Eventbrite moves toward a $2 bln-plus IPO


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By Rohit Kulkarni, SharesPost

Eventbrite Inc, the event ticketing and services unicorn, recently filed its S-1 in advance of its IPO. Eventbrite’s potential IPO is well timed to take advantage of the very favorable IPO market and the fresh highs in equities markets.

At its most recent funding round in August 2017, the company was valued at $1.45 billion. Based on the recent performance metrics and growth projections in the company’s S-1, we believe the company’s post-IPO valuation could very well exceed $2 billion, assuming a mid-single digit revenue multiple on 2020 estimates.

The company’s IPO also points to another successful exit for VCs and private investors, including Sequoia Capital and Tiger Global Management.

Below are 10 observations from Eventbrite’s S-1.

1. Eventbrite plans to raise up to $200 million. The company will trade on the NYSE under the ticker “EB.” Underwriters of the offering include Goldman Sachs, J.P. Morgan, Allen & Company and RBC Capital Markets.

2. Strong revenue growth. Between the fiscal year 2016 and 2017, Eventbrite enjoyed a 51 percent increase in revenue, from $133.5 million to $201.6 million. The first half of 2018 has seen even stronger growth of 61 percent, from $88.2 million in 2017 to $142.1 million. However, we believe recent acquisitions have contributed to the accelerating revenue growth.

3. History of losses. While the revenue growth is impressive, investors do have a reason to be cautious regarding the company’s history of losses. It has yet to achieve profitability. At year-end 2016 and 2017, Eventbrite posted accumulated deficits of $200 million and $238 million, respectively. The filing suggests that scaling will eventually result in profitability. Despite the slight decrease in net losses from 2016 to 2017, Eventbrite’s net loss increased in the six months ending June 30, 2018, to $21 million from $18 million in the six months ending June 30, 2017

4. Large addressable market. The filing highlights the potential growth opportunity based on the significant size of the existing market. Eventbrite estimates that for 2018, the opportunity in its top 12 markets will total $3.2 billion in gross ticket fees, or about 1.1 billion tickets. In 2017, Eventbrite received fees from the sales of 71 million tickets. Effectively, Eventbrite benefits from a fairly low penetration in a large market opportunity.

5. Opportunities from shifts in consumer spending. Eventbrite’s S-1 cites findings from the U.S. Bureau of Economic Analysis, which suggests consumer spending on experiences (as opposed to goods) has outpaced overall growth in consumer spending. Should this trend continue, the company could benefit from continued growth in its addressable markets.

6. Broad range of competitors. Eventbrite faces competitive risks from established players, such as Live Nation Entertainment, owner of Front Gate Tickets, and Ticketmaster Entertainment. These formidable competitors are in addition to traditional event-management solutions and local or specialized competitors. Further competition has come from the large tech companies, such as eBay and Amazon, both of which have operated in ticketing services. In our view, the competition will only get tougher.

7. Strong retention rates. In 2016 and 2017, Eventbrite enjoyed retention rates from “event creators” of 93 percent and 97 percent, respectively. As explained in the filing, “event creators” are the direct customers of Eventbrite who organize and create events. They benefit from the promotion and distribution services provided on the Eventbrite platform. That level of customer retention is a positive indicator about its ability to stave off competition.

8. Growth through M&A. Eventbrite has supplemented its organic growth with a significant amount of M&A activity. Since 2015, Eventbrite has acquired seven companies, including Ticketfly, Ticketea and Picatic. Despite the risks associate with any acquisition, the company has demonstrated its ability to manage a fragmented landscape and successfully integrate acquired company operations.

9. Effective strategic partnership strategy. To facilitate the ease of payment on its platform, Eventbrite partnered with Square, which is now the primary online processing partner for the company’s payment processing in the U.S., Canada, Australia, and the U.K. Strategic partnerships like this one should increase the efficiency of managing the complexity of transactions performed on the platform.

10. Threat of security breaches. Just like any other online platform, Eventbrite faces the ongoing threat of cybersecurity breaches. This has already occurred at one of the companies it acquired. In 2018, Ticketfly experienced a data breach, which resulted in a recorded liability of $6.6 million.

Rohit Kulkarni is a managing director and head of research at SharesPost Inc.

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