Is the bottom falling out for Eventbrite? Not really, but it needs to turn a corner soon to make investors more confident in its future. It takes time and money to build a global platform, and it looks like Eventbrite could be running out of time.
No one said the events business was easy, and Eventbrite is feeling pressure after its second quarter as a public company yielded concerns about its future success.
Eventbrite stock fell more than 25 percent in aftermarket trading following the release of its quarterly earnings report on Thursday, the result of weak revenue guidance for the first quarter of 2019 and a loss per share that widened to 17 cents from an expected 14 cents.
Eventbrite’s stock has been in steady decline since going public, and it seems like the acquisition heavy approach it took before its IPO is dragging it down.
While Eventbrite beat expectations on fourth-quarter revenue by $2.7 million, it seems the prospect of various integrations weighing down the future profitability of the company has troubled investors. Eventbrite’s strategy expansion has been fueled by acquisitions in global markets, and integrating the various systems while retaining clients seems to have been harder than expected.
The bigger problem is that the company’s losses have increased even as it drives more revenue.
|Eventbrite Losses/Revenues (in millions)
As we reflected when analyzing Eventbrite’s prospects as a public company, the extremely fragmented event technology marketplace ensures that acquisitions lead to a time-intensive and costly integration process. These acquisitions, whether of technology or a ticketing business, take some time to start making money for the buyer. They are also vulnerable when it comes to shifting demand from both event producers and their customers.
The integration of Eventbrite’s marquee acquisition Ticketfly is taking longer than expected and the key reason for the company’s reduced revenue guidance. It’s now slated for completion in the second half of 2019, but there are many other smaller regional operations it has to integrate as well.
“Rather than deciding to operate the Ticketfly platform on its own, we made the decision to integrate Ticketfly onto the Eventbrite platform, thus delivering the full power of both to independent music venues and promoters; this strategy also requires an intensive process where our team focuses on migrating existing customers as well as building platform enhancement,” said Julia Hartz, Eventbrite’s CEO, during the earnings call.
“While this strategy will impact revenues in the short term, as seen in our Q1 guidance, in the long term, we believe building a leading global independent music platform will maximize our revenue and allow for meaningful innovation. We believe the work we are undertaking this year to bring our North American music business onto a single global platform will pay off for many years to come.”
The plan is for Ticketfly (now known as Eventbrite Music) and the various other regional ticketing operations the company has acquired to sit on one technology platform instead of working across a hodgepodge of systems like they do today. Once they are integrated, the administrative costs of dealing with all that won’t weigh on the company’s margins so heavily.
The company’s international ticketing business remains a question mark as well. Eventbrite just launched a product in Singapore and has built a localized platform in Mexico that lets users pay for tickets in cash at local convenience stores. It now operates 20 different ticketing and event businesses in international markets, accounting for 30 percent of the company’s revenue.
On the non-technical side, it seems like the efforts by Eventbrite’s sales and customer teams to retain the existing clients on their platforms have been more challenging than expected. Eventbrite’s business where small customers sign themselves up for the service is growing much more strongly than the wing that strikes more expensive and binding deals with event companies or venues.
“As you look at our business, we have this wonderful channel where customers sign themselves up,” said Randy Befumo, Eventbrite’s chief financial officer. “At the time of the offering, it was 54 percent. It’s been growing faster than the sales channel, and so it’s grown since then. That quarter-to-date, we’re seeing, along with international, 20 percent-plus volume growth… You can imagine then the rest of the business, North American music, which we’ve been talking about in sales is growing below that rate. North American music, the story really there and our learning in the migration process is that if you’re timing your activities to align with the creators, it requires some patience. And if you have a team that you’re asking to focus on those creators, first and foremost, there are growth consequences. They just aren’t spending as much time growing the business.”
While Eventbrite tries to turn itself into a global platform for selling tickets, they’re not neglecting non-ticketing event technology tools and products that event creators really need. You can see this in the various payment systems the company has deployed around the world, along with the various marketing tools it has improved.
“We have an opportunity to bring to event creators in every category non-ticketing solutions that help them grow their businesses faster,” said Hartz. “And you’ll see in our 10-K that we’re making a considerable investment of almost $18 million in the last year towards these solutions. And as we continue to ideate and validate and finally bring these solutions to the market, that will continue to help us compound not only the value that we give our creators but also our revenue growth.”
A global ticketing platform for mid-size creators sounds great, as does better tools to empower events around the world. But first, Eventbrite has to find a way to turn around the narrative that losses will mount over the course of 2019.
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Photo credit: A promotional photo of the Eventbrite offices. Eventbrite