson
Yes. Two general comments to that and see if that satisfies, please follow on.
But on one hand, with UMS, as we said, we just saw better - we saw great results, we're hoping to get some countrywide wins and continue work on those. Those are long-term projects, so it's great to see even small countries when they're six-figure deals, so that equates to large counties or cities here.
And they are more meaningful when you win them because you then line up the large corporations as we win them. So that that's positive.
I also want to note that the core SaaS business, which is a Mass Notification solutions specifically built for the Scandinavian markets, performed better than planned and organically, year-over-year, better than previous years. So that meant they did do better with our either with our health quarter or just coincidence and timing.
We'll take it that we were involved a little bit and nurture that along. And so their core business did better than historical and so we consider that a contribution that Everbridge in making.
Then on your final part, we're seeing some early indication that people like to Everbridge now owns the business and it gives them more stability. Look, as a small roughly $10 million public business in Norway, yes, I think the fact that the market leader now is integrated, gives them long-term stability.
We've had their largest partners soundly endorse the acquisition and work with us. And we believe that we're going to see more and more customers excited about the ultimate migration onto the Everbridge platform.
And then with the PAS solution it being integrated with a more corporate or standard Mass Notification solution. So I think on all those pieces, partially that we have some initial PAS wins and they're excited about how we can merge our other core products with the population alerting solution.
Partly that they had a strong SaaS showing throughout Scandinavia. And then partly because we are seeing some support for Everbridge as the person that stands behind it, all worked to our benefit in this past quarter.
Bradley Sills
Great. And in the past, you guys had given some color around the pipeline for state deals.
Could you provide an update on that please?
Jaime Ellertson
Yes. I don't think - and of that chain the pipeline is still strong as we say, whether it's an entire country deal or statewide deal, we have a rhythm that sometimes we go for two quarters up something and then 1 or 2 pops.
They are not as predictable as we'd like. The pipeline has not decreased at all nor has anyone else won one of the big deals that we're focused, but they do take time.
And so as Ken states, when we talk about deferred rev or something else, you have to look at on a long-term basis, on a long-term basis, was see that still healthy, and we still see large city, county and state deals as a principal driver for state and local although that business now falls within federal. And a large federal contract could easily be as large as any of our state and local deals.
So stay tuned.
Operator
Our next question or comment comes from the line of Brian Peterson from Raymond James.
Kevin Ruth
Kevin here on Brian. You mentioned your Analyst Day of looking for the right balance for profitability versus growth going forward.
How are you looking at some of your potential investment areas, primarily, international UMS. And the impact that might have on operating leverage over the next few quarters?
Jaime Ellertson
Well, I'll only make one comment, which I did in my prepared remarks. This is Jaime again and then I'm going to turn it over to Ken for the long-term outlook to see he's pretty published set of remarks on this topic.
But we did - the minute the acquisition closed, we did take some strong management action along with the team in concert, I would say with the team to focus their results and in fact, some of that even included some headcount reductions because we wanted to get them in line with a long-term sustainable plan. I'm happy to report, as I said, in my prepared remarks, that those changes dividend this quarter and present us positive opportunity going forward.
On the broader picture of how that folds into Everbridge, I'll turn it over to Ken.
Kenneth Goldman
Yes. So as we've talked about since going public eight quarters ago, we run the business at effectively adjusted EBITDA neutral and cash flow neutral to slightly positive.
That said. When we do acquisitions, as you know because of acquisition accounting, we take our a haircut on the deferred revenue which causes a drag on the adjusted EBITDA and typically happens within the first year after acquisition.
So we then relatively acquisitive over the last couple of years, all to the positive. And so for instance, the acquisition that we've completed over the past year have settled down nicely in terms of meeting our objectives to be neutral to slightly positive on both cash flow and adjusted EBITDA.
But we will continue to look to be strategic and doing additional acquisitions. That said, we're still committed to a long-term model that says within roughly five years after IPO to get to higher gross margin, higher adjusted EBITDA, with the understanding that we'll balance that with the opportunity for continued growth.
As you've seen over the last couple of quarters, growth has continued to move in a nice direction as evidenced by this quarter's 40-plus percent growth. And therefore, we hate to say that there are any absolutes.
The reason that investor trust as a management team is to make that decisions on growth and profitability. But we think as a mature management team and as a growing public company that we have to achieve the right balance.
So committed that balance over time. The time frame we set was five years from IPO, which would be 2021, and we're still on track to that, with the understanding that we may make a couple of minor midcourse corrections to take advantage of opportunities for continued growth as well.
Operator
Our next question or comment comes from the line of Dmitry Netis from William Blair.
Dmitry Netis
Jaime, I want to go back to FedRAMP and ask the question, I think, for the second time since the Analyst Day, and that is if you could help us understand the SAM of this market? I mean we have a lot of questions coming from investors in terms of kind of what the dollar value is for this market?
If you don't want to put the exact number, maybe you could identify the bucket that belongs in, is it $100 million to $200 million? Is it $400 million to $500 million?
I know you said it's 2x the size of S&L opportunity. But maybe if you could just help us understand what the actual size of the addressable market is?
That would be super helpful.
Jaime Ellertson
Yes. Unfortunately, there aren't a lot of published numbers when you break it down at the end of these markets.
We don't have that for corporate, we don't have that for healthcare, we don't have that for the federal government. The only analysis that we do is we try to build from the bottom up and take example wins.
So when you think of the only other FedRAMP certified player, just last quarter, literally, coincidental with our earnings call, winning a $68 million project for one service, that's one customer. And you multiply it times the hundreds of customers, pick any number you want, you can come up with $1 billion market at the drop of a hat.
So it's not tough to a bottoms up expansion and say there are at least 3 to 4 major service arms and then major departments that are that large that could be multimillion wins, gets you to a very significant federal market. Another way we've said to do it quite honestly is that our current state and local market, as we said in our prepared remarks, roughly 30% of our business.
That 30%, if you take to this year's guidance we just gave you, I'm going to round it upwards, but 150 would mean that's a $50 million market and that's $100 million and our every opportunity for us in that market. So double the size of our $50 million current state and local.
So either way, it's a very significant expansion of revenue or significant expansion of TAM. It's built into our $45 billion right now.
Is just we have been accessing effectively because we didn't have the right certification to access - streamline the buying and purchasing process and we all know that that's a big part of winning federal business. So those two answers kind of gross bottom up by what the competitors winning on the size of their business and the size of our business in terms of revenue expansion or the two ways we can do that for you Dmitry.
And we apologize because there isn't much more that wouldn't be a very detailed buildup, which we happily talk about off-line for upcoming Investment Conference, for instance, this next month in Chicago.
Dmitry Netis
This is super helpful. I think this gives us a good start and good kind of color look into a how to cite this market opportunity.
So really appreciate that color. Maybe if I could just slip one more, or it's a two-part question.
One is, as you think about kind of the FirstNet and how it's being built out. There's a big focus now by AT&T to try to bring this together and expand their base station and so forth and so on.
I know it's a separate opportunity from what you do but do you think the two can kind of coexist and as far as kind of driving forth, potentially coming the Mass Notification market opportunity as sort of there's a call to improve the reliability of the network or nationwide alert system emergency alert system other's first Nat the big driver, do you think, for U.S. some uptake in the Mass Notification market?
Jaime Ellertson
Well, as we've said before, Dmitry, the first at opportunities for first responders, right? And we are particularly strong in its first responders application.
It doesn't replace that, it's any frequency directed for them and anything that generates a higher sense of awareness for emergency notification and alerting applications helps us drive our business. As we are the largest player in the space and seen as the clear market leader, all of those nationwide programs with particular submarkets help drive our market.
And then as you think about as internationally, as the market leader in the whole countries, who better to involve whether it's the U.S., a federal government or internationally, with a market momentum that something like FirstNet creates. But again, let's be clear in FirstNet is.
FirstNet is a new bandwidth and frequency created for first responders between an excellent the rest of our business and Public Safety where the market leader with applications there and so to the extent that more first responders are paying attention to emergency and nationalized alerting, drive summer business, doesn't hurt us. It doesn't compete with us.
And as we said before, the particular people involved there are also existing partners. So we think net-net, that's an absolute positive and will help us drive market adoption in penetration and the state and local and ultimately, even the federal or the corporate transportation from a lot of the other submarket that we play in.
Dmitry Netis
Yes. That's what I meant.
More of a pull-through effect. And if I may, yes that as far as the vector of strong acquisition, wanted to ask this question also.
As far as may be taken this machine learning data analytics and a high and mashing it up with Incident Management tools, is that something you guys are thinking about as well from DevOps standpoint? API standpoint or maybe just all match above AI and Incident Management?
Is there an effort internally guide you kind of create a solution similar to that? Or do you need to play in that market?
I mean, how are you thinking about that?
Jaime Ellertson
Well, so we do that. So if you - I think you may have missed the briefing on last quarter, the previous quarter, but we mentioned a birthmark orchestration and smart orchestration does just some of those components.
It's not pure machine learning but it allows you to more rapidly orchestrate and deliver Incident Management to the IC space and notify the right person in the right location about the right failure to reduce meantime to repair in a large IT operation or complex global IT operation. With that, we have told you that you're going to add analytics this next year.
And the machine learning is the idea of adding that has pads on those notifications, those incidents and overtime, building up a body of knowledge so that you can more rapidly have identify not only the cause of the potential solution, therefore, further reducing meantime to repair. So we're all over that.
Of a difference between some of the players in the IT Alerting, the AI and the analytics space when it comes to IT operations and IT CEM is quite frankly, we see at the enterprise level. So we have a distinct difference and we believe it's an advantage to our enterprise customers.
We already are implemented on a corporate wide basis. We passed security and contractual obligations.
We have a profile on everyone in the company including, by the way, the 10% or 5% or 15% that are in IT ops. So you don't have to build up a separate database and get a separate alerting implementation going just to handle your IT incidents.
And we are geared towards an enterprise level with the scale, reliability and global reach that none of those guys can touch. And so our play is that the enterprise level and using the same infrastructure to deliver those same results versus the DevOps play, which is often down at the detail department level.
And it means that they have to net them together and stitch them together. Both opportunities side of the market are growing pretty rapidly.
As we said, a 35% growth just quarter-over-quarter and that wasn't our strongest quarter of IT Alerting. And so we think we'll continue to be a leader in that space.
We're excited to see some of Mike's punk get into the DevOps, we again think that will drive opportunity on enterprise is more is more large corporations say we need to be serious about the impact on the operational impact on IT outages and select an IT Alerting solution. When it comes to enterprise play, we think we got to change to win every one of those.
Operator
Our next question or comment comes from the line of Mike Latimore from Northland Capital.
Unidentified Analyst
This is Vijay here on for Mike Latimore. Could you talk a little bit about your sales and marketing strategy even in the Singapore in your sales team headcount and channel strategy, the sales cycle.
And also I think you briefly touched upon the pipeline on the federal side. But maybe if you can kind of talk a little bit about the pipeline overall, including your CEM?
And the split between domestic and international within the pipeline please?
Robert Hughes
Sure. This is Bob.
Obviously, the pipeline in constant ongoing work that we do, we made it very closely to this a certain pipeline metrics that we are constantly tracking and trying to improve. In terms of the sales force, our expansion and sales first continues to vertical continues.
The focal the geography you were seeing some of the benefit of that in terms of results in North America as well as international. Started back last Q4, really trying to instrument the entire go-to-market organization start to measure things like how fast we can hire, how we can create them, how fast can we produce penetration of flight how do we get the more productive?
And get on at - we're pleased with the progress and don't see any hiccups in terms of hiring attrition or that path to increase productivity. submitted it into very good direction.
Unidentified Analyst
Okay. Great.
And any comments around the split given domestic growth and international within the pipeline?
Jaime Ellertson
No. We don't give specifics on anything in terms of forward looking.
But we will continue to see continued international growth but domestic growth as well. So assume that they both growth similar place.
Operator
I'm showing no additional questions in the queue at this time. I would like to turn the conference back to Mr.
Jaime Ellertson for any closing remarks.
Jaime Ellertson
Thanks for joining our call today. We're pleased with the strong first half 2018 and as I said, remain pretty optimistic about the remainder of the year.
And we look forward to speaking or seeing you at an investment conference in the future. Thanks, again, for attending the call today.
Goodbye.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program.
You may now disconnect. Everyone, have a wonderful day.