Q3 2021 Eventbrite Inc Earnings Call
Good afternoon, and thank you for standing by and welcome to the Eventbrite third quarter 2021 earnings conference call.
At this time all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session. If he would like to ask a question today. Please press star followed by one on your telephone keypad. Please be advised that today's conference is being recorded I would now like to hand, the conference over to MS. Catherine Chen head of Investor Relations. Please.
Go ahead.
Good afternoon, and welcome to <unk> third quarter 2021 call.
As of this call, we released our shareholder letter and our five.
Which can be found on our website at investors out of the 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.
Caution that such statements reflect our best judgment as of today October 28 based on factors 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 SEC.
We undertake no obligation to update any forward looking statements made during the call to reflect events or circumstances after today or to reflect the information or the occurrence of unanticipated except as required by law.
During this call we will present, adjusted EBITDA and non-GAAP financial measure.
This non-GAAP financial measures not prepared in accordance with generally accepted accounting principles and there's limitations as analytical tool you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under GAAP.
A reconciliation to the most directly comparable GAAP financial measure is available in our shareholder letter.
Carriage you to read our shareholder letter as it contains important information about GAAP and non-GAAP results.
With that I'll now turn the call over to Julia Hartz, co founder and Chief Executive Officer.
Thank you Catherine.
Everyone and thank you for joining us this afternoon I hope everyone on this call and all of your families are well.
Without a doubt we are seeing tremendous anticipation around the resurgence of live events.
<unk> third quarter results have captured that momentum and rising demand over 250000 creators around the world chose eventbrite to power their events exceeding $1 2 million in the quarter.
And more than 28 million unique buyers came to eventbrite to connect with others through live events.
We are thrilled to see in person gatherings, improving our everyday lives again, and we are honored to be supporting our creator community as the world recognizes and celebrate the value of live experiences.
After a prolonged period of social isolation, we are in the early days of surging interest for unique and local events.
Gathering together safely enables us to achieve that memorable experience only brought on by human connection.
So far this year over 75 searches on eventbrite or for in person events, which account for over 65% of total ticket volume.
Borrowing in Australia, New Zealand and the U K paid ticket volume for in person events has approached quarterly records.
I'll also note that recent vaccination trends are extremely encouraging.
Vaccination rates are up from the single digits six months ago to exceeding 55% of the population in all of our major markets.
Some regions are even pushing into the 60 and 70% range.
We believe this meaningful improvement will lead to greater comfort with live events and it is a positive indicator that demand will grow both in the intermediate and long term.
We know that events have permanently changed for both creators and attendees and Eventbrite is supporting creators who have found innovative ways to thrive in this dynamic and changing landscape.
San Francisco the success of outdoor events was turned temporary venues like sidewalks streets them, even vacant parking lots into permanent event spaces at last count nearly 2500 applications have been submitted to use these new venues.
Creators are building avenues to reach new audiences by hosting both virtual and in person events on the platform. One example of Black Bourbon Society, which is furthering appreciation for Bourbon through tastings and tours that celebrates the diverse history of distilling.
Core tenet of their mission is to broaden the inclusivity of the spirits industry.
When in person events were canceled they embraced the opportunity to expand their reach through virtual events.
Already tripled their number of events and tickets year to date in 2021, and they plan to keep their online community of over 8000 followers engaged with local and online experiences.
Our platform offers creators a way to market sell and manage any kind of event from the same store.
Through all of the ways that live events have changed in the last year, our distinct creator centric focus has helped us stay highly engaged with our customer community.
We've achieved sequential growth in the number of total paid and frequent creators and each of the last five quarters and then the third quarter alone total creators grew 29% paid creators increased 56% and frequent creators rose, 24% compared to a year ago.
What's even more exciting is that we also acquired 90000 new creators in this period.
As our core customer community expand we will continue to lean into the product driven growth strategy that is helping creators build smarter businesses and bigger audiences.
Frequent creators in particular remain our north star and an important focus of our strategy for.
For the third quarter paid ticket volume from frequent creators nearly doubled from a year ago.
Proximately two thirds of paid ticket volume came from these creators who host at least one event a month.
As more creators returned to the platform to reactivate their event series they want our help to build and engage new audiences.
Launched this year at that bright boost meet this need.
Early data shows that in some categories creators are seeing a lift of 25% and ticket volume after using boost to help market their events.
We're excited to keep adding features and functionality to boost that will help users reach more audiences in a simple and efficient way.
Our most recent product release, we've made the campaign set up process more seamless and intuitive by using data about the creator and their events to generate personalized recommendation.
The automation and customization makes it easier than ever for event entrepreneurs to launch campaigns, regardless of their experience level.
Our future releases will focus on making event marketing easier and more effective for the small business owner.
As the world awakened from the isolation of the pandemic and people look for great things to do together, we see an opportunity to directly support our customers and building their businesses.
Year to date, the reach and visibility of our platform has helped drive more than $350 million gross ticket sales for our creators content.
In our view demand generation can be a natural extension of our focus on marketing and audience growth.
We're thinking strategically about the right way to ship these capabilities to our customers.
Meanwhile, creators of free events can also benefit from participating in our marketing services, while continuing to use our core ticketing function at no cost.
Free tickets for 74% of our total transactions for the third quarter and we are excited to explore ways to deepen our engagement with this cohort and potentially develop these avenues for future monetization.
Extending beyond our platform. We're also leading the global community of experience creators in two distinct ways.
First after a very successful virtual customer stomach called reconvene in May we are continuing the momentum by hosting reconvene section.
This program is ongoing in person and virtual events are tailored towards the event community. They provide a vital for him to share ideas and foster community and accelerate business growth.
Second we are lending our voice to the ongoing movement to relieve the mental health impact of social isolation.
I'm proud to announce that Eventbrite recently joined the coalition to end social isolation and loneliness we.
We aim to increase awareness of this timing issue and advocate for live events as a way to improve social connectedness.
We believe this work directly supports our mission to bring the world together through live experiences, we look forward to working with our partners to advance this important cause.
The entire Eventbrite team is thankful to have the partnership with our creators our employees and our shareholders as we strive to build the best self service ticketing and marketing solution for event creators and event goers.
We are proud of what we've achieved and excited to keep you updated on our progress.
With that I'll now turn the call over to Lanny.
Thank you Julien our third quarter results delivered strong gains in both revenue and adjusted EBITDA.
Splitting the powerful leverage inherent in our business and financial model.
Revenue of $53 4 million in the third quarter was up 144% year over year, and 15% greater than the second quarter of 2021.
We saw increased consumer demand for live events as vaccination rates increased in our major markets.
Our product focus on serving frequent creators is also corresponded with improving acquisition and retention trends within that valuable segment year to date.
The number of paid event creators active on our platform rose 12% quarter to quarter.
Reaching 109000 total creators in the third quarter.
The highest level since early 2020.
As health restrictions were paired back in many of our markets. We saw a return of one off summer season events.
Events per creator declined 14% from the second quarter to the third quarter.
Wherever strong consumer demand for live experiences Mr. Creators are able to stage larger events this quarter and paid tickets per event rose 23% quarter over quarter.
Putting the pieces together total paid ticket volume rose, 19% quarter over quarter to $19 1 million, which is more than two X, where we were one year ago.
It's a credit to our engineering and support teams and we've been able to support such significant volume growth.
Maintaining price stability and reliability.
Also improving customer satisfaction scores year to date.
We've also invested to make our self service product experience more intuitive and efficient for creators.
And we believe the benefit of this can be seen in our positive customer trends.
Another place, where our product blood self service ethos pays off is in operating leverage.
Sure I think it's worthwhile to point out that Eventbrite ticket volume and revenue were both up more than 100% year to year in the third quarter.
While our average employee count grew by less than 10% over the same timeframe.
We believe that comparison really highlights the strategic choices, we've made as well as outstanding execution by our team.
Now turning back to the financial results, our third quarter gross margin of 66% was nearly five percentage points higher than in the second quarter of 2021.
Reaching an all time quarterly record for Eventbrite.
Increased ticket volume and higher revenue led to better absorption of the fixed portion of cost of revenues.
Our deliberate focus on scalable products helped gross margins exceed our historical level.
And the long term, we continue to believe that our gross margins can rise into the high 60% range with greater ticket volume and revenue scale.
Total operating expenses were $46 4 million in the third quarter, essentially flat compared to the second quarter.
The underlying mix of our operating expenses continues to tilt toward leverages, both product and engineering investments rather than to variable operating costs associated with volume growth.
More than 50% of our employee base is in product development and engineering today.
And significant portions of those teams are located in lower cost locations overseas.
With operating expenses relatively stable and revenue and gross margin up nicely in the quarter. We delivered a very strong result in adjusted EBITDA, which was $5 9 million for the third quarter.
That represents an 11% adjusted EBITDA margin for the third quarter.
When compares to roughly breakeven in the second quarter.
On both a quarter over quarter and a year over year basis.
Excluding the impact of adjustments to reserves in prior quarters.
Approximately 50% of revenue growth flowed through to adjusted EBITDA in the third quarter. Once again, demonstrating the strong operating leverage potential of our business. Looking ahead, we believe our product blood operating model and scalable technology platform will lead eventbrite towards sustainable revenue growth and improved bottom line results.
Our cost of revenue includes the one major directly variable cost item in our model, which is standard transaction processing fee. That's correlated with ticket sale operating expenses are largely under our discretion and we intend to manage them carefully.
We will prioritize investments in our team to further strengthen our platform deliver on our product roadmap and strategy.
Grow our creator base.
New product offerings like Eventbrite boost and eventually demand generation are expected to contribute to revenue growth and should have attractive margin characteristics as well.
In the near term based on our current outlook, we expect paid ticket volume and revenue to be higher in the fourth quarter than in the third quarter of 2021.
Normally October was the strongest month of the fourth quarter, and we expect that seasonal pattern to prevail this year as well.
We also anticipate that month to month paid ticket trends may be variable based on the potential impact of COVID-19 variance as well as normal seasonality.
We expect cash costs, excluding processing fees.
Between $36 million and $38 million for the fourth quarter of 2021.
Compared to $35 million in the third quarter.
Yeah.
To conclude we are encouraged by the third quarter performance in which we delivered a significant step up in adjusted EBITDA margin propelled by healthy creator trends.
At the same time, we supported strategic investments into the products that we believe will drive our next phases of growth. We are excited to empower the creators who use our platform to bring the world together through live experiences and we're honored to be their partner and Reimagining. The live events industry with that I'll turn the call over to the operator for the question.
And answer portion of the call.
Okay and at this time, if you would like to ask a question. Please press star on your telephone keypad to withdraw your question just press the pound key.
We'll pause for just a moment to compile the Q&A roster.
Yeah.
And your first question comes from the line of Ryan Sundby. Your line is open.
Yeah, Hi, guys. Thanks for taking my questions good afternoon.
Maybe maybe.
Where you kind of left off there and talk about what paid ticket volume look like sequentially as you move through the quarter and do you feel like Delta had a significant disruption in the business because it sounds like September was your highest paid ticket maybe maybe just keeps looking to ethics.
Sure. Thanks, Brian.
From June to July paid ticket volume rose about 9% month over month.
From July to August it went down about 9% and that was the timeframe at which.
The Delta variance if you go back it was really in sort of its fullest.
Most threatening and sort of been posing.
Moment.
In September ticket volume rose, 13% from where we were in August and we've started off October.
We're seeing good ticket volume growth really in all regions. So there is the variability that we have spoken about.
And the connection between the consumer.
And even local restrictions that are tied to the virus is very much in the business I think as we go into the fourth quarter. You said October is usually the strongest quarter over September we expect normal seasonality to play through in the fourth quarter.
Although the virus environment I think is generally speaking with vaccinations looking encouraging.
We are hesitant to indoor season in the northern hemisphere and remains to be seen how that will impact demand in the short term, but the long term. Thanks.
Things are certainly setting up well.
Got it very helpful. There.
And Julia I know you just recently launched boost it may but it does seem like a very compelling tool.
Encouraging to hear that or at least certainly arent as helping traders expand their reach can you talk a little more about what percentage of theaters have started to use boost and maybe who they are these high frequency traders and maybe.
Any more feedback youre getting from from them as they use the tool.
Absolutely thanks, Bryan so boost.
Did launch to all of our careers in May and so it's still very very early days, but what's exciting about how we built boost and how we're iterating on the product features is its just a continuous loop with our customers. So boost really came about by integrating.
Integrating with <unk>, which was the social paid advertising platform and realizing that our creators saw this strong product market fit to meet their needs and about 85% of our core frequent creators tell us they want our help and being smarter marketers of those events.
Once we acquired 10 down and quickly integrated into the platform. We saw that creators, we're starting to use it and really interesting and creative ways and so as me.
Observe that.
Here, we're really focused on two key elements. The first is to simplify and automate all of the actions that are going into creating a marketing campaign and really figuring out how to market. The event because our core creator is oftentimes a solo entrepreneur.
And so the wearing many hats and they don't have a lot of time to be figuring out new technology or to be figuring out how to be the best marketer of their events and often times. These cleaners are spending up to 40% of the face value of the ticket on marketing so there's a lot of them.
Opportunity there to create efficiency and help them get better Bang for their box and secondly, we wanted to help creators just reached a significantly larger audiences. We know that eventbrite has this wide breadth of consumer audience and that data really allowed us to understand where.
Or we could find more audiences like those two match with the type of content that our creators are offering and on average we've seen creators who are using boost sell about 16% more tickets for their events, but in some categories. They are selling in the upwards of a quarter more.
Tickets for their events and so we see this really early traction is very interesting and as we continue to lean in and invest in this new capability will not only continue to make it simpler and more efficient, but will broaden the channels and the diversity of opportunity for creators to reach their audiences more effectively.
Got it Thats great color, there and then maybe.
Maybe just one last one here bigger picture.
As you look out down the road.
That's in the future.
Just on the comments on maybe more emphasis on demand generation and discovery.
What kind of contribution should we expect to see from non ticket offerings.
Would that someday be a meaningful revenue contributor or should we think of these tools to support the case for patients.
Yeah, what I would think about the landscape of Eventbrite in the intermediate term as being three three factors. The first is our core business, which is ticketing transactions thats really the storefront for creators and we're focused on making that more efficient every day because again they don't have a lot of time to be spending on these.
Daily tasks, they would rather be spending time on creating content for their event and we really want to enable them to be able to spend more time on the content. The second part is around how theyre marketing their event and we want to make them smarter and really more adaptable to the changing landscape to be able to reach that bigger audience and when.
It's for an in person event or a virtual event be able to grow their businesses through this recovery period and beyond and then the third the third part that I would think about is access to audience. So we know that in the quarter alone 28 million unique buyers came to eventbrite to peruse, our content and find things to do and.
A quarter of those came to the event that they actually purchase through and Eventbrite proprietary channel and so what we see as being.
You know on unlocked opportunity right now is really leaning into demand generation, because we know where the consumers are and we've become very good at putting the right event in front of the right person at the right time in order to make that match in the marketplace. So I would think about those things as being you know three areas of the business that reinforce themselves.
Really speak to what our core customer needs. During this time as they continue to expand their businesses on the platform.
That's great. Thanks, Thanks for the color guys.
And your next question comes from the Lee from Jpmorgan. Your line is open.
Great. Thanks for taking the questions.
The first one for Julia.
Continuing on the topic of boost.
Think about the progress to the creators right now and what do you think is the biggest friction points or more creators to adopt the product.
The learning that they have to do or is there something else prevent the creators tissue.
To try out the boost product and then.
There is a built in person the event was good to see so just curious to hear if that's nearly.
Creator driven meaning that the creators are opting into the in person meetings.
The more demand driven customers.
Hey Bank scores are requesting more in person events.
Visitor event as a percent of the total has been coming down every quarter. This year with <unk> at the lower end of your expectations for the long term mix. So just curious to see if there is.
Seasonality it looks like the biggest factor to that or is there something else.
The mix of tourists in person events.
Thanks for the question, Dave So I'll start with boost I think the biggest.
I don't even think it's a barrier, but I think what we're focused on right now with awareness of the product. This is an entirely new capability for our creators to be able to unlock our marketing muscle and help them become more efficient marketers of their experiences and so we're working really diligently to be able to show that product value and really.
Kate are not only our installed base of creators who use the platform today, but new creators such as the 90000.
<unk> you saw in the last quarter understand the value of Eventbrite is supposed to ticketing and marketing platform. So I think education and product marketing and awareness are.
No really the keys to our success with the current product.
And we're continuing to iterate that product. So again, we'll be doubling down our investment on our engineering team and product team focused around boost as we continue to learn more about what creators find is those killer feature and continue to reinforce the product market fit there and.
That for us being able to learn more about how readers are unlocking value from this is one of the hallmarks of the Eventbrite product development cycle. We don't just put features out there to see what sticks, we really listen to our customers and observe what they're what they're actually doing on the platform and then we work to make it better faster and more successful for them.
In terms of in person event growth I would say, it's almost entirely demand driven.
Many of our frequent creators have found that they can take the same content that would they had produced in person and actually hit that Q virtual events and have done so in a really successful manner.
We see the vast majority of searches on Eventbrite for me being for in person events. So much like commerce shifting to shop near me, we're seeing people search for events near me and obviously that's driving that.
Trends have been more in person events, becoming published by our creators and more paid tickets towards in person events being generated in the quarter and we do I think a great job of closing that loop for our creators by telling them about these trends and giving them ideas of what consumers are looking for on the platform.
Which is really valuable as they think about their own mix shifts. The final thing I'll say on that is is the frequent creators which are really our core creators are.
Thinking about their business now with two different channels of delivering the same content and that's an exciting opportunity for us. They are thinking about building. These hybrid businesses not necessarily hybrid events, where they can actually.
Posted an in person unique and local events as well as access to global audience. That's on Eventbrite to host a virtual event again with that same type of content, but much lower cost. So I think there's more to come from that it's obviously early days and we'll continue to track the trends, but I think eventbrite does a really nice job of being able to support both type of event.
Since we are absolutely format agnostic.
And then I think that that in terms of online events and where we see that going you know it is still today about.
About 10 X what it was in 2019, even though the next mix is shifting as we see more and more in person events come back. So we think that this is a permanent shift in our model and again going back to what I. Just described as the most common use case for frequent events.
You know it.
I expect to see that trend continue for us.
To be way more virtual events on the platform than prior to Covid, but certainly it will it will mix shift around and we'll continue to support those.
Got it.
Just a follow up to boost you did talk about potentially opening up the marketing and demand generation capabilities too.
Curious to get creators.
You also mentioned 75%.
There was a pickup was.
Sort of a free ticket events so.
You look at the base of tickets or creators how much what.
A portion of those do you think you could potentially monetize using marketing and demand generation capabilities.
Well when you think about the free event creator on Eventbrite, it's very often a professional creator who is hosting an experience that is generating revenue. It may just not being the ticket price. So what we've tailored our you know our go to market motion around in terms of boost towards pre creators is helping to educate.
Kate those creators on the value of reaching a bigger audience and being able to convert that audience into registration for their event and I think the opportunity for us as the business has been a long time coming and we want to continue to support the growth of three events and free tickets on the <unk>.
<unk> because it is.
Building, our ecosystem and helping to helping consumers find great ways to connect with other people every day, but we also think the business case for that the frequent creator of free events is that we can be the lead gen source for these experiences in which theyre getting some type of value out of having more people.
We'll attend the event, whether it's in person or virtually.
Got it alright, thanks for the color.
And again, if you would like to ask a question press Star one on your telephone Keypad. Your next question comes from La Mancha Williams from Stifel. Your line is open.
Hi, Thanks for taking my questions. The first one I had is as you know.
Progressing through the recovery.
Are you seeing and you'll be bringing on a number of new theaters in keeping players are you seeing any notable changes in the mix of the type of events relative to kind of where you were.
Pre pandemic.
Thanks for the question.
We really have seen that.
Pretty consistent representation of categories and the events that are being both no.
Published and the tickets that are being sold on on the platform I think that that for us what we really care about is whether or not a creator is a frequent creator really focused on driving business growth through this strategy of focusing on those frequent creators who are creating persistent inventory like the American outdoor school.
We felt we focus on in our shareholder letter, they're publishing between 50 and 100 events a month they have a.
I need to be able to run their business in the most efficient way on the platform as well as continually reach new audiences as they create new types of events and they published new new content.
We're focused on on frequency above all else.
We definitely are seeing some.
Some interesting trends that are emerging as new types of event.
<unk> format as well as things that you would imagine are coming back like music as people got outdoors, and we're able to gather.
Together again in and enjoy that time in those live experiences.
Okay.
Okay, Great and then just a follow up question.
It's kind of been pretty topical but.
Some of the privacy changes with Apple and IBSA as is.
Are you seeing any impact with some of your creators on the platform stemming from this.
So you know I think that the changes have been widely reported on in certainly eventbrite is not unique in and observing some impact from the iOS changes that rolled out in April around ATT.
What we see in terms of of small businesses being impacted we think is actually an advantage for eventbrite because.
Eventbrite creators are small business owners, there again, often entrepreneurial ventures that have one to two to folks. So they don't have the time to try to figure out the ever changing landscape of marketing in digital advertising and Eventbrite does we have not only the data that we have proprietary first party data to.
Our platform, but we also have the knowhow to diversify across different channels and I think we agenda really nice job of helping creators distribute their content to channels that are really effective and again, putting that right event in front of the right person at the right time wherever they are online and I think in as this continue.
To play out and we continue to observe the ways in which we can support our creators.
We'll continue to do what's right in order to help our creators market more efficiently and we're excited about the opportunities that that allows us to explore on platform and off platform as we continue to build boost.
Okay, great. Thank you.
[noise].
And your last question comes from Youssef Squali from <unk> Securities. Your line is open.
Hi.
Taking the question.
So yes.
You spoke about.
And an increase in demand and.
Economy, Reopens and you begin to see some normalcy.
What what are you seeing in terms of competitive landscape.
Or are you seeing a resurgence of competitors as well.
And how does that shape going into next year is there any color.
You can provide on that.
So as the as the markets continue to reopen and I think we are in the very very early days of it you know there's incredible variability all over the world, but as the markets reopen and as people are clamoring to get back out and be together, we certainly expect the competitive landscape to shift.
Not least of which this is an incredibly attractive market I think that we're excited for us to compete again.
Against anyone in the field and we feel really good about our prospects because we're a 15 year old company focused on it.
<unk>.
Pacific persona of creator that is frequently entrepreneurial creator we think that independence is a very very important aspect of both what they want and need for the future as well as the ethos of our company.
Thank the approach of self serve in a technology driven product growth strategy is something that is going to pay off dividends in the years to come and we also know that the reach that we can add.
Really enable them to get to new people and to build their businesses is going to be indispensable. So for those factors I feel really confident about our ability to continue to adapt and grow and be in this ever changing landscape and I think we have the.
The right amount of visibility into where the competitive landscape may shift over time, because certainly things have changed rapidly over the last year and a half.
Great. Thank you.
And that concludes our question and answer session and today's conference call. Thank you for participating you may now disconnect.
[music].
Yes.