Vivid Seats Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm 59 Consolidated Balance Sheets 0 Consolidated Statements of Operations 0 Consolidated Statements of Comprehensive Income 0 Consolidated Statements of Equity (Deficit) 0 Consolidated Statements of Cash Flows 0 Notes to the Consolidated Financial Statements 66 58 Report of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of Vivid Seats Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Vivid Seats Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 , in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois March 12, 2025 We have served as the Company’s auditor since 2021 . 59 VIVID SEATS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 31, December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 243,482 $ 125,484 Restricted cash 1,166 6,950 Accounts receivable – net 48,315 58,481 Inventory – net 19,601 21,018 Prepaid expenses and other current assets 32,607 34,061 Total current assets 345,171 245,994 Property and equipment – net 12,567 10,156 Right-of-use assets – net 12,008 9,826 Intangible assets – net 233,116 241,155 Goodwill – net 943,119 947,359 Deferred tax assets – net 77,967 85,564 Investments 6,929 6,993 Other assets 5,219 3,052 Total assets $ 1,636,096 $ 1,550,099 Liabilities, redeemable noncontrolling interests, and shareholders' equity Current liabilities: Accounts payable $ 232,984 $ 257,514 Accrued expenses and other current liabilities 165,047 191,642 Deferred revenue 23,804 34,674 Current maturities of long-term debt 3,950 3,933 Total current liabilities 425,785 487,763 Long-term debt – net 384,960 264,632 Long-term lease liabilities 18,731 16,215 TRA liability 155,720 165,699 Other liabilities 36,865 29,031 Total liabilities 1,022,061 963,340 Commitments and contingencies (Note 18) Redeemable noncontrolling interests 352,922 481,742 Shareholders' equity: Class A common stock, $ 0.0001 par value; 500,000,000 shares authorized, 143,819,497 and 141,167,311 shares issued and outstanding at December 31, 2024 and 2023, respectively 14 14 Class B common stock, $ 0.0001 par value; 250,000,000 shares authorized, 76,225,000 shares issued and outstanding at December 31, 2024 and 2023, respectively 8 8 Additional paid-in capital 1,267,710 1,096,430 Treasury stock, at cost, 11,433,749 and 7,291,497 shares at December 31, 2024 and 2023, respectively ( 75,568 ) ( 52,586 ) Accumulated deficit ( 930,171 ) ( 939,596 ) Accumulated other comprehensive income (loss) ( 880 ) 747 Total shareholders' equity 261,113 105,017 Total liabilities, redeemable noncontrolling interests, and shareholders' equity $ 1,636,096 $ 1,550,099 The accompanying notes are an integral part of these financial statements. 60 VIVID SEATS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share data) Years Ended December 31, 2024 2023 2022 Revenues $ 775,586 $ 712,879 $ 600,274 Costs and expenses: Cost of revenues (exclusive of depreciation and amortization shown separately below) 201,854 182,184 140,508 Marketing and selling 285,146 274,096 248,375 General and administrative 202,123 159,081 127,619 Depreciation and amortization 44,238 17,178 7,732 Change in fair value of contingent consideration — ( 998 ) ( 2,065 ) Total costs and expenses 733,361 631,541 522,169 Income from operations 42,225 81,338 78,105 Interest expense – net 23,172 13,505 12,858 Other income – net ( 3,666 ) ( 3,109 ) ( 8,227 ) Loss on extinguishment of debt — — 4,285 Income before income taxes 22,719 70,942 69,189 Income tax expense (benefit) 8,417 ( 42,199 ) ( 1,590 ) Net income 14,302 113,141 70,779 Net income attributable to redeemable noncontrolling interests 4,877 38,605 42,117 Net income attributable to Class A common stockholders $ 9,425 $ 74,536 $ 28,662 Net income per Class A common stock: Basic $ 0.07 $ 0.80 $ 0.36 Diluted $ 0.06 $ 0.26 $ 0.36 Weighted average Class A common stock outstanding: Basic 132,330,914 92,678,514 80,257,247 Diluted 209,142,627 198,877,441 198,744,381 The accompanying notes are an integral part of these financial statements. 61 VIVID SEATS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years Ended December 31, 2024 2023 2022 Net income $ 14,302 $ 113,141 $ 70,779 Other comprehensive income (loss): Foreign currency translation adjustment ( 2,672 ) 1,152 — Unrealized gain on Note 119 196 — Total other comprehensive income (loss) ( 2,553 ) 1,348 — Comprehensive income 11,749 114,489 70,779 Net income attributable to redeemable noncontrolling interests 4,877 38,605 42,117 Other comprehensive income (loss) attributable to redeemable noncontrolling interests: Foreign currency translation adjustment attributable to redeemable noncontrolling interests ( 970 ) 511 — Unrealized gain on Note attributable to redeemable noncontrolling interests 44 90 — Total other comprehensive income (loss) attributable to redeemable noncontrolling interests ( 926 ) 601 — Comprehensive income attributable to Class A common stockholders $ 7,798 $ 75,283 $ 28,662 The accompanying notes are an integral part of these financial statements. 62 VIVID SEATS INC. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (in thousands, except share/unit data) Class A common stock Class B common stock Treasury stock Redeemable noncontrolling interests Shares Amount Shares Amount Additional paid-in capital Shares Amount Accumulated deficit Accumulated other comprehensive income (loss) Total shareholders' equity (deficit) Balances at January 1, 2022 $ 1,286,016 79,091,871 $ 8 118,200,000 $ 12 $ 182,091 — $ — $ ( 1,042,794 ) $ — $ ( 860,683 ) Net income 42,117 — — — — — — — 28,662 — 28,662 Issuances of Class A common stock — 591,118 — — — — — — — — — Deemed contributions from former parent 2,687 — — — — 1,824 — — — — 1,824 Equity-based compensation — — — — — 14,621 — — — — 14,621 Repurchases of Class A common stock — — — — — — ( 4,342,477 ) ( 32,494 ) — — ( 32,494 ) Tax distributions to redeemable noncontrolling interests ( 5,245 ) — — — — — — — — — — Reclassification of contingent consideration — — — — — 2,657 — — — — 2,657 Increase in Class A common stock outstanding following warrant exchange — 2,727,785 — — — — — — — — — Subsequent remeasurement of redeemable noncontrolling interests ( 462,715 ) — — — — 462,715 — — — — 462,715 Balances at December 31, 2022 862,860 82,410,774 8 118,200,000 12 663,908 ( 4,342,477 ) ( 32,494 ) ( 1,014,132 ) — ( 382,698 ) Net income 38,605 — — — — — — — 74,536 — 74,536 Issuances of Class A common stock — 1,228,279 — — — — — — — — — Deemed contributions from former parent 1,898 — — — — 1,598 — — — — 1,598 Equity-based compensation — — — — — 24,546 — — — — 24,546 Repurchases of Class A common stock — — — — — — ( 2,949,020 ) ( 20,092 ) — — ( 20,092 ) Tax distributions to redeemable noncontrolling interests ( 14,304 ) — — — — — — — — — — Other comprehensive income 601 — — — — — — — — 747 747 2023 Secondary Offerings ( 307,732 ) 41,975,000 4 ( 41,975,000 ) ( 4 ) 307,732 — — — — 307,732 Establishment of liabilities under TRA, net of tax and other tax impact of 2023 Secondary Offerings (Note 20) — — — — — ( 95,849 ) — — — — ( 95,849 ) Issuance of Class A common stock related to acquisition — 15,553,258 2 — — 95,495 — — — — 95,497 Termination of Option Contingent Warrants 1,094 — — — — — — — — — — Subsequent remeasurement of redeemable noncontrolling interests, net of tax impacts ( 101,280 ) — — — — 99,000 — — — — 99,000 Balances at December 31, 2023 481,742 141,167,311 14 76,225,000 8 1,096,430 ( 7,291,497 ) ( 52,586 ) ( 939,596 ) 747 105,017 Net income 4,877 — — — — — — — 9,425 — 9,425 Issuances of Class A common stock — 2,859,871 — — — — — — — — — Deemed contributions from former parent 3,512 — — — — 6,073 — — — — 6,073 Equity-based compensation — — — — — 41,604 — — — — 41,604 Repurchases of Class A common stock, net of tax impacts — — — — — ( 1,952 ) ( 4,142,252 ) ( 22,982 ) — — ( 24,934 ) Tax distributions to redeemable noncontrolling interests ( 10,014 ) — — — — — — — — — — Other comprehensive loss ( 926 ) — — — — — — — — ( 1,627 ) ( 1,627 ) Net settlement of equity incentive awards — ( 207,685 ) — — — ( 714 ) — — — — ( 714 ) Subsequent remeasurement of redeemable noncontrolling interests ( 126,269 ) — — — — 126,269 — — — — 126,269 Balances at December 31, 2024 $ 352,922 143,819,497 $ 14 76,225,000 $ 8 $ 1,267,710 ( 11,433,749 ) $ ( 75,568 ) $ ( 930,171 ) $ ( 880 ) $ 261,113 The accompanying notes are an integral part of these financial statements. 63 VIVID SEATS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 2022 Cash flows from operating activities Net income $ 14,302 $ 113,141 $ 70,779 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 44,238 17,178 7,732 Amortization of leases 1,697 818 2,170 Amortization of deferred financing costs 988 924 1,052 Equity-based compensation 50,429 27,614 19,053 Change in fair value of warrants ( 4,044 ) ( 971 ) ( 8,227 ) Loss on asset disposals 277 685 369 Change in fair value of derivative asset 800 ( 536 ) — Deferred income tax expense (benefit) 1,246 ( 44,859 ) — Non-cash interest income – net ( 890 ) ( 261 ) — Unrealized foreign currency loss (gain) 4,056 ( 2,177 ) — Adjustment of liabilities under TRA ( 6,166 ) 574 — Change in fair value of contingent consideration — ( 998 ) ( 2,065 ) Loss on extinguishment of debt — — 4,285 Changes in operating assets and liabilities: Accounts receivable – net 9,776 ( 17,129 ) ( 329 ) Inventory – net 1,413 ( 8,184 ) ( 1,010 ) Prepaid expenses and other current assets 1,161 ( 1,176 ) 42,894 Accounts payable ( 23,691 ) 53,817 ( 30,779 ) Accrued expenses and other current liabilities ( 30,164 ) 1,336 ( 94,415 ) Deferred revenue ( 10,870 ) 827 6,844 Long-term lease liabilities ( 994 ) — — Other assets and liabilities – net 358 6,697 ( 3,978 ) Net cash provided by operating activities 53,922 147,320 14,375 Cash flows from investing activities Purchases of property and equipment ( 4,227 ) ( 895 ) ( 3,558 ) Purchases of personal seat licenses ( 737 ) ( 542 ) ( 165 ) Investments in developed technology ( 19,014 ) ( 11,339 ) ( 11,684 ) Purchases of seat images ( 347 ) — — Disbursement of 2024 Sponsorship Loan ( 2,000 ) — — Payments of Acquired Domain Name Obligation ( 417 ) — — Transfer of cash consideration during Acquisitions, net of cash acquired — ( 206,865 ) ( 8 ) Investment in Note and Warrant — ( 6,000 ) — Net cash used in investing activities ( 26,742 ) ( 225,641 ) ( 15,415 ) Cash flows from financing activities Payments of 2017 Term Loans — — ( 465,712 ) Proceeds from 2022 First Lien Loan — — 275,000 Payments of 2022 First Lien Loan ( 689 ) ( 2,750 ) ( 2,062 ) Repurchases of Class A common stock ( 22,982 ) ( 20,092 ) ( 32,494 ) Tax distributions to redeemable noncontrolling interests ( 10,014 ) ( 14,304 ) ( 5,245 ) Payments of Shoko Chukin Bank Loan ( 2,655 ) ( 279 ) — Payments of deferred financing costs and other debt-related expenses ( 315 ) — ( 4,856 ) Proceeds from 2024 First Lien Loan 125,500 — — Payments of 2024 First Lien Loan ( 1,975 ) — — Payments of taxes related to net settlement of equity incentive awards ( 714 ) — — Payment of liabilities under TRA ( 77 ) — — Cash paid for milestone payments — ( 6,005 ) ( 1,111 ) Net cash provided by (used in) financing activities 86,079 ( 43,430 ) ( 236,480 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 1,045 ) 1,895 — Net increase (decrease) in cash, cash equivalents, and restricted cash 112,214 ( 119,856 ) ( 237,520 ) Cash, cash equivalents, and restricted cash – beginning of period 132,434 252,290 489,810 Cash, cash equivalents, and restricted cash – end of period $ 244,648 $ 132,434 $ 252,290 64 VIVID SEATS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Supplemental disclosures of cash flow information Cash paid for interest $ 19,498 $ 19,330 $ 14,794 Cash paid for income taxes $ 5,469 $ 4,021 $ — Cash paid for operating lease liabilities $ 3,377 $ 1,165 $ 3,113 Supplemental disclosures of non-cash investing and financing activities Equity-based compensation expense related to capitalized development costs $ 766 $ 428 $ 79 Right-of-use assets obtained in exchange for operating lease liabilities $ 4,663 $ — $ 3,406 Property and equipment obtained through tenant improvement allowance $ 651 $ — $ 6,472 Domain obtained through Acquired Domain Name Obligation $ 17,348 $ — $ — Reduction of deferred tax assets under the repurchases of Class A common stock, net of tax impacts $ 1,952 $ — $ — Transfer of non-cash consideration during Vegas.com Acquisition $ — $ 95,497 $ — Establishment of liabilities under TRA $ — $ 165,202 $ — Establishment of deferred tax assets under 2023 Secondary Offerings and other equity transactions $ — $ 67,073 $ — The accompanying notes are an integral part of these financial statements. 65 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 1. Background and Basis of Presentation Vivid Seats Inc. (“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 easily discover and purchase tickets to live events and attractions and book hotel rooms and packages in the United States, Canada, and Japan. In our Marketplace segment, we primarily act as an intermediary between ticket buyers, sellers, and partners within our online ticket marketplace, while enabling ticket sellers and partners to seamlessly manage their operations. In our Resale segment, we primarily acquire tickets to resell on secondary ticket marketplaces, including our own. We have prepared these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These consolidated financial statements include all of our accounts, including those of our consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. 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, among VSI, Horizon Acquisition Corporation, a publicly traded special purpose acquisition company (“Horizon”), Hoya Intermediate, Horizon Sponsor, LLC (“Horizon Sponsor”), and Hoya Topco, LLC (“Hoya Topco”). 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, we: • 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, and subsequently paid an additional $ 15.5 million in transaction costs incurred by Horizon using such cash and cash equivalents; • issued 118,200,000 shares of Class B common stock and warrants to purchase 6,000,000 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 Intermediate Warrant (as defined below), to Hoya Topco in exchange for its outstanding Intermediate Units (as defined below); • issued to certain investors, including 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) 50,000 shares of Class A common stock, (ii) warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share (the “$10 Exercise Warrants”), (iii) warrants to purchase 17,000,000 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”), and (iv) warrants to purchase 6,519,791 shares of Class A common stock at an exercise price of $ 11.50 per share (the “Private Warrants”); and 66 VIVID SEATS INC. NOTES to the Consolidated Financial Statements • 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 3,000,000 common units of Hoya Intermediate (“Intermediate Units”) at an exercise price of $ 10.00 per unit (the “$ 10 Intermediate Warrants “ ) and warrants to purchase 3,000,000 Intermediate Units at an exercise of $ 15.00 per unit (the “$ 15 Intermediate Warrants“ and, together with the $ 10 Intermediate Warrants, the “Intermediate Warrants”). A portion of the Intermediate Warrants, consisting of 1,000,000 $ 10 Intermediate Warrants and 1,000,000 $ 15 Intermediate Warrants (together, the “Option Contingent Warrants”), were issued in tandem with stock options we issued to members of our management team and would only become exercisable by Hoya Topco if such a stock option was forfeited or expired unexercised. On December 7, 2023, Hoya Topco voluntarily terminated all of the Option Contingent Warrants. 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, 2024, see Note 15, Financial Instruments . 2. Summary of Significant Accounting Policies Use of Estimates We use estimates and assumptions in the preparation of our consolidated financial statements in accordance with U.S. 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 rewards loyalty program (the “Vivid Seats Rewards Program”) ; inventory valuation; valuation of equity-based compensation; 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; 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 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 the underlying financial institutions fail. As of December 31, 2024 and 2023 , we have not experienced any loss or lack of access to our cash and cash equivalents. 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. 67 VIVID SEATS INC. NOTES to the Consolidated Financial Statements Foreign Currency Translation Our reporting currency is the U.S. dollar. 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 cumulative foreign currency translation adjustment is recorded in the Consolidated Balance Sheets as a component of Accumulated other comprehensive income (loss) within Shareholders' equity. Unrealized foreign currency gains and losses generated by transactions denominated in a currency different from the functional currency of the applicable entity are recorded in Other income – net in the Consolidated Statements of Operations 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 – Net 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. 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. 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 – Net 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. A provision is recorded to adjust inventory to its estimated realizable value when inventory is determined to be in excess of anticipated demand. During the years ended December 31, 2024, 2023, and 2022, we incurred inventory write-downs of $ 7.0 million, $ 4.7 million, and $ 5.0 million, respectively, which are recorded in Cost of revenues in the Consolidated Statements of Operations. Property and Equipment – Net Property and equipment are stated at cost, net of depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives: Asset Class Estimated Useful Life Computer equipment 5 years Purchased software 3 years Furniture and fixtures 7 years Leasehold improvements are amortized over the shorter of the term of the lease or the improvements’ estimated useful lives. 68 VIVID SEATS INC. NOTES to the Consolidated Financial Statements Leases 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 in the Consolidated Balance Sheets and rent expense for these short-term leases is recorded 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. Goodwill – Net and Intangible Assets – Net 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. 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 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, 2024, 2023, and 2022. 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 the corresponding carrying amount. 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 fair value. No impairment triggering events to our definite-lived intangible assets were identified during the years ended December 31, 2024, 2023, and 2022. Definite-lived intangible assets are amortized on a straight-line basis over their estimated period of benefit, over the following estimated useful lives: Asset Class Estimated Useful Life Supplier relationships 4 - 5 years Customer relationships 2 - 5 years Acquired developed technology 3 - 5 years Capitalized development costs 3 years Acquired domain name 15 years Seat images 3 years 69 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 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 recorded in Intangible assets – net in the Consolidated Balance Sheets and are amortized using the straight-line method over the three-year useful life of the applicable software. The accompanying amortization is recorded in Depreciation and amortization in the Consolidated Statements of Operations. Accounts Payable Accounts payable primarily consists of amounts due to ticket sellers across our platform. These amounts are recorded at the time the Marketplace orders are confirmed and are payable following the event, or as otherwise agreed upon. 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 recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets represents the balance of credits issued to these customers. Breakage income from customer credits that are not expected to be used, and are not subject to escheatment, is estimated and recognized as revenue in proportion to the pattern of redemption for the customer credits that are used. We estimate breakage based on historical usage trends for credits issued by us and available data on comparable programs. 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. The expected recoveries of these obligations are recorded in Prepaid expenses and other current assets in the Consolidated Balance Sheets. 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. 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. Income Taxes Hoya Intermediate is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hoya Intermediate’s taxable income was passed through to and included in the taxable income of its members, including VSI, for periods following the Merger Transaction. Following the Merger Transaction, our legal parent entity is VSI. We are subject to income taxes at the U.S. federal, state, and local levels for income tax purposes, including with respect to our allocable share of any taxable income of Hoya Intermediate. 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 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. The realization of the deferred tax assets is dependent on the amount of our future taxable income. 70 VIVID SEATS INC. NOTES to the Consolidated Financial Statements We recognize interest and penalties related to underpayment of income taxes in Income tax expense (benefit) in the Consolidated Statements of Operations. 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 (the “TRA”) with the existing Hoya Intermediate unitholders that provides for our payment to such unitholders of 85 % of the amount of any tax savings 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. Long-Term Debt – Net Long-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 over the terms of the respective borrowings using the effective interest method and are recorded in Interest expense – net in the Consolidated Statements of Operations. Upon the repayment of our term debt in 2022, we expensed all applicable prepayment penalties and wrote-off all unamortized borrowing costs and discounts, both of which are recorded in Loss on extinguishment of debt in the Consolidated Statements of Operations. Fair Value Measurements We measure certain assets and liabilities at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements (“ASC 820”), which defines fair value as 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, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: • 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 11, Investments , Note 13, Long-Term Debt – Net, and Note 15, Financial Instruments . Our non-financial assets, such as Goodwill – Net, Intangible assets – Net, and various long-lived assets, which are measured at fair value on a nonrecurring basis, utilizing Level 3 inputs, are presented in Note 10, Goodwill – Net and Intangible Assets – Net . Other financial instruments, including Accounts receivable – Net 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, 2024, 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 Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC Topic 815 , Derivatives and Hedging (“ASC 815”), to determine the appropriate classification and accounting treatment. The Public Warrants, the Private Warrants and the Exercise Warrants meet the criteria to be 71 VIVID SEATS INC. NOTES to the Consolidated Financial Statements classified as equity instruments. Because the Intermediate Warrants are exercisable for Intermediate Units, which allow for a potential cash redemption at the discretion of the unitholder, they are recorded in Other liabilities in the Consolidated Balance Sheets. The warrant liability is subject to a fair value remeasurement each period with an offsetting adjustment recorded in Other income – net in the Consolidated Statements of Operations. Redeemable Noncontrolling Interests VSI holds a 63.4 % inter est 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 in the Consolidated Balance Sheets. Remeasurements of our redeemable noncontrolling interests are based on the fair value of the Class A common stock. Equity-Based Compensation We account for restricted stock units (“RSUs”) and stock options 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, which requires us to make assumptions and judgments about the variables used in the calculation, related to the expected term, volatility of our common stock, risk-free interest rate, and dividend yield. Expenses related to grants of equity-based awards are recognized as equity-based compensation and are recorded in General and administrative expenses in the Consolidated Statements of Operations. Prior to the Merger Transaction, certain members of management received profits interests in Hoya Topco and phantom units in a cash bonus pool funded by Hoya Topco. Under ASC 480 and ASC Topic 718, Compensation – Stock Compensation , the grants of profits interests 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 profits 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. For phantom units with service and performance conditions, we recognize a liability for the fair value of the outstanding units only when we conclude it is probable that the performance condition will be achieved. On June 10, 2024, the Board of Managers of Hoya Topco (the “Hoya Topco Board”) approved the redemption, repurchase and cancellation by Hoya Topco (using Hoya Topco’s funds) of all of its outstanding profits interests held by our employees (including the Class B-1, Class D, and Class E Units discussed elsewhere in this Annual Report on Form 10-K). Accordingly, we recognized equity-based compensation expense related to the profits interests of $ 4.6 million for the year ended December 31, 2024. See Note 21, Equity-Based Compensation , for more detail. On June 10, 2024, the Hoya Topco Board also approved the repurchase and cancellation by Hoya Topco (using Hoya Topco’s funds) of all of its outstanding phantom units held by our employees. The phantom units held service and performance conditions, requiring us to recognize a liability for the fair value the outstanding phantom units only when we conclude it is probable that the performance conditions will be achieved. Accordingly, we recognized 72 VIVID SEATS INC. NOTES to the Consolidated Financial Statements equity-based compensation expense related to the phantom units of $ 5.0 million for the year ended December 31, 2024 . There was no equity-based compensation expense previously recognized related to the phantom units. Hoya Topco had no outstanding profits interests or phantom units held by our employees, and we had no unrecognized equity-based compensation expense related thereto, as of December 31, 2024 . 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 our 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. Marketplace Segment We act as an intermediary between buyers, sellers, and partners in our online platform. 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. 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. The revenue reversal is reflected within Accrued expenses and other current liabilities in the Consolidated Balance Sheets when the buyer has yet to be compensated. 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 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 vs. new sales transactions can result in customer compensation costs exceeding current period sales resulting in negative Marketplace revenue for that period. In certain instances, ticket buyers are compensated with credit to be used on future purchases. When a credit is redeemed, revenue is recognized for the newly placed order. Breakage income from customer credits that are not expected to be used, and not subject to escheatment, is estimated and recognized as revenue in proportion to the pattern of redemption for the customer credits that are used. We also earn referral commissions on purchases of third-party insurance services by ticket buyers at the time of sale of the associated ticket on the Marketplace platform. 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 within 30 days from being invoiced. This revenue is included within all categories of Marketplace disaggregated revenue described in Note 4, Revenue Recognition . 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. 73 VIVID SEATS INC. NOTES to the Consolidated Financial Statements Resale Segment 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 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. 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 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. We estimate the future customer compensation liability, and corresponding charge against revenue, using the expected value method. 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 on our own marketplace, the service fee is recorded in Marketplace revenues and the sales price of the ticket is recorded in Resale revenues. Deferred Revenue Deferred revenue consists of fees received related to unsatisfied performance obligations at the end of the period. The majority of unsatisfied performance obligations are related to the Vivid Seats Rewards 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. Deferred revenue also consists of service fees on hotel and tour transactions where check-in has not yet occurred. In addition, 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 and Indirect Taxes Sales and indirect taxes are imposed by country, state, county, and city governmental authorities. In most jurisdictions, we collect sales and indirect taxes from ticket buyers in our Marketplace segment where required and remit to the appropriate governmental agency. For these jurisdictions where we collect and remit taxes, they are recorded as a liability until remitted and there is no impact on the Consolidated Statements of Operations as revenues are recorded net of sales taxes. We also remit sales and indirect taxes on certain Resale segment transactions. Sales and indirect taxes that are recorded in General and administrative expenses in the Consolidated Statements of Operations represent estimated liabilities for jurisdictions for which we are not yet collecting and remitting taxes. 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 and recorded in Marketing and selling expenses in the Consolidated Statements of Operations, were $ 284.7 million, $ 273.5 million, and $ 247.3 million for the years ended December 31, 2024, 2023, and 2022 , respectively. 74 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 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. These costs are accrued upon the recognition of revenue. Recent Accounting Pronouncements As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, 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 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. The new expected credit loss impairment model requires immediate recognition of estimated credit losses expected to occur. Additional disclosures are required regarding assumptions, models, and methods for estimating the credit losses. ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates , deferred the effective date for non-public companies. The standard is effective for non-public companies for fiscal years beginning after December 15, 2022. 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. 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 U.S GAAP 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. 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. The ASU 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, 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. The ASU 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 these requirements during the three months ended December 31, 2023 with no material impact on our consolidated financial statements. 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 should be applied retrospectively to all prior periods presented in the financial statements. We adopted these requirements during the year ended December 31, 75 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 2024 with no material impact on our consolidated financial statements, other than the impact of the required changes to our Segment Reporting Note. See Note 5, Segment Reporting , for more information. Issued Accounting Standards Not Yet Adopted Income Taxes 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 will be effective for annual reporting periods beginning after December 15, 2024. We are currently evaluating the impact of adopting the amendments, which are expected to result in enhanced disclosures, on our future consolidated financial statements. Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting—Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses . The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, and amortization) included within income statement expense captions. The amendments will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The amendments are to be applied prospectively with the option for retrospective application. We are currently evaluating the impact of adopting the amendments on our future consolidated financial statements. 3. Business Acquisitions During 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 Topic 805 , Business Combinations . Vegas.com Acquisition 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, consisting of $ 152.8 million in cash and $ 95.5 million in equity (for which we issued 15.6 million shares of our Class A common stock). We financed the cash portion of the purchase price at closing with cash on hand, as well as cash balances acquired. The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting. The goodwill acquired in the Vegas.com Acquisition is not deductible for income tax purposes. The goodwill, which is included in our Marketplace segment, is primarily attributable to revenue opportunities with the Vegas.com service offerings and the assembled workforce. During the year ended December 31, 2023 , we recognized an expense of $ 1.9 million for direct costs incurred in relation to the Vegas.com Acquisition , which is recorded in General and administrative expenses in the Consolidated Statements of Operations. 76 VIVID SEATS INC. NOTES to the Consolidated Financial Statements The following table summarizes the final allocation (described in further detail below) of the purchase price amongst Vegas.com ’s tangible and intangible assets and liabilities as of the Vegas.com Acquisition Date (in thousands): Cash and cash equivalents $ 1,868 Accounts receivable 2,469 Prepaid expenses and other current assets 2,175 Property and equipment 264 Intangible assets 130,549 Goodwill 185,276 Right-of-use assets 779 Other assets 449 Accounts payable ( 34,589 ) Accrued expenses and other current liabilities ( 11,291 ) Deferred revenue ( 1,864 ) Long-term lease liabilities ( 69 ) Deferred tax liability ( 27,721 ) Purchase price $ 248,295 During the year ended December 31, 2024, we finalized the purchase price allocation of the Vegas.com Acquisition upon the expiration of the one-year remeasurement period that began on the Vegas.com Acquisition Date. The sole difference between the preliminary purchase price allocation and the final purchase price allocation presented above relates to a reclassification adjustment that increased the balance of Goodwill – net by $ 0.5 million and decreased the balance of Prepaid expenses and other current assets by $ 0.5 million. 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: Cost Estimated Useful Life Trade name $ 43,669 Indefinite Supplier relationships 37,160 4 years Customer relationships 27,590 3 years Acquired developed technology 22,130 4 years Acquired intangible assets $ 130,549 Unaudited Pro forma Financial Information The following table summarizes, on an unaudited pro forma basis, the condensed consolidated 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, 2023 2022 Revenues $ 797,879 $ 688,629 Income before income taxes 79,007 74,026 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 Vegas.com Acquisition 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 77 VIVID SEATS INC. NOTES to the Consolidated Financial Statements recognition with our policies; and (iv) elimination of interest expense incurred by Vegas.com prior to the Vegas.com Acquisition. Wavedash 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” and, together with the Vegas.com Acquisition, the “2023 Acquisitions” ). 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 purchase price at closing with cash on hand. The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting. In connection with the Wavedash Acquisition, we also assumed long-term debt owed to Shoko Chukin Bank (the “Shoko Chukin Bank Loan”) of JPY 458.3 mil (approximately $ 3.1 million) , which had an original maturity date of June 24, 2026 and was subject to a fixed interest rate of 1.27 % per annum. On April 4, 2024, we paid off the Shoko Chukin Bank Loan balance in its entirety. See Note 13, Long-Term Debt – Net, for more information. The goodwill recognized in the Wavedash Acquisition is not 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. During the year ended December 31, 2023 , we recognized an expense of $ 2.7 million for direct costs incurred in relation to the Wavedash Acquisition, which is recorded in General and administrative expenses in the Consolidated Statements of Operations. The following table summarizes the final allocation (described in further detail below) of the purchase price amongst Wavedash ’s tangible and intangible assets and liabilities as of the Wavedash Acquisition Date (in thousands): Cash and cash equivalents $ 18,390 Accounts receivable 2,182 Inventory 49 Prepaid expenses and other current assets 259 Property and equipment 67 Right-of-use assets 1,927 Other assets 675 Intangible assets 31,846 Goodwill 45,351 Accounts payable ( 7,427 ) Accrued expenses and other current liabilities ( 3,901 ) Current maturities of long-term debt ( 566 ) Long-term debt ( 2,546 ) Other liabilities ( 11,981 ) Purchase price $ 74,325 During the year ended December 31, 2024, we finalized the purchase price allocation of the Wavedash Acquisition upon the expiration of the one-year remeasurement period that began on the Wavedash Acquisition Date. There were no differences between the preliminary purchase price allocation and the final purchase price allocation presented above. 78 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 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: Cost Estimated Useful Life Trade name $ 2,173 Indefinite Supplier relationships 19,963 5 years Customer relationships 5,500 4 years Acquired developed technology 4,210 3 years Acquired intangible assets $ 31,846 Pro forma financial information for the Wavedash Acquisition was not considered material to our consolidated financial statements and has not been presented. Vivid Picks Acquisition On December 13, 2021 (the “Vivid Picks Acquisition Date“), we acquired 100 % ownership of Betcha (the “Vivid Picks Acquisition” and, together with the 2023 Acquisitions, the “Acquisitions”). 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 Vivid Picks Acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting. During the year ended December 31, 2022, we recognized an immaterial expense for direct costs incurred in relation to the Vivid Picks Acquisition, which is recorded 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 (the “Vivid Picks Earnouts”) 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 Vivid Picks Earnouts are measured at fair value using a Monte Carlo simulation model. The change in fair value of the Vivid Picks Earnouts is recorded in Change in fair value of contingent consideration in the Consolidated Statements of Operations. As of December 31, 2024, the estimated fair value of the Vivid Picks Earnouts was zero. For the years ended December 31, 2024, 2023, and 2022, the estimated fair value of the Vivid Picks Earnouts decreased by zero , $ 1.0 million, and $ 2.1 million , respectively. We made no payments related to the Vivid Picks Earnouts during the years ended December 31, 2024, 2023, and 2022. In addition, the consideration included future milestone payments of $ 9.5 million (collectively, the “Vivid Picks Milestone Payments”) 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 years ended December 31, 2024, 2023, and 2022, we paid Vivid Picks Milestone Payments of zero , $ 6.0 million, and $ 1.1 million, respectively. During the year ended December 31, 2022 , we also issued 0.3 million shares of Class A common stock such that the total Vivid Picks Milestone Payment consisted of $ 1.1 million cash and 0.3 million shares of Class A common stock. As of December 31, 2023, the integration objectives were fully met and we had no further liabilities related to the Vivid Picks 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. 79 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 4. Revenue Recognition During the years ended December 31, 2024, 2023, and 2022, Marketplace revenues by business model consisted of the following (in thousands): Years Ended December 31, 2024 2023 2022 Owned Properties revenues $ 533,086 $ 462,263 $ 400,413 Private Label Offering revenues 114,805 135,125 110,681 Marketplace revenues $ 647,891 $ 597,388 $ 511,094 During the years ended December 31, 2024, 2023, and 2022, Marketplace revenues consisted of the following event categories (in thousands): Years Ended December 31, 2024 2023 2022 Concert revenues $ 283,192 $ 308,507 $ 251,423 Sport revenues 202,220 199,837 196,467 Theater revenues 137,715 83,273 61,483 Other revenues 24,764 5,771 1,721 Marketplace revenues $ 647,891 $ 597,388 $ 511,094 In our Resale segment, we primarily acquire tickets to resell on secondary ticket marketplaces, including our own. Resale segment revenu es were $ 127.7 million, $ 115.5 million, and $ 89.2 million during the years ended December 31, 2024, 2023, and 2022, respectively. At December 31, 2024, Deferred revenue in the Consolidated Balance Sheets was $ 23.8 million, which primarily relates to the Vivid Seats Rewards 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 within the next seven years . At December 31, 2023, $ 34.7 million was recorded as Deferred revenue in the Consolidated Balance Sheets, of w hich $ 25.8 million was recognized as revenue during the year ended December 31, 2024. At December 31, 2022, $ 32.0 million was recorded as Deferred revenue in the Consolidated Balance Sheets, of which $ 17.6 million was recognized as revenue during the year ended December 31, 2023 . 5. 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 (the “CODM”) in making decisions regarding resource allocation and performance assessment. The CODM is our Chief Executive Officer (“CEO”). We have determined that we have two operating and reportable segments: Marketplace and Resale. In our Marketplace segment, we primarily act as an intermediary between ticket buyers, sellers, and partners through which we earn revenue processing ticket sales for live events and attractions and from facilitating the booking of hotel rooms and packages. In our Resale segment, we primarily acquire tickets to resell on secondary ticket marketplaces, including our own. The CODM evaluates the performance of the segments and allocates resources to them based on contribution margin (defined as revenues less cost of revenues and marketing and selling expenses). Cost of revenues consists largely of payment processing fees for our Marketplace segment and ticket costs for our Resale segment. Marketing and selling expenses, which exclusively relate to our Marketplace segment, almost exclusively consist of online and offline advertising costs. For all segments, the CODM uses contribution margin in the annual budgeting and forecasting process, as well as when reviewing forecast-to-actual variances while making decisions about the allocation of operating and capital resources to each segment. 80 VIVID SEATS INC. NOTES to the Consolidated Financial Statements We do not report assets, capital expenditures, general and administrative expenses, or depreciation and amortization expenses by segment because the 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, 2024 (in thousands): Year Ended December 31, 2024 Marketplace Resale Total Revenues $ 647,891 $ 127,695 $ 775,586 Cost of revenues (exclusive of depreciation and amortization shown separately below) 99,460 102,394 201,854 Marketing and selling: Online 261,188 — 261,188 Offline 23,958 — 23,958 Total marketing and selling 285,146 — 285,146 Contribution margin 263,285 25,301 288,586 General and administrative 202,123 Depreciation and amortization 44,238 Income from operations 42,225 Interest expense – net 23,172 Other income – net ( 3,666 ) Income before income taxes $ 22,719 The following table represents our segment information for the year ended December 31, 2023 (in thousands): Year Ended December 31, 2023 Marketplace Resale Total Revenues $ 597,388 $ 115,491 $ 712,879 Cost of revenues (exclusive of depreciation and amortization shown separately below) 94,557 87,627 182,184 Marketing and selling: Online 239,335 — 239,335 Offline 34,761 — 34,761 Total marketing and selling 274,096 — 274,096 Contribution margin 228,735 27,864 256,599 General and administrative 159,081 Depreciation and amortization 17,178 Change in fair value of contingent consideration ( 998 ) Income from operations 81,338 Interest expense – net 13,505 Other income – net ( 3,109 ) Income before income taxes $ 70,942 The following table represents our segment information for the year ended December 31, 2022 (in thousands): Year Ended December 31, 2022 Marketplace Resale Total Revenues $ 511,094 $ 89,180 $ 600,274 Cost of revenues (exclusive of depreciation and amortization shown separately below) 73,126 67,382 140,508 Marketing and selling: Online 224,872 — 224,872 Offline 23,503 — 23,503 Total marketing and selling 248,375 — 248,375 Contribution margin 189,593 21,798 211,391 General and administrative 127,619 Depreciation and amortization 7,732 Change in fair value of contingent consideration ( 2,065 ) Income from operations 78,105 Interest expense – net 12,858 Other income – net ( 8,227 ) Loss on extinguishment of debt 4,285 Income before income taxes $ 69,189 81 VIVID SEATS INC. NOTES to the Consolidated Financial Statements Marketing and selling expenses primarily consist of online costs aimed towards acquiring new customers, which include paid search engine marketing, fees paid to our advertising affiliates and distributors, and other online marketing activities. To a lesser extent, marketing and selling expenses also consist of offline costs towards acquiring new customers, which include spending on traditional media channels, advertising agency costs, and partnership expenses with teams and other media partners. Substantially all of our sales occur and assets reside in the United States. 6. Accounts Receivable – Net The following table summarizes our accounts receivable balance, net of allowance for credit losses as of December 31, 2024 and 2023 (in thousands): December 31, December 31, 2024 2023 Uncollateralized payment processor obligations $ 28,740 $ 32,810 Due from ticket sellers for cancellation charges 6,835 5,632 Due from distribution partners for cancellation charges 13,308 12,736 Event insurance and other commissions receivable 4,980 11,414 Other 6,437 5,963 Accounts receivable 60,300 68,555 Less: allowance for credit losses ( 11,985 ) ( 10,074 ) Accounts receivable – net $ 48,315 $ 58,481 We recorded an allowance for credit losses of $ 12.0 million and $ 10.0 million at December 31, 2024 and 2023, 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 to reflect larger amounts due from distribution partners that are unlikely to be collected based on actual store credit usage. Write-offs were $ 0.2 million, $ 0.3 million, and $ 4.9 million for the years ended December 31, 2024, 2023, and 2022 , respectively. 7. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following at December 31, 2024 and 2023 (in thousands): December 31, December 31, 2024 2023 Recovery of future customer compensation $ 20,335 $ 25,750 Prepaid expenses 7,388 8,218 Other current assets 4,884 93 Prepaid expenses and other current assets $ 32,607 $ 34,061 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 $ 5.4 million at December 31, 2024 compared to December 31, 2023, primarily due to a decrease in estimated future cancellations driven by lower sales volumes for future events. A related provision for expected compensation to customers is recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. 82 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 8. Property and Equipment – Net The following table summarizes our major classes of property and equipment, net of accumulated depreciation as of December 31, 2024 and 2023 (in thousands): December 31, December 31, 2024 2023 Computer equipment $ 3,145 $ 2,792 Furniture 1,996 1,705 Leasehold improvements 8,692 7,655 Construction in progress 2,165 - Property and equipment 15,998 12,152 Less: accumulated depreciation ( 3,431 ) ( 1,996 ) Property and equipment – net $ 12,567 $ 10,156 Depreciation expense related to property and equipment for the years ended December 31, 2024, 2023, and 2022 was $ 1.7 million, $ 1.4 million, and $ 0.6 million, respectively, all of which is recorded in Depreciation and amortization in the Consolidated Statements of Operations. There were no impairment charges during the years ended December 31, 2024, 2023, and 2022. In each of the years ended December 31, 2024, 2023, and 2022, we recorded an expense of $ 0.1 million for losses incurred on property and equipment-related asset disposals, which is recorded i n General and administrative expenses in the Consolidated Statements of Operations. 9. Leases The following table presents the lease-related assets and liabilities in the Consolidated Balance Sheets as of December 31, 2024 and 2023 (in thousands): December 31, December 31, 2024 2023 Right-of-use assets – net $ 12,008 $ 9,826 Current operating lease liabilities included in Accrued expenses and other current liabilities $ 1,973 $ 2,059 Long-term lease liabilities 18,731 16,215 Operating lease liabilities $ 20,704 $ 18,274 We entered into all of our lease contracts as a lessee. We are not acting as a lessor under any of our leasing arrangements. The vast majority of our lease contracts are real estate leases for office space. All of our leases are classified as operating. None of our leases contain any material residual value guarantees or restrictive covenants. 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. The following table summarizes the weighted average remaining minimum lease term and the weighted average incremental borrowing rate as of December 31, 2024 and 2023: December 31, December 31, 2024 2023 Weighted average remaining minimum lease term 8.2 years 8.1 years Weighted average incremental borrowing rate 8.5 % 7.4 % 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 83 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 31, 2033 with a five-year renewal option. The aggregate lease payments for the initial term were approximately $ 16.2 million, with no rent due until March 2024. The lease agreement provides for a tenant improvement allowance from the landlord in an amount equal to $ 6.5 million towards the design and construction on the leased premises. As of December 31, 2022, we incurred leasehold improvement costs of $ 6.5 million related to the tenant improvement allowance. 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. In April 2024, we amended our lease agreement to provide for the expansion of our corporate headquarters. The amendment commenced in the fourth quarter of 2024 when we obtained control of the new premises, and runs through December 31, 2033 with a five-year renewal option. The aggregate lease payments for the initial term are approximately $1 .5 million with no rent due until November 2025. The lease agreement provides for a tenant improvement allowance from the landlord in an amount equal to $ 0.6 million towards the design and construction on the leased premises. As of December 31, 2024 , we incurred leasehold improvement costs of $ 0.6 million related to the tenant improvement allowance. 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 $ 0.3 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 in General and administrative expenses in the Consolidated Statements of Operations. Operating and variable lease expenses for the years ended December 31, 2024, 2023, and 2022 were $ 3.0 m illion, $ 2.0 million, and $ 3.6 million, respectively. 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 $ 3.4 million, $ 1.2 million, and $ 3.1 million during the years ended December 31, 2024, 2023, and 2022, respectively. The following table summarizes the present value of our operating lease liabilities as of December 31, 2024 (in thousands): Operating Leases 2025 $ 3,483 2026 3,627 2027 3,453 2028 3,240 2029 3,311 Thereafter 10,997 Total future lease payments 28,111 Less: imputed interest ( 7,407 ) Present value of lease liabilities $ 20,704 84 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 10. Goodwill – Net and Intangible Assets – Net Goodwill – Net Goodwill is inclu ded in our Marketplace segment. The following table summarizes the changes in the carrying amount of our goodwill during the years ended December 31, 2024 and 2023 (in thousands): Goodwill – Net Balance at January 1, 2023 $ 715,258 2023 Acquisitions (Note 3) 230,091 Foreign currency translation adjustment 2,010 Balance at December 31, 2023 947,359 Vegas.com Acquisition (Note 3) 536 Foreign currency translation adjustment ( 4,776 ) Balance at December 31, 2024 $ 943,119 Goodwill is recorded net of impairment, for which we recognized $ 377.1 million of cumulative impairment charges as of December 31, 2024 and 2023. Intangible Assets – Net The following tables summarize the carrying amount and weighted average remaining life (in years, if applicable) of our intangible assets at December 31, 2024 and 2023 (in thousands): December 31, Weighted Average 2024 Remaining Life Definite-lived intangible assets Supplier relationships $ 57,123 3.1 Customer relationships 34,620 2.0 Acquired developed technology 29,240 2.6 Capitalized development costs 46,293 1.6 Capitalized development costs – work in progress 6,839 Acquired Domain Name 17,348 15.4 Seat images 347 3.0 Foreign currency translation adjustment ( 1,891 ) Total gross book value 189,919 Less: accumulated amortization Supplier relationships ( 16,048 ) Customer relationships ( 14,053 ) Acquired developed technology ( 10,025 ) Capitalized development costs ( 27,325 ) Acquired Domain Name ( 88 ) Seat images ( 26 ) Foreign currency translation adjustment 357 Total accumulated amortization ( 67,208 ) Indefinite-lived intangible assets Trademarks 110,538 Foreign currency translation adjustment ( 133 ) Intangible assets – net $ 233,116 85 VIVID SEATS INC. NOTES to the Consolidated Financial Statements December 31, Weighted Average 2023 Remaining Life Definite-lived intangible assets Supplier relationships $ 57,123 4.1 Customer relationships 34,620 3.0 Acquired developed technology 29,240 3.6 Capitalized development costs 28,912 1.5 Capitalized development costs – work in progress 4,795 Foreign currency translation adjustment 1,315 Total gross book value 156,005 Less: accumulated amortization Supplier relationships ( 2,881 ) Customer relationships ( 3,522 ) Acquired developed technology ( 2,551 ) Capitalized development costs ( 16,433 ) Foreign currency translation adjustment ( 97 ) Total accumulated amortization ( 25,484 ) Indefinite-lived intangible assets Trademarks 110,538 Foreign currency translation adjustment 96 Intangible assets – net $ 241,155 Intangible assets are recorded net of accumulated amortization (for definite-lived components) and impairment (for indefinite-lived components). We recognized $ 78.7 million of cumulative impairment charges related to our trademarks as of December 31, 2024 and 2023. On October 22, 2024, we acquired a domain name that we had previously licensed (the “ Acquired Domain Name ” ). In exchange for the Acquired Domain Name, we are required to disburse monthly interest-free cash payments totaling $ 31.4 million through June 2040 (the “ Acquired Domain Name Obligation ” ). We account for the Acquired Domain Name as a definite-lived intangible asset under ASC Topic 350, Intangibles—Goodwill and Other . The acquisition cost of the Acquired Domain Name was $ 17.3 million, which will be amortized over a period of 15.6 years (the “ Acquired Domain Name Term ” ). As of December 31, 2024, the Acquired Domain Name had a carrying value of $ 17.3 million, which is recorded in Intangible assets – net in the Consolidated Balance Sheets. We account for the Acquired Domain Name Obligation as a liability for which we will accrue interest over the Acquired Domain Name Term at an effective interest rate of 8.6 % per annum. As of December 31, 2024, the Acquired Domain Name Obligation had a carrying value of $ 17.2 million, $ 0.6 million of which is recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. The remaining $ 16.6 million is recorded in Other liabilities in the Consolidated Balance Sheets. During the year ended December 31, 2024, we incurred $ 0.2 million of interest for the Acquired Domain Name Obligation, which is recorded in Interest expense – net in the Consolidated Statements of Operations. During the year ended December 31, 2024, our intangible assets increased primarily as a result of our investments in the Acquired Domain Name and other various capitalized development costs. Amortization expense on our definite-lived intangible assets was $ 42.4 million, $ 15.7 million, and $ 7.1 million for the years ended December 31, 2024, 2023, and 2022, respectively, which is recorded in Depreciation and amortization in the Consolidated Statements of Operations. During the years ended December 31, 2024, 2023, and 2022, we incurred losses of $ 0.2 million, $ 0.6 million, and $ 0.3 million, respectively, on asset disposals related to our definite-lived intangible assets, which are recorded in General and administrative expenses in the Consolidated Statements of Operations. 86 VIVID SEATS INC. NOTES to the Consolidated Financial Statements The estimated future amortization expense related to our definite-lived intangible assets (other than work in progress capitalized development costs) at December 31, 2024 is as follows (in thousands): Definite-Lived Intangible Assets 2025 $ 41,753 2026 36,368 2027 19,916 2028 3,202 2029 780 Thereafter 13,853 Estimated future amortization expense $ 115,872 11. Investments 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 8.0 % 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 Topic 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 recorded as a separate component in the Consolidated Statements of Comprehensive Income until realized. The Note’s unrealized gain for the years ended December 31, 2024 and 2023 was $ 0.1 million and $ 0.2 million, respectively. The Note’ s amortized cost was $ 3.0 million and $ 2.7 million at December 31, 2024 and 2023, respectively. We did not recognize any credit losses related to the Note during the years ended December 31, 2024 and 2023. We account for the Warrant in accordance with ASC 815, pursuant to which we record the derivative instrument in the Consolidated Balance Sheets at fair value with changes in fair value recorded in Other income – net in 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 in accordance with ASC 820, pursuant to which we disclose fair values as Level 1, Level 2, or Level 3 based on the fair value hierarchy. Investments recorded at fair value on a recurring basis as of December 31, 2024 and 2023 were as follows (in thousands): Fair Value Measurements Using Level 1 Level 2 Level 3 Total December 31, 2024 Note $ — $ — $ 3,604 $ 3,604 Warrant — — 3,325 3,325 $ — $ — $ 6,929 $ 6,929 Fair Value Measurements Using Level 1 Level 2 Level 3 Total December 31, 2023 Note $ — $ — $ 2,868 $ 2,868 Warrant — — 4,125 4,125 $ — $ — $ 6,993 $ 6,993 87 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 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 option pricing model, which requires us to make assumptions and judgments about the variables used in the calculation related to the expected term, the expected volatility, the risk-free rate of interest, and the expected dividend yield. Because of the inherent uncertainty of this 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, 2024 and 2023: December 31, December 31, Asset Significant Unobservable Inputs 2024 2023 Note Expected term (years) 5.5 6.5 Implied yield 21.0 % 21.7 % Warrant Expected term (years) 5.5 6.5 Expected volatility 59.0 % 56.0 % Risk-free rate 4.4 % 3.9 % Expected dividend yield 0.0 % 0.0 % The following table summarizes the changes in the carrying amount of the Note and the Warrant (both of which are measured at fair value using Level 3 significant unobservable inputs) during the years ended December 31, 2024 and 2023 (in thousands): Note Warrant Balance at July 3, 2023 (inception) $ 2,411 $ 3,589 Accretion of discount 23 — Interest paid-in-kind 238 — Unrealized gains: Recognized in net income — 536 Recognized in other comprehensive income 196 — Total unrealized gains 196 536 Balance at December 31, 2023 2,868 4,125 Accretion of discount 116 — Interest paid-in-kind 501 — Unrealized gains (losses): Recognized in net income — ( 800 ) Recognized in other comprehensive loss 119 — Total unrealized gains (losses) 119 ( 800 ) Balance at December 31, 2024 $ 3,604 $ 3,325 88 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 12. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following at December 31, 2024 and 2023 (in thousands): December 31, December 31, 2024 2023 Accrued marketing expense $ 30,573 $ 39,210 Accrued customer credits 55,785 64,318 Accrued future customer compensation 26,614 33,010 Accrued payroll 10,128 17,381 Accrued operating expenses 16,193 20,828 Other current liabilities 25,754 16,895 Accrued expenses and other current liabilities $ 165,047 $ 191,642 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 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 estimates could be impacted by future activity differing from our estimates, the effects of which could be material. During the years ended December 31, 2024, 2023, and 2022 , $ 18.5 million, $ 15.1 million, and $ 24.3 million of accrued customer credits were redeemed, respectively, and we recognized revenue from breakage of $ 12.2 million, $ 20.6 million, and $ 11.5 million, respectively. Breakage amounts are net of reductions in associated accounts receivable balances. Accrued future customer compensation represents an estimate of the amount of customer compensation due from cancellation charges in the future. 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 recorded 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 could be material. During the years ended December 31, 2024, 2023, and 2022, we recognized a net increase in revenue of $ 1.1 mi llion, $ 0.1 million, and $ 2.3 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. During the years ended December 31, 2024 and 2023, accrued future customer compensation decreased by $ 6.4 million and increased by $ 2.8 million, respectively, due to a decrease in the estimated rate of future cancellations as of December 31, 2024 and an increase in the estimated rate of future cancellations as of December 31, 2023 . 89 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 13. Long-Term Debt – Net The following table summarizes our long-term debt, net of unamortized debt issuance costs and current maturities as of December 31, 2024 and 2023 (in thousands): December 31, December 31, 2024 2023 2022 First Lien Loan $ — $ 270,188 Shoko Chukin Bank Loan — 2,954 2024 First Lien Loan 393,025 — Outstanding debt 393,025 273,142 Less: unamortized debt issuance costs ( 4,115 ) ( 4,577 ) Long-term debt 388,910 268,565 Less: current maturities of long-term debt ( 3,950 ) ( 3,933 ) Long-term debt – net $ 384,960 $ 264,632 2017 Term Loans In June 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 “2017 First Lien Loan”), and a second lien credit facility comprising a $ 185.0 million second lien term loan (the “2017 Second Lien Loan” and, together with the 2017 First Lien Loan, the “2017 Term Loans”). In July 2018, we amended the 2017 First Lien Loan to upsize the committed amount by $ 115.0 million. In October 2019 , we repaid the 2017 Second Lien Loan in its entirety. The revolving credit facility component of the first lien debt facility was retired in May 2020. In October 2021, we made an early principal payment related to the 2017 First Lien Loan of $ 148.2 million in connection with, and using the proceeds from, the Merger Transaction and the PIPE Financing. On February 3, 2022, we repaid $ 190.7 million of the 2017 First Lien Loan and refinanced the remaining balance with a new $ 275.0 million term loan (as discussed in the “2022 First Lien Loan” section below). 2022 First Lien Loan On February 3, 2022, we amended the June 2017 First Lien Loan to refinance the remaining balance with a new $ 275.0 million term loan (the “2022 First Lien Loan”), which had an original maturity date of February 3, 2029 , and added a $ 100.0 million revolving credit facility (the “Revolving Facility”) with a maturity date of February 3, 2027. The terms of the 2022 First Lien Loan specified a secured overnight financing rate (“SOFR”)-based floating interest rate and contain a springing financial covenant that requires compliance with a first lien net leverage ratio when revolver borrowings exceed certain levels. All obligations under the 2022 First Lien Loan were unconditionally guaranteed by Hoya Intermediate and substantially all of Hoya Intermediate’ s existing and future direct and indirect wholly owned domestic subsidiaries (collectively, the “Guarantors”). The 2022 First Lien Loan required quarterly amortization payments of $ 0.7 million. The Revolving Facility does not require periodic payments. All obligations under the 2022 First Lien Loan were secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our and the Guarantors ’ assets. The 2022 First Lien Loan carried an interest rate of SOFR (subject to a 0.5 % floor) plus a margin of 3.25 %. The effective interest rate on the 2022 First Lien Loan was 9.05 % per annum at December 31, 2023. The 2022 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. Because the fair value was estimated using quoted prices that were directly observable in the marketplace, it was estimated on a Level 2 basis. At December 31, 2023, the fair value of the 2022 First Lien Loan approximated its carrying value. We were subject to certain reporting and compliance-related covenants to remain in good standing under the 2022 First Lien Loan. These covenants, among other things, limited our ability to incur additional indebtedness and, in certain circumstances, to enter into transactions with affiliates, create liens, merge or consolidate, and make certain 90 VIVID SEATS INC. NOTES to the Consolidated Financial Statements payments. Non-compliance with these covenants and failure to remedy could have resulted in the acceleration of the loans or foreclosure on the collateral. As of December 31, 2023, we were in compliance with all debt covenants related to the 2022 First Lien Loan and had no outstanding borrowings under the Revolving Facility . During the year ended December 31, 2022, we recognized an expense of $ 4.3 million for losses incurred in relation to the refinancing of the 2017 First Lien Loan with the 2022 First Lien Loan, which is recorded in Loss on extinguishment of debt in the Consolidated Statements of Operations. On June 14, 2024, we refinanced the remaining $ 269.5 million balance of the 2022 First Lien Loan with a new $ 395.0 million term loan (as discussed in the “2024 First Lien Loan” section below). Shoko Chukin Bank Loan In connection with the Wavedash Acquisition, we assumed the Shoko Chukin Bank Loan of JPY 458.3 million (approximately $ 3.1 million), which had an original maturity date of June 24, 2026 and was subject to a fixed interest rate of 1.27 % per annum. The Shoko Chukin Bank 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. Because the fair value was estimated using quoted prices that are directly observable in the marketplace, it was estimated on a Level 2 basis. At December 31, 2023, the fair value of the Shoko Chukin Bank Loan approximated its carrying value. On April 4, 2024, we paid off the Shoko Chukin Bank Loan balance in its entirety. 2024 First Lien Loan On June 14, 2024, we amended the 2022 First Lien Loan to refinance the remaining balance with a new $ 395.0 million term loan (the “2024 First Lien Loan”), which has a maturity date of February 3, 2029 . The Revolving Facility was not impacted by the refinancing of the 2022 First Lien Loan with the 2024 First Lien Loan. The terms of the 2024 First Lien Loan specify a SOFR-based floating interest rate and contain a springing financial covenant that requires compliance with a first lien net leverage ratio when revolver borrowings exceed certain levels. All obligations under the 2024 Lien Loan are unconditionally guaranteed by the Guarantors. The 2024 First Lien Loan requires quarterly amortization payments of $ 1.0 million. All obligations under the 2024 First Lien Loan are secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our and the Guarantors’ assets. The 2024 First Lien Loan carries an interest rate of SOFR (subject to a 0.5 % floor) plus a margin of 3.00 % ; provided that such margin may be reduced to 2.75 % if the corporate rating assigned to us by Moody’s Investors Service, Inc. and S&P Global Ratings is at least Ba3/BB- (in each case, stable or better). The effective interest rate on the 2024 First Lien Loan was 7.89 % per annum at December 31, 2024. The 2024 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. Because the fair value was estimated using quoted prices that are directly observable in the marketplace, it is estimated on a Level 2 basis. At December 31, 2024, the fair value of the 2024 First Lien Loan approximated its carrying value. We are subject to certain reporting and compliance-related covenants to remain in good standing under the 2024 First Lien Loan. 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, 2024 , we were in compliance with all debt covenants related to the 2024 First Lien Loan and had no outstanding borrowings under the Revolving Facility. The refinancing of the 2022 First Lien Loan with the 2024 First Lien Loan was accounted for as a debt modification (the “First Lien Loan Modification”). During the year ended December 31, 2024, we recognized an expense of $ 1.7 million for third-party fees incurred in relation to the First Lien Loan Modification, which is recorded in Other income – net in the Consolidated Statements of Operations. 91 VIVID SEATS INC. NOTES to the Consolidated Financial Statements On February 5, 2025, we amended the 2024 First Lien Loan to reprice all $ 393.0 million of the then-outstanding balance. See Note 23, Subsequent Events , for more information. Future Maturities of Outstanding Debt The following table summarizes the future maturities of our outstanding debt, which entirely consists of the 2024 First Lien Loan, as of December 31, 2024 (in thousands): 2024 First Lien Loan 2025 $ 3,950 2026 3,950 2027 3,950 2028 3,950 2029 377,225 Future maturities of outstanding debt $ 393,025 14. Employee Benefit Plan 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 Service. The plan also provides for discretionary profit-sharing contributions and matching contributions. We contributed appro ximately $ 2.2 million, $ 1.6 million, and $ 1.3 million in matching contributions for the years ended December 31, 2024, 2023, and 2022, respectively, which is recorded in General and administrative expenses in the Consolidated Statements of Operations. For the years ended December 31, 2024, 2023, and 2022 , there were no discretionary profit-sharing contributions. 15. Financial Instruments We issued the following warrants during the year ended December 31, 2021 in connection with the Merger Transaction: Public Warrants In connection with the Merger Transaction, we issued to former Horizon warrant holders Public Warrants to purchase 18,132,776 shares of Class A common stock at an exercise price of $ 11.50 per share, 5,166,666 of which were issued to Horizon Sponsor. The Public Warrants are traded on the Nasdaq Global Select 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 0.24 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, 10 Public Warrants were exercised. The exercise of the Public Warrants is accounted for as an equity transaction and is recorded in Additional paid-in capital in the Consolidated Balance Sheets. As of December 31, 2024, there w ere 6,766,853 Public Warrants outstanding. 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 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 the date that is five years following the Merger Transaction, the date of 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 92 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 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. Private Warrants In connection with the Merger Transaction, 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, with the most notable difference relating to the fact that we are unable to redeem the Private Warrants. As of December 31, 2024, there were 6,519,791 Private Warrants outstanding. 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 holders of the Private Warrants. Exercise Warrants In connection with the Merger Transaction, we issued to Horizon Sponsor (i) $ 10 Exercise Warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share and (ii) $ 15 Exercise Warrants to purchase 17,000,000 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, 2024 , there were 34,000,000 Exercise Warrants outstanding (comprised of 17,000,000 $ 10 Exercise Warrants and 17,000,000 $ 15 Exercise Warrants). Mirror Warrants In connection with the Merger Transaction, Hoya Intermediate issued to us warrants to purchase 17,000,000 Intermediate Units at an exercise price of $ 10.00 per unit (the “$ 10 Mirror Warrants”), warrants to purchase 17,000,000 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, Private, and Exercise Warrants. Upon the valid exercise of a Public, Private, or Exercise Warrant, Hoya Intermediate will issue to us an equivalent number of Intermediate Units. Similarly, if a Public, Private, 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, 2024 , there were 47,286,644 Mirror Warrants outstanding (comprised of 17,000,000 $ 10 Mirror Warrants, 17,000,000 $ 15 Mirror Warrants, and 13,286,644 $ 11.50 Mirror Warrants). Because the Public, Private, and Exercise Warrants are indexed to our equity and meet the equity classification guidance of ASC Topic 815-40, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, they are accounted for as a component of Shareholders' equity and recorded in Additional paid-in capital in the Consolidated Balance Sheets. The Mirror Warrants eliminate in consolidation and do not impact the presentation of our consolidated financial statements. 93 VIVID SEATS INC. NOTES to the Consolidated Financial Statements Intermediate Warrants In connection with the Merger Transaction, Hoya Intermediate issued to Hoya Topco (i) $ 10 Intermediate Warrants to purchase 3,000,000 Intermediate Units at an exercise price of $ 10.00 per unit and (ii) $ 15 Intermediate Warrants to purchase 3,000,000 Intermediate Units at an exercise price of $ 15.00 per unit . A portion of the Intermediate Warrants (the Option Contingent Warrants, which consisted of 1,000,000 $ 10 Intermediate Warrants and 1,000,000 $ 15 Intermediate Warrants) were issued in tandem with the Management Options that we issued to members of our management team and would only become exercisable by Hoya Topco if a Management Option was forfeited or expired unexercised. Because the Intermediate Warrants allow for cash redemption at the option of the warrant holder, they are recorded in Other liabilities in the Consolidated Balance Sheets. Upon consummation of the Merger Transaction, the fair value of the Intermediate Warrants was determined using the Black-Scholes model and estimated at $ 20.4 million (including $ 1.6 million of Option Contingent Warrants), for which we recorded a warrant liability. 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 profits interests. On December 7, 2023, Hoya Topco voluntarily terminated all 2,000,000 of the Option Contingent Warrants. Immediately before such termination, the fair value of the liability related to the Option Contingent Warrants was determined using the Black-Scholes m odel and estimated at $ 1.1 million. Upon termination, this liability was reduced to zero, with an equivalent increase recorded to Redeemable noncontrolling interests. As of December 31, 2024, there were 4,000,000 Intermediate Warrants outstanding (comprised of 2,000,000 $ 10 Intermediate Warrants and 2,000,000 $ 15 Intermediate Warrants). The following assumptions were used to calculate the fair value of the Intermediate Warrants at December 31, 2024 and 2023: December 31, December 31, 2024 2023 Expected term (years) 6.8 7.8 Expected volatility 52.0 % 48.0 % Risk-free rate 4.5 % 3.9 % Expected dividend yield 0.0 % 0.0 % For the years ended December 31, 2024 and 2023, the fair value of the Intermediate Warrants decreased by $ 4.0 million and $ 1.0 million, respectively. For the year ended December 31, 2022, the fair value of the Intermediate Warrants (including the Option Contingent Warrants) decreased by $ 8.2 million. The change in fair value of the Intermediate Warrants (including, for the year ended December 31, 2022, the Option Contingent Warrants) is recorded in Other income – net in the Consolidated Statements of Operations. Upon the valid exercise of an Intermediate Warrant for Intermediate Units, we will issue an equivalent number of shares of our Class B common stock to Hoya Topco. 16. Redeemable noncontrolling Interests As of December 31, 2024, Hoya Topco held 100 % of our Class B common stock and 36.6 % o f the Intermediate Units, representing a redeemable noncontrolling interest in VSI. At its sole discretion, Hoya Topco has the right to exchange its Intermediate Units for shares of our Class A common stock on a one-to-one basis or for cash proceeds of equal value at the time of redemption . If Hoya Topco elects the redemption to be settled in cash: (i) the cash used to settle the redemption must be funded through a private or public offering of our Class A common stock; and (ii) the redemption must be approved by our Board of Directors (our “Board”). Net income attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate’s net income incurred in the period by Hoya Topco’s weighted average percentage allocation of Intermediate Units during the period. See Note 22, Earnings per Share , for computation of net income attributable to redeemable noncontrolling interests. 94 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 17. Equity Hoya Intermediate Subsequent to the Merger Transaction, Hoya Intermediate has Intermediate Units authorized, issued, and outstanding. Intermediate Units As of December 31, 2024, 208,170,326 Intermediate Units were outstanding, which is equivalent to the total number of shares of our Class A common stock and Class B common stock outstanding, net of treasury stock. VSI holds 63.4 % of the outstanding Intermediate Units as of December 31, 2024, with the remaining 36.6 % representing the redeemable noncontrolling interest held by Hoya Topco. VSI Subsequent to the Merger Transaction, VSI has Class A common stock and Class B common stock authorized, issued, and outstanding. 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 held. Class B Common Stock 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 Interests ). 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 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 Repurchases On May 25, 2022, our Board authorized a share repurchase program for up to $ 40.0 million of our Class A common stock (the “2022 Share Repurchase Program”). The 2022 Share Repurchase Program was announced on May 26, 2022 and its authorization was fully utilized during the year ended December 31, 2022 and the three months ended March 31, 2023. As of December 31, 2023 and 2022, we repurchas ed approximately 5.3 million shares of our Class A common stock for approximately $ 40.0 million a nd approximately 4.3 million shares of our Class A common stock for approximately $ 32.5 million, respectively, under the 2022 Share Repurchase Program, for which we recorded approximately $ 0.1 million in commissions and excise taxes. Pursuant to the underwriting agreement for the December 2023 Secondary Offering (defined below), we repurchased approximately 2.0 million shares of our Class A common stock from the underwriters at a price of $ 6.24 per share (the same price per share paid by the underwriters to Hoya Topco) on December 12, 2023. On February 29, 2024, our Board authorized a share repurchase program for up to $ 100.0 million of our Class A common stock (the “2024 Share Repurchase Program”). The 2024 Share Repurchase Program was publicly announced on March 5, 2024 and does not have a fixed expiration date. As of December 31, 2024, we repurchased approximately 4.1 million shares of our Class A common stock for approximately $ 22.8 million under the 2024 Share Repurchase Program, for which we recorded approximately $ 0.1 million in commissions and excise taxes. As of December 31, 2024, approximately $ 77.2 million remained available for future repurchases under the 2024 Share Repurchase Program. All of the above share repurchases were accounted for as equity transactions and are recorded in Treasury stock in the Consolidated Balance Sheets. 95 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 2023 Secondary Offerings In 2023, Hoya Topco, as selling stockholder, completed the following public offerings of shares of our Class A common stock: • On May 22, 2023, it sold 16.0 million shares, and on June 15, 2023, it sold 2.4 million shares pursuant to the full exercise of the underwriters ’ option to purchase additional shares (collectively, the “June 2023 Secondary Offering” ). The shares were purchased by the underwriters for $ 7.68 per share and sold at a public offering price of $ 8.00 per share. Hoya Topco exchanged 18.4 million shares of our Class B common stock and 18.4 million Intermediate Units for the shares that it sold. We did no t receive any proceeds from Hoya Topco ’s sale of shares in the June 2023 Secondary Offering. • On December 12, 2023, it sold 23.6 million shares, which included 3.1 million shares sold pursuant to the full exercise of the underwriters ’ option to purchase additional shares and 2.0 million shares repurchased by us (collectively, the “December 2023 Secondary Offering” and, together with the June 2023 Secondary Offering, the “2023 Secondary Offerings”). The shares were purchased by the underwriters for $ 6.24 per share and, other than the 2.0 million shares that we repurchased, sold at a public offering price of $ 6.50 per share. Hoya Topco exchanged 23.6 million shares of our Class B common stock and 23.6 million Intermediate Units for the shares that it sold. We did no t receive any proceeds from Hoya Topco’s sale of shares in the December 2023 Secondary Offering. During the year ended December 31, 2023 , we recognized expenses of $ 1.5 million and $ 0.7 million for fees incurred in relation to the June 2023 Secondary Offering and the December 2023 Secondary Offering, respectively, both of which are recorded in General and administrative expenses in the Consolidated Statements of Operations. Accumulated Other Comprehensive Income (Loss) The following table presents the changes in each component of accumulated other comprehensive income (loss) attributable to Class A common stockholders during the years ended December 31, 2024 and 2023 (in thousands): Unrealized Gain on Note Foreign Currency Translation Adjustment Accumulated Other Comprehensive Income (Loss) Balance at January 1, 2023 $ — $ — $ — Recognized in other comprehensive income 106 641 747 Balance at December 31, 2023 106 641 747 Recognized in other comprehensive loss 75 ( 1,702 ) ( 1,627 ) Balance at December 31, 2024 $ 181 $ ( 1,061 ) $ ( 880 ) 18. 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 $ 10.1 million payable in the next 12 months and $ 10.5 million payable thereafter. Litigation From time to time, we are involved in various claims and legal actions arising in the ordinary course of business, none of which, in management’s opinion, could have a material effect on our business, financial position, or results of operations other than those matters discussed below. 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 class members. Other class members were notified in 2022 that they are eligible to submit a claim for a coupon. As of December 31, 2024 and 2023, a liability of $ 0.9 million was recorded in Accrued expenses 96 VIVID SEATS INC. NOTES to the Consolidated Financial Statements and other current liabilities in the Consolidated Balance Sheets related to expected claim submissions and credit redemptions as of the measurement date. We have been a defendant in multiple class action lawsuits related to customer compensation for cancellations, primarily as a result of COVID-19 restrictions. A final order approving the settlement of one such lawsuit was entered by the court in November 2021 , pursuant to which we paid $ 4.5 million (after insurance) to fund a claims settlement pool in 2021 that was fully disbursed in 2022. A final order approving the settlement of another such lawsuit was entered by the court on January 31, 2023, pursuant to which we paid $ 3.3 million (after insurance) to cover legal and administrative fees and approved claims, payments for which were made in August 2023. We had no accrued liability as of December 31, 2024 and 2023 related to these matters. We are a defendant in a lawsuit related to an alleged violation of the Illinois Biometric Information Privacy Act. An order preliminarily approving the settlement of this lawsuit was entered by the court on September 27, 2024, which remains subject to final court approval and which will be covered in full by insurance. As of December 31, 2024, a liability of $ 0.3 m illion was recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to this matter. We had no accrued liability as of December 31, 2023 related to this matter. Indirect Taxes In 2018, the U.S. Supreme Court issued its decision in South Dakota v. 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 will be 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 event ticket sales, we have recorded liabilities in all jurisdictions where we believe a risk of loss is probable and reasonably estimable. We will continuously monitor state and local regulations and will implement required collection and remittance procedures if and when we are subject thereto. To the extent we have sales for international events, we may be required to register with various foreign jurisdictions and to collect and remit indirect taxes. It is reasonably possible that foreign jurisdictions may continue to adopt or interpret laws that impact the amount we are required to collect and remit. A successful assertion by one or more such 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 foreign indirect tax regulations, specifically related to marketplace facilitators and event ticket sales, we have recorded liabilities in the jurisdictions where we believe a risk of loss is probable and reasonably estimable. We will continuously monitor foreign regulations and will implement required collection and remittance procedures if and when we are subject thereto. As of December 31, 2024 and 2023, a liability of $ 7.5 million and $ 3.2 million, respectively, was recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to uncollected indirect taxes (including sales taxes). This liability is inclusive of both U.S. and foreign jurisdictions where we believe it is probable we should remit but have not collected all required amounts from customers and is reduced by abatements received. The net expense related to uncollected indirect taxes (including sales taxes) during the years ended December 31, 2024, 2023, and 2022 was $ 5.8 million, $ 3.2 million, and $ 2.8 million, respectively, which is recorded in General and administrative expenses in the Consolidated Statements of Operations. Sponsorship Loan On August 23, 2024, we and a privately held company entered into a sponsorship and custom content partnership agreement that provides us with various marketing services in exchange for our issuance of an interest-free loan payable in installments that could total a maximum of $ 5.0 million (the “Sponsorship Loan”). We account for the Sponsorship Loan as a note receivable in accordance with ASC Topic 310, Receivables . As of December 31, 2024, we have disbursed $ 2.0 million of the Sponsorship Loan (the “2024 Sponsorship Loan”). If certain conditions are met, 97 VIVID SEATS INC. NOTES to the Consolidated Financial Statements we will issue an additional interest-free $ 1.5 million loan in each of September 2025 and September 2026. While there is no stated maturity date for the 2024 Sponsorship Loan, we are entitled to a portion of advertising revenue received by the counterparty until the 2024 Sponsorship Loan is repaid in full. The 2024 Sponsorship Loan had a carrying value of $ 1.8 million as of December 31, 2024, which is recorded in Other assets in the Consolidated Balance Sheets. Additionally, we recognized less than $ 0.1 million of imputed interest income for the 2024 Sponsorship Loan during the year ended December 31, 2024, which is recorded in Interest expense – net in the Consolidated Statements of Operations. 19. Related –Party Transactions Viral Nation Viral Nation Inc. (“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, serves on the board of directors of Viral Nation, and is the Co-Founder, Chairman, and CEO of Eldridge Industries, LLC (“Eldridge”), which owns greater than 10% of Viral Nation. For Viral Nation’s services, we recognized an expense of $ 0.3 million, $ 1.7 million, and $ 0.8 million during the years ended December 31, 2024, 2023, and 2022, respectively, which is recorded in Marketing and selling expenses in the Consolidated Statements of Operations. Rolling Stone 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 our Board, is the Co-Founder, Chairman, and CEO of Eldridge, which owns greater than 10% of Rolling Stone. In relation to a strategic partnership with Rolling Stone, we recognized an expense of $ 0.7 million and $ 0.9 million during the years ended December 31, 2023 and 2022 , respectively, which is recorded in Marketing and selling expenses in the Consolidated Statements of Operations. We did no t recognize an expense in relation to this strategic partnership during the year ended December 31, 2024. Los Angeles Dodgers The Los Angeles Dodgers are an MLB team based in Los Angeles, California. Todd Boehly, a member of our Board, owns greater than 10% of the Los Angeles Dodgers. In relation to a strategic partnership with the Los Angeles Dodgers, including our designation as the official ticket marketplace of the Los Angeles Dodgers and certain other advertising, marketing, promotional, and sponsorship benefits, we recognized an expense of $ 2.2 million and $ 1.5 million during the years ended December 31, 2024 and 2023 , respectively, which is recorded in Marketing and selling expenses in the Consolidated Statements of Operations. We did no t recognize an expense in relation to the strategic partnership with the Los Angeles Dodgers during the year ended December 31, 2022. Tax Receivable Agreement In connection with the Merger Transaction, we entered into the TRA with the existing Hoya Intermediate unitholders. For more information, see “Tax Receivable Agreement” in Note 20, Income Taxes . Share Repurchase Hoya Topco controls 36.6 % 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, 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. For more information, see Note 17, Equity . 20. Income Taxes VSI is subject to U.S. federal and state income taxes with respect to our allocable share of any taxable income of Hoya Intermediate, as well as any stand-alone income we generate. 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 98 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 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, Japan and the United Kingdom. We anticipate this structure to remain in existence for the foreseeable future. Components of income before income taxes for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands): Years Ended December 31, 2024 2023 2022 United States $ 22,838 $ 68,166 $ 68,416 Foreign ( 119 ) 2,776 773 Income before income taxes $ 22,719 $ 70,942 $ 69,189 During the years ended December 31, 2024, 2023, and 2022, significant components of income tax expense (benefit) were as follows (in thousands): Years Ended December 31, 2024 2023 2022 State and local income tax expense $ 256 $ 326 $ 248 U.S. federal income tax expense 3,048 1,084 15 Foreign federal income tax expense 3,867 1,250 — Current income tax expense 7,171 2,660 263 State and local income tax expense (benefit) 2,696 ( 5,572 ) — U.S. federal income tax expense (benefit) 2,650 ( 38,915 ) — Foreign federal income tax benefit ( 4,100 ) ( 372 ) ( 1,853 ) Deferred income tax expense (benefit) 1,246 ( 44,859 ) ( 1,853 ) Income tax expense (benefit) $ 8,417 $ ( 42,199 ) $ ( 1,590 ) A reconciliation of income taxes computed at the U.S. federal statutory income tax rate of 21 % to the rate of our income tax expense (benefit) for the years ended December 31, 2024, 2023, and 2022 was as follows: Years Ended December 31, 2024 2023 2022 U.S. federal statutory income tax rate 21.0 % 21.0 % 21.0 % State income taxes 3.1 % 2.2 % 1.8 % Foreign rate differential ( 1.9 )% 0.4 % 0.1 % Redeemable noncontrolling interests ( 1.9 )% ( 10.9 )% ( 12.3 )% Change in valuation allowance ( 21.6 )% ( 131.9 )% ( 23.1 )% Deferred tax partnership adjustment 6.8 % 30.8 % 10.1 % Research and development credit ( 4.6 )% ( 1.1 )% ( 0.5 )% Limitation on compensation deductions 13.1 % 1.5 % — % Equity-based compensation shortfall 6.5 % — % — % Tax rate change 13.1 % — % — % Other 3.4 % ( 0.1 )% 0.6 % Impact of restructuring — % 28.6 % — % Income tax expense (benefit) 37.0 % ( 59.5 )% ( 2.3 )% 99 VIVID SEATS INC. NOTES to the Consolidated Financial Statements As of December 31, 2024 and 2023, our deferred tax balances consisted of the following (in thousands): December 31, December 31, 2024 2023 Deferred tax assets – net Net operating loss $ 12,487 $ 11,972 Interest carryforwards 20,126 16,689 Investment in partnership 28,446 44,894 Tax Receivable Agreement 38,232 40,994 Equity-based compensation 3,797 2,665 Other 3,037 1,914 Deferred tax assets 106,125 119,128 Less: valuation allowance ( 26,182 ) ( 32,318 ) Total deferred tax assets – net $ 79,943 $ 86,810 Deferred tax liabilities Intangible assets $ 6,779 $ 9,841 Other 61 1,848 Total deferred tax liabilities $ 6,840 $ 11,689 Net deferred tax asset / (liabilities) $ 73,103 $ 75,121 As of December 31, 2024, our deferred tax assets were primarily the result of our investment in partnership, the TRA, net operating losses, interest limitations, and tax credit carryforwards. We recognize deferred tax assets to the extent we believe these assets are more likely than not to be realized. As of December 31, 2024, we have recorded a valuation allowance for the tax benefits of a portion of our investment in partnership deferred tax assets. 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. After considering all those factors, we recorded a $ 26.2 million valuation allowance against our deferred tax assets, as we have determined these assets are not more likely than not to be realized as of December 31, 2024. Excluded from the deferred tax asset for investment in partnership above is a portion of the income tax basis in the partnership investment that will only reverse upon sale as a capital loss. 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. We estimate that up to $ 10.7 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 following table summarizes the changes in the carrying amount of our deferred tax asset valuation allowance in 2024, 2023, and 2022 (in thousands): 2024 2023 2022 Valuation allowance at beginning of year $ 32,318 $ 118,734 $ 145,668 Prior period adjustments (1) — ( 14,536 ) ( 6,154 ) Credited to costs and expenses ( 4,897 ) ( 72,968 ) ( 15,961 ) Charged (credited) to other accounts ( 1,239 ) 1,088 ( 4,819 ) Valuation allowance at end of year $ 26,182 $ 32,318 $ 118,734 (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 100 VIVID SEATS INC. NOTES to the Consolidated Financial Statements loss deferred tax assets and related valuation allowance. These adjustments had no net impact to our income tax benefit in either period. 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. During the year ended December 31, 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. As of December 31, 2024, after reassessing the realizability of our deferred tax assets, we reduced the valuation allowance by $ 6.1 million. 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, 2024, we had U.S. state operating loss carryforwards totaling $ 33.9 million and U.S. federal operating loss carryforwards totaling $ 44.5 million. 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 Section 382 of the Internal Revenue Code of 1986 as a result of the historical acquisitions. At December 31, 2024, with respect to our operations outside the United States, we had foreign operating loss carryforwards totaling $ 3.7 million, which begin to expire in 2037 . At December 31, 2024, 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 Topic 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. The following table summarizes the changes in the carrying amount of our unrecognized benefits related to a tax refund in 2024, 2023, and 2022 (in thousands): 2024 2023 2022 Unrecognized tax benefits at beginning of year $ 7,500 $ 7,500 $ — Tax positions taken in the prior year — — 7,500 Unrecognized tax benefits at end of year $ 7,500 $ 7,500 $ 7,500 Interest and penalties associated with income taxes are recorded in Income tax expense (benefit) in the Consolidated Statements of Operations. A liability of $ 1.4 million has been recognized related to interest and penalties as of December 31, 2024, $0.8 million of which was accrued during the year ended December 31, 2024 2024. 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, 2024. Due to the expiration of the applicable statute of limitations, it is reasonably possible that our gross unrecognized tax benefits may decrease by $ 7.5 million within the next 12 months. We are subject to routine audits by taxing jurisdictions. The periods subject to tax audits are 2020 through 2024. 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 unitholders that provides for our payment to such unitholders of 85 % of the amount of any tax savings 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 101 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 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 and 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. In 2024, the TRA liability was remeasured and reduced by $ 6.0 million. The decrease was primarily due to changes in the state tax rate and our existing tax basis allocations. In connection with the remeasurement of the TRA liability, during the year ended December 31, 2024, we recorded a decrease in Deferred tax assets – net of $ 2.8 million and recognized $ 6.0 million of income, which is recorded in Other income – net in the Consolidated Statements of Operations. TRA-related liabilities are classified as current or long-term based on the expected date of payment. As of December 31, 2024, $ 4.0 million is due within 12 months and is recorded as a current liability in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. The remaining amount is long-term and is recorded in TRA liability 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, 2024, we estimate that the tax savings associated with all tax attributes described above would aggregate to approximately $ 187.9 million. Under this scenario, we would be required to pay approximately 85 % of such amount, or $ 159.7 million, primarily over the next 14 years. 21. Equity-Based Compensation Our 2021 Incentive Award Plan (as amended, the “2021 Plan”) was approved and adopted in order to facilitate the grant of equity incentive awards to our employees, non-employee directors, and consultants. The 2021 Plan became effective in October 2021 upon consummation of the Merger Transaction, and the First Amendment to the 2021 Plan became effective on February 5, 2024. RSUs RSUs are denominated in a hypothetical equivalent number of shares of our Class A common stock. The value of each RSU is equal to the fair value of our Class A common stock on the grant date. Each RSU is settled in a share of our Class A common stock after vesting. During the years ended December 31, 2024, 2023, and 2022 , we granted to certain employees 11.1 million, 2.6 million, and 1.7 million RSUs, respectively, at a weighted average grant date fair value of $ 5.30 per share, $ 7.18 per share, and $ 10.01 per share, respectively. RSUs granted to employees vest over three years, with one-third vesting on the first anniversary of the grant date and the remaining portion vesting on a quarterly basis thereafter, subject to the employee’s continued employment through the applicable vesting date. During the years ended December 31, 2024, 2023, and 2022 , we granted to our directors 0.3 million, 0.1 million, and 0.1 million RSUs, respectively, at a weighted average grant date fair value of $ 5.24 per share, $ 7.68 per share, and $ 8.85 per share, respectively. RSUs granted to directors fully vest on the earlier of (i) one day prior to the date of our first annual meeting of stockholders following the grant date and (ii) the first anniversary of the grant date, subject to the director ’s continued service on our Board through the applicable vesting date. During each of the years ended December 31, 2024, 2023, and 2022 , we granted to certain consultants less than 0.1 million RSUs at a weighted average grant date fair value of $ 3.70 per share, $ 7.98 per share, and $ 8.94 per share, 102 VIVID SEATS INC. NOTES to the Consolidated Financial Statements respectively. RSUs granted to consultants either fully vest on the first anniversary of the grant date or in equal annual installments over three years, subject to the consultant’s continued service through the applicable vesting date. A summary of the total activity for RSUs during the years ended December 31, 2024 and 2023 is as follows (in thousands, except per RSU data): RSUs Weighted Average Grant Date Fair Value Per RSU Unvested at December 31, 2022 2,551 $ 10.99 Granted 2,775 7.22 Forfeited ( 232 ) 8.81 Vested ( 1,228 ) 10.62 Unvested at December 31, 2023 3,866 8.35 Granted 11,376 5.29 Forfeited ( 605 ) 7.41 Vested ( 2,860 ) 7.93 Unvested at December 31, 2024 11,777 $ 5.61 Stock Options Our 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 (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. 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. 2021 Stock 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 “2021 Stock Options ”). The fair value of the 2021 Stock Options was estimated on the grant date using the Hull-White model. 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 the outstanding 2021 Stock Options with an exercise price of $ 13.09 per share was modified and reduced by $ 0.23 per share to $ 12.86 per share (the “2021 Stock Option Modification”). The amount recognized in compensation expense related to the 2021 Stock Option Modification during the year ended December 31, 2021 was immaterial. 2022 Stock 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 Stock Options”). The fair value of the March 2022 Stock Options was estimated on the grant date using the Black-Scholes model. 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 Stock Options” and, together with the March 2022 Stock Options, the “2022 Stock Options”). The fair value of the November 2022 Stock Options was estimated on the grant date using the Black-Scholes model. 2023 Stock Options On March 10, 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 “March 2023 Stock Options”). The fair value of the March 2023 Stock Options was estimated on the grant date using the Black-Scholes model. 103 VIVID SEATS INC. NOTES to the Consolidated Financial Statements On June 14, 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 “June 2023 Stock Options” and, together with the March 2023 Stock Options, the “2023 Stock Options”). The fair value of the June 2023 Stock Options was estimated on the grant date using the Hull-White model. Stock Option Cancellation and Repricing On December 7, 2023 (the “Effective Date”), (i) 894,840 of the 2021 Stock Options with an exercise price of $ 15.00 per share and 894,840 of the 2021 Stock Options with an exercise price of $ 12.86 per share were cancelled and (ii) the exercise price of the remaining 2021 Stock Options, as well as all outstanding 2022 Stock 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 were exercised prior to the one-year anniversary of the Effective Date, the holder would be required to pay the original exercise price (the “Stock Option Cancellation and Repricing”). The Stock Option Cancellation and Repricing was 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 Stock Option Cancellation and Repricing using the Hull-White model, was less than $ 0.1 million. The cancelled 2021 Stock 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 and will instead be recognized over the remaining requisite service period of the remaining 2021 Stock Options and March 2022 Stock Options. The following assumptions were used to calculate the fair value of the 2022 Stock Options, the 2023 Stock Options, and the Stock Option Cancellation and Repricing: December 7, 2023 June 14, 2023 March 10, 2023 November 11, 2022 March 11, 2022 Expected term (years) 7.9 - 8.9 7.0 5.9 5.9 5.9 Expected volatility 47.0 % - 48.0 % 42.0 % 42.0 % 40.0 % 37.5 % Risk-free rate 4.2 % 4.0 % 3.9 % 3.9 % 2.0 % Expected dividend yield 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % No stock options were granted during the year ended December 31, 2024 . 104 VIVID SEATS INC. NOTES to the Consolidated Financial Statements A summary of the total activity for stock options during the years ended December 31, 2023 and 2024 is as follows (in thousands, except price per option data): Stock Options Weighted Average Exercise Price Per Stock Option Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Outstanding at December 31, 2022 6,125 $ 12.09 9.0 $ — Granted to employees 3,601 7.17 Granted to consultants: Tranche #1 200 7.98 Tranche #2 300 17.00 Tranche #3 400 23.00 Expired ( 29 ) 13.35 Cancelled ( 1,790 ) 13.93 Outstanding at December 31, 2023 8,807 8.02 8.7 — Forfeited ( 557 ) 7.01 Expired ( 148 ) 6.90 Outstanding at December 31, 2024 8,102 8.11 7.7 — Vested and exercisable at December 31, 2024 5,661 $ 7.47 The weighted-average grant date fair value for stock options outstanding during the years ended December 31, 2024, 2023, and 2022 was $ 3.44 , $ 2.88 , and $ 3.82 , respectively. The weighted-average grant date fair value for stock options forfeited during the years ended December 31, 2024, 2023, and 2022 was $ 3.53 , zero , and $ 3.83 , respectively. The weighted-average grant-date fair value for stock options vested during the years ended December 31, 2024, 2023, and 2022 was $ 3.58 , $ 3.89 , a nd $ 3.71 , respectively. The weighted-average grant-date fair value for stock options cancelled was $ 3.68 during the year ended December 31, 2023. Hoya Topco Profits Interests and Phantom Units Prior to the Merger Transaction, certain members of management received equity-based compensation awards for profits interests 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 interests 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. We account for forfeitures as they occur. Changes in assumptions made on expected term, the risk-free rate of interest, and expected volatility can materially impact the estimate of fair value and, ultimately, how much share-based compensation expense is recognized. The expected term is estimated based on the timing and probabilities until a major liquidity event. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and corresponds to the expected term. The expected volatility is estimated on the date of grant based on the average historical stock price volatility of comparable publicly traded companies. On June 10, 2024, the Board of Managers of Hoya Topco (the “Hoya Topco Board”) approved the redemption, repurchase and cancellation by Hoya Topco (using Hoya Topco’s funds) of all of its outstanding profits interests held by our current employees (including the Class B-1, Class D, and Class E Units discussed elsewhere in this Report). Accordingly, we recognized equity-based compensation expense related to the profits interests of $ 4.6 million for the year ended December 31, 2024. 105 VIVID SEATS INC. NOTES to the Consolidated Financial Statements On June 10, 2024, the Hoya Topco Board also approved the repurchase and cancellation by Hoya Topco (using Hoya Topco’ s funds) of all of its outstanding phantom units held by our employees. The phantom units held service and performance conditions, requiring us to recognize a liability for the fair value of the outstanding phantom units only when we conclude it is probable that the performance conditions will be achieved. Accordingly, we recognized equity-based compensation expense related to the phantom units of $ 5.0 million for the year ended December 31, 2024 . There was no equity-based compensation expense previously recognized related to the phantom units. Hoya Topco had no outstanding profits interests or phantom units held by our current employees, and we had no unrecognized equity-based compensation expense related thereto, as of December 31, 2024. A summary of the total activity for the Hoya Topco incentive units, Class D Units, and Class E Units during the years ended December 31, 2024, 2023, and 2022 is as follows: Incentive Units Class D Units Class E Units Units Weighted Average Grant Date Fair Value Per Unit Units Weighted Average Grant Date Fair Value Per Unit Units Weighted Average Grant Date Fair Value Per Unit Outstanding at December 31, 2022 836,000 $ 2.32 1,952,330 $ 4.60 500,765 $ 25.46 Repurchased — — — — — — Cancelled — — — — — — Forfeited — — — — — — Outstanding at December 31, 2023 836,000 2.32 1,952,330 4.60 500,765 25.46 Repurchased ( 820,600 ) 2.32 — — — — Cancelled — — ( 1,904,250 ) 4.31 ( 500,765 ) 25.46 Forfeited ( 15,400 ) 2.32 — — — — Outstanding at December 31, 2024 — $ — 48,080 $ 16.09 — $ — As of December 31, 2024 , the remaining outstanding Class D units are fully vested and held by former employees such that any future activity would not impact our financial results. Compensation Expense For the years ended December 31, 2024, 2023, and 2022 , equity-based compensation expense related to RSUs was $ 31.0 million, $ 14.3 million, and $ 8.4 million, respectively. Unrecognized compensation expense relating to unvested RSUs as of December 31, 2024 was approximately $ 51.3 million, which is expected to be recognized over a weighted average period of approximately one year. For the years ended December 31, 2024, 2023, and 2022, equity-based compensation expense related to stock options was $ 10.7 million, $ 10.2 million, and $ 6.2 million, respectively. Unrecognized compensation expense relating to unvested stock options as of December 31, 2024 was approximately $ 7.3 million, which is expected to be recognized over a weighted average period of approximately 0.5 years. For the years ended December 31, 2024, 2023, and 2022 , equity-based compensation expense related to profits interests was $ 4.6 million, $ 3.5 million, and $ 4.5 million, respectively. There was no unrecognized compensation expense relating to profits interests as of December 31, 2024. For the years ended December 31, 2024, 2023, and 2022 , equity-based compensation expense excludes $ 0.8 million, $ 0.4 million, and $ 0.1 million related to capitalized development costs. 106 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 22. Earnings Per Share We calculate basic and diluted net income per share of Class A common stock in accordance with ASC Topic 260, Earnings per Share . Because our Class B common stock does not have economic rights in VSI, it is not considered a participating security for basic and diluted net income per share, and we do not present basic and diluted net income per share of Class B common stock. However, our Class B common stockholders are allocated income in Hoya Intermediate (our operating entity) according to their weighted average percentage ownership of Intermediate Units during each quarter. Net income attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate’s net income in each quarterly period by Hoya Topco’s weighted average percentage ownership of Intermediate Units during the period. See Note 16, Redeemable Noncontrolling Interests, for more information regarding Hoya Topco’s right to exchange its Intermediate Units. The following table provides the net income attributable to Hoya Topco’s redeemable noncontrolling interests for the years ended December 31, 2024, 2023, and 2022 (in thousands): Years Ended December 31, 2024 2023 2022 Net income—Hoya Intermediate $ 13,427 $ 69,420 $ 70,794 Hoya Topco’s weighted average % allocation of Hoya Intermediate's net income 36.3 % 55.6 % 59.5 % Net income attributable to Hoya Topco's redeemable noncontrolling interests $ 4,877 $ 38,605 $ 42,117 Net income attributable to Class A common stockholders–basic is calculated by subtracting the portion of Hoya Intermediate’s net income 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 (benefit) for VSI’s portion of income, as well as the full results of Hoya Intermediate on a consolidated basis. Net income per Class A common stock–diluted is based on the average number of shares of our 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 attributable to Class A common stockholders–diluted is adjusted for (i) our share of Hoya Intermediate’s consolidated net income after giving effect to Intermediate Units that convert into potential shares of our Class A common stock, to the extent it is dilutive, and (ii) the impact of changes in the fair value of the Intermediate Warrants, to the extent they are dilutive. 107 VIVID SEATS INC. NOTES to the Consolidated Financial Statements The following table sets forth the computation of basic and diluted net income per share of Class A common stock for the years ended December 31, 2023 and 2022 (in thousands, except share and per share data): Years Ended December 31, 2024 2023 2022 Numerator—basic Net income $ 14,302 $ 113,141 $ 70,779 Less: net income attributable to redeemable noncontrolling interests ( 4,877 ) ( 38,605 ) ( 42,117 ) Net income attributable to Class A common stockholders—basic 9,425 74,536 28,662 Denominator—basic Weighted average Class A common stock outstanding—basic 132,330,914 92,678,514 80,257,247 Net income per Class A common stock—basic $ 0.07 $ 0.80 $ 0.36 Numerator—diluted Net income attributable to Class A common stockholders—basic $ 9,425 $ 74,536 $ 28,662 Weighted average effect of dilutive securities: RSUs 8 79 6 Redeemable noncontrolling interests 2,310 ( 23,401 ) 42,056 Exercise Warrants — — 55 Net income attributable to Class A common stockholders—diluted 11,743 51,214 70,779 Denominator—diluted Weighted average Class A common stock outstanding—basic 132,330,914 92,678,514 80,257,247 Weighted average effect of dilutive securities: RSUs 586,713 424,954 28,228 Redeemable noncontrolling interests 76,225,000 105,773,973 118,200,000 Exercise Warrants — — 258,906 Weighted average Class A common stock outstanding—diluted 209,142,627 198,877,441 198,744,381 Net income per Class A common stock—diluted $ 0.06 $ 0.26 $ 0.36 Potential shares of our Class A common stock are excluded from the computation of diluted net income per share of Class A common stock if their effect would have been anti-dilutive for the periods presented or if the issuance of shares is contingent upon events that did not occur by the end of the periods presented. 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 redeemable noncontrolling interests to shares of our Class A common stock, which would not have had 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 resulted in the recognition of incremental deferred tax expense, which is recognized in Income tax expense (benefit) in the Consolidated Statements of Operations. The following table presents potentially dilutive securities that are excluded from the computation of diluted net income per share of Class A common stock for the years ended December 31, 2024, 2023, and 2022 that could potentially dilute earnings per share in the future: Years Ended December 31, 2024 2023 2022 RSUs 4,568,900 734,588 1,224,919 Stock options 7,401,783 8,807,848 6,300,837 Public Warrants and Private Warrants 13,286,644 13,286,644 13,286,644 Exercise Warrants 34,000,000 34,000,000 17,000,000 Intermediate Warrants 4,000,000 4,000,000 6,000,000 108 VIVID SEATS INC. NOTES to the Consolidated Financial Statements 23. Subsequent Events On February 5, 2025, we amended the 2024 First Lien Loan to reprice all $ 393.0 million of the then-outstanding balance, reducing the applicable interest thereon to SOFR (subject to a 0.5 % floor) plus a margin of 2.25 %; provided that such margin may be reduced to 2.00 % if the corporate rating assigned to us by Moody’s Investors Service, Inc. and S&P Global Ratings is at least Ba3/BB- (in each case, stable or better). The amendment did not materially change any of the other terms and conditions of the 2024 First Lien Loan; accordingly, except as set forth in the preceding sentence, the repriced 2024 First Lien Loan has the same material terms (including with respect to maturity, prepayment, security, covenants and events of default) as described under “2024 First Lien Loan” in Note 13, Long-Term Debt – Net . 109 Item 9. Changes in Disagreements With Accountants on Accounting and Financial Disclosure None.