Eventbrite(EB) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements For Q1 2021, Eventbrite reported $27.8 million net revenue, an $84.9 million net loss, and positive operating cash flow of $40.2 million Condensed Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $868,050 | $795,685 | | Cash and cash equivalents | $593,342 | $505,756 | | Goodwill | $174,388 | $174,388 | | Total Liabilities | $684,758 | $480,113 | | Accounts payable, creators | $254,082 | $191,134 | | Long-term debt | $352,060 | $206,630 | | Total Stockholders' Equity | $183,292 | $315,572 | Condensed Consolidated Statement of Operations Summary (in thousands) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net revenue | $27,818 | $49,086 | | Gross profit | $14,143 | $21,081 | | Loss from operations | $(25,843) | $(137,114) | | Loss on debt extinguishment | $(49,977) | $— | | Net loss | $(84,891) | $(146,476) | | Net loss per share, basic and diluted | $(0.91) | $(1.71) | Condensed Consolidated Statement of Cash Flows Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $40,169 | $(47,267) | | Net cash used in investing activities | $(118) | $(2,942) | | Net cash provided by financing activities | $47,651 | $2,446 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail COVID-19's impact on estimates, accounting changes for convertible debt, and significant financing and litigation events - The COVID-19 pandemic has caused significant uncertainty in financial estimates, especially for chargebacks and refunds due to canceled or postponed events[32] - The company adopted ASU 2020-06 on January 1, 2021, which simplifies the accounting for convertible instruments and resulted in a net increase to long-term debt of $42.4 million[36] - In March 2021, the company issued $212.75 million of 0.750% Convertible Senior Notes due 2026. Proceeds were used to repay the May 2020 credit agreement[69][84] - A loss on debt extinguishment of $50.0 million was recorded in Q1 2021, primarily from the write-off of unamortized debt discount and a make-whole premium related to the repayment of the May 2020 credit agreement[69] - The company is involved in ongoing litigation, including a class action over its refund policy and stockholder lawsuits alleging misrepresentations in its IPO documents. An accrual of $1.9 million has been recorded for the expected settlement of the Federal stockholder action[103][108] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses COVID-19's impact on operations, cost reduction efforts, and strengthened liquidity through convertible notes Overview Eventbrite, a global self-service ticketing platform, experienced significant COVID-19 impact but saw Q1 2021 recovery and strengthened its financial position by issuing convertible notes - The COVID-19 pandemic has had a significant negative impact on the company's results, though net revenue improved in Q1 2021 compared to Q4 2020, with growth in Australia and online events[139] - In March 2021, the company issued $212.75 million in convertible senior notes due 2026 and used $153.2 million of the proceeds to repay its May 2020 credit agreement[141] Key Business Metrics and Non-GAAP Financial Measures Key business metrics show a significant decline in paid ticket volume but an improvement in Adjusted EBITDA due to cost controls Key Business Metrics | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Paid Ticket Volume (thousands) | 10,232 | 22,237 | | Adjusted EBITDA (thousands) | $(8,510) | $(119,600) | - Paid ticket volume decreased by 54.0% in Q1 2021 compared to Q1 2020[144][154] Results of Operations Q1 2021 net revenue decreased 43.3% due to lower ticket volume, while gross margin improved and operating expenses significantly decreased, notably in Sales, Marketing, and Support Year-over-Year Financial Performance (in thousands) | Item | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $27,818 | $49,086 | $(21,268) | (43.3)% | | Cost of Net Revenue | $13,675 | $28,005 | $(14,330) | (51.2)% | | Sales, Marketing & Support | $5,639 | $99,915 | $(94,276) | (94.4)% | | General & Administrative | $19,028 | $42,109 | $(23,081) | (54.8)% | | Loss on Debt Extinguishment | $(49,977) | $— | $(49,977) | N/A | - The decrease in sales, marketing and support expenses was primarily due to a net decrease in the chargebacks and refunds reserve. A reserve of $76.5 million was initially recorded in Q1 2020[165] - A loss on debt extinguishment of $50.0 million was recorded, related to the write-off of $31.8 million in unamortized debt discount/costs and a $18.2 million make-whole premium[173] Liquidity and Capital Resources As of March 31, 2021, the company held $593.3 million in cash, bolstered by a $212.75 million convertible note issuance, and expects sufficient liquidity for the next 12 months - As of March 31, 2021, cash and cash equivalents were $593.3 million, of which $254.1 million was due to creators[180] - In March 2021, the company received net proceeds of $207.0 million from the issuance of 2026 Notes and used $153.2 million to repay its May 2020 credit agreement and $18.5 million to purchase capped calls[181] - The company believes existing cash and cash from operations will be sufficient to meet anticipated cash needs for at least the next 12 months[187] Quantitative and Qualitative Disclosures About Market Risk The company faces no significant interest rate risk due to fixed-rate notes but is exposed to foreign currency fluctuations, though a 10% change is not expected to be material - The company has no financial or economic exposure to interest rate changes because its 2025 and 2026 Notes have fixed interest rates[199] - The company is exposed to foreign currency risk, particularly from the British Pound, Euro, Canadian Dollar, and Australian Dollar. A 10% change in exchange rates is not expected to have a material impact[200] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective[201] - No changes occurred during the quarter ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[202] PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 10 for details on ongoing litigation, including a class action regarding refund policy and stockholder lawsuits related to the IPO - For information on legal proceedings, the report refers to "Note 10 - Commitments and Contingent Liabilities - Litigation and Loss Contingencies" in the Notes to the Unaudited Condensed Consolidated Financial Statements[206] Risk Factors New risk factors include substantial indebtedness from convertible notes, potential cash flow issues, dilution, operational limitations, and provisions that could deter takeovers - The company's substantial level of indebtedness from its Convertible Notes could adversely affect cash flow and the ability to operate the business[208] - Risks associated with the debt include diverting cash flow to payments, limited ability to obtain additional financing, and potential dilution to existing stockholders from the conversion of the notes[208] - The company may not have the ability to raise funds for cash settlement upon conversion of the notes or to repurchase them following a fundamental change[213] - Provisions in the indentures governing the Convertible Notes, such as repurchase rights upon a 'fundamental change', could delay or prevent a potentially beneficial takeover[222] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the three months ended March 31, 2021, that were not previously reported - No unregistered sales of equity securities occurred during the quarter that were not already reported on a Form 8-K[224] Exhibits This section lists filed exhibits, including the indenture for the 2026 Convertible Senior Notes, the capped call confirmation, and required CEO/CFO certifications - Filed exhibits include the Indenture for the 2026 Notes, the form of the Capped Call Confirmation, and CEO/CFO certifications[227][228][234]