Vivid Seats Inc. Q4 FY2024 Earnings Call

Good morning and welcome to the Vivid Seats Fourth Quarter 2024 Earnings Conference Call. Following management's prepared remarks, we will open the call for Q&A. I would now like to turn the call over to Kate Africk.

Good morning, and welcome to Vivid Seats fourth quarter and full year 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 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 that could cause actual results to differ materially, including the risks and uncertainties described in our earnings press release, our 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, cash generation, and last 12 months net leverage, 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 comparable 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.

Good morning, everyone, and thank you for joining us today. As we reflect on 2024, we are encouraged by the performance of our investments that continue to drive differentiation and efficiency in our marketplace. While the market backdrop in 2024 was muted relative to the extraordinary years of 2022 and 2023, we remain confident in the long-term tailwinds driving North American live events and that we are making the right investments that will drive our long-term success. In the fourth quarter, we delivered $200 million of revenues, which is 1% higher year-over-year, and $33 million of adjusted EBITDA, which was 5% lower year-over-year. For full year 2024, we delivered $776 million of revenues, which was 9% higher year-over-year, and $151 million of adjusted EBITDA, which was 7% higher year-over-year. We delivered strong unit economics while continuing to invest in initiatives that position us well alongside the long-term secular growth trends in live events. Sources of industry data, such as third-party data from Polestar covering the last 25 years, highlight a long history of strong live event industry growth. Additionally, we are seeing that consumers increasingly prioritize spending on live experiences over goods and artists are touring more and more. While 2024 saw muted growth relative to the record-setting growth seen in 2022 and 2023, 2025 looks to potentially return to industry expansion, consistent with its long-term trajectory. Next, I'll turn to our investments that are yielding efficiencies and differentiating our platform. This includes our industry-leading loyalty program, Vivid Seats Rewards, where loyalty members earn a free 11th ticket and other perks. Over time, we have continued to refine our program and focus on targeting the right users with the right offers to maximize repeat behavior. We are seeing enrolled members making repeat orders 2 to 3 times as often as non-enrolled customers. Repeat orders are highly accretive, thanks to lower marketing expense. Our mix of repeat versus new orders has trended higher each year since we launched our loyalty program, and we are excited to share that our mix of repeat orders trended higher again in 2024, reaching 61%. Our investment in Game Center is another source of differentiation. Game Center users often browse tickets while playing contests. And in the fourth quarter, we paired our Game Center contest with concert on-sale announcements for 2025. With these exciting contests, such as for Kendrick Lamar and Stray Kids, we saw increased engagement and increased GOV and app downloads attributable to Game Center with limited marketing expense. Specifically, app downloads attributable to Game Center approximately doubled both year-over-year and quarter-over-quarter in the fourth quarter. We will continue to grow our Game Center user base and foster engagement in our app to further yield marketing efficiencies. In tandem with Game Center usership, our social media following continues to grow nicely. And notably, our net social sentiment is the highest among our scale ticketing competitors, which reinforces our repeat flywheel. Moving on to an update on Vegas.com, which we acquired in late 2023 and which is increasingly yielding synergies on two fronts. As we said last quarter, cross-listed complementary Vivid Seats inventory on Vegas.com already makes a notable contribution to our broader GOV. And now as we've had more time for our cross-sell campaigns to run, cross-sold Vegas.com customers are converting to Vivid Seats customers at an encouraging rate and generating substantial GOV while incurring minimal marketing expense. To conclude, cross-listing and cross-selling synergies are ramping nicely and ramping in line with our strategy estimates. Our TAM also continues to expand. First, this was through our acquisitions of Vegas.com and Wavedash, and now we are seeing TAM expansion through organic international expansion. We are excited to report that the first of our global technology platform capabilities that we built in 2024 are now in place and that we have kicked off our European launch. We expect to ramp activity throughout 2025, which we expect will contribute modestly to revenues. We will continue investing in the most favorable markets where we can also scale our platform and flywheel and look forward to international expansion bolstering our growth. Another element of TAM expansion is our position as the official ticketing provider and the exclusive home for tickets across all games in the new college basketball crown tournament beginning later this month. With this new post-season tournament, we will leverage our platform in new ways, facilitating the distribution of all primary and secondary tickets while elevating our brand awareness nationally. Looking to the seller side of our marketplace, Skybox remains the industry-leading ERP with over 55% of professional sellers exclusively using our ERP to run their businesses. Skybox is now even more powerful with the addition of our Skybox Drive automated pricing tool, which went live several months ago. We continue to onboard more Skybox Drive users and are excited to share that we have begun to monetize the product as initial adopters move beyond their trial periods. Users continue to be pleased with the product, which is turnkey, integrated, and exclusive to our Skybox ERP and leverages the power of Vivid Seats marketplace data. We have an exciting partnership pipeline and expect volumes to ramp through new partnerships, targeting captive audiences throughout 2025. These long-term partnerships have been a key focus as they allow us to drive accretive volume through our ecosystem that is insulated from competitive marketing intensity. This includes a new partnership with United Airlines, the world's largest airline. Our agreement will enable MileagePlus members to earn miles for purchasing tickets through Vivid Seats and even more miles when using the United MileagePlus credit cards powered by Chase. The United MileagePlus loyalty program is one of the largest loyalty programs in the world with over 130 million members. The partnership will go live later this year and will also connect millions of customers to personalized content through United's Connective Media, the first traveler media network operated by an airline. Again, strategic partnerships like these allow us to leverage our infrastructure and tap into new audiences, and we are excited by our growing roster of new and upcoming partners. As we look ahead to 2025, I wanted to highlight a dynamic contemplated within our guidance, which Larry will cover shortly. While competitive intensity was high for the duration of 2024, performance marketing channels were particularly competitive in the second half, causing us to expect to return to top-line growth in the second half of 2025 after we lap challenging comp periods in the first half. In 2024, amidst the ramp of competitive intensity, we made the strategic decision to prioritize strong profitability over incremental volume. With competitive intensity persisting into 2025, we are leaving flexibility within our guidance to increase investment as prudent to generate stronger volumes and long-term growth. We intend to increase investment in both marketing and technology consistent with our principled approach of building differentiated and sustainable value into our platform. We remain confident that efficient marketing, combined with a differentiated value proposition, will be a winning combination in the long term. With that, I will turn it over to Larry for a more detailed review of the quarter and year.

Thanks, Stan. In the fourth quarter of 2024, we generated $994 million of marketplace GOV, which was down 11% year-over-year. The decline was driven by a 12% reduction in total marketplace orders while average order size returned to growth with a 2% year-over-year increase. For full year 2024, we generated $3.9 billion of marketplace GOV, which was roughly flat year-over-year with a 6% increase in total marketplace orders, offset by a 6% decrease in average order size. In the fourth quarter, we delivered $200 million of revenue, up 1% year-over-year despite the decline in marketplace GOV. We delivered strong unit economics led by a 16.6% take rate, up 160 basis points year-over-year. For full year 2024, we delivered $776 million of revenue, which was 9% higher year-over-year and a 16.6% take rate, which was up 140 basis points. In the fourth quarter, we delivered $34 million of adjusted EBITDA, down 2% year-over-year, driven in large part by incremental competitiveness in performance marketing channels. For full year 2024, we delivered $151 million of adjusted EBITDA, which was 7% higher year-over-year as we prioritized unit economics in a challenged competitive environment. We increased our cash balance by $41 million in the fourth quarter and ended the year with $243 million of unrestricted cash. Last month, we were able to reduce the interest rate of our $393 million term loan from SOFR plus 300 basis points to SOFR plus 225 basis points, with the reduction resulting in $3 million of annualized savings. With approximately one turn of LTM net leverage and expectations of continued cash generation, we entered 2025 with strategic and operational flexibility. In terms of guidance, we expect 2025 marketplace GOV to be in the range of $3.7 billion to $4.1 billion, 2025 revenues in the range of $730 million to $810 million and 2025 adjusted EBITDA in the range of $110 million to $150 million. Our guidance contemplates improving content supply alongside a cautious view of demand. As Stan noted, we saw increasing competitive intensity as we moved through 2024. And as certain competitors prioritized volume growth over profitability. Accordingly, we expect our marketplace GOV and revenues to inflect and return to growth in the back half of the year as we approach the summer months, where we will see easier comps while others face a higher bar to outpace industry growth. Our adjusted EBITDA range incorporates flexibility for marketing, product, and technology investment as we move through the year. We continue to innovate and seek efficiencies as the landscape evolves, and we will continue our pursuit of our long-term goal of delivering sustained double-digit profitable growth. Back to you, Stan.

Thanks, Larry. To conclude, we continue to see compelling secular tailwinds in live events, and the product enhancements we delivered in 2024 will benefit us for years to come. We intend to lean in with additional investments in 2025 to support our long-term growth opportunity. I'm proud of our team's disciplined execution in 2024 and look forward to further progress in 2025. With that, operator, let's open it up for questions.

Our first question comes from Ryan Sigdahl with Craig-Hallum Capital Group. Your line is open.

Great, good morning, Stan. Good morning, Kate.

Good morning.

Starting on international, so helpful context, modest revenue. Are you willing to comment on which countries are going into first? And then kind of second part of that. Any comment on EBITDA if you think it will be additive in 2025?

Yeah. Ryan, I think we're excited, as we talked about, we've certainly launched in Europe. And I think as you look at it, the UK is where we started. We've got other countries, I think, within there that we feel pretty bullish on and are excited to continue expanding our presence there throughout the year.

And on EBITDA, I would say the current philosophy is let's get to scale on volume; profits will come later. As we talked about, at least the starting position will be targeting contribution margin neutral as we look to build that volume base.

Very good. Then just looking at the pipeline of concerts and kind of an improving backdrop, as you mentioned, Live Nation called out some pretty big numbers from a stadium pipeline of 60%. Curious what you guys are seeing and if that's translating specifically in North America? Or how much do you think that may be international versus North America for them? But just any context or color on what you're seeing from early activity for the concert side in stadiums. Thanks.

Yeah. I'd say it's mixed. I think there's been no question that the supply roster looks to be a bit better than what we saw last year. So that's encouraging. But in terms of what it's been driving in terms of volume at the industry level, caveat all this, I'd emphasize that hesitancy when you start zooming into months. But 2025, I'd say, started out with pretty solid double-digit year-over-year concert growth. That's turned neutral to negative in the last six weeks or so. And so you mix that together, and you're sort of roughly flat out of the gate, and probably too early to call what that means for the rest of the year.

Thanks, Larry. Good luck, guys.

Thank you. Our next question comes from Dan Kurnos with the Benchmark Company. Your line is open.

Yeah. Thanks, good morning. I guess, either Stan or Larry, just on the willingness to maintain or compete for market share, a couple of things. The first one would be, are you guys planning on using contra take rate as one of the avenues by which to compete? And would that be applicable to both concerts and sports tickets? And then the second question, and I think this is kind of a broader industry question and one that's really important, Stan, is we know who's doing the competing right now. And I think we've seen peaks and valleys in their share over the last five to six years. You guys have a loyalty program, but if you're going to defend your share, how do you make it sticky? I think that's kind of the view is that people are very mercenary when it comes to price. And so if you're going to make these investments, as you pointed out for long-term growth, how do you ensure that they stay within your ecosystem? Thank you.

Hey, Dan, thanks for the question. I think certainly well-timed and really relevant. I think I'd start with, as you heard in our highlighted remarks, our repeat users continue to perform more strongly than ever. And as a percentage of the total cohort ticking up to an all-time high at 61%, and from a frequency perspective, as we talked about, too just really, really clear delineation in terms of order frequency there. And hence, our continued focus and investment on elements within our ecosystem that drive that engagement and frequency, whether it's the loyalty program, whether it's Game Center, or whether it's Vivid Seats. We feel great about that. I think as you then look at the broader landscape, as you said, there are many who might be competing for short-term volume, and in that regard, caused pressure, I would say, on either the marketing or take rate channels. Certainly, as we described earlier today, our focus is really going to be on continuing to build out an ecosystem of products that engage users in unique ways and then investing and continuing to develop our marketing proficiency and then combating on the channels that we believe will drive long-term stickiness and growth into our platform and ecosystem.

Got it. That's helpful. And I mean, just given where the stock is, guys, and I know you're making investments but buyback at this point?

Yeah. I think it's definitely a core part of our capital allocation strategy, and so it will be top of mind as we move into our open window.

Thank you. Our next question comes from Maria Ripps with Canaccord. Your line is open.

Hey, good morning. Thanks for taking my question. Can you maybe expand a little bit more on your key investment priorities as you look to scale new international markets? Is your focus this year more sort of unbilled in liquidity on the buyer side or seller side of the market? And I guess, any existing relationships that you're able to leverage to help you accelerate sort of new international markets?

Hi, Maria, yeah, thanks for the question. I think last year, as we described, we were first building out the platform and infrastructure to allow us to really start growing and scaling internationally, which I think the team has done a great job on allowing us to really launch into the European markets as we described. Then as you get into it from a marketplace perspective, I think they go hand in hand. We're certainly continuing to ramp up supply within all the markets that we're present in, which we believe will then fuel the flywheel, allowing us to continue to accelerate growth of consumers on the buy side. On the relationship side, I think we continue to be very excited about both leveraging existing sellers within the ecosystem who are expanding their territories as well as developing new and very beneficial relationships with sellers in local markets as well to continue fueling that growth into our international segment.

Got it. And then secondly, how should we think about sort of the expected impact on your business and the industry more broadly from the implementation of the STC new junk fee rule? And I guess, what type of effect on kind of GOV or take rate could we expect?

Got it. Yeah. Look, I think as always, we interpret that as a very favorable consumer and transparency-oriented rule, which we've been very supportive of from the start. We think that a fair and level playing field that benefits consumers is something we're fully in support of and are more than prepared to support that when it should come to pass.

Thank you. Our next question comes from Cameron Mansson-Perrone with Morgan Stanley. Your line is open.

Thanks, good morning. First, on the guidance, a fairly wide range. I was wondering if you could provide some color just in terms of helping us frame the top and bottom end of it, both from a competitive intensity perspective and how that evolves as we move through the year, but then also with regard to how you're framing the macro or consumer expectations for '25. Thanks.

Yeah. Thanks, Cameron. I think you nailed it in the question on the rationale for a wider range. I think given what we saw throughout 2024 in terms of shift in competitive intensity and the need to adjust and adapt wanting to make sure that we have latitude as we see behaviors to properly and appropriately respond as we move through the year. And then I think the second piece, as we've approached today, we've certainly seen the commentary and concerns on consumer outlook. And while we certainly talked about our corner of the world being resilient or resistant, we never said we're immune. And so we're trying to build in some real-time awareness of those growing concerns that we're hearing out of other corners of the economy.

Got it. I have one more question regarding the monetization of Skybox Drive. Could you help us understand the financial opportunity it presents? Specifically, if we were to transition every professional seller on Vivid Seats to Skybox Drive and monetize them, what kind of revenue contribution could we expect? Any insight into this opportunity would be appreciated. Thanks.

Yeah. I would think with the way we set it up, you have to be on Skybox. So the TAM would be Skybox users rather than all professional sellers. But the way the economic model works, all of the volume that seller does, regardless of which marketplace the transaction occurs, would be eligible. And so I think if you were to capture the entirety of that market, I would think of that as a roughly $10 million a year revenue opportunity. I certainly don't think we'll get all of that market, so would discount that. But we've been running with most, if not all, of the costs in the P&L. And so if we're able to start marching towards a meaningful portion of that, that should have some pretty nice contribution from here.

Very helpful. Thanks, guys.

Thank you. Our next question comes from Andrew Marok with Raymond James. Your line is open.

Thanks for taking my question. Maybe one to drill down on marketing, if I could, please. Just kind of taking the midpoint of your guidance ranges, making assumptions for kind of G&A and cost of revenue relatively consistent. Is that meaning that marketing expense could potentially go down on an absolute basis year-over-year?

Yeah. I would think of our kind of baseline expectation is that marketing moves alongside volume. And so barring a deliberate shift to be changing our unit economics, if GOV and volume are up, all else equal, you should expect marketing to move at fairly consistent ratable levels; the inverse also true. But I think part of the range, when you start looking at the bottom line is to build in the flexibility to, for the first time, start shifting off of those basic economics that we pretty rigidly tried to adhere to last year.

Got you. Okay. That's really helpful. And then maybe one really quick on macro. Obviously, I appreciate the commentary on an earlier question about the uncertainty out there. But as you're kind of thinking about where those macro effects may pop up from the demand side. I guess, historically or in your estimation, do you think that live events is kind of like a leading indicator of macro worry, as one of the first purchases that people may be trying to cut out? Or is it maybe a little bit more durable and further down the line in terms of where people choose to pull back in your estimation? Thank you.

I think one of the things we've observed is that the acquisition of Vegas.com has provided us with valuable insights. In previous years, we noted a split in consumer behavior during times of health concerns, where those with less economic stability tend to spend less, while those with more financial security continue to spend. Historically, our core business has been more aligned with the latter group, which has shaped our observations. This sector often reacts slowly, if at all. During the previous consumer concern periods in 2022 and 2023, we didn't see any impact, but the situation in Vegas appears to be different. The Vegas business seems to attract a different type of consumer overall, with many events priced lower than major concerts or significant sporting events. We've noticed some decline in Vegas even before we saw any changes in our main market.

Thank you.

Thank you. Our next question comes from Curtis Nagle with Bank of America. Your line is now open.

Great. Thanks so much for taking the question. One just I guess on the assumption, right, return to growth in the back half of this year. What does that assume in terms of marketing intensity by competitors stay the same, lessen, increase? And then on the point of revenue, I guess growing in the second half, is that just mostly assumed on easier comparisons? It seems like there are a lot of headwinds kind of coming through at the moment.

I agree with several of the points raised. Regarding the assumed marketing intensity, we have discussed that we observed a significant rise during the first quarter of last year, followed by some incremental increases as we progressed through the first half and into the early part of the second half. The new level we experienced in the second half is what we expect to continue. We are not anticipating any easing or another significant jump. Therefore, we are assuming a steady state of competitive marketing intensity, which is considerably higher than what we experienced as we closed 2024. As for the comparisons in the second half, we noted that the competitive landscape has become more intense, meaning the market share required for growth is lower for us. We also highlighted that the third quarter is expected to be particularly weak and exceptional, making it a relatively easy comparison at the industry level for that part of the quarter. Additionally, we mentioned some new partnerships which we anticipate will start to gain momentum as we move into the latter part of the second quarter and throughout the second half, providing additional channels and support in addition to our existing business.

Okay. And then maybe just a follow-up. I guess any help on the cadence and seasonality of revenue by the quarter for '25, again, understanding that whatever growth assumed will be in the second half of the year?

Yes. I want to highlight two points. We've always mentioned that Q4 is usually the strongest quarter, while Q1 through Q3 are generally similar to each other. For guidance, we've indicated around 23% for each of Q1 through Q3, with the remainder typically seen in Q4. However, 2024 deviated from this pattern. Q1 was significantly stronger than usual due to increasing competitive intensity throughout the year, along with some softness in the concerts we observed in Q3. Attempting to predict 2024's seasonality may lead to incorrect assumptions. Instead, we should consider that in the first half, we're facing the impact of increased competitive intensity from the second half of the previous year, while also welcoming new partners. Therefore, for the upcoming year, we anticipate being more back-half loaded due to these new partners, even more so than the typical year, which is already back-half loaded compared to 2024.

Okay, very helpful. thank you.

Thank you. Our next question comes from Jason Bazinet with Citi. Your line is open.

Thanks. I just had a quick question on the marketplace mix by venue. It looks like sports is as a percentage of your total gone down a fair amount and theater has gone up a lot. Concerts down maybe a little bit. Is that merely just a function of the Vegas acquisition, or is this also a function of you trying to dig deeper into areas where maybe the competitive intensity is less acute? Thanks.

Yeah, thanks, Jason. The vast majority of Vegas is theater. And then Wavedash is mostly concert and theater. They have some baseball, but I'd say less sports than we see here in the U.S. And Vegas historically has had almost zero sports going through. So I wouldn't say there's anything meaningful happening on a like-for-like basis in terms of category shifts beyond the macro themes we've talked about, where concerts generally grow over a multi-year period, but sports had a better '24 than concerts.

Thank you. Our next question comes from Thomas Forte with Maxim Group. Your line is open.

Great. So first off, Stan and Larry, congrats on the quarter. So for my first question, there were published reports that you're exploring a sale. Is that something you can comment on?

Yeah, hey, Tom. Look, I think we're always looking at strategic opportunities for the business that are in the best interest of shareholders. We can't really comment on unsubstantiated rumors or speculation, so nothing more to say at this point, but always looking at opportunities for the business.

Thank you for that, Stan. For my second question, could you discuss the free cash flow conversion for '25 and how it compares to historical standards? Also, you mentioned buybacks earlier. What are your current thoughts on strategic mergers and acquisitions?

Yes, thanks, Tom. So I think the cash conversion, as we kind of lived through the bad version of in 2024, if growth gets pressured it will cap the cash generation. So I think it's inherently linked. If we're able to deliver the return to growth that we're outlining here in the second half, I think we would expect cash conversion to revert to historical levels where EBITDA times 60% to 70% is a good assumption. But consistent with the first half second half weighting, I think you would see the same where you'd see more of the cash generation coming in the second half relative to what you would typically anticipate. Yeah, I think we had a nice Q4 cash in terms of cash generation, putting about $40 million incrementally on the balance sheet. So that was a nice way to end the year after a couple more challenging cash generation quarters in Q2 and Q3. And so as we sit here today, I think we feel pretty good about our cash and the flexibility that offers. As it relates to the pillars we've typically said we would pursue, M&A and share repurchases being the two most prevalent. I would sort of reiterate our view that if you have a chance to buy yourself or you have a chance to buy someone else, the multiple and the relative quality of the business will be critical determinants. And we'll see where we continue to trade, but it's hard to articulate the scenario where we're going to find a bunch of targets at multiples lower than where we've been trading. And so I think we're pretty cautious about M&A in the near term.

Thank you, Larry. Thank you, Stan.

Thank you. This concludes today's question-and-answer session and conference call. Thank you for participating. You may now disconnect.