Q2 2022 Cvent Holding Corp Earnings Call
Emissions attendee engagement and our virtual solutions to broadcast the conference live and on demand to attendees now this new logo, which we closed in just about three weeks starting with using <unk> for just one event for nearly $300000 of ACB with plenty of room to grow.
One area in particular of our platform that continues to benefit from the return of in person.
Events is our onsite solutions, let me, giving a couple of examples.
Global professional networking association that haven't a $700000 ACB just increase their annual spend by almost 50% in Q2, bringing their total HCV to over $1 million.
Another example is a fortune 500 publicly traded financial and analytics company that had a $400000 ACD that grew around 50% to almost 600000, HCV and now has a TCE of almost $1 billion.
Both these organizations bought more of our in person solutions, something we saw repeatedly across many of our customers over the quarter.
The final point I'd like to make is that our event crop performance is how we as how our platform enables organizations to increase engagement opportunities even outside of event dates further extending the overall impact of the event.
For example, our <unk> hub, which was initially used primarily for virtual events is now also being leveraged for in person and hybrid events as Organisers look to use the solution to digitally engage with attendees before during and after an event takes place let.
Let me explain.
Even for an in person event, if it attendee fly, let's say to Vegas for a conference. They may still want to digitally engaged by networking online with other attendees prior to the vet, maybe they want to stream in early morning keynote online for their hotel room, what sessions they miss on demand at a later date or share fragrance session with their colleagues.
Each of these touch points offered deep attendee insights that organizations can act on this opportunity of year round engagement.
<unk> didn't exist before we.
We believe we're still in the early very early stages of this growth opportunity, we're investing heavily here and in other areas across our platform with the support of our <unk> thousand 300 person Tech team.
So to wrap up my comments on the bank cloud through our four key things driving our growth first.
Is this more dynamic events landscape organizations have more opportunities to engage than ever before through in person and virtual and hybrid events, which we call the triple threat.
And now that in person debenture back that triple threat is real.
This presents vastly more opportunity in just 15 months ago. When most people just thought about and used virtual <unk>.
Second our platform is more important than ever because of this changing environment organizations need greater flexibility and efficiency to manage the complexity of their total event program and maximize ROI. We have the all in one solution organizations are looking for.
Third as in person events continue to gain momentum our platform is perfectly positioned to serve this market, where we've been a leader for more than 22 years and finally our scale.
We have a global sales and marketing engine.
Are developers and customer service professionals and a strong global brand, we have the resources and the streamline processes to take advantage of our $30 billion Tam.
Now, let's pivot to the hospitality cloud, where we grew almost 30% year over year, demonstrating renewed strength coming out of the pandemic when it was heavily impacted.
Today, there are several things driving our hospitality growth first the return to in person events, the lifeblood of the hospitality class.
Pandemic driven digital transformation has turned hoteliers into tech savvy buyers, who now embraced technology more than ever to get their job done.
And third as hotels face staffing shortages.
Teams know they need to work smarter and more efficiently, which increases the reliance on CNN technology, let.
Let me talk about these a bit more in depth.
As in person events return hoteliers and venues want to increase their marketing efforts to get in front of planners before the competition.
In addition, given the market fluctuations and travel patterns that are that impact leisure travel hotels want to lock in both short and long term group bookings for operational stability.
All of this is driving demand for our sales and marketing solutions.
For example, a national property management company signed a one year $270000 ACB deal to leverage our marketing business transient solutions to help them meet their group business goals for 2023.
And one March Dallas Hotel had an <unk> of 235000 and this past quarter. They just signed an additional up sell for $110000 to attract even more meetings and group business through their newly renovated property.
There are many hotels out there.
That are spending tens of millions of dollars on renovations and we plan to continue to target newly renovated hotels as the pandemic eases.
In addition, we're seeing record engagement from destination management organizations and convention and visitor bureaus, just about every major city and most small to midsized cities have these organizations to bring meetings tourists and consumers to their city. For example, we had several large city BMO purchase our advertising solutions to some.
<unk> marketing group marketing efforts, helping us increased deal sizes by tens of thousands of dollars.
Another driver of our hospitality club growth as I mentioned earlier is the continued hotel staffing shortages.
<unk> technology can fill these gaps and help hoteliers automate and reduce manual processes across nearly every aspect of the group meeting process from sourcing to managing room blocks to diagramming meetings place to responding to briefly.
Yes.
Some examples are a leading global hotel chain signed a $486000 ACB contract to use <unk> interactive floor plan and <unk> diagramming solution across a number of hotels.
Nationally recognized operator of special event venues another target market for us signed a three year contracts.
For a TCE of $811000.
Precedence.
<unk> diagramming across nearly 100 of their venues.
And one large Las Vegas hotel.
That had an ACB of 600000 invested another 300000 for just our business intelligence software to help their sales team.
Prioritize what rfps to bid on.
To see how their bits compare to their competition take.
Taking their total ACB to $900000.
It's worth taking a pause and just focusing on the fact that this one hotel is now spending $900000 annually on <unk> products. This really highlights how critical technologies become to group and meeting focused hotels.
So as you can see from examples above hotels are continuing to buy.
Not just marketing packages to get in front of the growing interest and in person events, but also our software to automate streamline and more effectively manage their meetings and group business in.
In summary, we have momentum across our business driven by our strong competitive position and changing industry dynamics that work in our favor, but I'd be remiss, if I wrap up our call today without discussing the possible impact that the current macro economic uncertainty could have on our business now despite the macroeconomic conditions, we continue to see our <unk>.
Customers invest heavily in the total of that program.
And after being deprived of in person events for so long organizations recognize more than ever that they offer a highly effective way.
<unk> engagement generate leads deepen relationships and build brand loyalty, so even with the potential economic downturn, we believe events arent going to go anywhere because organizations now have the flexibility to run event programs with a mix of formats with optimizes their budget.
Our robust platform provides customers with the flexibility they need and our total event program go to market approach enables <unk> to power the event landscape, regardless of what comes our way.
In short we built the business that is positioned well to capitalize on the triple threat and that now has been bolstered by the return to in person events. Our experienced leadership team has successfully led the organization through to 2001, and 2008 recession, which enabled us each time to distance ourselves from the competition.
And we are confident in our ability to adapt grow.
And come out stronger no matter, what the environment is.
Now I'll turn it over to our CFO Billy.
Thanks, Rajiv and good afternoon, everyone.
First walk you through our Q2 2022 financial performance and then discuss our guidance for Q3 and updated guidance for full year 2022.
Our total Q2 revenue was 161.0 million.
An increase of 31, 1% year over year.
Meet the high end of our guidance for the quarter for the quarter by $6 8 million or four 4%.
The beat was primarily driven by planners moving quickly to add in person events as the pandemic eases.
This resulted in an acceleration of our sales cycle for onsite solutions and the time between contract signing and have been execution.
This also resulted in an associated higher amount of Upsells of our core event management product in the quarter.
Revenue growth was driven by both clubs and is due to the continued strong return of in person.
Additionally, as we mentioned in our last earnings call in May and May.
Q2, 2022 revenue growth benefits from the fact that we held our client conference Steve and connect in Q2 of this year compared to Q3 of 2021 the benefit to growth in Q2 from the timing of <unk> connect is approximately 300 basis points. So on a normalized basis Q2 growth would've been 28, 1%.
So in terms of revenue by cloud Q to Q2 of bank cloud revenue was $112 6 million.
An increase of 31, 6% year over year in Q2, <unk> cloud revenue was $48 3 million, an increase of 29, 8% year over year.
While revenue associated with our virtual solution is still one of our top event cloud revenue components. The acceleration in revenue growth in the quarter was the result of the return of in person events and a comparison to a prior year period when in person event, Vince revenue was de Minimis.
Ah study club revenue growth is due to the hotels increased demand for our advertising and software solutions driven by the continued return of in person.
We also saw a strong expansion of our net dollar retention rate to 114% up from 109% last quarter and 108% pre pandemic in Q4 of 2019.
Now, although we're very happy with the 114% net dollar retention rate in the 31% revenue growth in the quarter. Both of these metrics are being influenced by a quick pivot back to in person and comparing to a prior year period when in person was not very prevalent.
As a result, we believe that both metrics will start to drift down to a more sustainable level in the near term as the rate at which our clients increase their spend with us moderates from its current accelerated rate.
That means revenue growth of approximately 20%, which is consistent with what we have communicated in prior calls and as reflected in our Q3 guidance that I'm about to seek to yourself.
And our net dollar retention rate that is closer to our pre pandemic level of 190% to 110%.
Longer term, we still believe our net dollar retention rate will be approximately 115% as a result of the increased need for technology across the total event program.
In discussing the remainder of the income statement unless otherwise noted all references to expenses and operating results are on a non-GAAP basis, you can find information on the most directly comparable GAAP metrics in our second quarter earnings release available on the Investor Relations page of our website.
non-GAAP gross profit in the second quarter was $114 4 million.
We're 71, 1% of revenue compared to 76.0% in the same period of the prior year.
The year over year decline in our non-GAAP gross margin was primarily due to a higher percentage of total of total revenue in the quarter coming from onsite solutions in merchant services, which have lower margin profiles.
Excluding the impact of <unk> on our gross profit in the quarter non-GAAP gross margin would have been 71, 7%.
Which is up 20 basis points on a sequential basis relative to Q1 2022.
Moving down the income statement note that the operating expense increases in the second quarter them about to take you through reflects both meaningfully lower expenses from Covid cost saving measures that we are still in place in 2021, and the 2021 comparison period and a conscious decision today to prudently invest given the massive growth opportunity that we continue to see in <unk>.
'twenty two and beyond.
The main growth driver in each line item was employee expenses as a result of head count higher to support growth. In addition to increases we've seen an average compensation per employee due to wage inflation.
Sales and marketing expenses, which include the majority of our <unk> connect costs decreased 45%.
However, the 45% growth in sales and marketing expenses does or does not reflect the true growth of that line because of the <unk> connect timing, which results in no sales and marketing expenses for sale for Steve on connect in Q2 of 2021, while the expenses do appear in Q2 of 2022.
So excluding expenses receiver connect in Q2.
Thank you too from sales and marketing expense growth would have been 25 zero percent.
Research the research and development expenses increased 30% and general in general and administrative expenses increased 22, 2% and.
In addition to increased employee expenses R&D growth was driven by increased contracted services and G&A growth was driven by public company costs that did not exist in Q2 of 2021.
Shifting to earnings adjusted EBITDA was $23 4 million or 14, 5% of revenue, which represents a $7 $3 million beat over the high end of our guidance and a 410 basis point beat in terms of margin there.
The earnings beat is primarily the result of our $6 $8 million revenue over performance will.
But we think is even more impressive is the 750 basis point margin expansion, we saw in the quarter when compared sequentially to Q1 of 2022 after excluding the impact of Sema connect had on our Q2 2022 adjusted EBITDA margin.
Adjusted EBITDA margin was 16, 8% in the quarter, excluding the impact of <unk> and connect.
This very healthy sequential margin expansion as a result of the leverage we are seeing across all operating expense lines as we reap the rewards of the incremental investments we've been making since late 2020 in the form of margin expansion.
Turning to our balance sheet, we ended Q2 with cash cash equivalents and short term investments of $123 3 million a.
The decrease of $69 $7 million from the end of the first quarter of 'twenty two.
The decrease was primarily the result of us paying down our new revolving credit facility by $70.0 million in the quarter.
As a reminder, we entered into a $500 million revolving credit facility during the quarter and use that new facility to repay our $266 million term loan.
This new facility carries a lower interest rate than our prior term loan facility and gives us the ability to reduce interest expense by one our borrowing what we need.
<unk> at any given time we're.
More importantly, it significantly expands our borrowing capacity for potential future M&A.
We do not intend to use this facility to fund operations, given our positive adjusted free cash flow position.
At the end of Q2, our debt balance under the new facility was $195 million down from $266 million at the end of Q1.
Finally, adjusted free cash flow before interest payments on our long term debt and the change in client cash related to merchant services was $17 6 million for the second quarter.
Compared to $38 6 million in the second quarter of last year adjust.
Adjusted free cash flow in the second quarter of last year was a typically high as a result of the payment plans that allow clients to defer payment of their 2020 and voices to 2021 due to COVID-19.
Deferred revenue at the end of the second quarter was $268 6 million, an increase of 11, 1% compared to the second quarter of the prior year due to year over year bookings growth across the business.
Let's let's now turn to our guidance for Q.
Starting with revenue.
We expect Q3 2022 revenue of 158 zero million.
To a 159.0 million up 18, 2% at the midpoint compared to Q3 of 2021.
There are three reasons for the expected sequential drop in revenue growth from the second quarter and although I touched on all three when discussing our Q2 results. Let me go into more detail on each.
The first is related to the impact of the timing of Keybanc connect which explains approximately 550 basis points of the drop.
As already discussed Q2 revenue Q2 growth benefits from approximately 300 basis points as a result of Keybanc connecting held in Q2 of 2022 versus Q3 of 2021.
Without this benefit Q2 2022 growth would have been 28, 1% as I mentioned earlier.
The opposite happens to Q3 2022 growth. It is expected to be 250 basis points lower than what it would've been if it weren't for the inconsistent timing of Steve on connect between 2022 and 2021, so excluding the timing related impact to third quarter growth the midpoint of our guidance would have been 27% which is consistent with.
What we shared in our last call in May when we said that we'd see approximately 20% revenue growth in Q3 after normalizing Q3 growth for <unk> connect.
The amount of in person of that revenue in Q2 of 2021 was de Minimis, while the amount of in person event revenue in Q3 of 2021 significantly increased sequentially compared to Q2 of 2021 trading a higher base of revenue off of which to grow.
And third we saw an acceleration of our sales cycle and the time between contract signing and have been execution in Q2 of.
Q3 revenue guidance does not assume a similar accelerated rate of growth.
The accelerated rate.
Shifting to full year revenue guidance as a result of our strong second quarter revenue results. We are increasing our full year 2022 revenue range to $624 9 million.
To $628 $4 million.
Up 28% compared to the prior year at the midpoint and reflects a $2 $6 million raised over the midpoint of the guidance we shared in our last earnings call in early May.
The raise in raising our full year guidance, while less than our second quarter beat represents some prudent considering the current macroeconomic environment.
Moving to adjusted EBITDA, We expect third quarter 2022, adjusted EBITDA of $27 8 million to $28 6 million representing.
Representing a $17 eight adjusted EBITDA margin at the midpoint.
The $17 eight adjusted EBITDA margin is sequentially up from the $16 eight adjusted EBITDA margin. We had in Q2 2022, excluding the impact of Stephen connect had an adjusted EBITDA margin in the quarter.
And it reflects the continued operating leverage we're seeing as we reap the rewards of the incremental investments we've been making since late 2020 in the form of margin expansion.
Turning to full year adjusted EBITDA guidance as a result of the strong second quarter. Adjusted EBITDA results. We are increasing our full year 2022, adjusted EBITDA guidance range to $104 7 million to $109 6 million.
This reflects a $2 million increase over the midpoint of the guidance. We shared on our last earnings call in May and a 20 basis point increase in our adjusted EBITDA margin guidance at the midpoint.
The midpoint of our adjusted EBITDA margin guidance to 17, 1%.
The $2.0 million raised is less than the $7 3 million second quarter beat because of a slight shift in our revenue mix expectation expectations and the prudence, we built into the second half of 2022 revenue forecast considering the current macroeconomic environment.
In closing, we're very pleased with our Q2, 31% revenue growth and 70 to 150 basis points of adjusted EBITDA margin expansion on a normalized basis.
We believe these results exhibit the strong position and with <unk> finds itself given the return of in person continued interest in virtual events and our ability to provide one integrated platform for virtual hybrid and in person offering customers flexibility in the event of changing economic circumstances.
We built some prudence into our guidance for the second half of the year, considering the current macroeconomic environment, but we're still forecasting to follow through on growth on the growth for Q3, we messaged in our last call we.
We feel good about performance in the first half of the year and we feel we are well positioned to take our disproportionate share of the $30 billion Tam.
Now I'll turn it over to the operator for Q&A.
And as a reminder, if you would like to ask a question. Please signal by pressing star one our first question will come from Josh Baer of Morgan Stanley .
Go ahead.
Thanks for the question and congrats on the outperformance this quarter.
Wanted to just take a step back from kind of ignore macro for a minute and just ask you question about hybrid in the future of hybrid events.
What's your opinion on the future of hybrid events and does that does that stick longer term and then.
The follow up is like how much of your business is hybrid and how will that play out for you.
Yes, Jeff Good question. So let me first kind of give you a general view, what we said before.
As we said about 50% of the business will be in person.
25% will be hybrid and about 25% will be virtual so just kind of and that's still playing out no. One can tell exactly what's going to be but what we're seeing is is that first on the platform whether it's in person. Once you have two of the three in the mix you have to go to a platform.
Let's just say before you see virtual that was kind of what we all saw 15 18 months ago, and then with the in person coming back that's changed everything and of course hybrid. So basically what's happening is is that we think in the long term that the answer is yes, I mean virtual used to be fringe.
Fringe element of the business, but now it's a critical part and as the industry moves forward, it's going to use the mix depending in particular, let's say if theres a downturn people are going to want to use virtual more because it's less expensive.
But the hybrid is also being but we're seeing trends of it being used for the larger conferences like if youre doing a large conference Gino the goal of having in person as heavy engagement.
More engagement, but then when you do a virtually you'll get a larger audience. So usually it's a combination of doing both for the hybrid for the larger events in the mid size not for the smaller but we're very optimistic.
Are the future of hybrid just simply because it's a it's a superior format, depending on what the attendee wants.
That's really helpful.
And then if I could just ask.
For your help us a little exercise so assume a company.
The spacing to budgetary.
Pressure and decides to shift from in person events to virtual.
Can you like how much might that the company and then how does the spend to Steven.
Changed sharp.
Political scenario.
Yeah. So the example, we gave of a of a scenario was again I'll just repeat it real quick is just that a client, let's say had an event for a 4000 person. It was let's say roughly $10 million.
These are reasonable numbers by the way. This is kind of for two or three day conference that Youll spend in Vegas, and then related virtually let's just call. It was around <unk> 5 million 500, 600000, procure virtual and then when they did hybrid it with somewhere between which is about $6 million. So we had about.
2000, let's say half the people are in person the other eight were virtual.
It can range from $10 6 million to 500000, and so your CMO wants heavy engagement more engagement and look the reality is as studies have shown three times more engagement in person. That's the benefit the negative of course is the cost.
And the global reach so what the great thing about our product is let's just say a company wants to cut back its budget once the flexibility and the CFO both the CMO cut back they can choose and say hey, we spent $10 million if it's for all the hard cost of an event.
And let's say $10 million and we can take it all the way down and dial it down to 500 600000, but the key thing is we're not going to cancel the event. The second key thing is whatever way they do it whether it's the virtual and in person or hybrid.
Then.
They still need signal technology and relatively consistently we get.
We get a relative consistent amount from each each format. They use because generally if you do a pure virtual you might get a few more people, but then you don't use as many products, but in the end, we generally get a healthy number from any format. They choose and we if you remember Josh we use the term squeeze the balloon so let's say they went from pure in person and a squeeze into virtual we get a lot of benefit there.
Sure and if they squeeze and it goes.
Back in person then we get benefit back and so again with virtual you get more <unk>.
And you get less on sites and maybe more attendee hub.
But then but.
But if you do it in person.
Get more modules that maybe less attendees if its purion person. So it's a balance and that's why what I think is our platform will be really strategic for an organization to move up or down depending on their budgeting bowls.
Great. Thank you very much.
Yeah.
Yeah.
And our next question.
Pardon me our next question will come from Arun <unk>.
With William Blair.
Please go ahead.
Hi, John .
Glad to see what you guys are hearing from customers around the outlook for events and a possible recessionary environment, you guys still seeing strong demand for increasing our customers signing up maybe switching back to Rachel and the back half of the year cut costs.
Hey, Rachel this is Billy.
Look.
Right now, we're not really seeing any material impact from potential recession outlook.
Can't predict what's going to happen in the future.
But right now we're just there's some small signs maybe some indecision on some cases, but really nothing major and that's why we're very confident in our growth projections, but.
Generally speaking you mentioned about I think Rod you just mentioned in his remarks.
Are we seeing people who are moving from in person to virtual look at the end of the day companies. They wanted me great events.
So I'm not going to get canceled.
They're looking for and they're going to be looking for technology to help them meet.
Whether it be in person hybrid or virtually and really drive engagement of their attendees.
And so because we have that all in one platform.
They are truly is and you know some people say, we're in a recession and people aren't clients, saying they are but if for some reason there are budgetary constraints that our clients and they want to.
To reduce costs, they can move to either hybrid or virtual.
<unk> format, and we can be there for them because of our technology that supports all all three types now I will say that's the event cloud.
Didnt mentioned the hostile the cloud, but I'll just real quickly just touch on that because it is obviously a big part of our business.
The hotels right now theyre in budgeting season for 2023, and frankly in the discussions we've had with them, it's not really coming up I think you might have seen.
Some hotels there is actually some really good.
Metrics that are coming out from the hotels that show that there is really good signs of life from the group meetings business.
Remember the events that.
The planners are working with with the hotels right now Theyre planning well in advance well out and so the hotels that you spend today to get those advance events are going to be 12, 18, 24 months out and this is the best business for them, it's predictable because it's contracted since most highly profitable because they are getting all of those meeting rooms. In addition to the food and Bev.
<unk>.
And the hotel rooms that where people are saying.
Yes.
They are having the biggest staffing shortages in history, and so automation is that much more important for them and especially in a recessionary environment or they're going to want to potentially cut because theyre going to need.
More technology to do that.
And the last thing I would point I would make during COVID-19 planners really not used to.
The automation technology. They got for example, we've got a three D. Diagramming software that allows planners to go online they can see meeting rooms and very real.
Real ways I can see.
What the view out the window is and so planners are going to expect to be able to do that moving forward and so they are really driving things for.
Outside of cloud customers to use technology to do that.
Perfect. That's super helpful. Thank you.
Our next question will come from DJ Hynes with Canaccord.
Please go ahead.
Hey, Thanks, guys, Billy will have youre talking about hospitality cloud growth there has been pretty significantly accelerating we don't have a ton of operating history with that business as.
As the comps get more difficult.
Correlated do you think hospitality cloud growth is with event cloud growth like should it moves faster inline slower any color would help.
Look I think it is.
Going to be on the longer term in line I mean look depending on what goes on with the economy.
You might see one get out of whack. The other obviously the bank cloud got there.
They are a tailwind across the business right technology utilization impacts both sides of the house.
But on the bank side, obviously, we've got a really big pivot when it comes to what we call the triple threat or we can do not only in personal like we used to do pre pandemic, but now we've got hybrid and virtual and Theres, just a lot more engagement and things that our clients are going to do there and so.
Look in the quarter, you saw slightly higher growth out of out of the bank cloud I think in the short term we are expecting that the event cloud is going to have.
Higher growth in hospitality cloud.
But look.
Even though things are definitely outside of the call is showing strong signs of life, we're still not we're still not fully there.
We're not expecting to get there until 2023, and that's where I think from thereon youll start to see the growth rates even out between the two class.
Got it and then just a quick follow up remind me on the lead time of one and.
An event booking Hopkins and event cloud bookings versus one of your customers actually planning on hosting the event like how far those apart.
Yes, so I mean, obviously it depends on the size of the event the larger the event the longer Alex is going to be I mean look for the mega events, they're starting to like a year out like once their event and.
The next day, they are getting ready to do that right but.
That's the exception for us not the rule most of our events are I think like a 150 people in general are the average attendees those events, obviously youre going to be planned a lot more.
Tighter in.
Look I think on an average those are going to be maybe three to six months out and thats one of the big things that really benefits us in Q2, we're seeing planners they are saying alright, and epic is definitely easing.
I quickly want to get this event spun up and so that timeframe of three to six months with definitely pulled in in addition to you've got customers that are coming to us and they're saying I need to sign a contract tomorrow, because I need to do my bank one month.
Because they are just things are just quickly turning for trim person and so that's that's what we're seeing hey, DJ just a couple of thoughts on the hospitality cloud don't forget the big conventions might be booking out two three years in advance and there is a lot of tightness that so many organizations come back all of a sudden so you need to book them out.
And then as Billy said that when the smaller events, so the booking windows definitely shrunk.
For sure safety with event cloud.
People are moving more and more rapidly and quickly because they're kind of waiting to say hey, what's the environment. Like generally was enforced endemic maybe now it might be because of the economic environment, but but so it is shortening and that is one of the reasons why as Billy mentioned, we had acceleration of our of our revenue just because people are booking faster in shorter windows, but in the long.
<unk>, probably get a little bit more balanced, but I think things.
We'll be probably shorter in.
In the mid even the mid to long term is just people are just acting a little bit differently and that might be a go forward thing.
Yep very helpful. Okay. Thanks, guys.
Yes.
Our next question comes from the line of Scott Berg with Wuhan.
Please go ahead.
Hi, everyone. This is Michael Rockers I'm on for Scott Berg, just one quick one for me today.
How should we think about sales capacity additions moving forward.
The spend here.
Could drive that 20% plus growth do.
Do you kind of expect to hire in line with that revenue growth.
Is there any shift in strategy based on the macro.
Yes.
Look.
We're definitely going to be as we look at the macro environment and the focus on profitability.
We're definitely gonna take a balanced approach and we've always been a balanced <unk>.
<unk> approach there and look for the past 15 years, we've generated an EBITDA profit in our DNA, but along the way we've definitely we've been able to drive revenue growth along with that profitability and thats kind of going to be our plan moving forward and obviously.
You need to.
Prime the pump in there as you.
You need to do certain things to get that growth above 20%, what we've been really investing for the last two years with project flex switches the rewrite of our new 10 year rewrite of our core event management platform, and then pivoting to virtual and quickly building that product and making it very competitive as we think it is today, we've really been investing in R&D.
I think what we're probably going to see is youre going to see.
A decrease necessarily invest in R&D, but we're not going to see that incremental increases that are going to be in line with the revenue growth, it's really sales marketing, where we pulled back the most during the pandemic and we've definitely been investing in that area, but I think.
Youre going to see a continued investment there driven given the greenfield opportunity that we see there and so yes, I think there is probably.
It could outpace the revenue growth is knocking outpaced the biologics because of our.
Our focus moving forward with our plan that we shared with the the pipes back in May of 2021 is that we're going to expand margins in the plan was to do that starting the second half of 'twenty two and that's as you can see what we've been starting to do.
Great Super helpful. Thank you.
Okay.
And our final question will come from John Roy with water tolerant research.
Please go ahead great.
Great. So Reggie once your question some of your biggest competitors announced some pretty significant layoffs recently.
I guess just two questions here one what is what do you think is the main driver of that going on for them.
Have you guys been able to grow and the second thing is how does that change the landscape on a competitive standpoint going forward.
Good question I mean, there has been a.
Theres been some layoffs and a lot of larger.
<unk> and I'll just take the kind of focus on US is is that we're getting into in person, which there has been a real shift towards that.
Difficult, we believe we have deep moats in there and we've been doing it for 22 years and it's much more complicated develop in person tools in our view the virtual even though I'm not saying virtual easy.
So that was kind of one is that the in person is very difficult to develop and we have a real deep experience in that and we're of course.
Disproportionately benefiting for going back to in person.
The second thing is is that look the triple threat.
So everything was virtual virtual virtual people worrying about the triple threat, which is of course virtual in person and hybrid and once you start going back in person. It really made the triple threat real so now people like I need a platform because I may do an in person event that swap switches over to virtual all of a sudden for whatever reason it could be budgetary it could be that.
Just trying to figure it out but whatever it is they need a mix and they needed to be on one platform to make sure. They safeguard D. The attending journey not just the organization journey, but for the attending to make it seamlessly and with ours. We can run all the events of one platform. Another thing that I think is our strength.
Is is that we are playing to our strength in person and platform is really where we always had a shrink before the pandemic. We developed a virtual a little later than a lot of FERC, but now we're again going back to our strength and we have a strong vertical in the last couple of things as I'll say look our financial strength, our ability to scale profitably.
And we have the resources.
A little bit more mature processes, we've been through the <unk>. So we know how to handle this we knew this was going to happen. So we've been planning it.
Even though no one wants to trade a pandemic for a potential recession. This is frankly, where we have a lot of experience in and this is where our competitors generally would cut back and no wonder wait this is where we invested the balanced investment and a thoughtful but we're playing to our strength. So we think theres going to be.
A good opportunity in the last couple of things our brands I mean, we have 1000 people in sales and marketing.
And we built our brand and our brand is continuing to grow from a global view because of again, having one platform and in depth products and I think our view is that we're going to continue to thoughtfully invest.
We are cautiously.
Cautiously I am going to say the word optimistic about how things are going even though with the backdrop of the macroeconomic we know that things could shift a little bit, but we think events are a critical and we're going to continue to do that balanced approach of investing and from a competitive view. We think we're much better positioned than we were candidly 12 months ago, or certainly 18 months ago, and we think we're going to continue.
Take a disproportionate share because of all the things I just talked.
<unk> talked about.
Great. Thanks strategy.
Right.
Well thanks for the question there.
And that will conclude today's conference. Thank you for your participation and you may now disconnect.
Okay.
Sure.