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Eventbrite Update on Implications for the Endurance Registration Business

Eventbrite reported first quarter earnings yesterday to general disappointment. Net Revenue growth had slowed to 9% totaling $81M for the quarter with Gross Profit of $50M and a loss of $10M. These were below expectations, and expectations for Q2 also disappointed – resulting in a drop of about 30% in stock price this morning from yesterday’s close.

As we discussed when Eventbrite went public, there are a lot of lessons for race registration businesses like RunSignup. As we reported at the time, we think Eventbrite may have been pretty richly valued and that race registration businesses are not worth the same multiple. There are a couple of lessons that come out of this latest quarterly report.

Acquisitions have Costs

Eventbrite acquired Ticketfly in late 2017. Ticketfly was approximately $80M revenue business within Pandora before Eventbrite bought it. When Eventbrite went public, their revenue was about $200M, so Ticketfly was a significant chunk of the growth that was being shown on their income statements.

Eventbrite made a bold move in telling Ticketfly customers they were being forced to move over to the Eventbrite platform, which certainly makes sense strategically. However, in the near term, it means that a number of Ticketfly customers are moving to other platforms. Eventbrite is not reporting the churn numbers, but looking at some of their other stats, it seems pretty signficant since their self-serve business grew 23% and their overall growth was only 9%.

This is one of the reasons why RunSignup has been unwilling to pay a premium on the various registration companies that are looking to sell. We maintain our 2X Gross Profit valuation as a fair price for registration vendors.

Current Eventbrite Valuation

Over the past 12 months, Eventbrite reports Net Revenue of $298M and Gross Profit of $175M. Their market cap is $1.4B ($1.6B fully diluted) – roughly 4.6X Net Revenue and 8X Gross Profit.  These are much more reasonable valuations than their $3.4B valuation after their IPO on a Net Revenue of $200M for a 17X Net Revenue multiple.

Like we pointed out in our first evaluation of Eventbrite implications on the race registration vendors, Eventbrite deserves a much higher multiple than vendors in our endurance community based on size, growth of the market, growth of the company, pervasiveness of the platform, etc.

Eventbrite Growth will Rebound

While the news may be grim today, Eventbrite is just going thru a period of high churn of their Ticketfly customers and expectations that were set too high. Once that passes in Q4 or next Q1, their business growth will be be more normalized – probably tracking closer to that 23% self-serve growth rate they reported. They have a number of assets, like a solid platform, international business, and multiple growth markets.

This contrasts with many race registration businesses who have investors locked into illiquid assets that are not appreciating in value and where growth possibilities are limited.

RunSignup is unique, since we are not looking for an exit and have a long term plan we are executing on. In addition our 8,000+ nonprofit customers have a large set of needs that we will be addressing in some exciting announcements we will have over the coming months, providing us many years of growth opportunities for our customers and employees.

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