Research from Water Tower Research, Water Tower Research

Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Research from Water Tower Research

Equity Research Firm

Equity Bottom-Up

<h2>KEY POINTS</h2>
<ul>
<li>All eyes are on the rest of 2022 as 1Q22 is nearly completed. CEO Reggie Aggarwal said that customer sentiment had improved in the last 30 days and that management was surprised at how fast in-person event interest was coming back. The company sees 50% of events being in-person, and slippage of these events in 1Q22 due to Omicron hurt margins.</li>
<li>Revenue guidance for 1Q22 is for 13.6% growth at the mid-point with adjusted EBITDA margin of 7.6%. For the full year 2022 the company expects revenue growth of 20% and adjusted EBITDA margin of 16.9%, which is an increase on the previous guidance of 16.5%.</li>
<li>Three key elements to the Cvent story are (1) its market share is less than 10% today, (2) manual event management is still the biggest competition for in-person events, and (3) planner sentiment has been improving, particularly in the last 30 days.</li>
<li>Frost &amp; Sullivan estimates the total global spend for meetings and events software will be $29.7 billion this year. With expected 2022 revenue at ~$620-625 million, the company has significant runway to grow.</li>
<li>Cvent has 51% of the Fortune 500 companies as customers; these enterprises choose its offerings for scalability, security, and stability. The company sees the integrability of its offerings—for example, with marketing technology, customer relationship management (CRM) systems, and associations management software (AMS) from the likes of Salesforce, HubSpot, and Oracle—as a material value proposition, and one of the barriers to entry.</li>
<li>Cvent’s comparables include high-growth software companies with similar margins. Its comps have a median forward P/E of 138.9x, while CVT is trading at 60.5x, a 56% discount. On a P/S basis, CVT is trading at a 33% discount to comps. The stock traded up 10% in the aftermarket.</li>
<li>Read our initiation and other reports on&nbsp;Cvent&nbsp;on our website.</li>
</ul>
<h2>COMPANY OVERVIEW</h2>
<p>Cvent offers cloud-based, enterprise event marketing and management, and hospitality solutions through its Event Cloud and Hospitality Cloud businesses.</p>
<p>Event Cloud consists of tools that enable event organizers to manage the entire event lifecycle and deliver engagement across multiple events and formats, such as in-person, virtual, and hybrid. Event Cloud serves as a system of record for events and engagement data collected across an organization’s total event program, which comprises every internal and external event that an organization hosts or attends. By using Cvent’s platform, organizations can aggregate and analyze attendee engagement across all events and build a clear picture of buyer interest.</p>
<p>Hospitality Cloud offers a marketplace that connects event organizers looking for appropriate event space for their in-person and hybrid events with hoteliers and venue operators through a vertical search engine built on a proprietary database of detailed event space information. In addition, Hospitality Cloud provides marketing and software solutions that hotels and venues leverage to manage and measure their event business to attract valuable leads and grow their businesses and to manage and measure their events business from lead to sale.</p>
<p>The combination of Event Cloud and Hospitality Cloud results in a cohesive platform that generates network effects and attracts more event organizers, and hotels and venues.</p>
<p>VALUATION</p>
<h2>CVT is Trading at a 56% Discount to Its Comps</h2>
<p>A hallmark of our research at WTR is that we do not offer specific stock recommendations and/or stock price targets. Our purpose is to help educate our readers about a company and some of the factors that we believe can be relevant to their choices about when and if to invest in a particular issue. We do offer data and graphs about how the stock has been valued historically—typically, using conventional metrics—and sometimes we present data and graphs that juxtapose historical valuations among issuers that are believed to be comparable.</p>
<p>For Cvent, we focused on comparable analysis using high-growth software companies with similar margins given the company’s growth trajectory. The company has limited trading context; therefore, we are not focusing on historical valuation metrics. Catalysts for investors include new client acquisition announcements, an improved global COVID-19 health environment, continued digitization of the events industry, and continuation of strong revenue and earnings growth trends.</p>
<p>We have used a group of high-growth, high-margin software companies as comparables. They have a median forward P/E of 138.9x, while CVT is trading at 60.5x, a 56% discount. On a P/S basis, CVT is trading at a 33% discount to comps.</p>
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<h2>DISCLOSURES</h2>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>John Roy, PhD, who is the writer of this report, covers the Technology sector for WTR. Mr. Roy, PhD and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.<br><br>WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY POINTS

All eyes are on the rest of 2022 as 1Q22 is nearly completed. CEO Reggie Aggarwal said that customer sentiment had improved in the last 30 days and that management was surprised at how fast in-person event interest was coming back. The company sees 50% of events being in-person, and slippage of these events in 1Q22 due to Omicron hurt margins.
Revenue guidance for 1Q22 is for 13.6% growth at the mid-point with adjusted EBITDA margin of 7.6%. For the full year 2022 the company expects revenue growth of 20% and adjusted EBITDA margin of 16.9%, which is an increase on the previous guidance of 16.5%.
Three key elements to the Cvent story are (1) its market share is less than 10% today, (2) manual event management is still the biggest competition for in-person events, and (3) planner sentiment has been improving, particularly in the last 30 days.
Frost &amp; Sullivan estimates the total global spend for meetings and events software will be $29.7 billion this year. With expected 2022 revenue at ~$620-625 million, the company has significant runway to grow.
Cvent has 51% of the Fortune 500 companies as customers; these enterprises choose its offerings for scalability, security, and stability. The company sees the integrability of its offerings—for example, with marketing technology, customer relationship management (CRM) systems, and associations management software (AMS) from the likes of Salesforce, HubSpot, and Oracle—as a material value proposition, and one of the barriers to entry.
Cvent’s comparables include high-growth software companies with similar margins. Its comps have a median forward P/E of 138.9x, while CVT is trading at 60.5x, a 56% discount. On a P/S basis, CVT is trading at a 33% discount to comps. The stock traded up 10% in the aftermarket.
Read our initiation and other reports on&nbsp;Cvent&nbsp;on our website.

COMPANY OVERVIEW
Cvent offers cloud-based, enterprise event marketing and management, and hospitality solutions through its Event Cloud and Hospitality Cloud businesses.
Event Cloud consists of tools that enable event organizers to manage the entire event lifecycle and deliver engagement across multiple events and formats, such as in-person, virtual, and hybrid. Event Cloud serves as a system of record for events and engagement data collected across an organization’s total event program, which comprises every internal and external event that an organization hosts or attends. By using Cvent’s platform, organizations can aggregate and analyze attendee engagement across all events and build a clear picture of buyer interest.
Hospitality Cloud offers a marketplace that connects event organizers looking for appropriate event space for their in-person and hybrid events with hoteliers and venue operators through a vertical search engine built on a proprietary database of detailed event space information. In addition, Hospitality Cloud provides marketing and software solutions that hotels and venues leverage to manage and measure their event business to attract valuable leads and grow their businesses and to manage and measure their events business from lead to sale.
The combination of Event Cloud and Hospitality Cloud results in a cohesive platform that generates network effects and attracts more event organizers, and hotels and venues.
VALUATION
CVT is Trading at a 56% Discount to Its Comps
A hallmark of our research at WTR is that we do not offer specific stock recommendations and/or stock price targets. Our purpose is to help educate our readers about a company and some of the factors that we believe can be relevant to their choices about when and if to invest in a particular issue. We do offer data and graphs about how the stock has been valued historically—typically, using conventional metrics—and sometimes we present data and graphs that juxtapose historical valuations among issuers that are believed to be comparable.
For Cvent, we focused on comparable analysis using high-growth software companies with similar margins given the company’s growth trajectory. The company has limited trading context; therefore, we are not focusing on historical valuation metrics. Catalysts for investors include new client acquisition announcements, an improved global COVID-19 health environment, continued digitization of the events industry, and continuation of strong revenue and earnings growth trends.
We have used a group of high-growth, high-margin software companies as comparables. They have a median forward P/E of 138.9x, while CVT is trading at 60.5x, a 56% discount. On a P/S basis, CVT is trading at a 33% discount to comps.


DISCLOSURES
Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  John Roy, PhD, who is the writer of this report, covers the Technology sector for WTR. Mr. Roy, PhD and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.  WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.  The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

4Q21 Revenue Up 25% Y/Y and Guide Is for 20% Revenue Growth in 2022