Merging with Cvent, SaaS Event Technology Leader Projecting 23% CAGR Going Public at 8.5x Sales, a 59% Discount to Its Peers



KEY POINTS
  • Dragoneer Growth Opportunities Corp. II. is merging with Cvent, a leading meetings, events, and hospitality technology provider. Cvent’s suite of solutions automates and simplifies the event-management process and delivers live engagement to maximize the impact of virtual, in-person, and hybrid events.
  • With 92% of revenue recurring and 79% from subscriptions, the company believes it will grow adjusted revenue ~23% in each of the next two years, while keeping the EBITDA margin in the 16.5% to 17.8% range. The company’s longer-term model has the EBITDA margin growing to the 35% to 40% range, driven by volume and a waning COVID-19 pandemic.
  • Cvent leverages network effects to grow revenue, while building a competitive moat. The more customers use its Event Cloud, the more hotels will use its Hospitality Cloud. With more hotels on its Hospitality Cloud, more customers will use its Event Cloud.
  • With 51% of the Fortune 500 companies as customers, enterprises choose Cvent’s offerings for scalability, security, and stability. It sees the integrability of its offerings—such as with marketing technology, customer relationship management (CRM), 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.
  • Nine of the original eleven members of the management team are still with the company. The team has experience as a public company; for all the 11 quarters the company was public it beat consensus and raised guidance, while growing revenue YoY. Most SPAC targets do not have this level of experience, which allows Cvent to stand out among other deSPAC opportunities. Investors should not underestimate this facet of the Cvent story.
  • Cvent’s comparable analysis includes high-growth software companies with similar margins. Its comps have a median forward P/S of 20.6x while the transaction is pricing at 8.5x, a 59% discount. The trailing twelve-month gross margin is 10 points below the comp median (64.7% vs 74.8%), while Cvent’s EBITDA margin is 17.6 percentage points higher (17.7% vs. 0.2%). Cvent’s recurring revenue percentage is roughly in line with those of comps.
  • We will be hosting a WTR Fireside Chat with Reggie Aggarwal, Cvent CEO and Founder on November 18, 2021.
OUR INSIGHTS

The Opportunities

With the COVID-19 pandemic slowing and an events industry that has become increasingly digitized since March 2020, it appears to be an opportunistic time for Cvent to go public. The company’s 92% recurring revenue and 22% core revenue growth from 2017-2019 give it sufficient confidence to call for 23% revenue growth in 2022 and again in 2023. With the rise of virtual and hybrid events combined with demand for in-person events, the total addressable market (TAM) for event-management technology is estimated to be $29.7bn, and Cvent estimates it has $2.7bn of opportunity within its installed base.

The Obstacles

COVID-19 continues to be a risk like in 2020, when sales declined 13%, but the company has pivoted to, and added, a virtual offering, which is saw 700% bookings growth from FY 2019 to June 30, 2021. This offering enables customers to use Cvent’s platform no matter how they wish to meet. Video conferencing competitors are starting to get into the events business, but management points to the lack of in‑person, hybrid, and engagement features as a major disadvantage.

The Transaction

The business combination values Cvent at an initial enterprise value of $5.3 billion. The transaction will provide Cvent with $801 million in cash, which will enable it to accelerate product innovation, increase research and development, reduce debt, and expand go-to market activities to capitalize on its position in the $29.7 billion market for in-person, virtual, and hybrid events.

Read all our reports on Cvent on our website.

Dragoneer Growth Opportunities Corp. II. is merging with Cvent, a leading meetings, events, and hospitality technology provider. Cvent’s suite of solutions automates and simplifies the event-management process and delivers live engagement to maximize the impact of virtual, in-person, and hybrid events.

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