Q4 2022 Vivid Seats Inc Earnings Call
Speaker 1: the call
Speaker 2: Good morning and welcome to the Vivid Seeds Board Quarter 2022 Endings Conference Call. Following management's prepared remarks, we will open the call for Q&A. I would now like to send the call over to Kate Capose. Please go ahead.
Speaker 3: Good morning and welcome to VividSeats fourth quarter 2022 earnings conference call. I am Kate Koppels, head of investor relations at VividSeats.
Speaker 3: Joining me today to discuss Vivitiv's results are Stan Chia, Chief Executive Officer, and Larry Fay, Chief Financial Officer.
Speaker 3: By now, everyone should have access to the company's fourth quarter earnings press release spelled earlier this morning.
Speaker 3: We have also provided supplemental earnings slides. The press release and earnings slides are available on the Investor Relations page of the VividSeats website at investors.vividseats.com.
Speaker 3: During the course of this call, management may make forward-looking statements within the meaning of federal securities laws.
Speaker 3: 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.
Speaker 3: On today's call, we will refer to adjusted EBITDA and adjusted EBITDA margins, which are non-GAAP financial measures that provide useful information for our investors.
Speaker 3: 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. To incorporating the bias function, we added the Turkey
Speaker 3: And now I would like to turn the call over to Stan.
Speaker 4: Good morning, everyone, and thank you for joining us today.
Speaker 4: 2022 was a stellar year for live events and an exceptional year for VividSeas. Our team capitalized on strong demand, continued to innovate and expand our suite of leading marketplace products, navigated the competitive landscape with agility, and delivered on financial and strategic objectives that strengthened our business for 2023 and beyond.
Speaker 4: Looking first at the most recent fourth quarter, I'm proud to report that we generated 846 million of marketplace GOV, 165 million of revenues, and 34 million of adjusted EBITDA.
Speaker 4: For the full year 2022, we delivered Marketplace GOVs of $3.2 billion, revenues of $600 million, and adjusted EBITDA of $113 million.
Speaker 4: At VividSeats, we commit as a team to achieve our goals.
Speaker 4: Over the last year, we've demonstrated our ability to leverage our robust tools and execute adeptly, regardless of the environment, which became more challenging as the year progressed.
Speaker 4: We continue to set new records in 2022, with Marketplace's GOV and revenues both surpassing 2021's records by more than 30%.
Speaker 4: 2022 Marketplace GOV and revenues also exceeded our initial guidance midpoint by 10%.
Speaker 4: Even with unprecedented competitive pressures in the second half, we delivered adjusted EBITDA within our guidance range while making deliberate investments to drive higher customer lifetime value.
Speaker 4: As we all witnessed, 2022 was a phenomenal year for the live event industry.
Speaker 4: Live events were back, and then some. After seeing some cancellation impact from the Omicron variant in the first quarter, the risk of substantial disruption from COVID-19 waned throughout the year.
Speaker 4: As a result, fans were able and eager to get out and see the artists and teams they love. Among our event categories, which include concerts, sports, and theater, concerts were a particular standout, benefiting from strong demand as well as a tailwind from postponed events originally scheduled for 2020.
Speaker 4: As the year progressed, macroeconomic pressures grew, but live event demand remained resilient.
Speaker 4: We consistently raised our guidance from Marketplace, GOV, and revenues as we capitalized on strong demand.
Speaker 4: We are hopeful that this resiliency continues in 2023, but ultimately that will depend on how the economy evolves and where consumers prioritize their spend.
Speaker 4: That said, exciting tour announcements from top artists such as Beyonce, Madonna, Metallica, and SZA, in addition to several mega tour announcements last quarter, are promising. What's clear is that fans are passionate about their favorite artists and team and we continue to invest in that passion.
Speaker 4: creating exceptional experiences and enabling fans to attend more of their favorite events.
Speaker 4: Our focus on user engagement within our product ecosystem continues to be one of the pillars of our long-term strategy.
Speaker 4: In 2022, we rebranded, integrated, and enhanced VividPix while continuing to grow our user base.
Speaker 4: Year over year, we increased both our monthly active users and new accounts created by close to 300%.
Speaker 4: In the fourth quarter, we launched in-game play capability within Vividpix, and now our Daily Fantasy Sports users can place entries for contests covering the second half of the game.
Speaker 4: Whether fans are attending a live event or at home watching, fans may place entries as the game approaches and as the action of all.
Speaker 4: This upgrade adds another level of excitement to the vivid picks experience as fans engage with their favorite teams and athletes, as well as with other DFS players through social elements.
Speaker 4: This is especially beneficial for cultural touchstone events like the Super Bowl.
Speaker 4: We also create exceptional experiences through our brand partnerships such as Rolling Stone.
Speaker 4: Collaborations on exclusive live events are a key component of our partnership and for the third year We were proud to partner on the Rolling Stone live series and bring to life one of Super Bowl weekend most anticipated events
Speaker 4: Through our loyalty program, Vivid Seats Rewards, we surprised loyalty members with invitations to an exclusive live experience that expertly intersected the worlds of music, culture, and sports.
Speaker 4: Brand partnerships and exclusive events such as these bring differentiated experience and value to our buyers in addition to driving brand awareness with the right audiences.
Speaker 4: As we reflect on the past year, many of our exciting announcements focused on the buyer side of our marketplace.
Speaker 4: including our real rewards for real fans campaign and our partnerships with Leacher Report and the New York Post.
Speaker 4: This quarter, we are pleased to share a substantial development on the seller side of our marketplace.
Speaker 4: Skybox has been the industry leading ERP for professional sellers for years. And this quarter we are excited to announce Skybox Drive, an intelligent automation that optimizes revenue for our sellers on Skybox.
Speaker 4: Our broad swath of industry data has allowed us to develop a product that provides sellers a turnkey solution to customize and automate their revenue optimization strategies.
Speaker 4: seamlessly integrated into Skybox and powered by our marketplace data.
Speaker 4: Together, Skybox and Skybox Drive presents a unique and unmatched offering that will further deepen our stellar relationships as well as continue growing our install base.
Speaker 4: Guybox combined with our proprietary marketing algorithms provide us with the most complete view of the industry in real time, allowing us the ability to efficiently and effectively acquire new buyers. And recently with unified user profiles across vivid sees and vivid picks, we have unique insights into fan preferences that power and evolving person.
Speaker 4: and sellers to drive long-term differentiation and stickiness in our marketplace.
Speaker 4: We are seeing encouraging signs of that stickiness with a large and growing base of sellers on Skybox and increasing buyer repeat rate.
Speaker 4: In 2022, particularly in the second half, we saw competitors ramp aggressiveness in performance marketing channels, which elevated customer acquisition costs across the industry. Meanwhile, we continued to build differentiated products, drive brand affinity, and target high-value audiences with attractive repeat tendencies to create value in the long term.
Speaker 4: Loyal buyers making repeat purchases are accretive to margins and we believe we can temper near-term cash headwinds with increased customer lifetime value as our initiatives continue taking hold.
Speaker 4: Next, I will address some of those initiatives in more detail.
Speaker 4: 2022 was an exciting year for Vividseeds as we used new and expanded strategies to drive engagement and grow affinity for our brand.
Speaker 4: Beyond integrating VividPix, we also expanded and invigorated our social and experiential presence. These efforts included new platforms such as TikTok, expanded partnerships with influencers and creators, and new experiential activations on-site at events and festivals.
Speaker 4: With unified customer profiles across VividSeats and VividPix, we became more selective and sophisticated in targeting high value sports and music enthusiasts.
Speaker 4: We continue to grow our suite of tools to target the right buyers in a creative channel.
Speaker 4: Regardless of channel, we communicate a proven and compelling message. VivitSeeds is the only ticketing company to offer rewards, and our rewards offer real and differentiated value.
Speaker 4: With our multifaceted brand investments in play, we are seeing traction in driving targeted brand awareness and affinity.
Speaker 4: Fans are engaging with vivid seats more often while expressing positive sentiment toward the brand. In fact, our net social sentiment is highest amongst our main ticketing competitors. While opportunity to optimize our marketing capabilities and continue growing brand awareness remains, we are pleased with the results we've achieved thus far with a relatively modest brand marketing budget.
Speaker 4: We are proud of our ability to drive long-term brand affinity while remaining highly profitable and will continue to do so.
Speaker 4: Ultimately, our strategy to drive higher repeat rates is twofold. First, recruit the right buyers. Second, once inside our ecosystem, nurture each buyer with differentiated product, service, and value.
Speaker 4: We are excited that our repeat rates continue to trend higher across event categories. This includes repeat rates for new Q4 cohorts despite competitive pressures.
Speaker 4: Even in the current landscape with higher tax, momentum from our brand investments is building. As we look to the future, we expect tax to normalize, which in conjunction with brand momentum will lead to substantial margin leverage in the medium to long term.
Speaker 4: Larry will discuss our outlook for 2023 in detail, but I want to reiterate that we are steadfast in our strategy.
Speaker 4: delivering a differentiated product with a compelling value proposition that fosters value in the long term. As the landscape eventually rationalizes, we are well positioned to capture disproportionate growth and deliver long term margin expansion.
Speaker 4: In the near term, we are well equipped with a strong balance sheet and will continue to look for opportunities to accelerate growth for our current offerings, as well as to expand our TAM through both organic and inorganic investments.
Speaker 4: Before I wrap up, I want to touch on the ways we are creating exceptional experiences for all of those within our ecosystem, most importantly, our people.
Speaker 4: In December , we celebrated the grand opening of our new Chicago headquarters, and it has been so energizing to bring our employees together in a state-of-the-art collaborative workspace. This is another example of our commitment to fostering talent and encouraging innovation at all levels in our business.
Speaker 4: We have been recognized for these efforts. We earned a place on FAST Company's Best Workplaces for Innovators list and recently we were named to four of Built-In's 2023 Best Places to Work lists in both Chicago and Dallas.
Speaker 4: Lastly, we remain committed to giving back. As a marketplace that truly connects people, we understand just how much joy live events create and how they enhance the quality of life for so many.
Speaker 4: This year, we were proud to expand our CSR efforts with a partnership with Make-A-Wish, the global organization responsible for creating life-changing wishes for children with critical illnesses.
Speaker 4: Through our charitable foundation, Vivid Cheers, we are providing once-in-a-lifetime experiences by sending these children and their families to their favorite live events.
Speaker 4: With that, I will turn it over to Larry.
Speaker 4: Larry. Thanks, Dan.
Speaker 5: I'll begin with a discussion of our fourth quarter and full year 2022 results before turning to our outlook for 2023.
Speaker 5: The fourth quarter was a compelling capstone to our first year as a public company. We delivered another strong quarter, and with that, hit our revised full year guidance for each of Marketplace's GOV revenues and adjusted EBITDA.
Speaker 5: Our fourth quarter 2022 Marketplace GOV of $846 million decreased 3% year over year, driven by a 4% decline in total Marketplace orders, which was impacted by a lower than normal number of MLB Championship Series games along with competitive dynamics.
Speaker 5: For the full year 2022, we delivered 3.2 billion of marketplace GOV of 33% year over year and 40% higher than pre-pandemic levels. Fourth quarter average order size came in at $388.
Speaker 5: up slightly year over year and 9% above Q4 2019.
Speaker 5: Our quarterly AOS was volatile throughout 2020 and 2021, but his sense return to the 3-4% annual cater we have seen historically.
Speaker 5: Our fourth quarter 2022 revenues of $165 million increased 1% year over year, and our take rate was 16.6%.
Speaker 5: For the full year, revenues of 600 million increased 35% year-over-year and our K-grade was 16.0%.
Speaker 5: Our full year take rate, which is calculated by dividing our marketplace revenue by our marketplace.
Speaker 5: consistent with historical levels when considering the impact of our loyalty program, which is the count as far as a reduction to revenue.
Speaker 5: From quarterly variation in our K-grade is normal due to the mix of event categories.
Speaker 5: We also experienced additional quarterly take rate variation in 2022 as we refined our loyalty program assumptions throughout the year.
Speaker 5: resulting in relative take rate headwinds in the first half of the year compared to the second half. In the fourth quarter, we generated 34 million of adjusted EVA at a 20% adjusted EVA margin.
Speaker 5: For the full year 2022, we generated $113 million of adjusted EVA-DAH, adding 19% adjusted EVA-DAH margin.
Speaker 5: We continue to focus on cost discipline in the fourth quarter with flat sequential G&A expense, net of evertile adjustments.
Speaker 5: and expect that trajectory to continue in the next year.
Speaker 5: On the marketing front, we selectively targeted opportunities that provided the proper balance of volume and profitability.
Speaker 5: This resulted in sequentially higher adjusted e-vita-dom margins.
Speaker 5: despite continued pressure and performance marketing channels throughout the quarter. We entered 2022 targeting EBITDA margins of around 21% as we returned the business to scale, layered in public company costs, and made deliberate brand investments to position VividSeats to win in the long term.
Speaker 5: Despite marketplace, GOV and revenue coming in above expectation, EBITDA margins came in at 19%. Someone below our original target primarily due to elevated marketing activity across the industry.
Speaker 5: We ended 2022 with 252 million of cash and 273 million of gross debt on our balance sheet.
Speaker 5: Our cash balance reflects $32 million worth of share purchases in 2022, including $29 million worth of purchases in Q4.
Speaker 5: As of your end, we had repurchased 4.3 million class A shares at a volume weighted average price of $7.46 and $8 million remaining under our repurchase authorization.
Speaker 5: Our share repurchase program reduced our total shares of standing net of treasury stock to 196 million shares as of your end.
Speaker 5: This share balance includes 78 million Class A shares, which are publicly traded.
Speaker 5: and 118 million Class B shares, which are held by our private equity investors and are not publicly traded. Holders of Class A and Class B shares have equivalent per share economic interests in our operating entity.
Speaker 5: The Class B holders interest is shown as a redeemable non-controlling interest on our financial statement.
Speaker 5: and class B shares are convertible, one for one into class B shares.
Speaker 5: We present consolidated financial statements, which include the entirety of our operations.
Speaker 5: And we also present earnings per share for our Class A shares only.
Speaker 5: This ETS calculation reflects the approximately 40% economic interest in our operating entity attributed both the class A shares divided by the number of class A shares outstanding, which is approximately 40% of total shares.
Speaker 5: Our EBITDA to cash conversion in 2022 was below typical levels due to several non-occurring items, including sales tax payments, pandemic-related store credit redemptions, and normalization of seller payables, as pandemic postponements fully resolved. Our EBITDA to cash conversion in 2020 was below typical levels due to several non-occurring items, including sales tax payments,
Speaker 5: In aggregate, we estimate these non-recurring items represented $73 million of non-recurring reductions to cash flow in 2022.
Speaker 5: We have low levels of net interest expense in CapEx, and as we grow, working capital is typically a positive contributor to cash flow.
Speaker 5: With these dynamics, we expect to see normalizing cash conversion in 2023.
Speaker 5: In addition to future cash generation, we have a sizable cash balance and low level of debt, such as we can seize on strategic opportunities that may arise in ticketing or adjacent areas.
Speaker 5: VividPix is just one example of an adjacent PAM enhancing opportunity that is complementary to our ecosystem of buyers, sellers, and partners.
Speaker 5: In addition, we will continue to evaluate all available options to optimize our capital structure and enhance law in terms of shareholder returns.
Speaker 5: Turning to our 2023 Financial Guidance.
Speaker 5: We anticipate 2023 marketplace GOV in the range of 3.0 to 3.3 billion.
Speaker 5: revenues in the range of 580 to 610 million.
Speaker 5: and adjusted EBITDA in the range of $110 to $115 million. The wide event industry had a stellar 2022 with strong consumer demand and excess supply driven by postponed events originally scheduled for 2020.
Speaker 5: We believe the secondary market has grown well above the long-term trend line of 7 to 10 percent annual growth since reopening after the pandemic.
Speaker 5: As we enter 2023, coming off several years of record demand, we currently anticipate the initial growth to moderate with 2023 volumes approximating 2022 levels.
Speaker 5: of note post-pone pandemic events, which mostly consisted of concerts.
Speaker 5: provided a one-time tailwind during the second and third quarters in 2022. This dynamic will not recur in 2023 and will offset some underlying market growth.
Speaker 5: We anticipate adjusted e-thaw will be roughly flat year over year. Within the steady level of profitability, we expect the continued shift in our marketing spend towards brand investments in 2023. We are excited to have multiple avenues to build long-term value, including a growing array of marketing channels.
Speaker 5: along with strategic opportunities afforded by our profitability and strong balance sheet.
Speaker 5: The day-to-day excellence in agility, our team demonstrated in 2022 gives us confidence in our ability to seize opportunities in 2023.
Speaker 5: While we cannot precisely predict how and when the competitive landscape will evolve, history suggests customer acquisition costs will eventually subside. In the meantime, we will tactically balance volume, growth, and profitability while directing marketing spend to channels with attractive economics and investing for long-term stickiness on our platform.
Speaker 5: We continue to expect long-term adjusted evidom margins will approach or exceed 30 percent as the competitive landscape normalizes.
Speaker 5: long-term adjusted evid-dom margins will approach or exceed 30 percent as the competitive landscape normalizes. Back to you, Sam.
Speaker 4: Thanks Larry. In conclusion, it was a record 2022 for VividSeats and the broader live event industry and I'm proud of what our committed and talented team achieved.
Speaker 4: I'm confident that our team, our strategy, our investments, our technology, and our balance sheet put us in an excellent strategic position to capture and deliver value both in the near and long term.
Speaker 4: that our team, our strategy, our investments, our technology, and our balance sheet put us in an excellent strategic position to capture and deliver value both in the near and long term. And with that operator, I will open it up for questions.
Speaker 2: Thank you. Please send gentlemen to ask a question. You will need to press star 11 on your telephone and wait for your name to be announced. So, would you like a question? Please press star 11 again in order to accommodate participants in the question queue. We ask that you please limit yourself to questions only. Please send by while we compile the Q&A roster.
Speaker 2: And our first question coming from the line of.
Speaker 2: Steven Joo with Credit Suisse, Alana Salkin. Okay, thank you. So, well, I guess.
Speaker 6: You know, concerts, as you guys mentioned, particularly strong in 2022. Can you talk about what the mix of events might look like for this year? And if we are indeed going to be looking at a scenario in which sports begin to index higher and concerts lower.
Speaker 6: maybe even bad to what the mix was in 2019. Can you talk about how your customer retention rates may change? Because I would imagine there's probably greater frequency among the sports fans.
Speaker 6: And I think both you and Stan, Larry, you guys have both mentioned expectation that customer acquisition costs will otherwise normalize. So, what gives you the confidence that we will see that perhaps even this year or maybe over the longer term, because not all of it's within your control, but if you can speak to what's driving that call.
Speaker 4: and so that would be awful. Thanks. Yeah, good morning, Steven. Thanks for the question. You know, you start from maybe I'll take a little bit of where we think, you know, our investments in some of the redeemed rate dynamics that's in. And then certainly Larry kind of talked about how we anticipate the full year and the mix shaking out.
Speaker 4: Yeah, I mean, in a world where you see rising customer acquisition, like we talked about, I think it's really important that you continue to invest in the long-term sustainable things. And I think what we talked about this quarter, which we're really thrilled about, is our investments are really starting to pay dividends, you know, most notably in the form of our highest-prepete rates that we've ever seen amongst our customers.
Speaker 4: And that's really spread across the categories. I think it would be different if we said we saw higher repeat rates in sports versus concerts and we're mixing into a total higher repeat rate. But when we look at our investments in the loyalty program, some of our engagement protocols, what we're happy to see is that.
Speaker 4: You know, we're seeing repeat rates higher in every single category that we participate in. And beyond that, as we continue to drive that repeat behavior, we also continue to mix more profitably into a repeat segment of customers. All of that, frankly, allowing us to participate in a very tack intensive
environment where some of those effects might look muted at the bottom line, but internally all of that core strength is there, which I think allows us to one sustain for the very long term and two when that environment rationalizes, you'll see a lot of leverage in terms of what we're driving into.
We think users that it flows through to the bottom line. And just a little bit on that, I've done the next question. I don't think we anticipate a meaningful.
shift from the 2022 mix into 2023. And it's been reasonably balanced. We see in our business it's about 60% between concerts and beer, 40% in sports as the pre-pandemic level. And we are...
Almost right on top of that for 2022. So maybe a few basis points here and there of variance, but nothing that would impact overall mix in a meaningful way with nothing.
Thank you. Thank you. One moment please for our next question.
And our next question coming from the line-off, Raab Shockard with William Blair, you'll want to open.
Good morning. Thanks for taking the question. First question, just curious. Now the term is through a Q1. How is the quarter trending, I guess, after coming off of 2022? And then as you think about 2023, can you just remind us what we expect for seasonality through the year? Then I'd follow up, please.
Thanks, Raul. The seasonality is similar to what we historically pointed to, 23 to 24% of our full year GOV of each of quarters.
one, two, and three, and in the balance coming in Q4, which we expect will remain our strongest quarter of the year. Again, that I say we've seen robust performance and demand continue in the Q1 for short-sighted defeat. We've been waiting about a year over year.
comparisons that were laughing. Last Q1 and this will hopefully be the last time we ever said this. We were fighting COVID the Omicron variant which impacted the January body and then he had abnormal cancellations from non-COVID reasons and they'll be issues swinging beyond food fighters.
So we have not seen those recurrent, you see that the cancer that in general much lower cancels than prior year, no COVID impact. So I think we are.
expecting a pretty healthy year over year Q1 performance. The other part I've noted.
We've been a little wider on some of our marketing efforts out of the DQ1 to make sure we have powder dry as we get the back after the year with full sports season. So some may actually see some margins above full year levels in the quarter.
Great. And then Stan, you talked about brand investments, helping repeat rates. Maybe just kind of help us think through those investments for 2023 and how they could continue to benefit the repeat rates, potentially offset some of the higher levels of the impact that you think.
Yeah, sure thing. Ralph, you know, I think we've seen a lot of success, you know, when we look at our loyalty program, the components of that driving increase repeat, right? I think, you know, whether we're building that into the economics of our buy-10, get one free program, whether it's the experiential components. I think we continue to look to... us.
innovate along those dimensions, can we find new things that drive differentiated values to users? And I think you'll see us continue to drive integrated and innovative play options through VividTix. You know, we've talked about having our user base there on that platform just go 300% on a year-over-year basis where we can then, you know, use those two ecosystems to drive engagements where...
CRBO 5L on.
Thanks, Dan. Thanks, Larry.
Thank you. And our next question coming from the line-off, Maria Ripskleam, from Canada Court. Come on into this problem.
Great, thanks so much for taking my questions. First, I appreciate all the call around the 2023 outlook. Can you maybe just talk about how sort of competitor marketing span has been trending so far this year and what is embedded in your outlook in terms of expectations for competitor marketing activity? And then I have a quick follow up.
That thing is very, I think throughout 22 we saw.
a fairly consistent trend where competitor intensity was increasing with a particular shift upward starting in early Q3.
that intensity continued through Q4. I say for the large part, it's continued into Q1. And so we have presumed that that persists throughout the year and our guide.
I know we've alluded to it before, but we continue to be of the mindset that one can only lose money for so long before gravity catches you. So we don't want to predict the land with too much precision, but it does feel like current environment that has persisted in the Q1.
feels unsustainable given some of the, our understanding of some of the profitability implications of those decisions others.
Got it, that makes sense. Thanks, Larry. And then secondly, there's been a lot of sort of increased regulatory scrutiny on the music industry, or laid with the justice department sort of having recently opened an anti-tristan investigation into live nation. So, would love to hear your view on sort of on the government potentially taking some form of action.
that promoting competition is a good thing. And when fair competition exists, you see platforms like Vivitice, continue to innovate on behalf of fans with, as we talk a lot about here, you know, best in class customer service, a loyalty program that continues to drive differentiated value, Vivitics. That all exists when there's fair competition.
I would say rather than comment directly on what they're doing, I think a bunch of senators recently reviewed the industry and I think the focus and the perspective of that investigation is fairly clear. I think when you have large vertically integrated players who potentially leverage their advantages to cycle competitions, I think the end result for that is that anyone who plays by the rules is going to benefit.
And in our space, I think about things which have great momentum, like legislative ticket transferability, transparency into real supply and demand, transparency into pricing, where in particular our lean cost structure always allows us to be competitive. I look at that and say,
as there continues to be scrutiny, anything that promotes fair competition in this space, I think VividSeath is well poised to take advantage of and we look forward to seeing how that plays out.
Great. Thank you very much. Thank you. In our next question coming from the line of Thomas Porte with Z.A. Davidson, Yelena Snellven. Great. Thanks. So first off, Dan and Larry, congrats on the quarter and year. I have two comparing contrast questions. I'll ask one and then the second to follow up.
So first, can you compare contrast to sales and profitability of performance marketing versus brand marketing?
Yeah, I say.
As we've experimented, there's a little bit of a time longitudinal answer, Tom, as we've
going deeper into brand marketing, one of our tenants has been, we don't want to put too much gas on the fire until we feel like we've at a minimum replicated the lifetime economics. And so as we talked about some of our experiments being in trying to unlock that brand marketing angle, that was part of the journey.
With some of the experiments that we've been able to complete throughout 2022, we feel pretty good that these cheat that and that the economics on the brand side will at the spread state. What we've been able to deliver on this performance marketing side with the NAS basically different timing.
where you spend some of the brand dollars up front with a little more of a lag before you get the return relative to performance marketing that's more immediate feedback. But alongside that, we take the brand.
A customer acquired the brand channel, like he has higher rep, higher longevity, higher LCD. So on the dollar and percentage term basis, we think it will be FB people. And the data we're seeing now actually suggests that maybe better.
Great. And then for my second question, can you compare and contrast consumers returning to live events from influences to historical influences like fear of missing out versus a reflection of COVID-19, not unlike revenge travel?
Yeah, I can say the first crack that.
You know, I think it's we've looked at.
our guide for the year. There's a combination of both border volume and ALFs, dynamics that could tie into a fence up the man piece. And our view has been that average order size, I think. It looks like that's largely normalized. And we admitted 2022 as what I consider our historical term line.
on the orders side, you know, similarly, sports is now entering its third year of getting reopened. So I didn't grow well through that. We did, I think, express some caution relative to perhaps other perspectives out in the market on what the concert vibrance female look like this year. But overall, you know, in the world where we think seven to ten percent annual one-term growth is where the industry fits.
and we were up 40% and 22% were out of 2019. Having 23 as a flatish year, kind of touches the off the trend line and in no way changes our acceptation of trend line. Maybe I think we alluded to a few, if those is a caution around exactly what's the lack of.
postpone concerts can do the overall industry volumes a little bit of caution around what competitive posture may look like But that's not the day. There's not opportunity for out-of-the-cortin-fumble for those metrics
Thank you. And our next question coming from the line up. Jason Bessonette from City, Yelena Sopen.
I know there's a little complexity analyzing this. It's sales and marketing costs as a percentage of revenue. I say, complexity just given the impact of the loyalty being with this contra revenue. But the sales and marketing as a percentage of your revenue.
It seems like it's been bouncing around between 14, 42% or the last four quarters. The difference found is bad as you're rhetoric about the higher competitive intensity and higher pack. So I was just wondering if you could just...
I'm unpacked that a little bit and maybe I'm looking at the wrong metrics. Yeah, I think it's an astute question. And you know, you can make our comments around some of our agility in the levers that we have to hold. I think that's exactly what. Yeah.
We're speaking to, and it's, you know, in Q4, in example, I mean, a conscious decision to let some volume that was.
of unattractive profitability go in favor of maintaining profitability and holding the line on that marketing efficiency. Big the other things that we've seen in a shift in terms of our customer mix towards the CPU customers.
and away from fishing in the free agent pool that has gotten particularly expensive. And so it gets us really excited to get without trying to predict exactly which corner it happens, but with the strong sense that that's what happens when the...
cap normalizes. I think we expect to really be at down the fifth in the new customer acquisition where we pulled back a bit. I got it. That's super helpful. Thank you. Thank you one moment for next question. And our next question coming from the line of Benjamin Black from Deutsche Bank, Carolina Sopin.
Good morning. Thank you for the question. I think you're the earlier but on live nations earnings call they mentioned no sign of slowdown in the back. They expect even more robust trends into 2023 yet. You're seeing the 2023 growth should be more muted. It would be great if you could be more muted.
and how should it impact the P&L going forward, long term? Yeah, so I'll take the first part on my nation.
in fact the P&L going forward longer term. Yeah, so I'll take the first part on my nation.
So we thought we saw a big bad, and I think in some ways we've seen similar to them and then there's places where we diverge in terms of comparability.
They quoted a lot of metrics on January the mid-February performance being quite robust.
We can confirm that we are seeing directionally similar trends in terms of very strong year over year performance in the year-to-date area.
Where I think we perhaps the verge of it is one, just having a slightly more cautious view of what the impact of postponed events not recurring, being at the exit Q2 and Q3 on the concert side. Danny, date our overweight concerts when you look at their business overall, where there's contact at half of our business, so if you believe. Share it with me.
There's a more duty growth out with the exports that will pull it down a little bit. And then the last variable is graphic bait.
that'll pull it down a little bit. And then the last variable is get the date.
alluded to international being quite strong international, the opening a little bit later. So I think there's a little bit of a handoff between global strength in the first couple months in their guidance and then international press carrying a little bit higher growth back after the earthquake in states of America.
I don't think the second part, Ben, I think we're really excited to announce Shibots Drive, right? So I think when we announced that early last week, I'd say early signs of interest is through the roof. I think we're very proud of the platform that we built on Shibots Drive. Shibots Drive is an additional product line that we're launching next to that to further help the seller community.
as a turnkey solution to skybox, I think, has received tons of interest. You know, we are in our beta period. I would say the minute we announced and opened the beta, we were oversubscribed within the first two minutes to how many people wanted to participate. And I think if that's a good indicator, I think that was underlieve a fact that, you know, there's gonna be a lot of demand and interest in the product that we're building.
As we continue to do on all of our lines, you know there, I think we're going to evaluate what the right economics are. And, you know, there's an opportunity to make sure there's value that we can derive from that product line. I think we'll do so. What we're probably a little too early to talk about long-term P&L and factors. That's right right now. Great. Thank you very much. Thank you. And our next question coming from the line of Logan Rick from RBC, Yelena Sulpin.
Hey, good morning, thanks for taking the question. It's Logan on for Brad Erickson. Just another one on marketing spend. What's your guys' philosophy? I know you said you guys pull back a little bit on the performance marketing spending Q4, but as you go forward into 2023 on the full year, what's your expectation for competitive marketing and time today and what is your philosophy on?
I'm kind of matching that versus pulling back a bit on the less profitable orders for the full year. Thanks. I say embedded in our guidance, we have assumed current environment, persists throughout the year, i.e. intensity, and level, we believe.
is long term sustainable. We're certainly.
hoping that that cracks, but didn't want to build that into the baseline. So we'll see what comes from there. Yeah, I think you know, I mean, you know, maybe the right way to hone that too, you know, as we think about.
the timing impact, which I think is front of everybody's mind, which we just don't know how long it persists. I think the right question, which we've certainly oriented around is, you know, when you spend, whether that's in the form of, you know, marketing, whether that's in the form of degraded take rate, all the things that...
We're seeing now in the industry. The question is just when you stop spending that and when you stop degrading your take rate, does that volume remain? And if that volume doesn't remain, then all of that acquisition is just unsustainable. So our perspective has always been, we are in this for the long haul. And as we prioritize, I think making sure that we are
village and in smart about how to invest to both remain profitable drive growth and continue to grow our cash balance for potential offensive in organic activities. I think what you see is continued investment in the sustainable cohorts of customers that we continue to to reap benefit from both now and we think even more so in the long term.
And I just want to wrap it up. I certainly don't, I do need to strike a balance. We're not going to roll over and let competitors take keeps the volume without. But by similarly, we're not going to follow them down. What we think is that so much more excited path to finding the balance between those two in pockets, where you can pursue the most economic volume, the most economic customers in terms of lifetime value.
That's where we feel like a lot of our commentary is on our unique data and some of our agility and marketing facilities can really show it. Great. Thanks for the call. Thank you. And our next question coming from the line up, Daniel Cornel's with Benchmark, you'll let us know. Open. Yeah, thanks. Good morning.
I know you guys just try to kind of put an exclamation point on sort of your strategy. I guess the question that we get is, you know, in this environment and giving the uncertainty of the consumer, you know, if you put further pressure on your competitors, would you not accelerate sort of the cutoff or do you not think that's a possibility given how much better your balance sheet is?
And given, you know, look, we understand that the dynamics are somewhat like online travel, when there's a certain segment of cohorts that will be loyal to one, and then there's a certain segment of the cohort group that will probably be loyal to none, and just to price alone. And it feels like your competitors are, A, have no tools to get better loyalty.
and be more fishing in that.
non-repeat rate bucket, but is there no way that you guys could put incremental pressure on them beyond just striking the balance given how strong your balance sheet is?
right now. Yeah, it's a great question, Dan, and it's a topic that we...
Russell with a fair bit. I think where.
If we saw an opportunity to clearly accelerate that, we would lean into it. The idea to flip side is we can't speak with precision or conviction around.
What fundraising or capital access looks like for competitors. And so we're trying to take a balance where we continue to put pressure, steady pressure that gets to the end result we want, but also doesn't unduly.
Can you improve your term performance? It's only to find out that they have more capital stash play. Yeah, and Daniel, I know you sort of said alluded to this in their marks, but I kind of re-emphasize just certain extent we are doing what you're suggesting in our investments, right? Because as you think about it, look everybody. Live. Like, Malu. Have. Stop it. Look. Everybody.
Everybody who repeats with us is in order that we've taken away from somebody else. And where we've seen, you know, again, the very, the increase in repeat rates across categories for us at the highest level has ever been, you know, I think that's certainly something we continue to drive down. And every time that happens as an incremental order since they're all increased repeat rates with a higher and big sense of that.
So we think that's actually a very strong accelerant into call it the sustainability of our competitors.
Got it. I mean, that makes sense. And then just on the mix, it's always interesting that you guys actually spent less sequentially online in Q4 and more offline, which obviously talks to the brand spend.
that you guys are pushing here, even though things like everybody else wants to push performance, but I get the dynamics or difference here. How much of the brand is more toward vivid text versus internally you're just investing on some of the gamification aspects and trying to make it?
The PowerPoint, as you called out, and more integrated into the process versus, you know, kind of just broader, good and deep brand awareness. Just remember, hey, you know, we still have really small, unated brand awareness. And, you know, if we think bring that up, then we get people into the ecosystem that way.
I'll start there, a couple of different things. Where you've seen a lot of our honing of our brand span is into channels that I think we're starting to see increased economic performance. I think if you recall maybe.
In 2021, we tested a lot of very heavy media oriented channels that I think we were not as pleased with some of the kind of time horizon and returns that drive. I think we have found some great channels now. We talk about our ability to drive brand into other more programmatic areas.
And where we've seen a lot of success, you've all audited things, I think we're certainly excited about that. I think if you looked at what we've done in the fourth quarter and certainly in the first quarter and some of our more programmatic brand channels, we've got our real rewards for real fans campaign, right? I think that continues to resonate with fans. That continues.
to drive a halo around our performance both in normal performance channels and frankly as a direct channel itself for acquiring users. So I think we've been pleasantly surprised by the efforts on our marketing team to so quickly find a brand channel that has both driven the halo but also the performance itself. And I think we've seen that resonate really around one of our core propositions which we've invested in for a while now which is rewards. And I think the fans speak you know that.
That campaign is something that matters to them and that value profit something they'll continue to reward with purchases from us.
Zid is cheap at 3 billion plus of ticketing is going to command the significant performance of marketing, both performance and brand. We are targeting Zid to take the opportunity, particularly where it's deep in the ecosystem.
You used to think of the majority, so you didn't get any of the majority of that trans-fend being on the court case offering. So I would have assumed that, or I just didn't know if there was like an incremental push, but that's helpful. And just something just housekeeping, I guess, Larry, although a little more than that on your comments, but it sounds like you said free cash generation is going to normalize in 23. I know there were some...
puts in takes in 22. So you guys are gonna be in a firmly net cash position this year, assuming that you have your typical conversion, the way that that kind of plays out. So how are you thinking about kind of that benefit in this environment? Do you hold onto your cash to pay down your debt? Do you push share buyback more given where the stock is to help us figure that? I think yeah, you'd be considering all the standards.
We didn't touch on it much, but we did complete a significant share of purchase effort through with $32 million repurchase under our program three year end. I think it is a testament to our willingness to repurchase shares, balance by, we have a little bit less slope, then we would like, and so there's some limit in the short term on.
the amount of shares we can repurchase on the debt side of things, you know, the current interest rate environment with our cash balance approximating our debt balance, but we're effectively, aesthetically, as rates have gone up, so our interest expense hasn't really moved. Commencement for it, so we feel like it's still a reasonable price play for the optionality, whether it relates to common, I just made for M.A. whether that be...
The adjacent fees are more meaningful opportunities. I didn't cut something that we continued to review. So we like being the strong robust balance sheet. I think it fives in a little bit for the competitive landscape. And some of the comments you made about competitive PNLs. But I think Kevin, the sort of gold plated balance sheet alongside that. It's just great confidence in our ability to kind of be the other side of the stronger than ever. Great. Thanks for sticking with me. Appreciate all the thought, Jess.
Thank you. And our next question coming from the Linus with a criteria from Everquire, Sialynis open. Okay. Thank you. Dan, could you please provide a little bit more detail on sky box drive? So how does that work and understood on your commentary on economics of it? But where do you think will it have the most impact, both scale launch? Thank you.
I think all sellers look for ways to maximize revenue. I think in the auto pricing arena there are multiple players that provide that service. What's been unique about our...
Incisions along Skybox Drive is we've never had a turnkey solution integrated into our Skybox platform that allows for kind of an immediate auto-pricer to be turned on. We've also never allowed others to utilize some of our industry leading marketplace data to drive some of their revenue optimization strategies. I think
Those two things have strongly been in demand by the seller community and we were happy to provide that which again I think nobody else will be able to provide given that all criteria so in the long term as we launch that we remain. Really excited about the fact that we can grow the install base the sky box drive more stickiness to that and ultimately drive more value to our sellers and in turn all of those things feed our why we'll better data. FAC Jaytemjiang FCAT? Curleder,
better insight and potentially advanced cost structure, again, that flows through from an embedded revenue optimization system that functions in real time. As you think about the economics letter, I think it's early for us, but I think it's safe to say that in the market, nobody gives an auto price or a way for free, so there's probably some incrementality there. But for us, I think still a little too early to gauge what the long term impact's going to be. Okay, thanks Dan. Thank you and our next question.
of a customer within the industry with kind of the puts and takes. Obviously you guys are seeing good progress on your loyalty and rewards program kind of counteracted with the increase marketing spend around the industry going for that kind of free agent pool. Thank you.
You know, Andrew, I think maybe two things to point to. One, you know, clearly what we can see is that our repeats rates are higher than ever. You know, I think to buttress that maybe as a point against others, you know, we track a lot of social sentiments.
amongst the competitive landscape, which you might argue could be a leading indicator into brand loyalty. And I think what we felt really good about is that since we started looking at that every month since we've been tracking social sentiment, we've always been number one or two, where historically, we've not shown up by thinking the top.
you know five probably so I think being in the first and second position combined with our ability and our kind of proven now increase in repeat rates I would say we probably out index the competitive landscape. Great. Thank you.
Thank you. Our next question coming from the line of Matt from 5% where your line is open.
Thanks guys. Maybe just how are you thinking about the broader macro and maybe consumer spending as it relates to the full year guide and maybe it's digging a little bit deeper. How do you delineate maybe the competitive pressures that you're seeing between potentially at being some...
Thank you. Thank you. Yeah, I think we continue to, you know, similar to some of our poshers throughout the year last year where we wanted to take a balance view where we certainly reflected some awareness of risk inherent in the market, whether it be COVID or economic concerns. I think we can pitch that perspective.
So I alluded to it, we are not seeing anything in the numbers that would suggest the consumer is weakening at the moment, but we also see all the same headlines that everyone on this call does and that get prudent to build in some possibility or possibility of that, particularly in the second half of the year.
And so again, similar to last year, should that not manifest, that would be a positive development incremental to what we contemplated. I think if you find yourself in a world where consumer and industry backdrops were to weaken meaningfully from where we are, I think that's
That's an area where we long-term get excited and short-term to be a bit of pain, but I think that will really disproportionately hit competitors that are already running on the edge of the cliff. Yeah, I think that just hones in the point right. I think when you look at I think what we've invested in and what we've built and the decisions that we've made, you know, I think what we've really, what we really have is a long-term sustainable model with really great unit economics. Investments that I think we we believe will get a lot of leverage on in the long-term whether that's our repeat rates and in our loyalty program whether that's engagement into the fixed.
Or even more recently, I would say truly long-term economic is the state of more brand channels. So I think when we look at it, we've certainly been conservative as we look at the guidance for 23 in terms of, you know, I think as Larry said, the best way to look at it is, look, there's a lot of chatter around that. We want to make sure we've accounted for those scenarios. But in a world where any of that happens, I think we continue to have the strongest, you know, balance sheet, probably out there of all the pure secondary. Marketplaces along with strong unit economics and strong key indicators.
for sustained growth and sustained profitability. And I think that ultimately is what has us excited about, you know, continuing to win in the long term. Thank you. And I'm showing you an offer to questions and a cue at this time. Please, and gentlemen, thank you for participating in today's conference. This does conclude your program, and you may now disconnect. Everyone have a great day. Thank you.
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