Insight
The Company was founded in 1999 in theWashington, D.C. metro area as a provider of event registration software to meeting and event organizers. Since that time, we have continually innovated to develop a comprehensive platform of event marketing and management solutions and hospitality solutions. We believe that since inception, we have demonstrated an entrepreneurial spirit, culture of teamwork and sense of resilience, particularly in moments of crisis. This is best evidenced by the Company's continued progress and innovation in the midst of challenges like the recessions of 2001 and 2008 and the global COVID-19 pandemic. The Company is a leading cloud-based platform of enterprise event marketing and management and hospitality solutions. We power the marketing and management of meetings and events through our Event Cloud and Hospitality Cloud solutions. Our Event Cloud consists of tools to enable event organizers to manage the entire event lifecycle and deliver engaging experiences across every type of event and all event delivery models: in-person, virtual and hybrid. Event Cloud serves as the system of record for event and engagement data collected across an organization's total event program, which comprises every internal and external event an organization hosts or attends ("Total Event Program"). Our Hospitality Cloud offers a marketplace that connects event organizers looking for the appropriate event space for their in-person and hybrid events with hoteliers and venue operators through a vertical search engine built on our proprietary database of detailed event space information. In addition, our Hospitality Cloud provides marketing and software solutions that hotels and venues leverage to digitally showcase their event space to attract valuable leads and grow their businesses. This combination of the Cvent Event Cloud and Hospitality Cloud results in a cohesive platform that we believe generates powerful network effects and attracts more event organizers and hotels and venues. Impact of COVID-19 The global COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, including inflation, changes in interest rates, supply chain disruptions and labor shortages, which, in turn, could decrease overall economic activity or cause a recession in theU.S. or in the global economy. COVID-19 and these macroeconomic conditions significantly impacted our ability to sign new clients, and to upsell to and renew contracts with our existing clients, starting inMarch 2020 . Our customer count declined 7.5% as ofJune 30, 2022 as compared toJune 30, 2021 . The extent to which the ongoing presence of COVID-19 and these macroeconomic conditions will affect our business is uncertain and will depend on political, social, economic and regulatory forces that are outside of the Company's control, including but not limited to the incidence and severity of additional virus variants and actions that may be taken by regulators and businesses (including our customers) in response to the pandemic and these macroeconomic conditions. See also Part I. Item 1A. "Risk Factors - The effects of the global COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 for more information. Key Business Metric In addition to our financial information determined in accordance with generally accepted accounting principles in theU.S. ("GAAP"), we review the following key business metric to measure our performance, identify trends, formulate business plans and make strategic decisions.
Net retention rate in dollars
To evaluate the efficacy of our land and expand model, we examine the rate at which our customers increase their spend with us for our solutions. Our net dollar retention rate measures our ability to retain and increase spend across our existing customer base through expanded use of our platform, offset by customers who choose to stop using our solutions or spend less with us.
We calculate our net dollar retention rate as a quotient of the following:
•
Denominator: Revenue from customers whose revenue existed in the twelve months ending on the day twelve months prior to the date as of which the retention rate is being reported.
•
Numerator: Last 12 months revenue from customers whose revenue is reflected in the denominator.
In the Event Cloud, we define a customer as a party who has entered into an
active subscription contract with us. The majority of our customers are parties
who are separate organizations. In certain instances, separate business units of
an organization that have each entered into separate subscription agreements
with us are considered separate customers. In the Hospitality Cloud, we define a
19
--------------------------------------------------------------------------------
customer as an entity with an active account with the Company, where the
customer pays for the account or the account has been paid for by the customer's
parent company. For example, a corporate brand's individual hotel properties
whose accounts are paid for by that property's corporate brand would be
considered separate customers.
The calculation excludes transactional revenue, revenue associated with our
client conference and revenue associated with acquisitions where by-client
revenue is not available. This revenue comprised 5.1% and 1.6% of revenue for
the three months ended June 30, 2022 and 2021, respectively, and 4.4% and 2.3%
of revenue for the six months ended June 30, 2022 and 2021, respectively.
We believe our ability to not only retain, but upsell and cross-sell additional
features and products to, our existing customers will continue to support our
net dollar retention rate. As of June 30, 2022 and 2021, our net dollar
retention rate was 114.1% and 85.0%, respectively. The year-over-year increase
in our net dollar retention rate is primarily due to the lessening impact of the
global COVID-19 pandemic in 2021 and 2022 on both the Event and Hospitality
Clouds, and the adoption of our new virtual solution, Attendee Hub. With
in-person meetings and events now beginning to quickly return, our net dollar
retention rate currently exceeds pre-COVID levels. Although we believe our net
dollar retention rate will approximate pre-COVID levels in the near-term as the
rate of growth of in-person meetings and events normalizes, we believe our net
dollar retention rate may exceed historical levels longer-term as a result of
the market opportunity created by virtual and hybrid events and the accelerated
digitization of the meetings and events industry.
Our net dollar retention rate may fluctuate as a result of a number of factors,
including the growing level of our revenue base, the level of penetration within
our customer base, expansion of products and features, our ability to retain our
customers and our ability to upsell and cross-sell to our customers. Our
calculation of net dollar retention rate may differ from similarly titled
metrics presented by other companies.
Components of operating results
Revenue
We generate revenue from two primary sources: Event Cloud subscription-based
solutions and Hospitality Cloud marketing-based and subscription-based
solutions. Subscription-based solution revenue consists primarily of fees to
provide our customers with access to our cloud-based software platform.
Marketing-based solution revenue consists primarily of fees for digital
advertising on the Cvent Supplier Network ("CSN") or one of our other online
advertising platforms.
Event Cloud
We generate the majority of our Event Cloud revenue from subscriptions for our
event marketing and management software solution. Subscription revenue is driven
primarily by the number of registrations purchased and the number and complexity
of mobile applications, onsite events and virtual events purchased in addition
to additional modules that enhance the functionality of the software solution.
In some cases, the subscription price is based on the number of subscriptions
being purchased by the customer.
The terms of our Event Cloud contracts are typically non-cancellable, have
annual or multi-year terms, and are billed in advance on an annual or quarterly
basis, as applicable. In the case of multi-year agreements, the agreement
sometimes includes annual price increases over the contract term. Our agreements
are sum-certain and not pay-as-you-go. Generally, if a customer exceeds their
purchased number of registrations, the customer will incur an overage fee. We
recognize revenue associated with Event Cloud subscription agreements ratably
over the term of the contract. Certain revenue associated with Onsite Solutions
and Attendee Hub products is recognized at a point in time as the services are
performed and the performance obligations are satisfied. Amounts that have been
contractually invoiced are initially recorded as deferred revenue and are
recognized as revenue ratably over the subscription period. We refer to
contractual amounts that have not been invoiced as unbilled contract value, and
together with deferred revenue, remaining performance obligations. Unbilled
contract value is not reflected in our consolidated financial statements.
20
--------------------------------------------------------------------------------
Home cloud
We generate our Hospitality Cloud revenue from marketing and subscription-based software solutions. Marketing solutions revenue is primarily driven by the number of advertisements purchased on CSN. The advertisement price is primarily determined by the term, targeted geography, market tier, number and prominence of the advertising placement. Subscription revenue is driven primarily by the number of licenses purchased for our lead scoring solution to prioritize group RFPs, three-dimensional hotel tours, event diagramming to collaborate with event organizers on designing optimal event layouts and viewing three-dimensional renderings, room block management to enable event attendees to reserve hotel rooms, business transient solutions and business intelligence solutions to benchmark against internal and targeted competitive metrics. In some cases, the subscription price is based on the number of subscriptions being purchased by the customer. The terms of our subscription and marketing contracts are typically non-cancellable, annual or multi-year terms, and are typically billed in advance on an annual or quarterly basis, as applicable. In the case of multi-year agreements, the agreement sometimes includes annual price increases over the contract term. Our agreements are typically sum-certain and not based on usage. We recognize revenue associated with these agreements ratably over the term of the subscription or advertising period. Amounts that have been contractually invoiced are initially recorded as deferred revenue and are recognized as revenue ratably over the subscription or advertising period. We refer to contractual amounts that have not been invoiced as unbilled contract value, and together with deferred revenue, remaining performance obligations. Unbilled contract value is not reflected in our consolidated financial statements. See "Key Factors Affecting Our Performance -Seasonality" included in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 for the effects of seasonality on our Hospitality Cloud Revenue. For multi-year agreements for either Event Cloud or Hospitality Cloud solutions, we typically invoice the amount for the first year of the contract at signing, followed by subsequent annual invoices at the anniversary of each year. Since we bill most of our customers in advance, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced or recognized in revenue, they are considered by us to be unbilled contract value, and together with deferred revenue, remaining performance obligations. As ofJune 30, 2022 andDecember 31, 2021 our total current deferred revenue was$268.6 million and$239.8 million , respectively, which amounts do not include unbilled contract value for contracts not yet billed of$516.4 million and$573.4 million , respectively. We expect that the amount of unbilled contract value relative to the total value of our contracts will change from year to year for several reasons, including the amount of cash collected early in the contract term, the specific timing and duration of customer agreements, varying invoicing cycles of agreements, the specific timing of customer renewal, changes in customer financial circumstances and foreign currency fluctuations. We expect to recognize approximately 69.9% of our remaining performance obligations as revenue over the subsequent 24 months, and the remainder thereafter. Cost of revenue Cost of revenue primarily consists of employee-related expenses, such as salaries, benefits, bonuses and stock-based compensation, related to providing support and hosting our solutions, costs of cloud-based data center capacity, software license fees, costs to support our onsite solutions and virtual products, interchange fees related to merchant services and amortization expense associated with capitalized software. In addition, we allocate a portion of overhead, such as rent and depreciation and amortization to cost of revenue based on headcount. Although the Company breaks out revenue by cloud, we do not track or manage the business by cost of revenue by cloud. Rather, we manage cost of revenue by type of direct cost, and a significant portion of these direct costs are shared costs to support both Event Cloud and Hospitality Cloud solutions. This is consistent with the Company's approach to management of the business as one comprehensive solution for the entire event management lifecycle. We are invested in our customers' success and as such, we will continue to invest in providing support, expanding our capacity to support our growth and developing new features to support virtual, hybrid and in-person events and enhance our existing products, which in the near-term is expected to result in higher cost of revenue in absolute dollars.
Gross profit and gross margin
Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. We expect that our gross margin may fluctuate from period to period as a result of seasonality related to our onsite solutions, virtual and merchant services products in the near-term, and additional costs associated with potential future acquisitions.
Operating Expenses
21 --------------------------------------------------------------------------------
Our operating expenses include sales and marketing expenses, research and development expenses, general and administrative expenses, and amortization of intangible assets, excluding amounts included in cost of sales.
Sales and Marketing
Sales and marketing expenses primarily consist of personnel and related expenses for our sales and marketing staff, including salaries, benefits, bonuses, commissions and stock-based compensation. We capitalize commissions when they are earned by staff, which is when the customer contract is signed. We amortize capitalized commissions over the average historic customer contract life. In addition to staff costs, our cost of marketing includes product marketing and other brand-building and lead generation tactics such as webinars, trade shows, product seminars, content marketing, digital marketing, third-party content distribution and our annual client conference, Cvent CONNECT. In addition, we also allocate a portion of overhead, such as rent and depreciation to sales and marketing based on headcount. We intend to continue to invest in sales and marketing and expect spending in these areas to increase in absolute dollars in the near-term as we continue to expand our business both domestically and internationally and take advantage of the growing need for virtual and hybrid events. We expect sales and marketing expenses to continue to be among the most significant components of our operating expenses. Research and development Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, bonuses and stock-based compensation and the cost of third-party contractors. Research and development expenses, other than software development costs that qualify for capitalization, are expensed as incurred. In addition, we allocate a portion of overhead, such as rent and depreciation to research and development based on headcount. With the exception of software developed by companies we have acquired, we maintain a unified software code base for our entire platform, which we believe improves the efficiency of our research and development activities. We expect research and development expenses to increase in absolute dollars in the near-term as we continue to expand our product offerings, including our virtual and hybrid event functionality, and integrate and support potential future acquired businesses and technologies.
general and administrative
General and administrative expenses consist primarily of personnel and related expenses for administrative, internal information technology operations, finance, legal and human resource staff, including salaries, benefits, bonuses and stock-based compensation, as well as professional fees, insurance premiums and other corporate expenses. In addition, we allocate a portion of overhead, such as rent and depreciation to general and administrative based on headcount. We expect our general and administrative expenses to increase in absolute dollars in the near-term as we continue to expand our operations and hire additional personnel to support our growth. Additionally, we expect to incur incremental general and administrative expenses to comply with the requirements of being a public company.
Amortization of intangible assets, excluding amounts included in cost of sales
Intangible asset amortization, exclusive of amounts included in cost of revenue, consists entirely of amortization expenses related to acquired customer relationship and trademark intangible assets. This line item excludes intangible asset amortization related to cost of revenue, which is defined as acquired developed technology and capitalized software intangible asset amortization.
We expect to continue to pursue strategic acquisition opportunities and, if successful, expect our intangible asset amortization expense to increase in absolute dollars.
Other
Our other income/expense items include interest expense, amortization of deferred financing fees and debt discount, gain/loss on divestitures, net and other income/expense, net.
Interest expense
Interest expense relates primarily to interest payments on our outstanding
borrowings under our credit facilities as further described in Note 11. "Debt"
to the unaudited condensed consolidated financial statements included in Part I,
Item 1 of this Quarterly
22
--------------------------------------------------------------------------------
Report. From
Amortization of deferred financing costs and debt discount
The amortization of deferred financing costs and the debt discount consists of the amortization of the initial fees paid at the beginning of our credit facilities.
Loss on extinguishment of debt
Loss on extinguishment of debt consists of the write-off of unamortized deferred financing costs associated with the repayment and termination of the Term Loan Facility (as defined in Note 11. "Debt" to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report).
Other income, net
Other income/(expense), net, primarily includes interest income, foreign exchange gains or losses and import tax credits.
Provision for income taxes
The provision for income taxes consists mainly of income taxes
federal and state income taxes and income taxes in foreign jurisdictions in which we do business.
23 --------------------------------------------------------------------------------
Operating results
Comparison of the three months ended
The following table sets forth our consolidated statement of operations for the
periods indicated:
Three Months Ended June 30,
2022 2021
(in thousands)
Consolidated Statement of Operations Data:
Revenue:
Event cloud $ 112,634 $ 85,590
Hospitality cloud 48,328 37,224
Total revenue 160,962 122,814
Cost of revenue 65,560 45,999
Gross profit 95,402 76,815
Operating expenses:
Sales and marketing 48,826 33,070
Research and development 33,128 24,657
General and administrative 25,997 21,600
Intangible asset amortization, exclusive of amounts
included in cost of revenue 12,160 12,929
Total operating expenses 120,111 92,256
Loss from operations (24,709 ) (15,441 )
Interest expense (2,605 ) (7,638 )
Amortization of deferred financial costs and debt
discount (257 ) (941 )
Loss on extinguishment of debt (3,219 ) -
Other income, net 624 3,998
Loss before income taxes (30,166 ) (20,022 )
Provision for income taxes 1,334 1,825
Net loss $ (31,500 ) $ (21,847 )
24
--------------------------------------------------------------------------------
The following table sets forth data from our Consolidated Statements of Income expressed as a percentage of total revenue for the periods indicated:
Three Months
Ended
2022
2021
Consolidated Statement of Operations Data:
Revenue:
Event Cloud 70.0 % 69.7 %
Hospitality Cloud 30.0 % 30.3 %
Total revenue 100.0 % 100.0 %
Cost of revenue 40.7 % 37.5 %
Gross profit 59.3 % 62.5 %
Operating expenses:
Sales and marketing 30.3 % 26.9 %
Research and development 20.6 % 20.1 %
General and administrative 16.2 % 17.6 %
Intangible asset amortization, exclusive of amounts
included in cost of revenue 7.6 % 10.5 %
Total operating expenses 74.6 % 75.1 %
Loss from operations (15.4 %) (12.6 %)
Interest expense (1.6 %) (6.2 %)
Amortization of deferred financial costs and debt
discount (0.2 %) (0.8 %)
Loss on extinguishment of debt (2.0 %) 0.0 %
Other income, net 0.4 % 3.3 %
Loss before income taxes (18.7 %) (16.3 %)
Provision for income taxes 0.8 % 1.5 %
Net loss (19.6 %) (17.8 %)
Revenue
Three Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Revenue:
Event Cloud $ 112,634 $ 85,590 $ 27,044 31.6 %
Hospitality Cloud 48,328 37,224 11,104 29.8 %
Total revenue $ 160,962 $ 122,814 $ 38,148 31.1 %
Total revenue for the three months ended June 30, 2022 was $161.0 million , an
increase of $38.1 million , or 31.1% compared to the three months ended June 30,
2021 . Event Cloud revenue accounted for $112.6 million , or 70.0% of total
revenue, and Hospitality Cloud revenue accounted for $48.3 million , or 30.0% of
total revenue, for the three months ended June 30, 2022 .
Event Cloud revenue increased $27.0 million , or 31.6%, during the three months
ended June 30, 2022 compared to the prior year. The increase was due to the
strong performance of products that support in-person meetings as in-person
meetings continue to return. While revenue associated with our virtual solution
is still one of our top Event Cloud revenue components, the return of in-person
meetings has caused a revenue mix shift towards products that support in-person
and hybrid meetings. Additionally, $1.0 million of the revenue increase was
related to our client conference, Cvent CONNECT, which was held in the second
quarter of 2022 compared to the third quarter of 2021.
Hospitality Cloud revenue increased $11.1 million , or 29.8%, during the three
months ended June 30, 2022 compared to the prior year primarily due to increased
demand of our advertising and software solutions driven by the continued return
of in-person meetings and events. Additionally, $2.7 million of the revenue
increase was related to our client conference, Cvent CONNECT, which was held in
the second quarter of 2022 compared to the third quarter of 2021.
25
--------------------------------------------------------------------------------
We generate the majority of our revenue from North America . Revenue from outside
North America accounted for 11.4% and 13.3% of total revenue for the three
months ended June 30, 2022 and 2021, respectively. In the near-term, in absolute
dollars, we expect that total revenue from outside North America will increase
at the same rate as the rest of our business, and as such, we expect total
revenue from outside of North America as a proportion of total revenue will not
substantially change.
Cost of Revenue
Three Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Cost of revenue $ 65,560 $ 45,999 $ 19,561 42.5 %
Cost of revenue for the three months ended June 30, 2022 was $65.6 million , an
increase of $19.6 million , or 42.5%, compared to the three months ended June 30,
2021 . This increase was primarily driven by a $5.0 million increase in employee
expense due to a 34.5% increase in average headcount, a $2.7 million increase in
hosting expense, a $1.5 million increase in stock-based compensation and a $1.4
million increase in amortization of capitalized software development costs.
Additionally, third-party costs related to supporting virtual, in-person, and
hybrid events increased $4.9 million and credit card interchange fees related to
our merchant services business increased $1.9 million primarily driven by the
continued return of in-person meetings and events. Further, costs associated
with our client conference, Cvent CONNECT, which was held in the second quarter
of 2022 compared to the third quarter of 2021, increased by $2.0 million .
Operating Expenses
Three Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Sales and marketing $ 48,826 $ 33,070 $ 15,756 47.6 %
Research and development 33,128 24,657 8,471 34.4 %
General and administrative 25,997 21,600 4,397 20.4 %
Intangible asset amortization,
exclusive of amounts included in cost
of revenue 12,160 12,929 (769 ) (5.9 %)
Total operating expenses $ 120,111 $ 92,256 $ 27,855 30.2 %
Sales and Marketing. Sales and marketing expenses for the three months ended
June 30, 2022 were $48.8 million , an increase of $15.8 million , or 47.6%,
compared to the three months ended June 30, 2021 . This increase was primarily
driven by a $5.9 million increase in employee expense due to a 16.9% increase in
average headcount, a $3.6 million increase in stock-based compensation and a
$1.7 million increase in marketing program spend. Additionally, costs associated
with our client conference, Cvent CONNECT, which was held in the second quarter
of 2022 compared to the third quarter of 2021, increased by $4.4 million .
Research and Development. Research and development expenses for the three months
ended June 30, 2022 were $33.1 million , an increase of $8.5 million , or 34.4%,
compared to the three months ended June 30, 2021 . This increase was primarily
driven by a $7.0 million increase in employee expense due to a 16.5% increase in
average headcount and a $1.9 million increase in stock-based compensation.
General and Administrative. General and administrative expenses for the three
months ended June 30, 2022 were $26.0 million , an increase of $4.4 million , or
20.4%, compared to the three months ended June 30, 2021 . This increase was
primarily driven by a $2.0 million increase in employee expense due to a 23.9%
increase in average headcount, a $2.0 million increase in stock-based
compensation, a $1.1 million increase in contracted services and a $1.0 million
increase in corporate insurance related to public company directors' and
officers' insurance. A portion of these cost increases is also related to costs
incurred as a publicly traded company. The increases were partially offset by a
$1.3 million decrease in bad debt expense.
Intangible Asset Amortization, Exclusive of Amounts Included in Cost of Revenue.
Intangible asset amortization, exclusive of amounts included in cost of revenue
for the three months ended June 30, 2022 was $12.2 million , a decrease of $0.8
million , or 5.9%, compared to the three months ended June 30, 2021 . This
decrease was driven primarily by the scheduled decline in the amortization of
intangible assets acquired in past years and no significant business
acquisitions occurring in 2022.
26
--------------------------------------------------------------------------------
Interest Expense
Three Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Interest expense $ (2,605 ) $ (7,638 ) $ 5,033 (65.9 %)
Interest expense for the three months ended June 30, 2022 was $2.6 million , a
decrease of $5.0 million , or 65.9%, compared to the three months ended June 30,
2021 . This decrease was driven primarily by a significantly lower principal
amount on our outstanding long-term debt through May 2022 . In May 2022 , the
Company fully repaid its Term Loan Facility and entered into the Revolving
Credit Facility, borrowings under which bear a lower interest rate than was the
case under the Term Loan Facility.
Amortization of deferred financing costs and debt discount
Three Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Amortization of deferred financing
costs and debt discount $ (257 ) $ (941 ) $ 684 (72.7 %)
Amortization of deferred financing costs and debt discount for the three months
ended June 30, 2022 was $0.3 million , a decrease of $0.7 million , or 72.7%,
compared to the three months ended June 30, 2021 due to the acceleration of
amortization of deferred financing costs and debt discount associated with the
prepayment of the outstanding principal balance under the Term Loan Facility.
Loss on extinguishment of debt
Three Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Loss on extinguishment of debt
100.0%
Loss on extinguishment of debt for the three months endedJune 30, 2022 was$3.2 million , which is due to the acceleration of amortization of deferred financing costs and debt discount associated with repayment of the outstanding principal balance under the Term Loan Facility. Other Income, Net Three Months Ended June 30, 2022 2021 $ Change % Change (in thousands) Other income, net$ 624 $ 3,998 $ (3,374 ) (84.4 %) Other income, net for the three months endedJune 30, 2022 was$0.6 million , a decrease of$3.4 million , or 84.4%, as compared to the three months endedJune 30, 2021 . Other income for the three months endedJune 30, 2022 and 2021 consisted primarily of foreign currency gains. Provision for Income Taxes Three Months Ended June 30, 2022 2021 $ Change % Change (in thousands) Provision for income taxes$ 1,334 $ 1,825 $ (491 ) (26.9 %) 27
-------------------------------------------------------------------------------- Provision for income taxes for the three months endedJune 30, 2022 was$1.3 million , a decrease of$0.5 million , or 26.9%, compared to the three months endedJune 30, 2021 . The decrease primarily resulted from the recording of lower pre-tax book income in high tax foreign jurisdictions. 28 --------------------------------------------------------------------------------
Comparison of the six months ended
The following table sets forth our consolidated statement of operations for the
periods indicated:
Six Months Ended June 30,
2022 2021
(in thousands)
Consolidated Statement of Operations Data:
Revenue:
Event cloud $ 207,621 $ 166,723
Hospitality cloud 90,697 73,378
Total revenue 298,318 240,101
Cost of revenue 121,760 89,844
Gross profit 176,558 150,257
Operating expenses:
Sales and marketing 88,917 61,907
Research and development 64,534 46,331
General and administrative 50,948 38,354
Intangible asset amortization, exclusive of amounts
included in cost of revenue 24,314 25,964
Total operating expenses 228,713 172,556
Loss from operations (52,155 ) (22,299 )
Interest expense (5,197 ) (15,171 )
Amortization of deferred financial costs and debt
discount (577 ) (1,884 )
Loss on extinguishment of debt (3,219 ) -
Other income, net 885 4,271
Loss before income taxes (60,263 ) (35,083 )
Provision for income taxes 2,625 3,325
Net loss $ (62,888 ) $ (38,408 )
29
--------------------------------------------------------------------------------
The following table sets forth data from our Consolidated Statements of Income expressed as a percentage of total revenue for the periods indicated:
Six Months
Ended
2022
2021
Consolidated Statement of Operations Data:
Revenue:
Event Cloud 69.6 % 69.4 %
Hospitality Cloud 30.4 % 30.6 %
Total revenue 100.0 % 100.0 %
Cost of revenue 40.8 % 37.4 %
Gross profit 59.2 % 62.6 %
Operating expenses:
Sales and marketing 29.8 % 25.8 %
Research and development 21.6 % 19.3 %
General and administrative 17.1 % 16.0 %
Intangible asset amortization, exclusive of amounts
included in cost of revenue 8.2 % 10.8 %
Total operating expenses 76.7 % 71.9 %
Loss from operations (17.5 %) (9.3 %)
Interest expense (1.7 %) (6.3 %)
Amortization of deferred financial costs and debt
discount (0.2 %) (0.8 %)
Loss on extinguishment of debt (1.1 %) 0.0 %
Other income, net 0.3 % 1.8 %
Loss before income taxes (20.2 %) (14.6 %)
Provision for income taxes 0.9 % 1.4 %
Net loss (21.1 %) (16.0 %)
Revenue
Six Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Revenue:
Event Cloud $ 207,621 $ 166,723 $ 40,898 24.5 %
Hospitality Cloud 90,697 73,378 17,319 23.6 %
Total revenue $ 298,318 $ 240,101 $ 58,217 24.2 %
Total revenue for the six months ended June 30, 2022 was $298.3 million , an
increase of $58.2 million , or 24.2%, compared to the six months ended June 30,
2021 . Event Cloud revenue accounted for $207.6 million , or 69.6% of total
revenue, and Hospitality Cloud revenue accounted for $90.7 million , or 30.4% of
total revenue, for the six months ended June 30, 2022 .
Event Cloud revenue increased $40.9 million , or 24.5%, during the six months
ended June 30, 2022 compared to the prior year. The increase was due to the
strong performance of products that support in-person meetings as in-person
meetings continue to return. While revenue associated with our virtual solution
is still one of our top Event Cloud revenue components, the return of in-person
meetings has caused a revenue mix shift towards products that support in-person
and hybrid meetings.
Hospitality Cloud revenue increased $17.3 million , or 23.6%, during the six
months ended June 30, 2022 compared to the prior year primarily due to increased
demand of our advertising and software solutions driven by the continued return
of in-person meetings and events. Additionally, $2.7 million of the revenue
increase was related to our client conference, Cvent CONNECT, which was held in
the second quarter of 2022 compared to the third quarter of 2021.
We generate the majority of our revenue from North America . Revenue from outside
North America accounted for 11.7% and 13.5% of total revenue for the six months
ended June 30, 2022 and 2021, respectively. In the near-term, in absolute
dollars, we expect
30
--------------------------------------------------------------------------------
that total revenue from outside North America will increase at the same rate as
the rest of our business, and as such, we expect total revenue from outside of
North America as proportion of total revenue will not substantially change.
Revenue cost
Six Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Cost of revenue $ 121,760 $ 89,844 $ 31,916 35.5 %
Cost of revenue for the six months ended June 30, 2022 was $121.8 million , an
increase of $31.9 million , or 35.5%, compared to the six months ended June 30,
2021 . This increase was primarily driven by an $8.9 million increase in employee
expense due to a 33.9% increase in average headcount, a $5.5 million increase in
hosting expense, a $2.0 million increase in stock-based compensation and a $1.8
million increase in amortization of capitalized software development costs.
Additionally, third-party costs related to supporting virtual, in-person, and
hybrid events increased $6.9 million and credit card interchange fees related to
our merchant services business increased $3.6 million , both of which were
primarily driven by the continued return of in-person meetings and events.
Further, costs associated with our client conference, Cvent CONNECT, which was
held in the second quarter of 2022 compared to the third quarter of 2021,
increased by $2.0 million .
Operating Expenses
Six Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Sales and marketing $ 88,917 $ 61,907 $ 27,010 43.6 %
Research and development 64,534 46,331 18,203 39.3 %
General and administrative 50,948 38,354 12,594 32.8 %
Intangible asset amortization,
exclusive of amounts included in cost
of revenue 24,314 25,964 (1,650 ) (6.4 %)
Total operating expenses $ 228,713 $ 172,556 $ 56,157 32.5 %
Sales and Marketing. Sales and marketing expenses for the six months ended June
30, 2022 were $88.9 million , an increase of $27.0 million , or 43.6%, compared to
the six months ended June 30, 2021 . This increase was primarily driven by an
$11.5 million increase in employee expense due to a 16.0% increase in average
headcount, a $6.4 million increase in stock-based compensation, a $4.1 million
increase in marketing program spend and a $0.9 million increase in travel
related expense. Additionally, costs associated with our client conference,
Cvent CONNECT, which was held in the second quarter of 2022 compared to the
third quarter of 2021, increased by $4.5 million .
Research and Development. Research and development expenses for the six months
ended June 30, 2022 were $64.5 million , an increase of $18.2 million , or 39.3%,
compared to the six months ended June 30, 2021 . This increase was primarily
driven by a $12.2 million increase in employee expense due to a 15.0% increase
in average headcount, a $4.4 million increase in stock-based compensation and a
$2.4 million decrease in wage subsidies received pursuant to the Canada
Emergency Wage Subsidy program in 2022 compared to 2021.
General and Administrative. General and administrative expenses for the six
months ended June 30, 2022 were $50.9 million , an increase of $12.6 million , or
32.8%, compared to the six months ended June 30, 2021 . This increase was
primarily driven by a $5.5 million increase in stock-based compensation, a $4.1
million increase in employee expense due to a 24.4% increase in average
headcount, a $2.0 million increase in corporate insurance related to public
company directors' and officers' insurance, a $1.8 million increase in
contracted services and a $1.0 million increase in licenses & fees. A portion of
these cost increases is also related to costs incurred as a publicly traded
company. These increases were partially offset by a $1.1 million decrease in bad
debt expense and a $0.9 million decrease in legal costs.
Intangible Asset Amortization, Exclusive of Amounts Included in Cost of Revenue.
Intangible asset amortization, exclusive of amounts included in cost of revenue
for the six months ended June 30, 2022 was $24.3 million , a decrease of $1.7
million , or, 6.4% compared to the six months ended June 30, 2021 . This decrease
was driven primarily by the scheduled decline in the amortization of intangible
assets acquired in past years and no significant business acquisitions occurring
in 2022.
31
--------------------------------------------------------------------------------
Interest Expense
Six Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Interest expense $ (5,197 ) $ (15,171 ) $ 9,974 (65.7 %)
Interest expense for the six months ended June 30, 2022 was $5.2 million , a
decrease of $10.0 million , or 65.7%, compared to the six months ended June 30,
2021 . This decrease was driven primarily by a significantly lower principal
amount on our outstanding long-term debt through May 2022 . In May 2022 , the
Company fully repaid its Term Loan Facility and entered into the Revolving
Credit Facility, borrowings under which bear a lower interest rate than was the
case under the Term Loan Facility.
Amortization of deferred financing costs and debt discount
Six Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Amortization of deferred financing
costs and debt discount $ (577 ) $ (1,884 ) $ 1,307 (69.4 %)
Amortization of deferred financing costs and debt discount for the six months
ended June 30, 2022 was $0.6 million , a decrease of $1.3 million , or 69.4%,
compared to the six months ended June 30, 2021 due to the acceleration of
amortization of deferred financing costs and debt discount associated with the
prepayment of the outstanding principal balance under the Term Loan Facility.
Loss on extinguishment of debt
Six Months Ended
June 30,
2022 2021 $ Change % Change
(in thousands)
Loss on extinguishment of debt
100.0%
Loss on extinguishment of debt for the six months endedJune 30, 2022 was$3.2 million , which is due to the acceleration of debt issuance costs amortization associated with repayment of the outstanding principal balance under the Term Loan Facility. Other Income, Net Six Months Ended June 30, 2022 2021 $ Change % Change (in thousands) Other income, net$ 885 $ 4,271 $ (3,386 ) (79.3 %) Other income, net for the six months endedJune 30, 2022 was$0.9 million , a decrease of$3.4 million , or 79.3%, as compared to the six months endedJune 30, 2021 . Other income for the six months endedJune 30, 2022 and 2021 consisted primarily of foreign currency gains. Provision for Income Taxes Six Months Ended June 30, 2022 2021 $ Change % Change (in thousands) Provision for income taxes$ 2,625 $ 3,325 $ (700 ) (21.1 %)
Provision for income taxes for the six months ended
32 --------------------------------------------------------------------------------
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the non-GAAP measures of Adjusted EBITDA and Adjusted EBITDA margin are useful in evaluating our operating performance. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA and Adjusted EBITDA margin are supplemental measures of
operating performance monitored by management that are not defined under GAAP
and that do not represent, and should not be considered as, an alternative to
net loss or net loss margin, as determined by GAAP. We define Adjusted EBITDA as
net loss adjusted for interest expense, amortization of deferred financing costs
and debt discount, gain/(loss) on extinguishment of debt, gain/(loss) on
divestitures, net, other income/(expense), net, provision for/(benefit from)
income taxes, depreciation, amortization of software development costs,
intangible asset amortization, stock-based compensation expense, restructuring
expense, cost related to acquisitions, and other items. Adjusted EBITDA margin
represents Adjusted EBITDA divided by revenue. We use Adjusted EBITDA and
Adjusted EBITDA margin to understand and evaluate our core operating performance
and trends. We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to
investors, analysts, and other interested parties because they can assist in
providing a more consistent and comparable overview of our operations across our
historical financial periods.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools,
and you should not consider either in isolation or as a substitute for analysis
of our results as reported under GAAP. Because of these limitations, you should
consider Adjusted EBITDA and Adjusted EBITDA margin alongside other financial
performance measures, including net loss, net loss margin and our other GAAP
results. In evaluating Adjusted EBITDA and Adjusted EBITDA margin, you should be
aware that in the future we may incur expenses that are the same as or similar
to some of the adjustments in this presentation. Our presentation of Adjusted
EBITDA and Adjusted EBITDA margin should not be construed to imply that our
future results will be unaffected by the types of items excluded from the
calculation of Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA and
Adjusted EBITDA margin are not a presentation made in accordance with GAAP and
the use of the terms may vary from others in our industry.
33
--------------------------------------------------------------------------------
A reconciliation of Adjusted EBITDA to net loss and of Adjusted EBITDA margin to
net loss margin (defined as net loss divided by revenue), the most directly
comparable GAAP measures, respectively, for the three and six months ending June
30, 2022 and 2021, is as follows:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(in thousands) (in thousands)
Adjusted EBITDA:
Net loss $ (31,500 ) $ (21,847 ) $ (62,888 ) $ (38,408 )
Adjustments
Interest expense 2,605 7,638 5,197 15,171
Amortization of deferred financing
costs and debt discount 257 941 577 1,884
Loss on extinguishment of debt 3,219 - 3,219 -
Other income, net (624 ) (3,998 ) (885 ) (4,271 )
Provision for income taxes 1,334 1,825 2,625 3,325
Depreciation 1,886 2,901 3,924 5,985
Amortization of software development
costs 16,760 15,214 32,722 30,409
Intangible asset amortization 12,160 12,929 24,314 25,964
Stock-based compensation expense 16,952 7,815 26,720 8,423
Restructuring expense (1) 259 312 536 566
Cost related to acquisitions (2) 629 764 817 1,186
Other items (3) (575 ) 289 (757 ) (2,802 )
Adjusted EBITDA $ 23,362 $ 24,783 $ 36,121 $ 47,432
Adjusted EBITDA Margin:
Revenue $ 160,962 $ 122,814 $ 298,318 $ 240,101
Net loss margin (4) (19.6 %) (17.8 %) (21.1 %) (16.0 %)
Adjusted EBITDA margin (4) 14.5 % 20.2 % 12.1 % 19.8 %
(1)
Restructuring expense includes retention bonuses to employees of acquired
entities and costs to discontinue use of a back-office system and closing of
office space.
(2)
Represents costs incurred in association with acquisition activity, including
due diligence and post-acquisition earn out payments.
(3)
Includes other costs associated with litigation, private equity management fees,
and credit facility fees, net of the gain from government subsidies related to
the global COVID-19 pandemic.
(4)
Net loss margin represents net loss divided by revenue and Adjusted EBITDA
margin represents Adjusted EBITDA divided by revenue.
Cash and capital resources
Our principal sources of liquidity are cash and cash equivalents, on-going
collection of our accounts receivable and our Revolving Credit Facility (see
Note 11. "Debt" to the unaudited condensed consolidated financial statements
included in Part I, Item 1 of this Quarterly Report). Cash and cash equivalents
may include holdings in bank demand deposits, money market instruments and
certificates of deposit. We also periodically invest a portion of our excess
cash in short-term investments with stated maturity dates between three months
and one year from the purchase date.
We believe that existing cash and cash equivalents and short-term investments
held by us, cash and cash equivalents anticipated to be generated by us and
borrowing capacity under our revolving line of credit are sufficient to meet
working capital requirements, anticipated capital expenditures, and contractual
obligations for at least 12 months and beyond. We also believe that these
financial resources will continue to allow us to manage the ongoing impact of
COVID-19 on our business operations for the foreseeable future, including
mitigating potential reductions in revenue and delays in payments from our
customers and partners. Our future capital requirements will depend on several
factors, including but not limited to our obligation to repay any amounts
outstanding under our Revolving Credit Facility, our subscription growth rate,
subscription renewal activity, billing frequency, the timing and extent of
spending to support development efforts, the expansion of sales and marketing
activities, the introduction of new and enhanced solutions, the continuing
market adoption of our platform and our level of acquisition activity or other
strategic transactions. In the future, we may enter into arrangements to acquire
or invest in complementary businesses, services and technologies, including
intellectual property rights.
34
--------------------------------------------------------------------------------
We may be required to seek additional equity or debt financing. In the event
that additional financing is required from outside sources, we may not be able
to raise it on terms acceptable to us or at all. If we are unable to raise
additional capital or generate cash flows necessary to expand our operations and
invest in new technologies, this could reduce our ability to compete
successfully and harm our results of operations.
Cash flow
The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the six months endedJune 30, 2022 and 2021: Six Months Ended June 30, 2022 2021 (in thousands) Net cash provided by operating activities$ 107,648 $ 95,598 Net cash used in investing activities (47,099 ) (48,274 ) Net cash used in financing activities (72,694 ) (16,902 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,809 ) (744 ) Change in cash, cash equivalents, and restricted cash (17,954 )
29,678
Cash, cash equivalents, and restricted cash at beginning of year 126,629
65,470
Cash, cash equivalents, and restricted cash at June 30, 2022$ 108,675 $ 95,148 Cash paid for interest$ 5,177 $ 15,181 Operating Activities Net cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business and the amount and timing of customer payments. Cash provided by operations in the six months endedJune 30, 2022 and 2021 is primarily attributable to net loss adjusted for non-cash items. Cash provided by operations is also attributable to the change in accounts receivable and deferred revenue, which is driven by the seasonality of our business as a result of higher levels of invoicing in the first and fourth quarters and our collections process. Our cash flows from operating activities are generally reflective of our ability to invoice annual subscription fees upfront with payments due 30 days after the customer's receipt of the invoice. For the six months endedJune 30, 2022 , net cash provided by operating activities was$107.6 million , which was primarily driven by net loss adjusted for non-cash items, a$28.6 million increase in deferred revenue and a$32.6 million decrease in accounts receivable, partially offset by a$20.6 million increase in capitalized commissions, net. For the six months endedJune 30, 2021 , net cash provided by operating activities was$95.6 million , which was primarily driven by a$34.1 million decrease in accounts receivable, a$33.3 million increase in deferred revenue and net loss adjusted for non-cash items.
Investing activities
Our investing activities have consisted primarily of costs related to software developed for internal use, purchases of computer equipment and leasehold improvements, purchases and sales of short-term investments and business acquisitions. During 2021 and 2022, the impact of the pandemic lessened, and as these effects continue to lessen and as our business begins to grow again, we expect our capital expenditures and our investment activity to continue to increase. For the six months endedJune 30, 2022 , net cash used in investing activities was$47.1 million , reflecting$25.0 million in capitalized software development,$14.9 million in net purchases of short-term investments,$4.5 million in acquisitions, net of cash acquired and$2.7 million in purchases of property and equipment. For the six months endedJune 30, 2021 , net cash used in investing activities was$48.3 million , reflecting$19.4 million in capitalized software development,$14.8 million for the acquisition ofShoflo, LLC ,$12.1 million of purchases of short-term investments net of maturities and$2.0 million of purchases of property and equipment.
Fundraising activities
Our financing activities have consisted primarily of principal payments on the Company's variable rate first lien loan, (the "Term Loan Facility"), partially offset by net borrowings under the Revolving Credit Facility and proceeds from the exercise of stock options. For the six months endedJune 30, 2022 , net cash used in financing activities was$72.7 million , consisting primarily of the repayment of$265.0 million in the Company's Term Loan as well as$70.0 million in repayments under the Revolving Credit Facility partially offset by$265.0 million in borrowings under the Revolving Credit Facility, as well as proceeds from the exercise of stock options. For the six months endedJune 30, 2021 , net cash used in financing activities was$16.9 million , consisting of$13.4 million in repayments on the Company's prior$40.0 million revolving credit facility and$4.0 million of scheduled principal payments on the Company's Term Loan Facility. 35 --------------------------------------------------------------------------------
Commitments and contingencies
See the information set forth in Note 13. "Commitments and Contingencies" to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report. Indemnification Agreements In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses related to breach of confidentiality and claims by third parties of intellectual property infringement, misappropriation or other violation. See Part I, Item 1A. "Risk Factors-We have indemnity provisions under our contracts with our customers, channel partners and other third parties, which could have a material adverse effect on our business" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . In addition, we enter into indemnification agreements with our directors and certain officers and employees that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. There are no claims that we are aware of that could have a material effect on our consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows. Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity withU.S. GAAP and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assumptions and estimates that affect the amounts reported. Note 2. "Summary of Significant Accounting Policies" to the unaudited condensed consolidated Financial Statements in Part I, Item 1 of this Quarterly Report and in the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 describe the significant accounting policies and methods used in the preparation of the Company's condensed consolidated financial statements. There have been no material changes to the Company's critical accounting estimates since our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
© Edgar Online, source
