Vivid Seats(SEAT) - 2024 Q4 - Annual Report

Part I Business Vivid Seats operates an online ticket marketplace with Marketplace and Resale segments, focusing on customer acquisition, brand, and seller tools Our Business Model Vivid Seats operates two segments: Marketplace, earning fees as an intermediary, and Resale, involving direct ticket acquisition and resale - The business is structured into two main segments: Marketplace and Resale[28] - The Marketplace segment includes owned properties like Vivid Seats, Vegas.com (acquired Nov 2023), Wavedash (acquired Sep 2023), and the daily fantasy sports app Vivid Picks. It earns revenue primarily from service and delivery fees without holding ticket inventory[29][31][32] - The Resale segment actively buys tickets to resell on secondary marketplaces, including its own[35] - Skybox, a proprietary and free-to-use Enterprise Resource Planning (ERP) tool, is provided to ticket sellers to manage inventory and pricing, and is the most widely adopted ERP by professional ticket sellers[34] Our Growth Strategies Growth strategies focus on customer acquisition, brand awareness, retention, seller tools, and expanding partnerships - Utilize performance marketing and alternative channels (e.g., Vegas.com) to acquire new customers[36] - Enhance brand awareness and value proposition through the Vivid Seats Rewards Program, which offers a free 11th ticket[37] - Increase customer retention and engagement through personalized content, the loyalty program, and interactive features like Game Center and Vivid Picks[39][40][41] - Develop more seller tools, such as the recently launched subscription add-on Skybox Drive, to attract and retain sellers by improving their business efficiency[42][48] - Expand partnerships across media (e.g., ESPN), product/service, distribution, and content rights holders to generate sales and build brand recognition[44][47] Competition Vivid Seats faces intense competition from major ticketing platforms, leveraging its loyalty program and proprietary tools as advantages - Primary competitors in the ticketing market are StubHub, Ticketmaster, SeatGeek, and TicketNetwork[61] - Key competitive advantages include the Vivid Seats Rewards Program, proprietary performance marketing algorithms, and the free-to-use Skybox ERP, which is the most widely adopted in the industry[61] - Vivid Picks faces a highly competitive gaming market, differentiating itself with an easy-to-use mobile app that integrates social features and ticket purchasing[62] Risk Factors The company faces significant risks including event dependency, intense competition, regulatory compliance, cybersecurity, and a material weakness in internal controls - The business is highly dependent on the supply and demand for live events, which can be affected by economic conditions and other factors outside the company's control[98][99] - A material weakness in internal control over financial reporting has been identified, related to segregation of duties, defined roles in finance/accounting, and a lack of personnel with sufficient technical accounting and SEC reporting experience[189][193] - The company is party to a Tax Receivable Agreement (TRA) that requires substantial cash payments to Hoya Topco for certain tax benefits, which could be significant[177] - Intense competition from providers like StubHub and Ticketmaster, and reliance on search engine algorithms (e.g., Google) for traffic, pose significant risks[102][104] - The company faces risks from complex and evolving government regulations, particularly concerning ticket resale restrictions and data privacy laws like CCPA and GDPR[126][128][129] - As of December 31, 2024, goodwill of approximately $943.1 million represented about 57.6% of total assets, and future impairment could adversely affect financial condition[124] Unresolved Staff Comments The company has no unresolved staff comments from the SEC - None[210] Cybersecurity Vivid Seats manages cybersecurity risks through a program overseen by the Audit Committee and a cross-functional management team - The Board of Directors has delegated oversight of cybersecurity risks to the Audit Committee, which receives regular reports from management[214] - A cross-functional management team, reporting to the CTO, is responsible for managing the cybersecurity program, including the incident response plan[216] - The cybersecurity program includes periodic risk assessments, a security incident response team, use of third-party service providers for testing, and required annual employee training[213] Properties The company leases its 53,000 sq ft Chicago headquarters through 2033, plus facilities in Texas, Nevada, Canada, and Japan - The company's headquarters in Chicago, Illinois, is a leased space of approximately 53,000 square feet under a lease agreement extending to December 31, 2033[218] - Additional leased facilities are located in Coppell, Texas; Las Vegas, Nevada; Toronto, Canada; and Tokyo, Japan[218] Legal Proceedings The company reports no material legal proceedings - None[220] Mine Safety Disclosures This item is not applicable to the company - Not applicable[220] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on Nasdaq, with no current dividend plans and an active share repurchase program - Class A common stock and warrants are listed on Nasdaq under symbols 'SEAT' and 'SEATW'[223] - The company has no current intention to pay cash dividends and plans to retain future earnings for operations and growth[225] Share Repurchase Program Status as of Dec 31, 2024 | Program | Authorization | Remaining Value | | :--- | :--- | :--- | | 2024 Share Repurchase Program | $100.0 million | $77.2 million | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) In 2024, revenues grew 9% to $775.6 million, while net income decreased to $14.3 million due to a prior-year tax benefit, with Adjusted EBITDA increasing Key Financial and Business Metrics (2022-2024) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Marketplace GOV (in thousands) | $3,892,645 | $3,920,526 | $3,184,754 | | Revenues (in thousands) | $775,586 | $712,879 | $600,274 | | Net income (in thousands) | $14,302 | $113,141 | $70,779 | | Adjusted EBITDA (in thousands) | $151,419 | $141,982 | $113,325 | | Marketplace orders (in thousands) | 11,556 | 10,898 | 9,183 | - Revenues increased by 9% in 2024, driven by higher order volumes in both Marketplace and Resale segments, partly due to the full-year impact of the Vegas.com and Wavedash acquisitions[271][272] - Net income significantly decreased to $14.3 million in 2024 from $113.1 million in 2023. This was primarily because 2023 results included a large income tax benefit from the release of a valuation allowance on deferred tax assets[270][298] - The company completed the acquisition of Vegas.com in November 2023 for $248.3 million and Wavedash in September 2023 for approximately $74.3 million[263][264] - As of December 31, 2024, the company had cash and cash equivalents of $243.5 million and total debt of $393.0 million under its 2024 First Lien Loan[170][166] Results of Operations (2024 vs. 2023) In 2024, revenues grew 9% to $775.6 million, but net income dropped 87% to $14.3 million due to increased operating expenses and tax changes Comparison of Operations (in thousands) | Line Item | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $775,586 | $712,879 | 9% | | Marketplace revenues | $647,891 | $597,388 | 8% | | Resale revenues | $127,695 | $115,491 | 11% | | Total costs and expenses | $733,361 | $631,541 | 16% | | Cost of revenues | $201,854 | $182,184 | 11% | | Marketing and selling | $285,146 | $274,096 | 4% | | General and administrative | $202,123 | $159,081 | 27% | | Depreciation and amortization | $44,238 | $17,178 | 158% | | Income from operations | $42,225 | $81,338 | (48)% | | Net income | $14,302 | $113,141 | (87)% | - Marketplace revenue growth was driven by a 6% increase in Marketplace orders, particularly for theater events, and a higher take rate. This was partially offset by a $25.3 million decrease in concert revenues[273][274] - The 27% increase in General and Administrative expenses was primarily due to higher personnel costs, including equity-based compensation, and expenses related to the full-year inclusion of the Vegas.com and Wavedash acquisitions[290][291] - Depreciation and amortization expenses increased by $27.1 million (158%) mainly due to intangible assets acquired in the 2023 acquisitions and increased capitalized development costs[294] Liquidity and Capital Resources The company maintains strong liquidity with $243.5 million cash, refinanced debt to $395.0 million, and has a $100.0 million share repurchase program - As of December 31, 2024, the company had $243.5 million in cash and cash equivalents[300] - In June 2024, the company entered into a new $395.0 million term loan (the '2024 First Lien Loan') maturing in 2029, refinancing its previous debt[303][552] - The company has a $100.0 million share repurchase program authorized in February 2024, with $77.2 million remaining available as of year-end[310] - Future payments under the Tax Receivable Agreement (TRA) are estimated to be approximately $159.7 million over the next 14 years, contingent upon generating sufficient taxable income[317] Critical Accounting Policies and Estimates Critical accounting policies involve significant estimates for revenue recognition, equity-based compensation, asset impairment, and deferred tax assets - Revenue recognition requires significant estimates for future cancellation charges, breakage income on unused customer credits, and future usage of the Vivid Seats Rewards Program[330][333][335] - Goodwill and indefinite-lived intangible assets are tested for impairment annually (on October 31) or more frequently if indicators exist. No impairment was recorded for goodwill or indefinite-lived intangible assets in 2024[341][343][345] - The company maintains a valuation allowance against deferred tax assets it believes are not more likely than not to be realized, requiring significant judgment about future taxable income[349][350] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are interest rate fluctuations on debt and foreign currency exchange rate changes impacting international operations - A hypothetical 1% change in interest rates would have impacted interest expense by $3.4 million for the year ended December 31, 2024[358] - A hypothetical 10% change in foreign exchange rates would have impacted the foreign currency translation adjustment by $2.4 million as of December 31, 2024[360] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2022-2024, including balance sheets, income statements, and cash flows Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,636,096 | $1,550,099 | | Cash and cash equivalents | $243,482 | $125,484 | | Goodwill – net | $943,119 | $947,359 | | Total Liabilities | $1,022,061 | $963,340 | | Accounts payable | $232,984 | $257,514 | | Long-term debt – net | $384,960 | $264,632 | | TRA liability | $155,720 | $165,699 | | Total Shareholders' Equity | $261,113 | $105,017 | Consolidated Statement of Operations Data (in thousands) | Account | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Revenues | $775,586 | $712,879 | $600,274 | | Income from operations | $42,225 | $81,338 | $78,105 | | Net income | $14,302 | $113,141 | $70,779 | | Net income attributable to Class A common stockholders | $9,425 | $74,536 | $28,662 | Consolidated Cash Flow Data (in thousands) | Activity | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $53,922 | $147,320 | $14,375 | | Net cash used in investing activities | $(26,742) | $(225,641) | $(15,415) | | Net cash provided by (used in) financing activities | $86,079 | $(43,430) | $(236,480) | Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2024, due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024, due to a material weakness in internal control over financial reporting[682][686] - The material weakness stems from deficiencies in segregation of duties, undefined roles within finance/accounting, and insufficient personnel with technical accounting and SEC reporting experience[683] - Remediation efforts in 2024 included implementing segregation of duties, defining roles, hiring more experienced personnel, and designing new internal controls. The material weakness will be considered remediated once these controls operate effectively for a sufficient period[684] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 proxy statement - Information regarding directors and executive officers is located in Part I, Item 1 of the report[695] - The remaining information required by this item is incorporated by reference from the forthcoming 2025 annual meeting proxy statement[697] Executive Compensation Executive compensation information is incorporated by reference from the 2025 Annual Meeting of Stockholders proxy statement - The information required by this item is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[699] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information for beneficial owners and management is incorporated by reference from the 2025 proxy statement - The information required by this item is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[700] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2025 proxy statement - The information required by this item is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[701] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2025 Annual Meeting of Stockholders proxy statement - The information required by this item is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Stockholders[703] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including key corporate agreements, certifications, and XBRL data files - Lists all exhibits filed with the report, including foundational agreements like the Transaction Agreement, Stockholders' Agreement, and Tax Receivable Agreement[707][709] - Includes amendments to key agreements, such as the First Lien Credit Agreement, which was amended multiple times, most recently in February 2025[710][713] - Certifications by the Principal Executive Officer and Principal Financial Officer under Sarbanes-Oxley Sections 302 and 906 are filed as exhibits[713] Form 10-K Summary The company reports that there is no Form 10-K summary - None[715]