Eventbrite’s $100M Share Repurchase: A Ticket to Investor Attraction? – Buyback Wednesdays

Whether you want to buy tickets to a local school play or go with a group to watch the 2024 total solar eclipse, it is quite likely that you will be able to find someone who has organized the event and is selling tickets for it through an online platform called Eventbrite. Businesses where co-founders maintain significant leadership roles long after the company goes public often pique our interest. Eventbrite is one such company that recently announced a large buyback, representing around 18% of its market cap at announcement. 

Eventbrite, Inc. (EB): $5.23

Market Cap: $$552.13M

EV: $570.33 M

Key Insights

• Eventbrite is an online ticketing platform that connects event organizers and attendees.
• The presence of the company’s co-founders in leadership roles provides an added advantage.
• Management’s move from a ticketing agency to a two-sided events marketplace has led to improved business outcomes.
• The company has experienced a rebound in profitability and revenue following the pandemic.
• In 2023, consumer reach hit record levels, with over 92 million transactions, up 7% YoY.
• The company has struggled to regain its IPO highs and is down over 70% in the last five years.
• The CFO’s sale of a large amount of company shares is a cause for concern.

Source: Eventbrite ( Investor Presentation)

Eventbrite operates as a global platform offering self-service ticketing and marketing for small-to-mid-market events across nearly 180 countries. While music events are a core focus, the company also hosts a significant number of business, professional, food, and sports events. In response to economic challenges in 2019, Eventbrite implemented workforce reductions and relocated certain roles to Spain and India to optimize costs. The onset of the COVID-19 pandemic in 2020 led to further layoffs.

Despite these setbacks, recent trends indicate a resurgence in optimism. Eventbrite has ramped up hiring efforts, particularly in its sales team, with a 50% expansion in the latter half of 2023. The increased hiring has translated into enhanced performance, with a 24% increase in customer wins year-over-year.

The company’s strategic focus remains on major metropolitan areas like San Francisco, New York, London, and Los Angeles, where deals are already 15% larger for the recent quarter compared to the prior three quarters. This positive momentum in hiring and performance underscores Eventbrite’s confidence in its growth prospects.

Management 

Headquartered in San Francisco, California, Eventbrite was founded by Kevin Hartz, Julia Hartz and Renaud Visage in 2006.

• Kevin Hartz, a serial entrepreneur with experience at PayPal and Xoom Corporation (acquired by PayPal), co-founded the company alongside his wife, Julia. After serving as Eventbrite’s CEO for a decade, he transitioned to Executive Chairman in 2016. Beyond Eventbrite, Kevin has served as an early-stage investor and advisor to successful start-ups like Airbnb, Pinterest, Uber, Lookout, Trulia, Flixster, Skybox Imaging, and Yammer.
• Julia Hartz is the current CEO of the company. Recently, Eventbrite announced the appointment of Julia Hartz to the role of Executive Chair of the Board, effective June 6.

Business Model

Eventbrite provides an all-in-one event management and ticketing platform, capitalizing on event planning and ticket sales. With a tech-driven approach, Eventbrite aims to optimize event management, boost ticket sales, and improve the event experience. Employing a “fast feedback loop” strategy, the company leverages sales data to target creators, particularly in key metropolitan areas.

Source: Eventbrite (Image by author)

Shift To a Two-sided Market Place

Eventbrite transformed from a ticket processing platform to a marketplace for tickets and events. It is now a comprehensive growth platform for creators, leveraging a powerful consumer demand engine. Around 47% of paid tickets are influenced by demand generated through Eventbrite’s strategic marketing and advertising.

Source: Eventbrite ( Investor Presentation)

Revamping Pricing Plans

In Q4 FY2023, Eventbrite overhauled pricing plans, eliminating fully free services for larger events and imposing charges for events exceeding 25 tickets. This strategy, highlighted by the CEO in a recent conference call, has led to strong adoption of its  subscription-based model. Paid creators have increased by 15.4% this year. Eventbrite also started charging for its marketing and demand generation tools, with approximately 15% of creators utilizing these tools and experiencing significant performance improvements. The CEO reported positive feedback on this,

“We’re in about mid-teens percentage of creators using these tools and we continue to see that creators using the marketing tools are significantly outperforming on a same-store basis, roughly 60% or so increase. We’re also making strides in our demand generation messaging to our customers. We recently ran a survey across our customer base, and 75% of creators we surveyed view us as a demand generation partner.”

Eventbrite ads have also contributed to the top line with Q3 2023 revenue reaching $2 million, a 40% increase from Q2 2023.

Source: Eventbrite ( Investor Presentation)

Financials

As shown in the graphic below, Eventbrite has successfully increased its revenues and gross profit over the last three years benefiting from a rebound after the pandemic. Revenue has grown from $106 million in 2020 to $326 million in December 2023, which is essentially the same revenue they saw in 2019. The key difference is that the net loss has declined and the company will likely become profitable by the end of 2024, assuming the current growth trend continues.

Source: InsideArbitrage

Balance Sheet

Eventbrite has a unique business model that helps it manage working capital effectively. The company collects ticket fees on behalf of event creators and keeps these funds on its balance sheet before disbursing them. This creates a float, which allows Eventbrite to invest not only its own cash but also the payment float.

It is important to note that the true net debt/cash level can be obtained only after subtracting accounts payable to creators. As of December 2023, the company’s cash and cash equivalents were $642.9 million (cash + current investments), while its long-term debt was $357.7 million. Accounts payable to creators amounted to $303.4 million. Hence, after deducting accounts payable to creators, the company has a net debt of $18.2 million. Eventbrite’s current ratio is almost 2, which indicates that the company has a healthy liquidity position, with nearly double the current assets compared to current liabilities.

Valuation

At the current share price of approximately $5.23, Eventbrite has a market capitalization of $552.13 million. Factoring in the company’s balance sheet, with $642.95 million in cash (net of funds owed to creators) and $660 million in debt, yields an enterprise value of $570.33 million.

Considering the company is currently GAAP unprofitable, the Price to Sales ratio could serve as a rough valuation metric for Eventbrite. It is hard to find an apples to apples comparison for the company because it isn’t exactly a payments company like Block (SQ) but is more of a marketplace like Etsy (ETSY) or TheRealReal (REAL). Etsy and TheRealReal have similar gross margins as Eventbrite with all three companies sporting gross margins between 68% and 70%. The comparison ends there because Etsy is GAAP profitable, Eventbrite is free cash flow positive and TheRealReal has been posting a string of very real losses.

This is reflected in their P/S ratios with Etsy trading at a forward P/S of 2.87, Eventbrite coming in in the middle at 1.52 and TheRealReal at 0.70.

I attempted to run a discounted cash flow (DCF) model for the company but it is difficult to model what earnings might look like over a ten year period because of the discretionary nature of its revenue and a business model that is still in flux.

Share Repurchases

On March 14, 2024, Eventbrite’s Board of Directors authorized a new $100 million share repurchase program which it expects to fund from existing cash and cash equivalents and/or future cash flows. 

Shares outstanding have been increasing over the last four years. Historical data suggests that the recent buyback announcement is very likely a means to balance the dilution caused by Share-Based Compensation (SBC). SBC expense has increased recently from $53.36 million in 2022 to $55.1 million in 2023. 

Source: InsideArbitrage

Insider Activity

According to a recent SEC filing, Charles Baker, the Chief Financial Officer of the company, sold 20,000 shares of the company on March 15, 2024. The shares were sold at an average price of $5.52 per share, resulting in a total value of $110,496. It is worth noting that over the past year, the CFO sold a total of 40,000 shares and has not purchased any stock.

Key Metrics For Eventbrite

• Gross Ticket Sales: Total tickets sold (free and paid) totaled $3.6 billion in 2023 and increased by 6% YoY from $284 million to $302 million in Q4.
• Net Revenue: Revenue of $87.8 million grew 23% year-over-year based on a greater mix of marketplace-related revenue and improved take rate. Net revenue per ticket increased to $3.64 in December 2023 from $2.7 in December 2021.
• Number of Events: When the company rolled out new marketplace fees, it expected some shift in the size of events happening on the platform. Fortunately for the company, the number of events increased by 3% YoY in Q4 to 5.2 million.
• Paid Ticket Volume: Paid tickets were down 4% in the fourth quarter versus the prior year, even as total revenue was up 23% YoY. Paid ticket volume is expected to be lower YoY in the first quarter of 2024 as well, and this has been factored into the business outlook for the quarter and the full year. 
• Average Ticket Price: Consumer purchasing power is resilient with the average ticket price being about $40. The company has increased its ticketing take rate and enhanced revenue per ticket by more than 10% during 2023.
• Customer Acquisition Cost (CAC): Sales, marketing and support expenses, which grew rapidly in the second half of 2023 in support of the marketplace shift, are expected to grow modestly during 2024.
• Customer Retention Rate: This stands at a mid-teens percentage, with creators utilizing its marketing tools experiencing a significant 60% increase in performance. In 2023, its consumer reach hit record levels, with over 92 million consumers transacting free or paying for tickets, marking a 7% year-over-year increase.
• Churn Rate: There has been some churn of creators who, for the first time, have faced fees to list their events on Eventbrite. This is a cause of concern as a higher churn rate would derail the company’s growth plans or increase the CAC.

Source: Eventbrite ( Investor Presentation)

Q4 and FY2023 Results

Shifting towards a two-sided marketplace has led to meaningful changes in the company’s financial results over the past year. Eventbrite’s community grew to over 91 million event attendees and nearly 1 million event creators promoting over 5 million events through Eventbrite last year.

Source: Eventbrite ( Investor Presentation)

Outlook For FY2024

Eventbrite’s outlook for 2024 appears less optimistic. It expects full-year revenue to range between $359 million and $372 million, with the midpoint representing a 12% growth over 2023. For the first quarter of 2024, revenue is forecasted to be between $84 million and $87 million, translating to a 10% year-over-year growth at the midpoint. Adjusted EBITDA margins for the year 2024 are projected to range from low to mid-teens, excluding any potential impact from reserve adjustments and other factors.

However, the projected growth falls 8% short of what the company is planning to achieve.

Source: Eventbrite ( Investor Presentation)

Risks

Eventbrite operates in a risky business environment, particularly susceptible to economic downturns.

1. As a platform reliant on discretionary spending, Eventbrite’s fortunes may fluctuate with economic conditions, although consumer preferences favoring experiences over products provide some reassurance.
2. Intense competition further compounds these risks, with rivals such as SeatGeek, Ticketmaster, and Evite vying for market share. Additionally, there is a possibility of creators opting to manage their own ticket sales to circumvent rising take rates and fees imposed by Eventbrite.
3. Another significant risk lies in the potential stagnation or decline in creator growth. While recent quarters have seen a 10% year-over-year growth, a dip below 5% could strain the company’s expansion efforts. Maintaining a healthy 8-10% creator growth rate is crucial to mitigating this risk.

Bottom Line

Eventbrite’s founder-led CEO’s commitment to revenue growth is impressive. The company has been innovative in enhancing its business post-pandemic and is positioned for further expansion, particularly benefiting from the increased spending on experiences by a younger demographic.

Several key growth metrics, such as revenue per ticket and gross profit per ticket, are currently at their strongest levels. With effective management of corporate overhead and a continued focus on delivering value to its creators, Eventbrite has the potential to pave the way towards profitability.

Given its growth trajectory and the nice return it is earning on ticket sales related cash it holds on its balance sheet, the company is certainly worth exploring further.

Welcome to edition 88 of Buyback Wednesdays, a monthly series that tracks the top stock buyback announcements during the prior month. The companies in the list below are the ones that announced the most significant buybacks as a percentage of their market caps. They are not the largest buybacks in absolute dollar terms. A word of caution. Some of these companies could be low-volume small-cap or micro-cap stocks with a market cap below $2 billion.

With the earnings season winding up, the number of buyback announcements for the month dropped to almost half of the prior month. Around eighty companies declared buybacks this month, compared to one hundred thirty in the previous month.

Top 5 Stock Buyback Announcements 

1. Qudian Inc. (QD): $2.38

On March 18, 2024, the Board of Directors of this Chinese online platform approved a new $300 million share repurchase authorization, equal to around 53.4% of its market cap at announcement.

2. National CineMedia, Inc. (NCMI): $5.38

On March 18, 2024, the Board of Directors of this movie advertising network announced that it had approved a new $100 million stock repurchase agreement. This represents around 24.5% of its market cap at announcement.

3. So-Young International Inc. (SY): $1.14

On March 20, 2024, the Board of Directors of this online platform for medical aesthetics and consumption healthcare services announced that it had approved a new $25 million share repurchase program, equal to around 23% of its market cap at announcement.

4. Sohu.com Limited (SOHU): $10.89

On March 2, 2024, the Board of Directors of this Chinese online media, video, and game products and services provider approved an additional $70 million share repurchase program, equal to around 21% of its market cap at announcement.

5. Patterson Companies, Inc. (PDCO): $26.41

 On March 11, 2024, the Board of Directors of this specialty distributor and seller authorized a new $500 million stock repurchase program, equal to around 20.5% of its market cap at announcement.

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