Vivid Seats Inc. Q2 FY2025 earnings call

Key Points

• Stan Chia discussed second quarter results, noting the challenging near-term operating environment but long-term conviction in live event growth. Announced a cost reduction program targeting $25 million in annualized operating expense savings, with over $5 million already realized. Shut down Vivid Picks. International business is live in 4 European countries, growing and exceeding margin expectations.
• Larry Fey shared financial results: Marketplace GOV at $685M, Revenues at $144M, Adjusted EBITDA at $14M. Mentioned debt ($392M), cash ($153M), net debt ($239M), share buyback of ~4 million shares, and upcoming reverse stock split.

In the second quarter, Vivid Seats delivered $685 million of Marketplace GOV, $144 million of Revenues, and $14 million of Adjusted EBITDA. Marketplace GOV was down 31% year-over-year, Revenues down 28% year-over-year. The Marketplace take rate was 16.7% in Q2, down slightly year-over-year.

Forward-Looking

• Target $25 million in annualized operating expense savings to be actioned by year-end, with over $5 million already realized. Anticipate positive cash flow in Q3 due to seasonality and atypical June softness. Plan to use savings to offer leading value proposition and stabilize top line in 2026.

Risks

• Industry and competitive landscape challenges, including economic uncertainty and FTC's all-in pricing mandate leading to volatile monthly industry volumes. Competitive marketing spend pressures and potential impact of regulatory environment on certain segments.

Q: A couple for me. Maybe just kind of high-level thoughts on take rate was a little higher in the quarter...

A: Yes. Dan, thanks for that. I'll take the first part and then certainly, Larry can talk a little bit more about the take rate moves...

Q: Just in terms of kind of looking back at the quarter, I think you called out consumer spending, obviously, as well as competitive pressures. Any way you could split that out and give a sense maybe which one was having a bigger impact during the quarter?

A: Yes, Ralph, it's hard to be precise, but the best proxy, I think, that we have, recognizing that Vegas isn't directly analogous to all of our markets, you do get, I think, the cleanest read on underlying trends with the transient nature of Vegas. And we saw kind of throughout the first half, consistent year-over-year declines, I think in the mid- to high single digits in terms of some combination of visitors, hotel occupancy, price points...

Q: First, I wanted to ask, Google on their earnings call this quarter, you talked a bit about activity, search activity shifting into more towards AI mode. I was wondering if I could get your thoughts or thinking about how as search activity changes in that regard, how that might impact your SEO and performance marketing channels?

A: Cameron, I'll take the first part and then turn it over to Larry on the savings. But Yes. Look, I mean, certainly, I think I'd start by framing as we look at how consumer discovery continues to evolve, I mean, it's clear, and we're certainly an example of how much consumer discovery flows through the Google funnel, which today, I think, has a lot of opportunity for cost and spend-based funneling of traffic...

Q: On the $25 million in expense reductions, could you just go through, I guess, the balance of flow-through versus reinvestment? And where would those reinvested dollars primarily go?

A: Yes. I think some level of reserve judgment on exactly what the ratios will be based on what we see in the competitive landscape. But I think we've touched on the two major, call it, competitive levers in the P&L are the value proposition you're offering customers on the top line and then the marketing expense on the cost side...

Q: Sort of understanding competitive intensity on the marketing side, are there any alternative sort of customer acquisition channels that you may be exploring where competition is more manageable?

A: Yes. Maria, we're always looking. There are complementary channels to be had, but they are all a fraction of what the paid search and performance channels are today. So if you think about paid social as an example, a lot of time spent on Meta, on Reddit, on TikTok. But the transactional mindset is less. You're scrolling through pictures, you're having a chat versus you go into Google and you say, I want tickets to ACT Events...

Q: Can you maybe talk about the decision to invest internationally instead of supporting the U.S. market with more capital just given the challenges that you're seeing here. So maybe talk a little bit about the rationale there.

A: Thanks, Ben. Yes, I'll speak to international sellers. Yes, on the international business, I would think of it as an analysis around the incremental contribution that we can realistically get in the near term. And we talked about the J-curve in getting international off the ground. We incurred most of that in 2024. And then I think in 2025, while the top line in absolute figures and as a percentage of our total business remains small, we are now through that contribution margin curve and are positive on contribution margin...

Q: On Shuttering Vivid Picks, why Shutter Vivid Picks, it wasn't driving engagement as expected, competitive set, relative margin versus remainder of the business, regulatory environment?

A: Tom, I think certainly, probably the right -- it's a combination of all of the above, right? I'd start with -- we certainly had great aspirations and saw great early reads on potential engagement vehicles for the product that we had. I think as we look to focus in, I think, certainly, that was an area that took focus away from the core business, and we wanted to make sure as we thought about, again, the platform and the cost structure that allowed us to really move nimbly, that was one that fell a little bit outside the bounds of that...

Q: So for my follow-up, can you give your current thoughts on Adjusted EBITDA cash conversion for the remainder of the year? And then to the extent you're able to provide your thoughts on your cash flow expectations for 2025 and 2026?

A: Yes. I think it continues to be cash generation story driven primarily by two things: one, where EBITDA shakes out and then two, if we're able to return to sequential GOV growth. So I think year-over-year trends likely to remain under pressure for the next several quarters. But if you can get sequential improvement, that will show up in the balance sheet. So I do think we expect to be cash flow positive in Q3. There's seasonal strength in Q3 relative to Q2, particularly if you compare September to June, which determines the end of quarter cash balance. Our resale business, we spend money in the first half acquiring inventory, generally move that inventory in the second half, so some tailwinds there as well...