Eventbrite, Inc. (EB) Earnings Call Transcript & Summary

Anyway, I'm Heath Terry, I cover the Internet space for Goldman Sachs. Really happy to have with us the team from Eventbrite today: Julia Hartz, Founder and CEO; Lanny Baker, Chief Financial Officer. Thanks for taking the time to be here. I know it's an incredibly busy time for the company, so we really appreciate that you could do this.

Thank you for having us.

Yes. So, Julia, for people that may not be as familiar with Eventbrite or know you best just as a user of your -- as your service, what's the best way for an investor to think about what it is that you and the team are building as a company?

Sure. So our mission is to bring the world together through live experiences, and the way we match people to those events is by building an enablement platform for the event creators themselves. So the folks who are marketing and managing and selling out these events, Eventbrite is a platform that they can use that gives them reliability. So our platform is built to be there for the critical moments of each of those phases of putting on an event for sale. It's efficient. So we win when our creators win, meaning our business models that we take a small take of their paid ticket face value. And for us, the idea of building this platform really originated out of the notion that there really, in 2006, was nothing that you could use that was self-service. So ease of use and the self-service capability of our platform is something that is critically important to our creators. About 50% of our revenue and 98% of our customers self-sign on the platform. So that reinforces the importance of this ease of use. And when we look at the platform itself, it cuts across all categories, countries, formats and of live experiences, and I think that diversity of content is something that reinforces the scale of our platform. So over 1 million people in the last year have used Eventbrite to create an event. And on average, we see about 5 events per active creator on the platform. And I think that gives us a really interesting opportunity to derive data from how folks are gathering on the platform, how they're using the platform to create these events, live experiences and content as well as engage consumers and what they're looking to do and match them to the right events and so converting them from consumer into attendee and driving the flywheel of growth from there.

Yes. And so I realize there's not a typical Eventbrite creator. But when you look across the spectrum of creators with individuals at one end, big music festivals or corporate events at the other end, how should people think about sort of who the users of the platform, who the creators on the platform really are?

Yes. I think that 1 of our strategic advantages is that you can't actually pin down that 1 type of creator. We serve an infinite variety of event creators. And some are more amateur creators, and many are professional. I think that's a misnomer of the Eventbrite platform that we serve big sales and barbecues when, in fact, we serve the professional event creator community. And so when somebody is using Eventbrite, oftentimes they're using Eventbrite for something that they have established, an event series, a class, a workshop, a music festival, a gathering that has some sort of revenue component. And they're coming to Eventbrite as their platform to not only be able to organize the event promotion, but also manage the people that are coming to their events. So more and more, we're seeing our event creators not only use us for the efficiency that we provide through enablement, but also through the notion that we can help them market their event more efficiently and reach a wider audience. And so when we look across the platform and those million creators, we're really starting to zero in on those frequent creators who are coming to Eventbrite to host more than 1 event in the use case and frequently like a more than monthly event. And I think that opportunity for us is key because those professional creators have some unique needs that, as we meet them through our product capability, gives us a much wider aperture to continue to expand Eventbrite as the enablement platform.

And so when you aggregate all of those people together, how big is that market? And how fast would you say it's growing?

When we look at the served addressable market in our top countries and our top categories, and I'd say that the largest country for us today is the U.S., U.K., Canada, Australia, Ireland, Germany, Brazil are all sort of countries where we've seen some really healthy growth. And the categories for us that are larger than others are music, business, festivals. And when we look at that served addressable market, we see a revenue target of $3 billion, which is a lot bigger than where we are today. Now that's in just ticketing. And so that is not considering how we could expand the revenue opportunity across other capabilities that we could offer on the same platform. And when you think about Eventbrite as where we sit in the market, you imagine a triangle. You have the top of the triangle is the sort of large vertical players like a Live Nation or an AG or an Event Hub. And then you have the bottom of the pyramid is very wide and thin, which is the consumer events, the things you would RSVP on paperless post for or invite your friends through e-mail invitations. The fatty middle is really where Eventbrite plays, and the sort of demarcation lines are a professional event that is not in a large arena or a stadium and doesn't need a full vertical stack provider. We are that horizontal technology platform for the middle. And so the middle is huge. It's hard to define. We've been around this a couple of times, and it's growing. I mean, when you look at the prevalence of live experiences and consumer behavior, it's very easy to see that more and more share of wallet is going towards accessing live events, and we see that the sort of growth of new categories of live events on the platform happening constantly.

Yes. And so when you think about how you serve that creator audience now, beyond selling tickets for them, which is obviously the core of things, how do you see the creators using the platform? How does that suite of services look now? And how does that look to evolve?

So the genesis of Eventbrite was very much around a transactional platform. And given the experience of the founding team in creating scaled international microtransactional platforms, it made a lot of sense for us to think about the ticket as the thing. That very much is part of our core thesis and is alive and well today. 100% of our customers use Eventbrite in part to provide access to their events. They also use Eventbrite to promote their event and to manage the analytics associated with their event. So where we've really leaned in are in those 2 sort of parts of that vital sort of event cycle where an event creator comes to Eventbrite already pretty much knowing what events are going to the ticketing and who they want to reach, and we enable them to do that faster, better, more intelligently and more efficiently. But I think when you look to the left and right of that, you can see some very obvious adjacencies that we can open up as more and more people use the platform. One of those is Live Today, which is add-on to the ability to merchandise your event or sell add-on passes or physical goods associated to your event. One of the power users of this feature is actually the Sylvester Stallone meet and greet, where the add-on that -- the mission is actually the ticket and the add-on is the signed merchandise that you can buy. Sylvester Stallone is very popular in certain parts of the world.

Just certain parts?

More -- some parts more than others, let's go that way. I think he knows his key demo. Another capability that we offer is distribution. So the ability to publish your event on Eventbrite, and just with the click of a button, be able to distribute out to more than 50 distribution partners that we've partnered with, where we feed our content through an API to them to put the right event in front of the right person at the right time, wherever they are. So instead of manually inviting event -- consumers to become attendees, we do the legwork for the event creator, and that obviously feeds the flywheel of growth. But when we think about the future, when we think about where can we go beyond ticketing and promotion and really driving demand, I do think that the adjacencies to ticketing are really interesting. So the steps that an event creator's taking before they decide to publish their event, where are they accessing data about venues or sponsorships. And that's very nascent for us. I think we're really focused on getting that core right. And I think beyond that, we have, obviously, opportunities to continue to strengthen our third-party platform. So platform -- other software providers that integrate with Eventbrite as well as continue to extend into the event with our on-site tools that we offer.

Yes. No, that's great. Lanny, you've been at Eventbrite for a few months now, but you've obviously been at a lot of innovative companies before. What drew you to Eventbrite? What have you learned in your time there?

I was really -- I'm super drawn to the mission of the company, of bringing people together through live experiences. I think that's -- I look at my kids and I want them to take part of live experiences. I love live experiences. I think it's a secular trend in our economy and all around the world. It's really fun to be part of a company that's got this mission that just resonates through every one of our employees, takes some inspiration from some events or some category of events that they're involved with. And that's tremendous to be a part of. I think that it's great to be a part of a market leader taking advantage of this big trend in live experiences. And when I say that, one of the things that just sort of blows my doors is, when I put back on my research analyst hat from years and years ago, is the Self-Sign On business is, as Julia said, it's 98% of the customer acquisition is through Self-Sign On and half the revenue is coming in through that channel. That speaks to 2 things that are super powerful to me, which is, one, there is a very big demand out there, where people who have a problem are going, trying to solve their problem and finding Eventbrite. And number two, Eventbrite's solution for that problem is hooking up with that customer and serving their needs. That's -- that is our -- like our core, the locomotive of the business, being able to build sales and marketing and distribution channels around that product market fit is really exciting to me. And then I'm sure, when you look at this company, Julia talked about it a moment ago, the number of categories that we can move across that are event types, the number of countries that we can move across, the segments of creators from free to professional and sort of all the variants through there. There are so many ways for our product to continue to sort of unfold and adapt to penetrate those areas. And then in the, like, long term, the opportunity to put together a demand side of the marketplace, together with what we're doing on supply aggregation, just feels to me like, boy, there's a lot of runway in the company that's a market leader, and the market is already expressing its interest and appreciation for the product that we have. So it's fun to be part of that. And I guess, for me, personally, in all the career experiences I've had, I've collected some familiarity with operating cadences, with international operations, with how to prioritize investments and those are things that I feel that are in my Lanny Baker bag of experiences that I can bring to Eventbrite, and hopefully, really make a difference with those. So it's a good fit for me. I'm excited to be here.

Yes, absolutely. Lanny, to stick with you for a second, to talk about the scale of the platform. Julia mentioned the million creators on the platform. But to think about it more broadly, how many tickets are being distributed? How many -- what percentage of those are being paid for? How would you quantify the GMV of what's going across the platform for investors that are trying to think about sort of the reach that Eventbrite has? How would you quantify that?

Yes. Our revenue outlook for this year is a little bit north of $3 billion -- or $300 million, in a market that's probably $3 billion. So we're a big company, but we're small relative to the total market opportunity. In the first 9 months of this year, I think we distributed on our platform about 225 million tickets. About 35% of those were paid tickets. That number is a little bit north of...

And just to be clear, when you say this year, you're talking 2019?

2019, yes. Yes, that would be a good start to the year. And -- but -- so when you start to get into hundreds of millions of consumers using the platform, it gets really exciting. And so that's some view of the scale. In terms of the GMV, it's in the billions. You can take a guess that what the average ticket's worth. And it varies by categories. We have some events where the ticket might be $1,000. We also have, as I said a minute ago, like 2/3 of our tickets are to free events. And so it's really quite a big gamut. But we cover an awful lot of that marketplace, and yet our revenue relative to the opportunity is still pretty small.

Julia, music's obviously a huge category for you and one that you guys have spent a lot of time on over the last couple of years. Maybe just so everyone's on the same page, can you spend a minute or so, kind of taking everyone through the Ticketfly acquisition and kind of what you learned in the process and where we are with Ticketfly now?

So to sort of set the stage and step back for a minute, music is much bigger than what we report in the Ticketfly number, which is our North American music venue sales number. So music for us is a really important category. Contextually on the platform, it's one of the ways that people love to gather, and it's an important universal category in a way that we can reach many, many different types of consumers globally. Our music Self-Sign On business is one of the strongest growing categories in our entire portfolio of categories and channels. So that's important to note because the music business itself is about 1.5x what we've been reporting in our numbers on North American music sales. Now that being said, venues are really interesting to us because we have 1 event creator as the venue owner of the box office, producing hundreds of events. And so that to us is the ultimate frequent event creator. And so everything that we're doing to meet the needs of frequent creators and of music venues is this just wonderful sort of Venn diagram that overlaps and creates a lot of efficiency for our product efforts and our focus. And so we'll continue to invest in music. It's a key part of our strategy. But we're also looking at how we can use what we've built in music venues to meet the needs of the other frequent creators in categories like classes and workshops and different types of categories where there are just lots of events happening with 1 creator. And I think it's really important for us to put a stake in the ground and own independent live music venues in North America. However, the global opportunity is really exciting, too. And we're not starting from a standstill in those markets. So that provides a lot of runway for us as we continue to focus on our product market fit here.

Yes. And so when you look at the service offering within Eventbrite music, what does that suite of services look like now? And where do you see the investment going and what you want to really build around that vertical?

Yes, I think, foundationally, we're focused on how do we help people who are hosting a high volume of events, do that faster and more automatically. There's a lot of manual work that frankly happens on competing ticketing platforms that just doesn't meet the bar of what we expect from our product. And so I think what we're doing is, we're helping those venue owners understand how we can save them more time by automating some of the more manual tasks that they've been doing in the past. And I think that focusing on those foundational elements like reporting and payouts and just how you even set up an event listing when you have 500 events happening in a 9-month time span in 3 different rooms of 1 venue, those workflows are actually incredibly critical to our success as an enablement platform. And so it's not -- I'd say like the work isn't super sexy, but it's critical, and it's really important for us to nail that. So that's what we're focused on, delivering for those venue owners this year. Beyond that, where it gets really interesting is how we can help them access new marketing opportunities, be spending their dollars far wisely to reach a new audience, be helping them retain those consumers. One thing that we've done in the last year is introduce a follow feature in our native consumer app. And we've been really pleased with the signal that, that's provided, especially for somebody like a venue. So I can follow a venue and get push notifications on which shows are going on sale. And the adoption on the consumer side has been promising. We've seen over 8 million consumers following over 1 million creators. So there is that innate behavior that's happening, and that represents some of the opportunity that we can provide for these venues in the future.

Yes. So that following activity that you mentioned touches on the other side of this, sort of the consumer side. How do you think about building Eventbrite as a destination for people? That person who needs to find, what am I doing this weekend? What is my Wednesday night going to look like? Where do you get there?

I think that search is incredibly important for us, and discovery is something that we've been getting better and better at as we have collected the data from hundreds of millions of consumers. And we've invested discretely in this area. But we're not pouring tons of money into our destination to be that 1 place where people go. Folks are still using Google to find almost anything, right? So we want to make sure that when they're searching for something on Google or they're in their Facebook feed or they're on Instagram, that Eventbrite events are front and center. And so our focus is on matching the right event to the right consumer at the right time, wherever they may be. Obviously, for us, it's a great experience to have consumers download that app and not only use the app for their mobile wallet, for the ticket and inventory of what they've attended, but also to be able to match their relevant events and interests to things that are coming up on the -- in the Eventbrite ecosystem. And also, I think the important part of this is, we come at it from a creator-first mindset. And so we can take what we've learned on the consumer side and start teaching creators how to fish themselves. I think 1 interesting opportunity for us is how do we teach creators to be, just in general, more efficient and productive on the marketing side and how can they use the data that we have that's proprietary to our platform to be able to turn that into just greater outcome for the marketing dollars that they have. Because you can imagine that the mid-market, they struggle to sort of find the right audience and use their budget in a way that's really effective.

Yes. Lanny, when you look at the metrics that are going to be important to investors in judging the success of what you're all doing at Eventbrite, whether it's churn, whether it's customer growth, whether it's ARPU, how would you advise this group to sort of think about those metrics and the directions that they're sort of trending in?

Yes, I think it's pretty straightforward. We've talked a lot about creators. We are a creator-first company. And so the count and the tally of our creators and the growth of them and the size and nature of them, and what's important to creators is how many events do they use Eventbrite to host and then how many attendees come to those events. I mean it's like very basic unit economics. You can think of it as creators, events and attendees. And then there's a question of how much -- like what's the economic value of those attendees, whether it's -- because they've sold something to those people or they've sold them a ticket. And then what's our participation in that economic value. And so I kind of think of those 5 gears, if you will, as being kind of the way in which the business works. And so we do some communication about that right now, and I think that's probably an area where we can refine how we communicate to people. I think, similarly, it's important to understand some of the kind of unit economics of the business. We've got 60% gross margins, which is pretty attractive and the incremental cost of incremental tickets is not that great. And so there's a lot of scale and leverage in that. Another key thing, I think, for investors to understand is that our go-to-market channels, which are really different. We have the Self-Sign On channel, which has relatively low customer acquisition cost, it's acquiring some folks who are free. So there's low LTV, too, at least if you calculate it that way. But that SSO channel has very high contribution margins because it doesn't have a lot of go-to-market investment. On the other side, we have a sales channel, which is bringing in customers that think of their contribution to Eventbrite economically being 10x greater than the average Self-Sign On customer, which gives us a lot of room, that much higher LTV, which we can have a much higher acquisition cost. And one of the things needed on the sales side is, those are typically 2- to 5-year customer engagements, which have a very different level of predictability than somebody who is just on a Self-Sign On that might be for 1 event or it may turn out that they stay with us for a longer period of time. So I think one of -- if you put all that together, it's sort of like how many creators are we -- do we have? What channels are we acquiring them through? And then how successful are they? And the more successful they are, the more we participate with a very high gross margin and incremental margin.

Yes. So we do have time for questions to the audience. If you have one, raise your hand. We'll get a microphone around to you, or if you're sitting in the front row, go ahead.

Maybe you quantified Facebook already elaborating Facebook partnership and quantify it and timing?

Right. So we have a partnership with Facebook, wherein we distribute our event content to them. And it's a native checkout experience for the consumer, which is ideal for us because it has a much higher conversion rate for consumer to attendee. And so it drives more growth for our event creators. And we've been working with Facebook since 2008. And so this is an evolution of a partnership that we've had for quite some time. I think that as they continue to tune sort of how they want live events to up here in the feed, we continue to work with them on how we can get more events in front of more people at the right time because they really want that engagement of real-life experiences and real-life content in their feed. The distribution partnership for Facebook is a very minimal part of our event sell-through. The biggest category being the event creators themselves bringing the attendees to the platform as well as our destination efforts, and I believe that we quoted in the last quarter that our Eventbrite-driven tickets was growing 40% year-over-year. So we're seeing some really nice healthy growth there. So when we look at Eventbrite-driven tickets, we're thinking about our proprietary distribution channels as well as how we engage consumers through our native app and on the website and through content. And we keep an eye on that number because, obviously, the more that we can drive relevant consumers to become attendees of our event creators' live experiences, the more value that those creators are getting out of our platform in general.

And the rev share model?

I'd -- for Facebook, I don't know if we've reported that. But most of our distribution partners do not actually have a rev share model. It's mostly they want our content because these niche live experiences are really valuable content for their audiences.

I guess, in the last shareholders' letter, you discussed the end of the extensive integration process in Ticketfly. How do you look to -- or how can you help us think about how those freed-up resources will be applied? Will that go to the top line or bottom line or both as we project the company looking forward?

I would say that the resources that we've freed up with the time and effort that was spent on the integration that -- and migration that is now in the rearview mirror is going straight towards innovating and building new product for particularly our music creators. I've got a backlog of things that we can put those resources towards. So I think what you'll see is our continued investment and focus on building for those customers as well as our commercial teams being able to focus on building new music -- sorry, new customer acquisition. And then, of course, we need to retain these customers and really build a relationship with them on the Eventbrite platform. So we're not shortchanging that process as we all -- we are all on 1 platform now.

Julia, how do you think of the competitive landscape at this point realizing that your competition at the music festival level or the big event level is sort of very different than what you see at the individual level?

It's remarkable. Our competitive landscape really hasn't changed much since -- in the last decade or so. I mean, we compete mostly with folks who are trying to do this in-house. So it truly isn't -- that's why we use the word enablement, because we are actually enabling these event creators to use a platform and technology where they typically haven't in the past. And then as you move up the sort of spectrum of more sophisticated users, certainly, we see a higher degree of competition in categories like music, and specifically, in the U.S., which is why it's so important for us to really get that product market fit right in the most competitive market. We have the really great sort of luxury of this diverse event creator base all over the world, where 1/3 of our business is outside of the U.S. And so we can continue to extend and grow as we deepen our competitive positioning in the U.S. And then when you look beyond music, there really isn't any other competitor that is at our scale in a site Self-Sign On capacity anywhere in the world. And so that just continues to feed the growth of the scale of our platform, which again, is a really important part of how we grow in general. And so it's sort of this, again, one of those maddening answers, where there are thousands of online ticketing platforms, and most -- all of them are subscale to Eventbrite, and that gives us a really attractive position in the market.

Yes. Time for maybe one last question.

It's great to see that Ticketfly migration is in the rearview. But just, if you could sort of the line of thought, and just great to hear about some of the challenges on some of the blocks that you may have faced that were unexpected or are then you anticipated, any learnings that you might take away from that?

Yes. I would say the headline learning is both -- was both a challenge as well as a great advantage to us. When you think about the ticketing software for a venue, it operates a lot like an ERP for a small business. And so having someone switch their ERP on a time line that maybe wasn't of their choosing, is quite difficult. It takes a lot of time and effort and thought and attention. And I think that, that for us was the biggest hurdle, was the sort of emotional and logistical migration that needed to happen from one platform to the other. It's a great advantage to us because we have a very attractive position in the North American independent music venue space to now, you really have this healthy base of customers that we can continue to build for and through that build trust. I think that if I really look at it from a critical point of view of what I would have done differently, I think being more mindful of that, of the emotion of migrating from one platform to the other, and really giving the customers a bit more handholding earlier on would have mitigated some of the pain. But I think that now that the migration itself is in the rearview mirror, all of our effort can be spent on building the product that these customers need for the future as well as giving them service that really makes them feel loved and cared for, which at the end of the day, it's all we want.

I can't think of a better place to end. Julia, thanks so much for taking the time to join us. Lanny, thank you.

Thanks, Heath.