This article was originally published on Forbes.com
Ask any chief financial officer inside the Software-as-a-Service (SaaS) realm why they are better prepared than most CFOs to navigate the country’s impending recession, and chances are that they mention the pools of customer behavior data now streaming into their forecasting models.
Ask the same CFOs which SaaS developer’s customer data they would most like to siphon from in the coming months as they look to assess the prospects for a recovery, and that of Eventbrite Inc. (NYSE: EB) might rank high on the list.
Think about it. The event management and ticketing website company’s business model is entirely based on the fact that social distancing was, until recently, unheard of and a pain point for most businesses. Of course, now Eventbrite’s event offerings put the San Francisco-based company squarely in the pandemic’s cross hairs as shelter-in-place ordinances upended social gatherings and events across the country in March.
“I think that one of the things that was most exciting, challenging, and difficult during the past eight weeks was that Eventbrite acted really decisively,” says Eventbrite CFO Lanny Baker, who last week, along with Eventbrite CEO Julia Hartz, briefed analysts on the company’s staggering Q1 loss of $119.6 million. Hartz and Baker used the briefing to highlight the company’s response to the pandemic: a hard-charging reaction that removed $120 million in expenses and severed half of Eventbrite’s workforce.
Meanwhile, Eventbrite also announced an initial loan from Francisco Partners, a private equity firm, for $125 million. An additional $100 million draw is available from the investor, assuming that certain conditions that relate to business operations can be met. Meeting these conditions will no doubt rely on Eventbrite’s ability to correctly forecast as it seeks to navigate the arch of the pandemic.
For Baker, this is a challenge that involves two key areas of customer engagement, the first being the activities of “event creators” (individuals actually planning events) and the second being the attendees who purchase event tickets.
Among the first “inputs” that Eventbrite’s forecasting team introduced into its pandemic modeling were the different time frames for government restrictions that could potentially remain in place.
“These would be restrictions where people are not really allowed to have events, and we looked at the impact for three months, six months, nine months, and even 12 months,” reports Baker, who says an equally ambitious modeling priority is to expose a path to recovery after restrictions.
“Once the restrictions are lifted, will it be a gradual recovery? Maybe three years for things to return to where we were a year ago? Or is it more like a 12-month recovery? Or is it in the middle?” suggests Baker.
Among the different inputs to Eventbrite’s post-restrictions modeling is the possibility of a vaccine becoming available within similarly staggered time frames.
Says Baker: “Our assumption would be that a recovery would probably be steeper with a vaccine than if there weren’t one.”
Outside the United States, Baker says that Hong Kong and Singapore are two “reasonably sized” Eventbrite markets from which the company can glean insights.
“Those two markets have controlled things really well and have been able to reopen, and civic life has sort of re-emerged there,” explains Baker, who notes that within the span of two months both markets “bottomed out” at about 10 percent of normal activity before climbing back to about 55 percent of normal.
Along the way, Baker says, every new day brings a new tranche of customer behavior and sales data streaming into the company’s forecasting model, as was the case in early March.
“We saw that revenue was $100,000 less than we thought that it should be on a Tuesday, and that was all we needed to make us start peeling back the customer data to look at where purchases were slowing down,” recalls Baker.
“When you see the trends break the way they were breaking, there’s no sense in waiting around to see how far the ‘down’ really is. You know it’s going to be down, and it’s probably going to be down more than you’re admitting to yourself,” comments Baker, who quickly helped to architect an aggressive cost reduction plan that he says ultimately lowered the company’s “revenue break-even point” by about 50%.
At the same time, Baker says, Eventbrite began informing its event creators that allocating additional marketing dollars to April events would not likely remedy their sluggish ticket sales.
“We could tell these people on the second day, ‘No, no, it isn’t going to happen like that,’” explains Baker, who notes that the average event on the platform is 40 tickets, while Eventbrite sold 300 million tickets total in 2019.
Besides encouraging its event creator customers to perhaps curtail their 2nd quarter spending on marketing, Eventbrite sought to help event creators manage their exposure to refunds. Since the start of March, event creators on Eventbrite have refunded more than $150 million to ticket buyers, while refunds and chargebacks funded by Eventbrite have totaled less than $3 million over the same time frame, Baker told analysts. – Jack Sweeney