CVT (2021 - Q4)

Good day. My name is Savannah, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Cvent Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I would now like to turn the conference over to Investor Relations, Ralph Lynn, ICR. Please go ahead. Unidenti

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Cvent's Fourth Quarter and Fiscal Year 2021. With me on today's call are Reggie Aggarwal, Cvent's Founder and Chief Executive Officer; and Billy Newman, Cvent's Chief Financial Officer. During today's call, we will review our financial results for both the fourth quarter and fiscal year 2021 and discuss our guidance for the first quarter and full fiscal year 2022. In addition to our prepared remarks, our earnings press release, SEC filings. And a replay of today's call can be found on our Investor Relations website at investors.cvent.com. Today's call will include forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding our financial outlook, including our guidance for the first quarter and fiscal year 2022, our market opportunity, market position, product strategy and growth opportunities. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect the outcome of the matters covered by these forward-looking statements is included in our periodic filings with the SEC, including the section titled Risk Factors in the quarterly report on Form 10-Q for the quarter ended September 30, 2021, filed with the SEC on November 15, 2021. Additional information will be made available in our annual report on Form 10-K for the year ended December 31, 2021. In addition, during today's call, we will discuss non-GAAP financial results, which are not prepared in accordance with generally accepted accounting principles. A reconciliation between GAAP and non-GAAP financial results is included in our earnings release, which has been filed with the SEC and is also available on our Investor Relations website. And now I'd like to turn the call over to Reggie.

Thanks, Ralph, and hello, everyone. I'm excited for our first earnings call since returning to the public markets. And I'm happy to announce we had a very strong finish to the year. And despite the pressure from the Delta and Omicron variants in the second half of 2021, we were able to deliver a strong Q4 and grow our top line revenue by 25%, beating both our revenue and adjusted EBITDA guidance. And because of the continued adoption of our hybrid virtual and in-person platform, we are well positioned going into 2022. Therefore, we are reaffirming our full year 2022 revenue guidance that we gave investors in July of '21, up $622.6 million in revenue and increasing our adjusted EBITDA margin guidance from 16.5% to 16.9%. Now before I talk about how our business is performing, I'd like to provide a brief overview of Cvent and quickly set the context of the transformational changes within our industry since the pandemic that we believe has created a much larger market opportunity for us. Now Cvent is a SaaS platform that is used to plan, market and execute engaging events of all sizes, virtual, in-person and hybrid. Now our Event Cloud solutions excel at powering almost any event an organization hosts or attends, something we call the Total Event Program. So we're a single source of truth for event marketing, event spend, attending engagement, event ROI and more. And to run effective in-person events, you need a venue. That's where our Hospitality Cloud solutions comes in. Now we built a vast network with over 290,000 venues called the Cvent Supplier Network, or CSN for short. Think of hotels, unique event spaces and destinations. Event organizers go to CSN define research, define research and send RFPs to a select number of venues and then we monetize this by selling advertising and software to help them use attract planners, stand out from the competition and more effectively closed business. Now fundamentally, our Event and Hospitality Cloud software helps our customers grow their top line revenue and drive engagement while reducing OpEx and ensuring greater compliance. Now let's talk about our industry's transformation and how Cvent has responded. For over 20 years, we've helped automate in-person events, taking the industry from a manual pen and paper world to a digitized repeatable, measurable process. Then the pandemic hit. People couldn't physically meet and the digitization of our industry accelerated out of sheer necessity. Virtual events were the only way to meet and they took off. Virtual broke down accessibility barriers, drove massive increases in registrants and allowed event organizers to track attending engagement interactions at scale. When the virtual wave hit, Cvent was initially used for just event marketing, event websites, registration and so forth. But within 6 months, we launched our brand-new virtual solution, the Cvent Attendee Hub as a core part of our platform because our technology was future-ready. Built to maximize attendee engagement, the Attendee Hub serves not only as an engagement engine for virtual events, but also for hybrid and in-person events as well. With accelerated digitization as a tailwind, we delivered a very successful 2021. And we're entering a world where in-person events are coming back. Virtual events are now mainstream and more organizers want the best of both with hybrid events. And our platform is built to power all 3 of these event formats in person, virtual and hybrid, which we like to call the [triple threat]. This increasingly digitized events world has led to an explosion -- I'm sorry, it's led to a large expansion of our total addressable market, which is nearly $30 billion according to Frost & Sullivan. We believe we're in a great position to capitalize on this larger market opportunity due to: one, the core strengths that Cvent built over the last 20 years; and two, the emerging opportunities tied to digitization. It all starts with our seasoned management team that has helped navigate us through these tough times. We survived the dot-com burst in 2001 when most fail. We cemented our market leadership after the 2008 financial recession when others fell behind. And our ability to pivot during COVID, highlighted by our launch of Attendee Hub that became by far the fastest-growing product in our history demonstrates our agility, resilience and innovation. We have proven that whenever a crisis hits, we emerge stronger and better positioned than before. Next is our proven ability to innovate. Our R&D team is 1,100 strong and growing, giving us the resources, we need to drive innovation and expand market share. Finally, we have the ability to scale because with a global workforce of over 4,300 employees, including over 2,000 in India. This is a real competitive advantage when it comes to operating 24/7, moving fast, delivering profitability and most importantly, innovating. Now let's dive into Q4. We continue to win new logos with our Event Cloud solutions. During the fourth quarter, we signed hundreds of new logos ranging from Fortune 100 companies to small organizations to associations, universities, corporations and non-profits. For example, in Q4, we closed a new Fortune 500 pharma company for a 5-year $2.4 million TCV or total contract value. This company was still using manual processes to run their events but turned to Cvent to better manage and control the event spend and processes. Now 23 of the top 25 pharma companies in the U.S. use Cvent with plenty of growth left in these accounts. Another example of our success with the verticalized strategy is in higher education. Just in Q4 alone, we renewed or closed 6 out of the 8 Ivy leagues. One of our largest deals closed in Q4 was with the prestigious Research University for $1.5 million in TCV over 3 years. We're now powering over 400 universities and colleges across the globe. We also continue to sell more to our existing customers. At the end of '21, we increased the percent of Event Cloud customers buying 2 or more modules to almost 50%, up from 45% in the prior year. This increase is primarily due to customers needing 1 platform for their total event program, including Cvent for virtual events. Let me give you an example. A state health care counsel in Missouri has been a customer since 2014. Pre-COVID, they used a mix of on-site and event management solutions. When COVID hit, we sold them Attendee Hub. In Q4 '21, they signed a 5-year 583,000 TCV deal purchasing more registrations and Attendee Hub. Now moving on to the Hospitality Cloud. Because of COVID, there are still headwinds in the hospitality industry. However, despite the negative effects of hoteliers’ meetings and group's business, we believe our recovery is underway. For example, for the first time in 5 quarters, our Hospitality Cloud business grew in Q4. It was up 12.1% year-over-year. Over $9 billion of RFP value was sourced on the Cvent Supplier Network in 2021. The Q1 2020 included RFP sourced pre-COVID. So to really get an accurate picture of our recovery it's best to look at Q2 through Q4 of 2020 and compare that to Q2 through Q4 of '21, where we are up over 55% in source dollars, an increase of almost $4.4 billion. Now here are some sales highlights that demonstrate an industry and recovery. One of our customers is a small hotel chain located in Germany, a country that has some of the most stringent COVID restrictions in the world. When the pandemic started, they downgraded to a basic advertising package on CSN. We stayed in contact with the customer and shared insightful data to help highlight the recovery in the German market. Our actions helped us land a new 1-year, 6-figure deal reflective of a 73% increase from their pandemic spend. Now if you remember, about 60% of our Hospitality Cloud business is from recurring advertising dollars but the other 40% is from software solutions that help hotels analyze, manage and close more group business. One interesting growth story that shows the power of both our advertising and software solutions is with a prominent hotel chain that has rapidly expanded its number of properties over the last few years. As the chain added properties, they kept investing in Cvent along the way. It was foundational to the growth plans of each new hotel. And they turn to Cvent not just for our advertising capabilities that hotels use to market their space to event planners, but also for our software solutions, to help and close business and collaborate with planners on designing the event itself. As this chain expanded their hotels, their investment in Cvent went from $500,000 a year to $3.4 million a year, which is our current annual spend for 2022. This is a great example that as hotel chains and properties -- sorry, hotel chains add properties, they grow their event spend accordingly. So from these few examples, I hope you can see for both our Event Cloud and Hospitality Cloud, we're continuing to see broad-based and growing demand for our solutions. Now earlier, I talked about the larger market opportunity ahead of us due to the digitization of the events world. I'll now go into more detail on the key drivers that gave us confidence in our 2020 growth. First is the return to in-person events and the accelerating demand for hybrid. Now while our virtual is here to stay, the world can't wait to get back to in-person events, a space we have powered for over 20 years. We've seen time and time again that nothing beats the power of in-person interaction to create bonds with customers, win over prospects and energize your audience. And it's exciting to see that planners are taking what they learned in virtual events and now applying it to their in-person events. With the Cvent Attendee Hub, event planners and marketers can now start to build attendee engagement before the event versus waiting until everyone arrives. Instead of a no before you go e-mail on the event agenda, they can live stream the agenda reveal. Event organizers can enable their attendees to network in advance so they can connect with the right people before they arrive. Now we're seeing virtual elements being used for in-person and hybrid events, which is driving demand for our solutions. As in-person events return, planners and marketers will want to leave -- will not want to leave the massive virtual audiences behind. That's when you enter hybrid events. A successful hybrid event requires 1 platform that can seamlessly and simultaneously deliver an event experience for both in-person and virtual attendees. This is where our platform shines. We're able to help our event organizers and hotels attract large audiences, run safe meetings, deliver broadcast quality video content for virtual attendees and of course, deeply engage all attendees, all through 1 platform. And when arriving on site, technology is what will ensure a safe and impactful event. Pre-pandemic, we had built a leading suite of solutions to help planners execute on site. Throughout the pandemic, we sustained that investment and introduced contactless check-in, deeper support for hybrid events and partnered with ID.me to introduce Cvent Health Check for vaccine and COVID test verification and health status questionnaires. We also enhanced our on-arrival dashboards so that planners and executive stakeholders can see near real-time insights into the success of their events from their phones and the palm of their hands. Data such as how many people have checked in, how many attendees are currently watching the live stream, what the feedback was from this morning sessions and so forth. With many competitive solutions in the onsite space receiving no investment or even going out of business during the pandemic, we believe that we're well positioned to capture our disproportionate share of the market as in-person events return. Second, capitalizing on the power of engagement to drive demand for Cvent solutions. When in person, virtual and hybrid events are digitized, attendees leave behind a trail of digital interactions that can be compiled and scored to take quick, effective follow-up actions. This is why so many organizations, including marketers, love events. You can generate an incredible amount of information on your attendee and your buyer. And if you can track engagement and if you can put the full picture of interest together, that's when you really have something special. Our platform compiles this picture of attendee and account engagement across not just 1 event but all events across the total event program. With engagement from front and center and in their minds, increasingly, organizations now want to extend engagement before and after events occur and are moving to a year-round engagement mindset. The massive reach of virtual and the proliferation of video technology is allowing organizations to find ways to engage with their audiences before and after events occur through live stream, real-time communications and on-demand video content. This idea expands what Cvent can be in the marketplace and makes us used more frequently across an organization. As we look at our 2022 key growth drivers, we plan to aggressively invest in video, including our new Cvent Studio product and see a number of opportunities to help organizers develop their live and year-round engagement strategy that will only make their overall event program more impactful. Now the third growth vector is the expansion of our ecosystem. Let's start with the new product we are excited for hoteliers. It's called Cvent Instant Book. In an environment with reduced demand and a tight labor market, hoteliers and meeting planners have struggled to maintain staffing levels since the pandemic. And as meeting business recovers, planners and hoteliers continue to look for digital solutions that will allow them to service this demand more efficiently. In Q4 of last year, we launched an early adopter pilot of Cvent Instant Book, designed to simplify the sourcing process for small and simple meetings by allowing meeting planners the ability to view live rates and book hotel meeting space, food and beverage and AV without the need to send an RFP or negotiate with the hotel sales employee. And hotels will be able to generate demand more efficiently by not having to respond to small meeting RFPs. While we don't expect to see a material revenue impact in 2022, we believe this to be an important investment year to set the foundation for future adoption of Cvent Instant Book. In addition to focusing on automation and efficiency, we will also continue to identify ways to expand our reach internationally. In support of this strategy, our product is now localized in 18 different languages with a focus on simple, nonprofessional meeting planners in international markets. Now the localization of our sourcing product for international planners is the first phase of a longer-term initiative to implement a simpler and more consumer-oriented user interface for our media planner community. A new and refreshed user experience will help cement our market position with our current mostly professional meeting center audience and it will also enable our product to be more suitable for consumer and non-business-oriented events. As you can see, there are multiple growth drivers that we're excited about across our Event Cloud and Hospitality Cloud. Now with that, I'm going to hand it over to Billy, our CFO.

Thanks, Reggie, and good afternoon, everyone. I'll first walk you through fourth quarter and full year 2021 financial performance and then discuss our guidance for first quarter and full year 2022. As Reggie mentioned, despite the pressure from the Delta and Omicron variants in the second half of 2021, total fourth quarter revenue was $144.7 million, an increase of 25.3% year-over-year. We beat the high end of our guidance for the quarter by $3.6 million or 2.5%. The beat was largely driven by a combination of higher on-site solutions revenue due to more in-person events using our platform than expected during the quarter and higher-than-expected bookings in the quarter. Within total revenue, fourth Quarter Event Cloud revenue was $102.9 million, an increase of 31.5% year-over-year. In fourth quarter, Hospitality Cloud revenue was $41.8 million, an increase of 12.1% year-over-year. The strong Event Cloud revenue growth is the result of the continued rebound of on-site solutions and growth of Attendee Hub. The growth in Hospitality Cloud revenue marks the return to year-over-year growth after 5 COVID-impacted quarters. This return to growth is reflective of the strong sales momentum we've seen in the Hospitality Cloud this year as hotels begin to reinvest in the group portion of their business. In discussing the remainder of the income statement, unless otherwise noted, all references to our expenses and operating results are on a non-GAAP basis. You can find information on the most directly comparable GAAP metrics in our fourth quarter earnings press release. Now as I go through each expense line, note that the expense increases throughout reflect 2 things: first, abnormally low expenses in 2020 as we cut expenses to respond to COVID's impact on the business. And second, a conscious decision to invest given the massive growth opportunity that Reggie outlined and that we've continued to see in 2022 and beyond. Non-GAAP gross profit in the fourth quarter was $109.9 million or 76% of revenue compared to 77.1% in the same period of the prior year. The decline in non-GAAP gross margin is primarily due to investments for growth and strong momentum in day of the event products such as on-site solutions, mobile and Attendee Hub as in-person events start to return and virtual events continue. Moving down the income statement. Non-GAAP sales and marketing expenses in the fourth quarter were $33.5 million or 23.1% of revenue compared to 23.7% in the same period of the prior year. The decrease in non-GAAP sales and marketing expense as a percentage of revenue is primarily due to lower employee expenses, partially offset by increased marketing program expenses as a percentage of revenue. Non-GAAP research and development expenses in the fourth quarter were $23.8 million or 16.4% of revenue compared to 16.1% in the same period of the prior year. The increase in non-GAAP research and development expense as a percentage of revenue is primarily due to higher employee expenses and contracted services as a percentage of revenue as we continue to invest in our ability to support virtual and hybrid events. Non-GAAP general and administrative expenses were $19.9 million or 13.7% of revenue compared to 10.8% in the same period of the prior year. The increase in non-GAAP general and administrative expenses as a percentage of revenue is primarily due to higher costs as a percentage of revenue across multiple expense lines, a portion of which are related to costs associated with the SPAC process. Some of these costs were onetime and some costs will recur as we operate as a public company. Shifting to earnings. Adjusted EBITDA was $32.8 million or 22.7% of revenue, which represents a $10.1 million beat in dollars over the high end of our guidance and a 660 basis point beat in terms of margin. The outsized bet is the result of our $3.6 million revenue beat and lower-than-expected expenses across several line items, such as on-site solution support costs, employee expense, sales tax and travel. The majority of these cost savings were specific to the fourth quarter, so we don't expect them to recur into the future. Adjusted EBITDA margin is down from 26.5% in the prior year and the decline in margin is reflective of the investments we are making for growth and the temporary cost savings measures we took in 2020 to increase margin at the outset of COVID. On a full year basis, revenue was $518.8 million, an increase of 4% from 2020 and $11.4 million higher than the 2021 full year guidance we gave in July 2021. Within total revenue, Event Cloud revenue was $362.1 million, an increase of 14.6% compared to the prior year. And Hospitality Cloud revenue was $156.7 million, a decrease of 14.2% compared to the prior year. Adjusted EBITDA for the full year was $103.7 million or 20% of revenue, down from 25.9% in the prior year for the reasons previously shared. Turning to our balance sheet. We ended the year with cash, cash equivalents and short-term investments of $127.1 million, an increase of $9 million from the end of the third quarter of 2021. The increase was driven by $22.8 million of cash that was brought onto the balance sheet as part of our December leaseback after using $500 million of the total $523 million in proceeds to partially pay down our debt. Free cash flow before interest payments on our long-term debt and the change in client cash related to merchant services was $0.1 million for the fourth quarter, up $14.9 million compared to the fourth quarter of last year due to higher cash collections and the bookings growth we've seen in 2021. Note that the next to flat free cash flow we saw in the fourth quarter is seasonally typical and is due to the high percentage of client contracts that are calendar year, which results in negative cash negative -- flat to negative free cash flow in the fourth quarter and high cash inflows in the first quarter. For the full year, free cash flow before interest payments on our long-term debt and the change in client cash related to merchant services was $97.5 million, an increase of 52% from 2020. The 2021 free cash flow benefited from an estimated $20 million from 2020 cash collections that were delayed until 2021. Deferred revenue at the end of the year was $239.8 million, an increase of 15.5% compared to the end of the prior year due to the year-over-year bookings growth we began to see in February of 2021. Now let's turn to our guidance for the first quarter and full year of 2022. As Reggie mentioned at the outset of the call, despite the meaningful pressure from the Delta and Omicron variants in the second half of 2021, we are reaffirming our full year 2022 revenue guidance that we gave investors in July 2021 of $622.6 million and increasing our adjusted EBITDA margin guidance from 16.5% to 16.9%. We expect full year 2022 revenue of $619.6 million to $625.6 million, up 20% at the midpoint compared to 2021. And we expect adjusted EBITDA of $102.5 million to $107.5 million and adjusted EBITDA margin of 16.9% at the midpoint. Now shifting to the guidance for the first quarter of 2022. Revenue is expected to be between $133 million and $133.5 million, up 13.6% at the midpoint compared to the first quarter of 2021. I'd like to give some color with regard to the sequential and year-over-year trends we're seeing in the first quarter. Starting with the sequential drop in revenue dollars. There are 3 drivers for this decline. The first is due to there being 2 less days in Q1 than in Q4, which explains approximately $2.5 million of the drop. The second is that every year, there are more events held in the fourth quarter than in the first quarter. Because a portion of the revenue associated with our on-site solutions and Attendee Hub products is recognized at the time of the event, this creates some seasonality with regards to the revenue for these products, and this is most visible when going from the fourth quarter to the first quarter each year. The third and probably most important driver and it's also the reason for the deceleration of year-over-year growth in the quarter is the impact of the Omicron variant is having on event planners decision to buy software and hold in-person events in the first quarter. Many events originally scheduled to occur in the first quarter have been pushed to later in the year, and we estimate that first quarter revenue growth would have been approximately 19% if these events have not been pushed. With the impact of Omicron lessening, we are seeing strong interest in conducting in-person events in the second quarter. As evidenced by our full year revenue guidance, we expect to recoup much of the revenue delayed from the first quarter in 2022. Excluding the first quarter revenue guidance from our full year guidance, we are guiding that the revenue growth for Q2 to Q4 of 2022 will be 21.9% when compared to the same time period 2021. Finally, we expect the second quarter will be the strongest growth rate quarter of 2022, and we will return to a more normalized growth rate trend for the back half of 2022. Moving to adjusted EBITDA. We expect first quarter adjusted EBITDA of $9.9 million to $10.4 million, implying an adjusted EBITDA margin of 7.6% at the midpoint. The sequential drop in revenue -- I'm sorry, yes, the sequential drop in revenue is 1 reason for the drop in adjusted EBITDA margin between the fourth and first quarter as lower revenue lessens the operating leverage, we are able to achieve in our business. Additionally, in any given year, we typically generate lower margins in the first quarter relative to the rest of the year. This seasonal effect is largely a result of the cadence of our employee expenses, namely a step-up at the beginning of each year of items such as benefits, payroll taxes, PTO accrual and employee compensation. Adjusted EBITDA margin typically increases sequentially after the first quarter, ending the year at its highest point in the fourth quarter due to the increased revenue base at the end of the year. We expect the same trend to occur in 2022 on our way to the 16.9% adjusted EBITDA margin guidance we provided for the full year. In summary, -- we're very pleased with our fourth quarter financial performance, outperforming our revenue and adjusted EBITDA guidance for the quarter and ending the year with 25% revenue growth. We are seeing some temporary effects of the Omicron variant on our first quarter revenue but we expect to return to 20%-plus revenue growth over the last 9 months of the year, which is why we're reaffirming our prior year full year 2022 revenue guidance of $622.6 million and slightly raising our full year 2022 adjusted EBITDA margin guidance to 16.9%. I'll now open -- I'll now turn it back to Reggie for some closing remarks.

Thanks, Billy. In closing, 2020 was a tough year, but Cvent did what we do best. We pivoted, we were agile and we leveraged our inherent strengths to successfully navigate a pandemic. Those efforts helped us lead to a greater 2021 as our virtual business took off, in-person events started to return and hybrid demand grew. Event organizers needed technology to help them manage the complex ecosystem of meetings, conferences and events to drive that all-important engagement across their total event program. And at the same time, hotels continue to realize the benefit of technology in their recovery. Now with these means top of mind, the marketplace is increasingly looking to Cvent. And as we continue to invest heavily to broaden and deepen our platform, we are both further distancing ourselves from the competition, strengthening our market position as we go after this massive opportunity. Looking forward, the digital wave sweeping across the events world makes our platform even more essential and impactful. So we feel we're well positioned for a strong 2022. Now I'll hand it over to Savannah to moderate our live Q&A session.

[Operator Instructions] Our first question will come from Sterling Auty with J.P. Morgan.

So I'm curious, in terms of the Omicron impact on the first quarter events that shifted later, did you include all of those events still in the '22 guidance? And what gives you the visibility that those events that pushed will actually occur?

We did, not all the revenue because, obviously, some events might just not end up happening, but we have assumed that a good portion of that revenue will be recognized in 2022. And what gives us the confidence is that our sales team already is hearing from the clients that there's strong interest in in-person, we're seeing that in our sales funnel. We are having discussions, obviously, with those clients to get them rescheduled. Some are already being rescheduled for the second quarter. Frankly, we're hearing from the sales team that they're a little concerned about capacity constraints. Now we're going to obviously do what we need to take care of that. But we're really enthused by not only what we're seeing in terms of those events being rescheduled. But also just what we're seeing from our clients in general and looking to make new purchases.

And Sterling, this is Reggie. That's a great question. I think it's top of mind for all investors. Clearly, Omicron kind of took everyone by surprise. But here's what's kind of happening. It certainly was something that impacted at the end of December and in the first -- the very beginning of 2022. But what we see now recently, and I think we all on a personal level, can experience this is that we're seeing real positive change in planner sentiment. Just in the last kind of 30 days. They're embracing in-person and hybrid they're starting to plan stuff as you guys -- there's lots of conferences going on in the market. And we see a lot of momentum. There are 2 banking conferences, for example, next week at the beginning of the year. I think if you just asked 6 weeks ago, it was wait and see. Now people are comfortable having them, and we see a lot of positive signs, and we think that -- we feel pretty confident that at least this variant is behind us and that things are turning positive, in particular in the back half. But look, we'll lose a few -- some of them won't be rescheduled, and they'll just push, but most of them are being pushed to Q2 and in the back half of '22.

That makes sense. And 1 quick follow-up. You talked about market share. Can you give us a sense of maybe what your increased market share, especially for the in-person looks like given the financial strength that you've had to be able to weather through the COVID pandemic.

So look, if you look at the total TAM, it's $30 billion, you break that down to different markets. Look, our penetration, our market share is way less than 10%. So in terms of what we consider the in-person market share as it comes further as it comes back, so we have plenty of room to grow. As you look at all the competitors what their market share is, our biggest competitor is still basically manual processes, what we call. People are still using Outlook, Excel and all the things that you do to run events. And I'm not going to say they're pen and paper, but you still have a lot of people that do things a lot more manually, especially with the in-person. So that's where our biggest competitor is really just to automate those processes. But when you look at the other competitors, when you combine us all, there's still less than -- my guess is like 15%, 20% penetration across the market as it gets further digitized. The bigger thing to remember is that -- when you look at our space before this forcing function of digitization, this was a much more manual kind of industry. And candidly, it's been difficult, but 1 of the positive things that came out of this is this force digitization. And now when you take the best practices people learn in virtual and applying that to hybrid and in person, I think you're going to see people embrace technology more. But again, we have plenty of room to grow. And our market share is still very small, especially when you look at it from a global view and not just kind of a North America view.

And Sterling, 1 thing I would just add there. When you look at our competitive position, given our 20-plus years of leadership on the in-person event side and what we've been able to accomplish in the last 12 to 18 months on the virtual side and how we have a full total event program and platform, it's very hard to compete with. So that's going to even bolster how strong we are from a competitive position in terms of serving in-person events because they're going to watch somebody that can do all of it, get all that data engagement points and be able to analyze all those points together.

And our next question will come from Bhavan Suri with William Blair.

Can you guys hear me, okay?

Yes. we're hearing you great.

Congrats. Solid quarter there. I guess I wanted to start a little bit at a high level here. When you talk about sort of this manual thing that Sterling and you were discussing a little earlier, let's flip to the sort of virtual side of things. When you've got those hundreds of customers who you've added to now your virtual marketplace and your virtual conferencing business, how much of that is greenfield. How much of that is manual? Or are you ripping out sort of 1-point solution there? How should we think about what that market not the in-person events, but the virtual events looks like. Are people sort of still using a webinar approach and that's 1 thing? Or is that just sort of -- we don't know what to do yet and you're winning sort of this total greenfield. How should we think about that market?

Yes. Bhavan, look, it's a great question, and thanks for joining. So here I'll tell you, it's really 2 categories. First category is using the traditional webinar tools from WebEx to Zoom to Microsoft That's your first one, of course, which is your -- probably your more lion's share. The second group is you do have people that have kind of created their own stuff or using tools, putting it together. That's the kind of second. The third, of course, is, let's call it, the event software category, which we're in, the event management category. So people are doing across the 3 of them. It's more difficult to do manual, if you will, with virtual because they're kind of just exploded, and there were some, obviously, some great tools that were out there when pandemic hit. But the big thing to learn is that before the pandemic hit though, virtual events, we're not talking about your traditional events that maybe you would do on Zoom or Teams. Those events with internal employees. Those were obviously stuff that was growing, that was happening. But if you look at virtual events, let's say, more external events, for example, those were much more likely unless they're a webinar, they are much more likely be in person. So getting back to the virtual side, I think there, it's less manual processes, if you will, but where our strength comes in is that people are realizing they need a platform, right? They don't want to just handle virtual. They have to do the total customer experience all in 1 platform because when you have even it might be, let's say, say, a few hybrid events, they tend to be your larger events. And therefore, when you take your total event program, whether it's virtual, whether it's hybrid or whether in-person, you want it all in 1 place and so that's where I'm going to say it becomes manual. And when you look at the total event program and look at all, let's say, the virtual events that some of these companies we just mentioned help you with, can you really run a systematic analysis of all your attendees that went to the 30 different virtual events you have. Is the tools geared towards that, more enterprise, more mid-market focused, they're not as focused on that, and they're not geared towards that where our product is more geared towards the total event program? So not just the individual virtual event but the multiple virtual events that you do. And look, pre-pandemic in virtual is not a thing for many companies. So this is really a greenfield expansion. And look, there's a lot of shifts going on, a lot of force digitization. But what we're going to see is, as in person comes back, people are going to start a little bit more over-indexing now hey, does my virtual work with my in person. If you look at the last 2 years, it's been the other way. I have my virtual, I don't really care about my in person, and it's not as important. Now it's the opposite. And so that's where our strength comes in. And look, virtual is here to stay. Look, distributed workforces are going to be permanent. I think people are going to see that. And look, webinars and virtual events. There are going to be fixtures of live engagement. And so that's just 1 of the elements of the total event program and that total customer engagement, which is, again, plays to our strength.

Yes. I get that's really helpful. And I appreciate the detail. I guess I got a follow-up there, which is you guys have an amazing team in India that deals with data. And you've done a great job of advertising on the hospitality cloud side. And you just touched on it, which is I want to know that Bhavan went to this virtual event. He went to this particular in-person one, he went to this one, part-time virtual part time in person, and that creates a sales funnel and that sales funnel gets monetized some way. How do you guys think about productizing that data around a marketing business, not necessarily today, but in your plans over the next 3 to 5 years to sort of say, okay, company X, this is who the buyer really is, and this is his engagement in this particular product, for you. How do you think about that volume of data? Because you've obviously done a really good job with that on sort of understanding your marketing and the Hospitality Cloud. I'd love to understand as you get this complex data of different types now, especially on the virtual side, created from streaming visits, et cetera. How does that play out in your plans around R&D and product development?

Yes. Look, this is a core part of what our business is, which is, again, you want to digitize that customer engagement. I mean a customer engagement, customer journey, right? This is just 1 element of it. So everything you just described is exactly why people want 1 platform because it becomes super complex before it was just live events candidly. That was mostly what it was. There were certainly webinars and stuff, but there weren't many virtual event inputs, let's say. Now it's across all 3. So really what a core part of our product is, is to not only engage and digitize -- I mean integrate with all their marktech stack. But we want to make sure that we not only engage with that but we're a core part of that. So as an example, if you probably remember our customer journey chart that we showed during our roadshow that showed all the different touch points you have in a customer, how much events is such a big part. And that's why marketers were saying that events is one of the most important parts of their program. And so in the end, our -- we are productizing and we have productized many parts of that of that engagement with the customer because that's ultimately why a lot of people buy our technology so they can not only just integrate with their back end marktech but also to give an insight and actionable insight into how to work with those prospects and customers that came to their events. So we give them that in productized way, reporting and the whole point is to make it actionable and to make that engagement. One thing is also all year long, and that's another area that we're working on to help make that more of a community and a lot of our things what I talked about in my earnings call was before the event after event and to make sure that we get the total event program and to make sure that total customer journey is followed.

And our next question will come from Tyler Radke with Citi.

[indiscernible] down the road. Reggie I Always appreciate your engagement on the future of the events industry. And I'm just curious if you've seen that [indiscernible] here in the first few months of the year. I mean what's your sense for customers' appetite to new hybrid events. How is your view on the future of this industry is going to change?

Tyler, we're having a hard time hearing you. I don't know if there's any way you can put it here. I think you said what's your sense for customer appetite to do hybrid events. Is that the question? I'm sorry, it was hard to hear you.

Do you hear me better now?

Yes, a little bit better.

Okay. Yes. Sorry about that. Yes. just curious -- Okay, great. So yes, the question was just given the events that has played out over the first couple of months of the year, what's your sense of how customers are approaching their event strategy? And how do you see kind of the hybrid interest from customers? And maybe how has your view changed over the last 3 months or since the last time you were speaking with investors?

So, I'll give you kind of the first couple of thoughts. So look, 50%, if you look at from a TAM view, 50% will be in-person, 25% hybrid, 25% virtual. Something like that is what our research has shown. And again, that's why, again, with this total event program being such a various mix that platform wins. So that's kind of point number one. In terms of hybrid, here's a couple of things and return it in person. First of address in person. We've been a little surprised how fast in person has come back and how fast people have all of a sudden said, okay, whatever about virtual, now let's go back to in person. It's almost like what happened 2 years ago when everyone said, "I don't care even 1 cent about in person, all I care is virtual, and that's all they focused on. So it's happened a little more rapidly than we thought. Now of course, Omicron came in, changed that sentiment a little bit, but now we're getting back to more normalized times, but it'll take a little bit of time. But that's kind of the first observation. In terms of hybrid, what we're seeing is that hybrid events are better geared towards more of the midsize and larger events. It's not easy to get AV in an event. So if you have 50 people, it's a little more difficult to do it hybrid, okay? But it's more for the mid- and large-scale events. But why is it such a hybrid so important is if you think of a mix of your event program, it's your bigger events, which are the more important events that tend to be hybrid. Like let's take, for example, you go to a 300-person conference, it'd be in my view, a little strange if it wasn't a hybrid event because you're putting so much money to organize the event and the content you're getting all these great keynote speakers that you want to make sure as many people see it, kind of what we did at Cvent Connect where you might get a couple of thousand people together, but then you might have 7,000 or 8,000 that are virtual because the cost and putting together, you want to amplify it. So we're seeing that trend continue, that it's going to be a combination of both because people don't always want to fly in, and it's not just because of the pandemic. It's all kinds of reasons, cost and so forth. So our view is that hybrid continues to be the future. It's more towards the mid and larger events but it's going to be a mixture of all 3, and you need a technology platform. The other thing is that the expectations of attendees. They are growing dramatically. They're like -- just like they expected a lot of digital engagement and virtual, they expect that same digital engagement in person. So you're seeing that demand and that expectation because everyone's gotten more technologically savvy. Like take, for example, this is a little bit what I call old school like mobile apps. We were still finding people before the pandemic to say they have to have a mobile app so when they go to your in-person event. If you can believe it now, can you imagine an event, well, they don't have a mobile app, right? They're still giving those binders with the agendas. So just as an example, that kind of digitization, which doesn't seem kind of strange. Just before the pandemic in '19, we were still finding people and saying you need a mobile app because people want to interact and engage with their mobile app. So these kind of things together really gives us what we call the best of both worlds. And it really is something that this engagement and conversion from in person is going to be higher. But when you combine that with the digital or with the amount of people you can engage that didn't come in person and you combine those 2, it really becomes an amazing impact to the marketing program of any companies.

Yes. And Tyler, this is Chuck Ghoorah, President, Sales and marketing. CMOs love the hybrid because if you think about the in-person, that's higher engagement and conversion for the in-person. So check that block. But then with the virtual, there's a broader reach, even though the engagement might be less because it's virtual, but every CMO wants both. So that broader reach can't be replicated. So they now want to check both boxes, and that's what we're seeing in terms of the [indiscernible] question you had.

That's great. And a follow-up, just on the competitive landscape, I mean, it seems like during the pandemic, specifically with virtual-only events, a lot of customers may have adopted a lot of point solutions, kind of virtual-only event vendors or a number of the companies that thrive during that space. I guess now that things are reopening, do you see the desire for customers to kind of consolidate the spending and reduce the number of vendors you are working with? And how are you thinking about that in terms of your business from a competitive landscape?

Yes. So here's a couple of things. Look, largely, the competitive landscape is point solutions. That's why it was pre-pandemic. We saw increasing like that after pandemic because people just all of a sudden came out of -- a lot of new companies came out that were just virtual. And several companies just focused purely on virtual and they thought virtual was going to carry them. With this new, of course, kind of I'm going to call it almost a pivot, not quite yet, but it's pivot back to in person that we -- I think we're all very comfortable happen in '22, as again, Omicron kind of slows down and people start feeling more comfortable. But as that pivot happens, you can't be a point solution. And you're going to see just a lot of shifts, I think, in market share because of that. And look, with Cvent, let me just give you kind of a view is that look, for 22 years, we've been building the most robust and powerful in person. And Tyler, we've talked about many times before, what we did is almost with our current product, it happened to be a new, our new event management. We built our virtual on top of it. It took us longer -- it took us longer to build it. We have a lot of people, 1,100 people in our R&D team, but it took us longer to build the product because we integrated it in the core database and core code base of our event management tool, but that was the right decision because we knew in the end, when it comes back, they're going to want all 3. So from a competitive view, I think that people are going to want a unified seamless user experience that wanted to support your total event program, whether it's small, big, simple, complex, internal, external. And I believe we're uniquely positioned to hit the virtual return in-person hybrid. And a couple of things I want to throw out to our Hospitality Cloud is some of those differentiators are a marketplace with network effects with our largest online marketing place, connecting back to venues, which is the largest part, usually the budget of an event is their venue. And when you combine all this stuff up in our market position, we think that from a competitive landscape, there's a lot of competitors, but we think we're positioned now back to our strengths.

And Tyler, it's Chuck again. Everybody knows a study that says the pandemic accelerated digitization by x number of years. What's interesting, if I take you into the field, what precedes that acceleration is that conversations. There's a forcing function on the conversation. Meeting planners had time to sort of rethink strategically their events, right? And so we might have been talking to them about virtual in 2020 and the beginning of 2021, but it allowed us to in a marketing way, be able to say, by the way, did you know we have this full platform that does so much more. And so that time we used wisely to have the bigger conversation. So there's a major law firm that's a worldwide law firm based out of New York. We just closed them for a major 6-figure deal, TCV is terrific. And they took out the webinar provider, their multiple virtual providers and then standardized on the Cvent platform. And that's on the Event Cloud side. Those same conversations, as Reggie said in his remarks are also occurring on the hotel side. So pre-pandemic, we might have been talking to them a lot about advertising, but with shortened staff, less staff, hard-to-hire staff or whatever it might be, they had to turn to software to be able to digitize the experience. So people couldn't fly to the hotel to the virtual tour, right -- or to do the real, in-person tour, right? So now they would use our Venn diagram in software, able to see how the ballroom is configured. And then all of a sudden, this was a forcing conversation. They're like, wow, this will be a lot more efficient for my sales team, for the customer and whatnot. So all of this has led to sales conversations that I think also accelerated.

Our next question will come from DJ Hynes with Canaccord.

Nice start here. Reggie, I wanted to ask how tightly correlated is growth in Hospitality Cloud with the recovery in growth you're seeing with in-person event activity. Just trying to figure out if that's a useful leading indicator for us.

Yes. DJ, first, thanks for joining us. Absolutely, that's very correlated. On the Event side, we could obviously -- we had virtual, right? We call the squeezing the balloon. So if it didn't come back in person, we still have a virtual site. In the hospitality side, we have a little bit of that, but not nearly to the degree that we had in events. So what I would tell you is that hospitality is definitely more tied towards in-person, which is obvious reasons as the RFP volume goes up, we talked about the volume going up from Q2 of 2021 -- Q4 of 2021 compared to that same period last year. And so look, it's continued to go up. In person is starting to come back but it's going to take a little bit of time. So that's why if you can look at the Hospitality Cloud, it didn't grow nearly as fast as the Event Cloud, but -- and I'll tell you a big but that digitization trend is still important. What they're learning is that the planners are becoming more digital savvy. They don't sometimes want to even interact with the hotel salesperson, which was never the case. They want to go on their website. They want to be able to source online. They want to be able to use our social, our 3D diagramming product so that they can build their event and see if this is the venue for me. So before they even talk to a salesperson, they're making 80%, 90% potentially their decision before they talk to a hotel salesperson. And now with our new stuff like the small meetings, where they can book and see the live pricing and so forth, in particular, even though won't make a huge impact this year, but that foundation isn't built. These kind of digitation trends we're building into our hospitality clients, which is great because, again, it makes them more dependent, and they're going to need more technology to help them because their customers ultimately demand it. And so look, on one hand, it's going to take time for it to come back. But on the other hand, the good news as it comes back. They know they need to adapt technology much more because their customer has and is expecting it.

I want to revisit the hybrid model for a second. I think you touched on some of this answering Tyler's question, but I just want to make sure it's crystal clear, right? So the upside in the hybrid model, as I understand it, is that you essentially get customers to kind of double pay you for the folks that attend in person, right? They pay for the core on-site capabilities and then they also pay for Attendee Hub. Maybe you could talk about like what it is about the way you've packaged Attendee Hub that also makes it a must-have for your in-person attendees, right? In other words, like what makes you confident that this double pay dynamic is going to play out?

Well, I think the first thing is that, again, when people are buying, they don't know the mix of their events. Like sometimes they -- again, during this period, in particular, you never know what happens, but they're -- they know that they have, let's just say, 100 programs. Theoretically, 25 of them will be, let's say, 50% will be in person, 25 will be hybrid, 25 will be virtual percentage of their total kind of event program. So they need 1 product to do that. But I think, ultimately, when you look at why we are confident in our Attendee Hub is that it provides all of it. So if it's in person, you'll have your mobile, you have the engagement part. If it's virtual, we have a virtual part. And it all comes down to engagement, whether it's live or virtual and both of them we have to combine all that together to follow the customer journey. And the other thing I'll tell you is you'll be shocked at how many events happen where a person who looks they went to a hybrid event, they register to go in person and then they still go half the time virtual and in person, and that means flying into the city and vice versa. So someone says I'm going to come virtually, but then they decide, you know what, I'm going to come in person, especially if it's a more local event. And so the point is, is that you could be prepared for all of it. And whether it's before or after the event, you have to be prepared, but it all comes down to engagement. And you want to make sure that you have a tool that does that. And I'll give you 1 last thing is that in terms of creating that community or that 360-degree or 365-degree engagement, what's great about our tool is that we're empowering them to take that event and make a punch kind of -- punch stronger because it's not just for that 2 day or 1-day or half-day event, it lives longer. And so when you combine all these things, it just makes it so compelling to use a product like our Attendee Hub because it all ties it in 1 place no matter what type of model you use for that particular event.

Our final question will come from Scott Berg with Needham.

Congrats on the quarter. This is Michael Rackers. I'm on from Scott, sorry. Just 1 quick 1 for me. I was curious about how we should think about 2022 sales capacity additions. Do you expect to kind of add sales capacity kind of tracking revenue growth in 2022? Or is there some shift in the go-to-market motion?

Yes. Go head, Bill.

I can start, Reggie. I'm sure Chuck will have some points to chime in. I mean, look, there's a huge opportunity out there. And so we want to make sure we're getting our disproportionate share of the pie. And so yes, sales and marketing is one of the main areas -- major areas that we are focused on investing in. That's why you see our margins coming down from 2021 to '22, it's a conscious decision on our part to invest to drive growth for the future. Look, we've shown in 2 out of the last 4 years in 2017 and 2020, and that we can run at an EBITDA margin north of 25%. And 2020 was in the froze of COVID when our revenue was declined by 12%. So the business definitely has the ability to grow at a higher margin. But look, we always balance growth with margin and profitability based on what the needs the days are. And right now, the need is to go as hard as we can at the market because there's a great -- there's a huge opportunity, the digitization of the industry is just making it right for the picking for us because we've got the perfect solution for it, but we believe we have the perfect solution for it. And so yes, we're over-indexing in heads and also in marketing spend to go after that market.

And Michael, it's Chuck Ghoorah from sales and marketing, just to kind of double click on that and layer deeper, and you may know this. So yes, we're really thoughtful and well instrumented on how we think about the go-to-market motion. So we have a demand waterfall that we built for marketing. And then within the sales heads, we have -- obviously, the SDR ranks that are the appointment centers, but then they either track towards hunters, which are bringing in the new logos or farmers who are responsible for renewals and then upsell and cross-sell. And so when I say instrument, we're thoughtful about the sale of productivity and the efficiency of all those reps. And we sit down and we sort of think about deeply where do we want to make our investments place our bets and then be able to go get the TAM. So just to let you know, there's a lot of thoughtful instrumentation underneath all of this.

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