Vivid Seats Inc. (NASDAQ:SEAT) Q1 2024 Earnings Call Transcript May 7, 2024
Vivid Seats Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the Vivid Seats First Quarter 2024 Earnings Conference Call. Following managements prepared remarks, we will open the call for Q&A. I would now like to turn the call over to Kate Africk.
Kate Africk: Good morning, and welcome to Vivid Seats first quarter 2024 earnings conference call. I’m Kate Africk, Head of Investor Relations at Vivid Seats. Joining me today to discuss Vivid Seats results are Stan Chia, Chief Executive Officer, and Larry Fey, Chief Financial Officer. By now, everyone should have access to our first quarter earnings press release, which we released earlier this morning. The press release, as well as supplemental earnings slides, are available on the Investor Relations page of Vivid Seats website at investors.vividseats.com. During the course of today’s call, management may make forward-looking statements within the meaning of Federal Securities laws. These forward-looking statements are subject to risks and uncertainties, that could cause actual results to differ materially, including the risks and uncertainties described in our earnings press release and most recent annual report on Form 10-K, and our other filings with the SEC.
On today’s call, we will refer to adjusted EBITDA, and adjusted EBITDA margin, which are non-GAAP financial measures that provide useful information for our investors. To the extent reasonably available, a reconciliation of these non-GAAP financial measures to their corresponding GAAP measures, can be found in our earnings press release and supplemental earnings slides. And now, I would like to turn the call over to Stan.
Stan Chia: Good morning, everyone, and thank you for joining us today. We’re off to a great start in 2024 with strong financial results and substantial progress made on key strategic initiatives. These results are a testament to our strong market position, superior and differentiated offering, as well as the consistent execution of our talented team to keep raising the bar. Today, I’ll walk you through our financial highlights and then provide an update on our strategic initiatives. Then, Larry will speak to our financial results in more detail. In the first quarter, we delivered over $1 billion of marketplace GOV for the second quarter in a row, along with $191 million of revenues and $39 million of adjusted EBITDA. The strength of our business has continued, and we are proud to have delivered 20% top-line growth and strong adjusted EBITDA margins that exceeded 20%.
We saw widespread demand strengths continue in the quarter, with fans across categories wanting to experience it live with their favorite artists and teams. Following quarter-end, the industry reached an exciting and important milestone for women’s sports. After the Indiana Fever selected Caitlin Clark with the first pick in the WNBA draft, a women’s sports team was the top-selling performer on our platform for the first time ever. We are excited to see the continued growth in women’s sports and believe this demonstrates one example of the broad-based strengths we are seeing across the live events landscape. As the live event industry continues to benefit from long-term tailwinds, and as we continue to unlock leverage from our recent investments, we look forward to driving sustained double-digit growth on both the top and bottom line for years to come.
Through our loyalty program and brand initiative, we reached nearly 60% mix of repeat orders in 2023. Repeat orders are highly accretive to our margin profile, and Vivid Seats Rewards is one of many mechanisms that we employ to retain users within our ecosystem. Game Center is another key mechanism that attracts both existing and new customers to our platform. Whether it’s winning free tickets, competing with friends, or scoring promo codes, the engagement and retention of customers has been excellent. In fact, customers that have earned promo codes have on average engaged with our platform 26 times before earning their first code. The repeated brand exposure and high-intent engagement creates many more opportunities for players to browse tickets and make repeat purchases, all the while providing us with more information to personalize our offerings to each user.
Last quarter, we announced that we were accelerating our international expansion timeline, and I want to take a moment to highlight the excellent progress we are making. As we focus on internationalizing our platform so that it scales efficiently across geographies, we are pleased to report that we are on track to launch internationally by the end of the year. While the platform cost of international expansion is now embedded in our financial profile, upside from international revenues and contribution is still to come. As we look abroad, we continue to see favorable market conditions and believe our differentiated value proposition will be well received by international consumers. We have also made substantial progress with our recent acquisition of Vegas.com.
The integration of this business is going well, and we are already driving revenue synergies. We are now selectively cross-listing and optimizing ticket listings from Vivid Seats, such as for top concerts and sporting events, on our Vegas.com property. This is driving incremental revenues as high-intent live event fans traveling to Vegas browse an even more comprehensive offering of live event listings on Vegas.com. Our optimization efforts are ongoing, and we look forward to ramping cross-listed volumes. As we’ve said before, we see great potential and multiple avenues for synergies with Vegas.com. Las Vegas, which is already a key market for us, is also the home of the recently announced College basketball crown, a new post-season tournament beginning in 2025.
We are thrilled to be the tournament’s official ticketing provider and will be the exclusive home for tickets across all games in the tournament. This is a first for Vivid Seats and an example of how we are leveraging the power of our industry-leading technology platform in new ways. With this unique and innovative partnership, we will provide fans with a new turnkey end-to-end ticketing experience while simultaneously elevating our brand awareness nationally through another high-profile event in the entertainment capital of the United States. In summary, we are pleased with the great progress we are making on our strategic initiatives on the buyer side of our marketplace. As always, our focus is on driving long-term stickiness with both buyers and sellers.
Shifting to the seller side of our business, we are proud to share that Skybox remains the leading ERP for professional sellers. Building on our leading position, we strengthened our seller product lineup further and look forward to launching Skybox Drive, our new automated pricing tool, later this year. We continue to expect strong adoption from sellers for this tool, which is plugged directly into Skybox and will leverage robust data from our marketplace. As mentioned on previous calls, we have gone to new lengths to drive innovation and optimization in our marketplace. Launching new products for both buyers and sellers, expanding internationally and strengthening our tech stack. These efforts have resulted in Vivid Seats being recognized among the world’s greatest innovators.
We are proud to share that we have recently been named to fast companies list of the world’s most innovative companies of 2024. This prestigious list shines a spotlight on businesses that are shaping both industry and culture through innovation and setting new standards. With that, I will turn it over to Larry for a more detailed review of the quarter.
Larry Fey: Thanks, Stan. In the first quarter, our business continued to perform well amidst ongoing end-market strengths, which we were pleased to translate to solid financial results. In the first quarter, we generated more than $1 billion of marketplace GOV, which increased 20% year-over-year and was driven by increased total marketplace orders. Average order size was $358 in the first quarter of 2024 versus $376 in the first quarter of 2023, with the delta driven by the impact of acquisitions that bring a different AOS profile. We delivered $191 million of revenues in the first quarter, an 18% year-over-year increase. Our take rate was 15.6%, consistent with expectations of 15.5% or higher for full year 2024. In the first quarter, we delivered $39 million of adjusted EBITDA and a 20% adjusted EBITDA margin, while making incremental investments to develop our international platform capabilities.
As a reminder, our results from the first quarter of 2023 included $8 million of non-recurring timing benefits, which will impact year-over-year comparisons. Turning to cash flow, we generated $39 million of cash from operations in the first quarter, bringing our cash balance to $154 million, and our net leverage to 0.7 times forward adjusted EBITDA. We continued to expect strong cash generation and adjusted EBITDA to cash conversion in 2024 and beyond. After announcing a new $100 million share repurchase authorization on our fourth quarter earnings call, we repurchased 715,000 shares for an average price of $5.74 in March, leaving $96 million remaining under the authorization at quarter end. At these price levels, we believe repurchasing our stock is an attractive use of our robust cash flow.
With the strong start to the year, we continue to expect 2024 marketplace GOV in the range of $4.2 billion to $4.5 billion, 2024 revenues in the range of $810 million to $840 million, and 2024 adjusted EBITDA in the range of $160 million to $170 million. Our guidance calls for double-digit growth on both the top and bottom line for 2024, and we expect to deliver double-digit growth on a sustained basis as we capture a continued live event growth in North America and expand abroad. With the long history of operating leverage in our business, we believe our recent investments will augment both growth and profitability and support adjusted EBITDA margin improvement of 50 basis points per year in the coming years. Back to you, Stan.
Stan Chia: Thanks, Larry. Before we conclude and turn to Q&A, I’d like to highlight the progress we have made on our ESG initiatives. Last week, we published our 2024 environmental, social, and governance fact sheets, providing new and updated performance metrics. Sustainability and corporate responsibility play a vital role in our business strategy, and we are pleased to share the progress we have made in 2023. On the environmental front, we measured and disclosed our scope one and two greenhouse gas emissions to better understand our impact, enhance transparency, and benchmark future progress. And on the governance front, we will have a majority independent board of directors with fully independent board committees by November 2024.
We continue to demonstrate our commitment to enabling exceptional experiences for all stakeholders through the ongoing support of our employees, customers, and communities. To conclude, we are building upon an excellent 2023 where we delivered nearly 25% top and bottom line growth, and we are making significant progress thus far in 2024 on multiple strategic initiatives while delivering great financial results and increasing shareholder value. We look forward to making continued progress throughout the year toward our international launch and harnessing synergies from our Vegas.com acquisition. We are confident that our long-term strategy sets us up for double-digit growth again in 2024 and sustainably thereafter. With that, Operator, let’s open it up for questions.
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Your line is now open.
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Q&A Session
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Ryan Sigdahl: Hey, good morning. Stan, Larry, Kate. I want to start with guidance. So you mentioned accelerating international expansion timeline. I guess is that different from what your expectation was a couple months ago, or just relative to the past kind of few years’ strategy? And is 10 million still the right cost assumption that guidance? And then kind of lastly on guidance, I guess you beat nicely on Q1, reiterated the year. Any other puts takes besides international in there?
Stan Chia: Yes, thanks, Ryan. I think international is progressing well. I don’t think you should interpret that as a change in our philosophy. We are still not assuming within our guidance any revenue or contribution margin beyond the G&A investment. If we get to a point where kind of conviction and certainty on timing shifts to a level where it’s prudent to include it, it will let you know that we’re not at that point yet, but we’re trending well to be able to go live before the end of year. There are no changes on the investment amount. I’d say that’s all trending consistent with expectations. And then if you look at Q1 relative to full year guidance, obviously I think off to a night start, but still early in the year with a lot to play out so it felt prudent to maintain the target for that.
Ryan Sigdahl: Very good. Just my follow up, AEG partnership, I guess for College of Basketball, Crown, New, Unique, kind of where you guys are going to distribute primary tickets, be the exclusive. But can you talk through I guess the uniqueness of this deal, how you want it, why does AEG and AXS need Vivid, and then if there are any other opportunities like this out there?
Stan Chia: Yes, here Ryan. Look, I think we’re really excited about being their partner on this new tournament. I think as we continue to demonstrate, we have looked to use our technology across multiple vehicles where I think the uniqueness of what we do combined with abilities that we have allow us to serve as wonderful sources of distribution for partners and ultimately great value for fans and sellers. We’ve got a great relationship with AEG, AXS through this, and I think when we looked at what we do well and what they were looking for in a partner, this looked like a fantastic opportunity, and we’re really excited to see how it plays out next year.
Ryan Sigdahl: Awesome. Thanks guys. Good luck.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Curt Nagle with BOA. Your line is now open.
Curt Nagle: Great. Thanks very much for taking the question. Yes, maybe Stan, one for you. So, Curt is here in terms of vegas.com, seems like that’s ramping nicely. Synergies just starting to come through. Any more metrics or in terms of just a framework of kind of what potentially if we could see from cross-selling or integrating that asset in a false way into the platform?
Stan Chia: Yes, Curt. Thanks for the question. Look, we were excited when we acquired vegas.com and call it four or five months in now. We’re even more excited about what we see. We continue to look at that as really a critical part of our marketplace business and the thesis that, or the thesis that we had going into this, I think, continue to play out well, whether that is being a wonderful customer acquisition source for us, that we are then able to blend into our other marketplace brands or simply being able to monetize that traffic in an incremental manner where we are now able to add not just the selection that vegas.com had organically pre-acquisition, but we are also able to infuse it with events and selection that they didn’t have access to prior from the Vivid Seats supply side.
So, I think continue to be excited. Those are the thesis that we had going into it and we’re starting to see a lot of that come to fruition and remain really bullish on that through the remainder of the year.
Curt Nagle: Great. I’m going to be able to follow up with one competition, the U.S. obviously, your primary, the only market right now. How does that look relative to, let’s just say the end of the year and how it shaped up through the quarter? I know you didn’t give guidance to the year, or at least you said the quarter, but you put up some really nice GMV, so admittedly you were executing well. But just anything to call out in terms of how to think about relative competition for your bigger competitors and just how you think that shapes up through the year.
Stan Chia: Yes, I’d say we, in prior quarters, you have been political language and I think indicated that in the back half of last year, within those normal bands, perhaps on a little bit closer about the higher side than the lower side, I think that continued into Q1 without meaningful change. What I would call out is that if you did like a year-over-year, Q1, 24 or Q1, 23 comparison, Q1 23 was on the other side, right, within those natural oscillations, Q1 23 was a fair bit, we saw less competitively intensive relative to the balance of the year whereas this year it feels like it’s on the higher end of the spectrum but in both periods, I’d say within balance that we see in the past.
Curt Nagle: Okay, thanks very much.
Operator: Thank you. One moment for our next question. Our next question comes from Dan Kurnos with The Benchmark Company. Your line is now open.
Dan Kurnos: Yes, thanks. Just let me follow up on that Larry for a second. Just, and Stan, given the strong re-engagement and stickiness metrics that you guys have and given, kind of the noise in the competitive landscape. I know you guys always find unique ways to go out there and market, but what’s kind of the thought here on driving sort of new customers into the system a little bit more aggressively while, the other guys are trying to figure out a way to market?
Stan Chia: Hey, Dan. Look, I think, as you said, we have always focused on the things that we control and look to build on products and platforms that allow acquisition and stickiness to be strong, right? We spent some time talking about vegas.com. I think that is a very unique source for new customer acquisition. If you look at that Crown Basketball Challenge tournament that we announced with ANG, we’re really bullish on that, right? When you look at the fundamental basis for doing that deal, that will be a very, I think, strong source of customer acquisition and retention that will be unique to us and our ability to retain that within our ecosystem, right? So, I think, while we always talk about, undoubtedly this is a competitive environment, the reality is, I think we are very focused on the things that we control and have great confidence in the investments that we’re making to drive both better acquisition and, as always, I think, much stronger retention, which we see through our engagement vehicles, our repeat rates, our loyalty programs.
