Quarterly Report (10-q)

Date : 11/07/2019 @ 9:19PM
Source : Edgar (US Regulatory)
Stock : Eventbrite Inc (EB)
Quote : 19.39  0.21 (1.09%) @ 5:19PM

Quarterly Report (10-q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 10-Q
____________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-38658
_______________________________________________________________________________
EVENTBRITE, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________________________________
Delaware
14-1888467
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
 
 
155 5th Street, 7th Floor
San Francisco, CA 94103
(415) 692-7779
(Address, including zip code and telephone number, including area code, of Registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Class A common stock, $0.00001 par value
EB
The New York Stock Exchange
_________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
☒  
Smaller reporting company
 
 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
As of October 15, 2019, 57,411,637 shares of Registrant's Class A common stock and 26,991,920 shares of Registrant's Class B common stock were outstanding.




EVENTBRITE, INC.
TABLE OF CONTENTS
 
 
 
Page
 
 
PART I. FINANCIAL INFORMATION
 
Item 1.
4
 
4
 
5
 
6
 
8
 
10
Item 2.
28
Item 3.
45
Item 4.
45
 
PART II. OTHER INFORMATION
 
Item 1.
46
Item 1A.
46
Item 2.
51
Item 6.
52
53





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "appears," "shall," "should," "expects," "plans," "anticipates," "could," "intends," "targets," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about our future financial performance, including our revenue, costs of revenue and operating expenses; our anticipated growth and growth strategies and our ability to effectively manage that growth; our ability to achieve and grow profitability; the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs; our ability to maintain the security and availability of our platform; our predictions about industry and market trends; our ability to attract and retain creators; our ability to successfully expand internationally; our ability to maintain, protect and enhance our intellectual property; our ability to comply with modified or new laws and regulations applying to our business; and our ability to successfully defend litigation brought against us; the increased expenses associated with being a public company. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors described in the section titled "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events.

All forward-looking statements are based on information and estimates available to us as of the date of this Quarterly Report on Form 10-Q and are not guarantees of future performance. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.



PART I. FINANCIAL INFORMATION

Item 1. Unaudited Interim Condensed Consolidated Financial Statements

EVENTBRITE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value data)
(Unaudited)
 
September 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets
 
 
 
          Cash and cash equivalents
$
485,197

 
$
437,892

          Funds receivable
44,417

 
58,697

          Accounts receivable, net
4,142

 
4,069

          Creator signing fees, net
9,057

 
7,324

          Creator advances, net
23,841

 
21,255

          Prepaid expenses and other current assets
10,211

 
16,467

                    Total current assets
576,865

 
545,704

Property, plant and equipment, net
46,399

 
44,219

Goodwill
170,560

 
170,560

Acquired intangible assets, net
51,808

 
59,973

Restricted cash
2,218

 
1,508

Creator signing fees, noncurrent
15,919

 
9,681

Creator advances, noncurrent
956

 
1,887

Other assets
2,083

 
3,352

                   Total assets
$
866,808

 
$
836,884

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities
 
 
 
          Accounts payable, creators
$
367,299

 
$
272,201

          Accounts payable, trade
2,238

 
1,028

          Accrued compensation and benefits
5,564

 
5,586

          Accrued taxes
4,678

 
8,028

          Current portion of term loan

 
5,635

          Other accrued liabilities
21,767

 
15,726

                    Total current liabilities
401,546

 
308,204

Build-to-suit lease financing obligation
27,586

 
28,510

Accrued taxes, noncurrent
14,244

 
15,691

Term loan

 
67,087

Other liabilities
2,252

 
2,170

                    Total liabilities
445,628

 
421,662

Commitments and contingencies (Note 12)

 

Stockholders' equity
 
 
 
 Preferred stock, $0.00001 par value; 100,000,000 shares authorized, no shares issued or outstanding as of September 30, 2019 and December 31, 2018

 

 Common stock, $0.00001 par value; 1,100,000,000 shares authorized, 84,372,101 shares issued and outstanding as of September 30, 2019; 1,100,000,000 shares authorized, 78,546,874 shares issued and 78,358,394 shares outstanding as of December 31, 2018
1

 

Treasury stock at cost; no shares as of September 30, 2019 and 188,480 shares as of December 31, 2018

 
(488
)
 Additional paid-in capital
779,481

 
718,405

 Accumulated deficit
(358,302
)
 
(302,695
)
                   Total stockholders’ equity
421,180

 
415,222

                   Total liabilities and stockholders’ equity
$
866,808

 
$
836,884



(See accompanying Notes to Unaudited Condensed Consolidated Financial Statements)

4


EVENTBRITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net revenue
$
82,052

 
$
73,628

 
$
244,136

 
$
215,696

Cost of net revenue(1)   
33,345

 
31,477

 
94,936

 
89,424

                   Gross profit
48,707

 
42,151

 
149,200

 
126,272

Operating expenses(1):
 
 
 
 
 
 
 
          Product development
15,902

 
12,856

 
46,461

 
32,671

          Sales, marketing and support
28,552

 
21,186

 
75,986

 
63,415

          General and administrative
27,159

 
21,163

 
74,337

 
59,551

                    Total operating expenses
71,613

 
55,205

 
196,784

 
155,637

                    Loss from operations
(22,906
)
 
(13,054
)
 
(47,584
)
 
(29,365
)
Interest expense
(1,681
)
 
(3,300
)
 
(5,482
)
 
(9,399
)
Change in fair value of redeemable convertible preferred stock warrant liability

 
(3,520
)
 

 
(9,591
)
Loss on debt extinguishment
(1,742
)
 
(17,173
)
 
(1,742
)
 
(178
)
Other income (expense), net
(3,700
)
 
1,414

 
(1,145
)
 
(1,880
)
                    Loss before income taxes
(30,029
)
 
(35,633
)
 
(55,953
)
 
(50,413
)
Income tax provision (benefit)
147

 
(117
)
 
(946
)
 
683

Net loss
$
(30,176
)
 
$
(35,516
)
 
$
(55,007
)
 
$
(51,096
)
Net loss per share, basic and diluted
$
(0.36
)
 
$
(1.24
)
 
$
(0.68
)
 
$
(2.15
)
Weighted-average number of shares outstanding used to compute net loss per share, basic and diluted
83,063

 
28,736

 
81,094

 
23,799

 
 
 
 
 
 
 
 
(1) Includes stock-based compensation as follows:
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cost of net revenue
$
393

 
$
154

 
$
962

 
$
278

Product development
3,322

 
2,497

 
7,547

 
3,845

Sales, marketing and support
1,569

 
1,151

 
4,038

 
2,729

General and administrative
4,652

 
11,247

 
14,222

 
16,305

     Total
$
9,936

 
$
15,049

 
$
26,769

 
$
23,157

(See accompanying Notes to Unaudited Condensed Consolidated Financial Statements)

5


EVENTBRITE, INC.
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(Unaudited)
 
Common Stock-Class A
 
Common Stock-Class B
 
Treasury Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Total Stockholders' Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance at December 31, 2018
11,502,993

 
$

 
66,855,401

 
$

 
(188,480
)
 
$
(488
)
 
$
718,405

 
$
(302,695
)
 
$
415,222

Issuance of common stock upon exercise of stock options
3,570,467

 

 
249,207

 

 

 

 
22,953

 

 
22,953

Issuance of restricted stock awards
25,418

 

 

 

 

 

 

 

 

Issuance of common stock for settlement of RSUs
114,467

 

 

 

 

 

 

 

 

Issuance of common stock for ESPP Purchase
167,706

 

 

 

 

 

 
2,234

 

 
2,234

Shares withheld related to net share settlement
(36,107
)
 

 
 
 

 

 

 
(813
)
 

 
(813
)
Conversion of common stock from Class B to Class A
32,586,530

 

 
(32,586,530
)
 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 
184

 

 
184

Stock-based compensation

 

 

 

 

 

 
17,484

 

 
17,484

Retirement of treasury stock

 

 

 

 
188,480

 
488

 
(488
)
 

 

Cumulative effect adjustment upon adoption of ASU 2014-09

 

 

 

 

 

 

 
(600
)
 
(600
)
Net loss

 

 

 

 

 

 

 
(24,831
)
 
(24,831
)
Balance at June 30, 2019
47,931,474

 

 
34,518,078

 

 

 

 
759,959

 
(328,126
)
 
431,833

Issuance of common stock upon exercise of stock options
1,486,012

 

 

 

 

 

 
9,859

 

 
9,859

Issuance of restricted stock awards
369,140

 

 

 

 

 

 

 

 

Issuance of common stock for settlement of RSUs
107,554

 

 

 

 

 

 

 

 

Shares withheld related to net share settlement
(40,157
)
 

 

 

 

 

 
(704
)
 

 
(704
)
Conversion of common stock from Class B to Class A
7,399,542

 
1

 
(7,399,542
)
 

 

 

 
(1
)
 

 

Vesting of early exercised stock options

 

 

 

 

 

 
92

 

 
92

Stock-based compensation

 

 

 

 

 

 
10,276

 

 
10,276

Net loss

 

 

 

 

 

 

 
(30,176
)
 
(30,176
)
Balance at September 30, 2019
57,253,565

 
$
1

 
27,118,536

 
$

 

 
$

 
$
779,481

 
$
(358,302
)
 
$
421,180



6


EVENTBRITE, INC.
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (continued)
(in thousands, except share data)
(Unaudited)
 
Redeemable
Convertible
Preferred Stock
 
Common Stock-Class A
 
Common Stock-Class B
 
Treasury Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Total Stockholders’ Equity (Deficit)
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance at December 31, 2017
41,628,207

 
$
334,018

 

 
$

 
20,773,441

 
$

 
(188,480
)
 
$
(488
)
 
$
83,291

 
$
(238,617
)
 
$
(155,814
)
Issuance of common stock upon exercise of stock options

 

 

 

 
1,087,555

 

 

 

 
4,208

 

 
4,208

Issuance of common stock, acquisitions

 

 

 

 
676,060

 

 

 

 
7,439

 

 
7,439

Vesting of early exercised stock options

 

 

 

 

 

 

 

 
183

 
 
 
183

Stock-based compensation

 

 

 

 

 

 

 

 
8,381

 

 
8,381

Net loss

 

 

 

 

 

 

 

 

 
(15,580
)
 
(15,580
)
Balance at June 30, 2018
41,628,207

 
334,018

 

 

 
22,537,056

 

 
(188,480
)
 
(488
)
 
103,502

 
(254,197
)
 
(151,183
)
Conversion of redeemable convertible preferred stock in connection with initial public offering
(41,628,207
)
 
(334,018
)
 

 

 
42,188,624

 

 

 

 
334,018

 

 
334,018

Issuance of common stock in connection with the initial public offering, net of underwriting discounts and commissions

 

 
11,500,000

 

 

 

 

 

 
245,985

 

 
245,985

Costs related to initial public offering

 

 

 

 

 

 

 

 
(5,345
)
 

 
(5,345
)
Automatic conversion of warrants in connection with initial public offering

 

 

 

 
997,193

 

 

 

 
21,465

 

 
21,465

Issuance of common stock for settlement of RSUs

 

 

 

 
802,900

 

 

 

 

 

 

Shares withheld related to net share settlement

 

 

 

 
(391,874
)
 

 

 

 
(9,013
)
 

 
(9,013
)
Issuance of common stock upon exercise of stock options

 

 

 

 
552,922

 

 

 

 
3,302

 

 
3,302

Issuance of common stock, acquisitions

 

 

 

 
81,158

 

 

 

 
1,393

 

 
1,393

Vesting of early exercised stock options

 

 

 

 

 

 

 

 
92

 

 
92

Stock-based compensation

 

 

 

 

 

 

 

 
15,198

 

 
15,198

Net loss

 

 

 

 

 

 

 

 

 
(35,516
)
 
(35,516
)
Balance at September 30, 2018

 
$

 
11,500,000

 
$

 
66,767,979

 
$

 
(188,480
)
 
$
(488
)
 
$
710,597

 
$
(289,713
)
 
$
420,396

(See accompanying Notes to Unaudited Condensed Consolidated Financial Statements)

7


EVENTBRITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Cash flows from operating activities
 
 
 
 
 
 
 
Net loss
$
(30,176
)
 
$
(35,516
)
 
$
(55,007
)
 
$
(51,096
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
 
 
          Depreciation and amortization
6,237

 
8,830

 
18,456

 
25,612

          Amortization of creator signing fees
2,826

 
1,975

 
7,741

 
5,052

          Accretion of term loan
103

 
204

 
326

 
1,616

          Loss on debt extinguishment
1,742

 
17,173

 
1,742

 
178

          Change in fair value of redeemable convertible preferred stock warrant liability

 
3,520

 

 
9,591

          Change in fair value of term loan embedded derivatives

 
(2,119
)
 

 
(2,119
)
          Stock-based compensation
9,936

 
15,049

 
26,769

 
23,157

          Impairment charges
1,056

 
46

 
2,955

 
1,110

          Provision for bad debt and creator advances
1,602

 
274

 
3,982

 
1,807

          Loss on disposal of equipment
3

 

 
61

 
1

          Deferred income taxes
(33
)
 
(170
)
 
(778
)
 
447

          Changes in operating assets and liabilities, net of impact of acquisitions:
 
 
 
 
 
 
 
                    Accounts receivable
(121
)
 
(1,208
)
 
(1,182
)
 
(2,154
)
                    Funds receivable
2,165

 
(15,227
)
 
14,280

 
(449
)
                    Creator signing fees, net
(7,254
)
 
(4,654
)
 
(16,505
)
 
(10,931
)
                    Creator advances, net
1,823

 
(2,881
)
 
(6,690
)
 
(5,398
)
                    Prepaid expenses and other current assets
4,524

 
530

 
6,256

 
(2,900
)
                    Other assets
86

 
460

 
84

 
(234
)
                    Accounts payable, creators
44,317

 
49,585

 
95,098

 
79,531

                    Accounts payable, trade
112

 
390

 
1,068

 
801

                    Accrued compensation and benefits
286

 
676

 
(22
)
 
80

                    Accrued taxes
175

 
4,534

 
(3,350
)
 
6,777

                    Other accrued liabilities
2,879

 
(4,905
)
 
5,591

 
4,480

                    Accrued taxes, non-current
665

 
(12,486
)
 
(669
)
 
(11,846
)
                    Other liabilities
(194
)
 
(294
)
 
285

 
(328
)
                       Net cash provided by operating activities
42,759

 
23,786

 
100,491

 
72,785

Cash flows from investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(1,393
)
 
(1,545
)
 
(4,959
)
 
(4,233
)
Capitalized internal-use software development costs
(2,145
)
 
(1,603
)
 
(6,416
)
 
(5,934
)
Acquisitions, net of cash acquired

 
(2,247
)
 

 
11,606

                      Net cash provided by (used in) investing activities
(3,538
)
 
(5,395
)
 
(11,375
)
 
1,439


8


EVENTBRITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(Unaudited)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Cash flows from financing activities
 
 
 
 
 
 
 
Proceeds from initial public offering, net of underwriters' discounts, commissions and offering costs, net of reimbursements

 
244,133

 

 
244,133

Proceeds from issuance of common stock under ESPP

 

 
2,234

 

Proceeds from exercise of stock options
9,860

 
3,302

 
32,814

 
7,510

Taxes paid related to net share settlement of equity awards
(127
)
 
(9,013
)
 
(833
)
 
(9,013
)
Proceeds from term loans

 
75,000

 

 
120,000

Principal payments on debt obligations
(62,188
)
 
(74,210
)
 
(73,594
)
 
(109,665
)
Prepayment penalties on debt extinguishment

 
(7,406
)
 

 
(7,406
)
Payment of debt issuance costs

 

 
(457
)
 

Payments on capital lease obligations
(76
)
 

 
(214
)
 
(76
)
Payments on lease financing obligations
(237
)
 
(173
)
 
(638
)
 
(452
)
Payments of deferred offering costs

 

 
(413
)
 
(183
)
                    Net cash provided by (used in) financing activities
(52,768
)
 
231,633

 
(41,101
)
 
244,848

                    Net increase (decrease) in cash, cash equivalents and restricted cash
(13,547
)
 
250,024

 
48,015

 
319,072

Cash, cash equivalents and restricted cash
 
 
 
 
 
 
 
Beginning of period
$
500,962

 
$
261,269

 
$
439,400

 
$
192,221

End of period
$
487,415

 
$
511,293

 
$
487,415

 
$
511,293

Supplemental cash flow data
 
 
 
 
 
 
 
          Interest paid
$
756

 
$
2,163

 
$
2,632

 
$
5,785

          Income taxes paid, net of refunds
493

 
198

 
860

 
341

Non-cash investing and financing activities
 
 
 
 
 
 
 
          Vesting of early exercised stock options
$
92

 
$
92

 
$
276

 
$
275

          Purchases of property and equipment, accrued but unpaid
167

 

 
167

 

          Issuance of shares of common stock for acquisitions

 
1,395

 

 
8,834

         Conversion of redeemable convertible preferred stock in connection with initial public offering

 
21,465

 

 
21,465

        Issuance of redeemable convertible preferred stock warrants in connection with loan facilities and term loan

 

 

 
4,603

        Deferred offering costs included in accounts payable, trade and other accrued liabilities

 
3,262

 

 
3,262

(See accompanying Notes to Unaudited Condensed Consolidated Financial Statements)


9


EVENTBRITE, INC.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
1. Organization
Description of Business
Eventbrite, Inc. (Eventbrite or the Company) has built a powerful, broad technology platform to enable creators to solve many challenges associated with creating live experiences. The Company’s platform integrates components needed to seamlessly plan, promote and produce live events, thereby allowing creators to reduce friction and costs, increase reach and drive ticket sales.
Initial Public Offering
In September 2018, the Company completed its initial public offering (IPO) in which the Company issued and sold 11,500,000 shares of Class A common stock at a public offering price of $23.00 per share, which included 1,500,000 shares sold pursuant to the exercise by the underwriters' option to purchase additional shares. The Company received aggregate net proceeds of $246.0 million from the IPO, net of underwriter discounts and commissions, before deducting additional offering costs of $5.5 million, net of reimbursements.
Immediately prior to the closing of the IPO, (i) all shares of common stock then outstanding were reclassified as Class B common stock, (ii) 41,628,207 shares of redeemable convertible preferred stock outstanding converted into 42,188,624 shares of Class B common stock (including additional shares issued upon conversion of our Series G redeemable convertible preferred stock based on the IPO price of $23.00 per share) and (iii) warrants to purchase 933,269 shares of our Series G redeemable convertible preferred stock automatically exercised into 997,193 shares of Class B common stock.
2. Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements of the Company are unaudited. The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and the applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date.
The accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal and recurring nature considered necessary to state fairly the Company's consolidated financial position, results of operations and cash flows for the interim periods. All intercompany transactions and balances have been eliminated. The interim results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or for any other future annual or interim period.
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk" and the Consolidated Financial Statements and notes thereto included in Items 7, 7A and 8, respectively, in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K).

10


Prior Period Reclassification
Beginning in the first quarter of 2019, the Company classified the amortization of acquired customer relationship intangible assets and certain other costs as sales, marketing and support expenses. Previously, these expenses were classified as general and administrative expenses. The Company has reclassified $3.8 million and $10.4 million of expenses for the three and nine months ended September 30, 2018, respectively, and $0.4 million for the three months ended March 31, 2019 which is included in the nine months ended September 30, 2019, to make the presentation consistent with the current period. There was no change to total operating expenses, loss from operations, loss before provision for income taxes or net loss for the three or nine months ended September 30, 2018 or the three months ended March 31, 2019 as a result of these reclassifications.
Use of Estimates
In order to conform with U.S. GAAP, the Company is required to make certain estimates, judgments and assumptions when preparing its condensed consolidated financial statements. These estimates, judgments and assumptions affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods. These estimates include, but are not limited to, the recoverability of creator signing fees and creator advances, the capitalization and estimated useful life of internal-use software, certain assumptions used in the valuation of equity awards, assumptions used in determining the fair value of the redeemable convertible preferred stock warrant liability and term loan derivative asset, assumptions used in determining the fair value of business combinations, the allowance for doubtful accounts, indirect tax reserves and contra revenue amounts related to fraudulent events, customer disputed transactions and refunds. The Company evaluates these estimates on an ongoing basis. Actual results could differ from these estimates and such differences could be material to the Company’s consolidated financial statements.
Comprehensive Loss
For all periods presented, comprehensive loss equaled net loss. Therefore, the condensed consolidated statements of comprehensive loss have been omitted from the interim unaudited condensed consolidated financial statements.
Emerging Growth Company Status
As an emerging growth company (EGC), the Jump-start Our Business Start-ups Act (JOBS Act) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. As a result, the Company's financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Based on the market value of our Class A common stock held by non-affiliates as of June 30, 2019, the Company will become a large accelerated filer as of December 31, 2019 and cease to be an emerging growth company, and, therefore, will no longer be able to take advantage of this extended transition period.
Recently Adopted Accounting Pronouncements
The Company adopted ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business beginning January 1, 2019. This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The adoption of this standard has had no material impact on the Company's interim condensed consolidated financial statements.
In May 2014, and in subsequent updates, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40) (ASC Topic 606), which supersedes nearly all existing revenue recognition guidance. ASC Topic 606 establishes a five-step revenue recognition process in which an entity will recognize revenue when or as it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC Topic 606 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASC Topic 606 was effective for and adopted by the Company beginning January 1, 2019. The Company applied the modified retrospective approach to contracts which were not completed as of the adoption date.

11


The adoption of ASC Topic 606 primarily had the following impact on the Company's financial statements:
Beginning January 1, 2019, the Company recognizes revenue allocated to its customer service and account management performance obligations over time as the Company has a stand-ready obligation to provide these services to certain customers. The Company recorded a cumulative-effect adjustment to opening accumulated deficit as of January 1, 2019 of $0.6 million and a corresponding increase to contract liabilities, included within other accrued liabilities on the interim condensed consolidated balance sheet.
The adoption of ASC Topic 606 had no material impact to the Company's net revenues recorded in the three or nine months ended September 30, 2019.
The accounting treatment of incremental costs of obtaining contracts under ASC Topic 606 had no material impact to the Company's interim unaudited condensed consolidated financial statements.
The adoption of ASC Topic 606 had no impact to the Company's total net cash provided by or used in operating, investing or financing activities within the Company's interim condensed consolidated statement of cash flows for the three or nine months ended September 30, 2019.
Refer to Revenue Recognition below for additional discussion of the Company's revenue recognition policies under ASC Topic 606.
Recently Issued Accounting Pronouncements Not Yet Adopted
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. This standard is effective for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. This standard will apply to the Company’s reporting requirements in performing goodwill impairment testing, however, the Company does not anticipate the adoption of this standard will have a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02) which requires lessees to put most leases on their balance sheets but recognize expenses on their income statement and eliminates the real estate-specific provisions for all entities. ASU 2016-02 requires reporting entities to apply a modified retrospective transition approach and are permitted to choose to adjust comparative periods or to not adjust comparative periods. For public business entities, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. As the Company expects to become a large accelerated filer as of December 31, 2019 and cease to be an emerging growth company, the Company anticipates it will adopt ASU 2016-02 as of January 1, 2019 in the annual financial statements to be reported in its Annual Report on Form 10-K for the year ended December 31, 2019. The Company expects to adopt ASU 2016-02 using the modified retrospective transition approach and to not adjust comparative periods. The Company is currently evaluating the effect that implementation and adoption of ASU 2016-02 will have on its consolidated financial statements.


12


Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents includes bank deposits held by financial institutions. Cash and cash equivalents balances include the face value of tickets sold on behalf of creators and their share of service charges, which amounts are to be remitted to the creators. Such balances were $325.9 million and $217.4 million as of September 30, 2019 and December 31, 2018, respectively. Although creator cash is legally unrestricted, the Company does not utilize creator cash for its own financing or investing activities as the amounts are payable to creators on a regular basis. These amounts due to creators are included in accounts payable, creators on the condensed consolidated balance sheets.
The Company has issued letters of credit under lease agreements and other agreements, which have been collateralized with cash. This cash is classified as noncurrent restricted cash on the condensed consolidated balance sheets. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (in thousands):
 
September 30, 2019
 
December 31, 2018
Cash and cash equivalents
$
485,197

 
$
437,892

Restricted cash
2,218

 
1,508

Total cash, cash equivalents and restricted cash
$
487,415

 
$
439,400

Funds Receivable
Funds receivable represents cash-in-transit from third-party payment processors that is received by the Company within approximately five business days from the date of the underlying ticketing transaction. The funds receivable balances include the face value of tickets sold on behalf of creators and their share of service charges, which amounts are to be remitted to the creators. Such amounts were $41.4 million and $54.8 million as of September 30, 2019 and December 31, 2018, respectively.
Revenue Recognition
The Company determines revenue recognition through the following steps:
i.    Identification of the contract, or contracts, with a customer
ii.     Identification of the performance obligations in the contract
iii.    Determination of the transaction price
iv.     Allocation of the transaction price to the performance obligations in the contract
v.     Recognition of revenue when, or as, the Company satisfies a performance obligation
The Company derives its revenues primarily from service fees and payment processing fees charged at the time a ticket for an event is sold. The Company also derives revenues from providing certain creators with account management services and customer support. The Company's customers are event creators who use the Company's platform to sell tickets to attendees. Revenue is recognized when or as control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company allocates the transaction price by estimating a standalone selling price for each performance obligation using an expected cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of the event.
The event creator has the choice of whether to use Eventbrite Payment Processing (EPP) or to use a third-party payment processor, referred to as Facilitated Payment Processing (FPP). Under the EPP option, the Company is the merchant of record and is responsible for processing the transaction and collecting the face value of the ticket and all associated fees at the time the ticket is sold. The Company is also responsible for remitting these amounts collected, less the Company's fees, to the event creator. Under the FPP option, Eventbrite is not responsible for processing the transaction or collecting the face value of the ticket and associated fees. In this case, the Company invoices the creator for all of the Company's fees.

13


The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, and has the latitude in establishing pricing and selecting suppliers, among other factors. The Company determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled. The Company's service provides a platform for the creator and event attendee to transact and the Company's performance obligation is to facilitate and process that transaction and issue the ticket. The amount that the Company earns for its services is fixed. For the payment processing service, the Company determined that it is the principal in providing the service as the Company is responsible for fulfilling the promise to process the payment and has discretion and latitude in establishing the price of its service. Based on management's assessment, the Company records revenue on a net basis related to its ticketing service and on a gross basis related to its payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the condensed consolidated statements of operations.
Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator. If a creator is unwilling or unable to fulfill their refund obligations, the Company may, at its discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees. The benefit the Company receives by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue.
Significant Accounting Policies
Other than as discussed above with respect to the Company's adoption of ASC Topic 606, there have been no material changes to the Company's significant accounting policies as described in the Company's 2018 Form 10-K.
3. Fair Value Measurement
The Company measures its financial assets and liabilities at fair value at each reporting date using a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Other inputs that are directly or indirectly observable in the marketplace.
Level 3 – Unobservable inputs that are supported by little or no market activity.
The Company’s funds receivable, accounts receivable, accounts payable, other current liabilities and debt approximate their fair value. All of these financial assets and liabilities are Level 1, except for debt, which is Level 2. There are no other Level 1 or Level 2 assets or liabilities recorded at September 30, 2019 and December 31, 2018.
The Company measures the redeemable convertible preferred stock warrant liability (as discussed in Note 11) and term loan derivative asset (as discussed in Note 10) at fair value on a recurring basis and determined these are Level 3 financial assets and liabilities, respectively, in the fair value hierarchy.
The fair value of the redeemable convertible preferred stock warrants was estimated using a hybrid between a probability-weighted expected return method (PWERM) and option pricing model (OPM), estimating the probability weighted value across multiple scenarios, while using an OPM to estimate the allocation of value within one or more of these scenarios. Under a PWERM, the value of the Company’s various equity securities was estimated based upon an analysis of future values for the Company assuming various future outcomes, including two IPO scenarios and two scenarios contemplating the continued operation of the Company as a privately held enterprise. Guideline public company multiples were used to value the Company under the IPO scenarios. The discounted cash flow method was used to value the Company under the staying private scenarios. Share value for each class of security was based upon the probability-weighted present value of expected future investment returns, considering each of these possible future outcomes, as well as the rights of each share class.
The significant unobservable inputs into the valuation model used to estimate the fair value of the redeemable convertible preferred stock warrants include the timing of potential events (primarily the IPO) and their probability of

14


occurring, the selection of guideline public company multiples, a discount for the lack of marketability of the preferred and common stock, the projected future cash flows, and the discount rate used to calculate the present-value of the estimated equity value allocated to each share class. Generally, changes in the fair value of the underlying redeemable convertible preferred stock would result in a directionally similar impact to the fair value of the redeemable convertible preferred stock warrant liability.
The significant unobservable inputs into the valuation model used to estimate the fair value of the term loan derivative asset include the timing of potential events (primarily the IPO), probability of exercise and the discount rate used to calculate the present value of future cash flows.
There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 during the three or nine months ended September 30, 2019 or during the year ended December 31, 2018.
4. Acquisitions
In August 2018, the Company acquired Picatic e-Ticket Inc. (Picatic), a Canadian ticketing company. The Company acquired Picatic primarily to bolster its engineering staff and enhance its ticketing solutions. The acquisition of Picatic has been accounted for as a business combination. The acquisition date fair value of the consideration transferred was $2.9 million, which consisted of $1.3 million in cash and 81 thousand shares of the Company’s common stock. Acquisition costs directly related to the Picatic transaction were $0.3 million and are included in general and administrative expenses in the consolidated statements of operations for the nine months ended September 30, 2018.
The total purchase price of the Picatic acquisition was allocated to the assets acquired and liabilities assumed based on their fair value as of the acquisition date. The excess of the purchase price over the net assets acquired was recorded as goodwill. The goodwill recorded in connection with the Picatic acquisition is not deductible for tax purposes and is attributable to the assembled workforce and synergies from the future growth and strategic advantages in the ticketing industry.
In April 2018, the Company acquired Ticketea S.L. (Ticketea), a leading Spanish ticketing provider. The Company acquired Ticketea in order to enhance its ticketing solutions and expand in the Spanish market. The acquisition of Ticketea has been accounted for as a business combination. The acquisition date fair value of the consideration transferred was $11.4 million, which consisted of $3.6 million in cash and 0.7 million shares of the Company’s common stock. Of the 0.7 million shares, 0.1 million shares are being held in escrow for adjustments related to working capital requirements and breaches of representations, warranties and covenants. These escrowed shares will be released approximately 18 months from the acquisition date, net of any adjustments. Acquisition costs related to the Ticketea transaction were $0.5 million and are included in general and administrative expenses in the condensed consolidated statement of operations for the nine months ended September 30, 2018.
The total purchase price of the Ticketea acquisition was allocated to the assets acquired and liabilities assumed based on their fair value as of the acquisition date. The excess of the purchase price over the net assets acquired was recorded as goodwill. The goodwill recorded in connection with the Ticketea acquisition is not deductible for tax purposes and is attributable to the assembled workforce and synergies from the future growth and strategic advantages in the ticketing industry.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the respective acquisition dates (in thousands):
 
Picatic
 
Ticketea
 
Total
Cash and restricted cash
$
160

 
$
17,852

 
$
18,012

Funds and accounts receivable
10

 
1,058

 
1,068

Creator advances

 
532

 
532

Prepaid expenses and other current assets
87

 
94

 
181

Property and equipment

 
42

 
42

Other noncurrent assets

 
28

 
28

Accounts payable, creators

 
(19,671
)
 
(19,671
)
Other current liabilities
(121
)
 
(529
)
 
(650
)
Intangible assets
507

 
3,094

 
3,601

Goodwill
2,219

 
8,937

 
11,156

          Total purchase price
$
2,862

 
$
11,437

 
$
14,299


15


The following table sets forth the components of identifiable intangible assets acquired (in thousands) and their estimated useful lives as of the date of acquisition (in years):
 
Picatic
 
Estimated
useful life
 
Ticketea
 
Estimated
useful life
Customer relationships
$
507

 
2.5
 
$
2,475

 
5.0
Developed technology

 
 
 
619

 
1.0
          Total acquired intangible assets
$
507

 
 
 
$
3,094

 
 
5. Accounts Receivable, Net
Accounts receivable, net is comprised of invoiced amounts to customers who use FPP for payment processing as well as other invoiced amounts. The following table summarizes the Company's accounts receivable balances as of the dates indicated (in thousands):
 
September 30, 2019
 
December 31, 2018
Accounts receivable, customers
$
6,774

 
$
5,651

Allowance for doubtful accounts
(2,632
)
 
(1,582
)
          Accounts receivable, net
$
4,142

 
$
4,069


6. Creator Signing Fees, Net
Creator signing fees are additional incentives paid by the Company to secure exclusive ticketing and payment processing rights with certain creators. Amortization of creator signing fees is recorded as a reduction of revenue in the condensed consolidated statements of operations. As of September 30, 2019, these payments are being amortized over a weighted-average remaining contract life of 3.6 years on a straight-line basis. Creator signing fees that are expected to be amortized within 12 months of the balance sheet date are classified as creator signing fees, net and the remainder is classified as noncurrent on the condensed consolidated balance sheets. The following table summarizes the activity in creator signing fees for the periods indicated (in thousands):
 
Three Months Ended September 30,
 
2019
 
2018
Balance, beginning of period
$
20,763

 
$
13,278

Creator signing fees paid
7,254

 
5,441

Amortization of creator signing fees
(2,826
)
 
(1,975
)
Write-offs and other adjustments
(215
)
 
(802
)
Balance, end of period
$
24,976

 
$
15,942

 
Nine Months Ended September 30,
 
2019
 
2018
Balance, beginning of period
$
17,005

 
$
10,421

Creator signing fees paid
16,440

 
11,719

Amortization of creator signing fees
(7,741
)
 
(5,052
)
Write-offs and other adjustments
(728
)
 
(1,146
)
Balance, end of period
$
24,976

 
$
15,942


Creator signing fees are classified as follows on the condensed consolidated balance sheet as of the dates indicated (in thousands):
 
September 30, 2019
 
December 31, 2018
Creator signing fees, net
$
9,057

 
$
7,324

Creator signing fees, noncurrent
15,919

 
9,681


16


7. Creator Advances, Net
Creator advances provide the creator with funds in advance of the event and are subsequently recovered by withholding amounts due to the Company from the sale of tickets for the event until the creator payment has been fully recovered. Creator advances that are expected to be recovered within 12 months of the balance sheet date are classified as creator advances, net and the remainder is classified as noncurrent on the condensed consolidated balance sheets. The following table summarizes the activity in creator advances for the periods indicated (in thousands):
 
Three Months Ended September 30,
 
2019
 
2018
Balance, beginning of period
$
28,716

 
$
21,602

Acquired with Ticketea transaction

 

Creator advances paid
8,525

 
6,961

Creator advances recouped
(10,348
)
 
(3,261
)
Write-offs and other adjustments
(2,096
)
 
(852
)
Balance, end of period
$
24,797

 
$
24,450

 
Nine Months Ended September 30,
 
2019
 
2018
Balance, beginning of period
$
23,142

 
$
20,076

Acquired with Ticketea transaction

 
532

Creator advances paid
27,609

 
17,208

Creator advances recouped
(21,011
)
 
(10,998
)
Write-offs and other adjustments
(4,943
)
 
(2,368
)
Balance, end of period
$
24,797

 
$
24,450


Creator advances are classified as follows on the condensed consolidated balance sheet as of the dates indicated (in thousands):
 
September 30, 2019
 
December 31, 2018
Creator advances, net
$
23,841

 
$
21,255

Creator advances, noncurrent
956

 
1,887

8. Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following as of the dates indicated (in thousands):
 
September 30, 2019
 
December 31, 2018
Building and improvements
$
33,277

 
$
33,277

Capitalized internal-use software development costs
42,608

 
35,201

Furniture and fixtures
3,765

 
3,557

Computers and computer equipment
14,744

 
11,676

Leasehold improvements
6,546

 
5,084

 
100,940

 
88,795

Less: Accumulated depreciation and amortization
(54,541
)
 
(44,576
)
          Property, plant and equipment, net
$
46,399

 
$
44,219


17


The Company recorded the following amounts related to depreciation expense and capitalized internal-use software development costs during the periods indicated (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Depreciation expense
$
1,591

 
$
1,316

 
$
4,827

 
$
3,610

Capitalized internal-use software development costs
2,485

 
1,751

 
7,407

 
6,442

Stock-based compensation costs included in capitalized internal-use software development costs
339

 
148

 
990

 
427

Amortization of capitalized internal-use software development costs
1,965

 
1,603

 
5,464

 
4,650

9. Goodwill and Acquired Intangible Assets, Net
The carrying value of goodwill was $170.6 million as of September 30, 2019 and December 31, 2018.
Acquired intangible assets, net consisted of the following as of the dates indicated (in thousands):

 
September 30, 2019
 
 
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
 
Weighted-
average
remaining
useful life
(years)
Developed technology
$
19,096

 
$
19,018

 
$
78

 
0.4
Customer relationships
74,484

 
22,754

 
51,730

 
5.5
Tradenames
1,600

 
1,600

 

 

          Acquired intangible assets, net
$
95,180

 
$
43,372

 
$
51,808

 
 

 
December 31, 2018
 
 
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
 
Weighted-
average
remaining
useful life
(years)
Developed technology
$
19,096

 
$
18,628

 
$
468

 
0.8
Customer relationships
74,484

 
14,979

 
59,505

 
6.2
Tradenames
1,600

 
1,600

 

 
 
          Acquired intangible assets, net
$
95,180

 
$
35,207

 
$
59,973

 
 
The Company recorded amortization expense related to acquired intangible assets as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Cost of net revenue
$
66

 
$
3,003

 
$
390

 
$
8,824

Sales, marketing and support
2,616

 
2,621

 
7,775

 
7,594

General and administrative

 
274

 

 
850

          Total amortization of acquired intangible assets
$
2,682

 
$
5,898

 
$
8,165

 
$
17,268


18


As of September 30, 2019, the total expected future amortization expense for acquired intangible assets is as follows (in thousands):
The remainder of 2019
$
2,660

2020
10,443

2021
10,197

2022
8,202

2023
7,709

Thereafter
12,597

Acquired intangible assets, net
$
51,808

10. Term Loans and Promissory Note
The Company entered into a loan and security agreement with, and issued warrants to purchase shares of Series G redeemable convertible preferred stock to Western Technology Investments (WTI) in June 2017 (First WTI Loan Facility), which provided for a secured credit facility of up to $60.0 million of term debt. In May 2018, the Company entered into a second loan and security agreement with WTI which provided up to $15.0 million of term debt (Second WTI Loan Facility, and together with the First WTI Loan Facility, the WTI Loan Facilities) and issued additional warrants to purchase shares of Series G redeemable convertible preferred stock. The WTI Loan Facilities were collateralized by substantially all of the Company's assets and intellectual property rights.
The key terms and details of the Company's term loan borrowings under the WTI Loan Facilities is as follows:
Borrowing Date
 
Loan Facility
 
Loan Amount
(in thousands)
 
Maturity Date
 
Contractual Interest Rate
 
Effective Interest Rate
September 2017
 
First WTI Facility
 
$
30,000

 
February 2022
 
11.5
%
 
15.9
%
March 2018
 
First WTI Facility
 
$
30,000

 
September 2022
 
11.8
%
 
14.8
%
May 2018
 
Second WTI Facility
 
$
15,000

 
November 2022
 
12.0
%
 
14.7
%
For all borrowings, monthly payments of interest were due for the first 24 months and equal monthly installments of principal and interest were due for 30 months thereafter.
The Second WTI Loan Facility included a contingent prepayment feature under which if the Company consummated a qualified public offering within the first 24 months of the term loan and the Company prepaid the term loan within 15 days of the qualified public offering, the Company would be required to repay the outstanding principal balance plus accrued interest within 15 days of the consummation of a qualified public offering plus an additional amount equal to 50% of all interest that would have been incurred through the end of first 24 months of the loan. In connection with the Second WTI Loan Facility, the Company modified the terms of the First WTI Loan Facility so that the March 2018 loan would be subject to the same contingent prepayment feature that is included in the Second WTI Loan Facility. The Company determined that the contingent prepayment features under the WTI Loan Facilities were embedded derivatives, requiring bifurcation and separate accounting. The Company recorded a $2.1 million gain in the three months ended September 30, 2018 related to the change in fair value of the term loan embedded derivative asset, which is included within other income (expense), net on the condensed consolidated statements of operations.
In September 2018, five days after the completion of the IPO, the Company exercised its prepayment option and fully repaid all amounts outstanding under the WTI Loan Facilities. The Company recorded a loss on debt extinguishment related to the WTI Loan Facilities of $17.2 million during the three months ended September 30, 2018, and as of that date there were no amounts outstanding under the WTI Loan Facilities and all underlying agreements had been terminated.
In September 2018, the Company entered into a senior secured credit facility with a syndicate of banks consisting of $75.0 million aggregate principal amount of term loans (the New Term Loans) and a $75.0 million revolving credit facility (the New Revolving Credit Facility, and together with the New Term Loans, the New Credit Facilities). The New Term Loans were fully funded in September 2018 and the Company received cash proceeds of $73.6 million, net of arrangement fees of $1.1 million and upfront fees of $0.3 million.

19


The New Term Loans were scheduled to amortize at a rate of 7.5% per annum for the first two years of the New Credit Facilities, 10.0% per annum for the third and fourth years and the first three quarters of the fifth year of the New Credit Facilities, with the balance due at maturity. The New Credit Facilities had maturity dates on the fifth anniversary of the effective date. The New Revolving Credit Facility had a commitment fee which accrued at 0.40% on the daily unused amount of the aggregate revolving commitments of the lenders.
All outstanding amounts under the New Credit Facilities bore interest, at the Company's option, at (i) a reserve adjusted LIBO Rate plus a margin between 2.25% and 2.75% or (ii) a base rate plus a margin between 1.25% and 1.75%, in each case determined on a quarterly basis based on the Company's consolidated total leverage ratio. The current annual interest rate for the New Term Loans was 5.08% as of September 30, 2019.
In September 2019, the Company elected to prepay the outstanding principal balance of the New Term Loans in their entirety and terminated the New Credit Facilities. The Company paid $63.0 million, which consisted of $62.2 million of debt principal and $0.8 million of accrued interest and fees. The Company recorded a loss on debt extinguishment related to the termination of the New Credit Facilities of $1.7 million during the three months ended September 30, 2019 related to the write-off of unamortized debt issuance costs.
As of September 30, 2019, the Company has no outstanding debt.
Term loans consisted of the following as of December 31, 2018 (in thousands):
 
 
December 31, 2018
Outstanding principal balance
 
$
73,594

Less: Unamortized discount and debt issuance costs
 
(872
)
          Total term loan, net
 
$
72,722

 
 
 
Current portion of term loans
 
$
5,635

Term loans
 
67,087

Promissory Note
In September 2017, in connection with the acquisition of Ticketfly, LLC (Ticketfly), the Company issued a $50.0 million convertible promissory note as part of the purchase consideration (Promissory Note). The Promissory Note had a five-year maturity from the date of issuance and bore interest at a rate of 6.5% per annum. In March 2018, the Company reached an agreement with the seller of Ticketfly to repay the Promissory Note. The face value of $50.0 million was settled in full for $34.7 million, which represented $33.0 million of principal and $1.7 million of accrued interest. The Company recognized a gain of $17.0 million resulting from the extinguishment of the Promissory Note, and, when coupled with the loss on debt extinguishment related to the WTI Loan Facilities, recorded a net loss on debt extinguishment of $0.2 million in the condensed consolidated statements of operations for the nine months ended September 30, 2018.
11. Redeemable Convertible Preferred Stock Warrants
In connection with the WTI Loan Facilities discussed in Note 10, the Company issued warrants to WTI to purchase shares of Series G redeemable convertible preferred stock. The redeemable convertible preferred stock warrants became exercisable into 411,991 shares of Series G redeemable convertible preferred stock when the First WTI Loan Facility was executed in June 2017. In September 2017, the redeemable convertible preferred stock warrants became exercisable into an additional 205,995 shares of Series G redeemable convertible preferred stock when the Company borrowed $30.0 million under the First WTI Loan Facility. In March 2018, as a result of the Company borrowing the remaining $30.0 million under the First WTI Loan Facility, the Series G redeemable convertible preferred stock warrants became exercisable into an additional 205,995 shares of Series G redeemable convertible preferred stock. In May 2018, the Company issued additional warrants which were exercisable into 109,288 shares of Series G redeemable convertible preferred stock. The exercise price of all of the Series G redeemable convertible preferred stock warrants was $16.3836 per share and the redeemable convertible preferred stock warrants had an expiration date ten years from the date of issuance. In September 2018, in connection with the IPO, the redeemable convertible preferred stock warrants were automatically exercised into shares of Class B common stock and the related liability was reclassified to additional paid-in capital.
The Company recorded an increase in the fair value of the redeemable convertible preferred stock warrant liability of $3.5 million and $9.6 million during the three and nine months ended September 30, 2018, respectively. There was no activity

20


during the three or nine months ended September 30, 2019. Refer to Note 3 for discussion of the significant inputs used to determine the fair value of the redeemable convertible preferred stock warrant liability.
12. Commitments and Contingencies
Operating Leases
The Company leases office space under various noncancelable operating leases that expire at various dates through 2028. Rent expense from operating leases totaled $1.0 million and $0.9 million for the three months ended September 30, 2019 and 2018, respectively, and $3.0 million and $2.5 million for the nine months ended September 30, 2019 and 2018, respectively. The Company also recognized sublease income of $1.0 million for each of the three months ended September 30, 2019 and 2018, and $2.9 million and $2.5 million for the nine months ended September 30, 2019 and 2018, respectively.
Build-to-Suit Lease
In December 2013, the Company executed a lease for 97,624 square feet of office space in San Francisco, California. The initial lease term is seven years with an option to renew for an additional three years, and the leased space represents two floors in a seven-floor building. The lease provided for a $6.4 million tenant improvement reimbursement allowance, which the Company utilized in 2014. In order for the facility to meet the Company’s operating specifications, both the landlord and the Company made structural changes as part of the improvement of the building, and as a result, the Company has concluded that it is the deemed partial owner of the building (for accounting purposes only) during the construction period. Accordingly, at lease inception, the Company recorded an asset of $22.3 million, representing its estimate of the fair market value of the leased space, and a corresponding lease financing obligation on the consolidated balance sheets.
Upon completion of construction, the Company evaluated the derecognition of the asset and liability as a sale-leaseback transaction. The Company concluded it did not meet the provisions needed for sale-leaseback accounting, and thus the lease is being accounted for as a financing obligation. Lease payments are allocated to (1) a reduction of the principal financing obligation; (2) imputed interest expense; and (3) land lease expense (which is considered an operating lease) representing an imputed cost to lease the underlying land of the facility. In addition, the underlying building asset is being depreciated over the building’s estimated useful life of 30 years. The Company is evaluating the accounting treatment of the build-to-suit lease in connection with the adoption of ASU 2016-02.
Land lease expense was $0.2 million for each of the three months ended September 30, 2019 and 2018 and $0.7 million for each of the nine months ended September 30, 2019 and 2018. Interest expense related to the Company’s build-to-suit lease was $0.8 million and $0.9 million for the three months ended September 30, 2019 and 2018, respectively, and $2.5 million and $2.6 million for the nine months ended September 30, 2019 and 2018, respectively.
As of September 30, 2019, the future minimum lease payments and sublease rental payments under noncancelable leases are as follows (in thousands):
 
Capital Leases
 
Build-to-Suit
Lease
 
Operating
Leases
 
Sublease
Income
 
Total
The remainder of 2019
$
73

 
$
1,415

 
$
1,000

 
$
(1,031
)
 
$
1,457

2020
250

 
5,772

 
3,899

 
(4,205
)
 
5,716

2021
134

 
1,943

 
3,447

 
(1,238
)
 
4,286

2022
100

 

 
3,106

 

 
3,206

2023

 

 
2,771

 

 
2,771

Thereafter

 

 
4,321

 

 
4,321

          Total minimum lease payments
557

 
9,130

 
18,544

 
(6,474
)
 
21,757

Less: Amount representing interest and taxes

 
(5,060
)
 

 

 
(5,060
)
          Total
$
557

 
$
4,070

 
$
18,544

 
$
(6,474
)
 
$
16,697

Letters of Credit
The Company has issued letters of credit under lease and other banking agreements, which have been collateralized with cash. This cash is classified as noncurrent restricted cash on the condensed consolidated balance sheets based on the term of the underlying agreements. Restricted cash was $2.2 million and $1.5 million as of September 30, 2019 and December 31, 2018, respectively. 

21


Creator Signing Fees and Creator Advances
Creator signing fees and creator advances represent contractual amounts paid in advance to customers pursuant to event ticketing and payment processing agreements. Certain of the Company’s contracts include terms where future payments to creators are committed to as part of the overall ticketing arrangement. The following table presents, by year, the future creator payments committed to under contract but not yet paid a