[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines the forward-looking statements contained in the report, emphasizing that they are based on current expectations and are subject to risks and uncertainties [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements%20Content) This section outlines the forward-looking statements contained in the report, emphasizing that they are based on current expectations and are subject to risks and uncertainties - Forward-looking statements are based on current expectations and projections, but are not guarantees of future performance and are subject to difficult-to-predict risks, uncertainties, and assumptions[9](index=9&type=chunk) - Key topics for forward-looking statements include future financial performance, ability to raise financing, success in retaining key personnel, ability to pay dividends, and factors related to business operations like competition, customer relationships, platform improvement, economic conditions, acquisitions, regulatory compliance, litigation, cybersecurity, and pandemics[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, deficit, and cash flows, along with detailed notes - Total assets increased by **20.3% to $1,385,076 thousand** at September 30, 2023, from $1,151,431 thousand at December 31, 2022, driven by increases in current assets, intangible assets, and goodwill[16](index=16&type=chunk) - Net cash provided by operating activities for the nine months ended September 30, 2023, was **$114,386 thousand**, a substantial increase from $1,389 thousand in the prior year, primarily due to higher net income and changes in operating assets[28](index=28&type=chunk)[194](index=194&type=chunk) - The company acquired Wavedash for approximately **$74.3 million** and invested **$6.0 million** in a privately held company during the nine months ended September 30, 2023[34](index=34&type=chunk)[57](index=57&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a summary of the company's financial position, highlighting changes in total assets, liabilities, and shareholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change | % Change | | :-------------------------------- | -----------: | -----------: | -------: | --------: | | Total Assets | $1,385,076 | $1,151,431 | $233,645 | 20.3% | | Total Current Assets | $405,503 | $331,516 | $73,987 | 22.3% | | Goodwill | $759,971 | $715,258 | $44,713 | 6.3% | | Total Liabilities | $864,648 | $671,269 | $193,379 | 28.8% | | Tax Receivable Agreement liability | $98,977 | $0 | $98,977 | N/A | | Shareholders' Deficit | $(120,289) | $(382,698) | $262,409 | 68.6% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's financial performance, detailing revenues, income from operations, and net income for the periods presented Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Revenues | $188,133 | $156,818 | $514,576 | $435,284 | | Income from operations | $20,119 | $21,701 | $71,242 | $53,348 | | Net income | $16,018 | $18,747 | $84,616 | $45,945 | | Net income attributable to Class A Common Stockholders | $6,677 | $7,663 | $49,571 | $18,577 | | Basic EPS | $0.07 | $0.09 | $0.57 | $0.23 | | Diluted EPS | $0.07 | $0.09 | $0.43 | $0.23 | - Income tax expense for the three months ended September 30, 2023, was **$2,595 thousand**, a significant increase from $118 thousand in the prior year, contributing to the decrease in net income[19](index=19&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section outlines the company's comprehensive income, including net income and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------------------------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Net income | $16,018 | $18,747 | $84,616 | $45,945 | | Foreign currency translation adjustment | $(374) | $0 | $(374) | $0 | | Comprehensive income, net of taxes | $15,644 | $18,747 | $84,242 | $45,945 | | Comprehensive income attributable to Class A Common Stockholders | $6,511 | $7,663 | $49,405 | $18,577 | [Condensed Consolidated Statements of Deficit](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Deficit) This section details the changes in shareholders' deficit, including the impact of net income and additional paid-in capital Shareholders' Deficit Evolution (in thousands) | Metric | Balances at Jan 1, 2023 | Balances at Sep 30, 2023 | | :------------------------------------ | -----------------------: | -----------------------: | | Total Shareholders' Deficit | $(382,698) | $(120,289) | | Net income | $84,616 (9 months) | $84,616 (9 months) | | Additional paid-in capital | $663,908 | $884,523 | | Accumulated deficit | $(1,014,132) | $(964,561) | - The establishment of liabilities under the Tax Receivable Agreement, net of tax and other tax impact of Secondary Offering, resulted in a reduction of additional paid-in capital by **$46,132 thousand** during the nine months ended September 30, 2023[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change | | :---------------------------------------------------- | ----------------------------: | ----------------------------: | -------: | | Net cash provided by operating activities | $114,386 | $1,389 | $112,997 | | Net cash used in investing activities | $(71,032) | $(11,888) | $(59,144) | | Net cash used in financing activities | $(26,696) | $(204,911) | $178,215 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $17,444 | $(215,410) | $232,854 | | Cash, cash equivalents, and restricted cash – end of period | $269,734 | $274,400 | $(4,666) | - The significant increase in cash from operating activities in 2023 was driven by higher net income and net cash inflows from changes in net operating assets, particularly an increase in amounts payable to ticket sellers[194](index=194&type=chunk) - Investing activities in 2023 were heavily impacted by the acquisition of Wavedash (**$55,935 thousand**) and investments in a convertible promissory note and warrant (**$6,000 thousand**)[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes supporting the condensed consolidated financial statements [1. Background and Basis of Presentation](index=11&type=section&id=1.%20Background%20and%20Basis%20of%20Presentation) This note describes the company's business operations and the basis for preparing the financial statements - The Company operates an online secondary ticket marketplace for concert, sporting, and theater events in the United States, Canada, and Japan[29](index=29&type=chunk) - Business is divided into two segments: Marketplace (online platform connecting buyers and sellers) and Resale (acquires tickets to resell on secondary marketplaces)[29](index=29&type=chunk) [2. New Accounting Standards](index=11&type=section&id=2.%20New%20Accounting%20Standards) This note details the adoption and impact of new accounting standards on the financial statements - Adopted ASU 2016-13 (Credit Losses) and ASU 2020-04 (Reference Rate Reform) on January 1, 2023[31](index=31&type=chunk)[32](index=32&type=chunk) - The adoption of these new accounting standards had no material impact on the consolidated financial statements[31](index=31&type=chunk)[32](index=32&type=chunk) [3. Business Acquisition](index=11&type=section&id=3.%20Business%20Acquisition) This note provides details on the acquisition of Wavedash, including the purchase price and preliminary fair values of acquired assets - Acquired **100%** of WD Holdings Co., Ltd. ("Wavedash"), an online ticket marketplace in Tokyo, Japan, on September 8, 2023[33](index=33&type=chunk)[34](index=34&type=chunk) - Purchase price was approximately **$74.3 million**, financed with cash on hand[34](index=34&type=chunk) Wavedash Acquisition - Preliminary Fair Values (in thousands) | Asset/Liability | Amount | | :-------------------------------- | -------: | | Net assets acquired | $74,325 | | Goodwill | $45,351 | | Intangible assets | $31,846 | Identifiable Intangible Assets Acquired (in thousands) | Asset Type | Cost | Estimated Useful Life | | :---------------------- | -------: | :------------------ | | Tradename | $2,173 | Indefinite | | Supplier relationships | $19,963 | 5 years | | Customer relationships | $5,500 | 4 years | | Developed technology | $4,210 | 3 years | | **Total** | **$31,846** | | [4. Revenue Recognition](index=13&type=section&id=4.%20Revenue%20Recognition) This note explains the company's revenue recognition policies and presents revenue breakdowns by source and event category Marketplace Revenues by Source (in thousands) | Source | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Owned Properties | $122,778 | $106,597 | $329,006 | $288,827 | | Private Label | $31,610 | $23,945 | $101,113 | $82,145 | | **Total** | **$154,388** | **$130,542** | **$430,119** | **$370,972** | Marketplace Revenues by Event Category (in thousands) | Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Concerts | $87,142 | $63,802 | $239,762 | $188,291 | | Sports | $52,169 | $52,812 | $143,118 | $143,012 | | Theater | $14,788 | $13,526 | $45,705 | $37,997 | | Other | $289 | $402 | $1,534 | $1,672 | | **Total** | **$154,388** | **$130,542** | **$430,119** | **$370,972** | Resale Revenues (in thousands) | Period | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Resale Revenues | $33,700 | $26,300 | $84,500 | $64,300 | - Deferred revenue, primarily from the Vivid Seats Rewards loyalty program, was **$34.4 million** at September 30, 2023, expected to be recognized over the next seven years[41](index=41&type=chunk) [5. Segment Reporting](index=14&type=section&id=5.%20Segment%20Reporting) This note provides financial information by reportable segment, including contribution margin - Reportable segments are Marketplace (online secondary ticket marketplace intermediary) and Resale (acquires tickets for resale)[44](index=44&type=chunk) - Contribution margin is a key performance metric, calculated as revenues less cost of revenues and marketing and selling expenses[44](index=44&type=chunk) Segment Contribution Margin (in thousands) | Segment | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Marketplace | $53,459 | $46,269 | $166,400 | $138,097 | | Resale | $7,206 | $6,609 | $20,368 | $15,021 | | **Consolidated** | **$60,665** | **$52,878** | **$186,768** | **$153,118** | [6. Accounts Receivable - Net](index=14&type=section&id=6.%20Accounts%20Receivable%20-%20Net) This note details the composition of accounts receivable and the allowance for credit losses Accounts Receivable - Net (in millions) | Category | Sep 30, 2023 | Dec 31, 2022 | Change | | :---------------------------------------------------- | -----------: | -----------: | -------: | | Accounts receivable – net | $64.8 | $36.5 | $28.3 | | Uncollateralized payment processor obligations | $42.2 | $18.9 | $23.3 | | Amounts due from marketplace ticket sellers | $7.8 | $1.0 | $6.8 | | Allowance for credit losses (marketplace sellers) | $4.0 | $0.1 | $3.9 | | Amounts due from distribution partners | $12.1 | $11.7 | $0.4 | | Allowance for credit losses (distribution partners) | $5.0 | $3.6 | $1.4 | - The allowance for credit losses for marketplace ticket sellers increased significantly from **$0.1 million to $4.0 million**, reflecting greater risk due to certain sellers generating balances in excess of existing payables[49](index=49&type=chunk) [7. Prepaid Expenses and Other Current Assets](index=15&type=section&id=7.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note outlines the components of prepaid expenses and other current assets Prepaid Expenses and Other Current Assets (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | -----------: | -----------: | -------: | | Total prepaid expenses and other current assets | $49,407 | $29,912 | $19,495 | | Recovery of future customer compensation | $42,421 | $23,311 | $19,110 | - The increase in recovery of future customer compensation is due to a higher reserve for future cancellations, driven by increased sales volume for future events[52](index=52&type=chunk) [8. Goodwill and Intangible Assets](index=15&type=section&id=8.%20Goodwill%20and%20Intangible%20Assets) This note provides information on changes in goodwill and intangible assets, including amortization expense Goodwill and Intangible Assets Changes (in thousands) | Category | Jan 1, 2023 | Wavedash Acquisition | Sep 30, 2023 | | :-------------------- | -----------: | -------------------: | -----------: | | Goodwill | $715,258 | $45,351 | $759,971 | | Definite-lived Intangible Assets | $17,310 | $29,673 | $47,064 | | Trademark | $64,666 | $2,173 | $66,809 | - Amortization expense on definite-lived intangible assets increased by **50%** for the nine months ended September 30, 2023, to **$7.5 million**, compared to $5.0 million in the prior year[56](index=56&type=chunk) [9. Investments](index=16&type=section&id=9.%20Investments) This note describes the company's investments, including a convertible promissory note and warrant - Invested **$6.0 million** in a privately held company in July 2023 via a convertible promissory note and a warrant[57](index=57&type=chunk) - The convertible promissory note is classified as an available-for-sale security and recorded at fair value, with an amortized cost of **$2.5 million** at September 30, 2023[58](index=58&type=chunk) - The warrant is accounted for as a derivative instrument at fair value, with changes recognized in Other (income) expense[59](index=59&type=chunk) [10. Fair Value Measurements](index=17&type=section&id=10.%20Fair%20Value%20Measurements) This note details the fair value measurements of financial instruments, categorized by input levels Fair Value Measurements (in thousands) | Instrument | Level | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :---- | -----------: | -----------: | | Money market funds | 1 | $190,054 | $203,285 | | Investments: Note | 3 | $2,536 | $0 | | Investments: Warrant | 3 | $3,506 | $0 | | **Total** | | **$196,096** | **$203,285** | - The fair value of the Note is determined using the income approach, and the Warrant using the Black-Scholes model, both relying on Level 3 unobservable inputs such as expected terms, implied yield, estimated volatility, and risk-free rate[62](index=62&type=chunk)[63](index=63&type=chunk) [11. Accrued Expenses and Other Current Liabilities](index=18&type=section&id=11.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note presents the breakdown of accrued expenses and other current liabilities Accrued Expenses and Other Current Liabilities (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | -----------: | -----------: | -------: | | Total accrued expenses and other current liabilities | $197,247 | $181,970 | $15,277 | | Accrued marketing expense | $44,709 | $26,873 | $17,836 | | Accrued customer credits | $63,754 | $88,167 | $(24,413) | | Accrued future customer compensation | $46,263 | $30,181 | $16,082 | | Accrued contingencies | $0 | $5,898 | $(5,898) | - Accrued customer credits decreased by **$24.4 million**, while revenue from breakage increased significantly to **$18.4 million** for the nine months ended September 30, 2023, compared to $5.0 million in the prior year[66](index=66&type=chunk) - Accrued contingencies decreased primarily due to **$6.0 million** in milestone payments to Betcha Sports, Inc. (Vivid Picks)[68](index=68&type=chunk) [12. Debt](index=19&type=section&id=12.%20Debt) This note provides details on the company's outstanding debt, including terms and compliance with covenants Outstanding Debt (in thousands) | Debt Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | -----------: | -----------: | | February 2022 First Lien Loan | $270,875 | $272,938 | | Shoko Chukin Bank Loan | $3,068 | $0 | | Total long-term debt, net | $265,875 | $264,898 | - The February 2022 First Lien Loan has a maturity date of February 3, 2029, a SOFR-based floating interest rate (**9.04%** at Sep 30, 2023), and requires quarterly amortization payments of **$0.7 million**[73](index=73&type=chunk) - The Shoko Chukin Bank Loan, assumed with the Wavedash acquisition, has a fixed interest rate of **1.27%** per annum and matures on June 24, 2026[78](index=78&type=chunk) - The company was in compliance with all debt covenants related to the February 2022 First Lien Loan as of September 30, 2023[76](index=76&type=chunk) [13. Financial Instruments](index=20&type=section&id=13.%20Financial%20Instruments) This note describes various financial instruments, including warrants and share repurchase programs - Various warrants (Public, Private, Exercise, Mirror, Hoya Intermediate) were issued in connection with the Merger Transaction, with different exercise prices and terms[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) - Hoya Intermediate Warrants are classified as a liability due to cash redemption options and their fair value decreased by **$1.0 million** for the nine months ended September 30, 2023[86](index=86&type=chunk)[87](index=87&type=chunk) - The **$40.0 million** share repurchase program for Class A common stock was fully utilized by March 31, 2023, repurchasing **5.3 million shares**[89](index=89&type=chunk) - A secondary offering of **18.4 million** Class A common shares was completed in Q2 2023, but the company did not receive any proceeds from the sale by the Selling Stockholder[91](index=91&type=chunk) [14. Commitments and Contingencies](index=22&type=section&id=14.%20Commitments%20and%20Contingencies) This note outlines the company's legal commitments and contingencies, including class action lawsuits and tax obligations - Settled a class action lawsuit in Canada regarding undisclosed service fees, resulting in a **$0.9 million** liability for expected claim submissions and credit redemptions[93](index=93&type=chunk) - Settled class action lawsuits related to COVID-19 cancellations, with **$4.5 million** disbursed in 2022 for one and **$3.3 million** paid in August 2023 for another[94](index=94&type=chunk) - Facing a lawsuit alleging violation of the Illinois Biometric Information Privacy Act, but unable to reasonably estimate a possible loss[95](index=95&type=chunk) - Continuously monitors state regulations for sales tax collection obligations, particularly for marketplace facilitators and ticket sales, and does not believe risk of loss is probable on historical revenue activities where tax has not been remitted[97](index=97&type=chunk) [15. Related-Party Transactions](index=23&type=section&id=15.%20Related-Party%20Transactions) This note details transactions with related parties, including marketing expenses and the Tax Receivable Agreement - Incurred marketing and selling expenses with Viral Nation (**$0.1 million** for 3 and 9 months ended Sep 30, 2023) and Rolling Stone (**$0.2 million** for 3 months, **$0.7 million** for 9 months ended Sep 30, 2023), where a Board member has significant ownership[99](index=99&type=chunk)[100](index=100&type=chunk) - Incurred marketing and selling expenses of **$1.1 million** for the three and nine months ended September 30, 2023, with the Los Angeles Dodgers, where a Board member is a minority owner[103](index=103&type=chunk) - A Tax Receivable Agreement (TRA) obligates the company to pay **85%** of certain tax savings to Hoya Intermediate shareholders[104](index=104&type=chunk) - In Q2 2023, a **$99.0 million** liability was recorded under the TRA, and a **$52.8 million** deferred tax asset, due to Hoya Topco exchanging Intermediate Units in a secondary offering, with payments expected to begin in 2024[105](index=105&type=chunk) [16. Income Taxes](index=24&type=section&id=16.%20Income%20Taxes) This note provides information on income tax expense, deferred tax assets, and the Tax Receivable Agreement liability Income Tax Expense (Benefit) (in millions) | Period | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Income tax expense (benefit) | $2.6 | $(21.6) | $0.1 | $0.2 | - A **$31.3 million** valuation allowance on U.S. deferred tax assets was released in Q2 2023, driven by achieving three years of cumulative pretax income in the U.S. federal tax jurisdiction[108](index=108&type=chunk) - A Tax Receivable Agreement liability of **$99.0 million** and a deferred tax asset of **$52.8 million** were established in Q2 2023, with payments expected to begin in 2024[111](index=111&type=chunk) [17. Equity-Based Compensation](index=25&type=section&id=17.%20Equity-Based%20Compensation) This note details the company's equity-based compensation plans, including grants and expense recognition - Granted **2.6 million RSUs** and **4.5 million stock options** in 2023 to employees, directors, and consultants, with most vesting over three years[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) Equity-Based Compensation Expense (in thousands) | Category | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :-------------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | RSUs | $3,900 | $10,500 | $2,300 | $6,000 | | Stock options | $2,800 | $7,300 | $1,700 | $4,600 | | Profit interests | $1,000 | $3,000 | $1,100 | $3,400 | | **Total** | **$7,700** | **$20,800** | **$5,100** | **$14,000** | - Unrecognized compensation expense for unvested RSUs is **$35.8 million** and for unvested stock options is **$25.4 million**, both expected to be recognized over approximately two years[122](index=122&type=chunk)[123](index=123&type=chunk) [18. Earnings Per Share](index=27&type=section&id=18.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share for Class A common stock Net Income Per Class A Common Stock | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------------------------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Net income attributable to Class A Common Stockholders—basic | $6,677 | $7,663 | $49,571 | $18,577 | | Basic EPS | $0.07 | $0.09 | $0.57 | $0.23 | | Diluted EPS | $0.07 | $0.09 | $0.43 | $0.23 | | Weighted average Class A common stock outstanding—basic | 96,407,327 | 81,996,447 | 86,403,617 | 80,145,329 | | Weighted average Class A common stock outstanding—diluted | 96,862,899 | 82,023,463 | 196,307,731 | 198,709,769 | - The dilution in diluted net income per share for the nine months ended September 30, 2023, is primarily attributed to the assumed conversion of noncontrolling interests to Class A common stock, which has a disproportionate effect on net income due to the valuation allowance release benefiting Vivid Seats Inc[132](index=132&type=chunk) - Potentially dilutive securities excluded from diluted EPS computation include RSUs, stock options, Public Warrants, Private Warrants, Exercise Warrants, Hoya Intermediate Warrants, and Noncontrolling Interests, if their effect would be anti-dilutive[133](index=133&type=chunk) [19. Subsequent Events](index=29&type=section&id=19.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including the acquisition of Vegas.com - On November 3, 2023, acquired **100%** ownership of VDC Holdco, LLC (Vegas.com, LLC), a Las Vegas entertainment marketplace[134](index=134&type=chunk) - Purchase price was approximately **$243.8 million**, comprising **$153.6 million** in cash and approximately **15.6 million shares** of Class A common stock[134](index=134&type=chunk) - The cash portion of the acquisition was financed with cash on hand[134](index=134&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's discussion and analysis of Vivid Seats' financial condition and results of operations for the three and nine months ended September 30, 2023 - For the nine months ended September 30, 2023, revenues increased by **18% to $514.6 million**, and Marketplace Gross Order Value (GOV) increased by **20% to $2,808.2 million**[138](index=138&type=chunk)[145](index=145&type=chunk) - Adjusted EBITDA for the nine months ended September 30, 2023, was **$106.9 million**, representing a **34% increase** year-over-year[145](index=145&type=chunk) - Net cash provided by operating activities significantly improved to **$114.4 million** for the nine months ended September 30, 2023, compared to **$1.4 million** in the prior year[193](index=193&type=chunk) [Overview](index=30&type=section&id=Overview) This section introduces Vivid Seats' business model as an online ticket marketplace and highlights key financial and operational metrics - Vivid Seats is an online ticket marketplace connecting fans with ticket sellers for live events, differentiating itself with extensive breadth and depth of ticket listings at competitive value[138](index=138&type=chunk) Key Financial and Operational Metrics (in millions) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Revenues | $188.1 | $156.8 | $514.6 | $435.3 | | Marketplace GOV | $998.9 | $781.8 | $2,808.2 | $2,338.8 | | Net income | $16.0 | $18.7 | $84.6 | $45.9 | [Our Business Model](index=30&type=section&id=Our%20Business%20Model) This section describes the company's Marketplace and Resale segments, including revenue generation and the Skybox ERP tool - Marketplace segment acts as an intermediary, earning revenue from service/delivery fees and referral fees (event ticket insurance), and includes a daily fantasy sports offering[140](index=140&type=chunk)[141](index=141&type=chunk) - Resale segment acquires tickets for resale and provides internal R&D support for Skybox, a widely adopted ERP tool for professional ticket sellers[143](index=143&type=chunk)[144](index=144&type=chunk) - Skybox is a free-to-use proprietary ERP tool that helps ticket sellers manage inventory, adjust pricing, and fulfill orders across multiple resale marketplaces[143](index=143&type=chunk) [Key Business Metrics and Non-GAAP Financial Measure](index=31&type=section&id=Key%20Business%20Metrics%20and%20Non-GAAP%20Financial%20Measure) This section defines and presents key business metrics and the non-GAAP financial measure, Adjusted EBITDA Key Business Metrics (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Marketplace GOV | $998,933 | $781,834 | $2,808,200 | $2,338,789 | | Total Marketplace orders | 3,022 | 2,572 | 7,924 | 7,001 | | Total Resale orders | 110 | 90 | 273 | 225 | | Adjusted EBITDA | $33,367 | $28,284 | $106,879 | $79,625 | - Marketplace GOV was negatively impacted by event cancellations of **$10.1 million** and **$33.9 million** for the three and nine months ended September 30, 2023, respectively[148](index=148&type=chunk) - Adjusted EBITDA is a non-GAAP measure used by management to evaluate performance and trends, excluding items like income tax, interest, depreciation, equity-based compensation, and changes in fair value of warrants/derivatives[152](index=152&type=chunk)[154](index=154&type=chunk) [Key Factors Affecting our Performance](index=33&type=section&id=Key%20Factors%20Affecting%20our%20Performance) This section refers to the company's 2022 Form 10-K for a discussion of key factors affecting performance - No material changes from the "Key Factors Affecting Our Performance" discussed in the 2022 Form 10-K[159](index=159&type=chunk) [Recent Developments](index=34&type=section&id=Recent%20Developments) This section highlights recent significant events, specifically the acquisition of Wavedash - Acquired **100%** of Wavedash, a Japanese online ticket marketplace, on September 8, 2023, for approximately **$74.3 million** using cash on hand[160](index=160&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenues and expenses for the reporting periods [Revenues](index=34&type=section&id=Revenues) This section analyzes revenue trends by segment and event category, highlighting growth drivers Total Revenues by Segment (in thousands) | Segment | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | % Change (YoY) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | % Change (YoY) | | :-------------- | ----------------------------: | ----------------------------: | --------------: | ----------------------------: | ----------------------------: | --------------: | | Marketplace | $154,388 | $130,542 | 18% | $430,119 | $370,972 | 16% | | Resale | $33,745 | $26,276 | 28% | $84,457 | $64,312 | 31% | | **Total** | **$188,133** | **$156,818** | **20%** | **$514,576** | **$435,284** | **18%** | - Marketplace revenues increased primarily due to higher new orders and average order size, especially in the concerts category (**37% increase** for 3 months, **27% for 9 months**)[164](index=164&type=chunk) - Resale revenues increased by **28%** and **31%** for the three and nine months, respectively, primarily due to higher order volume[169](index=169&type=chunk) - Cancellation charges had a lower negative impact on revenue in 2023 compared to 2022, with a **$1.0 million** increase to revenue for the three months ended September 30, 2023, versus a **$3.0 million** reduction in the prior year, mainly due to higher store credit breakage[166](index=166&type=chunk) [Cost of Revenues (exclusive of Depreciation and Amortization)](index=36&type=section&id=Cost%20of%20Revenues%20(exclusive%20of%20Depreciation%20and%20Amortization)) This section details the cost of revenues by segment and explains changes in these costs Cost of Revenues by Segment (in thousands) | Segment | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | % Change (YoY) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | % Change (YoY) | | :-------------- | ----------------------------: | ----------------------------: | --------------: | ----------------------------: | ----------------------------: | --------------: | | Marketplace | $23,923 | $17,950 | 33% | $66,749 | $52,912 | 26% | | Resale | $26,539 | $19,667 | 35% | $64,089 | $49,291 | 30% | | **Total** | **$50,462** | **$37,617** | **34%** | **$130,838** | **$102,203** | **28%** | - Resale cost of revenues increased by **35%** for the three months ended September 30, 2023, which was higher than the **28%** increase in Resale revenues, attributed to event category mix[173](index=173&type=chunk) [Marketing and Selling](index=36&type=section&id=Marketing%20and%20Selling) This section analyzes marketing and selling expenses, identifying key drivers of changes Marketing and Selling Expenses (in thousands) | Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | % Change (YoY) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | % Change (YoY) | | :------- | ----------------------------: | ----------------------------: | --------------: | ----------------------------: | ----------------------------: | --------------: | | Online | $66,226 | $59,774 | 11% | $174,224 | $164,444 | 6% | | Offline | $10,780 | $6,549 | 65% | $22,746 | $15,519 | 47% | | **Total** | **$77,006** | **$66,323** | **16%** | **$196,970** | **$179,963** | **9%** | - The increase in marketing and selling expenses was driven by greater spending on online advertising (due to higher Marketplace GOV) and higher spending on offline advertising (for brand marketing and partnerships)[175](index=175&type=chunk) [General and Administrative](index=37&type=section&id=General%20and%20Administrative) This section details general and administrative expenses, explaining the factors contributing to their changes General and Administrative Expenses (in thousands) | Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | % Change (YoY) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | % Change (YoY) | | :-------------------- | ----------------------------: | ----------------------------: | --------------: | ----------------------------: | ----------------------------: | --------------: | | Personnel expenses | $27,740 | $22,251 | 25% | $78,791 | $64,685 | 22% | | Non-income tax expenses | $472 | $177 | 167% | $1,426 | $3,859 | (63)% | | Other | $9,013 | $7,811 | 15% | $27,704 | $27,177 | 2% | | **Total** | **$37,225** | **$30,239** | **23%** | **$107,921** | **$95,721** | **13%** | - The increase in general and administrative expenses was primarily due to higher personnel expenses, driven by increased equity-based compensation and employee headcount[176](index=176&type=chunk) [Depreciation and Amortization](index=37&type=section&id=Depreciation%20and%20Amortization) This section analyzes depreciation and amortization expenses, linking them to development activities and acquisitions Depreciation and Amortization Expenses (in thousands) | Period | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | % Change (YoY) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | % Change (YoY) | | :----- | ----------------------------: | ----------------------------: | --------------: | ----------------------------: | ----------------------------: | --------------: | | Expense | $3,301 | $2,158 | 53% | $8,603 | $5,269 | 63% | - The increase in depreciation and amortization was primarily related to increased development activities for the platform and intangibles acquired from the Betcha (Vivid Picks) acquisition[177](index=177&type=chunk) [Change in Fair Value of Contingent Consideration](index=37&type=section&id=Change%20in%20Fair%20Value%20of%20Contingent%20Consideration) This section explains the changes in the fair value of contingent consideration, primarily related to earnouts Change in Fair Value of Contingent Consideration (in thousands) | Period | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Change | $20 | $(1,220) | $(998) | $(1,220) | - The change in fair value is due to the remeasurement of Vivid Picks cash earnouts[158](index=158&type=chunk) [Other (Income) Expense](index=37&type=section&id=Other%20(Income)%20Expense) This section details other income and expenses, including interest and fair value remeasurements Other (Income) Expense Highlights (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | % Change (YoY) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | % Change (YoY) | | :-------------------------- | ----------------------------: | ----------------------------: | --------------: | ----------------------------: | ----------------------------: | --------------: | | Interest expense – net | $2,544 | $2,901 | (12)% | $8,596 | $9,542 | (10)% | | Loss on extinguishment of debt | $0 | $0 | 0% | $0 | $4,285 | (100)% | | Other income (expense) | $(1,038) | $(65) | (1,497)% | $(365) | $(6,618) | 94% | - The decrease in net interest expense was due to higher interest income[179](index=179&type=chunk) - The significant change in other income/expense for the nine months was primarily due to the fair value remeasurement of Hoya Intermediate Warrants and foreign currency revaluation losses[181](index=181&type=chunk)[182](index=182&type=chunk) [Income tax expense (benefit)](index=38&type=section&id=Income%20tax%20expense%20(benefit)) This section analyzes income tax expense or benefit, explaining the factors influencing tax outcomes Income Tax Expense (Benefit) (in thousands) | Period | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----- | ----------------------------: | ----------------------------: | ----------------------------: | ----------------------------: | | Expense (benefit) | $2,595 | $118 | $(21,605) | $194 | - The **$21.6 million** income tax benefit for the nine months ended September 30, 2023, was primarily due to the release of a valuation allowance on U.S. net operating losses, interest limitations, and tax credit carryforwards, and the impact of noncontrolling interests[183](index=183&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity position, capital resources, and cash flow activities - Primary liquidity source is cash from operations, with **$268.7 million** in cash and cash equivalents as of September 30, 2023[185](index=185&type=chunk) - Existing cash and cash equivalents are deemed sufficient to fund liquidity needs for at least the next 12 months[185](index=185&type=chunk) [Loan agreements](index=38&type=section&id=Loan%20agreements) This section details the company's outstanding loan agreements, including terms and interest rates - Outstanding debt includes the **$275.0 million** February 2022 First Lien Loan (SOFR + **3.25%**, **9.04%** effective rate at Sep 30, 2023) and the **$3.1 million** Shoko Chukin Bank Loan (**1.27%** fixed rate)[186](index=186&type=chunk)[187](index=187&type=chunk) - The company had no outstanding borrowings under its **$100.0 million** Revolving Facility as of September 30, 2023[187](index=187&type=chunk) [Share Repurchase Program](index=38&type=section&id=Share%20Repurchase%20Program) This section provides an update on the company's share repurchase program - The **$40.0 million** share repurchase program was fully utilized by March 31, 2023, repurchasing **5.3 million shares** of Class A common stock[188](index=188&type=chunk) - No share repurchases were made during the three months ended September 30, 2023[188](index=188&type=chunk) [Distributions to non-controlling interests](index=38&type=section&id=Distributions%20to%20non-controlling%20interests) This section reports on distributions made to non-controlling interests Distributions to Non-Controlling Interests (in millions) | Period | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :----- | ----------------------------: | ----------------------------: | | Distributions | $0 | $11.0 | [Tax Receivable Agreement](index=39&type=section&id=Tax%20Receivable%20Agreement) This section explains the Tax Receivable Agreement and its financial impact - The Tax Receivable Agreement (TRA) obligates the company to pay Hoya Intermediate shareholders **85%** of certain tax savings[191](index=191&type=chunk) - A **$99.0 million** TRA liability and a **$52.8 million** deferred tax asset were recorded in Q2 2023 due to a secondary offering, with payments expected to commence in 2024[192](index=192&type=chunk) [Cash Flows](index=39&type=section&id=Cash%20Flows) This section provides a detailed summary and analysis of cash flows from operating, investing, and financing activities Summary of Cash Flows (in thousands) | Category | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change | | :---------------------------------------------------- | ----------------------------: | ----------------------------: | -------: | | Net cash provided by operating activities | $114,386 | $1,389 | $112,997 | | Net cash used in investing activities | $(71,032) | $(11,888) | $(59,144) | | Net cash used in financing activities | $(26,696) | $(204,911) | $178,215 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $17,444 | $(215,410) | $232,854 | - Operating cash flow significantly improved due to higher net income and net cash inflows from changes in net operating assets, particularly an increase in amounts payable to ticket sellers[194](index=194&type=chunk) - Investing cash flow was primarily impacted by the Wavedash acquisition and investments in a privately held company[196](index=196&type=chunk) - Financing cash flow decreased substantially due to the absence of large debt repayments that occurred in the prior year[198](index=198&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section states that there have been no material changes to the company's critical accounting policies and estimates - No material changes to critical accounting policies and estimates during the nine months ended September 30, 2023[199](index=199&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 for details on recently adopted and issued accounting pronouncements - Refer to Note 2, New Accounting Standards, for details on recently adopted and issued accounting pronouncements[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily focusing on interest rate risk associated with its floating-rate debt - The company's primary market risk is interest rate risk associated with its floating-rate debt, specifically the February 2022 First Lien Loan[202](index=202&type=chunk)[203](index=203&type=chunk) - A hypothetical **1%** increase in interest rates (above the floor) would increase interest expense by **$2.1 million** based on outstanding amounts for the nine months ended September 30, 2023[203](index=203&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures, noting a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective at reasonable assurance levels as of September 30, 2023[208](index=208&type=chunk) - Identified a material weakness in internal control over financial reporting due to inadequate segregation of duties, undefined roles in finance/accounting, and insufficient personnel with technical accounting and SEC reporting experience[209](index=209&type=chunk) - Remediation efforts include a full review of internal control procedures, implementation of new controls, hiring additional qualified personnel, and establishing robust processes with clearly defined roles and segregation of duties[210](index=210&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part contains other information not included in the financial statements, such as legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 14, Commitments and Contingencies, for detailed information regarding the company's legal proceedings - Legal proceedings information is detailed in Note 14, Commitments and Contingencies[213](index=213&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's 2022 Form 10-K - No material changes to the risk factors disclosed in the 2022 Form 10-K[215](index=215&type=chunk) - Readers should consider the risk factors as they could materially adversely affect the business, financial condition, liquidity, results of operations, and capital position[215](index=215&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report for the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report[216](index=216&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[218](index=218&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[221](index=221&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023 - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023[223](index=223&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including transaction agreements, certificates of incorporation, warrant agreements, certifications of principal officers, and Inline XBRL documents - The exhibits include various legal and corporate documents such as transaction agreements, certificates of incorporation, warrant agreements, and certifications of principal executive and financial officers[225](index=225&type=chunk)[226](index=226&type=chunk) [Signatures](index=44&type=section&id=Signatures) This section contains the signatures of the principal executive and financial officers, certifying the report [Signatures](index=44&type=section&id=Signatures%20Content) The report is duly signed on behalf of Vivid Seats Inc. by Stanley Chia, Chief Executive Officer, and Lawrence Fey, Chief Financial Officer, on November 7, 2023 - The report was signed by Stanley Chia (CEO) and Lawrence Fey (CFO) on November 7, 2023[230](index=230&type=chunk)

Q2 2023 Financial Highlights - Marketplace GOV reached $954 million[3] - Revenues totaled $165 million[3] - Adjusted EBITDA amounted to $31 million[3] - Net income was $38326 thousand[3, 21] Q2 2023 Performance Analysis - Concert revenues increased by 18% to $77741 thousand compared to $65816 thousand in Q2 2022[29] - Theater revenues increased by 31% to $15527 thousand compared to $11856 thousand in Q2 2022[29] - Sports revenues decreased by 12% to $45349 thousand compared to $51285 thousand in Q2 2022[29] Financial Guidance Update - Marketplace GOV guidance revised upwards to $34 billion to $36 billion from the previous $30 billion to $33 billion[13] - Adjusted EBITDA guidance increased to $125 million to $135 million from $110 million to $115 million[13] Balance Sheet and Strategic Initiatives - The company has a cash balance exceeding debt by $35 million[25] - The company is acquiring Wavedash, a Japanese secondary ticket marketplace, for approximately $61 million in cash[25]

Financial Data and Key Metrics Changes - The second quarter 2023 marketplace Gross Order Value (GOV) was $954 million, a 17% increase year-over-year, with total marketplace orders increasing by 9% and average order size increasing by 7% [99][113][124] - Revenues for Q2 2023 reached $165 million, reflecting a 12% year-over-year growth driven by marketplace GOV growth [100][113] - Adjusted EBITDA for the second quarter was $31 million, also higher year-over-year, despite a lower than normal take rate of 14.6% [100][124] Business Line Data and Key Metrics Changes - The company reported strong performance in the concert category, particularly driven by the Taylor Swift Eras Tour, which significantly contributed to the overall growth [114][124] - The loyalty program has seen increased engagement, with repeat rates reaching new highs in Q2, indicating a successful strategy in retaining customers [119] Market Data and Key Metrics Changes - The acquisition of Wavedash, a leading secondary ticketing marketplace in Japan, is expected to expand the company's total addressable market (TAM) and enhance its international presence [112][121] - The international ticketing market is estimated to be roughly comparable to the North American market, with specific cultural considerations affecting individual country dynamics [138] Company Strategy and Development Direction - The company is focused on expanding its international footprint through strategic acquisitions like Wavedash, while maintaining a strong emphasis on its core ticketing business [112][121][122] - Partnerships with Major League Baseball teams and the National Football League are designed to enhance brand awareness and customer loyalty through unique fan experiences [91][92][116] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued strength of consumer demand for live events, despite potential macroeconomic challenges [136][145] - The company has raised its 2023 guidance, anticipating double-digit growth in GOV and adjusted EBITDA, reflecting a more favorable outlook than previously expected [102][104] Other Important Information - The company plans to utilize approximately $61 million of its cash balance for the acquisition of Wavedash, highlighting its strong financial position [126] - The introduction of the Game Center product has seen strong engagement, with over 70,000 unique players in the first 60 days since launch [120] Q&A Session All Questions and Answers Question: What is the overall TAM opportunity and what attracted the company to the Japanese market? - The company views the international ticketing market as a significant opportunity and is excited about the potential for growth through the acquisition of Wavedash, which is a market leader in Japan [131][121] Question: How is the competitive environment trending? - The competitive pressure remains stable but strong, with the company focusing on innovation and customer engagement to maintain its market position [75][149] Question: How does the company view the impact of student loan repayments on consumer spending? - Management acknowledged that while there may be a slight headwind from student loan repayments, the overall sentiment regarding consumer spending remains stable and positive [155][156]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited condensed consolidated financial statements for Vivid Seats Inc. as of June 30, 2023, including balance sheets, statements of operations, and cash flows, are presented with accompanying notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and shareholders' deficit as of specific dates - Total assets increased to **$1.32 billion** as of June 30, 2023, from **$1.15 billion** at December 31, 2022, driven by increases in cash, receivables, and deferred tax assets[15](index=15&type=chunk) - A **$99.0 million** Tax Receivable Agreement liability was newly recorded in long-term liabilities as of June 30, 2023[15](index=15&type=chunk) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $306,202 | $251,542 | | Total current assets | $427,793 | $331,516 | | Goodwill | $715,258 | $715,258 | | Deferred tax assets | $79,275 | $1,853 | | **Total assets** | **$1,324,684** | **$1,151,431** | | **Liabilities & Shareholders' Deficit** | | | | Accounts payable | $204,217 | $161,312 | | Total current liabilities | $429,075 | $378,015 | | Long-term debt – net | $263,873 | $264,898 | | Tax Receivable Agreement liability | $98,977 | $— | | Total Shareholders' deficit | ($293,333) | ($382,698) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's financial performance over specific periods, including revenues, expenses, and net income - For the three months ended June 30, 2023, revenues grew **12%** year-over-year to **$165.4 million**, while net income attributable to Class A Common Stockholders surged **218%** to **$30.7 million**, significantly boosted by a **$24.5 million** income tax benefit[17](index=17&type=chunk)[137](index=137&type=chunk) - For the six months ended June 30, 2023, revenues increased by **17%** year-over-year to **$326.4 million**, and net income grew **152%** to **$68.6 million**[17](index=17&type=chunk)[137](index=137&type=chunk) Key Operating Results (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | 6 Months 2023 | 6 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **$165,380** | **$147,694** | **$326,443** | **$278,466** | | Income from operations | $17,613 | $17,927 | $51,123 | $31,647 | | Net income | $38,326 | $24,060 | $68,598 | $27,198 | | Net income attributable to Class A Common Stockholders | $30,712 | $9,655 | $42,894 | $10,914 | | Diluted EPS (Class A) | $0.20 | $0.12 | $0.35 | $0.14 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods - Net cash provided by operating activities significantly improved to **$82.7 million** for the first six months of 2023, compared to just **$1.4 million** in the same period of 2022, driven by higher net income and favorable changes in working capital, particularly accounts payable[26](index=26&type=chunk)[170](index=170&type=chunk) - Net cash used in financing activities was **$22.5 million** in the first half of 2023, primarily for share repurchases and tax distributions, a sharp decrease from **$196.3 million** in the prior year period which included a major debt repayment and refinancing[26](index=26&type=chunk)[173](index=173&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $82,670 | $1,406 | | Net cash used in investing activities | ($5,583) | ($6,931) | | Net cash used in financing activities | ($22,503) | ($196,255) | | **Net increase (decrease) in cash** | **$54,584** | **($201,780)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the condensed consolidated financial statements - The company operates through two reportable segments: Marketplace, which acts as an intermediary, and Resale, which acquires and resells tickets; for Q2 2023, Marketplace revenues were **$139.2 million** and Resale revenues were **$26.2 million**[28](index=28&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) - In connection with a Secondary Offering in Q2 2023, the company recorded a new liability of **$99.0 million** under its Tax Receivable Agreement, which provides for payments to existing Hoya Intermediate shareholders of **85%** of certain tax savings realized by the company[85](index=85&type=chunk)[90](index=90&type=chunk) - The company recorded a **$24.5 million** income tax benefit in Q2 2023, largely due to the release of a valuation allowance on its U.S. deferred tax assets, as management determined it is now more likely than not that these assets will be realized[86](index=86&type=chunk)[88](index=88&type=chunk) - Subsequent to the quarter's end, the company agreed to acquire WD Holdings Co., Ltd., a Japanese online ticket marketplace, for approximately **$77.2 million**, with the transaction expected to close in Q3 2023[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the three and six months ended June 30, 2023, highlighting revenue growth, key business metrics, and liquidity position [Overview and Key Business Metrics](index=26&type=section&id=Overview%20and%20Key%20Business%20Metrics) Provides an overview of the company's business model and presents key operational metrics driving financial performance - The company operates an online ticket marketplace connecting fans with ticket sellers, with business divided into Marketplace and Resale segments; the Taylor Swift "Eras" tour was noted as a significant driver of higher Marketplace GOV in the first half of 2023[118](index=118&type=chunk)[119](index=119&type=chunk)[127](index=127&type=chunk) Key Business Metrics (in thousands) | Metric | Q2 2023 | Q2 2022 | 6 Months 2023 | 6 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Marketplace GOV | $953,739 | $814,817 | $1,809,267 | $1,556,955 | | Total Marketplace orders | 2,627 | 2,410 | 4,902 | 4,429 | | Total Resale orders | 76 | 67 | 163 | 135 | | Adjusted EBITDA | $31,077 | $30,329 | $73,512 | $51,341 | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Analyzes the company's revenues, costs, and expenses, detailing the drivers behind changes in financial performance - Total revenues for Q2 2023 increased **12%** YoY to **$165.4 million**, driven by a **7%** increase in Marketplace revenue and a **48%** increase in Resale revenue, attributed to higher order volume and average order size[138](index=138&type=chunk) - Marketplace revenue growth was led by Concerts (up **18%** YoY) and Theater (up **31%** YoY) categories in Q2 2023, while Sports revenue saw a **12%** decline[140](index=140&type=chunk) - Cost of revenues increased **31%** YoY in Q2 2023, outpacing revenue growth, primarily due to higher Marketplace GOV and increased Resale segment activity[148](index=148&type=chunk) - Marketing and selling expenses rose **10%** YoY in Q2 2023, driven by greater spending on both online advertising and offline brand awareness campaigns[152](index=152&type=chunk) - General and administrative expenses increased **6%** YoY in Q2 2023, mainly due to higher personnel expenses from increased employee headcount[153](index=153&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's ability to meet its short-term and long-term financial obligations and fund its operations - The company's primary source of liquidity is cash from operations; as of June 30, 2023, the company held **$306.2 million** in cash and cash equivalents, considered sufficient to fund needs for the next 12 months[161](index=161&type=chunk)[162](index=162&type=chunk) - The company's debt consists of the February 2022 First Lien Loan, with a balance of **$271.6 million** as of June 30, 2023, bearing a floating interest rate based on SOFR plus **3.25%**; there were no outstanding borrowings under the **$100.0 million** Revolving Facility[54](index=54&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - The **$40.0 million** share repurchase program was fully utilized during 2022 and Q1 2023, with no share repurchases made in Q2 2023[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk associated with its floating-rate long-term debt; the company does not currently hedge this exposure - The company's floating-rate debt exposes it to interest rate fluctuations; a hypothetical **1%** change in interest rates would alter the annual interest expense by approximately **$2.8 million** (**$1.4 million** for six months) based on the outstanding debt as of June 30, 2023[178](index=178&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of June 30, 2023, the company's disclosure controls and procedures were not effective due to a previously identified material weakness in internal control over financial reporting - A material weakness in internal control over financial reporting, first identified as of December 31, 2022, continues to exist as of June 30, 2023[184](index=184&type=chunk) - Remediation activities are underway, including hiring additional qualified personnel and implementing new controls and processes, but require more time to be fully implemented and tested for effectiveness[185](index=185&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) Presents additional required disclosures including legal proceedings, risk factors, and other miscellaneous information [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions arising in the ordinary course of business, including settled class action lawsuits and an ongoing lawsuit regarding the Illinois Biometric Information Privacy Act - A settlement for a class action lawsuit related to COVID-19 cancellations received final court approval in January 2023, establishing a settlement pool of up to **$2.5 million** to be funded in 2023[76](index=76&type=chunk)[188](index=188&type=chunk) - The company is defending a lawsuit related to an alleged violation of the Illinois Biometric Information Privacy Act, but is currently unable to reasonably estimate a possible loss[77](index=77&type=chunk)[188](index=188&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's Form 10-K for the fiscal year ended December 31, 2022 - Investors are directed to the Risk Factors section of the 2022 Form 10-K, as no material changes have occurred since its filing[190](index=190&type=chunk) [Other Part II Items](index=37&type=section&id=Other%20Part%20II%20Items) Covers remaining disclosures including unregistered sales of equity securities, defaults on senior securities, and trading arrangements, concluding with a list of exhibits - No unregistered sales of equity securities or use of proceeds were reported for the period[192](index=192&type=chunk) - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of 2023[194](index=194&type=chunk)

Financial Data and Key Metrics Changes - In Q1 2023, the company generated $856 million in marketplace Gross Order Value (GOV), $161 million in revenues, and $42 million in adjusted EBITDA, marking a 15% increase in GOV and a 23% increase in revenues year-over-year [6][14][16] - Adjusted EBITDA doubled year-over-year, driven by top-line growth and margin expansion, with adjusted EBITDA margins benefiting from improved marketing efficiency and changes to the loyalty program [17][18] - The take rate increased to 16.0% in Q1 2023 from 14.9% in Q1 2022, reflecting a recovery from previous disruptions [16] Business Line Data and Key Metrics Changes - The portion of repeat orders increased to 56% in 2022 from 47% in 2018, indicating a growing trend in repeat buyer engagement [11] - The company is focusing on enhancing buyer experience through its loyalty program, which is expected to drive further engagement and repeat purchases [8][12] Market Data and Key Metrics Changes - The live event environment in Q1 2023 was robust, driven by high demand for major events, including concerts and sports, with notable performances from artists like Drake and Beyoncé [7][15] - The company anticipates continued strong demand for live events, supported by a vibrant event calendar [21] Company Strategy and Development Direction - The company aims to drive profitable growth through disciplined investments in product differentiation and customer engagement, avoiding unsustainable volume growth strategies [12][22] - The strategic focus includes leveraging a strong balance sheet to pursue synergistic opportunities in ticketing and adjacent markets [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing demand for live events, despite potential macroeconomic challenges, and raised guidance for marketplace GOV, revenues, and adjusted EBITDA for 2023 [20][21] - The competitive landscape remains intense, but the company is confident in its ability to maintain efficiency and profitability [38] Other Important Information - The company published its inaugural Environmental, Social, and Governance (ESG) update, highlighting commitments to sustainability and community engagement [24][25] - The launch of a free-to-play product within the Vivid Seats app is expected to enhance user engagement and drive repeat purchases [10][91] Q&A Session Summary Question: Can you talk about the marketing efficiencies seen in Q1? - The company noted $8 million in benefits from marketing efficiencies despite a tough competitive environment, with ongoing efforts to refine and drive efficiency [5][36] Question: What are the trends in the competitive environment? - Management indicated that competitive activity has intensified, but the company continues to drive efficiency and profitability [38] Question: How is the macro environment affecting consumer discretionary spending? - No significant changes were observed in consumer behavior, with robust demand across event categories and price points [41] Question: What is the outlook for repeat orders? - The company expects repeat orders to continue increasing, with a focus on driving engagement through product offerings [70][71] Question: How is SkyBox supporting growth? - SkyBox is positioned as an industry-leading platform for professional sellers, enhancing competitive strength and data utilization [78] Question: What are the plans for capital deployment? - The company is open to both organic and inorganic investments to drive growth and innovation, leveraging its strong cash position [103][117]

Financial Performance - Vivid Seats' Marketplace Gross Order Value (GOV) reached $856 million in Q1 2023[43] - Revenues for Q1 2023 totaled $161 million[43] - Adjusted EBITDA for Q1 2023 was $42 million[43] - The company's Q1 2023 net income was $303 million, a significant increase from $31 million in Q1 2022[43] - Adjusted EBITDA margin increased to 263% in Q1 2023, compared to 161% in Q1 2022[33] Revenue Breakdown - Total Marketplace revenues increased by 24% to $136581 thousand in Q1 2023 from $110516 thousand in Q1 2022[20] - Concert revenues increased by 28% to $74879 thousand in Q1 2023 from $58673 thousand in Q1 2022[20] - Sports revenues increased by 17% to $45600 thousand in Q1 2023 from $38915 thousand in Q1 2022[20] - Theater revenues increased by 22% to $15390 thousand in Q1 2023 from $12615 thousand in Q1 2022[20] Customer Engagement - The order mix from repeat buyers has increased over time, reaching 56% in 2022[3]

FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 001-40926 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Vivid Seats Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 86-3355184 (State or ...

Vivid Seats Inc. (NASDAQ:SEAT) Q4 and Full Year 2022 Earnings Conference Call March 7, 2023 8:30 AM ET Company Participants Kate Copouls – Head-Investor Relations Stan Chia – Chief Executive Officer Larry Fey – Chief Financial Officer Conference Call Participants Stephen Ju – Credit Suisse Ralph Schackart – William Blair Maria Ripps – Canaccord Thomas Forte – D.A. Davidson Jason Bennett – Citi Benjamin Black – Deutsche Bank Logan Reich – RBC Daniel Kurnos – Benchmark Shweta Kajaria – Evercore ISI Andrew Mar ...

| --- | --- | --- | --- | --- | |-------|------------------------------------------------------------------------------|-------|-------|-------| | | | | | | | | Agenda | | | | | 01 | Business Highlights & Update | | | | | 02 | Stan Chia, Chief Executive Officer | | | | | | Financial Results Lawrence Fey, Chief Financial Officer | | | | | 03 | Q&A Stan Chia, Chief Executive Officer Lawrence Fey, Chief Financial Officer | | | | | --- | --- | --- | --- | |-------|----------------------------------------------- ...

Part I [Business](index=7&type=section&id=Item%201.%20Business) Vivid Seats operates a two-sided online ticket marketplace with Marketplace and Resale segments, leveraging its proprietary Skybox ERP tool and focusing on performance marketing and customer engagement for growth - Vivid Seats is an online ticket marketplace connecting buyers and sellers, operating through **Marketplace** and **Resale** segments[19](index=19&type=chunk)[21](index=21&type=chunk)[26](index=26&type=chunk) - The company acquired Betcha Sports, Inc. in December 2021, rebranding it as **Vivid Picks** to engage sports fans and gather customer data between ticketing transactions[23](index=23&type=chunk) - A core component of its platform is **Skybox**, a proprietary and widely adopted enterprise resource planning (ERP) tool offered free-to-use for ticket sellers to manage inventory and pricing[30](index=30&type=chunk)[43](index=43&type=chunk) - Key growth strategies include new customer acquisition via performance marketing, increasing brand awareness with the **Vivid Seats Rewards** program, and developing more tools for sellers[32](index=32&type=chunk)[33](index=33&type=chunk)[38](index=38&type=chunk) - As of December 31, 2022, the company had **575 full-time employees**[52](index=52&type=chunk) - The company's main competitors in the ticketing industry are **StubHub**, **Ticketmaster**, **SeatGeek**, and **TicketNetwork**[54](index=54&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including live event dependency, intense competition, regulatory compliance, cybersecurity threats, financial constraints, and a material weakness in internal controls - Business success is **highly dependent** on the supply and demand for live events, which can be affected by economic conditions, labor disputes, and extraordinary events like pandemics or terrorism[88](index=88&type=chunk)[89](index=89&type=chunk)[106](index=106&type=chunk) - The company is controlled by its Private Equity Owner (GTCR), which holds approximately **60% of the voting power**, creating potential conflicts of interest, and qualifies as a **'controlled company'** under Nasdaq rules, exempting it from certain corporate governance requirements[160](index=160&type=chunk)[164](index=164&type=chunk) - A **material weakness** in internal control over financial reporting has been identified for fiscal years 2020, 2021, and 2022, related to segregation of duties and a lack of sufficient personnel with technical accounting and SEC reporting experience[186](index=186&type=chunk)[189](index=189&type=chunk) - The company is subject to **significant government regulation** concerning data privacy (CCPA, CPRA), ticket resale laws in various jurisdictions, and sales tax compliance, which are complex and evolving[117](index=117&type=chunk)[118](index=118&type=chunk)[128](index=128&type=chunk) - The Tax Receivable Agreement (TRA) requires cash payments to Hoya Topco equal to **85% of certain tax benefits** realized by the company, which could be substantial and may exceed actual tax savings[167](index=167&type=chunk) [Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[213](index=213&type=chunk) [Properties](index=40&type=section&id=Item%202.%20Properties) The company leases its 48,000 square foot Chicago headquarters through 2033, with additional leased facilities in Coppell, Texas, and Toronto, Ontario - The company's headquarters is a leased space of approximately **48,000 square feet** in **Chicago, IL**, with the lease running through **December 31, 2033**[215](index=215&type=chunk) - Additional leased facilities are located in **Coppell, Texas** and **Toronto, Ontario**[215](index=215&type=chunk) [Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material legal proceedings - None[217](index=217&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's business - Not applicable[219](index=219&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Vivid Seats' Class A common stock and warrants began trading on Nasdaq in October 2021, and the company authorized a $40.0 million share repurchase program in May 2022, repurchasing 4.3 million shares for $32.5 million by year-end - Class A common stock (SEAT) and warrants (SEATW) began trading on **Nasdaq** on **October 19, 2021**[222](index=222&type=chunk) - A **$40.0 million** share repurchase program was authorized on May 25, 2022, effective until March 31, 2023[232](index=232&type=chunk) Share Repurchases in 2022 | Period | Total Shares Purchased | Weighted Average Price Paid Per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | Sep 1-30, 2022 | 397,551 | $7.65 | $3.0 | | Oct 1-31, 2022 | 716,857 | $7.87 | $5.6 | | Nov 1-30, 2022 | 972,578 | $7.73 | $7.5 | | Dec 1-31, 2022 | 2,255,491 | $7.19 | $16.2 | | **Total** | **4,342,477** | **$7.46** | **$32.5** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, Vivid Seats achieved significant financial growth with revenues of $600.3 million and net income of $70.8 million, driven by live event recovery, while increasing marketing spend and refinancing debt Key Financial Performance (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $600.3M | $443.0M | $35.1M | | Net Income (Loss) | $70.8M | ($19.1M) | ($774.2M) | | Marketplace GOV | $3,184.8M | $2,399.1M | $347.3M | | Adjusted EBITDA | $113.3M | $109.9M | ($80.2M) | - The **35% revenue growth** in 2022 was driven by an increase in new orders processed due to the resumption and increasing number of live events and fewer cancellations compared to 2021[272](index=272&type=chunk) - Marketing and selling expenses increased by **37%** to **$248.4 million** in 2022, primarily due to a **40% increase** in online advertising spend to capture rising demand and combat increased competition[284](index=284&type=chunk) - The company refinanced its debt on February 3, 2022, entering into a new **$275.0 million** term loan and a **$100.0 million** revolving facility, which significantly reduced interest expense in 2022[289](index=289&type=chunk)[297](index=297&type=chunk) - Net cash provided by operating activities **decreased to $14.4 million** in 2022 **from $175.8 million** in 2021, primarily due to sales tax liability settlements and the redemption of customer credits issued during the pandemic[303](index=303&type=chunk)[304](index=304&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=58&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate exposure on its floating-rate debt, where a 1% increase would raise annual interest expense by $3.0 million - The primary market risk is **interest rate risk** from **floating-rate debt**[342](index=342&type=chunk) - A hypothetical **1% increase** in interest rates would change annual interest expense by **$3.0 million**[343](index=343&type=chunk) [Financial Statements and Supplementary Data](index=59&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2020-2022, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, with detailed notes on key accounting matters Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $251,542 | $489,530 | | Total assets | $1,151,431 | $1,408,795 | | Total current liabilities | $378,015 | $497,496 | | Long-term debt – net | $264,898 | $460,132 | | Total Shareholders' deficit | ($382,698) | ($860,683) | Consolidated Statement of Operations Data (Year Ended Dec 31) | (in thousands, except EPS) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $600,274 | $443,038 | $35,077 | | Income (loss) from operations | $78,105 | $76,571 | ($716,018) | | Net income (loss) | $70,779 | ($19,129) | ($774,185) | | Diluted EPS (Class A) | $0.36 | ($0.04) | N/A | - The company adopted the new lease accounting standard (**ASC 842**) on January 1, 2022, recognizing right-of-use assets of **$6.6 million** and lease liabilities of **$8.1 million** upon adoption[453](index=453&type=chunk)[454](index=454&type=chunk) - In 2020, the company recorded total impairment charges of **$573.8 million** due to the impact of the COVID-19 pandemic, including **$377.1 million** for goodwill and **$78.7 million** for its trademark[475](index=475&type=chunk)[476](index=476&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=104&type=section&id=Item%209A.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with accountants but acknowledges an ongoing material weakness in internal control over financial reporting, with remediation efforts underway - The company reports **no disagreements** with its accountants[623](index=623&type=chunk) - A **material weakness** in internal control over financial reporting related to segregation of duties and lack of personnel with sufficient technical accounting experience was identified and remains as of December 31, 2022[628](index=628&type=chunk) - Remediation activities are **in progress**, including hiring qualified personnel and implementing new controls, but the material weakness is **not yet considered remediated**[629](index=629&type=chunk) [Other Information](index=105&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[634](index=634&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=105&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) The company reports no information under this item - None[635](index=635&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Accountant Fees](index=105&type=section&id=Items%2010-14) Information for Items 10 through 14, covering directors, executive officers, corporate governance, compensation, security ownership, and accountant fees, is incorporated by reference from the 2023 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the Registrant's definitive proxy statement for its **2023 Annual Meeting of Stockholders**[638](index=638&type=chunk)[640](index=640&type=chunk)[641](index=641&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=105&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8 and provides a comprehensive list of exhibits filed with the Form 10-K, including key corporate, debt, and compensation agreements - All required financial statements are listed in **Item 8**. Financial statement schedules have been **omitted** as they are not applicable or required[646](index=646&type=chunk) - A **list of all exhibits** filed as part of the Annual Report is provided, including key agreements related to the company's incorporation, debt, and merger transaction[647](index=647&type=chunk) [Form 10-K Summary](index=110&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no information for the Form 10-K summary - None[656](index=656&type=chunk)