Yahoo Finance Vivid Seats Inc. (NASDAQ:SEAT) Q3 2023 Earnings Call Transcript
Vivid Seats Inc. (NASDAQ:SEAT) Q3 2023 Earnings Call Transcript November 7, 2023
Vivid Seats Inc. beats earnings expectations. Reported EPS is $0.07, expectations were $0.04.
Operator: Good day, and thank you for standing by. Welcome to the Vivid Seats Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kate Africk, Head of Investor Relations. Kate, please go ahead.
Kate Africk: Good morning and welcome to Vivid Seats third quarter 2023 earnings conference call. I'm Kate Africa, 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 accessed to our third 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, including those described in our earnings press release and 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. You will find a historical reconciliation of adjusted EBITDA and adjusted EBITDA margin to the corresponding GAAP measures in our earnings press release, supplemental earnings slides and SEC filings. 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 pleased to share that Vivid Seats delivered another quarter of record results with our growth accelerating beyond the strong growth we saw in the first half of 2023. After delivering nearly $1 billion in Marketplace GOV, our highest quarter ever, it has never been more clear that demand for live events is strong and that we are capturing that strength at Vivid Seats. In addition, our focus on cultivating buyer loyalty continues to deliver results with repeat rates increasing and pacing ahead of expectations. Our strong quarter performance comes as we announced the acquisition of Vegas.com, our second strategic acquisition of the year. Vegas.com is a strategic asset that enhances our scale and reach in Las Vegas, the coveted entertainment capital of the U.S., while driving substantial TAM expansion and immediate accretion.
I'll walk through these exciting highlights from the quarter in more detail, and then I'll turn it over to Larry, who will discuss our financials and outlook. With the industry and our business firing on all cylinders in the third quarter, we delivered $999 million of Marketplace GOV, driving outstanding 28% year-over-year growth and accelerating from 16% growth in the first half of 2023. We also delivered $188 million of revenues and $33 million of adjusted EBITDA, both growing robustly year-over-year, while deploying compelling brand investments that will continue to drive value and impact in 2024 and beyond. With strong results to date this year, we are proud to raise our 2023 guidance for the third time. With 28% GOV growth, it is evident that consumer demand for live events is healthy and vibrant and that fans increasingly favor and return to our platform.
As we saw last quarter, demand strength continues to be pervasive across categories and is driven by a wide array of performers and teams. The robust demand we are seeing reflects long-term tailwinds that will drive strong growth for years to come. One of those tailwinds is the passionate fandom that drive our buyers to show up for their favorite artists and teams and to experience it live. Our engaging and innovative platform is resonating, and we see fans increasingly returning to Vivid Seats. Our repeat rates have increased significantly and are trending ahead of our forecast when we initially underwrote our investment in loyalty and brand. With repeat rate benefits that are exceeding expectations, we are excited to lean in and drive further repeat rate acceleration and buyer stickiness.
Repeat orders are accretive, and as our investments continue taking hold, we anticipate leverage and margin improvements beginning in 2024. As part of our brand initiatives, we are investing in partnerships with category leaders that help ensure our brand message reaches a targeted audience of sports and music enthusiasts that are highly likely to attend live events. For example, timed with the start of this NFL season, we launched a brand campaign with our partner, ESPN, which aired on Monday Night Football and reached millions of sports fans. The ad featured 11 times Pro Bowler Larry Fitzgerald Jr. and highlighted the 11th free ticket available through Vivid Seats Rewards, the only loyalty program in the industry. The campaign also included digital takeovers on both the ESPN and Bleacher Report apps.
We have seen campaigns like this drive long-term brand recognition and affinity along with immediate returns as our brand partners direct their users to our platform. As we spoke about last quarter, we are also growing our roster of team partnerships, which offer a unique and premium experiences that drive differentiation. In addition to our numerous partnerships across teams from the MLB, the NFL and the NBA, we are excited to share that we have expanded into the NHL for the first time as we are now the official ticket Marketplace partner for the LA Kings. We are also excited to add the LA Galaxy to our list of partners. Our first MLS partner in some time. With these partnerships, we will benefit from co-branded on-site activation and Vivid Seats customers will have unique access to premium seating areas bundled with experiences and perks.
Our initiatives driving repeat rates higher go beyond our brand and team partnerships. We are reaching fans through numerous channels, including social networks, connected TV and influencers to cultivate awareness and affinity with bands. A crucial part of brand loyalty lies within our award winning customer service. This quarter, we were thrilled to once again be recognized by Newsweek for our track record of providing excellence in customer service. We continue to foster engagement in our ecosystem through both our Vivid Picks app and Vivid Seats Game Center, which is available directly within the Vivid Seats app. With Vivid Seats Game Center, users play daily games to score points and earn credits towards drawings for free tickets. Game Center engagement and pricing between ticket purchases is resonating and driving desired repeat behavior.
We've already found that Game Center users purchase tickets at a rate 36% higher than non-Game Center app users, and Game Center unique player account continues to grow and accelerate already reaching 175,000 users since launch over the summer. Stickiness on both sides of our Marketplace is high and continues to grow. We continuously innovate our best-in-class seller tools like SkyBox, which is the ERP of choice for the majority of professional sellers. Our beta phase for SkyBox Drive, our innovative pricing tool continues to drive insights and garner excitement and we look forward to launching the product in early 2024. Sellers are eager to plug into SkyBox Drive, which will leverage the most robust data in the industry and generate valuable insights for sellers.
Turning to our two strategic acquisitions. First, a brief update on Wavedash. We closed the acquisition in early September and are excited to use learnings from Wavedash as we look to expand our TAM in other attractive international markets. Next, I'm thrilled to announce our acquisition of Vegas.com, which we purchased in early November for $240 million using a mix of cash on hand and equity. Vegas.com is uniquely positioned in the coveted Las Vegas market. As the local market authority with the most comprehensive event inventory of shows, attractions and tours, Vegas.com is a top destination for millions of Las Vegas tourists every year. As a two-sided Marketplace, Vegas.com connect those tourists to popular local events such as Cirque du Soleil and magic and comedy shows.
Las Vegas is benefiting from multiple tailwinds including new venues, new teams and successful artists residencies. Additional upcoming supply tailwinds include the inaugural Formula 1 Las Vegas Grand Prix later this month and the Super Bowl in 2024. With $89 million of 2022 revenues, the addition of Vegas.com will increase our scale and reach in this key market, bring incremental unique inventory through strategic partnerships and offer long-term synergistic upside. We are thrilled to acquire such a strategic asset at an accretive multiple that offers a compelling financial profile with robust EBITDA margin. Vegas.com brings a TAM of $6 billion plus that spans a diverse portfolio of shows, tours and attractions in Las Vegas, the entertainment capital of the country.
With millions of live event enthusiasts flocking to and from Las Vegas each year, we anticipate a nationwide awareness benefit as tourists return to their home markets with the awareness of Vivid Seats and enrollment in our loyalty program as we integrate the Vivid Seats brand into the Vegas.com customer experience. With our recent acquisitions of Vegas.com and Wavedash, we are building a track record of using our cash flow to invest in strategically accretive, TAM accretive and financially accretive assets. Each business is a leader in its market, and when combined with our leading platform will drive synergistic value that will accelerate our profitable growth, both domestically and internationally. We are excited to integrate these businesses and expand our reach and capabilities as a leading global marketplace.
The combination of our organic and inorganic investments have driven a fundamental trajectory shift of the business leading us to provide a strong preliminary view of 2024, which Larry will go into detail on shortly. With new growth vectors now in place internationally and domestically, as well as the valuable differentiation we continue to develop through our platform, we will enter next year prepared to deliver a step function increase both strategically and financially. Turning back to this quarter, our excellent results reflect the foundational strength of our business and the growing affinity and demand for our platform. We are excited to finish the year strong and remain focused on building that strength and creating long-term shareholder value.
With that, I will turn it over to Larry.
Lawrence Fey: Thanks, Stan. Our third quarter 2023 Marketplace GOV of $999 million increased 28% year-over-year, total Marketplace orders increasing 19% year-over-year, and average order size increasing 9%. We delivered our highest quarterly Marketplace GOV to-date reflecting strong Vivid Seats execution against the market backdrop of broad-based demand strength spanning performers and teams. Our third quarter 2023 revenues of $188 million increased 20% year-over-year driven by Marketplace GOV growth. Our Q3 take rate of 15.5% is consistent with expectations. We generated $33 million of adjusted EBITDA in the third quarter, up 18% year-over-year. We have seen improved efficiency and performance marketing on a year-over-year basis against a stable competitive backdrop.
With repeat rates trending higher and above expectations, we are seeing results from our brand and loyalty initiatives and continue to invest accordingly. Our third quarter offline marketing expense thus reflects brand and partnership investments that we expect will further improve awareness of our value proposition, drive brand affinity and in turn increase repeat rates. We have delivered exceptional cash flow generation with over $110 million in cash from operations year-to-date. As we look at our balance sheet following the Vegas.com acquisition, we remain flexible and can capitalize on additional compelling growth opportunities as they arise. Our post-acquisition cash balance of $117 million is healthy, our debt principal outstanding at $274 million is low and our revolver of $100 million is undrawn.
Our net leverage is less than 1 times our forward adjusted EBITDA and we anticipate continued strong cash generation. Our acquisitions this year demonstrate our ability to identify strategic assets and our willingness to deploy our cash to drive long-term value. Turning to our updated outlook for 2023. We are raising our guidance to account for our outperformance in Q3, continued strong demand trends thus far in Q4 and contribution from Vegas.com in the last two months of the year. We now anticipate 2023 Marketplace GOV in the range of $3.75 billion to $3.9 billion, revenues in the range of $685 million to $705 million and adjusted EBITDA in the range of $136 million to $142 million. Our guidance continues to reflect brand and partnership investments that we believe will drive attractive long-term returns.
We now expect 20% Marketplace GOV growth in 2023 on top of greater than 30% GOV growth in 2022 as broad-based demand strength continues well beyond the post-pandemic surge, we are leaning into these compelling secular trends and seeing our flywheel accelerate. While we do not typically provide next year guidance until our Q4 call, we are making an exception this year in light of our Vegas.com acquisition and the impact it will have on our financial profile in 2024. We expect 2024 Marketplace GOV in the range of $4.2 billion to $4.5 billion, approximately double our GOV from 2019. We also expect 2024 revenues in the range of $810 million to $840 million and 2024 adjusted EBITDA in the range of $170 million $180 million. At the midpoint, this represents mid-teens Marketplace GOV and revenue growth and 26% adjusted EBITDA growth.
Underlying our initial 2024 outlook is high single-digit revenue growth, excluding our Vegas.com acquisition with operating leverage and incremental contribution from Vegas.com contributing to 26% projected adjusted EBITDA growth. To wrap, between strong operational results and strategic acquisitions, it was a great quarter. We are excited for a strong close to 2023 as we gather momentum for another great year in 2024. Back to you, Stan.
Stan Chia: Thanks, Larry. There has never been a more exciting time for Vivid Seats, between vibrant industry growth, continued strategic and operational excellence as well as accelerating progress in driving long-term stickiness. The core Vivid Seats business is in a great position strengthened by not one, but two strategically accretive, TAM accretive and financially accretive acquisitions in 2023, we are teed up for yet another outstanding year in 2024. With that, operator, let's open it up for questions.
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