Eventbrite Q2 2023 Earnings Call Transcript

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August 3, 2023

There are 7 speakers on the call.

Operator

Good afternoon and thank you for standing by. Welcome to Eventbrite's Second Quarter Fiscal Year 20 23 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, There will be a question and answer session. 20.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to Catherine Chen, Head of Investor Relations. Please go ahead. 20.

Speaker 1

Good afternoon, and welcome to Eventbrite's 2nd quarter 2023 earnings call. Prior to this call, we released our shareholder letter announcing our financial results, which can be found on our website at investor. Eventbrite.com. Before we get started, I would like to remind you that during today's call, 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. 20.

Speaker 1

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 new information or the occurrence of unanticipated events except as required by law. During this call, we will present adjusted EBITDA, adjusted EBITDA Margin and Available Liquidity, 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 an analytical tool. You should not consider them in isolation or as a substitute for analysis of our results of operations as reported under GAAP.

Speaker 1

A We encourage you to read our shareholder letter, which contains important information about GAAP and non GAAP results. And with that, I'll now turn the call over to Julia Hartz,

Speaker 2

20. Record take rate helped net revenue grow to $79,000,000 up 20% year over year on a constant currency basis. I'm proud of how we've grown our core ticketing business efficiently while investing in our capacity to drive more demand toward events in our marketplace. This discipline produced adjusted EBITDA margin in the mid teens for Q2, which was nearly 3 times the profitability of a year ago. From the top line to the bottom line, we've substantially grown our business in the first half of twenty twenty three.

Speaker 2

The most urgent priority of our creators is selling more tickets, and Eventbrite's scale, products and consumer brand are uniquely positioned to help them succeed faster. Our results provide strong momentum as we head into the second half 2023 and as we focus on improving both the creator and ticket buyer experience in our marketplace. We know the audiences are seeking the vast and diverse categories found on Eventbrite from great live music to summertime food and drink festivals, to air shows and even reptile expos. Nearly 33,000,000 users bought or registered for tickets on Eventbrite during the Q2, which is a new all time record surpassing pre COVID levels. 20.

Speaker 2

Total ticket volume grew year over year in each of our top five geographies with the U. S. Setting a new Q2 record for tickets transacted. And monthly average users on the Eventbrite mobile app continued to accelerate growing 39% year over year in Q2. The team focused on 3 core areas in the quarter to boost demand in the marketplace.

Speaker 2

1st, and third, launching content partnerships to gain broader awareness for seasonal events. To drive more traffic to event listings, We recently launched a video feature to give creators the ability to showcase their event more dynamically to consumers. Creators who use this feature saw a 74% increase in consumer traffic to those event listings. To increase relevance in SEO and on Discovery pages, we're using machine learning to deliver better personalization and event recommendations to our Things to Do and For You pages, improving listings views by 64%. To reach a wider audience, We've launched a new partnership with Eater, the digital media brand focused on dining and restaurant discovery, which reaches 30,000,000 people each month.

Speaker 2

A jointly curated collection of the best springtime food events in New York City became one of our most highly viewed city collections ever. We plan to do many more brand partnerships with Eater and others to boost consumer traffic and bring new audiences to Eventbrite events. These initiatives and more increased our ability to drive ticket sales through notification, browse and discovery channels. Eventbrite drove over 6,000,000 paid tickets, which equates to $202,000,000 in gross ticket sales and another Listing on Eventbrite sparks a powerful growth flywheel for creators and we're investing to build even more value into demand generation features. This is a key unlock for event success because each incremental ticket sale represents revenue opportunity through food and beverage, merchandise and other event related transactions.

Speaker 2

Some of our targeted investments in Q2 were focused on the ads product to drive demand. 20. 1st, Eventbrite ads launched internationally in Canada and Australia, expanding to our 3rd and 4th largest markets. 2nd, ads are now available for recurring events, meaning creators can easily manage multiple promoted listings with a single campaign. 3rd, we're deploying generative AI to support end to end marketing motions.

Speaker 2

It now helps and in the coming quarter, we aim to expand AI to event listings creation, reducing the time it takes to publish an event to less than 1 minute. And 4th, we continue to make progress on our cost per click model for ads, which we expect will drive more dynamic pricing and better transparency quarter with ads revenue exceeding $1,000,000 for the first time on the 1 year anniversary of its launch. We believe that the growing appeal of our marketing and advertising capabilities is a strong signal that creators value Eventbrite as a marketplace and demand engine. As we spend more time and effort on the demand side of our marketplace, we remain wholly committed to the success of independent entrepreneurial creators. Our creator base has grown year over year for 9 straight quarters.

Speaker 2

That includes a record number of frequent creators in the 2nd quarter, representing about 24% of total creators. Finally, I wanted to give you an update on one more move we're making to better position the value and accessibility of Eventbrite's marketing tools. Today, creators come to Eventbrite for ticketing and then as a second order, they customers through a great product experience, we realize that it's important for all creators to have access to these features. Therefore, we're changing the onboarding of Eventbrite to include these marketing tools as part of the core product. Beginning in Q3, We're introducing a new packaging framework that offers this comprehensive feature set to event creators of free and paid events for a fee.

Speaker 2

We're excited to be opening up access to Boost to a much wider set of creators and we'll bring you updates as this rollout continues. I want to welcome Doctor. Pilar Monchon, who is joining our Board of Directors today. Pilar is the Senior Director of Engineering, leading AI Research at Google and a groundbreaking leader in this field. We're excited and delighted to have her join the Eventbrite team and look forward to her guidance and strategic vision as we build innovative product experiences for our customers.

Speaker 2

Now Lanny will discuss our Q2 results and Q3 outlook.

Speaker 3

Thank you, Julia. We had a strong second quarter that moves us another step closer 20.5 percent to our long term financial targets. Revenue of $79,000,000 was at the high end of our outlook range, up 19% year over year and up 20% on a constant currency basis. Gross margins rose to a new record at 69%, thanks to higher ticket volume, An increase in services revenue and control over fixed costs. Adjusted EBITDA was $12,000,000 excluding restructuring and other non routine costs.

Speaker 3

That equates to a 15% adjusted EBITDA margin for the quarter on an operating basis, up two points from Q1 and advancing toward our long term margin target of 20% or higher. 20. Finally, we ended the 2nd quarter with a strong balance sheet. Available liquidity increased by $8,000,000 during the quarter to 3 $66,000,000 as described in our shareholder letter. I'll provide more detail on 2nd quarter results and then discuss our outlook for Q3 and the full year.

Speaker 3

Total creators, including those hosting free events, exceeded 420,000 in the quarter. Paid creators grew 12% year over year to 189,000. 20. Paid events per creator averaged 3 events, down 2% from Q2 of 2022. 20.

Speaker 3

Total paid events reached 563,000 in Q2, up 10% year over year to a new all time record. Including free events, a total of 1,600,000 live experiences issued tickets on Eventbrite during Q2. Paid tickets per event averaged 41, down from 43 in the same quarter of last year. Total paid ticket volume of $23,300,000 was up 7% versus a year ago. The UK and Canada were the strongest in Q2 and paid ticket volume grew roughly 5% year to year in the United States.

Speaker 3

20.6 dollars per share. Average ticket price was slightly above $38 for the 2nd quarter, essentially flat compared to a year ago, and gross ticket sales were $890,000,000 in the quarter. Finally, revenue take rate was 8.9% in the 2nd quarter, a full point higher than a year ago and another new record. Revenue per ticket was $3.39 up 12% versus a year ago. 20.

Speaker 3

These improvements in monetization flow from investment we've made in the core product, increasing revenue from Boost and Eventbrite ads and price changes undertaken in early 2023. As we continue to emphasize and expand 20. Eventbrite's ability to help creators grow their attendance. We see opportunity to add even more value, from Q1 to Q2. And while advertising remains a small contributor to total revenue, we're encouraged by the progress we've made in our 1st year.

Speaker 3

At an advertiser account level, Eventbrite Ads is already producing the revenue and take rate uplift that is at the high end of the ranges we outlined during Investor Day, validating key assumptions and introducing cost per click pricing are important next steps for the growth of Eventbrite ads. Turning to the P and L, since we detailed the quarter's line by line results in our shareholder letter, I think it may be more helpful on this call to look at how our business model is performing relative to a year ago and in particular against the ranges and targets we put forth at our Investor Day last June. First, in terms of our overall unit economics, 20. Eventbrite's revenue per paid ticket in the 1st 6 months of 2023 was $3.37 compared to $3.03 per ticket that we showed at the investor meeting. We've achieved that 11% improvement Even as average ticket prices have been steady via investment in our core product, the introduction of new marketing and promotion features and thoughtful, balanced pricing actions.

Speaker 3

As a result, our revenue take rate has improved by a percentage point since the Investor Day, and we believe there is plenty of opportunity for these same levers to deliver further gains in unit economics and take rate in the future. 20. We've also made significant progress to our long term expense ratio and margin targets, which we present on an operating basis, 20 20. I'll note here that the restructuring initiated earlier this year is on track, and we expect roughly $13,000,000 to $14,000,000 in annual operating costs to be freed from our expense base 20 20.4 percent on a trailing 12 month basis, and we laid out a long term gross margin target of 68% to 70% of revenue. As of the first half of twenty twenty three, we're already in the middle of that target range, and we expect to scale to the top of the range as ticket volume and services revenue continue to grow.

Speaker 3

20. Product and development expenses were 32% of revenue at June 2022, and we stated 20. With revenue driving investment and consistent management of expenses, we can move that into the 27% to 30% of revenue range 20. As of the first half of twenty twenty three, we've shaved 4 points off this ratio Our new development centers in Spain and India should make these gains sustainable as we continue to build for profitable growth in the future. Sales, marketing and support expenses were 20% of revenue at the Investor Day, and we set a multiyear target of 17% to 20% of revenue for these costs.

Speaker 3

In the first half of twenty twenty three, sales, marketing and support expenses were 21% of revenue, 20. We are reorganizing support teams into lower cost centers outside the United States, and we expect to achieve savings and leverage from this starting in 2024. Additionally, We've stepped up marketing spending to accelerate our marketplace repositioning, and as that strategy unfolds, we expect enhanced revenue to provide the sales and marketing leverage previously outlined. General and administrative expenses were above 30% of revenue at the Investor Day, 20. And as of the first half of twenty twenty three, G and A is equal to 26% of revenue and rapidly approaching the 22% to 24% of revenue range we expect in the long term model.

Speaker 3

And one final note, we've also taken steps to manage non cash expenses, Most notably, the issuance and amortization of stock based compensation. As of the first half of twenty twenty three, 20. Depreciation and amortization expenses, including SBC, were 21% of revenue. Putting the pieces together, adjusted EBITDA margin in the first half of twenty twenty three was 14%, more than 2x where we were at Investor Day and solidly on track toward our goal of 20% or greater in the long term. 20.

Speaker 3

Based on our progress and our plans, we expect to reach 20% adjusted EBITDA margins before the end of 2024, even as we will continue to invest to drive long term revenue growth of 20% or better. Now wrapping up with our business outlook. We currently anticipate 3rd quarter revenue to be within a range of $79,000,000 to $82,000,000 The midpoint of that range would correspond with a fairly normal seasonal revenue pattern from Q2 to Q3. Looking to the full year, we've updated our business outlook and now anticipate total 2023 revenue to be within a range of $320,000,000 to $330,000,000 At the midpoint of that range, Revenue growth for the year would be 25%, slightly higher than in our prior outlook and consistent with our long term model of 20% or better annual revenue growth. Based on the expense and profitability progress I described earlier and the strong margin performance of the 2nd quarter and first half, we're also updating and raising our adjusted EBITDA profitability outlook for the year.

Speaker 3

20. We now anticipate that adjusted EBITDA margins will be in the range of 12% to 13% for the year, 20.2 points higher than in our initial view. At the midpoint of our revenue outlook range and excluding the impact of restructuring costs and other non routine items, we expect adjusted EBITDA to be roughly $40,000,000 for the year. In summary, we're pleased with our financial and operational results year to date, and we believe we are well positioned to drive our marketplace evolution across the remainder of 2023 and into next year. I'll now turn the call back to the operator 2Q and answer portion of the call.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. 20 20. The first question comes from Justin Patterson of KeyBanc. Please go ahead.

Speaker 4

20. Great. Thank you and good afternoon. Julia, could you talk about some of your marketplace transformation priorities for the second half? You clearly made a lot of progress with boost in ads and improving the discovery experience.

Speaker 4

So curious to hear what's next there. And then for Lanny, obviously, a lot of progress with the cost structure of this year. As you get the unit economics benefit from ads flowing in and just get deeper into some of these cost savings initiatives. I would love to hear a little bit more about how you're thinking about

Speaker 2

Thanks, Justin. I'm really proud of the achievements we've made in Q2 as evidenced through our results, particularly around achieving a record 33,000,000 unique buyers and having our app that may use grow close to 40% year over year. So that's been great. We're building on that momentum and making targeted but disciplined investments focus on the demand side of the marketplace and really seeing some great results from this move, which I talked about in the call a bit. 20.

Speaker 2

Some that I'll highlight are making the event listing and the storefront itself more dynamic by 20. Adding features like video, so buyers can really see the essence of an event. We talked about this on the last call, 20. We've seen now since then a 74% increase in page views for events that have used video audiences has also resulted in a great increase in page views of 64%. And then our recent design of the things to do pages that are really some of The strongest backbones of our consumer discovery work through SEO have led to a 40% increase in follows over the last quarter So I think that work combined with 20.

Speaker 2

That really comes to a great place for the second half of the year because we have 20. A groundswell of opportunity to drive the right buyer to the right event through the seasonal events where we saw strength last year. So, through our research, we know that there are various channels for discovering things to do. In fact, 9 out of 10 respondents in a recent consumer survey So what we're really focused on looking forward in the marketplace is to continue improving personalization to bring their friends. We'll continue to scale content and influencer partnerships and we will really lean into

Speaker 3

20. And Justin, on the question about unit economics and expense and investment management cost savings, the way we think about it is that 20. As we've invested in our core product, it's put us in a position to be able to realize improving unit economics, be that through The pricing changes that we made at the start of 2023, the repackaging of our marketing tools that Julia talked about just recently and the growth of advertising. As each of those things unfold, our marketplace is generating stronger unit economics. And we're looking at those improved economics 20.

Speaker 3

And we're pleased to fund and support the investment in things like growing our consumer experience, growing our consumer reach, funding those 20. The work that we do behind the partnerships, Julie just talked about. So, the monetization of the marketplace that's improving unit economics 20. As we look at our margin path 20 24. We see a real clear path to achieving that 20% target, long term target before the end of the year.

Speaker 3

We'll see margin benefits from especially at gross margin on higher ticket volume. We'll continue to see more revenue contribution from higher margin services There'll be more leverage there. And then finally, as we've done and we'll continue to do, we'll manage the operating costs very, very tightly. So We see a very clear path to those long term targets and it's not too far away.

Speaker 4

Thank you both.

Operator

Thank you. The next question comes from Matt Farrell of Piper Sandler. Please go ahead.

Speaker 5

20. Thanks, guys. Congrats on the strong results and the really impressive execution. You raised the midpoint of the guidance for 20 20. From your perspective, has anything changed from a consumer behavior or a

Speaker 2

20. Thanks, Matt. I think I'll start with the demand for experiences and then 20. I think you can talk about our a bit more about the guide. So we have our finger on the pulse of consumer trends, and we're seeing strong demand signals across particularly for categories like music, film and media, food and drink, nightlife, performing and visual arts.

Speaker 2

And as an anecdote in the marketplace, we're seeing people really want to get out and connect with one another. Singles and dating events are 50 percent up year over year. Independent singer songwriter hosted events are up 60%. And I'm sure you're not surprised by this, but AI related events have tripled. So we're just seeing the strong growth across categories and geographies.

Speaker 2

It's really about the demand side of the marketplace. And I think with our business, the flywheel of growth is really when you see surging demand, you see strengthening confidence on the event creator side. So we're seeing more and more creators be able to host more events in their category because they have that confidence that they'll be able to sell more tickets. And so we're meeting them right at that point. And with our changes that we talked about today, we're putting marketing tools, boost paid social advertising, email marketing right in front of them at the right time, so that they can continue to strengthen that flywheel.

Speaker 2

And I think all signs, both externally and internally, point to a really strong second half of the year in terms of ticket buyer demand for doing interesting things together through live experiences. 20. Lenny, is there anything else you'd add?

Speaker 3

Yes. As we look at the outlook for the full year, Matt, our assumptions are that we can always see continued healthy demand for live 20. Fairly normal seasonality, which always points toward a stronger Q4 by a little bit. I think The nature of our business today and the nature of seasonal holiday fall events, they're becoming a little bit more popular and that probably leads to perhaps a little bit stronger 20 2nd half seasonality than we've seen historically, and that plays out as we expect it may. Those are the kind of things that

Speaker 5

20. And maybe as a follow-up, I'd love to just hear a little bit more about the decision making process and the logic behind 20. Including the demand generation tools into the core product. And is there any way that we should be thinking about the

Speaker 2

Thank you. I'll start with the 1 and then I'll let Lainie talk about the model. Our mission is really to push marketing tools to all of our creators to make demand generation central to the value proposition. And this has been something we've worked on over the past 9 months. And our live events 20.

Speaker 2

For instance, our AI assisted social media ad copy creation flow is launching campaigns 20. 30% faster and creating 3 times as many campaigns. And Boost subscribers are seeing a 63% improvement in results and a return on ad spend of 5x to 6x. So it was at this point that we knew we 20. We saw this strong signal of efficacy and success in the customers who are using Boost and who are Advertising in the marketplace through Eventbrite Ads.

Speaker 2

We think by bringing all of this value and growth enablement to the front door of Eventbrite, It will benefit greater and faster growth by creators and better value for the platform. So the timing was right from that perspective. The product experience is ready and we think that this gives all creators the opportunity to benefit from the demand generation tools now

Speaker 3

Matt, the organizer fees that we're introducing are structured in a way that scales with both the We expect it to be as much as 60% of events, both free and paid events. We'll be able to publish their events and use our tools 20. As creators have success and their events become larger, the value of our marketplace and our tools becomes more relevant and more important to them, and we've matched For the most frequent and successful creators, we also have unlimited event packages that are available on a subscription basis, much like Boost. 20. And it's really early days.

Speaker 3

We'll be rolling this out more fully across the quarter across the marketplace during the Q3. We'll update you as we go on and we'll report back as we learn more. The fees on a per event basis range from 20 $10 to $50 per event depending on capacity, which based on research that we've done extensive research that we've done, we believe are

Operator

Thank you. The next question comes from Cameron Matson Parone of Morgan Stanley. Please go ahead.

Speaker 6

20. Thanks. Hi, guys. I'd love to hear take rates already up at 9%. 20.

Speaker 6

Lanny, I'd love to just get some color from you on whether or not you think there's room for that to move meaningfully higher. 20. And it seems like we're still a little early in the kind of rollout in terms 20. I'm seeing the tailwinds from the price increase kind of gradually roll through, but would love to any kind of update that you're willing to provide there. 20.

Speaker 6

And then really nice sequential growth in paid creators quarter over quarter after that was down a tick in 1Q. 20. Would love to hear any color in terms of what you think the drivers of that improvement were? Thanks, guys.

Speaker 3

20. Sure. Thanks, Tim. On the take rate, the biggest driver 20. Right now, year over year, really is the pricing change on the transaction fees that largely our consumer related fees that we introduced at the start of this year.

Speaker 3

And it applied to probably about 70% of our ticket volumes and it was an effective raise 20. Price change relative to the overall value of the event and to the value of the ticket. But that has gone well. 20. We've been pleased with what we've seen in the market reaction to with the uptake.

Speaker 3

And as I said earlier, that improvement in unit economics helps The uplift from ads and from We're getting close to a dime per paid ticket. Now that's a little bit of a mixed calculation because about 20% to 25% of those 20. Revenues from Boost and Ads are coming from creators of free events who really value our ability to help them market and promote those events. But overall, it's an important driver. We're really early days on the ads product.

Speaker 3

As Julius said, it was about $1,000,000 of revenue, a little bit over $1,000,000 of revenue in the quarter 20. In a marketplace that did nearly $1,000,000,000 of ticket sale transactions. So, we believe that there is 20. As we are continuing our push to drive these marketing demand generation tools, there is quite a bit of value that we're delivering to customers and that 20. And

Speaker 2

then on the sequential growth in paid 20. We see the fruits of our labor really coming through in this quarter in terms of our Self sign on is 99% of our creators. So that channel where creators are discovering Eventbrite through word-of-mouth, they're buying tickets to events, they're Discovering Eventbrite through SEO or paid marketing. That's driving the bulk majority of this growth, and that's great because the gross margins are really strong there. In terms of categories and geographies, we're seeing business professional grow quite quickly, performing and visual arts as well.

Speaker 2

20. And in general, community cultural events as we think communities are coming back out together and really seeking new ways 2. And then geographies, U. S. Total tickets hit a record high in Q2, which is great.

Speaker 2

Outside of the U. S, Canada grew 25% year over year and the U. K. Grew 10% year over year. So We're seeing some strength come back in non U.

Speaker 2

S. Markets, which is promising. So all told, 20. I really want to give credit to the team here. We focus on delivering a message that's based on event

Operator

20. Ladies and gentlemen, this does conclude the conference call for

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