Vivid Seats - Earnings Call - Q2 2025

Transcript

Speaker 1

Good morning and welcome to the Vivid Seats second quarter 2025 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 Africk.

Good morning and welcome to Vivid Seats second quarter 2025 earnings conference call. I'm Kate Africk, 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 our second quarter earnings press release, which was issued earlier this morning. The press release, as well as supplemental earnings slides, are available on the Investor Relations page of our website at investors.vividseats.com. During the course of today's call, we may make forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks and uncertainties described in our earnings press release, our most recent annual report on Form 10-K, and our other filings with the SEC.

On today's call, we will refer to adjusted EBITDA, which is a non-GAAP financial measure that provides useful information for our investors. A reconciliation of this non-GAAP financial measure to its corresponding GAAP financial measure can be found in our earnings press release and supplemental earnings slides. I would like to turn the call over to Stan.

Speaker 3

Good morning, everyone, and thank you for joining us today. Today, I'll walk through our second quarter results, provide context on the broader industry environment, and detail a strategic cost reduction program that we are executing against. This initiative is designed to right-size our cost structure, improve operating leverage, and better position Vivid Seats to capitalize on long-term growth opportunities. I'll turn it over to Larry to share our financial results in more detail. In the second quarter, we delivered $685 million of marketplace GOV, $144 million of revenues, and $14 million of adjusted EBITDA. The industry and competitive landscape continue to present a challenging near-term operating environment, but we nonetheless continue to have conviction in the tailwinds driving live event growth on a long-term basis. Similar to Q1, in Q2, we saw industry growth to start the quarter that gave way to double-digit industry declines across categories in June.

While some amount of monthly oscillation is to be expected due to event mix, the degree of monthly volatility has been elevated thus far in 2025, which we attribute to a combination of economic uncertainty and the implementation of the FTC's all-in pricing mandate. The sports category was particularly weak and down double digits in Q2, with underwhelming playoff matchups, challenging comps, and NFL schedule release occurring just two days after the all-in pricing rollout. Meanwhile, the concerts category was up low single digits in Q2 but down double digits in June. Recent industry trends, including the switch to all-in pricing, do not change our view that live events remain an attractive long-term opportunity supported by durable supply and demand tailwinds.

Despite this long-term confidence, the current operating environment is highly competitive, so we are taking deliberate action designed to enhance efficiency, strengthen our foundation for the future, and most importantly, to return to sustainable long-term growth. Today, we announced a cost reduction program targeting $25 million in annualized operating expense savings to be actioned upon by year-end. We are focused on increasing efficiency without compromising the experience we deliver to our fans or sellers. To date, we have realized over $5 million in annualized savings. In line with our focus on operational efficiency, we have chosen to shut down Vivid Picks, with savings to come over the next several months as that business winds down. We expect to realize the remaining savings under the program as we finish the year through additional technology and AI-enabled efficiencies, as well as targeted reductions in G&A and marketing.

These actions are part of a broader commitment to ensure near-term competitive challenges do not threaten long-term value creation. Following the execution of these efficiency efforts, Vivid Seats will operate with greater agility, deliver more impact, and drive durable growth. Importantly, we do not believe these cost reductions will impact our ability to innovate across our core strategic initiatives. As we've shared, our industry-leading ERP, Skybox ERP platform, is utilized by over half of professional sellers to run their businesses. This quarter, we rolled out incremental analytical capabilities within Skybox ERP platform that were well received, and we are excited about additional Skybox ERP platform functionality in our product pipeline. Internationally, I'm pleased to share that we are now live in four European countries. Our international business is demonstrating strong growth, albeit from a small base, and is exceeding our margin expectations.

While our initial target was to break even on a contribution basis while growing international revenues, we have been net contribution positive thus far in 2025. We look forward to further diligent expansion abroad. To conclude, the second quarter was challenging, but we remain confident that better industry conditions will return. We are keenly focused on reigniting sustainable growth through best-in-class efficiency and differentiation on both sides of our marketplace. With that, I will turn it over to Larry for a more detailed financial review of the quarter.

Speaker 4

Thank you, Stan. We generated $685 million of marketplace GOV in Q2, which was down 31% year-over-year. Total marketplace orders were down approximately 30% year-over-year, while average order size was down 2%. We generated $144 million of revenues in Q2, which was down 28% year-over-year. Our Q2 marketplace take rate was 16.7%, down slightly year-over-year. While we expect some degree of continued take rate variability, we anticipate near-term take rate will remain in the 16% range. Q2 2025 adjusted EBITDA was $14 million, down substantially from the prior year, due primarily to lower volume and negative operating leverage. Performance marketing intensity continues unabated and will continue to pressure results. Despite this pressure, we remain focused on creating a path to return to sustainable growth.

We will drive additional efficiency through our cost reduction program and will utilize a portion of these savings to offer a leading value proposition to buyers while remaining competitive across relevant marketing channels as we look to stabilize top-line in 2026 and beyond. We ended Q2 at $392 million of debt and $153 million of cash, with net debt of $239 million. In the quarter, we utilized approximately $9 million in cash to purchase approximately 4 million shares of our Class A common stock at an average price of $2.34. As Stan noted, June industry volumes were quite soft, even relative to typical seasonality. Our quarter-end cash balance is driven by volume trends as we exit the quarter, which resulted in continued pressure on cash balances in Q2.

We anticipate positive cash flow in Q3 due to a combination of typical seasonality improvements and a belief that the degree of June softness was atypical. Lastly, please note that our planned one-for-20 reverse stock split, which was announced yesterday, will become effective after market close today. Our second quarter financial statements reflect share counts and per-share amounts before the reverse stock split, but subsequent periods will be reported on a post-split basis. We believe the reverse stock split will, among other things, enhance the marketability of our common stock. I'll now hand it back to Stan for concluding remarks.

Speaker 3

Thanks, Larry. While industry challenges continued in the second quarter, our long-term thesis on live events persists. Our aim is to remain lean, agile, and well-positioned to capture opportunity as the environment evolves and ultimately return to sustainable long-term growth. With that, operator, we'll open up the line for questions.

Speaker 1

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Also, we are only allowing two questions. Please stand by while we compile the Q&A remarks. Our first question comes from Dan Kurnos at The Benchmark Company.

Speaker 2

Yeah, good morning, guys. A couple for me, maybe just kind of high-level thoughts on take rate was a little higher in the quarter. I don't know if that was just, you know, in anticipation of you guys implementing the cost controls. I guess, you know, do we think that you guys are looking at the way the market is transpiring right now and going, okay, there's maybe smaller TAM on GOV, but we can be more profitable and more nimble within that, or once these cost savings get implemented, you know, I know you talked in the prepared remarks, Stan, about, you know, being more competitive in the back half of the year, but, you know, there's obviously an intelligent way to do it. Maybe kind of just walk us through threading that needle.

Speaker 3

Yeah, hey, Dan, thanks for that. I'll take the first part and then certainly Larry can talk a little bit more about the take rate move. I think when you look at certainly in the environment and how we are positioning ourselves, we are still continuing to be really focused and honing our unit economics and really plan on emerging much leaner and using that as a mechanism to drive sustainable growth really into 2026. Lots of activity now as we continue to optimize our cost structure that we think will allow us to really push that growth as we drive acquisition and to have lots of leverage on that kind of moving again forward with our eyes towards 2026 post some of these cost reductions.

Speaker 4

Dan, on the take rate itself, I would not read into that that we've actually increased pricing. There are some mixed shifts across some of our different relationship types, namely marketplace and the private label. If anything, if you think about the two competitive levers, the two primary competitive levers out there with marketing expense and take rate, I think the intent and focus is on sustaining, if not increasing, competitiveness across both those levers this year moving forward.

Speaker 3

Got it. Larry, can you just give us some color on the buckets of the annualized savings plan?

Speaker 4

Yeah, I would think of all of the numbers that we're referencing when we talk about savings as fixed expense. We're not taking credit for anything that would be variable. Volume goes down, you spend less on credit cards, volume goes down, you spend less on paid search. That is not being captured in there. What is in there, though, is what I'd call fixed marketing, i.e., like longer duration brand type marketing is on the block and then G&A. Our G&A is primarily people and software expense. You can think of this as additional efficiency across those two categories. As we look at the targets, the majority is expected to come out of G&A.

Speaker 3

Got it. Thanks, guys. Appreciate it.

Speaker 1

Our next question comes from Ralph Schackart at William Blair.

Speaker 5

Good morning. Thanks for taking the question. Just in terms 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? I know it's difficult, but just any color there that I have a palette.

Speaker 4

Yeah, 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. We saw 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. I think there was a fair amount of chatter recently on the either June or July data coming out showing Vegas was down double digits. I think the headline is certainly the competitive intensity, but the consumer softness is probably a couple hundred basis points of underlying headwind.

Speaker 5

Great. In terms of Europe, it sounds like, obviously off a small basis, you noted, but it's exceeding your margin expectations. I know you have a lot going on right now, but as you sort of get through this period of transition, does that reshape your thoughts on your rollout plan or the number of countries? Maybe speak to what you're thinking about that market as the calendar turns in 2026. Would it allow you to potentially accelerate that growth? Any perspective there would be great. Thank you.

Speaker 3

Yeah. Hey, Ralph. I think we've been pretty pleased by what we've seen internationally, as we've talked about, probably ahead of schedule in terms of number of countries that we're in and ahead of schedule in terms of what we're seeing from a contribution margin perspective. I think as we continue to see that dynamic, I think we are excited and continue to be thoughtful but willing to accelerate investment as we see that as certainly TAM accretive and margin accretive in the future. We'll continue to, I think, look to make investments to grow that part of our business.

Speaker 5

Okay, great. Thanks, Dan. Thanks, Larry.

Speaker 1

Our next question comes from Cameron Manson Perrone at Morgan Stanley.

Speaker 5

Thank you. Morning, team. First, I wanted to ask, you know, Google on their earnings call this quarter, you talked a bit about activity, search activity shifting 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, and any read-through as you're thinking about it in terms of how that impacts the secondary ticketing industry more broadly. Second, on the savings opportunity, Larry, I was wondering if, just a housekeeping question, but is the $25 million, is that in-period savings? Is it an annualized kind of exit rate at year-end 2025? Just a little bit more specificity there would be helpful. Thanks.

Speaker 3

Yeah. Hey, Cameron. I'll take the first part and then I'll hand it over to Larry on the savings. Yeah, look, I mean, certainly I think I'd start by framing, you know, as we look at how consumer discovery continues to evolve, 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. I think certainly as AI overviews is coming through, you know, I think you see, I think, expected behavior there where I think you're getting, you know, a lot of perhaps relevancy over spend that's showing up.

Certainly as we think about that adaptation of how consumers discover AI overviews as it pertains to search and other evolving and emerging channels, we continue to look at that and really position our platform to be discoverable and ready to take advantage of those channels. Lots of stuff, I think, changing in that world. I think certainly on the Google front, we're paying close attention and deeply in partnership with them as some of that search experience evolves.

Speaker 4

On the cost reduction question, the number we put forward, think of that as a full-year annualized figure that we will expect to have fully actioned by the end of this calendar year. That is incremental to 2026 results in full. As you look at the back half of 2025, I'd say they are in flight and they will layer in over the coming months. It is not a particularly significant immediate benefit, but it'll scale quickly as we fully action the identified savings.

Speaker 3

Got it. That's helpful. Thank you both.

Speaker 1

Our next question comes from Ryan Sigdahl at Craig Hallum.

Speaker 5

Hey, thanks. This is Matthew Raab. I'm for Ryan. On industry volume, Larry, you gave a little color on the cadence of the quarter, gave a little insight into June. Can you maybe talk a little bit more about the all-in pricing change and how that's changed the market from a consumer perspective? I don't know if I caught it. Did the June softness continue into Q3?

Speaker 4

Yeah, I'd say the story is not yet fully written on all-in pricing. We've seen this before the national rollout play out at several states. Maryland, California, Tennessee had previously moved to all-in pricing. What we did see was a decline in those states in conversion that persisted for a couple months and then largely normalized, which would generally fit with what we've seen across various testings where conversion is generally higher if you do utilize lower price upfront with fees shown in the checkout versus an all-in price. I think the part that's, we have the data points from the prior state examples, but now we have a lot more states flowing through and it's TBD on will that recovery that we saw in those other states fully flow through at the national level. Broadly, it's tracking.

I think there is a digestion period that we're certainly working through and we'll see as we approach kind of next year's calendar if the flow through and cascade properly works its way through the system or if there's another kind of digestion period as the industry recalibrates up and down the chain.

Speaker 3

Okay. On just the June softness, did that continue into Q3?

Speaker 4

Yeah, I think we noted on Q1 month-to-month volatility, noted again in Q2 month-to-month volatility. I'd say volatility continues. We've actually seen July revert to being up year-over-year. Now July is a softer period, so all of the caveats that I would put on an already volatile year where that volatility continues, but we are seeing July return to positive.

Speaker 3

Okay, thanks, guys.

Speaker 1

Our next question comes from Andrew Marok at Raymond James.

Speaker 2

Thanks for taking my question. On the cost savings again, you mentioned shutting down Vivid Picks, but are there any other of those kind of emerging areas or investment initiatives that might come under review in the cost reduction program, or is that kind of mostly aimed, like you said, at the core of the legacy business and the OpEx involved in that? I have a follow-up.

Speaker 3

Hey, Andrew. I think we're continuing to put our lens on all areas that can be really streamlined and enable us to be as lean and nimble as possible as we look to really drive investment into growth. I think our portfolio of investments is completely under review, but certainly our focus is on our large G&A base, which we believe we can significantly streamline by the end of the year.

Speaker 2

Appreciate it. Maybe a quick one on 2Q. I heard that the poor playoff matchups were one of the reasons that sports came in a bit below in the quarter. Is there any way to quantify the contribution of a poor playoff slate versus a good one, or just the range of outcomes that we should be thinking about in a typical playoff season? Thank you.

Speaker 4

Yeah, the sports comp I would characterize as a pile of issues that summed up to the headwind. Last year we had the Copa America that drove pretty significant volume in soccer. This year we did have the FIFA World Cup, but that came in considerably smaller than Copa. You had a tough soccer comp. Last year I'd say Caitlin Clark fever was at its peak. We saw some headwinds on all things women's basketball on a year-over-year basis. As you noted, some matchup softness. If I were to put a rough number on, call it an NBA Finals between two small market teams versus the NBA Finals between the Lakers and Celtics, I would probably say in the quarter, that type of series guardrails are like a % of GOV. A fraction of a % when you think of it on a full-year basis.

There's just such diversity in events anyone won't make or break, but when it's part of a contributing series of issues, we like to call it out.

Speaker 2

Understood. Thank you.

Speaker 1

Our next question comes from Curtis Nagle at Bank of America.

Speaker 2

Great. Just a quick one for me. On the $25 million expense reductions, could we just go through the balance of flow-through versus reinvestment, and where would those reinvested dollars primarily go?

Speaker 4

Yeah, I think some level of reserved judgment on exactly what the ratios will be based on what we see in the competitive landscape. I think we've touched on the two major, you know, call it competitive levers in the P&L are, you know, the value proposition you're offering customers on the top line and then the marketing expense on the cost side. I will reiterate our view that the incremental yield on marketing spend in this current environment is difficult to put it politely. You can imagine reinvestment focusing on the other lever with exact form and channel to be, you know, fully resolved as we continue to evaluate exactly where we want to go and how. If you think about base pricing, loyalty, you know, that promos, that portfolio of offers, I think is where you would most likely reinvest it.

Really, if you think about a, you know, call it LTV to CAC paradigm, focus on enhancing LTV in a world where CAC is under severe pressure.

Speaker 2

Okay. Understood. Thank you very much.

Speaker 1

Our next question comes from Maria Ripps at Canaccord.

Speaker 0

Great morning. Thanks for taking my questions. 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?

Speaker 4

Yeah, thanks. I mean, 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 marketing channels are today. If you think about paid social as an example, a lot of time is 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 X event." We continue to find paid search is, you know, today by far the largest channel. Hence the comment earlier where if you think about the other lever in retaining customers, driving LTV through retention and repeat approach, I think that's the likely near-term focus that we'll pursue.

We have the broader questions on the longer-term top of funnel that I think that's a question that spans not only our industry, but many others.

Speaker 0

Got it. That's very helpful. Can you maybe help us understand some of the dynamics between own properties versus private label revenue in Q2? I guess what's driving this accelerated pressure within the private label segment?

Speaker 3

Yeah. Hey, Maria. When you think about our private label business, I think it's made up of a multitude of numerous distribution partners. As you can imagine, they vary largely in size as well. I'd say for us, as you look at the disproportionate decline in private label, I think unfortunately one of our largest partners made a change and it resulted in us seeing some substantially smaller volume from that partner, thus the accelerated or sort of disproportionate decline in that segment of our business.

Speaker 0

Great, thanks so much.

Speaker 1

Our next question comes from Benjamin Black at Deutsche Bank.

Speaker 5

Great. Thank you for taking my questions. 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? Maybe talk a little bit about the rationale there. On the other side of the marketplace, how has the competition evolved on the seller side of the equation? Have you seen any impact in your supply at all? How are professional brokers responding to the challenging end market? Thank you.

Speaker 4

Thanks, Ben. Yeah, I'll speak to international and sellers. 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. You know, we talked about the J curve in getting international off the ground. We incurred most of that in 2024. 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. There's some incremental G&A, but as we look at the landscape and the ability to generate volume at structurally sound economics, from what we've seen to date, the opportunity internationally remains healthy and robust and more consistent with what we would have seen in North America prior to the behavior of the last few years.

It continues to feel like an attractive pursuit where, you know, it's still going to be a much smaller piece of the business for any reasonable timeframe than North America, but can still be a positive needle mover with absolute impact on our GOV and profitability.

Speaker 3

On the sell side, Ben, I think sellers look for both a combination of distribution channels as well as technology providers that allow them to efficiently and effectively run and grow their businesses. On the distribution side, I think we remain a significant source of volume for them. I think we continue to look at better ways to serve that. Certainly, on the infrastructure and technology side, our marketplace continues to build out components on Skybox ERP platform that we believe are quite retentive and accretive to sellers. We talked about in the prepared remarks launching analytics tool sets for them this quarter, as well as enhancing some of the mobile user experiences we have for our sell side, which continue to be ways that we build and innovate on behalf of the sell side of the marketplace.

Speaker 2

Great. Thank you very much.

Speaker 1

Our next question comes from Brad Eriksen at RBC Capital Markets.

Speaker 5

Hey, guys. Thanks. I guess first, just as you think about all this competitive intensity happening you keep talking about, I would be curious if you could just maybe break that down for us a bit more. What's actually going on kind of industry-wide now? Why is that so persistent and kind of what levers you think you can pull there to help try and address? Second, just on the supply environment, maybe just anything you can share in terms of what you're embedding in your thinking for the second half of the year. Thanks.

Speaker 4

Yeah, on the competitive landscape, I think we've spoken about the meaningful increase in aggressiveness in performance marketing channels. Think of that as, you know, it's a Google or a Bing auction where someone, when you type in a search for Toronto Blue Jays tickets, someone is showing up in the first, second, third spot. That's an open auction, and the price people are willing to pay will influence who shows up at the top of that search. There's data out there across industries that most often customers will click on the first link if they're going to click on any link. As folks are willing to bid more for that first link, they can really take a meaningful portion of the available surface area. If they're able to effectively monopolize customer awareness by consistently showing up at the top spot, they will get disproportionate traffic flow.

Whether their value proposition is the most compelling or not, they'll continue to see that traffic. By our math, that incremental bid is uneconomic. I think you've seen across several industry players, or if you kind of follow the industry chatter, that has proven out that this incremental spend is uneconomic. Different folks have different strategic objectives. I think some folks are really focused on demonstrating top-line growth, even if that's destructive to the industry profitability pool. Frankly, coming into 2025, we thought that that story was an unfortunate but perhaps constrained to 2024 story. To our disappointment, it seems to continue unabated. The why and the endgame in all of this is less clear because it seems like we're well past the bounds of any reasonable corporate finance framework that you could employ.

For supply for the back half of the year, I think from our side, we had touched on last quarter, saying that we think at the industry level, expect flat, maybe down a little bit for the year. We saw Q2 come in roughly flat, albeit volatile. Q3 is off to a positive start with relatively easy comps year over year. Q4 has tougher comps year over year. At this point, not really changing that perspective that flat-ish is probably the right paradigm from an industry standpoint. To make a call on, call it the Q4 on-sale calendar and what that'll mean for 2026, is a bit premature. For the next quarter and a half, the contract calendar is pretty locked. I think we feel fine about it. Not too much volatility there.

Speaker 3

Yeah, yeah. I think the only other one thing, you know, Brad, kind of circling back, as you think about the broad industry dynamics, certainly very aligned sort of with what we look to position ourselves to be able to do is you've certainly got a lot of marketing pressure. I think the structural changes that we are certainly embarking on will better position us to be aggressive on that front as things return to, I think, a period of growth for us. Certainly, when you look at the industry profit pool, it's not just the CAC dynamic from a marketing perspective that's under pressure. There's certainly take rate pressure as well that exists. I think as we continue to see broadly, what we believe to be financially irrational moves on that front.

As we look at, again, positioning ourselves for the future, I think our goal is to be able to compete, whether it's on marketing or the take rate pressures that we're seeing, with a lot of nimbleness and agility that we believe we can get as we lean out our cost structure.

Speaker 5

That's helpful. Thanks, guys.

Speaker 1

Our last question comes from Thomas Forte from Maxim Group LLC.

Speaker 2

Great, thanks. Dan, Larry, best of luck navigating a challenging environment. One question and one follow-up. On shuttering Vivid Picks, why shutter Vivid Picks? It wasn't driving engagement as expected, a competitive set, relative margin versus remainder of business, regulatory environment. Just additional thoughts there would be appreciated.

Speaker 3

Yeah, hey, Tom. I think certainly probably the right answer, 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. We wanted to make sure as we thought about, again, the platform and the cost structure that allowed us to really move nimbly, that that was one that fell a little bit outside the bounds of that. Similarly, as you talk about, I think there were in that space and continue to be increasing regulatory components that are unique and distinct from our core business.

As we looked at the overall impact, we made the decision that it was more of a distraction than it was something that would enable the business and decided to shut that down.

Speaker 2

Yeah, and just really quick, we tried our darndest to craft the CAC code, and we just weren't able to do it at scale. We sort of became stuck as a subscale provider with unit economics that just didn't create a pathway to becoming something other than a subscale provider. You know, gave it a multi-year effort, tried a bunch of different approaches, and once it became evident that we weren't able to unlock a more sustainable unit economic profile, decided to call it. Thanks, Larry. All right, for my follow-up, can you give your current thoughts on adjusted EBITDA cash conversion for the remainder of the year? To the extent you're able, can you provide your thoughts on your cash flow expectations for 2025 and 2026?

Speaker 4

Yeah, I think it continues to be a 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. I think year-over-year trends are likely to remain under pressure for the next several quarters. If you can get sequential improvement, that will show up in the balance sheet. 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. Moving into next year, I think that the core objectives are to, one, return to growth and, two, generate sustainable positive cash flow.

Those two statements are very closely linked. Especially with where our EBITDA has been running relative to our interest expense and our CapEx, without positive working capital contributions, significant positive cash generation will be difficult to deliver in this environment. Getting back to top-line growth is key and is the focus as we head into 2026.

Speaker 2

Great. Thanks, Dan. Thanks, Larry.

Speaker 1

This concludes the question and answer session. Thank you for your participation in today's conference. You may now disconnect.