Vivid Seats Inc. (SEAT) Earnings Call Transcript & Summary

Good afternoon. Welcome to Citi's AppsEconomy Conference. I'm Jason Bazinet. I cover the media and internet sectors here at Citi. We have disclosures available to the right of the video player or under the Citi Disclosures tab if you're viewing this via Velocity. Very pleased to have Stan Chia, CEO of Vivid Seats, and Larry Fey, CFO of Vivid Seats. Gentlemen, welcome.

Jason, thank you for having us here this morning.

Absolutely, absolutely thrilled to do it. So I should mention to investors, there is a question box on the streaming video. And if you have a question for Stan or Larry, feel free to type it in, and I'll relay that question or you can e-mail me directly either way. But before we get any questions, maybe I can just start with a high-level question. Maybe you can just start, Stan, by just giving us a brief overview of Vivid Seats strategy and how, in particular, do you think it differs from some of the rivals that are out there in the marketplace?

Yes, sure thing. I think it comes maybe to start with our mission and who we are as an organization company. Our mission is -- has been and continues to be to help everybody experience it live. We believe in the power of live events, and we've built a marketplace business to really reflect that, right? So as a marketplace, I think you think about us as really a wonderful place to connect buyers and sellers in that arena. And we've been remarkably consistent in how we've attacked that. We have leading products, I think, across each of the constituencies in our marketplace. We have our leading consumer products, which I'm happy to talk about. And certainly, I think if you go out there and look at any of our competitors, I think it's fairly clear, we have a pretty much better product across every dimension, whether that's the economic offering with our competitive pricing, with our loyalty program that continues to give 10% on every ticket that you buy, all of the other perks. So I think we've differentiated ourselves clearly on our consumer offerings. And then on the sell side, we have our industry-leading ERP in our SkyBox platform, which has over 50% of the selling communities, so the other side of our network on that platform where we continue to invest in that technology platform to really provide best-in-class offerings that help sellers grow their business, and we provide that free of charge to sellers. So we see great adoption. We see that part of the business continue to fuel core marketplace through data, through relationships. And then we have our other technology platform in our digital marketing piece that continues to show strength as we are first transaction profitable on everything due to the algorithms, the data that we've had. We've had 10 years now of first-party category-specific data that we own that we can fine-tune and that shows up in our marketing efficacy. So you look at, I think, coming back to the strategy, we are -- we have clear technology platforms that we have continued to invest in. And I think a lot of that stems from the fact that we have been very consistent in our desire to be a leading marketplace and drive network effects in that by delivering best-in-class products to them. And as we move into this next phase of Vivid Seats journey, one of the big opportunities that we've seen is to really drive consumer brand awareness and really root that in engagement with consumers. So when you look at our app and what we've built out, loyalty program is one piece. We certainly built out personalization discovery. When we went through 2020, one of the features we added was Vivid Streams to allow live streaming in our app. And then most recently, in the last quarter, we announced the acquisition of Betcha Sports, right? If you think about that, a really, really simple, easy-to-use, intuitive interface, where users now can come in and play daily fantasy with us, right? So a much more higher frequency engagement product than, I would say, browsing events where you go to events less often than you might want to play a daily fantasy game. And so as you look at that again, being in line with our really consistent marketplace-oriented strategy to drive engagement, that's just another piece where we now can leverage the millions of customers that we have with that gaming product. It gives us an entrance too to really, I think, enhance and expand the TAM that we can leverage on top of the platforms that we already have as well, right? As you look at others in that space, whether it's DraftKings, FanDuel, struggling with customer acquisition cost. For us, we see the synergy there really in line with the strategy, driving engagement with the first-transaction-profitable marketing engine, now superimposed with the ability to drive unique value to consumers across two dimensions.

Super helpful. So you might disagree with this, but we followed sort of the broader sort of live events ticketing space with some other publicly listed companies for a while. And it just strikes me the last 18, 24 months have been about the most dynamic than I could remember, not only COVID, but we've seen StubHub split into 2 pieces. We've seen you guys go public, some other guys go public, it just seems like a lot of moving parts in the ecosystem. What implications do you think each of those events have? Maybe some of them are relevant, maybe some of them are quite important. But how do you think that will shape your narrative over the next 2 or 3 years?

Maybe I can start, and then certainly, Larry, I think we'll have some really helpful and useful insights too. But I'd start with -- I think we'd agree, right? I think the last 14 to 18 months probably impactful for everybody, I think, in the world, our industry and our -- and Vivid Seats in particular, I think, extremely impacted, I think it started I think as everyone would be -- would say what an awful thing for the world to shut down and live events to go down. But if you start with how that positioned us, I'd say our theme from that was always emerge stronger from this. And I think we truly have done that, and that's a testament to the team we have behind us. We treated our consumers right. I think you saw coming out of the pandemic. Now for the third year in a row, we've won best customer service and ticketing recognized by Newsweek. I think that's a reflection, everything we did. You've heard me talk about the investments in our products, where I think -- and I might be biased here, Jason, but I truly believe across all of our platforms, we really have the best product out there. But that's, again, us investing, I think, across all of the technology platforms we have. We also were able to change, I think, the trajectory of our business which then allowed us to really look for a strategic SPAC partner, and we found an unbelievable one in Todd Boehly, Horizon and Eldridge. And through that vehicle, we're able to complete that transaction last October and really hit the public market. So really coming out of the stronger access to the public equity and a new currency as well as a really, really strong balance sheet, right? I mean we're sitting in a net cash position here where we were heavily levered in a net debt position. We've now net cash. We've got a public currency. As you can see, I talked about Betcha, we've been aggressive. We bought that company with $25 million in upfront equity. So I think we came out of this with trajectory change, fantastic strategic partner, stronger balance sheet and really a better product for consumers, sellers across our platforms. And then I think when you look at everybody else and certainly, they went through the same trials and tribulations that we had in the industry. I think perhaps they come from a slightly less advantaged position, right? I won't look to opine too much on, I think, what they've decided to do strategically, but I think you can certainly comment maybe on StubHub having perhaps closed that deal with Viagogo at just a really inopportune time, right? February 2020, a heavily debt-financed deal. And in March, the pandemic hit, right? And then combined with, call it, revenues shrinking and cash being important, they also got slammed by the U.K. CMA saying, "Hey, we think this is anticompetitive. You can't go complete and integrate 18 to 20 months." So I think all the synergies they raised the debt on unable to do any of that. So I think with a starting point was then, I think they've been encumbered and they haven't been able to really start. And as they start, they've got a just more heavily burdened balance sheet, I think, than they had. And certainly, relative to us, I would surmise that we have a better position there. I think then if you're alluding to other folks going public, I think SeatGeek, as they, too, look to go down the SPAC route, I think perhaps the things I'd call out there a little bit differently. Strategic consistency, I think they've taken a few routes, I think, starting as a metasearch and then moving to maybe an attempt at a low take rate secondary that didn't last very long and then now into a primary. So perhaps their third reincarnation and I give props. I think they've got a good product, right? Like I think it's a good product they've built. But I think the fundamentals behind that, it's the third direction strategically for them. And a primary business, subscale overall, the business, I think losing money still is probably something I think they've got a heavily consider, and I'm certain investors looking at a third direction also perhaps challenged. And certainly, on that outlook, too, I think, maybe contrasting that with us, we didn't really need the cash from our transaction, right? We are and have always been extremely profitable. We generated over $100 million in EBITDA in '19. Our EBITDA to free cash flow conversion is at over 100%. So I think again, you contrast that with perhaps an emergent SeatGeek hitting the public markets trying to complete a SPAC transaction. I think the cash is actually important to them, right? So I think the competitors are really different in a multitude of ways, right, where I think the financial position strategically where they are, where they're starting from, they're different. That will have implications. And I continue to feel fantastic about where we sit, right, with a strong balance sheet, great products and platforms. And I'd say a real focus and perhaps a confidence in who we are, right? We know we are a marketplace first and foremost, and that's where we continue to invest.

Super helpful. Larry, do you want to add anything to that? Or do you think Stan covered all the points.

I would add one thing quickly. As we think about building a brand, which we would have intended to do with or without a pandemic, one of the silver linings of having everyone locked up for 12, 18, 24 months, is that you're going to have a flood of people looking to reengage with live events is a silver lining from all of this is the best way to say it, where we'll be really upping our brand efforts at a time where people are hopefully a once-in-a-lifetime opportunity to engage with as many live event goers as possible as people look to get back to normal and make up for lost time.

Super helpful. So I think when I talk to investors, it's not controversial that live events broadly is growing faster than the overall economy. I think everyone sort of understands that younger consumers like experiences over things. The part that maybe is less well understood or appreciated is that within live events, secondary has grown faster than primary. And the part that's just a head scratcher for me and maybe you can sort of get us all smarter is it just seems to me that at the end of the day, the artists are just leaving money on the table, right? There's like this massive arbitrage out there. And the arbitrage isn't getting smaller, it's getting larger, which is sort of counterintuitive. So can you guys spend a second and just unpack what is it that's causing secondary to go faster than primary? And why is it that the artists aren't setting the price of their ticket, the face value of the ticket closer to the market value?

Yes, I can take a first crack. I think one lens to think there is the way sellers, artists, teams, so the artists and the team is the original seller, the way they want to finance their business may not align and often does not align with the way buyers and fans want to purchase tickets either in terms of timing or size of purchase. And so to give the obvious example, a baseball team knows what its payroll is well before the season starts. But they don't know if they're going to be any good. So they know what their costs are. They don't necessarily know what their revenues will be, particularly later in the season. And so what they want is to be able to sell season tickets, a lot of season tickets ahead of time. On the flip side, the consumer in January is probably not spending a lot of time thinking about what they're going to be doing on a Tuesday in August in the afternoon and do they want to go to a baseball game or not. And so you can have the structural mismatch where the team would love to match their revenues and costs by selling their inventory upfront. The same can be said in concerts, the promoters, the artists would love, when they're taking on the cost of booking venues, paying artist bonuses, hiring their crew to be able to offset that with revenues, again, well in advance of when the show actually happens. And so you have this dynamic where you have a timing mismatch. But then the team is very, very, very [indiscernible] themselves, right? There's only one Chicago Cubs and the Cubs will either be good or they will not be good. But if you are a ticket seller, you can buy some Cubs tickets and some Indians tickets and some White Sox tickets, and have a diversified portfolio. And so I think between the timing element and the risk diversification element, there is a fundamental finance function being played by the secondary market. And then from there, may kick it over to Stan for this part, just the user experience. I feel like it's aligned very well with where the future is going.

Yes. Yes. I think the add-on, I mean, certainly from as Larry points to, I think you have that on almost you think about the supply side where they're doing that. And then if you shift to the consumer side, I think the further maybe kind of realization of that is as the generations move, right, I think I talk about my kids all the time. My kids know how to order on Alexa. They know how to do that. But the big thing I think is they're all getting trained to everything on demand and almost instant gratification, right? So that desire, as Larry talked about in the consumer side, they're used to Amazon, whoever it is shipping them things within the hour. So if you ask, I think, this new generation, hey, back to -- are you going to buy a concert, are you going to buy a sporting event like 6 months from now, they don't even know what they're going to do next week, right? So I think this liquidity pool that exists within the secondary market of frankly, being able to buy what you want, when you want, I think, continues to drive some of that outsized growth that you're seeing as well, combined with the fact that I think people are truly valuing, I think, experiential things, much more than material things, right? I think this thing is happening. And I think absolutely, we saw a little bit of that in the second quarter with the euphoria last year coming out of 1 year of a lockdown. And so I think you're seeing all of those consumer trends, wanting to experience things, wanting things on demand really driving, I think, fundamentally why we see the secondary growing faster.

Okay. Super helpful. Now I think as of the third quarter, you guys had almost $490 million of cash prior to the Betcha acquisition. So it's still a pretty chunky cash balance. Can you give us a little bit of insight in terms of how you're thinking about using that cash? I mean, do you envisage sort of paying down debt? Do you envisage returning capital to shareholders? Is it more tuck-in acquisitions? Like what's the broad breaststroke?

I think everything you touched on is part of it. One of the things I would say it's pretty unlikely. We are sufficiently profitable and cash flow positive. I think it would be hard to say with the straight face, we're going to make so much organic investments, so much incremental organic investment that, that will start consuming our cash balance, any incremental organic investment we make, I think will slow the rate at which we grow the cash. So as you think about our cash, certainly, with our cash balance largely matching our debt balance, I do you think there is a debt paydown element, the exact ratio and rate to be determined based on the one hand, some inefficiency of having some negative float. On the other hand, the flexibility of opportunities come around being able to strike quickly. Within those opportunities, I think as you touched on, there's a few different acquisition paths that could make sense. We'll certainly be disciplined and make sure we're not biting off more than we can chew and rip it off too many, too quick. So we've got a very meaningful opportunity ahead of us with the Betcha acquisition. So we'll be heads down executing on that. And then there's, I think, as you touched on a few different paths to returning capital to shareholders that you would certainly keep an eye on over time as we are continuing to build that cash balance, get through the debt paydown phases, et cetera.

Okay. Super helpful. So a lot of investors, I guess, I'll start with prior to vaccine availability, if I can roll the clock back. What I would speak to them, they would say, okay, I'm looking at that 2019 level of revenue. And at least in the travel market, the buy side said, it's either 2022 or 2023, we get back to normal. And then the vaccines came out and everyone said, "Oh my gosh, I think we're going to get back to 2019 revenues in 2022." And in your segment of the world, not travel, but more live events, there's this belief that we sort of have this surge, and you've alluded to some of the pent-up demand, Larry earlier. So my question is, do you sort of agree with that general cadence that we're going to see a very sharp snapback and probably overshoot 2019 revenues just industrially and then fades and goes back to normal. Is that like the right broad profile of the shape of the recovery curve? Or do you think it's something different?

Yes. I think all things that we say from here on will be subject to a lot of exogenous factors on all things COVID and variants. But if you assume that what I'd call the current trajectory, right, if Omicron where we're getting massive transmissibility. So a lot of people have been exposed, potency seems to be waning. I think there's a lot of theories that this is perhaps the beginning of the end of the pandemic is transition into being endemic. Assuming that is the baseline assumption, I think what you said, we'd very much agree with and the data that we've seen would largely support that. So if you look at our 2021 guidance, if we get 2022, we masked our 2019 levels based on our 2021 guidance, and that was with minimal activity in the first quarter. I think our performance may not be reflective of the industry as a whole. I think there's probably a bit of outperformance on our side. But as we looked into 2022, if you use Q2 of '21 as a proxy, when the doors were opened, and we had the sentiment of we beat it, it's done, hallelujah. Before delta variant before the premise of repeated variants, you saw just an outpouring of interest in events. And that came in the form of both artists trying to get out and create more supply, demand going off the charts. And I think with what's transpired subsequently, there's certainly a meaningful portion of the population that has just set out for the entirety of this pandemic. And once we are through the gates and kind of fully clear, they will rush in and it all leads to a dynamic where pretty likely, we think you'll have a surge beyond 2019 levels.

Stan, anything you want to add?

No, I think that's exactly right. I mean I think the glass half full, being the optimist that we are, too, as you talk about it, we saw the pent-up demand released and we almost look at this again with kind of an opportunity for perhaps a rerelease of pent-up demand, right? I think with some current variance kind of slowing things down potentially. I think we've seen the venues, I think rightfully so and cities impose vaccine mandates and requirements to go in. I mean we've always thought about that as I think if you look at the country as being, call it, about 65%, 70% vaccinated, there's 30%, 35% of the demand pool that is unqualified from being able to attend currently, right? And so when we get to the point where I think you released that again, you might have this opportunity where you've got to rerelease of the 35% that can't go again. So I think we continue to see. I think we saw the strong signs last year that pent-up demand was real. And I think as we move into 2022 and beyond, I think there is that glass half full look that says, hey, you might have an opportunity for a rerelease of pent-up demand as well.

So there's no company in the secondary market that sells exclusively sporting tickets or exclusively concerts or exclusively broadway shows. But when you -- if we imagine a company that was pure sports or imagined a company that was pure concerts, do you think the shape of -- do you think investors should prefer one or the cadence of recovery is faster or slower for one segment of your ticket sales versus another? Or is it all homogenous and there's no real difference between the shape of that curve, the recovery curve?

I can start and then Larry can definitely fill in. I think it starts from maybe before looking at maybe if you had a dedicated group, I think you start with what does the industry look like today? And where do we think growth by the segments might go? And I think what you've got is an industry that's about 60% sports and 40% concert and theater, right? And as you think about sports and perhaps where it's come back, I think they are always the first to come back. I don't think the NFL ever really had no fans in the stands, right, even through 2020. And so you've got, I think, sports concert certainly impacted with that. But when you think about them in general, I think what you've got is sports is sort of a fixed kind of capacity type group. You're not really going to add games, add teams on a regular basis. This year being the exception, right, the NFL added a game, and there's a new NHL team in Seattle. But in general, I think that's a little bit more fixed. I think concerts on the other side, I think you see this massive desire for artists, right? They've got to get out there because, one, they had the pandemic a year where they don't have it. They depend on touring and everything that comes with that for 90-plus percent of their income. So you see a real necessity for them to get out there, right? So I think you're going to see that happen. I think the theater as a segment, I think, probably a much smaller piece of, call it, the concert and theater pie with, I think, Broadway being overly representative of that population. I think similar trying a little bit more fixed in capacity and shows, and everybody is trying to be the next Hamilton, right? So I think a little bit of a different view there on the prospects. So I think it's really a sport and concert game. And then I think when you look at where Vivid Seats is and how we've positioned ourselves into those segments, we designed a loyalty program, right? And I think we're the only ones out there with a loyalty program. And it really, no pun intended, a rewarding loyalty program, right, with 10% in value on every ticket that they buy. And you think about sports again as it's a higher-frequency category than anything else because you've got all these baseball games. It's arguably a similar product because you want to root for the same team and you want to go. So I think our loyalty product positions us well to be -- to capture a disproportionate amount of growth out of sports, where we're actually under indexed, right? We're the inverse of the industry where we've got about 40% sports, 60% concert and theater. And then I think when you think about concert and that growth there, our outperformance there. And again, our loyalty, our digital marketing, also allows us, I think, strength in that segment, right? So I look at that as that's how the industry looks. I think we're inverse to that and that -- where we've invested. And then you add Betcha on the sports side, I think we've got a great opportunity to really continue growing disproportionately across those categories.

And maybe my numbers are wrong, but when I go back a few years, it seems like Vivid has been remarkably successful in terms of gaining market share in the secondary market, where I think you got to about 20% of the U.S. secondary market in 2019. Can you just roll the clock back and just talk about what were the key enablers that allowed you to gain share if I have the right data? And second, where do you think your share can go with some of the enhancements you made to your loyalty program and the investments you're making in your brand?

I'll start maybe on the roll back. And I think it's fundamentally maybe I'd keep from. I think we've been -- and the founders credit them, right? I mean, for where they've been, I think they've been very -- the Vivid's been a scrappy company that's been disciplined in its approach, right? And what we've continued to do there is be really cognizant about where we are and where our advantages are. You look at that history of Vivid from 2010 through now, call it, the past 11 years, and it's been a steadfast investment in the areas of strength. In SkyBox, right, in our digital marketing platform, really as areas where the competition hadn't put a lot of investment in, right? And I think as you saw that build up, as you saw, the 2015, 2017 period as you alluded to, I think that's where those platforms started to really build up a lot of scale. We're certainly at the point now we've got 50% of the professional sellers on SkyBox. And so we see a lot of the industry flowing through our infrastructure, which gives us great relationships with sellers, allows us to transfer those relationships into better pricing for consumers. It allows us to fuel our digital marketing engine across that space, right? So those two things combined with, I'd say, I think, other decisions from competitors, whether they be around pricing, whether it be around other things, allowed Vivid Seats to continue growing share there. And I think as we look at the next level where I think we have historically not invested as much has certainly been on the consumer and brand side. And I think we've talked about that's where we are currently investing, making sure we're out. And again, before we went into really launching brand advertising for us, the principle was always making sure before we tell you who we are, we want to make sure we are actually better. And so I think we're at the point where now we're out there telling the story of who we are and it's really not just, hey, here we are, we're Vivid Seats, you should know us. It's, hey, we're Vivid Seats, and here's why we're so much better than everybody else, right? So I think that's really been the journey and certainly, we're investing now and why we feel such confidence, I think, in the prospects going forward.

Larry, do you want to add anything?

Yes. I think as you touch on where we can get to it, I mean, I sort of wouldn't put specific number out there that is going to be false precision. But I think there's a lot of runway. We've said it a few times, we think it's an industry where scale matters. And we've got large former incumbent leader that's hobbled and weak and all. And so there's a lot of opportunity to take advantage there. That said, I don't think it's a winner-take-all market. Ticketmaster is probably the prime example, they're going to be around, right? They're partners with everyone on the primary side. A lot of eyeballs come to the Ticketmaster site. They will continue to sell some secondary tickets, albeit with restrictions in many instances, when teams and artists don't want to be competing against their technology provider. But the Ticketmaster will be around for the long haul. You've got some folks that do some degree of specialization in different niches that is hard to replicate as a scale provider, they'll stick around. But no reason why we couldn't double our share from current levels over the course of time.

Super helpful. So I've got a few inbound questions from investors. Do you mind if I read these.

Go ahead.

All right. So can you elaborate more on your sports betting strategy. Right now, focused on fantasy, how do you expect us to expand? Any regulatory concerns on future plans?

I'll start. I think we're really excited about the Betcha acquisition and certainly our first foray into perhaps another category. I think we are continuing to be extremely diligent, I think, in trying to get ahead of where there's regulatory opportunities. I think right now, our near-term focus is being able to integrate that into, call it, our broader ecosystem, right, to drive the synergies that we see amongst, I think, the sports live event door and the sports better and also driving that engagement in our app and ecosystem to then kind of catapult that brand awareness. So that regardless of which, call it, industry or vertical you want to partake in that you keep Vivid Seats top of mind as the approach there. But certainly, like I said, I think we remain really bullish about the prospects of entry into this market given the synergies, the customer acquisition, the overlap and interest that we see out there.

So can I ask a clarifying question? Maybe I'm just done, but the question says, right now, focused on fantasy. I didn't realize Betcha focused on fantasy. I thought it was all real sports betting on real events. Am I wrong?

So it is fantasy in the sense of it's defined as a game of skill. And thus is under a much more less regulatory paradigm. So it is an NFL game, but you're picking performance of individual players across multiple teams and thus qualifying as a game of chance. And so I do think it is a clear line when you shift into being a game of chance rather than skill from a regulatory paradigm. We are very cognizant of that. That would be a line that we cross thoughtfully and until we cross that line, I think one of the allures of the Betcha product, one, it has a lower regulatory burden, but two, it's just a very easy to use and intuitive product. So for anyone who hasn't used it, in 5 minutes, download the app, you'll look at it. It's -- you don't need to be a sports gaming expert to figure this out. You can get it pretty quickly for as a casual fan, and we think that's part of the allure.

Yes, I think the team described it really well, right, somewhat comically. If you look at the Betcha product, it's real money sports daily fantasy, but it really is like if fantasy, sports and twitter had a baby, right? Because there's gamification elements, there's social elements, right, which, again, it's quick, it's cute, but ultimately very in line with our strategy, right? Like I think we didn't spend a lot of time talking about that earlier. But beyond the fact that it is daily fantasy, it's super intuitive, it's really easy to use. They've also built a really wonderful gamification component of this, right, which drives social engagement, which I think is, again, a big part of why we liked what they had built and saw that synergy in terms of where we were trying to go with our core product as well.

Super helpful. So I have a second question here. So as you talked about a few acquisition path that makes sense, would you be open to sharing different potential verticals that might be of interest?

Yes. I think what I'd say is, and I think Betcha a great example. I think we're probably early on sharing verticals. But certainly, when you think about our balance sheet, when you think about the platforms that we have and the ability to continue growth as a marketplace, I think we will be aggressive and opportunistic across what I would say, our adjacencies that might make sense for us as we look to enhance either the consumer experience, the seller experience, whether there are roll-up opportunities and consolidation, I think we're going to keep a very keen eye out there. And should the right thing surface, we will aggressively pursue them.

Okay. So you guys break out your revenues in three buckets, right? There's the owned marketplace, the private label marketplace and then the resale of own tickets. Can you talk about each one of those segments in terms of which one -- which segment you think will grow most briskly? And is there any sort of shift in terms of your preference where one of those might even decline for strategic reasons as you put more effort behind some of the other segments?

Yes, I can take the first crack at that. So I'd first delineate both the owned and private label called that an area, our marketplace business separate from our resale business. Our resale business, we effectively act as a ticket seller, similar to the thousands of sellers that transact on our platform. And we do that and have that function to serve as an R&D home to make sure that our SkyBox product, which serves all of those sellers is remaining bleeding edge, right? So we have our own resale house that is plugged into every trend, what features people want, what features people can get elsewhere that we should incorporate into the platform and whatnot. So I think as a result of that, it's also you could view it as somewhat competitive to our sellers, and we're very cognizant and wary of that issue. And so what you'll see is our resale business, I think we'll think of it as a flat to slower growth segment. Certainly slower growth in our marketplace, which is the core focus of the business. One last note. You can think of our resale business is 3% to 4% of the GOV or the orders that flow through our platform. Because of some accounting issues, it shows up it's 15% of our revenue because the whole ticket shows up, not just the fee. And so we just looked at our revenue, you might say, wow, resale is a meaningful piece of the business. In terms of actual volume and contribution, it's low single digits.

Makes perfect sense.

Within Marketplace, the owned and private label distinction, I think a lot of what our efforts are around building the Vivid Seats brand and whatnot are certainly directed at driving volume through our owned marketplace. But as a premise, we just fundamentally believe that people are out and willing to buy tickets to live events in enough places that we will never cover them all, right? And I think whether it's partnering with someone like American Airlines to show up alongside their mileage programs or a group on who's playing their own game in terms of how they attract customers and their value proposition. Being able to power those folks using our infrastructure, our customer service to reach those dark corners of the demand pool that we wouldn't otherwise be able to get to is something that makes all the sense in the world. They're partners of ours who focus exclusively on theater, as an example. And they can just go deeper, right? Because it's what they do all day every day, and we're happy to power and support them. But what we spend more of our time on, and is more in our control be the own marketplace. So I think that would be what we would point to is the likely fastest growth component of the business.

Okay. You guys generate about 40% contribution margins in the marketplace segment. Are there distinctions from a margin standpoint between the private label and the owned marketplace?

No. Not meaningful. It ends up in about the same, yes.

Okay. All right. Great. Maybe you can spend a second, Larry, and just talk about lockups. Like what broad breaststrokes can you share about lockups that investors might care about or find interesting?

Yes. So we now have an effective S-1, so all of our shares are registered. That was an important checkpoint for us. But as part of the transaction, our existing investors who own about 60% of the business signed up for half of their shares to be on a 6-month lockup, half on a 12-month lockup. And similarly, the pie shares of our SPAC sponsor are on that same time line. So that would put you into Q2 for the first available release. Yeah, it certainly say as a former GTCR employee, I believe, I'm positioned to speak. This is not their first radio. They get that you need to be very thoughtful and deliberate in how you exit these positions when you choose to do so. But in the meantime, I think they're quite bullish on what 2022 will bring. But we all get the joke, right. It's a private equity firm with a finite hold period, and so that selling will come at some point in the future.

Okay. Maybe the one thing I'd add there, back to as we went out and our SPAC partner you talk about lockups, the other piece that I think is really worth mentioning. And I always get on my pedestal because I think we had an unbelievable SPAC partner or de-SPAC partner and Todd Boehly, who's now a big investor in our business and a Board Director, but the structure of that as well when you think about us versus others who've come through, right, the entirety of the promote there was taken in the form of warrants. So lockup aside, the promote from his perspective, right, there has to be accretive value with all of that taken in warrants, half at 10 half at 15, right? So when you think about that alignment structure and lockups, I really -- as Larry talked about, we've got investing -- existing investors who know what they're doing, they're playing the long game with us as they have with certainly a period there. But we also got a new powerful strategic investor whose alignments are fully there with, I think, everybody in the cap stat to drive long-term growth into the equity, right?

Understood. And one last question. You guys mentioned earlier that your debt balance is very close to your cash balance. But Larry, do you have a formal leverage target? And is it something that you think about on a gross or a net basis that investors should be aware of?

Yes. I think if you go back in time to when the GTCR investment was made, it was a full LBO, right, kind of take it to the tips on leverage, 7-plus turns on day one. And what happened subsequently was through steady cash flow and growth, within 2 years, we paid off the entirety of the second lien and had brought leverage multiple down to the low 4s. And so I think it's a testament of the business can support quite a bit of leverage. That said, as a public company, we certainly get the joke that, that is not the expectation going forward. But I think if there were a select opportunity and it's a short list of opportunities that I think would be of sufficient size and interest to warrant doing this, I think there is a scenario where you would go up to, call it, 3 turns of net leverage. But again, that would be select. In the absence of that, I think we like having low leverage, minimal net leverage and the flexibility to strike if there is a really exciting opportunity where having cash on hand is helpful.

Super helpful and very clear. Well, Stan, Larry, thank you very much for the time today, super informative, and we appreciate you taking some time out of your day to spend with us and investors. Thank you.

Thanks so much.

Thanks for having us.