10-Q
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ma

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-40926

 

Vivid Seats Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

86-3355184

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

111 N. Canal Street

Suite 800

Chicago, Illinois

 

 

60606

(Address of principal executive offices)

(Zip Code)

(312) 291-9966

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class

 

Trading

Symbol(s)

 

 

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

 

SEAT

 

The Nasdaq Stock Market LLC

Warrants to purchase one share of Class A common stock

 

SEATW

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of April 30, 2022, the registrant had 79,241,032 shares of Class A common stock, $0.0001 par value per share, outstanding and 118,200,000 shares of Class B common stock, $0.0001 par value per share, outstanding.

 

 

 


table of contents

 

 

 

Page

 

 

 

 

Forward-Looking Statements

1

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

3

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021

4

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021

5

 

Condensed Consolidated Statements of Deficit for the three months ended March 31, 2022 and 2021

6

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

 

 

 

PART II.

OTHER INFORMATION

34

 

 

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

38

 

 


forward-looking statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements regarding future events and the future results of Vivid Seats Inc. that are based on our current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Words such as “expect,” “anticipate,” “target,” “goal,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “likely,” “may,” “designed,” “would,” “future,” “can,” “could,” and other similar expressions which are predictions of, indicate future events and trends or which do not relate to historical matters, are intended to identify such forward-looking statements. These statements are based on our current expectations and beliefs and involve a number of risks, uncertainties and assumptions that are difficult to predict.

For example, we may use forward-looking statements when addressing topics such as:

the COVID-19 pandemic, its duration, its impact on our business, results of operations, financial condition, liquidity, use of our borrowings, business practices, operations, suppliers, third-party service providers, customers, employees, industry, ability to meet future performance obligations and ability to efficiently implement advisable safety precautions;
our ability to raise financing in the future;
our future financial performance;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
our ability to pay dividends on our Class A common stock on the terms currently contemplated or at all; and
factors relating to our business, operations and financial performance, including, but not limited to:
o
the impact of the pandemic on our business and the industries in which we operate;
o
our ability to compete in the ticketing industry;
o
our ability to maintain relationships with buyers, sellers and distribution partners;
o
our ability to continue to improve our platform and maintain and enhance our brand;
o
the impact of extraordinary events or adverse economic conditions on discretionary consumer and corporate spending or on the supply and demand of live events;
o
our ability to comply with domestic regulatory regimes;
o
our ability to successfully defend against litigation;
o
our ability to maintain the integrity of our information systems and infrastructure, and to mitigate possible cyber security risks;
o
our ability to generate sufficient cash flows or raise additional capital necessary to fund our operations; and
o
other factors detailed under the section entitled “Risk Factors.”

1


 

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document, or in the case of statements incorporated by reference, on the date of the document incorporated by reference.

Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2022, under the section entitled “Risk Factors,” in our press releases, and in our other filings with the SEC. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q or in the case of statements incorporated by reference, on the date of the document incorporated by reference. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of new information, future events, or risks. New information, future events, or risks may cause the forward-looking events we discuss in this report not to occur.

2


VIVID SEATS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data) (Unaudited)

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

314,055

 

 

$

489,530

 

Restricted cash

 

 

280

 

 

 

280

 

Accounts receivable – net

 

 

53,978

 

 

 

36,124

 

Inventory – net

 

 

17,899

 

 

 

11,773

 

Prepaid expenses and other current assets

 

 

75,687

 

 

 

72,504

 

Total current assets

 

 

461,899

 

 

 

610,211

 

Property and equipment – net

 

 

1,705

 

 

 

1,082

 

Right-of-use assets – net

 

 

9,517

 

 

 

 

Intangible assets – net

 

 

79,944

 

 

 

78,511

 

Goodwill

 

 

718,204

 

 

 

718,204

 

Other non-current assets

 

 

2,949

 

 

 

787

 

Total assets

 

$

1,274,218

 

 

$

1,408,795

 

Liabilities and shareholders’ deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

236,295

 

 

$

191,201

 

Accrued expenses and other current liabilities

 

 

272,705

 

 

 

281,156

 

Deferred revenue

 

 

28,233

 

 

 

25,139

 

Current maturities of long-term debt – net

 

 

2,750

 

 

 

 

Total current liabilities

 

 

539,983

 

 

 

497,496

 

Long-term debt – net

 

 

266,396

 

 

 

460,132

 

Long-term lease liabilities

 

 

8,387

 

 

 

 

Other liabilities

 

 

27,384

 

 

 

25,834

 

Total long-term liabilities

 

 

302,167

 

 

 

485,966

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

1,307,292

 

 

 

1,286,016

 

 

 

 

 

 

 

 

Shareholders' deficit

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 500,000,000 shares authorized at March 31, 2022 and December 31, 2021; 79,166,943 and 79,091,871 issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

8

 

 

 

8

 

Class B common stock, $0.0001 par value; 250,000,000 shares authorized, 118,200,000 issued and outstanding at March 31, 2022 and December 31, 2021

 

 

12

 

 

 

12

 

Additional paid-in capital

 

 

166,291

 

 

 

182,091

 

Accumulated deficit

 

 

(1,041,535

)

 

 

(1,042,794

)

Total Shareholders' deficit

 

 

(875,224

)

 

 

(860,683

)

Total liabilities, Redeemable noncontrolling interests, and Shareholders' deficit

 

$

1,274,218

 

 

$

1,408,795

 

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

3


VIVID SEATS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share data) (Unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenues

 

$

130,772

 

 

$

24,114

 

Costs and expenses:

 

 

 

 

 

 

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

 

 

32,164

 

 

 

3,925

 

Marketing and selling

 

 

54,228

 

 

 

7,955

 

General and administrative

 

 

29,275

 

 

 

15,871

 

Depreciation and amortization

 

 

1,385

 

 

 

295

 

Income (loss) from operations

 

 

13,720

 

 

 

(3,932

)

Other expenses:

 

 

 

 

 

 

Interest expense – net

 

 

3,942

 

 

 

16,319

 

Loss on extinguishment of debt

 

 

4,285

 

 

 

 

Other expenses

 

 

2,279

 

 

 

 

Income (loss) before income taxes

 

 

3,214

 

 

 

(20,251

)

Income tax expense

 

 

76

 

 

 

 

Net income (loss)

 

 

3,138

 

 

 

(20,251

)

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

 

 

 

 

 

(20,251

)

Net income (loss) attributable to redeemable noncontrolling interests

 

 

1,879

 

 

 

 

Net income (loss) attributable to Class A Common Stockholders

 

$

1,259

 

 

$

 

 

 

 

 

 

 

 

Income per Class A Common Stock(1):

 

 

 

 

 

 

Basic

 

$

0.02

 

 

 

 

Diluted

 

$

0.02

 

 

 

 

Weighted average Class A Common Stock outstanding(1):

 

 

 

 

 

 

Basic

 

 

79,151,929

 

 

 

 

Diluted

 

 

198,414,147

 

 

 

 

(1) There were no shares of Class A Common Stock outstanding prior to October 18, 2021. Therefore, no income (loss) per share information has been presented for any period prior to that date.

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

4


VIVID SEATS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands) (Unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net income (loss)

 

$

3,138

 

 

$

(20,251

)

Other comprehensive income (loss):

 

 

 

 

 

 

Unrealized gain on derivative instruments

 

 

 

 

 

243

 

Comprehensive income (loss), net of taxes

 

$

3,138

 

 

$

(20,008

)

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

 

 

 

 

 

(20,008

)

Comprehensive income (loss) attributable to redeemable noncontrolling interests

 

 

1,879

 

 

 

 

Comprehensive income (loss) attributable to Class A Common Stockholders

 

$

1,259

 

 

$

 

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

5


VIVID SEATS INC.

CONDENSED CONSOLIDATED STATEMENTS OF DEFICIT

(in thousands, except share/unit data) (Unaudited)
 

 

 

 

Redeemable Senior preferred units

 

 

Redeemable Preferred units

 

 

 

Common units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

 

Units

 

 

Amount

 

 

Additional paid-in capital

 

 

Accumulated deficit

 

 

Accumulated other comprehensive income (loss)

 

 

Total members' deficit

 

Balances at January 1, 2021

 

 

100

 

 

$

218,288

 

 

 

100

 

 

$

9,939

 

 

 

 

100

 

 

$

 

 

$

755,716

 

 

$

(1,026,675

)

 

$

(822

)

 

$

(271,781

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,251

)

 

 

 

 

 

(20,251

)

Unrealized gain on derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

243

 

 

 

243

 

Deemed contribution from former parent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,091

 

 

 

 

 

 

 

 

 

1,091

 

Accretion of senior preferred units

 

 

 

 

 

6,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,822

)

 

 

 

 

 

 

 

 

(6,822

)

Balances at March 31, 2021

 

 

100

 

 

$

225,110

 

 

 

100

 

 

$

9,939

 

 

 

 

100

 

 

$

 

 

$

749,985

 

 

$

(1,046,926

)

 

$

(579

)

 

$

(297,520

)

 

 

 

 

 

 

Class A Common Shares

 

 

Class B Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional paid-in capital

 

 

Accumulated deficit

 

 

Total shareholders' 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

 

 

1,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,259

 

 

 

1,259

 

Issuance of shares

 

 

 

 

 

75,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deemed contribution from former parent

 

 

691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

463

 

 

 

 

 

 

463

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,443

 

 

 

 

 

 

2,443

 

Subsequent remeasurement of Redeemable noncontrolling interests

 

 

18,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,706

)

 

 

 

 

 

(18,706

)

Balances at March 31, 2022

 

$

1,307,292

 

 

 

79,166,943

 

 

$

8

 

 

 

118,200,000

 

 

$

12

 

 

$

166,291

 

 

$

(1,041,535

)

 

$

(875,224

)

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

 

6


VIVID SEATS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

3,138

 

 

$

(20,251

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

1,385

 

 

 

295

 

Amortization of deferred financing costs and interest rate cap

 

 

329

 

 

 

1,311

 

Equity-based compensation expense

 

 

3,597

 

 

 

1,091

 

Loss on extinguishment of debt

 

 

4,285

 

 

 

 

Change in fair value of warrants

 

 

2,279

 

 

 

 

Interest expense paid-in-kind

 

 

 

 

 

10,640

 

Amortization of leases

 

 

490

 

 

 

 

Change in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(17,854

)

 

 

(1,843

)

Inventory

 

 

(6,126

)

 

 

(1,420

)

Prepaid expenses and other current assets

 

 

(3,252

)

 

 

(1,398

)

Accounts payable

 

 

45,094

 

 

 

37,857

 

Accrued expenses and other current liabilities

 

 

(10,599

)

 

 

1,164

 

Deferred revenue

 

 

3,094

 

 

 

3,006

 

Other assets and liabilities

 

 

(2,326

)

 

 

309

 

Net cash provided by operating activities

 

 

23,534

 

 

 

30,761

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(693

)

 

 

 

Investments in developed technology

 

 

(2,748

)

 

 

(1,726

)

Net cash used in investing activities

 

 

(3,441

)

 

 

(1,726

)

Cash flows from financing activities

 

 

 

 

 

 

Payments of June 2017 First Lien Loan

 

 

(465,712

)

 

 

(1,603

)

Proceeds from February 2022 First Lien Loan

 

 

275,000

 

 

 

 

Payments of deferred financing costs and other debt-related costs

 

 

(4,856

)

 

 

 

Net cash used in financing activities

 

 

(195,568

)

 

 

(1,603

)

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

 

 

(175,475

)

 

 

27,432

 

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

 

 

489,810

 

 

 

285,337

 

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

 

$

314,335

 

 

$

312,769

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Paid-in-kind interest added to May 2020 First Lien Loan principal

 

$

 

 

$

10,640

 

Cash paid for interest

 

$

3,612

 

 

$

6,985

 

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

 

$

3,406

 

 

$

 

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

7


Vivid Seats INC.

NOTES to the CONDENSED Consolidated Financial Statements

(UNAUDITED)

 

 

1. Background and Basis of Presentation

Vivid Seats Inc. and its subsidiaries including Hoya Intermediate, LLC and Vivid Seats LLC (collectively the “Company,” “us,” “we,” and “our”), provide an online secondary ticket marketplace, that enables ticket buyers to discover and easily purchase tickets to sports, concerts, theater, and other live events in the United States and Canada. Through our Marketplace segment, we operate an online platform enabling ticket buyers to purchase tickets to live events, while enabling ticket sellers to seamlessly manage their operations. In our Resale segment, we acquire tickets to resell on secondary ticket marketplaces, including our own.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for comprehensive annual financial statements. Our condensed consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 which was filed on March 15, 2022. Our condensed consolidated financial statements include all of our accounts, including those of our consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Immaterial Correction of an Error in Prior Periods

During the second quarter of 2021, we identified immaterial errors related to the classification of information technology expenses that impacted our previously issued financial statements for the three months ended March 31, 2021. Previously, we classified information technology expenses entirely within General and administrative expenses in the Condensed Consolidated Statements of Operations. We subsequently determined that a portion of our information technology expenses are directly attributable to our revenue-generating activities and should be classified within Cost of revenues. We have adjusted for these errors by revising our financial statements presented herein. The correction resulted in an increase to Cost of revenues of $0.4 million for the three months ended March 31, 2021, with a corresponding reduction to General and administrative expenses. The increase to Cost of revenues resulted in a decrease to Marketplace and Resale contribution margin of $0.3 million and $0.1 million, respectively, for the three months ended March 31, 2021. The effect of the error did not impact the Net loss, the Condensed Consolidated Balance Sheets, and Condensed Consolidated Statements of Cash Flows.

COVID-19 Update

The COVID-19 pandemic continues to have a material impact on our business and results of operations. Beginning in the second quarter of 2021, and continuing through the first quarter of 2022, we have seen a recovery in ticket orders as mitigation measures ease.

The COVID-19 pandemic is evolving, and as new variants emerge the ultimate pace and timing of recovery continues to remain uncertain. We expect uncertainties around our key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our condensed consolidated financial statements. If economic conditions caused by the pandemic do not continue to recover, our financial condition, cash flows, and results of operations may be further materially impacted.

8


Vivid Seats INC.

NOTES to the CONDENSED Consolidated Financial Statements

(UNAUDITED)

 

 

Betcha Acquisition

On December 13, 2021, we acquired 100% of the equity interests of Betcha, Sports Inc. ("Betcha"). Betcha is a real money daily fantasy sports app with social and gamification features that enhance fans’ connection with their favorite live sports. The acquisition date fair value of the consideration transferred consisted of approximately $0.8 million in cash and 2.1 million shares of Class A common stock. The total consideration includes cash earnouts of $7.5 million as of the acquisition date representing the estimated fair value that we may be obligated to pay if Betcha meets certain earnings objectives following the acquisition. In addition, the purchase consideration includes future milestone payments of $9.7 million as of the acquisition date representing the estimated fair value that we may be obligated to pay upon the achievement of certain integration objectives. The purchase consideration allocation for Betcha is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. The primary areas that are not yet finalized relate to the valuations of certain intangible assets, cash earnouts, milestone payments, and acquired income tax assets and liabilities. As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.

2. New Accounting Standards

Recently adopted accounting standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease) in the balance sheet. Lease liabilities are equal to the present value of lease payments, while right-of-use assets are based on the associated lease liabilities, subject to certain adjustments, such as for initial direct costs. We elected the extended transition period available to emerging growth companies and adopted Accounting Standards Codification ("ASC") 842 effective January 1, 2022 on a modified retrospective basis by applying the new standard to all leases existing at the date of initial application. We elected to present the financial statements for all periods prior to January 1, 2022 under the previous lease standard ("ASC 840"), as well as elected other options, which allow us to use our previous evaluations regarding if an arrangement contains a lease, if a lease is an operating or financing lease, and what costs are capitalized as initial direct costs prior to adoption. We also elected to combine lease and non-lease components.

Upon the adoption of the new lease standard, on January 1, 2022, we recognized right-of-use assets of $6.6 million and lease liabilities of $8.1 million (including a current liability of $3.0 million) in the Condensed Consolidated Balance Sheets and reclassified certain balances related to existing leases. The right-of-use assets balance as of January 1, 2022 is adjusted for $1.5 million of lease termination liabilities and deferred rent liabilities recognized under the previous lease standard. There was no impact to Accumulated deficit on the Condensed Consolidated Balance Sheets at adoption. Refer to Note 5, Leases, for more information on leases.

Accounting standards issued but not yet adopted

In June 2016, the FASB issued 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 elected the extended transition period available to emerging growth companies and are currently evaluating the effect of adoption of the standard on our condensed consolidated financial statements and related disclosures.

9


Vivid Seats INC.

NOTES to the CONDENSED Consolidated Financial Statements

(UNAUDITED)

 

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as modified in January 2021. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The 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. The amendment is effective for all entities starting March 12, 2020 and can be adopted through December 31, 2022. We have not yet decided the date of adoption of this standard. The adoption of this standard will not have a material impact on our condensed consolidated financial statements.

3. Revenue Recognition

We recognize revenue in accordance with ASC 606. We have two reportable segments: Marketplace and Resale.

Through the Marketplace segment, we act as an intermediary between ticket buyers and sellers. We earn revenue processing ticket sales from our Owned Properties, consisting of the Vivid Seats website and mobile applications, and from our Private Label offering, which is comprised of numerous distribution partners.

Marketplace revenues consisted of the following (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Marketplace revenues:

 

 

 

 

 

 

Owned Properties

 

$

83,666

 

 

$

18,196

 

Private Label

 

 

26,850

 

 

 

3,797

 

Total Marketplace revenues

 

$

110,516

 

 

$

21,993

 

Marketplace revenues consisted of the following event categories (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Marketplace revenues:

 

 

 

 

 

 

Concerts

 

$

58,673

 

 

$

7,014

 

Sports

 

 

38,915

 

 

 

14,138

 

Theater

 

 

12,615

 

 

 

783

 

Other

 

 

313

 

 

 

58

 

Total Marketplace revenues

 

$

110,516

 

 

$

21,993

 

Within the Resale segment, we sell tickets we hold in inventory on resale ticket marketplaces. Resale revenues were $20.3 million during the three months ended March 31, 2022, and $2.1 million during the three months ended March 31, 2021, respectively.

At March 31, 2022, Deferred revenue in the Condensed Consolidated Balance Sheets was $28.2 million, which primarily relates to Vivid Seats Rewards, our loyalty program.

At December 31, 2021, $25.1 million was recorded as deferred revenue, of which $4.0 million was recognized as revenue during the quarter ended March 31, 2022. At December 31, 2020, $6.0 million was recorded as deferred revenue, of which $0.6 million was recognized as revenue during the quarter ended March 31, 2021.

10


Vivid Seats INC.

NOTES to the CONDENSED Consolidated Financial Statements

(UNAUDITED)

 

 

4. Segment Reporting

Our reportable segments are Marketplace and Resale. Through the Marketplace segment, we act as an intermediary between ticket buyers and sellers within our online secondary ticket marketplace. Through the Resale segment, we acquire tickets from primary sellers, which are then sold through secondary ticket marketplaces. Revenues and contribution margin are used by our Chief Operating Decision Maker (“CODM”) to assess performance of the business. We define contribution margin as revenues less cost of revenues and marketing and selling expenses.

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

The following tables represent our segment information (in thousands):

 

 

Three Months Ended March 31, 2022

 

 

 

Marketplace

 

 

Resale

 

 

Consolidated

 

Revenues

 

$

110,516

 

 

$

20,256

 

 

$

130,772

 

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

 

 

16,409

 

 

 

15,755

 

 

 

32,164

 

Marketing and selling

 

 

54,228

 

 

 

 

 

 

54,228

 

Contribution margin

 

$

39,879