Everbridge(EVBG) - 2022 Q4 - Annual Report

Part I Business Everbridge provides a Critical Event Management (CEM) platform, with subscription revenue as its primary source, focusing on strategic realignment and growth through customer expansion and new applications - Everbridge provides a Critical Event Management (CEM) platform to over 6,500 global customers, helping them respond to threats like severe weather, IT outages, and cyber-attacks[12] Revenue Composition (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Subscription Services Revenue % | 89% | 89% | 89% | | Mass Notification Application Revenue % | 35% | 42% | 50% | - In 2022, the company initiated the "2022 Strategic Realignment" program to streamline operations, reduce headcount and facilities, and focus investments on key growth opportunities, expected to be completed by the end of fiscal 2023[18] - David Wagner was appointed as the new Chief Executive Officer on July 25, 2022[19] - The company's dollar-based net retention rate was over 110% for fiscal 2022, indicating strong growth within its existing customer base[30] Risk Factors The company faces significant risks including a history of net losses, intense market competition, cybersecurity threats, complex data privacy regulations, and financial risks related to convertible notes - Business & Financial Risks: The company has a history of net losses, reporting losses of $61.2 million in 2022, $94.8 million in 2021, and $93.4 million in 2020, making achieving and maintaining profitability a key challenge[100] - Market & Competition Risks: The market for Critical Event Management (CEM) solutions is highly fragmented and competitive, with Everbridge competing with in-house solutions and established vendors like BlackBerry, OnSolve, and PagerDuty[51][122][123] - Cybersecurity Risks: The business is vulnerable to security breaches, ransomware, and other cyber-attacks, where a compromise of customer data could lead to reputational damage, loss of customers, and significant liabilities[162][163] - Regulatory Risks: The company is subject to stringent and evolving global data privacy laws, such as GDPR in Europe and CCPA in California, with non-compliance potentially resulting in significant fines and harm to business operations[177][181][184] - Debt-Related Risks: The company has significant outstanding convertible notes (2024 Notes and 2026 Notes), whose conversion could dilute ownership for existing stockholders, and servicing the debt requires substantial cash flow[221][238] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[267] Properties Everbridge's principal executive offices are located in Burlington, Massachusetts, and Pasadena, California, with additional international offices, and the Burlington space is being reduced as part of strategic realignment - The company's principal executive offices are in Burlington, MA, and Pasadena, CA[267] - As part of a 2022 lease amendment, the Burlington, MA office space will be reduced from approximately 73,500 sq-ft to 36,700 sq-ft during 2023[267] Legal Proceedings Everbridge is involved in several legal proceedings, including a claim from former Anvil shareholders, a putative class action lawsuit alleging securities law violations, and a related shareholder derivative action, which the company intends to vigorously defend - A putative class action lawsuit was filed in April 2022, alleging misrepresentations regarding organic/inorganic revenue growth and acquisition integration between November 2019 and February 2022[270] - A shareholder derivative action was filed in June 2022 against certain directors and officers related to the same circumstances as the class action lawsuit[272] - Former shareholders of Anvil, a company Everbridge acquired, filed a claim in the UK alleging breaches of the acquisition agreement related to stock issuance[269] Mine Safety Disclosures This item is not applicable to the company - Not applicable[274] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Everbridge's common stock trades on Nasdaq under 'EVBG', and the company retired shares received from a capped call option settlement in November 2022 - The company's common stock is listed on The Nasdaq Global Market under the trading symbol EVBG[276] - In November 2022, the company received and retired 22,914 of its shares as a final settlement of capped call options related to the 1.50% convertible senior notes due 2022[282] Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2022, Everbridge's revenue grew 17.2% to $431.9 million, despite a net loss of $61.2 million, with improved non-GAAP metrics and strong liquidity of $198.7 million in cash and cash equivalents Key Financial Performance (2020-2022) | Metric (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $431.9 | $368.4 | $271.1 | | YoY Revenue Growth | 17.2% | 35.9% | 34.9% | | Gross Profit | $297.0 | $254.2 | $188.1 | | Operating Loss | ($84.2) | ($76.2) | ($72.2) | | Net Loss | ($61.2) | ($94.8) | ($93.4) | - The company adopted ASU 2020-06 for convertible instruments on January 1, 2022, which eliminated the separate accounting for embedded conversion features, reducing reported interest expense in 2022[302][303] Non-GAAP Financial Metrics (2020-2022) | Metric (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $42.1 | $11.2 | $8.0 | | Adjusted Gross Profit | $315.0 | $270.0 | $195.2 | | Adjusted Free Cash Flow | $13.9 | $2.4 | $2.9 | - As of December 31, 2022, the company had $198.7 million in cash and cash equivalents and believes this is sufficient to meet working capital and capital expenditure needs for at least the next 12 months[343][344] - During 2022, the company repurchased approximately $316.4 million principal amount of its 0.125% convertible senior notes due 2024 for about $288.8 million in cash[298][354] Quantitative and Qualitative Disclosures About Market Risk Everbridge's primary market risks are interest rate fluctuations and foreign currency exchange rates, which the company does not currently hedge, and inflation has not had a material effect - Interest Rate Risk: The company is exposed to interest rate risk through its investment portfolio and its outstanding convertible senior notes (2026 and 2024 Notes) but does not currently use derivative instruments to hedge this risk[399][400] - Foreign Currency Exchange Risk: The company has growing exposure to foreign currency fluctuations as its international operations expand, with revenues and expenses denominated in currencies like the British Pound, Euro, and Norwegian Krone, and does not currently engage in hedging activities[405] - Inflation Risk: Management does not believe that inflation has had a material historical effect on the company's business, financial condition, or results of operations[406] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal years 2020-2022, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with notes and the auditor's report Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,125,664 | $1,479,015 | | Cash and cash equivalents | $198,725 | $488,035 | | Goodwill | $508,781 | $531,163 | | Total Liabilities | $836,553 | $1,016,326 | | Convertible senior notes | $500,298 | $665,703 | | Deferred revenue | $242,384 | $237,840 | | Total Stockholders' Equity | $289,111 | $462,689 | Consolidated Statement of Operations Highlights (in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $431,892 | $368,433 | $271,141 | | Gross Profit | $296,958 | $254,217 | $188,113 | | Operating Loss | ($84,183) | ($76,249) | ($72,214) | | Net Loss | ($61,174) | ($94,796) | ($93,396) | | Net Loss Per Share (Basic) | ($1.54) | ($2.50) | ($2.70) | Consolidated Statement of Cash Flows Highlights (in thousands) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $20,167 | $22,193 | $15,803 | | Net cash used in investing activities | ($18,893) | ($281,836) | ($85,185) | | Net cash (used in) provided by financing activities | ($290,520) | $276,344 | $5,054 | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[408] Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, with no material changes during the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[409] - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[412] Other Information There is no other information to report under this item - None[416] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the company's 2023 Proxy Statement[418] Executive Compensation Information concerning executive compensation is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the company's 2023 Proxy Statement[420] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the company's 2023 Proxy Statement[421] Certain Relationships and Related Transactions, and Director Independence Information covering related party transactions and director independence is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the company's 2023 Proxy Statement[422] Principal Accounting Fees and Services Information detailing fees paid to the principal accountant is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the company's 2023 Proxy Statement[423] Part IV Exhibits, Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance documents, debt agreements, and certifications - This item provides an index of all exhibits filed with the Form 10-K, including corporate governance documents, debt agreements, and executive compensation plans[426][427] Form 10-K Summary The company has not provided a summary for its Form 10-K - None[433]