SeatGeek, which is in the process of a merger with RedBall Acquisition Corp that will bring it public, announced its third quarter earnings on Tuesday and painted a rosy picture of an industry on the rebound. The company reported record figures for both net revenue and gross profits in the quarter, at $59.7 million and $36.7 million, respectively.
The earnings come as SeatGeek continues to grow into the primary market from its origin as a secondary market ticket search engine into a burgeoning competitor of Ticketmaster, operating on both sides of the primary/resale fence. Earlier this week, SeatGeek announced its newest primary market deal, signing on as the ticketing provider for Major League Soccer’s St. Louis CITY FC when it launches in 2023.
“As fans return to the events, SeatGeek is positioned better than ever to deliver the best experience for consumers and to unlock the most value for our partners,” CEO Jack Groetzinger said in the earnings release. “Last quarter we continued to roll out new products like SeatGeek Swaps, the first return policy offered by a major ticketer that allows customers to return their tickets without any hassle, no questions asked. We also added major new ticketing partners, including the Brooklyn Nets and Barclays Center, and the Philadelphia Flyers and Wells Fargo Center. SeatGeek is a technology company at its core. Our focus on providing the best technology and data for our customers has accelerated market share gains within our industry. Against a backdrop of strong industry tailwinds, that sets us up well for future and continued success.”
The full press release from SeatGeek on its earnings with full details is below:
SeatGeek Announces Third Quarter 2021 Financial Results
NEW YORK–(BUSINESS WIRE)–SeatGeek, the high-growth, mobile-centric technology platform that is transforming the live-event experience for fans, teams, and venues, today announced its Q3 2021 financial results, including record net revenue and gross profits for a single quarter. As previously announced, SeatGeek recently entered into a Business Combination Agreement with RedBall Acquisition Corp. (“RedBall”), a publicly traded special purpose acquisition company (NYSE:RBAC).
Key Financial Results
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Loss from operations
1 Sequential numbers presented for this period due to the non-meaningful prior year comparison. While the live events market was still depressed by the impact of the COVID-19 pandemic during Q2, which impact eased in Q3, we believe the quarter over quarter comparison is useful to investors.
2 Results for the three months ended September 30, 2020, reflect the impact of the global COVID-19 pandemic, which resulted in the suspension of substantially all live events in the company’s markets.
3 Contribution Margin and Adjusted EBITDA are not measures defined under Generally Accepted Accounting Principles in the U.S. (“GAAP”). See “Use of Non-GAAP Measures” below for information on these non-GAAP measures and a reconciliation to the most comparable GAAP measure.
Jack Groetzinger, CEO of SeatGeek, said, “As fans return to the events, SeatGeek is positioned better than ever to deliver the best experience for consumers and to unlock the most value for our partners. Last quarter we continued to roll out new products like SeatGeek Swaps, the first return policy offered by a major ticketer that allows customers to return their tickets without any hassle, no questions asked. We also added major new ticketing partners, including the Brooklyn Nets and Barclays Center, and the Philadelphia Flyers and Wells Fargo Center. SeatGeek is a technology company at its core. Our focus on providing the best technology and data for our customers has accelerated market share gains within our industry. Against a backdrop of strong industry tailwinds, that sets us up well for future and continued success.”
Setting a company record, Q3 2021 net revenue rose to $59.7 million, up approximately 46% from Q2 2021 and versus $2.8 million in Q3 2020, when most live events were suspended due to the global COVID-19 pandemic. Robust growth was driven by the company’s ongoing success attracting major venues and teams to SeatGeek’s primary ticketing enterprise platform, as well as the continued expansion of SeatGeek’s secondary ticketing revenue and market share.
Gross profit of $36.7 million in Q3 2021 was also a company record, up approximately 44% from Q2 2021. Contribution Margin, defined by the company as gross profit less sales and marketing expense, was $5.9 million in Q3 2021, compared to $7.3 million in Q2 2021, as a result of increased sales and marketing investment in markets with recently signed enterprise partnerships. Loss from operations for the quarter was ($16.6) million versus ($11.2) million in Q2 2021 and ($24.1) million in Q3 2020. Adjusted EBITDA for the quarter was a loss of ($10.8) million, versus ($5.1) million in Q2 2020, also reflecting increased R&D investment intended to accelerate the company’s momentum and competitive differentiation. In addition to top line growth, year-over-year comparisons benefited from prior year reductions in discretionary and variable expenses in response to decreased demand due to the COVID-19 pandemic.
Brad Tacy, SeatGeek CFO, added, “Our third quarter financial results demonstrate SeatGeek’s powerful economic flywheel at work. Our expanding share of enterprise partnerships with some of the best-known names and venues in sports and live entertainment not only drives primary ticketing revenue but also compounds significant gains in secondary ticket sales, as new markets become established, and consumers and partners realize the benefits of our integrated platform. Strong gross profits and operating leverage as markets mature position SeatGeek for margin expansion and significant long-term profitability. We are confident we have a long runway for growth in both the primary and the secondary ticketing markets and plan to invest in our business to capture that growth.”
RedBall filed a registration statement on Form S-4 (the “Registration Statement”) with the SEC in connection with its proposed business combination with SeatGeek, which is currently expected to close in the first quarter of 2022, subject to the approval of RedBall’s shareholders and other customary closing conditions. Additional information can be accessed on the SEC’s website at www.sec.gov.
Use of Non-GAAP Measures
Contribution margin is a supplemental measure of operating performance monitored by management that is not defined under GAAP and that does not represent, and should not be considered as, an alternative to gross profit, as determined by GAAP. We define Contribution Margin as gross profit less sales and marketing expense. We use Contribution Margin to understand and evaluate the efficacy of our demand side spend.
Adjusted EBITDA is a supplemental measure of operating performance monitored by management that is not defined under GAAP and that does not represent, and should not be considered as, an alternative to net loss, as determined by GAAP. We define Adjusted EBITDA as loss from operations, adjusted for depreciation and amortization, equity-based compensation expense and transaction and public readiness costs. We use Adjusted EBITDA to understand and evaluate our core operating performance and trends.
We use Contribution Margin and Adjusted EBITDA in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, including assessing the efficacy of our marketing spend, and to communicate with our board of directors concerning our financial performance. We believe our non-GAAP measures are also helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. Our non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, you should consider our non-GAAP measures alongside other financial performance measures, including gross margin, loss from operations and our other GAAP results. In evaluating our non-GAAP measures, you should be aware that in the future, we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by the types of items excluded from the calculation of our non-GAAP measures. Our non-GAAP measures are not a presentation made in accordance with GAAP and the use of the terms varies from others in our industry.
A reconciliation of Contribution Margin to gross profit, the most directly comparable GAAP measure, is as follows:
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Sales and marketing expense
A reconciliation of Adjusted EBITDA to loss from operations, the most directly comparable GAAP measure, is as follows:
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Loss from operations
Depreciation and amortization
Equity based compensation1
Transaction & public readiness costs2
1 Non-cash equity-based compensation expenses.
2 Transaction and public readiness costs include non-capitalizable costs related to the Business Combination and non-recurring expenses related to our public company readiness initiative undertaken in anticipation of becoming subject to SEC and other obligations of a publicly listed company upon completion of the Company’s proposed business combination with RedBall.
Last Updated on December 15, 2021 by Dave Clark