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Key Investor Highlights From Everbridge's Q3 Earnings Report

By Rachel Warren and Brian Withers – Dec 16, 2021 at 3:55AM

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The company has long struggled with profitability.

Critical event management platform Everbridge (EVBG -4.08%) reported earnings for the third quarter on Nov. 9. In this segment of Backstage Pass, recorded on Nov. 22, Fool contributors Rachel Warren and Brian Withers discuss. 

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Rachel Warren: I am just going to go ahead and take a look at how they did with their most recent earnings. What's interesting is that as I mentioned, this company has had a really strong track record of revenue growth [laughs] and share price growth as well. [laughs] Despite the fact that it has had a lot of sustained unprofitability on a GAAP net income basis. 

But for example, if you see here, Everbridge's price change over the last several years compared to the S&P 500's total return. S&P has returned a total of about 140% over the last five years, while Everbridge has returned about 657%. [laughs]

Clearly, this is a company that investors are excited about, despite the fact that it has not always been a profitable business. This was the third quarter for the company reported earlier this month.

The company has a market cap of about $4.4 billion. Management was forecasting revenue in the $94.1 million to $94.5 million ballpark, which would be as much as 33% year-over-year growth. They forecast a net loss and net loss per share. Again, continuing with that unprofitable streak there.

But in the third quarter, revenue beat management's projections. The third quarter of 2021, its revenue was actually up 36% year over year. Its GAAP net loss of $28.7 million was less than management was forecasting. Management had forecast as much as a $46.4 million net loss, as well GAAP net loss per share was also lower than what management had forecast.

The company was profitable on a non-GAAP net income basis to the tune of about $2.1 million, which was down from its non-GAAP net income year over year. Adjusted EBITDA was $4.9 million, down slightly from $5.1 million in the third quarter of 2020. Another thing that I think is important to note from this report, the free cash flow was an outflow of $7.5 million, as well as compared to an outflow of $4.1 million in the third quarter.

Lots of cash outflows, negative cash flow there. The company did end the third quarter with over 6,000 global enterprise customers, which was up on a year-over-year basis, and management also noted that these numbers here, non-GAAP net income and adjusted EBITDA which were both positive, were also positive for the sixth quarter in a row. It has a nice track record it's been building upon there.

Cash and cash equivalents of $546.5 million at the end of the quarter compared to liabilities due within the next year of $261.8 million. The company also raised its revenue and profit guidance.

I have mixed feelings about this stock.

I really like the services they provide. I think the returns of this company over the last several years have been incredible. Really solid revenue growth. I think what concerns me is probably not a surprise to anyone here just the continued outflow and this has been a pattern of free cash flow compared to minimal or no inflow at the end of the quarter. Again, not profitable on a GAAP basis. You have any thoughts on this, Brian?

Brian Withers: Yeah. One of the headwinds that might be for this company, although they've blew away expectations this quarter, is as people move to more of a hybrid workplace, there's less maybe concern of disaster in the office area impacting a large swath of employees.

But the communication solutions that you mentioned are for all different use cases. I just happened to look. I was curious.

I went to the Glassdoor ratings, these guys' Glassdoor ratings are stellar. They have a 90% recommend to a family member or a friend, and their CEO has got a 95% rating. It's hundreds of ratings. There's a lot going on in this company that is doing well. If you're interested, it's worth poking around.

Brian Withers has no position in any of the stocks mentioned. Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns and recommends Everbridge. The Motley Fool has a disclosure policy.

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