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spk06: Good afternoon and thank you for standing by. Welcome to the Eventbrite 3rd Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you would like to ask a question today, please press star followed by 1 on your telephone keypad. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Catherine Chen, Head of Investor Relations. Please go ahead.
spk00: Good afternoon and welcome to Eventbrite's third quarter 2021 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 begin, 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, October 28th, 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, a non-GAAP financial measure. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles and has limitations as an analytical tool. You should not consider it in isolation or as a substitute for analysis of the 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 as it contains important information about GAAP and non-GAAP results. And with that, I'll now turn the call over to Julia Hart, co-founder and chief executive officer.
spk07: Thank you, Catherine. Hi, everyone, and thank you for joining us this afternoon. I hope everyone on this call and all of your families are well. Without a doubt, we are seeing tremendous anticipation around the resurgence of live events. Eventbrite's third quarter results have captured that momentum and rising demand. Over 250,000 creators around the world chose Eventbrite to power their events, exceeding 1.2 million in the quarter. And more than 28 million unique buyers came to Eventbrite to connect with others through live events. We are thrilled to see in-person gatherings improving our everyday lives again, and we are honored to be supporting our creator community as the world recognizes and celebrates the value of live experiences. After a prolonged period of social isolation, we are in the early days of surging interest for unique and local events. Gathering together safely enables us to achieve that memorable experience only brought on by human connection. So far this year, over 75 searches on Eventbrite are for in-person events, which account for over 65% of total ticket volume. Zeroing in on Australia, New Zealand, and the UK, paid ticket volume for in-person events has approached quarterly records. I'll also note that recent vaccination trends are extremely encouraging. Full vaccination rates are up from the single digits six months ago to exceeding 55% of the population in all of our major markets. Some regions are even pushing into the 60% and 70% range. We believe this meaningful improvement will lead to greater comfort with live events, and it's a positive indicator that demand will grow both in the intermediate and long term. We know that events have permanently changed for both creators and attendees. And Eventbrite is supporting creators who have found innovative ways to thrive in this dynamic and changing landscape. In San Francisco, the success of outdoor events has turned temporary venues like sidewalks, streets, and even vacant parking lots into permanent event spaces. At last count, nearly 2,500 applications have been submitted to use these new venues. Creators are building avenues to reach new audiences by hosting both virtual and in-person events on the platform. One example is Black Bourbon Society, which is furthering appreciation for bourbon through tastings and tours that celebrate the diverse history of distilling. A core tenet of their mission is to broaden the inclusivity of the spirits industry. When in-person events were canceled, they embraced the opportunity to expand their reach through virtual events. They've already tripled their number of events and tickets year to date in 2021. and they plan to keep their online community of over 8,000 followers engaged with local and online experiences. Our platform offers creators a way to market, sell, and manage any kind of event from the same store. Through all the ways that live events have changed in the last year, our distinct creator-centric focus has helped us stay highly engaged with our customer community. we've achieved sequential growth in the number of total, paid, and frequent creators in each of the last five quarters. And in the third quarter alone, total creators grew 29%, paid creators increased 56%, and frequent creators rose 24% compared to a year ago. What's even more exciting is that we've also acquired 90,000 new creators in this period. As our core customer community expands we will continue to lean into the product-driven growth strategy that is helping creators build smarter businesses and bigger audiences. Frequent creators, in particular, remain our North Star and an important focus of our strategy. For the third quarter, paid ticket volume from frequent creators nearly doubled from a year ago. Approximately two-thirds of paid ticket volume came from these creators who host at least one event a month. As more creators return to the platform to reactivate their event series, they want our help to build and engage new audiences. Launched this year, Eventbrite Boost meets this need. Early data shows that in some categories, creators are seeing a lift of 25% in ticket volume after using Boost to help market their events. And we are excited to keep adding features and functionality to Boost that will help users reach more audiences in a simple and efficient way. In our most recent product release, we've made the campaign setup process more seamless and intuitive by using data about the creator and their events to generate personalized recommendations. The automation and customization makes it easier than ever for event entrepreneurs to launch campaigns regardless of their experience level. Our future releases will focus on making event marketing easier and more effective for the small business owner. As the world awakens from the isolation of the pandemic and people look for great things to do together, we see an opportunity to directly support our customers in building their businesses. Year to date, the reach and visibility of our platform has helped drive more than $350 million in gross ticket sales for our creators' content. In our view, demand generation can be a natural extension of our focus on marketing and audience growth. We are thinking strategically about the right way to ship these capabilities to our customers. Meanwhile, creators of free events can also benefit from participating in our marketing services while continuing to use our core ticketing function at no cost. Free tickets were 74% of our total transactions for the third quarter, and we are excited to explore ways to deepen our engagement with this cohort and potentially develop these avenues for future monetization. Extending beyond our platform, we are also leading the global community of experienced creators in two distinct ways. First, after a very successful virtual customer summit called Reconvene in May, we are continuing the momentum by hosting Reconvene Sessions. This program of ongoing in-person and virtual events are tailored toward the event community. They provide a vital forum to share ideas, foster community, and accelerate business growth. Second, we are lending our voice to the ongoing movement to relieve the mental health impact of social isolation. I'm proud to announce that Eventbrite recently joined the coalition to end social isolation and loneliness. We aim to increase awareness of this timely issue and advocate for live events as a way to improve social connectedness. We believe this work directly supports our mission to bring the world together through live experiences. We look forward to working with our partners to advance this important cause. The entire Eventbrite team is thankful to have the partnership of our creators, our employees, and our shareholders as we strive to build the best self-service ticketing and marketing solution for event creators and event goers. We are proud of what we've achieved and excited to keep you updated on our progress. With that, I'll now turn the call over to Lanny.
spk02: Thank you, Julia. Our third quarter results. delivered strong gains in both revenue and adjusted EBITDA, displaying the powerful leverage inherent in our business and financial model. Revenue of $53.4 million in the third quarter was up 144% year-over-year and 15% greater than the second quarter of 2021. We saw increased consumer demand for live events as vaccination rates increased in our major markets. Our product focus on serving frequent creators has also corresponded with improving acquisition and retention trends within that valuable segment year to date. The number of paid event creators active on our platform rose 12% quarter to quarter, reaching 109,000 total creators in the third quarter. That's the highest level since early 2020. As health restrictions were pared back in many of our markets, we saw a return of one-off summer season events and events per creator declined 14% from the second quarter to the third quarter. However, strong consumer demand for live experiences meant that creators were able to stage larger events this quarter and paid tickets per event rose 23% quarter over quarter. Putting the pieces together, total paid ticket volume rose 19% quarter over quarter, to 19.1 million, which is more than 2x where we were one year ago. It's a credit to our engineering and support teams that we've been able to support such significant volume growth while maintaining site stability and reliability and while also improving customer satisfaction scores year-to-date. We've also invested to make our self-service product experience more intuitive and efficient for creators. And we believe the benefit of this can be seen in our positive customer trends. Another place where our product-led self-service ethos pays off is in operating leverage. Here, I think it's worthwhile to point out that Eventbrite's paid ticket volume and revenue were both up more than 100% year-to-year in the third quarter, while our average employee count grew by less than 10% over the same time frame. We believe that comparison really highlights the strategic choices we've made as well as outstanding execution by our team. Now, turning back to the financial results, our third quarter gross margin of 66% was nearly five percentage points higher than in the second quarter of 2021, reaching an all-time quarterly record for Eventbrite. Increased ticket volume and higher revenue led to better absorption of the fixed portion of cost of revenues, and our deliberate focus on scalable products helped gross margins exceed our historic level. In the long term, we continue to believe that our gross margins can rise into the high 60% range with greater ticket volume and revenue scale. Total operating expenses were $46.4 million in the third quarter, essentially flat compared to the second quarter. The underlying mix of our operating expenses continues to tilt toward leverageable product and engineering investments rather than to variable operating costs associated with volume growth. More than 50% of our employee base is in product development and engineering today, and significant portions of those teams are located in lower cost locations overseas. With operating expenses relatively stable and revenue and gross margins up nicely in the quarter, we delivered a very strong result in adjusted EBITDA, which was $5.9 million for the third quarter. That represents an 11% adjusted EBITDA margin for the third quarter and compares to roughly break-even in the second quarter. On both a quarter-over-quarter and a year-over-year basis, and excluding the impact of adjustments to reserves in prior quarters, approximately 50% of revenue growth flowed through to adjusted EBITDA in the third quarter. Once again, demonstrating the strong operating leverage potential of our business. Looking ahead, we believe our product-led operating model and scalable technology platform will lead Eventbrite towards sustainable revenue growth and improved bottom line results. Our cost of revenue includes the one major directly variable cost item in our model, which is the standard transaction processing fee that's correlated with ticket sales. Operating expenses are largely under our discretion and we intend to manage them carefully. We will prioritize investments in our team to further strengthen our platform, deliver on our product roadmap and strategy, and grow our creator base. New product offerings like Eventbrite Boost and eventually Demand Generation are expected to contribute to revenue growth and should have attractive margin characteristics as well. In the near term, based on our current outlook, we expect paid ticket volume and revenue to be higher in the fourth quarter than in the third quarter of 2021. Normally, October is the strongest month of the fourth quarter, and we expect that seasonal pattern to prevail this year as well. We also anticipate that month-to-month paid ticket trends may be variable based on the potential impact of COVID variants as well as normal seasonality. We expect cash costs, excluding processing fees, of between $36 million and $38 million for the fourth quarter of 2021, compared to $35 million in the third quarter. To conclude, we are encouraged by the third quarter performance, in which we delivered a significant step-up in adjusted EBITDA margin, propelled by healthy creator trends. At the same time, we supported strategic investments into the products that we believe will drive our next phases of growth. We are excited to empower the creators who use our platform to bring the world together through live experiences, and we're honored to be their partner in reimagining the live events industry. With that, I'll turn the call over to the operator for the question and answer portion of the call.
spk06: Okay, and at this time, if you would like to ask a question, please press star on your telephone keypad. To withdraw your question, just press the pound key. We'll pause for just a moment to compile the Q&A roster. And your first question comes from the line of Ryan Sanby. Your line is open.
spk04: Yeah, hi, guys. Thanks for taking my questions. Good afternoon. Lanny, maybe could we pick up where you kind of left off there and talk about what paid ticket volume looked like sequentially as you moved through the quarter? And do you feel like Delta had a significant disruption on the business? Because it sounds like if September was your highest paid ticket volume month, maybe it just wasn't that big of an impact.
spk02: Sure. Thanks friend. Um, from June to July paid ticket volume rose about 9% month over month. Um, from July to August it went down about 9% and that was the timeframe at which, uh, the Delta variant, if you go back, it was, was really in sort of its fullest, uh, most threatening and sort of imposing moment. Uh, in September ticket volume rose 13% from where we were in August. And as we've started off October, we're seeing good ticket volume growth in really in all regions. So there's the variability that we have spoken about and the connection between consumer demand and even local restrictions. that are tied to the virus is very much in the business. I think if we go into the fourth quarter, we said October is usually the strongest quarter. It's up over September. We'd expect normal seasonality to play through in the fourth quarter. And, you know, although the virus environment, I think, is, you know, generally speaking, with vaccinations looking encouraging, we are headed to, you know, an indoor season in the northern hemisphere and, you know, it remains to be seen how that will impact demand in the short term. But in the long term, you know, things are certainly setting up well.
spk04: Got it. Very helpful there. And, Julia, I know you just recently launched Boost in May, but it does seem like a very compelling tool and encouraging to hear that, at least early on, it's helping traders expand their reach Can you talk a little more about what percentage of creators have started to use Boost and maybe who they are, these high-frequency creators, and maybe any more feedback you're getting from them as they use the tool?
spk07: Absolutely. Thanks, Ryan. So Boost did launch to all of our creators in May, and so it's still very, very early days. But what's exciting about how we've built Boost and how we're iterating on the product features is, It's just a continuous loop with our customers. So, you know, Boost really came about by integrating with Tone Den, which was a social paid advertising platform, and realizing that our creators saw this strong product market fit to meet their needs. And about, you know, 85% of our core frequent creators tell us they want our help in being smarter marketers of those events. So once we acquired ToneDen and quickly integrated into the platform, we saw that creators were starting to use it in really interesting and creative ways. And so as we observed that behavior, we really focused on two key elements. The first is to simplify and automate all of the actions that are going into creating a marketing campaign and really figuring out how to market the event. our core creator is oftentimes a solo entrepreneur. And so they're wearing many hats and they don't have a lot of time to be figuring out new technology or to be figuring out how to be the best marketer of their event. And oftentimes these creators are spending up to 40% of the safe value of the ticket on marketing. So there's a lot of opportunity there to create efficiency and help them get a better bang for their buck. And secondly, we wanted to help creators reach a significantly larger audience. We know that Eventbrite has this wide breadth of consumer audience and that data really allowed us to understand where we could find more audiences like those to match with the type of content that our creators are offering. And on average, we've seen creators who are using Boost sell about 16% more tickets for their events. But in some categories, they're selling in the upwards of a quarter more of tickets for their events. And so we see this really early traction. It's very interesting. And as we continue to lean in and invest in this new capability, we'll not only continue to make it simpler and more efficient, but we'll broaden the channels and the diversity of opportunity for creators to reach their audiences more effectively.
spk04: Got it. That's a great color there. And then, Julia, maybe just one last one here. Bigger picture, as you look out down the road at your revenue mix in the future, I guess based on the comments on maybe more emphasis on demand generation and discovery, what kind of contribution should we expect to see from non-ticket offerings in Would that someday be a meaningful revenue contributor or should we think of these more as just tools to support the creative base?
spk07: Yeah, I would, I would think about the landscape of, you know, Eventbrite in the intermediate term as being three, three vectors. The first is our core business, which is ticketing transactions. That's really the storefront for creators. And we're focused on making that more efficient every day, because again, they don't have a lot of time to be spending on these, you know, daily tasks. They would rather be spending time on creating content for their event. And we really want to enable them to be able to spend more time on the content. The second part is around how they're marketing their events. And we want to make them smarter and really more adaptable to the changing landscape to be able to reach that bigger audience. And whether it's for an in-person event or a virtual event, be able to grow their businesses through this recovery period and beyond. And then the third part that I would think about is access to audience. So we know that in the quarter alone, 28 million unique buyers came to Eventbrite to peruse our content and find things to do. And about a quarter of those came to the event that they actually purchased through an Eventbrite proprietary channel. And so what we see as being... you know, an unlocked opportunity right now is really leaning into demand generation because we know where the consumers are and we've become very good at putting the right event in front of the right person at the right time in order to make that match in the marketplace. So I would think about those things as being, you know, three areas of the business that reinforce themselves and really speak to what our core customer needs during this time as they continue to expand their businesses on the platform.
spk04: That's great. Thanks for the call, guys.
spk06: And your next question comes from Daily from JP Morgan. Your line is open.
spk05: Great. Thanks for taking the questions. I have a couple. The first one for Julia, continuing on the topic of Boost, how do you think about the progress of Rollout to the creators right now, and what do you think is the biggest challenge friction point for more creators to adopt the product. Is it more about the learning that they have to do, or is there something else preventing more creators to try out this product? And then, you know, the growth in in-person event was good to see. So I'm just curious to hear if that's more creator-driven, meaning more creators are opting in to do in-person meetings, or was that more demand-driven and customer-driven? event goers are requesting more in-person events. And visitor event as a percent of total has been coming down every quarter this year, with 3Q at the lower end of your expectations for the long-term mix. So just curious to see if there's a big factor to that, or is there something else affecting the mix towards in-person events?
spk07: Thanks for the question, Dave. So I'll start with Boost. I think the biggest, you know, I don't even think it's a barrier, but I think what we're focused on right now is awareness of the product. This is an entirely new capability for our creators to be able to unlock our marketing muscle and help them become more efficient marketers of their experiences. And so we're working really diligently to be able to show that product value and really educate not only our install base of creators who use the the platform today but new creators such as the 90 000 uh new creators we saw in the last quarter understand the value of eventbrite as both the ticketing and marketing platform so i think education and product marketing and awareness are um you know really the the keys to our success with the current product and we're continuing to iterate that product so again we'll be doubling down our investment on our engineering team and product team focus around Boost as we continue to learn more about what creators find as those killer features and continue to reinforce the product market that's there. And I think that for us, being able to learn more about how creators are unlocking value from Boost is one of the hallmarks of the Eventbrite product development cycle. We don't just put features out there to see what sticks. We really listen to our customers and observe what they're actually doing on the platform, and then we work to make it better, faster, and more successful for them. In terms of in-person event growth, I would say it's almost entirely demand-driven. You know, many of our frequent creators have found that they can take the same content that they have produced in person and actually pivot that to virtual events and have done so in a really successful manner. We see the vast majority of searches on Eventbrite for being being for in-person events. So much like commerce shifting to shops near me, we're seeing people search for events near me. And obviously, that's driving the trend of more in-person events becoming published by our creators and more paid tickets towards in-person events being generated in the quarter. And we do, I think, a great job of closing that loop for our creators by telling them about these trends and giving them ideas of what consumers are looking for on the platform, which is really valuable as they think about their own next shift. The final thing I'll say on that is the frequent creators, which are really our core creators, are thinking about their business now with two different channels of delivering the same content. And that's an exciting opportunity for us. They're thinking about building these hybrid businesses, not necessarily hybrid events, where they can actually host an in-person unique and local event, as well as access the global audience that's on Eventbrite to host a virtual event, again, with that same type of content, but much lower cost. So I think there's more to come from that. It's obviously early days, and we'll continue to track the trends. But I think Eventbrite does a really nice job of being able to support both types of events, since we are absolutely format agnostic. And then I think that in terms of online events and where we see that going, you know, it is still today about 10x what it was in 2019, even though the mix is shifting as we see more and more in-person events come back. So we think that this is a permanent shift in our model. And again, going back to what I just described as the most common use case for frequent events, you know, it I expect to see that trend continue for us to see way more virtual events on the platform than prior to COVID. But certainly, you know, it will make shift around and we'll continue to support both.
spk05: Got it. And that's a follow-up to Boost. You did talk about, you know, potentially opening up the marketing and demand generation capabilities to free ticket creators. And you also mentioned 75% of events. or was it tickets, was for the free ticket events. So as you look at that base of tickets or creators, how much, like what portion of those do you think you can potentially monetize using these marketing and demand generation capabilities?
spk07: Well, when you think about the free event creator on Eventbrite, it's very often a professional creator who is hosting an experience that is generating revenue It may just not be in the ticket price. So what we've tailored our go-to-market motion around in terms of boost towards free creators is helping to educate those creators on the value of reaching a bigger audience and being able to convert that audience into registrations for their event. And, you know, I think this opportunity for us as a business has been a long time coming, and we want to continue to support the growth of free events and free tickets on the platform because it is. you know, building our ecosystem and helping consumers find great ways to connect with other people every day. But we also think the business case for the frequent creator of free events is that we can be the lead gen source for these experiences in which they're getting some type of value out of having more people attend the event, whether it's in person or virtually.
spk05: Got it. All right. Thanks for the call, Eric.
spk06: And again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from Lamont Williams from Stifel. Your line is open.
spk01: Hi. Thanks for taking my questions. The first one I had is, as we progress through the recovery, are you seeing, and you're bringing on a number of new creators and speaking creators, are you seeing any notable changes in the mix of the type of events relative to kind of where you were pre-pandemic?
spk07: Thanks for the question. We really have seen a pretty consistent representation of categories in the events that are being both published and the tickets that are being sold on the platform. I think that for us, what we really care about is whether or not a creator is a frequent creator. We're really focused on driving business growth through the strategy of focusing on those frequent creators who are creating persistent inventory, like the American Outdoor School that we focused on in our shareholder letter. They're publishing between 50 and 100 events a month. They have a need to be able to run their business in the most efficient way on the platform, as well as continually reach new audiences as they create new types of events and they publish new content. So we're focused on frequency above all else. But we definitely are seeing some, you know, some interesting trends that are emerging of new types of event formats, as well as things that you would imagine are coming back, like music, as people got outdoors and were able to gather together again and, you know, enjoy that time in those live experiences.
spk01: Okay, great. And then just a follow-up question. You know, it's kind of been pretty topical, but with some of the privacy changes with Apple and IDFA, are you seeing any impact with some of your creators or on the platform stemming from this?
spk07: So, you know, I think that the changes have been widely reported on and certainly Eventbrite is not unique in, you know, observing some impact from the iOS changes that rolled out in April around ATT. What we see in terms of small businesses being impacted, we think is actually an advantage for Eventbrite because Eventbrite creators are small business owners. They're, again, often entrepreneurial ventures that have one to two folks. So they don't have the time to try to figure out the ever-changing landscape of marketing and digital advertising. And Eventbrite does. We have not only the data that we have proprietary, the first-party data to our platform, but we also have the know-how to diversify across different channels. And I think we've done a really nice job of helping creators distribute their content to channels that are really effective. And again, putting that right event in front of the right person at the right time, wherever they are online. And I think as this continues to play out and we continue to observe the ways in which we can support our creators, Eventbrite will continue to do what's right in order to help our creators market more efficiently. And we're excited about the opportunities that that allows us to explore on platform and off platform as we continue to build Boost.
spk01: Okay, great. Thank you.
spk06: And your last question comes from Yusef Squally from Truist Securities. Your line is open.
spk03: Hi. Thank you for taking the question. So, you know, you spoke about an increase in demand, and as the economy reopens and you begin to see some normalcy, what are you seeing in terms of competitive landscapes Are you seeing a resurgence of competitors as well? And how does that shape going into next year? Is there any color you can provide on that?
spk07: As the markets continue to reopen, and I think we're in the very, very early days of it, there's incredible variability all over the world. But as the markets reopen and as people are clamoring to get back out and be together we certainly expect the competitive landscape to shift not least of which this is an incredibly attractive market i think that you know we're excited for uh to compete against uh against anyone in this field and we feel really good about our prospects because we're a 15 year old company focused on a specific you know, specific persona of creator that is this frequent entrepreneurial creator. We think that independence is a very, very important aspect of both what they want and need for the future, as well as the ethos of our company. We think the approach of self-serve and a technology-driven product growth strategy is something that is going to pay off dividends in the years to come. And we also know that the reach that we can really enable them with to get to new people and to build their businesses is is going to be indispensable. So for those factors, I feel really confident about our ability to continue to adapt and grow and be in this ever-changing landscape. And I think we have the right amount of visibility into, you know, where the competitive landscape may shift over time, because certainly things have changed rapidly over the last year and a half.
spk03: Great. Thank you so much.
spk06: And that concludes our question and answer session and today's conference call. Thank you for participating. You may now disconnect.
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