S-1 1 d520989ds1.htm FORM S-1 Form S-1

As filed with the Securities and Exchange Commission on July 8, 2013.

Registration No. 333-            

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

 

CVENT, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware   7372   54-1954458

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

Cvent, Inc.

8180 Greensboro Dr.

9th Floor

McLean, VA 22102

(703) 226-3500

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

Rajeev K. Aggarwal

Chief Executive Officer

Cvent, Inc.

8180 Greensboro Dr.

9th Floor

McLean, VA 22102

(703) 226-3500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

Mark R. Fitzgerald, Esq.

Michael C. Labriola, Esq.

Wilson Sonsini Goodrich & Rosati,

Professional Corporation

1700 K Street, N.W., Fifth Floor

Washington, D.C. 20006

Telephone: (202) 973-8800

Facsimile: (202) 973-8899

 

Lawrence Samuelson

General Counsel and Corporate Secretary

Cvent, Inc.

8180 Greensboro Dr.

9th Floor

McLean, VA 22102

Telephone: (703) 226-3500

 

Richard D. Truesdell, Jr., Esq.

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Telephone: (212) 450-4000

Facsimile: (212) 701-5800

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

Large accelerated filer ¨

   Accelerated filer ¨

Non-accelerated filer x (Do not check if a smaller reporting company)

   Smaller reporting company ¨

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of

Securities to be Registered

 

Proposed

Maximum

Aggregate
Offering Price(1)(2)

  Amount of
Registration Fee

Common Stock, par value $0.001 per share

  $100,000,000   $13,640

 

 

  (1)   Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended.
  (2)   Includes shares the underwriters have the option to purchase to cover over-allotments, if any.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.

 

 


The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PROSPECTUS (Subject to completion)

Issued July 8, 2013

 

             Shares

LOGO

 

 

 

Cvent, Inc. is offering              shares of its common stock and the selling stockholders identified in this prospectus are offering an additional              shares. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders. This is our initial public offering and no public market currently exists for our common stock. We anticipate that the initial public offering price of our common stock will be between $         and $         per share.

 

 

 

We intend to apply to list our common stock on the New York Stock Exchange under the symbol “CVT.”

 

 

 

We are an “emerging growth company” as defined under the federal securities laws and, as such, we may elect to comply with certain reduced public company reporting requirements for future filings. Investing in our common stock involves risks. See “Risk Factors” on page 15.

 

 

 

PRICE $             A SHARE

 

 

 

      

Price to
  Public  

    

Underwriting
Discounts
and
Commissions(1)

    

Proceeds to
      Cvent      

    

Proceeds to
Selling
Stockholders

Per Share

     $               $               $               $         

Total

     $                          $                          $                          $                    

 

  (1)   We have agreed to reimburse the underwriters for certain expenses. See “Underwriting.”

 

We and the selling stockholders have granted the underwriters the right to purchase up to an additional              shares of common stock at the price to public less underwriting discounts and commissions.

 

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The underwriters expect to deliver the shares of common stock to purchasers on                     , 2013.

 

 

MORGAN STANLEY   GOLDMAN, SACHS & CO.

 

STIFEL

 

PACIFIC CREST SECURITIES    NEEDHAM & COMPANY

 

                    , 2013


LOGO


LOGO


TABLE OF CONTENTS

 

     Page  

Prospectus Summary

     1   

Risk Factors

     15   

Cautionary Note Regarding Forward-Looking Statements

     37   

Industry Data

     37   

Use of Proceeds

     38   

Dividend Policy

     38   

Capitalization

     39   

Dilution

     41   

Selected Consolidated Financial Data

     43   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     45   

Business

     75   
 

 

 

 

Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.

 

Until                     , 2013 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

For investors outside the United States: We have not, the selling stockholders have not and the underwriters have not done anything that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.

 

i


PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth under the sections “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included in this prospectus. Some of the statements in this prospectus constitute forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” Unless the context requires otherwise, the words “we,” “us,” “our” and “Cvent” refer to Cvent, Inc.

 

CVENT, INC.

 

Our Mission

 

Our mission is to transform the events and meetings industry. Our software platform disrupts the traditional processes for the event planners who organize events and the venues that host them, creating more value for the entire events and meetings ecosystem.

 

Overview

 

We are a leading cloud-based enterprise event management platform. We provide solutions for both sides of the events and meetings value chain: (i) event and meeting planners, and (ii) hotels and venues. Our integrated, cloud-based solution addresses the entire event lifecycle by allowing event and meeting planners to organize, market and manage their meetings, conferences, tradeshows and other events. Our online marketplace connects event planners and venues through our vertical search engine that accesses our proprietary database of detailed hotel and venue information. The combination of these solutions creates an integrated platform that allows us to generate revenue from both sides of the events and meetings value chain.

 

Events and meetings reach across every industry vertical, from consumer products to energy to healthcare. A 2013 independent study conducted by Frost & Sullivan, which was commissioned by us, estimated that the global event management software market was $5.6 billion in 2012, which we view as an immediately addressable opportunity. The same study estimated that the global market for non-software event and meeting management was $22 billion in 2012, which included the additional labor of planning, managing and executing events and meetings using manual processes that we believe our platform could address and make more efficient.

 

For the event and meeting planner side of the value chain, which includes enterprises such as corporations, associations, not-for-profits, government agencies and universities, events and meetings are an integral way to build and strengthen relationships with customers, prospects, employees and partners. Enterprise events and meetings include external events, such as conferences, tradeshows, and customer summits, as well as internal functions, such as sales meetings, training seminars and team-building events. According to a 2013 study conducted by Frost & Sullivan, enterprises spend an average of 1.1% of their revenue on events and meetings.

 

Planning and running an event can be a highly complex, inefficient and time-consuming task when managed using traditional manual processes and disparate point software solutions. We address these challenges by providing planners an integrated platform with solutions that unify the full lifecycle of an event. Meeting planners use our solutions to identify the appropriate venue, secure a competitive proposal from hotels, manage budgets, market the event, send invitations, utilize pre-event surveys, establish a social media presence for the event, process registrations, manage fee collections, build an event-specific mobile app, manage event logistics such as travel and lodging, survey and engage attendees, and analyze event results and survey feedback following the event. Our platform helps planners decrease costs and increase attendance for their events.

 

 

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For the hotel and venue side of the value chain, group events and meetings are a vital source of revenue and profit. At certain types of hotels, group events and meetings can constitute approximately one-third of total revenue. Group meeting business is often a large hotel’s most profitable segment as these groups typically contract not only for significant sleeping room blocks, but also for meeting space, catering and audio visual equipment. Meeting attendees are often a captive audience at the hotel that can generate substantial incremental revenue.

 

Our online marketplace, the Cvent Supplier Network, or CSN, connects tens of thousands of event and meeting planners seeking the best venue for their event with more than 200,000 venues featured in our proprietary database. We believe that our CSN contains the world’s largest, most accurate database of detailed venue information with listings of hotels and venues in more than 175 countries that can be searched and filtered based on approximately 200 characteristics and data fields. Our CSN has become a leading solution for event and meeting planners who are researching potential locations and venues for their events, as well as for hotels and venues that are seeking to increase their group business revenue. The number of event requests for proposal, or RFPs, submitted through our CSN has increased from approximately 12,000 in 2008 to approximately 1.1 million in 2012.(1) We believe we have achieved critical mass and are benefiting from substantial network effects by simultaneously increasing the volume of RFPs transmitted from planners to venues, expanding our proprietary venue database and growing the number of hotel personnel trained on and using our system.

 

Our dual role as a provider to both event planners and venues allows us to generate revenue from both sides of the value chain. Event and meeting planners enter into annual and multi-year subscription contracts to utilize our cloud-based event and meeting management software solutions. As of December 31, 2012, we had more than 6,200 event and meeting planner customers, including Aimia Proprietary Loyalty (formerly Carlson Marketing), Corporate Executive Board, Edwards Lifesciences, Incisive Media, Maritz Travel Company, Merck KGaA, Visa, Walmart and Wellpoint Health Networks. Hotels and venues enter into annual and multi-year contracts with us for marketing solutions that increase the prominence of their properties in our CSN. As of December 31, 2012, more than 4,700 hotels and venues have purchased marketing solutions from us, including brands such as Hilton, Hyatt, IHG (InterContinental Hotels Group), Marriott and Starwood.

 

For the year ended December 31, 2012, our revenue was $83.5 million, representing year-over-year revenue growth of 37%. For the three months ended March 31, 2013, our revenue was $24.4 million, a 33% increase over the same period in 2012. Our enterprise-focused, cloud-based platform for event and meeting planners has historically constituted the majority of our revenue and represented 70% of our total revenue for the year ended December 31, 2012 and for the three months ended March 31, 2013. For the year ended December 31, 2012, we generated net income of $4.3 million, representing a margin of 5%, and adjusted EBITDA(2) of $20.3 million, representing a margin of 24%. For the three months ended March 31, 2013, we generated net income of $0.3 million, representing a margin of 1%, and adjusted EBITDA of $3.2 million, representing a margin of 13%.

 

Industry Background

 

The hospitality and travel industry serves three types of customers: individual business travelers, leisure travelers, and group events and meetings. In the 1990s, American Express began offering travel services and subsequently transformed the way business travelers book hotel rooms and air travel. In the 2000s, online travel agencies revolutionized the industry for leisure travelers. We believe that we are driving a similar revolution today in the way group events and meetings are planned, booked and managed, both by the event planners and the hotels and venues that host these events.

 

  (1)    For an explanation of how we measure number of RFPs transmitted, see “—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics.”
  (2)    Adjusted EBITDA is not calculated in accordance with U.S. generally accepted accounting principles, or GAAP. A reconciliation of this non-GAAP measure to the most directly comparable GAAP measure along with a summary of the definition and its material limitations are included at footnote 3 of “—Summary Consolidated Financial Statements—Other Financial Metrics.”

 

 

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Key Issues and Industry Trends Affecting Event and Meeting Planners

 

Highly Complex Planning Process. Planning and running a group meeting or event is a highly complex, tedious and often manual process that requires event planners to coordinate across numerous internal departments and external constituencies, including the event venue, service providers and potential attendees. Event and meeting planners have historically lacked an integrated software platform to manage and automate their activities.

 

Continued Importance of Events and Meetings. Events and meetings are among the most high-profile and high-impact marketing initiatives available to an enterprise. Mission critical events such as product launches and user conferences provide enterprises with a valuable opportunity to maximize their marketing and sales potential by having as many as hundreds, or even thousands, of customers, partners and employees all in one location. We believe that events and meetings represent approximately one quarter of an organization’s marketing budget. As a result, we believe that Chief Marketing Officers and other C-level executives are increasingly focused on events and meetings and seeking solutions to ensure they succeed.

 

Need for More Visibility Into Event and Meeting Expenses and Return on Investment. Many event and meeting planners, as well as others within their organizations, are seeking more transparency regarding the true costs of an event and looking to justify the return on investment for their events, while also ensuring that the events are effectively designed, planned and managed to meet targeted objectives. In addition, certain event planners in more regulated environments, such as pharmaceutical sales, are also facing increased regulatory reporting and accountability requirements that are not easily manageable with manual processes.

 

Increasing Number of Channels to Engage with Attendees. With the recent emergence of more diverse communication channels, including email, online marketing and social media platforms, event planners face a wide variety of options to market their event, increase engagement and more easily connect with attendees. However, many event planners struggle to efficiently present a consistent message across the numerous channels through which they are interacting with attendees.

 

Events are Increasingly Mobile. With the mass proliferation of mobile devices, attendees and event planners increasingly expect to use dedicated mobile applications, or apps, at events.

 

Key Issues and Industry Trends Affecting Hotels and Venues

 

Fiercely Competitive Hospitality Landscape. The global hospitality industry has become more competitive, and the group events and meetings segment has become increasingly important to the ultimate success or failure of many hotels. Frost & Sullivan estimates that group events and meetings represented $103 billion of revenue in 2012 globally for hotels. As a result, hotels spent an estimated aggregate of $3.9 billion on marketing and advertising to win that business. Group revenue often constitutes a large hotel’s most profitable segment, and the competition among hotels for event business continues to escalate.

 

Hotel Budgets for Group Marketing Shifting to Digital Mediums. Worldwide ad spending continues to shift from traditional mediums to online and mobile channels. Hotels are beginning to realize the power of online advertising.

 

Hotels Have Under-Invested in Group Segment Sales Relative to their Revenue Contribution. Although group events and meetings can account for approximately one-third of revenue for certain types of hotels, hotels on average spent only 13% of their marketing budget to solicit events and meetings business according to a 2013 study conducted by Frost & Sullivan. Hotels frequently find it challenging to identify event and meeting

 

 

3


planners and even more difficult to market to them. Given the right marketing solutions to identify and engage event planners more accurately, we expect their marketing spending mix to increase in favor of the group events segment.

 

Harnessing Technology to Automate Operations and Improve Performance. Most hotels have inefficient and non-standardized RFP response processes. Hotels that host a high volume of events and meetings can benefit from software for their group business segments that enhances sales and marketing activities, automates and improves the RFP process, and captures data that can provide actionable insights and increase the conversion of group sales leads.

 

The Cvent Solution

 

Solutions for Event and Meeting Planners. We offer planners a robust platform that addresses the entire lifecycle of events and meetings, including budgeting, planning, venue sourcing, marketing, management and measurement of meetings. We offer six major product categories: event management software, strategic meetings management software, mobile event apps, pre- and post-event web surveys, ticketing software and the Cvent Supplier Network. Our cloud-based platform allows event and meeting planners to:

 

   

Increase Event and Meeting Attendance. By offering integrated, multi-channel marketing and event registration solutions, we believe that we enable event and meeting planners to drive higher attendance at their events in a cost-effective manner.

 

   

Increase Efficiency through Automation. Our solutions automate and streamline the labor-intensive process of organizing, marketing and managing events and meetings.

 

   

Reduce Costs. Our solutions automate many tasks for event and meeting planners creating the potential for increased efficiency and cost savings. They also enable procurement professionals to define sophisticated thresholds and controls to restrict meeting planners from making unauthorized or out-of-policy expenditures.

 

   

Enhance Returns on Investment from Events and Meetings. Our solutions enable planners to regularly reach out to potential attendees through social media and surveys, build more accurate customer profiles and databases, customize event communications and send automated event reminders. Our software enables event planners to capture and analyze a wide variety of attendee metrics, and we believe it allows them to improve their future events with these insights.

 

Solutions for Hotels and Venues. Through the Cvent Supplier Network, we have created a proprietary online marketplace to connect hotels and venues with enterprise event and meeting planners. Our CSN allows hotels and venues to:

 

   

Increase Revenue in the Group Events and Meetings Segment. Our CSN is an effective solution to help hotels increase the number of in-bound sales leads and amount of revenue from enterprise event and meeting planners.

 

   

More Accurately Target Meeting Planners through Online Marketing. Through our online marketing solutions, hotels and venues are able to target ready-to-transact event and meeting planners in a more cost efficient manner than many other marketing channels. Our solutions also make it easier for hotels and venues to market to hard-to-identify relevant planner personnel within organizations, which results in an increase in the number of sales leads and converted group bookings.

 

   

Enhance Employee Productivity and Efficiency. Through our CSN, we offer hotels and venues tools to automate and standardize the process by which they receive and respond to RFPs from event and meeting planners. In 2012, approximately 1.1 million RFPs were transmitted using our standardized format and could be easily pre-populated by hotels and venues with responses, enabling hotel and venue employees to respond quickly and accurately.

 

 

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Better Analyze Operational Results. Hotels and venues can closely track the volume of potential and actual business that they receive through our CSN allowing them to more effectively measure the return on marketing investments. Managers can also improve the performance and productivity of their sales representatives by monitoring responsiveness to RFPs and tracking successful bids.

 

Our Competitive Strengths

 

We believe that the following competitive strengths differentiate us from our competitors:

 

End-to-End, Cloud-Based Software Platform. We offer an integrated cloud-based software platform that addresses the entire lifecycle of events and meetings. We believe that our ability to offer the entire suite of event and meeting management solutions on a single integrated platform is a key competitive differentiator for us compared to some of our competitors that typically offer only point solutions.

 

Massive Online Marketplace. We believe that the Cvent Supplier Network is an important resource for event and meeting planners as well as hotels and venues due to its:

 

   

Depth and Breadth of Venue Profiles. The Cvent Supplier Network includes detailed meeting profile information on more than 200,000 hotels and other venues, substantially more than the number of venues listed by any of our competitors. Our CSN allows planners to conduct searches and filters based on approximately 200 characteristics and data fields per hotel profile. The size and accuracy of the database is of critical importance to planners because they want to ensure that they use the most comprehensive and current database when selecting a venue for their meeting.

 

   

RFP Volume. The RFPs sent through the Cvent Supplier Network in 2012 represented an estimated total of 13.9 million hotel room nights requested and 44.4 million attendee days.(3) For hotel partners that manage the largest number of properties, we believe that our CSN is an important external source for group business leads.

 

   

Integration with Hotels. Thousands of hotel managers have been trained to respond promptly to RFPs submitted by planners through our CSN. As of December 31, 2012, there are more than 128,000 hotel and venue employee user accounts within our system to respond to RFPs.

 

Powerful Network Effects Across the Value Chain. By bringing together both sides of the value chain, our CSN creates significant network effects.

 

   

Event and meeting planners use our CSN, generally at no cost, to search for venues, request price quotes and proposals from hotels and venues and compare proposals to identify the venue that best meets their needs and requirements. As of December 31, 2012, we had more than 30,000 active CSN event and meeting planner users. The CSN is available with the same functionality to users of our paid subscription event and meeting platform solutions as well as to event and meeting planners that simply visit the CSN site and establish a free user account. All of these users have the ability to submit RFPs to hotels and venues free of charge using the CSN. We consider an event and meeting planner to be “active” if such user accessed their account within the 12 months preceding the date of measurement.

 

   

Hotels and event venues are listed, free-of-charge, in our CSN and can receive and respond to event proposal requests from meeting planners. Due to the extensive scope of our marketplace, many hotels have integrated our CSN into their core back-end technical systems. To date, more than 10,000 hotels have integrated their customer relationship management software systems with our platform.

 

  (3)   

For an explanation of how we measure room nights requested, see “—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics.”

 

 

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As the volume of RFPs delivered to hotels and venues through the Cvent Supplier Network increases, we become even more important to hotels and venues. As more hotels and venues realize the potential of our CSN, the number of listings in our CSN will continue to grow, making it more valuable to event and meeting planners. Greater usage by more event planners increases the volume of RFPs delivered to hotels and venues, thereby increasing the value we deliver to those hotels and venues.

 

Relationships with Extensive Number of Event and Meeting Planners. We have created a large, proprietary database of individuals who we believe engage in event and meeting planning activities within their organizations. With the size and scale of our database, as well as our 150,000 aggregate prospect interactions with planners in 2012 alone, we believe that we are highly effective at proactively and systematically identifying and building relationships with event and meeting planners.

 

Recurring Revenue Model. Our subscription-based model for our event and meeting planner platform along with our annual or multi-year marketing solutions results in strong visibility and predictability of future revenue, enhancing our ability to effectively manage our business.

 

Strategic Capabilities in India. As of December 31, 2012, we employed approximately 600 personnel in India. Our Indian operations help us accomplish three important business objectives: (i) near-continuous technical development and customer service, (ii) worldwide geographic reach for marketing efforts and (iii) building and maintaining our proprietary databases. These operations allow us to benefit from the labor and infrastructure cost advantages of the region and to accomplish many critical business tasks in an efficient and cost effective manner.

 

Strong Corporate Culture that Defines Us. Our corporate culture drives and defines us. Seven of the nine executive officers and key employees identified in the “Management” section of this prospectus, have been employed with us since 2000. We seek to hire highly talented, enthusiastic employees that will help us foster a positive workplace environment, and we also offer substantial training opportunities for those employees.

 

Our Growth Strategy

 

Aggressively Pursue New Customers. We believe that there is substantial opportunity to expand our business as adoption of technology platforms to manage events and meetings increases. According to a 2013 Frost & Sullivan study, 68% of organizations in the mid-market have never licensed event management software, and the majority of mid-market organizations’ events are still planned using manual processes. Likewise, their report also shows that 63% of large enterprises do not have a complete strategic meetings management program in place.

 

Up-Sell and Cross-Sell Existing Event Planner Customers. As of December 31, 2012, only 11% of our event and meeting planner customers paid us to use more than one of our solutions. We believe that as we enhance the functionality of our platform, our customers will not only renew their existing subscriptions but purchase additional solutions as well.

 

Up-Sell and Cross-Sell Existing Hotel Customers. In addition to the annual or multi-year marketing solutions available to increase their visibility in search results on our CSN, hotels and venues can reach an even greater number of meeting planners through other offerings that are a part of our platform. We continue to add specialized marketing placements and create new marketing inventory that hotels or venues can purchase. For example, venues can pay fees to be featured prominently in our Cvent Destination Guide, which is an online resource for planners in the early stages of researching and comparing cities for upcoming meetings. The Cvent Destination Guide received an average of 200,000 page views per month during the previous nine months ended March 31, 2013 and covers more than 900 major cities around the world through more than 10,000 pages of content to provide planners with destination-specific information and key statistics.

 

 

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Grow Our Revenue Outside North America. Our recent strategic focus on global expansion has increased our non-North American revenue from approximately 7% of our revenue for the year ended December 31, 2011 to approximately 9% of revenue for the year ended December 31, 2012 and 10% of revenue for the three months ended March 31, 2013. To support our international expansion efforts and to increase global sales for all of our solutions, we opened our first European sales office in London in May 2013 and ultimately plan to expand our sales force in Europe. We also plan to introduce select European and Asian language planner interfaces in the near future.

 

Further Monetize the Cvent Supplier Network by Creating Value for Hotels and Venues. We can increase the value we provide to hotels by offering enhanced marketing solutions and analytics that enable them to better target event and meeting planners and increase their group meeting sales. We also expect to provide hotels and venues with additional marketing models beyond our current offerings, including more targeted options.

 

Expand Our Direct Sales Force and Channel Partners. We intend to expand our direct sales force to augment our current marketing efforts. We are also focused on improving and developing our relationships with our channel partners.

 

Enhance Our Mobile Applications and Social Media Offerings. We currently offer a platform that enables event and meeting planners to create and deploy mobile applications and social media offerings for both corporate and large consumer events. We have already made significant investments in the area of social media to enhance the social experience for attendees. We believe that these solutions and enhancements position us well to capitalize on the growing mobile trend.

 

Continue to Add New Solutions to Our Platform. Investing in research and development is an integral part of our long-term growth strategy and has been a key factor in solidifying our position as the industry’s leading event management platform. For example, since 2008, we developed the Cvent Supplier Network, our Strategic Meetings Management solution and the Cvent Destination Guide.

 

Risks Related to Our Business

 

Investing in our common stock involves risk. You should carefully consider all the information in this prospectus prior to investing in our common stock. These risks are discussed more fully in the section entitled “Risk Factors” immediately following this prospectus summary. These risks and uncertainties include, but are not limited to, the following:

 

   

We are substantially dependent upon customer renewals, the addition of new customers and the continued growth of the market for cloud-based event and meeting management solutions;

 

   

We are subject to U.S. and foreign data privacy and protection laws and regulations as well as contractual privacy obligations, and our failure to comply could subject us to fines and damages and would harm our reputation and business;

 

   

We have experienced rapid growth and organizational change in recent periods and expect continued future growth. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately;

 

   

Our long-term success depends, in part, on our ability to expand the sales of our solutions to customers located outside of the United States;

 

   

Our business depends on maintaining and expanding our relationships with hotel and venue providers; and

 

   

Claims by third parties that we infringe their intellectual property rights could result in significant costs and have a material adverse effect on our business, operating results or financial condition.

 

 

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Company Information

 

We were incorporated in 1999 as a Delaware corporation. As of May 31, 2013, we had approximately 1,300 employees between our operations in the United States and India. Our headquarters are located at 8180 Greensboro Dr., 9th Floor, McLean, VA 22102, and our telephone number is (703) 226-3500. You can access our website at www.cvent.com. Information contained on our website is not part of this prospectus and is not incorporated in this prospectus by reference.

 

 

 

We have registered the “CVENT,” “CVENT.COM,” “CROWDCOMPASS,” “CROWDTORCH” and “TICKETMOB” trademarks in the U.S. in certain classes of goods and services applicable to our business. We also have pending trademark applications for “CVENT,” “CROWDCOMPASS” and “CROWDTORCH” in the European Union, Canada, Australia and China. This prospectus also contains trademarks of other persons.

 

 

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THE OFFERING

 

Common stock offered by:

  

Us

  

             shares

The selling stockholders

  

             shares

Total

  

             shares

Total common stock to be outstanding after this offering

  

             shares

Over-allotment option to be offered by:

  

Us

  

             shares

The selling stockholders

  

             shares

Total

  

             shares

Use of proceeds

   The principal purposes of this offering are to create a public market for our common stock and to facilitate our future access to the public equity markets, as well as to obtain additional capital. We intend to use the net proceeds from this offering for working capital and general corporate purposes, including further expansion of our operations and product development. In addition, we may use a portion of the proceeds from this offering for acquisitions of complementary businesses, technologies or other assets, although we do not currently have any plans, proposals or arrangements for any acquisitions. We will not receive any of the proceeds from the sale of shares to be offered by the selling stockholders. See “Use of Proceeds.”

Risk factors

   See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

Proposed              symbol

  

“CVT”

 

The number of shares of common stock that will be outstanding after this offering is based on 62,593,272 shares outstanding as of March 31, 2013. This number excludes:

 

   

12,680,324 shares of common stock issuable upon exercise of options outstanding at a weighted-average exercise price of $0.70 per share under our Stock Incentive Plan;

 

   

558,915 shares of our common stock issuable upon the exercise of outstanding warrants to purchase common stock as of March 31, 2013, at an exercise price of $0.45 per share, of which, subsequent to March 31, 2013, 58,915 shares have been issued upon the exercise of certain of these warrants and the warrants pertaining to the remaining 500,000 shares have been repurchased from the holder; and

 

   

an additional              shares of our common stock to be reserved for future issuance under our 2013 Equity Incentive Plan following this offering.

 

 

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Except as otherwise indicated herein, all information in this prospectus, including the number of shares that will be outstanding after this offering, assumes or gives effect to:

 

   

the conversion of all outstanding shares of our convertible Series A preferred stock into an aggregate of 69,675,216 shares of our common stock, which will occur upon the closing of this offering;

 

   

no exercise of options or warrants outstanding as of March 31, 2013; and

 

   

no exercise of the underwriters’ option to purchase additional shares in this offering.

 

 

10


SUMMARY CONSOLIDATED FINANCIAL DATA

 

In the following tables, we provide our summary consolidated financial data. We have derived the summary consolidated statement of operations data for the years ended December 31, 2011 and 2012 from our audited consolidated financial statements appearing elsewhere in this prospectus. We have derived the summary consolidated statement of operations data for the year ended December 31, 2010 from our unaudited consolidated financial statements not included in this prospectus. We have derived the summary consolidated statement of operations data for the three months ended March 31, 2012 and 2013 and balance sheet data as of March 31, 2013 from our unaudited consolidated interim financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial data for the three months ended March 31, 2012 and 2013 and as of March 31, 2013 includes, all adjustments, consisting only of normal recurring accruals, that are necessary in the opinion of our management for a fair presentation of our financial position and results of operations for these periods.

 

Our historical results are not necessarily indicative of the results to be expected in the future, and our operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 2013. When you read this summary consolidated financial data, it is important that you read it together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this prospectus.

 

Consolidated Statement of Operations Data

 

    Year ended December 31,      Three months ended March 31,  
            2010                     2011                     2012                      2012                      2013          
    (In thousands, except per share amounts)  

Revenue

  $ 45,060      $ 60,854      $ 83,474       $ 18,250       $ 24,360   

Cost of revenue(1)

    10,122        16,660        20,573         4,625         6,003   
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Gross profit

    34,938        44,194        62,901         13,625         18,357   

Operating expenses:

           

Sales and marketing(1)

    18,227        29,305        35,873         8,136         11,519   

Research and development(1)

    2,201        4,172        7,605         1,423         2,502   

General and administrative(1)

    6,946        8,422        11,523         2,135         4,647   
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total operating expenses

    27,374        41,899        55,001         11,694         18,668   
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Income (loss) from operations

    7,564        2,295        7,900         1,931         (311

Interest income

    111        270        811         268         259   
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Income (loss) from operations before income tax expense

    7,675        2,565        8,711         2,199         (52

Provision (benefit) for income taxes

    2,932        2,749        4,406         1,329         (362
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss)

  $ 4,743      $ (184   $ 4,305       $ 870       $ 310   
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss) per common share:

           

Basic

  $ 0.07      $ (0.00   $ 0.03       $ 0.01       $ 0.00   
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Diluted

  $ 0.03      $ (0.00   $ 0.03       $ 0.01       $ 0.00   
 

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

 

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    Year ended December 31,      Three months ended March 31,  
            2010                     2011                     2012                      2012                      2013          
    (In thousands, except per share amounts)  

Pro forma net income per common share:(2)

           

Basic

      $ 0.03          $ 0.00   
     

 

 

       

 

 

 

Diluted

      $ 0.03          $ 0.00   
     

 

 

       

 

 

 

Weighted average common shares outstanding:

           

Basic

    68,775        67,030        132,669         132,844         131,488   

Diluted

    135,656        67,030        139,163         139,462         138,271   

Pro forma weighted average common shares outstanding:(2)

           

Basic

        132,669            131,488   

Diluted

        139,163            138,271   

 

  (1)   Stock-based compensation expense included in these line items are as follows:

 

     Year ended December 31,      Three months ended March 31,  
     2010      2011      2012      2012      2013  
     (In thousands)  

Cost of revenue

   $ 33       $ 690       $ 762       $ 182       $ 210   

Sales and marketing

     57         2,376         2,895         817         777   

Research and development

     9         373         539         152         141   

General and administrative

     12         512         1,010         285         311   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation expense

   $ 111       $ 3,951       $ 5,206       $ 1,436       $ 1,439   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  (2)   Pro forma basic and diluted net income per share have been calculated assuming the conversion of all outstanding shares of our Series A convertible preferred stock into an aggregate of 69,675,216 shares of our common stock as of the beginning of the applicable year or at the time of issuance, if later.

 

Consolidated Balance Sheet Data

 

The following table presents summary consolidated balance sheet data as of March 31, 2013:

 

   

on an actual basis without any adjustments to reflect subsequent or anticipated events;

 

   

on a pro forma basis reflecting (i) the conversion of all outstanding shares of our Series A convertible preferred stock into an aggregate of 69,675,216 shares of our common stock, which will occur immediately prior to the completion of this offering and (ii) the filing of our amended and restated certificate of incorporation, which will occur immediately prior to the completion of this offering; and

 

   

on a pro forma as adjusted basis reflecting the conversion described in the preceding clause and the receipt by us of the net proceeds from the sale of              shares of common stock in this offering at an assumed initial public offering price of $         per share, the midpoint of the range on the front cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and excluding the exercise of any option held by the underwriters with respect to this offering.

 

The unaudited pro forma and pro forma as adjusted consolidated financial data is presented for informational purposes only and does not purport to represent what our consolidated results of operations or financial position actually would have been had the transactions reflected occurred on the date indicated or to project our financial condition as of any future date or results of operations for any future period.

 

 

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     March 31, 2013  
     Actual and Pro
Forma
     Pro Forma As
Adjusted
 
     (In thousands)  

Cash, cash equivalents and short-term investments, net of restricted cash

   $ 40,944       $            

Total current assets

     62,986      

Total assets

     92,412      

Deferred revenue

     53,258      

Total current liabilities

     68,730      

Total non-current liabilities

     2,745      

Stockholders’ equity

     20,937      

 

Other Financial Metrics

 

     Year ended December 31,      Three months ended March 31,  
     2010      2011      2012      2012      2013  
     (In thousands)  

Adjusted EBITDA(3)

   $ 10,781       $ 11,782       $ 20,344       $ 4,317       $ 3,238   

 

  (3)   To provide investors with additional information regarding our financial results, we have used adjusted EBITDA, a financial measure not calculated in accordance with U.S. generally accepted accounting principles, or GAAP, within this prospectus. We define adjusted EBITDA as net income (loss) calculated in accordance with GAAP plus: (i) interest expense (income); (ii) income tax expense; (iii) depreciation; (iv) amortization; (v) stock-based compensation expense; (vi) foreign currency (gains) losses associated with remeasurement and transactions; and (vii) transaction and severance costs included as a component of compensation or consideration paid in connection with acquisitions. We have included adjusted EBITDA in this prospectus because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

 

Although adjusted EBITDA measures are frequently used by investors and securities analysts in their evaluations of companies, adjusted EBITDA measures each have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results of operations as reported under GAAP. Some of these limitations are:

 

   

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

 

   

adjusted EBITDA does not reflect cash interest income or expense;

 

   

adjusted EBITDA does not reflect cash payments for transaction costs related to acquisitions and divestitures;

 

   

adjusted EBITDA does not reflect cash payments for employment or consulting compensation included as a component of the consideration paid related to acquisitions;

 

   

adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

 

   

adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;

 

   

adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and

 

   

other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

 

Because of these and other limitations, you should consider adjusted EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP financial results. Management addresses the inherent limitations associated with using adjusted EBITDA through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income (loss). Further, management also reviews GAAP measures, and evaluates individual measures that are not included in adjusted EBITDA such as our level of capital expenditures and interest expense, among other items.

 

 

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The following table presents a reconciliation of adjusted EBITDA to net income (loss), the most comparable GAAP measure, for each of the periods identified.

 

     Year Ended December 31,     Three months ended March 31,  
     2010      2011      2012         2012          2013  
     (In thousands)  

Net income (loss)

   $ 4,743       $ (184    $ 4,305      $ 870       $ 310   

Adjustments:

             

Interest income

     (111      (270      (811     (268)         (259)   

Provision (benefit) for income taxes

     2,932         2,749         4,406        1,329         (362)   

Depreciation and amortization expense

     3,106         3,917         5,446        1,222         1,756   

Stock-based compensation expense

     111         3,951         5,206        1,436         1,439   

Foreign currency losses (gains) associated with remeasurement and transactions

             1,619         286        (413)         (50)   

Costs related to acquisitions

                     1,506        141         404   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 10,781       $ 11,782       $ 20,344      $ 4,317       $ 3,238   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

 

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RISK FACTORS

 

Investing in our common stock involves a high degree of risk. Before you invest in our common stock, you should carefully consider the following risks, as well as general economic and business risks, and all of the other information contained in this prospectus. Any of the following risks could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. When determining whether to invest, you should also refer to the other information contained in this prospectus, including our consolidated financial statements and the related notes thereto.

 

Risks Related to Our Business and Industry

 

We are substantially dependent upon customer renewals, the addition of new customers and the continued growth of the market for cloud-based event and meeting management platform.

 

We derive, and expect to continue to derive, a substantial portion of our revenue from the sale of our cloud-based event and meeting management platform. During the year ended December 31, 2012 and the three months ended March 31, 2013, 70% of our total revenue was derived from this business line. The market for event and meeting management software is still evolving, and competitive dynamics may cause pricing levels to change as the market matures and as existing and new market participants introduce new types of solutions and different approaches to enable event and meeting planners and hotels to address their respective needs. As a result, we may be forced to reduce the prices we charge for our solutions and may be unable to renew existing customer agreements or enter into new customer agreements at the same prices and upon the same terms that we have historically.

 

Widespread acceptance and use of the cloud-based business model for delivery of our event and meeting management platform is critical to our future growth and success. Under the perpetual or periodic license model for software procurement, users of the software would typically install and operate the applications on their hardware. Because many companies were historically predisposed to maintaining control of their information technology, or IT, systems and infrastructure, there may be resistance to the concept of accessing a cloud-based service provided by a third party. If the market for cloud-based event and meeting management software fails to grow, grows more slowly than we currently anticipate or evolves and forces us to reduce the prices we charge for our solutions, our operating results and financial condition could be materially adversely affected.

 

We are subject to U.S. and foreign data privacy and protection laws and regulations as well as contractual privacy obligations, and our failure to comply could subject us to fines and damages and would harm our reputation and business.

 

We are subject to the data privacy and protection laws and regulations adopted by federal, state and foreign governmental agencies. Data privacy and protection is highly regulated, and may become the subject of additional regulation in the future. Privacy laws restrict our storage, use, processing, disclosure, transfer and protection of non-public personal information, including credit card data, provided to us by our event and meeting planners and registrants. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data protection. However, it is possible that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure, or perceived failure, by us to comply with federal, state, or international laws, including laws and regulations regulating privacy, data or consumer protection, could result in proceedings or actions against us by governmental entities or others.

 

The regulatory framework for privacy and data protection issues worldwide is evolving, and various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices, including some directed at providers of mobile and online resources in particular. In addition, as we expand our operations globally, compliance with regulations that differ from country to country may also impose substantial burdens on our business. In particular, the European Union, or EU, has traditionally taken a

 

15


broader view as to what is considered personal information and has imposed greater obligations under data privacy regulations. In addition, individual EU member countries have had discretion with respect to their interpretation and implementation of the regulations, which has resulted in variation of privacy standards from country to country. Complying with any additional or new regulatory requirements could force us to incur substantial costs or require us to change our business practices in a manner that could compromise our ability to effectively pursue our growth strategy.

 

We are subject to the privacy and data protection-related obligations in our contracts with our customers and other third parties, including voluntary third-party trade associations and industry self-regulatory groups that promulgate best practices or codes of conduct such as the Direct Marketing Association. We could be adversely affected by changes to these guidelines and codes in ways that are inconsistent with our practices or in conflict with the laws and regulations of the United States, foreign or international regulatory authorities. We may also be contractually liable to indemnify and hold harmless our clients from the costs or consequences of inadvertent or unauthorized disclosure of data that we store or handle as part of providing our services. Finally, we are also subject to contractual obligations and other legal restrictions with respect to our collection and use of data, and we may be liable to third parties in the event we are deemed to have wrongfully used or gathered data.

 

Any failure by us or a third-party contractor providing services to us to comply with applicable privacy and data protection laws, regulations, self-regulatory requirements or industry guidelines, our contractual privacy obligations or our own privacy policies, may result in fines, statutory or contractual damages, litigation or governmental enforcement actions. These proceedings or violations could force us to spend significant amounts in defense or settlement of these proceedings, result in the imposition of monetary liability, distract our management, increase our costs of doing business, and adversely affect our reputation and the demand for our solutions.

 

We have experienced rapid growth and organizational change in recent periods and expect continued future growth. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.

 

Our head count and operations have grown, both domestically and internationally, since our inception. In particular, from December 31, 2010 to December 31, 2012, we have added over 400 full-time positions. This growth has placed, and will continue to place, a significant strain on our management, administrative, operational and financial infrastructure. We anticipate further growth will be required to address increases in our platform offerings and continued expansion. Our success will depend in part upon the ability of our management team to manage this growth effectively. To do so, we must continue to recruit, hire, train, manage and integrate a significant number of qualified managers, technical personnel and employees in specialized roles within our company, including in technology, sales and marketing. If our new employees perform poorly, or if we are unsuccessful in recruiting, hiring, training, managing and integrating these new employees, or retaining these or our existing employees, our business may suffer.

 

In addition, to manage the expected continued growth of our head count, operations and geographic expansion, we will need to continue to improve our information technology infrastructure, operational, financial and management systems and procedures. Our anticipated additional head count and capital investments will increase our costs, which will make it more difficult for us to address any future revenue shortfalls by reducing expenses in the short term. If we fail to successfully manage our growth, we will be unable to successfully execute our business plan, which could have a negative impact on our business, results of operations or financial condition.

 

Federal, state and foreign laws impose certain obligations on the senders of commercial emails, which could minimize the effectiveness of our event management email solutions, limit our ability to market to prospective customers and impose financial penalties for noncompliance.

 

The U.S.’s CAN-SPAM Act establishes certain requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to

 

16


source or content. The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients with the ability to opt out of receiving future emails from the sender. In addition, some states have passed laws regulating commercial email practices that are significantly more punitive and difficult to comply with than the CAN-SPAM Act. The ability of recipients of emails from our customers using our event management software to opt out of receiving commercial emails may minimize the effectiveness of our solutions for our customers. Also, the ability of event planners to opt out of receiving future emails from us may minimize our ability to expand our event planner network. In addition, noncompliance with the CAN-SPAM Act carries significant litigation, regulatory investigation and related risks. If we were found to be in violation of the CAN-SPAM Act or similar state or international laws regulating the distribution of commercial email, whether as a result of violations by our customers or if we were deemed to be directly subject to and in violation of these requirements, we could incur penalties, and significant litigation and investigation-related expenses, and any inquiries might impact the deliverability of our commercial email regardless of outcome. This would adversely affect our operating results and financial condition and significantly harm our business, and our reputation would suffer. We also may be required to change one or more aspects of the way we operate our business, which could impair our ability to attract and retain customers or could increase our operating costs.

 

Our business depends on maintaining and expanding our relationships with hotels and venues.

 

An important component of our business success depends on our ability to maintain and expand relationships with hotels and venues. A substantial portion of our revenue is derived from compensation negotiated with hotels and venues for marketing solutions, particularly through the Cvent Supplier Network. If we are unable to continue to successfully sell marketing solutions to individual hotels and venues, our financial results may suffer. Furthermore, although individual hotel properties typically make separate decisions as to their advertising spending, the influence of the corporate offices of major hotel chains may affect the decisions of their individual properties. For example, if the corporate parent discontinues its relationship with us in favor of another solution, our relationship with the properties under that brand may suffer even though, in nearly all cases, we negotiate with each property individually. This may lead to considerable lost revenue or result in additional costs to complete sales of our advertising, any of which would adversely affect our operating results. Finally, our strong network relationships with hotels and venues are a key differentiator for our event management solutions. If we are unable to maintain and grow our network of hotels and venues, we may be unable to satisfy our customers’ needs, lose market share or incur additional costs to support our customers, all of which may adversely affect our business, results of operations or financial condition.

 

Our long-term success depends, in part, on our ability to operate offices located outside of the United States including India.

 

We currently maintain offices and have sales personnel in the United States, the United Kingdom and India, and we are exploring opening additional international offices. Any international expansion efforts that we may undertake may not be successful. In addition, conducting more extensive international operations subjects us to new risks that we have not generally faced in the United States. These risks include: unexpected costs and errors in the localization of our solutions, including translation into foreign languages and adaptation for local practices and regulatory requirements; challenges posed by different pricing environments and different forms of competition; lack of familiarity and burdens of complying with foreign laws, legal standards, regulatory requirements, tariffs, and other barriers; unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions; difficulties in managing technology partners; differing technology standards; difficulties in collecting accounts receivable; difficulties in managing and staffing international operations; varying expectations as to employee standards; fluctuations in exchange rates that may increase the volatility of our foreign based revenue and costs; potentially adverse tax consequences, including arising from the complexities of foreign value added tax (or other tax) systems and restrictions on the repatriation of earnings; uncertain political and economic climates; and reduced or varied protection for intellectual property rights in some countries. These factors may cause our costs of doing business in new geographies to exceed the existing costs of our comparable operations in the United States and India. Operating in new international

 

17


markets also requires significant management attention and financial resources. Any negative impact from our international business efforts could negatively impact our business, results of operations and financial condition.

 

We have significant operations in India. As of May 31, 2013, approximately 724 of our approximately 1,300 employees were based in India. Operating in India requires substantial resources and management attention and subjects us to economic, political and operational risks that are different from those in the United States. For example, there have been armed conflicts between India and neighboring Pakistan. Also, extremist groups within India and neighboring Pakistan have from time to time targeted Western interests. Other risks specific to our operations in India include, but are not limited to, difficulty with responding to changes in economic conditions that may include inflation and fluctuations in exchange rates and interest rates; problems that impair our business infrastructure, such as telephone system failure or an international disruption of our information technology systems by a third party; failure to act in accordance with labor, environmental, health and safety standards and regulations; and the need to increase the levels of our employee compensation more rapidly than in the past to retain talent. If any of these risks materialize, our business, results of operations and financial condition may be materially adversely affected.

 

If the security of our customers’ confidential information stored in our systems is breached or otherwise subjected to unauthorized access, our reputation may be severely harmed and we may be exposed to liability.

 

Our system stores personally identifiable information, proprietary email distribution lists, credit card information and other critical data for our customers and our customers’ event participants. We believe that we take reasonable steps to protect the security, integrity and confidentiality of the information we collect and store, but there is no guarantee that inadvertent (e.g., software bugs or other technical malfunctions, employee error or malfeasance, or other factors) or unauthorized disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. We have in the past and we may again in the future experience successful attempts by third-parties to obtain unauthorized access to our data despite our security measures. Since techniques used to obtain unauthorized access change frequently, we and our third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. Any willful or accidental security breaches or other unauthorized access could expose us to liability for the loss of such information, adverse regulatory action by federal and state governments, time-consuming and expensive investigation and litigation, extensive downtime of our systems and other possible liabilities.

 

If our security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any of our customers’ data, our relationships with our customers will be severely damaged, and we could incur significant liability. In addition, many jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data, and our agreements with certain partners require us to notify them in the event of a security incident. These mandatory disclosures regarding a security breach often lead to widespread negative publicity and may cause our customers to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation, and we could lose customers or fail to acquire new customers.

 

If we experience compromises to our information technology as a result of security lapses, technical difficulties or otherwise that result in performance or availability problems of our cloud-based solutions, the complete shutdown of our cloud-based solutions, or the loss or unauthorized disclosure of confidential information, our partners or customers may be harmed or lose trust and confidence in us, and decrease the use of our solution or stop using our solution in its entirety, and we would suffer reputational and financial harm. Our third-party vendors may also suspend or discontinue their relationships with us. Additionally, in the future, we could be subject to regulatory investigations and litigation in connection with a security breach or related issue, and we could also face regulatory fines and be liable to third parties for these types of breaches. For example, we work with third-party vendors to process credit card payments by our customers and are subject to payment card association operating rules. If our security measures fail to protect this information adequately or we fail to

 

18


comply with the applicable operating rules, we could be liable to both our customers for their losses, as well as the vendors under our agreements with them, we could be subject to fines and higher transaction fees, we could face regulatory action, and our customers and vendors could end their relationships with us, any of which could harm our business, results of operations or financial condition.

 

There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot provide assurances that our existing general liability insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and results of operations.

 

Failure to adequately protect our intellectual property, in the United States and abroad, could harm our business and operating results.

 

Our business depends on proprietary technology and content, including software, databases, confidential information and know-how, the protection of which is crucial to the success of our business. We rely on a combination of trademark, domain name, trade secret, and copyright law and contractual restrictions to protect our proprietary technology and content. We have begun to seek patent protection for certain of our technologies and currently have one U.S. patent application on file, although there can be no assurance that a patent will ultimately be issued. We are also pursuing the registration of our domain names, trademarks and service marks in the United States and in certain locations outside the United States. Effective trademark, trade secret, patent, copyright and domain name protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. The intellectual property rights we obtain may not be sufficient to provide us with a competitive advantage, and could be challenged, invalidated, circumvented, infringed or misappropriated. For example, in the past, competitors in both the United States and foreign jurisdictions have from time-to-time infringed our trademark rights and infringed our copyright rights in Cvent proprietary software and content, and we have incurred varying levels of costs to respond to such infringement. We may, over time, increase our investment in protecting our intellectual property through additional trademark, patent and other intellectual property filings that could be expensive and time-consuming. Some aspects of our business and services also rely on technologies, software and content developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.

 

We may also be required to protect our proprietary technology and content in an increasing number of jurisdictions, a process that is expensive and may not be successful, or which we may not pursue in every location. In addition, effective intellectual property protection may not be available to us in every country, and the laws of some foreign countries may not be as protective of intellectual property rights as those in the United States. Additional uncertainty may result from changes to intellectual property legislation enacted in the United States and elsewhere, and from interpretations of intellectual property laws by applicable courts and agencies. Accordingly, despite our efforts, we may be unable to obtain and maintain the intellectual property rights necessary to provide us with a competitive advantage.

 

We attempt to further protect our proprietary technology and content by requiring our employees and consultants to enter into confidentiality and assignment of inventions agreements and third parties to enter into nondisclosure agreements. These agreements may not effectively prevent unauthorized use or disclosure of our confidential information, intellectual property or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property or technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our website features, software and functionality or obtain and use information that we consider confidential or proprietary.

 

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Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our intellectual property rights; to protect our trademarks, trade secrets, patents, copyrights and domain names; and to determine the validity and scope of the proprietary rights of others. We may also be involved in disputes relating to the rights to, and ownership of, the intellectual property developed by our employees, consultants and others. Our efforts to enforce or protect our proprietary rights may be ineffective and could result in substantial costs and diversion of resources, as well as the invalidation or narrowing of the scope of our intellectual property, any of which could harm our business and operating results. Attempting to enforce our intellectual property rights against third parties could also expose us to counterclaims from such third parties.

 

Claims by third parties that we infringe upon their intellectual property rights could result in significant costs and have a material adverse effect on our business, operating results or financial condition.

 

Our success depends, in part, upon our noninfringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures or adverse consequences. The software industry generally is characterized by extensive intellectual property litigation. Although we were an early pioneer of event management software, a field which continues to rapidly evolve, many participants that own, or claim to own, intellectual property related to elements of our business historically have aggressively asserted their rights. From time to time, we may be subject to legal proceedings and claims that we, our customers, licensees or parties indemnified by us are infringing, misappropriating or otherwise violating the intellectual property rights of others, and the risk of such proceedings and claims may increase as we expand the complexity, scope and public profile of our business. For example, we may be subject to claims that we are infringing the patent, trademark or copyright rights of third parties, or that our employees have misappropriated or divulged their former employers’ trade secrets or confidential information.

 

It may therefore be necessary to defend against future claims by, for example, determining the scope, enforceability and validity of third-party proprietary rights or asserting and defining our proprietary rights. Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. Regardless of whether they have any merit, these claims are time-consuming and costly to evaluate and defend and could:

 

   

adversely affect our relationships with our current or future customers;

 

   

cause delays or stoppages in providing our software solutions;

 

   

divert management’s attention and resources;

 

   

require technology changes to our platform that would cause us to incur substantial cost;

 

   

subject us to significant liabilities;

 

   

necessitate incurring significant legal fees; and

 

   

require us to cease some or all of our activities.

 

In addition to liability for monetary damages against us, which may be tripled and may include attorneys’ fees, or, in some circumstances, damages against our customers, we may be prohibited from developing, commercializing or continuing to provide some or all of our event and meeting management solutions unless we obtain licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, which may not be available on commercially favorable terms, or at all.

 

We face significant competition from established and new companies offering event and meeting management software and from internally developed software.

 

The market for event and meeting management software is evolving, highly competitive and significantly fragmented, and we expect competition to continue to increase in the future. With the increased demands for

 

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event and meeting management solutions as well as the potential influx of new entrants to the market, we expect competition to intensify in the future, which could harm our ability to increase sales and maintain our prices.

 

Our competitors vary with each challenge that our event and meeting management solutions address, and include providers of point solutions for email marketing, event registration, ecommerce payments, budgeting, web surveys, web content management, scheduling, room and table assignments, name badging, mobile app development and social media. If individual point solutions become less expensive, we may face general pricing pressure. For example, if mobile app development becomes more prevalent and competition forces developers to reduce their fees, we may be forced to reduce the fees that we charge for our mobile event apps to remain competitive. In addition, we expect to face additional competition with the continued development and expansion of the event management software market. We expect that new competitors, such as software vendors that have traditionally focused on other applications, may enter the event and meeting management market with competing products, which could have an adverse effect on our business, operating results and financial condition. Additionally, competitors may develop a comprehensive event and meeting management platform that is similar to our own.

 

Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we have; be able to devote greater resources to the development, promotion, sale and support of their products and services; have more extensive customer bases and broader customer relationships than we have; and have longer operating histories and greater name recognition than we have. As a result, these competitors may be better able to respond quickly to new technologies and to undertake more extensive marketing campaigns. In some cases, these vendors may also be able to offer event and meeting management solutions at little or no additional cost by bundling them with their existing applications. If we are unable to compete with such companies, the demand for our solutions could substantially decline. To the extent any of our competitors have existing relationships with potential customers, those customers may be unwilling to purchase our solutions because of those existing relationships with that competitor. To the extent that we consider acquiring one of our competitors, this heightened competition could increase the cost of an acquisition within our industry.

 

We have in the past completed acquisitions and may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations and harm our operating results.

 

We have in the past acquired, and we may in the future acquire or invest in, businesses, products or technologies that we believe could complement or expand our platform, enhance our technical capabilities or otherwise offer growth opportunities. We cannot assure you that we will realize the anticipated benefits of these or any future acquisitions. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses related to identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

 

There are inherent risks in integrating and managing acquisitions. If we acquire additional businesses, we may not be able to assimilate or integrate the acquired personnel, operations and technologies successfully or effectively manage the combined business following the acquisition and our management may be distracted from operating our business. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including, without limitation: unanticipated costs or liabilities associated with the acquisition; incurrence of acquisition-related costs, which would be recognized as a current period expense; inability to generate sufficient revenue to offset acquisition or investment costs; the inability to maintain relationships with customers and partners of the acquired business; the difficulty of incorporating acquired technology and rights into our platform and of maintaining quality and security standards consistent with our brand; delays in customer purchases due to uncertainty related to any acquisition; the need to integrate or implement additional controls, procedures and policies; challenges caused by distance, language and cultural differences; harm to our existing business relationships with business partners and customers as a result of the acquisition; the potential loss of key

 

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employees; use of resources that are needed in other parts of our business and diversion of management and employee resources; the inability to recognize acquired revenue in accordance with our revenue recognition policies and the loss of acquired deferred revenue; and use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition. Acquisitions also increase the risk of unforeseen legal liability, including for potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses which are not discovered by due diligence during the acquisition process. Generally, if an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our business, results of operations or financial condition.

 

In addition, a significant portion of the purchase price of companies we acquire may be allocated to goodwill and other intangible assets, which must be assessed for impairment at least annually. Also, contingent consideration related to acquisitions will be remeasured to fair value at each reporting period, with any changes in the value recorded as income or expense. Our recent acquisitions all contained a contingent consideration element as well as other compensatory arrangements based on continued employment of certain key employees. If our acquisitions do not ultimately yield expected returns, we may be required to take charges to our operating results based on our impairment assessment process, which could harm our results of operations.

 

Any significant disruption in service on our websites, mobile applications or in our computer systems, which are hosted primarily by third-party providers, could damage our reputation and result in fees to customers or a loss of users, which would harm our business and operating results.

 

We have experienced limited interruptions in these systems in the past, including server failures that temporarily slowed down the performance of our websites and mobile applications, but we may experience more significant interruptions in the future. Interruptions in these systems, whether due to system failures, computer viruses, physical or electronic break-ins or other catastrophic events, could affect the security or availability of our services on our websites and mobile applications and prevent or inhibit the ability of our customers and event and meeting registrants to access our services. Problems with the reliability or security of our systems could harm our reputation or result in substantial costs to remedy these problems, any of which could negatively affect our business, results of operations and financial condition.

 

We have entered into agreements with many of our customers and business partners that obligate us to compensate them should an interruption affect their use of our services. While some of the communications, network and computer hardware used to provide our services, including our websites and mobile applications, are located at our headquarters in McLean, Virginia, a significant amount of this hardware is located in a facility in Ashburn, Virginia which we do not own or control. Also, businesses we have acquired rely heavily on third-party service providers to host their software applications, web services, data storage, credit card processing and other computing infrastructure, thereby increasing our dependence on these third party providers. Problems faced by our third-party information technology providers could adversely affect the experience of our customers. Any errors, defects, disruptions or other performance problems with our third-party information technology providers could directly affect our ability to provide services to our customers, which may result in liabilities to us and our customers, harm our reputation and negatively affect our business, operating results and financial condition.

 

We are dependent on the maintenance and expansion of the infrastructure of the internet, over which we have no control. Any failure of the internet infrastructure we rely on, even for a short period of time, could harm our business, operating results and financial condition. In addition, our systems and operations are vulnerable to damage, interruption or complete failure from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses, earthquakes and similar events. Our systems are not completely redundant, so a failure of our system at one site could result in reduced functionality for our customers, and a total failure of our systems at both sites could cause our platform to be completely unavailable for all customers.

 

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We are subject to the rules and regulations adopted by the payment card networks, such as Visa, MasterCard and American Express, and if we fail to adhere to their rules and regulations, we would be in breach of our contractual obligations to payment processors and merchant banks, which could subject us to damages and liability and could eventually prevent us from processing or accepting credit card payments.

 

The payment card networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants who process and accept credit cards for payment of goods and services. We are obligated to comply with these rules and regulations as part of the contracts we enter into with payment processors and merchant banks. The rules and regulations adopted by the payment card networks include the Payment Card Industry Data Security Standards, or the PCI DSS. Under the PCI DSS, we are required to adopt and implement internal controls over the use, storage and security of payment card data to help prevent fraud. We assess our compliance with the PCI DSS on a periodic basis, and make necessary improvements to our internal controls. If we fail to comply with the rules and regulations adopted by the payment card networks, including the PCI DSS, we would be in breach of our contractual obligations to payment processors and merchant banks. Such failure to comply may subject us to fines, penalties, damages and civil liability, and could eventually prevent us from processing or accepting debit and credit cards or could lead to a loss of payment processor partners. Further, there is no guarantee that even if we comply with the rules and regulations adopted by the payment card networks, we will be able to maintain our compliance. For example, we have acquired businesses in the past that were not immediately compliant with PCI DSS at the time of our acquisition. Until those businesses are fully integrated with our own systems we may be unable to comply with PCI DSS standards for those acquired businesses without substantial additional costs. We also cannot guarantee that such compliance will prevent illegal or improper use of our payments systems or the theft, loss or misuse of the debit or credit card data of customers or participants or regulatory or criminal investigations. Any such event would harm our reputation and may result in a loss of service for our customers, which would adversely affect our business, operating results and financial condition.

 

Our business is susceptible to declines or disruptions in the demand for events and meetings, including those due to economic downturns or natural disasters.

 

Our business and financial performance are affected by the health of the worldwide events and meetings industry. Events and meetings are sensitive to business-related discretionary spending levels and tend to grow more slowly or even decline during economic downturns. Decreased expenditures by meeting planners and participants could also result in decreased demand for our event management solutions, thereby causing a reduction in our sales. In addition, sales of our marketing solutions to hotels and venues may suffer if fewer event and meeting planners use our solutions. Although we are optimistic about the capabilities of our solutions to assist event and meeting planners in maximizing return on investment when funds available to spend on events are limited, further economic weakness and uncertainty may nonetheless result in significantly decreased spending on our event and meeting management solutions, which may adversely affect our business, operating results and financial condition.

 

External factors beyond our control may adversely affect the events and meetings industry, with a corresponding negative impact on our business and operating results. Economic downturns, natural disasters, such as hurricanes, tsunamis, earthquakes or volcanic eruptions, and other phenomena, such as pandemics and epidemics, have previously disrupted normal travel patterns and levels, which has correspondingly disrupted the events and meetings industry. The events and meetings industry is also sensitive to other events beyond our control, such as political instability, regional hostilities, increases in fuel prices, the emergence and widespread adoption of more-effective teleconference and virtual meeting technologies, imposition of taxes or surcharges by regulatory authorities, travel related accidents and terrorist attacks, any of which could have an impact on our business and results of operations. For example, the September 2001 terrorist attacks in the U.S. had a dramatic and sustained impact on the travel industry generally, which had a corresponding negative impact on the events and meetings industry thereafter. Any future terrorist attack, whether on a small or large scale, could have a material and negative impact on our business, results of operations or financial condition.

 

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We are dependent in part upon our relationships with our strategic partners to sustain the flow of business through the Cvent Supplier Network.

 

Our access to certain customers is facilitated in some cases by strategic partner relationships with certain companies. If these strategic partners terminate or do not renew their relationships with us, it could have a negative effect on revenue for sales of our event management software solutions. More than 60% of the RFPs transmitted to hotels and venues through our CSN during the year ended December 31, 2012 originated from event planners introduced to us through these partnerships. As such, the loss of several of these partnerships would greatly diminish the value of the CSN.

 

Growth of our business will depend on a strong brand, and any failure to maintain, protect, and enhance our brand would hurt our ability to retain or expand our base of users, or our ability to increase their level of engagement.

 

We believe that a strong brand is necessary to continue to attract and retain event and meeting planners and, in turn, the hotels and venues who choose to advertise on the Cvent Supplier Network. We need to maintain, protect, and enhance our brand to expand our base of customers and users and increase their engagement with our solutions. This will depend largely on our ability to continue to provide high-value, differentiated solutions, and we may not be able to do so effectively. While we may choose to engage in a broader marketing campaign to further promote our brand, this effort may not be successful. Furthermore, negative publicity about our company, including our content, technology, sales practices, personnel or customer service could diminish confidence in, and the use of, our solutions, any of which could harm our operating results. If we are unable to maintain or enhance customer awareness of our brand cost-effectively, our business, operating results and financial condition could be harmed.

 

Event and meeting planners may not widely adopt our applications to manage the important aspects of their events and meetings, which would limit our ability to grow our business.

 

Our ability to grow our business and increase revenue depends on our success in educating event and meeting planners about the potential benefits of our cloud-based platform. Cloud applications for organizing and managing important aspects of events and meetings have not previously been widely adopted by event and meeting planners. Concerns about cost, fraud, privacy, security, reliability and other issues may cause event and meeting planners not to adopt our applications. Moreover, event and meeting planners who have already invested substantial resources in other registration and management systems or methods may be reluctant to adopt a new approach like ours to supplement or replace existing systems or methods. If event and meeting planners do not widely adopt applications such as ours, our ability to grow our business will be limited.

 

We have experienced losses in the past and we may not sustain profitability in the future.

 

We have incurred a significant accumulated deficit in prior periods, in large part due to accretion of redemption features on previously outstanding preferred stock in those periods. We experienced a net loss of $0.2 million for the year ended December 31, 2011 and have an accumulated deficit as of March 31, 2013 of $19.5 million. We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to invest to grow our business and acquire clients, develop our platform, develop new solutions and comply with being a public company. These efforts may prove to be more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. Many of our efforts to generate revenue from our business, particularly with respect to our marketing solutions, are unproven, and any failure to increase our revenue or generate revenue from new solutions could prevent us from attaining or increasing profitability. Furthermore, to the extent we are successful in increasing our customer base, we could also incur increased losses because costs associated with entering into customer agreements are generally incurred up front, while revenue is generally recognized ratably over the term of the agreement. If we are unable to effectively manage these risks and difficulties as we encounter them, our business, financial condition and results of operations may suffer.

 

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Seasonality may cause fluctuations in our revenue and operating results.

 

We generally experience seasonality in our marketing solutions sales due to the seasonality of the underlying marketing budgets of hotels and venues. Hotels and venues advertising on the Cvent Supplier Network have historically made more purchasing decisions in the fourth quarter of the calendar year.

 

If we do not continue to innovate and provide solutions that are useful to our customers and event registrants and attendees, we may not remain competitive, and our revenue and operating results could suffer.

 

Our success depends on continued innovation to provide features and services that make our solutions, websites and mobile apps useful for event and meeting planners, hotels and venues and event registrants and attendees. Our competitors are frequently developing innovations in services and features. Additionally, the rapid pace at which technology evolves generally requires us to find new ways to deliver our solutions to end users with better performance and functionality. As a result, we must continue to invest significant resources in research and development in order to continually improve the speed, accuracy and comprehensiveness of our solutions. We may introduce significant changes to our existing solutions or develop and introduce new and unproven solutions, including using technologies with which we have little or no prior development or operating experience. If we are unable to continue offering innovative solutions or if new or enhanced solutions fail to engage event and meeting planners, hotels and venues or event registrants and attendees, we may be unable to attract additional customers or event registrants or retain our current customers or event registrants and attendees, which may adversely affect our business, operating results and financial condition.

 

Defects or disruptions in the rollout of our new products and product enhancements could diminish demand for our service, adversely affect our reputation and subject us to substantial liability.

 

Like many internet-based cloud companies, we provide frequent incremental releases of product updates and functional enhancements. Such new versions frequently contain undetected errors when first introduced or released. We have, from time to time, found defects in our service, and new errors in our existing service may be detected in the future. In addition, our customers may use our service in unanticipated ways that may cause a disruption in service for other customers or for event registrants. Since our customers use our service for important aspects of their business, any errors, defects, disruptions in service or other performance problems with our service could hurt our reputation and may damage our customers’ businesses. If that occurs, our customers may delay or withhold payment to us, elect not to renew, make service credit claims, warranty claims or other claims against us, and we could lose future sales. The occurrence of any of these events could result in an increase in our bad debt expense, an increase in collection cycles for accounts receivable, require us to increase our warranty provisions or incur the expense or risk of litigation. Further, if we are unable to meet the stated service level commitments we have guaranteed to our customers or suffer extended periods of unavailability for our service, we may be contractually obligated to provide these customers with credits for future service, and there would be a negative impact on our reputation.

 

We rely on the performance of highly skilled personnel, including senior management and our sales and technology professionals; if we are unable to retain or motivate key personnel or hire, retain and motivate qualified personnel, our business would be harmed.

 

We believe our success has depended, and continues to depend, on the efforts and talents of our senior management and our highly skilled team members, including our sales personnel and software engineers. Competition for well-qualified employees in all aspects of our business, including sales personnel and software engineers, is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate existing employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business would be adversely affected. The loss of any of our senior management or key employees could adversely affect our ability to build on the efforts they have undertaken and to execute our business plan, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees.

 

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Our business depends substantially on renewing agreements with existing customers and selling additional solutions to them. Any decline in our customer renewals or expansions would likely harm our future operating results, especially if we are unable to recognize sufficient revenue to offset related customer acquisition costs prior to such termination or cancellation of our customer agreements.

 

In order for us to improve our operating results, it is important that our event and meeting management customers renew their license agreements and our hotel and venue advertisers renew their advertising agreements with us when the initial term expires, as well as purchase additional solutions and advertising from us. We offer our event and meeting management solutions primarily through annual and multi-year subscription agreements and our hotel and venue marketing solutions primarily through a mix of single-year and multi-year arrangements. In some cases, our customers have no renewal obligation after their initial term expires, and we cannot assure you that we will be able to renew agreements with any of our customers at the same or higher contract value. Some agreements also contain a termination right for the customer in the event of customer dissatisfaction with our services because of substantial nonperformance that remains uncured by us. In addition, some of our customer contracts allow for a termination for convenience. Our ten largest event and meeting management customers and our largest ten hotel and venue advertising customers during the year ended December 31, 2012 represented 4% and 6%, respectively, of our total revenue during that year. If our customers do not renew their agreements, renew on less favorable terms or fail to purchase additional solutions or advertising, our revenue may decline, and our operating results would likely be harmed.

 

We typically bill customers for no longer than the next fiscal year with payment due upfront regardless of the full length of the contract, although we incur most of our customer acquisition costs at the time of sale. Depending upon the scope of the customer’s needs, these costs can be significant. If a customer does not renew or cancels its agreement with us, we may not recognize sufficient revenue from that customer prior to the termination or cancellation to offset the acquisition costs associated with that customer.

 

If we fail to offer high quality customer support, our business and reputation would suffer.

 

Our customers rely on our customer support services. High-quality education and customer support is important for the successful marketing and sale of our solutions and for the renewal of our agreements with existing customers. The importance of high quality customer support will increase as we expand our business and pursue new customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to sell new services to existing and new customers would suffer and our reputation with existing or potential customers would be harmed.

 

Our growth rate over the past few years may not be sustainable. If we fail to maintain an adequate growth rate, our business will be adversely affected and we may not achieve or maintain profitability.

 

Our revenue has grown rapidly over the past few years. We may not be able to sustain this level of growth in future periods, and you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Further, a portion of our revenue growth in the year ended December 31, 2012 and the three months ended March 31, 2013 resulted from acquisitions and not organic growth. We may not complete acquisitions in the future that increase our revenue at the same rate as in prior periods. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete the acquisitions we do identify as worth pursuing. If we are unable to maintain an adequate rate of growth, our business will be adversely affected and we may not maintain profitability.

 

Failure to adequately expand our direct sales force will impede our growth.

 

We will need to continue to expand and optimize our sales infrastructure in order to grow our customer base and our business. We plan to continue to expand our direct sales force, both domestically and internationally. Identifying and recruiting qualified personnel and training them requires significant time, expense and attention. It can take several months before our sales representatives are fully trained and productive. Our business may be

 

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adversely affected if our efforts to expand and train our direct sales force do not generate a corresponding increase in revenue. In particular, if we are unable to hire, develop and retain talented sales personnel, or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenue.

 

We have previously identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting, this could have a material adverse effect on our business.

 

We produce our consolidated financial statements in accordance with the requirements of U.S. GAAP. Effective internal controls are necessary for us to provide reliable financial reports to help mitigate the risk of fraud and to operate successfully as a publicly traded company. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

 

In connection with the preparation of our consolidated financial statements for the years ended December 31, 2011 and 2012, we identified a material weakness in the design and operation of our internal controls over financial reporting relating to management review controls over complex, non-routine accounting transactions and the preparation and review of financial statements. Specifically, we determined that we had significant deficiencies related to our review of equity transactions, controls related to the preparation and review of our tax provision and the operation of our financial reporting controls, all of which aggregated to a material weakness in internal control. In 2013, we began implementing procedures and controls designed to mitigate the material weakness and underlying significant deficiencies. Amongst other actions, we have expanded our in-house accounting resources, including hiring nine new personnel since October 2012, including our chief financial officer; implemented enhanced review procedures; begun a comprehensive documentation of our internal controls and procedures; and implemented more formal procedures as to the evaluation of non-routine judgments and estimates. In addition, we expect to implement an internal audit function during 2013 and complete our documentation of our internal controls and procedures. Although we believe these controls will be effective, we have not yet determined if we have successfully remediated the material weakness and those significant deficiencies.

 

If we continue to have these issues or other material weaknesses or significant deficiencies in the future, it could affect the financial results that we report or create a perception that those financial results do not fairly state our financial condition or results of operations. Either of those events could have an adverse effect on the value of our common stock.

 

If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion and focus on execution that we believe contribute to our success, and our business may be harmed.

 

We believe that a critical component to our success has been our corporate culture. We have invested substantial time and resources in building our team. As we grow and develop the infrastructure of a public company, we may find it difficult to maintain these important aspects of our corporate culture. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.

 

Because we generally recognize revenue from subscriptions ratably over the term of the agreement, near term changes in sales may not be reflected immediately in our operating results.

 

We offer our event and meeting management solutions primarily through a mix of single-year and multi-year subscription agreements and generally recognize revenue ratably over the related subscription period. We offer our hotel and venue marketing solutions primarily through a mix of single-year and multi-year arrangements and generally recognize revenue ratably over the related advertising period. As a result, much of the revenue we report in each quarter is derived from the recognition of previously unbilled contract value

 

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relating to agreements entered into during prior quarters or years. In addition, as we generally invoice for no more than the next fiscal year for any customer contracts, including those for multiple years, we do not record deferred revenue beyond amounts invoiced as a liability on our balance sheet. A decline in new or renewed subscriptions or marketing solutions agreements in any one quarter is not likely to be reflected immediately in our revenue results for that quarter. Such declines, however, would negatively affect our revenue and deferred revenue balance in future periods, and the effect of significant downturns in sales and market acceptance of our solutions, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. Our subscription and advertising model also makes it difficult for us to rapidly increase our total revenue and deferred revenue balance through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription or advertising term.

 

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

 

We have funded our operations since inception primarily through equity financings, lease arrangements, and cash from operations. In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in the level of operating cash flows or unforeseen circumstances. We may determine to engage in equity or debt financings or enter into credit facilities for other reasons, and we may not be able to secure additional debt or equity financing in a timely manner on favorable terms, or at all. We do not currently have access to a credit arrangement, and we currently fund our operations using cash generated from operations. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

 

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

 

We are not currently required to comply with Securities and Exchange Commission rules that implement Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. However, at such time as Section 302 is applicable to us, which we expect to occur immediately following effectiveness of this registration statement, we will be required to evaluate our internal controls over financial reporting. Furthermore, at such time as we cease to be an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act of 2012, we will also be required to comply with Section 404. At such time, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting and we may be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our operating results and financial condition.

 

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Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.

 

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, the Securities and Exchange Commission and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

 

We may have difficulty scaling and adapting our existing infrastructure to accommodate increased traffic and storage demands, technology advances or customer requirements, which could cause delays or service interruptions.

 

In the future, advances in technology, increases in traffic and storage demands and new customer requirements may require us to change our infrastructure, expand our infrastructure or replace our infrastructure entirely. Scaling and adapting our infrastructure is likely to be complex and require additional technical expertise. If we are required to make any changes to our infrastructure, we may incur substantial costs and experience delays or interruptions in our service. These delays or interruptions may cause customers and partners to become dissatisfied with our service and move to competing providers of event and meeting management solutions. Our failure to accommodate increased traffic and storage demands, increased costs, inefficiencies or failures to adapt to new technologies or customer requirements and the associated adjustments to our infrastructure could harm our business, results of operations and financial condition.

 

Some of our applications utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

 

Some of our applications include software covered by open source licenses, which may include, by way of example, GNU General Public License and the Apache License. The terms of various open source licenses have not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our applications. By the terms of certain open source licenses, we could be required to release the source code of our applications and to make our applications available under open source licenses, if we combine or distribute our applications with open source software in a certain manner. In the event that portions of our applications are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all, or a portion of, those applications or otherwise be limited in the licensing of our applications, each of which could reduce or eliminate the value of our technologies and services. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated, and could negatively affect our business, results of operations and financial condition.

 

If we do not or cannot maintain the compatibility of our solutions with third-party applications that our customers use in their businesses, demand for our solutions could decline.

 

The functionality of our cloud-based platform depends, in part, on our ability to integrate it with third-party applications and data management systems that our customers use and from which they obtain data. In addition, we rely on access to third-party application programming interfaces, or APIs, to provide our social media channel offerings through social media platforms. Third-party providers of these applications, data management systems and APIs may terminate their relationships with us, change the features of their applications and platforms, restrict our access to their applications and platforms or alter the terms governing use of their applications, data management systems and APIs and access to those applications and platforms in an adverse manner. Such

 

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changes could functionally limit or terminate our ability to use these third-party applications and platforms with our cloud-based platform, which could negatively impact our offerings and harm our business. Further, if we fail to integrate our platform with new third-party applications and platforms that our customers use, or to adapt to the data transfer requirements of such third-party applications and platforms, we may not be able to offer the functionality that our customers need, which would negatively impact our offerings and, as a result, could negatively affect our business, results of operations and financial condition.

 

Our business may be adversely affected by third-party claims, including by governmental bodies, regarding the content and advertising distributed by our customers through our service.

 

We rely on our customers to secure the rights to redistribute content over the internet or through mobile event apps, and we do not screen the content that they distribute using our solutions. There is no assurance that our customers have licensed all rights necessary for distribution, including internet or mobile app distribution. Other parties may claim certain rights in the content of our customers. In the event that our customers do not have the necessary distribution rights related to content, we may be required to cease distributing such content, or we may be subject to lawsuits and claims of damages for infringement of such rights. If these claims arise with frequency, the likelihood of our business being adversely affected would rise significantly.

 

We may not be able to utilize a significant portion of our net operating loss carryforwards, which could adversely affect our profitability.

 

As of March 31, 2013, we had federal and state net operating loss carryforwards due to prior period losses, which, if not utilized, will begin to expire in 2021 for both federal and state purposes. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.

 

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be further limited if we experience an “ownership change”. A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. For example, we had an “ownership change” under Section 382 in 2001. This offering or future issuances of our stock could cause an “ownership change.” It is possible that an ownership change in connection with this offering, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.

 

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, including in the United States, and we could be obligated to pay additional taxes in various jurisdictions.

 

As a multinational organization that operates in numerous jurisdictions in the United States and around the world, we may be subject to taxation in several jurisdictions with increasingly complex tax laws, the application of which can be uncertain. The authorities in these jurisdictions, including state and local taxing authorities in the United States, could successfully assert that we are obligated to pay additional taxes, interest and penalties. In addition, the amount of taxes we pay could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and operating results. The authorities could also claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on us and the results of our operations.

 

We are exposed to fluctuations in currency exchange rates.

 

We face exposure to movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. Our operating results could be negatively affected depending on the

 

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amount of expense denominated in foreign currencies, primarily the Indian rupee. As exchange rates vary, revenue, cost of revenue, operating expenses and other operating results, when remeasured, may differ materially from expectations. In addition, our operating results are subject to fluctuation if our mix of U.S. and foreign currency denominated transactions and expenses changes in the future. Although we may apply certain strategies to mitigate foreign currency risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications. Additionally, as we anticipate growing our business further outside of the U.S., the effects of movements in currency exchange rates will increase as our transaction volume outside of the U.S. increases.

 

A significant portion of our revenue is derived from event and meeting planners. As such, our business is dependent upon identifying new event planners.

 

Revenue from our solutions for event and meeting planners has historically constituted the majority of our revenue and represented 70% of our total revenue for each of the year ended December 31, 2012 and the three months ended March 31, 2013. Event and meeting planners can be found in a range of corporate departments, which makes it difficult to identify prospective planner customers. Since our formation, we have proactively and systematically worked to identify potential event planner customers. However, we cannot guarantee that we will be able to continue to identify new event planner customers, and the effort to identify new event planner customers will be more costly and time-consuming than seeking marketing contracts with new and existing venue customers.

 

If the estimates and assumptions we use to determine the size of our target market, customer groups or the verticals within customer groups are inaccurate, our future growth rate may be limited and our business would be harmed.

 

We calculate the size of our target market, customer groups and verticals within customer groups, based on data published by third parties and on internally generated data and assumptions. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. While we believe our market size information is generally reliable, such information is inherently imprecise. In addition, our projections, assumptions and estimates of future opportunities within our target market are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in this prospectus. If third-party or internally generated data prove to be inaccurate or we make errors in our assumptions based on that data, our future growth rate may be limited. In addition, these inaccuracies or errors may cause us to misallocate capital and other business resources, which would harm our business.

 

As Internet commerce develops, federal, state and foreign governments may propose and implement new taxes and new laws to regulate Internet commerce, which could increase our operating costs and negatively affect our business.

 

As Internet commerce continues to evolve, increasing regulation by federal, state or foreign governments becomes more likely. Our business could be negatively impacted by the enforcement of existing laws and regulations or the enactment of new laws applicable to interactive marketing. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be unable to pass along those costs to our customers in the form of increased fees. Legislation introduced in Congress in 2013, if enacted into law, would authorize states to require out-of-state retailers to collect and remit sales taxes on goods sold online. In addition, federal, state and foreign governmental or regulatory agencies may decide to impose taxes on services provided over the Internet or via email. Such taxes could discourage the use of the Internet and email as a means of commercial marketing, which would adversely affect the viability of our software.

 

If Internet search engines’ methodologies are modified or our search result page rankings decline for other reasons, participant engagement in our websites and online communities could decline.

 

We depend in part on various Internet search engines to direct a significant amount of traffic to our websites. Our ability to maintain the number of potential participants directed to our websites is not entirely

 

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within our control. Our competitors’ search engine optimization, or SEO, efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in an attempt to improve search results, which could adversely affect placement of our search result page rankings. If search engine companies revise their search algorithms in ways that are detrimental to new participant growth on our websites or in ways that make it more difficult for organizers or participants to use our websites, or if competitors’ SEO efforts are more successful than ours, the overall growth in the numbers of organizers and participants using our websites could slow, participant engagement could decrease and we could lose existing participants and become less attractive to existing and prospective organizer customers. Our websites have experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of participants directed to our website would harm our business and operating results.

 

Risks Related to this Offering

 

Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.

 

Our quarterly results of operations, including the level of our revenue, profitability, cash flow and deferred revenue, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly results may negatively impact the value of our common stock. Factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:

 

   

our ability to attract new customers;

 

   

the addition or loss of existing customers, including through acquisitions or consolidations;

 

   

the timing of recognition of revenue;

 

   

the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

 

   

network outages or security breaches;

 

   

general economic, industry and market conditions;

 

   

customer renewal rates;

 

   

increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements;

 

   

changes in our pricing policies or those of our competitors; and

 

   

seasonal variations in sales of our solutions, which has historically been highest in the fourth quarter of a calendar year.

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, or if our actual results differ significantly from our guidance, our stock price and trading volume could decline.

 

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

 

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In addition, from time to time, we may release earnings guidance or other forward-looking statements in our earnings releases, earnings conference calls or otherwise regarding our future performance that represent our management’s estimates as of the date of release. Some or all of the assumptions of any future guidance that we furnish may not materialize or may vary significantly from actual future results. Any failure to meet guidance or analysts’ expectations could have a material adverse effect on the trading price or volume of our stock.

 

An active, liquid and orderly trading market for our common stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment.

 

Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price of our common stock will be determined through negotiation with the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares of common stock following this offering. In addition, the trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

 

In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

 

If you purchase shares of our common stock in this offering, you will suffer immediate dilution of your investment.

 

We expect the initial public offering price of our common stock to be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma net tangible book value per share after this offering. Based on an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $         per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering and the assumed initial public offering price.

 

We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a return.

 

Our management will have considerable discretion in the application of the net proceeds of this offering, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The net proceeds may be invested with a view towards long-term benefits for our stockholders and this may not increase our operating results or market value. Until the net proceeds are used, they may be placed in investments that do not produce significant income or that may lose value.

 

We do not expect to declare any dividends in the foreseeable future.

 

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

 

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A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

 

Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly.

 

Upon completion of this offering, based on the number of shares outstanding as of March 31, 2013, we will have outstanding              shares of common stock, assuming no exercise of outstanding options or warrants. Of these shares, the              shares sold in this offering will be freely tradable, and             additional shares of common stock will be available for sale in the public market beginning 180 days after the date of this prospectus following the expiration of lock-up agreements between some of our stockholders and the underwriters. The representatives of the underwriters may release these stockholders from their lock-up agreements with the underwriters at any time and without notice, which would allow for earlier sales of shares in the public market.

 

In addition, promptly following the completion of this offering, we intend to file one or more registration statements on Form S-8 registering the issuance of approximately              shares of common stock subject to options or other equity awards issued or reserved for future issuance under our equity incentive plans. Shares registered under these registration statements on Form S-8 will be available for sale in the public market subject to vesting arrangements and exercise of options, the lock-up agreements described above and the restrictions of Securities Act Rule 144 in the case of our affiliates.

 

Additionally, after this offering, the holders of an aggregate of              shares of our common stock will have rights, subject to some conditions, to require us to file one or more registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. If we were to register these shares for resale, they could be freely sold in the public market. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

 

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

 

Upon completion of this offering, our executive officers, directors and current beneficial owners of 5% or more of our common stock and their respective affiliates will, in aggregate, beneficially own approximately     % of our outstanding common stock. These persons, acting together, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with our interests or the interests of other stockholders.

 

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

 

Our certificate of incorporation, bylaws, and Delaware law contain or will contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors. Our corporate governance documents include or will include provisions: creating a classified board of directors whose members serve staggered three-year terms; authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock; limiting the liability of, and providing indemnification to, our directors and officers; limiting the ability of our stockholders to call and bring business before special meetings; requiring advance notice of stockholder proposals for business to be conducted at

 

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meetings of our stockholders and for nominations of candidates for election to our board of directors; and controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

 

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.

 

Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

 

We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.

 

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as rules and regulations subsequently implemented by the Securities and Exchange Commission and the                     , including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which will increase when we are no longer an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act of 2012. We will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and maintain an internal audit function. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

 

We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance on the terms that we would like. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

 

We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging

 

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growth company” for up to five years following the completion of this offering, although, if we have more than $1.0 billion in annual revenue, if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year, or we issue more than $1.0 billion of non-convertible debt over a three-year period before the end of that five-year period, we would cease to be an “emerging growth company” as of the following December 31. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

Under the Jumpstart Our Business Startups Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also contained elsewhere in this prospectus. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “aim,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

 

You should refer to the “Risk Factors” section of this prospectus for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

INDUSTRY DATA

 

Some of the industry and market data contained in this prospectus are based on independent industry publications, including those generated by eMarketer or other publicly available information as well as an independent overview of the global events and meetings industry prepared by Frost & Sullivan, which was commissioned by us. Frost & Sullivan has consented to the references to their reports and the use of their name in this prospectus. This information involves a number of assumptions, estimates and limitations. These industry publications, surveys and forecasts generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.

 

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USE OF PROCEEDS

 

We estimate that the net proceeds from our issuance and sale of              shares of our common stock in this offering will be approximately $         million, or approximately $         million if the underwriters exercise their option in full, based upon an assumed initial public offering price of $         per share, which is the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of shares by the selling stockholders, although we will bear the costs, other than underwriting discounts and commissions, associated with those sales.

 

Each $1.00 increase or decrease in the assumed initial public offering price of $         per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

 

The principal purposes of this offering are to create a public market for our common stock and to facilitate our future access to the public equity markets, as well as to obtain additional capital. We intend to use the net proceeds from this offering for working capital and general corporate purposes, including further expansion of our operations and product development.

 

In addition, we may use a portion of the net proceeds from this offering to acquire, invest in or license complementary products, technologies or businesses, but we currently have no plans, proposals or arrangements with respect to any potential acquisition, investment or in-license. We may allocate funds from other sources to fund some or all of these activities.

 

The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering.

 

The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short- and intermediate-term, interest-bearing, investment-grade securities.

 

DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Accordingly, we do not expect to pay cash dividends on our common stock in the foreseeable future.

 

38


CAPITALIZATION

 

The following table sets forth our cash, cash equivalents and short-term investments and capitalization as of March 31, 2013:

 

   

on an actual basis without any adjustments to reflect subsequent or anticipated events;

 

   

on a pro forma basis reflecting (i) the conversion of all outstanding shares of our Series A convertible preferred stock into an aggregate of 69,675,216 shares of our common stock, which will occur immediately prior to the completion of this offering and (ii) the filing of our amended and restated certificate of incorporation, which will occur immediately prior to the closing of this offering; and

 

   

on a pro forma as adjusted basis reflecting the conversion described in the preceding clause and the receipt by us of the net proceeds from the sale of              shares of common stock in this offering at an assumed initial public offering price of $         per share, the midpoint of the range on the front cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and excluding the exercise of any option held by the underwriters with respect to this offering.

 

The following information is illustrative only of our cash, cash equivalents and short-term investments and capitalization following the completion of this offering and will change based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.

 

     As of March 31, 2013  
     Actual      Pro Forma      Pro Forma
As Adjusted
 
     (in thousands,
except share and per share data)
 

Cash, cash equivalents and short-term investments, net of restricted cash

   $ 40,944       $ 40,944       $                
  

 

 

    

 

 

    

 

 

 

Stockholders’ equity:

        

Preferred stock, $0.001 par value per share; no shares authorized, actual and pro forma; 100,000,000 shares authorized, pro forma as adjusted; no shares issued and outstanding, actual, pro forma and pro forma as adjusted

   $       $       $   

Series A Convertible Preferred stock, $0.001 par value per share; 69,675,300 shares authorized, actual; no shares authorized, pro forma and pro forma as adjusted; 69,675,216 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted

     70                   

Common stock, $0.001 par value per share; 154,492,987 shares authorized actual and pro forma; 1,000,000,000 shares authorized pro forma as adjusted; 64,674,123 shares issued and 62,593,272 shares outstanding, respectively, actual; 133,588,210 shares issued and outstanding, pro forma; and              shares issued and outstanding, pro forma as adjusted

     64         134      

Treasury stock

     (3,966)         (3,966)      

Additional paid-in capital

     44,258         44,258      

Accumulated deficit

     (19,489)         (19,489)      
  

 

 

    

 

 

    

 

 

 

Total stockholders’ equity

     20,937         20,937      
  

 

 

    

 

 

    

 

 

 

Total capitalization

   $ 20,937       $ 20,937       $                
  

 

 

    

 

 

    

 

 

 

 

39


The number of shares of common stock outstanding in the table above does not include:

 

   

12,680,324 shares of common stock issuable upon exercise of options outstanding at a weighted-average exercise price of $0.70 per share under our Stock Incentive Plan as of March 31, 2013;

 

   

558,915 shares of our common stock issuable upon the exercise of outstanding warrants to purchase common stock as of March 31, 2013, at an exercise price of $0.45 per share, of which, subsequent to March 31, 2013, 58,915 shares have been issued upon the exercise of certain of these warrants and the warrants pertaining to the remaining 500,000 shares have been repurchased from the holder; and

 

   

an additional              shares of our common stock to be reserved for future issuance under our 2013 Equity Incentive Plan following this offering.

 

40


DILUTION

 

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share is determined by dividing our total tangible assets less total liabilities by the number of outstanding shares of our common stock.

 

As of March 31, 2013, we had a net tangible book value of             , or approximately              per share of common stock. On a pro forma basis, after giving effect to the conversion of the outstanding shares of our convertible preferred stock into shares of our common stock upon the closing of this offering, our net tangible book value would have been approximately             , or approximately              per share of common stock.

 

Investors participating in this offering will incur immediate and substantial dilution. After giving effect to the issuance and sale of              shares of our common stock in this offering at an assumed initial public offering price of $         per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2013 would have been approximately $         million, or approximately $         per share of common stock. This represents an immediate increase in the pro forma net tangible book value of $         per share to existing stockholders, and an immediate dilution in the pro forma net tangible book value of $         per share to investors purchasing shares of our common stock in this offering. The following table illustrates this per share dilution:

 

Assumed initial public offering price per share

      $                

Pro forma net tangible book value per share as of March 31, 2013

   $                   

Increase in pro forma as adjusted net tangible book value per share attributable to this offering per share to existing investors

     
  

 

 

    

Pro forma as adjusted net tangible book value per share after this offering

     
     

 

 

 

Dilution per share to new investors

      $                
     

 

 

 

 

The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $         per share would increase or decrease our pro forma as adjusted net tangible book value by approximately $         million, or approximately $         per share, and the dilution per share to investors participating in this offering by approximately $         per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

 

If the underwriters exercise their option in full to purchase              additional shares of common stock from us in this offering, the pro forma as adjusted net tangible book value per share after the offering would be $         per share, the increase in the pro forma net tangible book value per share to existing stockholders would be $         per share and the dilution to new investors purchasing common stock in this offering would be $         per share.

 

41


The following table sets forth as of March 31, 2013, on the pro forma basis described above, the differences between the number of shares of common stock purchased from us, the total consideration paid by or received from existing stockholders and the weighted average price per share paid by existing stockholders and by investors purchasing shares of our common stock in this offering at an assumed initial public offering price of $         per share, which is the midpoint of the range set forth on the cover page on this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 

     Shares Purchased     Total Consideration     Average
Price Per
Share
 
     Number      Percent     Amount      Percent    

Existing stockholders

     133,588,210                      $ 141,343,587                      $ 1.06   

New investors

            
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

        100   $           100   $     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

Each $1.00 increase or decrease in the assumed initial public offering price of $         per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

 

The foregoing table excludes:

 

   

12,680,324 shares of common stock issuable upon exercise of options outstanding at a weighted-average exercise price of $0.70 per share under our Stock Incentive Plan as of March 31, 2013;

 

   

558,915 shares of our common stock issuable upon the exercise of outstanding warrants to purchase common stock as of March 31, 2013, at an exercise price of $0.45 per share, of which, subsequent to March 31, 2013, 58,915 shares have been issued upon the exercise of certain of these warrants and the warrants pertaining to the remaining 500,000 shares have been repurchased from the holder; and

 

   

an additional              shares of our common stock to be reserved for future issuance under our 2013 Equity Incentive Plan following this offering.

 

The foregoing table does not reflect any sales by existing stockholders through this offering. Sales by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to              shares, or     % of the total number of shares of our common stock outstanding after this offering, and will increase the number of shares held by new investors to              shares, or     % of the total number of shares of our common stock outstanding after this offering. In addition, if the underwriters exercise their option to purchase additional shares in full, the number of shares held by the existing stockholders after this offering would be reduced to             , or     % of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors would increase to             , or     % of the total number of shares of our common stock outstanding after this offering.

 

The shares of our common stock reserved for future issuance under our equity benefit plans will be subject to automatic annual increases in accordance with the terms of the plans. To the extent that options or warrants are exercised, new options are issued under our equity incentive plan or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

 

42


SELECTED CONSOLIDATED FINANCIAL DATA

 

The following selected consolidated financial data for the years ended December 31, 2011 and 2012 and the selected consolidated balance sheet data as of December 31, 2011 and 2012 are derived from our audited consolidated financial statements that have been audited by KPMG LLP, independent registered public accounting firm and are included elsewhere in this prospectus. The following selected consolidated financial data for the years ended December 31, 2008, 2009 and 2010 and the selected consolidated balance sheet data as of December 31, 2008, 2009 and 2010 are derived from our unaudited consolidated financial statements and are not included in this prospectus. The following selected consolidated statement of operations data for the three months ended March 31, 2012 and 2013 and balance sheet data as of March 31, 2013 from our unaudited consolidated interim financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial data for the three months ended March 31, 2012 and 2013 and as of March 31, 2013 includes, all adjustments, consisting only of normal recurring accruals, that are necessary in the opinion of our management for a fair presentation of our financial position and results of operations for these periods.

 

Our historical results are not necessarily indicative of the results to be expected in the future, and our operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 2013. The selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this prospectus.

 

Consolidated Statement of Operations Data

 

    Year ended December 31,     Three months ended March 31,  
    2008     2009     2010     2011     2012     2012     2013  
    (In thousands, except per share amounts)  

Revenue

  $ 26,129      $ 31,837      $ 45,060      $ 60,854      $ 83,474      $ 18,250      $ 24,360   

Cost of revenue(1)

    5,573        7,206        10,122        16,660        20,573        4,625        6,003   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    20,556        24,631        34,938        44,194        62,901        13,625        18,357   

Operating expenses:

             

Sales and marketing(1)

    10,087        12,302        18,227        29,305        35,873        8,136        11,519   

Research and development(1)

    1,015        1,605        2,201        4,172        7,605        1,423        2,502   

General and administrative(1)

    4,754        5,883        6,946        8,422        11,523        2,135        4,647   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    15,856        19,790        27,374        41,899        55,001        11,694        18,668   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    4,700        4,841        7,564        2,295        7,900        1,931        (311

Interest income

    180        114        111        270        811        268        259   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations before income tax expense

    4,880        4,955        7,675        2,565        8,711        2,199        (52

Provision (benefit) for income taxes

    1,854        1,641        2,932        2,749        4,406        1,329        (362
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 3,026      $ 3,314      $ 4,743      $ (184   $ 4,305      $ 870      $ 310   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share:

             

Basic

  $ 0.06      $ 0.05      $ 0.07      $ (0.00   $ 0.03      $ 0.01      $ 0.00   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ 0.02      $ 0.02      $ 0.03      $ (0.00   $ 0.03      $ 0.01      $ 0.00   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

43


    Year ended December 31,     Three months ended March 31,  
    2008     2009     2010     2011     2012     2012     2013  
    (In thousands, except per share amounts)        

Pro forma net income per share attributable to common stockholders:(2)

             

Basic

          $ 0.03        $ 0.00   
         

 

 

     

 

 

 

Diluted

          $ 0.03        $ 0.00   
         

 

 

     

 

 

 

Weighted average common shares outstanding:

             

Basic

    53,920        63,885        68,775        67,030        132,669        132,844        131,488   

Diluted

    147,787        147,783        135,656        67,030        139,163        139,462        138,271   

Pro forma weighted average common shares outstanding:(2)

             

Basic

            132,669          131,488   

Diluted

            139,163          138,271   

 

  (1)   Stock-based compensation expense included in these line items is as follows:

 

     Year ended December 31,      Three months ended March 31,  
     2008      2009      2010      2011      2012      2012      2013  
     (In thousands)  

Cost of revenue

   $ 8       $ 62       $ 33       $ 690       $ 762       $ 182       $ 210   

Sales and marketing

     14         105         57         2,376         2,895         817         777   

Research and development

     2         16         9         373         539         152         141   

General and administrative

     3         23         12         512         1,010         285         311   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation expense

   $     27       $ 206       $ 111       $ 3,951       $ 5,206       $ 1,436       $ 1,439   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (2)   Pro forma basic and diluted net income per share have been calculated assuming the conversion of all outstanding shares of our Series A convertible preferred stock into an aggregate of 69,675,216 shares of our common stock as of the beginning of the applicable year or at the time of issuance, if later.

 

Consolidated Balance Sheet Data

 

     December 31,      March 31,  
     2008      2009      2010      2011      2012      2013  
     (in thousands)  

Cash, cash equivalents and short-term investments, net of restricted cash

   $ 7,945       $ 10,035       $ 19,315       $ 26,485       $ 26,170       $ 40,944   

Total current assets

     14,367         21,610         36,806         48,764         61,320         62,986   

Total assets

     22,113         28,314         45,376         58,441         90,030         92,412   

Deferred revenue

     12,933         19,687         29,362         37,293         51,554         53,258   

Total current liabilities

     14,779         22,188         34,022         45,189         68,747         68,730   

Total non-current liabilities

     1,043         956         992         1,086         2,553         2,745   

Stockholders’ equity

     6,291         5,170         10,362         12,166         18,730         20,937   

 

44


MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Consolidated financial data referenced in this section as of and for the years ended December 31, 2011 and 2012 are derived from our audited consolidated financial statements included elsewhere in this prospectus. Consolidated financial data referenced in this section as of and for the years ended December 31, 2008, 2009 and 2010 are derived from our unaudited consolidated financial statements not included in this prospectus. Consolidated financial data referenced in this section as of and for the three months ended March 31, 2012 and 2013 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial data as of and for the three months ended March 31, 2012 and 2013 includes, all adjustments, consisting only of normal recurring accruals, that are necessary in the opinion of our management for a fair presentation of our financial position and results of operations for these periods. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this prospectus. See “Cautionary Note Regarding Forward-Looking Statements.”

 

Overview

 

We are a leading cloud-based enterprise event management platform. We provide solutions for both sides of the events and meetings value chain: (i) event and meeting planners, and (ii) hotels and venues. Our integrated, cloud-based solution addresses the entire event lifecycle by allowing event and meeting planners to organize, market and manage their meetings, conferences, tradeshows and other events. Our online marketplace connects event planners and venues through our vertical search engine that accesses our proprietary database of detailed venue information. The combination of these solutions creates an integrated platform that allows us to generate revenue from both sides of the events and meetings value chain.

 

Our event and meeting planner customers include enterprises such as corporations, associations, not-for-profits, government agencies and universities. These customers enter into annual and multi-year subscription contracts to utilize part or all of our cloud-based software solutions to plan, manage and execute enterprise events and meetings including external events, such as conferences, tradeshows, and customer events, as well as internal events, such as sales meetings, training seminars and team-building events. As of December 31, 2012, we had more than 6,200 event and meeting planner customers. Our event and meeting planner customers used our event management solutions to execute more than 139,000 events and meetings and managed 7.3 million registrations during the year ended December 31, 2012. Revenue from our event and meeting planning platform subscription solutions were $58.7 million during the year ended December 31, 2012 and $17.1 million for the three months ended March 31, 2013, or 70% of our total revenue during those periods. We generally recognize revenue from these contracts ratably over the term of the contract.

 

On the other side of the event value chain, hotels and venues utilize our online marketing solutions to generate more visibility with ready-to-transact event and meeting planners. Our online marketplace, the Cvent Supplier Network, or CSN, connects tens of thousands of event and meeting planners seeking the best venue for their event with more than 200,000 venues in our proprietary database. We believe that our CSN contains the world’s largest, most accurate and searchable database of detailed meeting venue information with listings of hotels, conference centers, convention centers, resorts, restaurants, museums, country clubs, wineries, castles and other special event venues in more than 175 countries. Hotels and venues enter into annual and multi-year advertising contracts with us for marketing solutions that increase the prominence of their properties in our CSN; we recognize the revenue from these marketing solutions over the term of the agreement based on the estimated selling prices of each solution. As of December 31, 2012, we had more than 30,000 active CSN event and

 

45


meeting planner users. The CSN is available with the same functionality to users of our paid subscription event and meeting platform solutions as well as to event and meeting planners that simply visit the CSN site and establish a free user account. All of these users have the ability to submit RFPs to hotels and venues free of charge using the CSN. We consider an event and meeting planner to be “active” if such user accessed their account within the 12 months preceding the date of measurement. As of December 31, 2012, we had more than 4,700 hotel and venue customers paying for marketing solutions. Event planners transmitted approximately 1.1 million RFPs for events requiring approximately 13.9 million room nights during the year ended December 31, 2012. Revenue from our marketing solutions were $24.7 million during the year ended December 31, 2012 and $7.2 million for the three months ended March 31, 2013, or 30% of our total revenue during those periods.

 

We were established in 1999 as a provider of event registration software to event and meeting planners. During the steep economic downturn in the technology sector from 2000 to 2002, we faced initial macroeconomic setbacks to our business and endured substantial austerity. We believe our early struggles have resulted in a strong culture of teamwork and entrepreneurial spirit. We have also evolved during that period from an event registration and event marketing software provider to a comprehensive platform solution covering the entire event value chain starting from venue sourcing to collecting online feedback from attendees.

 

Our revenue has increased from $26.1 million during the year ended December 31, 2008 to $83.5 million during the year ended December 31, 2012 and $24.4 million during the three months ended March 31, 2013. Our net income has grown from $3.0 million during the year ended December 31, 2008 to $4.3 million during the year ended December 31, 2012 and $0.3 million during the three months ended March 31, 2013. We had adjusted EBITDA of $20.3 million and $3.2 million during the year ended December 31, 2012 and the three months ended March 31, 2013, respectively. We first launched our CSN in 2008, and revenue from advertising solutions has grown from an immaterial percentage of total revenue during the year ended December 31, 2008 to 30% of total revenue during each of the year ended December 31, 2012 and the three months ended March 31, 2013. Although we have experienced substantial growth in revenues and adjusted EBITDA in recent years, we are dependent on attracting new event and meeting planner customers and new marketing customers to sustain a similar level of growth in future periods.

 

Although we have historically grown our business organically, we acquired three small complementary businesses during the year ended December 31, 2012. In January 2012, we acquired Seed Labs LLC, now branded as our CrowdTorch product, to develop our mobile app capabilities for consumer events. In June 2012, we acquired CrowdCompass, Inc. to develop our mobile app capabilities for business events. In December 2012, we acquired TicketMob LLC to develop our ticketing capabilities. We expect to maintain our focus on organic growth in the future and may pursue opportunistic acquisitions that add complementary technology or expand our geographic footprint.

 

We generate the majority of our revenue from North America. Revenue from outside North America accounted for 7%, 9% and 10% for years ended December 31, 2011 and 2012 and the three months ended March 31, 2013, respectively. However, we believe our market opportunity is global, and we expect that international revenue will grow as a percentage of our total revenue in future periods as we place increasing emphasis on developing that element of our business. To support our international expansion and to increase global sales for all of our solutions, we opened our first European sales office in London in May 2013 and ultimately plan to expand our sales force in Europe. We also plan to introduce select European and Asian language planner interfaces in future periods to strengthen our penetration within European and Asian event and meeting planner markets.

 

We believe an important element of our past success has been the effective use of our India office. As of December 31, 2012, we employed approximately 600 personnel in India, replicating nearly every U.S.-based business division there, as well as additional functions unique to our India operations. Our India operations help us accomplish three business objectives: (i) near-continuous technical development and customer service, (ii) worldwide geographic reach for marketing efforts and (iii) building and maintaining our proprietary databases.

 

46


Combining the resources of our U.S. and India operations, we are able to continue technical development and customer support throughout the normal business hours of each region. In addition, our India office houses the majority of our marketing personnel for the Asia-Pacific and Europe, Middle East and Africa regions. Finally, we leverage our Indian operations to build our large event planner contact database and to research and maintain more than 200,000 venues on our CSN. We are able to benefit greatly from the labor and infrastructure cost advantages of the region and accomplish many critical business tasks in an efficient and cost effective manner.

 

Since 1999, we have relied on private placements of capital stock, and cash from operating activities to fund our ongoing operations. In July 2011, three venture capital funds invested $135.9 million in our business. The net proceeds from this transaction were used to repurchase shares held by long-time early angel and venture capital investors as well as from certain members of our senior management.

 

Our ability to grow our revenue and capitalize on the significant market opportunity we see for ourselves depends on our ability to get more event planners, hotels and venues to adopt our solutions, grow the number of our solutions being used per customer and expand our geographical presence. In the near-term, although we expect revenue growth, we expect that our cost of revenue and operating expenses will increase as a percentage of revenue. Marketing and sales expenses are also expected to increase as a percentage of revenue, as we continue to expand our direct sales teams, international operations and increase our marketing activities. We believe that we must invest in maintaining a high level of client service and support as we consider it critical for our continued success. As such, we expect to invest in research and development to continue to provide cutting edge solutions for our clients. Finally, we also expect to incur additional general and administrative expenses as a result of both our growth and our transition to becoming a public company.

 

Key Metrics

 

     Year ended December 31,     Three months ended March 31,  
     2010     2011     2012     2012     2013  
     (In thousands, except percentages)  

Financial metrics

          

Revenue

   $ 45,060      $ 60,854      $ 83,474      $ 18,250      $ 24,360   

Year-over-year percentage increase

     42     35     37     37     33

Net income (loss)

   $ 4,743      $ (184   $ 4,305      $ 870      $ 310   

Adjusted EBITDA(1)

   $ 10,781      $ 11,782      $ 20,344      $ 4,317      $ 3,238   

Cash flows provided by operating activities

   $ 14,056      $ 14,610      $ 23,581      $ 15,678      $ 17,081   

Operating metrics

          

Event registrations processed

     4,664        5,757        7,325        1,905        2,267   

Events and meetings managed

     83        108        139        37        46   

Room nights requested

     6,815        9,114        13,851        3,387        4,512   

Number of RFPs transmitted

     564        825        1,108        295        334   

 

(1)   Adjusted EBITDA is not calculated in accordance with GAAP. A reconciliation of this non-GAAP measure to the most directly comparable GAAP-based measure along with a summary of the definition and its material limitation are included at footnote (3) of “Prospectus Summary— Summary Consolidated Financial Data—Other Financial Metrics.”

 

We monitor the key financial and operating metrics set forth in the preceding table to help us evaluate trends, establish budgets, measure the effectiveness and efficiency of our operations and gauge our cash generation. We discuss revenue and the components of net income (loss) in the sections titled “—Financial Operations Overview” and “—Results of Operations,” adjusted EBITDA in footnote (3) in the section titled “Prospectus Summary—Summary Consolidated Financial Data—Other Financial Metrics” and cash flows provided by operating activities in the section titled “—Liquidity and Capital Resources.” The other metrics presented are described in further detail as follows:

 

Event Registrations Processed. We measure event registrations processed as the total number of all attendee registrations executed through our platform in a given period. We believe that the number of event registrations

 

47


processed and the year-on-year growth rate help us evaluate the scale of events being executed through our software platform. We do not generate revenue on the basis of a fixed percentage per registration. Our pricing model is primarily based on contracted fees for blocks of registrations with an additional fee being charged for every registration being processed over and above that contracted amount. Thus, increases in registrations are a leading indicator of future increases in our revenue.

 

Events and Meetings Managed. We define events and meetings managed as the total number of all events and meetings managed through our platform in a given period. This amount includes all events and meetings using the date the event was created as listed in our system to determine which period the event was first actively managed by our platform. This also includes meetings being tracked on our platform by large enterprise clients for budgeting and management purposes. This amount does not include events and meetings identified by the planner as not yet active or deleted. We generally do not generate revenue on the basis of a rate per event or meeting. Our pricing model is based on a combination of (i) contracted fees for blocks of registrations with an additional fee being charged for every registration being processed over and above that contracted amount, (ii) annual maintenance fees and (iii) a fee per each additional module sold within our platform. Thus, the total number of events and meetings managed is a leading indicator of our revenue and helps us evaluate the scale being executed through our Event Management or Strategic Meetings Management solutions.

 

Room Nights Requested. We measure the number of room nights requested by event planners in a given period based on the total number of hotel guest room nights requested in connection with all unique RFPs transmitted through our CSN in such period less known cancelled RFPs. Although planners may submit a unique RFP created on our system to multiple venues, we consider each individual RFP created and transmitted on our system as an RFP representative of only one event. Event planners occasionally create more than one unique RFP for a particular event under certain circumstances, but we believe such behavior is infrequent. In addition, the actual number of room nights purchased in connection with an event from a particular venue may vary from the room nights requested. Nonetheless, we believe that room nights requested is a leading indicator of our online marketplace’s adoption by event planners and its significant network effects. As the number of room nights requested increases, more venues are incentivized to advertise and list in our CSN due to its value proposition for advertisers.

 

Number of RFPs Transmitted. We calculate the number of RFPs transmitted as the total count of all RFPs sent to all hotels and venues through our CSN during the period excluding events and meetings identified by the planner as cancelled. Most event planners request proposals from multiple venues for a particular event, and this metric reflects the gross level of activity by planners interacting with venues. We believe that the number of RFPs processed through our CSN is a leading indicator of our online marketplace’s adoption by event planners, as it shows the total level of activity on our network. As the number of RFPs transmitted increases, more venues are incentivized to advertise and list in our CSN due to the increased opportunity for venues to connect with planners.

 

48


Financial Operations Overview

 

Revenue

 

We generate revenue by offering subscriptions to our Event Management platform and marketing solutions on the Cvent Supplier Network. Since 2008, our revenue from our CSN has increased as a percentage of revenue as follows:

 

    Year ended December 31,     Three months ended March 31,  
    2008     2009     2010     2011     2012     2012     2013  
    (Dollars in thousands)  

Revenue by product:

             

Platform subscriptions

  $ 26,034      $ 29,191      $ 35,162      $ 44,379      $ 58,733      $ 12,730      $ 17,123   

Marketing solutions

    95        2,646        9,898        16,475        24,741        5,520        7,237   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  $ 26,129      $ 31,837      $ 45,060      $ 60,854      $ 83,474      $ 18,250      $ 24,360   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Percentage of revenue by product:

             

Platform subscriptions

    100     92     78     73     70     70     70

Marketing solutions

           8        22        27        30        30        30   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    100     100     100     100     100     100     100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Platform Subscriptions. We generate the majority of our revenue through subscriptions for our event management solutions platform, pricing for which is based on the features and functionality selected. Our Strategic Meetings Management solution is targeted towards the large enterprise market, and includes the full functionality of our platform. Our Event Management solution, which is targeted towards mid-market and smaller enterprises, has many of the same features as our Strategic Meetings Management solution but does not include some of the advanced features and functionality required by larger organizations. The number of attendee registrations available to customers subscribing to the registration functionality is contractually fixed, and registrations above the contracted amount result in additional fees paid by the customer.

 

Our customer contracts are typically not cancellable without cause and typically range in length from one to three years. We generally recognize revenue from platform subscriptions ratably over the term of the agreement. Customers are typically invoiced in advance on a quarterly or annual basis. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized as revenue ratably over the subscription period. We refer to contractual amounts that have not been invoiced as unbilled contract value. Unbilled contract value is not reflected in our consolidated financial statements.

 

Platform subscription revenue also includes revenue from our mobile event apps and web survey products.

 

Marketing Solutions. Marketing solutions revenue is generated through the delivery of various forms of advertising sold through annual or multi-year contracts to marketers, principally hotels and venues. Such solutions include prominent display of a customer’s venue within the Cvent Supplier Network, the Cvent Destination Guide or in various electronic newsletters. Pricing for the advertisements is based on the term of the advertisement, targeted geography, number of advertisements and prominence of the ad placement.

 

We generally recognize the revenue from these marketing solutions over the period the advertisements are delivered. Customer contracts are typically not cancellable without cause and typically range in length from one to two years. We generally invoice our customers in advance in annual installments. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized as revenue over the contract period. Contractual amounts that have not been invoiced, which we refer to as unbilled contract value, are not reflected in our consolidated financial statements.

 

49


Cost of Revenue

 

Cost of revenue primarily consists of employee-related expenses, including salaries, benefits, bonuses and stock-based compensation, related to providing support and hosting our applications, costs of data center capacity, software license fees and amortization expense associated with capitalized software. In addition, we allocate a portion of overhead, such as rent, information technology costs, depreciation and amortization to cost of revenue based on head count.

 

We are invested in our customers’ success and as such, we will continue to invest in providing support and expanding our capacity to support our growth, which in the near-term will result in higher cost of revenue in absolute dollars and as a percentage of revenue.

 

Operating Expenses

 

Sales and Marketing

 

Sales and marketing expenses primarily consist of personnel and related expenses for our sales and marketing staff, including salaries, benefits, bonuses, commissions and stock-based compensation. Commissions are expensed when the customer contract is signed. In addition to staff costs, our cost of marketing includes product marketing and other brand-building activities, such as trade shows, product seminars and online marketing.

 

We intend to continue to invest in sales and marketing and expect spending in these areas to increase in the near-term in absolute dollars and as a percentage of revenue as we continue to expand our business both domestically and internationally. We expect sales and marketing expenses to continue to be among the most significant components of our operating expenses.

 

Research and Development

 

Research and development expenses consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, bonuses and stock-based compensation and the cost of certain third-party contractors. Research and development costs, other than software development expenses qualifying for capitalization, are expensed as incurred.

 

With the exception of our three 2012 acquisitions, we maintain a unified software code base for our entire platform, which we believe improves the efficiency of our research and development activities. Notwithstanding, we expect research and development expenses to increase in the near-term in absolute dollars and as a percentage of revenue as we add new functionality on the platform and expand our cloud-delivery infrastructure.

 

General and Administrative

 

General and administrative expenses consist primarily of personnel and related expenses for administrative, finance, legal and human resource staffs, including salaries, benefits, bonuses and stock-based compensation, as well as professional fees, insurance premiums, other corporate expenses, and overhead.

 

We expect our general and administrative expenses to increase in absolute dollars and as a percentage of revenue as we continue to expand our operations, hire additional personnel and transition from being a private company to a public company. In transitioning to a public company, we expect to incur additional expenses related to outside legal counsel, accounting and auditing activities, compliance with public company reporting and corporate governance requirements, increased insurance requirements and enhancing our internal control environment.

 

50


Results of Operations

 

The following table sets forth selected consolidated statement of operations data for each of the periods indicated.

 

     Year ended December 31,      Three months ended March 31,  
         2011             2012              2012              2013      
     (In thousands)  

Revenue

   $ 60,854      $ 83,474       $ 18,250       $ 24,360   

Costs of revenue

     16,660        20,573         4,625         6,003   
  

 

 

   

 

 

    

 

 

    

 

 

 

Gross profit

     44,194        62,901         13,625         18,357   

Operating expenses:

          

Sales and marketing

     29,305        35,873         8,136         11,519   

Research and development

     4,172        7,605         1,423         2,502   

General and administrative

     8,422        11,523         2,135         4,647   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total operating expenses

     41,899        55,001         11,694         18,668   
  

 

 

   

 

 

    

 

 

    

 

 

 

Income (loss) from operations

     2,295        7,900         1,931         (311)   

Interest income

     270        811         268         259   
  

 

 

   

 

 

    

 

 

    

 

 

 

Income (loss) from operations before income tax expense

     2,565        8,711         2,199         (52)   

Provision (benefit) for income taxes

     2,749        4,406         1,329         (362)   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ (184   $ 4,305       $ 870       $ 310   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

The following table sets forth our consolidated statement of operations data as a percentage of revenue for each of the periods indicated.

 

     Year ended December 31,     Three months ended March 31,  
     2011     2012     2012     2013  

Revenue

           100           100           100           100

Costs of revenue

     27        25        25        25   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     73        75        75        75   

Operating expenses:

        

Sales and marketing

     48        43        44        47   

Research and development

     7        9        8        10   

General and administrative

     14        14        12        19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     69        66        64        76   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     4        9        11        (1

Interest income

            1        1        1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations before income tax expense

     4        10        12        0   

Provision (benefit) for income taxes

     4        5        7        (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (0 )%      5     5     1
  

 

 

   

 

 

   

 

 

   

 

 

 

 

51


Comparison of Three Months Ended March 31, 2012 and 2013

 

Revenue

 

     Three months ended March 31,     Period-to-period change  
     2012     2013    
     Amount      Percentage
of revenue
    Amount      Percentage
of revenue
     Amount        Percentage   
     (Dollars in thousands)  

Revenue by product:

               

Platform subscriptions

   $ 12,730         70   $ 17,123         70   $ 4,393         35

Marketing solutions

     5,520         30     7,237         30     1,717         31
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total revenue

   $ 18,250               100   $ 24,360               100   $ 6,110                 33
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

Total revenue increased during the three months ended March 31, 2013 compared to the corresponding quarter in 2012 primarily driven by a $6.7 million increase in revenue from sales of products to new customers, partially offset by customers lost during the three months ended March 31, 2013.

 

Platform subscription revenue increased during the three months ended March 31, 2013 compared to the same quarter in 2012 primarily due to a $4.8 million increase in revenue from sales of event planning subscriptions to new customers in 2013. Revenue from sales of additional products to existing customers, increased registration usage and a full quarter of revenue for new 2012 customers contributed $1.1 million in platform subscription revenue during the three months ended March 31, 2013. These amounts were partially offset by customers lost during the three months ended March 31, 2013.

 

Marketing solutions revenue increased during the three months ended March 31, 2013 compared to the same quarter in 2012 primarily due to recognition of revenue from sales of additional marketing solutions, price increases and recognition of a full period of revenue for new 2012 customers of $1.9 million during the three months ended March 31, 2013. Sales of marketing solutions to new 2012 customers contributed an additional $0.3 million during the three months ended March 31, 2013. These amounts were partially offset by customers lost during the three months ended March 31, 2013.

 

Our year-over-year revenue growth was moderately affected by our acquisitions during 2012. We acquired CrowdTorch in January 2012, CrowdCompass in June 2012 and TicketMob in December 2012. Aggregate revenue from sales of CrowdTorch, CrowdCompass and TicketMob products included in our consolidated results of operations were $0.1 million during the three months ended March 31, 2012 as compared to $1.7 million in the three months ended March 31, 2013.

 

We generate the majority of our revenue from North America with revenue from outside North America accounting for 8% and 10% of total revenue for the three months ended March 31, 2012 and 2013, respectively. We expect that the proportion of total revenue from outside of North America will continue to grow in the future.

 

Cost of Revenue

 

     Three months ended March 31,     Period-to-period change  
     2012     2013    
     Amount      Percentage
of revenue
    Amount      Percentage
of revenue
     Amount        Percentage   
     (Dollars in thousands)  

Cost of revenue

   $ 4,625         25   $ 6,003         25   $ 1,378         30

 

52


Cost of revenue increased during the three months ended March 31, 2013 compared to the corresponding quarter in 2012 primarily due to an increase in customer service support costs of $0.6 million and an increase in technology maintenance expense of $0.4 million. An increase of $0.2 million in amortization of capitalized software and acquired technology further contributed to the increase.

 

Operating Expenses

 

     Three months ended March 31,     Period-to-period change  
     2012     2013    
     Amount      Percentage
of Revenue
    Amount      Percentage
of revenue
     Amount        Percentage   
     (Dollars in thousands)  

Operating expenses:

               

Sales and marketing

   $ 8,136         44   $ 11,519         47   $ 3,383         42

Research and development

     1,423         8        2,502         10        1,079         76   

General and administrative

     2,135         12        4,647         19        2,512         118   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total operating expenses

   $ 11,694                 64   $ 18,668                 76   $ 6,974                 60
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

Sales and Marketing

 

Sales and marketing expenses increased primarily due to increased head count and expansion of our marketing efforts. Total head count of our sales and marketing personnel increased by 42% from March 31, 2012 to March 31, 2013, to support revenue growth and new product lines. This increase contributed $2.3 million of additional expenses in the three months ended March 31, 2013, and an associated increase of $0.6 million of overhead expense. Costs related to expanded marketing efforts contributed to an additional $1.1 million to the period-over-period difference.

 

Research and Development

 

Research and development expenses increased primarily due to increased head count within our software development group as we continue to add features and functionality to our platform and integrate new product lines. Total head count within research and development increased by 46% from March 31, 2012 to March 31, 2013. This increase contributed $1.1 million of additional expenses in the three months ended March 31, 2013 compared to the comparable period in 2012.

 

General and Administrative

 

General and administrative expenses increased primarily due to increased head count for administrative operations, particularly related to increased personnel necessary to operate as a public company upon the closing of this offering. Total head count of our general and administrative operations increased by 79% from March 31, 2012 to March 31, 2013, which contributed $1.0 million of increased personnel and related expenses in the three months ended March 31, 2013. Additionally, professional services fees including legal, tax, and audit fees primarily associated with this offering contributed an additional $0.9 million in period-over-period expense.

 

Interest Income

 

     Three months ended March 31,     Period-to-period change  
     2012     2013    
     Amount      Percentage
of revenue
    Amount      Percentage
of revenue
     Amount       Percentage   
     (Dollars in thousands)  

Interest income

   $ 268         1   $ 259         1   $ (9     (3 )% 

 

53


Interest income decreased for the three months ended March 31, 2013 as compared to the three months ended March 31, 2012 due to lower interest rates and the lower cash and cash equivalents balances we held throughout the three months ended March 31, 2013 in India as compared to the three months ended March 31, 2012.

 

Provision (Benefit) for Income Taxes

 

     Three months ended March 31,     Period-to-period change  
     2012     2013    
     Amount      Percentage
of revenue
    Amount     Percentage
of revenue
     Amount       Percentage   
     (Dollars in thousands)  

Provision (benefit) for income taxes

   $ 1,329         7   $ (362     (1 )%    $ (1,691     N/A   

 

Income tax benefit for the three months ended March 31, 2013 increased compared to the three months ended March 31, 2012. The increase principally resulted from incurring a pre-tax book loss and an associated income tax benefit in the first quarter of 2013, as compared to pre-tax book income and an associated income tax expense in the comparable period in the prior year.

 

Comparison of Years Ended December 31, 2011 and 2012

 

Revenue

 

     Year ended December 31,     Period-to-period change  
     2011     2012    
     Amount      Percentage
of revenue
    Amount      Percentage
of revenue
     Amount        Percentage   
     (Dollars in thousands)  

Revenue by product:

               

Platform subscriptions

   $ 44,379         73   $ 58,733         70   $ 14,354         32

Marketing solutions

     16,475         27     24,741         30     8,266         50
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total revenue

   $ 60,854         100   $ 83,474         100   $ 22,620         37
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

Total revenue increased during the year ended December 31, 2012 compared to the prior year primarily driven by a $13.5 million increase in revenue from sales of products to new customers.

 

Platform subscription revenue increased during the year ended December 31, 2012 compared to the prior year primarily due to an $8.8 million increase in revenue from sales of event planning subscriptions to new customers in 2012. Revenue from sales of additional products to existing customers, increased registration usage and a full year of revenue for new 2011 customers contributed $9.2 million in platform subscription revenue during the year ended December 31, 2012. These amounts were partially offset by customers lost during the year ended December 31, 2012.

 

Marketing solutions revenue increased during the year ended December 31, 2012 compared to the prior year primarily due to recognition of revenue from additional marketing solutions, price increases and recognition of a full year of revenue for new 2011 customers of $5.6 million during the year ended December 31, 2012. Sales of marketing solutions to new 2012 customers contributed an additional $4.7 million during the year ended December 31, 2012. These amounts were partially offset by customers lost during the year ended December 31, 2012.

 

Our year-over-year revenue growth was moderately affected by our acquisitions during the year ended December 31, 2012. We acquired CrowdTorch in January 2012 and CrowdCompass in June 2012. Aggregate

 

54


revenue from sales of CrowdTorch and CrowdCompass products included in our consolidated results of operations were $1.5 million during the year ended December 31, 2012. Since we acquired TicketMob upon the close of business on December 31, 2012, we did not recognize revenue in the year ended December 31, 2012 related to that product line.

 

We generate the majority of our revenue from North America with revenue from outside North America accounting for 7% and 9% of total revenue for the years ended December 31, 2011 and 2012, respectively. We expect that the proportion of total revenue from outside of North America will continue to grow in the future.

 

Cost of Revenue

 

     Year ended December 31,     Period-to-period change  
     2011     2012    
     Amount      Percentage
of revenue
    Amount      Percentage
of revenue
      Amount          Percentage    
     (Dollars in thousands)  

Cost of revenue

   $ 16,660         27   $ 20,573         25   $ 3,913         23

 

Cost of revenue increased during the year ended December 31, 2012 compared to the prior year primarily due to an increase in amortization of capitalized software and acquired technology of $1.2 million. Increases in technology costs of $1.8 million, customer service costs of $0.5 million and a $0.5 million increase in overhead further contributed to the increase.

 

Operating Expenses

 

     Year ended December 31,     Period-to-period change  
     2011     2012    
     Amount      Percentage
of Revenue
    Amount      Percentage
of revenue
      Amount          Percentage    
     (Dollars in thousands)  

Operating expenses:

               

Sales and marketing

   $ 29,305         48   $ 35,873         43   $ 6,568         22

Research and development

     4,172         7        7,605         9        3,433         82   

General and administrative

     8,422         14        11,523         14        3,101         37   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total operating expenses

   $ 41,899         69   $ 55,001         66   $ 13,102         31
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

Sales and Marketing

 

Sales and marketing expenses increased primarily due to increased head count and expansion of our marketing efforts. Total head count of our sales and marketing personnel increased by 38% from December 31, 2011 to December 31, 2012, to support revenue growth and new product lines. This increase contributed $3.6 million of additional expenses in 2012. Costs related to expanded marketing efforts contributed an additional $1.7 million to the year-over-year difference. Finally, sales and marketing-related stock-based compensation increased by $0.5 million due to greater head count and the increase in the grant date fair value of our common stock underlying options granted in the year ended December 31, 2012 as compared to the prior year.

 

Research and Development

 

Research and development expenses increased primarily due to increased head count within our software development group as we continue to add features and functionality to our platform and integrate new product lines. Total head count within research and development increased by 45% from December 31, 2011 to December 31, 2012, which increased personnel and related expenses in 2012 by $2.7 million. Finally, research

 

55


and development-related stock-based compensation increased by $0.2 million due to greater head count and the increase in the grant date fair value of our common stock underlying options granted in the year ended December 31, 2012 as compared to the prior year.

 

General and Administrative

 

General and administrative expenses increased primarily due to increased head count for administrative operations, particularly related to increased preparation in 2012 for this offering and becoming a public company. Total head count of our general and administrative operations increased by 75% from December 31, 2011 to December 31, 2012, which contributed $1.8 million of increased personnel and related expenses in 2012 and $0.7 million in legal fees primarily associated with acquisitions. Finally, general and administrative-related stock-based compensation increased by $0.5 million due to greater head count and the increase in the grant date fair value of our common stock underlying options granted in the year ended December 31, 2012 as compared to the prior year.

 

Interest Income

 

     Year ended December 31,     Period-to-period change  
     2011      2012    
     Amount      Percentage
of revenue
     Amount      Percentage
of revenue
    Amount      Percentage  
     (Dollars in thousands)  

Interest income

   $ 270               $ 811         1   $ 541         200

 

Interest income increased for the year ended December 31, 2012 as compared to the year ended December 31, 2011 due to higher interest rates, comparatively longer deposit periods, and the increased cash and cash equivalents balances we held throughout the year ended December 31, 2012 in India as compared to the year ended December 31, 2011.

 

Provision for Income Taxes

 

     Year ended December 31,     Period-to-period change  
     2011     2012    
     Amount      Percentage
of revenue
    Amount      Percentage
of revenue
    Amount      Percentage  
     (Dollars in thousands)  

Provision for income taxes

   $ 2,749         4   $ 4,406         5   $ 1,657         60

 

Income tax expense for the year ended December 31, 2012 increased $1.7 million, or 60%, compared to the year ended December 31, 2011. The increase principally resulted from an increase in pre-tax book income from 2011 to 2012, an increase in non-deductible stock-based compensation expense offset by a lower foreign currency remeasurement loss and the inclusion of a research and development credit in 2012.

 

56


Quarterly Results of Operations

 

The following tables set forth selected unaudited quarterly consolidated statement of operations data for each of the quarters indicated as well as the percentage of total revenue for each line item shown. The unaudited consolidated financial statements for each of these quarters have been derived from and prepared on the same basis as the audited consolidated financial statements included in this prospectus and, in the opinion of management, include all adjustments necessary for the fair presentation of the consolidated results of operations for these periods. You should read this information together with our audited consolidated financial statements, interim unaudited consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of the results for any future period.

 

    Mar. 31,
2011
    Jun. 30,
2011
    Sept. 30,
2011
    Dec. 31,
2011
    Mar. 31,
2012
    Jun. 30,
2012
    Sept. 30,
2012
    Dec. 31,
2012
    Mar. 31,
2013
 
    (In thousands)  

Revenue

  $ 13,286      $ 14,647      $ 15,620      $ 17,301      $ 18,250      $ 19,779      $ 21,836      $ 23,609      $ 24,360   

Cost of revenue

    3,749        3,833        4,415        4,663        4,625        4,628        5,395        5,925        6,003   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    9,537        10,814        11,205        12,638        13,625        15,151        16,441        17,684        18,357   

Operating expenses:

                 

Sales and marketing

    6,566        6,840        7,877        8,022        8,136        8,420        9,192        10,125        11,519   

Research and development

    912        939        955        1,366        1,423        1,886        2,082        2,214        2,502   

General and administrative

    1,461        1,552        2,541        2,868        2,135        3,553        2,269        3,566        4,647   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    8,939        9,331        11,373        12,256        11,694        13,859        13,543        15,905        18,668   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    598        1,483        (168     382        1,931        1,292        2,898        1,779        (311

Interest income

    39        19        43        169        268        203        199        141        259   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations before income tax expense

    637        1,502        (125     551        2,199        1,495        3,097        1,920        (52

Provision (benefit) for income taxes

    754        1,776        (148     367        1,329        982        1,696        399        (362
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ (117   $ (274   $ 23      $ 184      $ 870      $ 513      $ 1,401      $ 1,521      $ 310   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Mar. 31,
2011
    Jun. 30,
2011
    Sept. 30,
2011
    Dec. 31,
2011
    Mar. 31,
2012
    Jun. 30,
2012
    Sept. 30,
2012
    Dec. 31,
2012
    Mar.  31,
2013
 
    (As a percentage of revenue)  

Revenue

    100     100     100     100     100     100     100     100     100

Cost of revenue

    28        26        28        27        25        23        25        25        25   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    72        74        72        73        75        77        75        75        75   

Operating expenses:

                 

Sales and marketing

    49        47        51        46        44        43        42        43        47   

Research and development

    7        6        6        8        8        10        10        9        10   

General and administrative

    11        11        16        17        12        18        10        15        19   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    67        64        73        71        64        71        62        67        76   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    5        10        (1     2        11        6        13        8        (1

Interest income

    0        0        0        1        1        1        1        0        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations before income tax expense

    5        10        (1     3        12        7        14        8        0   

Provision (benefit) for income taxes

    6        12        (1     2        7        5        8        2        (1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    (1 )%      (2 )%      0     1     5     2     6     6     1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Quarterly Trends and Seasonality

 

Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, some of which are outside our control. We have experienced rapid growth in recent years, as well as other major corporate developments. For instance, since the beginning of 2011, we completed the first major venture capital investment in our business since 2001, repurchased a substantial number of shares from existing investors, entered into new international markets, made three acquisitions, and substantially increased our customer and user bases. These changes have resulted in substantial growth in our revenue and corresponding increases in operating expenses to support our growth. Our growth has led to uneven overall operating results due to changes in our investment in sales and marketing and technology and development from quarter to quarter. Our historical results should not be considered a reliable indicator of our future results of operations.

 

Our quarterly revenue has increased from $13.3 million in the quarter ended March 31, 2011 to $24.4 million in the quarter ended March 31, 2013. Our increase in quarterly revenue was mainly due to increased headcount and increased sales efforts resulting in additional customers and new contracts, as well as high renewals of existing contracts. Additionally, the Company’s acquisitions during 2012 provided increased revenue.

 

In the third quarter of 2011, we received an investment of $135.0 million from venture capital investors, and we subsequently repurchased shares of our outstanding common stock for $135.5 million. Separately, we also made substantial investments in our technology and operations.

 

Our revenue also tends to be seasonal in nature, with the first and fourth quarters of each calendar year historically representing the largest percentage of our total revenue for the year. Many event and meeting planners make new purchasing decisions at the start of the calendar year when budget planning takes place. Many advertisers spend the largest portion of their advertising budgets during the fourth quarter, in preparation for the holiday season. However, since the majority of our revenue is deferred over the life of a multi-year subscription or advertising contract, the seasonality of the sales cycle is somewhat less pronounced in our revenue results.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

To date, we have financed our operations primarily through private placements of capital stock, and cash from operating activities. As of March 31, 2013, we had $33.3 million of cash and cash equivalents, net of restricted cash and $7.6 million of short-term investments.

 

Throughout the year ended December 31, 2011 until March 20, 2012, we maintained a bank line of credit of $2.0 million. We did not draw on our line of credit during either of the years ended December 31, 2011 or 2012, and the line of credit was closed on March 20, 2012.

 

We believe our current cash and cash equivalents, short-term investments and cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.

 

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Working Capital and Cash Flows

 

The following table summarizes our cash, cash equivalents and short-term investments, accounts receivable, working capital and cash flows for the periods indicated:

 

     As of or for the year ended
December 31,
    Three months ended
March 31,
 
           2011                 2012                 2012                 2013        
     (In thousands)  

Cash, cash equivalents and short-term investments, net of restricted cash

   $ 26,485      $ 26,170      $ 38,059      $ 40,944   

Accounts receivable, net

     17,620        29,081        12,168        14,310   

Working capital

     3,575        (7,427     2,769        (5,744

Net cash provided by (used in):

        

Operating activities

     14,610        23,581        15,678        17,081   

Investing activities

     (11,667     (22,019     (2,920     (650

Financing activities

     (1,976     (2,862     3        21   

 

Our cash, cash equivalents and short-term investments at March 31, 2013 were held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts, certificates of deposit and money market funds that are currently providing only a minimal return.

 

As of March 31, 2013, $2.9 million of our total cash and cash equivalents and all $7.6 million of our short-term investments were held in India. These balances are available for general corporate purposes and are available for repatriation subject to U.S. tax consequences and to receipt of appropriate approvals from the Reserve Bank of India.

 

Operating Activities

 

Net cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business, the increase in the number of customers, recurring dollar retention rates and the amount and timing of customer payments. Cash provided by operations in the years ended December 31, 2011 and 2012 and the three months ended March 31, 2012 and 2013 is primarily attributable to net income (loss) and the change in deferred revenue, both of which are driven by an increasing customer base and increased sales of software subscriptions and marketing services. Our cash flows from operating activities are generally reflective of our ability to invoice annual subscription fees upfront with net 30 payment terms. Our days sales outstanding, or DSO, is a primary driver in cash flows from operating activities for a given period. We experience seasonality in our accounts receivable. The first and fourth quarters historically include a higher level of cash collections, which is a result of higher levels of invoicing in the fourth quarter. Additionally, we generally invoice our large hotel customers of the Cvent Supplier Network in the fourth quarter, as a result generating higher accounts receivable at year-end and subsequently higher cash collections during the first quarter of the following year.

 

Net cash provided by operating activities was $17.1 million for the three months ended March 31, 2013, which was driven by net income, as adjusted for depreciation and amortization and stock-based compensation, which contributed a combined $3.5 million to cash from operating activities. Also contributing to net cash provided by operating activities was a decrease in the accounts receivable. This change contributed $15.0 million during the period and was consistent with our historical first quarter cash collection cycle. Changes in our deferred revenue contributed an additional $1.7 million, which reflected the growth of our business generally. These were offset by an increase in prepaid expenses of $2.3 million and a decrease in accounts payable of $0.6 million during the period. Our DSO as of March 31, 2013 was 43. The increase in DSO computed at March 31, 2013 compared to the same quarter in the prior year was primarily due to the timing of collection of outstanding invoices from a few of our large hotel customers of the Cvent Supplier Network.

 

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Net cash provided by operating activities was $15.7 million for the three months ended March 31, 2012, which was driven by net income, as adjusted for depreciation and amortization and stock-based compensation, which contributed a combined $3.5 million to cash from operating activities. Also contributing to net cash provided by operating activities was a decrease in the accounts receivable. This change contributed $5.6 million during the period and was consistent with our historical first quarter cash collection cycle. An increase in our deferred revenue and in our accounts payable contributed an additional $2.6 million and $2.3 million, respectively, which reflected the growth of our business. Our DSO as of March 31, 2012 was 39.

 

Net cash provided by operating activities was $23.6 million for the year ended December 31, 2012, which was primarily driven by net income, as adjusted for depreciation and amortization and stock-based compensation, which combined contributed $15.0 million to cash from operating activities. Changes in our deferred revenue contributed an additional $13.6 million during the period, which reflected the growth of our business and our practice of invoicing for subscriptions annually at the beginning of the subscription period. Additionally, changes in our accounts payable contributed $4.5 million during the period, reflecting the growth of our business. This amount was partially offset by a $9.6 million increase in accounts receivable during the period, which also grew largely due to the increased scale of our business. Our DSO as of December 31, 2012 was 43, which was generally consistent with our DSO as of December 31, 2011.

 

Net cash provided by operating activities was $14.6 million for the year ended December 31, 2011, which was primarily driven by changes in our deferred revenue of $7.9 million during the period, which reflected the continued growth of our business and our practice of invoicing for subscriptions annually at the beginning of the subscription period. Additionally, changes in our accounts payable contributed $3.4 million during the period, reflecting the growth of our business. This amount was partially offset by a $3.4 million increase in accounts receivable during the period and the $1.4 million increase in prepaids and other assets, which also grew largely due to the increased scale of our business. Net loss, as adjusted for depreciation and amortization and stock-based compensation, contributed an additional $7.7 million to cash from operating activities. Our DSO as of December 31, 2011 was 41.

 

Investing Activities

 

Our investing activities have consisted primarily of purchases of equipment and software developed for internal use, and short-term investments, as well as business acquisitions in 2012. We expect our capital expenditures and our investment activity to continue to increase as our business grows.

 

Net cash used in investing activities was $0.7 million for the three months ended March 31, 2013. The amount consisted of investments in property and equipment of $1.8 million, including software developed for internal use to accommodate the growth of our business, and payments of $0.5 million related to earn outs in connection with our acquisitions in 2012. This was partially offset by purchases and maturities of short-term investments of $1.7 million, net.

 

Net cash used in investing activities was $2.9 million for the three months ended March 31, 2012. The amount consisted of investments in property and equipment of $2.7 million, including software developed for internal use to accommodate the growth of our business, and payments of $1.4 million related to an acquisition in the period. This was partially offset by purchases and maturities of short-term investments of $1.2 million, net.

 

Net cash used in investing activities was $22.0 million for the year ended December 31, 2012. The amount consisted primarily of $12.5 million of cash consideration paid, net of cash received, for acquisitions of Seed Labs LLC (now known as CrowdTorch), CrowdCompass Inc. and TicketMob LLC. In addition, we made investments in property and equipment of $8.1 million, including software developed for internal use to accommodate the growth of our business.

 

For the year ended December 31, 2011, net cash used in investing activities was $11.7 million. This amount was the result of our $2.7 million in investments in property and equipment to accommodate the growth of our business and $2.7 million in software developed for internal use. We also purchased of $6.3 million, net, of short-term investments during the period.

 

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Financing Activities

 

For the three months ended March 31, 2012 and 2013, net cash used in financing activities consisted primarily of proceeds from exercises of stock options and warrants and was not significant.

 

For the year ended December 31, 2012, net cash used in financing activities was $2.9 million, consisting primarily of $4.0 million used to repurchase restricted common stock from a former employee for which we held a right of repurchase that had not lapsed at the time of termination of employment. This was offset by proceeds received from option and warrant exercises of $1.1 million.

 

For the year ended December 31, 2011, net cash used in financing activities was $2.0 million, nearly all of which related to a financing and related repurchase of existing shares of our common stock. In July 2011, the affiliated funds of three venture capital investment firms purchased shares of our Series A Preferred Stock for a total purchase price of $135.9 million. We incurred net costs for that transaction of $0.8 million. Also during July 2011, we repurchased shares of our outstanding common stock for a total price of $135.5 million. Finally, earlier in 2011, we redeemed certain of our then-outstanding Series B-1 and Series B-2 Preferred Stock for a total of $1.5 million.

 

The net proceeds of this offering will be classified as cash received from financing activities. In addition, if and to the extent that employees exercise additional stock options either in connection with or following this offering, the proceeds of those exercises would be classified as cash from financing activities.

 

Contractual Obligations

 

Set forth in the following table is information concerning our known contractual obligations as of December 31, 2012 that are fixed and determinable.

 

     Payment due by period  

Contractual Obligations

   Total      Less than 1
Year
     1-3 years      3-5 years      More than 5
years
 
     (in thousands)  

Operating lease obligations(1)

   $ 5,770       $ 3,377       $ 2,103       $ 257       $ 33   

Minimum purchase commitments

     250         250                           
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 6,020       $ 3,627       $ 2,103       $ 257       $ 33   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)   We lease our office facilities in Virginia, Texas, California, Oregon and India under operating leases that are scheduled to expire at various times through 2018.

 

In addition, as of December 31, 2012, we had contingent payments that may become due in connection with our acquisitions of Seed Labs LLC, CrowdCompass, Inc. and TicketMob LLC that are described in the section titled “—Acquisitions.”

 

Unbilled Contract Value

 

We have typically entered into annual and multiple-year subscription contracts for our software solutions and our marketing solutions. For multiple-year agreements, we typically invoice the amount for the first year of the contract at signing followed by subsequent annual invoices at the anniversary of each year. Since we bill most of our customers at the beginning of each contract year, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in revenue, deferred revenue or elsewhere in our consolidated financial statements, and are considered by us to be unbilled contract value. As of December 31, 2012 and March 31, 2013, our deferred revenue was $51.6 million and $53.3 million, respectively, which amount does not include unbilled contract value for subscriptions and marketing solution contracts not yet billed of approximately $62.0 million and $60.6 million, respectively. We expect that

 

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the amount of unbilled contract value relative to the total value of our contracts will change from year to year for several reasons, including the amount of cash collected early in the contract term, the specific timing and duration of customer agreements, varying invoicing cycles of agreements, the specific timing of customer renewal, changes in customer financial circumstances and foreign currency fluctuations.

 

Customer Retention

 

We believe that our ability to retain our customers and expand their use of our platform over time is an indicator of the stability of our revenue base and the long-term value of our customer relationships. We assess our performance in this area using a metric we refer to as our recurring dollar retention rate. Our recurring dollar retention rate for our platform subscriptions averaged 89% for the four quarters of 2010, 93% for the four quarters of 2011 and 97% for the four quarters of 2012. Our recurring dollar retention rate for our marketing solutions averaged 114% for the four quarters of 2011 and 115% for the four quarters of 2012. Our recurring dollar retention rate for our marketing solutions in 2010 is not a meaningful metric as we did not begin to generate revenue for our marketing solutions until midway through 2009 and, therefore, had a materially smaller population of 2009 customers against which to measure recurring dollar retention rate. We calculate our recurring dollar retention rate by dividing (a) Retained Revenue by (b) Retention Base Revenue. We define Retention Base Revenue as recurring revenue by product from all customers in the prior period; and Retained Revenue as recurring revenue by product from the same group of customers in the current period, including any additional sales to those customers during the current period. We do not include non-renewable revenue such as overage fees for registrations and other miscellaneous services in this calculation. Such non-renewable revenue represented 6%, 5% and 5% of our total revenue in each of the years ended December 31, 2010, 2011 and 2012, respectively.

 

Acquisitions

 

During the year ended December 31, 2012, we acquired three separate businesses, which were neither individually or collectively significant to our financial position and result of operations as of and for the year ended December 31, 2012.

 

In January 2012, in an effort to enter the mobile event application space, we acquired all of the outstanding unit interests in Seed Labs LLC in exchange for $1.4 million in cash, net, and 467,692 shares of our common stock valued at $0.9 million at the time of the acquisition. In addition, the sellers are entitled to earn up to an additional $2.1 million in part based upon the achievement of certain sales-based targets and the continued employment of certain key employees of Seed Labs LLC, which will be recognized as compensation expense when earned. For financial reporting purposes, we allocated $2.4 million to the assets and goodwill of Seed Labs LLC. We subsequently rebranded Seed Labs as our CrowdTorch mobile application product.

 

In June 2012, in an effort to expand our mobile event applications offerings, we acquired all of the outstanding capital stock in CrowdCompass, Inc. in exchange for $5.8 million in cash, net. In addition, the sellers are entitled to earn up to an additional $3.8 million based upon the continued employment of certain key employees of CrowdCompass, Inc, which will be recognized as compensation expense when earned. For financial reporting purposes, we allocated $6.0 million to the assets, liabilities and goodwill of CrowdCompass, Inc.

 

In December 2012, in an effort to expand our consumer-facing event ticketing and registration offerings, we acquired all of the outstanding unit interests in TicketMob LLC in exchange for $5.2 million in cash, net. In addition, the sellers are entitled to earn up to an additional $14.6 million in part based upon the achievement of certain revenue-based targets and the continued employment of certain key employees of TicketMob LLC, which will be recognized as compensation when earned. For financial reporting purposes, we allocated $5.9 million to the assets, liabilities and goodwill of TicketMob LLC.

 

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Off-Balance Sheet Arrangements

 

As of March 31, 2013, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

 

Critical Accounting Policies and Estimates

 

Our financial statements and the related notes included elsewhere in this prospectus are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, cost of revenue, operating expenses, other income and expenses, provision for income taxes and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

 

We believe the assumptions and estimates associated with the following accounting policies have the greatest potential impact on our consolidated financial statements.

 

Revenue Recognition and Deferred Revenue

 

We derive our revenue from two primary sources: platform subscription-based and marketing solutions. These services are generally provided under annual and multi-year contracts and revenue is generally recognized on a straight-line basis over the life of the contract. We recognize revenue when all of the following conditions are met:

 

  (i)   persuasive evidence exists of an arrangement with the customer reflecting the terms and conditions under which the products or services will be provided;

 

  (ii)   delivery to customers has occurred or services have been rendered;

 

  (iii)   the fee is fixed or determinable; and

 

  (iv)   collection of the fees is reasonably assured.

 

We consider a signed agreement or other similar documentation to be persuasive evidence of an arrangement. Collectability is assessed based on a number of factors, including transaction history and the creditworthiness of a customer. If it is determined that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash.

 

Platform Subscription Revenue

 

We generate the majority of our revenue through software-as-a-service, or SaaS, subscriptions to our event management platform, pricing for which is subject to the features and functionality selected. No features or functionality within the subscription-based services have stand alone value from one another and, therefore, the entire subscription fee is recognized on a straight-line basis over the term of the subscription arrangement.

 

Our SaaS subscriptions may include functionality that enables customers to manage the registration of participants attending the customer’s event or events. In some cases, the negotiated fee for the subscription is based on a maximum number of event registrations permitted over the subscription term. At any time during the subscription term, customers may elect to purchase blocks of additional registrations which are referred to as up-sells. The fees associated with the up-sells are added to the original subscription fee and the

 

63


revenue is recognized over the remaining subscription period. In other more limited cases, a customer may purchase additional registrations on a pay-as-you-go basis which are referred to as overages. The revenue for overages is recognized as each additional registration is used by the customer. No portion of the subscription fee is refundable regardless of the actual number of registrations that occur. Other subscription-based solutions include the sale of mobile event apps as well as survey solutions, both of which are contracted through annual or multi-year agreements.

 

Our subscription agreements do not provide customers with the right to take possession of the underlying software at any time.

 

Marketing Solutions

 

Marketing solutions revenue is generated through the delivery of various forms of advertising sold through annual or multi-year advertising contracts. Such solutions include prominent display of a customer’s venue within the Cvent Supplier Network, the Cvent Destination Guide or in various electronic newsletters. Pricing for the advertisements is based on the targeted geography, number of advertisements and prominence of the ad placement.

 

We enter into arrangements with multiple deliverables that generally include various marketing solutions that may be sold individually or bundled together and delivered over various periods of time. In such situations, we apply the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, No. 605-25, Revenue Recognition—Multiple Element Arrangements to account for the various elements within the marketing solution agreements delivered over the platform. Under such guidance, in order to treat deliverables in a multiple-deliverable arrangement as separate units of accounting, the deliverables must have stand-alone value upon delivery. If the deliverables have stand-alone value upon delivery, we account for each deliverable separately and revenue is recognized ratably over the contractual period that the related advertising deliverable is provided. Annual marketing solutions on the Cvent Supplier Network are often sold separately, and, as such, all have stand-alone value.

 

Some one-time marketing solutions, which can run for a month, several months, or a year, are primarily sold in a package. In determining whether the marketing solutions sold in packages have stand-alone value, we consider the availability of the services from other vendors, the nature of the solutions, and the contractual dependence of the solutions to the rest of the package. We have concluded that all of the marketing solutions in the packages included in multiple-deliverable arrangements executed have stand-alone value.

 

Revenue arrangements with multiple deliverables are divided into separate units of accounting and the arrangement consideration is allocated to all deliverables based on the relative selling price method. In such circumstances, we use the selling price hierarchy of: (i) vendor specific objective evidence of fair value, or VSOE, if available, (ii) third-party evidence of selling price, or TPE, and (iii) best estimate of selling price. VSOE is limited to the price charged when the same element is sold separately by us. Due to the unique nature of some multiple deliverable revenue arrangements, we may not be able to establish selling prices based on historical stand-alone sales using VSOE or TPE; therefore we may use our best estimate to establish selling prices for these arrangements. We establish the best estimates within a range of selling prices considering multiple factors including, but not limited to, factors such as size of transaction, customer demand and price lists.

 

Deferred Revenue

 

Deferred revenue consists of billings or payments received in advance of revenue recognition from our platform subscription services or marketing solutions that are subsequently recognized when the revenue recognition criteria are met. We generally invoice our customers in advance in annual or quarterly installments.

 

Business Combinations

 

We are required to allocate the purchase price of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values.

 

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Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed. This allocation and valuation require management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets.

 

Critical estimates in valuing intangible assets include but are not limited to estimates about: future expected cash flows from customer contracts, customer lists, distribution agreements, proprietary technology and non-competition agreements; the acquired company’s brand awareness and market position, assumptions about the period of time the brand will continue to be used in our product portfolio; as well as expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed, and discount rates. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur.

 

In addition, uncertain tax positions and tax-related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date. We continue to evaluate these items quarterly and record any adjustments to the preliminary estimates to goodwill provided that we are within the measurement period. Subsequent to the measurement period, changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income taxes in the consolidated statements of operations.

 

Other estimates associated with the accounting for these acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

 

Goodwill

 

Goodwill represents the excess of: (i) the aggregate of the fair value of consideration transferred in a business combination, over (ii) the fair value of assets acquired, net of liabilities assumed. Goodwill is not amortized, but is subject to annual impairment tests. Goodwill is reviewed for impairment at least annually and is tested at the reporting unit level using a two-step approach. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and step two is required to measure the amount of the impairment, if any. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the carrying value of goodwill exceeds the implied fair value, an impairment charge would be recorded to operating expenses in the period the determination is made. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed.

 

We perform our annual impairment review of goodwill on November 30 and when a triggering event occurs between annual impairment tests.

 

Stock-Based Compensation

 

We account for stock-based compensation in accordance with the authoritative guidance on stock compensation. Under the fair value recognition provisions of this guidance, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense using the straight-line attribution method over the requisite service period, which is generally the vesting period of the respective award, net of estimated forfeitures. The estimated forfeitures are based on historical employee turnover rates and expectations for future turnover.

 

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Determining the fair value of stock-based awards at the grant date requires judgment. We use the Black-Scholes option-pricing model to determine the fair value of stock options. The determination of the grant date fair value of options using an option-pricing model is affected by our estimated common stock fair value as well as assumptions regarding a number of other complex and subjective variables. These variables include the fair value of our common stock, the expected term of the options, our expected stock price volatility, risk-free interest rates, and expected dividends, which are estimated as follows:

 

   

Fair value of our common stock. Because our stock is not publicly traded, we must estimate the fair value of common stock, as discussed in “—Common Stock Valuations.”

 

   

Expected term. The expected term represents the period that our stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, we have based our expected term on the simplified method available under GAAP.

 

   

Expected volatility. As we do not have a trading history for our common stock, the expected stock price volatility for our common stock was estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. We did not rely on implied volatilities of traded options in our industry peers’ common stock because the volume of activity was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available.

 

   

Risk-free rate. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.

 

   

Dividend yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

 

If any of the assumptions used in the Black-Scholes model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously.

 

The following table presents the weighted-average assumptions used to estimate the fair value of options granted during each of the periods indicated below:

 

     Year ended December 31,     Three months ended March 31,  
         2011             2012             2012             2013      

Dividend yield

     0.00     0.00     0.00     0.00

Expected volatility

     54.0     54.3     55.3     53.6

Expected term (in years)

     6.38        6.49        6.56        6.53   

Risk-free rate

     2.47     0.97     1.29     1.17

 

The intrinsic value of all outstanding options as of March 31, 2013 was $         based on the estimated fair value for our common stock of $         per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. As of March 31, 2013, we had $5.4 million of unrecognized stock-based compensation expense, net of estimated forfeitures, that is expected to be recognized over a weighted average period of 1.3 years.

 

Common Stock Valuations

 

The fair value of the common stock underlying our stock options was determined by our board of directors, which intended all options granted to be exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant. The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation and Internal

 

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Revenue Service Revenue Ruling 59-60. The assumptions we used in the valuation model were based on future expectations combined with management judgment. In the absence of a public trading market, our board of directors with input from management exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock as of the date of each option grant, including the following factors:

 

   

contemporaneous independent valuations performed at periodic intervals by an unrelated third-party valuation specialist;

 

   

the nature of our business and its history since inception;

 

   

the economic outlook in general and the condition and outlook of our specific industry;

 

   

the book value of our stock and the financial condition of our business;

 

   

our operating and financial performance and forecast;

 

   

the dividend-paying capacity of our business;

 

   

whether or not we have goodwill or other intangible values;

 

   

recent sales of our common stock;

 

   

the prices, rights and privileges of our preferred stock relative to the common stock;

 

   

the hiring of key personnel;

 

   

present value of estimated future cash flows;

 

   

the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an initial public offering o