Everbridge (EVBG) Q4 2021 Earnings Call Transcript

Everbridge (EVBG 0.03%)
Q4 2021 Earnings Call
Feb 24, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to Everbridge fourth quarter 2021 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Patrick Brickley. Please go ahead.

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Thanks. Good afternoon, and welcome to Everbridge's Earnings conference call for the fourth quarter and full year 2021. This is Patrick Brickley, executive vice president and chief financial officer of Everbridge and interim co-CEO. With me on today's call is Vernon Irvin, executive vice president, chief revenue officer and interim co-CEO.

After the market closed, we issued our earnings release, which can be accessed on the Investor Relations section of our website at ir.everbridge.com. This call is being recorded, and a replay of the teleconference will be available on our IR website at the conclusion of today's event. During today's call, we will make forward-looking statements regarding future events or the financial performance of the company that involve certain risks and uncertainties. The company's actual results may differ materially from the projections described in such statements.

Factors that might cause such differences include, but are not limited to, those discussed in our Forms 10-Q and 10-K as well as other subsequent filings with the SEC. Information provided on this call reflects our perspective only as of today and should not be considered representative of our views as of any subsequent date. We explicitly disclaim any obligation to update any forward-looking statements or our outlook. Also during today's call, we will refer to certain non-GAAP financial measures.

A reconciliation of our GAAP to non-GAAP financial measures is included in our press release. On today's call, Vernon will review our business highlights, and I will provide more details on the financial results. And then we will open up the call to Q&A. With that, let me turn the call over to Vernon. 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Thank you, Patrick, and thanks to all of you for joining us today. As you know, Patrick and I are acting as co-CEOs, while the company conducts a formal search for a CEO. We've engaged a search firm but optimizing for talent, not expediency. Since December, Patrick and I and the Board and Everbridge executive team have conducted a holistic review of our strategy, operations and execution.

Everbridge has built a strong foundation as a leader in critical event management, and we're taking access to improve on our strategic direction, go-to-market execution and efficiency to ensure that we deliver solid profitable growth and generate long-term value for our shareholders. On today's call, I'd like to discuss our fourth quarter results and outline actions that we're taking to refine our strategy in order to better focus and align our organizations to meet the multibillion-dollar opportunity we are pursuing. We'll be discussing how these improvements inform our guidance for 2022 and increase our ability to drive sustainable revenue growth while also meaningfully expanding our profitability and positive cash flow. Looking at our reported results, we delivered a solid fourth quarter revenue of $103 million, up 36% over Q4 2020, and adjusted EBITDA of $0.6 million.

For the full year 2021, revenue was $368 million, up 36% from prior year. And adjusted EBITDA was $11 million, up 39% from 2020, reflecting our ability to drive leverage in our model. These are solid headline numbers, driven, in part, by another strong quarter for Critical Event Management that we refer to as CEM. However, before I dive into -- further into the Q4 results, I want to make a few minutes to discuss elements of our recent execution that were not strong as we would have liked and the actions that we're taking currently to drive -- to address these in 2022.

As I noted on the onset, beginning in December, our management team, together with the board, conducted a comprehensive review of our strategy and operations. We identify specific elements, the performance from certain acquired technologies, including barrier to upsell and cross-sell from increased complexity, and incomplete integrations and pushed out demand for travel-related solutions, as well as smaller deal size for international public warning wins that are having adverse impacts on business, our go-to-market strategy, and sales organization. Informed by our review, we're taking decisive actions to address the root causes of these issues. Patrick will discuss in greater detail, but the net impact of these changes will be to simplify the business, which will result in near-term trade-off of revenue growth but provide an attractive, sustainable long-term growth trajectory, and improved profitability, and positive cash flow.

The first item highlighted in my review relates to the number of acquisitions completed in 2020 and 2021, which will provide us with a stronger overall CEM solution to power our long-term growth. However, these products and businesses have created incremental product line complexity that produce integration challenges and have complicated our go-to-market efforts. Within complete integration into our CEM platform, it's been harder for our customers to take advantage of our new technological capabilities and for our enterprise sales organization to execute on our land, adopt, and expand sales strategies. As a result, this year, we'll be focusing on integrating and simplifying our CEM solutions to focus on key customer personas.

In addition, we'll be deemphasizing M&A this year. This focus on integration will allow us to simplify our product messaging and strategy, as well as enable our enterprise team to be more effectively sell our greatest asset: a more robust and integrated industry-leading CEM platform. The second area highlighted in our review involved the continued maturation of our international public warning marketplace. I should remind you that we define public safety as a combination of our core Mass Notification solutions and our successfully integrated international whole country public warning solutions.

Both of these are industry-leading and being chosen by more U.S. states, federal, and state agencies, and governments in multiple countries around the world than any of our competitors. However, recent international market activity is seeing meaningful contraction in the size of countrywide deals as compared to the wins that we are seeing over the past couple of years. These deal size contractions, coupled with elongated public warning implementation timelines, suggest to us that our near-term wins for large- and medium-sized countrywide public warning deals will be smaller than previously estimated.

That said, we expect to continue our hard win rates in public warning and the network effects that further expand the opportunity. So let's explain the three main actions that we're currently taking to approve the execution issues, as well as the expected impact. First, we are pausing material new M&A and instead prioritizing development efforts to focus on accelerating product integrations across our existing acquired assets, allowing for greater competitive differentiation, product simplification, and lower cost. Next, we're simplifying our product offerings, moving from several dozen individual product -- point products to focus on four strategic CEM solutions, each targeting a specific buyer persona with a unique and differentiated technology solution CEM digital is a single package that solves problems CIOs face.

CEM for business operations includes E911 and travel risk components to focus on enterprise resilience for chief risk officers. And CEM for people resilience serves the needs for chief security officers and their duty-of-care concerns. Finally, CEM for security helps CIOs and CSOs secure government and enterprise IoT assets to protect people and facilities. These integrations will significantly simplify our go-to-market process and drive higher productivity over time.

In the short term, however, we expect this to create a revenue headwind as we deemphasize some small, nonstrategic point products. Last, in the public warning market, we're going to continue to leverage our industry-leading win rates to drive land and expand opportunities, as well as apply increased focus toward driving network effects that multiply the opportunity inside a region once we start to penetrate it. As you expect, these factors impact our current 2022 revenue outlook, which Patrick will discuss in more detail. While these headwinds are disappointing, we believe that increasing our focus on product line integration and simplifying our enterprise go-to-market motion will better leverage our most productive, strategic, and mission-critical solutions to drive top-line growth that is attractive, sustainable, and meaningful -- more profitable, meaningfully more profitable.

So let's talk about our fourth quarter in a little more detail. Overall, we saw continued momentum in the core strategic opportunities with 19 new growth CEM deals around the world. Recent events that include the crisis in Ukraine, threats of cyber attacks and criminals on global assets, the recent hostage incidents in the Texas synagogue, wildfires in the West Coast, and the ongoing global supply chain disruption highlight that our mission has never been more important. New customers that selected CEM in the fourth quarter included global customers, such as U.S.

software leader PTC and Leidos, the defense and aerospace leader formerly known as SAIC. Leidos is a Virginia-based defense aviation infotech and biomedical research company that provides engineering systems integration and technical services. As a new Everbridge customer, Leidos selected CEM and crisis management offerings to bolster their business continuity and emergency management efforts before, during, and after periods of crisis. CEM was also selected by the largest online marketplace in South Korea and a leading American bedding manufacturer, just to name a few examples.

The bedding manufacturer selected CEM because of the value of its -- derived by applying our industry-leading situational awareness to accelerate its response to disruptions impacting its 5,000 team members, its 600-plus store locations, and assets moving between them. We also continue to track records of expanding relationships with existing customers, including a multiple global pharmaceutical leader who expanded their use of Everbridge CEM implementation. In addition, the largest bank in Canada, RBC Financial Group; and the U.S. Department of Treasury were among customers to increase their Everbridge commitment to become CEM customers.

Specifically, the U.S. Department of Treasury, which is one of the more than 80 federal agencies using Everbridge, upgraded our risk intelligence solutions to full CEM in order to have a robust common operating picture of all treasury locations. These transactions in Q4 represent our land-and-expand strategy, and we believe that we will simplify our -- simplifying our CEM packaging, messaging, and go-to-market will continue to expand this success in 2022. In the area of public warning, we believe we are well-positioned to continue winning a significant amount of public warning opportunities with our industry-leading platform.

We will expect a slowdown in revenue growth from Public Warning this year as a result of smaller deal sizes. We believe we will see a continuation of our high win rates for all public warning opportunities, as well as the resulting network effect opportunities will expand our growing presence in Europe and around the globe. We're already repeating that success we've seen in the U.S., like Florida, New York, as well as countries like Singapore, Norway, and Sweden, where we have since won more localized network effect deals, such as the city of Stockholm, in the top employers within the city. As you'll recall, in the third quarter, we announced a countrywide public warning win in Spain.

And in the fourth quarter, global insurer MAPFRE España, based in Spain with a presence in 45 countries, selected Everbridge's Mass Notification solution. Following our successful appointment of national public warning systems in the United Kingdom last year, in Q4, we secured several enterprise banking and local government customers throughout the country, in cities including London, Bristol, and Cardiff. In India, the network effect from public warning contracts in four states led to contracts with NASDAQ-listed global analytics and digital solutions giants, like EXL India, as well as with Baja Financial, a financial services and insurance company with over 20,000 employees across 1,400 locations. These examples are powerful network effect illustrations why we remain optimistic that we can expand our public warning business globally and drive enormous strategic value from it, even with smaller countrywide wins now and in the future.

Now turning to some more specific business metrics from the fourth quarter. We added 125 net new customers in the fourth quarter, ending the year with 6,135 enterprise customers. As I mentioned, 19 customers were selected -- were either selected or expanded to our CEM platform, bringing the total number of CEM customers to 192. That's up 50% from a year ago.

Our momentum with large transactions this year continued in Q4, resulting in a trailing 12-month ASP that were again above $100,000. Contributing to ASP growth were 66 deals worth more than $100,000 per year, tying our record performance from a year ago. From a product mix perspective, 58% of our new and gross sales over the last four quarters came from new products as we continue to see demand for our newer applications, as well as our core Mass Notification. Our international revenue mix was 34% in the quarter.

And as we continue to win business both at home and abroad compared to 28% a year ago, we expand our presence in every major region around the world. Our revenue mix by vertical remained relatively consistent with 68% from corporate, 23% from local state and countrywide government, and 9% from healthcare, reflecting strong growth in corporate markets with increasing post-vaccine use cases. As always, we remind that these quarterly metrics can fluctuate, but that longer-term trend continues to reflect our overall business growth. For the year, our application has managed a record 6.9 billion critical interactions, demonstrating our scale, resiliency, and market leadership.

So overall, the fourth quarter financial results were strong driven by continued success of our core strategic market of CEM. However, there were some aspects of our business that are not performing as originally expected. Specifically, complexities introduced by rapidly expanding portfolio negatively impacted our enterprise go-to-market performance. This, coupled with our strategic public warning business, experienced lowering ASP, and longer implementation time is influencing our current revenue outlook for 2022.

We've conducted our review, identified the core issues, and are taking immediate actions to pause material M&A, streamline, integrate, and reduce complexity, as I discussed. While this will create some near-term disruption, we strongly believe that with our market leadership and differentiated technologies, these actions will drive attractive, sustainable revenue growth with meaningful increase in profitability and positive cash flow. Now allow me to turn the call over to Patrick for more details on our financial results, our guidance for Q1, and our operational focus in 2022. Patrick? 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

 Thanks, Vernon. As Vernon said, our board and management team are in alignment on the initiatives we are putting in place to focus on CEM growth through integration and simplification and on optimizing our approach to the public warning strategic opportunity. This is important work for the company, and we are being very thoughtful on the potential short-term headwinds. Currently, we estimate a total impact on revenue of $32 million this year, which is reflected in our guidance.

While these actions are disruptive in the short term, we believe this will ultimately enable the company to deliver attractive, sustainable, profitable revenue growth, and long-term value for our shareholders. Let me break this down a bit more. First, as we discussed, with the volume of M&A in 2020 and 2021, we now offer the broadest and deepest set of technologies in our market. However, these additions have created complexity for the business seen in product, back office, and go-to-market headwinds that are obstacles to sales growth.

Removing these headwinds by accelerating integration work will be our focus in the first half of this year. At the same time, we are using this opportunity to deemphasize certain smaller, nonstrategic products that don't fit cleanly into our CEM and public warning focus areas. While these products do deliver some stand-alone revenue, they are a distraction to our primary focus and negatively impact our sellers' overall productivity. We estimate that impact from these combined factors to be roughly a $17 million headwind to 2022 revenue.

This is based on work we've done in the last couple of months, as well as our Q4 sales performance, some of which was not considered in our preliminary guidance for the year. Second, in the public warning market, additional clarity on recent countrywide pricing trends in certain markets and elongated implementation timelines is where we expect the other $15 million of headwind in 2022 versus our previous expectations. We are taking decisive actions to address these two areas over the next few quarters. I'm confident the results of these actions will be to focus on building sustainable, long-term growth.

At the same time, this will enable us to be much more profitable with a meaningful increase in adjusted EBITDA in 2022 on both a dollar basis, as well as on a margin basis, and should also position us for strong margin leverage beyond this year. With that backdrop, let me summarize our guidance for the first quarter and full year. For the full year, we anticipate revenue to be in the range of $426 million to $432 million, representing growth of 15% to 17%. We anticipate adjusted EBITDA will be in the range of $33 million to $35 million, tripling from 2021 and representing an initial adjusted EBITDA margin of 8%.

We expect a non-GAAP net income of between $10.2 million and $12.2 million or between $0.22 and $0.26 per share based on 47 million diluted weighted average shares outstanding. For the first quarter, we anticipate revenue of between $98.8 million and $99 million, representing growth of 20%. We anticipate adjusted EBITDA will be between negative $1.9 million and negative $1.5 million, and we anticipate a non-GAAP net loss of between negative $7.1 million and negative $6.7 million or a loss of between $0.18 and $0.17 per share. One important note about our Q1 revenue guidance.

Many public warning deals are recognized upfront upon implementation. We completed a number of implementation milestones and recognized that corresponding revenue in Q4. Due to this timing, we expect revenue from public warning to be down sequentially in Q1, and this impact is reflected in our first quarter guidance. Before we open up the call for Q&A, let me quickly run through a recap of Q4 and full year performance.

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. Q4 by itself was solid with revenue of nearly $103 million, up 36% from a year ago, while gross margin increased to almost 74%, reflecting leverage as our business scales. Our net retention rate continues to track at or above 110%, reflecting continued customer satisfaction, combined with demand for additional Everbridge technology to expand within the existing customer base.

Adjusted EBITDA for the quarter was $572,000, and net loss was negative $2.1 million. On a GAAP basis, our net loss was negative $10.5 million. For the full year 2021, total revenue increased 36% to $368 million with gross margin improving 130 basis points to 73%. Finally, adjusted EBITDA grew to $11.2 million for the year, an increase of 39% from 2020.

As I said earlier, we expect to significantly increase profitability in 2022 as efficiencies are realized. Our balance sheet continues to be very healthy. We ended Q4 with nearly $493 million in cash, cash equivalents, and restricted cash, reflecting the impact of the cash paid to acquire Anvil, offset by positive operating cash flow of $10 million. From a capital allocation perspective, we are focused on organic investment opportunities in 2022, consistent with the key programs that Vernon and I have discussed.

Therefore, we do not currently anticipate significant use for M&A. We will evaluate other opportunities to deploy capital, including repurchases of stock or convertible debt as the year progresses. In summary, we delivered a strong performance in the fourth quarter and all of 2021. As we look to 2022, we are very focused on execution, driving organic growth, and maximizing past investments.

Looking further, we believe we can deliver attractive, sustainable top-line growth with improving profitability and positive cash flow which can generate significant long-term value for all of our stakeholders. Now, operator, we're ready to open the call for questions. 

Questions & Answers:

Operator

[Operator instructions] And the first question will come from Terry Tillman with Truist. Please go ahead.

Terry Tillman -- Truist Securities -- Analyst

Yeah. Thanks for taking my questions. Good afternoon, Vernon and Patrick. The first question is on the -- I do appreciate breaking out the two key areas of this big revenue shortfall, $15 million in public warning market side. I wanted to focus on that first.

It seems like public warning systems are more important than ever internationally, so is this a struggle to articulate the value of what you all have? Because you brought a lot together here in terms of the platform capability. So is there just a struggle to articulate the value? Is there any kind of competition dynamics that are just kind of creating price dynamics? Or is it budget issues? Just anything more you can share on the international side of public warning, and then I had a follow-up. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

 Hey, Terry. It's Patrick. Yeah, recently, we've seen a contraction in deal sizes, in part, because of competitive behavior, where a range of competitors are seemingly overcommitting and undercharging in selected markets to secure share, which we believe is unsustainable over the midterm. And that contraction in deal sizes has been exacerbated by lingering effects of COVID, which is elongated implementation timelines.

We feel that we continue to be very well-positioned to win long term because we have the technology and the reliability and the referenceability necessary for critical applications. And in addition, this is a strategic opportunity for us and helps us to lay the foundation for network effects. So we still see a tremendous strategic opportunity for us here despite what we've -- these recent trends in the market. 

Terry Tillman -- Truist Securities -- Analyst

OK. Just -- thanks for that, Patrick. The follow-up maybe, Vernon, for you in terms of there is a meaningful increase in EBITDA, so I guess that's a constructive dynamic, and you're going to pause the M&A. But confidence in terms of stabilizing kind of the go-to-market side -- and like what's going on with the sales capacity? How is the churn of the sales team? And are you investing less in sales headcount? And had you been overcapacity? Just more on just trying to understand the stability of the sales force amid these various actions and initiatives.

Thank you.

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

 Sure. And thank you, Terry. As I said in my prepared comments, in terms of areas of complexity, we had a number of acquisitions, obviously, throughout the year. And that really added to the complexity of both the back office and the product platform.

That complexity was extended to our customers and to our sellers. And as a result of that, obviously we saw slow sales results in Q4. And as I said also in my prepared comments, one of the things that we're doing now is prioritizing the integration of those technologies so that we could actually also take those key differentiated assets and provide a differentiation in the marketplace with a set of very nice bundles that are persona-based. So if you're a CIO or a CSO or CHRO, you now have bundled solutions that are part of Everbridge CEM solutions.

And what that's going to do is make it simpler for our sellers to sell. It's going to make it simpler for our customers to buy. And we believe that that pivot is going to be very important for sustainable long-term growth for the company, and that's work that both Patrick and I kicked off a couple of months ago. 

Operator

Thank you. And the next question will come from Ryan MacWilliams with Barclays. Please go ahead.

Ryan MacWilliams -- Barclays Capital -- Analyst

 Thanks for taking the question. Patrick, you had the initial guide of 20% to 23% at the time of David's departure, and it looks like a solid fourth quarter. Can you just talk about maybe what changed in December, like some puts and takes from the review that now has shifted Everbridge's strategy to focusing on EBITDA profitability and less on revenue growth and acquisitions? And is there any changes on how you view the growth rate in your core massification and CEM end markets?

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Hey, Ryan. Thanks for the question. Yeah, in December, we provided preliminary guidance that was based on the model and strategy in place at the time. And since then, Vernon, and I, and the board have taken a hard look at what we are doing well and what needs improvement.

And the actions that we're taking to integrate recent acquisitions, simplify the CEM solution, optimize our approach to public warning, these are all going to drive more moderate near-term growth but also higher profitability and we think a midterm growth profile that remains strong and attractive, and again, with significant profitability. We've done our bottoms-up planning to come to this view and have a strong confidence in our guidance. 

Ryan MacWilliams -- Barclays Capital -- Analyst

No, I appreciate that color. And then toward the end of last year, you had the acquisition of Anvil for $160 million. Could you just help us out with maybe how fast that was growing, what that revenue contribution might be for this year? And then when it comes to which point solutions you're planning to deemphasize, any more color there? And like have any particular acquisitions maybe underperformed your expectations? Thanks, guys.

Patrick Brickley -- Senior Vice President and Chief Financial Officer

 Sure. As it relates to Anvil, it's largely services driven and -- in terms of revenue growth. And it's -- with COVID and the impact on business travel market, Anvil's performance hasn't been as strong as it was historically nor nearly as strong as we believe it will be as business travel returns. So for -- as we look at 2022, there could be some upside related to Anvil if business travel returns relatively quickly.

And in terms of the rationalization, we're not going to necessarily unpack what we're doing and go through a specific inventory of those products. Would just say that, for context, a number of the acquisitions that we did were very -- akin with very strategic and core technology for us as we built out the CEM platform and sometimes came with some noncore technology, and it's those noncore technology pieces that we're focused on right now. And so as we deemphasize those, we'll work hard to minimize the impact on affected customers. But naturally, we anticipate that this is going to have a small impact on gross retention this year, which we will lap and we'll have out of the system in 2023. 

Ryan MacWilliams -- Barclays Capital -- Analyst

Appreciate the color. Thanks, guys. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yup. 

Operator

Thank you. And the next question will come from Brian Peterson with Raymond James. Please go ahead. Brian, please go ahead.

Perhaps your line is muted on your end. Your line is open.

Brian Peterson -- Raymond James -- Analyst

Sorry about that, guys. Confused with the mute button again. But, hey, thanks for taking the questions. So, Patrick, I wanted to follow up on that last question in terms of the $17 million impact.

Could you maybe give us a little bit more color specifically on what you're doing with those products? Or are those basically getting end of life, and so the customers will essentially be turned off? And when is that actually happening as we're thinking about 2022? Or should that linearity hit in the first quarter or first half? Or just how should we be modeling that impact? 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah. Well -- so first, hey, Brian, thanks for the question. The $17 million headwind that we're associating with M&A really is twofold. There's the go-to-market impact, and there's the rationalization impact.

And so just to break those down. In terms of go to market, we were well down a path of selling dozens of solutions that were not always tightly integrated. We were selling them to multiple buyers. And as Vernon said, that was confusing to customers and to our sellers.

So the action that we're taking there to remedy that, we're focusing on integrating the acquisitions. We're simplifying our go to market. We're aligning and upgrading our back office to make it a lot easier to do business with and within Everbridge. And so the impact of that, and it's part of the $17 million, that showed up in second-half sales, especially in Q4.

And the other aspect of the $17 million is the rationalization. And as I said, for acquisitions to work well, it requires that you integrate the acquired products onto your platform, as well as rationalize the smaller components that are not a good strategic fit. And in 2022, we're focused on accelerating both of those. And so it's a limited portion of the headwind that's due to rationalization.

And that work is already underway, and that's going to -- it's already underway in Q1, and it will progress throughout the year. 

Brian Peterson -- Raymond James -- Analyst

OK, got it. And maybe just a follow-up on pricing. I know you guys mentioned for some of the public warning solutions, you're seeing price points that are maybe lower than expected. I'd be curious, how are things looking maybe outside of that in terms of Mass Notification or CEM? I'd just be curious to get an update on pricing trends there.

Thank you. 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

So I think when we think about public warning, as we said earlier, that we still have the leading platform for providing countrywide alerting for all of our customers, and that is shown as a result of our continued -- ability to continue to win both large and medium-size country deals. We also have -- continue to also win a fair amount of state local deals in Mass Notification and our Resident Connect, and some of our other Everbridge suite of solutions. And so as it relates to our public safety products, most of the price compression we've seen is actually in the international public warning specifically. But overall, public safety pricing is holding up pretty well.

That pricing pressure is evident in the fact that they're highly competitive bids with lots of competitors and a pretty rigorous RFP process. And even though that is the case, we continue to win them because we've got the leading platform but clearly has put pressure on the pricing for our international public warning business. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah. And otherwise, just to jump in, we're not seeing pricing pressure in our primary growth engine of critical event management, in particular, as we continue to migrate toward more operational use cases. That continues to progress well. 

Brian Peterson -- Raymond James -- Analyst

Understood. Thank you. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

You bet. 

Operator

And the next question is from Matt Stotler with William Blair. Please go ahead. 

Matthew Stotler -- William Blair -- Analyst

Hi, everyone. Hey, Patrick. Thanks for taking the questions. Maybe start with one on the pipeline.

So obviously, a lot of things changing, management turnover, some strategic decisions being made, which seem to make a lot of sense. From a pipeline perspective, obviously, you'd like to push the focus away from billings. But on a trailing 12-month basis, I mean, billings growth was flat or was consistent in Q4 relative to the year-over-year growth we saw in Q3 and Q2, which I think is impressive, considering the -- maybe inefficiency that you talked about and the impact that it had on selling in Q4. So I would like to maybe just dig into what you're seeing in the pipeline, both with customers that are either coming up for renewal or new deals.

I mean -- and just kind of balance these two things where the trailing 12-month billings performance and the billings performance in the quarter specifically seem to be doing relatively well, but also you have these changes upcoming. I would love to get some more color there. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah. Thanks, Matt. I'll go first, and then I'll turn it over to Vernon. As you know, I'm a broken record on the billings metric and have recently been suggesting that folks pay more attention to current RPO, which you'll see in our 10-K.

But the growth year over year in current RPO was about 24%, which I think is probably a better indicator of backlog and is reflected in our guidance going forward. But you also asked about pipeline. I'll turn it over to Vernon to talk about that. 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Thanks, Patrick. And thanks, Matt, for the question. Look, our direction around simplifying our product platform is allowing us to get more proficient and also more efficient around speaking to our customers and our sales folks. So as I think about the CEM packages that Everbridge has, CEM for digital focus on the CIO persona allows us to very succinctly be able to communicate to what their use case and need is for that persona, simplifies the go to market for our sales folks, and be able to actually fully utilize the pipeline we've got in place for that.

And then our second and equally as important is our CEM for people resilience around enabling CHROs for business continuity and security professionals in their organizations really gives us the opportunity to leverage that bundle of solutions for that particular persona. And as I round out some of the top four CEM for business ops really helps us from a business continuity perspective and risk management, and we're really excited about that opportunity for the marketplace. And then last but not least, CEM for smart security really enables the CSOs and other security leaders to take full advantage of those pipelines and those solutions in a very simple bundle. And what is really attractive about it is we've got entry-level capabilities in each of the bundles.

So we can sell a set of solutions that are easy to enter but allows our customers to be able to migrate up to a full CEM solution. So again, simplifying the platform, making it usable for our customers and more consumable, while, at the same time, creating a great deal of simplicity and simplification, not only in go to market, but in comp plans and the way we do business, is something that both Patrick and I are excited about for 2022. 

Matthew Stotler -- William Blair -- Analyst

Got it. Got it. That's helpful. And then just a follow-up on the partner ecosystem.

Obviously, building that out has been a core focus for the past couple of years. How are you thinking about the initiatives there going forward, how those learn to the strategy for 2022 and beyond? And any initial or early feedback from your customers on the bundling and strategic changes that you're making?

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

I think the -- when we talk to our customers, and we try to do that pretty often, and our top sales folks, we are now very actively being able to now what I call operationalize the partnerships that got signed last year. What we're excited about those partnerships, both in Americas, and EMEA, and Asia Pac, are now beginning to work very closely together with our direct and indirect sales organization. So reactions to the bundling and the packaging, the feedback from the partners has been very, very good and received very well and the fact that now they can simplify what they have to deliver to their customers. Many of our partners that we signed, whether it be Deloitte or PwC, are having meaningful conversations at the C level with many of our existing customers around resilience, and CEM powers resilience.

And so these CEM bundles really align very nicely with what's going in the marketplace and with our partners. 

Matthew Stotler -- William Blair -- Analyst

Got it. Thanks. again 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Yup. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

You bet. 

Operator

And the next question will be from Scott Berg with Needham. Please go ahead. 

Scott Berg -- Needham and Company -- Analyst

Hi, everyone. Congrats on continued momentum, and thanks for taking my questions here. I guess the first question has been asked many times in the last 45 minutes, just trying to understand the timing of when all this happened. Someone else in the Q&A alluded to kind of what happened in the last two months here, Patrick.

But when we think about the timing and when you saw some of these changes happen, how should we think about the last two months unfolding? And I say that in the context of conversations I had with yourself and the prior CEO suggested you all have kind of seen some of these smaller public warning deals, these countrywide deals now for at least a little bit of time frame. It doesn't seem like it was completely new in the last maybe eight or nine weeks. Thank you. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah, sure. Hey, Scott. It's Patrick. With public warning, we had seen pricing sort of all over the place, and we've shared that.

But what we've seen recently is just a narrowing of that trend to just smaller-dollar deals, much smaller than what we've experienced in the past. And as Vernon was describing, the purchasing dynamics, there's a timeline. It's very public. A lot of folks are jumping in, I think potentially overcommitting, that kind of thing.

So as we got through the end of the year and came into 2022 and look toward this looming deadline, we just see more and more price pressure. And so it just is what it is. It's a global opportunity for us. It's still very strategic.

We're still very excited about it because it's a long game, but we -- that's just something that it's going to come in a lot lower than our previous expectation, for sure. 

Scott Berg -- Needham and Company -- Analyst

OK, fair enough. And then a follow-up question is on the integration process. Lots of acquisitions have -- I've seen have had different challenges or opportunities in the integration process. But given the review that you've done recently and the expectation that this is kind of a -- we'll call it the year of the integration, how should we all view your progress there, in particular? What are you thinking for timelines on some of these integration needs? Is it one month, one quarter, one year type of scenario? Help us understand that.

And then when you get to the other side, how will we see it outside of just general bookings and maybe pipeline commentary? Thank you. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah. Well, we'll keep you updated as we go through this. We're excited to go through this. Vernon and I jumped on this quickly as an opportunity to do some great things for the business for the long run to drive much more sustainable and profitable growth.

So the actions that we're taking are going to take a few quarters. We've set out initial guidance for the year, both top and bottom line. We'll -- as I think we make progress and as the success materializes, we'll continue to update guidance. And as any other developments occur, we'll share those as well on these quarterly calls.

I'm sure we'll get plenty of questions and plenty of opportunities to provide updates. 

Scott Berg -- Needham and Company -- Analyst

Great. Thanks for taking my questions. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

You bet. 

Operator

The next question will be from Michael Turrin with Wells Fargo. Please go ahead. 

Michael Berg -- Wells Fargo Securities -- Analyst

Hi. This is Michael Berg on for Michael Turrin. I wanted to follow up on Terry's question from the top. Given the recent change in the international global macro dynamics, is there anything that maybe has happened or changes in conversations given what is perceived as an incrementally higher need and could lead to quicker implementation times for the public warning systems internationally that may not have been incorporated into guidance? Or how should we think about how current events are playing out for that part of your business? 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Yeah. Hi, Michael. Thank you for the question. We're certainly seeing that our public warning go to market is certainly extended throughout, obviously, the EU mandate but now expanding outside into other parts of the world.

They are still highly competitive and RFP oriented. But we think we've got an amazing platform and solution for that. And I think -- overall, I think a lot of countries are thinking about their resilience plans. And so I can say that the pipeline is steady, and the team is micro focused on making sure we win our fair share of the competitive wins.

But we haven't seen -- I think, if I'm answering your question properly, we haven't seen that the current marketplaces changed much. I think there's just some regulatory mandates in Europe that we won our fair share of, and we think there's more to come. And then outside of the EMEA marketplace, we are running into other opportunities that we think we'll be very successful in. 

Michael Berg -- Wells Fargo Securities -- Analyst

Thank you. And then quick follow-up. When you run into competition, how can we think about the competitive landscape? Is it a bunch of regional smaller [Inaudible] or large tech companies that the investors may be familiar with? Or how should we think who these competitors are? 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah. I'll jump in first. It's -- our primary competition continues to be some version of sort of by local. But that said, the -- more and more folks jump into these, and it just -- it runs a gamut of sort of large technology companies with sort of aged telco and other technology to really small companies that don't have much referenceability in the space.

So these RFP processes run quick. They run hot. And in some of them, especially in previous quarters, the RFP might really gear toward price over technology, but we're still able to win despite being higher priced. We're just seeing more and more RFPs weigh even more and more to price as we get toward the deadline, at least for the EU mandate. 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Yeah. It's important to understand the differentiation in our platform. We also -- not only just public warning but self broadcast, which is an advanced technology. And we think the combination of the two are integrated.

We did that integration work in a timely manner, and I think that has made us pretty differentiated, which is why I think many of our customers are selecting our solution, albeit in a hypercompetitive marketplace. 

Michael Berg -- Wells Fargo Securities -- Analyst

Thank you. 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Yup.

Operator

And the next question will come from Will Power with Baird. Please go ahead. 

Charles Erlikh -- Baird -- Analyst

Hey, guys. This is Charlie Erlikh on for Will. Thanks for taking the question. I just wanted to ask again about the population alerting pricing pressure.

It seems like you guys feel competitors are lowering their prices a little bit too much. But I guess I'm wondering if you think it makes sense for you given your network effects and whatnot to also lower prices to win a deal? Or would you rather sort of hold firm on pricing? Just love to hear about your philosophy on that. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah. Well, thanks, Charlie, for the question. That is a dynamic that we've been navigating for the past few quarters. As we mentioned earlier, we've seen pricing sort of all over the place.

We've seen large prices. We've seen small prices. It is a strategic opportunity for us. And more often than not, we are determined to compete.

And sometimes we can alleviate the pricing pressure by just getting to the right people and explaining our technology and the referenceability. No one has the referenceability that we do know and has the technology that we do. That said, we've just seen some recent ones where it sure seems like overreaching on price, and there is a limit to which we'll participate in some of those opportunities. If at the end of the day, we look at the country and determine that that could be a significant player, a significant growth lever for us over the next few years.

then we'll think hard about it. If it's -- if instead, it's a country that may not be a tier 1 opportunity for us, then we may decide not to follow the competition there. 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

I'll add some additional color, Charlie. I think the way we're starting to think about that given the level of competition is you can think of our winning these public warning deals as the sort of tip of the spear. We talk often about this network effects program where you can land a big country and do the work that we did at Spain, where we won the country of Spain but then quickly went and won some additional Mass Notification business, part of the Everbridge suite, in that country. So from our perspective, we think that landing those deals are important.

They will continue to be very highly competitive. But if we do our jobs with our product simplification, we think we'll be able to increase our network effects over the long term. 

Charles Erlikh -- Baird -- Analyst

OK. That's helpful. And then just last question for me. Can you help us with the revenue and the profit linearity through the year as you're making these operational changes? Should we maybe expect Q1 profit to be the trough for the year or Q2? Or any help on any of that would be great. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Yeah. The profitability will grow throughout the year. We would expect that by the time we're exiting 2022, we'll have an adjusted EBITDA margin of -- in the neighborhood of roughly 15% and with free cash flow following right behind that. But that's -- as we go through this simplification and rationalization, we'll be -- we'll be repurposing our resources, most of which are fungible.

And so there's -- throughout the year, we'll be working toward doing more with what we've got. And that will show up in leverage across the model, whether it's continued improvement on adjusted gross margin; G&A, as examples; and certainly in sales and marketing, which, in 2021, was in the neighborhood of 40% of revenue. And you'll see that as Vernon and team are doing a great job of simplifying our go to market, we anticipate that it will be more productive and more cost efficient. And that will show up in our sales and marketing expense as a percent of revenue throughout the year. 

Charles Erlikh -- Baird -- Analyst

Very helpful. Thanks, guys. 

Operator

And the next question comes from Parker Lane with Stifel. Please go ahead. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

You bet. 

Operator

And the next question comes from Parker Lane with Stifel. Please go ahead. 

Matthew Kikkert -- Stifel Financial Corp. -- Analyst

Hi, Vernon and Patrick. This is Matthew Kikkert on for Parker. First off, could you talk a bit about the recent collaboration that you announced with Brown & Brown? What do you envision is the opportunity there as you start to expand into assisting the P&C insurance base? 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

I think the relationship with Brown & Brown is a really interesting partnership. We think that when you think about resilience in organizations or countries that need to look after the duty of care for their citizens or employees or assets, obviously, these companies underwrite those countries and those companies. And having a platform that powers resilience, like our CEM platform, is a really nice fit together with Brown & Brown and going to market to make sure that there is digital transformation sort of powering resilience, if you will. And so therefore, there's an opportunity to obviously benefit from more flexible rates, better options with Brown & Brown.

So that partnership feels very natural for us. It's early, obviously. We just announced it, but we're looking forward to working very closely with them in the marketplace. 

Matthew Kikkert -- Stifel Financial Corp. -- Analyst

OK, great. And then secondly, how do you expect international expansion to kind of trend in the coming years? Outside of public warning, which products do you think have the highest potential over there? 

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Well, again, I have to go back to sort of prepared remarks around the CEM packages. One of the things that Patrick and I have done to prepare for 2022 and certainly in the last couple of months is the first thing is pause on the M&A activity. And secondly, let's get the integration work done around the front office, and back office, and the product complexity out of the system with these bundles. Those bundles are going to be extended to our international marketplaces, whether it be CEM for smart city, or CEM for business continuity, or CEM for digital.

Those CEM bundles -- simplified bundles are going to be made available to all of our markets, both in Latin America, and in EMEA, and throughout the Americas. So again, I think the fact that we prioritize, again, pausing on the M&A activity but focused on making sure that the product integration simplicity gets completed for our customers is going to provide benefits worldwide for our customers. 

Matthew Kikkert -- Stifel Financial Corp. -- Analyst

OK, makes sense. Thanks a lot for taking my questions. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

You bet.

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Welcome. 

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Patrick Brickley for any closing remarks.

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Thank you for joining our call today. We look forward to further advancing our position in the market in 2022 with more efficiency, focus and, clarity, and we look forward to speaking with you again. Thanks again. Goodbye. 

Operator

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. 

Patrick Brickley -- Senior Vice President and Chief Financial Officer

All right. Thank you.

Duration: 62 minutes

Call participants:

Patrick Brickley -- Senior Vice President and Chief Financial Officer

Vernon Irvin -- Executive Vice President, Chief Revenue Officer, and Interim Co-Chief Executive Officer

Terry Tillman -- Truist Securities -- Analyst

Ryan MacWilliams -- Barclays Capital -- Analyst

Brian Peterson -- Raymond James -- Analyst

Matthew Stotler -- William Blair -- Analyst

Scott Berg -- Needham and Company -- Analyst

Michael Berg -- Wells Fargo Securities -- Analyst

Charles Erlikh -- Baird -- Analyst

Matthew Kikkert -- Stifel Financial Corp. -- Analyst

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