David Wagner: We’re not in a position to do the guide on those revenues. As Patrick went through the narration of the script and you’ve seen the guide in the past a couple of quarters and maybe you look again at the investor deck, we gave a quarterly trend of those numbers over a period of time. But we went through a season in the last two years, 2021, 2022 with record public warning deals. This year, we’re going through a year where there has not been a public awarding deal awarded globally to date this year. So this, in some ways, this year feels low, but it also contextually, everything we’re doing is around growing the recurring revenue. We’re working with those products and those customers to make them more subscription.
So our intention over time is to drive their subscription revenues on. One thing I think we’ve demonstrated this year is we’re going to be able to manage expenses around those onetime. I don’t want to run table will be holding on getting a onetime deal for our business model. So we’re building the business model laser-focused on ARR and subscription revenue growth. And in that way, I’m not expecting a tailwind from nonsubscription the way we’re trying to do that to run the business.
Unidentified Analyst: Fair enough. Thanks. I’ll pass it back.
Operator: The next question comes from Terry Tillman from Truist. Please go ahead.
Unidentified Analyst: Hi, good afternoon team. This is Connor Passarella [ph] on for Terry. Appreciate you taking the questions. Just curious on what changes you’ve made in the customer success organization to better serve your existing customer base? And enable that cross-sell, upsell opportunity. And then I guess also, what kind of conversations they’re having with the existing base around the value of organizational resilience.
David Wagner: Yes. So that’s a great question. Customer success is an area we’re focused on some really great account managers and renewal specialists. Now that work with our clients that is an area that John is spending a lot of attention on. We’re expecting to make some changes that the further dry alignment to those two teams and support the customers even better. On the customer journey, we’re getting really good feedback. The Everbridge 360 doesn’t deliver on the ease of use and the integration. [indiscernible] like the geopolitical unrest and our ability to deliver messages in a really troubled hard environment on delivering messages into our clients’ employees and services to get them to state locations. We’re deeply engaged with our clients right now. And I’m just – I’m pleased with the team and how we’re able to service them in their time and need.
Unidentified Analyst: Great. That’s helpful. Thank you.
Operator: Next question comes from Ryan MacWilliams from Barclays. Please go ahead.
Ryan MacWilliams: Hey guys, thanks for the question. I know it’s early, but any early comments on next year and how should we think about your priorities for your focus on a return to growth or continue the cash flow improvement? What is your color there? Thanks.
David Wagner: Yes. Ryan, that’s a good follow-up question of a little more detail and the most pointed thing that Patrick and I mentioned was we’re early but looking ahead with a focus on growing EBITDA at 25% year-over-year. So we think we can continue to deliver operating improvements as we continue to grow. When you look at the ARR growth, it has come down quarter-over-quarter. We had some real strong quarters. At this time last year, we had a really much bigger team this time last year, and that’s why I think the improvements in sales productivity, pipeline build, deal sizes are so important as we look forward into next year, where we expect to be delivering year-over-year improvement beginning in Q1 on our recurring bookings for full performance, which with our strong renewal rates will start to drive ARR growth rates later next year because we’re still lapping some stronger compares with a lot more salespeople through this quarter.
Ryan MacWilliams: Okay. And then Patrick, glad to see the convertible debt retirement. Definitely come along over the past few quarters. The slides were helpful there. I guess just for investors, how should we think about the path ahead for average capital structure, what you plan to accomplish over the next few years? Thanks.
Patrick Brickley: Sure. As we mentioned, we’ve got enough cash to get through the debt that matures in December 2024. We have another $300 million or so that will mature in March 2026. Between now and then, we will continue to generate more and more cash flow to be able to pay that down. And as we mentioned at our Investor Day in 2022 – December 2022, we anticipate that if we’re not able to satisfy that obligation in March 2026 entirely out of our own pockets, that by then, we will be driving enough profitability that we could – we’ll have a number of options, including just straight bank debt that we’re exiting this year with adjusted EBITDA to leverage of roughly three to one. We’re going to get that down to two to one.
And by then, maybe – around one to one. So we don’t know what debt markets will look like in late 2025 or late 2026, but we’re confident that we’re – you’re going to be able to have a lot of different options that are not dilutive to be able to satisfy that remaining obligation.
Ryan MacWilliams: Appreciate the color. Thanks guys.
Operator: [Operator Instructions] And the next question comes from Koji Ikeda from Bank of America. Please go ahead.
Koji Ikeda: Hey guys. Thanks for taking the questions. I had a question on renewals and specifically on the contraction in the downsells. And I was wondering if you could talk a little bit about what’s driving that? Is it seats? Is it pricing? Is it a certain type of product? Any sort of color there to help understand the contraction would be great. Thank you.
David Wagner: Yes. It’s primarily seats. Of course, we’re dealing with over 6,000 customers and lots and lots of renewals. So the aggregate is a summary of the downticks accounted for the quarter-over-quarter decline in retention, but retention remains where it was this quarter last year. So it’s in a good spot, not a better spot that we want to in the contractions in the quarter, headcount reductions are certainly part of it. It’s anecdotal, but if there’s a concentration there was a lot — there was some consolidation, which customers being purchased and a little bit maybe more in our digital operations than our core CEM business. But just generally it added up to the eight to 10 basis points increase churn in the quarter.
Koji Ikeda: Got it. Okay. That’s helpful and then just one follow-up here. When I look at the deck and it’s a slide – what is slide is this. It looks like 2026, the reconciliation of the guidance, kind of the previous cash is the guide that is today. I noticed that there’s a reduction in the license and PS due to delays in large on-prem deals. It was $8 million and then an additional $2 million added on to the updated guidance. The question here is what gives you the confidence that these deals, these push deals will eventually close? Thanks guys.
