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

All right. Hello, everyone. My name is Dae Lee, and I am an Internet analyst at JPMorgan. Thank you for joining us today in our fireside chat with Eventbrite. I'll be kicking it off with some questions. [Operator Instructions] So just to kick off, Eventbrite is a global platform that serves and empower event creators. Its mission is to bring the world together through live experiences, which are fundamental to fulfilling a human desire to connect. In 2020, Eventbrite enabled 650,000 creators to host 4.6 million events in nearly 180 countries, processing 231 million tickets across those events. With us today are Eventbrite's Co-Founder and CEO, Julia Hartz; and CFO, Lanny Baker. Julia and Lanny, thank you for taking the time to speak with us today.

Thanks for having us, Dae.

Thank you.

All right. I guess to start, I don't think it's hard to guess what the first topic of our discussion will be, and it's the pandemic. It was and remains a challenge for all of us, but it's struck right at the core of your mission statement of bringing the world together through live experiences with the creators who you serve at the center of that challenge. So reflecting on the past 15 months, what surprised you the most about Eventbrite and your customers as you navigated through the pandemic?

Yes. I mean I think I'll take this and then, Lanny, you can -- you were there, too, so you can chime in. But I think most of our time these days is spent thinking about the future because that's what our customers need us to do. But for -- I'll indulge you and go back for just a brief moment in time. I think when this black swan event occurred and a once-in-a-100-year pandemic hit, we most benefited from the impact being pretty clear from the get-go. I think as a business, we understood that this was going to be a defining moment for us, and that our job as an executive team was to ensure the safety of, first and foremost, our team; secondly, our customers; and in turn, the business, right? So we set out on a, frankly, a war path for 90 days to ensure that we'd be sitting here with you talking about the future. What surprised me about that is not the fact that we made it and that we're here. It's everything that happened in between. I think by the time we really were off and running on a honed strategy, a restructured company, a vision for the future, solvency and runway to be able to see through any duration of this crisis, our customers were also doing the same thing. And so resilience and innovation were 2 things that I could have had a pretty strong intuition about had you asked me, but seeing it play out was pretty phenomenal.

Yes. That makes sense.

But I think that the way -- I think the way that -- sorry, the way that I want to just like put a finer point on resilience is that hundreds of thousands of creators pivoted their business to a virtual space, to this idea that these hyperlocal events could actually be consumed online. And what happened was that they actually ended up exploding into international global audiences and events. And so that's a whole new path for our customers to grow their future businesses. These customers found new ways to gather online. There were a whole host of creators who decided they weren't just going to take their event and try to do it in a virtual space. They were going to actually create a whole new format for gathering around something that they were passionate about. And I think that's emblematic of what we'll see going forward, especially in our market where we're serving the sole proprietor, frequent creator who's building a business on our platform as if it is their operating system. I think that really set the tone for our product direction and how we think about the future and the level of optimism we have, frankly.

Yes. That sounds good. Makes sense. So I guess before we talk about the future and how you guys are shaping the future of event creators, just take a look at the present, right now. Like how far along is live events at Eventbrite in the recovery? And what are some metrics that you guys look at to track the pace of recovery and where the world is headed?

Well, first, I'd start by saying what do we envision as recovery. I think we're -- we haven't seen everything, but we're certainly far more wiser and sort of battle-tested than we were even 15 months ago. We think that recovery will take form in fits and starts, will be volatile. There isn't going to be this really smooth kind of pathway up and to the right, and we're prepared for that. I think any company who is in any space that's been impacted by this pandemic who isn't thinking that way is in trouble. We're thinking very long term, and we're prepared for ups and downs. And we're also preparing our customers for that, too. So I'm going to be [ Captain Obvious ] and say that people are desperate to get back out. We've all been stripped of our freedom that we didn't even know was optional and negotiable, for a good reason, for the greater good of public health. But freedom of assembly has been something that all of us have just taken for granted. So I think that as people start to get back out and start to think about how they want to live their lives, they're going to be redesigning how they want to spend their time. A recent survey said that 52% of adults are saying they're thinking about leaving their job now. That also applies to how we're spending the most precious resource we have, which is not finite: it's time. And so what we're seeing is attendee -- or consumer demand is really fueling the attendee return to live events, and that's an incredible opportunity for our creators and for us to be able to tell them about what people want to go to. What do they -- how do they want to gather? Do they want to gather locally? Do they want to be traveling? And last Thursday and Friday, I was just telling you about this, Dae, we hosted the RECONVENE summit, which is our way of bringing event creators back together to design the next live events revolution. We had over 20,000 people sign up for this, and these are all creators right in our sweet spot, in our market of people who are hosting frequent events and who want to get their businesses back up and running. And the energy was incredible. I mean we're still processing through all the learnings. But it was incredibly interactive. You were there. You saw how much energy there was around meeting this new demand for live experiences, and how much opportunity these entrepreneurs see in that.

Yes. Speaking of RECONVENE, you talked about it a little bit. But I mean, were there any surprises that came out of the event since you hosted them? And do you guys plan on doing more of these going forward?

Well, again, the biggest surprise was how hard it was to produce it live. So hats off to JPMorgan for this live virtual event. It -- there are so many things that you can course-correct or, frankly, mask when you're actually in-person, when you're producing an in-person event. And a conference of our magnitude or of this size, it has to run like clockwork and it's live TV. And it's sort of counterintuitive because you're like, well, you're live if you're in-person. There's just so many ways that you can manage both sort of what happens on the stage as well as behind the scenes when you actually are in-person: nonverbal cues, all sorts of things that we had to learn the hard way. Case in point, I was in my basement doing the opening, the keynote for this 2-day event and had to race upstairs for a fireside chat with one of my favorite authors, Priya Parker, who wrote The Art of Gathering and didn't have any time to think about any sort of disaster scenario planning. And Priya's WiFi went out in the middle of our conversation, and she left me at the altar. I was on stage by myself for 15 minutes with thousands of customers and prospective customers and no backup plan -- no game plan. So I had to -- we may do that to you, Dae. We're going to both step out just for a minute to see how you do it.

Oh, I've done that.

I know -- Lanny, anything you would add? I know you've been in the weeds with us planning this event.

Yes. I mean I think the thing I would say, Dae, is that Julia gave a good flavor of that event. One thing that you asked your questions about, like surprises and things we hadn't anticipated, in the whirlwind of the onset of the pandemic, where your compass is spinning in every direction, you're trying to figure out which way is which. And one of the things that's been a surprise is really, at the end of the day, just how predictable things have been over the last 6 or 7 months -- or 4 or 5 quarters. And that's to say, when the pandemic and the virus are in recession, when restrictions on local gatherings are easing, when consumer confidence around being out in the public and gathering is on the rise, live events take off, in-person events take off and it's very, very strong. And then the flip side, when things don't look so good and when the health -- and in localities where the health dynamic is not good or where it has been good and it weakens, our business and our industry slows down. The sort of the thing we're seeing is, Julia mentioned it, the resilience and the creativity of the frequent creator to find a way to connect with their audience, whether it's much, much smaller events happening much more frequently in-person or if that can't happen, going to online. It really is heartening for a company, who has set its strategic focus on the needs of those frequent creators and serving them better than anybody else can because we're intimate with them and we're hosting 20,000 of them in our basement, that -- we feel like we've really found a very, very vibrant core of our business. And by focusing on them, we have a lot of confidence about our ability to continue to grow with them, acquire and retain more of them and help them as they try to grow their business into and far beyond this recovery.

Great. No, that makes sense. Then, I guess, [ sticking ] on recovery, you guys did highlight Australia and New Zealand as a region where you already see paid ticket volume reach a new all-time high and 20% of the [ monthly ] average in 2019. So like, I mean, is that a good example of how we should think about recovery playing out in other regions as [indiscernible] goes up and the restrictions ease? Or do you think that there's something unique about that market that could have driven a faster recovery there?

Well, I think that as apples-to-apples, it's a horrible example because Australia is, effectively, an island nation as is New Zealand, and they were able to close their borders and keep the bulk majority of the infection out. As a -- what's happening as a community, as a nation, as people start to get out -- because, again, Australia hasn't just been open. It's had a series -- I think Melbourne had one of the longest lockdowns. They continue to have a series of snap lockdowns, which are 3- to 5-day lockdowns, when there is an infection reported in a certain area. What is relevant is the way in which our customers are continuing to push forward and get creative and how much more frequency they can support because people, when they can get out, will go to the same beer festival 3 weekends in a row, for example, right? So there's -- there are these different sort of shapes and trends that are taking place, and our part in this is not to dictate how people should be gathering. It's to support our creators and say, hey, anything you are doing to help rebuild and reopen this live experience economy, we're going to support you with great product. One more point about RECONVENE that I think is really important, and yes, we do plan to continue doing something like this. It may not be called RECONVENE, hopefully, soon, [ or become convene ]. But is that -- it wasn't about Eventbrite. It's not about us. It's about our customers. And I think we did a great job of staying true to that promise and not making it all about us. Because we know at the end of the day that if we do our jobs right, we're creating a product, a platform and services that allow our customers to be exponentially more successful in what they do by doing 2 things: by driving down the amount of time that they have to spend on publishing their event, on promoting their event, on managing their attendees and all the workflows that go around -- that go into doing something over and over and over again, so that they could spend more time on the content and on cultivating that community element that's so important to their success. And the second thing is by helping them build a bigger community, a bigger audience of people who will convert into ongoing event attendees. And so effectively, recurring customers and recurring revenue. And that's what we've done recently with Eventbrite Boost is really put a flag in the ground and say, hey, we are going to expand more into how you market and how you promote your event. We're going to make -- help make you a better and more efficient marketer so that, again, you can achieve more with a finite budget because our customers don't have endless amounts of cash flow, certainly not today.

Right. Okay. Yes, that makes sense. And that segues into my next question of, I mean, just thinking about how you're positioning Eventbrite for future growth. You guys have made a few strategic pivots focusing on the Self-Sign On channel, [ certain ] creators and a better platform -- or, I guess, much easier platform for creators to use. So I mean, Julia, could you talk -- walk us through some of the strategic pivot that you made over the past 1.5 years and what drove that decision. And then, Lanny, if you could talk about that from a financial and capital allocation perspective, that would be helpful.

Yes. I mean I think that we did a huge service to ourselves during the crisis as well as to the long-term prospects of the business by asking a key question in late March of 2020. So very early on in the course and the cycle of this pandemic, we asked ourselves, knowing what we know about this business and our customers, what would we do if we could do it all over again? And that sort of turned this scary, ominous, amorphous, mysterious black swan event into something that was brighter, optimistic, clear what our mission was and what we needed to do. And so what came out of that were a series of decisions and all driven by the fact that we know so much about our core customer. We are experts in the frequent creator of events that are in this mid-market, and we have a few ways in which we do what we do best. And one of those is we offer a self-service product that's not just self-service because we don't offer account management. It's self-service because it's intuitive. It's automated. It really was about like, in a way, returning to the roots of what we know and where we shine and then exponentially leaning into that area. So that was the philosophy around honing the strategy and sort of making the subsequent decisions. But I'll let Lanny chime in about how then we reshaped the company to be where we are today.

Yes. I mean on the financial side, we eliminated over $100 million of operating expenses, and those were not volume-based changes in our cost structure. Those were service offerings, infrastructure, facets of our company that were either eliminated or renegotiated or resized. And those things were all done to really move the center of gravity into the product. And so today, more than 50% of our employees are in product engineering, data, design, where going back a couple of years ago, that number might have been in the mid-30s. And that's very purposeful to give the company a stronger emphasis around the core product, which is -- that which differentiates us. And it's also -- it's part of what creates the operating leverage for investors in our business in that technology platform is very, very scalable. And so as we add creators and as they have more successful events and they grow their attendance and we're able to offer them additional features on top of that technology platform, there's a tremendous amount of operating leverage that doesn't have to be met with a lot more people and a lot more operating costs as we grow. And I think we'll see that in coming quarters as hopefully our -- the recovery continues and our revenue progresses. I think we'll begin to show some of that operating leverage that we've been talking about and we've positioned the company for. Another important change that we made was our capital structure. We raised a bunch of money, $125 million in sort of the early moments of the pandemic. It was more than enough to get us through the pandemic environment. And then quickly, as we saw opportunity, we refinanced once and then really refinanced a second time to lower our interest cost by more than 90% and put us in a position where some of the convertible notes that we acquired are now, effectively, have sort of start to look much more like an equity investment or equity cost to the company. And we've, I think, got a capital structure, as Julia said, that is -- that's very ready to see the company far into the future. We made a small acquisition in the midst of all of this, a company that we've worked with for 2.5 years, as Julia talked about, in the marketing tools area. And 6 or 7 months later, we had integrated that product into our technology, delivered it and rolled it out, announced it to our customers and we're now out there talking about it. Really, what I think is just -- it's a wonderful timing because it's not too early that everybody's sort of worried about when are things going to come back, and it's not too late that things have already come back. We sort of delivered this new suite of marketing tools integrated into the Eventbrite product at the perfect moment in time where everybody is back, they're confidently back and they're thinking about how do I reengage with my audience, how do I grow my audience. So I think between lowering our expense structure, giving the company a lot more operating leverage and then adding, importantly, in areas that are big, long-term growth opportunities for us like this marketing suite and the marketing services, I think we've made some pretty material changes to the company so that I think externally, it's easy to look at Eventbrite as, oh, kind of a recovery play, but we feel like there's a lot more going on than a recovery. This is sort of like a transition play, a different company coming back to the market with a very strong position still there and, frankly, probably stronger position through the pandemic and really ready for growth far beyond just a recovery.

Yes. That's good. That's a great overview. Just talking about self-service a little bit more, I know you guys are making the pivot and shifting -- or planning to shift the mix more towards, I guess, Self-Sign On channel. And can you talk about the mix of -- mix between Self-Sign On and sales channel today? And then just specifically on sales channel, I do think there's some confusion around like what you guys plan to do with the existing customers in that channel right now. So could you guys talk about how that transition will play out?

Sure. Let me talk about this because I think there's a little bit of confusion, Dae. The way I would try to really be clear about it is, is think of 2 different things: go-to-market and service. And on the go-to-market, we have 2 channels: a sales channel and a Self-Sign On channel. Self-Sign On, if you include our free event business, Self-Sign On is 96% of our customer acquisition. And the sales, either inbound or outbound, is a relatively small portion of the business. So the bulk of our customer acquisition comes from the ubiquity of Eventbrite's presence across live events, the capabilities of our platform and the content that we produce about anything you need to know about organizing an event either in-person or online. The second facet, though, is to think about the service. So I talked about a minute ago about the go-to-market. Now let's talk about service. There's a self-service modality, and there's full service. Historically, that full service included all kinds of things like on-site gate and attendance management, event security. There were things that we historically have offered like a studio that created marketing collateral for customers. There was a program of providing capital for construction of facilities or for growth of our customers' businesses. We have looked at those full-service offerings and said -- really analyzed them pretty carefully kind of pre-pandemic and realized while valuable to many customers, they're very hard to scale. They're very hard to differentiate. They do not drive great margin. And as they become bigger and you do scale the people and the resources there, they become operationally very intense parts of the company that are not as attractive and not as differentiated and not -- don't support the kind of margins and the long-term value creation that focusing our time and attention and resources and efforts against our technology platform do. And so while we haven't really changed sales and Self-Sign On, those are both -- we'll still go to market through those 2 channels. We have very much changed the service so that 100% of our business today is self-service and we're not doing that full-service stack of other hard-to-differentiate things anymore. And so as we look forward, today, about 2/3 of our customers in the last quarter were customers -- 2/3 of the ticket volume -- paid ticket volume came from customers who were acquired through the Self-Sign On channel. If we were looking at new customers acquired during the period, it's probably a little bit stronger towards Self-Sign On just given that those smaller customers who come in through Self-Sign On are a bit more vibrant and active part of the marketplace today. So as we look forward, the elimination of that full services that we've offered in the past is going to mean higher gross margins. Probably -- the full-service customers were sort of low 50% gross margins, and the Self-Sign On -- self-service customers are high 60% to 70% gross margins. So as the mix shifts toward full service -- or sorry, towards self-service, we'll see higher gross margins. And then the service cost behind that has really been eliminated. So I think the margin structure of the business has been very much changed by this emphasis on self-service. And I think what will be true in time is that the growth momentum of the company will be amplified by the focus on self-service because it's just such a more efficient and whether that's resource efficient or capital efficient way for us to grow and to get to the market. As we continue to invest in product, I think we'll see that that's a far stronger model for us as we go forward.

Okay. Yes, that's helpful. Thanks for that color. Now I guess as we look out longer term, let's talk about TAM a little bit. It's a question we get a lot from investors and how we should think about your normalized [ level once ] the world returns to normal. So -- I mean, I think prior to the pandemic, you have a [ $5 billion ] revenue TAM number that was out there. Just curious to hear your thoughts around if the size of the TAM has changed at all because of the pandemic.

I think everything's changed in our business. I mean if you -- it's -- I would say the closest parallel is travel. So yes, absolutely, the TAM has changed. And we think -- obviously, we're very excited about what we're seeing in terms of market creation, the same event creator being able to host 2x the number of events because they've been able to really figure out a model where they're maybe gathering fewer people but more frequently, or they're subsidizing their in-person event with the newfound online community that they've created and events that they've created, right, where they have now access to 150 countries and people from all walks of the globe who have the same interest. But they're also able to bring back their pop-up event in regional cities that bring people together, and they're able to think about maybe how they might price that differently. Look, there's just so -- there's a different level of opportunity coming out of this that is not going to be a temporary burst. So I think that's how I think about TAM. It's just how -- we've aligned ourselves behind who we believe are the strongest customers on our platform who are creating market. It's up to us to build the right products to continue to not only scale those creators, but also to have them scale themselves, right? So finding new creators, but also having our creators partake more in this live events economy. And that, I think, is part of why the strategy makes so much sense. And also it's sort of -- it's underpinned by both the data that we're seeing on the platform as well as the anecdotal stories that we're getting from countless customers. We talk to customers endlessly all day, every day. And I think that if you look out 5 to 10 years, much of what we do will be self-service in nature. That's the beauty of technology and software specifically is that if you can really get to a place where somebody doesn't need to have a human actually go behind the scenes and flip something on for them, you're good, right? Like moving in the right direction. So I think that it's about sort of thinking about the ways in which events create depth in our lives, right? Think about it from the end user. You may go to a book reading on Tuesday and, Dae, I know you love your Sunday yoga workshops. These are the types of events that are fueled by the Eventbrite creator, and this is what I think is going to be explosive as we come out of this period of isolation where we've all been sort of held away from each other, away from these experiences. I don't know, Lanny, you may have a more satiating comment on TAM, though?

No. I mean I think that -- you're right. The marketplace doesn't look like it used to look like. It's certainly as big, if not bigger, going forward. And I think to a large degree, Eventbrite's opportunity is also defined by our focus. And you made a really good point, which is our product investment that helps creators succeed and have confidence to launch events and increase the frequency of events and to try new formats and to try new sort of content variations to give them tools to stay close to their loyal attendees and keep marketing and remarketing to prior customers as well as to identify new customers. I feel like our opportunity to continue to grow our part of the market to give creators the tools that they need to have confidence, to give them access to customers is really what drives our growth, much more than a sort of installed base of customers and we're just slowly chipping away at market share within an industry. I feel like we're really powering the success of a groundswell of creators who are taking to TikTok, taking to all kinds of different media to engage directly with customers. And the most direct form of engaging with your audience is to do it live, and Eventbrite's here to help that happen.

Got it. Okay. Yes. That makes sense. And just going back to your point about online events and that opening up your creators to a global audience base, like how do you guys think about like online events as a mix of your overall business going forward? Do you think -- I mean, given the exposure that you're providing, can that become bigger than in-person events over time?

Well, I think that was a very pleasant surprise and upside to this otherwise horrible year for anyone involved in this industry is that the human desire to connect transcended all obstacles. And creators saw that as an opportunity, and they really took that and ran with it. And so online events had historically been 1% to 2% of our business. We'd always ticketed online events because we ticket any kind of gathering. But it really was not -- it was not a meaningful part of our business. And online events were up 2,000% last year, and we think that, that is both a pandemic phenomenon. But so much has sort of -- there's been so much adoption and access to great technology in these global audiences that really leads us to believe that structurally, we will be different moving forward. We don't know if that means -- our intuition, rather, is that it's not going to be 50% of our business going forward. We can already see a shift back to in-person events as regions start to safely reopen. But we think it's going to be more than 1% to 2%. So I hate to give you such a vague answer, but I think that predicting the future is [indiscernible] at this point in terms of exactly what is -- where we're going to rest. I just think that where we've seen kind of a tangible evidence is in the fact that our creators do not want to give up that online channel now. They're not saying, "Oh, I'm never going to do online again. I'm only going to do in-person and shrink my audience by 200%." They're saying, "Oh, I'm going to continue doing this online series of events, and I'm going to bring back my in-person events," which is a wonderful opportunity for us to say, hey, we can help you build audiences for both, give you insight on pricing, help you understand how to organize both, build a better product for you to manage both, and that's exactly what we're doing. So I think it will be a bigger part of our business moving forward, but I don't think it will be so much so that we become an online events ticketing platform only.

Got it. Okay. That makes sense. And then just talking about product a little bit. You guys have already talked about Eventbrite Boost. I mean are there other like features or product that creators are asking for you -- from you to help run their events better? And could that be an opportunity to better monetize the audience that you guys have today?

Yes. Listen, we've been working really hard on getting our house in order. Through this -- like I said, we didn't have much time to sit and wait around and wonder what would happen. We took action right away. And in hindsight, that was one of the best things that could have happened to this company at this juncture. So we've been retooling, reimagining, ripping out foundational elements, replacing with more modern infrastructure, taking advantage of the lower volumes and activity during some of the most critical times of the pandemic to really think about how do we make long-term technical investments that will help us move exponentially faster. We welcomed a new CTO, Vivek Sagi, in the summer, late September of last year. And we've been -- obviously, by what Lanny just told you about the shift in OpEx, we've been focused on development. So we'll continue to be holding -- we will continue a pattern of putting forth product, whether it's vastly improved product for our creators or it's new innovative areas where we know we can have a meaningful role in helping them get a job done. And we'll continue to make sure that the marketplace grows and is liquid and vibrant and we're matching the right events with the right consumer at the right time, wherever they are. So I think that there will be -- our -- what we care about most is that our core customer understands that we understand their needs, and we also understand where we could be doing a better job. And so without giving away the full year's road map, I think you'll -- we've said enough to say there to give a good picture of we're going to make the product continually better, more efficient and more impactful for -- specifically for frequent creators who are doing this multiple times a month, sometimes multiple times a week.

Okay. That makes sense. I think with that, we are out of time. So Julia, Lanny, thank you again for joining us today and look forward to Eventbrite in the coming quarters.

Thank you, Dae. Good to see you.

Thank you [ for having us ].

Okay. Take care.