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

Hi, and welcome, everyone. I'm Cameron Mansson-Perrone, Morgan Stanley Music and Live event analyst. Before we get started, I want to note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures, all appear as a handout available in the registration area and on the Morgan Stanley public website. With that, I want to please welcome Julia Hartz, Co-Founder, CEO and Executive Chair of Eventbrite; and Anand Gandhi, Chief Financial Officer. So welcome both of you. Thanks for joining us.

Thank you.

Thanks, Cameron.

Julia, obviously, the '25 outlook you provided last week reflects some near-term headwinds. But how would you describe the general health of consumer demand for live events and experiences? And how are you looking to position Eventbrite appropriately to best capture those trends?

Sure. Thank you. I want to talk about consumer demand because that's the really fun part of your question. But first, I want to start with the less fun part of your question, which is the '25 guide and the headwinds. So stepping back, in 2023, we decided to change the pricing structure for creators on Eventbrite. We decided that instead of charging add-on fees for marketing tools, which we had built to help drive more ticket sales, we wanted to combine that functionality and democratize that for everybody to allow anyone to use those tools, which is really in line with the principle of Eventbrite and how we built this almost 20-year-old company. And we're certainly not the first company to have some challenges with pricing. It won't be the last. But I think what we learned through that -- so we rolled out this new pricing in 2023. What we learned in '24 was the pricing was confusing to our creators. And I think the headline lesson that's applicable to any marketplace is that it's a dialogue, not a mandate, meaning we were sure that we had simplified the structure enough that our creators would feel it was a no-brainer to pay a low fee per listing. And to them, it was a complete it was orthogonal to like what they felt Eventbrite did for them. And so what I think that we did in reverting back to a predominantly ticket fee structure is that we showed that we're adaptable. We showed that we listen. We show that we're not afraid to take risks even if it means that we were wrong and having to guide for a year that we have to lap these incremental fees. But we also showed that we can find ways to monetize this business that are in line with creators' best interest. And so today, while the majority of our business is driven by ticketing fees and revenue, advertising, which is net new to the business, is growing quite quickly, grew 83% year-over-year. And that's a promoted listings feature that gives creators the opportunity to opt in to drive greater exposure in the marketplace and to drive ticketing revenue. So that brings me to consumers. The consumer demand story is really stable and exciting. We're seeing the rise of online communities that people have really engendered themselves to translate into even more formats and categories of live experiences. It's really driven by Gen Z, but it's also supported by millennials and even baby boomers who are very active on Eventbrite, and including my own parents. And the ways in which we're capturing that is, I think, evident in our metrics. We're driving consumers to the right event at the right time wherever they are. So Eventbrite-driven tickets were up 10% year-over-year. We're also investing in spaces where consumers are looking for great things to do at a higher rate, where it's more concentrated and they're more active. For us, that's the consumer app. It's growing 17% year-over-year. And consumers that are coming to Eventbrite to find things to do through the app are transacting at about 2.5x the rate of those who are using web. In total, we have about 90 million active monthly users on the consumer side. So it's not an insignificant number. It's certainly -- we think there's a lot for us to do there. And I think the categories that are showing sustainable growth and even acceleration continue to be things like music, food and drink, cultural events. And that's really exciting for us as we look forward and we really lead the way through our consumer efforts to drive demand for our creators to help them reach a larger audience and to drive efficiency for them, especially in marketing.

One of the trends that you guys conducted a study on recently touched on this idea of Fourth Spaces. I think to the demos you just touched on Gen Z and millennials. What was surprising about those data to you? And what do you think that it means in terms of opportunity for Eventbrite?

Well, so Fourth Spaces is a nod to the idea that we have our home, which is our first space. We have work, probably all of you have work office, which is your second space. Third space is like cafes and public places where you can go and be with people and maybe also do work, which is a lot of young people today. When we looked at our consumer data, 90% of 18- to 35-year-old -- sorry, 95%. So let's just say all of the 18- to 35-year-olds that we talk to on the consumer research side said, they want to find more ways to be in real-life experiences with their digital communities. So if you just kind of like think about that over the last 5 years, these are young adults who created a -- who grew up with social media, who created digital identities early in their lives, who leaned into those digital communities, whether it's niche interest or affinity chatboards, they leaned into it early and they went really deep in COVID. And now this emergence of Fourth Spaces, we coined the term Fourth Spaces, but is coming to fruition in live experiences where consumers are wanting and desiring to bring their digital community selves into real-life experiences. So what does that mean? Because I just feel like a bunch of buzzwords. It means culinary pop-ups and anime speed dating and Silent Disco Yoga, there's a lot of mashup that's happening in formats and themes, which is probably the most surprising thing. It's just like how many combinations you can generate in these engaging live experiences. And community organizers are really savvy about how they bring people together. And so Eventbrite is capturing that. We're leading with the idea that niche is the new math. The digital identity we've created online, and we've cultivated throughout many, many years is now -- it's part of the flywheel of growth because now we're seeking out experiences that underscore who we are and then sharing them back online. And for the first time, we're really seeing a drive in content creation that's happening IRL that's based on the type of formats that you see online, and that's creating net new business opportunity for brands, for partnerships and for small creators.

When we think about -- because it's not just you guys, I think, broadly, companies who work in the live event space talk to very healthy underlying demand. Typically, when consumer demand is very healthy and high, it attracts competitors and capital. How is the competitive landscape for Eventbrite evolved?

Yes. I mean I think with consumers in our recent studies showing that 3/4 of them plan on attending more live events in the next 6 months, it shows that the market is healthy. We think that our current total addressable market is between $20 billion to $30 billion, and we're doing $300 million in revenue. So we think that there's a lot of great room to grow in our core mid-market. And I think the fact that the average ticket on Eventbrite is less than $40 lends itself to greater accessibility. Competition remains incredibly fragmented and hasn't really changed a whole lot. There's market dynamics and people going out of business and new entrants all the time. But if I had to like categorize the tactical business competitors that we have. The first is vertical ticketing players. So because Eventbrite, we're the #2 primary ticketing site by traffic globally. Because -- and the reason we are is because we have such a breadth of live events, like if you can dream it, it is on Eventbrite. Quite literally, I'll sound like bubble gum shrimp if I tell you all the events that are on Eventbrite. But the -- that breadth really lends itself to the audience reach that we can give our creators, which gives us a competitive differentiator against these vertically focused subscale ticketing platforms. It's also challenging because in the conversation with the creator, we have to make sure that they understand both the efficiency that we bring them from our tooling, but also the audience reach and show them. Recently, we've had a number of large creators come back to Eventbrite after leaving the platform, maybe during or right after COVID. And the #1 predominant reason why they came back is because they sell more tickets on Eventbrite. And now we've leaned into that with marketing tools that they can use and that they can see actually will work for them. The second thing that we compete against is DIY solutions. So in the mid-market and especially with small creators, which make up a very important long tail of our business, they might think, you know what, I don't want to pay a fee on top of payment processing, I'm just going to put a Venmo button on my web page or I'm going to add PayPal to my Squarespace. And what happens there is they also suffer from the lack of reach and the lack of activity in the marketplace and the analytics and reporting that we make available to everybody through our self-service solution. And then the third thing is social selling. So that's -- this is the sort of newer competitive pressure to us. The idea that like if you have an Instagram following, you should just be able to sell tickets on Instagram. And certainly, most social media platforms we actually integrate with and we integrate very deeply with to help create that transaction. Alone, it doesn't work because there's way too much noise in these mass social media platforms. We have the highest intent audience in this mid-market, ticket buying wise. And so we differentiate ourselves on conversion there. And then finally, I would say the esoteric competition we have is sitting on their couch and not going out, right, watching Netflix or being alone. And we think that Eventbrite holds a very special purpose in enabling creators and consumers to connect in real life. And everything we're seeing is around the support for the antidote to social isolation. And I would say that, that's really -- that underpins our mission of bringing the world together the live experiences.

Anand, I want to ask you, I think, an appropriate question given you're relatively new to the CFO role. What attracted you to Eventbrite? And I guess, in talking about competition and the landscape, what do you view as Eventbrite's competitive advantage, its most valuable asset?

Thanks, Cameron, and great to be here. So for me, it was really immediately evident the tremendous potential Eventbrite has to be an even larger two-sided marketplace. And the fact that 2 decades of experience building deep relationships on both sides of the marketplace, creators and consumers is really, really valuable. And Julia mentioned some of the stats, that vast broad selection on the supply side, plus all this traffic on the demand side, really gives a massive advantage to building that type of marketplace environment. And there's a simple other piece of that Eventbrite is a leader in this space and what it does. As Julia mentioned, the second highest traffic site for primary tickets. And the product, all this time, all this experience sets us up to have the best product for both creators and consumers. And so this leadership position is valuable. And from coming from a marketplace, coming from Viator, I see a lot of parallels. And all of that actually, and since I've come inside Eventbrite, I'm just even more confident about. And one thing that's really interesting as well is the ability for this business to scale we want to returns to ticketing volume growth. The cost structure works out very nicely for margin expansion. We're not -- because of all this organic traffic, we're not reliant on really expensive acquisition marketing, where a lot of platforms are. And right now, that's -- if we go to that path at some point, that's just upside. So it's a really -- the bones are there for a company that as we return to growth, can be a very -- in my mind, a very high-margin marketplace.

So let's talk about that return to growth in the context of your '25 outlook. We touched on it at the top. But obviously, short term, immediate term, working through some paid ticket volume headwinds. Obviously, no longer have the benefit of organizer fees. Help us -- help frame for us the kind of trajectory for growth as we move through the year. You mentioned that you'll get back to positive growth by the back half. But what does that trajectory look like? And on the profitability side, as you move through that end this year, what does that look like within the context of your kind of mid-single-digit margin guidance for the year?

Yes. This year is a unique year. We have this situation of the organizer fees going away. So you have $20 million of fees that is mostly drops to EBITDA going away. And that is unique and something we'll fully lap before the end of the year. So we had about a year kind of reaching kind of the bottom, I guess, of the negative impact of the fees on ticket volume and now it can take -- it'll take some time to get back to growth. And so that one piece in itself, mathematically, that margin compression could get you just to mid-single digits. Then we also have some incremental compression just from the fact that we haven't returned to ticket volume growth yet. So that adds a little bit of deleverage operating-wise. And so -- but again, once we return to growth, that becomes a positive. So these margins are really a temporary situation of just these really unique, I see onetime dynamics. And then it sets us up in a really good place for next year because if -- our core revenue streams are really ticketing, which vast potential, huge market and these ads that are really high margin and that are growing nicely. And those are the revenue streams going forward. And we're confident that they'll be growing. And so when you look at a cost base that we believe has been rightsized and reduced, that we don't believe needs to grow to continue to scale revenue, it sets you up for a simple -- simple math there is quite compelling. So we feel really good about the trends we're seeing this year that suggests returning to paid ticket volume growth, second half of the year, all the things Julia mentioned. But that's really positive. Everything we've seen since we removed the organizer listing fees have been exactly where we want it is that what we hope to see. Creators coming back. Improvement both in new creators and retention of creators, volumes improving. So it's all the right trends, everything is heading in the right direction. Obviously, everyone wants to know pinpoint exactly at what point you flip to paid ticket volume growth. And I think right now, I think the right thing to say is what we did in the second half of the year. But obviously, we'll share more as the year goes on.

What are some of the specific actions that you've taken from a blocking and tackling perspective that's helped you start to move paid ticket volume back in the right direction?

Yes. I think as we reset the pricing and really oriented the messaging around Eventbrite is free to grow because we had introduced greater functionality through our marketing tools and promotional tools that had previously been behind a separate paywall. So we streamlined the organizer -- the creator experience to go from creating your listing to being able to market your event and really see the benefits of that right off the bat. In addition to that, we had -- we have rolled out much better and more sophisticated reporting and analytics that is drop dead simple to use as well as time to entry, which pushes us into a new market in a segment, which is for hyper frequent events. But with that rollout, we also had introduced account level payouts, which was -- it's a behind-the-scenes change that means a lot to our creators and how they can perform bookkeeping for their events. So there was a lot to say in terms of benefits. And strangely, like even in the midst of a crisis when you're trying to make up with your customers, you can't let it go to waste. So the marketing message landed well. And it also helped us engage high-value creators and really get sharp and specific about what we want to see as we rebuild the marketplace, mostly on the inventory side, where we want to be spending our time, how we want to be targeting the creators that we know drive consumer demand to the platform and how we think about that, not only from a self-sign-on side, which is 70% of our revenue and 98% of our creators, but also from a sales side, we've been rebuilding our sales motion for the last 12 months under new leadership, and these two things converged at the same time. So it is building some really healthy momentum on the supply side, both bringing in high-value creators in categories we care about and metros we know we can drive marketplace liquidity and as well as opening the doors to the self-sign-on creators who maybe had opted out or had decided not to use Eventbrite because they were confused by the pricing.

That's a good segue, and I wanted to focus on specifically high-value creators. You guys mentioned it as a big opportunity. And when you refer to high-value creators, I think in my mind, at least, it is a cohort of your creator base that is not only active on the platform, but kind of proactively taking advantage of or availing themselves of a lot of the demand gen capabilities that you provide to your creators. Is that a fair characterization for what you mean when you refer to high-value creators?

Absolutely. I think you said it better than I could. So well done. The threshold for high-value creators is really above $1,000 a year in GTF. So that's a pretty large cohort of customers. When you drill into who we're building for and how we're reaching them and who we're investing marketing and sales dollars into, it really becomes a bit more nuanced in terms of -- on the sales side, we want to work with creators that have been long established, who we have clear relationships with and we know that they're bringing with them not only consumers, but also lighthouse account effects, so halo effects within their category. The kind of the good news, I think, about event creators is that it's a community-driven industry where every -- if you're hosting a cooking workshop in Seattle, you're acutely aware of what your competitors are using in terms of ticketing. Same thing goes for a venue in Brooklyn. And so we can capitalize on that through our sales motion and how we rebuild our book of business there. And then on the self-sign-on side, again, fundamentally, we are driving the conversation on growth and audience reach, and those marketing messages are really starting to land. And so I feel confident that we can stay the course that we can stay focused on what we're doing. We're really focusing on driving demand for our creators. We're focused on expanding Eventbrite ads as a monetization channel. And we're focused on driving operational efficiency for creators and consumers, right? We don't want consumers to have to spend so much time looking for the live events that they should be attending. We want it to be quite literally always there ready for them. And on the creator side, for every hour that we can save an event creator, it is like it's gold to them because they are such small teams or often solo entrepreneurs.

Any help with sizing the base of high-value creators within your overall creator universe?

I don't think that we've shared that yet. So I don't think I should make up an answer right now.

No problem. The other big focus, it seems to be is on customer service and really adding value to your creator base through those support services. What do you see as the opportunity there? And maybe to bring it back to the financial outlook and what it means ultimately for the business, what's the value to Eventbrite from what I assume to be mostly driving retention up, driving creator churn down?

Yes. I think that there's a -- I think there's a huge amount that we can do to drive up the feeling of trust and support for our creator base by showing up for them when they need us the most. And so what we do is we focus on the critical moments where it's like do or die for creators, which is can you sell tickets to your event? And can you get the money that was generated from those ticket sales. And we obsess over those moments and really focusing on making sure that we can give the best possible service to our creators in those moments. Then beyond that, we're looking at ways that we can make Eventbrite's service and customer success always on because event organizing is a 24/7 like I was going to say sport, it's not really a sport, a profession for people. It's something that oftentimes things go wrong in the off hours. And we want to make sure that we have the internal infrastructure and technology to just always be on for them. And then third is we want our service to be consultative, meaning we don't want to just be triaging issues. We want to actually be able to help creators proactively grow and take advantage of the marketplace. And then one more thing, which is consumer support has scaled. We've partnered with a company called Decagon, and we've scaled AI-driven support there by partnering with creators to populate their own SAQ so that our chatbot can be their customer service department for the consumer questions that come our way. And that's something that's nascent. I think we'll see some great returns from that this year as consumer sentiment goes up because there are a lot of questions that come and our creators don't have customer support teams to man those, so we can take that on for them.

Got it. I want to branch out from just ticketing and touch on your ancillary revenue streams, ads, which you mentioned before, and I think it's now the Pro plan are collectively, I think it was 8% of revenue in the fourth quarter. Where do you think adoption of those goes long term? And where do you think the revenue contribution from those ancillary streams can go?

So going forward, in this marketplace line, we had -- we're not going to have the organizer fees, and it's going to be added as well as these services. And we see ads growing and that being a significant driver. And it's a very high-margin attractive offering that's seen a lot of success with our consumers. So I think the way to think about that is that line gets it's kind of this year's adjusted down given lack of organizer fees in the future, it's going to be mostly ads, and there'll still be some -- we still feel like they'll be good solid Pro services in those fees. But ads is the one that we see the ability to grow faster -- fastest of everything and really become a real and a significant revenue stream. I think the ticketing -- core ticketing will always be really, really large revenue stream given the size of this market and the potential for when we return to growth. I mean, that's always going to be the biggest driver, but having also ads there that is seeing success that customers are getting benefit from and that's high margin growing fast really sets us up well when -- as we continue -- as mentioned here, those are our revenue streams going forward. It's really ticketing and ads, then they're both positioned quite well.

What is the recipe for ad scaling? Is it about better or continuing to communicate with your creators and make sure that they're aware of these tools? Or is it continuing to build out and improve the efficacy of the tools?

Yes. I mean I think first, one note on Pro because we kind of threw it around. It's premium e-mail marketing. So it's a higher volume option for premium e-mail marketing and more sophisticated tooling. It replaces a Mailchimp. So that's what we mean by Pro. And I don't see us developing more into that package in 2025. We're going to focus on ticketing and ads, but that could become something in the future. On the ad side, it comes down to three things. Yes, awareness and adoption, so making sure our customers understand how they can use Eventbrite ads and why they should use Eventbrite ads over spending their marketing and advertising dollars elsewhere. We know that the average creator spends about 40% of the face value of the ticket on marketing. And so we know that Eventbrite is the highest intent audience of event seekers to advertise to. Again, it's very noisy out in social media land and traditional digital advertising places spaces, and we think that we have the highest conversion rate, and we're seeing some really strong ROAS for our creators. On average, a creator who uses Eventbrite ads sells 4x more tickets than when they sell tickets to the same event not using ads. And so we have some strong signal that we can use in our messaging and our case studies for creators. So building awareness and adoption is key. This year, we're really focusing on making sure our sales account management teams are really -- our customer success teams are really incentivized and focused on ads adoption for our highest value creators. Secondly, as we're pushing into the time to entry segment, we're focused on making sure that those customers are all using Eventbrite ads since those events tend to be evergreen and you can really study the efficacy of Eventbrite ads over time with those creators and show them the benefit of that versus just a one-off event. The second thing is expanding ad placements. So making sure that tomorrow, we'll be launching our redesigned app, making sure that ads are showing up in the places where consumers are transacting more. Consumers in the app are 2.5x more active than those on the web. So making sure that we've expanded ad placements throughout the ads throughout the app experience. And the third thing is getting to a more sophisticated objective level for our advertisers. Today, you can drive impressions and you can drive clicks, but you can't set your goals on ticket sales. And we obviously want to get to that point because that's what we care about most. And we think that there's something for everyone once we have that in place.

You mentioned the new mobile app. What else is on the radar from a product development standpoint? Where are you guys focused with regard to the product? And for the mobile app, what do you see as the big unlock or opportunity that, that can help provide?

Yes. I would really just categorize our product road map this year on two key themes, which have been pretty consistent for us in the last few years, efficiency and reach. We really think that creator tooling to ensure creators can use Eventbrite for their needs to be able to get on sale quickly, to be able to see the sophistication of where their ticket sales are coming from, to be able to advertise their events. and market their events in a way that's really efficient is our #1 job. And the second is over half of our creators state audience growth as a problem, as their #1 problem. So reach is our second major pillar and theme. And so our product road map is centered around those two parts of the marketplace this year. And what I'll say about the consumer app is it's not just like new brand logo and color palette. It's really about centering around contextual discovery and really that driving usage of the app and discovery and ticket sales for our creators and also the ability to build the social graph and allow consumers to start to partake in the idea of curated discovery and building out your own digital interest, that whole bridge, right? The whole Fourth Spaces bridge is really about what we're building that consumer app for. And I would say like it's really important to note that we're not betting the future of Eventbrite on the consumer app, but that's where our most active consumers are. And again, mobile app MAUs are up 17% year-over-year, and we're seeing greater conversion and value from those consumers. So rather than boil the ocean, we're ring-fencing our consumer demand investments around the app, not only to get signal faster, but also to help drive creators to partake in that and to see return.

You guys have -- I mean, the mobile app is a good example, but have seemed to be executing well from the perspective of shipping product without OpEx growing super healthily recently. Is that an opportunity that you see continuing to be the case? Do you feel like there's a robust enough product map and high enough ROI where you see yourselves leaning more into product development spend? What's the outlook for that financially?

We do feel like we're in a healthy place with staffing for product and in generally for OpEx. So we -- this is part of, I think, what sets us up well as we believe, foresaw margin expansion of the fact that we are staffed well today. We've taken costs out of the business. And we're very disciplined about adding any cost in the business. And basically, ensuring that people self-fund and find and it's about reprioritizing resources and having strong talent and not necessarily about adding new talent. I think -- and it goes to the bigger just overall, the margin piece, right? It lends itself to why the math for our perspective make so much sense because you have a team that's solid, that's strong, that is well staffed, but it is also smaller than it was before. And we believe can continue to meet our growth objectives and aspirations without requiring incremental investment, really. And so -- so that's our plan. And all these initiatives we've taken to really monitor spending have been really well received internally. People get it, and sometimes it forces you to get the best work out of people when you're really being disciplined about it. So one of our key themes is that I have a broken record on is like financial discipline and which we're really confident is going to pay dividends as revenue starts growing again.

As we think about the overall profitability opportunity, we're almost out of time, so maybe I'll end it here. But do you see scaling the ticketing business as providing sufficient leverage for you over time to really ramp that profit curve? Or do you need to grow ads and ancillary streams? You said, as you highlighted, they're higher-margin revenue. Do you need to ramp those? Or do you think just scaling ticketing is enough to really execute on your margin trajectory?

Yes. Ticketing by itself, 100% is enough, right? And it's -- and -- and so the opportunity there and the ability when we think the market is to scale, that itself provides more than enough room, in our view, for significant margin expansion. The ads is a really great opportunity on top of that, right? And just to remind, our core ticket business is high margin, it's just ads are even higher margin. So we have our core business that has a lot of room to scale, that is high margin, that itself, I believe, will get us to -- will drive significant margin expansion. And on top of that, we have this great revenue stream that's showing a lot of success in the stats that Julia was mentioning in terms of how effective they are for our creators. I mean, those are real stats, and I think that's going to provide a nice little bonus that's going to be -- bonus is underselling it, to provide additional upside that's meaningful, but I don't think it's -- it's not required to deliver margin expansion, but I think it will add to margin expansion.

Great. That takes us to time, but thank you both for joining us.

Thanks, Cameron. Thank you all.

Thank you.