We continue our TheTicketingBusiness finance insights* with a look at Eventbrite’s share performance since its IPO in September:
Eventbrite made a strong debut IPO back in September – with the stock originally priced at $23 but finishing opening day trading at $36.50. However, in the past six months its share price has reflected the impact of key stock performance drivers. Today the stock stands at $20, below the original IPO.
A brief re-cap on the timeline to date:
- IPO 19 September 2018 at originally priced at $23. Raised $230M. TTM net loss at IPO was $46M (4th biggest loss-making Bay Area tech company to launch an IPO)
- Opening day price fluctuated between $35 and $39, ending at $36.5
- 3-11 October 2018 the Dow and NASDAQ dropped 6.6% and 8.7%, respectively. EB fell 18.6% during that period.
- 12 October 2018 – class action lawsuit filed over Ticketfly data breach, which compromised 26 million users’ data.
- 12 November 2018 – earnings release reported a $35.6M loss or $1.24 per share on $73.6M revenue. Analysts estimated $0.46 per share loss on $71.7M revenue (note: First quarter results following an IPO are often heavily burdened by stock-based compensation expenses which represented roughly half the loss).
- 20 December 2018 – Stifel analyst downgrades EB to Hold; stock drops 18%.
- 7 March 2019 investor call, EB reported higher than expected revenue but larger than expected losses, which was driven by more challenges than expected migrating Ticketfly to the EB platform. Specific financials included:
- Loss per share: 17 cents, vs. 14 cents forecast by Refinitiv.
- Revenue: $75.9M, vs. $73.2M forecast by Refinitiv.
- More problematic was the next quarter outlook. Analysts’ expectations were $0.02 EPS on $91M revenue, compared to management guidance of $80M to $84M.
- 8 March 2019 – Analysts at Stifel and SunTrust drop price targets; Stock steadily drops 37% from the 7 March close at $32.42 to close on 26 March at $20.50.
- 19 March 2019 – Zacks Investment Research downgraded shares of Eventbrite from a Hold rating to a Sell rating.
- 29 March 2019 – Shares drop to record low of $19.06.
The graphic below charts these impacts on the share price timeline.
Life After Acquisitions: No picnic
Eventbrite claims to have successfully completed its two major international acquisitions – Ticketscript (2017) and Ticketea (2018) – to expand the company territorially but also to drive the overall product development of the core Eventbrite platform, with a new Madrid-based technology centre recently announced.
However, the 2017 integration of Ticketfly has required a very different technical and operational integration of two platforms – which have evolved from very different sectors. Eventbrite’s historic focus was serving the needs of ‘event creators’ with a self-serve SaaS solution. Combining the technical platforms of the previous two acquisitions was more straightforward, as both Ticketscript and Ticketea were targeting the same set of ‘event creator’ needs with a SaaS solution. In contrast, Ticketfly was developed to serve a very different set of client needs: those being the box office (ticket agent) functions of indedendent live music promoters, predominantly in North America.
The end result to date – dubbed by commentators as ‘Eventbrite Music’ – has thus been (beta) launched (Q4 2017) as ‘a solution specifically tailored for independent music venues and promoters’ with ‘measurable progress’ apparently made but with an emphasis on long-term aspirations.
However, the full technical system integration and sun-setting of Ticketfly to ‘Eventbrite Music’ is being impacted by various required platform enhancements, which are due to be completed by end Q2 2019, but with the operational migration aiming to be completed by year-end 2019 and an organisational uplift then experienced in early 2020.
This delay is in part explained by;
- higher-volume businesses which may have limited windows for operational migration (for example, seasonality of events or festivals), or;
- the training and implementation of any new ticketing system requires time and resource (from both the platform and the end-user), and;
- the transference of event inventory from one ticketing platform to another between Pre-Sale / OnSale to event maturity is prone to error.
These ‘deliberate choices’ of timing, by both Eventbrite and its live music client-base – along with the logistical demands of engineering a single global platform – will, apparently, continue to impact revenues with a weaker than previously expected short-term outlook.
These are the circumstances that have ‘spooked’ the market, and until Eventbrite can demonstrate technical advancement of the new ‘Eventbrite Music’ solution, client adoption (along with legacy client migration) and then revenue growth, there will continue to be some negative sentiment.
Independent promoters like sign-on fees too
Eventbrite itself acknowledge that the pace and success of migration will be influenced by a number of factors, including: product development; operational support; and the adoption of business practices outside of the platform that matter to the event-creator.
Meanwhile, competing ticketing service providers will be attempting to ‘cherry-pick’ any unconvinced or unconverted ‘Eventbrite Music’ (i.e. former Ticketfly) clients either via ready-to-go platform solutions and/or with the usual live entertainment ticketing supply-side inducement of rebates, commissions and marketing support.
Ticketfly historically grew with some success as an independent ticket retail and marketing services partner for non-aligned promoters and venues (i.e. those promoters which were not under the Live Nation or AEG umbrellas). It also understood that clients typically required financial incentives to select one ticketing provider over another.
Eventbrite is now acknowledging that for some clients a fit-for-purpose ticketing solution is a given, but money is also a major decision-making factor. Consequently it has had to increase the level of signing fees from $9M in 2017 to $16M in 2018. This figure may continue to rise with the proposed growth of ‘Eventbrite Music’ and with increased music sector competition.
Inventory: Create it? Or Pay for it?
Whilst Eventbrite arguably fitted more into the event technology sector as a software-as-a-service (SaaS) provider to event creators, with the genre-specific ‘Eventbrite Music’, it is increasingly more of a ticketing company targeting mid-market clients.
So whilst it provides some event planning and marketing tools to users, it arguably lacks some of the advanced tools and customization offered by the more established SaaS operators like Aventri, Cvent, Regonline, or Xing that serve larger corporations with integrated solutions to help plan, execute and market events.
In an attempt to develop a more compelling Eventbrite solution, it may to have develop a native checkout (allowing event-creators to enable transactions directly on their website) and a growing API network.
For example in 2017 payments platform Square invested $25M in Eventbrite, as part of a broad online, mobile and in-person payments partnership deal that made it Eventbrite’s main payment processing partner. (At the time of the Eventbrite IPO that investment had more than doubled in value to $61.9m accoridng to Square’s Q3 2018 10-Q public filing). Additionally, Eventbrite has added Mercado Pago for the Latin American territories to better support instalment payments, which are popular in Brazil and Argentina.
The Eventbrite Facebook and Instagram API integrations (amongst fifty others) are also major technical initiatives and allow Eventbrite to present an incremental eco-system of enabling functionalities and systems.
Organic growth opportunities for Eventbrite may therefore be derived from converting a greater number of event creators from ‘free’ (still the vast majority of Eventbrite system users) to paying, either for differentiated levels of ticketing services, functionalities or integration via enabling API to third party services.
Additionally, new market entrants in the self-service events sector may view the Eventbrite Self Sign-On margin-creep as good news – especially for those Start-Ups seeking to compete on a standardised service with price sensitivity.
However, Eventbrite is claiming some success in this ‘freemium’ strategy with the differing growth rates reported for Self Sign-On and international event creators exceeding North American music which has dragged down the Q1 2019 projection.
More optimistically, Eventbrite believes that it will be able to increase volume and revenues from the international markets (currently 27.4% of overall revenues, down from 30% in 2017) and has recently opened satellite operations in Singapore and a localised platform in Mexico.
A picture of contrasts
Eventbrite has a number of key strengths but also weaknesses. In summary:
- Brand – recognizable name and high awareness;
- Technology – client-friendly platform;
- Network effect – user multiplier increases value;
- High barriers to entry – switching costs are high for clients and ticket buyers;
- Repeat business – super high retention rate.
- Competition – existing competitors (e.g. Ticketmaster) and deep-pocket new entrants (e.g. Amazon, Facebook) could be a threat;
- Concentration ratio – very low percentage of clients actually generate revenue; majority use the platform for free;
- Stock price volatility – subject to dramatic swings from market dynamics (Beta) and ability to manage analysts and expectations.
The volume’s up but the sound’s still not sweet
To conclude, according to Crunchbase, Eventbrite has incurred net losses of $40.4M (2016), $38.5M (2017) & $64.1M (2018) from net revenues of $133.5M, $201.6M and $291.6M after raising $332.3M in nine rounds and the $230M from the IPO.
Eventbrite increased its global ticketing volumes in 2018 to 265M (up 33% Y-O-Y), but it still has a relatively low percentage of clients from whom it actually generates revenue as the majority of event-creators use the platform for free.
For the full year the total volume of Paid Tickets transacted grew to 97.3M in 2018 (up 36.9%), with the net revenue per paid ticket in 2017 equating to $2.84 raising in 2018 to $3.00.
Observers may conclude that it is struggling internally with the weight of its M&A decisions (nine transactions to date) while facing a saturated market for online ticketing in the events sector.
Further, as noted in the Q4 2018 10-K filing, the overall Eventbrite growth strategy may mean continued selective acquisition of additional businesses (with the similar sunsetting of platforms) which implies a further splintered development of the core solution in order to better serve specific categories or countries, so ‘Eventbrite Theatre’ at some point in the future?
Whilst Eventbrite resolves its current issues with Wall Street and the investment community, it is perhaps hampered in its ill-conditioned to look far beyond near-term results and it is therefore likely to continue to be subject to dramatic swings from market sentiment.
Calendars have now been marked for 1 May – this is the day Eventbrite will reports its financial results for the first quarter ended March 31, 2019. Investors will be looking at the figures very intensely.
Other articles in this series:
- INSIGHTS: CTS Eventim’s dividends and performance
*ABOUT THIS ANALYSIS: This series of financial insights is provided by the The FP&A Team at TheTicketingBusiness. The FP&A Team comprises a group of industry finance experts who volunteer their expertise to provide ad hoc analysis of key industry financial, M&A, funding and investment news. All in an effort to better-inform the market and support the industry’s long term development. Any questions or feedback welcome to [email protected]
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