What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-08 compared with 2023-03-07 · 879 added, 723 removed, 617 unchanged (72% of the section changed)

12 unchanged sentences

We have audited the accompanying consolidated balance sheets of Vivid Seats Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), deficit, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

26 unchanged sentences

Restricted cash

Accounts receivable –

Inventory –

Accounts receivable – net

Inventory – net

Prepaid expenses and other current assets

Total current assets

Property and equipment –

Right-of-use assets –

Intangible assets –

Property and equipment – net

Right-of-use assets – net

Intangible assets – net

Deferred tax assets

Other non-current assets

6 unchanged sentences

Total current liabilities

Long-term debt –

Long-term debt – net

Long-term lease liabilities

TRA liability

Other liabilities

2 unchanged sentences

Redeemable noncontrolling interests

Shareholders' deficit

Shareholders' equity (deficit)

Class A common stock, $ 0.0001 par value;

500,000,000 shares authorized, 82,410,774 issued and outstanding at December 31, 2022;

79,091,871 shares issued and outstanding at December 31, 2021

500,000,000 shares authorized, 141,167,311 and 82,410,774 shares issued and outstanding at December 31, 2023 and 2022, respectively

Class B common stock, $ 0.0001 par value;

250,000,000 shares authorized, 118,200,000 issued and outstanding at December 31, 2022 and December 31, 2021

250,000,000 shares authorized, 76,225,000 and 118,200,000 shares issued and outstanding at December 31, 2023 and 2022, respectively

Additional paid-in capital

Treasury stock, at cost, 4,342,477 shares at December 31, 2022;

no shares at December 31, 2021

Treasury stock, at cost, 7,291,497 and 4,342,477 shares at December 31, 2023 and 2022, respectively

Accumulated deficit

Total Shareholders' deficit

Total liabilities, Redeemable noncontrolling interests, and Shareholders' deficit

Accumulated other comprehensive income

Total Shareholders' equity (deficit)

Total liabilities, Redeemable noncontrolling interests, and Shareholders' equity (deficit)

The accompanying notes are an integral part of these financial statements.

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Depreciation and amortization

Impairment charges

Change in fair value of contingent consideration

Income (loss) from operations

Income from operations

Other (income) expense:

Interest expense –

Interest expense – net

Loss on extinguishment of debt

9 unchanged sentences

(1) There were no shares of Class A Common Stock outstanding prior to October 18, 2021.

Therefore, no income (loss) per share information has been presented for any period prior to that date.

Therefore, income (loss) per share information has been presented for the period from October 18, 2021 to December 31, 2021.

The accompanying notes are an integral part of these financial statements.

4 unchanged sentences

Net income (loss)

Other comprehensive income (loss):

Unrealized gain on derivative instruments

Comprehensive income (loss), net of taxes

Other comprehensive income:

Foreign currency translation adjustment

Unrealized gain on investments

Comprehensive income (loss)

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

Comprehensive income (loss) attributable to redeemable noncontrolling interests

Net income (loss) attributable to redeemable noncontrolling interests

Foreign currency translation adjustment attributable to redeemable noncontrolling interests

Unrealized gain on investments attributable to redeemable noncontrolling interests

Comprehensive income (loss) attributable to Class A Common Stockholders

3 unchanged sentences

(in thousands, except share/unit data)

Redeemable senior preferred units

Redeemable preferred units

Redeemable senior

preferred units

noncontrolling

Class A Common Shares

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Treasury Stock

Redeemable noncontrolling interests

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive (income) loss

Total shareholders' equity (deficit)

comprehensive

shareholders'

income (loss)

equity (deficit)

Balances at January 1, 2021

Unrealized gain on derivative instruments

Loss reclassified from accumulated other comprehensive loss to earnings

Deemed contribution from former parent

Accretion of senior preferred units

Distributions to former parent

Balances at December 31, 2020

Net loss prior to reverse recapitalization

Loss reclassified from accumulated other comprehensive loss to earnings prior to reverse recapitalization

VIVID SEATS INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(in thousands, except share/unit data)

Deemed contribution from former parent prior to reverse recapitalization

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Balances at December 31, 2021

VIVID SEATS INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(in thousands, except share/unit data)

Issuance of shares

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Repurchases of common stock

Distributions to non-controlling interest

Distributions to non-controlling interests

Reclassification of contingent consideration

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Balances at December 31, 2022

Issuance of shares

Deemed contribution from former parent

2023 Secondary Offerings of Class A common stock

Equity-based compensation

Repurchases of common stock

Distributions to non-controlling interests

Other comprehensive income

Establishment of liabilities under TRA, net of tax and other tax impact of 2023 Secondary Offerings (Note 20)

Issuance of shares related to acquisition

Options Contingent Warrants termination

Subsequent remeasurement of Redeemable noncontrolling interests, net of tax impacts

Balances at December 31, 2023

The accompanying notes are an integral part of these financial statements.

5 unchanged sentences

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

Amortization of leases

Amortization of deferred financing costs and interest rate cap

Loss on asset disposals

Equity-based compensation expense

Loss on extinguishment of debt

Interest expense paid-in-kind

Change in fair value of warrants

Impairment charges

Amortization of right-of-use assets

Change in fair value of derivative asset

Change in fair value of contingent consideration

Changes in operating assets and liabilities:

Loss on extinguishment of debt

Loss on asset disposals

Deferred taxes

Non-cash interest income

Interest expense paid-in-kind

Foreign currency revaluation gain

TRA liability adjustment

Change in assets and liabilities:

Accounts receivable

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Deferred revenue

Other assets and liabilities

Net cash provided by (used in) operating activities

Other non-current assets and liabilities

Net cash provided by operating activities

Cash flows from investing activities

Cash acquired (paid) in acquisition

Acquisition of business, net of cash acquired

Investments in convertible promissory note and warrant

Purchases of property and equipment

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Payments of February 2022 First Lien Loan

Payments of Shoko Chukin Bank Loan

Distributions to non-controlling interests

Repurchase of Common Stock as Treasury Stock

Repurchases of common stock

Cash paid for milestone payments

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Dividends paid to Class A Common Stock Shareholders

Proceeds from May 2020 First Lien Loan

Proceeds from Revolving Facility

Payments of Revolving Facility

VIVID SEATS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Payments of deferred financing costs and other debt-related costs

Distributions

Net cash (used in) provided by financing activities

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

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

Cash, cash equivalents, and restricted cash –

beginning of period

Cash, cash equivalents, and restricted cash –

end of period

Cash, cash equivalents, and restricted cash – beginning of period

Cash, cash equivalents, and restricted cash – end of period

Supplemental disclosure of cash flow information:

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Cash paid for interest

Cash paid for income tax

Cash paid for operating lease liabilities

Equity-based compensation expense related to capitalized development costs

Acquisition non-cash consideration

1 unchanged sentence

Right-of-use assets obtained in exchange for lease obligations

Equity-based compensation expense related to capitalized development costs

Establishment of liabilities under TRA

Establishment of deferred tax assets under the 2023 Secondary Offerings and other equity transactions

The accompanying notes are an integral part of these financial statements.

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Vivid Seats Inc.

("VSI") and its subsidiaries including Hoya Intermediate, LLC ("Hoya Intermediate"), Hoya Midco, LLC ("Hoya Midco"), and Vivid Seats LLC (collectively the “Company,”

“us,”

“we,”

and “our”) provide an online secondary ticket marketplace that enables ticket buyers to discover and easily purchase tickets to concert, sporting and theater events in the United States and Canada.

Through our Marketplace segment, we operate an online platform enabling ticket buyers to purchase tickets to live events, while enabling ticket sellers to seamlessly manage their operations.

("VSI") and its subsidiaries including Hoya Intermediate, LLC ("Hoya Intermediate"), Hoya Midco, LLC, and Vivid Seats LLC (collectively the “Company,” “us,” “we,” and “our”) provide an online ticket marketplace that enables ticket buyers to discover and easily purchase tickets to concert, sporting and theater events in the United States, Canada and Japan.

Through our Marketplace segment, we operate an online platform enabling ticket buyers to purchase tickets to live events, while enabling ticket sellers and partners to seamlessly manage their operations.

In our Resale segment, we acquire tickets to resell on secondary ticket marketplaces, including our own.

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All intercompany transactions and balances have been eliminated in consolidation.

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

VSI was incorporated in Delaware on March 29, 2021 as a wholly owned subsidiary of Hoya Intermediate.

VSI was formed for the purpose of completing the transactions contemplated by the definitive transaction agreement, dated April 21, 2021 (the “Transaction Agreement”), by and among Horizon Acquisition Corporation (“Horizon”), a publicly traded special purpose acquisition company, Hoya Intermediate, Hoya Topco, VSI, and the other parties thereto.

On October 18, 2021, the transactions contemplated by the Transaction Agreement were completed.

The Merger Transaction and PIPE Financing —On October 18, 2021, we consummated a series of transactions (collectively, the "Merger Transaction") between Horizon, VSI, and Hoya Intermediate.

The Merger Transaction was accounted for as a reverse recapitalization, with Hoya Intermediate treated as the accounting acquirer.

Accordingly, our consolidated financial statements represent a continuation of the financial statements of Hoya Intermediate with net assets of Hoya Intermediate stated at historical cost.

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

Certain prior period amounts have been reclassified to conform to current period presentation.

These reclassifications had no effect on previously reported totals for assets, liabilities, shareholders' equity (deficit), cash flows or net income (loss).

VSI was incorporated in Delaware on March 29, 2021 as a wholly owned subsidiary of Hoya Intermediate for the purpose of completing the transactions (collectively, the “Merger Transaction”) contemplated by the transaction agreement, dated April 21, 2021 (the “Transaction Agreement”), among Horizon Acquisition Corporation, a publicly traded special purpose acquisition company (“Horizon”), Hoya Topco, LLC (“Hoya Topco”), Hoya Intermediate, VSI, and the other parties thereto.

The Merger Transaction and PIPE Financing

The Merger Transaction, which was consummated on October 18, 2021, was accounted for as a reverse recapitalization, with Hoya Intermediate treated as the accounting acquirer.

Accordingly, our consolidated financial statements represent a continuation of Hoya Intermediate's financial statements with the net assets of Hoya Intermediate stated at historical cost.

In connection with the Merger Transaction, VSI:

• Issued 29,431,260 shares of Class A common stock to former shareholders of Horizon, whereby $ 293.2 million in cash and cash equivalents (after the payment of $ 18.7 million in transaction costs incurred by Horizon) of Horizon became avail able to VSI.

We subsequently paid an additional $ 15.5 million in transaction costs incurred by Horizon using the cash and cash equivalents that became available to VSI;

Issued 118,200,000 shares of Class B common stock and 6,000,000 warrants at an exercise price of $ 0.001 per share to purchase Class B common stock ("Class B Warrants"), which are only exercisable upon the exercise of a corresponding Hoya Intermediate Warrant (defined below), to Hoya Topco in exchange for the outstanding shares of Hoya Intermediate;

Received $ 475.2 million in aggregate consideration from certain investors, including Horizon Sponsor in exchange for 47,517,173 shares of Class A common stock, pursuant to a private investment in public equity (“PIPE Financing”).

Used proceeds from Horizon and the PIPE Financing to pay (i) $ 482.4 million towards our outstanding debt, (ii) $ 236.0 million to facilitate the redemption of preferred units held in Hoya Intermediate, and (iii) $ 54.3 million for tr ansaction fees incurred in connection with the Merger Transaction;

Issued to Horizon Sponsor (i) warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share , (ii) warrants to purchase 17,000,000 shares of Class A common stock at an exercise of $ 15.00 per share (collectively, the "Exercise Warrants"), and (iii) 50,000 shares of Class A common stock;

Issued private warrants to purchase 6,519,791 shares of Class A common stock at an exercise price of $ 11.50 per share ("Private Warrants"), and public warrants to purchase 18,132,776 shares of Class A

We subsequently paid an additional $ 15.5 million in transaction costs incurred by Horizon using such cash and cash equivalents;

• Issued 118.2 million shares of Class B common stock and warrants to purchase 6.0 million shares of Class B common stock at an exercise price of $ 0.001 per share, which are only exercisable upon the exercise of a corresponding Hoya Intermediate Warrant (as defined below), to Hoya Topco in exchange for the outstanding units of Hoya Intermediate;

• Issued to certain investors, including Horizon Sponsor, LLC (“Horizon Sponsor”), 47,517,173 shares of Class A common stock in exchange for $ 475.2 million in aggregate consideration, pursuant to a private investment in public equity (the “PIPE Financing”);

• Used the proceeds from the transactions described above to pay (i) $ 482.4 million towards our outstanding debt, (ii) $ 236.0 million to facilitate the redemption of preferred units of Hoya Intermediate and (iii) $ 54.3 million for tr ansaction fees incurred in connection with the Merger Transaction;

• Issued to Horizon Sponsor (i) warrants to purchase 17.0 million shares of Class A common stock at an exercise price of $ 10.00 per share (the “$10 Exercise Warrants”), (ii) warrants to purchase 17.0 million shares of Class A common stock at an exercise of $ 15.00 per share (the “$15 Exercise Warrants” and, together with the $10 Exercise Warrants, the "Exercise Warrants"), (iii) warrants to purchase

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

common stock at an exercise price of $ 11.50 per share ("Public Warrants"), to former holders of Horizon warrants.

In connection with the Merger Transaction, Hoya Intermediate issued to Hoya Topco (i) warrants to purchase 3,000,000 shares of common units of Hoya Intermediate (“Intermediate Units”) at an exercise price of $ 10.00 per share, and (ii) warrants to purchase 3,000,000 shares of Intermediate Units at an exercise of $ 15.00 per share (collectively, the "Hoya Intermediate Warrants").

A portion of the Hoya Intermediate Warrants consisting of warrants to purchase 1,000,000 Intermediate Units at exercise prices of $ 10.00 and $ 15.00 per unit (“Option Contingent Warrants”), respectively, were issued in tandem with stock options issued by VSI to members of our management team (“Management Options”).

The Option Contingent Warrants only become available to exercise by Hoya Topco in the event that a Management Option is forfeited or goes unexercised.

For additional details regarding the issuance of warrants in connection with the Merger Transaction refer to Note 14, Financial Instruments .

Following the Merger Transaction, the legacy unit holders of Hoya Intermediate own a controlling interest in VSI through their ownership of Class B common stock in VSI.

Immaterial Correction of an Error in Prior Period —We identified an immaterial error related to the classification of the payment of previously deferred interest in our Consolidated Statement of Cash Flows for the year ended December 31, 2021.

The payment of $ 44.1 million of deferred interest was previously classified as a financing cash outflow included within the Payments of May 2020 First Lien Loan in the Consolidated Statement of Cash flows.

We subsequently determined that the $44.1 million should have been classified as an operating cash outflow in the Consolidated Statement of Cash Flows.

We therefore conducted an evaluation of the quantitative and qualitative factors outlined in Staff Accounting Bulletin No.

99 and concluded that the impact of the cash flow classification error was not material to the previously issued financial statements.

We corrected 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.

The effect of the error did not impact the Consolidated Statement of Operations, the Consolidated Statement of Comprehensive Income (Loss), or the Consolidated Statement of Equity (Deficit) for the year ended December 31, 2021.

The effect of the error did not impact the Consolidated Balance Sheet as of December 31, 2021.

The impact of this correction in the Consolidated Statement of Cash Flows for the year ended December 31, 2021 is as follows:

Cash flows from operating activities

Deferred paid-in-kind interest paid on May 2020 Loan

Net cash provided by operating activities

Cash flows from financing activities

Payments of May 2020 First Lien Loan

Net cash (used in) provided by financing activities

Supplemental disclosure of cash flow information:

Cash paid for interest

COVID-19 Update —Beginning in the second quarter of 2021, and continuing throughout 2022, we have seen a recovery in ticket orders as mitigation measures ease.

While we have experienced recovery from the COVID-19 pandemic, uncertainty remains around the potential for new variants to emerge or case counts to rise.

We expect some of our key accounting estimates to continue to evolve depending on the degree of future impacts associated with the COVID-19 pandemic.

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

6,519,791 shares of Class A common stock at an exercise price of $ 11.50 per share (the “Private Warrants”) and (iv) 50,000 shares of Class A common stock;

• Issued to former warrant holders of Horizon (including Horizon Sponsor) warrants to purchase 18,132,776 shares of Class A common stock at an exercise price of $ 11.50 per share (the “Public Warrants”).

In connection with the Merger Transaction, Hoya Intermediate issued to Hoya Topco warrants to purchase 3.0 million common units of Hoya Intermediate (“Intermediate Units”) at an exercise price of $ 10.00 per unit and warrants to purchase 3.0 million Intermediate Units at an exercise of $ 15.00 per unit (collectively, the “Hoya Intermediate Warrants”).

A portion of the Hoya Intermediate Warrants, consisting of warrants to purchase 1,000,000 Intermediate Units at exercise prices of $ 10.00 and $ 15.00 per unit, respectively (the “Option Contingent Warrants”), were issued in tandem with stock options issued by VSI to members of our management team (the “Management Options”).

The Option Contingent Warrants only become exercisable by Hoya Topco if a Management Option is forfeited or expires unexercised.

Immediately following the Merger Transaction, the legacy unitholders of Hoya Intermediate owned a controlling interest in VSI through their ownership of Class B common stock.

The numbers of outstanding warrants, units and shares have changed subsequent to the transactions described above.

For additional details regarding the issuance of warrants in connection with the Merger Transaction, as well as amounts outstanding on December 31, 2023, see Note 15, Financial Instruments .

Summary of Significant Accounting Policies

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Use of Estimates —We use estimates and assumptions in the preparation of our consolidated financial statements in accordance with GAAP.

Our estimates and assumptions affect the reported amounts of assets and liabilities at the date of the ﬁnancial statements, and the reported amounts of revenues and expenses during the reporting period.

Our actual financial results could differ significantly from these estimates.

The significant estimates underlying our consolidated financial statements include the accrual for future customer compensation and the related recovery of future customer compensation asset;

Use of Estimates

We use estimates and assumptions in the preparation of our consolidated financial statements in accordance with GAAP.

These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual financial results could differ significantly from these estimates.

The significant estimates underlying our consolidated financial statements include:

the accrual for future customer compensation and the related recovery of our future customer compensation asset;

breakage rates related to customer credits;

usage assumptions for our loyalty program;

usage assumptions for our Vivid Seats Rewards loyalty program;

inventory valuation;

valuation of equity-based compensation;

valuation of warrants;

valuation of acquired intangible assets and goodwill and valuation of earnouts issued in connection with our acquisition of Betcha Sports, Inc.

(“Betcha”, as renamed "Vivid Picks");

valuation of certain financial instruments;

valuation of acquired intangible assets and goodwill;

valuation of earnouts issued in connection with our acquisitions of Betcha Sports, Inc.

(“Betcha”, which we rebranded as “Vivid Picks”);

useful life of definite-lived intangible assets and other long-lived assets;

impairments of goodwill, indefinite-lived intangible assets, definite-lived intangible assets and long-lived assets, and valuation allowances.

C ash and Cash Equivalents —Cash and cash equivalents include all cash balances and highly liquid investments purchased with original maturities of three months or less.

Our cash and cash equivalents consist primarily of domestic bank accounts, interest-bearing deposit accounts, and money market accounts managed by third-party financial institutions.

recoverability of goodwill, indefinite-lived intangible assets, definite-lived intangible assets and long-lived assets;

income taxes and valuation allowances.

C ash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments purchased with original maturities of three months or less.

Our cash and cash equivalents consist primarily of domestic and foreign bank accounts, interest-bearing deposit accounts and money market accounts managed by third-party financial institutions.

Cash and cash equivalents are valued by us based on quoted prices in an active market, which represent a Level 1 measurement within the fair value hierarchy.

Cash and cash equivalents held in interest-bearing accounts may exceed the Federal Deposit Insurance Corporation insurance limits.

Cash and cash equivalents held in bank accounts may exceed the Federal Deposit Insurance Corporation insurance limits.

To reduce credit risk, we monitor the credit standing of the financial institutions that hold our cash and cash equivalents.

However, balances could be impacted in the future if underlying financial institutions fail.

As of December 31, 2022 and 2021, we have not experienced any loss or lack of access to its cash and cash equivalents.

Restricted Cash —Restricted cash consists of funds reserved for Vivid Picks account balances, which are required to remain separate from our operational funds and are reserved for users.

Accounts Receivable and Credit Policies —

$ 18.9 million and $ 9.5 million of the Accounts receivable balance at December 31, 2022 and 2021, respectively, consisted of uncollateralized payment processor obligations due under normal trade terms typically requiring payment within three business days.

Credit risk with respect to accounts receivable from payment processing entities is limited due to the consolidation of those receivables with large financial institutions and the frequency with which the receivables turn over.

$ 1.0 million and $ 7.2 million of the Accounts receivable balance at December 31, 2022 and 2021, respectively, consisted of amounts due from marketplace ticket sellers for cancelled event tickets.

We recorded an allowance for doubtful accounts of $ 0.1 million and $ 1.4 million at December 31, 2022 and 2021, respectively, to reflect potential challenges in collecting funds from marketplace ticket sellers.

The allowance for doubtful accounts decreased during 2022 as ticket sellers on the marketplace platform repaid their outstanding balances or uncollectable amounts were written off.

Accounts receivable balances are stated net of allowance for doubtful accounts and bad debt expense is presented as a reduction of Revenues in the Consolidated Statements of Operations.

$ 11.7 million and $ 14.5 million of the Accounts receivable balance at December 31, 2022 and 2021, respectively, consisted of amounts due from distribution partners for cancellation charges, primarily related to cancelled events.

We recorded an allowance for doubtful accounts of $ 3.6 million and $ 1.6 million at December 31, 2022 and 2021, respectively, to reflect potential challenges in collecting funds from distribution partners, particularly for amounts due upon usage of store credit previously issued to buyers.

Accounts receivable balances are stated net of allowance for doubtful accounts and bad debt expense is presented as a reduction of Revenues in the Consolidated Statements of Operations.

Write-offs were $ 4.9 million , $ 1.0 million , and less than $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

However, balances could be impacted in the future if the underlying financial institutions fail.

As of December 31, 2023 and 2022, we have not experienced any loss or lack of access to our cash and cash equivalents.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Inventory —Inventory consists of tickets to live events purchased by our Resale segment.

Restricted Cash

Restricted cash includes cash and cash equivalents that are restricted through legal contracts or regulations, including funds reserved for Vivid Picks users, and letters of credit required by certain vendors .

Foreign Currency Translation

Our reporting currency is the U.S.

Assets and liabilities of foreign operations denominated in local currencies are translated at the spot rate in effect at the applicable reporting date.

Revenues and expenses of foreign operations are translated at the weighted average rate of exchange during the applicable period.

The resulting unrealized cumulative translation adjustment is recorded as a component of Accumulated other comprehensive income (loss) in Shareholders’ equity (deficit).

Realized and unrealized transaction gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in Other (income) expense in the period in which they occur .

Business Combinations

We account for business combinations using the acquisition method.

Under this method, the purchase price of an acquisition is allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the acquisition.

This allocation involves a number of assumptions, estimates, and judgments that could materially affect the timing or amounts recognized in our consolidated financial statements.

As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill.

Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from customer and buyer relationships, trade names, acquired developed technology and discount rates.

Acquisition-related costs, including advisory, legal, accounting, valuation, and other similar costs, are expensed in the periods in which they are incurred.

The results of operations of acquired businesses are included in our consolidated financial statements from the acquisition date.

Accounts Receivable and Credit Policies

Accounts receivable consist primarily of uncollateralized payment processor obligations due under normal trade terms typically requiring payment within three business days, amounts due from marketplace sellers and distribution partners for canceled events and commissions due from insurance purchased by ticket buyers.

Accounts receivable balances are stated net of allowance for credit losses and bad debt expense is presented as a reduction of Revenues in the Consolidated Statements of Operations.

Inventory consists primarily of tickets to live events purchased by our Resale segment.

All inventory is valued at the lower of cost or net realizable value, determined by the specific identification method.

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During the years ended December 31, 2023, 2022 and 2021, we incurred inventory write-downs of $ 4.7 million , $ 5.0 million , and $ 2.1 million , respectively, which are presented in Cost of revenues in the Consolidated Statements of Operations.

Property and Equipment—

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Property and Equipment

Property and equipment are stated at cost, net of depreciation.

Depreciation is computed using the straight-line method over the following estimated useful lives:

Estimated Useful Life

Computer Equipment

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Furniture and Fixtures

Leasehold improvements are amortized over the shorter of the term of the lease or the improvements’

estimated useful lives.

Long-Lived Assets Impairment Assessments —We review our long-lived assets (property and equipment –

net and personal seat licenses –

net) for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

The fair value of our long-lived assets is determined using both the market approach and income approach, utilizing Level 3 inputs.

Leasehold improvements are amortized over the shorter of the term of the lease or the improvements’ estimated useful lives.

We determine if an arrangement is or contains a lease at inception and classify each lease as operating or financing.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit interest rate, we use the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets and rent expense for these short-term leases is recognized in General and administrative expenses in the Consolidated Statements of Operations on a straight-line basis over the lease term.

We have applied the practical expedient which allows us to not separate lease and non-lease components for all leases.

Recoverability of Long-Lived Assets

We review our long-lived assets (property and equipment – net and personal seat licenses – net) for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

The fair value of our long-lived assets is determined using both the market and income approaches, utilizing Level 3 inputs.

If circumstances require a long-lived asset or asset group to be held and used be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that long-lived asset or asset group to its carrying amount.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent the carrying amount exceeds its fair value.

During the second quarter of 2020, we determined a triggering event occurred that required us to evaluate our long-lived assets for impairment.

We recorded an impairment charge as a result of those assessments.

Refer to Note 6, Impairments , for additional information.

Goodwill and Intangible Assets —Goodwill represents the excess purchase price over the fair value of the net assets acquired.

Intangible assets other than goodwill primarily consists of customer and supplier relationships, developed technology, non-compete agreements, and trademarks.

We evaluate goodwill and our indefinite-lived intangible asset for impairment annually on October 31 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable.

We have the option to assess goodwill and our indefinite-lived intangible asset for impairment by first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit or the indefinite-lived intangible asset is less than its carrying value.

If it is determined that the reporting unit’s or the indefinite-lived intangible asset’s fair value is more-likely-than-not less than its carrying value, or if we do not elect the option to perform an initial qualitative assessment, we perform a quantitative assessment of the reporting unit’s or the indefinite-lived intangible asset’s fair value.

If the fair value of the reporting unit or the indefinite-lived intangible asset is in excess of its carrying value, the related goodwill or the indefinite-lived intangible asset is not impaired.

If the fair value of the reporting unit is less than the carrying value, we recognize an impairment equal to the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying value of goodwill.

If the fair value of the indefinite-lived intangible asset is less than the carrying value, we recognize an impairment equal to the difference.

We review our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

If circumstances require a definite-lived intangible asset or its asset group to be held and used be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that definite-lived intangible asset or asset group to its carrying amount.

If the carrying amount of the definite-lived intangible asset or asset group is not recoverable on an

No impairment triggering events to our long-lived assets were identified during the years ended December 31, 2023, 2022 and 2021 .

Goodwill and Intangible Assets

Goodwill represents the excess purchase price over the fair value of the net assets acquired.

Intangible assets other than goodwill primarily consists of customer and supplier relationships, acquired developed technology, capitalized development costs, and trademarks.

We evaluate goodwill and our indefinite-lived intangible assets for impairment annually on October 31 or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable.

We have the option to assess goodwill and our indefinite-lived intangible assets for impairment by first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit or the indefinite-lived intangible assets is less than its carrying value.

If it is determined that the reporting unit’s or the indefinite-lived intangible assets' fair value is more-likely-than-not less than its carrying value, or if we do not elect the option to perform an initial qualitative assessment, we perform a quantitative assessment of the reporting unit’s or the indefinite-lived intangible assets' fair value.

If the fair value of the reporting unit or the indefinite-lived intangible assets is in excess of its carrying value, the related goodwill or the indefinite-lived intangible assets are not impaired.

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NOTES to the Consolidated Financial Statements

undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value.

The fair value of our definite-lived intangible assets or asset group is determined using both the market approach and income approach, utilizing Level 3 inputs.

If the fair value of the indefinite-lived intangible assets is less than the carrying value, we recognize an impairment equal to the difference.

No impairment triggering events to our goodwill and indefinite-lived intangible assets were identified during the years ended December 31, 2023, 2022 and 2021.

We review our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

If the carrying amount of the definite-lived intangible asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value.

The fair value of our definite-lived intangible assets or asset group is determined using both the market and income approaches, utilizing Level 3 inputs.

No impairment triggering events to our definite-lived intangible assets were identified during the years ended December 31, 2023, 2022 and 2021.

Definite-lived intangible assets are amortized on a straight-line basis over their estimated period of benefit, over the following estimated useful lives:

Non-competition agreements

Estimated Useful Life

Supplier relationships

Developed technology

Customer relationships

During the second quarter of 2020, we determined a triggering event occurred that required us to evaluate our long-lived assets for impairment.

We recorded an impairment charge as a result of those assessments.

Refer to Note 6, Impairments , for additional information.

Capitalized Development Costs —We incur costs related to internal-use software and website development.

Costs incurred in both the preliminary project stage and post-implementation stage of development are expensed as incurred.

Acquired developed technology

Capitalized development costs

Capitalized Development Cost s and Cloud Computing Arrangements Implementation Costs

We incur costs related to internal-use software and website development.

Costs incurred in both the preliminary project and post-implementation stages of development are expensed as incurred.

Qualifying development costs, including those incurred for upgrades and enhancements that result in additional functionality to existing software, are capitalized.

Capitalized development costs are classified as Intangible assets –

net on the Consolidated Balance Sheets and amortized using the straight-line method over the 3 year useful life of the applicable software.

Capitalized development costs are classified as Intangible assets – net on the Consolidated Balance Sheets and amortized using the straight-line method over the three-year useful life of the applicable software.

The amortization is presented in Depreciation and amortization expense in the Consolidated Statements of Operations.

Accrued Customer Credits —We may issue credits to customers for cancelled events that can be applied to future purchases on our marketplace.

We capitalize qualifying implementation costs incurred under cloud computing arrangements (“CCAs”).

Costs incurred during the application development stage related to the implementation of CCAs are capitalized and included in Prepaid expenses and other current assets or Other non-current assets in the Consolidated Balance Sheets based on the terms of the associated CCA.

Amortization of capitalized implementation costs is recognized on a straight-line basis over the terms of the associated CCA when it is ready for its intended use and is included in General and administrative expense in the Consolidated Statements of Operations.

Costs related to preliminary project activities and post-implementation activities are expensed as incurred.

During the years ended December 31, 2023, 2022 and 2021, capitalized implementation costs were less than $ 0.1 million.

Accrued Customer Credits

We may issue credits to customers for cancelled events or travel services that can be applied to future purchases on our marketplace.

The amount recognized in Accrued expenses and other current liabilities in the Consolidated Balance Sheets represents the balance of credits issued to these customers.

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

This estimate could be impacted by changes in credit usage rates, or in the determination of which credits are subject to escheatment, the effects of which could be material to the consolidated financial statements.

These estimates could be impacted by changes in credit usage rates, or in the determination of which credits are subject to escheatment, the effects of which could be material to our consolidated financial statements.

When customer credits are used to make a purchase, revenue is recognized for the new transaction.

Accrued Future Customer Compensation —Provisions for accrued future customer compensation are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets and represent compensation to be paid to customers for event cancellations or other service issues related to previously recorded sales transactions.

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NOTES to the Consolidated Financial Statements

Accrued Future Customer Compensation

Provisions for accrued future customer compensation are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets and represent compensation to be paid to customers for event cancellations or other service issues related to previously recorded sales transactions.

The expected recoveries of these obligations are included in Prepaid expenses and other current assets.

These provisions are based on historic experience, revenue volumes for future events, and management's estimate of the likelihood of future event cancellations and are recognized as a component of Revenue.

This estimated accrual could be impacted by future activity differing from our estimates, the effects of which could be material to the consolidated financial statements.

Income Taxes —Hoya Intermediate is treated as a partnership for U.S.

These provisions, which are based on historic experience, revenue volumes for future events, and management's estimate of the likelihood of future event cancellations, are recognized as a component of Revenue.

This estimated accrual could be impacted by future activity differing from our estimates, the effects of which could be material to our consolidated financial statements.

Hoya Intermediate is treated as a partnership for U.S.

federal and most applicable state and local income tax purposes.

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Accordingly, amounts related to income taxes were zero for us prior to the Merger Transaction, and therefore, are not representative of future amounts expected to be incurred by us.

Following the Merger Transaction, our parent legal entity is VSI.

Following the Merger Transaction, our legal parent entity is VSI.

We are subject to income taxes at the U.S.

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Income taxes are accounted for using the asset and liability method of accounting.

Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences on differences

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NOTES to the Consolidated Financial Statements

between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse.

Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences on differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse.

The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted.

Deferred tax assets are reduced by a valuation allowance when it is “more-likely-than not”

that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets are reduced by a valuation allowance when it is “more-likely-than not” that some portion or all of the deferred tax assets will not be realized.

The realization of the deferred tax assets is dependent on the amount of our future taxable income.

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To date, the interest or penalties incurred related to income taxes have not been material.

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.

Debt —Term debt is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

Tax Receivable Agreement

In connection with the Merger Transaction, we entered into a Tax Receivable Agreement (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.

Term debt is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

Deferred borrowing costs and discounts are amortized to interest expense over the terms of the respective borrowings using the effective interest method.

Upon the repayment of our term debt, we reflected prepayment penalties and the write-off of any unamortized borrowing costs and discounts as loss on extinguishment of debt on the Consolidated Statements of Operations.

Fair Value of Financial Instruments —Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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NOTES to the Consolidated Financial Statements

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value of our financial instruments is disclosed based on the fair value hierarchy using the following three categories:

Level 1 —Measurements that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 —Measurements that include other inputs that are directly or indirectly observable in the marketplace.

Level 3 —Measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Level 1 —Measurements that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 —Measurements that include other inputs that are directly or indirectly observable in the marketplace.

Level 3 —Measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

These fair value measurements require significant judgment.

Our assets and liabilities measured at fair value on a recurring basis are presented in Note 12, Debt, and Note 14, Financial Instruments .

Our non-financial assets, such as goodwill, intangible assets, and long-lived assets are measured at fair value on a nonrecurring basis, utilizing Level 3 inputs, are presented in Note 9, Goodwill and Intangible Assets .

Our assets and liabilities measured at fair value on a recurring basis are presented in Note 11, Investments , Note 13, Debt, and Note 15, Financial Instruments .

Our non-financial assets, such as goodwill, intangible assets and long-lived assets, which are measured at fair value on a nonrecurring basis, utilizing Level 3 inputs, are presented in Note 9, Goodwill and Intangible Assets .

Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.

We did not have any transfers of financial instruments between valuation levels during the years ended December 31, 2023 and 2022.

Warrants —In connection with the Merger Transaction, we issued several types of warrants.

We separately evaluate the terms for each of these outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging:

Contracts in an Entity’s Own Equity to determine the appropriate classification and accounting treatment.

Our Public Warrants, Private Warrants, and Exercise Warrants meet the criteria to be classified as equity instruments.

Hoya Intermediate Warrants are exercisable for Intermediate Units, which allow for a potential cash redemption at the discretion of the unit holder, and hence, these warrants are classified as a liability in Other liabilities on our Consolidated Balance Sheets.

The warrant liability is subject to a fair value remeasurement each period with an offsetting adjustment reflected in Other expenses on our Consolidated Statements of Operations.

In connection with the Merger Transaction, we issued several types of warrants.

We separately evaluate the terms for each of these outstanding warrants in accordance with Accounting Standards Codification ("ASC") 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging:

Contracts in an Entity’s Own Equity, to determine the appropriate classification and accounting treatment.

The Public Warrants, the Private Warrants and the Exercise Warrants meet the criteria to be classified as equity instruments.

Because the Hoya Intermediate Warrants are exercisable for Intermediate Units, which allow for a potential cash redemption at the discretion of the unitholder, they are classified as a liability in Other liabilities on the Consolidated Balance Sheets.

The warrant liability is subject to a fair value remeasurement each period with an offsetting adjustment reflected in Other expenses on the Consolidated Statements of Operations.

Redeemable Noncontrolling Interests

VSI holds a 63.7 % in terest in Hoya Intermediate, with the remainder held by Hoya Topco.

Hoya Topco’s interest in Hoya Intermediate represents a redeemable noncontrolling interest.

At its discretion, Hoya Topco has the right to exchange its Intermediate Units for shares of Class A common stock on a one-to-one basis or for cash proceeds of equal value at the time of redemption.

See Note 16, Redeemable Noncontrolling Interests , for additional detail on Hoya Topco's right to exchange its Intermediate Units.

As the redeemable noncontrolling interests are redeemable upon the occurrence of an event that is not solely within our control, we classify them as temporary equity.

Our redeemable noncontrolling interests were initially measured at Hoya Topco’s share in the net assets of Hoya Intermediate upon consummation of the Merger Transaction.

Subsequent remeasurements of our redeemable noncontrolling interests are recorded as a deemed dividend each reporting period, which reduces retained earnings, if any, or additional paid-in capital on the Consolidated Balance Sheets.

Remeasurements of our redeemable noncontrolling interests are based on the fair value of the Class A common stock.

Offering Costs

We incurred incremental costs associated with the Merger Transaction and the PIPE Financing related for legal, accounting and other third-party fees.

In accordance with Staff Accounting Bulletin (“SAB”) Topic 5.A, Expenses of Offering , we deferred certain incremental costs directly associated with the Merger Transaction and the PIPE Financing.

These deferred costs were capitalized by us and subsequently charged against the gross proceeds of the

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NOTES to the Consolidated Financial Statements

Redeemable Noncontrolling Interests —VSI holds a 40.5 % int erest in Hoya Intermediate, with the remainder held by Hoya Topco.

Hoya Topco’s interest in Hoya Intermediate represents a redeemable noncontrolling interest.

At its discretion, Hoya Topco has the right to exchange its common units in Hoya Intermediate for either shares of Class A common stock of VSI on a one-to-one basis or cash proceeds of equal value at the time of redemption.

Any redemption of Intermediate Units in cash must be funded through a private or public offering of Class A Common Stock and is subject to the approval of the VSI Board of Directors ("Board").

As of December 31, 2022, equity holders of Hoya Topco hold the majority of the voting rights on the Board.

As the redeemable noncontrolling interests are redeemable upon the occurrence of an event that is not solely within our control, we classify our redeemable noncontrolling interests as temporary equity.

The redeemable noncontrolling interests were initially measured at Hoya Topco’s share in the net assets of Hoya Intermediate upon consummation of the Merger Transaction.

Offering costs —We incurred incremental costs associated with the Merger Transaction and PIPE Financing related for legal, accounting, and other third-party fees.

In accordance with Staff Accounting Bulletin (“SAB”) Topic 5.A, Expenses of Offering , we deferred certain incremental costs directly associated with the Merger Transaction and PIPE Financing.

These deferred costs were capitalized by us and subsequently charged against the gross proceeds of the Merger Transaction and PIPE Financing as a reduction to additional paid-in capital on the Consolidated Balance Sheets.

Our tota l transaction costs during the year ended December 31, 2021 were $ 32.7 million, of which $ 20.2 million was charged against the gross proceeds of the Merger Transaction and PIPE Financing.

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 award stock options to certain employees.

Merger Transaction and the PIPE Financing as a reduction to additional paid-in capital on the Consolidated Balance Sheets.

Our total transaction costs during the year ended December 31, 2021 were $ 32.7 million, of which $ 20.2 million was charged against the gross proceeds of the Merger Transaction and the PIPE Financing.

Equity-Based Compensation

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 award stock options to certain of our employees and consultants.

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

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.

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 the common stock, risk-free interest rate, and expected dividends.

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

Prior to the Merger Transaction, certain members of management received profit interests in Hoya Topco and phantom units in a cash bonus pool funded by Hoya Topco.

Under Accounting Standards Codification ("ASC") 718, Compensation–Stock Compensation , and ASC 480, Distinguishing Liabilities from Equity , the grants of profits interest meet the criteria to be recognized as equity-classified awards, whereas the grants of Phantom units meet the criteria to be recognized as liability-classified awards.

For the profit interests and Phantom units, we used a market-based approach to determine the total equity value of Hoya Topco and allocate the resulting value between share classes using the Black-Scholes option pricing model to determine the grant date fair value of employee grants.

Under ASC 718, Compensation–Stock Compensation , and ASC 480, Distinguishing Liabilities from Equity , the grants of profits interest meet the criteria to be recognized as equity-classified awards, whereas the grants of phantom units meet the criteria to be recognized as liability-classified awards.

For the profit interests and phantom units, we used a market-based approach to determine the total equity value of Hoya Topco and allocated the resulting value between share classes using the Black-Scholes model to determine the grant date fair value of employee grants.

The exercise prices used are based on various scenarios considering the waterfall payout structure of the units that exists at the Hoya Topco level.

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As of December 31, 2023 and 2022, it is not probable the performance condition will be achieved.

Segment Reporting—

Operating segments are defined as components of an entity for which discrete financial information is available and is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in making decisions regarding resource allocation and performance assessment.

Segment Reporting

Operating segments are defined as components of an entity for which discrete financial information is available and is regularly reviewed by our Chief Operating Decision Maker (our “CODM”) in making decisions regarding resource allocation and performance assessment.

Our CODM is our Chief Executive Officer.

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Marketplace and Resale.

Revenue Recognition

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers .

We report revenue on a gross or net basis based on management’s assessment of whether we are acting as a principal or agent in the transaction.

Revenue is reported net of sales taxes.

The timing of revenue recognition, and the determination of whether we are acting as a principal or an agent in a transaction, is based on the evaluation of control over the asset being transferred.

We act as an intermediary between buyers, sellers and partners in our online marketplaces.

Revenue primarily consists of service and delivery fees and is reduced by incentives provided to buyers.

Our performance obligation for marketplace transactions is facilitating the transaction between buyers, sellers and partners.

For live event tickets, our performance obligation is satisfied at the time the order is confirmed, as control of the ticket, and the related rights of ownership, transfer to the buyer at that time.

For hotels and tours, our performance obligation is satisfied at the time of check-in, as the buyer is unable to control the asset until that point.

In all of these transactions, we act as an agent as we do not control the asset prior to facilitating the transfer to the buyer.

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NOTES to the Consolidated Financial Statements

Revenue Recognition —We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

We report revenue on a gross or net basis based on management’s assessment of whether we are acting as a principal or agent in the transaction.

Revenue is reported net of sales taxes.

The determination of whether we are acting as a principal or an agent in a transaction is based on the evaluation of control over the ticket, including the right to sell the ticket, before it is transferred to the ticket buyer.

We act as an intermediary between ticket buyers and sellers in our online secondary ticketing marketplace.

Revenue primarily consists of service fees from ticketing operations and is reduced by incentives provided to ticket buyers.

We have one primary performance obligation, facilitating the Marketplace transaction between the ticket buyers and sellers, which is satisfied at the time the order is confirmed.

In this transaction, we act as an agent as we do not control the ticket prior to transferring it to the ticket buyer.

Revenue is recognized net of the amount due to the ticket seller when the seller confirms an order with the ticket buyer, at which point the seller is obligated to deliver the tickets to the buyer in accordance with the original marketplace listing.

Payment from the ticket buyer is due at the time of sale.

Our sales terms provide that we will compensate the ticket buyer for the total amount of the purchase if an event is cancelled, the ticket is invalid, or if the ticket is delivered after the promised time.

Payment from the ticket buyer is generally due at the time of sale.

Our sales terms generally provide that we will compensate the ticket buyer for the total amount of the purchase if an event is cancelled, the ticket is invalid or the ticket is delivered after the promised time.

In certain circumstances for travel reservations, we may allow buyers to initiate returns or cancel.

We have determined this is considered a stand-ready obligation to provide a return that is not a separate performance obligation, but is an element of variable consideration, which results in a reduction to revenue.

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We estimate the customer compensation liability, and corresponding charge against revenue, using the expected value method, which best predicts customer compensation for future cancellations.

To the extent we estimate that a portion of the refund is recoverable from ticket sellers or distribution partners, we record the recovery as revenue to align with the net presentation of the original transaction.

To the extent we estimate that a portion of the refund is recoverable from ticket sellers or partners, we record the recovery as revenue to align with the net presentation of the original transaction.

In extreme circumstances, such as the COVID-related shutdowns during 2020, the timing of event cancellations versus new sales transactions can result in customer compensation costs exceeding current period sales resulting in negative Marketplace revenue for that period.

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Referral commissions are recognized as revenue when the ticket buyer makes a purchase from the third-party insurance provider during customer checkout.

Payment from the third-party provider is due to us net 30 from when invoiced.

Payment from the third-party provider is due to us within 30 days from being invoiced.

This revenue is included within all categories of Marketplace disaggregated revenue described in Note 4, Revenue Recognition .

We earn revenue from our daily fantasy sports offering, which 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.

In addition, we earn revenue from online display advertising, which revenue is recognized when an advertisement is displayed as that is when we have fulfilled our obligation.

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 sell tickets we own on secondary ticket marketplaces.

The Resale business has one performance obligation, which is to transfer control of a live event ticket to a ticket buyer once an order has been confirmed.

We act as a principal in these transactions as we own the ticket and therefore we control the ticket prior to transferring the ticket to the customer.

We act as a principal in these transactions as we own the ticket and therefore control the ticket prior to transferring it to the customer.

Revenue is recorded on a gross basis based on the value of the ticket and is recognized when an order is confirmed in the secondary ticket marketplace.

Payment from the marketplace is typically due upon delivery of the ticket or after the event has passed.

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NOTES to the Consolidated Financial Statements

Secondary ticket marketplace terms and conditions require sellers to repay amounts received for events that are cancelled or tickets that are invalid or delivered after the promised time.

We have determined that this obligation is a stand-ready obligation to provide a return that is not a separate performance obligation, but is an element of variable consideration, which results in a reduction to revenue.

We have determined that this is considered a stand-ready obligation to provide a return that is not a separate performance obligation, but is an element of variable consideration, which results in a reduction to revenue.

We recognize a liability for known and estimated cancellation charges within Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

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To the extent we estimate that a portion of the charge is recoverable from the event host, we record the estimated recovery asset to Prepaid expenses and other current assets.

When our Resale business sells a ticket in our own marketplace, the service fee is recorded in Marketplace revenues and the sales price of the ticket is recorded in Resale revenues.

When our Resale business sells a ticket on our own marketplace, the service fee is recorded in Marketplace revenues and the sales price of the ticket is recorded in Resale revenues.

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NOTES to the Consolidated Financial Statements

Deferred Revenue

Deferred revenue consists of fees received related to unsatisfied performance obligations at the end of the period.

The majority of the unsatisfied performance obligations are related to our loyalty program, Vivid Seats Rewards.

Vivid Seats Rewards allows ticket buyers to earn stamps for each ticket purchased, which convert to credits upon reaching certain thresholds.

Buyers can redeem those credits on future transactions.

The majority of unsatisfied performance obligations are related to our Vivid Seats Rewards loyalty program, which allows enrolled Vivid Seats ticket buyers to earn stamps for each ticket purchased.

These buyers can convert those stamps into credits upon reaching certain thresholds and then redeem those credits on future transactions.

The credits earned in the program represent a material right to the ticket buyer and constitute an additional performance obligation for us.

As such, we defer revenue based on expected future usage and recognize the deferred revenue as credits are redeemed.

Revenue from sales of contingent events, such as postseason sporting events, is initially recorded as Deferred revenue in the Consolidated Balance Sheets and is recognized when the contingency is resolved.

Sales Tax —Sales taxes are imposed by state, county, and city governmental authorities.

We collect sales tax from the ticket buyer where required and remit to the appropriate governmental agency.

Deferred revenue also consists of service fees on hotel and tour transactions where check-in has not yet occurred.

In addition, r evenue from sales of contingent events, such as postseason sporting events, is initially recorded as deferred revenue in the Consolidated Balance Sheets and is recognized when the contingency is resolved.

Sales taxes are imposed by state, county, and city governmental authorities.

We collect sales tax from ticket buyers on our marketplace where required and remit to the appropriate governmental agency.

We also collect and remit sales tax on certain resale sales.

Collected sales taxes are recorded as a liability until remitted.

There is no impact on the Consolidated Statements of Operations as revenue is recorded net of sales taxes.

Advertising Costs —We utilize various forms of advertising, including paid search, brand partnership, e-mail marketing, and other forms of media.

Advertising costs are expensed as incurred and were $ 247.3 million , $ 180.7 million , and $ 37.5 million for the years ended December 31, 2022, 2021, and 2020 respectively.

Advertising Costs

We utilize various forms of advertising, including paid search, brand partnerships, e-mail marketing and other forms of media.

Advertising costs, which are expensed as incurred, were $ 273.5 million , $ 247.3 million and $ 180.7 million for the years ended December 31, 2023, 2022, and 2021 respectively.

Advertising costs are presented as part of Marketing and selling expense in the Consolidated Statements of Operations.

Shipping and Handling —Shipping and handling charges to customers are included in Revenues in the Consolidated Statements of Operations.

Shipping and Handling

Shipping and handling charges to customers are included in Revenues in the Consolidated Statements of Operations.

Shipping and handling costs incurred by us are treated as fulfillment activities, and as such are included in Cost of revenues in the Consolidated Statements of Operations.

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Recent Accounting Pronouncements

As an “emerging growth company”

under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we are provided the option to adopt new or revised accounting guidance either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as non-public business entities, including early adoption when permissible.

The following provides a brief description of recent accounting pronouncements that could have a material effect on our financial statements:

As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we are provided the option to comply with new or revised accounting guidance within the same time periods as those applicable to either public or non-public companies, including early adoption when permissible.

The following provides a brief description of recent accounting pronouncements that could have a material effect on our consolidated financial statements:

Issued Accounting Standards Adopted

Leases —In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease) in the balance sheet.

Lease liabilities are equal to the present value of lease payments, while right-of-use assets are based on the associated lease liabilities, subject to certain adjustments, such as for initial direct costs.

We elected the extended

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

transition period available to emerging growth companies and adopted Accounting Standards Codification ("ASC") 842 effective January 1, 2022 on a modified retrospective basis by applying the new standard to all leases existing at the date of initial application.

We elected to present the financial statements for all periods prior to January 1, 2022 under the previous lease standard ("ASC 840"), as well as elected other options, which allow us to use our previous evaluations regarding if an arrangement contains a lease, if a lease is an operating or financing lease, and what costs are capitalized as initial direct costs prior to adoption.

We also elected to combine lease and non-lease components.

Upon the adoption of the new lease standard, on January 1, 2022, we recognized right-of-use assets of $ 6.6 million and lease liabilities of $ 8.1 million (including a current liability of $ 3.0 million) in the Consolidated Balance Sheets and reclassified certain balances related to existing leases.

The right-of-use assets balance as of January 1, 2022 is adjusted for $ 1.5 million of lease termination liabilities and deferred rent liabilities recognized under the previous lease standard.

There was no impact to Accumulated deficit on the Consolidated Balance Sheets at adoption.

Refer to Note 8, Leases , for more information on leases.

Financial Instruments-Credit Losses —In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Financial Instruments-Credit Losses

In June 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which changes how entities will measure credit losses for financial assets and certain other instruments that are not measured at fair value through net income.

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We adopted these requirements as of January 1, 2023 with no material impact on our consolidated financial statements.

Reference Rate Reform —In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting , as modified in January 2021.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting , as modified in January 2021.

The ASU is intended to help stakeholders during the global market-wide reference rate transition period.

The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued.

The guidance also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients.

We adopted these requirements as of January 1, 2023 with no material impact on our consolidated financial statements.

Business Acquisition

On December 13, 2021 , we acquired 100 % of the equity of Betcha.

Acquired Contract Assets and Contract Liabilities

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers , as if it had originated the contracts.

Under the previous guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date.

ASU 2021-08 allows for immediate adoption on a retrospective basis for all business combinations that have occurred since the beginning of the annual period that includes the interim period of adoption.

We elected to adopt ASU 2021-08 in the fourth quarter of 2023, with no material impact on our consolidated financial statements.

Issued Accounting Standards Not Yet Adopted

Segment Reporting - Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the provisions of the amendments and the impact on our future consolidated financial statements.

In December 2023 , the FASB issued ASU 2023-09 , Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid.

The amendments are intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments are effective for annual periods beginning after December 15, 2025 for non-public companies.

We are currently evaluating the impact of the new standard, which is expected to result in enhanced disclosures, on our consolidated financial statements.

Business Acquisitions

During the fiscal year 2023, we acquired VDC Holdco, LLC, the parent company of Vegas.com, LLC (together, “Vegas.com”), and WD Holdings Co., Ltd., the parent company of Wavedash Co., Ltd.

(together, “Wavedash”).

These transactions have been accounted for under the acquisition method of accounting in accordance with ASC 805 , Business Combinations.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

On November 3, 2023 (the "Vegas.com Acquisition Date"), we acquired 100 % of the outstanding shares of Vegas.com, an online ticket marketplace headquartered in Las Vegas, Nevada (the “Vegas.com Acquisition”).

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

We financed the cash portion of the Vegas.com Acquisition at closing with cash on hand, as well as cash balances acquired.

The goodwill acquired in the Vegas.com Acquisition is not expected to be deductible for income tax purposes.

The goodwill, which is included in our Marketplace segment, is primarily attributable to revenue opportunities with the Vegas.com services offerings and the assembled workforce.

The purchase consideration allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process.

The primary areas that are not yet finalized relate to the valuations of certain intangible assets and acquired income tax assets and liabilities.

Acquired assets and liability amounts are also still being finalized.

We expect to finalize the allocation of the purchase price as soon as practicable, but no later than one year from the Vegas.com Acquisition Date.

Acquisition costs directly related to the Vegas.com Acquisition were $ 1.9 million for the year ended December 31, 2023 and are included in General and administrative expenses in the Consolidated Statements of Operations.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the Vegas.com Acquisition Date (in thousands):

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Intangible assets

Right-of-use assets – net

Other non-current assets

Accounts payable

Accrued expenses and other current liabilities

Deferred revenue

Long-term lease liabilities

Deferred tax liability

Net assets acquired

The following table sets forth the components of identifiable intangible assets acquired (in thousands) and their estimated useful lives (in years) as of the Vegas.com Acquisition Date:

Supplier relationships

Customer relationships

Acquired developed technology

Total acquired intangible assets

Since the date of acquisition, Vegas.com has contributed revenue and income before income taxes of $ 15.7 million and $ 1.0 million, respectively.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Unaudited Pro forma Financial Information

The following table summarizes, on an unaudited pro forma basis, the condensed combined results of our operations for the years ended December 31, 2023 and 2022, assuming the Vegas.com Acquisition had occurred on January 1, 2022 (in thousands):

Years Ended December 31,

Income before income taxes

The unaudited pro forma financial information presented above is for informational purposes only and is not necessarily indicative of the actual results of operations that might have occurred had the Vegas.com Acquisition occurred on January 1, 2022, nor are they necessarily indicative of future results.

The unaudited pro-forma information for all periods presented above reflects the following adjustments, where applicable, assuming the acquisition of Vegas.com had occurred on January 1, 2022:

(i) incremental amortization expense related to the long-lived intangible assets acquired in the Vegas.com Acquisition;

(ii) reclassification of transaction costs incurred in connection to the Vegas.com Acquisition to the earliest year presented;

(iii) alignment of Vegas.com’s revenue recognition with our policies;

and (iv) elimination of interest expense incurred by Vegas.com prior to the Vegas.com Acquisition.

On September 8, 2023 (the "Wavedash Acquisition Date"), we acquired 100 % of the outstanding shares of Wavedash, an online ticket marketplace headquartered in Tokyo, Japan (the “Wavedash Acquisition”).

The purchase price was JPY 10,946.1 million, or approximately $ 74.3 million based on the exchange rate in effect on the Wavedash Acquisition Date, before considering the net effect of cash acquired equal to the amount in the table below.

We financed the Wavedash Acquisition at closing with cash on hand.

The goodwill recognized in the Wavedash Acquisition is not expected to be deductible for income tax purposes.

The goodwill, which is included in our Marketplace segment, is primarily attributable to revenue opportunities associated with Wavedash’s service offerings and assembled workforce.

The fair values of the assets acquired and liabilities assumed are preliminary and subject to change because the evaluations necessary to assess the fair values of the net assets acquired are still in process.

The primary areas that are not yet finalized relate to the valuations of certain intangible assets and acquired income tax assets and liabilities.

Acquired assets and liability amounts are also still being finalized.

We expect to finalize the allocation of the purchase price as soon as practicable, but no later than one year from the Wavedash Acquisition Date.

In connection with the Wavedash Acquisition, we also assumed long-term debt which matures in the second quarter of 2026, subject to a fixed interest rate.

See Note 13, Debt, for more information.

Acquisition costs directly related to the Wavedash Acquisition were $ 2.7 million for the year ended December 31, 2023, and are included in General and administrative expenses in the Consolidated Statements of Operations.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the Wavedash Acquisition Date (in thousands ):

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Right-of-use assets

Other net assets

Intangible assets

Accounts payable

Accrued expenses and other current liabilities

Current maturities of long-term debt

Long-term debt

Other non-current liabilities

Net assets acquired

The following table sets forth the components of identifiable intangible assets acquired (in thousands) and their estimated useful lives (in years) as of the Wavedash Acquisition Date:

Supplier relationships

Customer relationships

Acquired developed technology

Total acquired intangible assets

Pro forma financial information for the Wavedash Acquisition was not considered material to our consolidated financial statements and has not been presented.

On December 13, 2021 (the “Vivid Picks Acquisition Date"), we acquired 100 % ownership of Betcha (the "Vivid Picks Acquisition").

In August 2022, we rebranded Betcha as Vivid Picks.

Vivid Picks is a real money daily fantasy sports app with social and gamification features that enhance fans' connection with their favorite live sports.

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

Acquisition costs directly related to the transaction for the year ended December 31, 2022 were not material and are included in General and administrative expenses in the Consolidated Statements of Operations.

The acquisition date fair value of the consideration consisted of $ 0.8 million in cash and 2.1 million shares of our Class A common stock.

The total consideration includes cash earnouts of $ 3.4 million as of the acquisition date representing the estimated fair value that we may be obligated to pay if Vivid Picks meets certain earnings objectives.

In addition, the consideration includes future milestone payments of $ 9.5 million as of the acquisition date representing the estimated fair value that we may be obligated to pay upon the achievement of certain integration o bjectives.

For the year ended December 31, 2022, the estimated fair value of cash earnouts decreased by $ 2.1 million, which is presented in Change in fair value of contingent consideration on the Consolidated Statements of

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

Acquisition costs directly related to the Vivid Picks Acquisition for the year ended December 31, 2022 were not material and are included in General and administrative expenses in the Consolidated Statements of Operations.

The Vivid Picks Acquisition Date fair value of the consideration consisted of $ 0.8 million in cash and 2.1 million shares of Class A common stock.

The total consideration included cash earnouts of $ 3.4 million as of the Vivid Picks Acquisition Date representing the estimated fair value that we would be obligated to pay if Vivid Picks met certain earnings objectives.

The cash earnouts are measured at fair value using a Monte Carlo simulation model.

The change in fair value of cash earnouts is presented in Change in fair value of contingent consideration on the Consolidated Statements of Operations.

As of December 31, 2023 the estimated fair value of cash earnouts was zero.

For the years ended December 31, 2023 and 2022, the estimated fair value of cash earnouts decreased by $ 1.0 million and $ 2.1 million, respectively.

For the years ended December 31, 2023 and 2022, we made no payments related to cash earnouts.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

As of December 31, 2022, $ 2.6 million was recorded in Additional paid-in capital in the Consolidated Balance Sheets related to our first milestone payment.

For the year ended December 31, 2022, we made no payments related to cash earnouts and paid milestone payments which consisted of 0.3 million in shares of our Class A common stock and $ 1.1 million in cash.

Subsequent to the year ended December 31, 2022 , we paid a milestone payment of $ 2.5 million in cash.

As of December 31, 2022, we had $ 5.9 million recorded in accrued expenses and other current liabilities related to future milestone payments and $ 1.1 million in other liabilities related to earnouts.

As part of the acquisition, we agreed to pay cash bonuses to certain Vivid Picks employees over three years following the anniversary of the employee start date.

In addition, the consideration included future milestone payments of $ 9.5 million as of the Vivid Picks Acquisition Date representing the estimated fair value that we would be obligated to pay upon the achievement of certain integration objectives.

For the year ended December 31, 2023, we paid milestone payments of $ 6.0 million in cash.

For the year ended December 31, 2022, we paid milestone payments which consisted of 0.3 million shares of Class A common stock and $ 1.1 million in cash.

As of December 31, 2023, the integration objectives were fully met, and we do not have future liabilities related to milestone payments.

As part of the Vivid Picks Acquisition, we agreed to pay cash bonuses to certain Vivid Picks employees over three years following the anniversary of the employee start date.

The payouts are subject to continued service, and therefore treated as compensation and expensed.

Proforma financial information has not been presented as the Vivid Picks acquisition was not considered material to our Consolidated Financial Statements.

The consideration was allocated to the assets acquired and liabilities assumed based on their fair value as of the acquisition date.

The excess of the purchase price over the net assets acquired was recorded as goodwill.

The goodwill recorded is not deductible for tax purposes as the Vivid Picks acquisition was primarily a stock acquisition and is attributable to the assembled workforce as well as the anticipated synergies from the integration of Vivid Picks's technology with our technology.

During the year ended December 31, 2022, we recognized adjustments related to the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

The adjustments primarily consisted of $ 0.9 million in definite-lived intangible assets and $ 2.9 million i n goodwill.

Refer to Note 9, Goodwill and Intangible Assets , for the acquisition adjustment.

We have finalized purchase accounting for this acquisition in the fourth quarter of 2022.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Pro forma financial information has not been presented as the Vivid Picks Acquisition was not considered material to our consolidated financial statements.

The consideration was allocated to the assets acquired and liabilities assumed based on their fair value as of the Vivid Picks Acquisition Date.

The excess of the purchase price over the net assets acquired was recorded as goodwill in the Marketplace segment.

The goodwill recorded is not deductible for tax purposes as the Vivid Picks Acquisition was primarily a stock acquisition and is attributable to the assembled workforce as well as the anticipated synergies from the integration of Vivid Picks' technology with our technology.

During the year ended December 31, 2022, we recognized adjustments related to the estimated fair values of the assets acquired and liabilities assumed at the Vivid Picks Acquisition Date .

The adjustments primarily consisted of $ 0.9 million in definite-lived intangible assets and $ 2.9 million in goodwill.

See Note 9, Goodwill and Intangible Assets , for the acquisition adjustment.

We have finalized acquisition accounting for the Vivid Picks Acquisition in the fourth quarter of 2022.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the Vivid Picks Acquisition Date (in thousands):

Restricted cash

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Net assets acquired

The following table summarizes the purchase consideration (in thousands):

The following table summarizes the purchase consideration as of the Vivid Picks Acquisition Date (in thousands):

Fair value of common stock

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Total purchase consideration

The following table sets forth the components of identifiable intangible assets acquired (in thousands) and their estimated useful lives (in years) as of the date of acquisition (in thousands):

Estimated Useful Life

The following table sets forth the components of identifiable intangible assets acquired (in thousands) and their estimated useful lives (in years) as of the Vivid Picks Acquisition Date (in thousands):

Customer relationships

Developed technology

Acquired developed technology

Total acquired intangible assets

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Resale revenues were $ 115.5 million , $ 89.2 million , and $ 53.4 million during the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2022, Deferred revenue in the Consolidated Balance Sheets was $ 32.0 million , which primarily relates to Vivid Seats Rewards, our loyalty program.

Stamps earned under the program expire in two to three years , if not converted to credits, and credits expire in two to four years , if not redeemed.

At December 31, 2023, Deferred revenue in the Consolidated Balance Sheets was $ 34.7 million , which primarily relates to our Vivid Seats Rewards loyalty program.

Stamps earned under the loyalty program expire in two to three years , if not converted to credits, and credits expire in two to four years , if not redeemed.

We expect to recognize all outstanding deferred revenue in the next seven years .

At December 31, 2021, $ 25.1 million was recorded as Deferred revenue, of which $ 16.2 million was recognized as revenue during year ended December 31, 2022.

At December 31, 2022, $ 32.0 million was recorded as Deferred revenue, of which $ 17.6 million was recognized as revenue during the year ended December 31, 2023.

At December 31, 2021, $ 25.1 million was recorded as deferred revenue, of which $ 16.2 million was recognized as revenue during the year ended December 31, 2022.

Segment Reporting

Our reportable segments are Marketplace and Resale.

Through the Marketplace segment, we act as an intermediary between ticket buyers and sellers within our online secondary ticket marketplace.

Through the Resale segment, we acquire tickets from primary sellers, which we then sell through secondary ticket marketplaces.

Revenues and contribution margin are used by our CODM to assess performance of the business.

We define contribution margin as revenues less cost of revenues and marketing and selling expenses.

Through the Marketplace segment, we act as an intermediary between ticket buyers and sellers within our online ticket marketplace.

Through the Resale segment, we acquire tickets from primary sellers, which we then sell through secondary ticket marketplaces, including our own.

Revenues and contribution margin (which is defined as revenues less cost of revenues and marketing and selling expenses) are used by our CODM to assess performance of the business.

We do not report our assets, capital expenditures, general and administrative expenses or related depreciation and amortization expenses by segment, because our CODM does not use this information to evaluate the performance of our operating segments.

The following table represents our segment information for the year ended December 31, 2022 (in thousands):

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The following table represents our segment information for the year ended December 31, 2023 (in thousands):

Cost of revenues (exclusive of depreciation and amortization shown separately below)

5 unchanged sentences

Income from operations

Interest expense –

Loss on extinguishment of debt

Interest expense – net

Income before income taxes

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Depreciation and amortization

Change in fair value of contingent consideration

Income from operations

Interest expense –

Interest expense – net

Loss on extinguishment of debt

Other expenses

Loss before income taxes

Income before income taxes

The following table represents our segment information for the year ended December 31, 2021 (in thousands):

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Depreciation and amortization

Impairment charges

Loss from operations

1 unchanged sentence

Loss on extinguishment of debt

Other expenses

Loss before income taxes

Substantially all of our sales occur and assets reside in the United States.

As disclosed in Note 2, Summary of Significant Accounting Policies, we assess goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired.

Definite-lived intangible assets and other long-lived assets are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

During the second quarter of 2020, we identified the COVID-19 pandemic as a triggering event for our long-lived assets, goodwill, indefinite-lived trademark, and definite-lived intangible assets.

Due to global social distancing efforts put in place to mitigate the spread of the virus, and compliance with restrictions enacted by various governmental entities, most live events during 2020 were either postponed or cancelled.

Consequently, we experienced a significant reduction of revenue during the year ended December 31, 2020.

The following summarizes the impairment charges recorded by us during the year ended December 31, 2020 (in thousands):

Indefinite-lived trademark

Definite-lived intangible assets

Property and equipment

Personal seat licenses

Total impairment charges

Long-lived asset impairments

We assessed its long-lived assets for potential impairment during the second quarter of 2020.

ASC 360, Property, Plant, and Equipment , requires an impairment loss to be recognized for a long-lived asset if the carrying amount of the asset is not recoverable and exceeds its fair value.

In accordance with ASC 360, we classify our long-lived assets as a single asset group, which consists primarily of property and equipment, personal seat licenses, and definite-lived intangible assets.

For the fair value of the asset group, we compared the expected future undiscounted cash flows associated with the asset group to the long-lived asset group’s carrying value and concluded that the carrying value was not recoverable.

We then measured the fair value of the asset group using a discounted cash flow model.

The significant estimates used in the undiscounted and discounted cash flow models include projected operating cash flows;

forecasted capital expenditures and working capital needs;

rates of long-term growth;

and the discount rate (in the discounted cash flow model).

The significant unobservable inputs included forecasted revenues which reflected significant declines in earlier years as a result of the COVID-19 pandemic and included estimates regarding when revenue would return to pre-pandemic levels.

The significant unobservable inputs also included forecasted costs, capital expenditures, and working capital needs which were informed by actual historical experience and estimates of the timing of when live events would return to pre-pandemic levels.

The following table presents quantitative information about the significant unobservable inputs applied to these Level 3 fair value measurements during our assessment for impairment in the second quarter of 2020:

Significant Unobservable Inputs

Range (Weighted

Discount rate

12.5 % - 13.5 % ( 13.0 %)

Long-term growth rate

2.5 % - 3.5 % ( 3.0 %)

The following table presents the sensitivities to changes in the significant unobservable inputs above (in thousands):

50 basis point increase in discount rate

50 basis point decrease in long-term growth rate

As a result, we recorded an impairment of $ 118.0 million, of which $ 107.4 million was related to definite-lived intangible assets.

The impairment is presented in Impairment charges in the Consolidated Statements of Operations.

No impairment triggering events to our long-lived assets were identified during the years ended December 31, 2022 and 2021.

Indefinite-lived trademark and goodwill impairments

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

During the second quarter of 2020, we determined that the estimated carrying value of our indefinite-lived trademark was in excess of its fair value.

The fair value of the indefinite-lived trademark asset, classified as a Level 3 measurement, was measured using the relief-from-royalty method.

This methodology involves estimating reasonable royalty rates for the trademarks, applying the royalty rate to a net sales stream, and utilizing the discounted cash flow method.

We utilized a 2.0 % royalty rate, consistent with the rate used in the initial valuation of the trademark.

We recorded an impairment charge of $ 78.7 million related to the indefinite-lived trademark.

The impairment charge is presented in Impairment charges in the Consolidated Statements of Operations.

As part of the goodwill impairment assessment performed during the second quarter of 2020, we determined that the carrying value of its Marketplace reporting unit exceeded its estimated fair value, resulting in a goodwill impairment charge of $ 377.1 million, which is presented in Impairment charges in the Consolidated Statements of Operations.

The fair value estimate of our reporting units was based on a blended analysis of the present value of future discounted cash flows and market value approach, using Level 3 inputs.

The significant estimates used in the discounted cash flow models are projected operating cash flows;

forecasted capital expenditures and working capital needs;

weighted average cost of capital;

and rates of long-term growth.

These estimates considered the recent deterioration in financial performance of the reporting units, as well as the anticipated rate of recovery, and implied risk premiums based on the market prices of our equity and debt as of the assessment date.

The significant estimates used in the market multiple valuation approach include identifying business factors;

such as size, growth, profitability, risk and return on investment;

and assessing comparable revenue and earnings multiples.

Following the impairment charge, the carrying value of the Marketplace reporting unit’s goodwill was $ 683.3 million.

In accordance with its annual re-assessment, we assessed its goodwill and indefinite-lived trademark for impairment as of October 31, 2020, determining no further impairment had occurred.

No triggering events were identified during the years ended December 31, 2022 and 2021.

Our goodwill and indefinite-lived trademark constitute nonfinancial assets measured at fair value on a nonrecurring basis.

These nonfinancial assets are classified as Level 3 assets in the fair value hierarchy established under ASC Topic 820, Fair Value Measurement (“ASC 820”).

Accounts Receivable – Net

The following table summarizes our accounts receivable balance, net of allowance for doubtful accounts at December 31, 2023 and 2022 (in thousands):

Uncollateralized payment processor obligations

Due from marketplace ticket sellers for cancellation charges

Due from distribution partners for cancellation charges

Event insurance and other commissions receivable

Allowance for doubtful accounts

Total Accounts Receivable

We recorded an allowance for credit losses of $ 10.0 million and $ 3.6 million at December 31, 2023 and 2022, respectively, to reflect potential challenges in collecting funds from distribution partners and ticket sellers, particularly for amounts due upon usage of store credit previously issued to buyers.

The allowance for credit losses increased during the year as certain ticket sellers on the marketplace platform generated balances in excess of their existing payables, creating a greater risk of credit losses on these receivables.

Write-offs were $ 0.3 million , $ 4.9 million and $ 1.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Property and Equipment

The following table summarizes our major classes of property and equipment, net of accumulated depreciation (in thousands):

The following table summarizes our major classes of property and equipment, net of accumulated depreciation at December 31, 2023 and 2022 (in thousands):

Computer equipment

Leasehold Improvements

Construction in progress

Total property and equipment

accumulated depreciation

Total property and equipment –

Total property and equipment – net

Depreciation expense related to property and equipment was $ 1.4 million , $ 0.6 million and $ 0.1 million for the years ended December 31, 2023, 2022, and 2021, respectively, and is presented in Depreciation and amortization expense in the Consolidated Statements of Operations.

There were no impairment charges for the years ended December 31, 2023, 2022 and 2021.

For the year ended December 31, 2020, l ong-lived asset impairment charges related to property and equipment of $ 3.7 million were recognized, resulting in a full impairment of all property and equipment.

The impairment charges are presented in Impairment charges in the Consolidated Statements of Operations.

During the year ended December 31, 2022, we incurred a loss of $ 0.1 million on asset disposals related to property and equipment, which are included in General and administrative expenses in the Consolidated Statements of Operations.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

During the years ended December 31, 2023 and 2022 we incurred a loss of $ 0.1 million and $ 0.1 million, respectively, on asset disposals related to property and equipment, which are included in General and administrative expenses in the Consolidated Statements of Operations.

There were no losses on asset disposals related to property and equipment during the year ended December 31, 2021.

On January 1, 2022, we adopted ASC 842 using a modified retrospective transition approach that allows for a cumulative-effect adjustment in the period of adoption without revising prior period presentation.

Therefore, for reporting periods beginning after December 31, 2021, the financial statements are prepared in accordance with the current lease standard (ASC 842) and we elected to present the financial statements for all periods prior to January 1, 2022 under the previous lease standard (ASC 840).

Therefore, for reporting periods beginning after December 31, 2021, our consolidated financial statements are prepared in accordance with the current lease standard (ASC 842) and we elected to present our consolidated financial statements for all periods prior to January 1, 2022 under the previous lease standard (ASC 840).

We elected the practical expedient package, which permits us to not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, and any initial direct costs for any existing leases as of the effective date.

We determine if an arrangement is a lease at inception of a contract.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit interest rate, we use the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

As of December 31, 2022, the weighted average discount rate applied to the lease liabilities is approximately 7 % .

Short-term lease costs were not material to our Consolidated Statements of Operations for the year ended December 31, 2022.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We entered into all of our lease contracts as a lessee.

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All of our leases are classified as operating.

At December 31, 2022, we had $ 7.9 million of ROU assets in Right-of-use assets —

net, and the corresponding operating lease liabilities of $ 0.6 million recorded in Accrued expenses and other current liabilities and $ 14.9 million recorded in Long-term lease liabilities in the Consolidated Balance Sheets.

None of our leases contain any material residual value guarantees or restrictive covenants.

The following table presents the lease-related assets and liabilities on the Consolidated Balance Sheets at December 31, 2023 and 2022 (in thousands):

Right-of-use assets – net

Current lease liabilities in Accrued expenses and other current liabilities

Long-term lease liabilities

Total operating lease liabilities

Most leases have one or more options to renew, with renewal terms that can initially extend the lease term for various periods up to five years .

The exercise of renewal options is at our discretion and are included if they are reasonably certain to be exercised.

As of December 31, 2022, the weighted average remaining minimum lease term is approximately 9.7 years.

Lease expense for operating leases is recognized on a straight-line basis over the lease term and is recorded under General and administrative expenses in the Consolidated Statements of Operations.

We elected not to separate lease and non-lease components.

Our leases do not contain any material residual value guarantees or restrictive covenants.

The following table summarizes the weighted average remaining minimum lease term and the weighted average incremental borrowing rate at December 31, 2023 and 2022:

Weighted average remaining minimum lease term

Weighted average incremental borrowing rate

In December 2021, we entered into a lease agreement for our new corporate headquarters in Chicago, Illinois.

The lease commenced in the first quarter of 2022 when we obtained control of the premises, and runs through December 31, 2033 with a 5-year renewal option.

The lease commenced in the first quarter of 2022 when we obtained control of the premises, and runs through December 31, 2033 with a five-year renewal option.

The aggregate lease payments for the initial term are approximately $ 16.2 million with no rent due until March 2024.

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This amount is recorded in Property and equipment – net in the Consolidated Balance Sheets.

On the commencement date, we recognized the ROU asset and corresponding lease liability of $ 3.4 million in Right-of-use assets —

net and Long-term lease liabilities, respectively, in the Consolidated Balance Sheets.

On the commencement date, we recognized the ROU asset and corresponding lease liability of $ 3.4 million in Right-of-use assets — net and Long-term lease liabilities, respectively, in the Consolidated Balance Sheets.

Lease expense for operating leases is recognized on a straight-line basis over the lease term and is recorded under General and administrative expenses in the Consolidated Statements of Operations.

Operating and variable lease expenses for the years ended December 31, 2023, 2022 and 2021 were $ 2.0 million , $ 3.6 million and $ 3.7 million, respectively.

Cash payments for operating lease liabilities during the year ended December 31, 2022, which are included within the operating activities section in the Consolidated Statements of Cash Flows, were $ 3.1 million .

Future lease payments at December 31, 2022 are as follows (in thousands):

Cash payments for operating lease liabilities, which are presented as a component of cash flows from operating activities within the Consolidated Statements of Cash Flows, were $ 1.2 million and $ 3.1 million during the years ended December 31, 2023 and 2022, respectively.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Future lease payments at December 31, 2023 are as follows (in thousands):

Operating Leases

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Present value of lease liabilities

Future lease payments at December 31, 2021 under ASC 840 were as follows (in thousands):

Operating Leases

Total remaining lease payments

Goodwill and Intangible Assets

Definite-lived intangible assets includes developed technology and customer relationships, which had a net carrying amount of $ 17.3 million and $ 13.8 million at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, accumulated amortization related to our developed technology was $ 9.6 million and $ 2.5 million , respectively.

Our goodwill is included in our Marketplace segment.

The net changes in the carrying amounts of our intangible assets and goodwill were as follows (in thousands):

Definite-lived Intangible Assets

Our goodwill is inclu ded in our Marketplace segment.

The following table summarizes the changes in the carrying amount of goodwill at December 31, 2023 and 2022 (in thousands):

Balance at January 1, 2022

Capitalized development costs

Balance at December 31, 2021

Acquisition adjustment

Capitalized development costs

Balance at December 31, 2022

Business acquisitions

Foreign currency translation

Balance at December 31, 2023

We had recorded $ 377.1 million of cumulative impairment charges related to our goodwill as of December 31, 2023 and 2022.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We had recorded $ 563.2 million of cumulative impairment charges related to our intangible assets and goodwill as of December 31, 2022 and 2021.

Amortization expense on our definite-lived intangible assets was $ 7.1 million , $ 2.3 million , and $ 47.4 million for the years ended December 31, 2022, 2021, and 2020, respectively, and is presented in Depreciation and amortization in the Consolidated Statements of Operatio ns.

During the year ended December 31, 2022, we incurred a loss of $ 0.3 million on asset disposals related to definite-lived intangible assets, which are included in General and administrative expenses in the Consolidated Statements of Operations.

The estimated future amortization expense related to the definite-lived intangible assets as of December 31, 2022 is as follows (in thousands):

Definite-lived intangible assets

The following table summarizes components of our definite-lived intangible assets (in thousands) and weighted average remaining life (in years) at December 31, 2023:

Remaining Life

Definite-lived Intangible Assets

Supplier relationships

Customer relationships

Acquired developed technology

Capitalized development costs

Capitalized development costs – Work in progress ("WIP")

Foreign currency translation

Total gross book value

Accumulated amortization

Supplier relationships

Customer relationships

Acquired developed technology

Capitalized development costs

Foreign currency translation

Total accumulated amortization

Indefinite-lived Intangible Assets

Foreign currency translation

Intangible assets – net

The following table summarizes components of our definite-lived intangible assets (in thousands) and weighted average remaining life (in years) at December 31, 2022:

Remaining Life

Definite-lived Intangible Assets

Customer relationships

Acquired developed technology

Capitalized development costs

Total gross book value

Accumulated amortization

Customer relationships

Acquired developed technology

Capitalized development costs

Total accumulated amortization

Indefinite-lived Intangible Assets

Intangible assets – net

We had recorded $ 78.7 million of cumulative impairment charges related to our trademarks as of December 31, 2023 and 2022 .

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

During the year ended December 31, 2023, intangible assets increased primarily due to the Vegas.com Acquisition, the Wavedash Acquisition and our investments in capitalized development costs.

Amortization expense on our definite-lived intangible assets was $ 15.7 million , $ 7.1 million and $ 2.3 million for the years ended December 31, 2023, 2022 and 2021, respectively, and is presented in Depreciation and amortization in the Consolidated Statements of Operations.

During the years ended December 31, 2023 and 2022, we incurred a loss of $ 0.6 million and $ 0.3 million, respectively, on asset disposals related to definite-lived intangible assets, which is included in General and administrative expenses in the Consolidated Statements of Operations.

There were no losses on asset disposals related to definite-lived intangible assets during the year ended December 31, 2021.

The estimated future amortization expense related to the definite-lived intangible assets as of December 31, 2023, except WIP, is as follows (in thousands):

Future amortization expense:

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Recovery of future customer compensation represents expected recoveries of compensation to be paid to customers for event cancellations or other service issues related to previously recorded sales transactions.

Recovery of future customer compensation costs decreased by $ 35.0 million due to a reduction in the estimated rate of future cancellations as of December 31, 2022.

Recovery of future customer compensation costs increased by $ 2.4 million at December 31, 2023 compared to December 31, 2022 due to an increase in the reserve for future cancellations driven by higher volume of sales for future events .

The provision related to these expected recoveries is included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

In July 2023, we invested $ 6.0 million in a privately held company in the form of a convertible promissory note (the “Note”) and a warrant to purchase up to 1,874,933 shares of the company's stock (the "Warrant").

Interest on the Note accrues at 8 % per annum and outstanding principal and accrued interest is due and payable at the earlier of July 3, 2030 or a change in control of the company.

The Warrant is exercisable until the date three years after the Note is repaid, subject to certain accelerating events.

We account for the Note in accordance with ASC 320, Investments - Debt and Equity Securities .

The Note is classified as an available-for-sale security and is recorded at fair value with the change in unrealized gains and losses reported as a separate component on the Consolidated Statements of Comprehensive Income until realized.

The Note's unrealized gain for the year ended December 31, 2023 was $ 0.2 million .

The Note's amortized cost amounted to $ 2.7 million at December 31, 2023.

We did not recognize any credit losses related to the Note during the year ended December 31, 2023.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We account for the Warrant in accordance with ASC 815, Derivatives and Hedging , pursuant to which we record the derivative instrument on the Consolidated Balance Sheets at fair value with changes in fair value recognized in Other (income) expense on the Consolidated Statements of Operations on a recurring basis.

The classification of the derivative instrument, including whether it should be recorded as an asset or a liability, is evaluated at the end of each reporting period.

We measure our investments at fair value on recurring basis, and the balances at December 31, 2023 are as follows (in thousands):

Fair Value Measurements Using

December 31, 2023

The fair value of the Note is determined using the income approach, utilizing Level 3 inputs.

The estimated fair value of the Warrant 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.

Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.

The following table presents quantitative information about the significant unobservable inputs applied to these Level 3 fair value measurements at December 31, 2023:

Expected terms (years)

Implied Yield

Expected terms (years)

Estimated volatility

Risk-free rate

Expected dividend yield

The following table provides a reconciliation of the financial instruments measured at fair value using Level 3 significant unobservable inputs for the year ended December 31, 2023 (in thousands):

Balance at July 3, 2023 (inception)

Accretion of discount

Interest paid-in-kind

Total unrealized gains or losses:

Recognized in earnings

Recognized in Other comprehensive income (loss)

Balance at December 31, 2023

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Accrued Expenses and Other Current Liabilities

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Accrued marketing expense

Accrued taxes

Accrued customer credits

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Accrued payroll

Accrued operating expenses

Other current liabilities

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Accrued customer credits represent credits issued and outstanding for event cancellations or other service issues related to recorded sales transactions.

The accrued amount is reduced by the amount of credits estimated to go

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

unused, or breakage, provided that the credits are not subject to escheatment.

The accrued amount is reduced by the amount of credits estimated to go unused, or breakage, provided that the credits are not subject to escheatment.

We estimate breakage based on historical usage trends and available data on comparable programs, and recognize breakage in proportion to the pattern of redemption for customer credits.

Our breakage estimate could be impacted by future activity differing from our estimates, the effects of which could be material.

Our breakage estimates could be impacted by future activity differing from our estimates, the effects of which could be material.

During the year ended December 31, 2023, $ 15.1 million of accrued customer credits were redeemed and we recognized $ 20.6 million of revenue from breakage.

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Accrued future customer compensation represents an estimate of the amount of customer compensation due from cancellation charges in the future.

These provisions are based on historic experience, revenue volumes for future events, and management’s estimate of the likelihood of future event cancellations and are recognized as a component of Revenues in the Consolidated Statements of Operations.

These provisions, which are based on historic experience, revenue volumes for future events, and management’s estimate of the likelihood of future event cancellations, are recognized as a component of Revenues in the Consolidated Statements of Operations.

The expected recoveries of these obligations are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

This estimated accrual could be impacted by future activity differing from our estimates, the effects of which co uld be material.

During the years ended December 31, 2022, 2021 and 2020, we recognized a net increase in revenue of $ 2.3 million, $ 5.1 million, and a decrease in revenue of $ 15.3 million, respectively, from the reversals of previously recorded revenue and changes to accrued future customer compensation related to event cancellations where the performance obligations were satisfied in prior periods.

Accrued future customer compensation decreased by $ 43.8 million due to a reduction in the estimated rate of future cancellations as of December 31, 2022.

Accrued taxes decreased as we have historically accrued contingent sales tax expense in jurisdictions where we expected to remit sales tax payments for sales prior to collecting tax from customers which began in the second half of 2021.

During 2022, we finalized the remaining open discussions with jurisdictions regarding the liability for uncollected sales tax and no longer have this contingent liability.

Other current liabilities primarily decreased as a result of making sales tax payments for liabilities that were no longer deemed contingent as of December 31, 2021, but were not yet paid at that time.

These payments represent the exposure 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 remaining historic sales tax liability payments were made during the year ended December 31, 2022.

Our outstanding debt at December 31, 2022 and 2021 is comprised of the following (in thousands):

June 2017 First Lien Loan

During the years ended December 31, 2023, 2022 and 2021, we recognized a net increase in revenue of $ 0.1 million, $ 2.3 million and $ 5.1 million, respectively, from the reversals of previously recorded revenue and changes to accrued future customer compensation related to event cancellations where the performance obligations were satisfied in prior periods.

Accrued future customer compensation increased by $ 2.8 million due to an increase in the estimated rate of future cancellations as of December 31, 2023.

Accrued contingencies decreased as a result of Betcha milestone payments of $ 6.0 million in cash during the year ended December 31, 2023.

Other current liabilities primarily increased as a result of adding accrued expenses for Vegas.com vendors, an increase in the liability for uncollected local admissions taxes and higher accrued interest.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Our outstanding debt at December 31, 2023 and 2022 consisted of the following (in thousands):

February 2022 First Lien Loan

Shoko Chukin Bank Loan

Total long-term debt, gross

3 unchanged sentences

Total long-term debt, net

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

June 2017 Term Loans

O n June 30, 2017, we entered into a $ 575.0 million first lien debt facility, comprised of a $ 50.0 million revolving facility and a $ 525.0 million term loan (the “June 2017 First Lien Loan”), and a second lien credit facility, comprised of a $ 185.0 million second lien term loan (the “June 2017 Second Lien Loan”).

The First Lien Loan was amended to upsize the committed amount by $ 115.0 million on July 2, 2018.

On June 30, 2017, we entered into a $ 575.0 million first lien debt facility, comprising a $ 50.0 million revolving credit facility and a $ 525.0 million term loan (the “June 2017 First Lien Loan”), and a second lien credit facility, comprising a $ 185.0 million second lien term loan (the “June 2017 Second Lien Loan”).

The June 2017 First Lien Loan was amended to upsize the committed amount by $ 115.0 million on July 2, 2018.

On October 28, 2019 , we paid off the June 2017 Second Lien Loan balance.

The underlying revolving credit facility, part of the June 2017 First Lien Loan, was subsequently retired on May 22, 2020.

On October 18, 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 PIPE Financing.

On February 3, 2022, we repaid $ 190.7 million of the outstanding balance of the June 2017 First Lien Loan and refinanced the remaining balance with a new $ 275.0 million term loan.

The June 2017 First Lien Loan was held by third-party financial institutions and was carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

The fair value was estimated using quoted prices that are directly observable in the marketplace.

Therefore, the fair value is estimated on a Level 2 basis.

At December 31, 2021, the June 2017 First Lien Loan had a fair value of $ 465.1 million as compared to the carrying amount of $ 460.1 million.

The revolving credit facility component of the first lien debt facility was retired on May 22, 2020.

On February 3, 2022, we repaid the outstanding balance of $ 190.7 million from the June 2017 First Lien Loan and refinanced the remaining balance with a new $ 275.0 million term loan.

February 2022 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 term loan (the "February 2022 First Lien Loan") with a maturity date of February 3, 2029 .

In connection with the February 2022 First Lien Loan, we also entered into a new revolving credit facility (the “Revolving Facility”), which allows for an aggregate principal amount of $ 100.0 million and has a maturity date of February 3, 2027 .

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

The terms of the February 2022 First Lien Loan specified a secured overnight financing rate (“SOFR”) based floating interest rate and revised the springing financial covenant under the June 2017 First Lien Loan to require 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.

It requires quarterly amortization payments of $ 0.7 million.

On February 3, 2022, we entered into an amendment which refinanced the remaining balance of 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.

At December 31, 2023, we had no outstanding borrowings under the Revolving Facility.

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.

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

The Revolving Facility does not require periodic payments.

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.

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

Our February 2022 First Lien Loan is held by third-party financial institutions and is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

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.

The February 2022 First Lien Loan is held by third-party financial institutions and is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

The fair value was estimated using quoted prices that are directly observable in the marketplace.

Therefore, the fair value is estimated on a Level 2 basis.

At December 31, 2022, the fair value of our February 2022 First Lien Loan approximates the carrying value.

At December 31, 2023 and 2022, the fair value of the February 2022 First Lien Loan approximated the carrying value.

We are subject to certain reporting and compliance-related covenants to remain in good standing under the February 2022 First Lien Loan.

These covenants, among other things, limit our ability to incur additional indebtedness, and in certain circumstances, create restrictions on the ability to enter into transactions with affiliates;

create liens;

merge or consolidate;

and make certain payments.

These covenants, among other things, limit our ability to incur additional indebtedness and, in certain circumstances, to enter into transactions with affiliates, create liens, merge or consolidate and make certain payments.

Non-compliance with these covenants and failure to remedy could result in the acceleration of the loans or foreclosure on the collateral.

As of December 31, 2022, we were in compliance with all of our debt covenants related to the February 2022 First Lien Loan.

Due to the refinancing of the June 2017 First Lien Loan with the February 2022 First Lien Loan, we incurred a loss of $ 4.3 million for the year ended December 31, 2022, which is presented in Loss on extinguishment of debt in the Consolidated Statements of Operations.

May 2020 First Lien Loan

As of December 31, 2023, we were in compliance with all debt covenants related to the February 2022 First Lien Loan.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

On May 22, 2020, we entered into a $ 260.0 million first lien term loan (the “May 2020 First Lien Loan”) that is pari passu with the June 2017 First Lien Loan.

The proceeds from the May 2020 First Lien Loan were used for general corporate purposes and to extinguish and retire t he revolving facility rel ated to the June 2017 First Lien Loan in full.

The May 2020 First Lien Loan had no required amortization payments.

All obligations under the May 2020 First Lien Loan were secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our assets.

The interest rate for the May 2020 First Lien Loan was determined using a LIBOR rate plus an applicable margin of 9.50 % per annum, or a base rate plus an applicable margin of 8.50 % per annum.

The LIBOR rate was subject to a 1.00 % floor and the base rate was subject to a 2.00 % floor.

All obligations under the May 2020 First Lien Loan were secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our assets.

For any period ending prior to May 22, 2022, we had the option of submitting paid-in-kind elections, whereby the entire outstanding balance would be charged interest at 11.50 % per annum and interest amounts will be added to the outstanding principal.

On and after May 22, 2022 but prior to May 22, 2023, we had the option of submitting paid-in-kind elections with respect to all or some of the outstanding balance, whereby the portion for which such paid-in-kind election was made will be charged interest at a rate equal to the sum of i) 5.0 % per annum and ii) at our election, a LIBOR rate plus an applicable margin of 5.00 % per annum, or a base rate plus an applicable margin of 4.00 % per annum.

Under the terms of the May 2020 First Lien Loan, for certain prepayments and repricing transactions that occurred prior to May 22, 2023, we would owe a prepayment penalty of 3.0 % on the first $ 91.0 million of prepayments.

For prepayments greater than $ 91.0 million prior to May 22, 2022, the amount exceeding $91.0 million would be subject to a prepayment penalty equal to the greater of i) 6.0 % and ii) the excess of the discounted measure of principal and interest due upon the second anniversary of the effective date and the outstanding principal at the time of the prepayment.

For prepayments greater than $91.0 million on or after May 22, 2022 and prior to May 22, 2023, the amount exceeding $ 91.0 million would be subject to a prepayment penalty equal to 6.0 %.

Our May 2020 First Lien Loan was not traded and was carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

On October 18, 2021, in connection with, and using the proceeds from the Merger Transaction, we paid off in full the May 2020 First Lien Loan balance.

The debt extinguishment resulted in a loss of $ 34.1 million, which is presented in Loss on extinguishment of debt in the Consolidated Statements of Operations.

The loss consists of a $ 28.0 million prepayment penalty and the remaining balance of the original issuance discount and issuance costs of $ 6.1 million.

Shoko Chukin Bank Loan

In connection with our acquisition of Wavedash, we assumed long-term debt 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.

The fair value was estimated using quoted prices that are directly observable in the marketplace.

Therefore, the fair value is estimated on a Level 2 basis.

At December 31, 2023 the fair value of our Shoko Chukin Bank Loan approximated the carrying value.

Future maturities of our outstanding debt, excluding interest, as of December 31, 2023 were as follows (in thousands):

1 unchanged sentence

We have a defined contribution and profit-sharing 401(k) plan that covers substantially all employees who meet eligibility requirements.

Participants may contribute to the plan, through regular payroll deductions, an amount subject to limitations imposed by the Internal Revenue Code.

Participants may contribute to the plan, through regular payroll deductions, an amount subject to limitations imposed by the Internal Revenue Service (the "IRS").

The plan also provides for discretionary profit-sharing contributions and matching contributions.

We contributed approximately $ 1.3 million, $ 0.8 million, and $ 0.9 million in matching contributions for the years ended December 31, 2022, 2021, and 2020, respectively, and is included in

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

General and administrative expense in the Consolidated Statements of Operations.

We contributed approximately $ 1.6 million, $ 1.3 million and $ 0.8 million in matching contributions for the years ended December 31, 2023, 2022 and 2021, respectively.

Matching contributions expense is included in General and administrative expense in the Consolidated Statements of Operations.

For the years ended December 31, 2023, 2022 and 2021 there were no discretionary profit-sharing contributions.

6 unchanged sentences

The credit valuation adjustment associated with the derivatives, related to the likelihood of default by us and the counterparty, was not significant to the overall valuation.

Interest Rate Swaps

On November 10, 2017, we purchased pay-fixed, receive-float interest rate swaps with a combined notional value of $ 520.7 million on September 30, 2020.

The interest rate swaps matured on September 30, 2020.

The interest rate swaps had a fixed rate of 1.9 %.

The interest rate swaps were purchased to reduce a portion of the exposure to fluctuations in LIBOR interest rates associated with our variable-rate term loan.

The objective in using the swaps was to add stability to interest expense and to manage the exposure to interest rate movements.

The interest rate swaps are designated as effective cash flow hedges involving the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreement without exchange of the underlying notional amount.

We performed a regression analysis at inception of the hedging relationship to assess the effectiveness.

The design of the regression analysis addresses the effectiveness of the hedging relationship by considering how the hedge instrument performs against the forecasted transaction or hypothetical interest rate swaps over historical months.

The changes in the fair value of the hedge instrument and the hedged item over the historical months demonstrated the effectiveness of the hedge relationship as the prospective and retrospective test.

On an ongoing basis, we assessed hedge effectiveness prospectively and retrospectively.

The hedge continued to be highly effective through its maturity date.

The amount recognized in Interest expense —

net in the Consolidated Statements of Operations was $ 4.3 million for the year ended December 31, 2020.

Interest Rate Cap

On November 26, 2018, we entered into an interest rate cap with an effective date of September 30, 2020.

We paid $ 1.0 million to enter into the cap.

The notional value was $ 516.8 million on September 30, 2021.

On November 26, 2018, we paid $ 1.0 million to enter into an interest rate cap with an effective date of September 30, 2020 (the "Interest Rate Cap").

The notional value of the Interest Rate Cap was $ 516.8 million on September 30, 2021.

The Interest Rate Cap matured on September 30, 2021.

1 unchanged sentence

The Interest Rate Cap was purchased to reduce a portion of the exposure to fluctuations in LIBOR interest rates associated with our variable-rate term loan.

The objective in using the cap is to add stability to interest expense and to manage the exposure to interest rate movements.

Interest rate caps involve the borrower paying the hedge provider an initial one-time fee in exchange for the hedge provider paying the borrower the excess of the floating interest rate payment above a strike rate, in the event that the floating interest rate is greater than the strike rate during the period between the effective date and maturity date.

We performed a regression analysis at inception of the hedging relationship to assess the effectiveness.

The design of the regression analysis addressed the effectiveness of the hedging relationship by considering how the hedge instrument performs against the forecasted transaction or hypothetical interest rate cap over historical months.

Historical changes in the fair value of the hedge instrument and the underlying item demonstrated the effectiveness

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

of the hedging relationship.

The objective in using the Interest Rate Cap was to add stability to interest expense and to manage the exposure to interest rate movements.

We performed a regression analysis at the inception of the hedging relationship to assess the effectiveness.

The design of this analysis addressed the effectiveness of the hedging relationship by considering how the hedge instrument performs against the forecasted transaction or hypothetical interest rate cap over historical months.

Historical changes in the fair value of the hedge instrument and the underlying item demonstrated the effectiveness of the hedging relationship.

On an ongoing basis, we assess hedge effectiveness prospectively and retrospectively.

The hedge continued to be highly effective through its maturity.

The interest rate cap is measured at fair value, which was zero at December 31, 2020.

Effect of Derivative Contracts on Accumulated Other Comprehensive Loss ("AOCL") and Earnings

Since we designated the financial instruments as effective cash flow hedges that qualify for hedge accounting, net interest payments are recorded in Interest expense –

net in the Consolidated Statements of Comprehensive Income (Loss), and unrealized gains or losses resulting from adjusting the financial instruments to fair value are recorded as a component of Other comprehensive loss and subsequently reclassified into earnings in the same period during which the hedged transaction affects earnings.

During the years ended December 31, 2021 and 2020, we reclassified losses of $ 0.8 million and $ 0.2 million, respectively, into Interest expense –

net from AOCL related to the interest rate cap.

Effect of Derivative Contracts on Accumulated Other Comprehensive Income (Loss) ("AOCL") and Earnings

Since we designated the Interest Rate Cap as an effective cash flow hedge that qualifies for hedge accounting, net interest payments were recorded in Interest expense – net in the Consolidated Statements of Comprehensive Income (Loss), and unrealized gains or losses resulting from adjusting the financial instruments to fair value are recorded as a component of Other comprehensive loss and subsequently reclassified into earnings in the same period during which the hedged transaction affects earnings.

During the year ended December 31, 2021, we reclassified losses of $ 0.8 million into Interest expense – net from AOCL related to the Interest Rate Cap.

Cash flows resulting from settlements are presented as a component of cash flows from operating activities within the Consolidated Statements of Cash Flows.

The following table presents the effects of hedge accounting on AOCL for the year ended December 31, 2021 for interest rate contracts designated as cash flow hedges (in thousands):

The following table presents the effects of the Interest Rate Cap hedge accounting on AOCL for the year ended December 31, 2021 (in thousands):

Interest rate cap

3 unchanged sentences

Ending accumulated derivative loss in AOCL

The following table presents the effects of hedge accounting on AOCL for the year ended December 31, 2020 for interest rate contracts designated as cash flow hedges (in thousands):

Beginning accumulated derivative loss in AOCL

Amount of gain recognized in AOCL

Amount of loss reclassified from AOCL to income

Ending accumulated derivative loss in AOCL

We issued the following warrants during the year ended December 31, 2021 in connection with the Merger Transaction:

Public Warrants

W e issued warrants to purchase 18,132,776 shares of Class A common stock at an exercise price of $ 11.50 per share to former warrant holders of Horizon, of which 5,166,666 shares were issued to Horizon Sponsor.

These warrants are traded on the Nasdaq Stock Market under the symbol “SEATW.”

On May 26, 2022, we announced the commencement of an offer to the holders of outstanding Public Warrants to receive 0.240 shares of Class A common stock in exchange for each outstanding Public Warrant (the “Offer”).

On July 5, 2022, a total of 11,365,913 public warrants were tendered for 2,727,785 shares of Class A common stock (the “Exchange”).

W e issued to former warrant holders of Horizon Public Warrants to purchase 18,132,776 shares of Class A common stock at an exercise price of $ 11.50 per share, of which Public Warrants to purchase 5,166,666 shares of Class A common stock were issued to Horizon Sponsor.

The Public Warrants are traded on the Nasdaq Stock Market ("Nasdaq") under the symbol “SEATW.”

On May 26, 2022, we announced the commencement of an offer to the holders of outstanding Public Warrants to receive 0.240 shares of Class A common stock in exchange for each properly tendered outstanding Public Warrant (the “Offer”).

On July 5, 2022, 11,365,913 Public Warrants were tendered in exchange for 2,727,785 shares of Class A common stock (the “Exchange”).

Following the Exchange, 6,766,853 Public Warrants remained outstanding.

During the year ended December 31, 2022, ten Public Warrants were exercised.

The exercise of the Public Warrants are accounted for as a

During the year ended December 31, 2022, 10 Public Warrants were exercised.

The exercise of the Public Warrants are accounted for as a transaction within Additional paid-in capital in the Consolidated Balance Sheets.

As of December 31, 2023, there were 6,766,853 o utstanding Public Warrants.

We may, in our sole discretion, reduce the exercise price of the Public Warrants to induce early exercise, provided that we provide at least five days' advance notice.

The exercise price and number of shares of Class A common stock

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

transaction within Additional paid-in capital in the Consolidated Balance Sheets.

As of December 31, 2022, we had 6,766,853 outstanding Public Warrants.

We may, in our sole discretion, reduce the exercise price of the Public Warrants to induce early exercise, provided that we provide at least five days advance notice.

The exercise price and number of Class A common stock shares issuable upon exercise of the Public Warrants may also be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation.

issuable upon exercise of the Public Warrants may also be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation.

In no event are we required to net cash settle the Public Warrants.

The Public Warrants became exercisable 30 days following the Merger Transaction and expire at the earliest of five years following the Merger Transaction, our liquidation, or the date of redemption elected at our option provided that the value of the Class A common stock exceeds $ 18.00 per share.

There is an effective registration statement and prospectus relating to the shares issuable upon exercise of the Public Warrants.

Under certain circumstances, we may elect to redeem the Public Warrants at a redemption price of $ 0.01 per Public Warrant at any time during the term of the Public Warrant in which our Class A common stock share trading price has been at least $ 18.00 per share for 20 trading days within the 30 trading-day period.

If we elect to redeem the Public Warrants, we must notify the Public Warrant holders in advance, who would then have at least 30 days from the date of notification to exercise their respective warrants.

If the Public Warrant is not exercised within that 30-day period, it will be redeemed pursuant to this provision.

The Public Warrants became exercisable 30 days following the Merger Transaction and expire at the earliest of five years following the Merger Transaction, our liquidation or the date of our optional redemption thereof provided that the value of the Class A common stock exceeds $ 18.00 per share.

There is an effective registration statement and prospectus relating to the shares of Class A common stock issuable upon exercise of the Public Warrants.

Under certain circumstances, we may elect to redeem the Public Warrants at a redemption price of $ 0.01 per Public Warrant at any time during the term of the Public Warrants in which the trading price of the Class A common stock has been at least $ 18.00 per share for 20 trading days within a 30 trading-day period.

If we elect to redeem the Public Warrants, we must notify the Public Warrant holders in advance, who would then have at least 30 days from the date of such notification to exercise their respective Public Warrants.

Any Public Warrants not exercised within that 30-day period will be redeemed pursuant to this provision.

As part of the Merger Transaction, we modified the terms of the Public Warrants.

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Private Warrants

We issued warrants to purchase 6,519,791 shares of our Class A common stock at an exercise price of $ 11.50 per share to the Sponsor.

The Private Warrants have similar terms to the Public Warrants, except that the Private Warrants are not redeemable by us.

We issued to Horizon Sponsor Private Warrants to purchase 6,519,791 shares of Class A common stock at an exercise price of $ 11.50 per share.

The Private Warrants have similar terms to the Public Warrants, except that they are not redeemable by us.

As of December 31, 2023, there were 6,519,791 outstanding Private Warrants.

As part of the Merger Transaction, we modified the terms of the Private Warrants.

The modification did not result in a transfer of incremental value to the warrant holders.

As of December 31, 2022, we ha d 6,519,791 o utstanding Private Warrants.

The modification did not result in a transfer of incremental value to the holders of the Private Warrants.

Exercise Warrants

We issued warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share (“$ 10 Exercise Warrants”) and warrants to purchase 17,000,000 of Class A common stock at an exercise of $ 15.00 per share (“$ 15 Exercise Warrants”;

together with the $ 10 Exercise Warrants, “Exercise Warrants”).

The Exercise Warrants have similar terms to the Public Warrants, except that the Exercise Warrants have different exercise prices, an initial term of 10 years , are not redeemable by us, and are fully transferable.

As of December 31, 2022, we had 17,000,000 $ 10 Exercise Warrants outstanding and 17,000,000 $ 15 Exercise Warrants outstanding.

We issued to Horizon Sponsor (i) $ 10 Exercise Warrants to purchase 17.0 million shares of Class A common stock at an exercise price of $ 10.00 per share and (ii) $ 15 Exercise Warrants to purchase 17.0 million shares of Class A common stock at an exercise of $ 15.00 per share.

The Exercise Warrants have similar terms to the Public Warrants, except that they have different exercise prices, an initial term of 10 years , are not redeemable by us and are fully transferable.

As of December 31, 2023, there were outstanding 17.0 million $ 10 Exercise Warrants and 17.0 million $ 15 Exercise Warrants.

Mirror Warrants

Hoya Intermediate issued warrants to VSI to purchase 17,000,000 Intermediate Units at an exercise price of $ 10.00 per unit (“$ 10 Mirror Warrants”), warrants to purchase 17,000,000 Intermediate Units at an exercise of $ 15.00 per unit (“$ 15 Mirror Warrants”), warrants to purchase 24,652,557 Intermediate Units at an exercise price of $ 11.50 per unit (“$ 11.50 Mirror Warrants”;

together with the $ 10 Mirror Warrants and $ 15 Mirror Warrants, “Mirror Warrants”).

The number and terms of the Mirror Warrants are identical to the Public, Private and Exercise Warrants, respectively.

Upon the valid exercise of a Public Warrant, Private Warrant and Exercise Warrant, Hoya Intermediate will issue to VSI an equivalent number of Intermediate Units.

Similarly, if a Public, Private or Exercise Warrant is

Hoya Intermediate issued to us warrants to purchase 17.0 million Intermediate Units at an exercise price of $ 10.00 per unit (the “$ 10 Mirror Warrants”), warrants to purchase 17.0 million Intermediate Units at an exercise of $ 15.00 per unit (the “$ 15 Mirror Warrants”), warrants to purchase 24,652,557 Intermediate Units at an exercise price of $ 11.50 per unit (the “$ 11.50 Mirror Warrants” and, together with the $ 10 Mirror Warrants and the $ 15 Mirror Warrants, the “Mirror Warrants”).

The number and terms of the Mirror Warrants are identical to the Public Warrants, the Private Warrants and the Exercise Warrants, respectively.

Upon the valid exercise of a Public Warrant, Private Warrant or Exercise Warrant, Hoya Intermediate will issue to us an equivalent number of Intermediate Units.

Similarly, if a Public Warrant, Private Warrant or Exercise Warrant is tendered, an equivalent number of Mirror Warrants will be tendered.

In connection with the Exchange, we tendered 11,365,913 $ 11.50 Mirror Warrants and received 2,727,785 Intermediate Units.

As of December 31, 2023, there were outstanding 17.0 million $ 10 Mirror Warrants, 17.0 million $ 15 Mirror Warrants and 13,286,644 $ 11.50 Mirror Warrants.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

tendered, an equivalent number of Mirror Warrants will be tendered.

In connection with the Exchange, we tendered 11,365,913 $ 11.50 Mirror Warrants and received 2,727,785 Intermediate Units.

As of December 31, 2022, we had 17,000,000 $ 10 Mirror Warrants outstanding, 17,000,000 $ 15 Mirror Warrants outstanding and 13,286,644 $ 11.50 Mirror Warrants outstanding.

As the Public Warrants, Private Warrants and Exercise Warrants are indexed to our equity and meet the equity classification guidance of ASC 815-40, we reflect these warrants as a component of equity within additional paid-in capital.

Our Mirror Warrants eliminate in consolidation and do not impact the presentation of our consolidated financial statements.

As the Public Warrants, the Private Warrants and the Exercise Warrants are indexed to our equity and meet the equity classification guidance of ASC 815-40, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, we reflect these warrants as a component of equity within additional paid-in capital.

The Mirror Warrants eliminate in consolidation and do not impact the presentation of our consolidated financial statements.

Hoya Intermediate Warrants

Hoya Intermediate issued the Hoya Intermediate Warrants, which are classified as Other Liabilities in the Consolidated Balance Sheets.

1,000,000 Hoya Intermediate Warrants to purchase Intermediate Units at exercise prices of $ 10.00 and $ 15.00 per unit, respectively (“Option Contingent Warrants”), were issued in tandem with stock options we issued to members of our management team (“Management Options”).

Hoya Intermediate issued to Hoya Topco 3.0 million $ 10 Hoya Intermediate Warrants and 3.0 million $ 15 Hoya Intermediate Warrants, which are classified as Other Liabilities in the Consolidated Balance Sheets.

A portion of the Hoya Intermediate Warrants, consisting of the Option Contingent Warrants to purchase 1.0 million Intermediate Units at exercise prices of $ 10.00 and $ 15.00 per unit, respectively, were issued in tandem with Management Options we issued to members of our management team.

The Option Contingent Warrants only become exercisable by Hoya Topco if a Management Option is forfeited or expires unexercised.

As of December 31, 2022 , 0.2 million of the corresponding Management Options had been forfeited.

Hoya Intermediate Warrants allow for cash redemption at the option of the warrant holder.

Hence, the Hoya Intermediate Warrants are classified as a liability in Other liabilities on our Consolidated Balance Sheets.

Upon the valid exercise of a Hoya Intermediate Warrant for Intermediate Units, we will issue an equivalent number of shares of Class B common stock to Hoya Topco.

As of December 31, 2022, 0.2 million Management Options had been forfeited.

Because the Hoya Intermediate Warrants allow for cash redemption at the option of the warrant holder, they are classified as a liability in Other liabilities on the Consolidated Balance Sheets.

Upon consummation of the Merger Transaction, we recorded a warrant liability of $ 20.4 million reflecting the fair value of the Hoya Intermediate Warrants determined using the Black-Scholes model.

The fair value of the Hoya Intermediate Warrants includes Option Contingent Warrants of $ 1.6 million.

The estimated fair value of the Option Contingent Warrants is adjusted to reflect the probability of forfeiture of the Management Options based on historical forfeiture rates for Hoya Topco profit interests.

The following assumptions were used to calculate the fair value of the Hoya Intermediate Warrants and Option Contingent Warrants at December 31, 2022 and 2021:

Upon consummation of the Merger Transaction, the fair value of the Hoya Intermediate Warrants included Option Contingent Warrants of $ 1.6 million.

The estimated fair value of the Option Contingent Warrants was adjusted to reflect the probability of forfeiture of the Management Options based on historical forfeiture rates for Hoya Topco profit interests.

On December 7, 2023, Hoya Topco voluntarily terminated a portion of the Hoya Intermediate Warrants, consisting of Option Contingent Warrants to purchase 1.0 million Intermediate Units at exercise prices of $ 10.00 and $ 15.00 per unit, respectively.

Immediately before such termination the fair value of the Option Contingent Warrants liability was determined using the Black-Scholes m odel and was estimated at $ 1.1 million.

Upon termination, we recorded a reduction in this liability to zero, along with an increase in Redeemable noncontrolling interests.

As of December 31, 2023, there were outstanding 2.0 million $ 10 Hoya Intermediate Warrants and 2.0 million $ 15 Hoya Intermediate Warrants.

The following assumptions were used to calculate the fair value of the Hoya Intermediate Warrants at:

December 31, 2023

December 7, 2023

December 31, 2022

Estimated volatility

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Expected dividend yield

For the year ended December 31, 2022, the fair value of the Hoya Intermediate Warrants and Option Contingent Warrants decreased by $ 8.2 million, which is presented in Other income on the Consolidated Statements of Operations.

For the period fro m October 18, 2021 until December 31, 2021, we recognized a charge to Other expenses on the Consolidated Statements of Operations resulting from an increase in the fair value of the Hoya Intermediate Warrants and Option Contingent Warrants of $ 0.1 million.

Upon the valid exercise of a Hoya Intermediate Warrant for Intermediate Units, VSI will issue an equivalent amount of VSI Class B common shares to Hoya Topco.

Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.

Redeemable noncontrolling Interests

As of December 31, 2022, Hoya Topc o held 100 % of the Class B common stock in VSI and o wned 59.5 % of the Intermediate Units.

Hoya Topco has the right to exchange its Intermediate Units for shares of VSI Class A common stock on a one-to-one basis or cash proceeds of equal value at the time of redemption.

The option to redeem Intermediate Units for cash proceeds must be approved by the Board of VSI, which as of December 31, 2022, is controlled by investors in Hoya Topco.

The ability to put Intermediate Units is solely within the control of the holder

For the year ended December 31, 2023, the fair value of the Hoya Intermediate Warrants decreased by $ 1.0 million, which is presented in Other (income) expense on the Consolidated Statements of Operations.

For the year ended December 31, 2022, the fair value of the Hoya Intermediate Warrants and the Option Contingent Warrants decreased by $ 8.2 million, which is presented in Other (income) expense on the Consolidated Statements of Operations.

For the period fro m October 18, 2021 until December 31, 2021, we recognized a charge to Other (income) expense on the Consolidated Statements of Operations resulting from an increase in the fair value of the Hoya Intermediate Warrants and the Option Contingent Warrants of $ 0.1 million.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

of the redeemable noncontrolling interests.

If Hoya Topco elects the redemption to be settled in cash, the cash used to settle the redemption must be funded through a private or public offering of Class A common stock and subject to our Board's approval.

Redeemable noncontrolling Interests

As of December 31, 2023, Hoya Topco held 100 % of the Class B common stock and 36.3 % of the Intermediate Units, representing a redeemable noncontrolling interest in VSI.

Hoya Topco has the right to exchange its Intermediate Units for shares of VSI’s Class A common stock on a one-to-one basis or for cash proceeds of equal value at the time of redemption.

The ability to exchange Intermediate Units for shares of Class A common stock is solely within the control of Hoya Topco.

The option to redeem Intermediate Units for cash proceeds must be approved by VSI's Board of Directors (the "Board"), which as of December 31, 2023 consisted of a majority of directors nominated by affiliates of Hoya Topco and GTCR, LLC pursuant to our stockholders’ agreement.

The ability to put the Intermediate Units is solely within the control of the holder of the redeemable noncontrolling interest.

If Hoya Topco elects the redemption to be settled in cash, the cash used to settle the redemption must be funded through a private or public offering of Class A common stock and is subject to the Board's approval.

Net income (loss) attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate's net income (loss) incurred in the period by Hoya Topco's weighted average percentage allocation of Intermediate Units during the period.

Refer to Note 21, Earnings per Share , for computation of net income (loss) attributable to redeemable noncontrolling interests.

See Note 22, Earnings per Share , for computation of net income (loss) attributable to redeemable noncontrolling interests.

For periods prior to the Merger Transaction, Hoya Intermediate had Senior Preferred Units, Preferred Units and Common Units, described below, authorized, issued and outstanding.

As described in Note 1, Background, Description of Business and Basis of Presentation , on October 18, 2021, we consummated a series of merger transactions between Horizon, VSI, and Hoya Intermediate.

Subsequent to the Merger Transaction, we have two classes of common stock authorized and issued by VSI:

Subsequent to the Merger Transaction, VSI has two classes of common stock authorized and issued:

Class A common stock and Class B common stock.

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In connection with the Merger Transaction, the Senior Preferred Units and the Preferred Units were redeemed and no longer remain outstanding.

As of December 31, 2022, 196,268,297 Intermediate Units are outstanding.

As of December 31, 2023, 210,100,814 Intermediate Units are outstanding, equivalent to the total number of shares of Class A and Class B common stock outstanding (net of treasury stock).

VSI holds 63.7 % of the outstanding Intermediate Units as of December 31, 2023, with the remainder held by Hoya Topco.

VSI Class A Common Stock

Holders of Class A common stock are entitled to full economic rights in VSI, including the right to receive dividends when and if declared by our Board, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.

Each holder of Class A common stock is entitled to one vote for each share of Class A common stock held.

Holders of Class A common stock are entitled to full economic rights in VSI, including the right to receive dividends when and if declared by the Board, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.

Each holder of Class A common stock is entitled to one vote for each share held.

VSI Class B Common Stock

Holders of Class B common stock do not have economic rights in VSI but are entitled to one vote for each share of Class B common stock held.

Holders of Class B common stock receive one Intermediate Unit for each Class B share (see Note 15, Redeemable Noncontrolling Interest).

Holders of Class B common stock are entitled to one vote for each share held but do not have economic rights in VSI.

However, holders of Class B common stock receive one Intermediate Unit for each share, entitling them to economic rights in our operating entity, Hoya Intermediate (see Note 16, Redeemable Noncontrolling Interest ).

Holders of Class A common stock and Class B common stock vote as a single class on all matters requiring a shareholder vote.

Following the Merger Transaction, the quantity of Class A common stock and Class B common stock outstanding net of treasury stock is equal to the quantity of Intermediate Units outstanding.

Following the Merger Transaction, the number of shares of Class A common stock and Class B common stock outstanding, net of treasury stock, is equal to the quantity of Intermediate Units outstanding.

Share Repurchase Program

On May 25, 2022, the Board authorized a share repurchase program for up to $ 40.0 million of 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.

As of December 31, 2023 and 2022, we have repurchas ed 5.3 million shares of Class A common stock for $ 40.0 million a nd 4.3 million shares of Class A common stock for $ 32.5 million, respectively.

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

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

June 2023 Secondary Offering

We completed a public offering of 18.4 million shares of 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").

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

We did no t receive any proceeds from the sale of the shares by Hoya Topco in the June 2023 Secondary Offering.

In connection with the June 2023 Secondary Offering, we incurred $ 1.5 million of expenses during the year ended December 31, 2023, which are included within General and administrative expenses in the Consolidated Statements of Operations .

December 2023 Secondary Offering and Share Repurchase

On December 12, 2023, we completed a public offering of 23.575 million shares of 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, together with the June 2023 Secondary Offering, the “2023 Secondary Offerings”) 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, were sold at a public offering price of $ 6.50 per share.

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

We did no t receive any proceeds from the sale of the shares by Hoya Topco in the December 2023 Secondary Offering.

In connection with the December 2023 Secondary Offering, we incurred $ 0.7 million of expenses during the year ended December 31, 2023, which are included within General and administrative expenses in the Consolidated Statements of Operations.

Pursuant to the underwriting agreement for the December 2023 Secondary Offering, we repurchased 2.0 million shares of 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.

The shares repurchased pursuant to the Share Repurchase are accounted for as Treasury stock in the Consolidated Balance Sheets.

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in each component of AOCL attributable to Class A Common Stockholders (in thousands):

Balance at January 1, 2023

Other comprehensive income

Balance at December 31, 2023

Commitments and Contingencies

Purchase Obligations

We enter into non-cancelable arrangements, primarily related to the purchase of marketing services and tickets at an agreed upon price.

Our purchase obligations are $ 2.7 million payable in the next twelve months and $ 5.2 million payable thereafter.

From time to time, we are involved in various claims and legal actions arising in the ordinary course of business, none of which, in the opinion of management, could have a material effect on our business, financial position or results of operations other than those matters discussed herein.

We enter into non-cancelable arrangements, primarily related to the purchase of marketing services and tickets at an agreed upon pr ice.

Our purchase obligations are $ 7.2 million payable in the next 12 months and $ 8.2 million payable thereafter.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We are a co-defendant in a class action lawsuit in Canada alleging a failure to disclose service fees prior to checkout, which we have settled.

On January 5, 2022, we issued coupons to certain members of the class.

Other members were notified in 2022 that they are eligible to submit a claim for a coupon, which they will receive in 2023.

As of December 31, 2022 and December 31, 2021, a liability of $ 0.9 million was recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to expected claim submissions and credit redemptions as of the measurement date.

We are a co-defendant in a class action lawsuit in Canada alleging a failure to disclose service fees prior to checkout.

A final order approving the settlement of this lawsuit was entered by the court in August 2020.

In January 2022, we issued coupons to certain members of the class.

Other members of the class were notified in 2022 that they are eligible to submit a claim for a coupon, which they will receive in 2023.

As of December 31, 2023 and 2022, a liability of $ 0.9 million was recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to expected claim submissions and credit redemptions as of the measurement date.

We received multiple class action lawsuits related to customer compensation for cancellations, primarily as a result of COVID-19 restrictions.

A final order approving settlement of one of the lawsuits was entered by the court on November 1, 2021 .

A final order approving the settlement of one of the lawsuits was entered by the court in November 2021 .

As such, after insurance, $ 4.5 million was funded to a claims settlement pool in 2021 and fully disbursed in 2022.

A settlement was reached in another of the lawsuits in July 2022 which established a separate claims settlement pool of up to $ 2.5 million.

That settlement received final approval from the court on January 31, 2023 and the settlement pool will be funded in 2023.

As of December 31, 2022 and December 31, 2021, we had accrued a liability of $ 1.6 million and $ 1.7 million, respectively, within Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to these matters.

We expect to recover some of these costs under our insurance policies and have separately recognized an insurance recovery asset of $ 0.5 million within Prepaid expenses and other current assets in the Consolidated Balance Sheets at December 31, 2022 and December 31, 2021, respectively.

A settlement was reached in another of the lawsuits in July 2022 and received final approval from the court on January 31, 2023.

After insurance, we paid $ 3.3 million to cover legal and administrative fees and approved claims.

Payments for approved claims were made in August 2023.

We had an accrued liability of zero and $ 1.6 million as of December 31, 2023 and 2022, respectively, within Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to these matters.

We are a defendant in a lawsuit related to an alleged violation of the Illinois Biometric Information Privacy Act.

We deny these allegations and intend to vigorously defend against this lawsuit.

Based on the information currently available, we are unable to reasonably estimate a possible loss or range of possible losses and no litigation reserve has been recorded in the Consolidated Balance Sheets related to this matter.

In 2018, the U.S.

Supreme Court issued its decision in South Dakota v.

Wayfair Inc., which overturned previous case law that had precluded states from imposing sales tax collection requirements on retailers without a physical presence in the state.

In response, most states have already adopted laws that attempt to impose tax collection obligations on out-of-state companies, and we have registered and are collecting tax, where required by statute.

However, states or local governments may continue to adopt laws requiring that we calculate, collect, and remit taxes on sales in their jurisdictions.

A successful assertion by one or more jurisdictions could result in tax liabilities, including taxes on past sales, as well as penalties and interest.

Based on our analysis of certain state regulations, specifically related to marketplace facilitators and ticket sales, we do not believe risk of loss is probable on historical revenue activities where tax has not already been remitted.

Wayfair Inc., which overturned previous case law that had precluded state and local governments from imposing sales tax collection requirements on retailers without a physical presence.

In response, most jurisdictions have adopted laws that attempt to impose tax collection obligations on out-of-state companies, and we have registered and begun collecting tax, where required by statute.

It is reasonably possible that state or local governments will continue to adopt or interpret laws such that we are required to calculate, collect, and remit taxes on sales in their jurisdictions.

A successful assertion by one or more jurisdictions could result in material tax liabilities, including uncollected taxes on past sales, as well as penalties and interest.

Based on our analysis of certain state and local regulations, specifically related to marketplace facilitators and ticket sales, we have recorded liabilities in all jurisdictions where we believe a risk of loss is probable.

We continuously monitor state regulations and will implement required collection and remittance procedures if and when we are subject to such regulations.

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 the Consolidated Balance Sheets.

As of December 31, 2023, we have recorded a liability of $ 3.2 million related to uncollected local admissions taxes.

This liability is recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The related non-income tax expense was $ 3.2 million for the year ended December 31, 2023 .

Related –Party Transactions

Vivid Cheers Inc.

In December 2020, Vivid Cheers Inc.

(“Vivid Cheers”) was incorporated as a non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code.

Vivid Cheers’

mission is to support causes and organizations dedicated to healthcare, education, and support of workers in the live events industry during times of

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We have the right to elect the Board of Directors of Vivid Cheers, which currently comprises our executives.

We do not have a controlling financial interest in Vivid Cheers, and accordingly, do not consolidate Vivid Cheers’

statement of activities with its financial results.

We made charitable contributions of $ 0.6 million and $ 2.4 million for the years ended December 31, 2022 and 2021, respectively to Vivid Cheers.

We had no accrued charitable contributions payable as of December 31, 2022 and had $ 1.3 million of accrued charitable contributions payable as of December 31, 2021, which is included in Accrued expenses and other current liabilities in the Consolidated Balance Sheet.

Viral Nation Inc.

1 unchanged sentence

("Viral Nation") is a marketing agency that creates viral and social media influencer campaigns and provides advertising, marketing, and technology services.

Todd Boehly, a member of our Board, is the co-founder, Chairman and CEO of Eldridge Industries, which owns in excess of 25% of Viral Nation.

We incurred an expense of $ 0.8 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively, which is presented in Marketing and selling expenses in the Consolidated Statements of Operations.

Todd Boehly, a member of the Board, serves on the board of directors of Viral Nation and is the Co-Founder, Chairman and CEO of Eldridge Industries, LLC (“Eldridge”), which owns approximately 19% of Viral Nation.

We incurred an expense of $ 1.7 million, $ 0.8 million and $ 0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively, which is presented in Marketing and selling expenses in the Consolidated Statements of Operations.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Rolling Stone

Rolling Stone is a high-profile magazine and media platform that focuses on music, film, TV, and news coverages.

Todd Boehly, a member of our Board, is the co-founder, Chairman and CEO of Eldridge Industries, which owns in excess of 20% of Rolling Stone.

We incurred an expense of $ 0.9 million and $ 0.1 million as part of our multifaceted partnership with Rolling Stone for the years ended December 31, 2022 and 2021, respectively, which is presented in Marketing and selling expenses in the Consolidated Statements of Operations.

Khoros, LLC ("Khoros") is a social media engagement and management platform.

Martin Taylor, a member of our Board, is a principal at Vista Equity Partners, which is one of our investors and a majority owner of Khoros.

We incurred an expense of $ 0.1 million and zero for the years ended December 31, 2022 and 2021, respectively, which is presented in General and administrative expenses in the Consolidated Statements of Operations.

We are subject to U.S.

Rolling Stone, LLC ("Rolling Stone") is a high-profile magazine and media platform that focuses on music, film, television, and news coverage.

Todd Boehly, a member of the Board, is the Co-Founder, Chairman and CEO of Eldridge, which owns in excess of 20% of Rolling Stone.

We incurred an expense of $ 0.7 million, $ 0.9 million and $ 0.1 million as part of our multifaceted partnership with Rolling Stone for the years ended December 31, 2023, 2022 and 2021, respectively, which is presented in Marketing and selling expenses in the Consolidated Statements of Operations.

Los Angeles Dodgers

The Los Angeles Dodgers (the “Dodgers”) is a Major League Baseball team based in Los Angeles, California.

Todd Boehly, a member of the Board, is a minority owner of the Dodgers.

As part of our strategic partnership with the Dodgers, including our designation as the Official Ticket Marketplace of the Dodgers and certain other advertising, marketing, promotional and sponsorship benefits, we incurred an expense of $ 1.5 million for the year ended December 31, 2023, which is presented in Marketing and selling expenses on the Consolidated Statements of Operations.

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.

Share Repurchase

Hoya Topco controls 36.3 % of the voting power of our outstanding common stock.

On December 12, 2023, we repurchased 2.0 million shares of Class A common stock from the underwriters of the December 2023 Secondary Offering.

The shares were initially purchased by the underwriters from Hoya Topco, the selling stockholder in the

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

December 2023 Secondary Offering, at a price of $ 6.24 per share.

We paid the same price per share to the underwriters, which was funded with cash on hand.

See Note 17, Equity, for more information regarding the December 2023 Secondary Offering and the Share Repurchase.

VSI is subject to U.S.

federal and state income taxes with respect to our allocable share of any taxable income or loss of Hoya Intermediate, as well as any stand-alone income or loss we generate.

Hoya Intermediate is organized as a limited liability company and treated as a partnership for federal tax purposes, with the exception to the Canadian operations of Vivid Seats Canada Ltd.

(formerly Fanxchange Ltd.), which we acquired in 2019.

Hoya Intermediate’s taxable income or loss is passed through to its members, including VSI.

VSI files and pays corporate income taxes for U.S.

federal and state income tax purposes.

Hoya Intermediate is organized as a limited liability company and treated as a partnership for federal and state income tax purposes.

Generally, entities characterized as a partnership for federal and state income tax purposes are not subject to entity-level income taxes.

Hoya Intermediate’s taxable income or loss is passed through to its members, including VSI and Hoya Topco, each of whom are responsible for their own U.S.

federal and state income taxes.

Other subsidiaries of VSI are treated as corporations and will separately file and pay taxes apart from VSI in various jurisdictions, including the United States (federal, state, and local), Canada, and Japan.

We anticipate this structure to remain in existence for the foreseeable future.

Components of (loss) income from continuing operations before income taxes for the years ended December 31 were as follows (in thousands):

Components of income (loss) from operations before income taxes for the years ended December 31 2023, 2022 and 2021 were as follows (in thousands):

United States

Total (loss) income before income taxes

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Prior to 2021, we did not incur material amounts of income tax expense or have material income tax liability or deferred tax balances.

Total income (loss) before income taxes

During the years ended December 31, 2023, 2022 and 2021, significant components of income tax expense (benefit) were as follows (in thousands):

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Total income tax expense (benefit)

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

A reconciliation of income taxes computed at the U.S.

federal statutory income tax rate of 21 % for 2022 and 2021 to our income tax (expense) benefit was as follows:

federal statutory income tax rate of 21 % for the years ended December 31, 2023, 2022 and 2021 to our income tax (expense) benefit was as follows:

statutory tax rate

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Pass-through loss / (income)

Noncontrolling interest

Noncontrolling interests

Change in valuation allowance

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Research & Development Credit

Impact of restructuring

Limitation on compensation deductions

Total income tax expense (benefit)

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Investment in partnerships

Tax Receivable Agreement

Stock-based compensation

Total deferred tax assets

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Net Deferred Tax Assets / (Liabilities)

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We recognize deferred tax assets to the extent we believe these assets are more likely than not to be realized.

Valuation allowances have been established primarily with regard to the tax benefits of certain net operating losses, tax credits, as well as its investment in partnership.

Valuation allowances have been established primarily with regard to the tax benefits of a portion of our investment in partnership and certain foreign tax attributes.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

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Excluded from the deferred tax asset for investment in partnerships above is a portion of the income tax basis in the partnership investment which will only reverse upon sale as a capital loss.

As the Company does not expect to have sufficient sources of future capital gains to offset this future capital loss, the Company has not recorded a deferred tax asset for this portion of the basis difference in the investment in the partnership.

As we do not expect to have sufficient sources of future capital gains to offset this future capital loss, we have not disclosed a deferred tax asset for this portion of the basis difference in the investment in the partnership, nor the associated valuation allowance.

However, reflected in Income tax expense (benefit) for the year ended December 31, 2023 is a valuation allowance release of $ 6.1 million related to the excluded portion of the deferred tax asset and valuation allowance on the basis difference in the investment in the partnership, which $ 5.8 million resulted from the 2023 Secondary Offerings and

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

$ 0.3 million resulted from the Share Repurchase.

We estimate that up to $ 12.7 million of future valuation allowance release associated with the excluded portion of the deferred tax asset and valuation allowance may result from future ownership changes.

We continue to disclose the deferred tax asset associated with items expected to be recovered through ordinary business operations;

however, the portion of deferred tax asset disclosed for which no ordinary tax benefit is expected due to partnership allocation rules is offset by a valuation allowance.

The deferred tax asset valuation allowance and changes were as follows (in thousands):

Balance at beginning of period

Charged to costs and expenses

Prior period adjustments (1)

(Credited) charged to costs and expenses

(Credited) charged to other accounts

Ending balance

(1) This relates to a true-up of the investment in partnership deferred tax asset and related valuation allowance which has been updated to remove the basis that will only reverse upon sale as a capital loss.

As of December 31, 2022, we determined that there is sufficient positive evidence to conclude that it is more likely than not that our Canadian deferred taxes of $ 1.9 million are realizable.

(1) In 2022, this adjustment relates to a true-up of the investment in partnership deferred tax asset and related valuation allowance which has been updated to remove partnership tax basis that we expect will only reverse upon sale as a capital loss.

In 2023, there was an adjustment to the investment in partnership and net operating loss deferred tax assets and related valuation allowance.

These adjustments had no net impact to tax expense (benefit) in either period.

As of December 31, 2023, our deferred tax assets were primarily the result of our investment in partnership, Tax Receivable Agreement, net operating losses, interest limitations, and tax credit carryforwards.

As of December 31, 2022, a full valuation allowance was maintained against our U.S.

deferred tax assets on the basis of our reassessment of the amount of the deferred tax assets that are more likely than not to be realized.

As of each reporting date we consider new evidence, both positive and negative, that could affect our view of the future realization of deferred tax assets.

As of June 30, 2023, in part because in the current year we entered into a cumulative income position in the U.S.

federal tax jurisdiction, we determined that there is sufficient positive evidence to conclude that it is more likely than not that deferred tax assets of $ 31.3 million associated with our investment in partnership, U.S.

net operating losses, interest limitations, and tax credit carryforwards are realizable.

We therefore reduced the valuation allowance accordingly .

We expect to continue maintaining a full valuation allowance on our U.S.

net deferred tax asset until there is sufficient positive evidence to support the reversal of a portion of this allowance.

However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 3-6 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion or the entirety of the valuation allowance will no longer be necessary to be recorded against our U.S.

net deferred tax assets.

Release of the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and an income tax benefit in the period in which the release of the valuation allowance is recorded.

However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of positive evidence becoming available.

As of December 31, 2022, we determined that there was sufficient positive evidence to conclude that it is more likely than not that our Canadian deferred taxes of $ 1.9 million are realizable.

We therefore reduced the valuation allowance accordingly.

At December 31, 2023, we had U.S.

state operating loss carryforwards totaling $ 23.0 million, U.S.

state operating loss carryforwards totaling $ 17.5 million, and U.S.

federal operating loss carryforwards totaling $ 38.6 million.

federal and state operating loss carryforwards begin to expire in 2029 with $ 46.4 million of the operating loss carryforwards having no expiration date.

At December 31, 2022, with respect to our operations outside the U.S., we had foreign operating loss carryforwards totaling $ 5.3 million.

The foreign operating loss carryforwards begin to ex pire in 2037 .

At December 31, 2022, we were not indefinitely reinvested on undistributed earnings from our foreign operations and the deferred tax liability associated with the future repatriation of these earnings is expected to be immaterial.

ASC 740, Income Taxes, prescribes a recognition threshold of more-likely-than not to be sustained upon examination as it relates to the accounting for uncertainty in income tax benefits recognized in an enterprise’s financial statements.

Certain of the U.S.

federal and state operating loss carryforwards begin to expire in 2029 with the remainder of the federal and state net operating loss carryforwards having no expiration date.

Certain tax attributes remain subject to an annual limitation under Internal Revenue Code section 382 as a result of the historical acquisitions.

At December 31, 2023, with respect to our operations outside the United States, we had foreign operating loss carryforwards totaling $ 8.1 million, which begin to ex pire in 2037 .

At December 31, 2023, we were not indefinitely reinvested on undistributed earnings from our foreign operations and the deferred tax liability associated with the future repatriation of these earnings is immaterial.

ASC 740, Income Taxes , prescribes a recognition threshold of more-likely-than not to be sustained upon examination as it relates to the accounting for uncertainty in income tax benefits recognized in an enterprise’s financial statements.

Our unrecognized tax benefits which relate to a tax refund are as follows:

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We classified interest and penalties associated with income taxes in income tax expense (benefit) within the Consolidated Statements of Operations.

We did not recognize any interest and penalties during 2022.

There was no liability recognized related to interest and penalties as of December 31, 2022.

A liability of $ 0.5 million has been recognized related to interest and penalties as of December 31, 2023, all of which was accrued in 2023.

The total amount of gross unrecognized tax benefits that, if recognized, would impact the effective tax rate is $ 7.5 million as of December 31, 2023.

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There are currently no audits for any tax periods in progress.

Tax Receivable Agreement

In connection with the Merger Transaction, we entered into the TRA 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, 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 VSI making payments under the TRA.

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.

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

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

As of December 31, 2023, $ 0.1 million is due within 12 months and included as a current liability.

The remaining liability is included in TRA liability within long-term liabilities in the Consolidated Balance Sheets.

Amounts payable under the TRA are contingent upon the generation of future taxable income over the term of the TRA and future changes in tax laws.

If we do not generate sufficient taxable income in the aggregate over the term of the TRA to utilize the tax benefits, then we would not be required to make the related payments.

As of December 31, 2023, we estimate that the tax savings associated with all tax attributes described above would aggregate to approximately $ 195.0 million.

Under this scenario we would be required to pay approximately 85 % of such amount, or $ 165.8 million, primarily over the next 15 years.

Equity-Based Compensation

The 2021 Incentive Award Plan ("2021 Plan") was approved and adopted to facilitate the grant of equity incentive awards to our employees, directors and consultants.

The 2021 Plan became effective on October 18, 2021 upon closing of the Merger Transaction.

We award RSUs to our employees, directors and consultants.

RSUs vest generally over periods from one to three years from issuance.

The 2021 Incentive Award Plan, which was approved and adopted to facilitate the grant of equity incentive awards to our employees, directors and consultants, became effective on October 18, 2021 upon closing of the Merger Transaction.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

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

RSUs generally vest over periods from one to four years from issuance.

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

A summary of activity for RSUs is as follows (in thousands):

Weighted-Average Grant Date Fair Value Per Share

A summary of activity for RSUs is as follows (in thousands, except per share data):

Weighted-Average

Grant Date Fair Value

Unvested at December 31, 2021

Unvested at December 31, 2022

Unvested at December 31, 2023

Stock options

On October 19, 2021, we granted 3.1 million stock options at an exercise price of $ 13.09 and 1.0 million stock options at an exercise price of $ 15.00 to certain employees.

The fair value of stock options granted during 2021 is estimated on the grant date using the Hull-White model.

On March 11 ,2022, we gr anted 2.6 millio n stock options at an exercise price of $ 10.26 and grant fair value of $ 3.99 per option, and on November 11, 2022, we granted 0.1 million stock options at an exercise price of $ 8.22 and grant fair value of $ 3.66 , to certain employees.

The fair value of stock options granted during 2022 is estimated on the grant date using the Black-Scholes model.

Stock options provide for the purchase of shares of our Class A common stock in the future at an exercise price set on the grant date.

These stock options vest over three years , with one-third vesting upon the one-year anniversary of the grant date and the remaining portion vesting on a quarterly basis thereafter.

The stock options have a contractual term of ten years from the date of the grant, subject to the employee’s continued service through the applicable vesting date.

The following assumptions were used to calculate the fair value of our stock awards:

Our stock options provide for the purchase of shares of Class A common stock in the future at an exercise price set on the grant (or modification) date.

Our stock option awards vest over three years, with one-third vesting on the one-year anniversary of the grant date and the remaining options vesting on a quarterly basis thereafter, with the exception of the October 2021 Options (as defined below), which vest in equal quarterly installments over four years.

Stock options granted to employees have a contractual term of ten years from the grant date, subject to the employee’s continued service through the applicable vesting date.

Stock options granted to consultants have a contractual term of seven years from the grant date, subject to the consultant’s continued service through the applicable vesting date.

October 2021 Options .

On October 19, 2021, we granted to certain employees 3.1 million stock options at an exercise price of $ 13.09 per share and 1.0 million stock options at an exercise price of $ 15.00 per share (collectively, the "October 2021 Options").

The fair value of the October 2021 Options was estimated on the grant date using the Hull-White model.

The Board declared a special dividend of $ 0.23 per share to holders of Class A common stock on October 18, 2021, which we paid on November 2, 2021 .

On November 2, 2021, the exercise price of the outstanding October 2021 Options with an exercise price of $ 13.09 per share was modified and reduced by the same $ 0.23 per share to $ 12.86 per share.

The amount recognized in the compensation expense relating to stock option modification for the year ended December 31, 2021 is immaterial.

March 2022 Options .

On March 11, 2022, we granted to certain employees 2.6 million stock options at an exercise price of $ 10.26 per share and a grant date fair value of $ 3.99 per option (the "March 2022 Options").

The fair value of the March 2022 Options was estimated on the grant date using the Black-Scholes model.

November 2022 Options.

On November 11, 2022, we granted to certain employees 0.1 million stock options at an exercise price of $ 8.22 per share and a grant date fair value of $ 3.66 (the "November 2022 Options").

The fair value of the November 2022 Options was estimated on the grant date using the Black-Scholes model.

March 2023 Options .

In March 2023, we granted to certain employees 3.6 million stock options at an exercise price of $ 7.17 per share and a grant date fair value of $ 3.30 per option.

The fair value of these stock options was estimated on the grant date using the Black-Scholes model.

June 2023 Options.

In June 2023, we granted to certain consultants 0.9 million stock options, divided into three tranches of 0.2 million, 0.3 million and 0.4 million options at exercise prices of $ 7.98 , $ 17.00 and $ 23.00 per share, respectively, and grant date fair values of $ 3.22 , $ 1.87 and $ 1.44 per option, respectively.

The fair value of these stock options was estimated on the grant date using the Hull-White model.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

December 2023 Cancellation and Repricing.

On December 7, 2023 (the "Effective Date"), 894,840 of the October 2021 Options with an exercise price of $ 15.00 per share and 894,840 of the October 2021 Options with an exercise price of $ 12.86 per share were cancelled.

Also on the Effective Date, the exercise price of the remaining October 2021 Options, as well as all outstanding March 2022 Options and November 2022 Options, was reduced to $ 6.76 per share, the closing price of the Class A common stock on the Effective Date, provided that if any of such stock options are exercised prior to the one-year anniversary of the Effective Date, the holder will be required to pay the original exercise price (the “Cancellation and Repricing”).

The Cancellation and Repricing were treated as a modification of the affected stock options.

The incremental fair value of the modification, which was calculated based on the difference between the fair value of each affected stock option immediately before and after the Cancellation and Repricing using the Hull-White model, w as less than $ 0.1 million.

The cancelled October 2021 Options had a grant date fair value of $ 6.6 million, of which $ 3.0 million had not yet been recognized as of the Effective Date.

That amount will be recognized over the remaining requisite service period of the remaining October 2021 Options and March 2022 Options.

The following assumptions were used to calculate the fair value of our stock options:

December 7, 2023

June 14, 2023

March 10, 2023

November 11, 2022

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Estimated volatility

47.0 % - 48.0 %

Expected term (years)

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Expected dividend yield

A summary of activity for stock options is as follows (in thousands):

Outstanding Options

Weighted Average Exercise Price Per Option

Weighted Average Remaining Contractual Life (in Years)

Aggregate Intrinsic Value

A summary of activity for stock options is as follows (in thousands, except price per option data):

Exercise Price

Life (in Years)

Intrinsic Value

Outstanding at December 31, 2021

Outstanding at December 31, 2022

Outstanding at December 31, 2023

Vested and exercisable at December 31, 2023

No options were vested and exercisable as of December 31, 2021.

The weighted-average grant date fair value per stock options outstanding as of December 31, 2023, 2022 and 2021 was $ 2.88 , $ 3.82 and $ 3.71 , respectively.

The weighted-average grant date fair value for stock options forfeited was $ 3.83 during the year ended December 31, 2022.

The weighted-average grant-date fair value for stock options vested was $ 3.71 during the year ended December 31, 2022.

During 2022, the total fair value of options vested was $ 3.5 million.

Profits interest and Phantom Units

The weighted-average grant-date fair value for stock options vested was $ 3.89 a nd $ 3.71 during the years ended December 31, 2023 and 2022, respectively.

The weighted-average grant-date fair value for stock options cancelled was $ 3.68 during the year ended December 31, 2023.

Profits Interests and Phantom Units

Prior to the Merger Transaction, certain members of management received equity-based compensation awards for profits interest in Hoya Topco in the form of Incentive Units, phantom units, Class D Units, and Class E Units.

Each incentive unit vests ratably over five years and accelerates upon a change in control of Hoya Topco.

We do not expect any future profits interest to be granted after the Merger Transaction.

The fair value of the incentive units granted is estimated using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires certain subjective inputs and assumptions, including the fair value Hoya Topco's equity, the expected term, risk-free interest rates, and expected equity volatility.

We do not expect

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

any future profits interest to be granted after the Merger Transaction.

The fair value of the incentive units granted is estimated using the Black-Scholes model.

The Black-Scholes model requires certain subjective inputs and assumptions, including the fair value Hoya Topco's equity, the expected term, risk-free interest rates, and expected equity volatility.

The fair value of incentive units is recognized as equity-based compensation expense on a straight-line basis over the requisite service period.

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The expected volatility is estimated on the date of grant based on the average historical stock price volatility of comparable publicly-traded companies.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The following table summarizes the Hoya Topco Incentive Units, Class D Units, and Class E Units for the years ended December 31, 2023, 2022, and 2021:

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Class E Units

Number of Incentive Units

Weighted Average Grant Date Fair Value

Number of Incentive Units

Weighted Average Grant Date Fair Value

Number of Incentive Units

Weighted Average Grant Date Fair Value

Balances at January 1, 2021

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Compensation expense

For the years ended December 31, 2022, 2021 and 2020, equity-based compensation expense related to RSUs was $ 8.4 million, $ 0.8 million and zero , respectively.

Unrecognized compensation expense relating to unvested RSUs as of December 31, 2022, was approximately $ 26.6 million, which is expected to be recognized over a weighted average period of approximately three years .

For the years ended December 31, 2022, 2021 and 2020, equity-based compensation expense related to stock options was $ 6.2 million, $ 0.8 million and zero , respectively.

Unrecognized compensation expense relating to unvested stock options as of December 31, 2022, was approximately $ 19.1 million, which is expected to be recognized over a weighted average period of approximately three years .

For the years ended December 31, 2022, 2021 and 2020, equity-based compensation expense related to profit interests was $ 4.5 million, $ 4.4 million and $ 4.3 million, respectively.

Unrecognized compensation expense as of December 31, 2022 related to these incentive units was $ 4.5 million, which is expected to be recognized over a weighted average period of approximately two years .

For the year ended December 31, 2022, equity-based compensation expense excludes $ 0.1 million related to capitalized development costs.

Our Board declared a special dividend of $ 0.23 per share to holders of Class A common stock on October 18, 2021, which we paid on November 2, 2021 .

On November 2, 2021, the exercise price of outstanding options was modified and reduced by the same $ 0.23 per share.

The amount recognized in the compensation expense relating to stock option modifications for the year ended December 31, 2021 is immaterial.

Earnings Per Share

We calculate basic and diluted net income (loss) per share of Class A common stock in accordance with ASC 260, Earnings per Share.

Class B common stock does not have economic rights in VSI and as a result, is not considered a

For the years ended December 31, 2023, 2022 and 2021, equity-based compensation expense related to RSUs was $ 14.3 million, $ 8.4 million and $ 0.8 million, respectively.

Unrecognized compensation expense relating to unvested RSUs as of December 31, 2023 was approximately $ 32.3 million, which is expected to be recognized over a weighted average period of approximately two years .

For the years ended December 31, 2023, 2022 and 2021, equity-based compensation expense related to stock options was $ 10.2 million, $ 6.2 million and $ 0.8 million, respectively.

Unrecognized compensation expense relating to unvested stock options as of December 31, 2023 was approximately $ 22.6 million, which is expected to be recognized over a weighted average period of approximately two years .

For the years ended December 31, 2023, 2022 and 2021, equity-based compensation expense related to profit interests was $ 3.5 milli on, $ 4.5 million and $ 4.4 million, respectively.

Unrecognized compensation expense as of

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

participating security for basic and diluted income (loss) per share.

December 31, 2023 related to these incentive units was $ 1.0 million , which is expected to be recognized over a weighted average period of approximately two years .

For the years ended December 31, 2023 and 2022, equity-based compensation expense excludes $ 0.4 million and $ 0.1 million related to capitalized development costs.

Earnings Per Share

We calculate basic and diluted net income (loss) per share of Class A common stock in accordance with ASC 260, Earnings per Share.

Class B common stock does not have economic rights in VSI and, as a result, is not considered a participating security for basic and diluted income (loss) per share.

As such, basic and diluted income (loss) per share of Class B common stock has not been presented.

However, holders of Class B common stock are allocated income in Hoya Intermediate (our operating entity) according to their weighted average percentage ownership of Intermediate Units during each quarter.

Net loss attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate's net income (loss) incurred in each quarterly period by Hoya Topco's weighted average percentage ownership of Intermediate Units during the period.

The following table provides the net income (loss) attributable to Hoya Topco's redeemable noncontrolling interest for the year ended December 31, 2022 and the period from October 18, 2021 to December 31, 2021:

Net income (loss)—Hoya Intermediate

Hoya Topco’s weighted average % allocation of Hoya Intermediate's net income (loss)

Net income (loss) attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate's net income (loss) for each quarterly period by Hoya Topco's weighted average percentage ownership of Intermediate Units during the period.

See Note 16, Redeemable Noncontrolling Interest, for detail on Hoya Topco’s right to exchange its Intermediate Units.

The following table provides the net income (loss) attributable to Hoya Topco's redeemable noncontrolling interests for the years ended December 31, 2023 and 2022, and the period from October 18, 2021 to December 31, 2021:

Net income (loss)—Hoya Intermediate

Hoya Topco’s weighted average % allocation of Hoya Intermediate's net income (loss)

Net income (loss) attributable to Hoya Topco's redeemable noncontrolling interests

Net income (loss) to Class A common stock–basic is calculated by subtracting the portion of Hoya Intermediate's net loss attributable to redeemable noncontrolling interests from our total net loss, which includes our net loss for activities outside of our investment in Hoya Intermediate as well as the full results of Hoya Intermediate on a consolidated basis.

Net income (loss) per Class A common stock–diluted is based on the average number of shares of Class A common stock used for the basic earnings per share calculation, adjusted for the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method and if-converted method, as applicable.

Net income (loss) attributable to Class A common stockholders–diluted is adjusted for our share of Hoya Intermediate’s consolidated net loss after giving effect to Intermediate Units that convert into potential shares of Class A common stock, to the extent it is dilutive.

In addition, Net income (loss) attributable to Class A common stockholders–diluted is adjusted for the impact of changes in the fair value of Hoya Intermediate Warrants, to the extent they are dilutive.

The following tables set forth the computation of basic and diluted net income (loss) per share of Class A common stock for the year ended December 31, 2022 and the period from October 18, 2021 to December 31, 2021 where we had Class A and Class B common stock outstanding (in thousands, except share and per share data):

Net income (loss) attributable to Class A common stockholders–basic is calculated by subtracting the portion of Hoya Intermediate's net income (loss) attributable to redeemable noncontrolling interests from our total net income, which includes our net income for activities outside of our investment in Hoya Intermediate, including income tax expense for VSI's portion of income, as well as the full results of Hoya Intermediate on a consolidated basis.

Net income (loss) per Class A common stock–diluted is based on the average number of shares of Class A common stock used for the basic earnings per share calculation, adjusted for the weighted-average number of Class A common share equivalents outstanding for the period determined using the treasury stock and if-converted methods, as applicable.

Net income (loss) attributable to Class A common stockholders–diluted is adjusted for (i) our share of Hoya Intermediate’s consolidated net income (loss) after giving effect to Intermediate Units that convert into potential shares of Class A common stock, to the extent it is dilutive, and (ii) the impact of changes in the fair value of Hoya Intermediate Warrants, to the extent they are dilutive.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Numerator—basic:

The following tables set forth the computation of basic and diluted net income (loss) per share of Class A common stock for the years ended December 31, 2023 and 2022, and the period from October 18, 2021 to December 31, 2021 (in thousands, except share and per share data):

Numerator—basic:

Net income (loss)

(Income) loss attributable to redeemable noncontrolling interests

Net income (loss) attributable to Class A Common Stockholders—basic

Denominator—basic:

Weighted average Class A common stock outstanding—basic

Net income (loss) per Class A common stock—basic

Numerator—diluted:

Net income (loss) attributable to Class A Common Stockholders—basic

Denominator—basic:

Weighted average Class A common stock outstanding—basic

Net income (loss) per Class A common stock—basic

Numerator—diluted:

Net income (loss) attributable to Class A Common Stockholders—basic

Net income (loss) effect of dilutive securities:

3 unchanged sentences

Effect of dilutive Hoya Intermediate Warrants

Net income (loss) attributable to Class A Common Stockholders—diluted

Denominator—diluted:

Weighted average Class A common stock outstanding—basic

Net income (loss) attributable to Class A Common Stockholders—diluted

Denominator—diluted:

Weighted average Class A common stock outstanding—basic

Weighted average effect of dilutive securities:

2 unchanged sentences

Effect of dilutive noncontrolling interests

Weighted average Class A common stock outstanding—diluted

Net income (loss) per Class A common stock—diluted

Potential shares of common stock are excluded from the computation of diluted net income per share if their effect would have been anti-dilutive for the period presented or if the issuance of shares is contingent upon events that did not occur by the end of the period.

The following tables present potentially dilutive securities excluded from the computation of diluted net income per share for the periods presented that could potentially dilute earnings per share in the future:

Weighted average Class A common stock outstanding—diluted

Net income (loss) per Class A common stock—diluted

Potential shares of our Class A common stock are excluded from the computation of diluted net income (loss) per share of Class A common stock if their effect would have been anti-dilutive for the period presented or if the issuance of shares is contingent upon events that did not occur by the end of the period.

The dilution reflected in diluted net income per share of Class A common stock during the year ended December 31, 2023 relates primarily to an assumed conversion of our noncontrolling interests to shares of our Class A common stock, which would not have a commensurate effect on net income, primarily due to the release of the valuation allowance which benefit is attributable to VSI only.

The Vegas.com Acquisition and the subsequent pushdown of the acquired entity to Hoya Intermediate primarily results in incremental deferred tax expense.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The following table presents potentially dilutive securities excluded from the computation of diluted net income (loss) per share of Class A common stock for the periods presented that could potentially dilute earnings per share in the future:

Stock options

3 unchanged sentences

Shares of Class B common stock

We analyzed the calculation of income (loss) per share for periods prior to the Merger Transaction and determined that it resulted in values that would not be meaningful to the users of the consolidated financial statements.

Therefore, income (loss) per share information has not been presented for periods prior to the Merger Transaction.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data