Q2 2020 Eventbrite Inc Earnings Call
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Good afternoon. My name is Christina I'll be your conference operator today.
It's time I'd like to welcome everyone to the event right second quarter 2020 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question answer session.
He would like Africa questions. Starting this time simply press Star then the number one on your telephone keypad. Please limit yourself to one question and a follow up and reenter the queue for additional questions to out each analyst time to participate if he would like to withdraw your question press. The Penske. Thank you I would now like to him.
The conference over to your Speaker today, Ron Clark head of Investor Relations. Please go ahead Sir.
Good afternoon, and welcome to event right second quarter 2020 earnings Conference call.
Year to this call we released our shareholder letter announcing our financial results. It can be found on our website at Investor day event bright dot com.
Before we begin I would like to remind you that during today's call, we will be making forward looking statements regarding future events and financial performance.
We caution that such statements reflect our best judgment as of today August six.
Based on factors that are currently known to us and that actual future events or results could differ materially due to several factors many of which are beyond our control.
For a more detailed discussion of the risks and uncertainties affecting our future results. We refer you to the section titled forward looking statements in our shareholder letter and our filings with the FCC.
We undertake no obligation to update any forward looking statements made during the call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law.
During this call we will present, adjusted EBITDA and free cash flow, both of which are non-GAAP financial measures.
These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and have limitations as analytical tools.
You should not consider them in isolation or as substitutes for analysis of our results of operations as reported under GAAP.
Reconciliations to the most directly comparable GAAP financial measures are available in our shareholder letter and we encourage you to read our shareholder letter as it contains important information about GAAP and non-GAAP results.
And with that.
I'll now turn the call over to Giulia Hearts, co founder and Chief Executive Officer.
Thanks, Ron Hi, everyone and thank you for joining us on the call today, we hope that you in your loved ones are healthy and safe.
As I reflect on the last few months I'm struck by two thing.
Durability of our founding vision and the resilience of independent creators.
Building self service solutions for the many challenges that our credit airspace and their day to day work has always been the center of our strategy.
We believe the second quarter's impressive activity on the platform speaks to our customers resilient and creativity as well as our unique ability to rapidly evolved to meet their needs.
In the second quarter overall event volume held at nearly three quarters of prior year levels.
We processed more than 40 million total event tickets on the platform with nearly 5 million paid event tickets. Thanks in large part to a surge and online event activity.
Tickets to online events increased more than 30 times from last year as creators used our platform to extend their reach and host more frequent event.
In fact, the number of events hosted per creator grew 55% compared to last year.
We are seeing creators to expand their events nationally and globally.
And our shareholder letter we featured one creator.
Market books hosted a thoughtful online discussion with author E X hendi, which help them expand beyond their local audience to contribute to the global discourse on racial justice.
The powerful virtual event gathered 17000 attendees.
This is just one example of how creators are reaching new audiences with event right.
Creators are also using event bright to delight and engage their audiences with free event.
Reinvent ticket volume was 70% of the year ago level in the second quarter and actually grew year over year in July.
Many of these events are also being hosted online and increasing frequency.
By offering expansive and unique features we continue to build stronger relationships with creators as they rely on event right to drive the success of their businesses.
Well, we're pleased with the strong creator engagement hate ticket volume remained below normal levels in the second quarter due to restrictions on in person gathering.
We are however, seeing encouraging signs has creators are adapting to the current environment.
Havent tickets improves consistently throughout the second quarter and also in July and we're seeing particular strength in the south sign on channel.
We will not predict the shape or duration of recovery, but we are prepared for any scenario.
We are using this time to position our platform and product experience to be the very best solution for a bank creators to continue rebuilding the live experience as the economy.
We are committed to providing creators with the critical features to both navigate this temporarily changed world as well as thrive into the future.
Help us realize our product driven vision and accelerate our progress.
We're pleased to welcome that back soggy to our team as Chief Technology Officer.
Does that brings more than 20 years of experience, leading globally distributed and high performing engineering team.
When he starts next week the Vac will report directly to me, while leading over 200 engineers worldwide.
I remain as confident as ever and event Brighton during mission and the engine new any of our creators.
We believe that by solving creators unique needs in this critical time, we will not only cement event bright as the platform of choice for live events around the world that expand our market share in the future.
The steps we've taken during this time to drive greater efficiency and focus while accelerating platform improvements in shipping critical features makes us an even stronger company.
Before I turn it over to Lanny I want to pay deep respect our team for the steadfast dedication and focus on what is most important.
They are unwavering commitment to our customers and each other has helped event bright continue to hold a central and vital possession in serving millions of event creators and ticket buyers. During this time.
And with that I'll turn it over and Atlanta.
Thanks, Joanne I was reported in our shareholder letter second quarter, 2020 revenue was $8.4 million compared to 81 million a year ago.
That adjusted EBITDA was a loss of 20 million for the quarter compared to breakeven one year ago.
However, those headline figures do not immediately reveal the underlying resilience, we see in our creators or the inherent strength residing within our platform.
Going to layer or two deeper we can share more of that picture.
After hitting a low in late March paid ticket volume rebounded in April.
And then grew by 33% from April to me.
Hey tickets grew by another 38% from May to June.
45% of total paid ticket volume for the quarter was transacted in June.
And paid ticket volume in July was 10% higher than in June.
For July total paid ticket volume was down 71% year to year very nice improvement from the 90% declines we saw in March.
Within those figures smaller highly local frequent creators.
Who are our mainstays and the focus of our self service business absurd even better.
Hey ticket volume in our self sign on channel has improved consistently since late March.
So so paid tickets were down 80% year to year in April.
70% in May.
It's 2% in June and by just over 50% in July it's been heartening to see and to support this steady progress within our self service franchise.
Smaller highly entrepreneur entrepreneurial creators have demonstrated again, they're characteristic nimbleness during the pandemic.
As reflected in the exponential growth of online events on event right.
We processed more than 27 million free and paid tickets to online events in the second quarter.
Compared to just 850000, a year ago, and 4 million in the first quarter of 2020.
More than 70% of event break creators who hosted an event in the second quarter organized at least one the online event.
And about half of these creators were brand new to event right.
Not only are we helping existing credit or customers shift their businesses online. We're also acquiring new creators thanks to the flexibility and ubiquity of our platform.
Results like these during a time of enormous social and economic challenge reinforce our confidence in the long term opportunity in our market and in our business.
Let me know turned back to our financial results for the second quarter.
I'm not go through the results line by line because these are covered in detail in our shareholder letter.
I do want to call attention to certain covered related impacts in the second quarter.
First reported revenue of 8.4 million for the quarter was reduced by 3.4 million in reserves related to anticipated ticket fee refunds and services revenue.
Second.
Total operating expenses of 34.4 million for the quarter were reduced by 18.1 million due to a partial reversal of the PEO reserve, we booked in the first quarter of 2020.
This reversal was recorded within sales marketing and support.
And reflects progress, we've made reducing IPO exposure, which I'll get back to in a minute.
Third we recorded 6 million in severance and other costs associated with our expense reduction initiative and finally.
We recorded 3.2 million in expenses associated with impairments of creator contracts and fees.
Netting it all out operating expenses would have been 43.4 million in the quarter. Excluding these covered related impacts.
On that basis operating expenses were down roughly 22 million or 33% from the second quarter of 2019.
This puts us slightly ahead of plan on our path to over $100 million in annualized expense savings.
Moving to the balance sheet.
Brent spreads available liquidity.
Which is essentially our cash and cash equivalents plus less payables and cash from ticket sale proceeds that we hold on to critters account.
Was 360 million at June Thirtyth up from 151 million at the started the quarter.
This increase in available liquidity reflects the private placement of senior notes as well as the convertible bond offering we completed during the quarter.
The Companys advance payout balance, which is cash advance to creators ahead of events occurring and is therefore netted out of greater payables.
The 253 million at June Thirtyth and had declined to 244 million by August steps.
Since we suspended the A.P.O. program in early March we've reduced what was originally Athree hundred 54 million dollar outstanding balance by $111 million or 31%.
With less than 4 million in cumulative refund or charge back losses for event.
This healthy progress has been enabled by our product payment and operations teams, who have worked diligently to serve creators and attendees during an unprecedented period in our industry.
Based on the progress we've made and the trends we've seen we reduced our reserve for future apio losses by $18 million in the quarter.
Looking ahead to the rest of 2020 or outlook remains clouded by the ongoing impacted the pandemic and the near term uncertainties that prevents presents for live events.
Well strengthen online events and among smaller critters on our platform have propelled increases and paid ticket volume and revenue since March we expect to paid tickets and revenue to remain well below normal levels levels in the second half a year.
Excluding processing fees, we expect cash costs, which were 36 million in the second quarter.
To be between 33 million and 35 million in the third and fourth quarter. So this year.
Our monthly adjusted EBITDA loss was in the five to 8 million dollar range in June and July.
In conclusion, our second quarter results reflect at once the external pressures on or industry as well as the benefits of steps, we've taken to position to the bright for the future.
Sharpened our focus on self serve made or operating model winner.
Strengthened our financial resources.
We don't live event Pride is ready to emerge from the pandemic a stronger company at a trusted partner to creators everywhere.
Were inspired by the ingenuity and resilience of those creators and we're committed to supporting their success today than it is a future.
With that let's open the line for questions. Please operator.
Thank you at the reminders to ask a question you want me to press Star then one on your telephone to withdraw your question press the pound or Husky. Please limit yourself to one question and one follow up and reenter the queue for additional questions two of that each analyst time to participate P sand.
By we compile acumen a roster.
Your first question comes from line, if Youssef Squali from Trust Securities. Your line is open [noise].
Hi, great. Thanks. This is a neat mitchell on for USIS Lanny, maybe I'm just starting with you.
How do you think we should think about you know the IPO exposure trajectory from here on the one hand, I think you know the rate of improvement seems to have slowed since you last includes that run. The other hand, you know your reversing some of the reserves and it sounds like you're even starting to open the program backup so well above some more color there on how we should be thinking about that you've got.
Three of this exposure.
Sure. It we're pleased with the progress we've made a and how they appeal balance has resolved thus far our efforts to manage the PEO balance which include reaching out to creators providing them with the ability to more easily process refunds introducing new features like ticket credits have.
Really helped reduce the IPO extend the outstanding over the course of this summer.
Creators have come forth to refund the overwhelming majority of refunds and they continue to proactively communicate with their attendees about postponements and rescheduling of events. So thus far we haven't seen a a large number of charge backs that required funding.
By event bright our today as we said has been less than $4 million of Chargebacks and refunds and as we look forward a and we look at those trends and the experience. We've had to date, we determined that the reserve. We took originally a 90 days ago was larger than we then we need it.
It takes some time to resolve the remaining $250 million turns $44 million outstanding today have a appeal balance, but from where we sit right now things have been moving forward and.
Pretty productive way and we feel like it's a situation will continue to be able to manage fairly effectively we've got another five or six weeks on the summertime concerts and festivals season as we got through that I think we'll know just a little bit more about how to the balance of all to be resolved things look good so far.
Great. Thank you for that color.
Julia I want to hear maybe if you could you know expand a little bit on the.
Opportunity with online or virtual events.
How do you think about you know the total addressable market or revving up revenue opportunity broadline events and and how should we think about you know monetization levels. What are you seeing you know.
Readers, gaining more confidence that they can charge for these kinds of events any any color there would be really appreciated.
Sure they say well I've looked at.
Presents and I'm confident opportunity for event creators to expand their audiences be on hair, local or even national boundaries and so one of the most impressive things that we've seen has been they reach that our creators can have particularly on the event bite platform because.
We are a global platform. So we already have embedded in our marketplace International consumers, who are looking for ways to connect with each other over things that they have in common and I think that's that has been a big driver of growth for our creators, we're seeing frequency the another opportunity and all.
In line events, obviously with both consumer behavior shifting to be available and also to be adopting online formats for events creators aren't leaving that pent up demand with new formats and wave to be able to connect with and through live events. So that you know the strength and growth and all.
Mine events on the platform is one that I think is both a testament to the creativity and entrepreneurial ism of our creators as well see you become ubiquitous in the event bright platform and all life experience says I think as we start to continue up this adoption curve.
Curve any team more online events become these formats become more mature we'll be looking for opportunities to help our event creators monetize these live experiences and I think predominantly today, we see a big and a big portion of these online events are free we think theres an opportunity in that.
Back then online that our free tickets free event tickets grew year over year in July gives us a lot or class in that regard in terms of the momentum.
Awesome, Thanks, I'll get back into the too.
Thanks <unk>.
Your next question comes from the line of Ryan suddenly high from William Blair. Your line is open.
Yeah, Hi, guys. Thanks for taking my question.
I guess, Randy maybe just to start to follow up on the eighth year crushing.
If we're looking at $244 million balance.
Is there a way to help us understand how much of that is related to events that have been postponed. So that if you know the attendee have taken a credit for a future event.
I'm just trying to understand that you know what's out there that that may be really isn't that right for you guys.
Sure well, let me let me make one point clearly first which is that there's a difference between holding a ticket for a future event and taking a credit for a future event.
Attendees would hold it ticket for a future events. When the same event was being postponed or being rescheduled. There are other cases, where with the new product offering that we've introduced.
Attendee is able to take a credit for some as yet to be defined and yet to be scheduled future event and both of these are ways for us to assist this market to effectively clear a in a very highly unusual time.
It's been really heartening to us to see that in the vast majority of cases north of 98% of the time when there has been a call for any kind of refund.
The craters have stepped forward to spend that money back to event right event brand has them for that money to attendees. We've also seen a significant number of attendees say effectively I'm willing to hold my ticket I'm going to wait for that future event, and we haven't seen a influx of charge back requests that has been at all.
All in consistent with our normal historical experience, even though we're going through such an unusual time.
So as we look forward I think that the ultimate resolution of the appeal balance is very likely to be creators communicating with attendees about postponements eventually putting those events back on on on the calendar and that'll be matched by some of things were for seeing from attendees, where they may be willing.
The to forego the ticket they may be willing to donate the ticket value and other cases, they may ask for either refund or credit, but its been heartening to see the you know these are communities that we serve communities of creators serving their communities of attendees in most cases.
And there is a healthy relationship between between both of them and somebody's. They look out for each other just as we look out for all of them.
Great. Good helpful and then it's Julia.
As we see you know.
Hey ticket volume.
And so we take a running build each month.
Is there anything you see ended in the data around what types of events are coming back or or are there any geography that we stand out either hearing you after her globally.
That that you would cars would trend are highly is rightsized for.
Sure so what consistently seeing a smaller format events, whether they be classes workshop seminars really at the top of the category left and on smaller more frequent pattern. So the events per creator increasing 55% year over year is as signals.
That creators are able to host these more frequent intimate events, whether its online or in person.
In terms of in person events, nothing major that I would point to right now and her in terms of a trend except for the fact that in places like New Zealand, where you see the recovery of I've covered the quite remarkable we've seen over the last eight weeks the recovery of that market on event right. So.
They have all almost a race the decline that they saw the initial cobot outbreak in the shelter in place order over the last eight week, while it's a small country. Obviously, it's significant in terms of the signal that that we can get on how quickly people want to get back out and out to lot live events.
And how that's great to hear Oh, I'll jump back in the Q.
Thank you.
Oh I can if you'd like to ask a question. Please press Star then one on your telephone. Your next question comes from the line of a dog man from JP Morgan Your line is open.
Hi, This is right around for Doug Thanks for taking my questions.
Curious, how we should think about the sales channel in 2021 and beyond you've talked about there being possibly an 80 20 mixed between sell signed in sales, but is it possible that creators and the sales channel are kind of sticky just due to event rights brand recognition and the fact that they used to the product.
And then my second question is you've talked about how self sign I creditors have a 30 times LTV to CAC ratio and I'm wondering if that implies maybe an opportunity to spend more marketing dollars there or if those creators are just inherently acquired better through word of mouth. Thanks.
Thanks, So much I'll take the first question all at all at Miami Chime in on the second so I guess, if the sales channel what we imagine as we've re centered our business model around our core self service ticketing platform and particularly the strength and ourselves sign on channel is that sales continues to be.
An important part of of the picture going forward. This sales motion is going to be different we believe that there's significant market opportunity in serving and in acquiring and serving self serve creators and we think that they can come through either channel wireless I'll find on channel is higher margin and faster growing.
The sales channel does play an important role and helping us identify strategically important creators her bringing compelling supply and inventory to the marketplace and so as we think about that a few care as sales. It's much more of that identification of of high value frequent creators as well as and Onboarding neck and.
As them versus you know selling sort of adjacent services or high attach services. In addition to the technology. We know that you know we have great strength and our self service eat though that's what we founded the event fright platform on the at 14 years ago, and we'll continue to lean into that so we think that you go hand in hand.
Well.
Many do I take the second question.
Sure. The <unk>, we have a really attractive lifetime by two customer acquisition cost and they're making our self service channel, particularly when measured in the classic sense of looking at.
Paid marketing dollars that are used to acquire customers and this is really built on a couple of things is built on a very strong organic president for event right that goes to our history and probably more importantly, just a breadth of our of our event content of our creator footprint of our geographical reach.
But that helps us from an organic perspective be kind of at the top of the list whether you're looking for an inline of online event or a in personal event, we kinda show up really really well, we bolstered that with investments in content and data our product and thought leadership publishing.
Pieces that are based on data and trends, we see in the marketplace to help creators be thoughtful about when to host events in this environment for instance, or how to migrate and communicate with and pursue crowd as you might try to move to a in real life event to online and these things as well have very attractive return on investment.
And we'll keep doing those things like I anticipate that that will be the mainstay of event brights customer acquisition activity, but there is room to spend on customer acquisition recently, we've seen some very attractive payback periods on acquiring online creator.
There's a creators of online events and spent a little bit of money there, but I anticipate that will continue to leverage our online or organic present, rather than a drive drive a big increasing paid spending for acquisition.
Great. Thanks.
I guess he would like to ask a question. Please press star and the number one on your telephone keypad. Your next question comes from the line of Ryan's I bought from William Blair. Your line is open.
Hi, Thanks are actually Hawk.
I guess.
It's really a rainy.
As you see bought you know the free event actually grow in July.
Talk about you know the importance of data and then you driving going through the system going and how that helps to you I guess craft.
What categories to go after or or or what events you know are working.
And as we think more broadly you know it back to more of a normal world, where we're seeing maybe hybrid models and much bigger audiences that can playgrounds then.
How do you see that evolving your use of data and then in discovery and then the Barton pushed through.
Thanks.
Thanks.
We think about data as being a table stakes element of our growth plans. So you know when when you talk about online events, and particularly that actually the growth of free events. Rather if this is this opportunity for us to reach a broad audience that global audience of can.
Tumors is very valuable because not only does it allow us to introduce new consumers to event right. It also allows our event creators to take advantage of the global marketplace and that broad broad scale of our platform to be able to grow their base of cost.
<unk> as well and so you know one good sort of practical use of this data is being able to draw consumers into the event bright ecosystem and help them find even more events to connect to we've seen a high repeat rate of consumers, who are coming to more and more online.
And events and in July we had over a million consumers follow four or more event creators through our destination, meaning they're able to get real time updates from those creators when they publish new event. There reminded of ticket sales that are happening for event and that creates a much stickier.
Our experience for these consumers and also improves their retention rate.
So that's one way that we can use the data that we're collecting through free event ticket registrations in order to help the whole ecosystem grow. The second is that on the category front were able to identify where consumers want to be what they want to be on connecting west whether it's an online event or an in person event and then.
We can you point, our marketing machine towards that we can publish case study it through our content at channel. We can you know spend on performance marketing. Some of that then you were trends that have been popping up recently are in person I events at driving theaters in the United States or globally.
Social activism event that you know, where we've been able to really put front and center on our home page and see an incredible conversion right out of those events by by really you know garnering that the search results that we see on event frightened and being able to serve a curated high quality content to meet those needs.
Okay, that's great to hear thank you.
Your next question comes from the line at Heath Terry from Goldman Sachs. Your line is open.
Great. Thanks, just wanted to dig a little bit deeper into the end to the online opportunity, particularly into you know with a with a new CTO on board into sort of the tech investments that you need to make to you know really fully take advantage of what online and you know, particularly hybrid event.
Would become over overtime, hopefully, we do get back to normal, but you know the idea that that maybe some part of online. Some part of this will be with us for a longer time, you know what what role do you do you see that see for per event bright where do you want you know with a with a new CTO you know what a sort of the.
First hundred days and beyond kind of look like for from a priority perspective, and the yeah. The spending that needs to sort of go with it to to really take advantage of that.
Thanks, Dave why think about it from three different factors, one platform to product and three marketing so on the platform front there is.
No rest for the weary at event bright right now we are just jamming through come the upgrades that we've been wanting to bank to our infrastructure for quite some time and been taking advantage of the lower activity on the platform to be able to create an acceleration around those improvements that fundamental building.
Okay. So you know, particularly in investment and a continued one around making our platform faster more reliable and more flexible because that allows us to build faster deliver faster value to our customers. It also allows us to integrate with best in class software that can be critically important to our small business custom.
As far as who are launching or pivoting new business models at this time.
And as a product experience you know cord tissue, we are as the ease of use nature of how people can use our product and the features that we offer that are completely self service for our customers. We know that there's a you know a road map ahead of I have to be able to continue doing prove on the core functionality of our product.
Experience that particularly meets the needs of frequent paid creator, so things like reporting or being able to publish and manage series events much more easily and then a third is marketing you know, we talked a little bit about data and one of the ways in which we can help our customers succeed as by pointing them into right direction.
How they can become much more efficient and successful marketers for there that there will be pent up demand no doubt when we emerge out of this period of time, but building and rebuilding it new businesses are it's going to be a incredible opportunity for our creators and we think we'll be right there with them as though.
Green shoots start to grow so in terms of the Vacs first hundred days you know his background is very much in a transformation and being you know at front and center in and taking platforms like ours and the next level, that's really where has had its going to be in addition to getting to know you know all the bright lngs remotely around.
On the world any investment on on all of these factors will remain consistent with what we set out to do in 2020, because we've been able to strategically shift and narrow our focus on the most important things. We know that we can continue to be consistent and not investment and still stay with range.
As you know financially healthy as we face the this feature.
Great. Thank you so much.
I can if he would like to ask a question. Please press star and another one on your telephone keypad.
And there are no further questions at this time, ladies and gentlemen, this concur.
Today's conference call. Thank you for participating you may now disconnect.
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