Vivid Seats(SEAT) - 2025 Q2 - Quarterly Report

Forward-Looking Statements This section outlines forward-looking statements regarding future events and results, which are subject to various risks and uncertainties that may cause actual outcomes to differ materially - This report contains forward-looking statements regarding future events and results of Vivid Seats Inc. and its subsidiaries, identified by words like "anticipate," "believe," "expect," and "will"[9] - These statements are based on current expectations and projections but are subject to risks, uncertainties, and assumptions, meaning actual results may differ materially[11] - Important factors that could cause differences include supply and demand of live events, economic conditions, ability to maintain relationships, competition, platform improvements, extraordinary events, acquisitions, regulatory compliance, legal proceedings, the Reverse Stock Split, and cybersecurity risks[12][14] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Vivid Seats Inc., including balance sheets, statements of operations, comprehensive income (loss), equity, and cash flows, along with detailed notes. The financial statements reflect a significant net loss for the six months ended June 30, 2025, primarily driven by impairment charges and a decrease in revenues, contrasting with a net income in the prior year period Condensed Consolidated Balance Sheets This section details the company's financial position, showing significant decreases in total assets, liabilities, and equity, primarily driven by reductions in goodwill and TRA liability Table: Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $1,149,268 | $1,636,096 | $(486,828) | -29.8% | | Total Liabilities | $803,109 | $1,022,061 | $(218,952) | -21.4% | | Redeemable Noncontrolling Interests | $128,822 | $352,922 | $(224,100) | -63.5% | | Total Shareholders' Equity | $217,337 | $261,113 | $(43,776) | -16.8% | | Cash and Cash Equivalents | $153,007 | $243,482 | $(90,475) | -37.1% | | Goodwill – net | $649,418 | $943,119 | $(293,701) | -31.1% | | Intangible assets – net | $198,152 | $233,116 | $(34,964) | -15.0% | | TRA liability | $795 | $155,720 | $(154,925) | -99.5% | - Total assets decreased by $486.8 million, or 29.8%, from December 31, 2024, to June 30, 2025, primarily due to significant reductions in goodwill and TRA liability[16] - Total liabilities decreased by $219.0 million, or 21.4%, largely driven by a substantial reduction in TRA liability from $155.7 million to $0.8 million[16] Condensed Consolidated Statements of Operations This section presents the company's operational performance, highlighting a significant net loss for the period, primarily due to decreased revenues and substantial impairment charges Table: Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenues | $143,566 | $198,316 | $307,589 | $389,168 | | Total costs and expenses | $475,291 | $190,434 | $643,635 | $360,614 | | Income (loss) from operations | $(331,725) | $7,882 | $(336,046) | $28,554 | | Net income (loss) | $(263,327) | $(1,221) | $(273,115) | $9,518 | | Net income (loss) attributable to Class A common stockholders | $(139,675) | $(1,061) | $(145,617) | $5,013 | | Basic EPS | $(1.07) | $(0.01) | $(1.11) | $0.04 | | Diluted EPS | $(1.27) | $(0.01) | $(1.31) | $0.04 | - Revenues decreased by 28% for the three months and 21% for the six months ended June 30, 2025, compared to the prior year, primarily due to lower Marketplace orders[19] - The company reported a significant net loss of $(263.3) million for the three months and $(273.1) million for the six months ended June 30, 2025, largely driven by $320.4 million in impairment charges[19] Condensed Consolidated Statements of Comprehensive Income (Loss) This section outlines the company's comprehensive income (loss), reflecting a net loss for the period, partially offset by an improvement in other comprehensive income Table: Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income (loss) | $(263,327) | $(1,221) | $(273,115) | $9,518 | | Total other comprehensive income (loss) | $858 | $(1,308) | $2,034 | $(3,081) | | Comprehensive income (loss) | $(262,469) | $(2,529) | $(271,081) | $6,437 | | Comprehensive income (loss) attributable to Class A common stockholders | $(139,133) | $(1,893) | $(144,328) | $3,051 | - Total other comprehensive income (loss) improved significantly, moving from a loss of $(1.3) million in Q2 2024 to a gain of $0.9 million in Q2 2025, primarily due to foreign currency translation adjustments[21] Condensed Consolidated Statements of Equity This section details changes in the company's equity, showing a decrease in redeemable noncontrolling interests and an increase in the accumulated deficit due to net losses Table: Condensed Consolidated Statements of Equity | Metric | Balances at January 1, 2025 (in thousands) | Balances at June 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :------------------------------------- | :-------------------- | | Redeemable noncontrolling interests | $352,922 | $128,822 | $(224,100) | | Additional paid-in capital | $1,267,710 | $1,384,399 | $116,689 | | Treasury stock | $(75,568) | $(91,705) | $(16,137) | | Accumulated deficit | $(930,171) | $(1,075,788) | $(145,617) | | Accumulated other comprehensive income (loss) | $(880) | $409 | $1,289 | | Total Shareholders' Equity | $261,113 | $217,337 | $(43,776) | - Redeemable noncontrolling interests decreased substantially by $224.1 million, primarily due to subsequent remeasurement[26] - Accumulated deficit increased by $145.6 million, reflecting the net loss attributable to Class A common stockholders during the period[26] Condensed Consolidated Statements of Cash Flows This section presents the company's cash flow activities, indicating a shift from cash generation to cash usage in operations and a significant change in financing activities Table: Condensed Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Net cash provided by (used in) operating activities | $(53,908) | $25,359 | $(79,267) | | Net cash used in investing activities | $(11,665) | $(10,548) | $(1,117) | | Net cash provided by (used in) financing activities | $(25,443) | $94,716 | $(120,159) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(90,662) | $107,991 | $(198,653) | | Cash, cash equivalents, and restricted cash – end of period | $153,986 | $240,425 | $(86,439) | - Operating activities shifted from providing $25.4 million in cash in H1 2024 to using $53.9 million in H1 2025, primarily due to a net loss and changes in operating assets and liabilities[29] - Financing activities used $25.4 million in H1 2025, a significant change from providing $94.7 million in H1 2024, mainly due to Class A common stock repurchases and TRA payments, contrasting with prior year's loan refinancing proceeds[29] Notes to Condensed Consolidated Financial Statements This section provides detailed explanatory notes to the condensed consolidated financial statements, covering accounting policies, segment information, and specific financial instrument details 1. Background and Basis of Presentation This section describes Vivid Seats Inc.'s business operations, including its Marketplace and Resale segments, and the basis for preparing its unaudited condensed consolidated financial statements - Vivid Seats Inc. operates an online ticket marketplace for live events and attractions, also facilitating hotel bookings and packages, with two segments: Marketplace and Resale[30] - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, and should be read with the 2024 Form 10-K[31] 2. New Accounting Standards This section details the adoption of new accounting standards and the evaluation of future pronouncements, noting their impact on financial reporting - The company adopted ASU 2023-07 (Segment Reporting) in 2024, which had no material impact other than on segment reporting disclosures[32] - ASU 2023-09 (Income Taxes) and ASU 2024-03 (Disaggregation of Income Statement Expenses) are not yet adopted but are being evaluated for future impact on financial statements, with effective dates in 2025 and 2026/2027, respectively[33][34] 3. Revenue Recognition This section outlines the company's revenue recognition policies, detailing decreases in Marketplace revenue and slight increases in Resale revenue, along with deferred revenue balances - Marketplace revenue, primarily from processing ticket sales and hotel bookings, decreased by 33% for the three months and 25% for the six months ended June 30, 2025, compared to the prior year[37] Table: Marketplace Revenue Category | Marketplace Revenue Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Owned Properties revenues | $97,439 | $138,587 | $206,671 | $265,158 | | Private Label Offering revenues | $17,039 | $31,459 | $41,547 | $64,900 | | Total Marketplace revenues | $114,478 | $170,046 | $248,218 | $330,058 | | Concert revenues | $50,586 | $80,803 | $108,740 | $148,832 | | Sport revenues | $35,818 | $51,457 | $74,416 | $98,805 | | Theater revenues | $23,744 | $30,932 | $55,277 | $68,839 | | Other revenues | $4,330 | $6,854 | $9,785 | $13,582 | - Resale revenues increased slightly by 3% for the three months and 0.4% for the six months ended June 30, 2025, to $29.1 million and $59.4 million, respectively[37] - Deferred revenue, primarily from the rewards loyalty program, was $20.0 million at June 30, 2025, down from $23.8 million at December 31, 2024[38][39] 4. Segment Reporting This section provides an overview of the company's two reportable segments, Marketplace and Resale, and their respective contribution margins - Vivid Seats operates two reportable segments: Marketplace, acting as an intermediary for ticket sales and hotel bookings, and Resale, acquiring tickets for secondary market resale[41] - Contribution margin (revenues less cost of revenues and marketing/selling expenses) is the key metric used by the CEO to allocate resources and evaluate segment performance[42] Table: Segment Contribution Margin | Segment Contribution Margin | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Marketplace | $42,516 | $74,769 | $91,145 | $140,893 | | Resale | $4,821 | $4,668 | $11,578 | $12,066 | | Total | $47,337 | $79,437 | $102,723 | $152,959 | - Marketplace contribution margin decreased by 43% for the three months and 35% for the six months ended June 30, 2025, primarily due to lower order volumes and higher marketing investment[44] 5. Accounts Receivable - Net This section details the company's accounts receivable, noting a slight increase in net receivables and a rise in the allowance for credit losses Table: Accounts Receivable - Net | Component | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------------- | :----------------------------- | :------------------------------- | | Accounts receivable – net | $49,530 | $48,315 | | Less: allowance for credit losses | $(12,449) | $(11,985) | - Accounts receivable – net increased slightly to $49.5 million at June 30, 2025, from $48.3 million at December 31, 2024[46] - The allowance for credit losses increased by $0.5 million to $12.4 million, mainly due to higher uncollectible amounts from distribution partners[46] 6. Prepaid Expenses and Other Current Assets This section outlines the decrease in prepaid expenses and other current assets, primarily due to a reduction in expected recoveries of future customer compensation Table: Prepaid Expenses and Other Current Assets | Component | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Prepaid expenses and other current assets | $28,796 | $32,607 | | Recovery of future customer compensation | $17,221 | $20,335 | - Prepaid expenses and other current assets decreased by $3.8 million to $28.8 million at June 30, 2025, from $32.6 million at December 31, 2024[48] - The decrease was primarily driven by a $3.1 million reduction in expected recoveries of future customer compensation, reflecting a decrease in estimated future event cancellations[48] 7. Goodwill – Net and Intangible Assets – Net This section details significant impairment charges recognized for goodwill and indefinite-lived intangible assets due to declines in financial performance and stock price Goodwill – Net This section details the qualitative impairment assessment of goodwill, leading to a significant non-cash impairment expense due to declining fair value - A qualitative impairment assessment at June 30, 2025, indicated that the fair value of the Marketplace Reporting Unit was likely less than its carrying value, triggered by declines in financial performance, near-term outlook, and stock price[50][51] - Consequently, a non-cash goodwill impairment expense of $297.4 million was recognized during the three and six months ended June 30, 2025[53] Table: Goodwill – Net | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :---------------------------------- | :------------------------------- | :----------------------------- | | Goodwill – net balance | $943,119 | $649,418 | | Accumulated impairment charges | $377,100 | $674,512 | Intangible Assets – Net This section outlines the decrease in net intangible assets, driven by increased amortization and impairment charges on indefinite-lived trademarks Table: Intangible Assets – Net | Intangible Asset Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Definite-lived intangible assets (gross) | $201,668 | $189,919 | | Accumulated amortization | $(91,062) | $(67,208) | | Indefinite-lived intangible assets (gross) | $110,538 | $110,538 | | Accumulated impairment charges (indefinite-lived) | $(23,037) | $0 | | Total Intangible assets – net | $198,152 | $233,116 | - Total intangible assets – net decreased by $35.0 million, or 15.0%, primarily due to increased accumulated amortization and impairment charges on indefinite-lived intangible assets[66] - A non-cash impairment expense of $23.0 million was recognized for certain indefinite-lived trademarks during the three and six months ended June 30, 2025, following a qualitative impairment assessment[63][65] - Amortization expense for definite-lived intangible assets increased to $11.7 million for the three months and $22.7 million for the six months ended June 30, 2025, from $10.1 million and $20.1 million in the prior year periods, respectively[61] 8. Investments and Fair Value measurements This section details the company's investments in a privately held company and the fair value measurements applied to financial assets and nonrecurring items Investments This section describes the company's investment in a privately held company through a convertible promissory note and a warrant, classified at fair value - In 2023, Vivid Seats invested $6.0 million in a privately held company via a convertible promissory note (Note) and a warrant (Warrant)[67] - The Note is classified as an available-for-sale security and recognized at fair value, while the Warrant is a derivative instrument recognized at fair value with changes recorded in Other expense (income) – net[68][69] Fair Value Measurements This section explains the use of Level 3 inputs for determining the fair value of financial assets, goodwill, and trademarks, requiring significant judgment Table: Financial Asset Fair Value | Financial Asset | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------- | :----------------------------- | :------------------------------- | | Note | $3,922 | $3,604 | | Warrant | $2,752 | $3,325 | | Total | $6,674 | $6,929 | - The fair values of both the Note and Warrant are determined using Level 3 inputs, requiring significant judgment due to unobservable variables[71][72] - Goodwill and Trademarks are also subject to nonrecurring Level 3 fair value measurements, with sensitivities to discount rates, long-term growth rates, and royalty rates[74] 9. Accrued Expenses and Other Current Liabilities This section details the decrease in accrued expenses and other current liabilities, primarily due to reductions in accrued future customer compensation and marketing expenses Table: Accrued Expenses and Other Current Liabilities | Component | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Accrued expenses and other current liabilities | $138,912 | $165,047 | | Accrued marketing expense | $21,542 | $30,573 | | Accrued customer credits | $54,439 | $55,785 | | Accrued future customer compensation | $21,461 | $26,614 | - Accrued expenses and other current liabilities decreased by $26.1 million, or 15.8%, to $138.9 million at June 30, 2025, from $165.0 million at December 31, 2024[76] - Accrued future customer compensation decreased by $5.2 million, primarily due to a decrease in estimated future event cancellations[80] - Revenue recognized from customer credit breakage decreased to $1.0 million for the three months and $2.6 million for the six months ended June 30, 2025, compared to $4.5 million and $6.5 million in the prior year periods, respectively[77] 10. Long-Term Debt – Net This section outlines the company's long-term debt, detailing the refinancing of its first lien loans and the payoff of the Shoko Chukin Bank Loan 2022 First Lien Loan This section describes the initial refinancing of the company's first lien debt in February 2022, including a term loan and revolving credit facility - In February 2022, the company refinanced its former first lien debt with a $275.0 million term loan and a $100.0 million revolving credit facility[83] 2024 First Lien Loan This section details the refinancing of the 2022 First Lien Loan in June 2024 with a new term loan maturing in February 2029 - On June 14, 2024, the 2022 First Lien Loan was refinanced with a $395.0 million term loan (2024 First Lien Loan) maturing February 3, 2029, carrying an interest rate of SOFR (0.5% floor) plus 3.00%[84][85] 2025 First Lien Loan This section outlines the February 2025 refinancing of the 2024 First Lien Loan, including its interest rate, payment terms, and the resulting loss on debt extinguishment - On February 5, 2025, the 2024 First Lien Loan was refinanced with a $393.0 million term loan (2025 First Lien Loan) maturing February 3, 2029, with an interest rate of SOFR (0.5% floor) plus 2.25% (potentially 2.00% based on corporate rating)[87][89] - The effective interest rate on the 2025 First Lien Loan was 6.8% per annum at June 30, 2025, and the loan requires quarterly principal payments of $1.0 million[88][89] - The refinancing resulted in a $0.8 million loss on extinguishment of debt for the six months ended June 30, 2025[94] Shoko Chukin Bank Loan This section notes the full repayment of the Shoko Chukin Bank Loan in April 2024, which was assumed during the Wavedash acquisition - The Shoko Chukin Bank Loan, assumed during the Wavedash acquisition, was fully paid off on April 4, 2024[95] 11. Financial Instruments This section describes the various financial instruments, including Public, Private, Exercise, and Intermediate Warrants, and their terms Public Warrants This section details the Public Warrants issued in connection with the Merger Transaction, including their exercise price and outstanding quantity - 18,132,776 Public Warrants were issued in connection with the Merger Transaction, exercisable at $11.50 per share, with 6,766,853 outstanding as of June 30, 2025[96][99] Private Warrants This section describes the Private Warrants issued to Horizon Sponsor, noting their similar terms to Public Warrants but non-redeemable nature - 6,519,791 Private Warrants were issued to Horizon Sponsor, with similar terms to Public Warrants but not redeemable by the company, and remain outstanding[100] Exercise Warrants This section outlines the Exercise Warrants issued to Horizon Sponsor, specifying their different exercise prices and non-redeemable status - 34,000,000 Exercise Warrants were issued to Horizon Sponsor, with different exercise prices ($10.00 and $15.00), a 10-year term, and are not redeemable[101][102] Mirror Warrants This section describes the Mirror Warrants issued by Hoya Intermediate to Vivid Seats, which mirror other warrant terms and eliminate in consolidation - 47,286,644 Mirror Warrants were issued by Hoya Intermediate to Vivid Seats, mirroring the terms of Public, Private, and Exercise Warrants, and eliminate in consolidation[103][104][106] Intermediate Warrants This section details the Intermediate Warrants issued to Hoya Topco, which allow for cash redemption and resulted in a recognized gain from fair value changes - 4,000,000 Intermediate Warrants were issued to Hoya Topco, allowing for cash redemption at the holder's option, and are recorded in Other liabilities[107][108][109] - The fair value of Intermediate Warrants decreased by $4.8 million for the six months ended June 30, 2025, resulting in a recognized gain[110] 12. Equity This section details the company's equity, including its share repurchase program and changes in accumulated other comprehensive income (loss) Share Repurchase Program This section outlines the Board-authorized share repurchase program for Class A common stock, detailing the shares repurchased and remaining availability - The Board authorized a $100.0 million share repurchase program for Class A common stock on February 29, 2024, with $61.2 million remaining available as of June 30, 2025[111][113] - During the six months ended June 30, 2025, the company repurchased 6.3 million shares for $15.7 million under the program[112] Accumulated Other Comprehensive Income (Loss) This section details the shift in accumulated other comprehensive income (loss) from a deficit to a gain, primarily due to foreign currency translation adjustments Table: Accumulated Other Comprehensive Income (Loss) | Component | Balances at January 1, 2025 (in thousands) | Balances at June 30, 2025 (in thousands) | | :------------------------------------ | :--------------------------------------- | :------------------------------------- | | Accumulated Unrealized Gain on Note | $181 | $157 | | Accumulated Foreign Currency Translation Adjustment | $(1,061) | $252 | | Total Accumulated Other Comprehensive Income (Loss) | $(880) | $409 | - Accumulated other comprehensive income (loss) shifted from a loss of $(0.9) million at January 1, 2025, to a gain of $0.4 million at June 30, 2025, primarily due to a positive foreign currency translation adjustment[114] 13. Commitments and Contingencies This section outlines the company's commitments and contingencies, including liabilities for litigation, uncollected indirect taxes, and a written-off sponsorship loan Litigation This section details the company's litigation matters, including a remaining liability for a Canadian class action settlement and the resolution of an Illinois BIPA lawsuit - A $0.9 million liability for expected claim submissions and credit redemptions related to a Canadian class action lawsuit settlement remains as of June 30, 2025[116] - A lawsuit related to the Illinois Biometric Information Privacy Act was settled, with $0.3 million paid (covered by insurance) on March 28, 2025, and no accrued liability remaining[117] Indirect Taxes This section outlines the liability for uncollected indirect taxes and the company's ongoing monitoring of tax collection regulations - A liability of $3.4 million for uncollected indirect taxes (including sales taxes) was recognized at June 30, 2025, down from $7.5 million at December 31, 2024[120] - The company continuously monitors state, local, and foreign regulations regarding tax collection obligations, particularly for marketplace facilitators and event ticket sales[118][119] Sponsorship Loan This section details the full write-off of a $2.0 million Sponsorship Loan due to the counterparty's bankruptcy, resulting in a recognized loss - A $2.0 million Sponsorship Loan disbursed in August 2024 was fully written off during the three and six months ended June 30, 2025, due to the counterparty's bankruptcy, resulting in a loss recorded in Other expense (income) – net[123][124] 14. Related-Party Transactions This section describes transactions with related parties, including marketing services from Viral Nation, a strategic partnership with the Los Angeles Dodgers, and the Tax Receivable Agreement Viral Nation This section notes that no expenses were incurred for Viral Nation's marketing services during the current reporting period - No expenses were incurred for Viral Nation's marketing services during the three and six months ended June 30, 2025, compared to $0.3 million in the prior year period[125] Los Angeles Dodgers This section indicates that no expenses were incurred for the strategic partnership with the Los Angeles Dodgers during the current reporting period - No expenses were incurred for the strategic partnership with the Los Angeles Dodgers during the three and six months ended June 30, 2025, compared to $1.1 million in the prior year period[126] Tax Receivable Agreement This section outlines the Tax Receivable Agreement, which provides for payments of 85% of realized tax savings to Hoya Intermediate unitholders - The Tax Receivable Agreement (TRA) with Hoya Intermediate unitholders provides for payments of 85% of realized tax savings[127] 15. Income Taxes This section details the company's income tax expense, deferred tax assets, and the significant adjustment to the Tax Receivable Agreement liability Income Tax Expense This section highlights a significant increase in income tax expense, primarily due to an increased valuation allowance and reductions in TRA liability - Income tax expense significantly increased to $76.1 million for the three months and $79.3 million for the six months ended June 30, 2025, compared to $0.6 million and $2.9 million in the prior year periods, respectively[128][129] - The increase was primarily due to an increase in valuation allowance, reduction in TRA liability, and impairment charges in foreign jurisdictions[128] Deferred Tax Assets – Net This section details the increase in the valuation allowance against deferred tax assets, driven by significant impairment charges and cumulative domestic losses - A valuation allowance of $76.5 million was increased against deferred tax assets at June 30, 2025, due to significant goodwill and intangible asset impairment, cumulative losses, and a negative earnings trend in the U.S. federal tax jurisdiction[131] Tax Receivable Agreement This section outlines the income recognized from the change in TRA liability, reflecting a significant reduction due to the improbability of sufficient future taxable income - The company recorded income of $149.2 million for the change in TRA liability during the three and six months ended June 30, 2025, as it is no longer probable that sufficient future taxable income will be generated to support a significant portion of the previously recorded TRA liability[133] - As of June 30, 2025, the estimated probable TRA liability is $6.5 million, with $5.8 million due within the next 12 months, a significant reduction from the total obligation of $155.7 million[133] 16. Equity-Based Compensation This section details the company's equity-based compensation, including RSU and stock option activity, and the total compensation expense recognized RSUs This section details the RSU activity, including grants to employees and directors, and the total unvested RSUs at period-end - 12.9 million RSUs were granted to employees and 0.9 million to directors during the six months ended June 30, 2025, at weighted average grant date fair values of $2.79 and $1.52 per share, respectively[136][137] Table: RSU Activity | RSU Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Unvested at December 31 | 11,777 | 3,866 | | Granted | 13,826 | 10,940 | | Forfeited | (508) | (225) | | Vested | (4,723) | (1,486) | | Unvested at June 30 | 20,372 | 13,095 | Stock Options This section outlines the stock option activity, noting a slight decrease in outstanding options and their weighted average exercise price Table: Stock Option Activity | Stock Option Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Outstanding at December 31 | 8,102 | 8,807 | | Forfeited | (15) | (114) | | Expired | 0 | (148) | | Outstanding at June 30 | 8,087 | 8,545 | | Vested and exercisable at June 30 | 6,833 | 4,622 | - Stock options outstanding decreased slightly to 8.1 million at June 30, 2025, with a weighted average exercise price of $8.11[141] Hoya Topco Profits Interests and Phantom Units This section notes the redemption, repurchase, and cancellation of all outstanding profits interests and phantom units held by current employees - All outstanding profits interests and phantom units held by current employees were redeemed, repurchased, and cancelled by Hoya Topco on June 10, 2024, with no unrecognized equity-based compensation expense remaining as of June 30, 2025[143][144] Equity-Based Compensation Expense This section details the total equity-based compensation expense for the period and the unrecognized expense for unvested RSUs and stock options Table: Equity-Based Compensation Expense | Expense Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | RSUs | $10,400 | $8,400 | $19,200 | $13,900 | | Stock options | $1,500 | $2,900 | $3,700 | $5,800 | | Profits interests | $0 | $3,100 | $0 | $3,300 | | Total (excluding capitalized development costs) | $11,900 | $14,400 | $22,900 | $23,000 | - Total equity-based compensation expense (excluding capitalized development costs) for the six months ended June 30, 2025, was $22.9 million, consistent with $23.0 million in the prior year period[145][146][147] - Unrecognized equity-based compensation expense for unvested RSUs and stock options was $67.6 million and $3.6 million, respectively, as of June 30, 2025, both expected to be recognized over approximately one year[145][146] 17. Earnings per Share This section presents the basic and diluted net loss per Class A common stock, noting the anti-dilutive effect of certain securities during the net loss periods Table: EPS Metric | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Net income (loss) per Class A common stock | $(1.07) | $(0.01) | $(1.11) | $0.04 | | Diluted Net income (loss) per Class A common stock | $(1.27) | $(0.01) | $(1.31) | $0.04 | | Weighted average Class A common stock outstanding (basic) | 130,537,970 | 131,802,620 | 131,712,573 | 132,935,446 | | Weighted average Class A common stock outstanding (diluted) | 206,962,634 | 208,027,620 | 208,137,237 | 209,937,710 | - Basic and diluted net loss per Class A common stock significantly increased to $(1.07) and $(1.27) for the three months, and $(1.11) and $(1.31) for the six months ended June 30, 2025, respectively, compared to near-zero or positive EPS in the prior year[154] - Potentially dilutive securities, including RSUs, stock options, and various warrants, were excluded from diluted EPS computation due to their anti-dilutive effect during the periods of net loss[155] 18. Subsequent Events This section details significant subsequent events, including the approved Reverse Stock Split and the potential impact of the One Big Beautiful Bill Act Reverse Stock Split This section outlines the approved 1-for-20 reverse stock split, its uniform effect on stockholders, and the pro forma impact on earnings per share - On July 21, 2025, stockholders approved a 1-for-5 to 1-for-30 reverse stock split, with the Board subsequently approving a 1-for-20 split, effective August 5, 2025[156] - The Reverse Stock Split will uniformly affect all common stock holders, not altering percentage ownership or voting power (except for fractional shares), and will not change authorized shares or par value[157] Table: Pro Forma EPS Metric (1-for-20 split) | Pro Forma EPS Metric (1-for-20 split) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Net income (loss) per Class A common stock | $(21.40) | $(0.16) | $(22.13) | $0.75 | | Diluted Net income (loss) per Class A common stock | $(25.47) | $(0.18) | $(26.24) | $0.71 | OBBB Act This section describes the recently signed One Big Beautiful Bill Act, detailing its tax reform provisions and the company's ongoing evaluation of its potential financial impact - The One Big Beautiful Bill Act (OBBB Act), signed July 4, 2025, includes tax reform provisions such as elective deductions for R&D, 100% bonus depreciation, and modifications to interest expense limitations[159] - The company is evaluating the impact of the OBBB Act, which could affect its effective tax rate and deferred tax assets in 2025 and future periods, though a material impact is not currently anticipated given the recorded valuation allowance[159] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Vivid Seats Inc.'s financial condition and operational results for the three and six months ended June 30, 2025, compared to the prior year. It highlights a challenging environment with declining Marketplace GOV and orders, leading to a significant net loss primarily due to impairment charges. The company is implementing a cost reduction program and has undertaken a reverse stock split to address these challenges Overview This section provides an overview of Vivid Seats' online ticket marketplace business, highlighting significant decreases in Marketplace GOV, revenues, and Adjusted EBITDA, leading to a net loss - Vivid Seats operates an online ticket marketplace connecting fans with live events and facilitating hotel bookings, aiming to provide an extensive breadth and depth of ticket listings at competitive value[161] Table: Overview Metrics | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Marketplace GOV | $685,488 | $998,065 | $1,505,847 | $2,026,543 | | Revenues | $143,566 | $198,316 | $307,589 | $389,168 | | Net income (loss) | $(263,327) | $(1,221) | $(273,115) | $9,518 | | Adjusted EBITDA | $14,356 | $44,178 | $36,077 | $83,096 | - Marketplace GOV decreased by 31% for the three months and 26% for the six months ended June 30, 2025, reflecting challenging industry trends and economic uncertainty[162] Our Business Model This section describes the company's business model, distinguishing between its Marketplace segment, which acts as an intermediary, and its Resale segment, which acquires tickets for secondary markets Marketplace Segment This section details the Marketplace segment's operations, revenue sources, associated costs, and the role of its proprietary Skybox ERP tool - The Marketplace segment acts as an intermediary for ticket sales and hotel bookings through Owned Properties (Vivid Seats, Wavedash, Vegas.com, and formerly Vivid Picks) and Private Label Offering partners[164] - Revenue is primarily derived from service and delivery fees, with costs mainly related to platform development, customer service, payment facilitation, and substantial online advertising[165][166] - Skybox, a proprietary ERP tool, is a key component of the online platform, used by ticket sellers to manage inventory, pricing, and orders across multiple marketplaces[167] Resale Segment This section describes the Resale segment's primary activity of acquiring tickets for resale on secondary marketplaces and its internal R&D support for Skybox - The Resale segment primarily acquires tickets for resale on secondary marketplaces, including its own, and provides internal R&D support for Skybox[168] Recent Developments This section outlines recent significant developments, including the approved Reverse Stock Split, the initiation of a cost reduction program, and the impact of the OBBB Act Reverse Stock Split This section details the stockholders' approval of a 1-for-20 reverse stock split, which will uniformly affect all common stock holders without altering percentage ownership - Stockholders approved a 1-for-5 to 1-for-30 reverse stock split on July 21, 2025, with the Board approving a 1-for-20 split, effective August 5, 2025[169] - The split will combine every 20 shares of Class A and Class B common stock into one, affecting all holders uniformly without changing percentage ownership or voting power (excluding fractional shares)[169] Current Environment and Cost Reduction Program This section addresses the challenging industry trends and economic uncertainty, leading to the initiation of a cost reduction program to enhance long-term efficiency - The company faces challenging industry trends, including economic uncertainty and competitive intensity, leading to pressure on Marketplace Order volumes in 2025[171] - In response, a cost reduction program was initiated during Q2 2025 to right-size the business and enhance long-term efficiency[171] OBBB Act This section describes the One Big Beautiful Bill Act, outlining its tax reform provisions and the company's ongoing evaluation of its complex financial impact - The One Big Beautiful Bill Act (OBBB Act), signed July 4, 2025, introduces tax reform provisions, including elective R&D deductions, 100% bonus depreciation, and modifications to interest expense limitations[172] - The company is evaluating the OBBB Act's impact on its effective tax rate and deferred tax assets, noting that a quantitative estimate is not yet reasonably determinable due to complexity[172] Key Business Metrics and Non-U.S. GAAP Financial Measure This section presents key business metrics and non-U.S. GAAP financial measures, including Marketplace GOV, orders, and Adjusted EBITDA, highlighting their significant declines Marketplace GOV This section details the significant decrease in Marketplace Gross Order Volume (GOV), primarily attributed to lower order volumes and challenging industry trends - Marketplace GOV decreased by $312.6 million (31%) for the three months and $520.7 million (26%) for the six months ended June 30, 2025, primarily due to lower order volumes[179] Table: Marketplace GOV and Event Cancellations Impact | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Marketplace GOV | $685,488 | $998,065 | $1,505,847 | $2,026,543 | | Event cancellations impact | $(20,300) | $(21,200) | $(35,800) | $(39,400) | Marketplace Orders This section outlines the decrease in Marketplace orders, reflecting reduced activity within the Marketplace segment - Marketplace orders decreased by 0.9 million (30%) for the three months and 1.5 million (25%) for the six months ended June 30, 2025, reflecting lower activity in the Marketplace segment[181] Table: Marketplace Orders and Event Cancellations | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Marketplace orders | 2,173 | 3,097 | 4,469 | 5,974 | | Event cancellations | 47,845 | 52,392 | 90,198 | 102,441 | Resale Orders This section details the changes in Resale orders, noting a slight decrease for the three months and a slight increase for the six months - Resale orders decreased by less than 0.1 million (4%) for the three months ended June 30, 2025, but increased by less than 0.1 million (1%) for the six months ended June 30, 2025[183] Table: Resale Orders and Event Cancellations | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Resale orders | 97 | 101 | 202 | 200 | | Event cancellations | 1,276 | 1,211 | 2,161 | 2,083 | Adjusted EBITDA This section highlights the significant decrease in Adjusted EBITDA, driven by impairment charges and adjustments related to Tax Receivable Agreement liabilities - Adjusted EBITDA decreased significantly by 67.5% to $14.4 million for the three months and 56.6% to $36.1 million for the six months ended June 30, 2025, compared to the prior year periods[175] Table: Adjusted EBITDA Reconciliation | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Adjusted EBITDA | $14,356 | $44,178 | $36,077 | $83,096 | | Net income (loss) | $(263,327) | $(1,221) | $(273,115) | $9,518 | | Impairment charges | $320,449 | $0 | $320,449 | $0 | | Adjustment of liabilities under TRA | $(149,172) | $0 | $(149,172) | $0 | - Key adjustments to reconcile net income (loss) to Adjusted EBITDA include significant impairment charges ($320.4 million) and a large income adjustment from the remeasurement of TRA liabilities ($(149.2) million) in 2025[187] Key Factors Affecting Our Performance This section notes that no material changes to the key factors affecting performance were observed during the reporting period - No material changes to the key factors affecting performance were noted during the six months ended June 30, 2025, compared to those discussed in the 2024 Form 10-K and Q1 2025 10-Q[188] Results of Operations This section provides a detailed comparison of the company's operational results for the current and prior year periods, analyzing revenue, costs, and expenses Comparison of the Three and Six Months Ended June 30, 2025 and 2024 This section compares the financial performance for the three and six months ended June 30, 2025, highlighting significant decreases in revenues and substantial increases in total costs and expenses Table: Comparison of Financial Performance | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | Revenues | $143,566 | $198,316 | $(54,750) | -28% | | Total costs and expenses | $475,291 | $190,434 | $284,857 | 150% | | Income (loss) from operations | $(331,725) | $7,882 | $(339,607) | -4309% | | Net income (loss) | $(263,327) | $(1,221) | $(262,106) | -21467% | | Net income (loss) attributable to Class A common stockholders | $(139,675) | $(1,061) | $(138,614) | -13064% | - Total revenues decreased by 28% for the three months and 21% for the six months ended June 30, 2025, compared to the prior year, primarily due to lower Marketplace orders[189] - Total costs and expenses increased by 150% for the three months and 78% for the six months, largely driven by $320.4 million in impairment charges in 2025[189] Revenues This section provides a detailed analysis of the company's total revenues, breaking down performance by Marketplace and Resale segments and event categories Total Revenues This section details the overall decrease in total revenues, primarily driven by reduced Marketplace orders Table: Total Revenues by Segment | Segment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | Marketplace | $114,478 | $170,046 | $(55,568) | -33% | | Resale | $29,088 | $28,270 | $818 | 3% | | Total | $143,566 | $198,316 | $(54,750) | -28% | - Total revenues decreased by $54.8 million (28%) for the three months and $81.6 million (21%) for the six months ended June 30, 2025, primarily due to a decrease in Marketplace orders[191] Marketplace Revenues This section outlines the decrease in Marketplace revenues across all event categories, reflecting lower order volumes and the impact of cancellation charges Table: Marketplace Revenues by Event Category | Event Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | Concert | $50,586 | $80,803 | $(30,217) | -37% | | Sport | $35,818 | $51,457 | $(15,639) | -30% | | Theater | $23,744 | $30,932 | $(7,188) | -23% | | Other | $4,330 | $6,854 | $(2,524) | -37% | | Total | $114,478 | $170,046 | $(55,568) | -33% | - Marketplace revenues decreased by 33% for the three months and 25% for the six months ended June 30, 2025, driven by corresponding decreases in Marketplace orders across all event categories[192] - Marketplace cancellation charges negatively impacted revenues by $4.2 million for the three months and $9.5 million for the six months ended June 30, 2025[193] Resale Revenues This section details the slight increase in Resale revenues, attributed to higher average revenue per order, despite increased cancellation charges - Resale revenues increased by $0.8 million (3%) for the three months ended June 30, 2025, due to higher average revenue per order despite fewer orders[197] - Resale revenues increased by $0.3 million (0.4%) for the six months ended June 30, 2025, consistent with a 1% increase in Resale orders[197] - Resale cancellation charges increased to $0.7 million for the three months and $1.2 million for the six months ended June 30, 2025, due to a higher number of cancelled orders[198] Cost of Revenues This section analyzes the company's cost of revenues, detailing changes in both Marketplace and Resale segments Total Cost of Revenues This section details the overall decrease in total cost of revenues, primarily consistent with lower Marketplace orders Table: Total Cost of Revenues by Segment | Segment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | Marketplace | $18,162 | $25,163 | $(7,001) | -28% | | Resale | $24,267 | $23,602 | $665 | 3% | | Total | $42,429 | $48,765 | $(6,336) | -13% | - Total cost of revenues decreased by $6.3 million (13%) for the three months and $11.4 million (12%) for the six months ended June 30, 2025, primarily due to lower Marketplace orders[199] Marketplace Cost of Revenues This section outlines the decrease in Marketplace cost of revenues, consistent with the decline in Marketplace Gross Order Volume - Marketplace cost of revenues decreased by $7.0 million (28%) for the three months and $12.1 million (24%) for the six months ended June 30, 2025, consistent with the decrease in Marketplace GOV[200] Resale Cost of Revenues This section details the increase in Resale cost of revenues, consistent with the corresponding increases in Resale revenues - Resale cost of revenues increased by $0.7 million (3%) for the three months and $0.7 million (2%) for the six months ended June 30, 2025, consistent with the increases in Resale revenues[201] Marketing and Selling This section analyzes the company's marketing and selling expenses, distinguishing between online and offline advertising costs Total Marketing and Selling This section details the overall decrease in total marketing and selling expenses, primarily due to lower Marketplace orders, partially offset by increased digital performance marketing Table: Total Marketing and Selling Expenses | Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | Online advertising | $48,630 | $63,905 | $(15,275) | -24% | | Offline advertising | $5,170 | $6,209 | $(1,039) | -17% | | Total | $53,800 | $70,114 | $(16,314) | -23% | - Total marketing and selling expenses decreased by $16.3 million (23%) for the three months and $19.9 million (14%) for the six months ended June 30, 2025, primarily due to lower Marketplace orders, partly offset by higher investment in digital performance marketing[202] Online Advertising This section outlines the decrease in online advertising costs, driven by lower Marketplace orders but partially offset by increased investment in digital performance marketing - Online advertising costs decreased by $15.3 million (24%) for the three months and $18.0 million (14%) for the six months ended June 30, 2025, due to lower Marketplace orders, partially offset by increased investment in digital performance marketing[203] Offline Advertising This section details the decrease in offline advertising costs, reflecting reduced spending in traditional brand marketing channels - Offline advertising costs decreased by $1.0 million (17%) for the three months and $2.0 million (16%) for the six months ended June 30, 2025, reflecting reduced spending in traditional brand marketing channels[204] Contribution Margin This section analyzes the company's contribution margin, detailing performance for both the Marketplace and Resale segments Total Contribution Margin This section details the overall decrease in total contribution margin, primarily driven by a lower contribution from the Marketplace segment Table: Total Contribution Margin by Segment | Segment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | Marketplace | $42,516 | $74,769 | $(32,253) | -43% | | Resale | $4,821 | $4,668 | $153 | 3% | | Total | $47,337 | $79,437 | $(32,100) | -40% | - Total contribution margin decreased by $32.1 million (40%) for the three months and $50.2 million (33%) for the six months en