The Exchanges

Q How do you do that? Cause like, if I go to cloudbeds.com, I just see software. Like what's your equivalent of Expedia.com?

A We don't have the equivalent. So what we do is we feed it into various sources. So for example, 62% of all origination of travel these days is happening through social media influence. So using ads, Very targeted ads that are automated using generative AI. We can place an advertisement in front of a search population that's looking for a property that could be event specific. That could be, I'm just looking for a property in Costa Rica. It's called our Amplify solution. So we're not at, we're not a brand. We're not a place that you go. We are just originating the way to reach the guests and then sending them right back to our, our booking engine experiences or landing pages. That we create on behalf of the property, help them transact, and we take a very tiny, tiny sliver of that in comparison to what Google, or excuse me, what Expedia or Booking.com would charge at 20%.

AI assessment note: “We don't have the equivalent. So what we do is we feed it into various sources.”

Q We actually talked in 2018 and 20 21 and now today, but for folks that missed those first two episodes, I feel like, I feel like our 20 18 conversation was, I can't really say this, but back when you were a baby at only, quote, only ten million dollars of ARR. But, um, for folks that misses episodes, who is Cloudbed selling to today? What do you guys do?

A Yes, absolutely. So the best way to think about it is hoteliers around the world run their entire businesses on software and that tech stack Predominantly has been 18 different systems that are inter to joined, uh, back in the day with serialized cables on premise. Now it's all in the cloud, but it's still disjointed and too many different systems connecting to one another. Cloudbed slides a box across the table and say, Hey, everything in that runs your business more effectively. And so we take the day to day operational side of running a hotel, uh, in a much more modern, uh, capability. We do it in a 157 markets across two and a half million beds in this world. Now we're the category leader for independent hoteliers and man, uh, that's been a long time ago when we were at ten million in ARR and we've definitely grown since we're 757 people, uh, in 41 countries around the world now. And, and it's been quite the journey.

AI assessment note: “we're the category leader for independent hoteliers”

Q And what's the opportunity that you see there? You know, if you process five billion of GMV, you're keeping one percent or what's the revenue upside or potential?

A You know, it's really hard to look at the take rate because every jurisdiction is, is governed by different rules. But it's a big market. Nevertheless, it's one of those things where if you look at toast as a publicly traded company or Shopify as another, you know, 50% of their revenue is coming from fintech solutions. I look at it as probably something similar right now. It's less than 20% of our overall revenue, but it's fast growing. It's multiple hundred percent year over year growth rates in that sector. Uh, the thing that I like about it is it's incredibly sticky, right? Every hotel in the world needs to capture revenue. On behalf of their, uh, guest. And if we can do that in a much more efficient way, pre-arrival, during stay, create micro transaction opportunities, it actually drives more revenue for our hotel. Increase a lot of opportunity for them. And so we're, we're just pleased that we're part of that storyline. And the more and more we do, the more and more we're going to get back to the hotel over time. But yeah, we are, we, we do over ten billion dollars in GMV. Just in reservations within the, the key markets that we serve. Obviously it's a much bigger number as you think about all the markets we serve, but you know, that's a big opportunity for us to take a little, little sliver of value.

AI assessment note: “50% of their revenue is coming from fintech solutions. I look at it as probably something similar”

Q So there's the private equity side, but then I, you know, I'm looking at your Twitter feed. August eighth, you have a big announcement about an integration with Airbnb. If I'm Airbnb, I'm going, this is like, makes one hundred million percent sense to acquire you guys. Why haven't you sold to an Expedia or an Airbnb, and how do you think about acquisition in general?

A Ah, we're having a lot of fun, right? So it's a, it's a, There's a, a give and a take, right? So when you give up and you are now part of a bigger story, it changes your life. Um, hopefully for forever in a good way, but it also can be in a bad way. And so it's not just the financial gain from an acquisition. It's also fit. My team has to go somewhere and they have to be comfortable with where they go. And so, uh, we, we've obviously had conversations with a lot of the strategic buyers. And, and I think what's fun about that is There's never the perfect time to do it, but then there's also always the opportunity to do it in the future. What we're focused on right now is just keep building our financial profile as an organization, and then also create environments where our team is successful in that balance has produced amazing results. And if someone offers us a ridiculous multiple, sure, I might be the first person to sign that document, but at this time, we're just focused on keep building. We're having a lot of fun over here.

AI assessment note: “It's not just the financial gain from an acquisition. It's also fit.”

Q What's tiny? I'm sure you don't want to give an exact number. What's a range? Like under 10, under five percent?

A Under five percent, yeah. So we're not trying to, we're not trying to nickel and dime. We believe that there's value there. The best part about it is the ROAS on all of that dollar spent with us is in the teens in terms of Multiple return on, on, on their money spent. So like giving a 13 X return on every dollar they spend with us is beautiful. We want to do more of that. Um, I would love to find a money manager who I could give them a dollar and they could give me 13 dollars back consistently. Right. But so we figured that out. We've, we have various ways that we're doing that in an automated manner. We're going to expand that. So that's our new product. That's out. Yeah.

AI assessment note: “Under five percent, yeah.”

Q What does that mean? Like I buy this, I buy the Snickers bar in the lobby.

A Yeah, exactly. And to get you to go buy the Snickers bar In the lobby or to upsell you during your originating of during your pre-arrival flow or to say, Hey, how are we doing? Oh, by the way, Nathan, what are some entrances, interests that you have around the area? So think about, think about the side of a business, right? You have the business side of a hotel, and then you have the art. The art is the experience that you feel when you're staying at a hotel. The business side is just the check-in, the collection of payments, doing the accounting and all that fiscalization. So what we believe is there's two sides that we have to do incredibly well. Now what I want to do is bring you to the product of a market and a product of the market is all the things that sit around the property. And that is very, very micro transaction heavy. There are many events where you're like, damn it. I wish I could just get a Snickers bar right now. Yeah. Well, Hey, if I can just text the application, which I power and go, Hey, front desk, I'd love a Snickers bar. Can you run it to room one Oh one Oh eight. They'll be like, Hey, Nathan, no problem. Let me run your Snickers. Do you want a Pepsi also? You're like, yeah, yeah, no, that sounds good. Plus, you know, why don't you send up two bottles of water? They just created transactions. Whereas most times the guest is actually leaving property to go…

AI assessment note: “Yeah, exactly. And to get you to go buy the Snickers bar In the lobby”

Q Um, or what would you, maybe you don't use that. Maybe it's not in our bed, but what would you say growth rate has been at cloud beds the past 12 months?

A You know, we've grown over a 75% CAGR in the last three years, so really, really top quartile growth rates, and that's continued to sort of maintain. Um, knowing what the publicly traded SaaS analogs are, we're better and faster than all of them, and we're doing that at scale, so no slowing down from our, our, our business, but we also have a, a dark night in that story. We are a fintech company just as much as we're a SaaS company. We've seen tremendous amount of acceleration in The ability for us to bring in financial products into our capabilities. So imagine every reservation that runs through a hotel, we can also do all the, the, the capturing of that revenue through credit cards and wallet type, uh, transactions. And we handle all that.

AI assessment note: “we've grown over a 75% CAGR in the last three years”

Q All right. Somebody else. All right. Very good. Um, talk to me about churn. I imagine you probably have some nice A nice little stickiness once you're actually active on a property, but what does churn look like today and how do you manage it?

A Yeah. So churn, we, we cut it three different ways, right? You sort of have this trial customer that's sort of flirting with the product, isn't quite committed for a long-term solution. This doesn't happen very often. We keep our customers, at least from a long-term value perspective over five years. That's what we project. And that gives us a tremendous amount of economics to sort of work with over time. Um, what, what we like about turn is you sort of the trial customer, you have the longterm cohorts on a net and a gross basis. Uh, we're best in class for S and B, um, software solutions. So depending on the month, it ranges, but on a net basis, we're sub-fifteen. And that's growing in the right direction.

AI assessment note: “depending on the month, it ranges, but on a net basis, we're sub-fifteen.”