Earnings Call Transcript - SEAT Q2 2023

Operator, Operator

Good morning. And welcome to the Vivid Seats Second Quarter 2023 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.

Kate Africk, Head of Investor Relations

Good morning. And welcome to Vivid Seats second quarter 2023 earnings conference call. I am Kate Africk, Head of Investor Relations at Vivid Seats. Joining me today to discuss Vivid’s results are Stan Chia, Chief Executive Officer; and Larry Fey, Chief Financial Officer. By now, everyone should have access to our second 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 their 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, CEO

Good morning, everyone, and thank you for joining us today. I am excited to share our strong second quarter 2023 results with you. On top of excellent growth and profitability, our investments have continued to drive increased consumer affinity as demonstrated by increasing repeat rates and strong brand sentiment. We have also entered into several accretive and unique strategic partnerships that further differentiate our platform. And just yesterday, we announced our planned expansion into the Asia-Pacific region, entering into a definitive agreement to acquire Wavedash, the leading secondary ticketing marketplace in Japan. I will address each of these exciting developments after walking through highlights from the quarter. Then I will turn it to Larry who will walk through our financials and outlook in more detail. Building on a stellar first quarter, we delivered yet another record quarter in Q2, generating $954 million marketplace GOV, 17% higher year-over-year. We delivered $165 million of revenues and $31 million of adjusted EBITDA, also higher year-over-year. While we continue to invest to strengthen our product and brand to cultivate loyal users on both sides of our marketplace. With outstanding performance in the first half, we are raising our 2023 guidance for the second time. After another quarter of record breaking GOV, it is clear consumers continue to prioritize live event experiences. Demand strength was widespread across categories and performers, but the Taylor Swift Eras Tour, complete with unprecedented demand and fandom, stands out. Furthermore, a number of large tours, such as Aerosmith, were announced outside of the typical window and contributed to additional upside in the quarter. Beyond the robust demand that we are seeing in 2023, secular trends for live events are strong and should provide tailwinds to the industry for years to come. To capture that strength, our strategic marketing campaigns foster targeted brand awareness of our differentiated fan experience that is underpinned by Vivid Seats Rewards, the only rewards program in our industry. This unique and industry-leading platform offers fans more rewards the more they buy, a win-win for our loyal buyers and for us. For frequent live event enthusiasts, rewards accumulate the compelling value that drive them back to Vivid Seats to complete more purchases for tickets to their favorite live events. The value of our loyalty program is so much more than the free 11th ticket. We are truly differentiating the live event experience itself with exclusive perks for our users, like surprise upgrades and unique experiences rewarding fans with even more value. One way we are accomplishing that is through multifaceted partnerships with professional sports teams. Through these partnerships, we craft unique and premium experiences that drive differentiation, while also increasing both targeted brand awareness and brand affinity with high value audiences. Two exciting updates to this strategy focus on Major League Baseball teams. First, Vivid Seats is now the official ticket marketplace of the Los Angeles Dodgers. As part of this partnership, Dodgers fans now have access to the Vivid Seats Speakeasy and Vivid Seats Elite Seats. These newly branded experiential areas are exclusively available on Vivid Seats and will offer fans premium experiences and perks, such as craft cocktails, complimentary food and beverage options, and luxury seating. Second, we are now the official ticket marketplace at the Colorado Rockies. This partnership will feature naming rights to the Vivid Seats club level, offering extensive opportunities to prominently display our brand and elevate the consumer experience for hundreds of thousands of fans each year. Selected Vivid Seats club level fans will also have the once-in-a-lifetime opportunity to throw the first pitch before select games throughout the season. In addition to Major League Baseball teams, we have also expanded our list of National Football League team partners. Joining our existing partnership roster with the Indianapolis Colts, Cleveland Browns, and San Francisco 49ers, we are excited to become the proud partner of the Los Angeles Chargers, enabling fans to access one of the most unique experiences in Southern California sports: the Perch suites at SoFi Stadium, complete with a private DJ and surprise visits from Chargers Legends. Ultimately, we expect team partnerships such as these to be accretive to repeat rates as fans return to Vivid Seats seeking an elevated experience. Lastly, we are excited to now offer fans additional payment options by partnering with PayPal Pay Later starting in September. We look forward to integrating this new partnership as consumers continue to look for more flexibility and as we continue to focus on ways to make it even easier for them to attend their favorite events. As we have discussed, all of our initiatives, whether through strategic partnerships or marketing channels, are designed to cultivate targeted brand awareness and lasting affinity for our platform. Our results show that this is working. Since our loyalty program refresh just two years ago, more and more repeat buyers are getting to their free 11th ticket, a key moment in their loyalty journey. Loyal buyers then repeat on our platform are highly accretive to margins and we are proud to share that our repeat rates reached new highs in Q2. Last quarter, we announced our first free-to-play product available within the Vivid Seats App. The product now branded as Game Center is fully live and fans are showing very strong engagement. With Game Center, users play daily challenges, and winners of these contests are rewarded with free tickets to events or ticket credits for future purchases. Since soft launching our product in mid-June, we are proud to already have accumulated over 70,000 unique players in the first 60 days. Game Center is yet another example of the ways in which we are innovating and differentiating our products, all while rewarding fans and increasing engagement between ticket purchases. Our focus is also on continuing to innovate on behalf of our sellers. Our industry-leading Skybox ERP continues to onboard new sellers and give them access to best-in-class tools and technology. Skybox is already the ERP of choice for the majority of professional sellers and we are excited to further differentiate our platform. Skybox Drive is continuing to ignite excitement as we progress through our beta phase and we are looking to increase the number of beta users as we move towards a full launch later in the year. Next, I will turn to our planned acquisition of Wavedash. We are excited to grow our total addressable market by expanding internationally with a market-leading business. Wavedash is the leader in the Japanese secondary ticketing market with a large and growing customer network supported by robust technology and compliance capabilities. With approximately $35 million of revenue during its last fiscal year ended March 31, 2023 and accretive EBITDA margins, the acquisition of Wavedash is both financially and strategically compelling. We expect to close the transaction in the third quarter, utilizing approximately $61 million of balance sheet cash. We are well equipped with a strong balance sheet and ongoing cash generation that will enable us to seize other accretive and total addressable market expanding opportunities both organically and inorganically. As we expand our footprint internationally, we remain grounded in our core principles, which are to drive strong growth, strong profitability, and strong cash flow while cultivating loyalty in our marketplace and innovating to be on the forefront of what’s next. Another recent example of this innovation is the launch of the first live events plug-in for OpenAI’s ChatGPT, which we announced just last month. An industry first, this plug-in makes event discovery more exciting, easier, and faster. After fans have all their live event questions answered by the chatbot, this generative AI shopping experience links to our website for ticket purchase. To conclude, Q2 2023 was an exciting quarter for Vivid Seats with strong financial results stacked with strategic partnerships and investments that further differentiate our marketplace and support continued momentum for our business. With that, I will turn it over to Larry.

Larry Fey, CFO

Thanks, Stan. Our second quarter 2023 marketplace GOV of $954 million increased 17% year-over-year, with total marketplace orders increasing 9% year-over-year and average order size increasing 7%. Our second quarter marketplace GOV reflects a robust event calendar and continued strength in PAM demand. We saw particular strength in the concert category, led by Taylor Swift’s U.S. Eras Tour, supporting double-digit growth against a record Q2 2022. Our second quarter 2023 revenues of $165 million increased 12% year-over-year, driven by marketplace GOV growth. Our Q2 take rate was 14.6%, below historical levels due to an increase in loyalty accruals, coupled with select strategic pricing decisions. As we go forward, Wavedash brings a lower take rate than Vivid Seats and we, therefore, expect our take rate to be roughly 15.5%. We generated $31 million of adjusted EBITDA in the second quarter, converting GOV to solid profitability despite a lower than normal take rate. We continue to see attractive marketing returns and are investing in accretive channels, such as incremental partnerships and influencer campaigns. Our cash balance of $306 million exceeded our debt principal outstanding by $35 million at quarter end. Our planned acquisition of Wavedash will utilize approximately $61 million of cash and is a clear example of the strategic opportunities we are able to pursue as a result of our strong balance sheet and cash flow profile. Turning to our updated outlook for 2023. We are raising our guidance to account for strong performance in the first half of the year, while including an estimated four months of contribution from Wavedash. We now anticipate 2023 marketplace GOV in the range of $3.4 billion to $3.6 billion, revenues in the range of $630 million to $650 million and adjusted EBITDA in the range of $125 million to $135 million. We expect our 2023 results will be more first-half-weighted than normal due to significant contribution in the first half from Taylor Swift. It is abnormal for a single tour or event to move the needle for our full-year results, but the Eras Tour has proven to be a positive outlier. With continued industry strength and encouraging results from our marketing efforts, we are leaning into select additional brand investments that we believe can drive compelling long-term returns. This includes our recently announced strategic partnerships, along with an increasing use of influencers to share our differentiated value proposition to high-value customers. We believe these channels will drive incremental customers while supporting repeat rates. Accordingly, additional marketing investment is reflected in our adjusted EBITDA guidance. We originally anticipated a digestion year for the industry with flat GOV and adjusted EBITDA in 2023. This view has proven overly conservative as widespread strength in live event supply and demand has continued such that we now expect double-digit growth in GOV and adjusted EBITDA once again. To wrap, it was another strong quarter and an excellent first half. We are excited to integrate Wavedash and complement our differentiated, growing, and highly profitable business. Back to you, Stan.

Stan Chia, CEO

Thanks, Larry. I am proud of the strong results that our team continues to deliver. Our team’s innovation and efforts to build valuable and differentiated products have continued to drive long-term stickiness on both sides of our marketplace, with higher buyer repeat rates and continuing seller Skybox adoption. Our disciplined execution has driven robust growth, profitability, and cash flow, enabling us to pursue accretive opportunities such as Wavedash, and ultimately drive long-term shareholder returns. With that, Operator, let’s open it up for questions.

Operator, Operator

Thank you. Our first question comes from Ralph Schackart with William Blair. Your line is now open.

Ralph Schackart, Analyst

Good morning. Thanks for taking the question. First question, just on Wavedash, maybe provide some perspective, if you could please, on the overall total addressable market opportunity, maybe what attracted you to the Japanese market, and is this your first international expansion opportunity that may broaden out going forward?

Stan Chia, CEO

Hey. Good morning, Ralph. Thanks for the question. Yeah. Again, I think we have always been looking at the landscape for favorable opportunities for expansion in total addressable market growth, and as we have been looking, I think the appeal and the strength of the asset in Wavedash was really favorable against what we were assessing, being able to enter a market with an industry leader, both profitable, as well as strong in terms of share there. I think was an excellent way for us to look to begin some of our international efforts where we can learn where the backdrop is favorable, and so I think as we continue to look, I think our strong balance sheet is going to allow us to be aggressive when we find opportunities such as Wavedash in the future.

Ralph Schackart, Analyst

Perfect, Stan. Maybe just a follow-up. Can you just speak to the competitive environment, how that trended during the quarter and sort of Vivid Seats positioning within the competitive dynamic? Thank you.

Stan Chia, CEO

Sure. Look, I think we have continued to see stable but strong competitive pressure, and really, what we are focused on is the innovation that we drive in the platform, whether that’s through our loyalty program, which continues to yield results in really high repeat rates, whether that’s in our engagement platform, the combination of Vivid Seats, as well as now Game Center driving over 70,000 new users in the first 60 days. We think we have got a lot of great innovation driving long-term value in the platform and I think really what you are going to see us do is continue to focus on that. As we announced, I think, during this call also, we have got a lot of great experiential partnerships that we have launched with the Chargers, with the Dodgers, with the Rockies that we believe are real differentiators in both the short and long term.

Operator, Operator

One moment for our next question. Our next question comes from the line of Curt Nagle, Bank of America. Your line is now open.

Curt Nagle, Analyst

Good morning. Thank you for the question. I guess my first question is why not increase the outlook for the second half of the year a bit more? We’ve had two very strong quarters and we've experienced four months of Wavedash. I understand that you tend to be conservative, but it seems like there’s no sign of demand slowing down. Live Nation appears to have a more positive outlook for the next couple of years. So aside from basic conservatism, what factors are influencing the outlook and why not consider a larger increase?

Larry Fey, CFO

Yeah. Hey, Curt. So I think we have tried to reflect what we believe is continued healthy outlook for the balance of the year. Certainly, as we move forward through the quarters, we have increasing visibility on the balance of the year, particularly the concert calendar. And so that all resets as we shift into the next year and wait for the Q4 on sales. But I’d say, in particular, I think what drove some unique weighting this year is the Taylor Swift. I think we would generally say no single event, no single performer will have a demonstrable or meaningful impact on our aggregate results. I don’t think that would be true for this year. I think you can just feel the phenomenon that it was, right? When you see the videos and the excitement and the passion from her fans, it was just an outlier. And that tour ends this week or next week with our last shows in the state for this year in L.A. And so essentially, we are assuming that without Taylor Swift in the numbers, there’s a bit of a gap to fill and that balances out. Not to say that it’s not plausible that there’s more opportunity, but we wanted to make sure that we reflected that there’s only one Taylor Swift and she will not be performing in the back half of the year.

Curt Nagle, Analyst

Okay. Fair enough. And then just as a quick follow-up, Larry, just take rate. So I understand drivers for this quarter. I think you said the go-forward rate of 15.5%, would that be a reasonable rate for 3Q and 4Q?

Larry Fey, CFO

I think that’s a good number going forward. However, we are not extremely precise, so you will see some fluctuations, but I believe over time, that’s a solid midpoint for us to aim for.

Operator, Operator

One moment for our next question. Our next question comes from Cameron Mansson-Perrone with Morgan Stanley. Your line is now open.

Cameron Mansson-Perrone, Analyst

Thanks for taking the questions. I have one regarding the resale business. I assume that the strong growth in the second quarter is partly due to Taylor Swift. What are your expectations for the resale business in the second half of the year? Additionally, concerning the TRA liability, the quarterly report indicates that payments are expected to begin in 2025. Can you clarify whether this will be a single lump payment or multiple payments? How should we approach modeling this for now? Thank you.

Stan Chia, CEO

Hey, Cameron. It’s Stan. I will take the first one and then pass to Larry for the TRA. But Cameron, as we have always talked about, resale is a great R&D center for us. I wouldn’t really expect anything different than what we put forth there. Where you see the fluctuations in the quarter. I think they represent more fluctuations in the industry versus anything else. So I wouldn’t read anything more than that’s just industry strength into what you are seeing in the first half of the year.

Larry Fey, CFO

And then on the TRA, at the risk of restating things that already are known, the amount that we will owe and thus the amount on our balance sheet is reflective of amounts that we are not paying in federal income tax. Instead, we are taking those savings, sharing them with our TRA holders, and then we retain 15% of that benefit. An incremental quirk in them is that there is a year delay, and so I would think of the cash outflows as generally being a year after the payment obligation is generated. And so we will have rolling quarterly tax obligations, and then you will have rolling a year later, the money actually going out the door.

Operator, Operator

One moment for our next question. Our next question comes from the line of Stephen Ju with Credit Suisse. Your line is now open.

Stephen Ju, Analyst

Great. Thank you. So, Stan, just a follow-up question on Wavedash. It does look like it has multiple businesses outside tickets. So maybe it’s early to comment on here, but what do you think you will do with the things that are probably a bit more distant from your core ticketing business? And secondarily, what can you tell us about the Japanese market environment that’s different or the same as the one here in the United States? Thank you.

Stan Chia, CEO

Thank you for your question, Stephen. We are genuinely excited about our core business and are actively exploring ways to expand it internationally and learn from that experience. Wavedash has been a particularly exciting opportunity for us. While we are focusing on the ticketing side, we are eager to learn about other aspects of the business. Our main priority will be on strengths that are central to our operations and finding ways to apply those insights in new markets and vice versa as we gain more experience. Regarding the Japanese market, we are also very enthusiastic. Live events are thriving globally, and Japan is no exception. We see a favorable environment where we can partner with a market leader, which could serve as a springboard for exploring other markets while we refine our knowledge and processes to grow as an international organization.

Larry Fey, CFO

And Stephen, just to add two small things. One, the other businesses, the three of them sum up to about 10% of the company’s revenue. So the vast majority is the core ticketing business. So we are very excited about that alignment. The other difference I might call out between the North American and Japanese market is that sports are just a little bit less popular over there. I think North America in many ways is the global leader in terms of our passion for sports, the number of professional sports. So you will see a slightly heavier concert teeter weighting in that market than you will see here.

Operator, Operator

One moment for our next question. Our next question comes from the line of Maria Ripps with Canaccord. Your line is now open.

Maria Ripps, Analyst

Great. Good morning. Thanks for taking my questions. First on Wavedash, how should investors interpret this acquisition as it relates to your appetite for further international expansion? And what are your thoughts on any potential synergies here? Is it fair to assume that those are likely to be on the back end on the expense side or any color you can share on that?

Stan Chia, CEO

Yeah. Hi, Maria. I think the right thing for folks to interpret is, certainly, we are always going to be on the lookout for ways to expand. And as we have looked at Wavedash, I think, again, we found a great opportunity for us to launch internationally with an asset that is accretive and profitable. And so I think as we look at the broader landscape, anytime we find a favorable backdrop where I think we can either move in organically or inorganically with strength, I think we are going to do that. I think on the synergies question, I think we are certainly excited to continue to learn more as we move towards closing the deal. But certainly, you can expect us to be managing for both where we see front-end and back-end opportunities. I think we are at the forefront, certainly, of all the AI opportunity that’s there. I think embedded in much that we do is already, what I would say, a lot of advanced data science and algorithms powering some of our proprietary marketing in particular. I think we are always excited to be on the forefront, whether that’s in our partnership with OpenAI and ChatGPT, whether that’s in looking at new opportunities to self-develop AI on the marketing side. But I think we are early days there, if we have anything to share, we will be happy to. We continue to look for ways to be really efficient and aggressive on the marketing front as well.

Larry Fey, CFO

On the competitive front, I believe the level of competition is stable. Compared to what we might consider peak competition, particularly around the third quarter of last year when one or two competitors strayed from the norm, things have returned to a more typical range. I consider this a stable situation among the larger players in the market. However, there is still a significant question about whether this stability can last for those companies that have yet to achieve profitability and continue to struggle after many years in operation. This might suggest a potentially unsustainable business model.

Maria Ripps, Analyst

Great. Thanks so much for the color.

Operator, Operator

One moment for our next question. Our next question comes from Brad Erickson with RBC. Your line is now open.

Logan Reich, Analyst

Hey. Good morning. This is Logan on for Brad. Thanks for taking the question. Last quarter, on the full-year guide, I think you guys had mentioned you were baking in some sort of a macro slowdown for the full year. Just given what you guys have seen this past quarter. I just wanted to see if there’s any update to your thinking there for the full year. And then, additionally, just given where competitive pressures are in the advertising side and to your comment of maybe on sustainable levels, any expectation to those normalizing further in the back half of the year? Thanks.

Larry Fey, CFO

I believe that two factors have influenced our outlook for the remainder of the year. Firstly, after 15 months and having clarity over seven months, we can reduce speculation. Secondly, it's fair to say the overall macroeconomic sentiment has improved since the start of the year, with more discussions around a soft landing rather than a hard landing. While we don't aim to be precise macroeconomists, we feel confident in our guidance for a stable outlook for the rest of the year. We do not anticipate a rapid downturn. As we prepare for our 2024 outlook, we'll keep monitoring market sentiment. Current sentiment shows some concerns about a potential slowdown, but that anxiety seems to be easing. Regarding competition, I don't expect significant changes in the latter half of the year compared to what we witnessed in the first and second quarters. While it's possible that competitors may adjust their strategies for reasons we cannot predict, we have not identified any obvious shifts since the end of the quarter or any clear reasons to expect changes soon.

Logan Reich, Analyst

Okay. Thanks.

Operator, Operator

One moment for our next question. Our next question comes from the line of Thomas Forte of D.A. Davidson. Your line is now open.

Thomas Forte, Analyst

Great. So, Stan and Larry, congrats on the quarter. Just one question for me. So with Wavedash representing your first international foray, can you talk about the international total addressable market and compare it to the drastic growth rate for the secondary market inside and outside the U.S.?

Larry Fey, CFO

Yeah. I think, in aggregate, we would estimate that the total international ticketing market roughly approximates the North American ticketing market, maybe a little bit smaller in aggregate. Obviously, you need to then decompose into individual countries that will have each of their own cultural considerations. So I don’t think it’s quite as simple as entering the U.S. and you need to double your addressable market. It will be a bit more piecemeal. But overall, I would think that we view the growth rates as similar, perhaps slightly positive as you contemplate that international has a slightly heavier concert and theater weight. I think Japan is somewhat reflective of a number of countries where the North American weighting on sports is just going to be heavier than others, and as we pointed out, I think, stronger growth in concerts and sports that can be a slight tailwind for the overall international opportunity.

Operator, Operator

One moment for our next question. Our next question comes from the line of Matt Farrell of Piper Sandler. Your line is now open.

Matt Farrell, Analyst

Thanks, guys. My first one is just on the impact of the student loan repayments coming back up in Q4. I guess how are you thinking about that as an impact of the guide and maybe just thinking a little bit beyond just this year? Do you see that as maybe a headwind for consumers willing to spend broadly on live events in 2024?

Stan Chia, CEO

Hey, Matt. I think we continue to see the resilience in consumer demand, especially considering the macroeconomic backdrop. We will keep an eye on how that trends and adjust accordingly, but we certainly haven’t observed anything that would lead us to reconsider that perspective.

Matt Farrell, Analyst

And then maybe for my second question, how has Vivid Picks been performing over the last couple of months and how should we be thinking about engagement trends as we head into the football season, which tends to be a heavier DFS time of year? Thanks.

Stan Chia, CEO

We are excited about the platform. We continue to see user growth on Vivid Picks month-over-month, with high double-digit daily growth in our active users and entries per month. This shows strong engagement. Equally exciting is our plan to integrate this engine into our game center platform. Across our app ecosystem, we now have various ways to engage consumers, and we are experiencing increasing engagement and user acquisition through these channels, leading us to be very optimistic about their long-term value to the business.

Operator, Operator

One moment for our next question. Our next question comes from the line of Andrew Marok from Raymond James. Your line is now open.

Andrew Marok, Analyst

Thanks for taking my questions. Given that the thought was for a digestion year in 2023 originally and that ended up proving conservative, does that expectation move out to 2024, or does that take the prospect for digestion maybe off the table or reduce its impact a little bit, obviously, being cognizant that you are not formally guiding for 2024 at this point?

Larry Fey, CFO

Yeah. Thanks, Andrew. Yeah. As you noted, I think, the benefit of hindsight, the digestion premise and the concern around pent-up demand or event spending proved overly conservative, much to our pleasant surprise. As we look forward to next year, I think, we have no reason to believe that our general long-term growth trajectory for the industry wouldn’t hold with perhaps the exception this year of the aforementioned Taylor Swift benefit this year, which fortunately, we are happy to report we will have some recurring benefit next year since she announced some shows. But certainly a smaller footprint than she had this year. So it will be a net reduction and given the size of that tour, I think, that will be perhaps a slight headwind relative to otherwise what feels like a really strong secular trend. And consistent with past practice, we look to Live Nation commentary. I think they have the best insight on that forward calendar, and we continue to hear steady consistent bullish commentary that this is a secular and not a transient trend.

Andrew Marok, Analyst

Got it. So Taylor helped you shake it off. Understood.

Stan Chia, CEO

Yeah.

Andrew Marok, Analyst

For a follow-up with the Japanese expansion, not to be to what have you done for me lately. But looking into other specific markets lately, would you highlight some that are maybe better opportunities for the secondary side of ticketing and some that are maybe a little bit more constrained? I am thinking of countries or sports leagues like the Premier League, where secondary ticketing isn’t really that big of a thing for them.

Stan Chia, CEO

Sure, Andrew. It's Stan. When we consider international opportunities, I believe we have great potential ahead of us. Instead of pinpointing specific markets, our focus will be on finding those with a favorable regulatory environment and strong supply and demand dynamics. We will also look for opportunities to expand both organically and through acquisitions. As we explore various global markets, we will continue to identify those that align with our criteria. We are confident that our balance sheet and platform will enable us to act on both organic and inorganic opportunities as they come up.

Operator, Operator

One moment for our next question. Our next question comes from the line of Dan Kurnos of Benchmark Company. Your line is now open.

Dan Kurnos, Analyst

Great. Thanks. Good morning. Nice quarter, guys, obviously. Maybe, Stan, just going back to the marketing mix question. Our checks suggest that most of the take rate pressures came from the sports side, not concert and you have announced obviously more strategic partnerships with sports teams. And I think the overall marketing spend was maybe a little bit less than we anticipated in the quarter. So can you just talk about your desire to continue to differentiate or maybe spend on more take rate or promotional activity rather than pure brand spend or even performance-based spend in the marketplace given what’s going on with the competitive environment?

Stan Chia, CEO

Yeah. Sure. Hey, Dan. Yeah. I think we are excited to have found, I think, great opportunities on the partnership front. I think, I will frame for maybe reference. I think we have always looked at perhaps just raw brand spend as being a difficult thing to measure and drive value on. So I think we have always looked at how do we drive targeting towards high-value audiences, as well as investments that will yield differentiated experiences for our consumers. So both in our digital mix as you look at what we do there. I think we continue to be intelligently programmatically buying towards high-value audiences. And then on the partnership side, I think especially the ones that we have announced today, when you look at whether it’s the Dodgers with the Vivid Seats Speakeasy, custom drinks, food, and drinks acquired or our special section with the Chargers, which will go in this football season, where we have got unique areas with a DJ playing where, again, that’s fully branded and only accessible on Vivid Seats. I think those are areas where we look at the opportunity to invest is really differentiating on the platform, one that we think has long-term viability and staying power, and that’s really what’s guiding our hands on our investments towards the marketing frontier.

Dan Kurnos, Analyst

How do you evaluate the economics of those deals, and do you notice any fan-to-fan interactions in those arrangements?

Stan Chia, CEO

I got it. Yeah. I think on the horizon, I think, as with everything, I think we only look at deals that we believe have long-term value to us over the period of a customer’s life cycle. When we look at some of those partnership investments, certainly, I think the horizon is going to be longer than when we look at more of the immediate customer acquisition performance marketing elements. But certainly, we don’t have an infinite horizon and we are quite judicious in terms of how we assess goodness. When we look at the fan-to-fan inside, I think, we are certainly excited about the prospects of potentially broadening that component of our business as we look at partnership with teams that will certainly drive that. I think to the extent how much they drive it is what we will assess through the course of this period, but I think we are certainly excited about the prospects and the ability of growing that in partnership with the teams that we are working with.

Operator, Operator

One moment for our next question. Our next question comes from the line of Jason Bazinet with Citi. Your line is now open.

Jason Bazinet, Analyst

I just had a quick question on the loyalty program. Maybe this is a question for Larry. What counsel would you give the investment community in terms of metrics that they should focus on or analyze to assess the traction that you guys are getting on the loyalty program?

Larry Fey, CFO

Yeah. Certainly, on an annual basis, I think the most helpful, albeit on an annual cadence, will be that continued hopeful shift towards repeat orders. So we talked about the improvements from high 40s to 56% of orders coming from repeat customers. I think we expect that number to continue to move up over time, and the magnitude of that increase will be reflective of the traction we are getting with folks coming into our ecosystem and staying in our ecosystem. Yeah, I think, if you were to take a slightly longer time horizon, ultimately, we think that shift is what drives the operating leverage and the long-term return on the brand marketing and loyalty investments that we have made. Would you start to get more precise than that?

Jason Bazinet, Analyst

Yeah.

Larry Fey, CFO

Okay. Sorry. Go ahead.

Jason Bazinet, Analyst

Yeah. No. No. Go ahead.

Larry Fey, CFO

Okay. Sorry. As we start thinking about being more precise, there are other metrics that we look at internally. I’d say none of them are perfect, right? Because it’s very difficult to understand with precision. Person repeat because of our loyalty or because of our improved engagement from Vivid Picks or because of the better experience from the partnerships or better awareness from our high-value audience targeting. We will never really know, so it tends to be an aggregate impact. But we are generally looking to substantiate the ROI from the loyalty program on repeat rate alone, and any other benefit would be ready and we feel like we are trending well in that regard.

Operator, Operator

I am showing no further questions at this time. Thank you all for your participation in today’s conference. This does conclude the program. You may now disconnect.