Eventbrite, Inc. (NYSE:EB) Q4 2023 Earnings Call Transcript
Eventbrite, Inc. (NYSE:EB) Q4 2023 Earnings Call Transcript February 27, 2024
Eventbrite, Inc. beats earnings expectations. Reported EPS is $-0.00927, expectations were $-0.05. Eventbrite, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Katherine Chen: Good afternoon, and welcome to Eventbrite's Fourth Quarter 2023 Earnings Call. My name is Katherine Chen, Head of Investor Relations. With us today are Julia Hartz, our Co-Founder and Chief Executive Officer; and Lanny Baker, our Chief Financial Officer. As a reminder, this conference call is being recorded and will be available for replay on Eventbrite's Investor Relations website at investor.eventbrite.com. Please also refer to our Investor Relations website to find our shareholder letter announcing our financial results. which was released prior to the call. Before we get started, I would like to remind you that during today's call, we'll be making forward-looking statements regarding future events and financial performance.
We caution that such statements reflect our best judgment as of today, February 27, based on the 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'll present adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures.
These non-GAAP financial measures are not prepared in accordance with generally accepted accounting and have limitations as an analytical role. 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.
Julia Hartz: Thank you to everyone joining us to review our fourth quarter and fiscal 2023 results. We took bold action this year to accelerate our two-sided marketplace model. Success meant delivering audience growth to our creators, tapping into new and vast consumer opportunities and driving increased financial returns for our business. I'm proud of the team for making progress on these priorities. Gross ticket sales totaled $3.6 billion in 2023 as we helped power the global experience economy. Our community grew to over 91 million people who love to go to events and nearly 1 million event creators who trusted Eventbrite to handle ticketing and promotion for over 5 million events last year. We democratized online advertising for our creators with the widespread release of our marketing tools.
For consumers, we helped to bring events to life with a richer and more personalized search and discovery experience. Our strong 25% top line growth for the year reflects our ability to serve ticketing, marketing and event discovery needs. Looking ahead to 2024, we remain focused on our goal of becoming the go-to marketplace for shared experiences. Thanks to our thoughtful product investments, the creator experience became more differentiated than ever during 2023. Our focus on generating demand has been a key driver in our marketplace transition. We've become a demand generation partner by providing marketing tools to all Eventbrite users. Over 75% of creators we surveyed already consider us a partner in boosting their event success. We believe our brand equity, consumer presence and ability to influence event marketing outcomes will set us apart from other solutions.
We're happy with the progress made throughout the year on Eventbrite Ads. Our team has worked tirelessly to support a record number of creators who are looking to promote their events in the marketplace. In response to feedback from our creators, we have introduced new ways to tailor event listings, resulting in better ads efficacy and accelerated sign-up rates. With the implementation of AI-powered event and marketing flows, we drastically decreased the time it takes to create an event listing and marketing campaign. We continue to find new ways to apply conversational AI to serve our customers' needs and generative AI to make hosting an event intuitive and successful. Each of these product areas focuses on addressing the most urgent need of creators, to sell more tickets and improve event success.
In 2023, we better positioned our team to deliver that outcome for our customers by repurposing investment resources toward growth enablement. Earlier this year, we restructured our teams to reduce operations overhead. We outsource customer support functions to the Philippines to streamline operations and scaled our development capacity in Spain and India. We believe this new operating mode will help us execute our proven ticketing playbook more efficiently. By doing this, we can focus on creating more value for our customers and also better target those creators in the future. We've already witnessed the advantages of this strategy in our financial performance. Although monetization has increased, we've been able to maintain moderate operational expense growth by improving efficiency and cost management on a daily basis.
We aim to continue these gains this year and strive to achieve even better results. Our decisions reflect our thoughtful transition to the two-sided marketplace model that we believe best serves creators and consumers and creates long-term value for our business. We've made strong progress on our product road map to support our marketplace repositioning over the past year. Where we now see the biggest opportunities are in honing our go-to-market strategy and continuing to improve our consumer product experience. This means attracting and winning creators who value and amplify our differentiation. It also means enhancing personalization and search and discovery to delight consumers and increase engagement. These are our immediate priorities as we address paid ticket growth and ensure each lever of our business positively reinforces our growth model.
As we look forward, we plan to evolve our sales and marketing in 2024 to target the events we know our most valuable consumers seek starting with Nightlife. We plan to supplement our value proposition to win this inventory and increase our total addressable market by building new tools that our creators want, like timed entry and better business empowerment tools. To make discovering events even easier, we plan to lean into distribution partnerships to put the right event in front of the right person at the right time wherever they are. To encourage repeat purchasing, we plan to evolve how consumers interact with our brand across all critical surface areas, starting with the consumer mobile app. We plan to continue building trust in our marketplace for both creators and consumers by anticipating and protecting against fraud as well as modernizing our support channels to deliver rapid problem resolution for more customers.
We believe that our focus on driving demand for creators, coupled with our consumer road map will yield great benefits for both sides of our marketplace and result in increased ticket growth. By leaning into our scale, trusted brand and powerful operating model, we are confident that we can chart a path forward, which enriches live events, brings the world together through live experiences and creates value for all stakeholders. With that, I'll turn the call over to Lanny to discuss our financial performance and outlook.
Lanny Baker: Thank you, Julia. I'll address financial highlights from the fourth quarter and full year before providing more detail on paid ticket performance and our actions there, and then I'll turn to our outlook. Shifting toward becoming a two-sided marketplace has led to meaningful changes in our financial results over the past year. First, we've grown non-ticketing revenue from 2% to more than 10% of our revenue as of the fourth quarter of 2023. We've done this by deliberately delivering and extracting value associated with the demand generation we provide to creators. Subscription and per event organizer fees totaled $6.6 million in the fourth quarter as creators brought 1.4 million events to be ticketed in our marketplace during the quarter.
Eventbrite Ads revenue was $2.3 million in the fourth quarter, up 28% quarter-over-quarter as the number of advertisers and spend per advertiser both grew to new highs. Collectively, demand generation embodied by marketing tools, organizer fees and Eventbrite Ads revenue helped us reach a new revenue record in the fourth quarter, and we expect to build on this in 2024. Second, we updated our ticketing and service fees in early 2023 to reflect prior product investments and align with industry norms. As a result, we have increased our ticketing take rate and enhanced revenue per ticket by more than 10% during 2023. These gains strengthen our ability to further invest in the consumer side of our marketplace. And third, the changes in monetization arising from our marketplace strategy have helped our margins reach new highs.
Gross margin exceeded 70% for the first time during Q4 compared to 66% a year ago. Our adjusted EBITDA margin also improved. Excluding restructuring costs, reserve adjustments and other items, we more than doubled our adjusted EBITDA margin year-over-year, reaching 12% for the full year 2023, with 40% of year-to-year revenue growth flowing through to adjusted EBITDA. These encouraging financial benefits arising from our marketplace strategy have to be considered in the overall context of our business, however, and we've seen a near-term impact on paid ticket volume from the changes we've introduced. Paid tickets were down 4% in the fourth quarter versus the prior year, even as total revenue was up 23% year-to-year to $88 million, which was the midpoint of our Q4 business outlook range.
Paid ticket volume is expected to be lower year-over-year in the first quarter of 2024 as well, and this has been factored into our business outlook for the quarter and the full year. When organizer fees were widely implemented in September, October of 2023, this was the first time Eventbrite had imposed in charge associated with accessing our marketplace and our audience reach. The larger objective here was to shift our model and our go to market and to reposition Eventbrite as a marketplace, delivering attendees for creators and serving up great live experiences for consumers. We continue to have conviction in this strategy, and we are focusing on attracting creators of high-quality events who seek audience growth and showcasing the appealing events that feed strong consumer demand in order to improve paid ticket volume in 2024.
Nonetheless, we see recent paid ticket volume trends having a near-term impact, and I want to turn to what this means for our immediate operating priorities and then our business outlook for the coming year. We are pursuing three main levers to improve paid ticket growth. And in a marketplace mode, these efforts play on and reinforce each other. First, highly visible, high-volume, in-demand events are central to our marketplace. And we have focused inbound and outbound sales to target these strategic accounts. Our sales team closed 24% more new accounts in the second half of 2023, than in the same period last year. And that momentum remains strong in early 2024. With the changes we've made to monetization we can be very competitive and profitable in the sales channel today, and we're leaning in here.
Next, we're focused on the self-sign-on channel and making adjustments to move past what we believe is a temporary disruption in creator acquisition tied to the implementation of organizer fees. We intend to improve landing pages and sign-up flows, better explain and simplify our new pricing tiers through product marketing, and in some cases, adjust pricing, for instance, introducing annual plans for institutions that prefer to be built in advance and new rates for non-profits. Then on the consumer side, our near-term priorities are elevating the visibility of top events, either via Eventbrite Ads or through algorithm updates. We're also steering users to the personalization and ease of our mobile app and investing in SEO and distribution partnerships to expand top-of-funnel traffic.
Combined, these actions are expected to improve paid ticket volume growth as the year unfolds. Based on current information, we anticipate revenue of $359 million to $372 million for full year 2024. The midpoint of that range would equate to 12% revenue growth over 2023. For the first quarter of 2024, our business outlook anticipates revenue in the range of $84 million to $87 million or 10% year-to-year revenue growth at the midpoint for the first quarter. There are a number of assumptions reflected in our quarterly and full year revenue outlook, including the following: paid ticket volume is expected to be lower year-to-year in the first half and down slightly to up modestly for the full year. As comparisons become easier, we move beyond the initial marketplace changes, and we execute on our product, marketing and sales priorities.
Average ticket prices are expected to increase low single digits year-over-year, providing a similar sized benefit to ticketing revenue on top of the volume dynamics just described. Organizer fees will cycle fully into revenue for the first time in Q1, Q2 and Q3 of 2024 and are anticipated to contribute to revenue growth for the full year in the process. And Eventbrite Ads revenue is expected to scale further as we improve reach, targeting and efficiency and realize higher adoption rates among creators. We plan to manage expenses tightly to focus on improving paid tickets and executing the marketplace strategy. We anticipate adjusted EBITDA margins in the low to mid-teens for the year 2024, again, excluding potential impact from reserve adjustments and other items.
Product and development expenses, which as a percentage of revenue are already in line with our long-term model, are expected to grow faster than revenue for the full year as we build out consumer and marketplace functionality. Sales, marketing and support expenses, which grew rapidly in the second half of 2023 in support of the marketplace shift, are expected to grow modestly quarter-over-quarter during 2024. And we plan to manage general and administrative expenses as tightly as possible in order to drive operating leverage. Stock-based compensation is a focus as we make progress toward profitability. As we've shifted more teams to new locations and substituted other forms of incentive and reward, SBC as a percentage of revenue declined by 3 percentage points in 2023 versus 2022, and we plan to take more steps to continue that progress in 2024 and beyond.
In summary, we had a solid 2023, in which we achieved our overall financial objectives as we made significant strides in our marketplace strategy. In the process, we introduced changes in our go to market that we believe are both necessary and appropriate to unlock Eventbrite's full potential. That potential lies in doing more for creators than ticketing and payment processing, and it centers on leveraging our unmatched scale, our brand recognition and technical capabilities to attract consumers and drive demand for creators' events. We are fully focused on returning to paid ticket volume growth as we execute our strategy. I'll now turn the call to the operator for Q&A.
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