We have been following Eventbrite since they are a similar company serving events and having a similar business model of charging for their services only with processing fees since they went public. We are also likely to begin to compete with them more as nonprofits discover the GiveSignup Ticket Platform that is purpose built for nonprofits. We reported on the Eventbrite Q2 and Q1 earnings this year as well as past public Eventbrite reports.
Like RunSignup | GiveSignup, their key metric is how many paid tickets they have sold. It was down 66% in Q3 compared with last year.
This has been driven by more live events, which is similar to what RunSignup | GiveSignup is seeing. We are fortunate that the number of virtual events on our platform was proportionally higher and accounted for the fact that our year over year numbers were down only 24%. Comparing our numbers:
The Gross Profit is also slowly improving as well, but follows a bit behind ticket sales being down 78% (RunSignup | GiveSignup was down 23%).
Chargebacks
Eventbrite reports similar low volume of chargebacks to what we have seen at RunSignup | GiveSignup. This is much more encouraging than what Eventbrite and we expected in March, and is an indication that our customers did a very good job of engaging their participants and gaining their support.
Eventbrite has incurred gross chargebacks of $4 million, or 3% of the total, which is consistent with the company’s historical average annual loss rate.Q3 Eventbrite Report
Lower Investment in Development, Sales and Operations
Eventbrite had a 45% reduction in staff in Q2, which has lowered their investment across the company. RunSignup | GiveSignup has been fortunate to grow our teams in development, support and sales over the past several months in comparison.
Product and development expenses were down 29% year-to-year. Sales, marketing and support costs were down 65% year-to-year. General and administrative expenses were down 30%. And total operating expenses were down 44% or $30 million year-to-year for the quarter.Earnings Call Transcript, Page 3
Advanced Payouts
Eventbrite took a very hard turn on advanced payouts. In previous years, they had advanced payments to some customers even greater than the ticket transactions. They pulled way back on this as a result of COVID, and they now do not pay out any transactions until after the event has occurred.
This is very different than RunSignup | GiveSignup, where we had previously paid out 100% of transactions as they occurred. We made adjustments to this policy during 2020, and now have a reserve of only 5% of transactions held until after the event. This provides nonprofits and events cash flow as they prepare for their events, and will likely become another big advantage for nonprofits to move from Eventbrite to GiveSignup’s purpose-built nonprofit ticket platform.
Financials
The big reductions that Eventbrite made to their cost structures by reducing staff by 45% will allow them to become a profitable company much earlier in the recovery of live events. There are a number of financial complications to their income statement that make things hard to see.
For example, they made adjustments to their loss reserves for chargebacks, and recorded that as an offset to Sales and Marketing costs (they made $5M!):
The two items highlighted in red above are from the 2 debt financings that they did in the past 6 months. While they are going to save money on employee reductions, they will pick up a recurring charge for interest expense on the debt they are carrying. This is a fine balance, as the cash on their balance sheet gives them enough to weather any storm for the next 5 years.
The other item is the number of shares outstanding. Some of this is employee compensation, but some of it (and potentially more to come depending on the debt deal outcomes) is dilution of shareholders with the debt deals they did. Our rough “back of the envelope” calculations show the Francisco Partners deal to have an effective interest rate of about 25% between upfront fees, interest expense and stock grants.
Again, we consider ourselves lucky at RunSignup | GiveSignup to have taken a round of financing at much better terms.
Long Term
We think Eventbrite will recover, along with the live event community in 2022. It should be in very good shape moving forward with lower expenses and much easier comparable YOY numbers. So it will have growth and profitability that should allow the company and the stock to recover.