SEAT - NASDAQ

Good morning, and welcome to the Vivid Seats' First 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 Copouls.

Good morning, and welcome to Vivid Seats' First Quarter 2023 Earnings Conference Call. I'm Kate Copouls, Head of Investor Relations at Vivid Seats. Joining me today to discuss Vivid Seats' results are Stan Chia, Chief Executive Officer; and Larry Fey, Chief Financial Officer. By now, everyone should have access to our first quarter earnings press release, which we released earlier this morning. We have also provided supplemental earnings slides. The press release and earnings slides are available on the Investor Relations page of Vivid Seats' website at investors.vividseats.com. During the course of this call, management may make forward-looking statements within the meaning of Federal Securities Laws. These forward-looking statements are subject to the risks and uncertainties as 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 measure in the earnings press release, supplemental earnings slides, and SEC filings. And now I would like to turn the call over to Stan.

Good morning, everyone and thank you for joining us today. I'm thrilled to share our exceptional first quarter 2023 results with you. As always, we prioritize initiatives that generate long-term value and stickiness in our marketplace, and I'm excited to report on our progress. Our first quarter financial results speak to our ability to relentlessly drive incremental efficiency and simultaneously invest in competitive product differentiation. To begin with, I'll walk through our financial and strategic highlights from the quarter before turning it to Larry to take you through our financial results in more detail and to discuss our updated outlook for 2023. We set out strong in 2023 and I'm proud to report we generated $856 million of marketplace GOV, $161 million of revenues, and $42 million of adjusted EBITDA in the first quarter. We delivered double-digit growth for marketplace GOV and revenues and doubled adjusted EBITDA despite a highly competitive ticketing environment. Thanks to a strong March, we quickly exceeded expectations set during our Q4 call, and we are accordingly raising our 2023 marketplace GOV revenue and adjusted EBITDA guidance. The live event environment in the first quarter 2023 was robust due to a combination of exciting event supply and exuberant fan demand. Consumers continue to crave live experiences in the first quarter, and we believe this trend will continue for many years. Consumers were eager to secure their seats for concert headliners like Drake and Beyoncé, and for sporting events such as the World Baseball Classic and NCAA Women's Basketball Final 4. The Women's Final 4 was the latest data point supporting an exciting trend of outsized growth across women's sports as a category that we believe will continue for decades to come. While consumers are seeking their favorite live events, our marketing campaigns are focused on ensuring fans are aware of our differentiated experience, underpinned by our unique Vivid Seats Rewards program. Vivid Seats Rewards aligns us with fans by offering more rewards the more they buy. In addition to ticket savings, our loyalty program includes a host of other benefits ranging from surprise upgrades to exclusive game day experiences. Our buyer experience and engagement efforts, starting with our loyalty program, are designed to cultivate brand awareness and lasting affinity for our platform. Engagement during and between live events is crucial in our relatively low-frequency category, and we are seeing continued improvement as we invest in both marketing and product vehicles to drive engagement. With marketing efforts, whether at an on-site event or through our growing social presence, our buyers are engaging with us more than ever before. In social, we lead the competition with the highest positive sentiment, and we have been rapidly growing our social following. Our social engagement has grown 50 times since we began our initiatives in earnest and nearly doubled quarter-over-quarter in Q1. We continue to innovate and differentiate our product-focused engagement efforts to buyers and are excited to announce our first free-to-play product available directly within the Vivid Seats app, fully powered by Vivid Picks. Launching in May, users will be able to play daily challenges with a chance to win free tickets. We're thrilled to get this product off the ground and offer another compelling engagement opportunity for our buyers within our app experience. On the seller side, SkyBox Drive, our new automated pricing product that leverages our powerful marketplace data, continues to progress and has moved into its beta phase. We are incorporating feedback as we march towards an exciting launch in the latter half of the year. Our leading products are the result of consistent investments focused on driving long-term stickiness on both sides of our marketplace. Our install base of sellers on SkyBox already includes more than 50% of professional sellers. On the buyer side, we continue to grow by adding new buyers and driving accretive repeat order activity. In tandem with our investments in loyalty and differentiated buyer experience, the portion of repeat orders placed on Vivid Seats increased to 56% in 2022 from 47% in 2018. We know our buyers better than ever before and offer personalized recommendations and campaigns. Even with our repeat rates trending higher across categories, there is still room to grow as we drive repeat behavior among passionate sports and music fans. At the same time, we will continue to attract cohorts of new buyers onto our platform, creating an ever-growing network to nurture for repeat purchases that provide a tailwind for our margins. Our strategic and operating principles are grounded in driving profitable growth. Our approach has always been to execute with disciplined rigor and maniacal testing such that we continue to attract new buyers while increasing repeat rates through a consistent focus on things we can control. Raising and consuming capital to drive unsustainable volume is a strategy that does not endure. Sustained gains stem from differentiated products, service and value, and that is where we invest and excel. To conclude, we made important strategic progress this quarter and delivered healthy growth, profitability, and cash flow. We continued to strengthen our product and market position, while our strong balance sheet serves as a substantial asset that we are ready to deploy to continue our track record of outpacing industry growth. With that, I will turn it over to Larry.

Thanks, Dan. We kicked off 2023 with an exceptional first quarter and are raising our marketplace GOV, revenues and adjusted EBITDA guidance to account for our results to date. I'll discuss the first quarter in detail before turning to our updated outlook for 2023. Our first quarter 2023 marketplace GOV of $856 million increased 15% year-over-year, driven by a 13% increase in total marketplace orders and a 2% increase in average order size. Our strong GOV growth reflects a robust live event calendar, particularly in March, coupled with a relatively easy Q1 2022 comp due to the negative impact the Omicron variant had on demand in Q1 of last year. MLB opening day, a marquee event that garners significant GOV, shifted back into the first quarter this year. We also saw unprecedented demand for the World Baseball Classic and top artist on-sale activity, including Drake and Beyoncé. Our first quarter 2023 revenues of $161 million increased 23% year-over-year, driven by marketplace GOV growth and an improvement in take rate. Our take rate, calculated by dividing marketplace revenues by marketplace GOV was 16.0% in Q1 2023 compared to an unusually low 14.9% in Q1 2022 due to the MLB lockout and several prominent concert tour cancellations. Cancellations represented 1.4% of pre-canceled GOV in Q1 2023, which is down considerably from 4.5% in Q1 2022. This decline in cancellations provided several hundred basis points of year-over-year revenue growth. Our first quarter 2023 adjusted EBITDA of $42 million doubled year-over-year, driven by a combination of top line growth and margin expansion. Margins benefited from improved marketing efficiency, which we achieved despite continuing intensity in the competitive environment as we continually seek pockets of improvement. First quarter adjusted EBITDA margins also benefited from the cadence of certain brand-related marketing investments, along with tailwinds from changes to our loyalty program. In aggregate, marketing timing and loyalty changes benefited adjusted EBITDA by approximately $8 million in the first quarter. Accordingly, Q1 adjusted EBITDA margins were especially strong and will result in the first quarter likely representing an outsized portion of full-year EBITDA relative to a typical year. Non-recurring benefits aside, we are encouraged by our continued underlying progress towards our long-term EBITDA margin targets as we profitably captured underlying industry growth. Cash flow was also strong in the first quarter. We generated $65 million in cash from operations and expect 2023 EBITDA to cash flow conversion to approach historical levels. Our cash balance of $303 million exceeded our debt principal outstanding by $31 million at quarter-end. Our cash balance also reflects $8 million of share repurchases completed during Q1 as we fully utilized the remainder of our $40 million repurchase authorization during the quarter. Turning to our updated outlook, we are raising our guidance for each of marketplace GOV, revenues, and adjusted EBITDA to account for a tremendous start to 2023. We now anticipate 2023 marketplace GOV in the range of $3.15 billion to $3.40 billion; revenues in the range of $605 million to $630 million, and adjusted EBITDA in the range of $115 million to $130 million. Our updated outlook contemplates continued intensity across the competitive landscape coupled with awareness of a potentially weakening macroeconomic environment, although we have yet to see any weakening in demand for live events. Our 2023 outlook also reflects more challenging comps in Q2 and Q3 as we lap the periods that benefited from the occurrence of previously postponed concerts. We have multiple paths to accelerate our trajectory and build long-term value. We see a vibrant long-term growth outlook for live events, and we are very well-positioned with our sizable cash balance, ongoing cash generation, loyal user base of buyers and sellers and superior product and data. We have the balance sheet and internal capabilities to seize upon synergistic opportunities in ticketing or adjacent TAM-enhancing areas that leverage our technology platform and ecosystem of buyers, sellers and partners. We also continue to evaluate all available opportunities to optimize our capital structure to drive long-term shareholder returns. To wrap, it was an exceptional quarter for growth, profitability and cash flow. The live event industry continues to see robust demand, and our team is delivering consistent outperformance, which serves as a testament to our ability to win in the long-term. Back to you, Stan.

Thanks, Larry. It was a truly exciting quarter and start to 2023. I'm proud of what our team delivered and excited about what we can accomplish as the live event ticketing environment evolves and we continue to drive long-term value at Vivid Seats. In addition to our exceptional financial results, I would like to highlight that we recently published our inaugural Environmental, Social and Governance update. Our 2023 ESG fact sheet outlines key initiatives, including our commitment to environmental sustainability, our dedication to diversity, our investments in our communities, and our responsibility to safety and security. We are committed to ethical decision-making across the organization, and we are proud of our combined majority diverse leadership team and Board. We also recently celebrated World Wish Day with our partner, Make-A-Wish, who we have been working with to grant life-changing wishes, sending children and their families to events like the NCAA College Football Championship, The Daytona 500 and the NCAA College Basketball Final 4. As a newly public company, we look forward to continuing to make positive contributions to our communities while also delivering strong financial results. With that, operator, let's open it up for questions.

[Operator Instructions]. Our first question will come from the line of Jason Bazinet from Citi. Your line is open.

Thanks. I just had two quick questions. I was wondering if you could just talk about the increase in repeat orders and talk about what's driving it and how we should think about margin implications if that continues to improve? And then second, this is a little bit of a strange question since you raised your guidance, but can you just talk a little bit about the deferred revenue balance that I think sort of ticked down sequentially and is that meaningful at all in the context of future revenue growth?

Good morning Jason, it's Stan. Yes, look, I think we've been really thoughtful and I think deliberate about our investments with respect to engagement and ensuring that our product is differentiated in a way that drives users to engage more with us. And we're seeing a lot of that fruit start to pay off as we talked about repeat rates being higher. And I think, since we've started these investments in 2018, an almost 1,000 basis point shift in order mix to repeat buyers. So we're seeing a lot of that goodness. We're pretty excited about that, and we continue to invest in areas that drive that engagement, such as our free-to-play product that's launching later this month. When you look at margins, right, I think we've always talked about the ability for us to drive incremental margin leverage and certainly through our repeat buyers, that is one element where we are significantly more profitable on a repeat buyer versus a new buyer despite the fact that we are first transaction-profitable on new buyers. So I think we continue to invest in all those things. We think, as we continue to increase our product, we expect to continue driving increased engagement with consumers that we think will play out in our long-term story here. And with that, I'll punt it to Larry can talk through the margin profile, as well.

Yes. And quickly, on the repeat orders, this is a metric that we'll provide, going forward, on an annual basis because we think there's continued room to run for the foreseeable future. And we'll continue to see nice mix shift as we have more cohort aging and the improvement of each of those cohorts as we focus on our buyer experience continues to grow. On the deferred revenue balance, that primarily reflects our loyalty accruals. And so there was a quick note in the prepared remarks around continued refinement of our estimates on what utilization will be on the loyalty program. And so you'll generally see that number being pretty stable. But as those estimates continue to mature as we get more data, since we're still pretty early in the overall program maturation phase, that was really the rebalancing.

Okay, that’s great. Thank you.

One moment for your next question. Our next question will come from the line of Ralph Schackart from William Blair. Your line is open.

Good morning and thanks for taking the question. Can you talk about some of the marketing efficiencies you saw in Q1, Larry, I think you talked about $8 million in benefits despite a tough competitive environment, so maybe a little bit more color on that and expectations, going forward? And then just to sort of bolt on to that, in the letter you talked about the timing of certain marketing investments, can you also provide a little bit on that? And then I have a follow-up.

Yes. I inverted it a little bit, Ralph. The $8 million in the commentary, I characterize that as the element that was more timing, with the balance of outperformance being more of the sustainable efficiency. On the sustainable efficiency, I think we've acknowledged that we're in a pretty intense competitive environment, but that fact doesn't exempt us from continuing to drive efficiency as we've always done. And I think this quarter was a good example of that, where we saw, particularly in the performance marketing realm, some pockets of opportunity to continue to refine and drive efficiency. It's pretty granular in detail when you take apart how we got there and a little bit of secret sauce, but I think it's sort of endemic to who we are that we'll continue finding those pockets, that there definitely is a meaningful portion of this that we believe is a sustainable efficiency that we drove.

Great. And just one more, if I could. Just on the competitive environment, can you maybe just provide an update, I guess what you saw this quarter, the trends on competition and maybe how that may have compared to the previous quarter? Thank you.

Hi Ralph, it's Stan. I think when we look at it, that's one of the pieces that we think is an important distinction. I don't think we've seen a lessening of competitive activity. If anything, I'd say the space, as we continue to see consumer resiliency, has become more competitive. So I think it's a testament to some of our efforts here and our ability to continue to drive efficiency even in that environment. I think this is just when you look at the advantages we have with our first-party data, with the ability to drive marketing algorithms, combined with all of the infrastructure, our SkyBox platform, our engagement engine, all of these things firing together such that, even in a heightened competitive environment, we are still able to drive, I think, earnings and profit in a really efficient manner.

Great, thanks Stan, thanks Larry.

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

Great. Thanks so much for taking my questions and congrats on strong results. First, can you maybe share a little bit more color on macro environment and consumer discretionary spend, any notable changes in consumer purchase behavior that you would highlight? And as ticket prices sort of stay elevated, are you seeing sort of consumers trading down to less expensive events? And then I have a quick follow-up.

Yes, I'd say no change observed, consistent with prior quarters. I think we continue to acknowledge that there's a lot of chatter and concern out there, that that will change in the not-distant future, but it continues to be the case that we're seeing very robust demand across our event categories, across price points. I think we continue to see average order size increasing broadly in line with historical levels. On top of that, I'd say, if anything, we've been pleasantly surprised by the supply calendar. There's a little bit of a disconnect, I'd say, between our tone on industry outlook for the balance of the year and perhaps some of the folks that are closer to it, namely Live Nation, who has information that we don't on who's coming up in the calendar. And as it played out, I think we were happy to see that they did know something we didn't know with some of the major announcements coming, like Drake, most recently, Aerosmith, and that has led to what has continued to be a really strong event calendar. And it gives us optimism that, despite lapping a bunch of concert postponements, we have a very robust supply environment to match up to that great demand dynamic.

That's very helpful. And then, secondly, you had really strong cash generation in Q1, can you maybe just talk about key drivers behind that, sort of what that enabled? And then how should we think about cash conversion, going forward?

Yes, so generally speaking we have really nice cash conversion where the main uses of cash, as you step from EBITDA to true cash generation, will be interest expense and taxes, partially offset by working capital benefit as we grow. The seasonal fluctuations beyond that conversion are really driven by working capital. And with the way our working capital dynamics work, you should think of it's less about the volume we deliver in a quarter and more about the volume we deliver in the last month of the quarter. And so March is a pretty strong month. So perhaps, counterintuitively, Q1 ends up being seasonally stronger on working capital than Q4 because the end of Q4 slows down post-holidays. So because March ends strong, we saw a seasonal strength in Q1 that, as you get into Q2, will soften a little bit at the end of June as post-NBA and NHL playoffs. So you see a little bit less activity at the end of the quarter, which will flow through on the working capital. Speaking to general cash conversion, though, I think we've historically said we think our true cash generation in the year will be 60% to 70% of our EBITDA. Again, most of that delta is our interest expense and cash taxes. This year, there's a little bit of noise. We'll likely be below that level in terms of cash taxes, which is great, offset by the remaining elements of our store credit redemptions. So the net of those two will probably be on the lower end of our historical range, but should be back in that range after 2022 where we had a bit more noise as we cleaned up some pandemic-related items.

Great, that’s very helpful. Thank you very much for the color.

One moment for your next question. Our next question will come from the line of Benjamin Black from Deutsche Bank. Your line is open.

Hi, thank you for taking our questions. This is Ishant Goel on for Ben. Could you please give some color on how SkyBox is supporting growth here, possibly adding to your competitive strength to maybe fuel the supply side of the equation on the platform?

Can you repeat the first part of the question? Sorry, I didn't catch all of it.

Yes. So can you give some more color on how SkyBox is supporting growth here, possibly adding to your competitive strength to fuel your supply side of the equation on the platform?

Yes, sure thing. I think SkyBox continues to be the industry-leading platform ERP for the professional selling community as they have over 55% of professional sellers now on the platform. And when you think about that, that really means that if professional sellers represent 80% of the industry, then more than 40% of the entire industry flows through our infrastructure. And we utilize that data to ensure that we can power our best-in-class marketing algorithms, which allow us to compete efficiently for customer acquisition. Similarly, I think, as we continue to develop technologies, such as SkyBox Drive, which we talked about is in its beta phase, that allows us to just deepen our relationship with sellers as well as we continue to power elements of their business.

Great, and maybe one more, if I can. On AOS, like how should we think about phasing of AOS for the balance of the year?

Yes, so generally speaking, we've pointed to 3% to 4% annualized growth. Coming out of the pandemic, there was a bit more noise and chop in the water as you had a spike in demand, some inconsistent supply. And so, if you look at our trending throughout 2020 and 2021, there's just distortions relative to normal levels. I'd say, more typically, there's not huge fluctuation quarter-to-quarter from a seasonal standpoint. As a general comment, Q3 is usually pretty soft. That's largely because a disproportionate amount of volume is regular season baseball that has a lower AOS. Q4 is usually quite strong, driven by World Series, all major sports being in action, and then some major concerts going on sale for the following year. But nothing as we look to the back half or the remainder of this year where I would point to anything other than directional performance similar to Q1, where we're sort of back to year-over-year performance in the low single-digit growth over the prior year.

Okay, great, thank you so much.

Thank you. One moment for your next question. Our next question comes from the line of Stephen Ju from Credit Suisse. Your line is open.

Okay. Thank you. So Stan, Larry, a follow-up on the repeat order rate you disclosed earlier on the deck. So wondering if you can talk about how that moves around during the course of the year and should we think about that rate stepping up or down on a quarterly basis when there are one-off major events like the World Baseball Classic, where you may actually lean in to acquire more new users? Thanks.

Hey Stephen, good morning. I think we talked about it a little bit last quarter, too. When we look at repeat rates across the categories, I think what we've continued to see is, as our investments and engagements are starting to accretive, across each of the categories we've seen the repeat rates for customers continue to trend higher. And kind of right now, they're in the highest point that they've been historically, whether you're talking about baseball, basketball, any of the sports category or concerts. Now I think, when you go into the deeper part of, hey, should we see seasonality, I think you can almost expect, as with some of the cohorts and sports, you're going to see some of that maybe mix a little bit differently, i.e. there's 81 home games for baseball, which is unique versus other categories. And so, logically, you see repeat rates in that category in particular trend a little higher than the rest. But overall, we remain really excited, and we continue to see a step function change in repeat across every single category that we have.

Thank you.

One moment for your next question. Our next question is from line of Logan Reich from RBC Capital Markets. Your line is open.

Hey, good morning. This is Logan on for Brad Erickson. Congrats on the results this morning, guys. Just one quick question on the guide. It looks like your EBITDA guidance would imply some deleveraging for the balance of the year. Can you just talk about kind of what's included in the guidance for the expense side, and particularly marketing and kind of how you guys think about margins for the balance of the year?

Yes, thanks Logan. It's only been two months since we gave our full year guidance. So I'd say, thematically, that the guide for the balance of the year remains consistent; namely, we continue to take a cautious view regarding the macroeconomic environment and are building in some potential for softening at the macro level. And should that not happen, I think that would be a net tailwind relative to what we've assumed. I think, specific to margins, probably the more salient item is competitive landscape, which we've alluded to has been pretty intense. We anticipate it remaining so. And as we put together our EBITDA guidance for the balance of the year, we wanted to make sure we have sufficient flexibility to make targeted investments and respond in as flexible a manner as possible in light of that backdrop. And so we'll certainly be as thoughtful and efficient as possible, but we did want to make sure we do retain that flexibility.

Okay, thank you very much.

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

Hi. So Stan, Larry, congrats on the quarter. One question and then one follow-up. Can you give your current thoughts on industry growth for 2023 and factors that could result in a higher growth rate for the year compared to the projected long-term CAGR? And then, can women's sports or other emerging categories increase the long-term CAGR?

Yes. Hey Tom, good morning. When we look at the year, I think, and Larry alluded to this a little bit earlier, I think we've been pleasantly surprised by some of the, in particular, concert strength that's been announced this year, which is a little unseasonably typical for what we see at this point of the year. So I think, if that were to persist in a non-typical manner, we're certainly excited about the upside that we see this year in that lineup. When you look at some of these other sports categories, which we've always looked at as a more fixed category given the larger leagues and the number of games per season. I think we've also been really pleasantly surprised with some of the strength in women's categories if you look at F1 and kind of the resurgence or emergence of that as a really strong category. So I think there's a few categories there that we've continued to see emerge across both sports and concerts that give us some certainly upside potential in the remainder of this year, and then long term, as well.

Great. And then, for my follow-up, can you quantify how Vivid Picks has had a positive impact on your CAC for Vivid Seats?

Yes. Look, when we talk about engagement, I think we look at Vivid Picks as a fundamental part of our engagement engine where we have a vehicle now to engage you between events, right, which we think is part of nurturing that entire lifecycle of the customer. There's the event, there's between events, there's at the event, and we've deployed our marketing to engage people at the event and certainly to acquire the user there. And between the event is where Vivid Picks comes in. We've talked about the number of entries rising, where I think our average entries now per month is in the mid to high double digits. And where we continue to see strength there is, as we have users who are both using our Vivid Picks product and Vivid Seats product, any time they are cross-users of each, they are stronger users than if they were to just uniquely use one platform. Hence, we get really excited about our investments there, and in particular launching our free-to-play products, which will open up our entire audience base to what we think is a very unique and engaging product.

Thank you Stan.

One moment for your next question. And our next question comes from the line of Shweta Khajuria from Evercore ISI. Your line is open.

Okay, thank you for taking my question. Stan, what do you think -- how high can repeat orders as a percentage of total orders get, what are you shooting for, it seems like it's been trending up year after year to 56% now, where can it go on your platform, and how does that compare to industry repeat rates perhaps, do you have a sense of where it is on competitive platforms? Thank you.

Yes. I'd start with where it can run. I think we continue to see runway for it to increase, right. So I think we're excited that, over the past four to five years, we've raised that niche from an order of mix perspective by almost 1,000 bps, and we do think there's runway up. But I think it's balanced when you think about the long-term and maybe even medium-term impacts here as CAC is high as today. I think when CAC renormalizes, I think there's a great opportunity, and for us, with our multiple ways to acquire users to go out there and drive that. So I certainly expect, in a world where CACs normalize, you might see a rebalancing, if you will. But certainly I think, if you decompose that into the actual repeat rates of the users as well, I think that continues to trend higher, and I think we're excited again about how our products will drive the repeat rates of the users that then drive the industry level mix of repeat orders.

Okay, thanks Stan. Any sense on where it is for the industry, or even by categories, it sounds like sports is higher?

Yes. I think when you look at sports, I think, just to make that point, yes, you have a very unique difference versus perhaps others where there's just so many home games, and the nature of those home games drive repeats. I think, when we look across the competitive landscape, I think we feel pretty strongly that our repeat rates are trending perhaps higher than the industry index. And I think, as we continue to invest in the products, we think that outperformance there should grow on our side.

Okay, thanks Stan.

One moment for your next question. Our next question will come from the line of Matt Farrell from Piper Sandler. Your line is open.

Thanks guys, congrats on the strong results. I guess I wanted to touch on how you're thinking about balancing growth and profitability here amid the competitive dynamics and the macro uncertainty, but also still making sure that you're taking advantage of the strong consumer demand environment here in the near-term?

Good morning. Thanks for the question. Maybe I'll give you two things. I think we've always focused, I think, on the long-term here and, in the long-term, making sure that we can build a sustainable business where we are able to deliver both growth and margins. And I think this is a quarter where I think we demonstrated we clearly have the assets and the technology, and certainly the executional ability to drive both. As we look into the long-term and how you balance that, I think we've always said do we want to go out there and buy fleeting or temporary volume. And I think that's just not a good long-term strategy to be deploying capital that doesn't really bring any, call it, repeat behavior or long-term profits in. And I think that's where you've seen, when we look at repeat order mix and some of the questions we've gotten trending higher there and investing in products that drive repeat behavior, I think we're always going to do that. And in a world where I think the capital that's out there and being utilized in a manner that's not sustainable runs out, I think we'll have a heightened ability to then continue to go and build our user base in a stronger way. I'd point out, as well, I think where others perhaps are buying that volume and depleting cash reserves, we certainly are on the other side of that, where we're efficient in driving repeat behavior, but also extremely efficient on the cash-generating side. And we sit here, I think, with a balance sheet that affords us a ton of opportunity as we look out and say how can we deploy this capital. And as we see our investments working, we are unafraid to deploy them organically to drive growth and product innovation. And we're certainly unafraid to deploy that inorganically, as well, should the right opportunity surface for us to accelerate any of our areas of strategic growth.

And then, as a follow-up, could you just maybe help us understand where there is the potential for further integration for Vivid Picks over the course of 2023 and 2024, the free ticket offering is an interesting one, but where can we kind of be looking beyond that as we think about the crossover opportunity?

Yes. I mean, I would think about it maybe in two ways. I think we are certainly really excited about our daily fantasy product, which is a little bit more limited from a regulatory standpoint being compliant there. And I think our launch of our free-to-play is the ability now for us to take the engagement engine that has been limited to certain audiences to be able now to drive that into every user that we have in one single app. And we remain bullish about the ability to do that, especially in a world where I think we talked about, in the prepared remarks, our social ability. Our social engagement is now up 50 times from when we started that, and we have the highest net positive social sentiment amongst the competitive set. I think that combined with a free-to-play product across the entirety of our user base is where we think we've got a standout offering in ways to engage users between events.

Yes. And Matt, just a small addition to that, I think there's really fertile ground to cross-pollinate information from Vivid Seats users into the Vivid Pick user experience. So for example, if we know that you've purchased a ticket to a game, we can use CRM to make you a targeted offer. We can cross-pollinate prizing. So if you're on Vivid Picks, the base prizing will be a real money, but there's opportunities for ticket discounts and other leaderboard-type awards where you're really driving the ecosystem benefiting in a unique way

Alright, thank you.

One moment for your next question. Our next question will come from the line of Andrew Marok from Raymond James. Your line is open.

Hi, thanks for taking my questions. Two if I could please. First, I think you've given a little bit of color on this in the past around the MLB lockout and some of the concert cancellations in 1Q 2022. But as we look out into the event supply side of the equation, like how big a deal can some of these high-end concert tours be, thinking like the Taylor Swift, the Drakes, the Blink-182s. I guess, given that there's kind of a “inorganic impact” since they didn't happen in 2022, kind of how big of an impact in an individual high-end tour have?

Yes, I think we would directionally say we have a portfolio of events, and I think that perhaps echo comments others have made. While event calendars will have impacts in a given month or quarter, over the course of the year it tends to even out. So it's not the proverbial hit-driven business that some other industries may be. So generally, I think you spoke to, in Q1 of last year, a larger tour being potentially around 1% of full-year GOV if you're a true headliner. If you talk about like the biggest headliner who perhaps may be on tour at the moment, in Pink, Taylor Swift, you could probably do a bit more than that on that one tour. But directionally, even the largest acts are going to be 1%-ish of GOV. So very, very diversified. The other dynamic, and we've referred to this before, you have the pros of a really robust 2023 event calendar with a number of huge acts as you noted, Taylor Swift, Beyoncé, Drake, Blink-182. 2022 had its fair share of very good acts and then also had postponed tailwinds, which was why in our guidance we had taken a fairly cautious view around the high bar we had to get above to drive growth in 2023 even with a really robust calendar. And I think, as it's played out, the 2023 calendar has been sufficiently robust to get to above the bar. But with the potential exception of the largest of the tours, there will be big names that go on in 2024. I think you heard Live Nation perhaps refer to their outlook for sustained high single-digit growth in 2024 and beyond. And I think we're confident that the calendar will continue rolling on.

Great, thank you. And you kind of led into my second question, which is on the impact of lapping those postponed events from 2022. Is that primarily going to hit orders or is there an AOS component to that, as well? Thank you.

So Q1, our GOV growth was 15%; and of that 2% was AOS; the balance 13% was orders. And I think, as we alluded to, no reason to believe that AOS trajectory will meaningfully diverge from what we saw in Q1, which is generally consistent with what we've seen throughout cycles over prior years, something in the 3% to 4% annualized growth range, with the balance of growth being driven by order count.

Great, thank you.

Thank you. One moment for your next question. And our last question comes from the line of Dan Kurnos from The Benchmark Company. Your line is open.

Great, thanks, good morning. Really strong results, guys. Just want to dig in on two areas that you've kind of already touched on. Obviously, a lot of questions have been asked already, but with one of the players filing confidential IPO, it's sort of an interesting dynamic as I feel like they're probably in the weakest position of the group. And so, as you guys think about the dynamics, I don't know if you're seeing either sort of a widening of take rate across categories, so maybe more aggressive in sports versus concerts, which I think you'd called out in the past; and subsequently sort of their need to show profitability, how either you, Stan or Larry, are thinking about if they have to moderate spend at some point in order to proceed with that process? Why don't we start there, and then I got a follow-up for you.

Hey Dan, good morning. It's Stan. Thanks for the question. I think, look, yes, when we hear of potential things, I think we focus really on the things that we can control. And I think, honestly, we welcome a uniform, transparent reporting field, where I think, again, our differentiation certainly on the P&L side will be very well-differentiated in terms of an entity or a company that is burning cash versus one that's generating cash. So I certainly think our ability to stand out and be differentiated, should that hypothetically be what comes to market, I think it's something that we look forward to. Again, as we continue our investments in that arena to drive our long-term strategy, and I think our balance sheet's going to be really important here. And certainly, I think where we see opportunities, I think we've talked about our levers to drive either growth or profitability or innovation through products. I think certainly, when there's an opportunity to deploy that cash balance sheet to drive disproportionate growth, I think we're certainly willing to do that. And in an environment where I think we see competition perhaps with a shrinking cash balance, again, I think we are excited and unafraid to deploy our capital to continue to win the long game here.

Yes. Dan, I think that part of the peculiar dynamic as we see it today embedded in diluting your question, as they need to pursue and demonstrate profitability, which one would I think reasonably presume in the current environment, that the growth-at-all-costs profile has gone somewhat out of favor demonstrating sustainable unit economics that is important. We don't have direct insight, so we can't say this with certainty, but generally, our metrics that we can see are pretty accurate and predictive, and we are not seeing that behavior. And so, when we talk about the potential unlock, if we see folks shift to pursuing profitability in the current period, that's when we think we will really see a benefit and a tailwind in both volume and margin. It's one thing to say, next year we promise. It's another to deliver it in the current period, and we're excited for when you have to deliver it in the current period on equal footing to what we're doing.

Got it and that is super helpful. And look, Stan, outside of marketing you kind of alluded to this. I mean, given the earlier question on cash conversion and the really strong flow-through in Q1 as you guys were able to maybe delay or push off the marketing spend and have a really strong flow-through, I mean you guys are going to generate a boatload of cash this year. You're already, what, net cash positive at this point. So, I mean, you have some opportunities in front of you. I don't know what the environment from either M&A or kind of where your head is at for capital deployment, given that share buyback is a little bit of a trickier proposition from here, but just help us think through sort of maybe other uses of cash at this point other than just it's always nice to have this building of the balance sheet in an uncertain environment, right?

Yes, for sure, Dan. I guess that I think the best way to frame it is, on the capital structure, I'd certainly say we're always going to look for ways to optimize that to ultimately deliver the most shareholder value that we can. But certainly, as we look at the industry, if anything, as we continue to generate cash, I think our posture towards both organic investments and inorganic ones should the right opportunity surface I think you'll see us aggressively pursue things that we think are accretive to the asset base that we have that will continue to drive things. So I'd say aggressive posture and certainly a balance sheet to support it across all dimensions.

Alright, great. Thanks very much guys. Appreciate it.