Everbridge, Inc. (EVBG 0.11%)
Q3 2018 Earnings Conference Call
November 5, 2018, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, ladies and gentlemen, and welcome to the Everbridge Q3 2018 earnings conference call. All participants are in listen-only mode. Later, we'll conduct a question and answer session and an introduction or instructions will follow at the time. If anyone should require assistance during the conference, please press * then 0 on your touchstone telephone. As a reminder, this conference call is being recorded.
I would like to turn the call over to Mr. Ken Goldman. Please, sir, go ahead.
Ken Goldman -- Senior Vice President and Chief Financial Officer
Good afternoon and welcome to Everbridge's earnings conference call for the third quarter of 2018. This is Ken Goldman, Senior Vice President and Chief Financial Officer with Everbridge. With me on the call today is Jaime Ellerston, CEO and Chairman, in addition to Bob Hughes, President of Go to Market and Jim Totton, EVP of Product Management, Engineering, and Operations, who will be available during Q&A.
After the market close today, we issued a press release with details regarding our third 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 website following the conclusion of the call.
10 stocks we like better than Everbridge
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Everbridge wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018
During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views at 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 on material risks and other important factors that could affect our actual results, please refer to our filings for 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. Reconciliation of GAAP to non-GAAP measures is included in our press release.
Finally, at times in our prepared remarks or responses to your questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business of 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 Jamie for his [prepared remarks.
Jaime Ellerston -- Chairman and Chief Executive Officer
Thanks, Ken. Welcome to those of you joining our third quarter earnings conference call. We're excited to share our strong results with you today. Our most recent quarterly results highlight or continued momentum with our critical event management strategy. Our Q3 results exceeded our guidance for both revenue and adjusted EBITDA.
Third quarter revenue of $39.8 million represents 43% year over year growth. We also continue to invest in our efforts to deliver two new major products to the market as well as complete several major infrastructure projects while simultaneously manage to deliver positive adjusted EBITDA ahead of our guidance at $153,000.00.
We're pleased that our Q3 results market our ninth consecutive quarter of better than expected results since our IPO in 2016. Our positive operational metrics in the quarter also reflect our continued to success in the marketplace as we one, continue to penetrate the mass notification market, two, drive multi-product sales with newer products, and three, expand adoption of our strategic critical event management suite.
In the quarter, we added 109 net new enterprise customers, bringing our total enterprise customer count to 4,267, a 29% increase form a year ago. Dollar-based retention remained consistent with past quarters in the mid-90% range and net retention continued to be over 110%. In Q3 we saw a strong contribution from our new products such as IT alerting, safety connection, and our visual command center, which together totaled a record 50% of all new and gross sales in the quarter, with the other 50% coming from mass notification products representing continuing momentum with our core products.
In Q3, our ITA product revenue increased by over 40% year over year and our safety connection and visual command center products, both key components of our CEM suite, grew by more than 100% year over year. These products were often purchased in combination, raising the number of multi-product deals closed during Q3 to an all-time record of 107 transactions. That is a 95% increase over our 55 multi-product deals we closed in Q3 of 2017, resulting in an increase in our trailing 12-month average to 82 multi-product deals per quarter.
This increasing number of multi-product 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.
In Q3, our average sales price across all transactions grew to 55,000, an increase of 33% year over year. Our international revenue in the quarter also continued to accelerate, coming in at 20% of total revenue. That's up over 150% year over year. We signed a number of new CEM deals and expanded the total number of customers with our new multi-product suite to 24, with contract values that range from 5 to 15 times our overall ASP.
Lastly, our revenue mix for the quarter was 54% for corporate, 32% for state and local government, and 14% for healthcare, the three major verticals we talk about and remained roughly consistent with previous quarters.
Our strong performance can be directly tied to our three primary long-term growth drivers, specifically first expanding adoption of our core notification into the communication and secure messaging products in the corporate and government markets worldwide, our new population learning success in the international markets, and our early success in the US federal government.
Second, sustained, strong, net retention in our large enterprise space of over 4,000 customers which helps drive cross-selling with record setting new multi-product sales for our strategic products, such as safety connection, IT alerting, and visual command center. And third, strong product and customer success with our strategic integrated critical event management suite. In other words, our third quarter results were, in fact, clear, accelerating progress all three growth segments, including important new wins at every segment.
So, let me turn to providing some color on those wins. Beginning with LabCorp, the Fortune 500 company operating one of the largest clinical laboratory networks in the world, processing 2.5 million lab tests weekly selected Everbridge mass modification, one of the fastest closing six-figure deals in our history.
Following a highly publicized ransomware attack that started in July, LabCorp contacted us to get a mass notification system up and running as quickly as possible. Everbridge was able to close the deal, configure an environment, and stand up a solution within 24 hours. To contain a cyberattack and begin remediation, LabCorp's security operation center shutdown its own network, limiting communications capabilities and leveraged Everbridge to provide an out of band method to notify and communicate with employees during the attack without using their internal phone or email systems.
Other significant core mass notification wins at leading corporations included in Q3 manufacturers like Goodyear Tire and Rubber Company, one of the top three mutual funds in the financial services space, as well as leading brands such as Shopify and AutoNation, to name but a few. In addition to these corporate winds, we continue to expand our presence in the state and local governments space, with new contracts like a six-figure contract with the City of Nashville as well as Fayette County, Ohio Emergency Management, and Indiana National Guard.
In the related public transportation space, we also continue to add to our list of top customers. As you know, we already have 25 of the top 25 US airports as well as many of the largest Port Authorities, such as New York, New Jersey, Delaware, South Carolina, Georgia, Toronto, to name a few. In this category, we also added new names, including Massachusetts Bay Transit Authority and leading airports such as New Orleans, Nashville, and Anchorage to name a few here, all in the third quarter.
In the healthcare space, we continue to see strong traction from our core products with winds at leading organizations like the University Medical Center of El Paso, the level one trauma center that is leveraging a combination of our Everbridge CareConverge as well as our mass notification and secure messaging solutions that resulted in a significant six-figure contract.
In Florida, with the benefit of our large statewide presence, we registered a new win with the Orlando Health for a similar combination of products, again, a six-figure contract.
Within our core notification solutions, we continue to see accelerating performance internationally. Revenue from outside the United States represented 20% of our total third quarter revenue compared to 10% a year ago, with international revenue up 150% from a year.
Six-figure international wins in the quarter included CaixaBank, the third-largest bank in Spain, who chose us after a market review in which they identified our mass notification and safety connection solutions as, and I quote, "The most advanced in the marketplace." In additional, leading international financial services brands like [inaudible] Finance and Bank of Tokyo, who were added to our mass notification and incident communication customer base in the quarter.
In addition to these organizations, we also witnessed several key strategic wins in Q3 for our newer location-based population alerting solution acquired from UMS. This highly successful acquisition has exceeded our expectations, is contributing to our accelerating revenue expansion outside the United States as well as bringing us new technology that expands our overall market opportunity.
During the third quarter, we recorded winds at governments of all sizes in multiple countries around the world, such as the entire country and Iceland, and major cities like Oslo, the capital of Norway that has a metropolitan population of 1.5 million people, and shows our solution in a large six-figure win.
We also added a number of other municipalities in Q3 who signed new expanded population alerting licensing agreements, including organizations in the Netherlands, Sweden, and others in Norway, among numerous players.
Our differentiated population alerting system support our position as the number population alerting solution in Europe, a market that is in the process of finalizing new laws that will require all EU nations to implement advanced population alerting systems by the year 2021.
Over in Asia, we recorded a new six-figure population alerting win at the Indian state of Andhra Pradesh. With a total population of roughly 50 million people and the second-longest coastline in India, Andhra Pradesh sees recurring threats of typhoons and tsunamis and our solution will help them warn and alert the millions of coastal visitors and local residents of impending disaster to keep them safe.
Finally, speaking of our core notification growth drivers, I'm delighted to announce that we're not only open for business in the US government space, but early in the game, we're already putting big wins on the board. In Q3, the same quarter in which we gained our final Fed ramp authorization, we also signed a record number of large federal deals. We estimate the federal market opportunity to be in excess of $1 billion, significantly expanding our total addressable market and facilitating new grow opportunities for our entire Everbridge suite.
Combined with our more recent defense information systems, agency authorization to operate, we believe we are positioned to gain a significant share of the federal market. Our first full quarter of sales did not disappoint.
With key wins such as the US Department of Agriculture, who chose mass notification solution for a quarter-million dollar-plus contract to support over 120,000 constituents across the Continental United States, and the United States Postal Service, who chose our IT alerting solution and a competitive displacement, opening the door for the Postal Service to adopt our broader CEM vision over time, and the US Census Bureau, which is an example of how we can not only close new customers with our Fed ramp and defense-related authorizations, but also have the tools to cross and upsell existing federal relationships as well.
The US Census bureau, an existing mass notification customer, displaced an existing on-premises application with our IT alerting solution in the quarter, a six-figure growth deal enabled by our Fed ramp authorization.
Finally, our more strategic example in the third quarter of what the US Federal Government opportunity can be was our multi-million-dollar a year agreement with the US Army to support the Joint Analytic Real Time Virtual Information Sharing System or JARVIS. To put it mildly, this is a big deal. JARVIS is a global threat information-sharing system that assists the military in effectively and efficiently identifying and assessing incidents and threats in close proximity to military facilities globally and near real time environment.
To provide you better context, I'll use our CEM framework to help explain what and how we support the JARVIS project. One of the core CEM capabilities is our situational awareness solution, which enables customers to ingest various threat data feeds and events, then visualize them spatially, showing where exactly your assets, people in facilities actually are and then overlay critical events to identify risk and possible impact.
We assist JARVIS in the integration of global threat information originating from tens of thousands of data sources -- news media, local municipality services, commercial business, crime data, and government sources -- into actionable information providing the military an enterprise system for sharing and reporting threat information and mitigating risk at or near bases and facilities around the world.
The JARVIS solution is a military-grade system that could be further leveraged by a large number of DOD agencies and provides potential for multiple additional contracts and follow-on business.
Moving on to our second growth driver, our ability to expand existing customer relationships begins with our mid-90s net dollar renewal rates. Everbridge also continues to invest heavily in our infrastructure and technology differentiation as a way to protect our long-term market leadership and establish barriers for the competition. This combination of high customer retention and new technology development enables the sale of our newer strategic solution, such as safety connection and IT alerting products as cross-sales and larger multi-product deals with new and existing customers.
In Q3, our metrics clearly demonstrate that we continue to execute well and are experiencing the acceleration of these strategic growth drivers as we saw 50% of all new and gross sales in the quarter coming from these newer products, while the other 50% came from growing adoption of our core products.
Safety connection and IT alerting wins set new records, include wins like Takeda Pharmaceuticals, one of the world's largest pharmaceutical companies, who chose our IT alerting solution in a deal worth almost $1 million to replace an existing IT response automation vendor. Our solution will be integrative. They've got a ServiceNow implementation to assist their global IT teams in reducing response times related to major incidents and critical events.
Also, in Q3, Allscripts, a large healthcare software provider, chose our IT alerting solution to significantly reduce the team's response time during critical outages as well as integrate customer notification into the process. We expanded our existing mass notification relationship with OpenText, a large software company, who grew to add our IT alerting solution, and has the contractual room to expand further over time.
Similarly, we expanded our relationship with AMC Entertainment, the largest movie theater chain in the world, with a six-figure contract to add IT alerting to their mass notification deployment after demonstrating an ROI benefit over $1 million.
Now, let's turn to one of our other strategic solutions, Safety Connection, where we achieved record setting metrics in Q3, including 100% year over year growth. In Q3, we signed no contracts at organizations like Fox Entertainment, who leveraged Safety Connection to protect US international employees and travelers, such as the staff at national geographic channel and one of the largest Native American casino operators who selected Everbridge Safety Connection as a result of the concerns from the terrible Las Vegas shooting in October of 2017.
They wanted to streamline their processes and understand where their people were during business disruption and quickly and efficiently communicate to their employees to keep them safe and their operations running.
Internationally, we saw accelerating success over Safety Connection solution with wins like Credit Suisse, who was looking for a solution for their increasing mobile employee population as well as travel security. They chose our Safety Connection pro solution to enable a comprehensive app that would enable mobile employee check-ins, SOS functionality, and mobile incident zones along with integration into their primary travel booking provider and related travel itineraries.
In addition to our success with these strategic products in Q3, we saw an acceleration of our customers willing to engage in multi-product transactions with higher average selling prices, which we believe demonstrates our ability to provide significantly greater enterprise value than just mass notification. We signed 107 multi-product deals in Q3, a roughly 100% year over year increase.
Examples of these large multiple-product winds include United Parcel Service -- UPS chose our mass notification, IT alerting, and Crisis Commander solutions in a contract that is a total value of over $1 million. This initial deployment represents a subset of UPS's overall operations, including major incident response, crisis management, and business continuity.
Other examples of large multi-product wins in the quarter include Loblaw, the largest food retailer in Canada. Loblaw operates a private label program for groceries and household items and in Q3 selected Everbridge mass notification IT alerting in a contract with a six-figure annual value to replace a competitor who is not meeting compliance requirements and to enable Loblaw to better meet their safety requirements that can involve time-sensitive communications with their over 2,000 stores.
Finally, our third and most strategic growth drive is our critical event management solution, an enterprisewide common operating environment that provides situational awareness, integrated incident and operational response and communications and collaboration to enable them to ensure the safety and security of their employees and avoid unnecessary business impact during a wide range of critical impact that affect their organizations every day.
The hardest CEM is Visual Command Center, which became a part of our suite with our acquisition of IDV in January 2017. VCC's ability to visualize threats to an organization, operations, and people has been extremely well-received by the marketplace. Having now fully integrated VC with our entire suite, we expect our next generation critical event management platform to generate even more interest and demand in the marketplace.
Because CEM is comprised of tightly integrate suite of our applications, with the differentiated customer value proposition of a single operating environment for the most critical impactful events delivers higher value, which results in larger overall contracts. Our third quarter results reflect the growing demand we're seeing for CEM, with several new growth deals at large Fortune 500 companies ranging from $900,000.00 to over $1.5 million in total contract value.
As in past quarter, our CEM deals are resulting in substantially deals than our core mass notification transactions. In the quarter, we saw new deals with one of the largest technology companies to accelerate their implementation of CEM as well as with a leading financial services firm, who added our Visual Command Center and Safety Connection solutions to an existing implementation of mass notification to address their needs related to worldwide security turning disaster relief to their clients around the world and enabling services which they believe will result in stronger brand and customer loyalty.
Last, I'd like to highlight one of largest CEM wins to date -- Chevron. It's one of the largest energy companies in the world with offices in over 180 countries and over 50,000 employees. It's truly a global operation. Chevron is a prototypical example of our target CEM buyer as they're engaged in developing oil and gas production in locations reaching from North America to Australia as well as riskier locations like Nigeria, Angola, and Kazakhstan.
Chevron chose our risk data as a service, our Visual Command Center, our Safety Connection, and our core mass notification solution, in other words, the full CEM suite, as a centerpiece of their initiative for greater global threat awareness, risk management, and resiliency. Chevron chose Everbridge CEM over a number of options for independent situational awareness, visualization of assets, and automation of urgent communications due to our ability to provide that calm operating environment for all critical events.
To further support our CEM market success, we also continue to expand our suite of CEM solutions in the quarter, with new products like risk data as a service, which was introduced to our customer base in the third quarter, our risk data as a service offering includes the multiple threat reference and contextual feeds from a variety of public and proprietary sources in a single integrated and flexible package.
What makes this risk data as a service operating is the combination data analysis and categorization along with human validation that is to perform by specially trained multi-lingual intelligence analysts at our Global Intelligence Operations Center, 24x7, 365 a year. In the quarter, we closed a number of new customers like PayPal, CVS, in addition to Chevron, just to name a few of them.
We also progressed our development of two additional new CEM products during the quarter -- a rich analytics solution and our crisis management solution. We were able to accelerate our time to market for our analytics solution because we were leveraging a recently acquired code base from a past successful asset purchase transaction. Our M&A results over the past few years established a strong record of successfully opening new markets from geographic segments like the Nordics, to new verticals, like healthcare and federal markets, as well as acquiring significant new technologies, such as our patented population alerting solutions.
Our new analytics solution will have a unique capability to analyze large volumes of critical event data and processes to predict disruptions, understand the quickest path to resolution, and chart a course for future improvements. In Q3, we were able to sign up a significant early adopter for our new analytics solution, who will help provide design and usage feedback, a contract over $1 million over the next few years, as well as an important reference for our general release of analytics in the second half of 2019.
We also rolled out an early adopter program for our previously announced crisis management application. Our new crisis management solution enables CEM customers to accelerate their response to critical events by uniquely providing one platform for centralized access to risk events, impact that asset, plan documents, task management, and real time dashboards for collaboration.
We currently have over 20 customers involved in an early adopter program and anticipate general release to be in the first quarter of 2019. The addition of these two new integrated solutions for our CEM suite will further expand our market opportunity as well as increase potential deal sizes.
As I close my comments, our third quarter results illustrate how a combination of investments, internal development, and successful acquisitions, Everbridge has evolved into a true enterprise solution provider, addressing the large multi-billion-dollar critical events management opportunity.
During the first ten years of our business, we became the clear market leader in the mass notification space. We continue to be selected by the largest public and private organizations as well as expand into new markets, like the Federal Government and the international population alerting spaces.
Next, roughly four years ago, we began to introduce new adjacent products that leveraged our proven enterprise data management and global communication infrastructure that have expanded our team and are driving cross-sales and upsells into our growing customer base of thousands of enterprise organizations worldwide. Our record setting multi-product sales in Q3 are evidence that this strategy is working.
Last year, we announced our integrated critical event management suite to drive significantly greater value to large private organizations like Chevron this quarter. In just over one year, we've closed many of the world's leading brands and organizations with growing momentum driving CEM transactions that are 5 to 15 times larger than our historic average selling price.
So, please understand me when I say we are much more than a messaging application vendor. We believe our enterprise CEM platform will continue to drive long-term growth by disrupting the over $20 billion safety and security marketplace and establish Everbridge as a clear category leader as we look ahead.
All in all, our third quarter results demonstrate that our strategy is working and that we're positioned to have continued success. Now, I'll turn the call back over to Ken for details on our financial performance and increased guidance for the year.
Ken Goldman -- Senior Vice President and Chief Financial Officer
Thanks, Jaime. I'll provide some more detail on our financial performance for the third quarter and then discuss our outlook for the fourth quarter and full-year 2018. Third quarter revenue of $38.9 million increased 43% from a year ago and was above the high-end of our guidance range with a strong performance across the board. We also executed well to deliver adjusted EBITDA that also exceeded our guidance at $153,000.00 compared to an adjusted EBITDA of $807,000.00 a year ago.
Our dollar-based net retention rate remains above 110%, reflecting the significant value and satisfaction we provide to our customers. Total enterprise customer count -- that is customers generating fees of $200.00 per month or more -- increased by a net of 109 to a total of 4,267.
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 was 70.2%, compared to 72% a year ago, primarily due to the purchase accounting impact on acquired deferred revenue from recent acquisitions.
Gross margin during the quarter was also impacted by efforts to complete a number of larger implementations from recent contract wins. We expect both of these factors to be short-term in nature. However, as always, please keep in mind that gross margins can fluctuate from quarter to quarter and should not be considered indicative of any trends.
Total operating expenses in the quarter were $29.1 million, an increase of 43% from a year ago, reflecting the combination of continued headcount and product investments, along with the expenses of acquired businesses. As I mentioned, adjusted EBITDA was $153,000.00 and above our guidance range.
Net loss in the third quarter was $3.1 million or -$0.10 per basic share and was also better than our guidance compared to a loss of $575,000.00 or -$0.02 per basic share in the year ago quarter. On a GAAP basis, our net loss was $8.5 million and was also better than our guidance range.
Turning to our balance sheet, we ended the quarter with $103.1 million in cash, cash equivalents, and short-term investments compared to $106 million at the end of the second quarter, primarily due to CapEx and capitalized software development costs of $3.1 million, which were partially offset by the positive operating cashflow from operations of $700,000.00.
Total deferred revenue was $88.6 million at the end of the quarter, an increase of 37% from a year ago. As we've noted on prior calls, our deferred revenue balance at the end of any quarter can vary due to a number of factors, including seasonality, in which the first quarter represents our smallest quarter for renewals, and the fourth quarter being the largest.
As such, even though we have predominately annual payment terms, deferred revenue is not always a meaningful indicator of the underlying momentum of our business from a quarterly perspective, though we believe it's directionally relevant on a longer-trended basis.
Now, let me turn to our outlook. Continued investment over the course of 2018 has contributed to our better than expected results so far this year. Therefore, we're entering Q4 from a position of strength and are increasing our revenue guidance for the year as well as the midpoint of our adjusted EBITDA guidance.
For the fourth quarter of 2018, we anticipate revenue of between $40.7 million and $41 million representing growth of 39.5% to 40.5%. We anticipate adjusted EBITDA to be between positive $400,000.00 and positive $700,000.00. We anticipate a non-GAAP net loss of between $3.3 million and $2.9 million or a loss between $0.11 and $0.10 per share based on $29.6 million basic weighted average shares outstanding.
Stock-based compensation expense is expected to be $4.9 million to $5.1 million for the fourth quarter. Therefore, for the full year 2018, we're raising our revenue guidance to the range of $146 million to $146.3 million, an increase of $2.2 million at the midpoint from prior guidance, representing growth of 40% from a year ago.
This increase in guidance reflects our better than expected third quarter results and strong business momentum going into the fourth quarter. From a profitability perspective, we now anticipate full-year adjusted EBITDA to be in the range of $3.1 million to $2.8 million, an improvement of $0.2 million from our prior guidance. We've seen favorable results from our investments in people and products so far this year and continue to pursue this strategy. We expect a non-GAAP net loss of between $16.3 million and $15.9 million for the full year 2018 or between -$0.56 and -$0.55 per share based on $29.1 million basic weighted average shares outstanding.
This includes the impact of an estimated $4.8 million in net interest expense, primarily related to our convertible notes. This guidance assumes an estimated stock-based compensation expense of $25.1 million to $25.3 million for the years. Recall that divesting of our performance stock units is triggered by share price and this is reflected in our increased stock-based compensation expenses in 2018 with our share price approximately doubling from a year ago. Looking beyond 2018, we remain very enthusiastic and expect strong growth trends to continue into 2019 and anticipate positive organic adjusted EBITDA and free cashflow on a full-year basis from our existing business.
In summary, we delivered a better than expected performance in the third quarter with positive and encouraging results across our business. We're enthusiastic about our ability to drive growth from our core mass notification business, new products, expanded market opportunity with our defense information systems agency and Fed ramp authorizations and accelerating international business as we expand our ability to capture an increasing share of a large opportunity that our critical management solutions address.
With that, we'll open the call to questions. Operator?
Questions and Answers:
Operator
At this time, I would like to remind everyone, ladies and gentlemen, if you have questions, please press * and then the number 1 on your touchstone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the # key. We'll pause for a few moments to compile the Q&A roster.
Our first question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.
Brad Zelnick -- Credit Suisse -- Managing Director
Excellent. Thank you. Congrats on a great quarter, guys. Jaime, my question for you -- the JARVIS deal with the US Army is a really strong reference point for the powerful things you can do with CEM and the broader platform. Your prepared remarks are consistent with what we've seen from other providers to the federal government that success in one agency begets success in others.
But you sized the federal opportunity at $1 billion. I'm curious to know how much of that is more simple mass notification. Now, with Fed ramp approval, how are you doing competitively against your foreign competitor that's been selling into the Fed for a while now?
Jaime Ellerston -- Chairman and Chief Executive Officer
Thanks for the compliment, Brad and the question. It's a good one. I think we do want to point out that we have signed a number of deals this quarter. Some of that is having a fully ramped federal sales team on the ground starting earlier in the year and being able to gain momentum with some of these opportunities. Unfortunately, until you have your Fed ramp compliance, you really can't participate in some. So, some we already watch go right by us that were good opportunities that we believe we would have had a more than fair chance of winning.
Some of the deals that we just announced were competitive takeaways. Those agencies we're looking at, they weren't small dollars moving because they had a less than satisfactory or just wanted some of the feature, functionality, and overall solution benefits that we provide with a broader suite into the Federal Government.
So, given there's only one competitor -- they are owned by a foreign organization and their product isn't nearly as dynamic as ours -- it bodes well for us in the broad federal government. In the specific defense space, we added another authorization to operate there and something the size of JARVIS is a very important situational win for us because I think going forward, you have to have that referenceability.
I think we count 12 different defense agencies watching the current rollout of JARVIS. As I said in my prepared remarks, we hope the success with JARVIS will lead to supplemental contracts with other organizations. That's often the case, as you mentioned.
Brad Zelnick -- Credit Suisse -- Managing Director
Thanks, Jaime. That deal raised a lot of eyebrows with the folks that we speak to in and around the federal market. If I could ask a follow-up for Ken. Ken, operating cashflow, it was a little bit lighter than we were modeling, can you just comment a bit on your cash conversion and the puts and takes in the quarter and how we should think about it going forward? Thanks again.
Ken Goldman -- Senior Vice President and Chief Financial Officer
Yeah. Brad, we've discussed this on prior calls and I know you're new to the story. We, in particular in regard to strong renewal base, will see customers who will renew potentially early in the quarter or late in the quarter and that can help the time in cash. We can have a Q3 renewal that renews in Q2 or Q4 renewal that renews in Q3 or a Q3 renewal that renews the first day of the next quarter. That can affect our billing and cash collections. We have almost a zero percent charge-off history.
So, given the nature of the organizations that we do business with, sometimes they can be a little bit shy with their cash payments in terms of timing, but that's probably one of my greater challenges is when you're dealing with the likes of Global 2000 or Fortune 1000 companies, they will often times pay a little bit late. That's frustrating on our part but overall, when you look at cash collections over the course of the year, they continue to be strong.
Brad Zelnick -- Credit Suisse -- Managing Director
I appreciate it. We also appreciate the lumpiness of cashflow and timing of renewals. I was seeing if there was something else to call out. I appreciate the color. Thanks again.
Ken Goldman -- Senior Vice President and Chief Financial Officer
Thanks, Brad.
Operator
Our next question comes from the line of Richard Davis from Canaccord.
Richard Davis -- Canaccord Genuity -- Analyst
This is a question sometimes we get from investors because we get questions about competitive moat and obviously everyone's like the last question to ask questions about Fed ramp. They're all excited about that, which is definitely good. I wonder if the more broad question is I feel like your business is subject to network effects along several axes as you scale up. To what extent is that -- have I actually been telling investors the correct thing on that front? I would hate to be contradicted. Can you help us flesh that out? Thanks.
Jaime Ellerston -- Chairman and Chief Executive Officer
Yeah. A lot of businesses that focus solely on revenue drivers, they're working with companies when they're in growth cycles, when they're not. Our primary drivers are our ability to keep people safe and then operationally, ensure operations continue to run throughout any type of event.
Larger events often provide impetus for purchase. So, you bet that we had discussions with numerous C-level officers during and after the hurricanes because they were calling us up trying to figure out how to do certain things that their current stand-alone environments didn't allow for. So, whether it's a tragic shooting in Pittsburgh, as I mentioned, a mass shooting in Vegas or a major hurricane or typhoon in Asia, those almost always generate a continuing flow of business for us.
We want to focus increasingly on the operational use of our system as well so that there's an every day payback. That's why we mentioned an over million-dollar payback for an IT alerting customer that is spending several hundred dollars and looking for a million-dollar return in its first year of use.
We see both drivers for the business, but no one can avoid the fact that the world is an increasingly complex and dangerous place and more and more of a target market for CEM, the Fortune 1000 is very concerned with how they ensure the safety of an increasingly mobile population and ensure their operations continue. Big events like hurricanes, shootings just promote more customer buying.
Richard Davis -- Canaccord Genuity -- Analyst
Got it. Thank you very much.
Operator
Our next question comes from the line of Brad Sills from Bank of America Merrill Lynch. Your line is open.
Brad Sills -- Bank of America Merrill Lynch -- Analyst
Thanks for taking my question. Just another one on the federal results -- obviously real strong out of the gate here. Would you attribute that to pent up demand. As you were getting certified for Fed ramp, obviously, there were some deals in the pipeline. Do you think we're going to see -- I guess maybe just any commentary on the pipeline leading up to the Fed ramp certification and some of these follow-on deals you're mentioning.
Jaime Ellerston -- Chairman and Chief Executive Officer
Sure. As I said in the first answer I gave you, we don't want to mislead you that we started earlier in the year building both the sales team, as we told you we would, and targeting a mid-summer achievement of our Fed ramp. In fact, we now have two of those authorizations and even a highly classified defense project.
So, we're gaining momentum but that was a planned set of events. We're always going to take the approach of being hopefully a reasonably matured management team in the sense that we have enough experience to tell you once we have a great quarter in Federal, not to expect it again every quarter because our sales can be lumpy up and down.
We want to stress that we have good momentum in that space and it continues to provide great opportunity for us to not only grow existing customers -- the USPS was an example of an existing customer expanding -- and the IT alerting solution was significantly larger than their mass notification purchase.
So, you see a three-four expansion of a customer contract. That's as good as a brand new win in our book and then big new wins being as large as USDA or a mega contract like JARVIS that can propel other opportunities in the defense space where there's a lot of spending.
We can't tell you that every quarter is going to be the same as our first one where we had a one-quarter running start into it. It's the culmination of probably two quarters. We do see continued great momentum in the Federal space and we're just getting into a rhythm in the Federal space too. We won't project the results, but I would watch the next quarter in the Federal market.
Operator
Our next question comes from the line of Tom Roderick from Stifel. Your line is open.
Tom Roderick -- Stifel Nicolaus -- Analyst
Thank you, guys for taking my question. I kind of want to dive deeper on the question Richard was asking but thinking about the cross-sell approach here, both domestically and internationally now that you've had UMS and VCC in the mix and you're rolling out CEM. I would love to hear what happens with sales cycles as you're taking some of these newer products to market. How much does that shorten the sales cycle? What does that do for stickiness in terms of revenue retention going forward? How much more efficient does this all become as you're laying on new solutions to affect the install base?
Jaime Ellerston -- Chairman and Chief Executive Officer
Tom, thanks for the question. It's a good one because it plays to both our strengths and the state of strategic strategy of both multi-product deals, obviously with what we believe is kind of a best in class dollar renewal basis in the mid-90s -- that's where it starts if you're losing too many customers out the back door. You have to do a lot of new selling just to break even. But when you're in that mid-90 category, I think you're best in class, so it starts.
Then we layer on the new products which are clearly gaining traction. You heard 40% to 100% year over year growth for those products. They'll obviously be out for a while, so there's are multi-million-dollar revenue schemes. That helps us gain traction. It's certainly faster to sell to an existing customer.
We're no different than anyone else. We want to build an ecosystem and a platform play for people and get them to buy one, two, three, four products, much easier than making 100% of the growth, which used to happen for us and is consistent with a lot of young enterprise software companies coming off their first or second application and only being new customers.
We like the fact that we're recording multiple multi-product deals in the base. They are faster time to market. We don't give you the actual time to close for our deals, but they are considerably faster in the base than they are with net new customers. That also leads into in many cases or high-strategic and integrative suite, which is CEM, where customers like Chevron are buying four products at once.
That leads to a much larger ASP. As I said, the CEM suite, the average increase over our general ASP that's across all products is 5 to 15 times. It makes it a lot easier for us to get to our numbers and exceed our numbers when we're able to cross and upsell the base, which happens faster than a net new sale flows and then on the net new, if we put in whatever that time period is, 7-9 months on average, we're no different probably than most other enterprise software companies. It helps to sell four products instead of two or three products because it just increases the sales price and the return for us is better with that customer.
As you know, we've quoted this stat before, but once a customer gets three products from us, essentially, we don't ever lose them. So, the retention level is bordering, teetering, and got to be on 100%. That's how we'd answer that. It's a good question.
Tom Roderick -- Stifel Nicolaus -- Analyst
Thanks, Jaime. That's great. Ken, this is a little bit in the weeds, but I'm curious about the timing relative to the federal launch -- a bit of a jump in the long deferred line. Anything to that with the long-term deferred number doubling quarter on quarter? Is that a new norm reflecting some of the larger customers looking to pay multiple years at once? Any comment on that?
Ken Goldman -- Senior Vice President and Chief Financial Officer
We're not going to provide specific detail. The reality is you will see the ups and downs in both current and long-term deferred. It's the nature of trying to accommodate the needs of our customers. Nothing specific to federal or any particular market. It's something that as our business continues to grow, as international continues to grow, we are meeting the needs of our customers in terms of the contractual arrangements.
Jaime Ellerston -- Chairman and Chief Executive Officer
As we've said repeatably, Tom, you can't look into one quarter and try to take it forward because it will be lumpy at times according to contracts being signed, etc.
Tom Roderick -- Stifel Nicolaus -- Analyst
I get it. Thank you, guys. I appreciate it.
Operator
Our next question is from Brent Brisner from KeyBanc Capital. Your line is open.
Clarke Jeffries -- KeyBanc Capital Markets -- Analyst
This is Clarke Jeffries on for Brent. Jaime, it seems like we're hearing more about deals that are closed within 24 hours. The stat that struck me was 20-some odd companies moved to Everbridge during Hurricane Irma. I was wondering if you could maybe give some color on what's necessary to win those deals. Is there investments you can callout in terms of enabling the salesforce to operate like that and impact to multi-product deals?
Jaime Ellerston -- Chairman and Chief Executive Officer
Sure. I don't know where the 20 during Irma came from. That may be a statistic that was quoted a long time ago and may be accurate. I didn't use that in my prepared remarks. That one I don't know about. What I can do is link this to the previous question from Tom and Richard about the network and the effect of these large events out there being our most strategic suite is critical that when large events happen, does that cause these things to happen?
The example you've got here of Loblaw, they're in a terrible ransomware, malware situation, they have to shut down their internal network. They need a solution immediately. We are the stated market leaders in our opinion but by most analyst's opinion both in size and quality of solution out there.
They put a call to us and then we deliver. We stand it up in 24 hours. That sales rep is a very happy camper in that base or have that name to count. We often say when major events occur and acceleration of the sales cycle and that's natural with a good economy with high revenue growth means people are looking at how they can spend on further revenue growth.
One of the drivers for our business are critical events worldwide. If you track them, they are up in every single meaningful stat across the board globally and they show no signs and none of the fundamentals show signs of them changing at all in the near future. That's going to drive collapsing of some sales cycles for us and I think you'll hear about them in future quarters.
In terms of being a general driver for our business, it's hard to say because we don't do anything but enable the salesforce to sell it to a customer based on purpose value proposition of keeping people safe and their businesses running, a strong ROI and collapsing multiple independent apps into a single operating environment.
Those two benefits they're trained to sell on, whether it's a customer who's desperate, needs it in a day or a week, or a customer who works with us for six months to close a six-figure contract. They pretty much come out the same. It's just that with big events come an acceleration of the business in different categories.
Clarke Jeffries -- KeyBanc Capital Markets -- Analyst
Great. Thank you for all that color. On the Federal opportunity, I was wondering if you could help us frame our expectations to the size of the commitment you're already seeing from these agencies?
Jaime Ellerston -- Chairman and Chief Executive Officer
The Federal market, we held out the opportunity clearly to the Street and to our investor population that we thought the Federal market was going to be a significant opportunity in terms of its size, certainly over $1 billion of new TAM for us to be accessing, equal to the entire TAM for our state and local population for core products and mass notification, instant communication, things like IT alerting, even new strategic product Safety Connection. It's a significant new TAM.
Because we said there's only one other player in that space today and we are the established leader in the space but not playing, we thought we could start to score some runs and win some games right away. As I said using that same baseball analogy given we're from Boston and are used to winning, we kind of just said that we're going to put some points on the board early, we did that.
What's impressive is those deals are all equal to something that you guys at least to the street have tracked very closely these big state wins. We said you're not a state win every day for seven figures, but in this most recent quarter, our big Army win was a multi-figure, seven-figure deal, it probably puts them by the end of the year in our top three customer category. That's a big deal for us, as big as the State of Florida. On the other end, the smallest deal was in the hundreds of thousands of dollars.
Our hope was these big agencies are going to play like large enterprises or statewide deals, a metric and a customer profile, which you guys know well and look, the first quarter out of the box, granted, we had a little bit of a running start because we got working on it a little earlier this year. We certainly didn't disappoint with that. We got everything from a couple hundred-thousand-dollar deal to the multi-million-dollar deal. We can't guarantee that's going to happen every quarter the same way, but we're clearly just getting started in the Federal market.
Operator
Our next question comes from the line of Scott Berg with Needham. Your line is open.
Jaime Ellerston -- Chairman and Chief Executive Officer
Scott, you there?
Scott Berg -- Needham & Company -- Managing Director
Sorry, guys. Didn't realize I had you on mute. Two quick ones -- Jaime, you mentioned in the EU, the advanced population alerting system requirements coming down the pipeline. Is there anything you guys need to do to change your platform to prepare for some of those opportunities or are you pretty much all set to as-is?
Jaime Ellerston -- Chairman and Chief Executive Officer
No. Again, talk about the same thing, trends in your business. You know that in technology, sometimes compliance and regulation is a friend. In our case, this is going to be very friendly. The basic laws that are being crafted in the EU today for release, we think, this year, early next, are going to require countries to have automated population alerting systems in.
There are only a few players in that game. We're the only software-based solution that has two-way and international traveler capability. Given that we have so many great references about success in Europe and continue to win very, very large populations, like Andhra Pradesh, as I mentioned, 50 million people.
We have the scale and reputation of being the best in the world. That's just a set of regulations that's going to be driving an entire continent to be purchasing en masse. So, we don't have to do anything special. We have to sit back and wait for the regulations to get closer and as you can imagine, assume, like the federal government, we're already starting to work those opportunities.
Scott Berg -- Needham & Company -- Managing Director
Then a follow-up for Ken -- Ken, I believe you had mentioned some brief commentary on Fiscal '18, expectations around adjusted EBITDA, that it should be mildly positive from continuing operations. Given that '18 that way when you'd likely back out the impact of the UMS acquisition, does that kind of magnitude or trajectory change much relative to '18 or is this still foot on the accelerator to invest for growth and positive-EBITDA still probably fairly minimal for the year?
Ken Goldman -- Senior Vice President and Chief Financial Officer
Yeah. I would say our long-term commitment that we gave at the time of the IPO that by 2021 we would produce a strong level of both increased adjusted gross margin and increased adjusted EBITDA and in the intervening years basically break even to slightly positive is consistent.
As we talk to investors around the country, they are steadfast in their belief that growth versus profitability, growth is the driver of value, that doesn't mean that a responsible, experienced senior management team we don't think about profitability, but we want to have the correct balance between the two.
We talked about on today's call that we have made ongoing investments throughout the year witness the results two quarters in a row of 43% growth, but for 2019, right now, although we're not giving guidance per se, directionally, we're saying we will be positive in terms of adjusted EBITDA and cashflow from the core business.
Operator
Our next question comes from the line of Will Power at Baird. Your line is open.
Will Power -- Robert W. Baird & Co. -- Analyst
Jaime, I guess on the prepared remarks, you referend several critical event management wins, including Chevron, which would seem to be a great global reference account. I wonder if you could provide any color on was that a competitive displacement? Are these some new capabilities they didn't have from point solutions previously? Just some color on the competitive process and what sets you apart from whoever else showed up to provide those capabilities?
Jaime Ellerston -- Chairman and Chief Executive Officer
It was certainly competitive in the sense that they look at multiple different providers of stand-alone systems. But I went to great lengths in my prepared remarks -- I want to remind you to let you know we're not your standard mass notification or just messaging company. We believe we have gotten past that to the point that now, we're talking about CEM disrupting the $20 billion safety and security market because it provides a single offering environment for major organizations to keep all their people safe and secure as well as the business running.
So, in the Chevron example, what you ended up having is they were looking at individual situational awareness solutions from different security vendors. They were looking at multiple mass November companies, how they manage major incidents, how they communicate when there's an incident like a ransomware and you can't use you channels and want them secure. They were looking even at the threat data. How can we get this data that can tell us there's an event near one of our oil refineries or offices or impacting a senior executive's travel schedule?
Those are all individual stand-alone products that we competed against and it was absolutely a competitive win. We feel like we had an unfair advantage. We have an integrated common operating environment, which at the end of the day is the only way if you've got 180 locations and 50,000 people with 10,000+ travelers a week out there, how would you possibly manage that on seven independent systems? It just doesn't work.
So, being the people that brought this space together and the first guys to call it CEM, sometimes we bear the burden this last year of educating the market but what's happening is we're seeing increased traction because people are buying into -- I'm not going to buy seven of these and stitch them together. I don't have the time. I don't have the interest in that.
The same way that it happened for ERP, for CRM, for human capital management, another recent very large market pulling together talent management all the way to contractor management and cost management. We're just integrating all those pieces in a single environment out of the box enterprise scale global reach from a public company.
That makes it really difficult for someone to compete against us. These are significant deals. These are million-dollar wins. Everyone wants a piece of that action, it's just that no one else has that integrated platform.
Operator
Our next question comes from the line of Eric Lemus at SunTrust Robinson. Your line is open.
Eric Lemus -- SunTrust Robinson Humphrey -- Analyst
Thanks for squeezing me in. There's a lot of momentum you talked about in the quarter, specifically in federal and international and plenty of different new products coming to market. With that all in mind, you spoke briefly a bit about 2019, but is there any reason the core business ex-acquisitions wouldn't accelerate next year?
Jaime Ellerston -- Chairman and Chief Executive Officer
Well, business acceleration comes from all three of our core strategic drivers, right? We are seeing -- a lot of people worry about earlier in our existence. As I remind you, we're not just a messaging platform. On the other hand, our messaging products like core mass notification, our enterprise app for alerting and emergencies had a fantastic quarter across all accounts, from corporate to state and local, to federal, and now international wins with the acquired product for population alerting, but in that same mass notification family, entire countries were winning.
So, that provides the base of our business because it has been our largest revenue component. I also want to point out that the strategic new products are quarter after quarter basically hitting the roughly 50% mark. In other words, all new and gross sales out of those 109 new customers, 50% of them were solely new products. There was no mass notification in there. They were made up of the new products, safety connection, visual command center, the CEM suite integrating message notification, safety connection, risk data as a service, and safety connection.
So, those products that are growing that fast do provide continued acceleration. Would we take you past our current 40% level? No. That's not going to be us. Maybe Ken is going to give you that guidance, but I'm not. We're pretty comfortable with the fact that over the last year and a half we've moved from, I think, an initial public company to the mid-20s, high-20s, mid-30s, high-30s, and now the 40s.
To sustain that is a chore for any enterprise software company. We do believe we're accelerating. We do believe we're giving the best in class results as a result of the core business doing well, more of our customers purchasing multiple products, which drives a bigger ASP, and then our CEM suite being the most strategic piece in the first inning of that game really scoring runs and putting runs on the board in addition to all the sub-component parts.
All those are just supporting elements to the long-term growth strategy, which is CEM. Would we go past whatever we did this quarter, 43%? No. We wouldn't give you that guidance right now.
Eric Lemus -- SunTrust Robinson Humphrey -- Analyst
Great. Thanks.
Operator
Our last question comes from the line of Mike Latimore from Northland Capital. Your line is open.
Mike Latimore -- Northland Capital -- Managing Director
A couple of quick questions on the international side -- can you give an update on your Sweden win? Is it fully deployed and operational right now? What other countries or regions look promising?
Jaime Ellerston -- Chairman and Chief Executive Officer
We talked about a number of international wins. Sweden, I don't think I necessarily talked about this quarter in terms of the existing national contract. That's been in place. It's multi-million dollars, $7 million, $8 million, $10 million over a number of years contract. So, those population learning for an entire country wins can become very substantive.
That's why the EU regulations that are coming into place are very meaningful for us because it creates a meaningful growth driver for all countries in the EU. Often, they have very uneven path with a national system like France are going to be required to update that and have a fully fledged automated population alerting system such as our population alerting product that we acquired from UMS. Sweden has been in place and is working fine.
The Sweden one I mentioned on this call was a brand new one, which just went into play. It was a new licensing agreement during the quarter among Iceland as a whole country and Oslo as a significant six-figure win for the million and a half people of Oslo. That product is working across Europe and equally, we announced Andhra Pradesh. Last quarter, we talked about the rollout in Singapore. That product is working in Asia and in Europe. We do not sell that product in the US, but internationally, it's firing on all cylinders.
Operator
I'm showing no further questions at this time. Mr. Ken Goldman?
Ken Goldman -- Senior Vice President and Chief Financial Officer
All right. Thank you for joining our call today. We're excited, again, to exceed our financial objectives and raise our outlook. We believe our third quarter results demonstrate our core business is strong. Our strategy is working and we are well-positioned, as I mentioned a number of times, to drive continued success for the CEM solution in the broad safety and security marketplace in the next few years. Look forward to speaking to you again and again, thanks for attending. Goodbye.
Operator
Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may now disconnect.
Duration: 70 minutes
Call participants:
Ken Goldman -- Senior Vice President and Chief Financial Officer
Jaime Ellerston -- Chairman and Chief Executive Officer
Brad Zelnick -- Credit Suisse -- Managing Director
Richard Davis -- Canaccord Genuity -- Analyst
Brad Sills -- Bank of America Merrill Lynch -- Analyst
Tom Roderick -- Stifel Nicolaus -- Analyst
Clarke Jeffries -- KeyBanc Capital Markets -- Analyst
Scott Berg -- Needham & Company -- Managing Director
Will Power -- Robert W. Baird & Co. -- Analyst
Eric Lemus -- SunTrust Robinson Humphrey -- Analyst
Mike Latimore -- Northland Capital -- Managing Director
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
10 stocks we like better than Everbridge
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Everbridge wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018