Vivid Seats(SEAT) - 2022 Q4 - Annual Report

Part I Business 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][21][26] - 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] - 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][43] - 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][33][38] - As of December 31, 2022, the company had 575 full-time employees[52] - The company's main competitors in the ticketing industry are StubHub, Ticketmaster, SeatGeek, and TicketNetwork[54] Risk Factors 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][89][106] - 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][164] - 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][189] - 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][118][128] - 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] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[213] Properties 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] - Additional leased facilities are located in Coppell, Texas and Toronto, Ontario[215] Legal Proceedings The company reports no material legal proceedings - None[217] Mine Safety Disclosures This section is not applicable to the company's business - Not applicable[219] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - A $40.0 million share repurchase program was authorized on May 25, 2022, effective until March 31, 2023[232] 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 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] - 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] - 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][297] - 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][304] Quantitative and Qualitative Disclosures about Market Risk 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] - A hypothetical 1% increase in interest rates would change annual interest expense by $3.0 million[343] Financial Statements and Supplementary Data 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][454] - 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][476] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 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] - 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] - Remediation activities are in progress, including hiring qualified personnel and implementing new controls, but the material weakness is not yet considered remediated[629] Other Information The company reports no other information - None[634] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reports no information under this item - None[635] Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Accountant Fees 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][640][641] Part IV Exhibits, Financial Statement Schedules 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] - 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] Form 10-K Summary The company reports no information for the Form 10-K summary - None[656]