Q1 2022 Vivid Seats Inc Earnings Call

May 10, 2022

Ladies and gentlemen, thank you for holding your conference will begin shortly thank you for your patience.

[music].

Yeah.

Welcome to the debit seats Q1 2022 earnings Conference call. My name is Richard and I'll be your operator for today's call.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press zero one on.

And you touched on phone as a reminder, the conference is being recorded I will now turn the call over to <unk> head of Investor Relations Ms <unk>.

You may begin.

Good morning, and welcome to visit States' first quarter 2022 earnings conference call I'm, Kate <unk> head of Investor Relations activity.

Joining me today to discuss <unk> results are Stan Chia, Chief Executive Officer, and Larry Seay, Chief Financial Officer.

By now everyone should have access to the company's first quarter earnings press release filed earlier. This morning, we have also provided supplemental earnings slides.

Our press release and earnings slides are available on the Investor Relations page of <unk> website at investors got vivid seat dotcom.

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 the company's 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 we believe provide useful information for our investors.

You will find a historical reconciliation of adjusted EBITDA and adjusted EBITDA margin the corresponding GAAP measure in the earnings press release supplemental earnings slides and other filings with the SEC.

Now I would like to turn the call over to Stan.

Good morning, everyone and thank you for joining us today.

I'm excited to speak with you about our strong record setting first quarter and the continued momentum we are seeing across our business.

In the first quarter of 2022, we achieved our highest ever Q1 marketplaces <unk> and revenue the.

The results we delivered in the first quarter demonstrate growing consumer demand over the last year and our outpaced performance in that environment.

Fans are eager to attend live events, and we are well positioned to capitalize on that demand.

Such we have raised our 2022 guidance.

Today I'll share an update on the progress we made in the first quarter and discuss how we are continuing to position vivid seats to win as a differentiated technology marketplace with multiple products and platforms that facilitate engaging and memorable experiences for fans then I'll turn it over to Lee.

Larry to share our financial results in more detail.

Heading into this quarter, we were well positioned after finishing 2021 with record revenue in each of the second third and fourth quarters as live events rapidly return I'm proud of our team, which continued delivering awesome results in the first quarter of 2022, including 742 million.

And marketplace gross order value or <unk>.

$131 million in revenues and $21 million and adjusted EBITDA.

As a technology platform and marketplace, we sit at the intersection of supply and demand.

This vantage point in Q1, we continued to see the strong and growing consumer demand that we saw in the fourth quarter and it's been exciting to witness the energy of fans connecting with each other and their favorite artists or sports teams through live event experiences.

During March Madness, we saw the most in demand College basketball single game ticket that we've ever track with Duke versus Unc.

And in advance of the fall 2022 football season, we've seen excitement from consumers building since early March when our website traffic spiked with fans looking for tickets, even without an NFL schedule.

Additionally, even with the MLB season delays, we're seeing much stronger demand for baseball tickets compared to 2019, which was the last baseball season not impacted by the pandemic.

It's clear that there is a strong drive from consumers for connection and we are seeing the fulfillment of this desire happened through live experiences, which is reflected in purchasing patterns specifically the percentage of concert ticket orders for more than four ticket has increased since pre pandemic 2019.

Tumors continue to seek out this kind of connection we remain committed to empowering and enabling these moments.

We are also seeing success with the investments we've made in our marketplace that continue to bring differentiated value to our customers whether they are fans of our sellers.

For fans, our superior technology powers, a marketplace that delivers an extensive breadth and depth of tickets at a competitive value along with an industry leading rewards program.

On the seller side, our superior technology powers Sky box, the leading ERP for sellers and both sides are supported by our excellent customer service as recognized by Newsweek for the last three years. These factors collectively give us the confidence that we truly have a right to win.

We are not alone in this belief recent.

Recent sentiment from both fans and sellers alike, who have used our product or our frequent ticket buyers show that our efforts have earned us some of the industry's highest net promoter scores. We have seen this reflected in both the data we track as well as independent sources, such as the Harris poll, where we had the highest recommendation percentage among.

Peers.

As a growing and innovative technology company with validated customer sentiment brand awareness is an important pillar for us to build upon our momentum and draw more users onto our platform alongside our brand investment. We will also continue to invest in performance marketing channels to further grow our marketplace.

<unk>.

Amplifying our message to maximize awareness of what differentiates us continues to be an opportunity that we believe will have long term benefits. While we're still early in these efforts and live events are a low frequency category. We ultimately believe strategic investments here will drive lifetime customer value through acquisition efficiency.

And retention benefits.

That said, we view the ROI profile is a J curve with at least several quarters before results appear in our margin profile.

We also continued to innovate evolve and expand our offerings to engage with and reached new live event fans.

I said last quarter user engagement within our product ecosystem remains central to our long term strategy.

We continue to quickly grow users are better our daily fantasy sports App and those users are highly engaged continuing to place more than 10 entries per month on average.

Also we have started surfacing cross platform content and I'm pleased to note that customers who are active on both the vivid seats and better platforms play more frequently place larger entries and deposit more than those who solely use the <unk> app.

That is currently in a hyper growth phase off a small base and we are investing in infrastructure to scale our offerings, while our core business remains of live events marketplace. We view Bachelor is Tam additive and the high overlap between sports fans interests and live events and daily Fantasy sports will allow us to leverage.

Profitable customer acquisition and drive increased engagement through more relevant and differentiated platform ecosystem, while we continue to make progress building and integrating our products and brands. We are still early and unlocking better potential and remain excited about its future prospects.

We are also leveraging partnerships that amplify brand awareness, while delivering incremental reach and revenue. We will continue to drive brand efforts with category endemic leaders, who reach a significant share of the live event going population and we have seen our year to date <unk> generated by key brand partners.

Page 2019 by a wide margin.

With longtime partner ESPN, we recently launched hot ticket.

<unk> branded and exclusive segment, which spotlights the most in demand match ups across all mediums audio digital and television.

Additionally in March we strengthened our partnership with capital one with the launch of capital One entertainment a new ticketing platform for capital one rewards cardholders built and powered by Vivek. This digital first booking experience unlocks exclusive access to unforgettable experiences across sports.

Music and more for capital one rewards cardholders, we created this new experience by leveraging our marketplace inventory technology fulfillment and customer service capabilities, we will continue to seek out mutually beneficial partnerships and our existing ecosystem as well as in other categories that improve the experience.

Our customers, while leveraging our existing brand traffic and reputation.

Before I turn the call over to Larry I wanted to congratulate and thank both Riva call, who has been promoted to the new role of chief product and strategy officer, and Ted pick US who has been promoted to chief accounting officer for their dedication and leadership.

Both Riva and Ted are tremendous proven leaders, who have been integral to vivek <unk> success over the past few years as we continue to invest in talent and support our proven leaders. These promotions were natural choices.

All of us at <unk> are proud of their accomplishments and privilege to work alongside them and I'm confident that their talent will continue to move our business forward and deliver shareholder value.

Again, congratulations and a sincere thanks to both Riva and Ted.

With that I will turn it over to Larry.

Like you said.

I am proud to present, our financial results for yet another record breaking quarter as our marketplace flywheel continues to perform.

As Stan mentioned, we achieved our highest Q1 marketplace.

New ever in the first quarter of 2022, despite the impact of unexpectedly high cancellations.

These results speak to the underlying strength of the demand environment.

US the confidence to raise our 2022 <unk> and revenue guidance early in the year.

First quarter marketplace.

Marketplace orders and revenues were all well above pre COVID-19 levels from Q1, 2019, which we view as the most relevant comparison period, given the severe impact of Covid during Q1 of 2020 in 2021.

Our record Q1 marketplace year over year was driven by increases in both market place orders and average order size.

Average order size was $368 for the quarter, which represents a 12% increase for 2019 levels.

We have included average order size by quarter from 2019.

One of this year in the appendix of our earnings presentation that provides additional historical context, given the heightened average order size volatility experienced in 2020 and 2021 due to COVID-19.

We have historically seen average order size grew 3% to 4%.

Similar to Q1 marketplaces.

Q1 revenues of $131 million were up substantially compared to both 2019 and 2021.

Okay, great, which we calculate by dividing our marketplace revenues by our marketplace was approximately 15% for Q1.

While the reported take rate was lower than in Q4, our underlying take rates remain largely consistent with historical levels.

The impact of our loyalty program, which is accounted for as a contra to revenue.

Other adjustments such as cancellation related charges and charge backs, which were elevated in Q1.

The higher than expected cancellations in Q1 were comprised of a mix of both COVID-19 and non COVID-19 related items.

The omicron variance impact on cancellations in Q1 was largely confined to January it reduced substantially upon the reduction of case counts.

Subsequent to the omicron there were several significant cancellations not related to COVID-19.

The MLB locked out Celine Dion who fighters.

These non COVID-19 related cancellations accounted for roughly half of the careful for the quarter.

In the first quarter, we generated 21 million of adjusted EBITDA and a 16% adjusted EBITDA margin.

We continue guard investments into our plan.

Uh huh.

Public company infrastructure, while also positioning our business to support higher GOP after running very lean.

Got it.

We believe we have now right sized our G&A cost base at a more sustainable run rate.

Our EBITDA in the quarter was also impacted by the previously noted higher than expected cancellation related items.

Specifically canceled T O V. In Q1, 2022 was four 5% of pre canceled Yogi, which compares to 1%.

19.

When an event is canceled we refund customers and received the ticket costs back from sellers.

Generally do not recover other expenses such as marketing.

As such our adjusted EBITDA would have been roughly $4 million higher with adjusted EBITA margin of roughly 300 basis points higher that cancellation spend consistent with 2019 levels.

In February we completed a refinancing that further reduced our debt balance and interest expense.

This refinancing reduced our debt principal outstanding to $275 million.

Extended our debt in 2029.

Reduced our interest rates.

And provided us with a $100 million undrawn revolving credit facility.

We generated $24 million of classroom operating expenses in Q1 and ended the quarter with 304 million of cash and $39 million of Nat cats aren't here.

It's an environment of rising interest rates, we are well situated as a growth company that also has a long track record of profitability and strong cash flow conversion.

We will deploy our cash and balance sheet to compete and also consider M&A for synergistic opportunities and further enhancing the product and technology that power or flywheel.

Following a robust demand in Q1, coupled with the MLB lockout resolution, which include the full 2022 schedule, we are raising our 2022 financial guidance.

We now anticipate 2022 marketplace for year over year to be in the range of two point is for <unk>.

$3 5 billion.

Representing 22% year over year growth at the midpoint.

We are also raising our 2022 revenue guidance to the range of 520 to 555 million equivalent to 21% year over year growth at the midpoint.

Due to the cancellation of the headwinds experienced in Q1, we are maintaining our EBITDA guidance at $110 million to $15 million.

Our adjusted EBITDA guidance continues to reflect investments in our brand investments to scale, our daily fantasy sports offerings.

The build out of our public company infrastructure.

Relative to 2019, the aggregate spend in these categories collectively represent $33 million of incremental expense.

Our robust cash flow generation allows us to pursue multiple exciting growth levers in our core as well as Tam additive areas such as search App.

We continue to believe our adjusted EBITDA margins will be at or above 30% at the long term.

We reap the benefits of these near term investments.

Even in 2022 is our full year guidance implies would you expect margins to improve from the first quarter as cancellations cut back toward historical levels.

I'd like to contextualize, our strong Q1 performance and are now higher 2022 guidance within the broader macroeconomic environment and specifically within the live events environment.

Our marketplaces, a barometer of supply and demand.

And order momentum through Q1 is suggestive of a healthy environment.

We believe our business has built in protections against inflation.

As higher ticket prices will result in more G O V and because our revenue is based on a percentage take rate higher revenue.

Most of our costs are variable and we anticipate with broadly move in response to replace and in a similar manner as our tioga.

We are aware of the broad concerns regarding the macroeconomic environment and how that may impact consumer discretionary spending.

I'd first like to confirm that our business is geographically focused in North America, and we did not have meaningful exposure to any of Ukraine, Russia or China.

More broadly our record volume for the past four quarters indicates demand momentum in the short term and secular trends that are in our favor as we look further out.

While the potential impacts of a recession would depend on specific facts and circumstances.

A combination of secular tailwind favoring experiences over good coupled with consumers being deprived of live events during the pandemic.

Gives us confidence and continued strong demand across our categories.

On the supply side artists or ear couture again close to paying debit is touring provides as much as 90% of artist income.

We are seeing that that capacity added for 2022 and hearing encouraging commentary around supply in 'twenty three and beyond.

With that I will hand, it back to Stan for closing remarks.

Thanks, Larry in conclusion vivid seats continue to break records this quarter and I'm truly excited about the momentum we are seeing in our business. We remain confident in our long term business outlook and as we look to the future we believe that our differentiated offering superior.

Your cost structure exceptional leadership team and scale will allow us to continue to drive meaningful growth and to capitalize on opportunities that drive value for shareholders and with that operator, I will open it up for questions.

Thank you we will now begin the question and answer session.

You have a question. Please press zero one on your Touchtone phone.

Wish to be removed from the queue. Please press zero two if youre using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again, if you have a question. Please press zero one on your Touchtone phone. We also ask that you. Please limit your questions to one question and one follow up question.

Yeah.

And your first question on line comes from Mr. Ralph <unk> from William Blair. Please go ahead.

Hi, Good morning. Thanks for taking my question first question just in terms of brand investment and increased investments in performance marketing is down I think you talked about on the call can you maybe just give us some perspective, you know how youre seeing those returns in both categories.

About the ROI profile is a J curve, but maybe just sort of give us a sense of kind of return on that spend and what youre, saying then I have a follow up.

Yeah, sure Hey, Ralph.

Yes, I think I think first and foremost I think as we continue to invest in brand and product and as we shared you know I think we're seeing.

Our efforts really resonate with consumers right across the board all of our sources tell us that you know I think there.

Our investments there are yielding in the largest percentage of consumers recommending us.

And we're really excited about all of those net promoter score increases as we then look through you know I think where we're seeing some of the.

Impacts their brand I think one of the more exciting components as we look at the NBA NHL season that just ended you know I think we've seen upwards of 10% increase in repeat rates, which I think are a combination of our brands and rewards programs.

Working effectively.

That's kind of the performance marketing side as we continue to.

Invest in all things marketing, we expect that to ripple through.

Those efforts as well.

Great and maybe just maybe talk to more recent kind of quarter to date performance, obviously people want to get out again now that restrictions are lifted but how do you think about that in context.

Increasing variants.

Sections of the United States are you seeing cancellations at all or how is that may be impacting the business.

Yeah.

Obviously I think if we look at everything we look for safety first amongst consumers, but but as we see trends you know and I point back at current quarter. All your commentary around the industry. We continue to see a lot of bullishness.

In this phase fans wanting to get out there are.

Our AOS as we talked about higher than historical growth rates is as I think demand continues to outpace supply and perhaps one other.

Industry look at travel you know I think I'll have to look at how how much are people traveling right to get to the events.

We've seen fans now traveling almost more than 20 miles more than they used to to get to an event. So I think overall, we continue to see.

Largely that.

A excitement from consumers and.

Willingness to go to go with that.

And then Ralph I know there was a good amount of.

I mentioned around the cancellations in Q1.

They were higher than we expected largely on the back of non COVID-19 related items.

We can say that while we don't want to jinx. It as we sit here about halfway into Q2, we've seen a.

Very meaningful reduction in cancels to date in Q2.

Okay. That's helpful. Thanks, Larry Thanks, Dan.

Yeah.

Thank you. Our next question on line comes from Maria <unk> from Canaccord Genuity.

Good morning, Thanks for taking my questions.

It seems like demand here remains pretty strong and you sort of touched on this a little bit but could you talk about what sort of embedded in your guidance from the macro sort of standpoint sort of including elevated gas prices consumer spending and possibly you called experience.

Yes, so as we put together our guidance.

I think that was.

Call. It early in the inflation story and.

And at the time.

I think there was a lot more belief that.

The transitory element made sense and could hold.

So I don't think.

Longitudinally.

Had the benefit of the kind of the latest developments or it looks like it'll be a bit more persistent and drive.

April .

Interest excuse me increasing interest.

Interest rates.

But I think overall.

Landscape as we can see it in our category has remained pretty resilient, we havent seen it flow through.

So demand are impacting consumers.

We have heard others allude to.

So that's certainly not a guarantee that that won't change, but I think we're seeing that.

Consistent.

Demand trends as we saw.

In the period, when we put the guidance together.

Got it that's very helpful. And then secondly can you maybe just talk about how have attendance and pricing been trending for some of the key Q2 sporting events like the NBA playoffs.

NHL playoffs Masters NCWA et cetera.

Yeah, sure Hey, Maria.

<unk>, maybe I'll start there was one when we looked at that pretty pretty unbelievable across the season I think a lot of.

Interest I think some of the Mark key things, we talked about there that final due home game you know I think we saw prices theyre rivaling superbowl prices right. So I think just such a strong group and certainly when we look at.

The actual tournament.

Under the same lens of how much is demand outpacing.

Supply certainly saw that to be the strongest tournament.

We've ever seen.

And you know when you look at really recently, perhaps.

This past weekend I think with F. One.

In Miami, we've seen F. One sales and certainly with a lot of renewed interest in the category.

Tripling what that had been historically on the platform and average order size there north of $3500. So I think we continue to see some of the marquee events as you mentioned draw a lot of strong interest from crowds and fans out there.

Great. Thanks, so much for the color.

Thank you.

Yeah.

Our next question on line comes from Stephen Ju from Credit Suisse.

Hi, This is a first of all on for Stephen Ju.

So I know, it's still early but could you. Please update us on some of the details and planned product integration so far with betcha.

What have you learned so far and what kinds of cross promotional revenue synergy opportunities do you think you kind of look going into the future. Thanks.

Sure.

Thanks for the question look we are we remain really excited about the Bachelor opportunities as you know I think the fan base and both in terms of the product offerings and the increased ability to learn more about customer interest.

Through the platform continue to be really compelling reason.

For us to invest and to think about integration is the right thing when you look at what we've done.

You can clearly see if you if you look into the.

That's a product that we've enabled.

Sign on capability, meaning you can actually log into the batch of App with your <unk> logging, which then allows us a lot of insight and the ability to understand interest again across multiple platforms. When you look at what we've been able to test that I alluded to this in the prepared remarks, we continue to see.

Users, who are using both of our product today.

Hum.

And are much more engaged user across the platform right and whether they're playing more whether they are depositing more.

We're continuing to see that engaged user engagement across that.

<unk> field bullishness on our side as we move forward with integration across product and brand.

Got it thank you and then.

Just one follow up on I think.

Revamp of the website and the App has been a key initiatives. So can you talk about kind of what kind of directional improvements you may be seeing so far.

In terms of engagement and retention.

I know you mentioned, the 10% increasingly peak rates, but was that from the revamp of the website and app.

Just general.

<unk> you are seeing as you roll out these changes.

Yeah sure I think.

All of these things work together right as you look at our investments around brand product improved web improved rewards program.

With that I shared earlier is one of all those things working together, where we've seen repeat rate.

And a CAD in Q2 sports categories increased double digits from where they've been historically I think is something we're very excited about and the other thing I'd point you to as we think about all of these factors collectively.

Our ability to become somewhat of a discovery channel for users and as we talked about we've seen traffic.

Coming to our website around.

Around NFL, even before schedule relief right. So I think for US I think again, that's a fantastic sign of people coming to us and using us as a discovery channel learning about the brand and subsequently at the right time converting over when there was a transaction. So I think all those things I think are a great culmination of all the efforts that we put into.

Investing behind our product and our brand.

Might add one thing as part of the new.

Web rollout there is both the front end difference, but then also have some backend.

Improvements that allow us to iterate more quickly.

Run more tests et cetera.

That's an ongoing process and a benefit that will bear fruit over subsequent quarters and years, but we've already seen in the first few months. After we realized a number of those experiments yield meaningful improvements in click through rates since you start tracking through our funnel and so we're very excited about what that backend enhancement will enable.

In terms of.

New enhancements to the front end.

Got it thank you very much.

Thank you. Our next question online comes from short term did urea from Evercore ISI. Please go ahead.

Hi, Neil Peterson pinch hitting for sure. This morning, one quick question following up on the demand question that was asked earlier, how much visibility you guys, adding to demand trends for the year and what are you seeing that you do now as leading indicators of demand.

Yes, I think we.

Certainly.

Look to a few different elements.

You think about.

The marketplace Theres, an intersection of supply and demand.

And so step one is verifying that you have supply and ideally growing supply.

We feel.

Quite good that those indicators have been and remain quite strong and the duration of that strength seems to be.

Spending not shortening.

Generally speaking yes.

That supply, particularly in areas, where theres variability like concerts, where they don't need to go on tour will only come online. If there is a belief that there is ample demand for it.

So while it's certainly difficult to prognosticate on how people are going to field six months from now.

I think all of the indicators that you can see with some historical lag continue to remain positive and then what we're seeing.

Performance.

We spoke to for the quarter.

Certainly demand was robust throughout that period, so the real time feedback, which was strong as well.

So other than.

The theoretical concerns around which shouldnt higher gas prices have an impact shouldnt decreasing stock prices have an impact.

Other than that quantification, we are not seeing or had anything that you can point to.

That would suggest a meaningful shift downward.

Great. Thanks, and just to kind of follow up on that for the.

Quarter, any particular region or vertical live sports called Richard Theater.

You could call out in Q1 that came in stronger than expected.

Yes, I think we had a it was a pretty nice quarter.

Concerts, and I think that generally foots with what you're hearing the folks at live nation say when they talk about an incredibly robust Q2 and Q3 calendar.

Also an underweight Q1 calendar. So I think they shifted out events in light of continued COVID-19 concerns and bought themselves more time, but.

But you have all of the backlog you've previously talked about.

Events that were postponed in prior years being pushed into 2022, a lot of concert excuse me artist eager to get out on the road in 2022.

The summer concert season, so youre seeing that pushing to Q2 and Q3 and so it follows logically that folks will start buying for those shows in Q1 as they make their plans for the summer and I think we did see that strengthen and concerts during the quarter.

Great. Thank you.

Thank you.

Someone comes from Tom Forte from D. A Davidson. Please go ahead.

Great.

Dan Larry Congrats on the quarter. Thanks for the questions. So first question and then a follow up so how do you think about when you have excess sales like you did in the quarter and choosing between reinvesting back in the business from a technology standpoint, or incremental marketing spend or letting it flow through the bottom line.

Hey, Tom Thanks for the question.

I think for US are our long term strategy has guided us on this right, which is to make sure that as we continue investing we we we see tangible returns.

Over a.

A link.

Right Horizon for US right as we continue to see I'd say, the leading indicators to our investments across the marketing and product front, they've all been rather strong right we've talked about.

From <unk>, however, our investments in product resonated.

With consumers and sellers and I think the data is out there whether it's our data whether it's independent sources I think all of those investments.

Our yielding and higher satisfaction amongst that group and then the question becomes is that satisfaction translating into monetize value for us and as we look at I think increased repeat rates as we look at the ability to.

Continue to outperform on driving customers and <unk> into our ecosystem I think those all look like great long term investments for us where we continue to have confidence in that and so I think as we continue to invest I point to all of the signs remain extremely encouraging that we are making investments.

In the right areas I think the strength of our core business further allows us the ability to do that right. As you look at a business that has always been structurally profitable and we're on top of that we're able to convert over 100% of our tickets out of free cash I think that allows us a lot of the ability to really invest I think in the thing.

That yield long term results for us and our shareholders.

I would add Greg.

I think a lot of a lot of folks out there are having to change their stripes in reaction to a palpable shift in the market and its view on profitability.

We have the fortune good fortune of having long been focused on profitability.

All the way back to when the business was founded but through the private equity ownership and so there is already built into the DNA of <unk>.

Every project has to stand on its own from an ROI standpoint, if it's not working you stop it if it is where do you put more fuel on it.

No real shifts our posture relative to historical.

Excellent Alright, and then the second question the more fun, one for the phone or one sustaining what I'm talking about your long term vision and M&A, how should we think about your desire to operate multiple marketplaces.

Marketplace brands like Etsy has done.

Pulling up the category like Grubhub is done.

Adding complementary assets, which you did with such as sports or your build versus buy for incremental technology.

Yeah.

A question Tom as you know.

And by the way I got to say I always love it when Larry passed himself on the back with the private.

Private equity background, but.

We are very disciplined as what I would continue to say and will remain so and even in the area I think Tom that you bring it up here you know I think the keys for us as we look to invest.

Always around.

Are there complementary areas that we believe we can truly drive.

Synergy through our existing asset base and I always go back.

A great example of that.

Consumer base very complementary with us when you think through all of the signals.

Increased consumer interest that we get.

Within the product.

That continues to be something we're very excited about the.

The fact that it Tam additive is also another component I think that is great and I think those principles. When you look at that synergy consumer value and engagement Tam additive I think that's going to continue to drive.

A lot of our decisions both on the organic but certainly on the inorganic front.

Look at inorganic opportunities again that are out there to build versus buy decision I think once against it in a great position of strength right with a with a strong balance sheet, great cost structure and the ability to accelerate those efforts should they become.

Available.

Great. Thanks, Dan Thanks, Larry.

Thank you our last question comes from Andrew Merrick from Raymond James. Please go ahead.

Thanks for taking my questions. Stan you touched on this in your prepared remarks, but I thought the net promoter score data was really interesting are there a couple of key issues that you could really point to that's driving that delta, especially on the seller side between <unk> and the rest of the competition and then I have an.

I can follow up after.

Sure, Yeah, Hey, Andrew.

Thanks for the question there I think we look at it if you start on the sell side you know I think it just comes back to you.

Product and service I think David's origin, I think with <unk>.

Tremendous founders with lots of experience I think in sell side of business I think our product and our service strategy.

Again as a as a truly a marketplace with two sides. We've never forgotten that we have customers on each side of the equation and when you look at what we've done in terms of investing across our sky box platform, which continues to be the leading ERP.

With new features better data better integrations to allow sellers to grow and run their businesses independently I think it's no surprise investments we've put there on top of I would say.

Think about customer service experience, we certainly invested across that space as well when you hear about <unk>.

<unk> in our in our customer service that certainly extends to the seller side.

See that that that difference certainly.

Flat in the seller sentiment on the NPS side.

As you look onto the sand side of the equation I think all the things we've been investing in for the past two to three years are truly coming to light and resonating again with folks who have actually use the product.

Failure with us in our frequent ticket buyers in our investment.

Customer service Newsweek being the best barometer out there in the <unk>.

Paul independently all indicating we have some of the best customer service out there are rewards program coming through it's purely a differentiate it.

And then certainly the discovery elements across our enhanced web and App product I think all of those things yield an ecosystem across the buy side and the sell side, where the differentiation.

Paid features are translating into more value for our constituents and that truly I think is reflected in the NPS scores that we see across the category.

Great. Thank you and then a quick one on cancellations. It's good to hear that it's trending in the right direction for <unk>, but as we get incremental news about tour cancellations or things like that there may be unexpected.

Is there a good rule of thumb that we can have to kind of assess the sizing of such an impact for maybe like an arena style tour.

Yes, I can.

Give you.

I think we had.

Okay.

Hopefully a fairly unique experience going forward with the Foo fighters, where they were.

The ancillary and Dion or bolt call it top 10 type.

High performers.

They in MLD, we're all pretty similarly sized and those three collectively made up about half of the cancels. So you can sort of back into.

Meaningful tour.

And the $6 7 million of Govt range, obviously subject to the number of shows and how many you cancelled and whatnot, but I think thats, a reasonable directional assumption for that arena style to it.

Got it thank you very much.

Yeah.

And we have no further questions at this time I would now like to turn the call over to Kate coupled for closing remarks.

Thanks, everyone for joining us today to discuss our record first quarter.

Since our call have a great day.

And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Yeah.

Okay.

[music].

Welcome to the different seats Q1, 2022 earnings Conference call. My name is Richard and I'll be your operator for today's call.

And you touched on phone as a reminder, the conference is being recorded I will now turn the call over to <unk> head of Investor Relations Ms. <unk> you may begin.

Good morning, and welcome to visit States' first quarter 2022 earnings conference call I'm, Kate toppled head of Investor relations activity joining.

Joining me today to discuss the results are Stan Chia, Chief Executive Officer, and Larry Seay, Chief Financial Officer.

By now everyone should have access to the company's first quarter earnings press release filed earlier. This morning, we have also provided supplemental earnings slides.

This release and earnings slides are available on the Investor Relations page or visit <unk> website at investors got vivid seat dot 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 the company's 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 we believe 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 other filings with the SEC.

Now I would like to turn the call over to Stan.

Good morning, everyone and thank you for joining us today I'm excited to speak with you about our strong record setting first quarter and the continued momentum we are seeing across our business.

In the first quarter of 2022, we achieved our highest ever Q1 marketplaces <unk> and revenue.

The results we delivered in the first quarter demonstrate growing consumer demand over the last year and our outpaced performance in that environment.

Fans are eager to attend live events, and we are well positioned to capitalize on that demand as such we have raised our 2022 guidance.

Gary to share our financial results in more detail.

And marketplace gross order value or <unk> of $131 million in revenues and $21 million and adjusted EBITDA.

As a technology platform and marketplace, we sit at the intersection of supply and demand from this vantage point in Q1, we continued to see the strong and growing consumer demand that we saw in the fourth quarter and it's been exciting to witness the energy of fans connecting with each other and their favorite artists or sports teams through life.

Event experiences.

During March Madness, we saw the most in demand College basketball single game ticket that we've ever track with Duke versus UNC and in advance of the fall 2022 football season, we've seen excitement from consumers building since early March when our website traffic spiked with fans looking for ticket even without <unk>.

I'll schedule.

Additionally, even with the MLB season delay, we're seeing much stronger demand for baseball tickets compared to 2019, which was the last baseball season not impacted by the pandemic.

To seek out this kind of connection we remain committed to empowering and enabling these moments.

We are also seeing success with the investments we've made in our marketplace that continues to bring differentiated value to our customers whether they are fans are sellers.

For fans, our superior technology powers, a marketplace that delivers an extensive breadth and depth of tickets at a competitive value along with an industry leading rewards program.

We are not alone in this belief recent.

Recent sentiment from both fans and sellers alike, who have used our product or our frequent ticket buyers show that our efforts have earned us some of the industry's highest net promoter scores. We've seen this reflected in both the data we track as well as independent sources, such as the Harris poll, where we had the highest recommendation percentage among.

Peers.

As a growing and innovative technology company with validated customer sentiment brand awareness is an important pillar for us to build upon our momentum and draw more users onto our platform alongside our brand investments. We will also continue to invest in performance marketing channels to further grow our marketplace.

<unk>.

Amplifying our message to maximize awareness of what differentiates us continues to be an opportunity that we believe will have long term benefits. While we're still early in these efforts and live events are a low frequency category. We ultimately believe strategic investments year will drive lifetime customer value through acquisition efficiency.

And retention benefits.

That said, we view the ROI profile is a J curve with at least several quarters before our results appear in our margin profile.

We also continued to innovate evolve and expand our offerings to engage with and reached new live event fans.

I said last quarter user engagement within our product ecosystem remains central to our long term strategy.

We continue to quickly grow users are better our daily fantasy sports App and those users are highly engaged continuing to place more than 10 entries per month on average.

So we have started surfacing cross platform content and I'm pleased to note that customers who are active on both the vivid seats and better platforms play more frequently place larger entries and deposit more than those who solely use the bench of app.

<unk> is currently in a hyper growth phase off a small base and we are investing in infrastructure to scale, our offering while our core business remains of live events marketplace. We view batch of a Tam additive and the high overlap between sports fans interests and live events and daily Fantasy sports will allow us to leverage.

Profitable customer acquisition and drive increased engagement through a more relevant and differentiated platform ecosystem, while we continue to make progress building and integrating our products and brands. We are still early and unlocking better potential and remain excited about its future prospects.

<unk> 2019 by a wide margin.

With longtime partner ESPN, we recently launched hot ticket.

See its branded and exclusive segment, which spotlights the most in demand match ups across all mediums audio digital and television.

Digital first booking experience unlocks exclusive access to unforgettable experiences across sports music and more for capital one rewards cardholders. We created this new experience by leveraging our marketplace inventory technology fulfillment and customer service capabilities, we will continue to seek.

Out mutually beneficial partnerships and our existing ecosystem as well as in other categories that improve the experience for our customers, while leveraging our existing brand traffic and reputation.

Before I turn the call over to Larry I wanted to congratulate and thank both Riva calls who has been promoted to the new role of chief product and strategy officer, and Ted pick US who has been promoted to chief accounting officer for their dedication and leadership.

Again, congratulations and a sincere thanks to both Riva and Ted.

With that I will turn it over to Larry.

Thank you Stan.

I am proud to present, our financial results for yet another record breaking quarter as our marketplace flywheel continues to perform.

As Stan mentioned, we achieved our highest Q1 marketplace <unk> and revenue ever in the first quarter of 2022, despite the impacts of unexpectedly high cancellations.

These results speak to the underlying strength of the demand environment and give us the confidence to raise our 2022 <unk> and revenue guidance early in the year.

First quarter marketplace, <unk> marketplace orders and revenues were all well above pre COVID-19 levels from Q1, 2019, which we view as the most relevant comparison period, given the severe impact of Covid during Q1 of 'twenty 'twenty and 2021.

Our record Q1 marketplace year over year was driven by increases in both market place orders.

And average order size.

Average order size was $368 for the quarter, which represents a 12% increase for 2019 levels.

We have included average order size by quarter from 2019.

One of this year in the appendix of our earnings presentation to provide additional historical context, given the heightened average order size volatility experienced in 2020 and 2021 due to COVID-19.

We have historically seen average order size grew 3% to 4% annual rate.

Similar to Q1 marketplace Deogee Q1 revenues of $131 million were up substantially compared to both 2019 and 2021.

Great, which we calculated by dividing our marketplace revenues by our marketplace T. O D was approximately 15% in Q1.

While the reported take rate was lower than in Q4, our underlying cause grades remain largely consistent with historical levels.

The impact of our loyalty program, which is accounted for as a contra to revenue.

Other adjustments such as cancellation related charges and charge backs, which were elevated in Q1.

The higher than expected cancellations in Q1 were comprised of a mix of both COVID-19 and non COVID-19 related items.

The omicron variance impact on cancellations in Q1 was largely confined to January it reduced substantially upon the reduction of discounts.

Subsequent to omicron, there were several significant cancellations not related to COVID-19.

The MLB locked out.

Beyond that who fighter.

These non COVID-19 related cancellations accounted for roughly half of the cancels in the quarter.

In the first quarter, we generated 21 million of adjusted EBITDA and a 16% adjusted EBITDA margin.

We continued our investments into our plan.

And our public company infrastructure, while also positioning our business to support higher G. O V. After running very lean very hands on it.

We believe we have now right sized our cost base at a more sustainable run rate.

Our EBITDA in the quarter was also impacted by the previously noted higher than expected cancellation related items.

Specifically cancel G O V. In Q1, 2022 was four 5% of pre canceled Yogi, which compares to 1% in 2019.

When an event is canceled we refund customers and received the ticket costs back from sellers.

Generally do not recover other expenses such as marketing.

As such our adjusted EBITDA would have been roughly $4 million higher with adjusted EBITA margin of roughly 300 basis points higher cancellations than consistent with 2019 levels.

In February we completed a refinancing that further reduced our debt balance and interest expense.

This refinancing reduced our debt principal outstanding to $275 million.

Extended our debt in 2029.

Reduced our interest rates.

And provided us with a $100 million undrawn revolving credit facility.

We generated $24 million of classroom operating expenses in Q1 and ended the quarter with $304 million of cash and $39 million of Nat cats aren't here.

It's an environment of rising interest rates, we are well situated as a growth company that also has a long track record of profitability and strong cash flow conversion.

We will deploy our cash and balance sheet to compete and also consider M&A for synergistic opportunities and further enhancing the product and technology that power or flywheel.

Following a robust demand in Q1, coupled with the MLB lockout resolution, which include the full 2022 schedule, we are raising our 2022 financial guidance.

We now anticipate 2022 marketplace to year over year to be in the range of 2.8 from $3 5 billion.

Representing 22% year over year growth at the midpoint.

We are also raising our recording 22 revenue guidance to the range of 520 to 555 million equivalent to 21% year over year growth at the midpoint.

Due to the cancellation of the headwinds experienced in Q1, we are maintaining our EBITDA guidance at 110.

$15 million.

Our adjusted EBITDA guidance continues to reflect investment in our brand investments to scale, our daily fantasy sports offerings and the build out of our public company infrastructure.

Relative to 2019, the aggregate spend in these categories collectively represent $33 million of incremental expense.

Our robust cash flow generation allows us to pursue multiple exciting growth levers in our core as well as Tam additive areas such as touch up.

We continue to believe our adjusted EBITDA margins will be at or above 30 per se that the long term as we reap the benefits of these near term investments.

Even in 2022 is our full year guidance implies you expect margins to improve from the first quarter as cancellations cutting back toward historical levels.

I'd like to contextualize, our strong Q1 performance and are now higher 2022 guidance within the broader macroeconomic environment and specifically within the live events environment.

Our marketplaces, a barometer of supply and demand and order momentum through Q1 is suggestive of a healthy environment.

We believe our business has built in protections against and place them as.

As higher ticket prices will result in more G O V.

Because our revenue is based on a percentage take rate higher revenue.

Most of our costs are variable and we anticipate with broadly move in response to replace and in a similar manner as our T O D at revenue.

We are aware of the broad concerns regarding the macroeconomic environment and how that may impact consumer discretionary spending.

I'd first like to confirm that our business is geographically focused in North America, and we do not have meaningful exposure to any of Ukraine, Russia or China.

More broadly our record volume for the past four quarters indicates demand momentum in the short term and secular trends that are in our favor as we look further out.

While the potential impacts of a recession would depend on specific facts and circumstances.

Combination of secular tailwind favoring experiences over good.

Coupled with consumers being deprived of live events during the pandemic.

Gives us confidence and continued strong demand across our categories.

On the supply side artists are eager to secure again post pandemic as touring provides as much as 90% of artist income.

We are seeing that that capacity added for 2022 and hearing encouraging commentary around supply in 'twenty three and beyond.

With that I will hand, it back to Stan for closing remarks.

Thanks, Larry and conclusion vivid seats continue to break records this quarter and I'm truly excited about the momentum we are seeing in our business. We remain confident in our long term business outlook and as we look to the future we believe that our differentiated offering superior.

Thank you we will now begin the question and answer session.

Have a question. Please press zero one on your Touchtone phone, if you wish to be removed from the queue. Please press zero two if youre using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again, if you have a question. Please press zero one on your Touchtone phone.

We also ask that you. Please limit your questions to one question and one follow up question.

Yeah.

And your first question on line comes from Mr. Ralph <unk> from William Blair. Please go ahead.

Good morning. Thanks for taking my question first question just on terms of brand investment and increased investments in performance marketing is down I think you're talking about on the call can you maybe just give us some perspective, you know how youre seeing those returns in both categories. You talked about the ROI profile is a J curve, but maybe just sort of give us a sense of kind of return on that spend and what you are saying then I have a follow up.

Yeah, sure Hey, Rob.

Yes, I think I think first and foremost I think as we continue to invest in brand and product and as we shared you know I think we're seeing.

Our efforts really are.

Resonate with consumers right across the board all of our sources tell us that you know I think there.

Our investments there are yielding in the largest percentage of consumers recommending us.

And we're really excited about all those net promoter score increases.

If we then look through you know I think what we're seeing some of the.

It impacts their brand I think one of the more exciting components as we look at the NBA NHL.

Isn't that just ended you know I think we've seen upwards of 10% increase in repeat rates, which I think are a combination of our brand and rewards programs.

Working effectively.

It's kind of a performance marketing side as we continue to.

Invest in all things marketing you know, we expect that to ripple through.

Those efforts as well.

Great and maybe just maybe talk to more recent kind of quarter to date performance, obviously people want to get out again now that restrictions are lifted but how do you think about that in context of <unk>.

Increasing variance.

Sections of the United States are you seeing cancellations at all or how is that may be impacting the business.

Yeah, you know, obviously and I think if we look at everything we look for safety first amongst consumers, but but as we see trends you know and I point back at current quarter all of the commentary around the industry. We continue to see a lot of bullishness.

In this phase fans wanting to get out there.

Our AOS as we talked about higher than historical growth rates.

Demand continues to outpace supply and perhaps one other.

Industry thing I spoke about.

At travel.

If you look at how.

How much are people traveling right to get through events and we've seen fans now traveling almost more than 20 miles up more than they used to to get to an event. So I think overall, we continue to see a.

Largely that.

A lot of excitement from consumers and.

Willingness to go to go to a X.

Ralph I know there was a good amount of mentioned.

I mentioned around the cancellations in Q1.

And how they were higher than we expected largely on the back of non COVID-19 related items.

We can we can say that while we don't want to jinx. It as we sit here halfway into Q2, we've seen a V.

Very meaningful reduction in cancels to date in Q2.

Okay. That's helpful. Thanks, Larry Thanks, Dan.

Thank you. Our next question on line comes from Maria <unk> from Canaccord Genuity.

Good morning, and thanks for taking my questions.

First it seems like demand here remains pretty strong and you sort of touched on this a little bit but could you talk about what sort of embedded in your guidance from the macro sort of standpoint sort of including elevated guest prices consumer spending and possibly you called experience.

Yes, so as we put together our guidance.

I think that was.

We call it early in the inflation story.

At this time.

I think there was a lot more belief that with.

The transitory element made sense and could hold.

So I don't think.

Longitudinally.

<unk> had the benefit of the kind of latest developments or it looks like it'll be a bit more persistent and drive.

Meaningful.

Chris excuse me increasing.

Interest rates.

But I think overall.

Landscape as we can see it in our category has remained pretty resilient, we havent seen it flow through.

So demand are impacting consumers in a way that we've heard others allude to.

So that's certainly not a guarantee that that won't change, but I think we're seeing that.

Consistent.

Demand trends as we saw.

In the period, when we put the guidance together.

Okay.

Got it that's very helpful. And then secondly can you maybe just talk about how have attendance and pricing been trending for some of the key Q2 sporting events like the NBA playoffs.

NHL playoffs, Masters, and Chicago et cetera.

Yeah, sure Hey, Maria.

Yeah.

<unk>, maybe I'll start there was one when we looked at that pretty pretty unbelievable across the season I think a lot of them are.

And you had interest I think some of them Mark key things, we talked about there that final Duke home game I think we saw prices there rivaling Super Bowl prices right. So I think just such a strong group and certainly when we look at the actual tournament.

Under the same lens of how much is demand outpacing.

Supply certainly saw that to be the strongest tournament.

We've ever seen.

And you know what you're looking at really all recently, perhaps.

As soon as this past weekend.

One in.

In Miami.

We've seen F. One sales and certainly with a lot of renewed interest in the category.

Tripling what that had been historically on the platform and average order size. There you know north of $3500. So I think we continue to see some of the marquee events.

Mentioned draw a lot of strong interest from from crowds and fans out there.

Great. Thanks, so much for the color.

Thank you.

Okay.

Our next question on line comes from Stephen Ju from Credit Suisse.

Hi, This is a first of all on for Stephen Ju.

So I know, it's still early but could you. Please update us on some of the details and planned product integration, so far with Tetra and.

What have you learned so far and what kinds of cross promotion of revenue synergy opportunities do you think you can unlock going into the future. Thanks.

Sure.

Through the platform continued to be really compelling reason.

For us to invest in and to think about integrations are right. When you look at what we've done.

You can clearly see if you if you look into the batch of product that we've enabled single sign on capability, meaning you can actually log into the batch of App with your <unk> logging, which then allows us a lot of insight and the ability to understand interest again across multiple platforms. When you look at what we've been able to tap.

And I alluded to this in the prepared remarks, we continue to see.

Users, who are using both of our product today.

Resulting in a much more engaged user across the platform right and whether they're playing more whether they are depositing more.

We're continuing to see that engaged user engagement across that.

Continues to fuel bullishness on our side as we move forward with integration across the product and brand.

Got it thank you and then.

Just one follow up on I think.

Revamp of the website and the App has been a key initiatives. So can you talk about kind of what kind of directional improvements you may be seeing so far.

In terms of engagement and retention.

No you mentioned, the 10% increasingly peak rates, but was that from the revamp of the website and app.

Yeah, and just general.

Improvements youre seeing as you roll out these changes.

Yeah sure I think.

All of these things work together right as you look at our investments around brand product improved web improved rewards program.

I think the stat I shared earlier is one of all those things working together, where we've seen repeat rate and a.

And a CAD in Q2 sports categories increased double digits from where they've been historically I think it's something we're very excited about and the other thing I'd point you to as we think about all of these medicine collectively.

Our ability to become somewhat of a discovery channel for users and as we've talked about we've seen traffic.

Coming to our website.

Round NFL, even before a scheduled release right. So I think the US I think again, that's a fantastic sign.

People coming to us and using us as a discovery channel learning about the brand and subsequently at the right time converting over when there's a transaction. So I think all those things I think are a culmination of all the efforts that we put into investing behind our product and our brand.

And I might add one thing as part of the new.

Web rollout, there's both the front end difference, but then also some backend.

<unk> that allow us to iterate more quickly.

Run more tests et cetera.

And while that's an ongoing process and a benefit that will bear fruit over subsequent quarters and years.

<unk> already seen in the first few months. After we were alive a number of those experiments yield meaningful improvements in click through rates. Since you started tracking through our funnel and so we're very excited about what that backend enhancement will enable in terms of.

New enhancements to the front end.

Got it thank you very much.

Thank you. Our next question on line comes from short term to Julia from Evercore ISI. Please go ahead.

Hi, This is named Peterson pinch hitting for shred. It this morning.

One quick question following up on the demand question that was asked earlier, how much visibility you guys, adding to demand trends for the year and what are you seeing that you view now as leading indicators of demand. Thanks.

Okay.

Yes, I think we can certainly.

Look to a few different elements.

Think about.

The marketplace Theres, an intersection of supply and demand.

And so step one is verifying that you have supply and ideally growing supply.

We feel.

Quite good that those indicators have been and remain quite strong and the duration of that shrink seems to be.

Extending not shortening.

And generally speaking.

That supply, particularly in areas, where theres variability like concerts, where they don't need to go on tour.

When they come online if there is a belief that there is ample demand for it.

So while it's certainly difficult to prognosticate on how people are going to field six months from now.

I think all of the indicators that you can see with some historical lag continue to remain positive and then what we're seeing.

Performance.

We spoke to for the quarter.

Certainly demand was robust throughout that period, so the real time feedback, which was strong as well.

So other than.

The theoretical concerns around which shouldnt higher gas prices have an impact shouldnt decreasing stock prices have an impact.

Other than that quantification, we are not seeing or had anything that you can point to.

That would suggest a meaningful shift downward.

Great. Thanks, and just to kind of follow up on that for the.

Or any particular region or vertical live sports content your theater.

You could call out in Q1 that came in stronger than expected.

Yes, I think we had a it was a pretty nice quarter for concerts, and I think that generally foots with what you're hearing the folks at wide nations say when they talked about an incredibly robust Q2 and Q3 calendar.

Also underway Q1 calendar, so I think they shifted out even in light of continued COVID-19 concerns and bought themselves more time, but.

But you have all of the backlog, we previously talked about.

Some events that were postponed in prior years being pushed into 2022, a lot of concert excuse me artist eager to get out on the road in 2022.

The summer concert season, so youre seeing that pushed into Q2 and Q3.

So it follows logically that folks will start buying for those shows in Q1 as they make their plans for the summer and I think we did see that strengthen and concerts during the quarter.

Great. Thank you.

Thank you.

Someone comes from Tom Forte from D. A Davidson. Please go ahead.

Great.

Dan Larry Congrats on the quarter. Thanks for the questions Alright. So first question and then a follow up so how do you think about when you have excess sales like you did in the quarter and choosing between reinvesting back in the business from a technology standpoint, or incremental marketing spend we're letting it flow through the bottom line.

Hey, Tom Thanks for the question.

I think for US are our long term strategy has guided us on this right, which is to make sure that as we continue investing we we we see tangible returns.

Over.

A link.

Right Horizon for US right as we continue to see I'd say, the leading indicators to our investments across the marketing and product front, they've all been rather strong right we've talked about.

<unk> from <unk>, However, our investments in product that resonated.

With consumers and sellers and I think the data is out there right, whether it's our data whether it's independent sources I think all of those investments.

Are yielding and higher satisfaction amongst that group and then the question becomes is that satisfaction translating into monetize value for us and as we look at you know I think increase repeat rates as we look at the ability to.

Continue to outperform on driving customers and <unk> into our ecosystem I think those all looked like great long term investments for us where we continue to have confidence in that and so I think as we continue to invest I point to all of the signs remain extremely encouraging that we are making investments.

In the right areas I think the strength of our core business further allows us the ability to do that right. As you look at a business that has always been structurally profitable and we're on top of that we're able to convert over 100% of our kids out of free cash I think that allows us a lot of the ability to really invest I think in the thing.

That yield long term results for us and our shareholders.

I would add.

A lot of a lot of folks out there are having to change their stripes in reaction to a palpable shift in the market and its view on profitability I think we have the fortune good fortune of having long been focused on profitability.

All the way back to when the business was founded but through the private equity ownership and so there is already built into the DNA of view.

Every project has to stand on its own from an ROI standpoint, if it's not working you stop it if it is where do you put more fuel on it.

No real shifts our posture relative to historical.

Excellent Alright. So then the second question the more fun one for the phone or one sustained I wanted to talk about your long term vision and M&A, how should we think about your desire to operate multiple marketplaces marketplace brands like Etsy has done rolling up the category like Grubhub has done adding complementary assets, which you did with such.

Sports or your build versus buy for incremental technology.

Yeah, well a lot of the question Thomas as you know.

And by the way I got to say I always love it when Larry passed himself on the back with the private.

Private equity background, but.

We are very disciplined as what I would continue to say and will remain so and even in the area I think Tom that you bring it up here you know I think the key for us as we look to invest.

Always around.

Are there complementary areas that we believe we can truly drive.

Synergy through our existing asset base and I always go back it's such a great example of that.

Consumer base very complementary with us when you think through all of the signals.

Increased consumer interest that we get.

In the product.

That continues to be something we're very excited about the.

A lot of our decisions both on the organic but certainly on the inorganic front.

Look at inorganic opportunities again that are out there to build versus buy decision I think we once against it and are in a great position of strength with a strong balance sheet, great cost structure and the ability to accelerate those efforts should they become.

Available.

Great. Thanks, Dan Thanks, Larry.

Thank you.

Last question comes from Andrew Merrick from Raymond James. Please go ahead.

Thanks for taking my questions.

And you touched on this in your prepared remarks, but I thought the net promoter score data was really interesting are there a couple of key issues that you could really point to that's driving that delta, especially on the seller side between <unk> and the rest of the competition and then I have an unrelated follow up after.

Sure, Yeah, Hey, Andrew.

Thanks for the question there I think we look at it if you start on the sell side you know I think it just comes back to you know.

Product and service I think David's origins, you know I think.

With two tremendous founders with lots of experience I think in sell side of business I think our product and our service strategy again as a as a as truly a marketplace with two sides. We've never forgotten that we have customers on each side of the equation and when you look at what we've done in terms of investing across our skybox plaque.

Form which continues to be the leading ERP.

With new features better data better integrations to allow sellers to grow and run their businesses independently I think it's no surprise that the investments we've put there on top of I would say.

About the customer service experience, we certainly invested across that space as well when you hear about.

Our investments in our in our customer service that certainly extends to the seller side and as you can see that that that difference.

Flack in the seller sentiment on the NPS side.

If you look onto the sand side of the equation I think all the things we've been investing in for the past two to three years are truly coming to light and resonating again with folks who have actually use the product and are familiar with us and our frequent ticket buyers are investment in.

Customer service.

<unk> being the best parameter out there and the Harris poll independently all indicating we have some of the best customer service out there are rewards program coming through it's purely a differentiate it.

And then certainly the discovery elements across our enhanced web and App product I think all of those things yield an ecosystem across the buy side and the sell side, where the differentiated features are translating into more value for our constituents and that truly I think is reflected in the NPS scores that we see across the.

Corey.

Is there a good rule of thumb that we can have to kind of assess the sizing of such an impact for maybe like an arena style tour.

Yeah, I could give you.

I think we had.

Hum.

Hopefully a fairly unique experience going forward with the Foo fighters, where they were.

Dan Celine Dion or bolt call it top 10 type.

High performers.

They in MLD, we're all pretty similarly sized and those three collectively made up about half of the cancels. So you can sort of back into.

Meaningful pure size in the $6 million to $7 million of Govt range, obviously subject to the number of shows and how many you cancelled and whatnot, but I think thats right.

Reasonable directional assumption for that arena style to it.

Got it thank you very much.

Yeah.

And we have no further questions at this time.

Like to turn the call over to Kate coupled for closing remarks.

Thanks, everyone.

One for joining us today to discuss our record first quarter. This concludes our call have a great day.

And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Q1 2022 Vivid Seats Inc Earnings Call

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