Cvent Holding Corp.

Good afternoon, everyone. My name is Kellyanne. I'll be your conference operator for today. At this time, I'd like to welcome everyone to today's C-VENT first quarter 2022 earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the digit one on your telephone keypad. If you would like to withdraw your question at any time, you may also press star one once again. At this time for opening remarks, I'd like to turn the conference over to April C, Investor Relations. Please go ahead, ma'am.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Cvent's first quarter 2022. With me on today's call are Reggie Agrawal, Cvent's founder and chief executive officer, and Billy Newman, Cvent's chief financial officer. During today's call, we will review our financial results for both the first quarter of 2022 and discuss our guidance for the second quarter and full year of 2022. In addition, our earnings press release, SEC filings, and a replay of today's call can be found on our investor relations website at investors.cvent.com. Today's call will include forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding our financial outlook, including our guidance for the second quarter and full year 2022, are market opportunity, market position, product strategy, and growth opportunities. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be material different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect the outcome of the matters covered by these forward-looking statements is included in our periodic filings with the SEC, including the section titled Risk Factors in the quarterly report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC today. Additional information is available in our annual report on the Form 10-K for the year ended December 31, 2021, as well as in the cautionary language included in our earnings press release. In addition, during today's call, we will discuss non-GAAP financial results, which are not prepared in accordance with generally accepted accounting principles. A reconciliation between GAAP and non-GAAP financial results is included in our earnings release filed with the SEC and available on our investor relations website. And now I would like to call, turn the call over to Reggie.

Thanks, April. And good afternoon, everyone. I'm excited to be here with you today. Now, we got off to a great start in 2022, delivering revenue and profitability that were above our guidance. Revenue in the first quarter was 137.4 million. a beat of 3.9 million versus the high end of our guidance. And this drove a beat versus the high end of our guidance on adjusted EBIT as well. The revenue outperformance was driven by higher onsite revenue associated with greater demand for in-person functionality. Now we expect these trends to continue, resulting in a strong growth of 25% in the second quarter. And we're therefore modestly increasing our full year guidance, which Billy will detail later in the call. For those of you who are new to our story, Here's a quick Cvent overview. Cvent is a SaaS platform that provides value to event organizers with our event cloud solutions and to event venues and hotels through our hospitality cloud solutions. Our event cloud is used to plan, market, and organize engaging events of all sizes across all event formats, including virtual, in-person, and hybrid. And our hospitality cloud offers a marketplace that enables meeting organizers to find and book event space at hotels and unique venues. as well as software solutions that help venues promote and manage their meetings and events business. Fundamentally, our platform helps our customers grow their top line revenue and drive engagement, while reducing OPEX and ensuring greater compliance. In our last earnings call, I talked about three drivers fueling our growth for 2022 and beyond. First, the return to in-person events and the accelerating demand for hybrid. Second, new opportunities to measure and grow attendee engagement. And third, expansion of our ecosystem. In Q1, these growth drivers continue to fuel our progress across the entire business with both clouds showing strong performance in the quarter. Now, before I recap Q1, I want to first share our views on the state of the event and hospitality markets. Never before in Sieben's history has there been such an extended period of time when the world didn't connect, collaborate, socialize, and conduct business at in-person events. This is fundamentally counter to our natural desire for human connection. This is why organizations and attendees are yearning to meet in person again. We see it and hear it every day, and we believe that pent-up demand for face-to-face interactions will continue to be a tailwind for our business throughout the rest of the year. Now we believe this pent-up demand will help offset macroeconomic pressures that might otherwise dampen a return to in-person and hybrid events. Now looking at our Q1 business in more detail, Let me start by walking you through how each growth driver impacted the quarter and how we plan to continue to capitalize on the opportunity in front of us. First, let's start with the return to in-person events. Just to remind everyone, before the pandemic, 95% of our revenue came from in-person technology. We spent 20 years innovating and building a comprehensive platform to power the meetings and events industry. As a global market leader, we powered millions of in-person events, and this was our strength. then the pandemic hit. And over the past two years, we've all been generally meeting virtually. But throughout the year, we've seen a steady increase in in-person events. Now, we see this in both our own data and industry data. According to the North Star Seaman Industry Pulse Survey, 66% of event planners are booking or actively sourcing for event space. And based on sales teams' conversations in Q1, over 80% of conference and trade show planners we surveyed are looking for in-person components within their overall event strategy. But according to the same survey, and what's most encouraging, is that 40% of survey planners now believe they'll be planning more events in 2023 than they planned pre-COVID. We believe this rising confidence and demand for in-person will continue to rise throughout the year, and demand will naturally flow to us due to our inherent strength in in-person event technology. Now this is because in the new meetings and events landscape, there are more options than ever before for our customers to engage with their customers, prospects, employees, and stakeholders. We call this new landscape the triple threat. Virtual events reach massive audiences in a cost-efficient manner. In-person events are ideal for making deep and personal connections, and hybrid events maximizes the power of both. No matter what our customers' budgets, desired engagement levels, or size of their audiences, the Cvent platform can help them meet their event goals. And as a proof point of the triple threat in action, I'm very excited to announce that our net dollar retention increased in Q1 to 109%, 1% above our levels in Q4 of 2019. And as you may recall, it was 84% at the low point of the pandemic. Let me walk you through one of our customer examples that highlights how organizations are leveraging our product to support their total event program. which is leading to that strong net dollar retention I just mentioned. One of the world's leading investment banks spends over $2 million a year on Cvent software. They were an early adopter of the attendee hub at the beginning of COVID to support their virtual events. In early Q1, their team recognized that in-person events were quickly returning and they needed the right solution to deliver engaging in-person experiences. So they purchased Cvent's online solution software modules and other products. increasing their overall annual recurring revenue from 1.4 million to over 2 million. The bank also increased their investment in Attendee Hub, which they now use as their mobile application and web experience for many of their in-person, virtual, and hybrid events. This upsell is not only a testament to the power of Cvent for in-person events, but the power of Cvent's platform for your total event program. Now, this is just one example, but we have hundreds of both new and install-based customers increase their annual recurring revenue in Q1 by purchasing our onsite solution software. Some of these increases include an Ivy League school that purchased onsite solutions for the first time since February 2019 for nearly $300,000. A Fortune 500 pharmaceutical company increased their onsite ARR by 229,000. A publicly traded computer software company that increased it by 191,000. And a graduate admissions council that increased it by 124,000. I think these examples show that spending on in-person functionality is steady increasing. We also see continued demand for other parts of our event cloud, including our virtual solution. A Fortune 100 investment bank increased their virtual ARR by 361,000. A large private software company increased their virtual ARR by 169,000. One of the largest U.S. industrial distributors increased their virtual ARR by 162,000. And a Fortune 100 international oil and gas company increased our virtual ARR by 127,000. Now from the hospitality cloud side, the return of in-person events is having a real positive impact on the business. Hospitality cloud revenue also grew 17% year over year. This is up from 12% last quarter and represents the largest year over year growth for the hospitality cloud since Q1 of 2020. Now when I ask my sales team why, the number one reason is recovery upsell. As group business starts to come back, hotels want to capture as much as they can, and they are turning to Cvent's Hospitality Cloud as a strategic investment. They are using Cvent to advertise and market their event space to meeting planners, send their RPs, and then they are using our software to manage, analyze, and optimize these RP leads so they can close them at a higher rate. Here's an example. There's a new property in Vegas that is slated to open in late 2023. As part of their opening plan, they are investing heavily in Cvent to win event businesses in a very competitive market. They bought almost all of our key hospitality cloud modules, such as advertising, diagramming, room block management, analytics, et cetera. This is one of the largest deals for an individual property in our history. The annual contract value on this deal was almost $500,000. And the total contract value is approaching 2 million. This property was not alone. We had thousands of hotels, convention bureaus, and venues renew and increase their spend with Cvent because our tools are essential to winning group business as planners book events in 2022, 23, and beyond. And those that don't invest in our ever-increasing capabilities may find themselves further behind when it comes to their competitors. Now, this demand for Cvent aligns with what We are seeing and what we're seeing and what our data is showing on our fees being sent to hotels for event space. Now, overall, we're excited about the potential of our hospitality cloud business as in-person events return. Now, moving to our second growth driver, increasing opportunities for event organizers to use Cvent solutions to engage with their attendees across the total event program. Now, pre-pandemic, event organizers mostly cared about engaging attendees during the event. With the rise of video, online networking, and virtual event platforms, organizations now have the tools they need to engage with their attendees before, during, and after an event occurs, gaining even more insight into buyer needs. Let me share how we're seeing this play out even within our own events program. Now, just a few weeks ago, we held our annual user conference, Cvent Connect, in Las Vegas. This is a hybrid multi-day, multi-track conference that brings together thousands of event and hospitality industry professionals, both in-person and virtually, to network, engage, and evolve their meetings and events and hospitality programs. This year was our second year hosting it in a hybrid event format, and we had nearly 40% more in-person attendees than eight months ago when we held Cvent Connect in August of 2021. Now, we leveraged our attendee hub to create a seamless experience for in-person and hybrid attendees. Not only did Attendee Hub facilitate interactions between Cvent and our audience during the event, but it served as a focal point of engagement before and after event with pre-event appointment scheduling, attendee to attendee networking, pre- and post-event content, and post-event discussions. With Cvent technology powering engagement across our in-person and virtual attendees, we generated and measured nearly 850,000 unique engagement points, such as sessions attended, leads scanned, polls answered, questions asked, content downloaded, and more. And we're able to leverage this data and to continue to build these relationships by offering relevant follow-up content and event invitations based on the insights from not just our CventConnect conference, but from our entire event program. Our technology enabled customers to deliver this level of low friction and high engagement across an entire event program. This is making events as a marketing channel even more strategic and makes Cvent technology even stickier as organizations use Cvent more often between events, not just during events. Finally, let's talk about our third growth driver, the opportunity to expand our ecosystem. We connect the buyers and suppliers of our physical event space and streamline how they find and book event venues. But more goes into an event than just physical space. You also need the technology and other key partners to deliver compelling virtual in-person hybrid events. At Cvent Connect, we launched the Cvent App Marketplace, which delivers one centralized place for planners and marketers to find complimentary technology partners that connect to the Cvent platform. to improve event execution and deliver greater business impact. We also launched the Cvent Vendor Marketplace, built within the Cvent supplier network, to help planners find vendors and suppliers for all their event needs, such as AV and transportation, for example, whether it's virtual, in-person, or hybrid. Now, the CSN is now your one-stop shop for all your sourcing needs. While we don't expect to see any material revenue impact in 2022 from these products, we believe these marketplaces are going to be a long-term investment to make Cvent even more embedded into the fabric of the events industry. Our hospitality club business is fundamentally about monetizing events in the ecosystem. And as we highlighted at our customer conference, we've been making investments to make it easier for our venue customers and hotel customers to showcase their event space and our vendor customers to showcase their event services, win more business, and collaborate with event professionals to deliver great event experiences. For example, we expanded the localization of the Cvent Supplier Network. Planners and suppliers can now communicate with each other in 18 languages. We also announced the launch of photorealistic 3D event spaces on the Cvent Supplier Network to help hoteliers showcase their event space via immersive 3D tours. We will continue to invest in our event cloud and hospitality cloud capabilities to deliver the innovations that the marketplace demands to make Cvent the one platform that organizations need to maximize the ROI from events of all shapes and sizes. In summary, we are very pleased with the financial results from our first quarter, but we're even more excited about our future. We have a business that's resilient to potential new COVID variants, and it's positioned well for what we believe is continued strong movement towards the return to in-person events. As we continue to broaden and deepen our platform, we're both further distancing ourselves from the competition and strengthening our market position as we go after our nearly $30 billion tan. With all these investments in our unified platform, we're further insulated from macroeconomic pressures, and we're well positioned for a strong 2022. Now, I'll turn it over to our CFO, Billy. Thanks, Reggie. Good afternoon, everyone. I'll first walk you through first quarter 2022 financial performance and then discuss our guidance for second quarter and updated guidance for full year 2022. Total first quarter revenue was $137.4 million, an increase of 17.1% year over year. We beat the high end of our guidance for the quarter by $3.9 million, or 2.9%. The beat was largely driven by higher onsite solutions revenue as we saw higher than expected demand for in-person functionality in the quarter. Within total revenue, first quarter event cloud revenue was $95.0 million, an increase of 17.1% year-over-year. And first quarter hospitality cloud revenue was $42.4 million, an increase of 17.2% year-over-year. Event cloud growth is a result of growth across the platform, including event management, attendee hub, and onsite solutions. Hospitality cloud growth is due to hotels' continued reinvestment in the group portion of their business as in-person events begin to return. This is the second quarter in a row of growth for the hospitality cloud after five COVID-impacted quarters. And as expected, we're seeing an acceleration in the growth rate. Year-over-year growth in the fourth quarter of 2021 was 12.1% compared to the 17.2% we saw this quarter. Now, before I move on to expenses, I want to take a minute to discuss our key business metrics, as they also point to the trends we're seeing in the business. As Reggie already mentioned, our net dollar retention rate increased to 109% in the first quarter, which is one percentage point higher than where this metric was pre-COVID at the end of 2019. We also saw a demonstrable increase in the number of customers who contribute more than 100,000 in annual recurring revenue. As of March 31, 2022, that number was 840 customers, which is 121 customers higher than a year ago, and is a record for CMAT. The increases we're seeing in these metrics is driven by the lessening impact of COVID in 2021 and 2022 on both the event and hospitality clouds and the adoption of attendee docs. Note that moving forward, we will not report the number of event cloud customers who contribute more than 100, I'm sorry, the number of customers who contribute more than 100,000 in annual recurring revenue on a quarterly basis. We believe that this metric could be misleading when tracked on a sequential quarterly basis since there could be temporary anomalies quarter to quarter. On an annual basis, this will not be an issue, so we'll report this metric as of December 31st each year in the future. We expect this metric will continue to increase each year as a result of our land and expand strategy within our existing clients. Now, in discussing the remainder of the income statement, unless otherwise noted, all references to expenses and operating results are on a non-GAAP basis. You can find information on the most directly comparable GAAP metrics in our first quarter earnings release. Non-GAAP gross profit in the quarter was $98.2 million, or 71.5% of revenue, compared to 75.8% in the same period of the prior year. The year-over-year decline in non-GAAP gross margin is primarily due to a higher percentage of total revenue in the quarter coming from onsite solutions and merchant services, which have lower margin profiles. Moving down the income statement, Note that the operating expenses, operating expense increases in the first quarter I'm about to take you through reflect both meaningfully lower expenses from COVID cost saving measures that were still in place in the 2021 comparison period and a conscious decision today to heavily invest given the massive, massive growth opportunity that we continue to see in 2022 and beyond. Sales and marketing expenses increased 30.5%. Research and development expenses increased 22.1%. and general and administrative expenses increased 37.3%. The increase in general administrative expenses was also due to new costs related to operating as a public company that did not exist in the first quarter of last year. The main growth driver in each line item was employee expenses as a result of headcount higher to support growth in addition to increases we've seen in average compensation for employee due to wage inflation. Outside of employee expenses, The other key growth drivers were increased marketing expenses and increased contracted services. Shifting to earnings, adjusted EBITDA was $12.8 million, or 9.3% of revenue, which represents a $2.4 million beat in terms of dollars over the high end of our guidance and a 1.5 percentage point beat in terms of margin. The beat is the result of our $33.9 million revenue beat. Adjusted EBITDA margin is down from 19.3% in the prior year, and that decline in margin is again because of the COVID cost-saving measures that were still in place in 2021 and reflective of the investments we are making for growth. Turning to our balance sheet, we ended the first quarter with cash, cash equivalent, and short-term investments of $193.0 million, an increase of $66.0 million from the end of the fourth quarter of 2021. The increase was driven by strong cash collections in the first quarter, which is seasonally typical due to the high percentage of client contracts that are calendar year based and invoiced in the first quarter. Free cash flow before interest payments on our long-term debt and the change in client cash related to merchant services was $44.7 million for the first quarter, up $3.9 million compared to the first quarter of last year. Deferred revenue at the end of the first quarter was $287.5 million, an increase of 18.0% compared to the first quarter of the prior year due to year-over-year bookings growth driven by the adoption of the attendee hub and in-person events beginning to return. Let's turn to guidance for the second quarter, starting with revenue. We expect second quarter revenue of $153.2 million to $154.2 million, up 25.1% at the midpoint compared to the second quarter of 2021. This strong revenue growth is driven equally by both clouds and is powered by in-person events continuing to return. There is also a benefit to growth in the quarter related to the timing of our annual client conference. We typically hold the event in the third quarter of each year, but we had to hold it in the second quarter of this year in exchange for being let out of the contract for our 2020 in-person client conference that we switched to virtual. This benefits growth by three and a half percentage points in the second quarter, but will have an equal but opposite effect on the third quarter revenue growth. Shifting to full year revenue guidance, as a result of the earlier than expected bounce back of in-person events we saw in the first quarter, we are increasing our full year guidance to $621.4 million to $626.9 million, up 20.3% compared to the prior year at the midpoint, and reflects a $1.5 million raise over the midpoint of the guidance we shared in our last earnings call in early March. The $1.5 million raise is less than the $3.9 million first quarter B because the majority of the first quarter B was the result of revenue from events that occurred towards the end of the quarter that we thought would be pushed out to later in the year due to Omicron. This shifted revenue that we expected to realize later in the year forward to the first quarter. The remaining first quarter beat was due to the bounce back of in-person events occurring sooner than anticipated in late first quarter, as opposed to our original expectation of the second quarter. So the earlier start of the bounce back helps the first quarter and the full year, but doesn't have a snowball effect for the remainder of the year. Looking forward to the second half of the year, we expect year-over-year revenue growth in the third and fourth quarters to be relatively consistent after adjusting for the three-and-a-half percentage point impact related to timing of our client conference that I mentioned previously. This timing item will benefit second quarter revenue growth, but will have an equal but opposite effect on third quarter revenue growth. Moving to adjusted EBITDA, we expect second quarter adjusted EBITDA of $15.1 million to $16.1 million, representing a 10.1 adjusted EBITDA margin at the midpoint. Now, one detail that is key to understanding our adjusted EBITDA margin guidance is the cost of our annual client conference that I just mentioned materially exceed the revenue generated by the event. It's our number one marketing initiative, so we believe the net cost to the company is justified. Excluding the revenue and the cost of our client conference from our second quarter guidance, the midpoint of our adjusted EBITDA margin guidance would be 12.6%, meaning that we're expecting to see 3.3 percentage points of margin expansion between the first and second quarters on a normalized basis. Turning to full-year adjusted EBITDA guidance, we are keeping our adjusted EBITDA margin guidance unchanged from our prior guidance of 16.5% to 17.2%, which results in a slight increase to our adjusted EBITDA guidance in terms of dollars as a result of the increase to our revenue guidance. The $2.4 million first quarter adjusted EBITDA fee does not fully flow through to the full year because we are starting to feel an impact on our expenses from the macroeconomic factors that are currently in play, especially wage inflation. Looking forward to the margin expansion we're forecasting in Q3 and Q4, the step up in the magnitude of the quarterly expansion in those quarters is a result of reaching a solid footing from a business perspective, off of which we can now springboard in terms of margin expansion. Since the third quarter of 2020, when we reintroduced our virtual solution and our adjusted EBITDA margin peaked, we've been in a state of flux from all angles. Extensive technology development related to virtual, a high degree of support to our customers who are learning how to hold events in a virtual setting, and lots of friction in the sales process as we help our customers determine what's the best solution for them given an ever-changing environment for in-person events. Now that we have a platform that supports all three event formats, our customers' event programs are becoming more and more stable and predictable, and planners in general are becoming more confident in using technology to support in-person, virtual, and hybrid events. We can begin to level off operating expense spend and start to reap the rewards of the increasing incremental investments we've been making since late 2020 in the form of increased margin expansion through the end of the year. In summary, we are proud of our progress and performance in the first quarter. We are seeing positive signs of recovery in the meetings and events industry, but we're still in the recovery process. Although the uncertainty created by COVID is fading, other macroeconomic factors are beginning to rise. However, and most importantly, as a result of the investments we've made to broaden and deepen our platform to support all event types and formats across the total event program, We believe we are very well positioned to take our disproportionate share of the nearly $30 billion PAM. Now I'll turn it back over to the operator for Q&A.