IPO Preview: Everbridge Inc.

Business Summary: Provider Of Security Solutions Designed For Protection During Critical Events

Everbridge Inc. (Pending:EVBG), is a software company which provides critical enterprise and related safety communications. Its platform is designed to immediately disseminate news and updates during public safety threats such as terrorist attacks, active shooter situations, severe weather conditions, IT outages, or cyber incidents. Their SaaS-based platform allows its clients to aggregate and assess threat data as well as then deliver intelligent, contextual messages.

Customers can also receive verification of delivery of those messages across multiple communication means, including: email, voice messages, and texts. Their platform can send millions of messages simultaneously to over 100 different communication devices, across more than 200 countries and territories, in 15 languages and in near real-time delivery. In 2015, the company handled 1.1 billion separate communications.

The company's critical communications and enterprise safety applications include: Mass Notification, Incident Management, IT Alerting, Safety Connection, Community Engagement, Secure Messaging, and Internet of Things. It serves customers in technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, higher education, and professional services industries.

In the last five years, Everbridge has grown its customer base from 867 to over 3,000 business and government customers. Everbridge serves customers in 25 countries and eight of the 10 largest US cities. Their customer base includes: 24 of the 25 busiest US Airports, eight of the 10 largest US-based investment banks, six of the 10 largest global auto makers, six out of the 10 largest global consulting firms, all four of the largest global accounting firms, four of the 10 largest U.S.-based health insurers, and four of the 10 largest U.S.-based healthcare providers.

EVBG filed for the IPO on August 19, 2016 and will offer 7.5 million shares at an expected price range of $11 to $13. If the underwriters price the IPO at the midpoint of that range, EVBG will have a market capitalization of $90 million. Everbridge's team of underwriters include: BofA Merrill Lynch, Credit Suisse Securities, Canaccord Genuity, Pacific Crest Securities, Raymond James & Associates, Stifel Nicolaus & Co., and William Blair & Co.

(Everbridge Inc., Form S-1 SEC Filing)

Use of Proceeds

Everbridge estimates net proceeds of its issuance and sale of shares to be approximately $66.3 million, assuming an initial public offering price of $12 per share, which is at the mid-point of the range set for the issuance.

It intends to use the net proceeds of the IPO to pay down $11.6 million on a debt owed on a line of credit issued by Western Alliance Bank and to create a public market for its common stock, facilitating future access to the capital markets. Everbridge currently has approximately $15.5 million in total debt and after the IPO, predicts it will have total debt equal to $3.8 million remaining.

Everbridge also expects to use proceeds for other general corporate purposes, including: investments in sales and marketing in the United States and internationally and in research and development.

Executive Management

CEO and Chairman of the Board, Jamie Ellertson, was formerly the CEO and Chairman of CloudFloor Corporation, a provider of cloud solutions that manage and optimize enterprise cloud operations. Everbridge acquired CloudFloor in 2011. Mr. Ellertson previously held senior executive positions at Gomez Inc., and S1 Corporation. He has founded several software companies, including: Openware Technologies, Document Automation Corporation, and Purview Technologies.

CFO and SVP Kenneth Goldman has over 30 years of experience in finance, administration, M&A, operations and corporate strategies. He previously held senior executive positions at Fiksu, Black Duck Software, Salary.com, Lodestar Corporation, Student Advantage, MediaMap, Shoplink.com and Goldweitz & Co. He graduated from Syracuse University and is a CPA.

Potential Competition: BlackBerry Limited, Emergency Communications, PagerDuty and Others

The market for critical communications solution is highly fragmented, competitive, and constantly changing. Everbridge competes both with established as well as emerging companies and with in-house solutions. Everbridge views its ability to offer a full suite of capabilities as one of its key advantages over competitors.

Its primary competitor for its Mass Notification and Incident management application include: BlackBerry Limited and Emergency Communications. Top competitors for its IT Alerting application include: PagerDuty, Inc. and xMatters, Inc. and top competitors for its Secure Messaging application include: DocHalo, LLC, Spok, Inc., and Perfect Serve.

Valuation

Everbridge Inc. reported revenue of $58.7 million for the year 2015, a 38% increase from $42.4 million in 2014. For the last six months ended June 30, 2016, revenue was $35.6 million, up from 27.3 million the same time the previous year. Since inception, Everbridge has shown revenue growth, but that rate has been slowing since 2015 is concerning. Revenue growth rate has declined from 41% in 2014 to 38% in 2015, and 30% for the first half of 2016.

Since inception, EVBG has reported net losses, including: $0.6 million, $10.8 million and $6.0 million in 2014, 2015 and six months ended June 30, 2016, respectively. The company has not yet been profitable and as of June 30, 2016 had accumulated a deficit of $84.4 million.

Conclusion

The Everbridge IPO is expected to kick off a series of tech IPOs anticipated in the coming weeks. In the last 12 months, the 13 technology firms which have gone public have raised over $50 million and had an average return of approximately 80%.

IPOs in the technology sector are clearly on a hot streak; however, we are concerned over Everbridge's slowing growth rate despite high spending. We do not recommend investing in this IPO stock.