In this segment from Industry Focus: Consumer Goods, the cast turns to Eventbrite's financial statements to get a pulse on the company's rapid revenue growth and rising profitability. They also discuss a major acquisition from 2017 and progress in international markets.
A full transcript follows the video.
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This video was recorded on Aug. 28, 2018.
Vincent Shen: Let's also now look at how that pans out, in terms of the actual financial performance for the company. I'll run down through a few of the high-level numbers. Feel free to jump in, Nick, with any of the details that really stood out to you. Revenue for 2017 came in at $202 million. That's up 51% year over year. In the first half of this year, 2018, it was $142 million, up 61% year over year. I have to say, for 12-year-old company, those growth levels do reaffirm how large the market can be won for Eventbrite, even in this so-called middle market space. It's important to note -- this is something that you really called out to me when we were prepping for the show -- is a pretty substantial part of the growth has also been driven by acquisitions, right?
Nick Sciple: Yes, that's correct. Over the past five years, Eventbrite has made nine acquisitions. The most significant of those acquisitions was acquiring Ticketfly from Pandora about a year ago, in June of 2017. They acquired the company for around $200 million, which is significant in that, a little less than two years prior to that, Pandora had acquired Ticketfly for about $335 million. Pandora had overpaid a little bit, but Eventbrite was able to get what amounted to their largest competitor in that middle market space. By acquiring Ticketfly, Eventbrite has really become the largest player in the middle of the market. In addition, what they got through that acquisition of Ticketfly is, Ticketfly as a subsidiary of Pandora for those two years had built some partnership relationships and some integrations with Pandora. That has come over with the Eventbrite acquisition. Not only has it allowed Eventbrite to solidify their control of the middle market space, but it's additionally gained them a partnership with Pandora to attract users to use their platform to attend events.
Shen: With the various buyouts that Eventbrite has gone through -- I think I saw seven deals since 2015. They're pretty acquisitive. How that pans out, in terms of the growth, and the caveat there -- I mentioned 61% top line growth in the first half of 2018. Only 60% of that expansion was organic. The remainder was driven by, for example, the Ticketfly and ticketea acquisitions.
Looking at the bottom line, profitability is also definitely improving. That was something that the CEO mentioned was a so-called requirement before they wanted to take Eventbrite public. On a GAAP basis, the net loss shrank in 2017. On an adjusted EBITDA basis, it more than doubled year over year to positive $10 million for the first half of 2018. I'll also mention that free cash flow is strong, $21 million for 2017. If you look at the balance sheet for this company, Eventbrite has $260 million of cash on hand, less than $70 million for debt. Pretty strong, especially for a company at this stage, and one that's growing at this level. I like those numbers more than some of the other IPOs we've seen, in terms of how they're trending in profitability.
Before we move on to our takes -- what we like, what we don't like about Eventbrite -- anything else you want to cover?
Sciple: I would just say, from a balance sheet perspective, we're seeing a significant portion of their assets are good will. That's being reflected from those acquisitions we talked about. They're seeing pretty substantial international growth over the past year. Revenue outside of the United States was up to 30% in 2017, up from 18% in 2012. That shows it's really pushing abroad and gaining that market share overseas. In addition, their paid tickets for events outside of the U.S. were 36% of their overall paid ticket volume. That, again, reflects that internationally, they're doing very strong, as well as in the United States.
Shen: There's something interesting there, in terms of the international paid ticket sales. It's interesting to note that, with the international markets growing, making up 25-30% of revenue, it presents a stronger option, in a way, for the company in this realm. A lot of those regions charge lower fees, in terms of the payment processing. As the company scales globally, we might see even better profitability because of that.
The last thing that I'll mention, in terms of the financials and what we're looking at with this deal is the use of proceeds. There's no final number on the size of the initial public offering yet and how much they're going to raise. But use of proceeds, the company cites that they want to pay down some of their debt. They also want to have some flexibility going forward, not surprisingly. Potential future acquisitions, but also other investments.
Nick Sciple has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Pandora Media. The Motley Fool has a disclosure policy.