Cvent Holding Corp. (NASDAQ:CVT) Q2 2022 Earnings Conference Call August 4, 2022 5:00 PM ET
Company Participants
April Scee – Investor Relations
Reggie Aggarwal – Founder & Chief Executive Officer
Billy Newman – Chief Financial Officer
Conference Call Participants
Josh Baer – Morgan Stanley
DJ Hynes – Canaccord
Michael Rackers – Needham
John Roy – Water Tower Research
Operator
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 Second Quarter 2022 Earnings Conference Call. Today’s call is being recorded. All lines have been placed on mute to prevent any background noise. And after the speakers’ remarks, there will be an opportunity to ask questions. [Operator Instructions] Thank you.
And I would now like to turn the conference over to April Scee, Investor Relations. Please go ahead.
April Scee
Good evening, and thank you for joining us on today’s conference call to discuss the financial results for Cvent second quarter 2022. 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 the second quarter of 2022 and discuss our guidance for the third quarter and full year of 2022. In addition, our earnings press release, SEC filings and a replay of today’s call can be found on our Investor Relations website at investors.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 third quarter and full year 2022, our market opportunity, market position, product strategy and growth opportunities.
Forward-looking statements involve known and unknown risks, estimates 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 and the company assumes no obligation to update these statements whether as a result of new information, future events or otherwise. 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 in the section titled Risk Factors in our quarterly report on Form 10-Q for the quarter ended June 30, 2022 filed with the SEC today, and in our most recently filed annual report on Form 10-K along with other filings the company makes with the SEC from time to time. Additional information is available in the cautionary language included in our earnings press release issued earlier today.
In addition during today’s call we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Reconciliations to the most directly comparable GAAP measure of the non-GAAP financial measures discussed on this call including adjusted EBITDA and adjusted free cash flow are included in our earnings release issued today along with the definitions for those terms. The release is filed with the SEC and is available on our Investor Relations website.
And now, I’d like to turn the call over to Reggie.
Reggie Aggarwal
Thanks, April and thanks everyone for joining today’s call. I’m excited to share our Q2 2022 results. We started the year with a strong quarter beating our Q1 guidance and I’m pleased to say we continued that strong momentum in Q2.
Our revenue for the quarter was $161 million which was $6.8 million above the high end of our guidance representing 31% revenue growth year-over-year. Our strong growth was driven by a healthier and more dynamic events industry where in-person events are quickly returning while interest in virtual events continues.
Additionally, better-than-expected cost containment enabled us to exceed the high end of our adjusted EBITDA guidance by $7.3 million and adjusted EBITDA margin guidance by over 400 basis points. We also increased our adjusted EBITDA margin by 750 basis points when sequentially compared to Q1 of 2022 on a normalized basis.
In addition, we generated $17.6 million in adjusted free cash flow in the quarter. We continue to land new logos, retain existing customers and grow our share of wallet within our base through cross sells and upsells. On that note, our net dollar retention rates increased to 114% up from 109% last quarter. So the business is delivering on both the top-line and the bottom-line.
In this new and more complex events ecosystem, Organizations are increasingly looking for one platform to support their total event program across all three event formats in person, virtual and hybrid. And unlike those that offer point solutions for just one event format, our new and integrated platform addresses all three, which really helps set us apart from our competition.
We’re excited about our strong Q2 performance and it’s especially notable when compared against the challenges our competitors have been facing. Now for those of you who are new to our story here’s a brief overview. Cvent is a SaaS platform that is comprised of our Event and Hospitality Cloud solutions.
Organizations use our Event Cloud products to plan market and organize engaging events of all sizes across what we call their total event program. And our Hospitality Cloud offers a marketplace that enables meeting organizers to find and book event space at hotels and unique venues. In addition, hotels and venues use our software solutions to promote, manage and automate their meetings and events business. Fundamentally our platform helps our customers grow their top line revenue, drive engagement and deliver leads, while reducing OpEx and ensuring greater compliance.
Now before I dive more deeply into our Q2 performance by cloud, I’d like to discuss some trends we’re seeing. First, it’s become increasingly clear that in-person events are the bedrock of the event industry. Nothing beats face-to-face human connection and interaction, which is why we’re starting to see in-person events return so quickly.
Now this is reflected in our sourcing data from the Cvent Supplier Network, which is our global marketplace where planners can source and find meeting space at more than 290,000 hotels destinations and special event venues. The data shows our RFP volume has been steadily increasing since the beginning of the year. And in a few weeks during the quarter, we actually saw RFP volume approach their 2019 levels.
This is important because in 2019 it was a record year for Cvent when more than $18 billion was sourced through our platform. The other trend, we’re seeing is that organizations are looking for greater flexibility, as they build an event program that takes advantage of a mix of event format to maximize engagement and optimize their budgets.
Let me give you an example. We have a customer that hosted a 4,000-person in-person event where the total hard event cost was about $9 million or $10 million. Then they did the same event virtually where they had over 10,000 people and it cost about $600,000. A year later, they hosted a hybrid event where they had about 10,000 people attend about 2,000 in-person and 8,000 were virtual. And that hybrid event costs about $6 million.
Now from the CMO perspective, this example shows that you can go all in person for $10 million or go all virtual for about $600,000 or somewhere in between. With the digital transformation from the last two years organizations now have the option to deliver events that can match their business goals and increasingly just as important their budgets. This kind of flexibility and budget elasticity, just didn’t exist pre-pandemic and that elasticity is extremely powerful when CMOs want to continue to host events, while CFOs want to control spend.
And it’s also, a powerful growth opportunity for Cvent, because no matter, which format that our customers choose they need to invest in a robust event technology platform like Cvent. This is why we believe that, the event technology spend will continue to make up a disproportionate share of overall event spend moving forward.
Now in short, the return of in-person events combined with the need for one platform to manage the total event program plays back to Cvent’s historical strengths as a long-time leader in the space.
Now, I’ll dive more deeply into the performance of our two clouds. First, let’s discuss the Event Cloud and the competitive advantages we’ve implemented through our decades of product development and experience. We believe customers no longer want disparate point solutions to manage their events.
One for virtual, another for in-person and a third for hybrid, because this approach adds complexity and cost to their event programs, and it negatively impacts the attendee experience. So they’re turning to Cvent’s platform to manage their total event program, which is all the events that they host or attend whether it’s in person virtual or hybrid.
For example in Q2, a leading national business media company selected Cvent, because we were seen as a truly unified platform. While most of their events are now in person they wanted the flexibility to pivot to virtual as they build out a more event more robust event program. They’re starting with the $200,000 annual contract value or ACV, and a $578,000 total contract value or TCV account. And with more than 20 other media brands under the account this new logo offers continued opportunity for growth.
From a global perspective one of the most renowned universities in Australia liked our product so much that, they 3x their Cvent investment and grew their account from an ACV of about $100,000 to an ACV to about $360,000. In addition, they signed a five-year agreement for a TCV of $1.8 million as they decided to move from having multiple event management systems to the Cvent platform.
Another example is an organizer for a large conference that turned to Cvent to run their hybrid event. They’re using Cvent for event marketing registration on-site solutions attending engagement and our virtual solutions to broadcast the conference live and on-demand to attendees.
Now, this new logo, which we closed in just about three weeks is starting with using Cvent for just one event for nearly $300,000 of ACV, with plenty of room to grow. One area in particular of our platform that continues to benefit from the return of in-person events is our on-site solutions.
Let me give you a couple of examples. A global professional network and association that had a $700,000 ACV just increased their annual spend by almost 50% in Q2 bringing their total ACV to over one million. Another example is, our Fortune 500 publicly traded financial and analytics company that had a $400,000 ACV that grew around 50% to almost $600,000 ACV, and now has a TCV of almost $1 million. Both these organizations thought more of our in-person solutions, something we saw repeatedly across many of our customers over the quarter.
The final point, I’d like to make is that our Event Cloud performance is how we – is how our platform enables organizations to increase engagement opportunities even outside of event dates, further extending the overall impact of the event. For example, our Cvent Attendee Hub, which was initially used primarily for virtual events, is now also being leveraged for in-person and hybrid events as organizers look to use the solution to digitally engage with attendees before during and after an event takes place.
Let me explain. Even for an in-person event, if it attendee flies let’s say to Vegas for a conference, they may still want to digitally engage by networking online with other attendees prior to the event. Maybe they want to stream an early morning keynote online from their hotel room, watch sessions they miss on demand at a later date, or share a private session with their colleagues.
Each of these touch points offer deep attendee insights that organizations can act on. This opportunity of year-round engagement just didn’t exist before. We believe we’re still in the early – very early stages of this growth opportunity. We’re investing heavily here and in other areas across our platform with the support of our 1,300-person tech team.
So to wrap-up, my comments on the Event Cloud, there are four key things driving our growth. First, is this more dynamic events landscape. Organizations have more opportunities to engage than ever before through in-person virtual and hybrid events, which we call the triple threat. And now that in-person events are back that triple threat is real. This presents, vastly more opportunity than just 15 months ago, when most people just thought about and used virtual.
Second, our platform is more important than ever because in this changing environment, organizations need greater flexibility and efficiency to manage the complexity of their total event program and maximize ROI. We have the all-in-one solution organizations are looking for. Third, as in-person events continue to gain momentum, our platform is perfectly positioned to serve this market where we’ve been a leader for more than 22 years. And finally, our scale. We have a global sales and marketing engine, thousands of developers and customer service professionals and a strong global brand. We have the resources and the streamlined processes to take advantage of our $30 billion TAM.
Now let’s pivot to the Hospitality Cloud, where we grew almost 30% year-over-year demonstrating renewed strength coming out of the pandemic when it was heavily impacted. Today, there are several things driving our hospitality growth. First, the return to in-person events the lifeblood of the Hospitality Cloud. Second, pandemic-driven digital transformation has turned hoteliers into tech savvy buyers who now embrace technology more than ever to get their job done. And third, as hotels face staffing shortages, teams know they need to work smarter and more efficiently which increases the reliance on Cvent technology.
Let me talk about these a bit more in depth. As in-person events return, hoteliers and venues want to increase their marketing efforts to get in front of planners before the competition. In addition, given the market fluctuations and travel patterns that impact leisure travel, hotels want to lock in both short- and long-term group bookings for operational stability. All of this is driving demand for our sales and marketing solutions.
For example, a national property management company signed a one-year $270,000 ACV deal to leverage our marketing business transient solutions to help them meet their group business goals for 2023. And one large Dallas Hotel had an ACV of 235,000. And this past quarter, they just signed an additional upsell for $110,000 to attract even more meetings and group business to their newly renovated property. There are many hotels out there that are spending tens of millions of dollars on renovations and we plan to continue to target newly renovated hotels as the pandemic eases.
In addition, we’re seeing record engagement from destination management organizations and convention and visitor bureaus. Just about every major city and most small-to-midsize cities have these organizations to bring meetings, tourists and consumers to their city. For example, we had several large city DMOs purchase our advertising solutions to support their marketing — group marketing efforts, helping us increase deal sizes by tens of thousands of dollars.
Another driver of our Hospitality Cloud growth, as I mentioned earlier is the continued hotel staffing shortages. Cvent Technology can fill these gaps and help hoteliers automate and reduce manual processes across nearly every aspect of the group meeting process from sourcing, to managing room blocks, to diagramming meetings place, to responding to group leads.
Some examples are a leading global hotel chain signed a $486,000 ACV contract to use Cvent’s interactive floor plan and 3D diagramming solution across a number of hotels. A nationally recognized operator of special event venues another target market for us signed a three-year contract for a TCV of $811,000, for Cvent 3D diagramming across nearly 100 of their venues.
And one large Las Vegas hotel had an ACV of $600,000 invested another $300,000 for just our business intelligence software to help their sales team prioritize what RFPs to bid on, to see how their bids compare to their competition taking their total ACV to $900,000. It’s worth taking a pause and just focusing on the fact that this one hotel is now spending $900,000 annually on Cvent products.
This really highlights how critical technologies become to group and meeting focused hotels. So as you can see from the examples above, hotels are continuing to buy, not just marketing packages to get in front of the growing interest in in-person events, but also our software to automate streamline and more effectively manage their meetings in the group business.
In summary, we have momentum across our business driven by our strong competitive position and changing industry dynamics that work in our favor. But I’d be remiss if I wrapped up our call today without discussing the possible impact that the current macroeconomic uncertainty could have on our business. Now despite the macroeconomic conditions, we continue to see our customers invest heavily in their total event program.
And after being deprived of in-person events for so long, organizations recognize more than ever that they offer a highly effective way to maximize engagement, generate leads, deepen relationships and build brand loyalty. So even with the potential economic downturn, we believe events aren’t going to go anywhere because organizations now have the flexibility to run event programs with a mix of formats which optimizes their budget.
Our robust platform provides customers with the flexibility they need and our total event programs go-to-market approach enable Cvent to power the event landscape regardless of what comes our way. In short, we built a business that is positioned well to capitalize on the triple threat and that now has been bolstered by the return to in-person events. Our experienced leadership team has successfully led the organization through the 2001 and 2008 recessions, which enabled us each time to distance ourselves from the competition. And we are confident in our ability to adapt, grow and come out stronger, no matter what the environment is.
Now I’ll turn it over to our CFO Billy.
Billy Newman
Thanks, Reggie and good afternoon, everyone. I’ll first walk you through our Q2 2022 financial performance and then discuss our guidance for Q3 and updated guidance for full year 2022. Our total Q2 revenue was $161.0 million, an increase of 31.1% year-over-year. We beat the high end of our guidance for the quarter by $6.8 million or 4.4%. The beat was primarily driven by planners moving quickly to add in-person events as the pandemic eases. This resulted in an acceleration of our sales cycle for on-site solutions and the time between contract signing and event execution. This also resulted in an associated higher amount of upsells of our core event management product in the quarter.
Revenue growth was driven by both clouds and is due to the continued strong return of in person. Additionally, as we mentioned in our last earnings call in May, Q2 2022 revenue growth benefits from the fact that we held our client conference Cvent CONNECT in Q2 of this year compared to Q3 of 2021. The benefit to growth in Q2 from the timing of Cvent CONNECT is approximately 300 basis points. So on a normalized basis, Q2 growth would have been 28.1%.
In terms of revenue by cloud, Q2 Event Cloud revenue was $112.6 million, an increase of 31.6% year-over-year and Q2 Hospitality Cloud revenue was $48.3 million, an increase of 29.8% year-over-year. While revenue associated with our virtual solution is still one of our top of event cloud revenue components, the acceleration in revenue growth in the quarter was the result of the return of in-person events and in comparison to a prior year period, when in-person events revenue was de minimis.
Hospitality Cloud revenue growth is due to hotels increased demand for our advertising and software solutions, driven by the continued return of in person. We also saw a strong expansion of our net dollar retention rate to 114%, up from 109% last quarter and 108% pre-pandemic in Q4 2019.
Now, although we’re very happy with the 114% net dollar retention rate and the 31% revenue growth in the quarter both of these metrics are being influenced by a quick pivot back to in-person and comparing to a prior year period when in-person was not very prevalent. As a result, we believe that both metrics will start to drift down to a more sustainable level in the near-term as the rate at which our clients increase their spend with this moderates from its current accelerated rate. That means revenue growth of approximately 20% which is consistent with what we have communicated in prior calls and is reflected in our Q3 guidance that I’m about to speak to you about and a net dollar retention rate that is closer to our pre-pandemic level of 109% to 110%.
Longer term, we still believe our net dollar retention rate will be approximately 115%, as a result of the increased need for technology across the total event program. In discussing the remainder of the income statement, unless otherwise noted, all references to expenses and operating results are on a non-GAAP basis. You can find information on the most directly comparable GAAP metrics in our second quarter earnings release available on the Investor Relations page of our website.
Non-GAAP gross profit in the second quarter was $114.4 million or 71.1% of revenue, compared to 76.0% in the same period of the prior year. The year-over-year decline in our non-GAAP gross margin is primarily 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. Excluding the impact of Cvent CONNECT on our gross profit in the quarter, non-GAAP gross margin would have been 71.7%, which is up 20 basis points on a sequential basis relative to Q1 2022.
Moving down the income statement. Note that the operating expense increases in the second quarter that I’m about to take you through, reflect both meaningfully lower expenses from COVID cost-saving measures that were still in place in the 2021 comparison period and a conscious decision today to prudently invest given the massive growth opportunity that we continue to see in 2022 and beyond.
The main growth driver in each line item was employee expenses as a result of headcount higher to support growth in addition to increases we’ve seen in average compensation per employee due to wage inflation. Sales and marketing expenses, which include the majority of our Cvent CONNECT costs increased 40.5%. However, the 40.5% growth in sales and marketing expenses does not reflect the true growth of that line because of the Cvent CONNECT timing, which results in no sales and marketing expenses for a Cvent CONNECT in Q2 of 2021, while the expenses do appear in Q2 of 2022.
So excluding expenses for Cvent CONNECT in Q2 from sales and marketing expense, growth would have been 25.0%. Research and development expenses increased 30% and general and administrative expenses increased 22.2%. In addition to increased employee expenses, R&D growth was driven by increased contracted services and G&A growth was driven by public company costs that did not exist in Q2 of 2021.
Shifting to earnings. Adjusted EBITDA was $23.4 million or 14.5% of revenue, which represents a $7.3 million beat over the high end of our guidance and a 410 basis point beat in terms of margin. The earnings beat is primarily the result of our $6.8 million revenue overperformance.
What we think is even more impressive is the 750 basis point margin expansion we saw in the quarter when compared sequentially to Q1 of 2022, after excluding the impact of Cvent CONNECT had on our Q2 2022 adjusted EBITDA margin. Adjusted EBITDA margin was 16.8% in the quarter, excluding the impact of Cvent CONNECT.
This very healthy sequential margin expansion is a result of the leverage we’re seeing across all operating expense lines as we reap the rewards of the incremental investments we’ve been making since late 2020 in the form of margin expansion.
Turning to our balance sheet. We ended Q2 with cash, cash equivalents and short-term investments of $123.3 million, a decrease of $69.7 million from the end of the first quarter of 2022. This decrease was primarily the result of us paying down our new revolving credit facility by $70.0 million in the quarter.
As a reminder, we entered into a $500 million revolving credit facility during the quarter and used that new facility to repay our $266 million term loan. This new facility carries a lower interest rate than our prior term loan facility and gives us the ability to reduce interest expense by only borrowing what we need to at any given time.
More importantly, it significantly expands our borrowing capacity for potential future M&A. We do not intend to use this facility to fund operations, given our positive adjusted free cash flow position. At the end of Q2, our debt balance under the new facility was $195 million, down from $266 million at the end of Q1 2022.
Finally, adjusted free cash flow before interest payments on our long-term debt and the change in client cash related to merchant services was $17.6 million for the second quarter compared to $38.6 million in the second quarter of last year. Adjusted free cash flow in the second quarter of last year was atypically high as a result of the payment plans that allow clients to defer payment of their 2020 invoices to 2021 due to COVID.
Deferred revenue at the end of the second quarter was $268.6 million, an increase of 11.1% compared to the second quarter of the prior year due to year-over-year bookings growth across the business.
Let’s now turn to our guidance for Q3, starting with revenue. We expect Q3 2022 revenue of $158.0 million to $159.0 million, up 18.2% at the midpoint compared to Q3 of 2021. There are three reasons for the expected sequential drop in revenue growth from the second quarter.
And although I touched on all three when discussing our Q2 results, let me go into more detail on each. The first is related to the impact of the timing of Cvent CONNECT, which explains approximately 550 basis points of the drop.
As already discussed, Q2 growth benefits from approximately 300 basis points as a result of Cvent CONNECT being held in Q2 of 2022 versus Q3 of 2021. Without this benefit, Q2 2022 growth would have been 28.1%, as I mentioned earlier.
The opposite happens to Q3 2022 growth. It is expected to be 250 basis points lower than what it would have been, if it weren’t for the inconsistent timing of Cvent CONNECT between 2022 and 2021.
So excluding the timing-related impact to third quarter growth, the midpoint of our guidance would have been 20.7%, which is consistent with what we shared in our last call in May, when we said that we’d see approximately 20% revenue growth in Q3 after normalizing Q3 growth for Cvent CONNECT.
Second, the amount of in-person event revenue in Q2 of 2021 was de minimis, while the amount of in-person event revenue in Q3 of 2021 significantly increased sequentially compared to Q2 of 2021, creating a higher base of revenue off of which to grow.
And third, we saw an acceleration of our sales cycle and the time between contract signing and event execution in Q2. Our Q3 revenue guidance does not assume a similar accelerated rate of growth — accelerated rate.
Shifting to full year revenue guidance. As a result of our strong second quarter revenue results, we are increasing our full year 2022 revenue range to $624.9 million to $628.4 million, up 20.8% compared to the prior year at the midpoint and reflects a $2.6 million raise over the midpoint of the guidance, we shared in our last earnings call in early May. The raise in our full year guidance, while less than our second quarter beat represents some prudence considering the current macroeconomic environment.
Moving to adjusted EBITDA, we expect third quarter 2022 adjusted EBITDA of $27.8 million to $28.6 million, representing a 17.8% adjusted EBITDA margin at the midpoint. The 17.8% adjusted EBITDA margin is sequentially up from the 16.8% adjusted EBITDA margin we had in Q2 2022, excluding the impact that Cvent CONNECT had on adjusted EBITDA margin in the quarter and it reflects the continued operating leverage we are seeing as we reap the rewards of the incremental investments we’ve been making since late 2020 in the form of margin expansion.
Turning to full year adjusted EBITDA guidance. As a result of the strong second quarter adjusted EBITDA results, we are increasing our full year 2022 adjusted EBITDA guidance range to $104.7 million to $109.6 million. This reflects the $2.0 million increase over the midpoint of the guidance we shared on our last earnings call in May and a 20 basis point increase in our adjusted EBITDA margin guidance at the midpoint, bringing the midpoint of our adjusted EBITDA margin guidance to 17.1%.
The $2.0 million raise is less than the $7.3 million second quarter beat, because of a slight shift in our revenue mix expectations and the prudence we built into the second half of 2022 revenue forecast, considering the current macroeconomic environment.
In closing, we’re very pleased with our Q2 31% revenue growth and 750 basis points of adjusted EBITDA margin expansion on a normalized basis. We believe these results exhibit the strong position in which Cvent finds itself, given the return of in-person, continued interest in virtual events and our ability to provide one integrated platform for virtual hybrid and in-person, offering customers flexibility in the event of changing economic circumstances.
We built some prudence into our guidance for the second half of the year considering the current macroeconomic environment, but we’re still forecasting to follow through on growth — on the growth for Q3, we messaged in our last call. We feel good about performance in the first half of the year and we feel we are well positioned to take our disproportionate share of the $30 billion TAM.
Now, I’ll turn it over to the operator for Q&A.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question will come from Josh Baer with Morgan Stanley. Please, go ahead.
Josh Baer
Thanks for the question and congrats on the outperformance this quarter. I wanted to just take a step back from kind of ignore macro for a minute and just ask you a question about hybrid and the future of hybrid events. Reggie, what’s your opinion on the future of hybrid events? And does that stick longer term? And then, the follow-up is like how much of your business is hybrid? And how will that play out for you?
Reggie Aggarwal
Yes, Josh, it’s a good question. So let me first, kind of, give you a general view. What we said before is, we said about 50% of the business will be in-person, 25% will be hybrid and about 25% will be virtual. So just kind of — and that’s still playing out. No one can tell exactly what it’s going to be.
But what we’re seeing is that, first on the platform, whether it’s in-person, once you have two of the three in the mix, you have to go to a platform. So let’s just say, before it used to be virtual, that was kind of what we all saw 15, 18 months ago. And then with the in-person coming back, that changed everything and of course, hybrid.
So basically, what’s happening is that, we think in the long term that — the answer is, yes. I mean, virtual used to be a fringe element of the business, but now it’s a critical part and as the industry moves forward, it’s going to use the mix depending, in particular, let’s say, if there’s a downturn people are going to want to use virtual more, because it’s less expensive.
But the hybrid is also being — what we’re seeing is trends of it being used for the larger conferences. Like, if you’re doing a large conference, the goal of having in-person is heavy engagement and more engagement. But then when you do it virtually you get a larger audience.
So usually, it’s a combination of doing both for the hybrid for the larger events in the midsize, not for the smaller, but we’re very optimistic of the future of hybrid, just simply, because it’s a superior format depending on what the attendee wants.
Josh Baer
That’s really helpful. And then, if I can just ask for your help with a little exercise. So I assume, a company is facing budgetary pressure and decides to shift from an in-person event to virtual? Like, can you – -like how much might that save the company? And then, how does the spend to Cvent change in a hypothetical scenario?
Reggie Aggarwal
Yes. So the example we gave of a scenario was – again, I’ll just repeat it real quick is, is that a client, let’s say, had an event for 4,000 in-person, it was, let’s say, roughly $10 million, okay? These are reasonable numbers, by the way. This is kind of for a two, three-day conference that you’ll spend in Vegas.
And then we did it virtually, let’s just call it, it was around $0.5 million, $500,000, $600,000 for pure virtual. And then when they did a hybrid, it was somewhere in between, which is about $6 million. So we had about 2,000, let’s say, half the people are in-person that were virtual. So it can range from $10 million to $6 million to $500000.
So your CMO wants heavy engagement more engagement. And look, the reality is that, studies have shown three times more engagement in-person, that’s the benefit. The negative, of course, is the cost and the global reach. So what the great thing about our product is, let’s just say, a company wants to cut back its budget, wants the flexibility and the CFO goes to CMO, cut it back.
They can choose and say, hey we spent $10 million if it’s all — we will take the hard cost of an event in, let’s say, $10 million. And we can take it all the way down and dial it down to $500,000 $600,000, but the key thing is you’re not going to cancel the event.
The second key thing is whatever way they do it, whether it’s the virtual, in-person or hybrid, then we — they still need Cvent’s technology. And relatively consistently we get a relative consistent amount from each format they use, because generally if you do a pure virtual, you might get a few more people, but then you don’t use as many products.
But in the end, we generally get a healthy number from any format they choose. And if you remember, Josh, we use the term squeeze the balloon. So, let’s say, they went from pure in-person and they squeeze it to virtual, we get a lot of benefit there. And if they squeeze in it goes back in-person then we get benefit there.
And so, again, with virtual you get more regis, and you get less on-site and maybe more attendee hub. But then it’s — but if you do it in-person you get more modules, but maybe less attendees if it’s pure in-person. So it’s a balance. And that’s why what I think is, our platform will be really strategic for an organization to move up or down depending on their budgeting goals.
Josh Baer
Great. Thank you very much.
Operator
And our next question will come — our next question will come from Arjun Bhatia with William Blair. Please go ahead.
Unidentified Analyst
Hi. It’s Rachel on for Arjun. I wanted to see what you guys are hearing from customers around the outlook for events in a possible recessionary environment. Are you guys still seeing strong demand for in-person, or are customers talking about maybe switching back to virtual in the back half of the year to cut costs?
Billy Newman
Hey, Rachel this is Billy. Look, right now, we’re not really seeing any material impact from a retention recession. Now look, we can’t predict what’s going to happen in the future. But right now we’re just — there’s some small signs maybe some indecision on some cases, but really nothing major. And that’s why we’re very confident in our growth projections.
But I think generally speaking you mentioned about — and I think Reggie just mentioned in his remarks, are we seeing people who are moving from in-person to virtual. Look, at the end of the day, companies they want to meet, right?
Events are not going to get canceled. They’re looking for — and they’re going to be looking for technology to help them meet, whether it be in-person, hybrid or virtually and really drive engagement of their attendees.
And so because we have that all in one platform, if there truly is and some people say we’re in recession some people aren’t quite saying they are. But if for some reason there are budgetary constraints at our clients and they want to reduce cost they can move to either hybrid or virtual format. And we can be there for them because of our technology that supports all three types.
Now I will say that’s the Event Cloud. You didn’t mention the Hospitality Cloud, but I’ll just real quickly just touch on that, because it is obviously a big part of our business. The Hotels, right now they’re in budgeting season for 2023. And frankly in discussions, we’ve had with them it’s not really coming up.
I think you might have seen some hotels there was actually some really good metrics that are coming out from the hotels, that show there’s really good signs of life from the group meetings business. Remember, the events planners are working with the hotels right now, they’re planning in advance well out.
And so the hotels we get spent today, to get those events are going to be 12, 18, 24 months out. And this is the best business for them. It’s predictable, because it’s contracted. It’s most highly profitable, because they’re getting all those meeting rooms, in addition to the food and beverage and the hotel rooms that where people are staying.
And remember, they’re having the biggest staffing shortages in history. And so automation is that much more important for them. And especially in a recessionary environment where they’re going to want to potentially cut cost, they’re going to need more technology to do that. And the last thing I would point out to make, during COVID, planners really got used to the automation technology they got.
For example, we’ve got 3D Diagramming Software that allows planners to go online. They can see meeting rooms, in very real ways. They can see what the view out the window is. And so, planners are going to expect to be able to do that, moving forward. And so, they’re really driving things for Hospitality Cloud customers to use technology to do that.
Unidentified Analyst
Perfect. That’s super helpful. Thank you.
Operator
Our next question will come from DJ Hynes of Canaccord. Please go ahead.
DJ Hynes
Hey. Thanks guys. Billy, we’ll have you talking about, Hospitality Cloud. Growth there has been pretty significantly accelerating. We don’t have a ton of operating history with that business. As the comps get more difficult, how tightly correlated do you think Hospitality Cloud growth is with Event Cloud growth? Like, should it move faster, in line slower? Any color would help.
Billy Newman
Look, I think it’s going to be on the longer term in line. I mean look, depending on what goes on with the economy you might see one get out of back to the other. Obviously, the Event Cloud got — there are tailwinds across the business, right?
Technology utilization impacts both sides of the house. But on the Event Cloud obviously we’ve got a really big pivot when it comes to, what we call the triple threat where we can do not only in-person like we used to do pre-pandemic, but now we’ve got hybrid and virtual and there’s just a lot more engagement and things that our clients are going to want to do there.
And so, look, in the quarter you saw a slightly higher growth out of the Event Cloud. I think in the short-term we’re expecting that the Event Cloud is going to have higher growth in Hospitality Cloud.
But look, even though things are definitely — Hospitality Cloud is showing strong signs of life we’re still not — we’re still not fully there. We’re not expecting to get there until 2023. And that’s where I think from there on, you’ll start to see the growth rate teaming up between the two clouds.
DJ Hynes
Yeah. Got it and then, just a quick follow-up, remind me on the lead time of when, an event booking happens, Event Cloud booking versus when your customer is actually planning on hosting the event. Like, how far are those apart?
Billy Newman
Yeah. So I mean, obviously it depends on the size of the event. The larger the event, the longer out it’s going to be. I mean, look, for the Mega Events, they’re starting like a year out. Like, once their event ends, the next day they’re getting ready to do that, right?
But that’s the exception for us, not the rule. Most of our events are, I think like 150 people in general are the average attendees. Those events obviously are going to be planned a lot tighter in.
Look I think on average, those are going to be maybe three to six months out. And that’s one of the big things that really been in plus in Q2. We’re seeing planners that are saying all right, pandemic is definitely easing. They’re like I quickly want to get this event spun up.
And so that time frame of three to six months is definitely pulled in in addition to you’ve got customers that are coming to us and they’re saying, I need to sign a contract tomorrow because I need to do my event in one month because they’re just things are just quickly turning for in-person. And so that’s what we’re seeing.
Rajeev Aggarwal
Hey DJ just a couple of thoughts. On the Hospitality Cloud, don’t forget the big conventions might be booking out two, three years in advance. And there is a lot of tightening in so many organizations come back all of a sudden, so you need to book them out. And then as Billy said that when the smaller events, so the booking windows definitely shrunk for sure.
Same thing with the Event Cloud. People are moving more rapidly and quickly because they’re kind of waiting to say, hey what’s the environment like generally with the COVID pandemic, maybe now it might be because of the economic environment. But — so it is shortening and that is one of the reasons why as Billy mentioned, we had an acceleration of our revenue just because people are booking faster in shorter windows.
But in the long-term, we’ll probably get a little bit more balanced, but I think things will be probably shorter in the — even in the mid to long-term because just people are just acting a little bit differently and that might be a go-forward thing.
DJ Hynes
Yes, very helpful. Okay. Thanks guys.
Operator
Our next question comes from the line of Scott Berg with Needham. Please go ahead.
Michael Rackers
Hi everyone, this is Michael Rackers I’m on for Scott Berg. Just one quick one for me today. How should we think about sales capacity additions moving forward and kind of the spend here to drive that 20%-plus growth. Do you kind of expect to hire in line with that revenue growth, or is there any type of shift in strategy based on the macro? Thank you.
Billy Newman
Look we’re definitely going to be — as we look at the macro environment and the focus on profitability, we’re definitely going to take a balanced approach. And we’ve always been a balanced — had a balanced approach there. Look for the past 15 years, we’ve generated an EBITDA profit in our DNA. But along the way we’ve definitely — we’ve been able to drive revenue growth along with that profitability. And that’s kind of going to be our plan moving forward.
Now, obviously, you need to prime the pump and there’s — you need to do certain things to get that growth above 20%. What we’ve been really investing in for the last two years with Project Flex, which is the rewrite of our — tenure rewrite of our core event management platform and then pivoting to virtual and quickly building that product and making it very competitive as we think it is today.
We’ve really been investing in R&D. I think what we’re probably going to see is you’re going to see not a decrease necessarily in investment in R&D, but we’re not going to see that incremental increases that are going to be in line with the revenue growth. It’s really — sales marketing is where we pulled back the most during the pandemic and we’ve definitely been investing in that area.
But I think you’re going to see a continued investment there given the greenfield opportunity. That we see there. And so yes I think there’s probably — it could outpace the revenue growth, it’s not going to outpace it by a lot because our focus moving forward is our plan that we shared with the pipes back in May of 2021 is that we were going to expand margins and the plan was to do that starting the second half of 2022 and that’s as you can see what we’ve been starting to do.
Michael Rackers
Great. Super helpful. Thank you.
Operator
And our final question will come from John Roy with Water Tower Research. Please go ahead.
John Roy
Great. So, Reggie, one quick question. Some of your biggest competitors announced some pretty significant layoffs recently. I guess, just two questions here. One, what is — what do you think is the main driver of that going on for them? And why have you guys been able to grow? And the second thing is, how has that changed the landscape on a competitive standpoint going forward?
Rajeev Aggarwal
It’s a good question. I mean there’s been some layoffs in a lot of larger competitors. And I’ll just say the kind of focus on us is that, look getting it in person which there’s been a real shift towards that is very difficult. We believe we have deep moats in there and we’ve been doing it for 22 years and it’s much more complicated to develop in-person tools in our view than virtual, even though I’m not saying virtual is easy. So that was kind of one is that in-person is very difficult to develop and we have a real deep experience in that. And we’re of course, disproportionately benefiting for — going back to in-person.
The second thing is that, look, the triple threat. I want to stress. Everything was virtual, virtual, virtual, people are like were worrying about the triple threat which is of course virtual in-person and hybrid. And once you start going back in person, it really made the triple threat real. So now people like I need a platform because, I may do an in-person event that switches over to virtual all of a sudden for whatever reason. It could be budgetary, it could be that they’re just trying to figure it out, but whatever it is they need a mix and they needed to be on one platform to make sure they safeguard the attending journey, not just the organization journey, but for the attendee to make seamlessly. And with ours, we can run all the events on one platform.
Another thing that I think is our strength is that, we are playing to our strength. I mean in-person and platform is really where we always had a strength before the pandemic. We developed a virtual a little later than a lot of perks [ph], but now we’re again going back to our strength and we have a strong virtual. And the last couple of things is I’ll say, look, our financial strength, our ability to scale profitably and we have the resources and a little bit more mature processes. We’ve been through the 108. So we know how to handle this. We knew this was going to happen. So we’ve been planning it even though no one wants to trade a pandemic for a potential recession. This is frankly where we have a lot of experience in and this is where our competitors generally would cut back and through 108. This is where we invested, the balanced investment and thoughtful, but we’re playing to our strength. So we think there’s going to be a good opportunity in the last couple of things to our brand.
I mean, we have 1,000 people in sales and marketing and we built a brand and our brand is continue to grow from a global view because of again having one platform and in-depth products. And I think, our view is that, we’re going to continue to thoughtfully invest. We’re cautiously — I’m going to say that we’re optimistic about, how things are going, even though with the backdrop of the macroeconomics, we know that things could shift a little bit, but we think events are critical and we’re going to continue to do that balanced approach in investing. And from a competitive view, we think we’re much better positioned than we were candidly 12 months ago or certainly 18 months ago and we think, we’re going to continue to take our disproportionate share because of all the things I just talked about.
John Roy
Great. Thanks, Reggie.
Rajeev Aggarwal
Thanks for the question there.
Operator
And that will conclude today’s conference. Thank you for your participation and you may now disconnect.
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