Eventbrite, Inc.

Q4 2022 Earnings Conference Call

2/28/2023

spk14: Good afternoon. Thank you for attending today's Eventbrite Q4 2022 earnings call. My name is Tamia, and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. It is now my pleasure to pass the conference over to your host, Catherine Chen, Head of Investor Relations.
spk13: You may proceed.
spk12: Good afternoon and welcome to Eventbrite's fourth quarter and fiscal year 2022 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, February 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, adjusted EBITDA margins, 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 have 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 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.
spk11: Thank you all for joining our call. Today, I want to reflect on 2022, recap our Q4 results, and share our strategy for driving profitable growth going forward. In the past year, we have achieved significant milestones. We sold nearly $3.3 billion in gross ticket sales. We grew revenue by 39%. We launched our first ads product for creators. And through our demand generation efforts, we helped creators generate over $680 million in ticket sales. Importantly, we have maintained positive adjusted EBITDA each quarter by focusing on profitability. To recap our recent results, we generated revenue of $72 million in the fourth quarter, which was our highest since 2020. We supported 178,000 paid creators, 26% more than last year. and served a near record number of frequent creators. These creators organized a wide variety of paid events, selling over 25 million tickets worldwide. We believe that demand for these affordable and accessible experiences will continue to be strong, and we play a very valuable role in that. Paid ticket sales through event-driven channels increased by 34% year over year. Consumers' interest in live events reveals how important human connection in real life is. In 2022, we helped creators offer 1.7 million paid events, matching pre-pandemic levels. We're a stronger, more focused, and profitable company, ready as audiences return and creators rebuild. Our long-term strategy has been designed to meet this opportunity in three key ways. First, we have significantly upgraded our technology to support future growth. This includes speeding up page load times by up to 90%. Also, by modernizing our data platform and launching over 60 new products and features. As these improvements continue to be our standard operating mode, we expect to achieve greater performance and efficiency over time from the core ticketing product. Second, our product roadmap is helping creators succeed, especially frequent creators who drove 60% of our ticket sales this year. Helping these creators offer recurring events is paying off, with event frequency up nearly 20% from 2019. Products we launched this year improve the event lifecycle for all creators. For new creators, onboarding is now simpler, more engaging, and personalized. Nearly twice the industry average of new users complete our onboarding tour, helping them better understand our value. For active creators, we rebuilt our event dashboard, the most visited creator page. We expect this will increase creator satisfaction, success, and retention. For busy creators, we improved attendee reporting, payout scheduling, and access to chat support. And for creators seeking growth, we made event listing pages more attractive to consumers. One example of that is flashing the urgency signal on event listings, which led to over $40 million in extra gross ticket sales. We're also experimenting with GPT-3 enablement to improve event creation and listings. The third part of our plan is creators increasingly using our marketing and demand generation products to grow audiences. Boost, which automates social media marketing, now supports successful creators accounting for over 10% of paid tickets. For creators promoting events on our site and app, Eventbrite Ads is now in 20 cities. Interest has been strong and ad fulfillment was 100% in Q4 as we supported more users. We've also opened more ad space on our homepage, search, and related events pages. We're excited to expand Eventbrite Ads to help creators connect with our visitors. Demand generation is key to our creator and consumer marketplace. Eventbrite influenced 30% of paid tickets in 2022, which is a record. Of note, in Q4, we grew holiday ticket sales 20% from 2021 with targeted inventory and demand generation. We encouraged new event listings and directed consumers to events driving extra ticket sales. We'll build on this with more campaigns in the future. To boost demand generation, we're improving the consumer experience. Adding Apple Pay and Express Checkout added nearly $70 million in extra gross ticket sales for creators in 2022. Our mobile app has also outgrown 2019 levels with personalized recommendations significantly improving ticket purchases. We believe our strategy, ticketing, demand, and a consumer marketplace offers a clear path to sustainable growth. Last quarter, we said we act as a demand engine for most listed events with 80% benefiting from Eventbrite driven tickets and 20% receiving over half their sales from us. We aim to accelerate this and are restructuring to focus on our future as a two-sided events marketplace. Within ticketing, we've achieved major scale and will streamline costs and teams keeping innovation We prioritize what creators and consumers want, which is an easy marketplace to host, find, and attend unique live events. This means more search, personalization, ads, and checkout features. Our goal is for creators to list with us because they know consumers come to Eventbrite for the best, most unique events. Accelerating our marketplace model means boosting high margin revenue from ads and monetizing free events. This will build value and drive profitable growth toward our long-term target. Our pricing now also reflects the value and investments we provide. We raised fees for the first time in five years in December and January and simplified pricing from three tiers to two. We'll keep earning creators' trust by investing in their needs and expanding our marketplace. On the company front, I wanted to share more context about our restructuring plan. As part of ongoing efforts to drive efficiency in our core business operations and consolidate our development hub, we will eliminate 8% of rules immediately and relocate 30% of rules over the next 10 months. While these decisions were difficult, we are approaching this in line with our values and are committed to supporting those affected. These changes will enable us to streamline our operations and better position ourselves for long-term success while also ensuring that we continue to provide our customers with the highest level of service. We remain focused on delivering value to our investors and are confident that these actions will help us achieve our goals. In summary, we've achieved significant milestones over the last year, generating strong Q4 results and have a clear strategy for driving profitable growth. I really want to thank our community of Brightlings for showing up for one another and our leadership team for proactively driving our transformation. There's no better team to be in the trenches with, and I'm in awe of their compassion and grace. I'm excited about the opportunity ahead and appreciate the team's work transforming Eventbrite into the top events marketplace. Now, Lanny will discuss our Q4 results and 2023 outlook.
spk04: Thank you, Julia.
spk10: Starting with the headlines, we grew revenue by 20% year-over-year in Q4 and by 39% for the full year 2022. Our take rate, revenue per ticket, and gross margins hit new highs for Q4 and the full year. We delivered our sixth consecutive quarter and second straight year of adjusted EBITDA profitability. And we ended the year with $359 million in available liquidity, as defined in our shareholder letter. These results reflect consistent execution on the strategy we put in place three years ago. And they provide a strong foundation as we continue to evolve the company in 2023 and beyond. Diving into fourth quarter trends, paid creators grew 26% year-over-year to 178,000, the highest since the start of the pandemic. For the full year, we served nearly 367,000 paid creators, a 33% increase over 2021. Paid events per creator averaged three events, down slightly from 3.2 events in Q4 of last year. Based on healthy growth in creator volume, total paid events increased 17% year-over-year to 536,000 in the fourth quarter. That's the second highest number in the company's history. Growing the inventory of events posted on Eventbrite is an important driver for our marketplace strategy. Paid tickets per event averaged 47, down slightly from 48 in the same quarter of last year. Paid ticket volume of $25.1 million was up 14% from a year ago. And for the full year, we issued 87 million paid tickets, a 29% increase. Average ticket price was close to $35 in the fourth quarter, up modestly from a year ago, as creators remained cautious about raising ticket prices. At the same time, refund and cancellation activity declined in the fourth quarter, And with a small but growing contribution of incremental revenue from subscriptions and advertising, our revenue take rate increased by another quarter point year to year, and revenue per ticket rose 6% versus last year's fourth quarter. Although boost and Eventbrite ads are still relatively new and emerging components of our business, these event marketing products continue to attract growing numbers of Eventbrite creators who seek our help expanding their audiences. Boost and Eventbrite Ads generated combined revenue of $1.7 million in the fourth quarter, which equates to about seven cents per paid ticket. Revenue from Eventbrite Ads in particular surged as we expanded availability in the holiday season. And 25% of Q4 advertisers were hosts of free events. Revenue from creators using Eventbrite ads was 18% greater than it would have been without the availability of this new high-margin service. As we move forward toward a marketplace model and amplify our demand generation, we believe that the importance of products like Boost and Eventbrite ads will continue to grow, both for creators and for Eventbrite. Gross margin was a highlight for the fourth quarter and exceeded 66% for the first time. That's more than seven percentage points higher than in Q4 2019. And we have confidence that gross margins can move into the high 60% range as ticket volumes and revenue ramp. Excluding the impact of non-routine expense items, operating expenses totaled $61 million in the fourth quarter. an increase of 17% year-to-year compared to 23% growth in the first nine months of the year. Product and engineering expenses were our largest and fastest-growing area of investment, up 29% compared to a year ago. We leaned into marketplace capabilities such as marketing tools, ads, the consumer experience, and checkout conversion, all of which are delivering incremental revenue. Sales and marketing expenses were up 15% year-over-year, primarily reflecting increases in advertising and content spending to help drive Q4 and 2023 revenue. Finally, general and administrative expenses were up 9% year-to-year, and we gained three percentage points of operating leverage compared to a year ago by maintaining discipline on expenditures not directly tied to revenue growth. Fourth quarter adjusted EBITDA was 3.4 million after removing the benefit of non-routine items. Our adjusted EBITDA margin was 5 percent for the quarter, two percentage points lower than in the prior year. And we expect this step back to be temporary as it reflects investment in product development ahead of anticipated revenue impact. We continue to have confidence in the long-term adjusted EBITDA margin targets of 20 percent or greater especially as we pursue our marketplace strategy and increase monetization. As you are aware, we updated our pricing this past January. This is the first increase we've initiated since 2018, even as we've invested considerably in new features and product performance. It will take one or two more months for the effect of this change to flow across all applicable events and tickets. And once it's fully in place, we would expect to see approximately 10% improvement in monetization. Another significant development, also with implications for revenue and profitability, is the restructuring that we announced publicly today. As Julia said earlier, with the progress we've achieved in ticketing and the opportunity we see in demand gen and marketplace, we're taking decisive actions to increase efficiency, accelerate our transition, and drive faster toward our long-term profitability targets. In the intermediate term, we're eliminating roughly 8% of existing roles. We will also exit leased office space and vendor agreements that no longer support where we're headed. Over a slightly longer timeframe extending to year end, we're relocating approximately 30% of remaining roles to locations where we believe talent is strongest and cost dynamics are most attractive. Our presence in Spain and India will grow as we move customer service, operations, and certain development roles from Argentina and the U.S. We expect that the near-term reduction in force and exit of leases and vendors will displace $13 to $14 million in annualized operating expenses, delivering immediate efficiencies to enable greater investment toward consumer and marketplace. The planned relocations to new geographies are expected to yield compounding long-term benefits to cost efficiency and productivity, structurally lowering operating expenses as a percent of revenue by four to five points once complete. Combined, we anticipate that the effects of our restructuring, both in accelerating the marketplace transition and in increasing operating efficiency, will allow us to reach our long-term adjusted EBITDA margin target of 20% or better before the end of next year. As we execute the restructuring, we expect severance charges and employee transition costs of approximately 10 to 15 million and lease restructuring charges of approximately $7 million. We're still finalizing the timing of these charges and costs. Now, turning to our business outlook, We currently anticipate first quarter revenue to be within a range of $73 to $76 million. This outlook assumes normal seasonal patterns on the creator side, continued healthy consumer demand, and a positive contribution to revenue as the January price increase goes into effect across more events and ticket sales. With the variability of the pandemic era receding, We believe we are in an improved position to also provide a full-year outlook for revenue and for profitability. Of course, macroeconomic factors could still impact 2023 results, and we've tried to capture that exposure within our views. Based on current information, our business outlook anticipates revenue in a range of $312 million to $330 million for 2023, and growth of 20% to 26%, versus $261 million in revenue in 2022. The higher end of that range would likely correspond with stronger contributions from marketing and consumer product initiatives in the year, along with a fuller benefit of ticket fee changes and strong growth for Eventbrite ads. Factors that could trend results toward the lower end of the range include weaker macroeconomic conditions impacting event supply or demand higher levels of customer churn in reaction to product and pricing changes, and transition challenges related to marketplace or the restructuring. Finally, we expect our full year 2023 adjusted EBITDA margin to be approximately 10% with revenue at the midpoint of our outlook range. Before I wrap up, I want to touch on one other housekeeping item. Today we filed with the SEC restated 10Qs for the second quarter and the third quarter of 2022. These documents present greater detail within the statement of cash flows on the effect of foreign currency translations on cash holdings, particularly creator cash balances and accounts payable. These balances and foreign currency impacts match and offset each other, and I want to be clear that the change presentation on our cash flow statements has no impact on revenue, net income, adjusted EBITDA, ending cash balances, compensation programs, or any financial covenants. We made these changes in accordance with GAAP. I'll now turn the call back to the operator for the question and answer portion of this call.
spk04: Thank you.
spk14: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. As a quick reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. Our first one comes from Yusef Squally with Truist. You may proceed.
spk06: Great. Thank you very much. Hi, guys. So just a couple questions from you. One, Julia says, In your efforts to transform the platform into maybe more of a consumer marketplace, as per your letter, can you maybe just help expand on that, exactly what it means, particularly in terms of making the marketplace a destination and what that would mean in terms of just your reliance on increasing traffic, increasing SEO, SEM, and ultimately increasing your sales and marketing? Maybe just help us kind of think through that. And then on the raised fees and simplified pricing that you guys instituted recently, can you maybe just speak to what you've seen so far in terms of maybe any pushback, any increase in return, and just broadly speaking, where do you think you're your pricing power is? Because as you said, you really haven't done any price increases. This is the first. So just trying to get a sense of, you know, is this the first of many as you continue to elaborate and improve the product, et cetera. Thank you.
spk11: Thanks for the questions, Yusuf. So on the first one, in our, you know, three-year strategy, as we laid out on our investor day, the third year is really about how we can help creators gain greater exposure for their events and also start to reinforce a greater scale in our marketplace dynamics. And in order to do that, we need to continue to scale the network effects in the marketplace and also really underpin the long-term value creation for our creators. So what does that mean? It means reinforcing the brand promise with creators that we are indisputably the best place to gain that exposure to build a bigger audience and really help them sell more tickets to events because that is truly what they need the most amount of help with. It's also to continue reinforcing a well-lit marketplace, which means transparency, trust, liquidity. And the third thing is that we need to develop and continue developing a high-quality user experience for people who want to discover things to do. so that we are that trusted place to find relevant events that really match their needs, their wants, their schedules, their price point. The exciting part about this is that this isn't a net new effort, and we're not starting from zero. So Eventbrite-driven gross ticket sales was nearly $700 million in the year, and the Q4 run rate is closing in on a billion dollars. And we help really source nearly a third of the paid tickets for creators already. So that's a huge economic impact. The introduction of Eventbrite ads was informed by the fact that our creators' marketing budgets are up to five times greater than their ticketing budget. So we're unlocking a whole new economic value chain with our customers that is really going to help them gain greater following and sell more tickets. And ads already is lifting per creator revenue by an average of 20% for the early users who are involved in this marketplace dynamic. And what I'm excited about is that in Q4, boost in ads revenue was nearly 1.7 million. So again, I'm pointing back to these things because we are funding investment in building and strengthening the consumer destination and really focusing on that match of right events in front of the right consumer at the right time. And we're funding that through our own efforts, through the expanded gross margin revenue that's coming from Boost ads and other marketplace services in the future. And I think our right to win here really comes down to brand, scale, and trust, which I think are our three virtues of Eventbrite. Lanny, I'll let you go on the second question.
spk10: Yeah, Yusuf, we tested the increase in prices in a couple markets before we rolled it out more broadly. We rolled it out very early January. And to date, we've seen relatively little reaction in the marketplace. I think, as Joy said, in many ways, we've loaded the product with improvements and performance gains really steadily over the, not just the last five years, but particularly over the last two and a half to three years. And as we looked at what competitive rates were in the marketplace and various other digital commerce platforms we felt like we had room to adjust our prices. We did so and we've seen relatively little pushback so far. It takes a while for the full effect of the pricing change to apply as events that were listed before we announced the pricing change are still operating under the old prices and some of our events are sort of longer dated. So we're not yet at a place where it's We can tell you that we've seen the full, full impact, but encouraging for sure thus far. On your question about pricing power, I think as we've considered this, we want Eventbrite to be the sort of cost preferential choice amongst creators. And our trustworthiness, our reliability, our functionality to provide great value on the core ticketing side of the marketplace. As we go further in the direction of demand generation and audience and promotion of events, I think that's a part of the market where it's pretty customary to let the market determine the prices. And at an average ticket price of $40, where the marginal economics for a creator of selling one or ten more tickets are very, very attractive. Their unit economics don't move that much. We think that there's a great willingness and a great ability to pay for that. So I think as you look at pricing in the long term, we can use our scale to compete on the core, and we can use our audience reach to really participate in what we see as a big demand generation opportunity in the long term.
spk06: That's great. That's very helpful. Thank you both.
spk14: Thank you. Our next question comes from Matt Bear with Piper Sandler. You may proceed.
spk08: Hey, guys. Congrats on the really strong results and guidance. I just wanted to touch base on creator confidence. Where are we at from that perspective to start the year? Are you still having to lean in on marketing around this topic and maybe just touch on the current state of the creator and how that's helping to shape the outlook for the full year? Thanks.
spk11: So, you know, we're seeing a strengthening confidence from creators in the categories that are really, you know, roared back to life. So music, food and drink, you know, consumer popular events that are really on a tear right now. You know, creator growth at 26% with over 100,000 new creators gives us the confidence that we're continuing to see more and more people come back to live events and be able to, you know, expand their reach. I would say, like, what drives creator confidence is consumer engagement. And in 2022, we had over a billion visits to the Eventbrite properties with 200 million consumer searches on the website and 90 million unique buyers. And so we're really turning our messaging toward the scale and the exposure that we can offer our creators to consumers. And I think that's the brand promise that we can make and fulfill in 2023 and beyond that's really going to continue to reinforce confidence in hosting live events in our market.
spk08: It may be just a follow-up on the demand generation tools. They appear to be resonating very well with creators. You mentioned the $6 million run rate exiting this year. I guess, how should we be thinking about that run rate exiting 2023 as you continue to roll out new innovations for both boost and ads? Thanks.
spk04: I think, Matt, as you look forward, we're looking at a $6 million run rate, as you said.
spk10: at $3.3 billion of gross ticket sales. So we're just beginning to scratch the surface. And as we said, about 25% of the advertisers, a little bit lower percentage of the revenue, about 20% of the revenue, is coming from the creators of free events. So that's not even included in the $3.3 billion sales. total transaction value in our marketplace. So we are going to continue to expand cities that have availability of Eventbrite ads. We have things that we're adding new, what we call surfaces, but locations for which creators can buy exposure within the Eventbrite marketplace. And we're going to stay full steam ahead on really expanding that opportunity. It seems to be high appeal, very engaging to creators, and we really think there's a lot of upside in that area. In terms of the end of next year's revenue, or end of this year's revenue for advertising, we'll come back on that and update you as we make progress this year, but it's clearly an area of excitement and focus for us in 2023 and beyond.
spk14: Thank you. The next question comes from Ryan Sundby with William Blair. You may proceed.
spk09: Hey, guys. Thanks for the questions. It looks like you added another 10 cities for ads this quarter to get to 20 within six months of the launch. Is that the kind of pacing we should expect going forward, or do you start to see a faster rollout as you kind of move to maybe less quarter cities from here?
spk11: Thanks, Ryan. I'll start and let Landy follow up if I miss anything. We expect to accelerate our pace of cities. We're really figuring out what works and being able to get 100% access element, this expanded city rate was a great win for the team in Q4. Our customers want to put their events in front of eager buyers who are looking for things to do on Eventbrite, so it's a pretty obvious value proposition for them. And we're getting better and better at figuring out how to serve them their needs and be able to put the right event in front of the right consumer at the right time. So we'll continue to expand, and I expect that rate will accelerate throughout 2023. Now, I'd say there are –
spk10: There are multiple vectors that we're pushing on here, and we'll push on the ones that resonate the most with creators and have the greatest opportunity for us. By that, I mean we had great success in the holidays around the holiday events and New Year's Eve events, and really kind of tailoring advertising-enabled experiences that creators could use to get to consumers looking for those kind of events. That felt like a bigger opportunity in that season than adding the next 10 cities. We're also looking at things like the ad formats I mentioned a moment ago. We're looking at the pricing dynamic. Today it's a CPM-based model and you can imagine that that can evolve and there's other ways to price and charge for the exposure that we can drive. There are efforts that we're working on to increase the reach across things like our email products and our push notifications. We'll push on all these things. It's not just about cities. It's really kind of a multi-factor growth. There are lots of avenues for us to pursue. And we will take them in sequence according to what creators are looking for, asking for, and what's working for them.
spk09: Got it. That makes a lot of sense. And I think you said 25% of ads were for free events. Sorry if I got that wrong. There's a question around that. As you see free event traders start to adapt things like boosts and ads, are you starting to see them transition over into being paid traders as well?
spk10: No, not as much as, you know, I think you might guess from the distance. We are, I think, you know, let me give you a couple baseline numbers. In the quarter we had 25 million paid tickets. And we had 76 million total tickets. So the delta there is the 51 million tickets to free events. What I said a moment ago was that of the advertisers, the count of advertisers in the fourth quarter, 25% of the advertisers were creators of those free events. And it's really clear that there are economics behind those free events. that are really material, whether that's a membership or it's supplies or it's a free event that has ticketing for one reason but then maybe sells food and drink behind the gate. And all of those things, as the organizers are putting those events together, are both the incentive and the resource for them to be dedicating advertising dollars to driving and attracting awareness and ticket sales for their events. So this is true, it's true as well on the paid event side. I think sometimes people make the mistake of thinking that the sum total of the economics of our paid business is the $3.3 billion in ticket sales. But again, for a lot of those creators, there's merchandise and there's food and beverage and there's all kinds of other things going on at that event. And ultimately, the advertising and the marketing dollars behind those events is not drawn just from the face value of the ticket. And so, you know, in the long term, as Joey said, creators spend between two and five times as much on advertising, marketing, promoting their events as they do on the ticketing service. And, you know, we're starting to see, sense, and capture more and more of that with these products.
spk09: Got it. Yeah, just making sure, if you've got something to open the wallet, if they would lead to ticketing sales as well. Last question for me. Go ahead.
spk10: No, go ahead. I was going to say, there's another category that we don't talk about often, which is people who do both kinds of events. And there are plenty of creators who do free events and paid events, and they've also been big advertisers for us as well.
spk09: Okay. Last question for me. Paid ticket growth The last two quarters looks like it's really been driven strongly by international. Just wondering, as you kind of look at the 23 guide, how do we think about mix between domestic and international next year?
spk10: Well, you know, in the domestic part, there have been categories that have not recovered as quickly as those categories overseas or as other categories. And as we look into 2023, We're optimistic that those categories will perform better, and we think that for us in particular, as we elevate the demand generation capabilities, which as Julie said, really is what the creators are ultimately looking for. It's that which gives them confidence to host and promote events, and we can provide visibility to those events. We think we are delivering exactly the kind of products that can stimulate stronger growth in those categories and for those creators. So I think we're looking for a bit of a rebound in growth domestically, but in the last 90 days, we've seen, like you said, really strong growth overseas, in particular, even beyond our top five or six markets, kind of out in the quote-unquote rest of the world. Creators are knocking on the door. Consumers are coming to Eventbrite for ticket sales. Thanks for the color today.
spk13: Thank you. Our next question comes from Justin Patterson with KeyBank. Your line is open.
spk07: Great. Thank you and good afternoon. Julia, I just wanted to go back to the ad business. You've made a lot of progress this past year. How do you think about just as you move toward more of a marketplace model and really optimizing the ad load so that way you've got a nice balance of helping creators reach the consumer while also not over overburdening the page with too many ads such that it is counterproductive to engagement and conversion and then lanny i just wanted to go back to one of your comments and prepared remarks i believe you said 20 margin line of sight for 2024 um because you give us just a little more color on timing is that more of an exit rate or is that something you think happens a little bit earlier in the year. Thank you.
spk11: So when we think about developing as a consumer experience, our net goal is really to be as relevant and specific as possible. That's the long-term goal for our discovery experience. And so you'll see us continue to improve search personalized recommendations and generally speaking the browse experience on Eventbrite because I think we have a multi-year journey to really become that first thought destination when someone's wondering what they should be doing, things to do. And so that for us is a really important part, the relevancy piece. We don't want to put a bunch of content in front of our consumers and really make them do the work. And I don't think that's where the future of search and personalization is going. So on the ad load piece, it's really important that we're not overbearing the consumer with sponsored ads and listings. I think we can learn a lot of great lessons on how to optimize that experience from established and scaled marketplaces. And we are very much considering that consumer experience as being the most important experience for us as we move forward here. And that's really balancing you know, the years that we have spent on the creator creation management promotion experience. So this is a very exciting next chapter for us as we really delve into the other side of our marketplace while not leaving behind our creators, right, because we're doing this for them. So as it comes back to AdLos and how that experience unfolds, I think you'll see us really balance long-term growth with, the most engaging and relevant user experience for consumers?
spk10: Justin, on the profitability target, we expect to be at that 20% or better before the end of next year. And factors that would make it be earlier in the year would be faster, stronger, more successful transition to marketplace, more of the high margin subscription and advertising revenue. strong uptake and no resistance on the pricing actions that we've had and continued good economic conditions. On the flip side, things that would push it toward later in the year might be slower macroeconomic growth and any kind of disruptions or challenges associated with either the transition to marketplace or the relocation of our teams. We have a lot of excitement and confidence about the depth of the talent pool and the operating cost efficiencies that are available and the places that we'll be consolidating toward, and those will be helping the margins as well. So, you know, our commitment is we'll be there before the end of next year, and their factors will keep you apprised on as to the specific timing.
spk03: Very helpful. Thank you both.
spk13: Thank you. The following question comes from Cameron Manson Perrin.
spk14: With Morgan Stanley, you may proceed.
spk01: Thank you. Thanks for taking the question. Two for Lanny, if I can. If I think back to the multi-factor revenue model that you emphasized at the investor day, can you provide some color in the context of your 23 revenue guidance in terms of how we should think about the factors that are driving the growth that you've laid out for this year? Are there outside drivers among those factors, or is it kind of more evenly distributed across them? Any color there would be helpful. And then on the restructuring plans, can you provide some color on where within the OPEX space those changes are focused for both the headcount reductions and the relocations that you're planning?
spk04: Thanks. Sure.
spk10: Just to recap real quickly, we have thought of our platform business model as being a function of the number of creators, the frequency with which they put on events, the attendees that they attract to each one of those events on average, the ticket price, and our take rate. We've laid out targets for relatively modest growth, we would argue, across each of those, not every quarter, but over a longer period of time. that compounds to that 20% or better long-term revenue growth rate that we have targeted as our long-term model. As we look at 2023, there are a couple of things that I think are important. Number one, creator acquisition continues, as Julia said, with the confidence in the marketplace to be strong and consistent. We expect that to be in the ranges that we've laid out in the long term. On the other end of the spectrum, the revenue take rate is influenced by, obviously, the growth of advertising dollars, as well as the pricing move that we made in January. So I think those two are probably the two biggest drivers. But ultimately where we're going, Cameron, is in the middle of that, which is to drive the demand generation and the audience growth. And audience growth will typically first show up in attendance per event, and then as the events get big, it tends to spill over into an increased frequency of those events. So that's how we would shape it for the coming year. In terms of the restructuring and kind of where the reductions are located, first of we have leases in a couple locations that are not being utilized in the way that we work today. And those are multi-year leases that have annualized savings, let's say in the two to $3 million annual range. So that'll be, we allocate those costs kind of across where the people are throughout the P&L. So that's kind of a little bit of everywhere. And then from a Reduction perspective, a lot of the changes that we're making, as Julia said, are winding down support and infrastructure associated with where we've been on the ticketing platform side so we can go faster in the marketing place direction. So some of the reductions will be in development teams, product teams, support teams that are on that side. And from a relocation perspective, we're intending to move our customer support and operations teams, which are in the sales and marketing line outside the United States, as well as moving a portion of our development teams to our hubs in India and in Spain. So that's the detail in terms of where it's going to be across the lines, I'd say. comparable reductions in product development and sales and marketing, and then a little bit greater reduction in the G&A line because the first two, while we're making reductions, we're also investing heavily to drive the marketplace, whereas that's not true on the G&A side.
spk03: Great. Super helpful. Thanks.
spk13: Thank you. The following question comes from Lamont Williams with FIFO. You may proceed.
spk05: Hi. Have you ever previously disclosed the number of creators or percent of creators that you have in the prior pricing bucket? And I believe, Len, you said a 10% improvement in monetization. Could you just give a little bit more detail around that, kind of when you expect that to flow through and how you expect the price increase to kind of flow through the P&L?
spk04: Sure.
spk10: We haven't disclosed the portion on the various different pricing buckets. And as we go from three down to two, you know, I don't know that that's super informative. It's probably more detailed than we all want to keep track of. When we said that the effective benefit of the pricing change is going to be about a 10% improvement in monetization, We ran that through kind of a light ticket base and a light pricing bucket to determine what would be kind of fully applied. Customers who are under longer term contracts, some of our larger customers have not been affected immediately because we've got pricing commitments associated with that. Newer customers and customers who are not under those long term customers, a lot of our self sign on customers therefore are more immediately going to be affected. And typically, you know, I think between the time that an event goes live and the event and the occurrence of the event is somewhere in the 45 to 50 days on average. And so it takes that amount of time for the event cycle to run through before all of the events are under the current pricing. I think today of the events that we expect to be impacted by, affected by the change in pricing, we're in the 80% of inventory, maybe moving through the 80s week over week. So By the time we get out of the first quarter, it should be pretty complete coverage. From a P&L perspective, you know, that benefit should help gross margins. There'll be some processing costs associated with it. But from a contribution margin perspective, we would expect that the contribution from the pricing change to be pretty high margin on a contribution margin basis.
spk03: Okay, thank you. Thank you.
spk13: Thank you. Our final question comes from Day Lee with J.P. Morgan. You may proceed.
spk04: Great. Thanks for taking the question.
spk00: I'll ask you the first one, maybe for Julia. I have another one on the consumer marketplace. So if you look at common marketplaces out there, they typically use their PML to drive demand. And I guess they're going to take rates. that capability. So curious to hear the direction that you'll be headed longer term and it's not hard to thinking about the next generation. I would think that becomes more important as when you make the move to become more to your marketplace and when your event price continues to expand. And then secondly for anatomy, when I look at your 1Q revenue guide and your full year 2023 revenue guide, it feels like there's You brought up a bit of an upward sloping shape to the year when it comes to revenue. Is that primarily just due to the pricing change moving out through the year, or is there anything else that we should be thinking about in terms of seasonality?
spk11: Yeah, sure. So I'll take the first question, Day, on the consumer marketplace, which is really that, you know, we have some embedded advantages in our path forward here. not least of which is the SEO advantage, the top of funnel advantage we have. We also have the advantage that event creators themselves are marketing events to consumers to drive that flywheel. Our own consumer marketing is pretty conservative, I would say. We did some tests during the holidays where we spent about $80,000 on consumer marketing. and we drove 20% growth in holiday-related revenue, which I think is a testament to some of the ways in which we can help induce that demand generation while not having to really hike the investment there. And the take-rate part of this really for us is about getting more and more creators attuned to the fact that Eventbrite is not only a ticketing platform, It's a demand generation machine for them, and that in order to participate in that demand generation, they can adopt Boost for social paid marketing that is far more effective than if they're trying to do it on their own. They can adopt ads where they can really be able to boost the exposure of their events. in all these various places that we talked about. And those are 90% gross margin revenue lines as compared to 70% gross margin for ticketing. So all those things combined, I would say the tailwind that we already have in top of funnel demand generation on Eventbrite, plus the way in which we're thinking about using that incremental gross margin and the adoption of these of these products to help further our efforts, as well as the signals we're getting in some of the smaller consumer marketing tests we're doing. I think those set us up to be in a good place this year. And again, this is a multi-year journey. So we're taking the first step, which is really around that point of transaction, helping creators find that demand. And we'll continue to sequence our investments very thoughtfully, keeping an eye on on long-term profitability and shareholder return.
spk10: As we look at the year and the seasonality, your right day and the implementation of the pricing increase will have a bigger impact beyond the first quarter than it does in the first quarter this year. The growth of marketing tools, of ads, of progress on the consumer experience, the improvements to checkout conversion that we've made and that we are working on, All of those things contribute to that growth curve across the course of the year that you're seeing.
spk03: Got it. Thank you.
spk13: Thank you so much. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

Q4EB 2022

-

-