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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