Vivid Seats Inc (SEAT) 2022 Q4 法說會逐字稿

Good morning, and welcome to the Vivid Seats Fourth Quarter 2022 Earnings Conference Call. Following management's prepared remarks, we will open the call for Q&A. I would now like to turn the call over to Kate Copouls. Please go ahead.

Good morning, and welcome to Vivid Seats Fourth 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 fourth-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 investors.vividseat.com.

During the course of this call, management may make forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to the risks and uncertainties as described in the company's earnings press release and other filings with the SEC. On today's call, we will refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures that 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. 2022 was a stellar year for Live Events and an exceptional year for Vivid Seats. 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. Larry will take you through the fourth quarter and full year 2022 financial results in detail and discuss our outlook for 2023.

But first, I'd like to share highlights from our first full year as a public company and discuss the progress we've made on strategic objectives. 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. For the full year 2022, we delivered marketplace GOV of $3.2 billion, revenues of $600 million, and adjusted EBITDA of $113 million. At Vivid Seats, we commit as a team to achieve our goals. 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.

We continued to set new records in 2022 with marketplace GOV and revenues, both surpassing 2021s records by more than 30%. 2022 marketplace GOV and revenues also exceeded our initial guidance midpoint by 10%. 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. As we all witnessed, 2022 was a phenomenal year for the live event industry.

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. 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.

As the year progressed, macroeconomic pressures grew, but live event demand remained resilient. We consistently raised our guidance from marketplace GOV and revenues as we capitalized on strong demand. We are hopeful that this resiliency continues in 2023, but ultimately, that will depend on how the economy evolves and where consumers prioritize their spends. That said, exciting tour announcements from top artists such as Beyonce, Madonna, Metallica, and Cesar 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, creating exceptional experiences and enabling fans to attend more of their favorite events. Our focus on user engagement within our product ecosystem continues to be one of the pillars of our long-term strategy. In 2022, we rebranded, integrated, and enhanced Vivid Picks while continuing to grow our user base. Year-over-year, we increased both our monthly active users and new accounts created by close to 300%. In the fourth quarter, we launched in gameplay capability within Vivid Picks, and now our daily fantasy sports users can place entries for contests covering the second half of the game.

Whether fans are attending a live event or at home watching, fans may place entries as the game approaches and as the action evolves. 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 (inaudible) players through social elements. This is especially beneficial for cultural touchstone events like the Super Bowl. We also create exceptional experiences through our brand partnerships such as Rollingstone. Collaborations on exclusive live events are a key component of our partnership and for the third year, we were proud to partner on the Rollingstone Live series and bring to life one of Super Bowl weekends' most anticipated events.

Through our loyalty program, Vivid Seats Rewards, we surprised loyalty members with invitations to an exclusive live experience that expertly intersected the world of music, culture, and sports. 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. As we reflect on the past year, many of our exciting announcements focused on the buyer side of our marketplace, including our real rewards for real fans campaign and our partnerships with Bleacher Report and the New York Post.

This quarter, we are pleased to share a substantial development on the seller side of our marketplace. 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. 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, seamlessly integrate it into SkyBox, and powered by our marketplace data. Together, SkyBox and SkyBox Drive present a unique and unmatched offering that will further deepen our seller relationships as well as continue growing our installed base.

SkyBox combined with our proprietary marketing algorithms provides 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 Seats and Vivid Picks we have unique insights into fan preferences that power an evolving personalization engine that nurtures our relationship with sports and music enthusiasts. These capabilities continue to differentiate us in the highly competitive ticketing landscape. We continue to invest in superior products and service for both buyers and sellers to drive long-term differentiation and stickiness in our marketplace.

We are seeing encouraging signs of that stickiness with a large and growing base of sellers on SkyBox and increasing buyer repeat rates. 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 continue to build differentiated products, drive brand affinity, and target high-value audiences with attractive repeat tendencies to create value in the long term. 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.

Next, I'll address some of those initiatives in more detail. 2022 was an exciting year for Vivid Seats as we used new and expanded strategies to drive engagement and grow affinity for our brand. Beyond integrating Vivid Picks, 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. With unified customer profiles across Vivid Seats and Vivid Picks, we became more selective and sophisticated in targeting high-value sports and music enthusiasts.

We continue to grow our suite of tools to target the right buyers in accretive channels. Regardless of channel, we communicate a proven and compelling message. Vivid Seats is the only ticketing company to offer rewards and our rewards offer real and differentiated value. With our multifaceted brand investments in play, we are seeing traction in driving targeted brand awareness and affinity. Fans are engaging with Vivid Seats more often while expressing positive sentiment towards 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. We are proud of our ability to drive long-term brand affinity while remaining highly profitable and will continue to do so. Ultimately, our strategy to drive higher repeat rate is twofold: first, recruit the right buyers, second, once inside our ecosystem nurture each buyer with differentiated products, service, and value. 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. Even in the current landscape with higher tax, momentum from our brand investments is building. As we look to the future, we expect cash to normalize, which, in conjunction with brand momentum will lead to substantial margin leverage in the medium to long term. Larry will discuss our outlook for 2023 in detail, but I want to reiterate that we are steadfast in our strategy, 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.

In the near term, we are well equipped with a strong balance sheet, and we'll 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. 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. 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. We have been recognized for these efforts. We earned a place on fast companies, Best Workplaces for Innovators list, and recently, we were named to 4 of built-in 2023 Best Places to Work list in both Chicago and Dallas. 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. 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.

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. And with that, I will turn it over to Larry.

Thanks, Stan. I'll begin with a discussion of our fourth quarter and full year 2022 results before turning to our outlook for 2023. 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 GOV, revenues, and adjusted EBITDA. 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.

For the full year 2022, we delivered $3.2 billion of marketplace GOV, up 33% year-over-year and 40% higher than pre-pandemic levels. Fourth quarter average order size came in at $388 up slightly year-over-year and 9% above Q4 2019. Our quarterly AOS was volatile throughout 2020 and 2021, but has since returned to the 3% to 4% annual CAGR we have seen historically. Our fourth quarter 2022 revenues of $165 million increased 1% year-over-year and our take rate was 16.6%. For the full year, revenues of $600 million increased 35% year-over-year and our take rate was 16.0%. Our full year take rate, which is calculated by dividing our marketplace revenues by our marketplace GOV was consistent with historical levels when considering the impact of our loyalty program, which is accounted for as a reduction to revenue.

Some quarterly variation in our take rate is normal due to the mix of event categories. We also experienced additional quarterly take rate variation in 2022 as we refined our loyalty program assumptions throughout the year, 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 EBITDA at a 20% adjusted EBITDA margin. For the full year 2022, we generated $113 million of adjusted EBITDA, adding 19% adjusted EBITDA margin.

We continue to focus on cost discipline in the fourth quarter with flat sequential G&A expense, net of EBITDA adjustments, and expect that trajectory to continue into next year. On the marketing front, we selectively targeted opportunities that provided the proper balance of volume and profitability. This resulted in sequentially higher adjusted EBITDA margins despite continued pressure in performance marketing channels throughout the quarter. We entered 2022 targeting EBITDA margins of around 21% as we return the business to scale, layered in public company costs, and made deliberate brand investments to position Vivid Seats to win in the long term.

Despite marketplace GOV and revenue coming in above expectation, EBITDA margins came in at 19%, somewhat below our original target, primarily due to elevated marketing activity across the industry. We ended 2022 at $252 million of cash and $273 million of gross debt on our balance sheet. Our cash balance reflects $32 million worth of share repurchases in 2022, including $29 million worth of repurchases in Q4. As of year-end, we had repurchased 4.3 million Class A shares at a volume-weighted average price of $7.46 and $8 million remained under our repurchase authorization.

Our share repurchase program reduced our total shares outstanding, net of treasury stock to 196 million shares as of year-end. This share balance includes 78 million Class A shares, which are publicly traded 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 interest in our operating entities. The Class B holders interest is shown as a redeemable noncontrolling interest on our financial statements, and Class B shares are convertible one-for-one into Class A shares.

We present consolidated financial statements, which include the entirety of our operations, and we also present earnings per share for our Class A shares only. This EPS calculation reflects the approximately 40% economic interest in our operating entity attributable to Class A shares divided by the number of Class A shares outstanding, which is approximately 40% of total shares. Our EBITDA to cash conversion in 2022 was below typical levels due to several nonrecurring items, including sales tax payments, pandemic-related store credit redemptions, and normalization of seller payables as pandemic postponements fully resolved.

In aggregate, we estimate these nonrecurring items represented $73 million of nonrecurring reductions to cash flow in 2022. We have low levels of net interest expense and CapEx, and as we grow, working capital is typically a positive contributor to cash flow. With these dynamics, we expect to see normalizing cash conversion in 2023. In addition to future cash generation, we have a sizable cash balance and low levels of debt such that we can seize on strategic opportunities that may arise in ticketing or adjacent areas. Vivid Picks is just one example of an adjacent TAM-enhancing opportunity that is complementary to our ecosystem of buyers, sellers, and partners. In addition, we will continue to evaluate all available options to optimize our capital structure and enhance long-term shareholder returns.

Turning to our 2023 financial guidance. We anticipate 2023 marketplace GOV in the range of $3.0 billion to $3.3 billion, revenues in the range of $580 million to $610 million, and adjusted EBITDA in the range of $110 million to $115 million. The live event industry had a stellar 2022 with strong consumer demand and excess supply driven by postponed events originally scheduled for 2020. We believe the secondary market has grown well above the long-term trend line of 7% to 10% annual growth since reopening after the pandemic.

As we enter 2023 coming off several years of record demand, we currently anticipate industry growth to moderate with 2023 volumes approximating 2022 levels. Of note, postponed pandemic events, which mostly consisted of concerts, 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. We anticipate adjusted EBITDA will be roughly flat year-over-year. Within this steady level of profitability, we expect a 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, along with strategic opportunities afforded by our profitability and strong balance sheet.

The day-to-day excellence and agility our team demonstrated in 2022 gives us confidence in our ability to seize opportunities in 2023. 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. We continue to expect long-term adjusted EBITDA margins will approach or exceed 30% as the competitive landscape normalizes. Back to you Stan.

Thanks, Larry. In conclusion, it was a record 2022 for Vivid Seats and the broader live event industry, and I'm proud of what our committed and talented team achieved. 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. And with that, operator, I will open it up for questions.

(Operator Instructions) And our first question coming from the line of Stephen Ju with Credit Suisse.

Okay. So I guess, 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, maybe even back 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 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 is within your control, but maybe if you can speak to what's driving that confidence, that would be helpful.

Yes, Stephen, thanks for the question. Maybe I'll take a little bit of where we think our investments in some of the repeat rate dynamics have been and then certainly let Larry kind of talk to you about how we anticipate the full year and the mix shaking out. Yes, 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, most notably in the form of our highest repeat rates that we've ever seen amongst our customers and that's really spread across the categories, right?

I think it would be different if we certainly saw higher repeat rates in sports versus concerts and we're mixing into a total higher repeat rate. But if we look at our investments in the loyalty program, some of our engagement protocols, what we're happy to see is that 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 tech 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 2, when that environment rationalizes, you'll see a lot of leverage in terms of what we're driving into repeat users as it flows through to the bottom line.

And just really on the mix question, I don't think we anticipate a meaningful shift from the 2022 mix into 2023. And it's been reasonably balanced. We in our business have talked about 60% (inaudible) 40% in sports is the pre-pandemic level, and we are almost right on 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.

(Operator Instructions) And our next question coming from the line of Ralph Schackart with William Blair.

First question, just curious, now that you are through with 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? And then I have a follow-up, please.

Yes. Thanks, Ralph. The seasonality, I would say, is pretty similar to what we've historically pointed to 23% to 24% of our full year GOV in each of quarters one, 2, and 3 and then the balance coming in Q4, which we expect will remain our strongest quarter of the year. Against that, I'd say we've seen robust performance and demand continue into Q1, which we're excited to see leading up the year-over-year comparison that we're lapping last Q1, and this will hopefully be the last time we ever say this. We were fighting COVID, the Omicron variant, which impacted the January volumes, and then we had abnormal cancellations from non-COVID reasons, MLB issues [beyond food fighters]. So we have not seen those recur, (inaudible) user cancel that, in general, much lower cancels than prior year, still COVID impact. So I think we are expecting a pretty healthy year-over-year Q1 performance.

The other part I'd note is we've been a little lighter on some of our marketing efforts out of the gate in Q1 to make sure we have powder dry as we get in the back half of the year with the full sports season. So 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, I guess, benefit the repeat rates to potentially offset some of the higher levels of CAC that you're seeing?

Yes Ralph, I think we've seen a lot of success. When we look at our loyalty program, the components of that driving increased repeat, right? I think whether we're building that into the economics of our buy 10 get 13 program, whether it's the experiential components, I think we continue to look to innovate along those dimensions can we find new things that drive differentiated value to users. And I think you'll see us continue to drive integrated and innovative play options through Vivid Picks. We've talked about having our user base there on that platform, just grow 300% on a year-over-year basis where we can then use those 2 ecosystems to drive engagements where we're looking at that with now, I think, on average, close to 15 entries per month on that. So when you put together kind of innovation in the loyalty program itself combined with an engagement vehicle with 15 entries per month, I think we feel pretty good about the ability to continue to drive increased engagement and loyalty to our collective ecosystem and platform.

And our next question coming from the line of Maria Ripps from Canaccord.

Great. First, I appreciate all the color around the 2023 outlook. Can you maybe just talk about how sort of competitor marketing spend 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.

I think throughout '22, we saw a fairly consistent trend where competitor intensity is increasing with a particular shift upward starting in early Q3. That intensity continued through Q4. I'd say for the large part, it's continued into Q1. And so we have presumed that, that persists throughout the year in our guidance. 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. And so we don't want to predict the win with too much precision, but it does feel like current environment that has persisted into Q1 feels unsustainable, given some of the -- our understanding of some of the profitability implications of those decisions or others.

Got it. That makes sense. And then secondly, there's been a lot of sort of increased regulatory scrutiny on the music industry of late with the Justice department sort of having recently opened an antitrust investigation into Live Nation. So I would love to share your view on sort of on the government potentially taking some form of action to promote increased competition? And how might that impact your business in the secondary ticketing market more broadly?

Yes, sure. Look, I think it starts from just fundamentally, a belief that I think we have strongly that promoting competition is a good thing. And when fair competition exists, you see platforms like Vivid Picks continue to innovate on behalf of fans with -- as we talk a lot about here, best-in-class customer service, a loyalty program that continues to drive differentiated value, Vivid Picks that all exists when there's fair competition. I would say rather than comment directly on what they're doing, I think, look, a bunch of senators recently reviewed the industry. And I think the focus on the perspective of that investigation is fairly clear.

I think when you have large vertically integrated players who potentially leverage their advantages to cycle competition, I think the end result for that is that anyone who plays by the gold 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 as there continues to be scrutiny, anything that promotes fair competition in this space, I think Vivid Picks is well poised to take advantage of, and we look forward to seeing how that plays out.

And our next question coming from the line of Thomas Forte with D.A. Davidson.

Great. So first off, Stan and Larry, congrats on the quarter and year. I have 2 compare and contrast questions. I'll ask one and then the second is a follow-up. So first, can you prepare to trust the sales and profitability of performance marketing versus brand marketing.

Yes, I'd say as we've experimented, there's a little bit of a time latitude answer, Tom, as we've gone deeper into brand marketing. One of our tenants is bad. We don't want to put too much gas on the fire until we feel like we've at a minimum replicated for lifetime economics. And so as we talked about some of our experimenting and trying to unlock that brand marketing 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 we've achieved that and that the economics on the brand side will (inaudible) what we've been able to deliver on the performance marketing side is [that different timing] where you spend some of brand dollars upfront with a little more of a lag before you get the return relative to performance marketing as more immediate bet. But alongside that, we think the brands that customer acquired through brand channels likely has higher repeat, higher longevity, higher LTV. So on the dollar as a percentage term basis, we think it will (inaudible) and the data we're seeing now actually suggests may be better.

Great. And then for my second question, can you compare to (inaudible) consumers returning to live events from influences to historical influences like you're missing out versus a reflection of COVID-19, not unlike revenge travel.

Yes, I can take a first crack at that. I think as we looked at our guide for the year, there's a combination of both order volume and ALS dynamics that could tie into a pent-up demand thesis. And I think our view has been that average order size of things, it looks like that's largely normalized, and we exited 2022 is what I'd consider our historical trend line. On the order side, similarly, sports is now entering its third year again reopened. So I think we're well through that. We did, I think, expressed some caution relative to perhaps other perspectives out in the market on [the concert vibrants] may look like this year.

But overall, in a world where we think 7% to 10% annual long-term growth is where this industry fits. And we were up 40% in '22 relative to 2019. Having '23 as a flattish year, kind of hatched you up the trend line and in no way changes our expectation of trend line. I think we alluded to a few [degrees of caution] around exactly what the lack of postponed concerts can do to overall industry volumes, a little bit of caution around what competitor posture may look like. But that's not to say there's not an opportunity for outperformance on both of those metrics.

And our next question coming from the line of Jason Bazinet from Citi.

I know there's a little complexity analyzing this. Sales and marketing costs as a percentage of revenue, actually complexity is just given the impact of the loyalty being booked as contra revenue. But the sales and marketing as a percentage of your revenue, it seems like it's been bouncing around between 40% and 42% over the last 4 quarters. It doesn't sound as bad as you [read about] the higher competitive intensity and higher PAC. So I was just wondering if you could just unpack that a little bit or maybe I'm looking at the wrong metric.

Yes. I think it's an astute question. And when we make our comments around some of our agility and the levers that we have to pull, I think that's exactly what we're speaking to and in Q4, as an example, I made 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. I think the other thing that we've seen is a shift in terms of our customer mix towards the customers and away from fishing in the free agent pool that has gotten particularly expensive. And so it gets us really excited to go without trying to predict exactly which quarter it happens but with a strong sense that actually happens when the cap normalizes, I think we expect to really see that benefit in the new customer acquisition where we pulled back quite a bit.

Got it. That is super helpful.

And our next question coming from the line of Benjamin Black from Deutsche Bank.

Larry, I think you alluded earlier about on Live Nation earnings call, they mentioned no signs of a slowdown. In fact, they expect even more robust trends into 2023, you're seeing -- saying that 2023 growth should be more muted. So it'd be great if you could sort of bridge that disconnect there? And then Stan, in your prepared remarks, you highlighted SkyBox drives. I'd be curious to hear your perspective on how that new offering has been received or what early results have demonstrated so far? And how should it impact the P&L going forward longer term?

Yes. So I'll take the first part on Live Nation. So we start to consolidate that. 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 to mid-February performance being quite robust. I think we alluded to it, but we can confirm that we are seeing directionally similar trends in terms of very strong year-over-year performance in the year-to-date period. Well, I think we perhaps diverge a bit is, one, just having a slightly more cautious view of what the impact of (inaudible) not recurring being at the end of Q2 and Q3 on the concert side.

I'd say our overweight concerts when you look at their business overall, whereas concert is half of our business. So if you believe there's more duty growth outlook in sports, that will pull it down a little bit. And then the last variable is I think they alluded to international being quite strong. International reopening a little bit later. So I think there's a little bit of a handoff between global strength in the first couple of months in their guidance and then international perhaps carrying a little bit higher growth in the back half of the year relative to what we anticipate in North America.

I'll take the second part, Ben. I think we're really excited to announce SkyBox 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've built on SkyBox and SkyBox Drive is an additional kind of product line that we're launching next to that to further help the seller community as a turnkey solution to SkyBox I think, it received tons of interest. We are in our beta period. I would say the minute we announced and opened the beta we were oversubscribed within the first 2 minutes to how many people wanted to participate and I think if that's a good indicator, I think that would underline the fact that I think there's going to be a lot of demand and interest in the product that we're building.

As we continue to do on all of our lines there, I think we're going to evaluate what the right economics are, and there's an opportunity to make sure there's value that we can derive from that product line. I think we'll do so, but we're probably a little too early to talk about long-term P&L impact as SkyBox drive right now.

And our next question coming from the line of Logan Reich from RBC.

It's Logan on for Brad Erickson. Just another one on marketing spend. What's your guys' philosophy? I know you said you guys pulled back a little bit on the performance marketing set in Q4. But as you go forward into 2023 and the full year, what's your expectation for competitive marketing intensity? And what is your philosophy on kind of matching that versus pulling back a bit on the less profitable orders for the full year?

Yes. I'd say embedded in our guidance, we have assumed the current environment persist throughout the year, i.e., intensity above what we believe is long-term sustainable. We're certainly hoping that cracks but didn't want to build that into the baseline. And so we'll see what comes from there.

Yes. I think -- and maybe the right way to hone this, too, as we think about the timing impact that I think is front of everybody's mind, we just don't know how long it persists. I think the right question, which we certainly oriented around is when you spend, whether that's in the form of 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've prioritized, I think, making sure that we are diligent and smart about how we invest to both remain profitable, drive growth and continue to grow our cash balance for potential offensive inorganic activities. I think what you see is continued investment in the sustainable cohorts of customers that we continue to rebenefit from both now and we think even more so in the long term.

And just to wrap it up, I certainly don't think we need to strike a balance. We're not going to roll over and let competitors keep the volume about similarly, we're not going to follow them down what we think is a somewhat shortsighted path to finding the balance between those 2 in some pockets where you can pursue the most economic volume for most economic customers in terms of lifetime value. That's where we feel like a lot of our commentary around our unique data and some of our agility and marketing capabilities can really show itself.

And our next question coming from the line of Daniel Kurnos with Benchmark.

I know you guys just try to kind of put an explanation point on sort of your strategy. I guess the question that we get is in this environment and given the uncertainty of the consumer, 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 -- look, we understand that the dynamics are somewhat like online travel, whether in certain segments of cohorts that will be loyal to one and then there's a certain segment of cohort group that will probably loyal to [non in just] to price alone. And it feels like your competitors are, a, have no tools to get better loyalty and b, are more fishing in that non-repeat rate bucket, but is there no way that you guys could put incremental pressure on them beyond just sort of striking the balance, given how strong your balance sheet is right now?

Yes, it's a great question, Dan. And it's a topic that we wrestle with a fair bit. I think we're -- if we saw an opportunity to clearly accelerate that, we would lean into it. I think the 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 (technical difficulty) near-term performance, only to find out that they have more capital stashed away.

And Dan, I know you sort of said -- alluded to this in the remarks, but I kind of reemphasize to a certain extent, we are doing what you're suggesting in our investments, right? Because as you think about it, look, everybody who repeats with us is an order that we've taken away from somebody else. And where we've seen, again, the increase in repeat rates across categories for us at the highest level it's ever been. 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 mix into that, we think that's actually a very strong accelerant into, call it, the sustainability of our competitors.

Got it. That makes sense. And then just on the mix, those interesting that you guys actually spent less sequentially online in Q4 and more off-line, which obviously talks to the brand spend that you guys are pushing here even though it seems like everybody else wants to push performance, but I guess the dynamics are different here. How much of the brand is more towards Vivid Picks versus internally you're just investing on some of the amification aspects and trying to make it to your point, as you called out, and more integrated into the process versus kind of just broader Vivid Picks brand awareness? Just remember, hey, we still have really small unaided brand awareness. And if we can bring that up, then we get people into the ecosystem that way.

Yes. I'll start. I mean a couple of different things. I think where you've seen a lot of our honing of our brand spend is into channels that I think we're starting to see increased economic performance, right? 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 and as we talk about our ability to drive brand into other more programmatic areas and where we've seen a lot of success, you call out Vivid Picks, I think we're certainly excited about that. I think if you look 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 campaign is something that matters to them, and that value prop is something they'll continue to reward with purchases from us. (technical difficulty).

(technical difficulty) $3 billion plus of ticketing is going to command the significant preponderance of marketing, both performance and brand. We are targeting to pick opportunities, particularly where it is deep into the ecosystem, but you usually think of the majority -- significant majority of that brand spend being on the [core offering].

Yes, I would have assumed that Larry, I just didn't know if there was like an incremental push, but that's helpful. And just something just a housekeeping, I guess, Larry, 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 and takes in '22. So you guys are going to 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 on to your cash to pay down your debt? Do you push share buyback more given where the stock is? Just help us move through that.

I think, yes, considering all the standard possibilities. We didn't touch on it much, but we did complete a significant share repurchase efforts through -- with $32 million repurchased under our program through year-end, which I think is a testament to our willingness to repurchase shares, balanced by maybe have a little bit less float than 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, in the current interest rate environment with our cash balance approximating our debt balance, but we're effectively synthetically hedged as rates have gone up, so our interest expense hasn't really moved commensurate.

So we feel like it's still a seasonable price pay for the optionality, whether it relates to [comment, I just say for] M&A, whether that be adjacencies or more meaningful opportunities. I think that is something that we continue to review. So we like being a strong robust balance sheet. I think it ties in a little bit to the competitive landscape and some of the comments you made about competitor P&Ls, but I think happened to sort of gold play the balance sheet alongside that gives us great confidence in our ability to kind of the other side of this stronger than ever.

And our next question coming from the line of Shweta Kajaria from Evercore ISI.

Okay. Stan, could you please provide a little bit more detail on SkyBox 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 post scale launch?

Sure. Yes. Look, I think all sellers look for ways to maximize revenue. And I think in the auto pricing arena, there are multiple players that provide that service. what's been unique about our decisions along SkyBox Drive is we've never had a turnkey solution integrated into our SkyBox platform that allows for kind of an immediate auto price 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 2 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's all proprietary. So in the long term, as we launch that we remain really excited about the fact that we can grow the installed base of SkyBox drive more stickiness to that and ultimately drive more value to our sellers. And in turn, all of those things feed our flywheel, better data, better insight and potentially advantaged cost structure, again, that flows through from kind of an embedded revenue optimization system that functions in real time.

As you think about the economic Shweta, I think it's early for us, but I think it's safe to say that in the market, nobody gives an auto price away for free. So there's probably some incrementality there. But for us, I think it's still a little too early to gauge what the long-term impact is going to be.

And our next question coming from the line of Andrew Marok from Raymond James.

It's been asked kind of a couple of times in different ways, but I kind of want to address it directly. So in the overall space, I mean, the consumer experience has kind of been built on trust and there have been pretty decent repeat loyalty rates, et cetera. Have there been kind of any changes in the overall brand loyalty 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 increased marketing spend around the industry going for that kind of free agent pool.

Andrew, I think maybe 2 things to point to. One, clearly, what we can see is that our repeat rates are higher than ever. I think to buttress that maybe as a point against others, we track a lot of social sentiment amongst the competitive landscape, which you might argue it 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 #1 or #2, where historically we've not shown up, I think, in the top 5 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 indexed the competitive landscape.

Our next question coming from the line of Matthew Farrell from Piper Sandler.

Maybe just how are you thinking about the broader macro and maybe consumer spending as it relates to the full year guide? And maybe digging a little bit deeper, how do you delineate maybe the competitive pressures that you're seeing between potentially being some softening consumer trends?

Yes. I think we continue to [similar to] some of our postures throughout the year last year where we wanted to take a balanced view, where we certainly reflected some awareness of risk inherent in the market, whether it be [filled with] 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 things (technical difficulty) everyone on this call does and that gets prudent to build in some possibility or probability 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 the industry backdrop were to weaken from where we are I think that's a scenario where we long for to get excited in the short term, there will be a bit of pain. But I think that will really disproportionately hit competitors that are already running on the [edge].

Yes, 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, and I think what we really have is a long-term sustainable model with really great unit economics, investments that I think we believe we'll get a lot of leverage on in the long term, whether that's our repeat rates and our loyalty program, whether that's engagement in Vivid Picks or even more recently, I would say, truly long-term economically sustainable brand channels, right?

So I think when we look at it, we've certainly been conservative as we look at the guidance for '23 in terms of -- 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 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 continuing to win in the long term.

Thank you. And I'm showing no further questions in the queue at this time. Ladies 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.