StubHub Holdings, Inc. (STUB) Q3 2025 Earnings Call Transcript

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Overview

The earnings call summary reveals mixed signals. Financial performance shows improvement with debt reduction and strong cash flow, but the refusal to provide 4Q guidance raises concerns. The Q&A highlights positive long-term strategies and partnerships, yet lacks specific short-term guidance and clear answers. This ambiguity tempers the positive aspects, leading to a neutral sentiment.

Key Financial Performance

Gross Merchandise Sales (GMS) $2.4 billion in Q3 2025, representing 11% growth year-over-year. The growth reflects resilience despite the impact of federally mandated all-in pricing in the U.S., which reduced conversion rates and had a 10% one-time impact on the North American secondary ticketing market. Excluding the Taylor Swift Eras Tour's outsized impact in the prior year, GMS grew 24% year-over-year.

Revenue $468 million in Q3 2025, up 8% year-over-year. Growth was driven by GMS growth but offset by a reduction in take rates (from 20% to 19%) to invest in market share expansion and a reduction in inventory revenue due to phasing out minimum guarantees for direct issuance sellers.

Adjusted Gross Margin 84% in Q3 2025, up from 82% in Q3 2024. The improvement was primarily due to a reduction in ticket substitution and replacement costs.

Adjusted Sales and Marketing Expenses $255 million in Q3 2025, representing 54% of revenue, compared to $221 million (51% of revenue) in Q3 2024. The increase was driven by reduced take rates to drive market share gains.

Adjusted Operations and Support Expenses $17 million in Q3 2025, representing 3.5% of revenue, compared to $16 million (3.6% of revenue) in Q3 2024.

Adjusted General and Administrative (G&A) Expenses $52 million in Q3 2025, representing 11% of revenue, compared to $62 million (14% of revenue) in Q3 2024. The decrease reflects operational discipline.

Adjusted EBITDA $67 million in Q3 2025, representing 14% of revenue, up 21% year-over-year from $56 million (13% of revenue) in Q3 2024. The increase was driven by improved gross margins and operational efficiency.

Free Cash Flow $6 million for the trailing 12 months ending September 30, 2025. This included $120 million in net cash outflows due to seller proceed outflows and $153 million in cash interest costs. Excluding these items, free cash flow was $279 million, approximately 100% of trailing 12-month adjusted EBITDA.

Debt and Leverage Total debt reduced by 30% to $1.7 billion after retiring $750 million of U.S. dollar-denominated term loans. Net debt was $1.1 billion, with a net debt-to-TTM adjusted EBITDA ratio of 3.9x. Annual debt service costs reduced by 43% to $99 million.

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Operating Highlights

ReachPro: StubHub launched ReachPro, a software product for power sellers to manage ticket portfolios. It has seen rapid adoption, becoming a strategic asset for the company.

Direct Issuance: StubHub is expanding its platform to include enterprise sellers, allowing content rights holders to access its marketplace. Partnerships include Major League Baseball and independent music promoters.

Advertising Initiatives: StubHub is developing advertising models, including sponsored listings for sellers and corporate advertising partnerships, such as with Booking.com.

Market Share Growth: StubHub has grown its market share in North America, becoming approximately 4x larger than its nearest competitor based on GMS.

International Expansion: StubHub continues to expand internationally, contributing to its overall GMS growth.

Technology Stack: StubHub rebuilt its technology stack, enabling rapid innovation and deployment of new features.

Operational Cash Flow: StubHub's asset-light model and marketplace dynamics result in high cash flow conversion, with approximately 100% of adjusted EBITDA converted to free cash flow.

TAM Expansion: StubHub is targeting a $100 billion addressable market through direct issuance and advertising initiatives.

Capital Structure Optimization: StubHub reduced its total debt by 30% and improved its balance sheet, lowering annual debt service costs by 43%.

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Risk or Challenges

All-in Pricing Implementation: The federally mandated all-in pricing in the United States has reduced conversion rates as customers adjusted to the new pricing format. This transition has had an estimated 10% one-time impact on the size of the North American secondary ticketing market and is expected to influence year-over-year comparisons through May 2026.

Market Share Expansion Investments: StubHub has strategically reduced take rates to drive market share expansion, which has resulted in a slight decline in revenue as a percentage of GMS. This approach balances near-term results with long-term market leadership but poses a risk to short-term profitability.

Economic Sensitivity: The business model relies on consumer demand for live events, which could be impacted by broader economic downturns or reduced discretionary spending.

Regulatory and Compliance Risks: The implementation of new regulations, such as all-in pricing, demonstrates the potential for regulatory changes to impact operations and financial performance.

Competitive Pressures: StubHub faces competition from other ticketing platforms, which could impact its ability to maintain market share and profitability.

Technology and Innovation Risks: The company’s reliance on its technology stack and the need for continuous innovation to maintain competitive advantage could pose risks if technological advancements are not effectively implemented or if competitors outpace StubHub in innovation.

Debt and Financial Leverage: Despite reducing total debt by 30%, StubHub still carries $1.7 billion in total debt, with a net debt to TTM adjusted EBITDA ratio of 3.9x. High leverage could limit financial flexibility and increase vulnerability to interest rate changes.

Supply Chain and Seller Dependence: The business depends on a large network of sellers, including power sellers and enterprise sellers. Any disruption in this network or failure to attract and retain sellers could impact inventory and revenue.

Event-Specific Risks: The business is influenced by the timing and popularity of major events, such as the Taylor Swift Eras Tour. Shifts in event timing or reduced demand for specific events could impact financial performance.

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Guidance & Outlook

2026 Guidance: StubHub plans to provide detailed 2026 guidance during the next earnings call in early 2026.

Market Share Growth: StubHub has consistently gained market share in the North American secondary ticketing market since 2022, transforming from a business comparable in size to its nearest competitor to one approximately 4x larger based on GMS and comparable metrics.

Direct Issuance: StubHub is actively investing in direct issuance, which allows enterprise sellers to access its marketplace. This initiative represents an addressable market opportunity exceeding $100 billion and is expected to drive substantial long-term growth.

Advertising Business: StubHub is in the early stages of developing an advertising business, including sponsored listings and corporate advertising partnerships. This is expected to become a large and profitable business segment.

2026 Market Conditions: StubHub anticipates a robust year for live entertainment in 2026, with strong fan demand and the absence of temporary growth headwinds such as the Taylor Swift comparison and the implementation of all-in pricing.

Capital Structure and Debt Reduction: StubHub plans to continue reducing leverage and lowering debt service costs, with additional debt repayments expected in the near term to further enhance free cash flow generation.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you talk about the returns on investments in core resale market share and direct issuance, and why no 4Q guidance was provided?

A:Eric Baker explained that the company has been focusing on long-term investments in market share and direct issuance, which have shown positive results. He mentioned that the company is not providing 4Q guidance and will discuss 2026 in the next call. He highlighted the success of the point-of-sale system and its impact on market share and advertising business.

Q:How is StubHub aligning marketing investments over the medium to long term, and what signals are being received about user base growth?

A:Eric Baker emphasized the success of the direct issuance business and its role in open distribution. He mentioned partnerships with Major League Baseball and festival channels, highlighting the receptivity of rights owners. He noted that the majority of the pipeline does not require financial payments from StubHub, indicating a positive trajectory.

Q:What is the visibility on the sponsored listing ad launch, and how does the Major League Baseball deal look?

A:Eric Baker stated that sponsored listings will roll out in the second half of Q4, allowing sellers to pay to feature their listings. He highlighted the unique aspects of perishable items and the integration with the point-of-sale system. Regarding MLB, he mentioned that the league will use direct issuance for certain events and is facilitating team sign-ups, with promising results.

Q:What are the best opportunities for StubHub in the direct issuance market over the next 2-3 years?

A:Eric Baker explained that the direct issuance model is universal and applicable across various content types, including sports, festivals, and international markets. He emphasized that the model complements primary ticketing companies and provides a significant opportunity in the $150 billion market.

Q:How does StubHub view the future of Agentic search and ticket buying, and its impact on take rates or advertising revenue?

A:Eric Baker expressed optimism about AI and Agentic search, stating that StubHub is well-positioned due to its supply chain and catalog. He mentioned potential paid and unpaid models for traffic generation and emphasized the importance of delivering value to consumers.

Q:Has StubHub carved back the headwind from all-in pricing, and what is the expected impact of the World Cup next year?

A:Eric Baker confirmed that the 10% headwind from all-in pricing will last for one year, lapping in May 2026. He expressed excitement about the World Cup, calling it a tremendous global event with significant resale opportunities.

Q:What are the take rates between the secondary market and the direct issuance business, and can you unpack 3Q '25 GMS growth between North America and international?

A:Eric Baker stated that take rates are the same for both secondary market and direct issuance. He highlighted strong growth in international markets, particularly in Asia and Latin America, and noted the increasing global nature of tours.

Q:How many teams are expected to join the direct issuance platform next year, and what are the overall demand trends?

A:Eric Baker explained that the direct issuance model allows teams to join at any time without long-term commitments. He noted robust demand for live events and mentioned that timing shifts in event catalogs do not affect overall consumer interest.

Q:How much pull-forward was seen in 3Q, and how does StubHub manage speculative selling?

A:Constance James noted that 3Q saw some timing shifts, but the company remains focused on long-term market share growth. Eric Baker stated that StubHub minimizes fraud and ensures ticket authenticity, making speculative selling a non-issue.

Q:How are users interacting with the mobile app, and is there potential for it to evolve into a more comprehensive platform?

A:Eric Baker mentioned that the mobile app is being developed to provide a seamless experience, with features like integration with Booking.com. He emphasized the goal of making StubHub the first choice for users.

Q:Review of Unclear Management Responses

A:Management avoided providing direct answers to questions about 4Q guidance, the exact number of teams joining the direct issuance platform next year, and specific details on 3Q '25 GMS growth between North America and international markets. Responses were often broad and focused on long-term strategies without detailed numerical data.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

STUB Transcript

StubHub Holdings, Inc. (STUB) Q3 2025 Earnings Call Transcript

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