The conference will begin shortly. If you have any questions please press star 11. Good morning, and welcome to Vivid Seats' Third Quarter 2022 Earnings Conference Call. Following management's prepared remarks, we will open the call for Q&A. I will now turn the call over to Kate Copouls.

Good morning, and welcome to Vivid Seat's Third Quarter 2022 Earnings Conference Call. I am Kate Copouls, Head of Investor Relations at Vivid Seats. Joining me today to discuss Vivid Seats; results are Stan Chia, Chief Executive Officer; and Larry Fey, Chief Financial Officer. By now, everyone should have access to the company's third quarter earnings press release filed earlier this morning. We have also provided supplemental earnings slides. The press release and earnings slides are available on the Investor Relations page of Vivid Seats' website at investor.vividseats.com. During the course of this call, management may make forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to the risks and uncertainties as described in the company's press release and other filings with the SEC. On today's call, we will refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures that provide useful information for our investors. You will find a historical reconciliation of adjusted EBITDA and adjusted EBITDA margin to the corresponding GAAP measure in the earnings press release, supplemental earnings slides and SEC filings. And now I would like to turn the call over to Stan.

Good morning, everyone, and thank you for joining us today. I'm excited to discuss our third quarter results and another solid performance from the Vivid Seats team. The momentum we've seen in our business has continued, and we've now set quarterly records for both marketplace GOV and revenues for the last 6 consecutive quarters. These results are a testament to our powerful technology platform and our team's ability to capture industry strength with Agility. We continue to enhance our unique offerings to reinforce our long-term strategy of acquiring and retaining customers through strong product and service differentiation while making targeted investments to foster brand awareness and loyalty. This morning, I want to share an update on the business and our strategic progress before turning it over to Larry to discuss our results and financial guidance in more detail. To begin with, I'd like to remark on our first year as a public company, which is a milestone we just passed this October. It has been an incredible year for Vivid Seats. We reported record quarters capitalized on strong live event demand with strong execution and furthered our long-standing track record of growth and profitability. Next, I'd like to highlight our recent brand efforts. In September, we launched a new integrated brand campaign highlighting Vivid Seats Rewards and VividPIX. The real rewards for real fans campaign launched with content across paid, owned and earned media and was curated for category reach and the targeted recruitment of high-value audiences. This campaign highlights one of the key differentiators of our brand, Vivid Seats Rewards, connecting Vivid Seats with the number 11 and driving awareness of the key perk of the Vivid Seats Rewards program, the free 11th ticket. Most notably, with this campaign, Vivid Seats is the first brand ever to sponsor a…

Thank you, Stan. I'll begin with a discussion of our third quarter trends and results before turning to our updated outlook for the remainder of 2022. This quarter, we lapped very strong results from the third quarter of 2021 when we set multiple records by capturing exuberate reopening demand. During the third quarter of 2022, the live event demand environment remained healthy, and we are proud that Vivid Seats continued to set new records for third quarter marketplace GOV and revenues and once again achieved our highest quarterly total marketplace orders ever. Meanwhile, Vivid Seats remained highly profitable and generated $28 million of adjusted EBITDA while continuing to invest in our differentiated platform. Our third quarter 2022 marketplace GOV of $782 million increased 10% year-over-year, driven by a 9% increase in total marketplace orders, while average order size of $304 increased slightly. We view 2019 as a better baseline than 2021 for trend line AOS due to pandemic impacts throughout last year. In the first half of 2022, AOS increased 12% relative to the first half of 2019, in line with the 3% to 4% annual CAGR we have seen historically. And in the third quarter of 2022, AOS increased 7% versus Q3 2019, with the deceleration primarily driven by strong growth in select lower AOS categories, resulting in some mix shift. Later MLB playoff timing with the playoffs primarily occurring in Q4 this year also contributed -- we continue to see robust consumer demand this quarter with AOS for our top 50 artists by GOV, up 14% versus Q3 2019 and our ALS for top 20 artists up 19%. Our third quarter 2022 revenues of $157 million increased 12% year-over-year, and our take rate was 16.7%. Our take rate, which is calculated by dividing our marketplace revenues by our…

Thanks, Larry. In conclusion, Vivid Seats continued to set records this quarter, and I'm proud of what our talented and committed team accomplished. We are well positioned and confident that we have the right people, product, technology, scale and balance sheet to win in the long term. We look forward to discussing our strategy and outlook for 2023 on our fourth quarter call. And with that, operator, I will open it up for questions. Thank you.

[Operator Instructions]. Our first question comes from Maria Ripps with Canaccord Genuity.

Good morning. Congrats on on results here. Can you maybe just talk about what kind of sort of macro backdrop and consumer behavior is embedded in your Q4 outlook? And have you seen any signs of deceleration so far in Q4 from what you sort of saw in Q3? And then I have a quick follow-up.

Yes. I think from a guidance philosophy standpoint, nothing's changed, where we're trying to capture potential range of scenarios. I think the prospects of a COVID-related meaningful slowdown has certainly diminished now that we've had a number of unaffected quarters in a row. Alongside that, the prospects for potential impact of consumer softening feel like they're increasing despite not having seen it in the numbers to date. As we think about that overlay on Q4, I'd say a couple of things. One, we're now through the MLB season with MLB playoffs having a pretty meaningful impact on our Q4 GOV. There were technically more games because of the shift in format to adding more games in the wild [indiscernible]. But there were many fewer than normal championship series games. And so there is a bit of a headwind in the MLB world. And then beyond that, I think November and December are really important months in the concert realm as you track on sales. While there've been a couple of encouraging ones and there are some rumors swirling at this point, I think it's a little well-too early to call, and that will be a big determiner of where things shake out for the quarter.

Got it. That's very helpful. And can you maybe talk about any early takeaways from the latest brand campaign as well as additional callout on the 11 influencers the company is partnering with to promote the campaign.

Yes, sure. Maria. Look, I think we're really excited. I think when you think about the things that we control and the things that we've invested in, you start with our loyalty program, our brand campaigns. And I think we're really pleased to note across the board, we've seen higher repeat rates across every category, which gives us a lot of enthusiasm that what we offer is really resonating with consumers. As you then look out through the capabilities that we continue to build on that side, we're seeing significant sustained increases in both retention and repurchase, especially when we hit high-value audiences through some of our more targeted vehicles. We're also looking at, I think as you look through the new partners that we launched, we've talked about the New York Post today, we certainly also in the quarter, launched collaborations with brands like Doritos, Snapchat, and we're in early stages on collegiate NIL deals do. So when you look across that spectrum of I think the programs that we offer with consumers, combined with capabilities that we're investing in on the retention and brand marketing side, we continue to be really enthusiastic about the results that we're seeing.

That's very helpful.

One moment for our next question. And our next question comes from Stephen Ju with Credit Suisse. The line is open.

So I think the resale came in pretty strong on a nominal dollar basis. So I'm just kind of wondering what's driving that strength? Is it just the general environment? Or are you doing something from a product perspective with Skybox. And I guess it might be a little bit early, but I thought I'd lob in this question anyway. So I just wonder if you could update us on how the change for PEGs going and whether you're starting to see any early signs of synergies...

Yes. On the resale side of things, I would say, consistent with the raising of guidance on the top line that we've seen, it has been a pretty healthy overall market and frankly, has come in above our expectations over the course of the year. And as a representative seller, our retail there is no exception to that strength. Nothing fundamental shifted in the underlying strategy there. So it's really been a story of ride more than anything.

Yes. On the VividPIX side, I think we are -- we're excited about what we continue to see there. As we mentioned, we've introduced new categories within the VividPIX app, including the WNBA, Tennis, USC, F1. We're still early in unlocking value there. But certainly, I think as we look at some of the early stage fully integrated product and e-mail campaigns and CRM activities, those activities are looking to be some of our highest performing campaigns. So I think we're early in what we expect to be a very busy quarter on the [indiscernible] side, but all in is very positive on our side.

Thank you...

Thank you. Our next question comes from Ralph Schackart with William Blair.

Thanks for taking the question. Stan, just on the brand campaign, I think in the prepared remarks, you talked about a little bit more focus or more targeting on this campaign versus the other. Maybe a couple of specific examples about what's resonating. I'm guessing it's the loyalty program. But any color you could add there? And then I have a follow-up, please.

Yes, sure, Ralph. Yes, I think a lot of what we learned and as you look at some of the creative that we've launched, in particular, I think we're really proud of what we're doing around the 11th ticket is that fans with high intent and high kind of category awareness, really the rewards program resonates strongly with them. So when you look at the things that we've done to reinforce that, whether it is a iconic ESPN Top 10 Series 11 play or some of the homepage takeovers, we've seen those messages resonate really strongly there. And we also then looked across some of our partners, bother again, it is ESPN rolling stones, some of those folks, as we look at against audiences that they serve and what we're able to do there, we found that those audiences tend to be 2 times more likely to be aware of Vivid Seats and really from a consideration perspective, 2 to 3 times more likely to buy from us. And so as we look at channel diversification, as we look at channels that yield economic benefit while driving our messaging to fans, I think we look at the creative and we look at the channel, and we feel really good about the partners that we found in that space.

Great. And then just a follow-up, just on the competition that you called out on margins. Just curious, was that broad based? Was it a larger competitor? Was it a smaller road competitor? Just kind of want to get a sense of the competitive nature that you're seeing.

Yes. I think we've seen -- it's fairly widespread across the competitive side. I think there's certainly a lot of competition now for what looks to be a fairly resilient industry. And I think when we look at what we do again versus everyone else, I think we are really confident in our strategy of unique product differentiation, better service, better rewards, a new product offering in VividPIX. -- is our way to continue winning in the long term versus potentially spending -- overspending on marketing channels or potentially driving too much take rate pressure.

Our next question comes from Benjamin Black with Deutsche Bank.

This is Ishan on for Ben Black. Thanks for taking the question. So just thinking on the supply side, how is broker side faring with high inflation and rising rates? Have you seen any kind of softness on the supply side, given high cost of capital?

Yes. Look, I think on the sell side, and I stress again, in our business, I think being a marketplace business, the sellers are managing both their costs and certainly what the dynamics of demand and supply are. We've seen no softness on either side of the market yet. And I think as we continue to grow our base on Skybox, which I think we've talked about having over 110 sellers added year-to-date on the platform, we continue to see strength in the sellers being able to grow their businesses as well in the current environment.

Thank you.

Our next question comes from Brad Erickson with RBC Capital Markets. Your line is now open.

I guess first question on the marketing spend, as you can kind of deal with that competitive pressure you mentioned. How sensitive are you in terms of sort of drawing a line on ROI thresholds you're not willing to go beyond versus just being more set on holding market share? Maybe just remind us on sort of what your broad philosophy is around that. And then I have a follow-up.

Brad, I'd start by saying, I think we have historically had a target where we would look to -- on the acquisition of a customer, the first transaction blend to be profitable. But we've always been aware that there's some meaningful slack in that chain when you look at the lifetime value of the average new customer you bring in. And so as we look at the current competitive environment where we are seeing across a few different strategies, what I'd characterize as increasing investment and some incremental stream on some of those historical bounds. We definitely have it to move beyond what I would characterize as a historical threshold and something that we're actively looking at day-to-day on where that right line should sit in light everything that's happening in the competitive side.

Got it. That's helpful. And then I think just stepping back, maybe, I think you've gotten some benefit here in the market certainly has gotten some benefit this year from kind of the COVID catch-up on concerts in particular. How should we think about the [indiscernible] of concerts into next year relative to some of the year-over-year comps you're facing as well as just from a capacity perspective.

Yes. Certainly, when you look at the Live Nation commentary, it looks like they expect another robust year when you look at the lineup of names that have either already announced tours or or rumored to be announcing to ours in the near future. So with folks who have already announced adhere and Q2, moving Taylor Swift beyond set -- those are some really large names. And so I think that there's evidence that not everyone would say will get out in 2022. I think alongside that, though, you had a dynamic in 2022 where you saw a number of postponed events and perhaps higher utilization of arena and event capacity than you would normally see because you were condensing both a normal slate of new shows and some catch-up from postponed events. So perhaps more Tuesday night, Wednesday night type shows than in a normal year. So I think that doubling the details on is this coming year, a growth year on an all-in basis? Or is there a little bit of pressure on an all-in basis relative to how you think about that post-[indiscernible]. But overall, I think we expect it to be another very healthier, probably less year-over-year growth than we saw this year just given how robust the past year was, but no soon to think it will be a meaningful decline in the number or quality of shows.

Yes. That's great.

Next question comes from Shweta Kajaria with Evercore ISI. Your line is now open.

Okay. Thank you. Let me try two, please. What -- could you stand -- please provide some color on where you're investing when it comes to product and service. You highlighted that in your prepared remarks. I understood you're also investing in the brand awareness efforts. But if you could give details on product and service investments, that would be great. And then second, also for Stan, how do you define high-value audience, whether it is through engagement or dollar spend? How should we think about that?

On the product and service side, I think I almost go down the path of we remain bullish about the two areas in particular that are differentiated. I think we think about our rewards program and continuing to drive increased differentiation through that as a vehicle that we can continue to drive increased purchase patterns and behavior as well as retention with our brand and our site. Kind of in parallel with that, which I think you feel again is a strong differentiator, our Vivid Seats product, which enables our users continued ways to engage with us beyond ticket transactions between ticket purchases. And I think as you look at the offerings that we've built there, where as we've mentioned in today's remarks, we continue to enhance the number of categories and games, I think we see the ability there to engage consumers and keep them within our ecosystem where we can then utilize our marketing capabilities as really a strong demonstration of our investment in kind of our product suite, but also our product differentiation. On the service side, our work winning customer service, we continue to do that. We continue to invest in making sure that across the board, we have the best service there. But beyond that, we also look for experiential service components where we look at activating on-site, whether it's at festivals, whether it's at RT event. And we also talked about the Lucky roller, which we have as a unique activation event with users where they see us in cities with events where they can then engage with the brand where they can then win rewards and prizes, which then brings them into our ecosystem, provides them a tremendous experience and also buttresses our brand investment. So across those two elements, I think we feel really, really strongly about our investments there. On the high-value audience side, if we continue to learn as we look at the, call it, ocean of consumers that are interested in attending live events. Are you an event goer who is looking for that once-in-a-lifetime experience -- are you an event who is a category-specific user. And as we learn more about users, I think our definition certainly of high-value audiences or audiences where we believe we can maximize lifetime value through that. And so as we look at the channels, as we've mentioned, we are very focused on the marketing side and making sure that as we segment users into the highest LTV consumers that our channels correspondingly are focused on targeting those users and bringing them into our ecosystem.

Our next question comes from Thomas Forte with D.A. Davidson.

Stan, Larry and Kate, congrats on the quarter. One question and one follow-up. So I wanted to know if you could talk about how inflation impacts your results on the Pro side? Are you seeing a flow through from higher prices? And on the con side, are you seeing any kind of demand destruction...

Yes. I think on the pricing side, continue to have a little bit of a mixing bowl effect of pent-up demand, perhaps having peaked in prior quarters. Alongside that, you have an inflation trend line that's all mixing into our AOS, but I think over the intermediate term, our view is that there's no reason that tickets wouldn't behave on a similar path as other consumer expenditures. So I think we're insulated. There's going to be some noise in oscillation depending on [indiscernible] demand and broader supply/demand dynamic. But overall, feel very well protected should inflation persist on the revenue side. Have not seen us hit demand, right, to the extent that consumer should be getting stretched at this point, which I think is many theses we've seen. We haven't seen it hit our category yet. We have our own hypothesis on why, but we certainly haven't seen it hit the numbers yet. And then the last piece of the inflation nitration on the cost side, and we've generally seen certainly some pressure in the labor world as we're not convenient to the dynastic effect than others, but all with the normal balance expectation. And just given the nature of our cost structure, we found that I think inflation has not been a meaningful impact to our costs in aggregate.

Great. And then for my follow-up, I wanted to ask about VividPIX, which you've already got a lot of great questions on VividPIX. So I'm down to, is there an opportunity as it pertains to the World Cup for VividPIX.

Tom, yes, I think it's a great question. I think a lot of our current activities are focused on domestic games and products. So I think we haven't necessarily look there, but we're happy to evaluate as an opportunity.

Our next question comes from Andrew Marok with Raymond James. Your line is open.

Can you just remind us about the quarterly seasonality of the business? Just maybe asking the guidance question in a different way. I think in the past, you've talked about 4Q being seasonally strong with 3 of the 4 big sports in season, Christmas events, et cetera. But the guidance kind of calls for revenue to be down Q-over-Q at the midpoint. I guess just talk a little bit more about the conservatism being baked in along that axis? Or has the thinking changed on seasonality?

Yes, nothing's changed structurally. I think Q4 has some persistent reasons why it on average, outpace the first 3 quarters, namely all the sports ring season. coupled with Concert on sales happening, it appears that the concert announcement schedule will hold with prior years. So that's more a question of magnitude than will it happen. Yes, I think as we think about this year, I'd say 2 things. One, there's still pretty [indiscernible] unique elements as we think about not only this year's performance, but also the year-over-year trajectories just given some of the noise last year with the opening dynamics changes to the competitive landscape against those reopening dynamics, variance and whatnot. But as we look at this year and sequentially, I'd say there's certainly been a trend where as we caution or steadied ourselves for potential demand risk, those have not manifested the last several quarters. but we've continued to be buyback strategy this year, just given the still recent scars that we hold through the COVID experience. So there could be -- if Blueskys persist, as we said before, that would be a scenario that would point you to the higher end of outcomes. And then just continued caution in light of what was effectively shorter MLB playoff than normal. And in particular, when we say every time about the championship series where there was a sweep in a 5 game series formally games more like 12. And that's meaningful and create some cancellations and headwinds there. And then we're still a little early, right? The nature of the biggest on sales do have meaningful impacts. And as we sit here in first week of November, it's there's reasons to be hopeful, but we don't control it. And so we're trying to remain guarded in those views.

Understood. Very helpful. And then just kind of a semi-related follow-up. As you're looking to build in those scenarios around the potential range of outcomes, are you baking in any difference in macro resilience between sports and non-sports. Is there still the dynamic where concerts are still kind of a novel experience? Or are you kind of viewing them both similarly at this point?

Yes. I think broadly similar, right? If you think of, I think, Stan, you talked about the sawmill element in sports. And I think you saw that play out if you look at the World Series, where you had Philadelphia who hasn't had a World Series or play off front in over a decade, the exit was really allocated. You can contrast that the Astros where they've been rankers in the championship series and World Series. And while there was still strong interest, it wasn't as bullies you saw in Philly. And so you started about that rating across sports and series. If you almost always have teams that are cities that have been struggling for a number of years, ascended. There's a lot of excitement around that. And so you'll always have some number of teams that -- or fans that are excited to get out and do want the opportunity because I'll pick on Chicago and it's probably another 106 years before the cuts to make it back. So you got to strike why you can. -- there's definitely when we look at the results. The sports were the first area to be open. And so to the extent there was some reopening pent-up demand or excitement to get back. We're now in our second full season across all of the sports category. So we think we're settled back into a more recurring cadence, whereas concerts in a lot of ways this year was the first normal year. Faster was still a pretty easy environment with the code protocols and what not. So it feels like sports are a little ahead of concert in settling into that normal long-term trend. But by this time next year, I think everything will be pretty well aligned.

Well, I'm a Detroit sports fan, so I know what it's like to go through a dark period here.

And our next question comes from Matthew Farrell with Piper Sandler.

As on the strong execution. Maybe just one for me. When you take a step back, a lot has changed across the industry and for vibes as well over the last couple of years, I guess, with the kind of economic headwinds that seem to be appearing as we enter 2023, why is Vivid in a better position than ever to weather the storm and potentially excel in an uncertain environment... Thanks.

Yes, happy to talk about that. I think the -- I'll start first with, I think, the model that we have has continued to improve through and through, right? We are a scaled growing marketplace. And when you look at us on every line of the P&L, contribution margin positive, free cash flow positive, EBITDA positive. I think that one allows us to be able to invest as we see fit in an environment where we know a lot of the competition does not have that dynamic. When you then couple that over to the balance sheet, we sit in a position where we've got a really strong balance sheet. We sit, again, net debt positive here where we're able to have both the resources and the cost structure to continue to invest in the business. And then when you then look at, I think, the product and service differentiation that we've talked about, whether that is VividPIX in a unique way to engage a rewards program that nobody else has, industry-winning customer service. And then alongside on the seller side of the marketplace as the leading ERP for the professional selling communities. I think we remain really bullish that across the board with our financial trials, our capabilities on the product side and our service differentiation that truly we are best positioned in the competitive set to continue to win customers, but maybe to more directly answer your question, whether whatever foreseeable storm is ahead of us.

At this time, this concludes our conference call. You may now disconnect. Everyone, have a wonderful day, and thank you for participating.