Cvent's CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: Cvent, Inc. (CVT)

Cvent, Inc. (NYSE:CVT)

Q3 2013 Earnings Call

November 12, 2013 5: 00 pm ET


Rajeev Aggarwal - Co-Founder & CEO

Peter Childs - CFO


Jennifer Lowe - Morgan Stanley

Greg Dunham - Goldman Sachs

Michael Wang - Needham and Company

Tom Roderick -- Stifel

Brendan Barnicle - Pacific Crest Securities


Good afternoon everyone and welcome to the Cvent Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation there will be an opportunity for you to ask questions. Please note that this event is also being recorded.

This time I’d like to turn the conference call over to Mr. Pete Childs, CFO. Mr. Childs, please go ahead.

Pete Childs

Thank you very much, good afternoon and welcome everybody to Cvent’s conference call for the third quarter of 2013. I’m Pete Childs, the Chief Financial Officer of Cvent, and with me here today is Reggie Aggarwal, CEO and Chairman of Cvent, Chuck Ghoorah, our Executive Vice President of Sales and Marketing and other key members of the management team.

After the market close, we issued a press release for details on our third quarter performance. This can be accessed on the Investor Relations section of our website at During today’s call we will make statements related to our business that may be considered forward-looking under Federal Securities Laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date.

We disclaim any obligation to update any forward-looking statements or outlook, these statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These risks are summarized in the press release that we issued today, for a further discussion the material, risks and other important factors that could affect our actual results please refer to those continued in the Safe Harbor statements included in our earnings press release as well as our most recent filings with the Securities and Exchange Commission. Also during the course of today’s call we will refer to certain non-GAAP financial measures. The reconciliation of GAAP to non-GAAP measures is included in our press release.

Finally at times in our prepared comments to responses to your questions we may offer metrics that are incremental too or usually presentation to provide greater insight into the dynamics of our business for our quarterly results. Please be advised that we may or may not continue to provide these additional detail in the future. This call is being recorded and a replay will be available following the conclusion of the call.

And with that let me turn the call over to Reggie for his prepared remarks. Reggie?

Reggie Aggarwal

Thanks Pete and thank you for joining Cvent’s third quarter 2013 earnings call. We’re pleased to report better than expected third quarter results with strong performances across all of our major offerings.

Total revenue for the quarter was $29.1 million, a 33% increase from a year ago and above the high-end of our guidance. Our revenue upside and strong execution resulted in an adjusted EBTIDA of $5.1 million. There were several strong market drivers fueling our business. For instance, automation and replacing manual processes within the meetings and event history. The value integrated platform is increasingly becoming recognized and mobile and social capabilities are becoming more important.

We continue to be very excited about the opportunity ahead of Cvent, and as Pete will describe in more detail later we’ve increased our guidance for the full year 2013 based on our strong third quarter results combined with our ongoing business momentum. We’re still in the early stages of transforming to $565 billion meetings and event industry. Cvent is the largest provider of SaaS-based technology to the meetings industry and we believe that we’re the only vendor who truly offers an integrated end-to-end platform that addresses the entire event lifecycle.

You will recall that there are two sides of our ecosystem. Meeting planners on one side and hotels and venues on the other side. For meeting and event planners, we provide them with tools to market and manage the meetings and events. Some examples of these tools include online event registration, event marketing, mobile apps and web surveys.

For the hotel and venues, we have created the largest marketplace that connects thousands of Meetings Planners with over 200,000 hotels and venues. In describing new customer wins and expansion of existing customer relationships, we’ll refer to these two sides of the event ecosystem throughout our remarks today.

Now, let me start with some examples of successes on the meetings and events management side of our business. Many of our diverse customers are adopting Cvent to replace manual processes and excel spreadsheets. And one example of this from the third quarter is the Houston Livestock Show and Rodeo with an annual contract value in the low six figures. With over 42,000 members, the Houston Livestock Show and Rodeo is on of the largest shows of its kind. With Cvent there will be able to leverage our technology to manage membership events throughout the year in a more efficient and a cost effective manner.

While largest competition is manual or homegrown processes, we do run into customers that have already third-party solution. And when we do we often find out that this is not meeting their needs. As an example Jostens, the leader provider of yearbook and student created content was frustrated with their existing meeting management solution and its insufficient functionality. As a result Jostens was looking for an enterprise wide replacement that can manage without support from their IT team, they can also provide robust reporting.

Cvent’s strategic meetings management was able to provide them with what they were looking for out-of-the- box. By deploying SMM, Jostens was able to more effectively manage strategic sourcing, meeting registration, budgeting, payment processing, approval coordination, report generation and ROI analysis on meeting spend across their entire organization.

Over time, we’ve introduced additional functionality in our suite that has driven new customer adoption for our platform. Our recently added mobile apps are growing rapidly and are good examples of functionality that are driving new customers who initially engage with us. Increasingly attendees are realizing the convenience to mobile apps or events. Planners are recognizing their cost savings and both planners and attendees appreciate the increased level of engagement and interaction created by mobile apps. In fact, we believe that in the near future almost every event will have a mobile app which is why we continue to invest so aggressively in this area.

Following a pattern similar to our experience in event management, mobile apps for meetings and events appeal to customers around the world and organization is ranging from domestic non-profits to global Fortune 2000 companies. In the third quarter, we signed a diverse array of new mobile customers from around the world ranging from the American College of Radiology, the Cage Warrior Combat and the World Evangelical Alliance to international customers such as the South African’s Council for Shopping Centers to Blue Chip firms such as Lincoln Financial and Prudential Insurance.

To further extend our reach, we recently signed a reseller partnership with PSAV which is the largest outsourced AV and technology provider to hotels with more than 1,200 hotel and venue relationships across multiple countries. Located on-site and most of these hotels PSAV is a trusted AV partner for more than 250,000 events per year. Through our partnership PSAV has become a reseller of Cvent’s CrowdCompass mobile app development platform and they chose Cvent because of our best-in-class technology, functionality and ease-of-use when creating highly configurable native apps.

In addition, to helping us attract new customers, our mobile solutions also enhance our land and expand strategy. For example, after first utilizing our Event Management Software, Concur expanded their relationship with Cvent to include our CrowdCompass mobile app solution, which they will use for internal employee and sales events as well as their client facing activities.

Our overall land and expansion strategy goes well-beyond adding our mobile solutions to existing customers. For example, in the third quarter, we signed a new contract with an existing customer with a Fortune 100 technology company. This customer initially purchased our Event Management Software for use in one of their many divisions about 5 years ago. Since that time they’ve added Event Management capabilities of 4 other divisions, new capabilities such as surveys and most recently our strategic meetings management solution.

Our new multi-year contract has an annual contract value that is approximately 4x the size of our initial deal within five years ago. With the total contract value that is now in the low 7 figures. Even with such growth we believe we still have opportunities to further expand our relationship with this particular customer in the years ahead. This customer example also points an important trend as well. Global 5000 companies increasingly see the value in adopting strategic meetings management technology to help them centralizing gain visibility into the tens and millions of dollars they spend on meetings and events.

Based on this trend, we continue to see strong adoption for our SMM platform with new customers in the quarter including a division of Johnson & Johnson, Kohl’s Department Store and Discover Financial Services as well as growing usage of our platform through global corporation such as Wal-mart, Merck, Nokia and Procter & Gamble.

So now I’d like to turn to the other side of our platform, the Cvent Supplier Network which we monetized through marketing solutions for hotels and venues. We continued to see strong trends in meeting and event planners going online to research and source meeting locations.

In turn, hotels and venues are motivated to increase their visibility on our Cvent Supplier Network creating a very powerful network effect. Since about a third to the revenue from mid-to-large hotels has generated from meetings and events, our supplier network is an important contributor to the hotels top and bottom line performance.

During the third quarter, we added hundreds of new hotel and venue customers including the Houston JW Marriott, SLS Las Vegas, Visit Napa Valley and Zermatt Resort. Customer’s range from customer from convention and visitors bureaus to hotels and resorts as well as significant renewals of the existing customers including Hilton, Hyatt and Velas Resorts. With about half of our marketing solution’s revenue grow from existing customers, I thought it would be helpful to illustrate how these relationships expand over time.

A hotel would typically initially engage Cvent by purchasing a 1 or 2 diamond add for their property. These annual city-specific displays adds are embedded in the Cvent Supplier Networks search page for particular geographic location. As the hotel see a return on this investment they often upgrade to a higher visibility, three or four diamond add in the next year. As they see continued success by participating in our marketing solution, they often expand our advertising to include other properties in their hotel group and by purchasing other forms of advertising on the Cvent Supplier Network.

As in the second quarter, we’re also successful in the third quarter with hotels who looked to our bundled add for short-term campaigns to help them fill-in specific clause in their occupancy known in the industry as Need Days. Bundled adds included a variety of add types including advertisements in our online destination guides, newsletters, blogs or Pay per lead products because hotels can purchase and launch bundled adds quickly, they can be attractive for near-term business.

We’re also enthusiastic about growing international opportunity for our marketing solutions. During the third quarter, we saw increasing RFP volume to international hotels and venues on our network. Normally this is an indicator that our international reach is expanding. But experience as taught us that RFP volume is an important step in generating marketing solution interest by hotels and venues and new geographies making us optimistic in our ability to expand our marketing solution revenue on an international basis as we look forward. For example, the Hilton Istanbul Bomonti, a new hotel which is going to be the largest in that city [speak to] some of our top tier Cvent Supplier Network offerings. Similarly Pestana Hotels a mid-sized international hotel upgraded 5 of their hotels in Portugal.

Let me turn my attention to really talking about technology and customer services. Two aspects of our business that provide the basis of our success.

Our solutions offer strong competitive advantages. And we believe that we further distanced ourselves from the competition as we invest more aggressively in R&D than any other in our space. In fact, we’ve almost tripled our R&D investment since 2011. With two significant releases a year, we’ll be launching our next major release during the fourth quarter. Among the new features in this release will be updated SMM Dashboard Reports and new event survey integration and support for citywide RFPs.

Let me talk about this last one for a moment. The market currently lacks a robust offering to support citywide RFPs for very large events that require working with multiple hotels and venues to meet their requirements. Many updates were made to improve both the planner and supplier workflows to handle these complex RFPs. Our new capabilities will be another differentiator for Cvent.

We’re also introducing innovative solutions like our OnArrival mobile app that bronze our footprint in providing onsite technology. OnArrival makes it even easier to manage logistics side and event. OnArrival now allows event planners to edit and wirelessly print name badges, alert planners when checking in a registrant who hasn’t paid in full and pull up a list of VIPs and other attendees by category.

As we all know, meetings are inherently social events. Looking ahead, we’ll also be launching new event management features to leverage new social capabilities live during meetings and events. Meanwhile, we’ll also be looking at way to leverage CSN with add types that extend our marketing solutions even further.

Another way that we distinguish ourselves from the competition is our award-winning customer service. In addition to our high touch model based upon knowledgeable yet cost effective resources both in the U.S. and India. We recently introduced a Client Services Portal a knowledge base that provides a 24/7 self-service option for our customers. But our technology features often initially attract prospects to us our high cut support and commitment to customer success drives our strong reputation in the marketplace.

In summary, we had an excellent third quarter with strong performance for both the platform subscription and marketing solutions side of our business. At the same time, the network effects that drive planners to our platform and hotels to our platform continue to magnify. We’re still in the early stages of transforming the multibillion dollar meetings industry and we’re excited about our future.

With that let me turn over the call back to Pete.

Pete Childs

Thanks Reggie. And we are pleased to report a strong third quarter results which combined with the ongoing moment of our business provides us with the confidence to increase our revenue and profitability guidance for the full year 2013. I’ll take you through the details on both fronts starting with our third quarter P&L.

Total revenue for the quarter was $29.1 million, an increase of 33% from our third quarter 2012 and above the high end of our guidance range of $27.5 million to $27.9 million. Within total revenue platform subscription revenue was $20.1 million, an increase of 31% compared to a year ago and marketing solutions revenue was $9 million, an increase of 39% compared to a year ago.

As in the second quarter, new marketing solution add types help drive a portion of revenue upside in the quarter since our track record with these new add types remains limited and they’re short-term in nature revenue from them is not as predictable as compared to the substantial majority of our business. We’re pleased to see the continuing momentum in these new add types in the third quarter but believe it is still too early to identify definitive trends.

Looking at the rest of the P&L, I would discuss the results on a non-GAAP basis. The reconciliation of GAAP to non-GAAP results has been provided in our press release, issued after the market closed today. Non-GAAP gross profit in the third quarter was $21.1 million, resulting in a gross margin of 72% which is a decrease from 76% in the third quarter of 2012 due primarily to an increase in customer service head count and technology infrastructure to support the long-term growth of our business. Over the past few years gross margin has averaged in the mid 70% range and we are confident that – we can generate around 70% (later changed by the company to 80%) gross margins over the long-term.

Turning to operating expenses, non-GAAP sales and marketing costs increased 28% from a year ago, as we’re still on the early stages of ramping investments in sales and marketing to drive our top line growth on a global basis. We continue to invest in R&D which grew a 33% on a non-GAAP basis in the third quarter last year, to support continued product development and enhancements.

Non-GAAP G&A costs increased a 111%, due primarily to higher end support scaling of our business as well as to incremental costs associated with operating as a public company. Non-GAAP operating income was $3.1 million or 11% of revenue, compared to non-GAAP operating income of $4 million or 18% of revenue a year ago.

Adjusted EBITDA of $5.1 million represented an 18% adjusted EBITDA margin and compares to adjusted EBITDA of $5.3 million in the third quarter of last year. A combination of better than expected revenue and lower than expected expenses lead to third quarter adjusted EBITDA that was well above our guidance of $2.1 million to $2.5 million.

There was the case in the second quarter our profitability metrics were lower in the third quarter of 2013 compared to the prior year, due to the expected impact of investments in our growth including our CrowdTorch, CrowdCompass and TicketMob acquisitions increased investments in technology, sales and marketing and incremental costs associated with being a public company.

Having just completed our IPO during the third quarter, we are focused on deploying some of our additional growth – capital as quickly as possible, but we want to make sure that we are spending efficiently on programs as well as hiring the highest quality employees to join our organization and culture. Our expenses were lower than expected in the third quarter, but a significant opportunity in front of us we plan to increase investments in our growth initiatives in the fourth quarter and then in 2014 which is consistent with our previous messaging.

Non-GAAP net income was $2 million for the third quarter or $0.05 per share, based on 39.5 million diluted weighted average common shares outstanding, and was also above the high-end of our guidance range of loss of $100,000 to income of $300,000. This compares with non-GAAP net income of $2.5 million or $0.07 per share based on 34.9 million diluted weighted average common shares outstanding in the third quarter 2012.

On a GAAP basis, operating income was $276 million in the third quarter of 2013, due to the non-deductible nature of stock-based compensation expenses and earn-outs associated with our acquisitions we incurred a cash tax of $1.4 million on higher taxable income during the third quarter. As a result, our net loss was $829,000 or a loss of $0.02 per share based on $37.1 million pro forma basic weighted average common shares outstanding.

Turning to our balance sheet. We ended the quarter with cash, cash equivalents and short-term investments of $157.8 million, compared with $33.4 million at the end of the second quarter. Cash and cash equivalents include $122.1 million in net proceeds after underwriting discounts and offering-related expenses that were generated from the completion of the company’s IPO in August.

Deferred revenue at the end of the third quarter was $48.8 million, an increase of 31% on a year-over-year basis. Is important to note that sequential movements in our deferred revenue are not meaningful because of our contracts as many of our contracts are on year-end renewal cycles, our deferred revenue patents over the past four quarters have been consistent historical deferred revenue patents with a strong sequential increase in deferred revenue in the fourth quarter followed by a small sequential increase in the first quarter, the quarters to-date decreases in the second and third quarters. We anticipate this patent will continue.

Now reflected on our balance sheet, please note that we did make an 8-K filing subsequent to the end of the third quarter closing that we signed in a 11 year lease agreement to move our headquarters to a new location nearby in the second half of 2014.

Our new space will enable us to accommodate an expanded workforce of more than 400 new employees over the next several years, as part of this agreement we were pleased to have qualified for a $1 million grant from the Governor’s Opportunity Fund from the Commonwealth of Virginia which will help to [decrease] some of the costs of our expansion.

From an expense perspective we estimated that our expansion move will result in approximately $500,000 to $750,000 in an incremental operating expenses and $2 million to $3 million in capital expenditures net off the Governors’ Grant and Landlord Allowances with most of these expenses incurring in the third quarter of 2013.

Now let me turn our thoughts to the financial outlook for the fourth quarter as well as to our increased guidance for the full year 2013. Starting with the fourth quarter of 2013, we expect to generate revenue of $30 million to $30.4 million representing an increase of approximately 27% to 29% from the prior year. We expect adjusted EBITDA of $1.8 million to $2.2 million which reflects our intent to increase investments in sales and marketing and technology and as I described earlier, as well as on last quarters’ call, this would lead to non-GAAP net loss of $500,000 to $100,000 or a loss of $0.01 per share to break-even, based on an estimated 42.5 million diluted average weighted shares outstanding.

Non-GAAP guidance for the fourth quarter excludes stock-based compensation expenses of approximately $900,000 in the fourth quarter an acquisition-related costs of $400,000. Adjusted EBITDA excludes these expenses as well as depreciation and amortization expenses of approximately $2.2 million. Excluding these adjustments we anticipate a GAAP net loss of $1.8 million to $1.4 million, or a loss of $0.05 to $0.04 per share based on estimated 40 million basic average weighted shares outstanding. While we expect a GAAP net loss for the fourth quarter we expect to pay a cash tax of approximately $400,000 in the quarter. Now based on our third quarter results and fourth quarter guidance we now expect full year revenue to be in the range of $110.4 million to $110.8 million, an increase from prior guidance of $107.8 million to $108.7 million and representing a growth of 32% to 33% on a year-over-year basis.

We now expect adjusted EBITDA of $14.5 million to $14.9 million for the full year 2013, which is up from our previous guidance of $10.9 million to $11.3 million and represents an adjusted EBITDA margin of 13% at the midpoint of EBITDA and revenue guidance. We expect non-GAAP net income of $5 million to $5.4 million or $0.13 to $0.14 per share based on an estimated 37.8 million diluted shares. This is up from our previous guidance of $0.05 to $0.07 per share.

We will provide our 2014 guidance for revenue and profitability on next quarter’s conference call. That said we are pleased with the company’s profitability, pleased that it was above our expectations for the third quarter. I want to reiterate my comments from earlier that we do plan to resume our focus on investments in our business during the fourth quarter which will be fully realized next year and our strategy to invest heavily in sales and marketing and R&D during 2014 remains unchanged.

Our non-GAAP guidance for 2013 excludes stock-based compensation expenses of approximately $5 million, acquisition related cost of approximately $2.5 million and foreign currency losses of approximately $2.0 million. Adjusted EBITDA excludes these costs as well as depreciation and amortization expenses of approximately $8 million. Excluding these adjustments we anticipate a GAAP net loss of $4.6 million to $4.2 million or loss of $0.13 to $0.12 per share based on an estimated 35.8 million basic average weighted shares outstanding.

In summary we are pleased to deliver a strong performance in the third quarter of 2013. Most important we continue to expand our market leadership position and we are investing in our business to capitalize on the significant opportunity ahead of us.

And with that operator we can now open up the call to questions.

Question-And-Answer Session


(Operator Instructions) And our first question comes from Jennifer Lowe from Morgan Stanley. Please go ahead with your question.

Jennifer Lowe - Morgan Stanley

One of the things that really struck me was how strong the marketing solutions revenue was in the quarter and then in particular it looks like the growth rate there actually accelerated from the last couple of quarters. I know Pete mentioned briefly that given sort of the newness of the new offerings you don’t want to extrapolate any trends there but and I know Reggie comment on the international wins there. But can you talk a little bit about the strength there, was it new products, was it international, was the pricing, what kind of drove the strength there? And is there anything with new products that changed in terms of duration of the benefit you see or is it still one your contracts very similar to what we saw in that business historically?

Reggie Aggarwal

Yes. So Jennifer, good question. A couple of things is that again the new ad types are generally short term in nature, again to fill in that those kind of holes. So it’s still little unpredictable because we’re just starting to get a hold of it and we’re going to need some more time to understand the visibility in that revenue. It does makeup a small percentage of our overall revenue and a small percentage of our marketing solutions revenue.

From an international perspective I think that most of it was in the U.S. because that’s where our stronger market is and we’re just starting to tap into the international. But overall, we’re -- we feel good about that, we’re going to continue to see we see some growth in there which we modeled into our fourth quarter. But it’s still one of these things where we’re still trying to get our arms around it, but it’s still, it’s a positive trend.

Pete Childs

So to add to that, Jenn, if I could, this is Pete. We are having -- we’ve seen very strong growth in our core marketing solutions business in addition to these new ad types. So I don’t want to portray the new ad types is being the reason for all the increase of what you might have expected.

Jennifer Lowe - Morgan Stanley

Okay, great. And just one last one from me. One of your traditional competitors I believe went private this past quarter. Have you seen any change in the competitive landscape as they’ve gone through the sales process? Is that in your discussions with customers at all, anything like that? I'm talking about Active. People have said that.

Pete Childs

So with the Active question is with Active going private, has it changed our --

Reggie Aggarwal

Yes, so Jennifer, so obviously a lot of people have been asking questions about Active because they are one of our competitors. From our view we think we have a strong business. We didn’t really get involved with that process and we feel very good about how we performed over frankly the last decade against them. And so we’re going to continue to invest and do the things that we think we do best and we think that because of the large opportunity we’re going to continue to invest heavily but we really haven’t seen a lot of shifts; we haven’t seen a lot of things. And what I want to stress is that manual processes continue to be our biggest competitor. And that’s really where the most of the Greenfield is getting those manual processes and people using Access and Excel to convert to a software like Cvent.


And our next question comes from Greg Dunham from Goldman Sachs. Please go ahead with your question.

Greg Dunham - Goldman Sachs

Hi, thanks for taking my question. I guess I want to hit on mobile, it looks like you made some organizational changes there the CrowdCompass side. And I wanted to follow-up on what were those changes? And then also, where are we in terms of penetration of mobile today and productizing the solution and how should we think about that?

Reggie Aggarwal

Yes, so from a organizational change it hasn’t really been many. We’ve -- it’s really a fully integrated product into Cvent and the reason is that this really become an extension of our event management product. So for example our customer service team is actually shared between our event management team, our sales team. So both the event management product as well as CrowdCompass, and so from an organizational we really haven’t seen too many changes on that side and we feel that we’ve invested in the right people. We had a little bit work. Tom, who was the original CEO, he transitioned out of the organization and we promoted someone internally who was originally the VP of Marketing to kind of takeover that position. But otherwise overall organization we feel really good about the company.

In terms of the penetration today, again we feel like we’re in the early stages of penetration. To put it in perspective when we are doing the road show we talk about approximately 20,000 mobile apps have been created and we think that number will grow to over million over time because almost all events will have a mobile app. So again the penetration is very small.

One of the big partnerships that we’re excited about is PSAV that I mentioned and again it’s a really big win because PSAV is implanted, when you guys go to a hotel you notice that there is an AV provider and a lot of people assume it’s the hotel, most of the time it is PSAV. So they are in there, it’s kind of the AV technology support organization and so they’re going to be reselling our product and we trained a lot of their sales people and they already kind of -- already starting to make penetration. So we’re really excited about that model since we historically have not done distribution channels and this is one of the first that we’re really starting to push.

So I think overall the mobile space is an explosive space, we positioned ourselves well, we’re making a lot of traction in that and we kind of attacking it from a business app side with CrowdCompass and from the consumer side with CrowdTorch.

Greg Dunham - Goldman Sachs

Okay, great. And one final one from me. The expenses were a little lighter than we had modeled and I want to hit on the hiring plans. You outlined that we should expect investments to go up. But specifically did they meet the hiring plans for the quarter and how should we think about head count hiring particularly in sales as you go to 2014? Is it weighted in the first couple of quarters or how do we think about that?

Reggie Aggarwal

Yes, so Pete, let me make a couple of comments and then so our EBITDA was a little higher than expected because we just obviously had finished our IPO. We haven’t been able to deploy all the capital as aggressive we’d like to partly because very high standards in the quality people that we hire and some other programs that we want to do with technology and so forth where beta testing just took us a little longer to roll them out.

So but we do plan on aggressively investing in the business in Q4 I don’t know it will completely catch up in Q4 but certainly in 2014 we will continue to catch-up in that -- in the expenses and investments because we again see a big opportunity. It wasn’t -- in terms of the head count for hiring for sales, if you recall we hire a lot of our classes in bulk. So in August, we hired about 100 people basically over that summer, and so and the majority, the vast majority were sales people, they tend to be the pre-sales kind of zero to two years out of college.

So we hired them most of them in August, we’ll take about eight weeks to train them and then they’ll start frankly getting on the phone and be effective about four to six weeks later after that. So we think we’re well positioned for 2014 and we think we made there prerequisite investments. Now having said that, we can always invested more sales people and we are continuing to grow but we think generally speaking we executed well on that part of the business because that’s what the bulk of our hiring is.


Our next question comes from Michael Wang from Needham and Company. Please go ahead with your question.

Michael Wang - Needham and Company

Great. Two questions for you guys. First of all when you are thinking about the international opportunity, I was wondering if you could share with us kind of what percentage of RFP volume is international and maybe share how this is trending, I’m just trying to sense for -- convert volumes in the business is international right now?

Reggie Aggarwal

Yes, so we don't break out the international specifics, but maybe let me give you a sense of the trend. So when we first started the marketplace in 2008 we had about $50 million of RFP go through system, in 2012 it was $5 billion, it was 100 escrow. I just want to kind of start off with that. And most of it was domestic and that’s because most of our customers were domestic and the adoption rate of a product like this was easier because again we think the U.S. was ahead in terms of adopting products line online travel agencies that could speedy our price line.

So that was kind of the first observation. What’s happened since then is we continue to grow very aggressively in the U.S. because it’s a large market but we made a lot of inroads internationally. And part of that it’s one of the reasons we opened up our London office last quarter. But in general what’s happening in the first is that our U.S. multi-national companies are expanding globally. So I give you an example like take a Procter & Gamble or Coca Cola as they use us domestically and then expand internationally, they bring these meetings internationally so organic being pulled there.

We of course then reinforced that by more aggressively going after the international market and we continue to see a big uptake in our international RFP and why that’s important ultimately is the more adoption RFP flow you have then of course you can drive the marketing advertising solutions. And so I think that we’re seeing those trends based on the -- on our revenue increasing on an international basis. We don’t break out at the percentages but the trend is good, we are getting more revenue and we’re going to continue to invest more internationally because we think that’s an area that’s frankly pretty wide open because most of the competitors tend to come out of the U.S. and they are not able to expand globally because of their size constraints and capital constraints.

Michael Wang - Needham and Company

Got it. And just my last question here when you are thinking about kind of the enterprise segment or SMM, I know that you are placing a lot of manual still but wondering I mean did you replace start side at any of those nice logos that you talked about and I guess when you think about your assumption around win rates versus starts going forward I mean does the acquisition change kind of your assumption around how those win rates will trend?

Reggie Aggarwal

Yes. So let me give you a couple of thoughts. So the first thing is, is that I don't know specifically we closed several thousands contracts for the quarter. So it’s hard for me to know which ones we want and we can get back to that, Michael but in general let me give you again some trends. So in the SMM there is still mostly Greenfield because combined if you look at the Global 5000 our view is there is less than 10% to 15% penetration of the Global 5000,let me start there. Number two, the ones that are penetrated are almost not penetrated, they tend to be 10%, 20% penetrated like a division or just parts of it geographically.

So very low penetration and then when you at the ones that do have a system they haven’t penetrated deeply at all. So again a massive Greenfield. In terms of the customers we won specifically for the quarter I’m sure some of them were wins from other competitors, but I think that the majority of them were Greenfield opportunity. And as we look forward the opportunities that we see in our pipeline that the majority of them are definitely Greenfield because there just hasn’t been that much penetration and so again very positive. So in terms of now the cost and pricing constraints what we’ve seen is that because we have the full platform that we are still able to have a premium pricing because we are the premium pricer because of our product, our integrated platform, our most successful marketplace and finally our customer service. So, we continue to -- we’re going to continue to invest and drive in that way because we think customers are willing to pay a little bit of a premiums in order to get the best solution from our product and service perspective because they have so much at stake and because if you think of global there is so few companies that again can support them.

Michael Wang - Needham and Company

Great. And I appreciate it.

Reggie Aggarwal

Sure. And one of the thing Mike, just a couple of examples of wins, we won, Alpha Tours which is based out of Dubai and they committed around 300,000 room nights a year, it’s the largest operator in the UAE. And then JTB Global Marketing which is based out of Japan. Again, they committed about 20,000 room nights they were founded about a 100 years ago, one of the oldest in Japan but what these trends show you is that we’re able to go into the international market and get them to adopt our software and once we get a few leaders in there, then it just takes some time for us to frankly just cross the chasm and get the industry in that country adopted. In the U.S. for example there is something called CMI which is the largest third-party companies and 23 of the 25 of them are using Cvent now. So, we’re seeing the strength, still be very positive internationally.


And our next question comes from Tom Roderick from Stifel. Please go ahead with your question.

Tom Roderick -- Stifel

Hi, guys, good afternoon. So, maybe I could follow up on Jim’s first question it’s about the marketing solutions strength. And last quarter you talked a bit about the Pay per lead solution that was relatively new out there. Wondering if you could go into a little bit more detail particularly with respect to what type of visibility you’re building that product both in the pipeline and customer demand in the marketplace, it seems like it’s a solution that folks are buying they paid bundled purchase of effectively are piece of leads I guess. Maybe you could give us a little bit of a sense as to how much that’s contributing and what’s your visibility that’s starting to drive into the marketing solutions business?

Reggie Aggarwal

Yes. So, couple of thoughts there. So, we just launched that last quarter and it’s again still as we said the new ad types are still new. So, we are still trying to get our arms around how much it’s going to grow in stuff because they’re so new. It’s so far it’s been a positive reception because people are trying to fill in holes and this is a great way to lay awards to that a client hotel let’s say let me buy 50 extra RFPs for let’s just say 2500 bucks and then what happens is that they pay the $2500 and then still it might hit the capture upfront and then what happens is that they go through and however the longer takes to spend it, it could take 30 days, it could take 60 days it’s when they get through the RFPs so that we mean by the Pay per lead.

So, so far it’s been successful not in all regions because there is more RFP flow let’s say in the major cities so it’s much more successful there. But in general, we’re going to continue to slowly roll it out. When we think it makes sense for the right customers we’re trying to fill that hole.

And in terms of the contribution, it’s still a very small amount to our marketing solutions revenue a very small amount. But because of instant revenue recognition it does have an impact on the quarter a little bit which is what part of the reason why we were able to exceed expectations because partially it’s some of the success there.

Pete Childs

And so looking forward, we do have a reasonable amount of just in these new ad types built in our forecast but still looking for visibility because we just don’t have a lot of track record there and a lot of history.

Reggie Aggarwal

Yeah, I mean just to give you a little more flavor, we sold almost 200 hotels in the last three months, let’s say somewhere between 100 to 200 hotels. And then most of the leads have been fully consumed within those hotels already, so a lot of them are in round 2 of the pay per lead. So, the program seems again to be resonating but we’re rolling out cautiously and beginning our fourth quarter numbers, we modeled some reasonable expectations based on what we've seen in the last 90 days now.

Tom Roderick -- Stifel

Okay, great. Sticking with the marketing solutions side, so Reggie, you highlighted three big names for renewals there, this quarter Hilton, Hyatt and Marriott. Would those being multi-year renewals and three of your bigger properties on that side of the business, do we need to be aware or conscious of any sort of discounting that goes on with those big renewals? Maybe you could kind of walk us through with the renewal process looks like? Can you still grow a big customer like that or is that still largely renewing at the same sort of size as prior years?

Reggie Aggarwal

That’s a good question, Tom. So, let me just give you a couple of thoughts. So, the first thing is that I think there was two big names I’d mentioned which was Hilton and -- but I think it was two, but all the major hotels call for basic renew by the -- in the fourth quarter. And so historically, we had done one year renewals because our rates had gone up pretty tremendously because our volume up from $50 million to $5 billion. And even though again we’re seeing really good adoption and when we reported in the fourth quarter what we did for 2013, I think overall we’re going to be very pleased with the results of our growth. And so -- but as we build our relationships with the hotels, there is still a lot of areas that we can grow. So, one of the things is by signing multiyear deals is it gives us visibility which I frankly know that we like in and certainly our investors like.

The second thing, it allows us to focusing on more long-term solutions because a lot of these negotiations on these large deals, you’re spending six months negotiating and so forth. So, we spend a lot of our relationships just negotiating the following year once the last year was done. So, we just thought it’s more productive and start doing more multiyear. And because you do multiyear deals, you do give a little bit of a discount for sure because you’re getting visibility and you’re getting continuity. And so but we think it’s good because we’re able to sell more properties. We have different things to sell to them like we mentioned the different ad types like our destination guide or blogs and so forth and of course the pay per lead. And as we’re going to be developing additional products and functionality we’re going to be able to continue to add more value to the hotels and continue to monetize.

I think getting that baseline partnership over a couple of years is very helpful to building our relationship. And one of the things we’re pivoting on is we’ve been position ourselves as a technology provider to our hotels so that we can partner on more things to build together instead of building it because we’re not software companies and we’re really ingratiating ourselves with them by having these longer term partnerships as opposed to every year frankly renewing and spending six months negotiating the contract. So, that’s kind of our strategic reason we’re doing it, visibility, better partnership and we have other things to build and sell them that could brings more value.

Tom Roderick -- Stifel

Great. One last quick one from me, a lot of talk about mobile on this call. Haven’t heard much about ticketing in a little while and I recognize that’s a newer effort. But anything you can add with respect to your demand for ticketing interest and expanding that offering further R&D efforts there, just anything you can add would be great?

Reggie Aggarwal

Yeah. So, again we -- that was our first -- one of our first forays into the consumer side. And so we’re seeing great growth, we’re very pleased with the acquisition. The growth is going in what -- in line of what we thought it was. And so we continue to invest into that and we think that there is a huge space.

The mobile side especially the CrowdCompass has grown little more aggressively because it fits right into our sales cycle because our event sales people can also sell CrowdCompass over the mobile apps. The consumer side it’s newer to us so we have to -- it takes a little more time to kind of getting off the ground but the growth is very strong. We’re pleased with our almost our first year because we bought them at the end of last year. And we’re going to continue to invest in the consumer space because it’s a big segment that we haven’t put a lot of energy into because we’re so focused on the business side. So, we’re pleased with the results. I think when we -- as we continue to talk about what we’re doing, I think that will get good views from our shareholders on that.

Tom Roderick -- Stifel

Great. Thanks guys. Nice job.


And our final question today comes from Brendan Barnicle from Pacific Crest Securities. Please go ahead with your question.

Brendan Barnicle - Pacific Crest Securities

Thanks so much. Reg, you guys had some track to the new SMS business for some of these large enterprises. Was that the result of any of the new hiring that you’d done around that and is that an area that we’re going to see continued hiring in given out really early where you are and the opportunity there for that Global 1000?

Reggie Aggarwal

Yeah. So, Brendan good question. So, first thing is is that when you look at the sales cycles, if you broke down our business into two sides, the enterprise of course is a longer sales cycle. Our kind of run and gun transactional sales cycles are mid market where that sales cycles tend to be 45 to kind of like 60 to 90 days, I think on average it’s about 60 days. On the SMM it can range from kind of six months to 18 months, so it’s a longer enterprise sale and which is great because you also have very deep stickiness with that product. So, the new hires on the SMM didn’t make a major impact because it just take time to ramp them up and so forth.

A lot of the business we’re bringing in is things that we -- some of them we might I remember one of the accounts we closed we’ve been talking them since 2010 and have finally closed. But then there are others that they call is up there, they’re looking to invest and they want to make a decision in 120 days. So, but generally speaking most of this is from our prior investments I would say, but going forward we are going to more heavily invest in hiring SMM folks and we think that that’s the right thing to do because again there is very few companies positioned that can really provide the right value for Global Fortune 5000 company. And so the fact is that we think we’re best positioned.

And again we continue to get our disproportionate share. I feel comfortable again to say that in the last few quarters we probably brought on more new logos than the top five competitors combined or because we’re just taking so much market share because of our brand. And frankly going public was also very helpful because it just makes a lot of these larger companies more comfortable with Cvent because of our transparency in our financials and so forth. So, we’re going to continue to invest. We think it’s a great growth area and its so under penetrated even for the customers that we do have because it just takes time to roll off the product across geographies and across divisions.

Brendan Barnicle - Pacific Crest Securities

Great. And then, Pete, on the new property on the rental, I think you mentioned it -- is it $500,000 of incremental spending that you’re expecting and should we be kind of adding that as an incremental piece in our expectations around G&A or I think you said Q2 next year, is that right?

Pete Childs

Yes, this is really a $500,000 it’s a one-time cost for moving. Our operating cost will actually go down on a per square foot basis by about 20% based on the deal that reps negotiated and you’ll see that as you take a look at the new leases that’s going to be published with the 10-Q.

Reggie Aggarwal

Yes, Brendan one thing I wanted to mention is, how important culture is to Cvent because we will say the DNA of your company is your people. One of the reason we moved is we’re able to get a much nicer buildings at a much lower cost. So, that was kind of number one. Number two, it’s right on the metro which is important for kind of our millennial generation to be able to take the metro into work, that’s a big thing. And the third thing which is kind of interesting is is that the floor place are much larger so we can fit twice the people on one floor so we can kind of keep that culture and then we're all in contiguous floors where in this building were not.

And again our India office also just coincidentally moved yesterday into a new space with the same floor plate. We’re going to have about 800 or 900 cubicles on one floor. That’s how big and wide the plate is. And we did that again because from a cultural view we don’t like to be split between disparate floors and that’s how which going to be a hallmark of Cvent is making sure our culture is strong and the people we have have a good working place.

Brendan Barnicle - Pacific Crest Securities

Great. So, just a follow up on that. Pete, would you in vision performing out that $0.5 million of moving expenses since there are sort of one-time in nature and not operating? Would you -- and that’s a non-GAAP number what that does?

Pete Childs

Yes. I would expect to carve that out.


And gentlemen, at this time I’m showing no additional questions. I like to turn the conference call over for any closing remarks.

Reggie Aggarwal

Thank you again for joining us on our call today. We are pleased to see our momentum continue with strong third quarter results that exceeded expectations. We also believe we are well-positioned to deliver a strong fourth quarter with full year results that are above our prior guidance. Our strategy to invest in our growth is working and we will continue to make investments that we believe are enabling us to capture a disproportionate share of the large opportunity ahead of us as we create significant value for both sides of the meeting and events value chain. We look forward to speaking with you again on future calls. Thank you.


Ladies and gentlemen, that does conclude today’s conference call. We thank you for attending. You may now disconnect your telephone lines.

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