Eventbrite (EB) IPO

Investment Analysis Clubs Saul’s Investing Discussions
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I was watching for the Eventbrite IPO and it happened yesterday. Shares were up 53% in its first day . I missed out on most of that but I did start a position.

EB’s sales were up 61% in the first half of 2018 compared to the same period last year. Here’s a financial snapshot from MarketWatch

Eventbrite’s revenue grew by 51% from 2016 to 2017, and it rose 61% in the first half of 2018 relative to the year-earlier period. The company continues to lose money, posting a $1.98 loss per share in 2017, compared with $2.48 a year before. In the first six months of the 2018, Eventbrite lost 73 cents a share, relative to 44 cents in the year-ago period. The company is free-cash-flow positive.

https://www.marketwatch.com/story/eventbrite-ipo-6-things-to…

So they’re free cash flow positive and bottom line improved last year but is starting the first half with an increase in losses. EBITA was positive last year and CEO expects that to expand this year.

Eventbrite is an event planning and ticketing platform. Their target market is not so much the large headline concert and sporting event market dominated by Live Nation, which they list as a competitor. Rather it’s the largely unaddressed smaller to medium sized events like a county fair, craft beer festival, or local ballet type market. They are also starting to succeed internationally with about a 7% penetration of what they think is their total addressable market.

97% of their revenue is transactional. They have opportunity to expand transactions not just with ticket sales but other areas within an event through add on options and marketing and sponsorships.

Gary Alexander has a write up on the IPO in SA

https://seekingalpha.com/article/4207532-eventbrite-plenty-u…

EB will use the IPO funds to pay down debt and arrive at a net cash position of $385M. Gary estimates with a conservative 45% growth an EV/Forward Rev with current prices of 6.5x. Which he argues is pretty low for a company growing at 61% and which the CEO says they see opportunity to accelerate growth. Applying a 10x multiple would yield a $54 stock price.

Watched a Bloomberg interview with the CEO, Julia Hartz. She seems bright and has a good grasp of the market opportunity for her company. So I’m putting her solidly in the asset category for Eventbrite.

That’s my quick run down. I think it’s promising. Growing fast in a growing market and marching towards profitability.

Darth

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I was quite interested in this IPO and dug a bit deeper. Fool has a good podcast on this IPO:
https://www.fool.com/investing/2018/08/31/eventbrite-growth-…

One caveat on the 61% growth is that 22% came from acquisitions, only 36%(fool.com) ~ 39%(forbes.com) is organic.
(https://www.forbes.com/sites/greatspeculations/2018/09/20/ip…)

However, the company did not take on that much debt:

  • $260 million of cash on hand
  • less than $70 million of debt
  • Current annual revenue run rate approaching $300 million

At current price of $34.25 ($2.7 billion market cap), it has a P/S of around 9, P/EV of a little over 8.

In thinking about its business model, I am not sure how sticky their service is. I was thinking their service would be stickier if event creators have a “following” in their app, so I downloaded their app, and it doesn’t have the ability to follow the event creator. I guess it makes sense, because that feature would be competing with social media apps and it will most likely be a lost cause.

So I think its network effect is minimal. It comes down to execution, how they can land event creators, make it easy for them, and then keep them. They have executed very well so far, achieving good growth without burning much cash. Buying this stock is a bet on management and no serious competition emerges. But I wonder what would happen if Facebook decides to implement the feature to sell event tickets, which is not an unlikely event.

This company has good potential, but is not a slam dunk.

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