Eventbrite, Inc. (NYSE:EB) Q3 2023 Earnings Call Transcript November 1, 2023
Eventbrite, Inc. beats earnings expectations. Reported EPS is $-0.09882, expectations were $-0.11.
Katherine Chen: Good afternoon, and welcome to Eventbrite's Third Quarter 2023 Earnings Call. Prior to this call, we released our shareholder letter announcing our financial results, which can be found on our website at investor.eventbrite.com. Before we get started, I would like to remind you that during today's call, we will be making forward-looking statements regarding future events and financial performance. We caution that such statements reflect our best judgment as of today, November 1st, based on factors that are currently known to us and that actual future events or results could differ materially due to several factors, many of which are beyond our control. For a more detailed discussion of the risks and uncertainties affecting our future results, we refer you to the section titled Forward-Looking Statements in our Shareholder Letter and our filings with the SEC.
We undertake no obligation to update any forward-looking statements made during the call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. During this call, we will present adjusted EBITDA, adjusted EBITDA margin and available liquidity, which are non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and of limitations as an analytical tool. You should not consider them in isolation or as a substitute for analysis of our results of operations as reported under GAAP. A reconciliation to the most directly comparable GAAP financial measure is available in our shareholder letter.
We encourage you to read our Shareholder Letter, which contains important information about GAAP and non-GAAP results. And with that, I'll now turn the call over to Julia Hartz, Co-Founder and Chief Executive Officer.
Julia Hartz : Thank you for joining us today. We're pleased to report that our third quarter results were strong with noticeable growth in revenue and profitability year-over-year. Additionally, we have successfully rolled out our marketing and demand generation tools to all Eventbrite creators. I'm excited by the momentum we're building towards our transformation into a two-sided marketplace, which will enable us to create more value in the long-term. Gross ticket sales reached nearly $900 million in Q3. Year-to-date transactions totaled almost $3 billion for our creators. Take rate is now over 9% and revenue grew 21% year-over-year. When comparing year-to-date 2021, we have more than doubled our adjusted EBITDA margin. Our business has a unique position in connecting both audiences and creators of live events of any kind, anywhere.
In the third quarter, creators listed promoted and sold tickets for over 1.5 million events, a number that surpasses any other live events marketplace. There is truly a live experience for everyone on the marketplace. And with our strong brand affinity and trust, we attracted millions of consumers to browse and discover great things to do. We're working hand-in-hand with event creators to ensure their events are filled to capacity and they can more easily achieve their revenue goals. Eventbrite is their most trusted partner to power their event growth with both marketing tools and promoted listings that help tap into the consumer opportunity of our marketplace. I want to touch on the most meaningful change for our creator experience this quarter before discussing our work to bring more consumers to the marketplace.
We've integrated social media advertising and e-mail marketing tools into the core event listing experience. Access to these features is no longer a subscription, but rather a new pricing plan that is offered to creators of free and paid events. The new pricing model seeks to balance 3 key principles. Firstly, we aim to use the pricing strategy as a tool for positioning. Our goal is to make the audience and demand generation easily accessible to our customers so they can appreciate the value and effectiveness of our marketing tools and advertising products to achieve their goals faster. Secondly, we strive to create a cohesive product experience by combining core ticketing with our new demand generation capability. This will allow us to our customers better and provide a seamless experience between our ticketing and marketing solutions.
And finally, we're committed to better communicating enterprise value to our customers and creating a fair exchange with creators and consumers. We believe that by focusing on these 3 areas, we can significantly enhance the customer experience and achieve our business goals. Our new pricing model has been implemented in all major markets as of October and has contributed approximately $1.5 million in revenue for the third quarter. Our next plan is to introduce more in-product marketing during Q4 to help creators understand and utilize our marketing features in order to enhance the success of their events. Leading with marketing and demand generation at the heart of how we have served creators represents a major step in our marketplace journey.
We have a strong conviction that this new go-to-market approach can unlock meaningful growth going forward. Event creators who list their events on Eventbrite can take advantage of our Promoted Listings advertising product to increase visibility among high-intent visitors on a site and mobile app. In response to creator feedback, we've recently added an option to optimize Promoted Listings for click-through traffic instead of impressions alone. Advertisers have responded positively with 80% choosing the traffic option. During the third quarter, total demand for ad supply on Eventbrite increased by over 70%, indicating that each new feature release is improving product market fit. As we move towards the cost per click model for Eventbrite Ads, we expect to provide even more clarity on return on ad spending for creators, leading to wider adoption.
During the third quarter, Eventbrite witnessed a 78% increase in total revenue from organizer fees and subscriptions. It's worth noting that this represents most diverse revenue profile that the company has seen so far, although it's still early days. As Eventbrite continues to grow its higher-margin non-ticketing business, we'll continue to improve the overall take rate and move closer to achieving our long-term financial targets. Now let's shift our focus to the demand side of our marketplace and take a look at how we're catering to the needs of consumers. In the third quarter, Eventbrite's reach expanded to almost 32 million attendees. During Q3, we witnessed remarkable traffic on our website and the consumer app where monthly active users surged by 30% compared to the previous year.
This is noteworthy because we have observed that app users are typically event enthusiasts with 1 in 5 purchasing a ticket at least once a month. Year-to-date, over 388 million consumer sessions have occurred on Eventbrite as a result of the continued demand for unique and local live experiences. As you might expect, no one has a better -- what consumers want to do than Eventbrite. Those insights help us point consumers to popular events and drive incremental ticket sales. One example is our September GTFO and Date campaign, where we predicted fall dating trends and teamed up with the Bachelor Tyler Cameron to spotlight unique data ideas and drive viral content on TikTok and Instagram. Using targeted consumer marketing to embed ourselves in the event discovery process is critical to building our marketplace, and we will continue to invest thoughtfully in this area.
In Q3, Eventbrite user experience for consumers saw major improvements. Our Android app underwent an important update that simplified the search interface. We also made it easier for users to share event listings, which led to an immediate fivefold increase in shares from our home page. In October, we launched a nightlife discovery experience, aggregates events from different categories under a common theme, making event discovery more closely match real consumer search behavior. Our ML-based personalization and recommission models are continuously updated, and we're increasing the number of consumer touch points that benefit from these models, which results in increased engagement and conversion. Lastly, before I turn the call to Lanny, I want to congratulate our team for being named the most inclusive organization for women in tech in India by I'm proud that our values and commitment to equality are rooted so deeply in our culture that they're already recognized even in our newest development hub.
Now Lanny will discuss our Q3 results and Q4 outlook.
Lanny Baker : Thank you, Julia. We delivered continued progress in the third quarter in support of our long-term financial targets. Revenue of $82 million was at the high end of our outlook range, up 21% year-over-year. Gross margin rose to 69%, excluding restructuring costs, thanks to improved ticket volume, increasing marketplace-related revenue and control over fixed costs. Adjusted EBITDA was $7 million, excluding restructuring and other nonroutine costs. That yielded an 8% adjusted EBITDA margin for the quarter, up 2 points from the same period last year and bringing our year-to-date adjusted EBITDA margin to 12% on an operating basis. Finally, we ended the third quarter with a strong balance sheet. Available liquidity increased by $15 million during the quarter to $381 million as described in our shareholder letter.
I'll now provide more detail on third quarter results and then discuss our outlook for Q4 and the full year. Total creators, including those hosting free events exceeded $395,000 in the quarter, and paid creators grew 10% year-over-year to 185,000. Paid events per creator averaged 3 events, down 2% from Q3 of 2022. Total paid events reached 561,000 in Q3, up 8% year-over-year. This pace similarly to overall event growth which supported 1.6 million free and paid live experiences issuing tickets on Eventbrite during Q3. Paid tickets per event averaged 41% down from 42% in the same quarter of last year. Total paid ticket volume of $22.9 million was up 4% versus a year ago. Paid tickets grew 5% year-to-year in the United States and 2% year-to-year in the rest of the world.
Average ticket price was just over $39 for the third quarter, up slightly from a year ago, and gross ticket sales were $892 million in the quarter. Finally, revenue take rate was 9.1% in the third quarter, another record and more than one full point higher than a year ago. Revenue per ticket was $3.57, which is 17% higher than Q3 2022. Investments in the core product that support better pricing explain approximately 70% of the year-to-year increase in revenue per ticket. While the strong growth of ad revenue and organizer fees, accounts for about 30% of the improvement in revenue per ticket in Q3. As we continue to build Eventbrite's ability to help creators market events and grow attendance, we see additional opportunity to strengthen that monetization.
Turning to the P&L. We're encouraged by the early advances we made in our financial model as we pursue the marketplace transformation. Better monetization of total activity on the Eventbrite, including monetization of free events, combined with the favorable paid event pricing actions that we took earlier this year, have significantly improved overall unit economics. The benefits are twofold: structurally higher gross margins and greater financial resources to fund growth-driving investments. We plan to continue to invest thoughtfully in our core product and into new marketing and advertising features as we expect these to help further improve unit economics and take rate in the future. Demand generation and market-base related revenue exceeded 5% of net revenue during this quarter.
We're pleased to see the diversification of our revenue profile beyond ticketing and expect to make continued progress as we focus on accelerating these areas. Newly introduced organizer fees associated with marketing tools and listing events on Eventbrite, contributed $1.5 million in revenue in Q3. And revenue from Eventbrite ads was nearly $2 million, up more than 40% from Q2 levels. Boost contributed the balance of non-ticketing revenue in the quarter, and Boost subscribers will be migrated to subscription organizer plans during Q4. Now I'll turn to our expenses and profitability, which we will continue to present on an operating basis, excluding nonroutine items and restructuring charges. Regarding the restructuring, we're tracking to plan and expect total restructuring costs of less than $20 million for the year.
Consistent with our initial expectations, we anticipate roughly $13 million to $14 million in annual operating costs to be free from our expense base, a portion of which we intend to reinvest in talent and product. Gross margin performance remained strong at 69% for Q3. This is more than 3 points of improvement compared to the same period last year and continues to climb toward the higher end of our long-term target range of 68% to 70%. Our total operating expenses of $67 million in the third quarter were up 17% compared to a year ago, while supporting revenue growth of more than 20%. Product development and general and administrative expenses, both provided operating leverage and margin growth during the quarter. Product and development expenses grew 3% year-over-year, representing 28% of revenue.
We've successfully shifted a meaningful proportion of our product, development and engineering teams to Spain and India. And that gives us flexibility to invest in an increasingly efficient manner. We expect to manage these expenses within 27% to 30% of revenue as we execute on our product road map with an eye on achieving profitable and sustainable growth. General and administrative expenses were up 13% year-over-year. Included here are some transitory and duplicative costs that we anticipated in our restructuring plan. As those costs abate in the coming year, we expect to drive general and administrative costs closer to the 22% to 24% of revenue range that we've outlined in our long-term model. With these parts of the company and our restructuring, delivering strong operating leverage, we stepped up our investment in sales, marketing and support in Q3 to accelerate our marketplace repositioning.
We believe the timing occurring just ahead of the seasonal holiday period. And we ran Creator and consumer campaigns in tandem to elevate brand awareness and drive demand generation. Results from this marketing blitz are looking encouraging, particularly for consumer, and we're adapting to what we've learned for future initiatives. We also expanded our sales team and made steady progress on relocating our customer support teams into lower-cost international regions. Sales, marketing and support expenses grew 45% year-over-year in Q3, so we do not intend to grow at that rate longer term. Turning to our business outlook for the final quarter and the full year of 2023. Based on current information, we currently anticipate fourth quarter revenue to be in a range between $86 million and $90 million.
At the midpoint of that range, revenue growth will be 23% for the fourth quarter and it would lead to a new all-time record in quarterly revenue. Our Q4 outlook anticipates a growing revenue contribution from organizer fees and Eventbrite ads with modest year-to-year comparisons in paid ticket volume. For the full year, we're tightening our revenue outlook range, and we currently anticipate 2023 revenue in the range of $324 million to $328 million or 24% growth at the midpoint compared to 2022. As we've indicated previously, factors that would tend to move results toward the upper end of the business outlook range include stronger paid ticket volume as well as more successful product and marketing activity, especially as it relates to organizer fees and Eventbrite ads.
Factors that would tend to shift results towards the lower end of the outlook range include macroeconomic factors, reduced demand for events on our platform or disruption arising from the introduction of new fees and our shift toward a marketplace model. Based on the revenue outlook just described, we expect adjusted EBITDA margins, excluding the impact of restructuring charges, reserve adjustments and other nonroutine items, to be in the range of 12% to 13% for the full year of 2023, significantly improved from 5% in 2022 and on track with our goal of reaching a 20% adjusted EBITDA margin at a point in 2024. And now I'll turn the call over to the operator for the question-and-answer portion of our call.
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