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Item 7. Management’s Discussion and Analysis

2024-03-08 compared with 2023-03-07 · 256 added, 243 removed, 172 unchanged (74% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Op erations

Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.

This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled "Forward-Looking Statements," "Risk Factors" or in other parts in this Annual Report on Form 10-K.

Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

This discussion is intended to help readers understand our results of operations and financial condition and is provided as an addition to, and should be read together with, our audited consolidated financial statements and accompanying notes included elsewhere in this Report.

This discussion contains forward-looking statements, which are subject to a number of risks and uncertainties, as discussed in the “Forward-Looking Statements” section of this Report.

Important factors that could cause actual results or outcomes to differ materially from those anticipated in the forward-looking statements include, but are not limited to, those set forth in the "Risk Factors" section of this Report.

We are an online ticket marketplace that utilizes our technology platform to connect fans of live events seamlessly with ticket sellers.

Our mission is to empower and enable fans to Experience It Live.

We believe in the power of shared experiences to connect people with live events delivering some of life’s most exciting moments.

We operate a technology platform and marketplace that enables ticket buyers to easily discover and purchase tickets from ticket sellers while enabling ticket sellers to seamlessly manage their operations.

We believe in the power of shared experiences to connect people with live events delivering some of life’s most exciting moments.

We operate a technology platform and marketplace that enables ticket buyers to easily discover and purchase tickets while enabling ticket sellers and partners to seamlessly manage their operations.

We differentiate from competitors by offering an extensive breadth and depth of ticket listings at a competitive value.

During the years ended December 31, 2022, 2021, and 2020, our revenues were $600.3 million, $443.0 million, and $35.1 million, respectively, and Marketplace Gross Order Value ("Marketplace GOV") was $3,184.8 million, $2,399.1 million, and $347.3 million, respectively.

Our net income was $70.8 million for the year ended December 31, 2022.

Our net loss was $19.1 million and $774.2 million for the years ended December 31, 2021 and 2020, respectively.

The following table summarizes our Marketplace Gross Order Value (“Marketplace GOV”), revenues and net income (loss) for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Marketplace GOV*

Net income (loss)

Adjusted EBITDA*

* See “Key Business Metrics and Non-GAAP Financial Measure” below for more information on Marketplace GOV and Adjusted EBITDA, which is a non-GAAP financial measure.

Our Business Model

We operate our business in two segments, Marketplace and Resale.

In our Marketplace segment, we act as an intermediary between ticket buyers and sellers through which we earn revenue from processing ticket sales on our website and mobile applications and sales initiated through our numerous distribution partners.

Our Marketplace segment also includes our daily fantasy sports offering, where users partake in contests by making picks from a variety of sport and player matchups.

Using our online platform, we facilitate customer payments, deposits and withdrawals, coordinate ticket deliveries, and provide customer service to our ticket buyers and sellers and daily fantasy sports users.

In our Marketplace segment, we primarily act as an intermediary between ticket buyers, sellers and partners through which we earn revenue processing ticket sales from our Owned Properties, consisting of our websites and mobile applications, including Vivid Seats, Vegas.com and Wavedash, and from our Private Label Offering, which includes numerous distribution partners.

Our Marketplace segment also includes our Vivid Picks daily fantasy sports offering, where users partake in contests by making picks from a variety of sport and player matchups.

Using our online platform, we facilitate customer payments, deposits and withdrawals, coordinate ticket deliveries, and provide customer service.

We do not hold ticket inventory in our Marketplace segment.

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We also earn referral fee revenue by offering event ticket insurance to ticket buyers, using a third-party insurance provider.

The revenue we earn from our daily fantasy sports offering is the difference between cash entry fees collected and cash amounts paid out to users for winning picks, less customer promotions and incentives in a period.

We incur costs for developing and maintaining our platform, providing back-office and customer support to ticket buyers, sellers and daily fantasy sports users, facilitating payments and deposits, and shipping non-electronic tickets.

The revenue we earn from our Vivid Picks daily fantasy sports offering is the difference between cash entry fees collected and cash amounts paid out to users for winning picks, less customer promotions and incentives.

We incur costs for developing and maintaining our platform, providing back-office support and customer service, facilitating payments and deposits, and shipping non-electronic tickets.

We also incur substantial marketing costs, primarily related to online advertising.

A key component of our platform is Skybox, a proprietary ERP tool used by the majority of our ticket sellers.

A key component of our platform is Skybox, a proprietary ERP tool used by the majority of ticket sellers.

Skybox is a free-to-use system that helps ticket sellers manage ticket inventories, adjust pricing, and fulfill orders across multiple ticket resale marketplaces.

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Our Resale segment also provides internal research and development support for Skybox and our ongoing efforts to deliver industry-leading seller software and tools.

Key Business Metrics and Non-GAAP Financial Measures

Key Business Metrics and Non-GAAP Financial Measure

We use the following metrics to evaluate our performance, identify trends, formulate financial projections, and make strategic decisions.

We believe that these metrics provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team.

The following table summarizes our key business metrics and non-GAAP financial measure (in thousands):

We believe these metrics provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team.

The following table summarizes our key business metrics and non-GAAP financial measure for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Marketplace GOV (1)

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(1) Marketplace GOV represents the total transactional amount of Marketplace segment orders placed on our platform in a period, inclusive of fees, exclusive of taxes and net of event cancellations that occurred during that period.

During the year ended December 31, 2022, Marketplace GOV was negatively impacted by event cancellations in the amount of $80.3 million, compared to $108.0 million and $216.0 million during the years ended December 31, 2021 and 2020.

(2) Total Marketplace orders represents the volume of Marketplace segment orders placed on our platform during a period, net of event cancellations that occurred during that period.

During the year ended December 31, 2022, our Marketplace segment experienced 199,595 event cancellations, compared to 257,109 and 549,085 event cancellations during the years ended December 31, 2021 and 2020.

During the year ended December 31, 2023, Marketplace GOV was negatively impacted by event cancellations in the amount of $43.6 million compared to $80.3 million and $108.0 million during the years ended December 31, 2022 and 2021, respectively.

(2) Total Marketplace orders represents the volume of Marketplace segment orders placed on our platform in a period, net of event cancellations that occurred during that period.

During the year ended December 31, 2023, our Marketplace segment experienced 99,078 event cancellations compared to 199,595 and 257,109 event cancellations during the years ended December 31, 2022 and 2021, respectively.

(3) Total Resale orders represents the volume of Resale segment orders in a period, net of event cancellations that occurred during that period.

During the year ended December 31, 2022, our Resale segment experienced 5,205 event cancellations, compared to 6,165 and 20,644 event cancellations during the years ended December 31, 2021 and 2020.

(4) Adjusted EBITDA is not a measure defined under accounting principles generally accepted in the United States of America ("GAAP").

We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance.

Refer to the Adjusted EBITDA section below for a reconciliation to its most directly comparable GAAP measure.

During the year ended December 31, 2023, our Resale segment experienced 2,910 event cancellations compared to 5,205 and 6,165 event cancellations during the years ended December 31, 2022 and 2021, respectively.

(4) Adjusted EBITDA is a non-GAAP financial measure.

We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for making period-to-period comparisons of our business performance.

See the “Adjusted EBITDA” section below for more information and a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure.

Marketplace GOV

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Marketplace GOV reflects our ability to attract and retain customers, as well as the overall health of the industry.

Our Marketplace GOV is impacted by seasonality, and typically sees increased activity in the fourth quarter when all major sports leagues are in season and we experience increases in order volume for theater during the holiday season and concert on-sales for the subsequent year.

Quarterly fluctuations in our Marketplace GOV result from the number of cancellations, the popularity and demand of performers, tours, teams, and events, and the length and team composition of sports playoff series and championship games.

Our Marketplace GOV increased during the year ended December 31, 2022 as a result of a higher number of orders processed, driven by the resumption and increasing number of live events and fewer event cancellations.

Our Marketplace GOV can be impacted by seasonality.

Typically, we experience slightly increased activity in the fourth quarter when all major sports leagues are in season and there is an increase in order volume for theater events during the holiday season and concert on-sales for the following year.

Quarterly fluctuations in our Marketplace GOV result from the popularity and demand of performers, tours, teams and events, the length and team composition of sports playoff series and championship games, and the number of event cancellations.

Our Marketplace GOV increased during the year ended December 31, 2023 as a result of increases in the number of orders processed and average order size and, to a lesser extent, fewer event cancellations and our acquisitions of Wavedash in September 2023 and Vegas.com in November 2023.

Total Marketplace Orders

Total Marketplace orders represents the volume of Marketplace segment orders placed on our platform in a period, net of event cancellations.

An order can include one or more tickets and/or parking passes.

Total Marketplace orders represent the volume of Marketplace segment orders placed on our platform in a period, net of event cancellations that occurred during that period.

An order can include one or more tickets, hotel rooms or parking passes.

Total Marketplace orders allow us to monitor order volume and better identify trends within our Marketplace segment.

Total Marketplace orders increased during the year ended December 31, 2022 as a result of a higher number of orders processed, driven by the resumption and increasing number of live events and fewer event cancellations.

Total Marketplace orders increased during the year ended December 31, 2023 as a result of a higher number of new orders processed and, to a lesser extent, fewer event cancellations and our acquisitions of Wavedash in September 2023 and Vegas.com in November 2023.

Total Resale Orders

Total Resale orders represents the volume of Resale segment orders sold in a period, net of event cancellations.

An order can include one or more tickets and/or parking passes.

Total Resale orders represent the volume of Resale segment orders sold in a period, net of event cancellations that occurred during that period.

An order can include one or more tickets or parking passes.

Total Resale orders allow us to monitor order volume and better identify trends within our Resale segment.

Total Resale orders increased during the year ended December 31, 2023 as a result of higher activity in our Resale segment.

Adjusted EBITDA

We present Adjusted EBITDA, which is a non-GAAP measure, because it is a measure frequently used by analysts, investors, and other interested parties to evaluate companies in our industry.

Further, we believe this measure is helpful in highlighting trends in our operating results because it excludes the impact of items that are outside the control of management or not reflective of ongoing performance related directly to the operation of our business segments.

Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

Moreover, we believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations.

It also provides a useful measure for period-to-period comparisons of our business performance and highlights trends in our operating results.

We present Adjusted EBITDA, which is a non-GAAP financial measure, because it is a measure frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

Further, we believe this measure is helpful in highlighting trends in our operating results because it excludes the impact of items that are outside of our control or not reflective of ongoing performance related directly to the operation of our business.

Adjusted EBITDA is a key measure used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance and performing strategic planning and annual budgeting.

Moreover, we believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for making period-to-period comparisons of our business performance and highlighting trends in our operating results.

Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Adjusted EBITDA does not reflect all amounts associated with our operating results as determined in accordance with GAAP and may exclude recurring costs, such as interest expense – net, equity-based compensation, litigation, settlements and related costs, change in fair value of warrants, change in fair value of derivative assets and foreign currency revaluation (gains)/losses.

In addition, other companies may calculate Adjusted EBITDA differently than we do, thereby limiting its usefulness as a comparative tool.

We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from Adjusted EBITDA.

The following is a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss) (in thousands):

Net income (loss)

Income tax expense (benefit)

Interest expense –

Interest expense – net

Depreciation and amortization

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Change in fair value of warrants (7)

Change in fair value of derivative asset (8)

Change in fair value of contingent consideration (9)

Loss on asset disposals (10)

Impairment charges (10)

Foreign currency revaluation gain (11)

TRA liability adjustment (12)

Adjusted EBITDA

(1) We have historically incurred sales tax expense in jurisdictions where we expected to remit sales tax payments but were not yet collecting from customers.

During the second half of 2021, we began collecting sales tax from customers in the required jurisdictions.

The sales tax liability presented herein represents the tax liability for sales tax prior to the date we began collecting sales tax from customers reduced by abatements received, inclusive of any penalties and interest assessed by the jurisdictions.

The aforementioned liability was fully paid in 2022.

(2) Transaction costs consist of legal;

tax and other professional fees;

(1) We have historically incurred sales tax expense in jurisdictions where we expected to collect and remit indirect taxes, but were not yet collecting from customers.

The sales tax liability for 2023 represents the liability recorded for local admissions taxes which we are not yet collecting from customers, including estimated penalties.

The sales tax liability for 2022 and 2021 represents the tax liability for sales tax prior to the date we began collecting sales tax from customers reduced by abatements received, inclusive of any penalties and interest assessed by the jurisdictions.

(2) This consists of legal, accounting, tax and other professional fees;

personnel-related costs, which consist of retention bonuses;

and integration costs.

Transaction costs recognized in 2022 were related to the merger transaction with Horizon Acquisition Corporation (the "Merger Transaction"), the acquisition of Betcha Sports, Inc.

("Betcha" rebranded as "Vivid Picks"), refinancing of the remaining June 2017 First Lien Loan with a new $275.0 million term loan (the "February 2022 First Lien Loan") and our offering to the holders of our outstanding public warrants to receive shares of Class A Common Stock in exchange for each outstanding public warrant tendered by the holder.

Transaction costs recognized in 2021 were related to the Merger Transaction, to the extent they were not eligible for capitalization, and the acquisition of Vivid Picks.

Transaction costs recognized in 2020 were related to the acquisition of Fanxchange Ltd.

(3) We incur equity-based compensation expenses for profits interests issued prior to the Merger Transaction and equity granted according to the 2021 Incentive Award Plan ("2021 Plan"), which we do not consider to be indicative of our core operating performance.

The 2021 Plan was approved and adopted in order to facilitate the grant of equity incentive awards to our employees and directors.

The 2021 Plan became effective on October 18, 2021.

(4) Loss on extinguishment of debt incurred in 2022 resulted from the extinguishment of the June 2017 First Lien Loan in February 2022.

Loss on extinguishment of debt incurred in 2021 and 2020 resulted from the retirement of the May 2020 First Lien Loan, fees paid related to the early payment of a portion of the principal of the June 2017 First Lien Loan in October 2021, and the retirement of the revolving credit facility in May 2020.

(5) These expenses relate to external legal costs and settlement costs, which were unrelated to our core business operations.

(6) These charges relate to severance costs resulting from significant reductions in employee headcount due to the effects of the COVID-19 pandemic.

(7) This relates to the revaluation of warrants to purchase common units of Hoya Intermediate ("Intermediate Units") held by Hoya Topco following the Merger Transaction.

Transaction costs recognized in 2023 were primarily related to the 2023 Secondary Offerings (as defined herein) and our acquisitions and strategic investments.

Transaction costs recognized in 2022 were primarily related to our acquisitions and strategic investments, the refinancing of the June 2017 First Lien Loan (as defined herein) with the February 2022 First Lien Loan (as defined herein) and our exchange offering of shares of our Class A common stock for properly tendered public warrants.

Transaction costs recognized in 2021 were primarily related to the Merger Transaction, to the extent they were not eligible for capitalization, and our acquisition of Vivid Picks.

(3) This relates to profits interests issued prior to the Merger Transaction and equity granted pursuant to the 2021 Plan, which we do not consider to be indicative of our core operating performance.

(4) Losses incurred in 2022 resulted from the extinguishment of the June 2017 First Lien Loan in February 2022.

Losses incurred in 2021 resulted from the retirement of the May 2020 First Lien Loan (as defined herein) and fees paid related to the early payment of a portion of the principal of the June 2017 First Lien Loan in October 2021.

(5) This relates to external legal costs, settlement costs and insurance recoveries that were unrelated to our core business operations.

(6) This relates to severance costs resulting from significant reductions in employee headcount due to the effects of the COVID-19 pandemic prior to 2022.

(7) This relates to the revaluation of warrants to purchase Intermediate Units held by Hoya Topco following the Merger Transaction.

(8) This relates to the revaluation of derivatives recorded at fair value.

(9) This relates to the revaluation of Vivid Picks cash earnouts.

(10) This relates to asset disposals, which are not considered indicative of our core operating performance.

(10) We incurred impairment charges triggered by the effects of the COVID-19 pandemic during the year ended December 31, 2020.

The impairment charges resulted in a reduction in the carrying values of our goodwill, indefinite-lived trademark, definite-lived intangible assets, and other long-lived assets.

(11) This relates to unrealized foreign currency revaluation (gain) loss from the remeasurement of non-operating assets and liabilities denominated in non-functional currencies on the balance sheet date.

(12) This relates to remeasurement of the TRA liability.

Key Factors Affecting Our Performance

Our operational and financial results have been, and will continue to be, affected by a number of factors that present significant opportunities as well as risks and challenges, including those discussed below and elsewhere in this Annual Report on 10-K, particularly in Part I, Item 1A, "Risk Factors.”

The key factors discussed below impacted our 2022 results or are anticipated to impact our 2023 results.

Growth and Retention of Buyers, Sellers and Distribution Partners

Our operational and financial results have been, and will continue to be, affected by a number of factors that present significant opportunities as well as risks and challenges, including those discussed below and elsewhere in this Report, particularly in the “Risk Factors” section.

The key factors discussed below impacted our 2023 results and/or are anticipated to impact our 2024 results.

Growth and Retention of Ticket Buyers, Sellers and Partners

Our revenue growth primarily depends on acquiring and retaining customers.

We seek to have ticket buyers and sellers view us as the go-to ticketing marketplace when searching for, purchasing and selling event tickets.

We differentiate from competitors by offering an extensive breadth and depth of ticket listings at a competitive value, and by providing a reliable and secure experience for ticket buyers.

We differentiate ourselves from competitors by offering an extensive breadth and depth of ticket listings at a competitive value, and by providing a reliable and secure experience for ticket buyers.

We acquire new ticket buyers through various marketing channels, partnerships, brand advertisement and word-of-mouth.

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We seek to retain buyers by cultivating brand awareness and affinity for our differentiated offering.

We provide an optimal customer experience, additional avenues for engagement and outreach such as through customized emails and Vivid Picks, and most importantly, exceptional value with our Vivid Seats Rewards program.

We provide an optimal customer experience, additional avenues for engagement and outreach such as through customized emails, Game Center and Vivid Picks, and most importantly, exceptional value with our Vivid Seats Rewards loyalty program.

Likewise, we must preserve our longstanding relationships with ticket sellers to maintain extensive ticket listing options at competitive prices.

We recognize the

importance of seller and other distribution relationships in the ticketing ecosystem and offer products and services designed to support the needs of our sellers and distribution partners.

We recognize the importance of seller and other partner relationships in the ticketing ecosystem and offer products and services designed to support their needs.

Macroenvironment and Resulting Consumer Demand for Live Events

Consumer demand for live events could be impacted by economic conditions affecting disposable consumer income, including unemployment levels, fuel prices, interest rates, changes in tax rates and tax laws that impact individuals and rising inflation, that affect disposable consumer income.

These economic conditions could affect overall demand for live event tickets, ticket prices and/or price sensitivity, which in turn could have a negative impact on our business and financial results.

Consumer demand for live events could be impacted by economic conditions affecting discretionary consumer and corporate spending, including unemployment levels, fuel prices, interest rates inflationary concerns and changes in tax rates and tax laws.

While such conditions existed in 2023, we did not see a resulting impact to overall demand for live event tickets, ticket prices and/or price sensitivity, but an impact is possible if such conditions persist or worsen.

Ticketing Industry Competition

Our business faces significant competition from other national, regional and local primary and secondary ticketing service providers.

We also face competition in the resale of tickets from other professional ticket resellers.

Our business faces significant competition from other primary and secondary ticketing service providers.

Forms of competition can include, but are not limited to, increasing performance marketing spend, increasing brand advertisement spend, pricing changes, exclusive partnerships, and new product offerings and enhancements.

To combat such competitive dynamics, we continue to refine our marketing strategies to attract and retain customers and innovate to offer our customers an attractive value proposition.

Supply of Concert, Sporting and Theater Events

The number of live concert, sporting, and theater events will have a significant effect on our revenue and operating income.

Many of the factors affecting the number of live events are beyond our control.

We also face competition from other professional ticket resellers in our Resale segment.

Supply of Live Concert, Sporting and Theater Events

The number and popularity of live concert, sporting, and theater events will have a significant effect on our revenue and operating income.

Many of the factors affecting the strength of the event slate are outside of our control.

Attracting and Retaining Talent

We rely on the ability to attract and retain employees.

Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization.

We rely on our ability to attract, motivate and retain employees.

Our success depends on our ability to continue to identify, attract, hire, integrate, develop, motivate and retain highly skilled personnel for all areas of our organization.

We share the dedication to our mission to Experience It Live .

Offering employees an engaging and positive work environment contributes to both their success and our success.

Offering employees an engaging and positive work environment contributes to both their and our success.

We are committed to fostering an environment that is inclusive and welcoming to diversity in backgrounds, experiences and thoughts as a means toward achieving employee engagement, empowerment, innovation and good decision-making.

Our operational and financial results can be impacted by seasonality, with increased activity in the fourth quarter when all major sports leagues are in season and we experience an increase in order volume for theater events during the holiday season and concert on-sales for the subsequent year.

In addition, our quarterly results and quarterly year-over-year growth rates can be impacted by:

sports teams performance, the number of playoff games in a series and teams involved;

the timing of tours of top grossing acts;

tour, game, and other event cancellations due to weather, illness or other factors;

Our operational and financial results can be impacted by seasonality.

Typically we experience slightly increased activity in the fourth quarter when all major sports leagues are in season and there is an increase in order volume for theater events during the holiday season and concert on-sales for the following year.

In addition, our financial results and growth rates can vary from period to period depending on, among other things:

popularity and demand for certain performers and events;

COVID-19 Pandemic

The COVID-19 pandemic has had, and may continue to have, a significant negative impact on our business, operational and financial results.

Beginning in the second quarter of 2021, and continuing throughout 2022, we have seen a recovery in ticket orders as mitigation measures eased.

While we have experienced recovery from the COVID-19 pandemic, given the emergence of new variants and continued infectious cases, uncertainty remains.

If economic conditions caused by the pandemic were to worsen, our financial condition, cash flows, and results of operations may be further materially impacted.

sports teams’ performances, and the length and team composition of sports playoff series and championship games;

the timing of tours of top grossing acts;

event cancellations;

weather, seasonal and other fluctuations in our operating results;

the timing of guaranteed payments, investments, acquisitions and financing activities;

competitive dynamics;

and timing of disbursements of accounts payable to sellers and partners around quarter-end.

Recent Developments

Vegas.com Acquisition

On November 3, 2023, we acquired Vegas.com, an online ticket marketplace for live event enthusiasts exploring Las Vegas, Nevada.

The purchase price was $248.3 million, consisting of $152.8 million in cash and approximately 15.6 million shares of our Class A common stock.

We financed the cash portion of the purchase price with cash on hand.

The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting.

Wavedash Acquisition

On September 8, 2023, we acquired Wavedash, an online ticket marketplace headquartered in Tokyo, Japan.

The purchase price was JPY 10,946.1 million, or approximately $74.3 million based on the exchange rate in effect on the acquisition date, before considering the net effect of cash acquired.

We financed the purchase price with cash on hand.

The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting.

2023 Secondary Offerings and Share Repurchase

On December 12, 2023, we completed a public offering of 23.575 million shares of our Class A common stock, which included 3.1 million shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares (the "December 2023 Secondary Offering") and 2.0 million shares subject to the Share Repurchase (as defined below).

The shares were purchased by the underwriters from Hoya Topco, the selling stockholder, at a price of $6.24 per share and, other than the shares subject to the Share Repurchase (as defined below), were sold at a public offering price of $6.50 per share.

Hoya Topco exchanged 23.575 million shares of our Class B common stock and 23.575 million Intermediate Units for the shares of our Class A common stock that it sold in the December 2023 Secondary Offering.

We did not receive any proceeds from the sale of the shares by Hoya Topco in the December 2023 Secondary Offering.

Pursuant to the underwriting agreement for the December 2023 Secondary Offering, we repurchased 2.0 million shares of our Class A common stock from the underwriters at a price of $6.24 per share (the same price per share paid by the underwriters to Hoya Topco) (the “Share Repurchase”).

We funded the Share Repurchase with cash on hand.

We completed a public offering of 18.4 million shares of our Class A common stock, comprising 16.0 million shares sold on May 22, 2023 and 2.4 million shares sold on June 15, 2023 pursuant to the full exercise of the underwriters'

option to purchase additional shares (the "June 2023 Secondary Offering" and, together with the December 2023 Secondary Offering, the “2023 Secondary Offerings”).

The shares were purchased by the underwriters from Hoya Topco, the selling stockholder, at a price of $7.68 per share and were sold at a public offering price of $8.00 per share.

Hoya Topco exchanged 18.4 million shares of our Class B common stock and 18.4 million Intermediate Units for the shares of our Class A common stock that it sold in the June 2023 Secondary Offering.

We did not receive any proceeds from the sale of the shares by Hoya Topco in the June 2023 Secondary Offering.

The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar Two"), with certain aspects effective January 1, 2024 and other aspects effective January 1, 2025.

While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate (Canada and Japan) have either introduced or are in the process of introducing legislation to implement Pillar Two.

We continue to assess the Pillar Two legislation and do not anticipate any material impacts to our consolidated financial statements.

Results of Operations

Discussions of the year ended December 31, 2021 and comparison between the year ended December 31, 2021 and the year ended December 31, 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations ”

in our Annual Report on Form 10-K filed on March 15, 2022.

Discussions of the year ended December 31, 2021 and comparison of the years ended December 31, 2022 and 2021 can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 7, 2023, as amended by Amendment No.

1 thereto, which section is incorporated by reference herein.

On March 5, 2024, we issued a press release announcing financial results for the fourth quarter and fiscal year ended December 31, 2023 (the “Earnings Release”).

Net income of $113.1 million presented in this Report differs from Net income of $107.0 million initially reported in the Earnings Release due to a $6.1 million income tax benefit adjustment for the three months and fiscal year ended December 31, 2023 made following the Earnings Release and prior to the filing of this Report.

This resulted in a corresponding $6.1 million decrease in our Additional paid-in capital and $6.1 million decrease in our Accumulated deficit as of December 31, 2023 from the amounts included in the Earnings Release.

The information in this Report supersedes the disclosure in the Earnings Release.

Comparison of the Years Ended December 31, 2023 and 2022

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Other (income) expense:

Interest expense –

Interest expense – net

Loss on extinguishment of debt

Other (income) expense:

Income (loss) before income taxes

Income before income taxes

Income tax expense (benefit)

Net income (loss)

Net loss attributable to Hoya Intermediate, LLC shareholders prior to reverse recapitalization

Net income (loss) attributable to redeemable noncontrolling interests

Net income (loss) attributable to Class A Common Stockholders

Net income attributable to redeemable noncontrolling interests

Net income attributable to Class A Common Stockholders

The following table presents revenues by segment (in thousands, except percentages):

Total revenues

Total revenues increased $157.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase, which occurred in both our Marketplace and Resale segments, resulted from an increase in new orders processed resulting from the resumption and increasing number of live events and fewer event cancellations.

The pandemic and resulting mitigation measures had a significant adverse effect on order volume and event cancellations during the year ended December 31, 2021.

In the second quarter of 2021, most local governments began to lift large scale restrictions on live events such that there was a significant increase in live events held for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The following table presents revenues in our Marketplace segment by event category (in thousands, except percentages):

Total revenues increased $112.6 million, or 19%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase, which occurred in both our Marketplace and Resale segments, resulted primarily from increases in new orders processed and average order size, which is calculated by dividing Marketplace GOV by Total Marketplace Orders.

Fewer event cancellation and our acquisitions of Wavedash in September 2023 and Vegas.com in November 2023 also contributed to the increase.

The following table presents Marketplace revenues segment by event category (in thousands, except percentages):

Total Marketplace revenues

Marketplace revenues increased $121.4 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase in Marketplace revenues for the year ended December 31, 2022 resulted primarily from an overall increase in new orders processed, driven by the resumption and increasing number of live events, and fewer event cancellations compared to the year ended December 31, 2021.

The increase in Marketplace revenues was primarily driven by the concert category and resulted from an increase in new orders processed, driven by the resumption and overall increasing number of events, rescheduling of postponed events and reduced event cancellations.

Marketplace revenues increased $86.3 million, or 17%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase resulted primarily from increases in new orders processed and average order size (especially in our concerts event category) and, to a lesser extent, fewer event cancellations.

Revenues from our theater event category also increased substantially, primarily due to increased orders from our Vegas.com acquisition.

Total Marketplace orders increased 1.7 million, or 19%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Cancellation charges, which are recognized as a reduction to revenues, were $27.8 million for the year ended December 31, 2022, compared to $34.5 million for the year ended December 31, 2021.

Cancellation charges for the year ended December 31, 2022 were lower than the year ended December 31, 2021 due to lower event cancellations in all event categories and higher recorded breakage on customer credits, partially offset by higher customer refunds that increase as order volume increases.

Cancellation charges, which are recognized as a reduction of revenues, negatively impacted Marketplace revenues by $20.0 million and $27.8 million for the years ended December 31, 2023 and 2022, respectively.

The decrease was primarily due to higher store credit breakage and negative impacts in early 2022 from abnormally high cancellations.

Marketplace revenues by business model consisted of the following (in thousands, except percentages):

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Total Marketplace revenues

The increases in revenue from both Owned Properties and Private Label during the year ended December 31, 2022 compared to the year ended December 31, 2021 resulted from an increase in new orders processed, particularly in the concert category, and fewer event cancellations.

The increases in revenue from both Owned Properties and Private Label during the year ended December 31, 2023 compared to the year ended December 31, 2022 resulted from increases in new orders processed and average order size and, to a lesser extent, fewer event cancellations.

Within the Marketplace segment, we also earn referral fee revenue by offering event ticket insurance to ticket buyers, using a third-party insurance provider.

Our referral fee revenue was $29.4 million and $33.4 million during the years ended December 31, 2023 and 2022, respectively.

Referral fees were flat compared to 2021 as insurance attachment rate to orders declined.

Revenue for our Resale segment increased $35.8 million, or 67%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase resulted primarily from higher order volume in the concert category.

The decrease was due to declining insurance attachment rates to orders following abnormally high rates during the height of the COVID-19 pandemic and following the resumption of live events in 2021 and 2022.

Resale revenues increased $26.3 million, or 30%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase resulted primarily from higher order volume.

Total Resale orders increased 0.1 million, or 21%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Cancellation charges, classified as a reduction of revenue,

negatively impacted Resale revenue by less than $0.1 million and $2.8 million for the years ended December 31, 2022 and 2021, respectively.

Cancellation charges, which are classified as a reduction of revenue, negatively impacted Resale revenues by $1.1 million and less than $0.1 million for the years ended December 31, 2023 and 2022, respectively.

Cost of Revenues (exclusive of Depreciation and Amortization)

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Total cost of revenues increased $41.7 million, or 30%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase to total cost of revenues resulted primarily from higher order volume in both our Marketplace and Resale segments and a higher proportion of revenue from our Resale segment.

The increase was primarily driven by higher Marketplace GOV in our Marketplace segment and higher revenue in our Resale segment.

Marketplace cost of revenues increased $21.4 million, or 29%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase in cost of revenues is fairly consistent with the increase in total Marketplace orders, which increased by 2.5 million orders, or 38%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase was relatively consistent with the increase in Marketplace GOV, which increased by 23% during the same period.

Resale cost of revenues increased $20.2 million, or 30%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase resulted from an increase in total Resale orders of 0.1 million orders, or 57%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase in Resale cost of revenues is not consistent with the increase in Resale revenues for the year ended December 31, 2022 compared to the year ended December 31, 2021.

This was driven by strong post-COVID recovery demand in 2021 that resulted in abnormally high margins.

Cancellation charges resulted in a reduction to Resale cost of revenues of $0.5 million and $1.4 million for the years ended December 31, 2022 and 2021, respectively.

The increase resulted from an increase in Resale revenues, which increased by 30% during the same period.

Marketing and Selling

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Marketing and selling expenses, which are entirely attributable to our Marketplace segment, increased $25.7 million, or 10%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase in expenses primarily resulted from greater spending on online advertising.

Our spending on online advertising increased by $64.5 million, or 40%, during the year ended December 31, 2022 compared to the year ended December 31, 2021 as we scaled to capture an increase in live event demand and experienced increased competition in performance marketing channels.

The increase in our offline advertising expense was driven by our revamped brand awareness marketing efforts, which began with a large campaign in the fourth quarter of 2021.

The increase resulted from greater spending on online advertising, attributable to higher Marketplace GOV, and higher spending on offline advertising, attributable to increased brand marketing and partnership efforts to further cultivate brand awareness and affinity.

Total marketing and selling expenses increased relatively less than Total Marketplace revenues, which increased by 17%, as we saw initial benefits of our increasing share of repeat orders.

General and Administrative

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Total general and administrative expenses increased $31.5 million, or 25%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase was primarily due to a higher personnel expenses attributable to higher employee headcount, an increase in costs for our outsourced customer service provider and an increase in stock compensation expense from awards granted pursuant to the 2021 Plan, which became effective on October 18, 2021.

This increase was partially offset by a decrease in non-income tax expense as we began collecting sales tax from customers in the required jurisdictions in the second half of 2021.

The majority of the non-income tax expense in the prior periods represents the exposure for sales tax prior to the date we began collecting sales tax from customers, reduced by abatements received, and inclusive of any penalties and interest assessed by the jurisdictions.

The increase was primarily due to higher personnel expenses from higher employee headcount, including headcount added through our acquisitions of Wavedash and Vegas.com, and from higher equity-based compensation expense.

Higher professional fees incurred with our acquisitions of Wavedash and Vegas.com, which are reflected in other expenses, also contributed to the increase.

Depreciation and Amortization

Depreciation and amortization expenses increased $5.4 million, or 233%, during the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily as a result of an increase in development activities related to our platform and the intangibles acquired as part of the Vivid Picks acquisition.

Depreciation and amortization expenses increased $9.4 million, or 122%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase was primarily due to the intangibles acquired as part of our acquisitions of Wavedash and Vegas.com and, to a lesser extent, an increase in capitalized development activities related to our platform.

The magnitude of the increase attributable to the amortization of acquired intangibles had a significant impact on net income for the year ended December 31, 2023 compared to the prior-year period.

Change in Fair Value of Contingent Consideration

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Other (Income) Expense

Interest expense –

Interest expense decreased $45.3 million, or 78%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

We paid off the May 2020 First Lien Loan and made a partial payment of the outstanding principal on the June 2017 First Lien Loan in the fourth quarter of 2021.

In addition, we further reduced our outstanding debt balance and effective interest rate on February 3, 2022 when we refinanced the June 2017 First Lien Loan with the February 2022 First Lien Loan.

Interest expense – net

Interest expense – net increased $0.6 million, or 5%, during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to higher interest rates, partially offset by interest earned on cash balances.

Loss on extinguishment of debt

Loss on extinguishment of debt decreased $31.5 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.

For the year ended December 31, 2022, loss on extinguishment of debt was due to the refinancing of the June 2017 First Lien Loan with the February 2022 First Lien Loan in the first quarter of 2022.

For the year ended December 31, 2021, loss on extinguishment of debt was due to our full repayment of the May 2020 First Lien Loan and a partial repayment of the outstanding principal on the June 2017 First Lien Loan.

The loss includes $28.0 million for a prepayment penalty, $6.1 million for the amortization of the remaining balance of the original issuance discount and issuance costs related to the repayment of the May 2020 First Lien Loan in full and $1.7 million for the amortization of the balance of the original issuance discount and issuance costs related to the partial repayment of the outstanding principal on the June 2017 First Lien Loan.

Loss on extinguishment of debt was $4.3 million during the year ended December 31, 2022 due to the refinancing of the June 2017 First Lien Loan with the February 2022 First Lien Loan in the first quarter of 2022.

There was no loss on extinguishment of debt during the year ended December 31, 2023.

Other (income) expense

Other (income) expense decreased $9.6 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.

For the year ended December 31, 2022, other (income) expense was related to the fair value remeasurement of the Hoya Intermediate Warrants.

For the year ended December 31, 2021, other (income) expense was primarily related to our modification of the terms of Public Warrants in connection with the Merger Transaction.

Other (income) expense decreased $5.1 million, or 62%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The decrease was primarily due to the fair value remeasurement of warrants, net of foreign currency revaluation gains due to unrealized gains arising from the remeasurement of non-operating assets and liabilities denominated in non-functional currencies on the balance sheet date.

Income tax expense (benefit)

Income tax benefit increased $40.6 million during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase was primarily due to the release of our valuation allowance on our U.S.

net operating losses and interest limitations and tax credit carryforwards, as well as valuation allowance releases following the 2023 Secondary Offerings .

Liquidity and Capital Resources

We have historically financed our operations primarily through cash generated from our operating activities.

We have historically financed our operations primarily through cash generated from operations.

Our primary short-term requirements for liquidity and capital are to fund general working capital, capital expenditures and debt service requirements.

Our primary long-term liquidity needs are related to debt repayment and potential acquisitions.

Our primary sources of funds are cash generated from operations and proceeds from borrowings, including our term loans.

In response to the COVID-19 pandemic, we borrowed $50.0 million under our revolving credit facility in March 2020 and subsequently entered into the May 2020 First Lien Loan (defined below).

We received $251.5 million in net cash proceeds from the May 2020 First Lien Loan, which we used to repay the $50.0 million in outstanding borrowings under the revolving credit facility in May 2020 and to fund our operations.

As noted in the “Liquidity and Capital Resources—Loan Agreements”

section below, we repaid the May 2020 First Lien Loan in connection with, and using the proceeds from, the Merger Transaction and the PIPE Financing.

Our existing cash and cash equivalents are sufficient to fund our liquidity needs for the next 12 months.

As of December 31, 2022, we had $251.5 million of cash and cash equivalents.

Cash and cash equivalents consist of interest-bearing deposit accounts and money market accounts managed by financial institutions.

Our primary source of funds is cash generated from operations.

Our existing cash and cash equivalents are sufficient to fund our liquidity needs for the next 12 months and thereafter for the foreseeable future.

As of December 31, 2023, we had $125.5 million of cash and cash equivalents, which consist of interest-bearing deposit accounts, money market accounts managed by financial institutions and highly liquid investments with maturities of three months or less.

For the year ended December 31, 2023, we generated positive cash flows from our operating activities.

Loan Agreements

In response to the COVID-19 pandemic, we entered into the May 2020 First Lien Loan, which resulted in $251.5 million in net cash proceeds.

The May 2020 First Lien Loan, which is pari passu with the June 2017 First Lien Loan, carries a variable interest rate of LIBOR plus an applicable margin of 9.50%, or a base rate plus an applicable margin of 8.50%.

The May 2020 First Lien Loan matures in May 2026, subject to an earlier springing maturity date of June 30, 2024 if the June 2017 First Lien Loan, or a refinancing thereof with scheduled payments of principal prior to June 30, 2024, remains outstanding as of that date.

The effective interest rate on the May 2020 First Lien Loan, which fluctuates based on certain paid-in-kind elections, was 11.50% per annum as of December 31, 2020.

We made no payments during 2020 on the May 2020 First Lien Term Loan.

Interest incurred under the May 2020 First Lien Loan was capitalized into the principal quarterly in August and November 2020, resulting in an outstanding principal of $275.7 million as of December 31, 2020.

In May 2020, in response to the COVID-19 pandemic, we entered into a first lien term loan (the “May 2020 First Lien Loan”), which resulted in $251.5 million in net cash proceeds.

We had an outstanding loan balance of $275.7 million under the May 2020 First Lien Loan as of December 31, 2020.

Additional interest was capitalized into the principal in the first nine months of 2021, resulting in an outstanding principal of $304.1 million as of September 30, 2021.

On October 18, 2021, we repaid this loan in full in connection with, and using the proceeds from, the Merger Transaction and the PIPE Financing and incurred a $28.0 million prepayment penalty.

On October 18, 2021, we repaid the May 2020 First Lien Loan in full in connection with, and using the proceeds from, the Merger Transaction and a related private investment in public equity (the "PIPE Financing") and incurred a $28.0 million prepayment penalty.

In June 2017, we entered into a $525.0 million first lien term loan (the “June 2017 First Lien Loan”).

In July 2018, the June 2017 First Lien Loan was amended to upsize the committed amount by $115.0 million.

In October 2021, we made an early principal payment related to the June 2017 First Lien Loan of $148.2 million in connection with, and using the proceeds from, the Merger Transaction and the PIPE Financing.

We had an outstanding loan balance of $465.7 million under the June 2017 First Lien Loan as of December 31, 2021.

In the first quarter of 2022, we repaid $190.7 million of the outstanding June 2017 First Lien Loan.

On February 3, 2022, we entered into an amendment which refinanced the remaining June 2017 First Lien Loan with a new $275.0 million February 2022 First Lien Loan with a maturity date of February 3, 2029, added a new revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $100.0 million with a maturity date of February 3, 2027, replaced the LIBOR based floating interest rate with a term secured overnight financing rate ("SOFR") based floating interest rate and revised the springing financial covenant to require compliance with a first lien net leverage ratio when revolver borrowings exceed certain levels.

On February 3, 2022, we entered into an amendment which refinanced the remaining balance of $190.7 million from the June 2017 First Lien Loan with a new $275.0 million term loan (the “February 2022 First Lien Loan”), which has a maturity date of February 3, 2029, and added a new $100.0 million revolving credit facility (the “Revolving Facility”) with a maturity date of February 3, 2027.

The terms of the February 2022 First Lien Loan specify a secured overnight financing rate (“SOFR”)-based floating interest rate and contain a springing financial covenant that requires compliance with a first lien net leverage ratio when revolver borrowings exceed certain levels.

All obligations under the February 2022 First Lien Loan are unconditionally guaranteed by Hoya Intermediate and substantially all of Hoya Intermediate’s existing and future direct and indirect wholly owned domestic subsidiaries.

The February 2022 First Lien Loan requires quarterly amortization payments of $0.7 million.

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All obligations under the February 2022 First Lien Loan are secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our assets.

The February 2022 First Lien Loan carries an interest rate of SOFR plus 3.25%.

The SOFR rate for the February 2022 First Lien Loan is subject to a 0.5% floor.

As of December 31, 2022, we are only party to one credit facility, the February 2022 First Lien Loan.

At December 31, 2022, we had no outstanding borrowings under our Revolving Facility.

Share Repurchase Program

On May 25, 2022, our board of directors authorized a share repurchase program of our Class A Common Stock of up to $40.0 million ("Repurchase Program").

The Repurchase Program was announced on May 26, 2022 and will be effective until March 31, 2023.

We may repurchase shares from time to time in open market transactions, through privately negotiated transactions or otherwise in accordance with applicable federal securities laws.

The amount and timing of repurchases will depend upon market conditions and other factors including price.

The Repurchase Program does not obligate us to acquire any particular amount of stock, and it may be terminated, modified, or suspended at any time at our discretion.

The Repurchase Program commenced on July 5, 2022 upon the completion of the Exchange of our Public Warrants.

As of December 31, 2022, we have repurchased 4.3 million shares of our Class A Common Stock for $32.5 million under the Repurchase Program.

The share repurchases are accounted for as Treasury stock in our Consolidated Balance Sheets.

The February 2022 First Lien Loan carries an interest rate of SOFR (subject to a 0.5% floor) plus 3.25%.

The effective interest rate on the February 2022 First Lien Loan was 9.05% and 7.98% per annum at December 31, 2023 and 2022, respectively.

In connection with our acquisition of Wavedash, we assumed long-term debt owed to Shoko Chukin Bank of JPY 458.3 million (approximately $3.1 million), which has a maturity date of June 24, 2026 and is subject to a fixed interest rate of 1.27% per annum.

As of December 31, 2023, we had the February 2022 First Lien Loan and the Shoko Chukin Bank Loan outstanding and we had no outstanding borrowings under the Revolving Facility.

Share Repurchases

On May 25, 2022, our Board authorized a share repurchase program for up to $40.0 million of our Class A common stock (the “Repurchase Program”).

The Repurchase Program was announced on May 26, 2022 and its authorization was fully utilized during 2022 and the three months ended March 31, 2023.

Cumulatively under the Repurchase Program, we repurchased 5.3 million shares of our Class A common stock for $40.0 million and paid $0.1 million in commissions.

The share repurchases are accounted for as Treasury stock in the Consolidated Balance Sheets.

On December 12, 2023, we repurchased 2.0 million shares of our Class A common stock from the underwriters of the December 2023 Secondary Offering at a price of $6.24 per share (the same price per share paid by the underwriters to Hoya Topco, the selling stockholder).

See Note 17, Equity , to our consolidated financial statements included elsewhere in this Report for more information regarding the December 2023 Secondary Offering.

Distributions to non-controlling interests

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Tax Receivable Agreement

In connection with the Merger Transaction, we entered into a Tax Receivable Agreement with the existing Hoya Intermediate shareholders that will provide for payment to Hoya Intermediate shareholders of 85% of the amount of the tax savings, if any, that we realize (or, under certain circumstances, is deemed to realize) as a result of, or attributable to, (i) increases in the tax basis of assets owned directly or indirectly by Hoya Intermediate or its subsidiaries from, among other things, any redemptions or exchanges of Intermediate Units (ii) existing tax basis (including depreciation and amortization deductions arising from such tax basis) in long-lived assets owned directly or indirectly by Hoya Intermediate and its subsidiaries, and (iii) certain other tax benefits (including deductions in respect of imputed interest) related to Hoya Intermediate making payments under the Tax Receivable Agreement.

In connection with the Merger Transaction, we entered into the TRA with the existing Hoya Intermediate shareholders that provides for our payment to such shareholders of 85% of the amount of the tax savings, if any, that we realize (or, under certain circumstances, are deemed to realize) as a result of, or attributable to, (i) increases in the tax basis of assets owned directly or indirectly by Hoya Intermediate or its subsidiaries from, among other things, any redemptions or exchanges of Intermediate Units, (ii) existing tax basis (including depreciation and amortization deductions arising from such tax basis) in long-lived assets owned directly or indirectly by Hoya Intermediate and its subsidiaries, and (iii) certain other tax benefits (including deductions in respect of imputed interest) related to us making payments under the TRA.

In connection with the 2023 Secondary Offerings, Hoya Topco exchanged Intermediate Units, and as a result, we recorded a liability of $165.2 million, a deferred tax asset of $75.2 million related to the 2023 Secondary Offerings as well as the projected payments under the TRA, a decrease to additional paid-in capital of $95.8 million, and a $5.8 million income tax benefit related to valuation allowance releases on the portion of the deferred tax asset associated with the basis difference in the investment in the partnership excluded from the disclosure of deferred tax asset and valuation allowance.

We also recognized an income tax benefit of $14.0 million related to the release of valuation allowances at the time of the 2023 Secondary Offerings.

Due to an increase in the applicable state and local tax rate, there was a remeasurement of the TRA liability recorded for the 2023 June Secondary Offering, which resulted in an increase in the liability of $0.6 million, with the corresponding expense included in other income in the Consolidated Statements of Operations for the year ended December 31, 2023.

As a result of the increase in the TRA liability, we recorded an increase in deferred tax assets of $0.3 million which was recorded to deferred tax expense.

The TRA-related liabilities are classified as current or long-term based on the expected date of payment.

At December 31, 2023, the amount due within the next 12 months was $0.1 million and is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The following table summarizes our cash flows for the periods indicated (in thousands):

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $14.4 million for the year ended December 31, 2022 due to $70.8 million in net income, non-cash charges of $24.4 million, and net cash outflows from a $80.8 million change in net operating liabilities.

The net cash outflows from the change in our net operating liabilities were primarily due to a $94.4 million decrease in accrued expenses and other current liabilities and a $30.8 million decrease in accounts payable, partially offset by a $42.9 million decrease in prepaid expenses and other current assets.

Impact of foreign exchange on cash, cash equivalents, and restricted cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

Cash Provided by Operating Activities

Net cash provided by operating activities was $147.3 million for the year ended December 31, 2023 due to $113.1 million in net income, net non-cash charges of $2.0 million, and net cash inflows from a $36.2 million change in net operating assets and liabilities.

The net cash inflows from the change in our net operating assets and liabilities were primarily due to an increase in accounts payable to ticket sellers, which typically occurs upon higher order volume as seen in 2023.

The net cash outflows from the change in our net operating assets and liabilities were primarily due to decreases of $94.4 million in accrued expenses and other current liabilities and $30.8 million in accounts payable, partially offset by a $42.9 million decrease in prepaid expenses and other current assets.

The decreases resulted primarily from sales tax liability settlements, the redemption of customer credits issued during the COVID-19 pandemic and a decrease in amounts payable to ticket sellers as events postponed during the COVID-19 pandemic finally occurred.

Net cash provided by operating activities was $175.8 million for the year ended December 31, 2021 due to $19.1 million in net loss, non-cash charges of $75.3 million, and net cash inflows from a $119.7 million change in net operating assets.

The net cash inflows from the change in our net operating assets were primarily due to a $128.2

million increase in accounts payable, $19.2 million increase in deferred revenue, and a $14.2 million increase in accrued expenses and other current liabilities, partially offset by a $44.1 million decrease related to deferred paid-in-kind interest paid on May 2020 First Lien Loan, $7.6 million decrease in prepaid expenses and other current assets and a $4.3 million increase in inventory.

Net cash provided by operating activities was $175.8 million for the year ended December 31, 2021 due to $19.1 million in net loss, non-cash charges of $75.3 million and net cash inflows from a $119.7 million change in net operating assets and liabilities.

The net cash inflows from the change in our net operating assets and liabilities were primarily due to increases of $128.2 million in accounts payable, $19.2 million in deferred revenue and $14.2 million in accrued expenses and other current liabilities, partially offset by a $44.1 million decrease related to deferred paid-in-kind interest paid on the May 2020 First Lien Loan, a $7.6 million decrease in prepaid expenses and other current assets and a $4.3 million increase in inventory.

Excluding the decrease related to deferred paid-in-kind interest, each of these resulted from higher order volume and lower event cancellations in 2021.

We identified an immaterial error and revised the deferred interest payment of $44.1 million from an outflow in cash flows from financing activities to an outflow in cash flows from operating activities in the Consolidated Statement of Cash Flows for the year ended December 31, 2021.

This is outlined within Note 1, Background, Description of Business and Basis of Presentation .

Net cash used in operating activities was $33.9 million for the year ended December 31, 2020 due to $774.2 million in net loss, non-cash charges of $646.8 million, and net cash outflows from a $93.5 million change in net operating assets.

The net cash outflows from the change in net operating assets were primarily due to an increase of $195.4 million in accrued expenses and other current liabilities, partially offset by a $67.6 million increase in prepaid expenses and other current assets and a $28.7 million decrease in accounts payable.

These changes primarily resulted from lower order volume and higher cancellation rates in 2020.

Cash Used in Investing Activities

Net cash used in investing activities for the year ended December 31, 2022 was $15.4 million, which was attributable to capital spending on development activities related to our platform and capital expenditures related to our new corporate headquarters in Chicago, which we moved into in late 2022.

Net cash used in investing activities for the years ended December 31, 2021 and 2020 was $9.3 million and $7.6 million, respectively, which was primarily attributable to capital spending on development activities related to our platform.

Net cash used in investing activities for the year ended December 31, 2023 was $225.6 million, which was primarily related to our acquisitions of Wavedash and Vegas.com and, to a lesser extent, capital spending on development activities related to our platform and our investment in a privately held company.

Net cash used in investing activities for the year ended December 31, 2022 was $15.4 million, which was primarily attributable to capital spending on development activities related to our platform and capital expenditures related to our new corporate headquarters in Chicago, which we moved into in late 2022.

Net cash used in investing activities for the year ended December 31, 2021 was $9.3 million, which was primarily attributable to capital spending on development activities related to our platform.

Cash (Used in) Provided by Financing Activities

Net cash used in financing activities for the year ended December 31, 2022 was $236.5 million and was primarily related to the repayment of the June 2017 First Lien Loan in connection with the refinancing and our Class A Common Stock Repurchase Program.

Net cash provided by financing activities was $38.0 million for the year ended December 31, 2021.

This was due to capital contributions of $752.9 million, offset by $441.0 million in debt payments and debt extinguishment costs, $236.0 million of preferred equity redemptions, $20.1 million of Merger Transaction costs, and $17.7 million of dividends paid.

Net cash used in financing activities for the year ended December 31, 2023 was $43.4 million, which was primarily related to share repurchases and tax distributions to non-controlling interests.

Net cash used in financing activities for the year ended December 31, 2022 was $236.5 million, which was primarily related to the repayment of the June 2017 First Lien Loan and share repurchases.

Net cash provided by financing activities for the year ended December 31, 2021 was $38.0 million.

This was due to capital contributions of $752.9 million, partially offset by $441.0 million in debt payments and debt extinguishment costs, $236.0 million of preferred equity redemptions, $20.1 million of Merger Transaction costs, and $17.7 million of dividends paid.

This is outlined within Note 1, Background, Description of Business and Basis of Presentation .

Net cash provided by financing activities was $245.5 million for the year ended December 31, 2020, which resulted primarily from $260.0 million in proceeds from our May 2020 First Lien Loan.

This was partially offset by $6.5 million arranger fee on the May 2020 First Lien Loan, $5.9 million in principal payments on our June 2017 First Lien Loan, and $2.1 million in other debt-related costs.

We also borrowed $50.0 million under our Revolving Facility, which we subsequently repaid in 2020.

Off-Balance Sheet Arrangements

As of December 31, 2022, we did not have any off-balance sheet arrangements, as defined in item 303(a)(4)(ii) of Regulation S-K promulgated under the Exchange Act, that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows.

As of December 31, 2023, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, results of operations or cash flows.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and

expenses, and related disclosures.

Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.

On an ongoing basis, we evaluate our estimates and assumptions.

Actual results may differ from these estimates under different assumptions or conditions.

The assumptions and estimates associated with revenue recognition;

equity-based compensation, warrants and earnouts, and impairment of our goodwill, indefinite-lived intangible assets, definite-lived intangible assets, long-lived assets, and valuation allowances have the greatest potential impact on our consolidated financial statements.

Accordingly, these are the policies that are the most critical to aid in fully understanding and evaluating our Consolidated Balance Sheets, results of operations, and cash flows.

The estimates and assumptions associated with revenue recognition, equity-based compensation, warrants and earnouts, recoverability of our goodwill, indefinite-lived intangible assets, definite-lived intangible assets, long-lived assets and valuation allowances have the greatest potential impact on our consolidated financial statements.

Accordingly, these are the policies that are the most critical to aid in fully understanding and evaluating our consolidated financial statements.

Revenue Recognition

Revenue from our Marketplace segment primarily consists of service and delivery fees from ticketing operations, reduced by incentives provided to ticket buyers.

We also recognize revenue for referral fees earned on the purchase of ticket insurance by ticket buyers from third-party insurers.

We recognize revenue from our Marketplace segment when the ticket seller confirms an order with the ticket buyer, at which point the seller is obligated to deliver the tickets to the ticket buyer in accordance with the original marketplace listing.

Revenue from our Marketplace segment primarily consists of service and delivery fees from ticketing operations, reduced by incentives provided to ticket buyers, as well as service and delivery fees from travel reservations and other marketplace transactions we facilitate.

We also recognize revenue for referral fees earned on the purchase of ticket insurance by buyers from third-party insurers.

We recognize revenue from live event tickets when the ticket seller confirms an order with the ticket buyer, at which point control of the ticket is transferred because the seller is then obligated to deliver the tickets to the buyer in accordance with the original marketplace listing.

We recognize revenue from hotel reservations and tours at the time of check-in as the buyer does not have control of the item prior to that point.

Revenue from Marketplace transactions is recognized on a net basis because we act as an agent for these transactions.

Additionally, the revenue we earn from our daily fantasy sports offering is the difference between cash entry fees collected and cash amounts paid out to users for winning picks, less customer promotions and incentives in a period.

We estimate and reserve for future cancellation charges based on historical trends, with the corresponding charge reducing revenue.

This reserve, known as accrued future customer compensation, is classified within Accrued expenses and other current liabilities, with a corresponding asset for expected recoveries from ticket sellers and distribution partners recorded within Prepaid expenses and other current assets on our Consolidated Balance Sheets.

Specific judgments and assumptions considered when estimating future cancellation charges include historical cancellation charges as a percentage of sales, the average length of time to realize such charges, and the potential exposure based on the volume of recent sales activity.

Following the onset of the COVID-19 pandemic, estimates for future cancellation charges resulting from event cancellations have been determined based on historical event cancellation rates during different phases of the recovery and management’s estimates of future event cancellation trends.

Such estimates are inherently uncertain as we are unable to predict the rate at which actual cancellation charges will occur.

Estimates for future cancellation charges resulting from event cancellations are determined based on historical event cancellation rates and the volume of sales for events that have not yet occurred.

To the extent that actual cancellation charges are materially different than previously estimated amounts, or changes in recent trends require updates to previously reserved amounts, revenue may be materially impacted.

As a result of the COVID-19 pandemic, cancellation charge reserves increased materially in 2020 due to the large volume of cancellations that occurred from the pandemic.

In 2021 and 2022, reserves reduced due to reductions in estimated future cancellation rates.

In extreme circumstances, should actual cancellation charges exceed previous estimates by a significant amount, we may experience negative overall revenue.

When an event is cancelled, ticket buyers may receive either a cash refund or credit for future purchases in our marketplace.

Credits issued to buyers for cancellations are recorded as accrued customer compensation within Accrued expenses and other current liabilities on our Consolidated Balance Sheets.

Credits issued to buyers for cancellations are recorded as accrued customer compensation within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

When a credit is redeemed, revenue is recognized for the newly placed order.

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We estimate breakage based on historical usage trends for credits issued by us and available data on comparable programs.

To the extent that actual usage differs from expected usage, that trends in usage rates differ from those used to establish our breakage estimate, or that the volume of credits subject to escheatment changes, revenue may be materially impacted.

In 2022, we increased our estimated breakage rates based on lower credit usage.

Our recorded breakage estimates exclude credits subject to escheatment and are further constrained by our limited history of customer credits and exposure to events beyond our control.

We also offer our customers the opportunity to participate in our loyalty program, Vivid Seats Rewards, through our Marketplace segment, which allows customers to earn and redeem credits on Owned Properties transactions.

defer revenue associated with these credits, which is recorded as Deferred revenue on our Consolidated Balance Sheets.

The deferred amount is based on expected future usage, including the frequency with which buyers reach the ten stamp threshold for reward credit conversions and the rate of credit redemptions, and is recognized as revenue when the credits are redeemed.

To the extent that actual usage differs from expected usage, or that recent trends require a change in the estimated usage rate of unexpired credits, our revenue will be impacted by the change.

To the extent that actual usage differs materially from expected usage, that trends in usage rates differ materially from those used to establish our breakage estimate, or that the volume of credits subject to escheatment changes, revenue may be materially impacted.

In 2022 and 2023, we increased our estimated breakage rates based on lower credit usage.

Our recorded breakage estimates exclude credits subject to escheatment and are further constrained by our limited history of customer credits and exposure to events outside of our control.

We also offer our customers the opportunity to participate in our Vivid Seats Rewards loyalty program, through our Marketplace segment, which allows enrolled buyers to earn and redeem credits on Vivid Seats transactions.

We defer revenue associated with these credits, which is recorded as Deferred revenue on the Consolidated Balance Sheets.

The deferred amount is based on expected future usage, including the frequency with which buyers reach the threshold for reward credit conversions and the rate of credit redemptions, and is recognized as revenue when the credits are redeemed.

To the extent that actual usage differs materially from expected usage, or that recent trends require a change in the estimated usage rate of unexpired credits, revenue will be materially impacted by the change.

Revenue from our Resale business primarily consists of sales of tickets to customers through online secondary ticket marketplaces.

We recognize Resale revenue on a gross basis because we act as a principal in these transactions.

We recognize Resale revenue when an order is confirmed.

We recognize Resale revenue on a gross basis because we act as a principal in these transactions.

Equity-Based Compensation

We account for Restricted Stock Units ("RSUs"), stock options, and profits interest at fair value as of the grant date.

We award RSUs to our employees, directors and consultants.

We also award stock options to certain employees.

The awards are subject to the recipient’s continued service through the applicable vesting date.

The grant-date fair value of stock options is estimated using an option pricing model.

The model requires us to make assumptions and judgments about the variables used in the calculation, the volatility of our common stock, risk-free interest rate, and expected dividends.

We estimate the fair value of profits interest using the Black-Scholes option pricing model, which includes assumptions related to volatility, expected term, dividend yield and risk-free interest rate.

We account for restricted stock units ("RSUs"), stock options and profits interest at their grant date fair value.

We award RSUs to our employees, directors and certain consultants.

We also award stock options to certain employees and consultants.

The awards are subject to the recipient’s continued service through the applicable vesting date.

The grant date fair value of stock options is estimated using an option pricing model, which requires us to make assumptions and judgments about the variables used in the calculation related to the volatility of our common stock, risk-free interest rate and expected dividends.

We estimate the fair value of profits interest using the Black-Scholes model, which includes assumptions related to volatility, expected term, dividend yield and risk-free interest rate.

We account for forfeitures of outstanding, but unvested grants, in the period they occur.

Expense related to grants of equity-based awards is recognized as equity-based compensation in the Consolidated Statements of Operations.

The estimated fair value of warrant liabilities is determined by using the Black-Scholes model.

The model requires us to make assumptions and judgments about the variables used in the calculation related to volatility, expected term, dividend yield and risk-free interest rate.

The estimated fair value of warrant liabilities is determined using the Black-Scholes model, which requires us to make assumptions and judgments about the variables used in the calculation related to volatility, expected term, dividend yield and risk-free interest rate.

The warrant liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Consolidated Statements of Operations.

Impairment of Goodwill, Indefinite-Lived Intangible Assets, Definite-Lived Intangible Assets, and Other Long-Lived Assets

We assess goodwill and our indefinite-lived intangible asset (our trademark) for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired.

We assess definite-lived intangible assets and other long-lived assets (collectively, “long-lived assets”) for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

Goodwill and Indefinite-lived Intangible Asset (Trademark)

Recoverability of Goodwill, Indefinite-Lived Intangible Assets, Definite-Lived Intangible Assets, and Other Long-Lived Assets

Goodwill and Indefinite-Lived Intangible Assets (Trademarks)

We account for acquired businesses using the acquisition method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values.

Our goodwill and our indefinite-lived trademark are held by our Marketplace segment, which contains one reporting unit.

Goodwill is not subject to amortization and is reviewed for impairment annually, or earlier whenever events or changes in business circumstances indicate an impairment may have occurred.

Our goodwill and indefinite-lived trademarks are held in our Marketplace segment, which contains two reporting units.

Goodwill is not subject to amortization and is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate an impairment may have occurred.

We assess goodwill for impairment at the reporting unit level.

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If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then perform a quantitative assessment.

Depending upon the results of that assessment, the recorded goodwill may be written down, and impairment expense is recorded in the consolidated statements of operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit.

For the year ended December 31, 2022, as part of our annual assessment, a qualitative goodwill assessment was performed and we determined it was not more likely than not that the fair value of our reporting unit was less than its carrying value.

Similar to goodwill, our indefinite-lived trademark is not amortized, but reviewed for impairment annually, or earlier whenever events or changes in business circumstances indicate that the carrying value may not be recoverable.

For the year ended December 31, 2022, as part of our annual assessment, a qualitative assessment was performed resulting in no impairment.

The qualitative assessment included the history and longevity of our brand, our reputation, market share, and importance of our brand in buying decisions.

Each reporting period, we perform an evaluation of the remaining useful life of our indefinite-lived trademark to determine whether events and circumstances continue to support an indefinite life.

We consider the life of our indefinite-lived trademark to be appropriate for the years ended December 31, 2022.

Depending upon the results of that assessment, the recorded goodwill may be written down, and impairment expense is recorded in the Consolidated Statements of Operations when the carrying value of the reporting unit exceeds its fair value.

For the year ended December 31, 2023, as part of our annual assessment, a quantitative goodwill assessment was performed, and we determined that the fair value of our reporting units was greater than or equal to their respective carrying values.

Similar to goodwill, our indefinite-lived trademarks are not subject to amortization and are reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.

For the year ended December 31, 2023, as part of our annual assessment, a quantitative and qualitative assessment was performed resulting in no impairment.

The qualitative assessment included the history and longevity of our brands, our reputation, our market share and the importance of our brands in buying decisions.

Each reporting period, we perform an evaluation of the remaining useful life of our indefinite-lived trademarks to determine whether events and circumstances continue to support an indefinite life.

We consider the life of our indefinite-lived trademarks to be appropriate for the year ended December 31, 2023.

Long-Lived Assets

We also periodically review the carrying amount of our long-lived assets to determine whether current events or business circumstances indicate that the carrying amounts of an asset or asset group may not be recoverable.

We assess our indefinite-lived intangible asset (our trademarks) and other long-lived assets (collectively, our “long-lived assets”) for impairment periodically to determine whether events or business changes in circumstances indicate that the carrying amounts of an asset or asset group may not be recoverable.

We classify our long-lived assets as a single asset group, which consists primarily of definite-lived intangible assets, property and equipment, right-of-use assets and personal seat licenses.

Our definite-lived intangible assets consist of developed technology, customer and supplier relationships, and non-compete agreements.

Our definite-lived intangible assets consist of customer and supplier relationships, acquired developed technology and capitalized development costs.

For the year ended December 31, 2023, management did not identify any events or changes in circumstances which would indicate the carrying amount of an asset or asset group may not be recoverable.

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We recognize deferred tax assets for the expected future benefit from certain net operating losses, tax credits, basis differences from investments in operating partnerships and other similar items.

To the extent we believe these assets, or a portion of these assets, are not more likely than not to be realized, we record a valuation allowance against the deferred tax asset’s value.

To the extent we believe all or a portion of these assets are not more likely than not to be realized, we record a valuation allowance against the deferred tax asset’s value.

In determining the realizability of our deferred tax assets, we consider all available positive and negative evidence, including historical taxable income or loss amounts, projected future taxable income, anticipated reversals of temporary book/tax differences, tax planning strategies and recent results of operations.

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To the extent actual results of operations, or actual taxable income or loss, differs materially from our assumptions, we would need to modify the valuation allowance with a corresponding adjustment to net income or net loss.

Hoya Intermediate is a limited liability company taxed as a partnership and, accordingly, any taxable income generated by Hoya Intermediate is included in the taxable income of its members, including VSI.

As a result of the current tax structure, we have a significant deferred tax asset resulting from an outside basis difference in the investment in Hoya Intermediate.

The realizability of this deferred tax asset is dependent upon whether the tax basis is expected to be recovered through ordinary business operations and would therefore not result in a capital loss.

In general, the realizability of our deferred tax assets depends on the existence of sufficient taxable income of the appropriate character prior to expiration.

We make judgements and rely on future projections of income, which are inherently uncertain, in determining the realizability of the deferred tax assets.

Recent Accounting Pronouncements

See Note 2 to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a description of recently adopted accounting pronouncements and issued accounting pronouncements not yet adopted.

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Report for a description of recently adopted accounting pronouncements and issued accounting pronouncements not yet adopted.

JOBS Act Accounting Election

Section 107 of the JOBS Act allows emerging growth companies to take advantage of the extended transition period for complying with new or revised accounting standards.

Under Section 107, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

Under Section 107 of the JOBS Act, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

Any decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We have elected to use the extended transition period under the JOBS Act.

We have elected to use the extended transition period under Section 107 of the JOBS Act.

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What changed 10-K

Item 7. Management’s Discussion and Analysis