Cvent Holding Corp.

Good day. My name is Savannah, and I will be your conference operator for today. At this time, I would like to welcome everyone to this event's second quarter 2022 earnings conference call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be an opportunity to ask questions. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Thank you. And I would now like to turn the conference over to April C., investor relations. Please go ahead.

Good evening, and thank you for joining us on today's conference call to discuss the financial results for Cvent's second quarter 2022. With me on today's call are Reggie Agarwal, 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 the second quarter of 2022 and discuss our guidance for the third 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.zvent.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 third quarter and full year 2022, our market opportunity, market position, product strategy, and growth opportunities. Forward-looking statements involve known and unknown risk, as to the uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's belief and assumptions only as of the date made, and the company assumes no obligation to update these statements, whether as a result of new information, future events, or otherwise. 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 in the section titled Risk Factors in our quarterly report in Form 10Q, the quarter ended June 30, 2022, filed with the SEC today, and in our most recently filed annual report on Form 10K, along with other filings the company makes with the SEC from time to time. Additional information is available in the cautionary language included in our earnings press release issued earlier today. In addition, during today's call, we will discuss nine GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP measure of the non-GAAP financial measures discussed on this call, including adjusted EBITDA and adjusted free cash flow, are included in our earnings release issued today, along with the definitions for those terms. The release is filed with the SEC and is available on our investor relations website. And now I'd like to turn the call over to Reggie.

Thanks, April. And thanks, everyone, for joining today's call. I'm excited to share our Q2 2022 results. We started the year with a strong quarter, beating our Q1 guidance, and I'm pleased to say we continued that strong momentum in Q2. Our revenue for the quarter was $161 million, which was $6.8 million above the high end of our guidance, representing 31% revenue growth year over year. Our strong growth was driven by a healthier and more dynamic events industry, where in-person events are quickly returning while interest in virtual events continues. Additionally, better than expected cost containment enabled us to exceed the high end of our adjusted EBITDA guidance by 7.3 million and adjusted EBITDA margin guidance by over 400 basis points. We also increased our adjusted EBITDA margin by 750 basis points when sequentially compared to Q1 of 2022 on a normalized basis. In addition, we generated 17.6 million in adjusted free cash flow in the quarter. We continue to land new logos, retain existing customers, and grow our share of wallet within our base through cross-sells and upsells. On that note, our net dollar retention rates increased to 114%, up from 109% last quarter. So the business is delivering on both the top line and the bottom line. In this new and more complex events ecosystem, organizations are increasingly looking for one platform to support their total event program across all three event formats. in-person, virtual, and hybrid. And unlike those that offer point solutions for just one event format, our new and integrated platform addresses all three, which really helps set us apart from our competition. We're excited about our strong 2-2 performance, and it's especially notable when compared against the challenges our competitors have been facing. Now, for those of you who are new to our story, here's a brief overview. Cvent is a SaaS platform that is comprised of our event and hospitality cloud solutions. Organizations use our Event Cloud products to plan, market, and organize engaging events of all sizes across what we call their total event program. And our Hospitality Cloud offers a marketplace that enables meeting organizers to find and book event space at hotels and unique venues. In addition, hotels and venues use our software solutions to promote, manage, and automate their meetings and events business. Fundamentally, our platform helps our customers grow their top-line revenue, drive engagement, and deliver leads. while reducing OPEX and ensuring greater compliance. Now, before I dive more deeply into our Q2 performance by cloud, I'd like to discuss some trends we're seeing. First, it's become increasingly clear that in-person events are the bedrock of the event industry. Nothing beats face-to-face human connection and interaction, which is why we're starting to see in-person events return so quickly. Now, this is reflected in our sourcing data from the Cvent Supplier Network, which is our global marketplace where planners can source and find meeting space at more than 290,000 hotels, destinations, and special event venues. The data shows our RFP volume has been steadily increasing since the beginning of the year, and in a few weeks during the quarter, we actually saw RFP volume approach their 2019 levels. This is important because in 2019, it was a record year for CBET when more than $18 billion was sourced through our platform. The other trend we're seeing is that organizations are looking for greater flexibility as they build an event program that takes advantage of a mix of event formats to maximize engagement and optimize their budgets. Let me give you an example. We have a customer that hosted a 4,000-person in-person event where the total hard event cost was about $9 or $10 million. Then they did the same event virtually where they had over 10,000 people and it cost about $600,000. A year later, they hosted a hybrid event where they had about 10,000 people attend, about 2,000 in person, and 8,000 were virtual. And that hybrid event cost about $6 million. Now, from the CMO perspective, this example shows that you can go all in person for $10 million or go all virtual for about $600,000 or somewhere in between. With the digital transformation from the last two years, organizations now have the option to deliver events that can match their business goals and increasingly just as important, their budgets. This kind of flexibility and budget elasticity just didn't exist pre-pandemic. And that elasticity is extremely powerful when CMOs want to continue to host events while CFOs want to control spend. And it's also a powerful growth opportunity for Cvent because no matter which format that our customers choose they need to invest in a robust event technology platform like Cvent. This is why we believe that the event technology spend will continue to make up a disproportionate share of overall event spend moving forward. Now in short, the return of in-person events combined with the need for one platform to manage the total event program plays back to Cvent's historical strengths as a longtime leader in the space. Now I'll dive more deeply into the performance of our two clouds. First, let's discuss the event cloud and the competitive advantages we've implemented through our decades of product development and experience. We believe customers no longer want disparate point solutions to manage their events, one for virtual, another for in-person, and a third for hybrid, because this approach adds complexity and cost to their event programs, and it negatively impacts the attendee experience. So they're turning to Cvent's platform to manage their total event program, which is all the events that they host or attend, whether it's in person, virtual, or hybrid. For example, in Q2, a leading national business media company selected Cvent because we were seen as a truly unified platform. While most of their events are now in person, they wanted the flexibility to pivot to virtual as they build out a more event, a more robust event program. They're starting with a 200,000 annual contract value, or ACV, and a $578,000 total contract value or TCV account. And with more than 20 other media brands under the account, this new logo offers continued opportunity for growth. From a global perspective, one of the most renowned universities in Australia liked our product so much that they 3X their Cvent investment and grew their account from an ACV of about 100,000 to an ACV to about 360,000. In addition, they signed a five-year agreement for a TCV of 1.8 million as they decided to move from having multiple event management systems to the Cvent platform. Another example is an organizer for a large conference that turned to Cvent to run their hybrid event. They're using Cvent for event marketing, registration, on-site solutions, attendee engagement, and our virtual solutions to broadcast the conference live and on demand to attendees. Now this new logo, which we closed in just about three weeks, is starting with using Cvent for just one event for nearly $300,000 of ACV, with plenty of room to grow. One area in particular of our platform that continues to benefit from the return of in-person events is our on-site solutions. Let me give you a couple examples. A global professional networking association that had a $700,000 ACV just increased their annual spend by almost 50 percent in Q2, bringing their total ACV to over one million. Another example is a Fortune 500 publicly traded financial and analytics company that had a $400,000 ACV that grew around 50 percent to almost 600,000 ACV and now has a TCV of almost a million. Both these organizations bought more of our in-person solutions, something we saw repeatedly across many of our customers over the quarter. The final point I'd like to make is that our event cloud performance is how our platform enables organizations to increase engagement opportunities even outside of event dates, further extending the overall impact of the event. For example, our Cvent Attendee Hub, which was initially used primarily for virtual events, is now also being leveraged for in-person and hybrid events as organizers look to use the solution to digitally engage with attendees before, during, and after an event takes place. Let me explain. Even for an in-person event, if an attendee flies, let's say, to Vegas for a conference, they may still want to digitally engage by networking online with other attendees prior to the event. Maybe they want to stream an early morning keynote online from their hotel room, watch sessions they missed on demand at a later date, or share a favorite session with their colleagues. Each of these touch points offer deep attendee insights that organizations can act on. This opportunity of year-round engagement just didn't exist before. We believe we're still in the early, very early stages of this growth opportunity. We're investing heavily here and in other areas across our platform with the support of our 1,300-person tech team. So to wrap up my comments on the event cloud, there are four key things driving our growth. First is this more dynamic events landscape, organizations, have more opportunities to engage than ever before through in-person virtual and hybrid events, which we call the triple threat. And now that in-person events are back, that triple threat is real. This presents vastly more opportunity than just 15 months ago when most people just thought about and used virtual. Second, our platform is more important than ever because in this changing environment, organizations need greater flexibility and efficiency to manage the complexity of their total event program and maximize ROI. We have the all-in-one solution organizations are looking for. Third, as in-person events continue to gain momentum, our platform is perfectly positioned to serve this market where we've been a leader for more than 22 years. And finally, our scale. We have a global sales and marketing engine thousands of developers and customer service professionals, and a strong global brand. We have the resources and the streamlined processes to take advantage of our $30 billion TAM. Now let's pivot to the hospitality cloud, where we grew almost 30% year over year, demonstrating renewed strength coming out of the pandemic when it was heavily impacted. Today, there are several things driving our hospitality growth. First, the return to in-person events, the lifeblood of the hospitality cloud. Second, pandemic-driven digital transformation has turned hoteliers into tech-savvy buyers who now embrace technology more than ever to get their job done. And third, as hotels face staffing shortages, teams know they need to work smarter and more efficiently, which increases their reliance on Cvent technology. Let me talk about these a bit more in depth. As in-person events return, hoteliers and venues want to increase their marketing efforts to get in front of planners before the competition. In addition, given the market fluctuations and travel patterns that impact leisure travel, hotels want to lock in both short and long-term group bookings for operational stability. All this is driving demand for our sales and marketing solutions. For example, a national property managing company signed a one-year $270,000 ACV deal to leverage our marketing business transient solutions to help them meet their group business goals for 2023. And one March, Dallas Hotel had an AC of $235,000. And this past quarter, they just signed an additional upsell for $110,000 to attract even more meetings and group business to their newly renovated property. There are many hotels out there that are spending tens of millions of dollars on renovations, and we plan to continue to target newly renovated hotels as the pandemic eases. In addition, we're seeing record engagement from destination management organizations and convention and visitor bureaus. Just about every major city and most small to mid-sized cities have these organizations to bring meetings, tourists, and consumers to their city. For example, we had several large city DMOs purchase our advertising solutions to support their group marketing efforts, helping us increase deal sizes by tens of thousands of dollars. Another driver of our hospitality cloud growth, as I mentioned earlier, is the continued hotel staffing shortages. Sievent technology can fill these gaps and help hoteliers automate and reduce manual processes across nearly every aspect of the group meeting process, from sourcing, to managing room blocks, to diagramming meeting space, to responding to group leads. Some examples are a leading global hotel chain signed a $486,000 ACV contract to use Cvent's interactive floor plan and 3D diagramming solution across a number of hotels. A nationally recognized operator of special event venues, another target market for us, signed a three-year contract for a TCV of $811,000 for Cvent's 3D diagramming across nearly 100 of their venues. And one large Las Vegas hotel that had an ACV of $600,000 invested another $300,000 for just our business intelligence software to help their sales team prioritize what RFPs to bid on to see how their bids compare to their competition, taking their total ACV to $900,000. It's worth taking a pause and just focusing on the fact that this one hotel is now spending $900,000 annually on Cvent products. This really highlights how critical technology has become to group and meeting-focused hotels. So as you can see from the examples above, hotels are continuing to buy not just marketing packages to get in front of the growing interest in in-person events, but also our software to automate, streamline, and more effectively manage their meetings and group business. In summary, we have momentum across our business driven by our strong competitive position and changing industry dynamics that work in our favor. But I'd be remiss if I wrapped up our call today without discussing the possible impact that the current macroeconomic uncertainty could have on our business. Now, despite the macroeconomic conditions, we continue to see our customers invest heavily in their total event program. And after being deprived of in-person events for so long, Organizations recognize more than ever that they offer a highly effective way to maximize engagement, generate leads, deepen relationships, and build brand loyalty. So even with the potential economic downturn, we believe events aren't going to go anywhere because organizations now have the flexibility to run event programs with a mix of formats which optimizes their budget. Our robust platform provides customers with the flexibility they need and our total event program go-to-market approach enables Cvent to power the event landscape regardless of what comes our way. In short, we built a business that is positioned well to capitalize on the triple threat and that now has been bolstered by the return to in-person events. Our experienced leadership team has successfully led the organization through the 2001 and 2008 recessions, which enabled us each time to distance ourselves from the competition. And we are confident in our ability to adapt, grow, and come out stronger no matter what the environment is. Now I'll turn it over to our CFO, Billy.

Thanks, Reggie, and good afternoon, everyone. I'll first walk you through our Q2 2022 financial performance and then discuss our guidance for Q3 and updated guidance for full year 2022. Our total Q2 revenue was $161.0 million, an increase of 31.1% year over year. We beat the high end of our guidance for the quarter by $6.8 million, or 4.4%. The beat was primarily driven by planners moving quickly to add in-person events as the pandemic eases. This resulted in an acceleration of our sales cycle for onsite solutions and the time between contract signing and event execution. This also resulted in an associated higher amount of upsells of our core event management product in the quarter. Revenue growth was driven by both clouds and is due to the continued strong return of in-person. Additionally, as we mentioned in our last earnings call in May, Q2 2022 revenue growth benefits from the fact that we held our client conference, Cvent Connect, in Q2 of this year compared to Q3 of 2021. The benefit to growth in Q2 from the timing of Cvent Connect is approximately 300 basis points. So on a normalized basis, Q2 growth would have been 28.1%. In terms of revenue by cloud, Q2 event cloud revenue was $112.6 million, an increase of 31.6% year-over-year, and Q2 hospitality cloud revenue was $48.3 million, an increase of 29.8% year-over-year. While revenue associated with our virtual solution is still one of our top event cloud revenue components, the acceleration in revenue growth in the quarter was the result of the return of in-person events and a comparison to a prior year period when in-person events revenue was de minimis. Hostati Cloud revenue growth is due to the hotel's increased demand for our advertising and software solutions driven by the continued return of in-person. We also saw a strong expansion of our net dollar retention rate to 114% up from 109% last quarter and 108% pre-pandemic in Q4 2019. Now, although we're very happy with the 114% net dollar retention rate and the 31% revenue growth in the quarter, both of these metrics are being influenced by a quick pivot back to in-person and comparing to a prior year period when in-person was not very prevalent. As a result, we believe that both metrics will start to drip down to a more sustainable level in the near term as the rate at which our clients increase their spend with us moderates from its current accelerated rate. That means revenue growth of approximately 20%, which is consistent with what we have communicated in prior calls and is reflected in our Q3 guidance that I'm about to speak to you about. And a net dollar retention rate that is closer to our pre-pandemic level of 109 to 110%. Longer term, we still believe our net dollar retention rate will be approximately 115% as a result of the increased need for technology across the total event program. 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 second quarter earnings release available on the investor relations page of our website. Non-GAAP gross profit in the second quarter was $114.4 million, or 71.1% of revenue, compared to 76.0% in the same period of the prior year. The year-over-year decline in our non-GAAP gross margin is primarily due to a higher percentage of our total revenue in the quarter coming from onsite solutions and merchant services, which have lower margin profiles. Excluding the impact of C-Bank Connect on our gross profit in the quarter, non-GAAP gross margin would have been 71.7%, which is up 20 basis points on a sequential basis relative to Q1 2022. Moving down the income statement, note that the operating expense increases in the second quarter that 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 prudently invest given the massive growth opportunity that we continue to see in 2022 and beyond. 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 per employee due to wage inflation. Sales and marketing expenses, which include the majority of our C-Bank Connect costs, increased 40.5%. However, the 40.5% growth in sales and marketing expenses does not reflect the true growth of that line because of the C-Bank Connect timing. which results in no sales and marketing expenses for C-VAN Connect in Q2 of 2021, while the expenses do appear in Q2 of 2022. So excluding expenses for C-VAN Connect in Q2 from sales and marketing expense, growth would have been 25.0%. Research and development expenses increased 30%, and general and administrative expenses increased 22.2%. In addition to increased employee expenses, R&D growth was driven by increased contracted services, and G&A growth was driven by public company costs that did not exist in Q2 of 2021. Shifting to earnings, adjusted EBITDA was $23.4 million, or 14.5% of revenue, which represents a $7.3 million beat over the high end of our guidance and a 410 basis point beat in terms of margins. The earnings beat is primarily the result of our $6.8 million revenue over performance. What we think is even more impressive is the 750 basis point margin expansion we saw in the quarter when compared sequentially to Q1 of 2022 after excluding the impact of CventConnect had on our Q2 2022 adjusted EBITDA margin. Adjusted EBITDA margin was 16.8% in the quarter, excluding the impact of CventConnect. This very healthy sequential margin expansion is the result of the leverage we're seeing across all operating expense lines as we reap the rewards of the incremental investments we've been making since late 2020 in the form of margin expansion. Turning to our balance sheet, we ended Q2 with cash, cash equivalents, and short-term investments of $123.3 million, a decrease of $69.7 million from the end of the first quarter of 22. This decrease was primarily the result of us paying down our new revolving credit facility by $70.0 million in the quarter. As a reminder, we entered into a $500 million revolving credit facility during the quarter and used that new facility to repay our $266 million term loan. This new facility carries a lower interest rate than our prior term loan facility and gives us the ability to reduce interest expense by only borrowing what we need to at any given time. More importantly, it significantly expands our borrowing capacity for potential future M&A. We do not intend to use this facility to fund operations given our positive adjusted free cash flow position. At the end of Q2, our debt balance under the new facility was $195 million, down from $266 million at the end of Q1 2022. Finally, adjusted free cash flow before interest payments on our long-term debt and the change in client cash related to merchant services was $17.6 million for the second quarter compared to $38.6 million in the second quarter of last year. Adjusted free cash flow in the second quarter of last year was atypically high as a result of the payment plans that allowed clients to defer payment of their 2020 invoices to 2021 due to COVID. Deferred revenue at the end of the second quarter was $268.6 million an increase of 11.1% compared to the second quarter of the prior year due to year-over-year bookings growth across the business. Let's now turn to our guidance for Q3, starting with revenue. We expect Q3 2022 revenue of $158.0 million to $159.0 million, up 18.2% at the midpoint compared to Q3 of 2021. There are three reasons for the expected sequential drop in revenue growth from the second quarter. And although I touched on all three when discussing our Q2 results, let me go into more detail on each. The first is related to the impact of the timing of CVEC Connect, which explains approximately 550 basis points of the drop. As already discussed, Q2 revenue, Q2 growth benefits from approximately 300 basis points as a result of CVEC Connect being held in Q2 of 2022, versus Q3 of 2021. Without this benefit, Q2 2022 growth would have been 28.1%, as I mentioned earlier. The opposite happens to Q3 2022 growth. It is expected to be 250 basis points lower than what it would have been if it weren't for the inconsistent timing of CventConnect between 2022 and 2021. So excluding the timing-related impact to third-quarter growth, the midpoint of our guidance would have been 20.7 percent, which is consistent with what we shared in our last call in May, when we said that we'd see approximately 20 percent revenue growth in Q3 after normalizing Q3 growth for CventConnect. Second, the amount of in-person event revenue in Q2 of 2021 was the minimus, while the amount of in-person event revenue in Q3 of 2021 significantly increased sequentially compared to Q2 of 2021. creating a higher base of revenue off of which to grow. And third, we saw an acceleration of our sales cycle and the time between contract signing and event execution in Q2. Our Q3 revenue guidance does not assume a similar accelerated rate of growth or accelerated rate. Shifting to full year revenue guidance, as a result of our strong second quarter revenue results, We are increasing our full year 2022 revenue range to $624.9 million to $628.4 million, up 20.8% compared to the prior year at the midpoint, and reflects a $2.6 million raise over the midpoint of the guidance we shared in our last earnings call in early May. The raise in our full year guidance, while less than our second quarter beat, represents some prudence considering the current macroeconomic environment. Moving to adjusted EBITDA, we expect third quarter 2022 adjusted EBITDA of $27.8 million to $28.6 million, representing a 17.8 adjusted EBITDA margin at the midpoint. The 17.8 adjusted EBITDA margin is sequentially up from the 16.8 adjusted EBITDA margin we had in Q2 2022, excluding the impact that StevenConnect had on adjusted EBITDA margin in the quarter. And it reflects the continued operating leverage we are seeing as we reap the rewards of the incremental investments we've been making since late 2020 in the form of margin expansion. Turning to full-year adjusted EBITDA guidance, as a result of the strong second quarter adjusted EBITDA results, we are increasing our full-year 2022 adjusted EBITDA guidance range to $104.7 million to $109.6 million. This reflects a $2.0 million increase over the midpoint of the guidance we shared in our last earnings call in May, and a 20 basis point increase in our adjusted EBITDA margin guidance at the midpoint, bringing the midpoint of our adjusted EBITDA margin guidance to 17.1%. The $2.0 million raise is less than the $7.3 million second quarter beat because of a slight shift in our revenue mix expectations and the prudence we built into the second half of 2022 revenue forecast, considering the current macroeconomic environment. In closing, we're very pleased with our Q2 31% revenue growth and 1,750 basis points of adjusted EBITDA margin expansion on a normalized basis. We believe these results exhibit the strong position in which Cvent finds itself, given the return of in-person, continued interest in virtual events, and our ability to provide one integrated platform for virtual, hybrid, and in-person, offering customers flexibility in the event of changing economic circumstances. We built some prudence into our guidance for the second half of the year, considering the current macroeconomic environment, but we're still forecasting to follow through on the growth for Q3 we messaged in our last call. We feel good about performance in the first half of the year, and we feel we are well-positioned to take our disproportionate share of the $30 billion camp. Now I'll turn it over to the operator for Q&A.

Thank you. And as a reminder, if you would like to ask a question, please signal by pressing star 1. Our first question will come from Josh Blair with Morgan Stanley. Please go ahead.

Thanks for the question, and congrats on the outperformance this quarter. Wanted to just take a step back from kind of ignore macro for a minute and just ask you a question about hybrid and the future of hybrid events. Reggie, what's your opinion on the future of hybrid events? Does that stick longer term? And then the follow-up is like how much of your business is hybrid and how will that play out for you?

Yeah, Josh, it's a good question. So let me first kind of give you a general view. What we said before is we said about 50% of the business will be in-person events. 25% will be hybrid and about 25% will be virtual. So just kind of, you know, and that's still playing out. You know, no one can tell exactly what's going to be. But what we're seeing is that first on the platform, whether it's in person, once you have two of the three in the mix, you have to go to a platform. So let's just say before it used to be virtual. That was kind of what we all saw, you know, 15, 18 months ago. And then with the in-person coming back, that changed everything. And of course, hybrid. So basically what's happening is that we think in the long term that the answer is yes. I mean, virtual used to be a fringe element of the business, but now it's a critical part. And as the industry moves forward, it's going to use the mix, depending in particular, let's say if there's a downturn, people are going to want to use virtual more because it's less expensive. But the hybrid is also being what we're seeing is trends of it being used for the larger conferences. Like if you're doing a large conference, you know, the goal of having in-person is heavy engagement and more engagement. But then when you do it virtually, you get a larger audience. So usually it's a combination of doing both for the hybrid, for the larger events and the midsize, not for the smaller. But we're very optimistic of the future of hybrid just simply because it's a superior format depending on what the attendee wants.

That's really helpful. And then if I could just ask for your help with a little exercise. So assume a company is facing budgetary pressure and decides to shift from an in-person event to virtual. How much might that save the company? And then how does the spend to see event change in a hypothetical scenario? Sure.

yeah so the example we gave of a of a scenario was again i'll just repeat it real quick is that a client let's say had an event for 4 000 in person it was let's say roughly 10 million okay these are reasonable numbers by the way this is kind of for two three day conference that you'll spend in vegas and then when they did virtually let's just call it it was around half a million five six hundred thousand for pure virtual and then when they did hybrid it was somewhere in between which is about six million so we had about you know about 2,000, let's say half the people are in person, either eight or virtual. So it can range from 10 million to 6 million to 500,000. So your CMO wants heavy engagement, more engagement. And look, the reality is the studies have shown three times more engagement in person. That's the benefit. The negative, of course, is the cost. and the global reach. So what the great thing about our product is, let's just say a company wants to cut back its budget, wants the flexibility, and the CFO goes to the CMO, cut it back, they can choose and say, hey, we spent 10 million if it's all, you know, it's the hard cost of an event, and let's say 10 million, and we can take it all the way down and dial it down to 500,000, 600,000, but the key thing is you're not going to cancel the event. The second key thing is whatever way they do it, whether it's the virtual, in-person, or hybrid, then we, they still need savings technology. And relatively consistently, we get a relative consistent amount from each format they use because generally if you do a pure virtual, you might get a few more people, but then you don't use as many products. But in the end, we generally get a healthy number from any format they choose. And if you remember, Josh, we used the term squeeze the balloon. So let's say they went from pure in-person and they squeeze it to virtual, we get a lot of benefit there. And if they squeeze in and it goes, you know, back in person, then we get benefit there. And so, again, with virtual, you get more regs and you get less on-site and maybe more attendee help. But then it's, you know, but if you do it in person, you get more modules but maybe less attendees if it's pure in person. So it's a balance. And that's why what I think is our platform will be really strategic for an organization to move up or down depending on their budget and goals.

Great. Thank you very much.

Our next question will come from Arun Savia with William Blair.

Please go ahead. Hi, it's Rachel on for Arjun. I wanted to see what you guys are hearing from customers around the outlook for events in a possible recessionary environment. Are you guys still seeing strong demand for in-person or are customers talking about maybe switching back to virtual in the back half of the year to cut costs?

Hey, Rachel, this is Billy.

Look, right now, we're not really seeing any material impact from potential recession. Now, look, you can't predict what's going to happen in the future. But, you know, right now, we're just, you know, there's some small signs, maybe some indecision on some cases, but really nothing major. And, you know, that's why we're very confident in our growth projections. But, you know, I think generally speaking, you mentioned about, and I think Reggie just mentioned in his remarks, you know, are we seeing people removing from in-person to virtual? Look, at the end of the day, companies, they want to meet, right? Events, you know, are not going to get canceled. You know, they're looking for, and they're going to be looking for technology to help them meet, whether it be in-person, hybrid, or virtually, and really drive engagement of their attendees. And so, because we have that all-in-one platform, you know, if there truly is, and, you know, some people say we're in a recession, some people aren't quite saying they are, but If for some reason there are budgetary constraints at our clients and they want to reduce costs, they can move to either a hybrid or virtual format, and we can be there for them because of our technology that supports all three types. Now, I will say, you know, that's the event cloud. You didn't mention the hospitality cloud, but I'll just real quickly just touch on that because it is obviously a big part of our business. The hotels right now, they're in budgeting season for 2023. And frankly, in discussions we've had with them, it's not really coming up. I think you might have seen some hotels. There's actually some really good metrics that are coming out from the hotels that show there's really good signs of life from the group meetings business. Remember, the events that that planners are working with with the hotels right now, they're planning in advance, well out. And so the hotels need to spend today to get those events that are going to be 12, 18, 24 months out. And this is the best business for them. It's predictable because it's contracted, and it's the most highly profitable because they're getting all those meeting rooms in addition to the food and beverage and the hotel rooms where people are staying. And remember, they're having the biggest staffing shortages in history. And so automation is that much more important for them, and especially in a recessionary environment where they're going to want to potentially cut costs, they're going to need more technology to do that. And, you know, the last thing I would point out and make, you know, during COVID, planners really got used to, you know, the automation technology they got. You know, for example, we've got a 3D diagramming software that allows planners to go online. They can see meeting rooms in very real places. you know, real ways they can see what the view out the window is. And so planners are going to expect to be able to do that moving forward. And so they're really driving things for, you know, hospitality cloud customers to use technology to do that.

Perfect. That's super helpful. Thank you. Our next question will come from DJ Hines with Canaccord. Please go ahead.

Hey, thanks, guys. Billy, while I have you talking about hospitality cloud, growth there has been pretty significantly accelerating. We don't have a ton of operating history with that business. As the comps get more difficult, how tightly correlated do you think hospitality cloud growth is with event cloud growth? Like, should it move faster, inline, slower? Any color would help.

Look, I think it's going to be on the longer term in line. I mean, look, depending on what goes on with the economy, you might see one get out of whack to the other. Obviously, the event cloud's got their tailwinds across the business, right? Technology digitization impacts both sides of the house. But on the event cloud, obviously, we've got a really big pivot when it comes to what we call the triple threat, where we can do not only in-person like we used to do pre-pandemic, But now we've got hybrid and virtual, and there's just a lot more engagement and things that our clients are going to want to do there. And so, look, in the quarter, you saw slightly higher growth out of the event cloud. I think in the short term, we're expecting that the event cloud is going to have higher growth than the hospitality cloud. But, look, even though things are definitely hospitality cloud showing strong signs of life, we're still not fully there. You know, we're not expecting to get there until 2023. And that's where I think from there on, you'll start to see the growth rate teaming out between the two clubs.

Yep. Got it. And then just a quick follow up. Remind me on the lead time of when an event booking happens, you know, an event cloud booking versus when your customer is actually planning on hosting the event. Like how far are those apart?

Yeah, so I mean, obviously it depends on the size of the event. The larger the event, the longer out it's going to be. I mean, look, for the mega events, they're starting like a year out. Like once their event ends, the next day they're getting ready to do that, right? But that's the exception for us, not the rule. Most of our events are, I think like 150 people in general are the average attendees. Those events obviously are going to be planned a lot more, a lot tighter in, you know, Look, I think on average, those are going to be maybe three to six months out. And that's one of the big things that really benefited us in Q2. We're seeing planners, they're saying, all right, pandemic is definitely easing. They're like, all right, I quickly want to get this event spun up. And so that timeframe of three to six months is definitely pulled in. In addition to, you've got customers that are coming to us and they're saying, I need to sign a contract tomorrow because I need to do my event in one month.

um because they're just you know things are just quickly turning for uh for in person and so that's uh that's what we're seeing hey dj just a couple thoughts on the hospitality cloud don't forget the big conventions might be booking out two three years in advance and there is a lot of tightness so many organizations come back all of a sudden so you need to book them out um and then as billy said that when the smaller events though the booking window has definitely shrunk For sure, same thing with the event cloud. People are moving more rapidly and quickly because they're kind of waiting to say, hey, what's the environment like? Generally, before it was pandemic. Maybe now it might be because of the economic environment. So it is shortening, and that is one of the reasons why, as Billy mentioned, we had an acceleration of our revenue just because people are booking faster and shorter windows. But in the long term, we'll probably get a little bit more balance, but I think things will be probably shorter in the mid, even the mid to long term, because just people are just acting a little bit differently. And that might be a go forward thing.

Yeah, very helpful. Okay, thanks, guys.

Our next question comes from the line of Scott Berg with Needham. Please go ahead.

Hi, everyone. This is Michael Rackers. I'm on for Scott Berg. Just one quick one from you today. How should we think about sales capacity additions moving forward? and kind of the spend here to drive that 20% plus growth, do you kind of expect to hire in line with that revenue growth? Or, you know, is there any type of shift in strategy based on the macro?

Thank you.

Look, you know, it... We're definitely going to be, as we look at the macro environment and the focus on profitability, we're definitely going to take a balanced approach. And we've always had a balanced approach there. Look, for the past 15 years, we've generated an EBITDA profit in our DNA. But along the way, we've been able to drive revenue growth along with that profitability. And that's kind of going to be our plan moving forward. Now, obviously, you need to... you need to prime the pump and there's, you need to do certain things to get that growth above 20%. You know, what we've been really investing in for the last two years with project flex, which is the rewrite of our 10 year rewrite of our core event management platform, and then pivoting to virtual and quickly building that product and making it very competitive as we think it is today. We've really been investing in R and D. You know, I think what we're probably going to see is you're going to see not a a decrease necessarily in investment R&D, but we're not going to see that incremental increases that are going to be in line with the revenue growth. It's really, you know, sales marketing is where we pulled back the most during the pandemic. And we've definitely been investing in that area, but I think you're going to see a continued investment there, given the greenfield opportunity that we see there. And so, yeah, I think there's probably, it could outpace the revenue growth. It's not going to outpace it by a lot though, because our, You know, our focus moving forward is our plan that we shared with the pipes back in May of 2021 is that we were going to expand margins. And the plan was to do that starting the second half of 22. And that's, as you can see, what we've been starting to do.

Great. Super helpful. Thank you.

And our final question will come from John Roy with Water Tower Research.

Please go ahead.

Great. Great. So, Reggie, one quick question. Some of your biggest competitors have announced some pretty significant layoffs recently. I guess there's two questions here. One, what do you think is the main driver of that going on for them, and why have you guys been able to grow? And the second thing is, how does that change the landscape on a competitive standpoint going forward?

That's a good question. I mean, there's been some layoffs in a lot of larger areas, competitors, and I'll just say kind of focusing us is that, well, getting into in-person, which, you know, there's been a real shift towards that, is very difficult. We believe we have deep notes in there, and we've been doing it for 22 years, and it's much more complicated to develop in-person tools, in our view, than virtual, even though I'm not saying virtual is easy. So that was kind of one is that in-person is very difficult to develop, and we have a real deep experience in that. And we're, of course, disproportionately benefiting for going back to in-person. The second thing is that, look, the triple threat. I want to stress, when everything was virtual, virtual, virtual, people were like, we're worrying about the triple threat, which is, of course, virtual, in-person, and hybrid. And once you start going back in person, it really made the triple threat real. So now people are like, I need a platform because I may do an in-person event that switches over to virtual all of a sudden, for whatever reason. It could be budgetary. It could be that they're just trying to figure it out. But whatever it is, they need a mix, and they need it to be a one platform to make sure they safeguard the attending journey, not just the organization journey, but for the attendee to make it seamlessly. And with ours, we can run all the events on one platform. Another thing that I think is our strength is that we are playing to our strength. In-person and platform is really where we always had a strength before the pandemic. We developed a virtual a little later than a lot of firsts. But now we're again going back to our strength and we have a strong virtual. And the last couple of things is I'll say, look, our financial strength. our ability to scale profitably. And, you know, we have the resources and, you know, a little bit more mature processes. We've been through the 01 and 08. So we know how to handle this. We knew this was going to happen. So we've been planning it. You know, even though no one wants to trade a pandemic for a potential recession, this is frankly where we have a lot of experience in. And this is where, you know, our competitors generally would cut back in 01 and 08. This is where we invested the balanced investment and are thoughtful, but we're playing to our strengths. So we think there's going to be a, you know, a good opportunity. And the last couple of things are brand. I mean, we have a thousand people in sales and marketing and we built a brand and our brand is continuing to grow from a global view because of, again, having one platform, an in-depth product. And I think our view is that we're going to continue to thoughtfully invest You know, we're cautiously, cautiously, I'm going to say the word optimistic about how things are going, even though with the backdrop of the macroeconomic, we know that things could shift a little bit. But we think events are critical and we're going to continue to do that balanced approach in investing. And from a competitive view, we think we're much better positioned than we were, candidly, 12 months ago or certainly 18 months ago. And we think we're going to continue to take our disproportionate share because of all the things I just talked about.

Great. Thanks, Reggie. Well, thanks for the question there.

And that will conclude today's conference. Thank you for your participation and you may now disconnect.