Q1 2022 Cvent Holding Corp Earnings Call
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Are you hearing in front of me Investor Day, I'm getting miles I just need those.
Good afternoon, everyone. My name is Kelly and I'll be your conference operator for today at this time I'd like to welcome everyone to today's C. Bench first quarter 2022 earnings Conference call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question.
During this time simply press the star key followed by the digit one on your telephone keypad. If he would like to withdraw your question at any time you May Press Star one once again at this time for opening remarks, I'd like to turn the conference over to April seat Investor Relations. Please go ahead ma'am.
Good afternoon, and thank you for joining us on today's conference call to discuss the financial results received in the first quarter of 2022 with me on today's call are ready Agarwal, Stevens founder and Chief Executive Officer, Billy Newman Stevens Chief Financial Officer. During today's call. We will review our financial results for both the first quarter of 2022.
And discuss our guidance for the second quarter and full year of 2022. In addition, our earnings press release SEC filings and a replay of today's call can be found on our Investor Relations website at investors Dot Dot 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.
<unk>, including but not limited to statements regarding our financial outlook, including our guidance for the second quarter and full year 2022, our market opportunity market position product strategy and growth opportunities forward looking statements involve known and unknown risks and uncertainties that may cause our actual results performance or achievements to be materially different from those expressed or implied.
Forward looking statements.
Looking statements represent our management's beliefs and assumptions only as of the date need information on factors that could affect the outcome of the matter is 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 March 31, 2022 filed with the SEC.
See today additional information is available in our annual report on Form 10-K for the year ended December 31, 2021, as well as in the cautionary language included in our earnings press release.
During today's call, we will discuss non-GAAP financial result, which are not prepared in according in accordance with generally accepted accounting principles a reconciliation between GAAP and non-GAAP financial results is included in our earnings release filed with the SEC and available on our Investor Relations website, and now I'd like to call turn the call over to Reggie.
Thanks April .
And good afternoon, everyone I'm excited to be here with you today.
We got off to a great start in 2022, delivering revenue and profitability that were above our guidance revenue in the first quarter was $137 4 million a beat up $3 $9 million versus the high end of our guidance and this drove a beat versus the high end of our guidance on adjusted EBITDA as well the revenue outperformance was driven.
And by higher onsite revenue associated with greater demand for in person functionality.
And we expect these trends to continue resulting in a strong growth of 25% in the second quarter.
And were therefore modestly increasing our full year guidance, which Billy will detail later in the call.
For those who are new to our story here is a quick even overview Stephen is a SaaS platform that provides value to then organizers with our bank power solutions and two event venues and hotels.
Battalion cloud solutions.
<unk> cloud is used to plan market and organized engaging events of all sizes.
Ross, all about formats, including virtual and person and hybrid.
And our hospitality cloud offers a marketplace that enables meeting organizers to find and book event space at hotels and unique venues as well as software solutions that help venues promote and manage their meetings and events business.
Fundamentally our platform helps our customers grow their topline revenue and drive engagement, while reducing opex and ensuring greater compliance.
Last earnings call I talked about three drivers fueling our growth for 2022 and beyond.
First the return to in person events and accelerating demand for hybrid second new opportunities to measure and grow attendee engagement and third expansion of our ecosystem. In Q1. These growth drivers continue to fuel our progress across the entire business with both clouds showing strong performance in the quarter.
Now before I recap Q1, I want to first share our views on the state of the bet and hospitality markets.
Never before in Stephen's history has there been such an extended period of time when the world didn't connect collaborate socialize and conduct business at in person events.
This is fundamentally counter to a natural desire for human connection.
This is why organizations and attendees are yearning to meet in person again.
We see it and hear it every day and we believe that pent up demand for face to face interactions. We will continue to be a tailwind for our business throughout the rest of the year now we believe this pent up demand will help offset macroeconomic pressures that might otherwise dampen our return to in person hybrid events now.
Now looking at our Q1 business in more detail, let me start by walking you through how each growth driver impacted the quarter and how we plan to continue to capitalize on the opportunity in front of us.
First let's start with the return to in person events.
Just to remind everyone before the pandemic, 95% of our revenue came from in person technology. We spent 20 years innovating and building a comprehensive platform to power of the meetings and events industry.
As a global market leader, we powered millions of in person events and this was our strength.
Then the pandemic hit and over the past two years, we've all been generally meeting virtually.
But throughout the year, we've seen a steady increase in person events.
We see this in both our own data and industry data. According to the Northstar cement industry Pulse survey, 66% of event planners are booking or actively sourcing for events space.
And based on sales teams conversations in Q1 over 80% of conference and Tradeshow planners. We surveyed are looking for in person components within their overall event strategy.
But according to the same survey and whats most encouraging is that 40% of survey planners now believe there'll be planning more events in 2023 than they planned pre COVID-19.
We believe this rising confidence and demand for in person will continue to rise throughout the year and demand will naturally flow to us due to our inherent strength and in person event technology.
Now this is because of the new meetings and events landscape there are more options than ever before for our customers to engage with their customers prospects employees and stakeholders. We call. This new landscape the triple threat virtual events reach massive audience audiences in a cost efficient manner in person events are ideal for making.
Deep and personal connections and hybrid events maximizes the power of both no matter, what our customers' budgets desired engagement levels or size of their audiences, let's see that platform can help them meet their event kohls.
And as a proof point of the triple threat in action.
I'm very excited to announce that our net dollar retention increased in Q1 to 109%.
1% above our levels in Q4 of 2019.
And as you may recall, it was 84% at the low point of the pandemic.
Walk you through one of our customer examples that highlights how organizations are leveraging our product to support their total of that program, which is leading to that strong net dollar retention I just mentioned.
One of the world's leading investment banks bends over $2 million a year on Steve on software. They were an early adopter of the attendee hub at the beginning of Covid to support their virtual events.
In early Q1 13 recognized that in person events were quickly returning and he needed the right solution to deliver engaging in person experiences. So they purchase events online solution software modules and other products, increasing our overall annual recurring revenue from $1 4 million to over $2 million. The bank also increased their investment in <unk>.
Hendi hub, which now uses their mobile application and web experience for many of their in person virtual and hybrid adverse.
This up sells not only a testament to the power of Steven for in person events, but the power of Stephens platform for your total of that program.
Now this is just one example.
But we have hundreds of both new and installed based customers increased their annual recurring revenue in Q1 by purchasing our on site solution software. Some of these increases include an Ivy League school that purchase onsite solutions for the first time since February 2019 for nearly $300000 a fortune 500 pharmaceutical company.
Increase their onsite <unk> by 229000, a publicly traded computer software company that increased it by 191000 and a graduate emissions council that increased it by 124000.
I think these examples show that spending on in person functionality is steady increasing.
Yeah.
We also see continued demand for other parts of our bank cloud, including our virtual solution.
A fortune 100 investment bank increased their virtual <unk> by 361000, a large private software company increased our virtual air or by 169000.
One of the largest U S industrial distributors increased their virtual <unk> by 162000, and a fortune 100 international oil and gas company increased our virtual <unk> by 127000.
Now from the hospitality cloud side the return of in person events is having a real positive impact on the business.
Hospitality revenue also grew 17% year over year. This is up from 12% last quarter and represents the largest year over year growth for the hospitality cloud since Q1 of 2020.
Now when I ask my sales team why the.
The number one reason is recovery upsell.
As group business starts to come back hotels want to capture as much as they can.
And they are turning to <unk> hospitality club as a strategic investment they.
They are using Stephen to advertise and market their events space to meeting planners than their Rfps and then they are using our software to manage analyze and optimize these RFP leads so they can close them at a higher rate.
Here's an example, there is a new property in Vegas that is slated to open in late 2023 as part of their opening plan. They are investing heavily in <unk> to win event businesses took them skewed each event event businesses in a very competitive market.
We bought almost all of our key hospitality cloud modules, such as advertising Diagramming room block management analytics et cetera.
This is one of the largest deals for an individual property and our history. The annual contract value on this deal was almost $500000 and a total contract value is approaching $2 million.
This property was not alone we had thousands of hotels convention bureaus and venues renew and increase their spend with <unk> because our tools are essential to winning group business has planners book events in 2022, 23 and beyond and then those that don't invest in our ever increasing capabilities may find themselves further behind.
When it comes to their competitors.
Now this demand for Stephen aligns with what we're seeing and what we're seeing and what our data showing on Rfps being center hotels for event space.
Now overall, we're excited about the potential of our hospitality club business is in person events return.
Now moving to our second growth driver increasing opportunities for event organizers to use <unk> solutions to engage with their attendees across the total of that program now.
Now pre pandemic event organizers, mostly cared about engaging attendees during the event.
With the rise of video online networking.
And virtual event platforms organizations now have the tools they need to engage with their attendees before during and after an event occurs gaining even more insight into buyer needs.
Let me share how we're seeing this play out even within our own events program.
Now just a few weeks ago, we held our annual user conference <unk> connect in Las Vegas. This is a hybrid multi day multi track conference that brings together thousands of event in the hospitality industry professionals, both in person and virtually to network engage and evolve their meetings and events and hospitality progress.
This year was our second year hosting it in a hybrid event format and we had nearly 40% more in person attendees eight months ago. When we held <unk> connect in August of 2021.
Now, we leveraged our attendee hub to create a seamless experience for in person and hybrid attendees.
Not only did attendee hub facilitate interactions between <unk> and our audience. During the event, but has served as a focal point of engagement before and after event with pre event appointment scheduling.
Turning to attending networking pre and post event content and post event discussions.
Whats, even technology powering engagement across our in person and virtual attendees, we generated a measured nearly 850000 unique engagement points such as sessions attended lead scanned polls answered questions asked content downloaded and more.
And we're able to leverage this data and to continue to build these relationships by offering relevant follow up content and event invitations based on the insights.
From not just our <unk> connect conference, but from our entire event program.
Our technology enabled customers to deliver this texas to deliver this level of low friction and high engagement across an entire event program.
This is making events as a marketing channel, even more strategic and makes <unk> technology, even stickier as organizations you see them more often between events not just during events.
Finally, let's talk about our third growth driver the opportunity to expand our ecosystem.
We connect the buyers and suppliers of our physical event space and streamline how they find and book event venues.
But more goes into an event than just physical space you also need the technology and other key partners to deliver compelling virtual in person hybrid events at CB connect we launched.
The <unk> app marketplace, which delivers one centralized pace place for planters and marketers to find complementary technology partners that connect to the <unk> platform to improve event execution and deliver greater business impact.
We also launched the <unk> vendor marketplace built within the <unk> supplier network to help planners by vendors and suppliers for all of their vet needs such as aviation and transportation for example.
Whether it's virtual in person or hybrid.
Now the CSN is now your one stop shop for all your sourcing needs.
While we don't expect to see any material revenue impact in 2022 from these products. We believe these marketplaces are going to be a long term investment to make <unk>, an even more embedded into the fabric of the events industry.
Our hospitality club business is fundamentally about monetizing and events in the ecosystem and as we highlighted our customer conference, we've been making investments to make it easier for our venue customers and hotel customers to coke to showcase their event space and our vendor customers to showcase their event services win more business and.
With event professionals to deliver great event experiences.
For example, we expanded the localization of the <unk> supplier network planners and suppliers can now communicate with each other in 18 languages. We also announced the launch of photo realistic <unk> events basis on this even supplier network to help hoteliers showcase there been space by immersive <unk>, we will continue to invest in our event cloud in hospital.
How the cloud capabilities to deliver the innovations that the marketplace demands to make <unk>. The one platform that organizations need to maximize the ROI from events of all shapes and sizes.
In summary, we are very pleased with the financial results from our first quarter, but we're even more excited about our future. We have a business that's resilient to potential new COVID-19 variance and is positioned well for what we believe is continued strong movement towards the return to in person events as.
As we continue to broaden and deepen our platform where both further distancing ourselves from the competition and strengthening our market position as we go after are nearly $30 billion Tam.
With all these investments in our unified platform, where further insulated from macroeconomic pressures and we're well positioned for a strong 2022 now I'll turn it over to our CFO Billy.
Our strategy.
And good afternoon, everyone I'll first walk you through first quarter of 2022 financial performance and then discuss our guidance for second quarter and updated guidance for full year 2022.
Total first quarter revenue was 137 4 million an increase of 17, 1% year over year.
We beat the high end of our guidance for the quarter by $3 9 million or two 9%.
Beat was largely largely driven by higher onsite solutions revenue as we saw higher than expected demand for in person functionality in the quarter.
Within total revenue first quarter event cloud revenue was 90 $501 million, an increase of 17, 1% year over year and first quarter hospitality cloud revenue was $42 4 million, an increase of 17, 2% year over year.
Event cloud growth as a result of growth across the platform, including event management attendee hub and onsite solutions.
Our Saudi cloud growth is due to hotels continued reinvestment in the group portion of their business is in person events begin to return.
This is the second quarter in a row of growth for the hottest Howdy cloud after five COVID-19 impacted quarters and as expected, we're seeing an acceleration in the growth rate year over year year over year growth in the fourth quarter of 2021 was 12, 1% compared to the 17, 2% we saw this quarter.
Before I move on to expenses I want to take a minute to discuss our key business metrics as they also point to the trends we're seeing in the business.
As Rajeev already mentioned, our net dollar retention rate increased to 109% in the first quarter, which is one percentage point higher than where this metric was pre COVID-19 at the end of 2019.
We also saw a demonstrable increase in the number of customers who contribute more than 100000 annual occurring revenue as.
As of March 31, 2022 that number was 840 customers, which is a 121 customers higher than a year ago and is a record for CEVA.
The increases we're seeing in these metrics was driven by the lessening impact of Covid in 2021, and 2022 on both the event and half Saudi clouds and the adoption of attendee.
Note that moving forward, we will not report the number of event cloud customers, who contribute more than one I'm sorry, the number of customers who contribute more than 100000 of annual crane revenue on a quarterly basis.
We believe that this metric can be misleading when tracked on a sequential quarterly basis since there can be temporary anomalies quarter to quarter.
On an annual basis. This will not be an issue. So we will report this metric as of December 31, each year in the future.
We expect this metric will continue to increase each year as a result of our land and expand strategy within our existing clients.
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 directly comparable GAAP metrics in our first quarter earnings release.
non-GAAP gross profit in the quarter was $98 2 million or 71, 5% of revenue compared to 75, 8% from the same period of the prior year.
The year over year decline in non-GAAP gross margin is primarily due to a higher percentage of total revenue in the quarter coming from onsite solutions and merchant services, which have lower margin profiles.
Moving down the income statement note that the operating expenses operating expense increases in the first quarter I'm about to take you through reflects both meaningfully lower expenses from Covid cost saving measures that we are still in place in the 2021 comparison period and a conscious decision today to heavily invest given the massive massive growth opportunities.
<unk> that we continue to see in 2022 and beyond.
Sales and marketing expenses increased 35% research and development expenses increased 22, 1% and general and administrative expenses increased 37, 3%.
The increase in general and administrative expenses was also due to new costs related to operating as a public company that did not exist in the first quarter of last year.
The main growth driver in each line item with employee expenses as a result of head count higher to support growth. In addition to increases we've seen an average compensation for employees due to wage inflation.
Outside of employee expenses. The other key growth drivers were increased marketing expenses and increased contracted services.
Shifting to earnings adjusted EBITDA was $12 8 million for nine 3% of revenue, which represents a $2 4 million beat in terms of dollars in terms of dollars over the high end of our guidance and a one five percentage point in terms of margin.
The beat as a result of our $33 $9 million revenue beat.
Adjusted EBITDA margin is down from 19, 3% in the prior year and that decline in margin is again because of the coast Covid cost saving measures that we are still in place in 2021 and reflective of the investments we're making for growth.
Turning to our balance sheet, we ended the first quarter with cash cash equivalents and short term investments of 193.0 million.
An increase of 66.0 million.
From the end of the fourth quarter of 2021.
The increase was driven by strong cash collections in the first quarter, which is seasonally typical due to the high percentage of client contracts that are calendar year base and invoiced in the first quarter.
Free cash flow before interest payments on our long term debt and the change in client cash related to merchant services was $44 7 million for the first quarter up $3 9 million compared to the first quarter of last year.
Deferred revenue at the end of the first quarter was $287 $5 million, an increase of 18.0% compared to the first quarter of the prior year due to year over year bookings growth driven by the adoption of the attendee hub and in person events beginning to return.
So, let's turn to guidance for the second quarter, starting with revenue.
We expect second quarter revenue of $153 2 million to $154 2 million up 25, 1% at the midpoint compared to the second quarter of 2021.
This strong revenue growth is driven equally by both clouds and is powered by in person events continuing to return.
There is also a benefit to growth in the quarter related to the timing of our annual client conference.
We typically hold the event in the third quarter of each year, but we had to hold it in the second quarter of this year in exchange for being let out of the contract for our 2020 in person client conference that we switched to virtual.
This benefits growth.
Now this benefits growth by three five percentage points in the second quarter, but will have an equal but opposite effect on the third quarter revenue growth.
Shifting to full year revenue guidance as a result of the earlier than expected bounce back of in person events. We saw in the first quarter, we are increasing our full year guidance to $621 4 million to $626 $9 million.
23% compared to the prior year at the midpoint and reflects a $1 $5 million raised over the midpoint of the guidance we shared in our last earnings call in early March.
$1 $5 million raise is less than the $3 9 million first quarter be because a majority of the first quarter beat was the result of revenue from events that occurred towards the end of the quarter that we thought would be pushed out to later in the year, Jim amine due to Amazon.
This shifted revenue that we expected to realize later in the year forward to the first quarter.
The remaining first quarter beat was due to the bounce due the bounce back of in person events occurring sooner than anticipated in late first quarter as opposed to our original expectation of the second quarter.
To the earlier start of the bounce back helped the first quarter and the full year, but doesn't have a snowball effect for the remainder of the year.
Looking forward to the second half of the year, we expect year over year revenue growth in the third and fourth quarters to be relatively consistent after adjusting for the three five percentage point impact related to the timing of our client conference that I mentioned previously.
This timing item will benefit second quarter revenue growth, but will have an equal but opposite effect on third quarter revenue growth.
Moving to adjusted EBITDA, We expect second quarter, adjusted EBITDA of $15 1 million to $16 1 million.
Representing a $10 one adjusted EBITDA margin at the midpoint now.
Now one detail that is key to understanding our adjusted EBITDA margin guidance is the cost of our annual client conference that I just mentioned.
Materially exceed the revenue generated by the event.
It's our number one marketing initiative. So we believe the net cost of the company has justified our.
Excluding the revenue and the cost of our client conference from our second quarter guidance, the midpoint of our adjusted EBITDA margin guidance would be 12, 6%, meaning.
Meaning that we're expecting to see three three percentage points of margin expansion between the first and second quarters on a normalized basis.
Turning to full year adjusted EBITDA guidance, we are keeping our adjusted EBITDA margin guidance unchanged from our prior guidance of 16, 5% to 17, 2%, which results in a slight increase to our adjusted EBITDA guidance in terms of dollars as a result of the increase to our revenue guidance.
Two 4 million first quarter adjusted EBITDA does.
<unk> does not flow fully flow through to the full year, because we are starting to feel an impact on our expenses from the macroeconomic factors that are currently in play, especially wage inflation.
Looking forward to the margin expansion, we're forecasting in Q3 and Q4 the step up in the magnitude of the quarterly expansion in those quarters as a result of reaching a solid footing from a business perspective off of which we can now springboard in terms of margin expansion.
Since the third quarter of 2020, when reintroduced our virtual solution and our adjusted EBITDA margin Pete we've been in a state of flux from all angles.
Sensitive technology development related to virtual a high degree of support to our customers who are learning how to hold events in a virtual setting and lots of friction in the sales process as we helped our customers determine what's the best solution for them given an ever changing environment for in person events.
Now that we have a platform that supports all three event formats are customers event programs are becoming more and more stable and predictable and planners in general are becoming more confident in using technology to support in person virtual and hybrid events. We can begin to level off operating expense spend.
And start to reap benefits of the reap the rewards of the increasing.
Incremental investments, we've been making since late 2020 in the form of increased margin expansion through the end of the year.
In summary, we are proud of our progress and performance in the first quarter. We are seeing positive signs of recovery in the meetings and events industry, but we're still in the in the recovery process.
Although the uncertainty created by Covid assay other meat macroeconomic factors are beginning to rise.
However, and most importantly, as a result of the investments we've made to broaden and deepen our platform to support all event types and formats across the total event program. We believe we are in we are very well positioned to take our disproportionate share of the nearly $30 billion Tam.
Now I'll turn it back over to the operator for Q&A.
Thank you once again, if you do have a question today that will be at Star One we'll hear first from Arjun Bhatia with William Blair.
Sure.
Perfect. Thank you very much and congrats on a good first quarter here guys.
Well, it's really interesting commentary I think are more return of impersonal valves in storm it seems like.
Youre expecting that to continue and you definitely saw a lot of that in Q1, I'm curious as you're navigating some of these macro uncertainties and your customers are during the same.
How you think the allocation between in person events and virtual shifts.
Given the lower cost nature of virtual events also having.
Somewhat of an impact to reach and engage with.
Customers just curious how you see that playing out over the remainder of the year.
Yeah, Jordan. Thanks, Great questions. So look just every business every event has its own characteristics. So it depends on what they are trying to achieve so the first thing I would say that from an allocation I think what we had put out before was about about roughly half are going to be in person and about.
I think it was like 25%, 30% will be virtual and then the remaining would be hybrid so thats kind of what we had said previously I don't think it's changed much I think.
Again, it depends on the goals of the events, but that look the bigger news of whether that changes a little bit or a lot. It's we use the balloon analogy you squeeze one part of the balloon the other come through so let's just say people are focusing on on budget cuts because of some of the macroeconomic environments and they may tend to do a little bit more virtual if theyre trying to get a get more attendees there as I said so.
It really depends on what their goals are and what they're seeing in response, what I can tell you that could give you a couple of case studies and some like I recently went to a banking conference and they kind of switched to model from virtual to hybrid then to fully in person only and they they broke the records.
The amount they added <unk> 19, and so it really depends on the environment. We're seeing in person come strongly people are becoming more.
Frankly, more willing to travel and more willing to go out regardless of the pandemic, we see again people investing in that in person because of the pent up demand in the more leaders that go to in person the more they come back and say I can't say, how many conversations I've had with people say I went to this event and my God I forgot what's in persons like we're going to do more in person for our company.
Because it just it just much better than doing it virtually that depth of that relationship.
The engagement levels way more and you get business done more so I think what youre going to see a combination of all we're prepared for all of them have we showed but we do think in person is going to continue to be a tailwind and we think the mix will probably generally be somewhere where we said and that's right now what we're seeing at least in the in Q1 and what we're already seeing in Q2, but there's always things that can shift.
That is new variants come out.
As things happen with again, the macroeconomic environment, but again, we're prepared for any scenario.
Wonderful.
Very helpful and then on the announcements that you made.
<unk>.
The one that stuck out a little bit with the vendor marketplace.
In the cement supplier network and the ability to kind of have that play across all types.
Types I'm curious, where you are in actually building that out.
Getting the vendor data is that something that you have already or is that something that you do.
Are you still in the process of developing and then on the monetization aspect I know you mentioned.
Nothing material in 2022, but curious just how you think about monetizing and how that works from a functional perspective, whether you monetize both sides of that marketplace.
Or just one side from the from the final perspective.
Yes, so for.
For the first part of the data we're still gathering it just reminds me when we built our Stephen supplier network with the venues in hotels. We have 290000, we used our India office to help build that and get all that granular data. We have a couple of hundred characteristics for each of those venues or.
Or up to that I should say so its a lot of data. We're collecting we're doing the same thing here now the differences were much more evolved when we launched our Stephen supplier network that was 12 13 years ago, we didn't have the scale and the reputation that we have now so look the way we're gathering that data is getting a what we're trying to make it as a curated dataset and that carried dataset is that basically vendors that people recommend.
Look I'll just give an example on any supplier, let's just use something as simple as transportation you literally can have 100 <unk>.
<unk> organizations that can help in a particular city, what we want to do is get a curated which is one they have some scale. So they can help it certainly our enterprise customers in the more mid size and they just have a reputation to deliver but it's not just about the big companies. It's also you've got a lot of great small ones and the way you get that is from references and referrals from our customers and these are people that we know.
Strong programs are are very particular about who they choose so we're making that so when they come to our system. There like it's not just any one can be there. It's also a little bit of curated and again recommended but again, we're building that data as we speak but it's something we've done before and we're really good about turning over rocks to find back now in terms of in terms of the second part.
Which is how do we monetize.
Right now we're doing it.
Revenue just starting right now as you start off the network. It takes a while and again I want to stress that we do not expect any material revenue in 2022 from this it takes a while we're almost almost like an a beta right. Now then you get to that.
More.
Prime time, but even then it takes a while to build that because youre going after a really fragmented market. There hasnt really had this.
But as we build it then we'll go from AD revenue to potentially transaction deals our fees and we Bob we know how to build a marketplace, but it does take time to do it and we definitely have the event planners that are looking for it and the event organizers and we think it's a great extension of the ecosystem not just from a long term monetary but also just it makes it.
Is that one stop shop.
Perfect. That's very helpful. Thank you very much.
Thanks Arjun.
Well go next today from Tyler Radke with Citi.
Yes. Thanks for taking my question I wanted to ask you about the competitive landscape. Obviously, you talked a lot about the optimism around in person events, but just have you noticed any changes at your competitors now that there has been more of a focus back to in person events and how do you think this helps position you.
Longer term.
Yeah. So so.
So Tyler great question.
The first thing is is that look.
As the as things go back to in person as you know as I mentioned in my script. It plays to our strength for 20 years, we innovated we put.
1000, plus engineers on building in person technology until the pandemic hit that we built a great virtual product and again with integrated but still are that's our inherent strength comes from the in person. So as it goes back a place for our strength, especially as you compare to other competitors you had a rise of a lot of virtual competitors that came out.
Many of them are going to struggle because they focused on virtual and they're struggling to make the pivot because I can tell you building in person and our view is way more complicated and way more difficult than building virtual not the virtual wasn't tough to do but now when you do when you also build in person has to be again combined on one platform, which candidly the.
City grows almost geometrically as you start putting all these features that's why for US when we launched our virtual it took us probably longer than anyone to launch virtual compared to any other company and I got to be Canada. As we talked about before I was a little frustrated mitek team, saying why is it taking us with.
With the 1000 plus engineers why is why are these small companies putting it out because we are integrating it with our in person because we knew eventually it would come back to hybrid and you need all three methodologies. So so look I think.
What's what's going to happen with our competitors as they are starting to struggle because they can't do the total of that program is seamlessly to do it again in person virtual hybrid and as you start doing it all vent types from big small internal external that's a lot of heavy depth and product you need and also the service that across the whole platform.
That whole.
All the different different iterations that you can have between those those those between hybrid and person in different event types and the different modules that you need I think it can be difficult for a lot of people to compete in that and again get that engagement across the customer journey, but this is where the whole world's moving towards they want one platform to do all of this and they want the flexibility as we go towards <unk>.
Person look you can never know what happens where they shifted to hey, I turn this to a virtual event and then they need that flexibility of one platform be able to shift life and I'll tell you. This one conference you mentioned that Bank conference I went too they changed it three different times they were changing it literally up till up til.
A month before the event because you didn't know it was going to happen. That's why you need that flexibility and Thats why we know one platform and the ability to do all of them are are the right things, but we know that the in person is going to certainly drive to our strength and having one platform and be able to service to that is our other strengths. So that's why we feel it helps our business compared to our competitors. That's for one thing that we feel comfortable about.
Great. Thanks for that and earlier you talked about the strong.
Outlook for in person events for.
For next year in 2023.
Thinking that it.
Could exceed what you saw pre Covid I guess two questions there.
Given given that outlook how are you changing the way that you're investing in the business I guess is that kind of captured in the increased spending guide and then secondly have you started to see any leading indicators in terms of forward multiyear bookings.
Show up.
That would capture that demand thanks.
Yes, So let me just start with a multi year deal one real quick.
During the height of the pandemic, we definitely saw lower multi year deals because people didn't know what theyre going to do with their bet program that includes virtual they didn't own person then you feel comfortable with any of the methodologies. So they hesitated to invest and have a stable let's call. It of that program as we start getting back to more normalized times and and I mean, this is a big and they feel comfortable understand.
Virtual and in person and frankly, I think what people are starting to feel comfortable is that we might think we're going to have a combination of three and we don't know what's going to how it's going to play out.
But we know we're going to have events because they are one of the best engagement tools, we can with our customers our employees our stakeholders. So we're <unk>.
Starting to see people has they feel more comfortable than they're going to feel more comfortable signing multiyear deals we named a bunch of them that we're starting to see as a matter of fact I'm going to throw one out there. If you remember during our roadshow, we brought up that association that.
That we said had signed a debt grew from $3 five 350000, a year to $3 5 million.
Last quarter in Q1.
They expanded that relationship and they signed a five year deal that was almost close to $20 million, which is.
The biggest event <unk>, we've had in history for total contract value. So that just signed again in Q1. That's an example of people feeling more comfortable with signing multiyear deals because they know that they're going to have to do all three and we're prepared to do that so that was kind of the first question about multiyear deals in terms of the second question, which is.
How are we changing our investments so look it's where we are we are a little bit changing towards putting a little bit worn in person because we of course put a lot of our energy and virtual and now we've got a balance a better to go back to.
In person also but you got to keep because in a virtual here to stay we got to continue to do it now here's a couple of areas that we're doing so again, our attendee hub again to remind everyone. They went from originally we first launched it was just for virtual then now it's for engagement.
All type of events, whether it's in person virtual or hybrid and because it includes our virtual echostar virtual mobile App includes all our engagement.
Features and of course as the virtual so kind of a combination of all three so we're continuing to invest in Tommy hub on arrival, we're investing a lot in which is our and our on site tools. Because we are seeing a bigger demand for that and then look video is a core competency is still something that we're continuing to invest in heavily because look it's a new engagement driver for all types of events and.
And look it's here to stay and things like we're reinventing our webinar strategy for example, reinventing Webinars in general and virtual still here. There is so much more work to do because it's still a new area that needs a lot of investment and again some of the other areas. We're excited about is year round engagement and again, because they see that video centers kind of.
In the middle of that because engagement used to be just during the event now it's again before the event and after the event and some of these new ecosystem things that I mentioned in our script. So look there's a lot of areas. We're continuing invest there's a lot of innovation going on but I would say that with the fundamental thing of how to kind of put it down it's investing because all three of those models.
We call the triple threat, they all need investment, but a little bit more towards in person right now.
Just because that is an area that we need that we that we need to put some more because the whole in person experience is digitizing.
It's not just back to the old way of doing business.
Certainly that's part of it but it's also digitizing more people more open to it and that's exciting because again event technologies at the center of it and we believe with our one platform, we're really well positioned compared to our competitors.
Thanks for all the detail.
Thanks for the question.
Well move onto DJ Hynes with Canaccord.
Hey, guys. Thanks for taking the question and I appreciate all the color on the call.
Rajiv I'm curious if people are showing up at events at the rate that you expect like in other words like is the ratio of actual in person attendance relative to amberson registrations any different than what you saw pre COVID-19 and I guess, if there's any difference like is there anything to read into what that might mean for the business like I know customers pay <unk>.
On registration, so maybe it's not relevant but thinking about like renewal dynamics and anything else that that could impact.
Yes, so actually what I would tell you that strong trend of what how people are showing up even though it varies is absolutely a strong <unk>.
Signal for renewals and I'll tell you why because you are seeing less in person people, because we're still not up to <unk>.
Where we were pre Covid. So let me just give an example, if I had to pick a number I would say that your average conferences seeing somewhere between 40% to 60% of the attendance of 65% of tenants that they saw pre COVID-19. So think of it just to give you a rough idea you have certainly conferences like I'll tell you that I am going to refer back to that call.
I went to the bank conference they had more.
Attendants under 19, because they made a decision not to make it hybrid that just said everyone's got to come in person.
And so that sometimes forces people's hands to not go virtual of course income in person. So you have that strategy, but generally speaking if you depends on your conference, which a bolus, but let's say take our customer conference right. In total we had around let's call. It 10000.
If you look pre Covid, we were a little above 4000 by 4300 I think so we got.
Two five times more than what we had previously but it was a different mix. We had about let's just call. It 50, 50 or a little over 50% of what we had I think was 55% of what we had in 19 for in person, but that's okay. Because we got all those virtual and in the end if you ask our CMO Patrick Patrick will tell you.
I like the hybrid model more because you can leverage all of our assets like my speech gets in front of instead of 44000 4300. It gets in front of more and then 19. That's just actual during the event then you have the of the after digital engagement. So I think in the end what Youre seeing is is that in person events are shortly not up to where they were in 2000 and.
Pre COVID-19, but they are growing every week and month because of two reasons people more comfortable traveling at RSA three reasons second of all psychologically people are getting more comfortable it's not even just help some people just don't have a tough time, calling in the office in person, even though its not.
Our concern with that health, just psychologically getting over it and engaging with people again and the third one of course is budgets just in general some people didn't model maybe as much in the budgets to go to stuff because they know how it's going to play out in the beginning of the year and if you think back in November December January when people are finalizing budgets. We didn't know how COVID-19 was going to with the <unk> and how it is going to go so I think.
You get to more normalization, which is the back half of the year and then of course in 2023.
I think that.
Youre going to see more normalized in terms of how that impacts.
The business again, it it really it really doesn't because in the end again, the balloon whether they come in person to virtual doesn't matter, a reg as a reg and attendee.
Or is it the accounts is at <unk> and there is a no show we still get paid now and again so from a registration view, we are seeing more registrations generally with let's say, let's say take a mid to large conference, we're seeing more attendees and where they show up or not we get paid the same amount basically and then.
Again, it's all of these are leads and that's why people want to capture that so if I don't show up but I Register for a conference.
The organization wants to know that you registered and still collect information from you and again some of those people generally don't show up to the in person they tend to engage virtually if you have a virtual component. So that's why from us it doesn't really matter there's value added either way.
Okay got it.
And then Billy just a follow up for you on the numbers. So some moving parts of the guidance, which I think you walked through pretty clearly on the call, but the net of it to me seem like <unk>.
Revenue pulled forward.
But profit guidance became a little bit more backend loaded.
Can you just help me understand that dynamic and why we shouldnt notionally think that like add some risk to.
How the year plays out.
Yes.
There was some revenue that pull forward because of the events did some of the events. We thought we're going to push from the first quarter.
Amazon actually ended up happening in the first quarter, which is good and we also saw a bounce back.
Begin for in person events sooner than what we had originally thought started happening in late first quarter as both second quarter. So that the point forward, obviously doesn't impact the full year. The bounce back does obviously impact benefits Q1, and the full year, but you don't see that sort of snowball effect too.
So that's why you don't see the $3 nine turning into like a <unk>.
Larger raised the full year.
In terms of your.
A change in terms of the backlog and profitability I wouldn't say there was really a change there.
We always knew that.
There is going to be lower profitability, starting off the year because.
As we talked about in the first quarter, we had we always have more costs, especially employment related costs in the first quarter that both margin down.
The second quarter increase was not as quite as large because you have the.
The client conference that pulls down the margin in the quarter, but if you back that out.
And normalize the margin expansion, we did see.
Three three percentage point margin expansion, there, but you do see that margin expansion quarter to quarter is going to increase going into third quarter, and then again in the fourth quarters going to increase even more.
Because as I mentioned in my comments, we've gotten to kind of a more of a <unk>.
A level ground so to speak there is still some we are still in a recovery phase, but we are starting to see that as.
As Rajeev mentioned, we've got the the solution out there that can support all three types of formats of events.
So irrespective of where the puck goes here, we feel good there you've got we've got a customer base that is they've got an event program now they feel more comfortable in terms of trying to predict how it's going to play out.
So they can they can commit more now and you have a customer basis, just more comfortable using technology, especially from a virtual and hybrid perspective, and so we're not going to have to spend as much.
Really incrementally spend more on sales and <unk> spend.
Incrementally more on R&D customer support and all of the above you name it and so that's what's going to allow us that look we're still gonna, Nevada don't get me wrong. It's.
Sounds like Youre going to see a hockey stick of margins going up.
From where we are from an annual perspective, that's why we didn't increase our.
Our full year margin did not change.
But yes, that's really but again our.
Our expectations, we knew that was happening right now maybe we just didnt do I didn't do a good enough job of articulating that to you guys on that on the last quarter's call.
But just to give you want to have more color yes.
Just to give you. One example, like for example in sales there is less friction now because people are educated imagine a year ago. When you were doing the sales they were still like virtual theyre still getting used to they don't know what was going to be in person. They were just its just a new paradigm. So it just the sales cycle took longer and then and but more importantly to.
Get them took a lot longer you get a handhold them more so those were just some examples in one area that we're going to see some.
<unk> ability to leverage a little bit more.
You can get a little bit more efficient it makes sense, okay guys I appreciate the color.
Yeah.
Well hear now from Scott Berg with Needham.
Hey, everybody. This is Michael Rackers I'm on for Scott today could.
Could you give us maybe a little bit more color on your recent product innovations and announcements within the hospitality cloud.
Maybe what's your are more excited about longer term and then and then with the near term return to in person events.
Thank you.
Yeah. So look there's a lot of things we're doing on the hospitality clubs. Thanks for asking because we tend to focus on the event a lot.
Look first thing is group is coming back so youre seeing a digitization of group sales in general So some of the things when we talk about one year remember that hotels are struggling to hire people.
My understanding is that there's 20000 open positions for hotel salespeople as an example, the most they've ever been and almost probably I'm going to say in history.
Is my understanding and so just that means theyre high reliance on technology and hopefully on see that for the group business. So thats kind of give you a framework now look in terms of.
And some things that were doing were first of all we're trying to fundamentally engage the meeting planner Morse they are using our tool to source, because where the honey as the bes, we'll comp and again the hunting as the meeting planners and the <unk> of course are they are there hotels. So first doing things like for example, getting more sourcing volume by doing photo realistic three D. That's really going to be a real.
Some of that's really going to help us because by making that experience better when you're in a planner you are able to really see the venue without visiting it and get a better sense of some venues might you might have said I'm not going to visit but let me see the three D photo realistic and I can you know what thats, maybe a venue I want to consider and you have more content engaging content theyre going to come more.
The vendor marketplace, we think over time, we'll of course continue to increase it by getting them and say I can find other service providers.
But some of the other areas that we're really investing is making our Stephen supplier network. The UI much more friendly and then we're also doing things to help increase conversion. So for example for the hotel salespeople. What we're doing is we're letting new what we call smart custom proposals. So when they do a proposal remember literally millions of RFP responses are good.
Not by hotels millions in a year, so as they get a proposal and they got to they want to do a really nice proposals that can differentiate them from their their competitive hotels that we have a smart customer proposals out there that makes it easier for them to do it make it looks nicer than if im doing it typically I want to call. It manual because using the <unk> system to respond, but with the customer postal makes us the <unk>.
Sponsors better.
And things that we're integrating into march into the changed more so it's more seamless in our CSN our path our room block management and again, our event Diagramming and we're also doing things like automating responses because they have less salespeople. So we're helping them with less salespeople to find the right leads and to respond them quicker and again as I mentioned with better proposals and <unk>.
Easter. So these are some of the things that we're doing in terms of product innovations. Because this is what the where we're looking what the hotels are asking for and we know what the problem is not having our people and to automate more and we know what the event planners are looking for which is digitizing that experience more and so they will have to interact with salespeople until they have a better idea of what they really want.
So that's some of the innovations that we're doing and we're excited about about how we did in person comes back that of course hits, the hospitality cloud more than anything because you need that in person to drive that business.
Great. Thank you that was super helpful. Maybe one more quick one before.
We run out of time here, but kind of I guess.
That mix has shifted between hybrid in person and virtual have there been any shifts in your go to market strategy or I guess, how are you taking advantage of that from a from a go to market perspective.
Well the go to market Hasnt changed tremendously because our go to market strategy has now been well over a year I could say or maybe not well over a year, but.
Is the total of that program and what the total event program again, we know that you need some in person virtual and don't forget when Youre planning an in person event youre not planning a three or four months in advance. So in 2021, you're already thinking what's my 22 events can look like I'm, assuming the pandemic will lessen and therefore I needed. So mentally people have been there in 2021 at least a lot of our customers. If you think of <unk>.
'twenty 'twenty was all virtual virtual virtual maybe the first quarter was all virtual virtual but it started getting into 'twenty. One later on there thinking Mike My Big Conference in 'twenty, two which they are they are probably negotiating and contracting where they already have with a venue, they're making that decision. So so because of that we've been pushing all three and say we can help.
All three and that's basically what our go to market strategy has been for well over 12 months. So I don't think theres, a huge shift except except there's less friction as we said because people are now comfortable virtual they see in person coming back and they have confidence in their program and because of that they're more willing to commit and.
And they are also seeing that sometimes it's hard to find venues and right now because everyone's kind of jamming there their backlog in right now so that's kind of like we better get all our services our technology get everything lined up and again with our competition. They are point solutions that can't support the total event program, which positions us well, but our go to market strategy.
Is pretty stayed pretty consistent and we are a little bit pushing our strength and in person in particular that our virtual only competitors.
Kenneth Kennedy the Cat's Meow in 2020 in the beginning of the first half of 'twenty. One now I think that's showing the weakness so so in the end.
We're doing things like our in person lunches, where we used to do our product seminars, we've talked about that for years. We did hundreds of those a year that just add that in person lunch and learn tradeshows, we're going to have 125 of them ourselves because tradeshows are blossoming and we're seeing.
The trade shows where youre getting one trade show, that's coming up hopefully on <unk> to be able to make it in Europe . It's one of the biggest ones of the industry I think they have 12000 people are 10000 people coming to it.
Globally. So you are starting to see that come back. So we'll have a little bit of that more in our budget, which we did but we love that because of course events in person events is something we love to see because that certainly helps our business.
Great. Thank you.
And then the last time.
Oh I'm sorry go ahead.
I think we had one last one last caller.
Our analysts to cover.
Of course that will be from Morgan Stanley 's Josh Baer.
Great. Thank you for the question.
You mentioned several.
Virtual IRR expansions, just hoping to understand a little bit more about that how big is virtual IRR and how are you thinking about the durability of the virtual expansions.
Overtime.
Yes, Josh good question I mean look.
Virtual is off as they get into.
Like a balloon so as virtual may go down and some where you might have had a virtual event.
And then now it's become in person are hybrid so youre getting more on that side, but I think virtual is definitely doable. It's here to stay it's definitely.
A core part of everyone's total event program, because you might want to do it for cost effective shake engage an audience that are.
A far way could be just a two hour a four hour event, where it doesn't people aren't going to fly in which creates new use cases of events and again. This year round engagement with is an exciting thing where you can engage them again not just during the event, but in person to virtual so it's always going to be.
A critical part of events and this is really what it increased our Tam because what's making CMO think about and Ceos is is that all of a sudden they really have any they have a tool for any way they want to engage with all those stakeholders that can be more cost effective or let splits or I shouldn't say I think in personnel cost effective, but it's a more of a investment but you get that in depth.
Relationship. So I think all of them are going to be around in that and then you want that flexibility and the customers don't even necessarily know their mix I can tell you us as a company that does lots of events, we're still working through our mix and just kind of say well just see how it goes even though we put our like for example next year our customer conference. When we have it we're assuming we're going to grow we're going to continue to grow the in person.
But the goal is to grow both the in person and the and the virtual and so I think virtual IRR can range from from just 5000, a year for a customer we can range to $1 million and $5 a year, but I think.
It's going to continue to be a core part, but I think the emphasis on it is a little less because right now just to wait kind of things in life happen you had all in person then when all virtual now all of a sudden it's like we.
We had an index on in person, but it's going to end up being a balance and again, we're there for that balance and look just just just kind of as we wrap up look I think our opportunity now is big because look returned in person plays to our strength in place to the <unk> platform and ended the companies that can do all three and that includes virtual of course and then.
The other thing is a new way to engage attendees virtual and through video and then at this whole thing about expanding our ecosystem I think all those things all play towards where we are hopefully headed but if it if it's not then we're there wherever the balloon wherever you want to squeeze that we're there for that customer and for the whole ecosystem.
And we do have I don't know one or two more questions, we'll hear from credits friendly.
Okay.
It does very nice start to the very nice start to the year.
Now it comes from what it looks like things are getting back on track.
<unk> expanded dramatically in the quarter I was wondering if you could talk a little bit about the key drivers behind that and whether you think this is a sustainable trend based on your current knowledge.
Yes.
I apologize you said you said are <unk> kind of a couple of India.
Exactly.
Okay.
Sure talking about the right thing.
Look I think when we talked about the increases for <unk>.
In the past few periods, it's been very cloud centric because Saudi.
Howdy cloud was.
Lagging from a recovery perspective relative to the cloud.
But we're starting to see with the return of in person events. We are starting to see our hotel customers starting to reinvest in their groups as part of their business and so we are starting to see if we don't get me wrong. We saw a nice pickup in <unk> for the event cloud as we've been seeing for several quarters now but.
But we definitely saw a.
Larger than usual step up in the <unk> other effectively call. It three to four quarters, where the bank left behind where the banks Ottawa. So.
I think it's across the board it's more of the same in terms of the event cloud we continue to see.
Good adoption of the attendee hub, we're seeing the spend increasing are multiplying it or events that are at our clients' there as opposed to being Cannibalized Stefan.
Definitely increasing spend there as in person events begin to return, we're seeing increasing spend on onsite as well, but we're still holding onto.
Part of it Tony.
Ralph targeted times, where.
It doesn't mean less spending on it anyhow, but it's more than being offset by the higher spend on the onsite side. So that continues but not on the <unk> side, we're seeing that as Rajeev mentioned, the bounce back recovery remember getting the recovery spend from those hotel clients.
Two.
To start to.
Increased more spend on the grid business side, but look I think longer term, we had spoken about.
Approaching or being around 115% from a net dollar retention rate perspective, that's longer term don't think this year.
But that's all going to come from our clients are going to want one source of truth, one platform for where they go because things are getting really really complicated they're.
They are going to want being centralized in one place and our platforms can be the platform, where they can do that yes. Just one comment again, we had 108 was what we did at peak in 2019 or actually say peak just in 2019, that's what it was and so we're excited about how it's how we are starting to get back to basically where we were in 2019.
The one thing I just want to add some strategic why this is important as we look at as Billy mentioned as one platform and now people as they have to do all three types of events, they're going to they're going to be able to they're going to buy more of our modules and be more likely to buy our full platform because they have to be prepared to do all three and that's really the strategic.
A reason why we're excited about and they are kind of going up because it plays into our thesis that one platform that has to do all three different models and so therefore, you need more modules and you're more likely in the long term to stick with us the more modules that you get.
Because it just makes it stickier and because you are investing more into the business.
And our final question today will be from Jon Voight with water Tower research.
Great. Thanks, Hey, so Reggie kind of maybe sum up what really is driving your confidence in the rest of the year. Obviously there is some.
Interesting things in the macro environment, what is really driving it for the rest of the year for you.
Yes, so John good question, so look when I'm going to give a quick history don't forget about our beat and raise history. So when we say something we've had a great record when we were public before we had 11 straight quarters of beat and raise.
Look at the way, we looked at our confidence in our financial just think where we were in April of 2021, and all the changes in the market I mean look how we when we even though we werent public per say, we put out our numbers to the public market back at the end of April or in May and so our track record has been in my view Q2 of 2021 in Q3 of 'twenty, One Q4 of course.
Now this quarter. So we've already started to hopefully establish a track record many of the investors that have been following us since we put out our public numbers.
In Q2 of 'twenty, one so look so we have that track record I would say in the end I think we went through that difficult time.
When argue are much more difficult time than we've ever had ever in terms of projecting I think that that gives us tell you. How we look at things and the reason we're confident in the future is just simple we have gone through some tough times things are coming back to our strengths.
People are feeling more comfortable with all three methodologies are all three formats and we can service all of them and that look we have experienced management team thats weather. The storm, we've shown that we can predict things, even though it's a pretty.
A difficult environment, we do have our LOE costs.
Our efficiency in terms of our people with having a strong India presence and the way, we're able to work with our whole team and finally.
Think companies are really believing the power of live engagement through events, they're really seeing how events might be either number one or number two way of reaching their customers or their employees and it's really a channel that delivers and I think now as they're getting used to it and seeing it compared to the channels that they will continue to invest and they're going to want one kind of one platform and we believe as we get more in.
More integrated people are going to realize that it just makes sense to put everything in one place. If you can but this is something now that you need a software you can't do it with your backend technology. Your it department or use point solutions or use other software does that Jimmy him to do events like a lot of universities do our associations do.
And I think all of that leads to two to helping us with our solution, but look we still have of course, we were still not out of the pandemic. We still have different variants. We have some macroeconomic that with all of that but still we are positioned well and we feel comfortable where we are.
So with that I think that was the last question. We appreciate everyone joining our call.
Thank you all very much.
And again that does conclude this see that the first quarter 2022 earnings conference call. Thank you all for joining US you may now disconnect.
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