Eventbrite, Inc.
Q1 2021 Earnings Call Transcript

Published: 10 May 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Eventbrite, Inc. First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Julia Taylor. Thank you. Please go ahead, ma'am.

[Julia Taylor:]

Good afternoon and welcome to Eventbrite's first quarter 2021 earnings call. Prior to this call, we released our shareholder letter announcing our financial results. It can be found on our website at investor.eventbrite.com.

[Julia Hartz:]

Thank you, Julia. Hi, everyone and thank you for joining us on the call today. I hope you and your loved ones are safe and well. I know that all of us have been anticipating the return to normal life for over a year now. With vaccinations ramping and our schools and businesses finally reopening, it really does seem like the next chapter is in sight. At Eventbrite, we're naturally very excited about the emerging recovery of in person gathering and getting back to our mission of bringing people together through live experiences. It's core to our mission to help people connect in real life and create indelible memories through live events. We've been busy preparing for the return of in person gathering since last summer and as our first quarter results indicate, the light at the end of the tunnel really is getting brighter. Revenue and adjusted EBITDA improved compared to the fourth quarter of last year, and we gained momentum through the quarter and into April. In Australia and New Zealand, where we previously called out the first stages of recovery, paid ticket volume matched the quarterly average of the year preceding COVID. In March, paid ticket volume in the region reached a new all-time high. That was more than 20% above our monthly average in the year before the pandemic.

[Lanny Baker:]

Thank you, Julia. Let me start by providing greater detail around the improvement in business trends during the quarter. As local health conditions in our major markets improved, restrictions on in person gatherings eased during the quarter. The number of paid creators and paid events on our platform rose steadily as the quarter progressed. And as a result, paid ticket volume that was down just over 20% in January compared with December rose 18% month-over-month in February and another 41% month-over-month in March with healthy momentum across all major regions. On a year-over-year basis, paid tickets were up 9% in the month of March, marking the first positive year-to-year comparison since the pandemic took hold in early 2020. Although the bulk of our first quarter momentum in paid tickets was driven by in person events, the online event format has become a new fixture of the landscape and paid tickets for online events were up eight-fold year-over-year in the first quarter. Finally, in April, paid tickets were up 5% from March, bucking the historical seasonality of our business and reaching a new pandemic era high. With that progress in paid tickets, our financial results continued to improve as both revenue and adjusted EBITDA increased over the prior quarter. Net revenue of 28 million in the first quarter was $1 million higher than in the fourth quarter, though still down 43% compared to the first quarter of 2020. We recorded a $1.6 million reserve for expected future ticket refunds in the first quarter and this reduced reported net revenue for the period. We expect quarterly revenue comparisons to turn positive on a year-over-year basis starting in the second quarter of this year. Cost of revenue was 13.7 million in the first quarter compared with 28 million a year ago. Gross margin was 51% and we expect gross margins to trend with revenue.

[Operator:]

And your first question comes from Ryan Sundby with William Blair.

[Ryan Sundby:]

Hey, thanks for taking the question and glad to see some ray of hope on the horizon here. I guess I wanted to start with a question on the difference between the traditional assets there in a full-service creator. I guess as you invest time and resources to streamline the event creation process and install other services to improve the experience on SSL, are you starting to see creators who maybe historically would have been paid itself the SSL channel?

[Julia Hartz:]

Hi, Ryan. It is Julia. Thanks so much for your question. You know, I think that rather than look at self sign on versus full service, I would orient you around the frequent creator, which is effectively a segment of our customers who are using Eventbrite for at least one event a month, and oftentimes are using it for weekly events. And these creators are the ones who are generating the vast majority of tickets on the platform, especially today, as we start to build back up strength and you see the self sign-on Channel rebound. So while we look at how we can meet their needs, we think about two specific areas right now that we can really make a difference for them and attract more customers that look like them, as well as retain at a higher frequency these types of customers. The first is to build efficiency. So these creators, because they're publishing series of events, so think of a book reading that's happening on a weekly basis or a yoga workshop on a Sunday morning, they're doing activities over and over again on the platform and our product is becoming far more automated and intuitive to meet the needs that they have, whether it's publishing, it's reporting, it's making changes across the board. That's a really big part of what we mean by efficiency. And the second thing that they need about 85% of them have told us that they need help building audience and converting that audience into ticket buyers, especially as the world reopens. Because while we know that there's great pent-up demand, this is rebuilt for them. And they're both - they're managing new dynamics in the marketplace. So I think that, that actually builds out a greater picture of where our product is going and how we see the leverage that we can provide for our customers in everyday activities. And that means that they less have to pick up the phone and need help from us because it's all there on the product experience.

[Ryan Sundby:]

Julia, that's . Thanks for that. I guess one other thing I want to ask is, when we see the Eventbrite platform being used for 1.4 million vaccines, can you feel like your brand awareness has grown in the midst just given some of these non-traditional ways the press has been using during this time?

[Julia Hartz:]

Absolutely. I think when we started to see that use case, it wasn't very surprising to us, because, as I'm right is not always on platform. And if you really zoom out from the rhetoric around those early days of vaccine registration, it was a need that communities had where they needed to get up and running quickly on a platform that could technically handle large demand on or high demand on sales rather. So at one point, it was about 10 people to one vaccine in terms of demand that we saw on these on these pages. So I think it underscores the ubiquity of Eventbrite within communities that are gathering and that have a need. And certainly I think over the last year, given the fact that we've generated more tickets last year than the previous year, and through the pivot to online events, particularly, we've seen the strength happen in our brand. I think one of the one of the things that I want to see us develop a stronger muscle for is Eventbrite being a place where people go to discover live experiences, rather than just using it as a utility to gain access to events. And so I think we think a lot about building community and certainly building audience for event creators. And I think there's more for us to do to engage those consumers and keep them coming back.

[Ryan Sundby:]

Yeah. I think there is huge opportunity there on the . I guess, just kind of staying with that, on the online business, I think in the shareholder letter you talked about online events now lies in level well above the pre-pandemic benchmark with 1% or 2%. Any color on where you think that can really end up? And then how should we think about that, is it all incremental or assume that there is a shift from end person's online?

[Julia Hartz:]

I think that let me start with where we see it going, and then I'm going to hand it over to Lanny to talk about the incremental piece. So with online events, certainly, they'd become a much bigger part of the way in which people are gathering through this pandemic. And we've been really heartened to see that almost immediate pivot that our customers made and really underscores the adaptability and flexibility that they have in bringing these this content to an online space. And for them, the big benefit was building a much more global audience for their content because it was on the Eventbrite platform. And so really, for us, we got behind them, when we started making immediate tweaks to our product flow, we integrated with zoom and then strengthen that integration. We also started to drive discovery for online events back in spring of 2020. And, I think one way to break it down is if you look at, you look at the new creators in Q1 of 2021, 75,000 new creators came to Eventbrite, about 60% of those were online events, so their first event that they that they publish on Eventbrite was an online event. And we think that, that's a strong signal that we're continuing to build new market share in online events and we'll continue to support that. And then Lanny, do you want to talk a little bit more about what you see sort of when you extrapolate that out and the incrementality?

[Lanny Baker:]

Sure. Ryan, I think there are facets of the online creator phenomenon that are very certainly incremental. I mean, clearly, in times, like we had very early in the first quarter, and that we had through a lot of 2020. Online wasn't the only format. And so had we not had it, we wouldn't have had those events or we would have been able to service those creators, we wouldn't have issued those tickets. But I think your question is really about going forward prospectively. We have seen two phenomenon happen; one is there's sort of new formats, retailers is a great example, people who have coffee shops or chocolate stores or wine shops, who have taken in the pandemic to hosting online tastings and online events around that which they sell in their stores. And it's become a marketing channel for them. Various cheese shop, we talked about them a year ago. And so I think you're going to see retail and some other formats using online events as a distribution channel going into the future. We also have seen creators who historically have done in person events, pivot to online during the pandemic and discover much larger audiences beyond their local geographies that they can reach through the online format. And so for those creators, we anticipate that we will see them, as their as their local communities reopen, it's likely that they'll continue and sort of move back towards serving their local communities with in-person gatherings in their towns and cities. But we also anticipate that they will maintain some of their schedule for online events to be able to reach audiences beyond the local market. So, when you put all of those things together, those are the fundamentals that will make, in our estimation, the online category more than the 1% or 2% of total ticket volume category that it was historically. Through the product investments that we've done to the education of craters that we've done, we think -

[Julia Hartz:]

I think we might have lost Lanny temporarily.

[Ryan Sundby:]

No it is fine. I will jump back into queue.

[Julia Hartz:]

Alright, thanks.

[Ryan Sundby:]

Yeah, you bet.

[Operator:]

And your next question comes from David Lee with JPMorgan.

[David Lee:]

Great. Good afternoon, thanks for taking the questions. My first question for you Julia is on the Eventbrite Boost product you announced this morning. I'm curious to hear a little more about the product. How are creators promoting events right now and how is that product different and then the planning rollout and any early data that you may have to share? How are you thinking about monetizing this product?

[Julia Hartz:]

Thanks, Dave. So we did just announce Eventbrite Boost today and this is in direct response to what our frequent creators are asking us to help them with, which is getting out there and building a greater audience. If you think about the average creator, they're handling a lot, they're creating content, they're building awareness for their events, they're managing the event itself. In the past, we've seen studies where up to 40% of ticket price - of the face value of the ticket price is spent on marketing the event itself. So typically, in this market, it's highly inefficient and it's also complicated. Being able to manage social paid advertising, which is really where a lot of the audience is complicated. It's time - it takes a lot of time and it can be cost prohibitive to really get it right. So what we've done here is we've built a product that actually allows the creator to with just a few clicks of a button launch different marketing playbooks that actually, against any budget that they want to spend, helps them create new ticket buyers, through building audience and then also is able to give the analytics back to that event creators so they know where they should be spending their time to engage new people to come to their event. And so effectively, what we're doing is we're teaching event creators how to fish. We're giving them the tools to become better marketers for their events. And we are charging a small subscription fee for that. So it creates a diversified revenue opportunity for Eventbrite that can be applied across all the breadth of our event creators who are hosting both free and paid events.

[David Lee:]

That's helpful. Then as a follow-up, it looks like you guys saw a month-over-month growth in March. I was curious to hear what drove that and then do you guys have any more recent data around recent funds to share?

[Julia Hartz:]

Sure. Well, as I expressed, we had strengths going into the later part of the quarter. And I'm very pleased where the business is headed in Q2. I'll let Lanny Baker speak more to the recent trends that we want to share in relation to month-over-month growth and what we're seeing in the business.

[Lanny Baker:]

Sure, and I apologize. As we went through the quarter or earlier, at the very start of the quarter, it's hard to remember now, but the pandemic was in sort of full flare in markets like the UK and the United States coming out of the holidays. The restrictions on gatherings were pretty tight and the growth - at the very start of the year, we saw growth in the online category, but we saw the in-person category recede from where it had been in the fourth quarter. As we got into February and then really strengthening into March, the in-person category, as event - as local restrictions eased and the health situation improved, the in-person events began to gather considerable momentum. And so the growth that we saw, although we had a record quarter for online ticket volume in the first quarter, all-time record for us, the momentum throughout the quarter, that 40% increase we talked about in March in paid ticket volumes over February really was propelled by the reopening of in-person events. In April, as we said, paid ticket volume was up 5% above that 40% elevated number in March. And that 5% growth is, this is typically a time of year where seasonally ticket purchases come down from March through early summer and then begin to build again. So we're bucking seasonality at the moment and it's driven by in-person events. It's driven, really across all major markets and geographies that we share.

[David Lee:]

Got it. And then just a final question for me. If I remember correctly, I think 3Q is another seasonally strong quarter, so just looking ahead to that, do you have any data to share on how the calendar looks like?

[Lanny Baker:]

Yeah, you're correct that the third quarter is often a very strong quarter for us, it has been seasonally, historically. You get into the summer months and the music festivals and outdoor festivals in the Northern Hemisphere, those are very, very popular, obviously. We have seen some rescheduling of those events. We've seen, particularly in the in the UK, early in the first quarter, there were some events that were put on the schedule, just literally days after the British - England announced their reopening plan and we saw you know 5x, even bigger than that, increases in ticket purchases day over day, week over week for people just the pent-up demand for those events that were being scheduled in the summer in the UK. So we are starting to events come back on to the calendar for that season. And from what we've seen so far, the consumer interest in those events is very, very strong.

[David Lee:]

Great. Thank you.

[Lanny Baker:]

Thank you.

[Julia Hartz:]

Thanks.

[Operator:]

Your next question comes from Lamont Williams with Stifel.

[Lamont Williams:]

Hi. Thanks for taking my question. Just one question on advances and guarantees. As we continue to recover from the pandemic, how are you thinking about using advances and guarantees? I know you've selected - you have started to use these advances recently but relative to pre-pandemic, how should we think about where that could get up to?

[Lanny Baker:]

Sure. Thanks for the question Lamont. Let me differentiate between two different activities. One is advanced payouts of ticket sale proceeds and that would be where a creator wants, as they're selling tickets and the tickets will be sold on Eventbrite, where the merchant of record and we're collecting those ticket sale proceeds, some creators will ask to have those proceeds advance to them ahead of their event. And it's a way of generating working capital for the event and funding the operation from the setup and the organization of that event. We will continue to offer those advanced payouts of tickets proceeds. The core customer that Julia was talking about that frequent - high frequency, smaller entrepreneurial creator, they've got so many events going on, they've got things happening and their cash flows are quite different than somebody who might be planning like one big event several months into the future. And so in that core frequent creator market, advanced payouts were available and we offer them to those creators, we have certain reserves, amount of money that we hold back, we have due diligence that we do on any new customer. We have categories that have different advanced payout terms available to them versus other categories. But the reality is that that core customer of Eventbrite, that high frequency, smaller entrepreneurial creator, it's just not a super popular product for them. That's not something that they draw upon. And so, as we said, this quarter, the percentage of tickets that had advances, where we made it, where we advanced that ticket sale proceeds was down 90%, year-over-year. So we'll still offer that working capital help for creators, but I don't think it'll be as popular in the future as it perhaps has been in the past. The second thing are upfront commitments. And there are times at which in the competitive sale process for big, big crater accounts, there'll be sometimes negotiations around like signing bonuses that are either recoupable against future ticket sales or in some cases, they're not recoupable and they're effectively kind of upfront discounts against future revenue under the contract. That activity is not - that to us goes far beyond the self-service part of the market that we're most focused upon. Those are - that's kind of a different part of the market we're not currently offering. We signed 75,000 new customers in the first quarter and we didn't offer any advances or upfronts the way that we have done some of that in the past. So with the focus we have in our customer base, on most frequent creators, I think we're going to see - we are working to have a much lighter capital intensity that allows us to use our capital to build the product, which at the end of the day is the thing that we really differentiate upon.

[Lamont Williams:]

Okay, great. Thanks for that. And then, just a follow up, wanted to touch on average ticket price. You mentioned in the letter, you saw lower average ticket prices, but it has moved up pretty good, a little bit better. Do you see a recovering kind of closer to that three hours as we come out of a recovery? I guess the question is, how correlated is this to as the time to the recovering and paying tickets?

[Lanny Baker:]

Yeah, I do think that, looking out a little bit in time, we will see a return to kind of that $3 - roughly the $3 in revenue per ticket level. Right now, there are two things that are influencing revenue in particular, as we described. One is there is currently still an elevated level of refund activity. And when we refund tickets on behalf of creators back to the attendees, we reverse the revenue that we booked for Eventbrite on our ticket fee. And so in the first quarter, we had new tickets being sold, we also had some prior tickets being refunded and those prior tickets create an offset against the current revenue. And because the refund activity is running a little bit higher rate because of cancellations and postponements, there's a little bit more weight, if you will, on revenue per ticket from refunds flowing to the system, a little bit more weight than normal but a lot less weight than there was last year in the first quarter. So that's one of the big factors. That is as the refund activity sort of slows down and normalizes that's allowing the revenue per ticket to come up a little bit. The second thing that's happening in revenue per ticket is that the average ticket price across all the different categories and all different countries and formats that Eventbrite serves, is down today by a little bit less than 10% from where it was a year ago or prior to the pandemic. There was a time at which online tickets were less expensive and probably 30% less expensive than in-person tickets. That's not the case today. Online tickets and in-person tickets are priced at parity and have been since July of 2020. But there is - it's kind of across all categories and all formats, a little bit lower average ticket sale price, and while I don't know - we don't have any way to be completely sure, there may be some current pricing into advanced tickets, a little bit of a discount for the uncertainty of whether that event may or may not happen. But one of the things that we've seen in markets like Australia and New Zealand, where things have recovered is that ticket sale prices have gone right back to where they've been historically and our revenue per ticket has followed suit. So we've got probably a few more quarters to work our way through, and we'll keep you apprised of what we're seeing in that part of the business.

[Lamont Williams:]

Okay, great, thank you.

[Operator:]

Your next question comes from Ryan Sundby with William Blair.

[Ryan Sundby:]

Yeah, thanks for let me get in. I was just follow up mainly on your comment around team events activity pickup after UK put a hard reopening date out there. I think we're seeing some advance in New York and Illinois here in the last couple of days or weeks or even the states to get that fully reopened, like Texas or Georgia. Are you trying to see kind of a similar list here in the US when that happens or is there some reason that it is different? I mean, it is not national, I guess, to sustain, can you?

[Lanny Baker:]

Ryan, what we're seeing in the United States is a general improvement and acceleration in ticket sales. And so it's not only those longer dated things that correspond with the opening dates, but today, some of the opening dates like for New York and parts of Midwest, they're not very far away, they're just around the corner the reopening dates. And so, it's a little bit different than what we saw in the UK, because remember, that was like in February, looking all the way out to - I think it was a July date. And for that was a little bit more stark in that market. That market was a little bit more closed. It was a little bit bigger piece of news. That was sort of a brand new stroke of lightning piece of news but here what we're saying is, as markets reopen, certainly, ticket volume is - and event volume is picking up kind of in all markets where the health dynamic is heading the right direction.

[Ryan Sundby:]

Okay. Great. Thanks.

[Lanny Baker:]

Thank you.

[Operator:]

At this time, there are no further questions. That does conclude today's conference. Thank you for your participation. You may now disconnect.