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Vivid Seats Shares Jump on Positive Q1 Earnings Report
Vivid Seats (NASDAQ: SEAT) saw its share price jump Tuesday with a strong Q1 earnings report and raised guidance for its 2023 marketplace GOV, revenues, and adjusted EBITDA. SEAT was up by over 10% by mid-morning, trading at nearly $9/share after closing Monday at $7.89.
According to the company’s earnings report, the company’s net income was up more than 800% from its Q1 2022 figures, reaching $30.3 million. Marketplace GOV is up 15% from 742 to 855 million over the same period in 2022, while revenue is up 23%.
“We are off to an excellent start in 2023. The live event environment was robust in the first quarter with exciting event supply meeting exuberant fan demand,” said Stan Chia, Vivid Seats CEO. “It is clear sustained gains stem from providing differentiated product, service and value and we are thrilled to see our investments yielding results. Driven by our investments in our loyalty program and a differentiated buyer experience, repeat orders as a percentage of total orders placed on Vivid Seats have increased to 56% in 2022 from 47% in 2018.”
With the strong start to the year, the Chicago-based resale marketplace raised its 2023 guidance for investors.
“We delivered an exceptional quarter and we are raising our 2023 guidance to account for our strong performance and improving visibility into the remainder of the year,” said Lawrence Fey, Vivid Seats CFO. “Our robust profitability and cash flow continues to provide us numerous pathways to build long-term value.”
The full balance sheet released by Vivid Seats with its earnings report is included below:
| VIVID SEATS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (Unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 303,319 | $ | 251,542 | ||||
| Restricted cash | 675 | 748 | ||||||
| Accounts receivable – net | 46,531 | 36,531 | ||||||
| Inventory – net | 24,153 | 12,783 | ||||||
| Prepaid expenses and other current assets | 33,329 | 29,912 | ||||||
| Total current assets | 408,007 | 331,516 | ||||||
| Property and equipment – net | 10,308 | 10,431 | ||||||
| Right-of-use assets – net | 7,710 | 7,859 | ||||||
| Intangible assets – net | 81,800 | 81,976 | ||||||
| Goodwill | 715,258 | 715,258 | ||||||
| Other non-current assets | 4,432 | 4,391 | ||||||
| Total assets | $ | 1,227,515 | $ | 1,151,431 | ||||
| Liabilities and shareholders’ deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 218,138 | $ | 161,312 | ||||
| Accrued expenses and other current liabilities | 183,765 | 181,970 | ||||||
| Deferred revenue | 25,920 | 31,983 | ||||||
| Current maturities of long-term debt | 2,750 | 2,750 | ||||||
| Total current liabilities | 430,573 | 378,015 | ||||||
| Long-term debt – net | 264,384 | 264,898 | ||||||
| Long-term lease liabilities | 14,850 | 14,911 | ||||||
| Other liabilities | 13,118 | 13,445 | ||||||
| Total long-term liabilities | 292,352 | 293,254 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interests | 901,866 | 862,860 | ||||||
| Shareholders’ deficit | ||||||||
| Class A common stock, $0.0001 par value; 500,000,000 shares authorized at March 31, 2023 and December 31, 2022; 82,902,276 and 82,410,774 issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 9 | 8 | ||||||
| Class B common stock, $0.0001 par value; 250,000,000 shares authorized, 118,200,000 issued and outstanding at March 31, 2023 and December 31, 2022 | 12 | 12 | ||||||
| Additional paid-in capital | 644,759 | 663,908 | ||||||
| Treasury stock, at cost, 5,291,497 and 4,342,477 shares at March 31, 2023 and December 31, 2022, respectively | (40,106 | ) | (32,494 | ) | ||||
| Accumulated deficit | (1,001,950 | ) | (1,014,132 | ) | ||||
| Total Shareholders’ deficit | (397,276 | ) | (382,698 | ) | ||||
| Total liabilities, Redeemable noncontrolling interests, and Shareholders’ deficit | $ | 1,227,515 | $ | 1,151,431 | ||||
| VIVID SEATS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands) (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | $ | 161,063 | $ | 130,772 | ||||
| Costs and expenses: | ||||||||
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 37,760 | 32,164 | ||||||
| Marketing and selling | 54,772 | 54,228 | ||||||
| General and administrative | 32,389 | 29,275 | ||||||
| Depreciation and amortization | 2,598 | 1,385 | ||||||
| Change in fair value of contingent consideration | 34 | — | ||||||
| Income from operations | 33,510 | 13,720 | ||||||
| Other (income) expense: | ||||||||
| Interest expense – net | 3,280 | 3,942 | ||||||
| Loss on extinguishment of debt | — | 4,285 | ||||||
| Other (income) expense | (327 | ) | 2,279 | |||||
| Income before income taxes | 30,557 | 3,214 | ||||||
| Income tax expense | 285 | 76 | ||||||
| Net income | 30,272 | 3,138 | ||||||
| Net income attributable to redeemable noncontrolling interests | 18,090 | 1,879 | ||||||
| Net income attributable to Class A Common Stockholders | $ | 12,182 | $ | 1,259 | ||||
| VIVID SEATS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 30,272 | $ | 3,138 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 2,598 | 1,385 | ||||||
| Amortization of deferred financing costs and interest rate cap | 226 | 329 | ||||||
| Equity-based compensation expense | 5,530 | 3,597 | ||||||
| Loss on extinguishment of debt | — | 4,285 | ||||||
| Change in fair value of warrants | (327 | ) | 2,279 | |||||
| Amortization of leases | 150 | 490 | ||||||
| Loss on asset disposals | 7 | — | ||||||
| Change in fair value of contingent consideration | 34 | — | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | (10,000 | ) | (17,854 | ) | ||||
| Inventory | (11,370 | ) | (6,126 | ) | ||||
| Prepaid expenses and other current assets | (3,417 | ) | (3,252 | ) | ||||
| Accounts payable | 56,826 | 45,094 | ||||||
| Accrued expenses and other current liabilities | 444 | (10,599 | ) | |||||
| Deferred revenue | (6,063 | ) | 3,094 | |||||
| Other assets and liabilities | 201 | (2,326 | ) | |||||
| Net cash provided by operating activities | 65,111 | 23,534 | ||||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (215 | ) | (693 | ) | ||||
| Investments in developed technology | (2,027 | ) | (2,748 | ) | ||||
| Purchases of personal seat licenses | (365 | ) | — | |||||
| Net cash used in investing activities | (2,607 | ) | (3,441 | ) | ||||
| Cash flows from financing activities | ||||||||
| Payments of February 2022 First Lien Loan | (688 | ) | — | |||||
| Repurchase of common stock as treasury stock | (7,612 | ) | — | |||||
| Cash paid for milestone payments | (2,500 | ) | — | |||||
| Payments of June 2017 First Lien Loan | — | (465,712 | ) | |||||
| Proceeds from February 2022 First Lien Loan | — | 275,000 | ||||||
| Payments of deferred financing costs and other debt-related costs | — | (4,856 | ) | |||||
| Net cash used in financing activities | (10,800 | ) | (195,568 | ) | ||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 51,704 | (175,475 | ) | |||||
| Cash, cash equivalents, and restricted cash – beginning of period | 252,290 | 489,810 | ||||||
| Cash, cash equivalents, and restricted cash – end of period | $ | 303,994 | $ | 314,335 | ||||
Use of Non-GAAP Financial Measures
We present Adjusted EBITDA, which is not a measure defined under GAAP, because it is a measure frequently used by analysts, investors, and other interested parties to evaluate companies in our industry. Further, we believe this measure is helpful in highlighting trends in our operating results, because it excludes the impact of items that are outside the control of management or not reflective of ongoing performance related directly to the operation of our business segments.
Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance, and performing strategic planning and annual budgeting. Moreover, we believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance and highlighting trends in our operating results.
Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. Further limitations of Adjusted EBITDA are that it does not reflect all of the amounts associated with our operating results as determined in accordance with GAAP and may exclude costs that are recurring, such as interest expense, equity-based compensation, litigation, settlements and related costs and change in value of warrants. In addition, other companies may calculate Adjusted EBITDA differently than us, thereby limiting its usefulness as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from Adjusted EBITDA.
The following is a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (in thousands):
| Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net income | $ | 30,272 | $ | 3,138 | ||||
| Income tax expense | 285 | 76 | ||||||
| Interest expense – net | 3,280 | 3,942 | ||||||
| Depreciation and amortization | 2,598 | 1,385 | ||||||
| Sales tax liability(1) | — | 922 | ||||||
| Transaction costs(2) | 456 | 1,402 | ||||||
| Equity-based compensation(3) | 5,530 | 3,597 | ||||||
| Loss on extinguishment of debt(4) | — | 4,285 | ||||||
| Litigation, settlements and related costs(5) | 300 | (14 | ) | |||||
| Change in fair value of warrants(6) | (327 | ) | 2,279 | |||||
| Change in fair value of contingent consideration(7) | 34 | — | ||||||
| Loss on asset disposals(8) | 7 | — | ||||||
| Adjusted EBITDA | $ | 42,435 | $ | 21,012 | ||||
(1) We have historically incurred sales tax expense in jurisdictions where we expected to remit sales tax payments but were not yet collecting from customers. During the second half of 2021, we began collecting sales tax from customers in the required jurisdictions. The sales tax liability presented herein represents the tax liability for sales tax prior to the date we began collecting sales tax from customers reduced by abatements received, inclusive of any penalties and interest assessed by the jurisdictions. The remaining historic sales tax liability payments were made during the year ended December 31, 2022.
(2) Transaction costs consist of legal; accounting; tax and other professional fees; personnel-related costs, which consist of retention bonuses; and integration costs. Transaction costs recognized in 2023 were primarily related to legal expenses and retention bonuses related to Betcha Sports, Inc. (“Betcha” rebranded as “Vivid Picks”). Transaction costs recognized in 2022 were related to the Merger Transaction, the acquisition of Betcha and the refinancing of the remaining June 2017 First Lien Loan with a new February 2022 First Lien Loan.
(3) We incur equity-based compensation expenses for profits interests issued prior to the Merger Transaction and equity granted according to the 2021 Incentive Award Plan (“2021 Plan”), which we do not consider to be indicative of our core operating performance. The 2021 Plan was approved and adopted in order to facilitate the grant of equity incentive awards to our employees and directors. The 2021 Plan became effective on October 18, 2021.
(4) Losses incurred resulted from the extinguishment of the June 2017 First Lien Loan in February 2022.
(5) These amounts relate to external legal costs, settlement costs and insurance recoveries, which were unrelated to our core business operations.
(6) This relates to the revaluation of warrants to purchase common units of Hoya Intermediate (“Intermediate Units”) held by Hoya Topco following the Merger Transaction.
(7) This relates to the revaluation of Vivid Picks cash earnouts.
(8) This relates to asset disposals, which are not considered indicative of our core operating performance.
