Vivid Seats Inc. (NASDAQ:SEAT) Q4 2023 Earnings Call Transcript

Vivid Seats Inc. (NASDAQ:SEAT) Q4 2023 Earnings Call Transcript March 5, 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 day, and thank you for standing by. Welcome to the Vivid Seats Fourth Quarter 2023 Earnings Webcast and 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 speaker today, Kate Africk. Please go ahead.

Kate Africk: Good morning, and welcome to Vivid Seats fourth quarter 2023 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 fourth 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 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, adjusted EBITDA margin, and cash generation, 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. 2023 was a transformational year for Vivid Seats, which we were pleased to wrap with a strong fourth quarter. After great years in 2021 and 2022, the North American live event market continues, with robust and durable supply and demand. Throughout 2023, we seized upon market strength while furthering our strategic objectives that lay the foundation for our growth for years to come. We drove innovation, launching new products for both buyers and sellers, and continued to cultivate awareness and affinity for our marketplace, as demonstrated by our mix of repeat orders climbing to almost 60%. Importantly, we completed two strategically and financially accretive acquisitions that drove substantial TAM expansion and unlock additional avenues for durable double-digit growth.

All of this was accomplished while we generated very strong cash flow, which will enable future capital deployment and value creation for shareholders. Today. I'll walk you through our financial highlights and then discuss the progress we delivered on our long-term strategic objectives. Then Larry will walk through our financial results in more detail. Starting with the financial highlights for 2023, we are proud to have delivered $3.9 billion of marketplace GOV, $713 million of revenues, and $142 million of adjusted EBITDA, driving nearly 25% top and bottom line growth, and substantially outperforming our original forecast and guidance for the year. As we look at the live event industry, the North American market continues to hum with healthy growth and secular trends that we expect will drive growth for years to come.

As we've discussed previously, consumers crave and prioritize live experiences, and artists are eager to tour as their primary source of income, creating a robust environment for both demand and supply. Our 2023 results reflect industry strength that we amplified with our strategy. Encouraging repeat behavior is fundamental to our strategy, whether that is through our loyalty program, engagement initiatives, differentiated experiences, or excellent customer service, as validated by Newsweek once again this year. The most telling KPI for this strategy is our mix of repeat orders versus new, which stood at 47% repeat orders in 2018 before these initiatives. After climbing to 56% in 2022, we've now reached 59% repeat mix in 2023, shifting 300 basis points towards sticky and more profitable repeat orders.

As we continue cultivating brand awareness and affinity, we expect to mix even higher into repeat orders and drive substantial marketing leverage over the next several years. Our focus on engagement initiatives contributes to this shift, and we made substantial progress this year with our launch of Game Center within the Vivid Seats app. We introduced Game Center at midyear and rapidly gained users who play daily games and score points towards promo codes or drawings for free tickets. Game Center users engage frequently, opening the Vivid Seats app multiple times per month on average, and almost always browse tickets before or after playing in Game Center. We are already seeing Game Center use translating to purchases. Game Center now has more than 260,000 users, and those users purchase tickets at a faster rate than non-Game Center app users, which is the exact behavior we seek to drive.

In 2023, we expanded our roster of team partnerships across multiple leagues to offer unique and exciting forms of engagement with our buyers. Through team partnerships, we offer premium game day experiences and unique opportunities like exclusive early access to pre-game batting practice at stadiums, all-inclusive upscale suites, guaranteed jumbotron time, and surprise appearances from Hall of Famers, all exclusively available through Vivid Seats. Our industry-leading loyalty program, Vivid Seats Rewards, offers compelling value and reason to choose Vivid Seats. The message, buy 10 tickets, get one free, along with our excellent customer service, resonates with buyers. In fact, our latest NPS data shows that an unbiased panel of consumers is substantially more likely to recommend Vivid Seats than any other scaled ticketing marketplaces.

An equally important element within our broader strategy is maintaining our leading position with sellers. SkyBox is the ERP of choice for the majority of professional sellers, and in 2023, we continue to improve our best-in-class seller product lineup. SkyBox Drive is nearing the end of its beta phase, during which we have continued to onboard beta users and incorporate vital feedback into the product we plan to bring to market. We are excited to fully launch SkyBox Drive, and are on track to do so later this year. With our Vivid Seats flywheel spinning in 2023, we also substantially increased our TAM and enhanced the financial profile of our business with two compelling strategic acquisitions. First, with our acquisition of Wavedash in Japan, we began to unlock an estimated incremental $40 billion of global ticketing TAM.

Then, with our acquisition of vegas.com, we unlocked another $6 billion of venue-direct TAM in the entertainment capital of the United States. As we integrate these businesses, the pathways to driving synergistic upside from each have become even more clear and compelling. While it's still early days for vegas.com, we see great potential and multiple avenues for synergies. We've begun optimizing inventory selection across our sites and anticipate generating revenue synergies this year. Another exciting intermediate term opportunity is the use of vegas.com as a profitable customer acquisition vehicle that also funnels live event enthusiasts into the Vivid Seats ecosystem. Since last quarter, we've become incrementally excited about the international opportunity ahead of us, and have begun building the infrastructure to go live in new markets.

Secular tailwinds driving growth in North America are echoing abroad. We see exciting opportunity to deliver incremental growth and profitability for years to come as we expand into additional geographies. Because of this growing excitement, we are accelerating our investment into international expansion this year, and believe these investments provide additional pathways to delivering double-digit growth for years to come. Before Larry turns to the financial results, I want to reflect on what we achieved this year and where we are going in 2024 and beyond. In 2023, we grew top and bottom line by nearly 25%, significantly expanded our TAM, and furthered our objective to be the marketplace of choice for both sellers and buyers. We also added incremental capabilities such as Game Center and SkyBox Drive, continued to enhance our loyalty program, and were once again recognized by Newsweek as having one of the best customer service experiences.

We believe that the foundation we laid in 2023 reinforces our ability to deliver sustained double-digit growth. We enter 2024 with a $63 billion global ticketing TAM and multiple levers to continue driving durable growth and long-term value. Our growth opportunity is compelling, our value proposition is resonating, and our ample cash flow affords us the ability to continue delivering value to shareholders, including through both strategic M&A and share repurchases. With that, I will turn it over to Larry.

Larry Fey: Thanks, Stan. I'm pleased to share our financial results for an outstanding 2023, which we closed out with a great fourth quarter. For full-year 2023, our marketplace GOV of $3.9 billion increased 23% year-over-year, driven by a 19% increase in total marketplace orders. Robust growth in 2023 on top of 33% marketplace GOV growth in 2022, reflects a healthy end market and strong execution. Fourth quarter marketplace GOV of $1.1 billion increased 31% year-over-year, fueled by a 36% increase in total marketplace orders. Average order size was $374 in Q4 2023, versus $388 in Q4 of 2022, with that delta driven by the impact of acquisitions. Excluding the impact of acquisitions, fourth quarter average order size was up 3% year-over-year.

We expect a similar AOS dynamic to persist into 2024 due to our completed acquisitions. Excluding acquisitions, our marketplace GOV organically grew double-digits in the fourth quarter. As we fully integrate vegas.com and Wavedash, standalone tracking will become impractical, and therefore this will be our last disclosure decomposing growth with and without these acquisitions. Our full year 2023 revenues of $713 million increased 19% year-over-year, driven by marketplace GOV growth. Similarly, our fourth quarter revenues of $198 million increased 20% year-over-year. Our take rate was 15% in the fourth quarter, and we continue to expect take rates of 15.5% or higher in 2024, albeit with quarterly fluctuation to be expected. In the fourth quarter, we generated $35 million of adjusted EBITDA, bringing full-year 2023 adjusted EBITDA to $142 million, which was up 25% year-over-year.

We delivered 100 basis points of adjusted EBITDA margin improvement in 2023 as we saw benefits from our increasing share of repeat orders. Turning to cash flow, we generated over $116 million of cash in 2023, and we expect strong cash generation to continue in 2024. Our model benefits from limited CapEx and negative working capital, which supports strong EBITDA to cash conversion. This robust cashflow profile provides the foundation for strategic capital deployment. In 2023, our capital deployment strategy featured both strategic acquisitions and share repurchases. We deployed $213 million of cash on financially accretive acquisitions, and added $46 billion of TAM in the process. In 2023, we also repurchased 3 million of our own shares. Despite these significant investments, we enter 2024 with a cash balance of $125 million and net leverage of less than 1x forward adjusted EBITDA.

Today, we are pleased to announce that our board has authorized a new $100 million share repurchase program, reflecting our view that our share price has not matched our strong business performance. In terms of 2024 outlook, we are maintaining our marketplace GOV guidance of $4.2 billion to $4.5 billion, and our revenue guidance of $810 billion to $840 million, as 2024 concert tour announcements in late Q4 and early Q1 have been consistent with expectations. As Stan mentioned, we intend to make additional investments in 2024 in pursuit of attractive international TAM. As such, we now expect 2024 adjusted EBITDA in the range of $160 million to $170 million. At the midpoint of our guidance, we expect to grow both revenues and adjusted EBITDA by 16% in 2024.

With strong secular growth in North America enhanced by international expansion and strategic M&A, we are confident in our ability to deliver sustained double-digit annual growth. Back to you, Stan.

Stan Chia: Thanks, Larry. 2023 was a pivotal year for Vivid Seats, and we couldn't have done it without our talented team and the high-performance culture that we have built, which we are proud to say, was recognized again as one of the best places to work in 2024. Before we open it up to questions, I'd like to highlight an upcoming transition for our leadership team. After a great five-year run, our Chief Technology Officer, Jon Wagner, is planning to retire in the first half of this year. Accordingly, he will transition into a technical advisor role to ensure a smooth transition. I want to sincerely thank Jon for his leadership and friendship and to recognize his many integral contributions to Vivid Seats. We are grateful for his commitment over the past five years and for continuing to provide his valued perspective as a technical advisor through this plan transition.

As we look forward, we are excited to welcome Stefano Langenbacher later this month as our new Chief Technology Officer. Stefano has extensive expertise leading technology teams for high-performing consumer-facing e-commerce brands, joining us most recently from Suit Supply where he served as CTO for the past six years. His experience optimizing global platforms and international tech stacks, while fostering innovation, will be invaluable as we capture the international opportunity ahead of us. Stefano is a seasoned technology executive and his results-driven mindset makes him an ideal leader to drive our technology development at such a pivotal moment in our journey as a global business. To wrap, looking back at 2023, we are incredibly proud to have delivered nearly 25% top and bottom-line growth, while furthering our strategic objectives that enhance our ability to deliver sustained double-digit growth, strong profitability, and robust cash flow.

We are excited to continue our track record of delivering shareholder value in 2024, including through strategic M&A and share repurchases. With that, operator, let's open it up for questions.

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