Q3 2022 Eventbrite Inc Earnings Call
Coverage creator holding more than today than in 2019, we know that their number one need is to draw more audiences and we're uniquely positioned to help them succeed.
Our long term vision is to assist our creators and growing their businesses by creating a tailwind of demand for thereabout.
At Investor Day, we laid out our strategy and product roadmap, which included discrete investments in improving our technical infrastructure improving the platform for frequent creator U S.
Introducing premium marketing tools, and launching new ways to drive consumer demand.
Our right to win here begins with the fact that Eventbrite currently has more than doubled the consumer reach of our closest competitor and our visitors are high intent event cohorts, who seek out the unique local gatherings that are on our platform.
Demand generation tools like a temporary boost in that they're already making an impact for creators and we're leaning into this inflection point as we strengthen our ticketing growth engine.
Our boost product is clearly resonating with our healthiest and most active creators they look to boost as the most efficient and effective way to marry paid social advertising in premium email marketing with their ticketing and consumer data.
We've nearly doubled our subscriber base in the past quarter, but these creators holding an average twice as many events drawn double the events side and generating three times more ticket sales compared to creators who have not yet adopted it.
Around 25% abuse subscribers are re event creators whether this is the first time, we've been able to monetize our platform's value to them.
And there are additional ways to drive engagement as we look at different product and pricing opportunities in the coming quarters.
And then Brian Adams, our biggest product launch in the third quarter and is now available in 10 U S cities as of September .
This is our demand generation product that leverages, our deep know how around eventbrite, driven tickets, which for once again, roughly 25% of total ticket volume for the quarter.
And then probably adds is being embraced by early users and showing promising growth in its first 90 days, we're seeing many creators become repeat users and those creators also spend more on average for a campaign over time.
We're fast tracking development have already doubled the available advertising surface area since the beginning of October with much opportunity ahead for expansion.
Innovating in real time, and bringing our mission to life every day by giving our global creator base tools to drive more audience engagement and bringing more people together.
In fact, I'm proud to share that Eventbrite was recently honored on the fast company's brands that matter let.
It's an honor to be included among companies there are truly connected to their audiences and to be recognized for cultural relevant social impact and brand purpose.
That purpose inspires our strategy and our vision and it matters to our customers.
Our creators have content that resonates with the human need for connection which is core to all of our lives. They.
They want tools to help them reach as many people as possible with their unique offerings.
We're enabling that vision at scale by simplifying their marketing and expanding their reach all directly from our platform.
Their success also means rfps that we stay nimble to support creator knee as we power of the creator economy.
And as we work with them to drive sustainable growth to capture the long term opportunities ahead.
And now I'll pass the call over to Lanny.
Thank you Julia third quarter revenue grew 26% year over year and was up slightly quarter over quarter as we reported a steady pace of ticketing activity on our platform.
Month to month revenue trends within the quarter were generally consistent with pre pandemic norms with stronger performance towards the end of the quarter.
Product and marketing initiatives.
Putting those that Julia mentioned, just a few months ago.
So help to increase consumer purchase conversion the non ticketing revenue over the course of the quarter.
Most of our PE ticketing metrics improved versus a year ago.
The number of paid creators grew 27% year over year to 168000 creators.
And held steady with the prior quarter.
Readers of merger and frequent events continue to return to the platform while frequent creators. We're also up a strong 20% year over year.
The number of paid events her creator averaged three one of them in the quarter down from $3 six events.
Q3 of 2021.
The total number of acute events transacting on our platform grew by 10% year over year to nearly 520000, Nevada.
This is within 8% of our pre pandemic peak.
Big ticket proven were up as well to 42 ticket per the.
Compared to approximately 40.
Q3 of 2021.
Total paid ticket volume of $22 million grew 15% versus 2021 and reached the second highest level in two years.
Average ticket price was $38 for the third quarter.
And was it 8% year over year compared to $35 in Q3 of 2021.
The strengthening of the U S dollar relative to other currencies, particularly the pound and euro presented a 2% headwind to average ticket value and overall revenue in the quarter.
Finally revenue take rate was 8% up 10 basis points versus a year ago, and reaching a new quarterly record for this metric.
This progress reflects our understanding of greater needs for our ability to strengthen the product market fit.
Disciplined customer economics with capture and improving returns for our investments.
Revenue per ticket was $3.06 in the quarter.
Up 10% from a year ago.
With a small but growing contribution of subscription fees.
It's helping them put us above pre pandemic levels from Q3 2019.
Turning to the income statement.
Third quarter gross margin was 65, 2%.
Even with the second quarter and down slightly versus a year ago due to higher credit card processing fees in some international markets.
We continue to expect the gross margin will move into the high 60% range as revenue and ticket volume continued to increase.
Total operating expenses for Q3 were $57 million.
An increase of just over $1 million over the second quarter.
24% from $46 million in Q3 of 2021.
Product and engineering expenses were up 33% year to year in support of our long term strategy and the hiring of critical talent for priority initiatives, such as marketing tools and demand generation products.
On a sequential quarter to quarter basis product and engineering expenses were essentially flat.
Sales and marketing expenses were up 27% over Q3 of 2021.
As we've increased support for our growing customer base.
Advertising spend around our creator confidence campaign.
It's important to note that sales and marketing expenses remained more than 40% lower today than they were pre pandemic.
N or equal to 21% of revenue in the third quarter versus more than 30% of revenue in 2019.
General and administrative costs were up 12% year to year, reflecting our determination to extract all pretty well mature through automation and expense management.
Looking ahead, we plan to carefully manage overall head count growth given the near term macroeconomic condition.
When we do higher it will be heavily tilted to creator facing revenue generating areas rather than corporate needs adjust.
Adjusted EBITDA was $4 2 million, representing an adjusted EBITDA margin of 6% for the quarter.
As we have outlined at our Investor day, our long term adjusted EBITDA margin target is 20% or better.
And we have confidence in our ability to achieve that level of profitability.
Specifically, we believe we can deliver considerable upside in gross margin and operating leverage, particularly against general and administrative Paul as we invest in our product to drive revenue growth.
Overtime product advances and new revenue stream from subscription and advertising.
Can contribute to take rate and also increase the efficiency of our business model.
Although adjusted EBITDA margins did not increase in Q3, we continue to target incremental adjusted EBITDA margin in the 20% to 50% range over the long run.
Before I discuss our business outlook for the fourth quarter of 2022, I wanted to share an update on strategic progress and provide a little more insight to current created returns.
First an update on self service, which is a central pillar of our product strategy.
For the past two and a half years, we've worked diligently to improve the self service greater experience.
And the belief that delivering ease of use and efficiency to creators is a key tenant of fixed up.
As of Q3, 2022 revenue from creators, who sign up independently and begin selling tickets on their own is now more than 10% higher than it was in 2019.
Second an update on frequent creators the highest value customer segment at the heart of our strategy.
We chose to focus on frequent creators for three reasons.
They are popular repeating events drive a disproportionately high share of ticket volume and revenue.
They exist in every category every format and every geography.
In winning this segment of the market builds our bedrock business amongst successful high LTV customers.
As we've centered our product roadmap on the needs of frequent creators they've.
They've outperformed all other segments on trader counts and we.
We're now very close to our Q3 2019 level in this segment.
Third some category of data as we get asked about this often.
Given our scale and breadth, there's no single event category that drives or dominates our business.
And our frequent creators strategy is designed to play across all categories.
However in terms of creative talent, the two strongest categories on our platform today relative to 2019, our music and performing Arts, where we are at mid teen relative to pre pandemic levels.
We're also seeing real time strength in Q4 in the seasonal events category with a record Halloween and encouraging early momentum on holiday and years EBITDA.
The two most challenged categories relative to 2019 remained business and professional and health enrollment.
Now turning to our business outlook, we currently anticipate fourth quarter revenue to be within a range of $69 million to $72 million.
Compared to reported revenue of $67 5 million in Q3.
The outlook range for Q4 is in line with to slightly stronger than quarter to quarter pattern observed pre pandemic.
We currently expect consumer demand for live events to remain healthy based on the strong desire to gather a renewed ability to do so safely and the affordable local nature of most inventory on our platform.
We recognize that the macroeconomic factors such as inflation labor shortages and other factors may lead to greater friction around staging live with them in the near term.
Looking beyond Q4, we intend to build upon what is already the largest self service live events platform in the market we.
We will continue to develop features and functionality that add greater value for creators and we see compelling opportunities to leverage our consumer reach to help creators grow their audiences and their business.
I'll now turn the call back to the operator for the question and answer portion of the call.
Thank you.
I'll begin the question and answer session.
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The first question comes from Matt Farrell with Piper Sandler. Please proceed.
Hey, guys. Thanks for letting me ask the question and congrats on the results.
Maybe two from me the first one maybe more near term.
You mentioned in the guide being slightly stronger on.
On a quarter to quarter basis than maybe historical patterns. Obviously, we're all aware of the macro but maybe you could just help us understand.
A little bit more detail what is giving you kind of a line of sight to.
Two of those trends.
As we move through Q4.
The vision of the quarters, we came in October .
Starting to see.
Uh huh.
Alright.
We gave you in October we started to see some exciting trends, particularly around some of the holiday events that are a big factor in the fourth quarter.
Theres Halloween there are holiday late shows to be in the.
Ziv events. These are a mid teens percentage of our ticket volume in the fourth quarter typically and Halloween. This year was really great. We saw about a 30% year over year increase in transacting creators that was actually also up about 30% from our prior all time record on Halloween there was.
Very strong consumer demand and such that ticket volume was roughly 50% above our prior record and total ticket sales value was up almost roughly 60% versus our prior record. So there seems to be very strong interest from consumers as we've talked about there.
There are some challenges on the on the alumina.
I've been hosting side, but some of that gives us encouragement looking into the final quarter of this year.
And then maybe a bigger picture, taking a step back as we enter 2023, which by all accounts looks to be relatively volatile macro economic environment.
Maybe just walk us through why Eventbrite is in a better position today than.
Than they ever have been to not only weather the storm, but also excel in an uncertain environment. Thank you.
Yeah. Thanks, so much.
2023 for us and.
On a year, where I think we'll see even greater recovery not only me alive, even industry, but also within our own business given the fact that we've been able to have undergone a massive shift and how we invest in the business with.
More of our investment headed in Q higher leverage areas like product in development and also how we think about delivering value to our customers and what that means for the growth of those customers businesses, primarily in driving more demand for or the events on our platform and all.
So offering our customers tools that can help them become more effective marketers and be able to participate and that accelerating mesh net ticket sales.
We also have been incredibly diligent about how and where we add back cost in our Opex and again that will continue into 2023. So we are just fundamentally a stronger business.
Third thing I would say is that when you look at our average ticket price of $38 and you think about the type of unique and local events that are powering eventbrite.
We consider the fact that 98% of our creators come through our self sign on channel and our hosting fees consumer popular and accessible events, we feel really strongly about the tailwind that we'll have in any economic environment around just be here.
The strength of that and resilience of that inventory on the platform.
Great. Thank you so much.
Thank you.
Our next question comes from Cameron <unk> with Morgan Stanley .
You May proceed.
Okay.
Hi, Thanks for taking the question.
Thanks for the color around the right.
Okay.
Thanks for the color on the and then Brian as momentum maybe could you talk a little bit more about the roadmap from here or there in terms of timing around expanding that beyond the 10 cities.
And <unk> and then as we track this from the outside maybe how we can measure success, there from where we sit.
And then.
You mentioned in the shareholder letter changes to the Onboarding process for creators.
Can you elaborate on that just on the product side.
What kind of options in terms of marketing and promotion does nucleators see when she starts using the platform now.
Thanks.
Absolutely.
So I'll take the first and the second question around <unk>, and then I'll take the third and so on that side as we're really just getting started we launched last quarter and we launched we went from three cities in 10 cities plus online events recently and we've committed to doing three things really.
Wow.
Being able to offer high exposure to to our creators by putting their events in front of the right. It can be at the right time and this is this audience on eventbrite better searching for events are high intent community of event goers.
This is of great value to the creators are choosing to advertise on on Eventbrite.
Second is you.
Continue to increase the surface area of where those ads are showing so right now it's mainly in the.
And the search stages, but we can we will continue to expand that to other surface areas that include E mail recommendations consumer app et cetera, and the third is really to continue to close the loop of the value that we're we're offering our creators through this.
First time ever opportunity to be able to buy promoted listing space on eventbrite and we'll use that not only in our marketing messaging, but also in a way that we report results back to the creator.
Yes for the foreseeable future this products will be a CPM based products, because we know that our creators want exposure they want more IRA looking at their event and considering that in conjunction with the other thing that they are planning or considering to do.
Lenny you might have about how we measure success on that sure.
The way you should measure there is a lot its very similar to where the real measured internally and I would start with the customer adoption of that advertising program as we expand into more markets and we advertise the success with advertisers or promote the success that advertisers are having elevating the visibility of their events and driving more tickets we're really.
We are optimistic and confident about our ability to deliver the advertising product more of our customer base certainly than we are today. The second dimension will be thinking about what share of those creators marketing wallet, we are able to capture with Eventbrite ads most.
Most greater spend two five to five times as much money on marketing <unk> events as they do on ticketing their events.
As you know we have a 8% revenue take rate.
On the ticketing of events and as we move in the direction of their marketing budget, we have a tremendous share of wallet expansion opportunity and the way I think that that will show up in the P&L will be an improvement in our take rate as advertising revenues coming into our revenue stream and you compare our revenue to the dollar value of the ticket sales youll see.
Should see growth in our in our revenue take rate importantly, the advertising product is and boost both have very strong appeal amongst free creators.
There's a free events as well as accretive as a paid event and so as we started to pick up revenue from three events, which currently are free on our service. That's another driver of the observed take rate for the business. So I think one of the key places to watch really is the take rate.
And kind of the efficiency of our business model revenue per ticket would be another place to observe improving the flow through from advertising and subscription products and at the end of the day I think probably the most exciting opportunity is as an employee becomes increasingly known and recognized and delivering on our ability to drive audience growth and.
Deliver expanded success to creators.
The presence of these products should also drive creator growth greater quality and greater retention. So.
It's a pretty important part of our of our development of our strategy and it will have implications kind of up and down to the P&L of our business.
And Matt on your third question around our product improvement and Onboarding process.
We are constantly making iterations and updates to how do we bring new creators on the platform with a 100000, new creators joining eventbrite in Q3 alone 98% of our creators coming through our self sign on channel. It's imperative that we continue to think about ways in which we can make it easier for those creators to get start at one of them.
Main areas that we're focused on right now is how we can personalize the onboarding process for event creators. So they understand precisely what they need to do to get started successfully and the second thing that we're focused on is putting the value of eventbrite boost and AD in front of those creators at the very beginning of their.
Journey, so that they understand eventbrite is a place where not only can they go to create a beautiful event listing to share that with our audience to track their attendees and most importantly to grow their audience and to sell tickets faster.
Great. That's really helpful. Thank you Bob.
Thank you.
Yes.
Thank you.
Your question comes from Lamont Williams with Stifel. Please proceed.
Hi, Good afternoon. Thank you for taking my question.
The first one is could you talk a little bit about what you are saying in some of your international markets.
It looks like the macro is a little bit tougher internationally, but you are seeing some better growth is that just.
<unk> a win.
Oh, the recovery or is there anything specific that you can point to.
Internationally, and then secondly, just to kind of follow up a little bit on the previous question as you rollout.
AD product.
Do we need to see more investment coming from into the product development and to the to the engineers or are we kind of.
The resources, there to kind of grow the products for the near to intermediate term. Thank you.
Yes, let me take the question first on the international front over the last couple of quarters, our domestic business has grown roughly at the rate of the overall company, maybe one or two percentage points slower year to year growth in our basket of overseas markets have grown a little bit faster than the USPS.
In our 10-Q.
When you look at it on a country or regional basis. The variations over the last six or nine months have really had more to do with the year ago comparisons and whether a.
A year ago at this time, Australia was a markdown another not so theres huge year over year growth in Australia.
Just kind of comparisons, but I think as we as we look at things sequentially, we're starting to see more of a steady recovery in a little bit less of those sort of highly volatile periods like we saw a year ago.
And on the Eventbrite as Brian .
Our prepared to continue investing as we have been in and product and development nothing materially different will happen in the coming quarters, we have.
Think done a great job of focusing on the things that matter the most.
And making it very clear what our priorities are which are Ted help frequent creators be more successful on the platform to help all creators drive demand for their event and to really strengthen the adoption of tools that help creators.
Become more effective marketers and promoters of those events.
Okay, great. Thank you.
Thank you.
This concludes the is it great third quarter fiscal year 2022 earnings conference call. Thank you for your participation you may now disconnect your lines.
Goodbye.