Vivid Seats Inc.

Good morning and welcome to the Vivid Seats second quarter 2023 earnings conference call. Following management's prepared remarks, we will open the call for Q&A. I would now like to turn the call over to Kate Africk.

Good morning and welcome to Vivid Seats second quarter 2023 earnings conference call. I am Kate Africk, head of investor relations at Vivid Seats. Joining me today to discuss Vivid Seats results are Stan Chia, Chief Executive Officer, and Larry Fay, Chief Financial Officer. By now, everyone should have access to our second quarter earnings press release, which we released earlier this morning. The press release, as well as supplemental earnings slides, are available on the Investor Relations page of Vivid Seats website at investors.vividseats.com. During the course of today's call, management may make forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, including those described in our earnings press release and other filings with the SEC. On today's call, we will refer to adjusted EBITDA and adjusted EBITDA margins, which are non-GAAP financial measures that provide useful information for our investors. you will find a historical reconciliation of adjusted EBITDA and adjusted EBITDA margins to their corresponding gap measures in our earnings press release, supplemental earnings slides, and SEC filings. And now, I would like to turn the call over to Stan.

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

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

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

With that, operator, let's open it up for questions. Thank you.

At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask participants to limit their questions to two questions per participant. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ralph Shacker with William Blair. The line is now open.

Good morning. Thanks for taking the question. First question, just on WaveDash, maybe provide some perspective, if you could, please, on the overall TAM opportunity. Maybe what attracted you to the Japanese market? Is this sort of your first international expansion opportunity that may broaden out going forward?

Hey, good morning, Ralph. Thanks for the question.

Yeah, again, I think we've always been looking at the landscape for favorable opportunities for expansion and TAM growth. And as we've been looking, I think the appeal and the strength of the asset in Wavedash was really favorable against what we were assessing. Being able to enter a market with an industry leader both profitable as well as strong in terms of share there, I think was an excellent way for us to look to begin some of our international efforts where we can learn where the backdrop is favorable. And so I think as we continue to look, you know, I think our strong balance sheet is going to allow us to be aggressive when we find opportunities such as WaveDash in the future.

Great. Thanks, Dan. Maybe just to follow up, maybe can you just speak to the competitive environment, you know, how that trend endured the quarter and sort of vivid seats positioning within the sort of competitive dynamic. Thank you.

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

Great.

Thanks, Dan.

One moment for our next question. Our next question comes from the line of Kurt Nagel, Bank of America.

Your line is now open.

Good morning. Thanks for taking the question. Yeah, so I guess the first one, maybe an obvious one, you know, why not raise the back half of the year a little bit more, right? I mean, two very, very strong quarters. You know, we've got four months of wave dash in there now. I know you guys are typically conservative, but At least as far as I can see, it doesn't look like there's any let up in demand. Live Nation sounded like they're more positive on the outlook for the next couple of years. So aside from just basic conservatism, what's going into the outlook and why not raise a little bit more?

Yeah. Hey, Kurt. So I think we've tried to reflect what we believe is continued healthy outlook.

for the balance of the year. Certainly as we move forward through the quarters, we have increasing visibility on the balance of the year, particularly the concert calendar. Until that all resets as we shift into the next year and wait for the Q4 on sales. But I'd say in particular, I think what drove some unique waiting this year was the Taylor Swift tour. I think we would generally say no single event, no single performer will have a demonstrable or meaningful impact on our aggregate results. I don't think that would be a true statement this year. I think you can just feel the phenomenon that it was, right? When you see the videos and the excitement and the passion from her fans, it was just an outlier. And that tour ends this week or next week with our last shows in the States for this year in L.A. um and so essentially we're we're assuming that with without taylor swift in the numbers there's a bit of a gap to fill um and that that balances out not to say that you know it's not plausible that there's there's more uh opportunity but we wanted to to make sure that we reflected that there's only one taylor swift and she will not be performing at that cap of the year okay fair enough um and then just as a quick follow-up uh larry just

take rate drivers for this quarter? I think you said kind of a go-forward rate of 15.5. Would that be a reasonable rate for 3 and 4Q?

I think that is a, yeah, that's a good number going forward. My usual caveat, we're not 10 or 20 basis points smart, so you'll see some oscillation, but I think over time that's a good midpoint. that we should revolve around.

All right, cool. Thanks very much.

One moment for our next question.

Our next question comes from Cameron Manson Perrone with Morgan Stanley. Your line is now open.

Hey, thanks for taking the questions. One, on the resale business, I'm assuming the really strong growth here in 2Q, I'm assuming that is also going to be Taylor Swift. But any expectations with regard to the resale business through the back half of the year? one on the tra liability i think the q says the payments they're expected to happen in 25 um just any color on is that going to be will that flow through as just one lump statement will that be multiple payments um kind of just how to think about modeling that for now thanks hey cameron it's dan i'll take the first one of them and then uh pass it to larry for the tra but

As we've always talked about, resale is a great R&D center for us. I wouldn't really expect anything different than what we put forth there. Where you see the fluctuations in the quarter, I think they represent more fluctuations in the industry versus anything else.

I wouldn't read anything more than that's just industry strength into what you're seeing the first half of the year. Got it.

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

Got it. That's helpful. Thanks, guys.

One moment for our next question.

Our next question comes from the line of Steven Ju with Credit Suisse. Your line is now open.

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

Hey, Stephen, thanks for the question. Yeah, I think when we looked at the asset, I mean, I focused it first on we're obviously excited about our core business and continue to look for ways where we can leverage you know, what we do well into a broader landscape, i.e. the international one, and certainly where we can learn. I think WaveDash was really exciting. So, yes, there are a few other components, I think, of the business there, but, you know, we're really focused on the ticketing side of it, excited to see, you know, what else and potentially learn about those other avenues. But I would say, you know, you're going to see us laser focused on, again, the things that we do well that are core to our business and where we can potentially leverage things that we do here over there and vice versa as we learn a little bit more. As it pertains, the Japanese market is also one that we're excited about. I think broadly, live events are booming around the world. I think Japan is no exception to that. I think what we saw there was a favorable backdrop where we could go in with a market leader and learn more. and potentially use that as a launching off point for other markets as we continue to develop our knowledge and hone our processes to be a larger international organization.

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

Thank you.

One moment for our next question.

Our next question comes from the line of Maria Rips with Canaccord. Your line is now open.

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

Yeah.

Hey, Maria.

You know, I think the right thing for folks to interpret is certainly we are always going to be on the lookout for ways to expand. And as we've looked at WaveDash, you know, I think, again, we found a great opportunity for us to launch internationally with an asset that is accretive and profitable. And so I think as we look at the broader landscape, anytime we find a favorable backdrop where, you know, I think we can either move in organically or inorganically with strength, I think we're going to do that. I think on the synergies question, you know, I think we're certainly excited to continue to learn more as we move towards closing the deal, but certainly I think you can expect us to be managing for both where we see front-end and back-end opportunities.

Got it. That's very helpful. And then secondly, many advertisers and brands are increasingly leveraging AI to optimize their marketing mix. Do you think you have any room for further efficiency gains by investing or leveraging in AI, investing in AI tools kind of on the marketing side? And then relatedly, could you maybe just touch on whether you've seen any easing on the competitive pressures on the advertising side?

I think we're at the forefront certainly of all the AI opportunity that's there. I think embedded in much that we do is already what I would say a lot of advanced data science and algorithms powering some of our proprietary marketing in particular. I think we're always excited to be on the forefront, whether that's in our partnership with OpenAI and ChatGPT, whether that's in looking at new opportunities to self-develop AI on the marketing side. But I think we're early days there. If we have anything to share, we'll be happy to. We continue to look for ways to be really efficient and aggressive on the marketing front as well.

Yeah, I'm competitive environment. I would generally think the right word is stable. Relative to what we may characterize as peak competitive intensity, I think we referenced perhaps Q3 of last year, a competitor or two maybe went particularly outside the normal bounds. I'd say that has come back within more normal ranges. I think this is a stable level amongst particularly the larger players in the space. I think there's still a very open question on if this is a sustainable level for some of the folks that haven't broken the profitability barrier and just continue to reiterate when you're in your 11 or 12 of operations and haven't quite cracked the code on being profitable. I think that's indicative of a perhaps unsustainable model.

Great. Thanks so much for the call.

One moment for our next question. Our next question comes from Brad Erickson with RBC.

Your line is now open.

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

Thanks.

Yeah, I think on the macro point, I think two things have both pushed in the same direction in terms of not projecting as much impact in the balance of the year. Just being now seven months in and knowing the answer on seven months with only five months remaining, I think, removes a fair bit of the speculation. And then the second part, I think, would not be controversial to say that the general mood on the macro has improved relative to where it was at the beginning of the year with more talk about soft landing versus hard landing. And so we're certainly not intending to play macro equity. economists with precision, but I do think our view is for the balance of the year. We feel like the outlook is pretty stable, and in our guidance, we're not forecasting a quick or sudden degradation in the macro. I think we'll evaluate as we prepare our 24 outlook and continue to keep an eye on how market sentiment evolves, but with the current sentiment, I think we would continue to have some degree of awareness that there is still concern around possible future slowdown, but that concern does appear to be softening. On the competitive question, I don't have a reason to believe there's going to be a meaningful shift in the back half relative to what we've been seeing in Q1 and Q2. Not to say it won't happen. We certainly see competitors pivot and adjust behavior. for reasons that we wouldn't be able to precisely explain, but no obvious shift that we've seen subsequent to the quarter end, and no obvious reason why we'd expect it to happen in the near future. Great. Thanks, Mr. Ripple.

One moment for our next question.

Our next question comes from the line of Thomas Forte of DA Davidson. Your line is now open.

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

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

Thank you, Larry.

One moment for our next question.

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

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

Hey, Matt, I think what we've continued to see is just resiliency and the strength of consumer demand here, especially against the macroeconomic backdrop.

So I think we'll continue to see how that trends and factor that in accordingly, but we certainly haven't seen anything there that would cause us to think about that any differently.

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

Yeah, sure. I think we're excited about that as a platform, right? I think as we continue month over month, we continue to see user growth on VividPix. We continue to see high double-digit daily for our active users, entries per month. So we continue to see that engagement there. And I think equally as exciting, we take that engine and we move that into our game center platform. So now ubiquitously across our app ecosystem, we have methods with which to engage consumers. And we continue to see growing engagement and growing user acquisition through those channels and remain really bullish on their long-term value to the business.

One moment for our next question.

Our next question comes from the line of Andrew from Raymond James. Your line is now open.

Thanks for taking my questions. Given that the thought was for a digestion year in 23 originally, and that ended up proving conservative, Does that expectation move out to 24, or does that take the prospect for digestion maybe off the table or reduce its impact a little bit, obviously being cognizant that you're not formally guiding for 24 at this point?

Yeah, thanks, Andrew.

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

Got it. So Taylor helped you shake it off. Understood. For a follow-up, with the Japanese expansion, You know, not to be too, you know, what have you done for me lately, but looking into other specific markets lately, would you highlight some that are maybe better opportunities for the secondary side of ticketing and some that are maybe a little bit more constrained? I'm thinking of countries or sports leagues like the Premier League where secondary ticketing isn't really that big of a thing for them.

Yeah, I understand. Yeah, like I think when we look at international, I think literally the world is our oyster here.

And so I think we have the opportunity to, I think, look for, you know, versus I think giving you specific markets, I think, you know, the criteria that we're going to look for are markets where Certainly there's a favorable regulatory environment where there is a favorable kind of supply and demand opportunity. And then I think where there's a favorable opportunity for us to move in either organically and inorganically, right? So I think as we continue to look at the world, we will look for things that meet our criteria. And, you know, as those criteria are evaluated and assessed, again, I think we'll have the balance sheet, and certainly the platform to be able to do things both inorganically and organically when those opportunities arise.

Thank you very much. I appreciate the color.

One moment for our next question.

Our next question comes from the line of Dan Kernos of Benchmark Company. Your line is now open.

Great. Thanks. Good morning. Nice quarter, guys, obviously. Maybe, Stan, just going back to the marketing mix question, I mean, our check kind of suggests that most of the pay grade pressure is coming from the sports side, not concert. And, you know, you announced, obviously, more strategic partnerships with sports teams. And I think the overall marketing spend was maybe a little bit less than we anticipated in the quarter. So can you just kind of talk about your desire to continue to differentiate or maybe spend on more, you know, take greater promotional activity rather than kind of pure brand spend or even performance-based spend, you know, in the marketplace given what's going on with competitive environments?

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

And how do you think about kind of economics of those deals? And do you pick up any fans of hands in that? in those deals?

Sorry, Dan, didn't hear the last part of your question.

I was just curious if you were able to penetrate any of the fan-to-fan market with any of those deals. I got it.

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

Got it. Super helpful. And just quick for Larry, just sort of housekeeping on the guide. i mean it's the check suggests that it's been more um order volume than price so the price has been super healthy so just on the thoughts on the back half of the year you know the you've talked about digestion a lot not really occurring but i mean should we see kind of similar orders slightly outpacing price with both of them above what you would think of as more normalized levels yeah i think um if you look at this quarter

orders up about 9%, AOS up about 7%. So strength across both, as you noted. I think if you look historically at our AOS trajectory, our 3% to 4% annualized CAGR really does play out with that always-present caveat that it's tough to be precise in a given quarter. So on the margin, I would guide to 7% higher than our normal 3% to 4%, so perhaps a little bit less in price in the back half. And that, I think, helps foot a little bit on the aggregate numbers. But we continue to see health, right? I think that if you saw price meaningfully moving in either direction from that long-term CAGR, it would tell you something about a supply and demand mismatch. And that we're seeing it very consistent, which I think indicates that there's pretty solid alignment between the amount of supply and demand out there. So, we feel good that they'll continue to move directionally and lockstep, barring some sort of change to the environment.

They keep raising primary prices, Larry, and secondary is still at a double that, and it consistently stays there. So, I think that's what you're saying.

Thanks for the color, guys. Really appreciate it.

One moment for our next question.

Our next question comes from the line of Jason Bassenat with Citi. Your line is now open.

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

Yeah, certainly on an annual basis, I think the most helpful, albeit on an annual cadence, will be that continued hopeful shift towards repeat orders.

So we talked about the improvements from high 40s to 56% of orders coming from repeat customers. I think we expect that number to continue to move up over time, and I think that will The magnitude of that increase will be reflective of the traction we're getting with folks coming into our ecosystem and staying in our ecosystem. Yeah, if you were to take a slightly longer time horizon, you know, ultimately we think that shift is what drives the operating leverage and the long-term return on the brand marketing and loyalty investments that we've made. When you start to get more precise than that, oh, sorry, go ahead. No, no, go ahead. Sorry. As we started thinking about being more precise, there are other metrics that we look at internally. I'd say none of them are perfect, right, because it's very difficult to understand with precision that a person repeat because of our loyalty or because of our improved engagement from VividPix or because of the better experience from the partnerships or the better awareness from our high-value audience targeting. We'll never really know, so it tends to be an aggregate impact. But we are generally looking to substantiate the ROI from the loyalty program on repeat rate alone, and any other benefit would be gravy. And we feel like we're trending well in that regard.

Is the right metric then that the sales and marketing expenses as a percent of revenue should come down, even if your take rate comes down in parallel? Is that the right way to think about it?

Yeah, I think that's exactly right. Over the intermediate term, if I step back and compare kind of the pre-pandemic to post-pandemic profile of Vivid Seeds, the big investments we made are adding the loyalty program and then some brand investment alongside that. I think we said we believe those are, call it four, five, six-year investments to get to full ROI. We're now a year and a half, two years into that cycle. And so I think we're seeing all of the right trends to believe we're going to get to the positive ROI you'd want to deliver. But we're not fully there yet. And I think the place you will ultimately see that is in marketing efficiency.

Okay.

Thank you.

I'm showing no further questions at this time.

Thank you all for your participation in today's conference. This does conclude the program.