CVT - Cvent Grows Revenue As In-Person Events Return

Summary

• Cvent Holding recently announced its Q2 2022 financial results.
• The company provides a range of event management software and services to organizations worldwide.
• CVT produced record quarterly revenue but operating losses remain high and it is continuing to add to headcount as an economic slowdown looms.
• I'm on Hold for CVT until we see a meaningful move toward operating breakeven.

A Quick Take On Cvent Holding Corp.

Cvent Holding ( CVT ) reported its Q2 2022 financial results on August 4, 2022, reporting its best ever quarterly revenue results.

The company provides a range of virtual and in-person event software and services to organizations worldwide.

While I’m encouraged by the return to in-person events driving revenue growth, until management can make a serious move toward operating breakeven, I’m on Hold for CVT.

Cvent Overview

Tysons, Virginia-based Cvent Holding was founded in 1999 to provide organizations with the ability to more efficiently manage their events, both in-person and virtual.

The firm is headed by founder and CEO Reggie Aggarwal, who was previously an attorney at Pillsbury Winthrop Shaw Pittman and a senior associate at PwC.

The company’s primary offerings include:

• Event marketing and management

• Exchange and sourcing

• Suppliers & Venues

The firm acquires customers through its website free trial self serve option as well as through inside and direct sales and marketing efforts for larger customer prospects.

Cvent’s Market & Competition

According to a 2017 market research report by MarketsandMarkets, the total event management software market was valued at $6.4 billion in 2017 and is projected to grow to $11.1 billion by the end of 2022, representing a CAGR of 11.6% during the forecast period.

The main factors driving market growth are the need for effective event management and increasing adoption of event planning software and event registration software by Small and Medium-sized Enterprises [SMEs].

Major competitors that provide event management or discovery software include:

• Live Nation ( LYV )

• Eventbrite

• XING Events

• ON24

• ACTIVE Network

• etouches

• EMS Software

• Ungerboeck Software International

• SignUpGenius

Cvent’s Recent Financial Performance

• Total revenue by quarter has grown per the following chart:

• Gross profit by quarter has followed approximately the same trajectory as that of total revenue:

• Selling, G&A expenses as a percentage of total revenue by quarter have varied within a narrow range over the past five quarters:

• Operating losses by quarter have worsened sharply in recent quarters:

• Earnings per share (Diluted) have remained negative, as the chart shows below:

(All data in above charts is GAAP)

In the past 12 months, CVT’s stock price has fallen 49% vs. the U.S. S&P 500 index’s drop of around 13.5%, as the chart below indicates:

Valuation And Other Metrics For Cvent

Below is a table of relevant capitalization and valuation figures for the company:

(Source - Seeking Alpha)

As a reference, a relevant partial public comparable would be Eventbrite ( EB ); shown below is a comparison of their primary valuation metrics:

(Source - Seeking Alpha)

A full comparison of the two companies’ performance metrics may be viewed here .

The Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.

CVT’s most recent GAAP Rule of 40 calculation was 1.5% as of Q2 2022, so the firm needs significant improvement in this regard, per the table below:

(Source - Seeking Alpha)

Commentary On Cvent

In its last earnings call (Source - Seeking Alpha ), covering Q2 2022’s results, management highlighted its strong revenue growth producing its highest quarterly revenue in company history.

Management is starting to see a return to in-person events, with growth in its Cvent Supplier Network showing an increase in RFPs for in-person event venues since the beginning of 2022.

Companies are also looking for increased flexibility, mixing event formats between in-person, virtual or hybrid, to increase engagement efficiently and better manage costs.

Management believes the return to in-person events combined with its flexible platform positions the firm well for industry changes.

As to its financial results, total revenue grew by 31.1% year-over-year, beating previous guidance by 4.4%, driven by growth in in-person event activity.

The company’s net dollar retention rate rose to 114%, indicating growing sales & marketing efficiency amid a return to in-person events.

Non-GAAP gross margin was 71.1% of revenue versus 76% year-over-year, due to a ‘higher percentage of our total revenue in the quarter coming from on-site solutions and merchant services, which have lower margin profiles.’

However, operating costs rose due to headcount addition at higher levels due to wage inflation and operating losses remained significant.

For the balance sheet, the firm ended the quarter with cash, equivalents and short-term investments of $123.3 million, dropping materially after paying down its revolving credit facility by $70 million. Total debt was $195 million at quarter end and adjusted free cash flow before interest payments on the debt was $17.6 million.

Looking ahead, management guided full year revenue to a growth rate of 20.8% at the midpoint and adjusted EBITDA increasing to $107.1 million at the midpoint.

Regarding valuation, the market is valuing CVT at an EV/Sales multiple of around 4.4x.

The SaaS Capital Index of publicly held SaaS software companies showed an average forward EV/Revenue multiple of around 7.7x at July 31, 2022, as the chart shows here:

So, by comparison, CVT is currently valued by the market at a discount to the broader SaaS Capital Index, at least as of July 31, 2022.

The primary risk to the company’s outlook is a potential macroeconomic slowdown or recession, which may slow sales cycles, lower event activity and reduce its revenue growth trajectory.

An upside catalyst could be a ‘short and shallow’ economic slowdown and a reduction of inflationary pressures on wage growth, helping to lower costs.

Like so many software companies, the firm is continuing to hire new employees despite recession clouds gathering and a higher cost of capital environment.

While I’m encouraged by the return to in-person events driving revenue growth, until management can make a serious move toward operating breakeven, I’m on Hold for CVT.

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