Q4 2021 Cvent Holding Corp Earnings Call

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 the see that fourth quarter and fiscal year 2021 earnings conference call today's call is being recorded.

All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time. Please press star one on your telephone keypad. If you would like to withdraw your question. Please press star one again.

I would now like to turn the conference over to Investor Relations Rosslyn ICR. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for <unk> fourth quarter and fiscal year 2021.

With me on today's call are Rajiv outer wall Stevens, founder and Chief Executive Officer, and Bill in humans. She runs the Chief Financial Officer.

During today's call, we will review our financial results for both the fourth quarter and fiscal year 2021.

And discuss our guidance for the first quarter and full fiscal year 2022.

In addition to our prepared remarks, our earnings press release SEC filings.

And a replay of today's call can be found on our Investor relations website at investors see that dot 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 first quarter and fiscal year 2022, our market opportunity market position product strategy and growth.

<unk>.

Forward looking statements involve known and unknown risks and 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 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 our quarterly report on Form 10-Q for the quarter ended September 32021 filed with the SEC on November 15th 2021.

Additional information will be made available in our annual report on Form 10-K for the year ended December 31 2021.

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, which has been filed with the SEC and is also available on our Investor Relations website.

And now I'd like to turn the call over to rich.

Thanks, Ralph and Hello, everyone.

I'm excited for our first earnings call since returning to the public markets.

I'm happy to announce we had a very strong finish to the year and despite the pressure from the Delta and Omicron Berry into the second half of 2021, we were able to deliver a strong Q4 and grow our top line revenue by 25%, beating both our revenue and adjusted EBITDA guidance and because of the continued adoption of our hybrid virtual and in person.

Platform, we are well positioned going into 2022.

Therefore, we are reaffirming our full year 2022 revenue guidance that we gave investors in July of 'twenty, one of $622 6 million in revenue and increasing our adjusted EBITDA margin guidance from 16, 5% to 16, 9%.

Now before I talk about how our business is performing I'd like to provide a brief overview of C bench and quickly set the context for the transformational changes within our industry. Since the pandemic that we believe has created a much larger market opportunity for US now Steven is a SaaS platform that is used to plan market and execute engaging events of all <unk>.

<unk>.

Virtual and.

In person and hybrid.

Our cloud solutions excel at powering almost any event.

An organization hosts portends.

Something we call the total of that program.

So we are a single source of truth for event marketing event spanned attendee engagement event ROI and more.

And to run effective in person events, you need a venue.

It's where our hospitality cloud solutions comes at now we built a vast network with over 290000 venues called the C that supplier network, where CSN for short think of hotels unique events spaces and destinations.

And then organize event organizers go to CSN defined research defined research and sent Rfps for a select number of venues and then we monetize this by selling advertising and software to help them use attract planners stand out from the competition and more effectively closed business.

Now fundamentally our vet and hospitality cloud software helps our customers grow their topline revenue and drive engagement, while reducing opex and ensuring greater compliance.

Now, let's talk about our industry's transformation and how <unk> has responded.

For over 20 years, we've helped to automate in person events.

Taking the industry from a manual pen and paper world to a digitized repeatable measurable process.

When the pandemic hit.

People couldn't physically meet and the digitization of our industry accelerated out of sheer necessity virtual events, where the only way to meet and they took off virtual broke down accessibility barriers.

Massive increases in registrants and allowed event organizers to track attendee engagement interactions at scale when the virtual wave hit C. That was initially used for just eat that event marketing event websites registration and so forth.

But within six months, we launched our brand new virtual solution, let's see then attendee hub is a core part of our platform because our technology was future ready built to maximize attendee engagement.

The attendee hub serves not only has an engagement engine for virtual events, but also for hybrid and in person events as well.

With accelerated Digitization as a tailwind we delivered a very successful 2021, and we're entering a world where in person events are coming back virtual events are now mainstream and more organizers want the best of both with hybrid events.

And our platform is built to power all three of these event formats in person virtual and hybrid which we like to call the triple threat.

This increasingly digitized events world has led to an explosion I'm sorry, it's led to a large expansion of our total addressable market, which is nearly $30 billion. According to Frost <unk> Sullivan.

We believe we're in a great position to capitalize on this larger market opportunity due to one the core strengths of seabed, that's even spilt over the last 20 years and to the emerging opportunities tied to digitization.

It all starts with our seasoned management team that has helped navigate us through these tough times. We survived the dotcom bust in 2001 2001, when most fail, we cemented our markets our market leadership after the 2008 financial recession, when others fell behind and our ability to pivot during COVID-19 highlighted by our launch of attendee hub.

That became by far the fastest growing product in our history demonstrates our agility resilience and innovation.

We have proven that whatever whenever a crisis hits, we emerge stronger and better positioned than before.

Next is our proven ability to innovate our R&D team is 1100 strong and growing.

Giving us the resources, we need to drive innovation and expand market share. Finally, we have the ability to scale because with a global workforce of over 4300 employees, including over 2000 in India.

This is a real competitive advantage when it comes to operating 24 seven moves.

Moving fast delivering profitability and most importantly innovating.

Now, let's dive into Q4, we continue to win new logos with our <unk> cloud solutions during the fourth quarter, we signed hundreds of new logos ranging from fortune 100 companies to small organizations to associations universities corporations and nonprofits.

For example in Q4, we closed a new Fortune 500 pharma company for a five year $2 4 million PCB or total contract value.

This company was still using manual processes to run their events turned to <unk> to better manage and control the <unk> spend and processes now.

Now 23 of the top 25 pharma companies in the U S. You see that with plenty of growth left in these accounts.

Another example of our success with the vertical strategy is in higher education.

Just in Q4 alone, we renewed or closed six out of the eight IV links one of our largest deals closed in Q4 was what the prestigious research University for $1 $5 million in PCB over three years, we're now powering over 400 universities and colleges across the globe.

We also continue to sell more to our existing customers at the end of 'twenty. One we increased the percent of event cloud customers buying two or more modules to almost 50%.

Up from 45% in the prior year. This increase is primarily due to customers needing one platform for their total event program, including Steven for virtual events.

Let me give an example, a state health care Council, Missouri has been a customer since 2014 pre COVID-19 . They use a mix of onsite and event management solutions when Covid hit we sold them attendee hub.

In Q4, 'twenty, one they signed a five year 583000, <unk> deal purchasing more registrations and attendee.

Now moving on to the hospitality cloud because of Covid, there's still headwinds in the hospitality industry.

However, despite the negative effects of it of hoteliers meetings and groups business. We believe our recoveries underway for example for the first time in five quarters, our hospitality cloud business grew in Q4, it was up 12, 1% year over year.

Over $9 billion of RFP value was sourced from the <unk> supplier network in 2021.

Q1, 2020 included RFP sourced pre COVID-19 .

Really get an accurate picture of our recovery, it's best to look at Q2 through Q4 of 2020 and compare that to Q2 through Q4, 'twenty, one where we are up over 55% in source dollars an increase of almost $4 4 billion.

Yeah, Here's some sales highlights that demonstrate an industry recovery one of our customers is a small hotel chain located in Germany, a country that has some of the most stringent COVID-19 restrictions in the world when the pandemic started they downgraded to a basic advertising package on CSS.

We stayed in contact with the customer and shared insightful data to help highlight the recovery in the German market. Our actions helped us land a new one year six figure deal reflective of a 73% increase from their pre print from their pandemic spent.

Now if you remember about 60% of our hospitality club business is from recurring advertising dollars, but the other 40% is from software solutions that help hotels analyzed manage and closed more group business.

One interesting growth story that shows the power of both our advertising and software solutions is with a prominent hotel chain that has rapidly expanded its number of properties over the last few years.

As the chain added properties, they kept investing and Stephen along the way it was foundational to the growth plans of each new hotel.

And they turned to see event not just for our advertising capabilities that hotels used to market their space to event planners, but also for our software solutions to help them close business and collaborate with planners on designing the event itself has this chain expanded their hotels their investment in <unk> went from 500000, a year to $3 4 million a year.

Which is a current annual spend for 2022 this.

This is a great example.

That is hotel chains and properties.

Are you starting to hotel chains add properties they grow their events.

<unk> spend accordingly.

So from these few examples I hope you can see.

For both our event cloud and hospitality cloud, we're continuing to see broad based and growing demand for our solutions.

Now earlier I talked about the larger market opportunity ahead of us due to the digitization of the eventual.

I'll now go into more detail on the key drivers that gave us confidence in our 2020.

Both.

First.

Is the return to in person events and the accelerating demand for hybrid.

While our virtual is here to stay the world can't wait to get back to in person events space. We've powered for over 20 years, we've seen time and time again that nothing beats the power of in person interaction to create bonds with customers whenever prospects and energize your audience and exciting it's exciting to see that planners are taking what they learned in <unk>.

<unk> events and now applying it to their in person events.

The C band attendee hub event planners and marketers can now start to build attendee engagement before the event versus waiting until everyone arrives instead.

Instead of a know before you go email on the advent agenda. They can livestream the agenda reveal.

Event Organisers can enable their attendees to network in advance so they can connect with the right people.

Before they arrive.

Now we are seeing virtual elements being used for in person and hybrid events, which is driving demand for our solutions as.

As in person events return planners are markers will want to leave will not want to leave the massive virtual audiences behind that.

That's one and that's when you enter hybrid events a successful hybrid event requires one platform that can seamlessly and simultaneously delivering event experience for both in person and virtual attendees.

This is where our platform shines, we're able to help our event organizers and hotels attract large audiences run safe meetings deliver broadcast quality video content for virtual attendees and of course deeply engaged all attendees all through one platform and when at rising and when arriving on site technology is what will ensure.

A safe and impactful event.

The pandemic, we have built a leading solution suite of solutions to help <unk> execute on site.

Throughout the pandemic, we sustain that investment and introduced contactless check in deeper support for hybrid events and partnered with IV Dot me to introduce Steven health checks for vaccine and Covid test verification and health status questionnaires. We also enhanced our on arrival dashboards, so that planners exec.

Stakeholders can see Cynthia near real time insights into the success of their events from their phones in the palm of their hands.

Data such as how many people checked in how many attendees are currently watching a live stream what the feedback was from this morning sessions and so forth.

With many competitive solutions in the onsite space, receiving no investment or even going out of business. During the pandemic. We believe that we're well positioned to capture a disproportionate share of the market has in person events return.

Second capitalizing on the power of engagement to drive demand for <unk> solutions when in person virtual and hybrid events are digitized attendees leave behind a trail of digital interactions that because that can be compiled and score to take quick effective follow up actions.

This is why so many organizations, including marketers love events, you can generate an incredible amount of information on your attendee and your buyer.

And if you can track engagement and if you can put the full picture of interest together. That's when you really have something special or platform compiles. This picture of attendee and account engagement across not just one event, but all events across the total event program.

With engagement from front and center and in their minds increase.

Increasingly organizations that want to extend engagement before and after events occur and are moving to a year round engagement mindset. The massive reach of virtual and the proliferation of video technology is allowing organizations to find ways to engage with their audiences before.

And after events occur through livestream real time communications and on demand video content.

This idea expands what C band can be in the marketplace and makes us used more frequently across an organization.

As we look at our 2022 key growth drivers, we plan to aggressively invest in video, including our new <unk> studio product.

See a number of opportunities to help organizers develop their lives and year round engagement strategy that will only make their overall event program more impactful.

Now the third growth vector is the expansion of our ecosystem, let's start with the new products. We're excited about the hoteliers, it's called <unk> instant book in an environment with reduced demand in a tight labor market hoteliers of meeting planners have struggled to maintain staffing levels since the pandemic and is meeting business recovers planners and hoteliers.

To look for digital solutions that will allow them to service. This demand more efficiently in Q4 of last year. We launched an early adaptor pilot of <unk> instant book designed to simplify the sourcing process for small and simple meetings by allowing meeting planners the ability to view live rates and book Hotel meeting space food and beverage and <unk>.

Without the need to send an RFP or negotiate with the hotel sales employee.

And hotels will be able to generate demand more efficiently by not having to respond to small meeting rfps.

While we don't expect to see a material revenue impact in 2022, we believe this to be an important investment year to set the foundation for future adoption of Stephen instant book.

In addition to focusing on automation and efficiency.

We will also continue to identify ways to expand our reach internationally in support of this strategy. Our product is now localized in 18 different languages with a focus on simple nonprofessional meeting planners and international markets now the localization of our sourcing product for international planners is the first phase of a longer term initiative to implement.

A simpler and more consumer oriented user interface for a meeting planner community.

A new and refreshed user experience will help cement our market position with our with our current mostly professional meeting payer audience and it will also enable our products to be more suitable for consumer and non business oriented events.

As you can see there are multiple growth drivers that we're excited about across our event cloud and hospitality club now with that I'm going to hand, it over to Billy our CFO .

Thanks, Rajiv and good afternoon, everyone I'll first walk you through fourth quarter and full year 2021 financial performance and then discuss our guidance for first quarter to full year 2022.

As already mentioned, despite the pressure from the Delta and Omicron variance in the second half of 2021 total fourth quarter revenue was $1 $44 7 million, an increase of 25, 3% year over year.

We beat the high end of our guidance for the quarter by $3 6 million or two 5%. The beat was largely driven by a combination of higher onsite solutions revenue due to more in person events using our platform than expected during the quarter and higher than expected bookings in the quarter.

Within total revenue fourth quarter event cloud revenue was $102 9 million, an increase of 31, 5% year over year.

And fourth quarter has started cloud revenue was $41 8 million.

An increase of 12, 1% year over year.

The strong cloud revenue growth is the result of the continued rebound of onsite solutions and growth of attendee hub.

The growth in hospitality cloud revenue marks a return to year over year growth. After five COVID-19 impacted quarters. This return to growth is reflective of the strong sales momentum we've seen in the half Saudi cloud this year as hotels begin to reinvest in the group portion of their business.

In discussing the remainder of the income statement unless otherwise noted all references to our expenses and operating results are on a non-GAAP basis.

You can find information on the most directly comparable GAAP metrics in our fourth quarter earnings press release.

Now as I go through each expense line note that the expense increases throughout reflect two things first abnormally low expenses in 2020, as we cut expenses to respond to COVID-19 impact on the business and second a conscious decision to invest given the massive growth opportunity that <unk> outlined and that we've continued to see in 2022.

And beyond.

non-GAAP gross profit in the fourth quarter was $109 9 million or 76% of revenue compared to 77, 1% in the same period of the prior year.

The decline in non-GAAP gross margin is primarily due to investments for growth and strong momentum in day of day of the event products, such as onsite solutions mobile and attendee hub as in person events start to return and virtual events continue.

Moving down the income statement non-GAAP sales and marketing expenses in the fourth quarter were $33 5 million or 23, 1% of revenue.

Compared to 23, 7% in the same period of the prior year.

The decrease in non-GAAP sales and marketing expense as a percentage of revenue is primarily due to lower employee expenses, partially offset by increased marketing program expenses as a percentage of revenue.

non-GAAP research and development expenses in the fourth quarter were $23 8 million or 16, 4% of revenue compared to 16, 1% in the same period of the prior year.

The increase in non-GAAP research and development expense as a percentage of revenue is primarily due to higher employee expenses and contracted services as a percentage of revenue as we continue to invest in our ability to support virtual and hybrid events.

non-GAAP general and administrative expenses were $19 9 million or 13, 7% of revenue compared to 10, 8% in the same period of the prior year the.

The increase in non-GAAP general and administrative expenses as a percentage of revenue is primarily due to higher costs as a percentage of revenue across multiple expense lines, a portion of which are related to costs associated with the stock process.

Some of these costs were onetime and some costs will recur as we operate as a public company.

Shifting to earnings adjusted EBITDA was $32 8 million or 22%.

22, 7% of revenue, which represents a $10 1 million in dollars over the high end of our guidance and a 660 basis point beat in terms of margin.

Outside.

The outsized B is the result of our $3 6 million revenue.

And lower than expected expenses across several line items, such as onsite solution support costs employee expense sales tax and travel the.

The majority of these cost savings were specific to the fourth quarter. So we don't expect them to recur into the future.

Adjusted EBITDA margin is down from 26, 5% in the prior year and the decline in margin is reflective of the investments, we're making for growth and the temporary cost savings measures. We took in 2020 to increase margin at the outset of Covid.

On a full year basis revenue was $518 8 million, an increase of 4% from 2020 and $11 4 million higher than the 2021 full year guidance. We gave in July 2021.

Within total revenue event cloud revenue was $362 1 million, an increase of 14, 6% compared to the prior year and hospitality cloud revenue was $156 7 million, a decrease of 40% to 42% compared to the prior year.

Adjusted EBITDA for the full year was $103 7 million or 20% of revenue down from 25, 9% in the prior year for the reasons previously shared.

Turning to our balance sheet, we ended the year with cash cash equivalents and short term investments of $127 1 million, an increase of $9 million from the end of the third quarter of 2021 <unk>.

The increase was driven by $22 8 million of cash that was brought onto the balance sheet as part of our December dis back after using $500 million of the total $523 million in proceeds to partially pay down our debt.

Free cash flow before interest payments on our long term debt and the change in client cash related to merchant services was <unk> 1 million for the fourth quarter up $14 9 million compared to the fourth quarter of last year due to higher cash collections and the bookings growth we've seen in 2021.

Note that the next two flat free cash flow, we saw in the fourth quarter.

Is seasonally typical and is due to the high percentage of client contracts that are calendar year, which results in negative free cash for negative flat to negative free cash flow in the fourth quarter and high cash inflows in the first quarter.

For the full year free cash flow before interest payments on our long term debt and the change in client cash related to merchant services was $97 5 million an increase of 52% from 2020.

The 2021 free cash flow benefited from an estimated estimated $20 million from 2020 cash collections that were delayed until 2021.

Deferred revenue at the end of the year was $239 8 million, an increase of 15, 5% compared to the end of the prior year due to the year over year bookings growth, we began to see in February of 2021.

Now, let's turn to our guidance for the first quarter and full year of 2022.

As Rajeev mentioned at the outset of the call. Despite the meaningful pressure from the Delta and omicron variance in the second half of 2021, we are reaffirming our full year 2022 revenue guidance that we gave investors in July 2021 of $622 $6 million and increasing our adjusted EBITDA margin guidance from 16 five.

5% to 16, 9%.

And we expect full year 2022 revenue of <unk>, $619 6 million to $625 6 million up 20% at the midpoint compared to 2021.

And we expect adjusted EBITDA of $102 5 million to $107 5 million and adjusted EBITDA margin of 16, 9% at the midpoint.

Now shifting to the guidance for the first quarter of 2022 revenue is expected to be between 133.0.

100, 133.0 million and $133 5 million up 13, 6% at the midpoint compared to the first quarter of 2021.

I'd like to give some color with regard to the sequential and year over year trends, we're seeing in the first quarter.

Starting with the sequential drop in revenue dollars. There are three drivers for this decline. The first is due to there being two less days in Q1 than in Q4, which explains approximately $2 $5 million of the drop.

The second is that every year there are more events held in the fourth quarter than in the first quarter.

Because a portion of the revenue associated with our onsite solutions and attendee hub products is recognized at the time of the event discrete.

This creates some seasonality with regards to the revenue for these products and this is most visible when going from the fourth quarter to the first quarter each year.

The third and probably most important driver and it's also the reason for the deceleration of year over year growth in the quarter is the impact of the omicron variant is having on event planners decision to buy software and hold in person events in the first quarter.

Many events originally scheduled to occur in the first quarter have been pushed to later in the year and we estimate that first quarter revenue growth would have been approximately 19%. If these events have not been pushed.

With the impact of Omicron lessening, we are seeing strong interest in conducting in person events in the second quarter.

As evidenced by our full year revenue guidance, we expect to recoup much of the revenue delayed from the first quarter in 2022.

Excluding the first quarter revenue guidance from our full year guidance.

We are guiding that the revenue growth for Q2 to Q4 of 2022 will be 21, 9% when compared to the same time period 2021.

Finally, we expect the second quarter will be the strongest growth rate quarter of 2022, and we will return to a more normalized growth rate trends for the back half of 2022.

Moving to adjusted EBITDA, We expect first quarter adjusted EBITDA of $9 9 million to $10 4 million, implying an adjusted EBITDA margin of seven 6% at the midpoint.

The sequential drop in revenue.

I'm sorry, yes, the sequential drop in revenue is one reason for the drop in adjusted EBITDA margin between the fourth and first quarters as lower revenue lessens. The operating leverage we are able to achieve in our business.

Additionally, in any given year, we typically generate lower margins in the first quarter relative to the rest of the year.

This seasonal effect is largely a result of the cadence of our employee expenses, namely a step up at the beginning of each year of items, such as benefits payroll taxes, PTO accrual and employee compensation.

Adjusted EBITDA margin typically increases sequentially after the first quarter ending the year at its highest point in the fourth quarter due to the increased revenue base at the end of the year.

We expect the same trend to occur in 2022 on our way to the 16, 9% adjusted EBITDA margin guidance, we provided for the full year.

So in summary, we're very pleased with our fourth quarter financial performance outperforming our revenue and adjusted EBITDA guidance for the quarter and ending the year with 25% revenue growth.

We are seeing some temporary effects of the omicron bearing on our first quarter revenue, but we expect to return to 20% plus revenue growth over the last nine months of the year, which is why we are reaffirming our prior year full year. Prior full year 2022 revenue guidance of $622 6 million and slightly raising our full year 2022 adjusted.

EBITDA margin guidance to 16, 9%.

Now open now I'll turn it back to Rajeev for some closing remarks.

Thanks Billy.

In closing 2000, 22020 was a tough year, but.

But Steven did what we do best we pivoted, we're agile and we leveraged our inherent strengths to successfully navigate a pandemic those efforts helped us lead to a greater 2021 is our virtual business took off in person events started to return and hybrid demand group.

Event Organisers needed technology to help them manage the complex ecosystem of meetings conferences and events to drive that all important engagement across our total event program and at the same time hotels continue to realize the benefit of technology in their recovery.

Now with these means top of mind, the marketplaces, increasing looking to see that.

And as we continue to invest heavily to broaden and deepen our platform.

We are both further distancing ourselves from the competition strengthening our market position as we go after this massive opportunity looking forward the digital wave sweeping across the events world makes our platform even more central impactful.

So we feel we're well positioned for a strong 2022.

Now I'll hand, it over to savanna to moderate our live Q&A session.

Thank you and as a reminder, if you would like to ask a question. Please press star one or.

Our first question will.

Come from Sterling Auty with J P. Morgan.

Please go ahead, yes, thanks Scott.

Yeah, Thanks, Hi, guys.

So I'm curious in terms of the omicron impact on the first quarter events that shifted later did you include all of those events still in 'twenty two guidance and what gives you the visibility that those events that pushed will actually occur.

Hey, Sterling Thanks for joining thanks for the question.

We did not all of the revenue because obviously some events might just not end up happening, but we have assumed that a good portion of that revenue will be recognized in 2022.

And what gives us the confidence is that our sales team already has.

Hearing from the clients that there's strong interest in <unk> and we're seeing that in our sales funnel.

We are having discussions obviously with those clients to get them rescheduled some are already being rescheduled for the second quarter frankly, we're hearing from the sales team that they're a little concerned about capacity constraints now we're going to obviously.

Deal, we needed to take care of that but.

We're really enthused by not only what we're seeing in terms of.

Those events being rescheduled.

But also.

Yes, what we're seeing from our clients in general and looking to make new purchases and Sterling. This is Reggie that's a great question I think it is top of mind for all investors.

Clearly omicron kind of took everyone by surprise, but here's what's kind of happening it's certainly.

<unk> was something that impacted at the end of December and in the first the very beginning of.

2022, but what we see now recently and I think we all on a personal level can experiences is is that we are seeing real positive change in plant or sentiment just in the last kind of 30 days they are embracing and pursing in hybrid they're starting to plan stuff. As you guys. There is there is lots of conferences going on in.

In the markets and we see look we see a lot of momentum there are two banking conferences. For example, next week or the beginning of the year I think if you just asked six weeks ago was a wait and see now people are comfortable having them and we see a lot of positive signs and we think that we feel pretty confident that that that at least this variant is behind.

Us.

And that things are turning positive in particular in the back half, but look we'll lose a few.

Some of them won't be it won't be rescheduled and they'll just push but most of them are being pushed.

Two Q2 and in the back half of 'twenty two.

That makes sense and one quick follow up you talked about market share can you give us a sense of maybe what your increase market share, especially for the in person looks like given the financial strength that you've had to be able to weather through the COVID-19 pandemic.

So look if you look at the total Tam it's $30 billion, you break that down to different markets look our penetration our market share is.

<unk> is way less than 10%.

In terms of what we consider the in person market share as it comes further as it comes back so we have plenty of room to grow.

As you look at all the competitors what their market share is our biggest competitor is still basically manual processes, what we call people are still using.

Outlook Excel and all the things that you do to run events and.

I'm not going to say their pen and paper, but you still have a lot of people that do things a lot more manually, especially with the in person. So that's where our biggest competitor is really just to automate those processes, but when you look at the other competitors. When you combine this hall there is still.

Les and my guess is is like 15, 20% penetration across the market as it gets further digitize the bigger thing to remember is is that when you look at our space before this forcing function of Digitization. This was a much more manual kind of industry and candidly, it's been difficult, but one of the positive things that came.

Out of this is as force Digitization and now when you take the best practices people learn and virtual and applying that to hybrid in person I think youre going to see people.

Embraced technology more but again, we have plenty of room to grow and our market share is still very small, especially when you look at it from a global view.

And not just a kind of a north America view and certainly one thing I would just add there when you look at our competitive position given our 20 plus years of leadership on the in person event side and what we've been able to accomplish in the last 12 to 18 months on the virtual side and how we have a full total event program and platform.

Very hard to compete with so that's going to even.

Mr. How strong we are from a competitive position.

In terms of serving in person events, because they're going to want somebody that can do all of it get all that data engagement points and buildup.

Analyze all those points together.

Makes sense. Thank you.

And our next question will come from Bob I'm, sorry, with William Blair.

Please go ahead.

Thank you. Thanks for taking my questions can you guys hear me okay.

Yes, we hear you great great great Congrats on a solid solid quarter there.

I guess I wanted to start a little bit at a high level here.

When you talk about sort of this manual thing that Sterling can you were discussing earlier, let's flip to the virtual side of things. When you got those 100 customers, who you've added to know your virtual marketplace and your virtual conferencing.

Business, how much of that is greenfield how much of that was manual or you're ripping out sort of one point solutions or how should we think about what that market not the in person events with the virtual events looks like are people, who are still using a webinar approach and thats one thing or is that just sort of we don't know what to do yet and you're winning sort of this total greenfield how should we think about that market.

Yes, Bob look it's a great question and thanks for joining.

So here's I'll tell you that it's really two categories first categories using the.

Didi traditional webinar tools from from Webex zoom.

Microsoft That's your first one of course, which as you probably are more lion's share. The second group is you do have people that have kind of created their own stuff we're using.

Tools, putting it together.

That's the kind of second and third of course is that let's call. It the event software category, which were an event management category. So people are doing across the three of them. It's more difficult to do manual if you will with virtual because it kind of just exploded and there were some obviously some great tools that were out there when.

The pandemic hit with the Big thing to learn is that before the pandemic hit though virtual event. So we're not talking about your traditional events that maybe you would do on zoom or teams.

Those events with internal employees those were obviously stuff that was growing that was happening, but if you look at virtual events, but let's say more external events for example, those were.

No.

Much more likely unless there were a webinar they are much more likely to be in person so getting back to the virtual side I think there.

It's less manual processes, if you will but where the where our strength comes in is that people are realizing they need a platform right. They don't want to just handle virtual they have to do the that the total customer experience all in one platform because when you have even it might be let's say a few hybrid events. They tend to be your larger events and therefore when you take your total of that program.

<unk>.

Whether it's virtual whether it's hybrid or were there in person you want it all in one place and so that's where I'm going to say it becomes manual and when you look at the total event program and look at all let's say the virtual events that some of these companies we just mentioned.

Help you with can you really run a systematic.

An analysis of all your attendees that went to the 30 different virtual events. You have is the tools geared towards that more enterprise more mid market focused they're not as focused on that and they're not geared towards that where our product is more engaging more more geared towards the total of that program. So not just the individual virtual then.

But the multiple virtual events that you do.

And then.

Yes go ahead.

All I can say and look.

Pre pandemic and virtual is not a thing for many companies. So this is really a greenfield expansion and look there's a lot of shifts going on lot of forced digitization, but what we're going to see us as in person comes back people are going to start a little bit more over indexing now he does my virtual work with my in person. If you look at the last two years has been the other way.

I have my virtual I don't really care about my end person and it's not as important now it's the opposite and so that's where our strength comes in and look and look virtual here to stay.

Look distributed Workforces are going to be permanent I think people are going to see that and look webinars and virtual events, they're going to be fixtures of live engagement and so that's just one of the elements of the total of that program and that total customer engagement, which is again plays to our strengths.

Yes.

That's really helpful and I appreciate the detail I guess I had a follow up there which is you guys have an amazing team in India that deals with data when you've done a great job of advertising on the hospitality cloud side.

Can you just touch on it which is I want to know that.

Oven went to this virtual lunch. He went to this particular in person one he went through this one part time virtual part time person and that creates a sales funnel in that cell phones, I guess monetize some way how do you guys think about prototyping that data around a marketing business not necessarily today, but in your plans over the next three to five years to sort of say Okay company.

This is who the buyer really is and this is his engagement and this particular product for you. How do you think about that volume of data could you've obviously done a really good job with.

So I understand the marketing and amortize or the hospitality club I'd love to understand what he gives us.

Complex data different types now, especially on the virtual side created from streaming visits et cetera, how does that play out in your plans around R&D and product development.

Yes look this is a core part of what our businesses is which is again you want to digitize that customer engagement customer engagement customer journey right. This is just one element of it. So everything you. Just described is exactly why people want one platform because it becomes super complex before we just live events candidly that was mostly what it was there is certainly webinars and stuff, but there weren't many.

Virtual event inputs, let's say now it's across all three so really what a core part of our of our product is is to not only engage and digitize.

Great with all of our Martech stack.

But we want to make sure that we not only engage with that but we are a core part of that so as an example, if you probably remember our customer journey chart that we showed during our roadshow that showed all the different touch points you have in a customer how much events is such a big part and Thats why marketers, we are saying that that events is one of their most important parts of there.

Their program and so in the end are we our product housing and we have prototypes many parts of that of that part of that engagement with the customer because that's ultimately why a lot of people buy our technology. So they can not only just integrate with their back end Mark Tech, but also to give them insights and actionable insights into how to work with those.

<unk> and customers that came to their events. So we give them that and product ties way reporting and the whole point is to make it actionable and to make that engagement.

One thing is also.

All year long and that's another area that we're working on to help make that more of a community and a lot of our things what I talked about in my in my earnings call was before the event after the event and to make sure that we get the total event program and to make sure that total.

AG customer journey is followed.

Super helpful that was awesome. Thank you guys great quarter, Thanks, taking my questions.

Thanks, Thank you.

And our next question will come from Tyler Radke with Fannie Please.

Please go ahead.

Sure.

Hi, Thanks for taking the question.

Hopefully.

Alan.

So services is here were on the road.

But.

Right.

I always appreciate your prognostication on the future.

Yes.

I'm just curious.

The first three months of the year I mean, what's your sense for that.

Customers appetite to get rid of.

How is your view.

In the future.

<unk>.

Hey, Tyler Hey, Tyler Radke, Tyler, we're having a hard time hearing you.

Don't know if theres any way you can put it to your I think you said, what's your sense for customer appetites to do hybrid events is that the question.

I'm sorry, it was hard to hear you.

If you had any better now.

Yeah, a little bit better.

Okay.

Alright.

Okay, yes, sorry about that.

Yes, that's fair.

Okay, Great third Time's a charm.

So yes. The question was just given.

Given the events that is.

Played out over the first couple of months of the year, what's your sense of how customers are approaching their event strategy and how do you see kind of the hybrid interests from from customers and maybe how has your view changed over the last three months or so last time you were.

Speaking with investors.

So I'll give you a kind of a the first couple of thoughts so look.

50%, if you look at from a Tam view, 50% will be in person and 25% hybrid 25% something like that is what our research.

As shown and again, that's why again with this total of that program being such as such various mix that platform wins. So that's kind of point number one in terms of hybrid here's a couple of things and in return of in person first of all to address in person we've been a little surprised how fast in person has come back and how fast people are all of a sudden said, okay whatever about virtual <unk>.

Now, let's go back to in person is almost like what happened two years ago. When everyone said I don't care, even <unk> about in person all like hers virtual and Thats all they focused on it. So it's happened a little more rapidly than we thought now of course omicron came in change that sentiment a little bit, but now we're getting back to more normalized times, but they'll take a little bit of time, but thats kind of the first observation in terms.

A hybrid what we're seeing is is that hybrid events or better geared towards more of the mid size and larger events.

Not easy to get AAV in a in a in an event. So if you have 50 people, it's a little more difficult to do it hybrid.

So so but it's more for the mid and large scale events, but why is it such a hybrid. So important is if you think of our mix of year event program. It's your bigger events, which are the more important events that are tend to be hybrid like let's take for example, you go to a 3000 person conference. It would be in my view, a little strange if it wasn't a hybrid event because we're putting so.

Morning to organize the event and the content that Youre getting all these great keynote speakers that you want to make sure as many people see it kind of what we did see that connect.

You might get a couple of thousand people together, but then you might have.

Seven or 8000 that are virtual because the cost and putting together you want to amplify. So we're seeing that trend continue that that it's going to be a.

Combination of both because people don't always want to fly in and it's not just because of the pandemic. It's all kinds of reasons for cost and so forth. So our view is is that hybrid continues to be the future. It's more towards the mid to larger events, but it is getting a mixture of all three and you need a technology platform. The other thing is that the expectations of attendees.

They are growing dramatically there like just like they expect a lot of digital engagement and virtual they expect that same digital gateway in person.

Youre seeing that demand and that expectation because everyone's got more technologically savvy like take for example, this is a little bit what I call old school like mobile apps, we were still fighting people before the pandemic to say they have to have a mobile app. So when they go to your in person event. If you can believe it now can you imagine going event, where they don't have a mobile app right theres still giving those three ring binders with the agenda.

So just as an example that kind of digitization, which doesn't seem it seems kind of strange just before the pandemic and 19, we were still fighting people and saying you need a mobile app because people want to interact and engage with their mobile app. So these kind of things together.

Really gives us what we call the best of both worlds and it really is.

It's something that this engagement and conversion from in person is going to be higher but when you combine that with the digital or with the amount of people you can engage that didnt come in person and you combine those two it really becomes a AA and an amazing impact to the marketing program of any companies.

And Tayo. This is Chuck of our present sales and marketing CMO glove with the hybrid because if you think about the in person.

Higher engagement.

And conversion for the in person so check that box, but then with the virtual theres a broader reach even though the engagement might be less because its virtual but every CMO wants both so that broader reach can't be replicated.

Theyre now while the checks both boxes and that's what we're seeing in terms of the Cognex Prognosticating question you had.

That's great.

A follow up just on the competitive landscape I mean, it seems like if during the pandemic specifically with virtual only even a lot of customers may have adopted a lot of point solutions.

Virtual only.

Event vendors are.

Remember that the companies that thrive during that space I guess now that things are reopening.

Do you see the desire for customers to kind of consolidate the.

Spending and reduce the number of vendors are working with them and how are you thinking about that.

In terms of your business from a competitive landscape. Thank you.

Yes, so here's a couple of things.

Look largely the competitive landscape.

Inscape as point solutions, that's where it was pre pandemic, we saw increasing like that after the pandemic because people just all of a sudden came out of a lot of new companies came out that were just virtual.

And several companies just focused purely on virtual and they thought virtual was going to carry them with this new of course kind of I'm going to call. It almost a pivot not quite yet this pivot back to in person that we I think we're all very comparable happened 22, as again omicron kind of slows down and people start feeling more comfortable but as that pivot happens you can't be a point solution.

And youre going to see.

Just a lot of a lot of shift I think end market share because of that and look.

Would <unk>, let me just give you kind of abuse that look for 22 years, we've been building some of our most robust and powerful in person and Tyler as we've talked about many times before what we did is almost with our current product. It happened to be a new are you of that management, we built our virtual on top of it it took us longer it took us longer to build it we have a <unk>.

Lot of people 100 people in our R&D team, but it took us longer to build the product because we integrated it and in the core Bay database.

Core code base of our of our event management tool, but that was the right decision because we knew in the end when it comes back they're going to want all three so from a competitive view I think that people are going to want us.

Unified seamless user experience that we wanted to support your total of that program, whether it's small big simple complex internal external and I believe we are uniquely positioned.

Hit the virtual returned in person hybrid.

And a couple of things I want to throw out for hospitality cloud as some of those differentiators are our marketplace with network effects with our largest online marketing place connecting back to venues, which is the largest part using of a budget of an event as the venue and when you combine all this stuff up and our market position.

We think that from a competitive landscape. There is a lot of competitors, but we think we're positioned now back to our strengths and dollars. Chuck again, everybody knows a study that save the pandemic accelerated digitization by X number of years, what's interesting if I take you into the field what precedes that acceleration is that.

<unk>.

Theres, a forcing function on the conversation medium banners had time to sort of rethink strategically there.

And so we might have been talking to them about virtual in 2020 in the beginning of 2021, but it allowed us to in a marketing way be able to say by the way did you know we have the full platform and there is so much more and so that time, we used wisely to have a bigger conversation. So there is a major law firm that's worldwide law firm based out of New York.

We just closed them for a major six figure deal Ptv is terrific and they took out the webinar provider their virtual multiple virtual providers have been standardized on the C&I platform and Thats on the event caused by those same conversations with Red you said in his remark are also occurring on the hotel side. So pre pandemic will be but it might have been talking to them a lot.

<unk> advertising, but with shortened staff less staff hard to hire staffer whatever it might be they had to turn to software.

To be able to digitize the experience so people couldn't fly to the hotel to do the virtual tours right or to do the real in person tour right. So now they would use our event diagramming software to be able to see.

See how the ballroom is configured and then I'll, let them. This was a forcing conversation they're like Wow.

This will be a lot more efficient from a sales team for the customer and whatnot. So all of this has led to sales conversations that I think also accelerated.

Thank you.

Thanks, Alex.

Our next question will come from DJ Hynes of Canaccord.

Please go ahead.

Hey, guys.

Can I start here.

Roger I wanted to ask how tightly correlated is growth in hospitality cloud with the recovery in growth Youre seeing with in person event activity. Just just trying to figure out if that's a useful leading indicator for us.

Yes, DJ first thanks for joining US absolutely that's a very correlated on the event side you know we could obviously, we had virtual right we call the squeezing the balloon. So if it didn't come back in person, we sell of a virtual site and the hospitality side, we have a little bit of that but not nearly to the degree that we had an event. So what I would tell you is that.

Hospitality is definitely more tied towards in person, so and which is obvious reasons is the RFP volume goes up we talked about the volume going up from Q2 2021.

And Q to Q4 of 2021 compared to that same period last year and so look it's continued to go up in person starting to come back, but it's going to take a little bit of time. So that's why if you can look at the hospitality cloud it didn't grow nearly as fast as the event, but I will tell you a big button that digitization trend is still important what they are learning is that the planners are becoming more.

Digital savvy, they don't sometimes one even interact with the hotel salesperson, which was never the case they want to go on their website they want to be able to source online they want to be able to use R. R.

<unk>.

Our <unk> products, so that they can build their event and see if this the venue for me so before they even talk to a salesperson theyre, making 80, 90% potentially their decision before they even talk to hotel salesperson and now with our new stuff like the small meetings, where they can book and see the live.

The live pricing and so forth in particular, even though we will make a huge impact this year, but that foundation has and built these kind of digitation trends, we're building into our hospitality clients, which is great because again, it makes them more dependent and theyre going to need more technology to help them because their customers ultimately demanded and so.

So look on one hand, it's going to take time for it to come back but on the other hand, the good news as it comes back that they know they needed.

Adapt technology much more because their customer has and is expecting it.

Yes, you have got it makes sense.

I want to revisit the hybrid model for a second I think you touched on some of this answering tyler's question, but I just want make sure. It's crystal clear right. So the upside in a hybrid model as I understand it is that you're essentially get customers to kind of double pay you for the folks that attended person right. They pay for the core onsite capabilities and then they also pay for attendee hub.

Maybe you could talk about like what it is about the way you've packaged attendee hub that also makes it a must have for your in person attendees right in other words like what makes you confident that this double pay dynamic is going to play out.

Well I think the first thing is is that again when people are buying they don't know the mix of their events like sometimes they they again during this period in particular, you never know what happens, but there they know that they have lets just say 100 programs.

Theoretically 25 of them will be it will be.

We will be let's say in our 50% will be in person 25 will be hybrid 25 will be virtual percentage of their total kind of event program. So they need.

They need one product to do that but I think ultimately.

When you look at why we are confident in our attendee hub is is that it provides all of it. So if it's in person you will have on your mobile you have the engagement part if it's virtual we have a virtual part and it all comes down to engagement, whether it's live virtual and both that we have to combine all that together to fall the customer journey and the other thing I will.

Tell you you'll be shocked at how many events happen, where a person who let's say went to a hybrid event. They register to go in person and then they still go half the time virtual and in person and that means flying into the city and vice versa. So someone someone says im going to come virtually but then they decided you know what I'm going to come in person, especially if it's a more local events and.

So the point is is that going to be prepared for all of it and whether it's before or after the event yet to be prepared but it all comes down to engagement and and you want to make sure that.

You have a tool that does that and I'll give you. One last thing is is that in terms of creating that community or that 360 degree or 365 degree engagement whats.

Great about our tool is that we're empowering them to take that event and make it punch kind of.

Punch stronger because its not just for that two day or one day or half day event. It lives longer and so when you combine all of these things. It just makes it so compelling to use a product like our attendee hub because it all ties it in one place no matter what type of.

Model you used for that particular event.

Yes, that's very helpful. Thanks for the color.

And our final question will come from Scott Berg with Needham.

Please go ahead.

Hi, everyone. Congrats on the quarter. This is Michael Rockers I'm on for Scott first Scott sorry. Thanks for taking my question just one quick one for me.

I was curious about how we should think about 2022 sales capacity additions.

Do you expect to kind of add sales capacity.

And I'm kind of tracking revenue growth.

In 2022 or is there some some shift and the go to market motion.

Sure.

Yes.

I can start Reggie I'm sure Chuck and we will have some points to chime in I mean.

Look there's a huge opportunity out there and so we want to make sure we're getting our disproportionate.

Share of the pie and so yes sales and marketing is one of the main areas major areas that we are.

Focused on on investing and that's why you see our margins coming down from 2021 'twenty two it's a conscious decision on our part to invest to drive growth for the future.

Look we've shown in two out of the last four years in 2017, and 2020 that we can run at an EBITDA margin north of 25% in 2020 was in the throes of Covid when our revenue was declining by 12%. So the business definitely has the ability to grow at a higher margin, but look we always balanced growth with margin and profitability based on what <unk>.

Needs today are and right now the need is to go as hard as we can at the market because there's a great. There is a huge opportunity to digitization of the of the industry is just ripe, making it right for the picking for us because we've got the perfect solution for it.

Believe we have the perfect solution for it.

And so yes, we're over indexing in heads and also in marketing spend to go after that that market.

Michael It's Chuck.

Sales and marketing just to kind of double click on that a layer deeper you may know that so yes.

Really thoughtful and well instrument it on how we think about the go to market motion. So we have a demand waterfall that we built for marketing and then within the sales heads.

We have obviously the SDR ranks that are the appointment centers, but then they either track towards.

Hunters, which are bringing in the new logos or farmers, who are responsible for renewals and upsells and cross sells and so when I say instruments.

Paul about the sales productivity and the efficiency of all those reps and we sit down and think about deeply where do we want to make our investments placed our bets and then be able to go get the Tam. So just to let you know there is there is a lot of thoughtful instrumentation underneath all of this.

Great. Thank you.

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

[music].

Yes.

Yes.

Yes.

Okay.

[music].

Yes.

Okay.

Okay.

Yes.

Okay.

Yes.

[music].

Okay.