i
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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, 2024, the registrant had outstanding
table of contents
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PART I. |
2 |
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Item 1. |
2 |
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2 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
25 |
Item 3. |
34 |
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Item 4. |
35 |
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PART II. |
37 |
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Item 1. |
37 |
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Item 1A. |
37 |
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Item 2. |
37 |
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Item 3. |
37 |
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Item 4. |
37 |
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Item 5. |
37 |
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Item 6. |
38 |
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40 |
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forward-looking statements
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) regarding future events and the future results of Vivid Seats Inc. and its subsidiaries (collectively, “we,” “us” and “our”). Words such as “anticipate,” “believe,” “can,” “continue,” “could,” “designed,” “estimate,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “plan,” “project,” “propose,” “seek,” “should,” “target,” “will” and “would,” as well as similar expressions which predict or indicate future events and trends or which do not relate to historical matters, are intended to identify such forward-looking statements.
For example, we may use forward-looking statements when addressing topics such as our future financial performance, including our ability to generate sufficient cash flows or to raise additional capital when necessary or desirable, our success in attracting, hiring, motivating and retaining our senior management team, key technical employees and other highly skilled personnel, our ability to declare and pay dividends on our Class A common stock and other topics relating to our business, operations and financial performance such as:
We have based these forward-looking statements largely on our current expectations, estimates, forecasts and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. 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. Forward-looking statements are not guarantees of future performance, conditions or results, and are subject to risks, uncertainties and assumptions that can be difficult to predict and/or are outside of our control. Therefore, actual results may differ materially from those contemplated by 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 Report or, in the case of statements incorporated by reference herein, as of the date of the incorporated document.
Important factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2024 (our “2023 Form 10-K”), as well as in our press releases and other filings with the SEC. Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements contained in this Report, whether as a result of new information, future events or otherwise.
1
VIVID SEATS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data) (Unaudited)
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March 31, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable – net |
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Inventory – net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment – net |
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Right-of-use assets – net |
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Intangible assets – net |
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Goodwill |
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Deferred tax assets |
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Investments |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Current maturities of long-term debt |
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Total current liabilities |
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Long-term debt – net |
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Long-term lease liabilities |
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TRA liability |
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Other liabilities |
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Total long-term liabilities |
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Redeemable noncontrolling interests |
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Shareholders' equity |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Treasury stock, at cost, |
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( |
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( |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Total Shareholders' equity |
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Total liabilities, Redeemable noncontrolling interests, and Shareholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
2
VIVID SEATS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data) (Unaudited)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Revenues |
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$ |
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$ |
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Costs and expenses: |
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Cost of revenues (exclusive of depreciation and amortization shown separately below) |
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Marketing and selling |
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General and administrative |
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Depreciation and amortization |
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Change in fair value of contingent consideration |
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Income from operations |
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Other (income) expense: |
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Interest expense – net |
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Other (income) expense |
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( |
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Income before income taxes |
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Income tax expense |
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Net income |
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Net income attributable to redeemable noncontrolling interests |
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Net income attributable to Class A Common Stockholders |
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$ |
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$ |
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Income per Class A common stock: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average Class A common stock outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these financial statements.
3
VIVID SEATS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands) (Unaudited)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Net income |
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$ |
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$ |
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Other comprehensive income: |
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Foreign currency translation adjustment |
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( |
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Unrealized gain on investments |
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Comprehensive income |
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$ |
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$ |
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Net income attributable to redeemable noncontrolling interests |
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Foreign currency translation adjustment attributable to redeemable noncontrolling interests |
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( |
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Unrealized gain on investments attributable to redeemable noncontrolling interests |
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Comprehensive income attributable to Class A Common Stockholders |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
4
VIVID SEATS INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
(in thousands, except share data) (Unaudited)
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Class A Common Stock |
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Class B Common Stock |
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Treasury Stock |
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Redeemable noncontrolling interests |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional paid-in capital |
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Shares |
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Amount |
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Accumulated deficit |
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Accumulated |
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Total shareholders' equity (deficit) |
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Balances at January 1, 2023 |
$ |
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$ |
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$ |
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$ |
663,908 |
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( |
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$ |
( |
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$ |
(1,014,132 |
) |
$ |
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$ |
( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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12,182 |
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— |
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Issuance of shares |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Deemed contribution from former parent |
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— |
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— |
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— |
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— |
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391 |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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4,615 |
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— |
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— |
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— |
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— |
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Repurchases of common stock |
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— |
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— |
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— |
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— |
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( |
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( |
) |
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— |
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— |
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( |
) |
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Distributions to non-controlling interests |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Subsequent remeasurement of Redeemable noncontrolling interests |
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— |
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— |
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— |
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— |
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(24,155 |
) |
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— |
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— |
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— |
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— |
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( |
) |
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Balances at March 31, 2023 |
$ |
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$ |
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$ |
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$ |
644,759 |
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( |
) |
$ |
( |
) |
$ |
(1,001,950 |
) |
$ |
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$ |
( |
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Class A Common Stock |
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Class B Common Stock |
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Treasury Stock |
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Redeemable noncontrolling interests |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional paid-in capital |
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Shares |
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Amount |
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Accumulated deficit |
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Accumulated |
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Total shareholders' equity (deficit) |
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Balances at January 1, 2024 |
$ |
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$ |
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$ |
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$ |
1,096,430 |
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( |
) |
$ |
( |
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$ |
(939,596 |
) |
$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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6,077 |
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— |
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Issuance of shares |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net settlement of equity incentive awards |
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— |
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( |
) |
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— |
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— |
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— |
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(462 |
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— |
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— |
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— |
|
|
— |
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( |
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Deemed contribution from former parent |
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|
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— |
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— |
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— |
|
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— |
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133 |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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8,439 |
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— |
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— |
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— |
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— |
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Repurchases of common stock |
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— |
|
|
— |
|
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— |
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— |
|
|
— |
|
|
— |
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|
( |
) |
|
( |
) |
|
— |
|
|
— |
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|
( |
) |
Distributions to non-controlling interests |
|
( |
) |
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— |
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|
— |
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|
— |
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|
— |
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— |
|
|
— |
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— |
|
|
— |
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— |
|
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— |
|
Other comprehensive income |
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Subsequent remeasurement of Redeemable noncontrolling interests |
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
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|
25,597 |
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— |
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— |
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— |
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— |
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Balances at March 31, 2024 |
$ |
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|
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$ |
|
|
|
$ |
|
$ |
1,130,137 |
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|
( |
) |
$ |
( |
) |
$ |
(933,519 |
) |
$ |
( |
) |
$ |
|
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The accompanying notes are an integral part of these financial statements.
5
VIVID SEATS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Unaudited)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Cash flows from operating activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of leases |
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Amortization of deferred financing costs |
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Equity-based compensation expense |
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Change in fair value of warrants |
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( |
) |
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( |
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Change in fair value of derivative asset |
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Change in fair value of contingent consideration |
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Loss on asset disposals |
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Deferred taxes |
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Non-cash interest income |
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( |
) |
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Foreign currency revaluation loss |
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Change in assets and liabilities: |
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Accounts receivable |
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( |
) |
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( |
) |
Inventory |
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( |
) |
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( |
) |
Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable |
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Accrued expenses and other current liabilities |
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( |
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Deferred revenue |
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( |
) |
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( |
) |
Other non-current assets and liabilities |
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( |
) |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Purchases of property and equipment |
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( |
) |
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( |
) |
Purchases of personal seat licenses |
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( |
) |
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( |
) |
Investments in developed technology |
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( |
) |
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( |
) |
Net cash used in investing activities |
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( |
) |
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( |
) |
Cash flows from financing activities |
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Payments of February 2022 First Lien Loan |
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( |
) |
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( |
) |
Payments of Shoko Chukin Bank Loan |
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( |
) |
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Repurchase of common stock |
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( |
) |
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( |
) |
Payments for taxes related to net settlement of equity incentive awards |
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( |
) |
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Payments of TRA liability |
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( |
) |
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|
Cash paid for milestone payments |
|
|
|
|
|
( |
) |
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Impact of foreign exchange on cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
|
|
Net increase in cash, cash equivalents, and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash – beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash – end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for income tax |
|
$ |
|
|
$ |
|
||
Cash paid for operating lease liabilities |
|
$ |
|
|
$ |
|
||
Repurchase of common stock recorded in Accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these financial statements.
6
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
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 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 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 (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for comprehensive annual financial statements. These 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 together with the audited annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 8, 2024 (our “2023 Form 10-K”). These 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.
2. New Accounting Standards
Issued Accounting Standards Adopted
Acquired Contract Assets and Contract Liabilities
In October 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires contract assets and liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the previous guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. 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 in the fourth quarter of 2023, with no material impact on our condensed consolidated financial statements.
Issued Accounting Standards Not Yet Adopted
Segment Reporting - Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of adopting the amendments on our future condensed consolidated financial statements.
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
7
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
and decision usefulness of income tax disclosures. The amendments are effective for annual periods beginning after December 15, 2025. We are currently evaluating the impact of adopting the new standard, which is expected to result in enhanced disclosures, on our future condensed consolidated financial statements.
Stock Compensation
In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718)—Scope Application of Profits Interest and Similar Awards. The amendments are intended to improve the clarity of paragraph 718-10-15-3 and its application to profits interest or similar awards, primarily through the addition of an illustrative example. The amendments are effective for fiscal years beginning after December 15, 2025, and for interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. We are currently evaluating the impact of adopting the amendments on our future condensed consolidated financial statements.
3. Business Acquisitions
Vegas.com Acquisition
On
Wavedash Acquisition
On
4. Revenue Recognition
We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We have
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 from our Owned Properties and from our Private Label Offering. Our Owned Properties consist of our websites and mobile applications, including Vivid Seats, Vegas.com and Wavedash, and our Private Label Offering consists of numerous distribution partners. The Owned Properties component of our Marketplace segment also includes our Vivid Picks daily fantasy sports offering, where users partake in contests by making picks from a variety of sport and player matchups. Using our online platform, we facilitate customer payments, deposits and withdrawals, coordinate ticket deliveries and provide customer service.
8
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
Marketplace revenues consisted of the following (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Marketplace revenues: |
|
|
|
|
|
|
||
Owned Properties |
|
$ |
|
|
$ |
|
||
Private Label |
|
|
|
|
|
|
||
Total Marketplace revenues |
|
$ |
|
|
$ |
|
||
Marketplace revenues consisted of the following event categories (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Marketplace revenues: |
|
|
|
|
|
|
||
Concerts |
|
$ |
|
|
$ |
|
||
Sports |
|
|
|
|
|
|
||
Theater |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total Marketplace revenues |
|
$ |
|
|
$ |
|
||
In our Resale segment, we primarily acquire tickets to resell on secondary ticket marketplaces, including our own. Resale revenues were $
At March 31, 2024, Deferred revenue in the Condensed Consolidated Balance Sheets was $
At December 31, 2023, $
5. Segment Reporting
Our reportable segments are 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. Revenues and contribution margin (defined as revenues less cost of revenues and marketing and selling expenses) are used by our Chief Operating Decision Maker (our “CODM”) to assess performance of the business.
We do not report our assets, capital expenditures, general and administrative expenses or related depreciation and amortization expenses by segment because our CODM does not use this information to evaluate the performance of our operating segments.
9
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
The following tables represent our segment information (in thousands):
|
|
Three Months Ended March 31, 2024 |
|
|||||||||
|
|
Marketplace |
|
|
Resale |
|
|
Consolidated |
|
|||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cost of revenues (exclusive of depreciation and amortization shown separately below) |
|
|
|
|
|
|
|
|
|
|||
Marketing and selling |
|
|
|
|
|
|
|
|
|
|||
Contribution margin |
|
$ |
|
|
$ |
|
|
$ |
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Income from operations |
|
|
|
|
|
|
|
|
|
|||
Interest expense – net |
|
|
|
|
|
|
|
|
|
|||
Other expense |
|
|
|
|
|
|
|
|
|
|||
Income before income taxes |
|
|
|
|
|
|
|
$ |
|
|||
|
|
Three Months Ended March 31, 2023 |
|
|||||||||
|
|
Marketplace |
|
|
Resale |
|
|
Consolidated |
|
|||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cost of revenues (exclusive of depreciation and amortization shown separately below) |
|
|
|
|
|
|
|
|
|
|||
Marketing and selling |
|
|
|
|
|
|
|
|
|
|||
Contribution margin |
|
$ |
|
|
$ |
|
|
$ |
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Change in fair value of contingent consideration |
|
|
|
|
|
|
|
|
|
|||
Income from operations |
|
|
|
|
|
|
|
|
|
|||
Interest expense – net |
|
|
|
|
|
|
|
|
|
|||
Other income |
|
|
|
|
|
|
|
|
( |
) |
||
Income before income taxes |
|
|
|
|
|
|
|
$ |
|
|||
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 doubtful accounts (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Uncollateralized payment processor obligations |
|
$ |
|
|
$ |
|
||
Due from marketplace ticket sellers for cancellation charges |
|
|
|
|
|
|
||
Due from distribution partners for cancellation charges |
|
|
|
|
|
|
||
Event insurance and other commissions receivable |
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
||
Total Accounts Receivable |
|
$ |
|
|
$ |
|
||
10
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
We recorded an allowance for credit losses of $
There were
7. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Recovery of future customer compensation |
|
$ |
|
|
$ |
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Other current assets |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Recovery of future customer compensation represents expected recoveries of compensation to be paid to customers for cancellations or other service issues related to previously recorded sales transactions. Recovery of future customer compensation costs decreased by $
8. Goodwill and Intangible Assets
Goodwill
Goodwill is included in our Marketplace segment.
|
|
Goodwill |
|
|
Balance at December 31, 2023 |
|
$ |
|
|
Foreign currency translation |
|
|
( |
) |
Balance at March 31, 2024 |
|
$ |
|
|
We had recorded $
11
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
Definite-Lived Intangible Assets
The following table summarizes components of our definite-lived intangible assets (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Definite-lived Intangible Assets |
|
|
|
|
|
|
||
Supplier relationships |
|
$ |
|
|
$ |
|
||
Customer relationships |
|
|
|
|
|
|
||
Acquired developed technology |
|
|
|
|
|
|
||
Capitalized development costs |
|
|
|
|
|
|
||
Capitalized development costs – Work in progress |
|
|
|
|
|
|
||
Foreign currency translation |
|
|
( |
) |
|
|
|
|
Total gross book value |
|
$ |
|
|
$ |
|
||
Less: Accumulated amortization |
|
|
|
|
|
|
||
Supplier relationships |
|
$ |
( |
) |
|
$ |
( |
) |
Customer relationships |
|
|
( |
) |
|
|
( |
) |
Acquired developed technology |
|
|
( |
) |
|
|
( |
) |
Capitalized development costs |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation |
|
|
|
|
|
( |
) |
|
Total accumulated amortization |
|
$ |
( |
) |
|
$ |
( |
) |
Indefinite-lived Intangible Assets |
|
|
|
|
|
|
||
Trademarks |
|
$ |
|
|
$ |
|
||
Foreign currency translation |
|
|
( |
) |
|
|
|
|
Intangible assets – net |
|
$ |
|
|
$ |
|
||
Amortization expense on our definite-lived intangible assets was $
9. Investments
In July 2023, we invested $
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 reported as a separate component on the Condensed Consolidated Statements of Comprehensive Income until realized. The Note’s unrealized gain for the three months ended March 31, 2024 was $
We account for the Warrant in accordance with ASC Topic 815, Derivatives and Hedging, pursuant to which we record the derivative instrument on the Condensed Consolidated Balance Sheets at fair value with changes in fair value recognized in Other (income) expense on the Condensed 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.
10. Fair Value Measurements
We account for financial instruments under ASC Topic 820, Fair Value Measurements (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value
12
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
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.
Financial instruments recorded at fair value on recurring basis as of March 31, 2024 and December 31, 2023 were as follows (in thousands):
|
|
Fair Value Measurements Using |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Warrant |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Fair Value Measurements Using |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Warrant |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The fair value of the Note is determined using the income approach, utilizing Level 3 inputs. The estimated fair value of the Warrant is determined using the Black-Scholes model, which requires us to make assumptions and judgments about the variables used in the calculation related to volatility, expected term, dividend yield and risk-free interest rate. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
The following table presents quantitative information about the significant unobservable inputs applied to these Level 3 fair value measurements:
Assets |
|
Significant |
|
March 31, |
|
|
December 31, |
|
||
Note |
|
Expected terms (years) |
|
|
|
|
|
|
||
|
|
Implied Yield |
|
|
% |
|
|
% |
||
Warrant |
|
Expected terms (years) |
|
|
|
|
|
|
||
|
|
Estimated volatility |
|
|
% |
|
|
% |
||
|
|
Risk-free rate |
|
|
% |
|
|
% |
||
|
|
Expected dividend yield |
|
|
% |
|
|
% |
||
13
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
The following table provides a reconciliation of the financial instruments measured at fair value using Level 3 significant unobservable inputs (in thousands):
|
|
Note |
|
|
Warrant |
|
||
Balance at January 1, 2024 |
|
$ |
|
|
$ |
|
||
Accretion of discount |
|
|
|
|
|
|
||
Interest paid-in-kind |
|
|
|
|
|
|
||
Total unrealized gains or losses: |
|
|
|
|
|
|
||
Recognized in earnings |
|
|
|
|
|
( |
) |
|
Recognized in Other comprehensive income |
|
|
|
|
|
|
||
Balance at March 31, 2024 |
|
$ |
|
|
$ |
|
||
Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of their short-term nature.
11. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Accrued marketing expense |
|
$ |
|
|
$ |
|
||
Accrued customer credits |
|
|
|
|
|
|
||
Accrued future customer compensation |
|
|
|
|
|
|
||
Accrued payroll |
|
|
|
|
|
|
||
Accrued operating expenses |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Accrued customer credits represent credits issued and outstanding for 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 we 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 three months ended March 31, 2024, $
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 cancellations, are recognized as a component of Revenues in the Condensed Consolidated Statements of Operations. The expected recoveries of these obligations are included in Prepaid expenses and other current assets in the Condensed 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 three months ended March 31, 2024 and 2023, we recognized a net decrease in revenue of $
Other current liabilities primarily increased as a result of accrued, but not paid, tax distributions, and accrued TRA liability that is expected to be paid in the next 12 months.
14
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
12. Debt
Our outstanding debt is comprised of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
February 2022 First Lien Loan |
|
$ |
|
|
$ |
|
||
Shoko Chukin Bank Loan |
|
|
|
|
|
|
||
Total long-term debt, gross |
|
|
|
|
|
|
||
Less: unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total long-term debt, net of issuance costs |
|
|
|
|
|
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Total long-term debt, net |
|
$ |
|
|
$ |
|
||
June 2017 Term Loans
On June 30, 2017, we entered into a $
February 2022 First Lien Loan
On February 3, 2022, we entered into an amendment which refinanced the remaining balance of the June 2017 First Lien Loan with a new $
The terms of the February 2022 First Lien Loan specify a secured overnight financing rate (“SOFR”)-based floating interest rate and contain a springing financial covenant that requires compliance with a first lien net leverage ratio when revolver borrowings exceed certain levels. All obligations under the February 2022 First Lien Loan are unconditionally guaranteed by Hoya Intermediate and substantially all of Hoya Intermediate’s existing and future direct and indirect wholly owned domestic subsidiaries. The February 2022 First Lien Loan requires quarterly amortization payments of $
The February 2022 First Lien Loan is held by third-party financial institutions and is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium. The fair value was estimated using quoted prices that are directly observable in the marketplace. Therefore, the fair value is estimated on a Level 2 basis. At March 31, 2024 and December 31, 2023, the fair value of the February 2022 First Lien Loan approximated the carrying value.
We are subject to certain reporting and compliance-related covenants to remain in good standing under the February 2022 First Lien Loan. These covenants, among other things, limit our ability to incur additional indebtedness and, in certain circumstances, 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
15
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
the loans or foreclosure on the collateral. As of March 31, 2024, we were in compliance with all debt covenants related to the February 2022 First Lien Loan.
Shoko Chukin Bank Loan
In connection with our acquisition of Wavedash, we assumed long-term debt owed to Shoko Chukin Bank (the “Shoko Chukin Bank Loan”) of JPY
13. Financial Instruments
We issued the following warrants during the year ended December 31, 2021 in connection with the Merger Transaction:
Public Warrants
We issued to former warrant holders of Horizon Acquisition Corporation warrants to purchase
Private Warrants
We issued to Horizon Sponsor, LLC warrants to purchase
Exercise Warrants
We issued to Horizon Sponsor, LLC warrants to purchase
Hoya Intermediate Warrants
Hoya Intermediate issued to Hoya Topco, LLC (“Hoya Topco”) warrants to purchase
A portion of the Hoya Intermediate Warrants, consisting of warrants to purchase
On December 7, 2023, Hoya Topco voluntarily terminated a portion of the Hoya Intermediate Warrants, consisting of Option Contingent Warrants to purchase
As of March 31, 2024, there were
16
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
The following assumptions were used to calculate the fair value of the Hoya Intermediate Warrants:
|
|
March 31, |
|
|
December 31, |
|
|
December 7, |
|
|||
|
|
2024 |
|
|
2023 |
|
|
2023 |
|
|||
Estimated volatility |
|
|
% |
|
|
% |
|
|
% |
|||
Expected term (years) |
|
|
|
|
|
|
|
|
|
|||
Risk-free rate |
|
|
% |
|
|
% |
|
|
% |
|||
Expected dividend yield |
|
|
% |
|
|
% |
|
|
% |
|||
For the three months ended March 31, 2024, the fair value of the Hoya Intermediate Warrants decreased by $
Upon the valid exercise of a Hoya Intermediate Warrant for Intermediate Units, we will issue an equivalent number of shares of our Class B common stock to Hoya Topco.
Mirror Warrants
Hoya Intermediate issued to us warrants to purchase
14. Equity
Share Repurchase Programs
On February 29, 2024, our Board of Directors (our “Board”) authorized a share repurchase program for up to $
On May 25, 2022, our Board authorized a share repurchase program for up to $
Share repurchases are accounted for as Treasury stock in the Condensed Consolidated Balance Sheets.
17
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
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 (in thousands):
|
|
Unrealized |
|
|
Foreign |
|
|
Total |
|
|||
Balance at January 1, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other comprehensive income |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance at March 31, 2024 |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
15. Commitments and Contingencies
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 the opinion of management, could have a material effect on our business, financial position or results of operations other than those matters discussed herein.
We were a co-defendant in a class action lawsuit in Canada alleging a failure to disclose service fees prior to checkout. A final order approving the settlement of this lawsuit was entered by the court in August 2020. In January 2022, we issued coupons to certain members of the class. Other members of the class were notified in 2022 that they are eligible to submit a claim for a coupon. As of March 31, 2024 and December 31, 2023, a liability of $
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 , pursuant to which we paid $
We are a defendant in a lawsuit related to an alleged violation of the Illinois Biometric Information Privacy Act. We deny these allegations and intend to vigorously defend against this lawsuit. Based on the information currently available, we are unable to reasonably estimate a possible loss or range of possible losses and no litigation reserve has been recorded in the Condensed Consolidated Balance Sheets related to this matter.
Other
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 are required to calculate, collect and remit taxes on sales in their jurisdictions. A successful assertion by one or more jurisdictions could result in material tax liabilities, including uncollected taxes on past sales, as well as penalties and interest. Based on our analysis of certain state and local regulations, specifically related to marketplace facilitators and ticket sales, we have recorded liabilities in all jurisdictions where we believe a risk of loss is probable. We continuously monitor state and local regulations and will implement required collection and remittance procedures if and when we are subject to such regulations.
As of March 31, 2024 and December 31, 2023, we had recorded a liability of $
18
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
we received an abatement related to uncollected amounts, which resulted in a reduction of the liability and a reduction in General and administrative expenses of $
16. Related-Party Transactions
Viral Nation Inc.
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. We incurred an expense of $
Rolling Stone, LLC
Rolling Stone, LLC (“Rolling Stone”) is a high-profile magazine and media platform focused 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. We incurred an expense of
Los Angeles Dodgers
The Los Angeles Dodgers (the “Dodgers”) is a Major League Baseball team based in Los Angeles, California. Todd Boehly, a member of our Board, owns greater than 10% of the Dodgers. As part of our strategic partnership with the Dodgers, including our designation as an Official Ticket Marketplace of the Dodgers and certain other advertising, marketing, promotional and sponsorship benefits, we incurred
Tax Receivable Agreement
In connection with the Merger Transaction, we entered into a Tax Receivable Agreement (the “TRA”) with the existing Hoya Intermediate shareholders. For more information, see “Tax Receivable Agreement” in Note 17, Income Taxes.
17. Income Taxes
For the three months ended March 31, 2024, we recorded a $
As of March 31, 2024 and December 31, 2023, our deferred tax assets were primarily the result of our investment in partnership, tax receivable agreement, net operating losses, interest limitations and tax credit carryforwards. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of March 31, 2023, we maintained a valuation allowance against our U.S. net operating losses, interest limitations and tax credit carryforwards, which was released in the second quarter of 2023. 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. We maintain a partial valuation allowance on our
19
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
investments in partnership related to the portion of the basis difference that we do not expect to realize on a more likely than not basis.
Tax Receivable Agreement
In connection with the Merger Transaction, we entered into the TRA with the existing Hoya Intermediate shareholders that provides for our payment to such shareholders of
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 March 31, 2024, we estimate that the tax savings associated with all tax attributes described above would require us to pay $
18. 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, directors and consultants. The 2021 Plan became effective on October 18, 2021 upon consummation of the Merger Transaction, and the First Amendment to the 2021 Plan became effective on February 5, 2024.
Restricted Stock Units
Restricted Stock Units (“RSUs”) are awards 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 converts into shares of our Class A Common stock upon vesting.
During the three months ended March 31, 2024, we granted
A summary of activity for RSUs is as follows (in thousands, except per share data):
|
|
Shares |
|
|
Weighted Average Grant Date Fair Value Per Share |
|
||
Unvested at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Unvested at March 31, 2024 |
|
|
|
|
$ |
|
||
20
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
|
|
Shares |
|
|
Weighted Average Grant Date Fair Value Per Share |
|
||
Unvested at December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Unvested at March 31, 2023 |
|
|
|
|
$ |
|
||
Stock Options
Stock options provide for the purchase of shares of our Class A common stock in the future at an exercise price set on the grant date.
On March 10, 2023, we granted
The following assumptions were used to calculate the fair value of the stock options granted on March 10, 2023:
Volatility |
|
|
% |
|
Expected term (years) |
|
|
|
|
Risk-free rate |
|
|
% |
|
Dividend yield |
|
|
% |
A summary of activity for stock options is as follows (in thousands, except per option data):
|
|
Outstanding Options |
|
|
Weighted Average Exercise Price Per Option |
|
|
Weighted Average Remaining Contractual Life (in Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options expired |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
Outstanding Options |
|
|
Weighted Average Exercise Price Per Option |
|
|
Weighted Average Remaining Contractual Life (in Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
21
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
Compensation Expense
For the three months ended March 31, 2024, equity-based compensation expense related to RSUs was $
For the three months ended March 31, 2024, equity-based compensation expense related to stock options was $
For the three months ended March 31, 2024 and 2023, equity-based compensation expense related to profits interests was $
For the three months ended March 31, 2024, equity-based compensation expense excludes $
19. 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 income per share, and we do not present basic and diluted income per share of Class B common stock. However, holders of our Class B common stock are allocated income in Hoya Intermediate (our operating entity) according to their weighted average percentage ownership of Intermediate Units during each quarter.
Net 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. 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 cash proceeds of equal value at the time of redemption. The option to redeem Intermediate Units for cash proceeds must be approved by our Board, which as of March 31, 2024 consisted of a majority of directors nominated by affiliates of Hoya Topco and GTCR, LLC pursuant to our stockholders’ agreement. The ability to put Intermediate Units is solely within the control of the holder of the redeemable noncontrolling interests. If Hoya Topco elects the redemption to be settled in cash, the cash used to settle the redemption must be funded through a private or public offering of our Class A common stock and is subject to our Board’s approval.
The following table provides the net income attributable to Hoya Topco’s redeemable noncontrolling interest (in thousands):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2024 |
|
|
2023 |
|
||
Net income—Hoya Intermediate |
|
|
$ |
|
|
$ |
|
||
Hoya Topco’s weighted average % allocation of Hoya Intermediate's net income |
|
|
|
% |
|
|
% |
||
Net income attributable to Hoya Topco's redeemable noncontrolling interests |
|
|
$ |
|
|
$ |
|
||
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 for VSI’s portion of income, as well as the full results of Hoya Intermediate on a consolidated basis.
22
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
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 Hoya Intermediate Warrants, to the extent they are dilutive.
The following table sets forth the computation of basic and diluted net income per share of Class A common stock for the periods in which shares of our Class A and Class B common stock were outstanding (in thousands, except share and per share data):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2024 |
|
|
2023 |
|
||
Numerator—basic: |
|
|
|
|
|
|
|
||
Net income |
|
|
$ |
|
|
$ |
|
||
Less: Income attributable to redeemable noncontrolling interests |
|
|
|
|
|
|
|
||
Net income attributable to Class A Common Stockholders—basic |
|
|
|
|
|
|
|
||
Denominator—basic: |
|
|
|
|
|
|
|
||
Weighted average Class A common stock outstanding—basic |
|
|
|
|
|
|
|
||
Net income per Class A common stock—basic |
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
||
Numerator—diluted: |
|
|
|
|
|
|
|
||
Net income attributable to Class A Common Stockholders—basic |
|
|
$ |
|
|
$ |
|
||
Net income effect of dilutive securities: |
|
|
|
|
|
|
|
||
Effect of dilutive Noncontrolling Interest |
|
|
|
|
|
|
|
||
Effect of RSUs |
|
|
|
|
|
|
|
||
Net income attributable to Class A Common Stockholders—diluted |
|
|
|
|
|
|
|
||
Denominator—diluted: |
|
|
|
|
|
|
|
||
Weighted average Class A common stock outstanding—basic |
|
|
|
|
|
|
|
||
Weighted average effect of dilutive securities: |
|
|
|
|
|
|
|
||
Effect of dilutive Noncontrolling Interest |
|
|
|
|
|
|
|
||
Effect of RSUs |
|
|
|
|
|
|
|
||
Weighted average Class A common stock outstanding—diluted |
|
|
|
|
|
|
|
||
Net income per Class A common stock—diluted |
|
|
$ |
|
|
$ |
|
||
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 period presented or if the issuance of shares is contingent upon events that did not occur by the end of the period.
23
Vivid Seats INC.
NOTES to the CONDENSED Consolidated Financial Statements
(UNAUDITED)
The following table presents potentially dilutive securities excluded from the computation of diluted net income per share of Class A common stock for the periods presented that could potentially dilute earnings per share in the future:
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2024 |
|
|
2023 |
|
||
RSUs |
|
|
|
|
|
|
|
||
Stock options |
|
|
|
|
|
|
|
||
Public Warrants and Private Warrants |
|
|
|
|
|
|
|
||
Exercise Warrants |
|
|
|
|
|
|
|
||
Hoya Intermediate Warrants |
|
|
|
|
|
|
|
||
24
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion is intended to help readers understand our financial condition and results of operations and is provided as an addition to, and should be read together with, our condensed consolidated financial statements and accompanying notes included elsewhere in this Report, as well as our audited consolidated financial statements and accompanying notes contained in our 2023 Form 10-K. This discussion contains forward-looking statements, which are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements. Such risks and uncertainties include, but are not limited to, those discussed in the “Risk Factors” and “Forward-Looking Statements” sections of this Report and our 2023 Form 10-K.
Overview
We are an online ticket marketplace that utilizes our technology platform to connect fans of live events seamlessly with ticket sellers. Our mission is to empower and enable fans to Experience It Live. We believe in the power of shared experiences to connect people with live events delivering some of life’s most exciting moments. We operate a technology platform and marketplace that enables ticket buyers to easily discover and purchase tickets to live events and attractions and book hotel rooms and packages, while enabling ticket sellers and partners to seamlessly manage their operations. We differentiate from competitors by offering an extensive breadth and depth of ticket listings at a competitive value. The following table summarizes our Marketplace Gross Order Value (“Marketplace GOV”), revenues, net income and Adjusted EBITDA for the three months ended March 31, 2024 and 2023 (in thousands):
|
|
Three months ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Marketplace GOV* |
|
$ |
1,028,477 |
|
|
$ |
855,528 |
|
Revenues |
|
|
190,852 |
|
|
|
161,063 |
|
Net income |
|
|
10,742 |
|
|
|
30,272 |
|
Adjusted EBITDA* |
|
$ |
38,920 |
|
|
$ |
42,435 |
|
* See the “Key Business Metrics and Non-GAAP Financial Measure” section below for more information on Marketplace GOV and Adjusted EBITDA, which is a financial measure not defined under accounting principles generally accepted in the United States of America (“GAAP”).
Our Business Model
We operate our business in two segments, Marketplace and Resale.
Marketplace
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 from our Owned Properties and from our Private Label Offering. Our Owned Properties consist of our websites and mobile applications, including Vivid Seats, Vegas.com (as defined herein) and Wavedash (as defined herein), and our Private Label Offering consists of numerous distribution partners. The Owned Properties component of our Marketplace segment also includes our Vivid Picks daily fantasy sports offering, where users partake in contests by making picks from a variety of sport and player matchups. Using our online platform, we facilitate customer payments, deposits and withdrawals, coordinate ticket deliveries and provide customer service. We do not hold ticket inventory in our Marketplace segment.
We primarily earn revenue from service and delivery fees charged to ticket buyers. We also earn referral fee revenue by offering event ticket insurance to ticket buyers using a third-party insurance provider. The revenue we earn from our Vivid Picks daily fantasy sports offering is the difference between cash entry fees collected and cash amounts paid out to users for winning picks, less customer promotions and incentives.
We incur costs for developing and maintaining our platform, providing back-office support and customer service, facilitating payments and deposits, and shipping non-electronic tickets. We also incur substantial marketing costs, primarily related to online advertising.
25
A key component of our platform is Skybox, a proprietary enterprise resource planning (“ERP“) tool used by the majority of ticket sellers. Skybox is a free-to-use system that helps ticket sellers manage ticket inventories, adjust pricing and fulfill orders across multiple ticket resale marketplaces. Professional ticket sellers use an ERP to manage their operations, and Skybox is their most widely adopted ERP.
Resale
In our Resale segment, we primarily acquire tickets to resell on secondary ticketing marketplaces, including our own. Our Resale segment also provides internal research and development support for Skybox and our ongoing efforts to deliver industry-leading seller software and tools.
Key Business Metrics and Non-GAAP Financial Measure
We use the following metrics to evaluate our performance, identify trends, formulate financial projections and make strategic decisions. We believe these metrics provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team.
The following table summarizes our key business metrics and non-GAAP financial measure (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Marketplace GOV(1) |
|
$ |
1,028,477 |
|
|
$ |
855,528 |
|
Total Marketplace orders(2) |
|
|
2,876 |
|
|
|
2,275 |
|
Total Resale orders(3) |
|
|
99 |
|
|
|
87 |
|
Adjusted EBITDA(4) |
|
$ |
38,920 |
|
|
$ |
42,435 |
|
Marketplace GOV
Marketplace GOV is a key driver of our Marketplace segment revenue. Marketplace GOV represents the total transactional amount of Marketplace segment orders placed on our platform in a period, inclusive of fees, exclusive of taxes and net of cancellations that occurred during that period. Marketplace GOV reflects our ability to attract and retain customers, as well as the overall health of the industry.
Marketplace GOV can be impacted by seasonality. Typically, we experience slightly increased activity in the fourth quarter when all major sports leagues are in season and there is an increase in order volume for theater events during the holiday season and concert on-sales for the following year. Quarterly fluctuations in Marketplace GOV can also result from the popularity and demand of performers, tours, teams and events, the length and team composition of sports playoff series and championship games, and the number of cancellations.
26
Marketplace GOV increased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily as a result of an increase in the number of orders processed, which for the three months ended March 31, 2024 included orders processed through Vegas.com and Wavedash.
Total Marketplace Orders
Total Marketplace orders represents the volume of Marketplace segment orders placed on our platform in a period, net of cancellations that occurred during that period. An order can include one or more tickets, hotel rooms or parking passes. Total Marketplace orders allows us to monitor order volume and better identify trends within our Marketplace segment. Total Marketplace orders increased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily as a result of an increase in the number of orders processed, which for the three months ended March 31, 2024 included orders processed through Vegas.com and Wavedash.
Total Resale Orders
Total Resale orders represents the volume of Resale segment orders in a period, net of cancellations that occurred during that period. An order can include one or more tickets or parking passes. Total Resale orders allows us to monitor order volume and better identify trends within our Resale segment. Total Resale orders increased during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily as a result of higher activity in our Resale segment.
Adjusted EBITDA
We present Adjusted EBITDA, which is a non-GAAP financial measure, because it is a measure frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe this measure is helpful in highlighting trends in our operating results because it excludes the impact of items that are outside of our control or not reflective of ongoing performance related directly to the operation of our business.
Adjusted EBITDA is a key measure used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance and performing strategic planning and annual budgeting. Moreover, we believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for making period-to-period comparisons of our business performance and highlighting trends in our operating results.
Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. Adjusted EBITDA does not reflect all amounts associated with our operating results as determined in accordance with GAAP and may exclude recurring costs, such as interest expense – net, equity-based compensation, litigation, settlements and related costs, change in fair value of warrants, change in fair value of derivative assets and foreign currency revaluation (gains)/losses. In addition, other companies may calculate Adjusted EBITDA differently than we do, thereby limiting its usefulness as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from Adjusted EBITDA.
27
The following table provides a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net income |
|
$ |
10,742 |
|
|
$ |
30,272 |
|
Income tax expense |
|
|
2,269 |
|
|
|
285 |
|
Interest expense – net |
|
|
5,082 |
|
|
|
3,280 |
|
Depreciation and amortization |
|
|
10,483 |
|
|
|
2,598 |
|
Sales tax liability(1) |
|
|
(2,732 |
) |
|
|
— |
|
Transaction costs(2) |
|
|
1,901 |
|
|
|
456 |
|
Equity-based compensation(3) |
|
|
8,488 |
|
|
|
5,530 |
|
Litigation, settlements and related costs(4) |
|
|
3 |
|
|
|
300 |
|
Change in fair value of warrants(5) |
|
|
(460 |
) |
|
|
(327 |
) |
Change in fair value of derivative asset(6) |
|
|
37 |
|
|
|
— |
|
Change in fair value of contingent consideration(7) |
|
|
— |
|
|
|
34 |
|
Loss on asset disposals(8) |
|
|
102 |
|
|
|
7 |
|
Foreign currency revaluation loss(9) |
|
|
3,005 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
38,920 |
|
|
$ |
42,435 |
|
Key Factors Affecting our Performance
During the three months ended March 31, 2024, there were no material changes to the “Key Factors Affecting Our Performance” disclosed in our 2023 Form 10-K. Our financial position and results of operations depend to a significant extent on those factors.
Recent Business Acquisitions
Vegas.com Acquisition
On November 3, 2023, we acquired VDC Holdco, LLC, the parent company of Vegas.com, LLC (together, “Vegas.com”), an online ticket marketplace for live event enthusiasts exploring Las Vegas, Nevada. The purchase
28
price was $248.3 million, comprising $152.8 million in cash and approximately 15.6 million shares of our Class A common stock. We financed the cash portion of the purchase price 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.
Wavedash Acquisition
On September 8, 2023, we acquired WD Holdings Co., Ltd., the parent company of Wavedash Co., Ltd. (together, “Wavedash”), an online ticket marketplace headquartered in Tokyo, Japan. The purchase price was JPY 10,946.1 million, or approximately $74.3 million based on the exchange rate in effect on the acquisition date, before considering the net effect of cash acquired. We financed the purchase price 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.
Results of Operations
Comparison of the Three Months Ended March 31, 2024 and 2023
The following table sets forth our results of operations (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Revenues |
|
$ |
190,852 |
|
|
$ |
161,063 |
|
|
$ |
29,789 |
|
|
|
18 |
% |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) |
|
|
49,583 |
|
|
|
37,760 |
|
|
|
11,823 |
|
|
|
31 |
% |
Marketing and selling |
|
|
67,745 |
|
|
|
54,772 |
|
|
|
12,973 |
|
|
|
24 |
% |
General and administrative |
|
|
42,366 |
|
|
|
32,389 |
|
|
|
9,977 |
|
|
|
31 |
% |
Depreciation and amortization |
|
|
10,483 |
|
|
|
2,598 |
|
|
|
7,885 |
|
|
|
304 |
% |
Change in fair value of contingent consideration |
|
|
— |
|
|
|
34 |
|
|
|
(34 |
) |
|
|
(100 |
)% |
Income from operations |
|
|
20,675 |
|
|
|
33,510 |
|
|
|
(12,835 |
) |
|
|
(38 |
)% |
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense – net |
|
|
5,082 |
|
|
|
3,280 |
|
|
|
1,802 |
|
|
|
55 |
% |
Other (income) expense |
|
|
2,582 |
|
|
|
(327 |
) |
|
|
2,909 |
|
|
|
890 |
% |
Income before income taxes |
|
|
13,011 |
|
|
|
30,557 |
|
|
|
(17,546 |
) |
|
|
(57 |
)% |
Income tax expense |
|
|
2,269 |
|
|
|
285 |
|
|
|
1,984 |
|
|
|
696 |
% |
Net income |
|
|
10,742 |
|
|
|
30,272 |
|
|
|
(19,530 |
) |
|
|
(65 |
)% |
Net income attributable to redeemable noncontrolling interests |
|
|
4,665 |
|
|
|
18,090 |
|
|
|
(13,425 |
) |
|
|
(74 |
)% |
Net income attributable to Class A Common Stockholders |
|
$ |
6,077 |
|
|
$ |
12,182 |
|
|
$ |
(6,105 |
) |
|
|
(50 |
)% |
Revenues
The following table presents revenues by segment (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
Change |
|
|
% Change |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
$ |
160,012 |
|
|
$ |
136,581 |
|
$ |
23,431 |
|
|
|
17 |
% |
Resale |
|
|
30,840 |
|
|
|
24,482 |
|
|
6,358 |
|
|
|
26 |
% |
Total revenues |
|
$ |
190,852 |
|
|
$ |
161,063 |
|
$ |
29,789 |
|
|
|
18 |
% |
Total revenues increased $29.8 million, or 18%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase, which occurred in both our Marketplace and Resale segments, resulted primarily from an increase in orders processed.
29
Marketplace
The following table presents Marketplace revenues by event category (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
Change |
|
|
% Change |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
||||
Concerts |
|
$ |
68,029 |
|
|
$ |
74,879 |
|
$ |
(6,850 |
) |
|
|
(9 |
)% |
Sports |
|
|
47,348 |
|
|
|
45,600 |
|
|
1,748 |
|
|
|
4 |
% |
Theater |
|
|
37,907 |
|
|
|
15,390 |
|
|
22,517 |
|
|
|
146 |
% |
Other |
|
|
6,728 |
|
|
|
712 |
|
|
6,016 |
|
|
|
845 |
% |
Total Marketplace revenues |
|
$ |
160,012 |
|
|
$ |
136,581 |
|
$ |
23,431 |
|
|
|
17 |
% |
Marketplace revenues increased $23.4 million, or 17%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase resulted primarily from an increase in the number of orders processed, particularly for theater events, and that the three months ended March 31, 2024 included orders processed through Vegas.com and Wavedash.
Total Marketplace orders increased 0.6 million, or 26%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Cancellation charges, which are recognized as a reduction to revenues, were $9.2 million and $3.6 million for the three months ended March 31, 2024 and 2023, respectively. The increase was primarily due to lower customer credit breakage, as well as an increase in cancellations due primarily to the three months ended March 31, 2024 including cancellations through Vegas.com and Wavedash.
The following table presents Marketplace revenues by business model (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
Change |
|
|
% Change |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
||||
Owned Properties |
|
$ |
126,571 |
|
|
$ |
102,815 |
|
$ |
23,756 |
|
|
|
23 |
% |
Private Label |
|
|
33,441 |
|
|
|
33,766 |
|
|
(325 |
) |
|
|
(1 |
)% |
Total Marketplace revenues |
|
$ |
160,012 |
|
|
$ |
136,581 |
|
$ |
23,431 |
|
|
|
17 |
% |
The increase in revenue from Owned Properties during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 resulted primarily from an increase in the number of orders processed and that the three months ended March 31, 2024 included orders processed through Vegas.com and Wavedash.
The decrease in revenue from Private Label during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 resulted primarily from the negative impact to revenue of customer credit breakage, which more than offset an increase in revenue from higher order volumes.
In our Marketplace segment, we also earn referral fee revenue by offering event ticket insurance to ticket buyers using a third-party insurance provider. Our referral fee revenue was $6.8 million and $7.2 million during the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily due to a decline in the insurance attachment rate to orders.
Resale
Resale revenues increased $6.4 million, or 26%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase resulted primarily from higher order volume.
Total Resale orders increased less than 0.1 million, or 14%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Cancellation charges, which are classified as a reduction to revenues, negatively impacted Resale revenues by $0.3 million for the three months ended March 31, 2024 compared to $0.5 million for the three months ended March 31, 2023. The decrease resulted primarily from fewer cancellations.
30
Cost of Revenues (exclusive of Depreciation and Amortization)
The following table presents cost of revenues by segment (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketplace |
|
$ |
26,141 |
|
|
$ |
20,060 |
|
|
$ |
6,081 |
|
|
|
30 |
% |
Resale |
|
|
23,442 |
|
|
|
17,700 |
|
|
|
5,742 |
|
|
|
32 |
% |
Total cost of revenues |
|
$ |
49,583 |
|
|
$ |
37,760 |
|
|
$ |
11,823 |
|
|
|
31 |
% |
Total cost of revenues increased $11.8 million, or 31%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase resulted primarily from higher revenues in both our Marketplace and Resale segments.
Marketplace
Marketplace cost of revenues increased $6.1 million, or 30%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was relatively consistent with the 20% increase in Marketplace GOV for the same period.
Resale
Resale cost of revenues increased $5.7 million, or 32%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was relatively consistent with the 26% increase in Resale revenues for the same period.
Marketing and Selling
The following table presents marketing and selling expenses (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
Marketing and selling: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Online |
|
$ |
61,904 |
|
|
$ |
49,108 |
|
|
$ |
12,796 |
|
|
|
26 |
% |
Offline |
|
|
5,841 |
|
|
|
5,664 |
|
|
|
177 |
|
|
|
3 |
% |
Total marketing and selling |
|
$ |
67,745 |
|
|
$ |
54,772 |
|
|
$ |
12,973 |
|
|
|
24 |
% |
Marketing and selling expenses, which are entirely attributable to our Marketplace segment, increased $13.0 million, or 24%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase primarily resulted from greater spending on online advertising, which increased by $12.8 million, or 26%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in spending on online advertising was relatively consistent with the 20% increase in Marketplace GOV over the same period as we scaled advertising to higher volumes, including volume associated with Vegas.com and Wavedash.
General and Administrative
The following table presents general and administrative expenses (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
% Change |
|
||||
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personnel expenses |
|
$ |
32,601 |
|
|
$ |
24,691 |
|
|
$ |
7,910 |
|
|
|
32 |
% |
Non-income tax expense (benefit) |
|
|
(2,379 |
) |
|
|
456 |
|
|
|
(2,835 |
) |
|
|
(622 |
)% |
Other |
|
|
12,144 |
|
|
|
7,242 |
|
|
|
4,902 |
|
|
|
68 |
% |
Total general and administrative |
|
$ |
42,366 |
|
|
$ |
32,389 |
|
|
$ |
9,977 |
|
|
|
31 |
% |
Total general and administrative expenses increased $10.0 million, or 31%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to higher personnel expenses from higher employee headcount, including headcount added through our acquisitions of Vegas.com and Wavedash, and from higher equity-based compensation expense. Higher professional fees, including those incurred with our acquisitions of Vegas.com and Wavedash, are reflected in other expenses and also contributed to the increase.
31
Depreciation and Amortization
Depreciation and amortization expenses increased $7.9 million, or 304%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to the intangibles acquired as part of our acquisitions of Vegas.com and Wavedash and, to a lesser extent, an increase in capitalized development activities related to our platform. The magnitude of the increase attributable to the amortization of acquired intangibles had a significant impact on net income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
Other (Income) Expense
Interest Expense – Net
Interest expense increased $1.8 million, or 55%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to higher interest rates, partially offset by interest earned on cash balances.
Other (Income) Expense
Other (income) expense increased $2.9 million, or 890%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to the fair value remeasurement of warrants, net of foreign currency revaluation losses due to unrealized gains arising from the remeasurement of non-operating assets and liabilities denominated in non-functional currencies on the balance sheet date.
Income Tax Expense (Benefit)
Income tax expense increased $2.0 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to our valuation allowance on our U.S. net operating losses, interest limitations and tax credit carryforwards as of March 31, 2023 that resulted in recording minimal income tax expense in the first quarter of 2023. The valuation allowance was subsequently released in the second quarter of 2023.
Liquidity and Capital Resources
We have historically financed our operations primarily through cash generated from operations. Our primary short-term requirements for liquidity and capital are to fund general working capital, capital expenditures and debt service requirements. Our primary long-term liquidity needs are related to debt repayment and potential acquisitions.
Our primary source of funds is cash generated from operations. Our existing cash and cash equivalents are sufficient to fund our liquidity needs for the next 12 months and thereafter for the foreseeable future. As of March 31, 2024, we had $154.0 million of cash and cash equivalents, which consist of interest-bearing deposit accounts, money market accounts managed by financial institutions and highly liquid investments with maturities of three months or less. For the three months ended March 31, 2024, we generated positive cash flows from our operating activities.
Loan Agreements
On June 30, 2017, we entered into a $575.0 million first lien debt facility, which included a $525.0 million term loan (the “June 2017 First Lien Term Loan”). We had an outstanding loan balance of $465.7 million under the June 2017 First Lien Loan as of December 31, 2021. In the first quarter of 2022, we repaid $190.7 million of the outstanding June 2017 First Lien Loan. On February 3, 2022, we entered into an amendment which refinanced the remaining balance of the June 2017 First Lien Loan with a new $275.0 million term loan (the “February 2022 First Lien Loan”), which has a maturity date of February 3, 2029, and added a new $100.0 million revolving credit facility (the “Revolving Facility”) with a maturity date of February 3, 2027. The terms of the February 2022 First Lien Loan specify a secured overnight financing rate (“SOFR”)-based floating interest rate and contain a springing financial covenant that requires compliance with a first lien net leverage ratio when revolver borrowings exceed certain levels. The February 2022 First Lien Loan requires quarterly amortization payments of $0.7 million. The Revolving Facility does not require periodic payments. All obligations under the February 2022 First Lien Loan are secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our assets. The February 2022 First Lien Loan carries an interest rate of SOFR (subject to a 0.5% floor) plus 3.25%.
32
In connection with our acquisition of Wavedash, we assumed long-term debt owed to Shoko Chukin Bank (the “Shoko Chukin Bank Loan”) of JPY 458.3 million (approximately $3.1 million), which has a maturity date of June 24, 2026 and is subject to a fixed interest rate of 1.27% per annum.
As of March 31, 2024, we have the February 2022 First Lien Loan and the Shoko Chukin Bank Loan outstanding and we had no outstanding borrowings under the Revolving Facility.
Share Repurchase Programs
On February 29, 2024, our Board of Directors (our “Board”) authorized a share repurchase program for up to $100.0 million of our Class A common stock, which program was publicly announced on March 5, 2024 and does not have a fixed expiration date (the “2024 Repurchase Program”). As of March 31, 2024, we have repurchased 0.7 million shares of our Class A Common Stock for $4.1 million under the 2024 Repurchase Program and paid less than $0.1 million in commissions. As of March 31, 2024, approximately $95.9 million remained available for future repurchases under the 2024 Repurchase Program.
On May 25, 2022, our Board authorized a share repurchase program for up to $40.0 million of our Class A common stock, which program was publicly announced on May 26, 2022 (the “2022 Repurchase Program”). The 2022 Repurchase Program’s authorization was fully utilized during 2022 and the three months ended March 31, 2023. Cumulatively under the 2022 Repurchase Program, we repurchased 5.3 million shares of our Class A common stock for $40.0 million and paid $0.1 million in commissions.
Share repurchases are accounted for as Treasury stock in the Condensed Consolidated Balance Sheets.
Distributions to Non-Controlling Interests
Pursuant to its Limited Liability Company Agreement, Hoya Intermediate is required to make pro rata tax distributions to its members, of which $3.7 million is owed to non-controlling interests as of March 31, 2024.
Tax Receivable Agreement
In connection with the Merger Transaction, we entered into a Tax Receivable Agreement (the “TRA”) with the existing Hoya Intermediate shareholders that provides for our payment to such shareholders of 85% of the amount of the tax savings, if any, that we realize (or, under certain circumstances, are deemed to realize) as a result of, or attributable to, (i) increases in the tax basis of assets owned directly or indirectly by Hoya Intermediate or its subsidiaries from, among other things, any redemptions or exchanges of Intermediate Units, (ii) existing tax basis (including depreciation and amortization deductions arising from such tax basis) in long-lived assets owned directly or indirectly by Hoya Intermediate and its subsidiaries and (iii) certain other tax benefits (including deductions in respect of imputed interest) related to us making payments under the TRA.
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 March 31, 2024, we estimate that the tax savings associated with all tax attributes described above would require us to pay $165.7 million, primarily over the next 15 years. As of March 31, 2024, $5.5 million is due within the next 12 months.
Cash Flows
The following table summarizes our cash flows (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash provided by operating activities |
|
$ |
39,165 |
|
|
$ |
65,111 |
|
Net cash used in investing activities |
|
|
(5,287 |
) |
|
|
(2,607 |
) |
Net cash used in financing activities |
|
|
(4,613 |
) |
|
|
(10,800 |
) |
Impact of foreign exchange on cash, cash equivalents, and restricted cash |
|
|
(820 |
) |
|
|
— |
|
Net increase in cash and cash equivalents |
|
$ |
28,445 |
|
|
$ |
51,704 |
|
33
Cash Provided by Operating Activities
Net cash provided by operating activities was $39.2 million for the three months ended March 31, 2024 due to $10.7 million in net income, net non-cash charges of $23.0 million and net cash inflows from a $5.4 million change in net operating assets. The net cash inflows from the change in net operating assets were primarily due to an increase in accounts payable resulting from seasonal fluctuations.
Net cash provided by operating activities was $65.1 million for the three months ended March 31, 2023 due to $30.3 million in net income, net non-cash charges of $8.2 million and net cash inflows from a $26.6 million change in net operating assets. The net cash inflows from the change in net operating assets were primarily due to an increase in accounts payable resulting from seasonal fluctuations.
Cash Used in Investing Activities
Net cash used in investing activities was $5.3 million and $2.6 million for the three months ended March 31, 2024 and 2023, respectively, which was primarily related to capital spending on development activities related to our platform.
Cash Used in Financing Activities
Net cash used in financing activities was $4.6 million for the three months ended March 31, 2024, which was primarily related to the 2024 Repurchase Program.
Net cash used in financing activities for the three months ended March 31, 2023 was $10.8 million, which was primarily related to the 2022 Repurchase Program.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Actual results may differ from these estimates under different assumptions or conditions. The estimates and assumptions associated with revenue recognition, equity-based compensation, warrants and earnouts, recoverability of our goodwill, indefinite-lived intangible assets, definite-lived intangible assets, long-lived assets and valuation allowances have the greatest potential impact on our consolidated financial statements. Accordingly, these are the policies that are the most critical to aid in fully understanding and evaluating our condensed consolidated financial statements. For a description of our critical accounting policies and estimates, see our 2023 Form 10-K. During the three months ended March 31, 2024, there were no material changes to the critical accounting policies disclosed in our 2023 Form 10-K.
Recent Accounting Pronouncements
See Note 2, New Accounting Standards, to our unaudited condensed consolidated financial statements included elsewhere in this Report for a description of recently adopted accounting pronouncements and issued accounting pronouncements not yet adopted.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential loss from adverse changes in interest rates, foreign exchange rates and market prices. Our primary market risk is interest rate risk associated with our long-term debt. We manage our exposure to this risk through established policies and procedures. Our objective is to mitigate potential income statement, cash flow and market exposures from changes in interest rates.
Interest Rate Risk
Our market risk is affected by changes in interest rates. The February 2022 First Lien Loan bears a floating interest rate based on market rates plus an applicable spread. We will be susceptible to fluctuations in interest rates if we do not hedge the interest rate exposure arising from our floating-rate debt, which may adversely impact our financial results. A hypothetical 1% change in interest rates, assuming rates are above our interest rate floor, would have impacted our interest expense by $0.7 million based on amounts outstanding under the February 2022 First Lien Loan during the three months ended March 31, 2024.
34
Foreign Currency Exchange Risk
Our reporting currency is the U.S. dollar, while certain of our international subsidiaries’ functional currency is their local currency. Our international revenue, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Accordingly, we are subject to foreign currency risk, which may adversely impact our financial results.
We are also exposed to foreign exchange rate fluctuations as we translate the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. We have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.
Due to fluctuations in exchange rates resulting from the current macroeconomic environment, we may experience negative impacts on the translation adjustments resulting from the conversion of the financial statements of our foreign subsidiaries into U.S. dollars, as well as the revaluation adjustments on U.S. dollar denominated intercompany loans. Foreign currency translation adjustment included in the Condensed Consolidated Statements of Comprehensive Income was $(1.9) million during the three months ended March 31, 2024. As of March 31, 2024, a hypothetical 10% change in foreign currency exchange rates applicable to our business would have impacted our foreign currency revaluation gain or loss, which is reflected in the Condensed Consolidated Statements of Operations, by $4.2 million.
Item 4. Controls and Procedures
Limitations on Effectiveness of Disclosure Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures.
Our management, with the participation of our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on such evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2024 due to the material weakness in our internal control over financial reporting described below.
Material Weakness
In connection with the audit of our consolidated financial statements as of December 31, 2023, 2022 and 2021, we identified a material weakness in our internal control over financial reporting related to the implementation of segregation of duties as part of our control activities, the establishment of clearly defined roles within our finance and accounting functions and the number of personnel in those functions with an appropriate level of technical accounting and SEC reporting experience which, in the aggregate, constitute a material weakness.
Remediation Activities
We continue to strengthen our internal control over financial reporting and are committed to ensuring that such controls are designed and operating effectively. During the three months ended March 31, 2024, we continued to review our internal control procedures, to implement new controls and processes, to hire additional qualified personnel and to establish more robust processes to support our internal control over financial reporting, including
35
by creating clearly defined roles and responsibilities and the appropriate segregation of duties. These actions have begun to be validated through testing and, when fully implemented, we believe they will be effective in remediating the material weakness. However, additional time is required to complete implementing the enhanced procedures and to test and ensure the effectiveness and sustainability of the improved controls. The material weakness will not be considered remediated until the applicable controls have been in place and operating for a sufficient period of time and management has concluded, through testing, that these controls are effective. We continue to devote significant time and attention to these efforts.
Changes in Internal Control over Financial Reporting
Except with respect to the continuing remediation activities described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are continuing to review the internal control structures of Wavedash and Vegas.com and, if necessary, will make appropriate changes as we continue to integrate such businesses into our overall internal control over financial reporting.
36
Part II - Other Information
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
In addition to the other information set forth in this Report, you should carefully consider the risks and uncertainties discussed in the “Risk Factors” section of our 2023 Form 10-K. These risks and uncertainties could cause actual results to differ materially from historical results or the results contemplated by the forward-looking statements contained in this Report. During the three months ended March 31, 2024, there were no material changes to the risk factors disclosed in our 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information about repurchases of our common stock during the three months ended March 31, 2024 (in thousands, except share and per share data):
Period |
|
Total Number of |
|
|
Average Price Paid |
|
|
Total Number of Shares |
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(2) |
|
||||
January 1-31, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
February 1-29, 2024 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100,000 |
|
March 1-31, 2024 |
|
|
715,000 |
|
|
|
5.74 |
|
|
|
715,000 |
|
|
|
95,894 |
|
Total |
|
|
715,000 |
|
|
$ |
5.74 |
|
|
|
715,000 |
|
|
$ |
95,894 |
|
(1) Excludes brokerage commissions and other costs of execution.
(2) On February 29, 2024, our Board authorized the 2024 Repurchase Program for up to $100.0 million of our Class A common stock. The 2024 Repurchase Program was publicly announced on March 5, 2024, does not have a fixed expiration date and does not obligate us to purchase any minimum number of shares. Under the 2024 Repurchase Program, we may repurchase shares in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On May 2, 2024, our Board approved, at the recommendation of its Compensation Committee, amendments to the employment agreements of certain of our executive officers, including Stanley Chia, our Chief Executive Officer, and Lawrence Fey, our Chief Financial Officer, to provide for the following enhanced benefits upon a termination without Cause or for Good Reason (each, as defined in the employment agreements) within one year prior to or following a Change in Control (as defined in the 2021 Plan): a lump-sum cash severance amount equal to a multiple of the executive’s annual base salary and target bonus (1.5x for our Chief Executive Officer and 1.0x for our Chief Financial Officer), and the full acceleration of the executive’s outstanding equity awards, in each case subject to the execution and non-revocation of a release of claims.
37
Item 6. Exhibits
Exhibit Number |
Description |
Incorporated by Reference |
Filed / Furnished Herewith |
||
Form |
Exhibit |
Filing Date |
|||
2.1 |
S-4 |
2.1 |
5/28/2021 |
|
|
2.2 |
S-4 |
2.2 |
5/28/2021 |
|
|
2.3 |
10-Q |
2.3 |
11/15/2021 |
|
|
3.1 |
8-K |
3.1 |
10/22/2021 |
|
|
3.2 |
10-Q |
3.2 |
5/10/2022 |
|
|
3.3 |
8-K |
3.2 |
10/22/2021 |
|
|
4.1 |
8-K |
10.7 |
10/22/2021 |
|
|
4.2 |
Specimen Class A Common Stock Certificate of Vivid Seats Inc. |
10-K |
4.2 |
3/15/2022 |
|
4.3 |
10-K |
4.3 |
3/15/2022 |
|
|
10.1# |
First Amendment to Vivid Seats Inc. 2021 Incentive Award Plan |
8-K |
10.1 |
2/9/2024 |
|
31.1 |
Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer |
|
|
|
* |
31.2 |
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer |
|
|
|
* |
32.1 |
18 U.S.C. Section 1350 Certification of Principal Executive Officer |
|
|
|
** |
32.2 |
18 U.S.C. Section 1350 Certification of Principal Financial Officer |
|
|
|
** |
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
|
|
|
* |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
* |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
* |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
* |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
* |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
* |
38
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
* |
* Filed herewith.
** Furnished herewith.
# Indicates management contract or compensatory plan.
The documents filed as exhibits to this Report are not intended to provide factual information other than with respect to the terms of the documents themselves, and should not be relied on for that purpose. In particular, any representations and warranties contained in any such document were made solely within the context of such document and do not apply in any other context or at any time other than the date on which they were made.
39
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Vivid Seats Inc. |
|
|
|
|
|
|
|
By: |
/s/ Stanley Chia |
|
|
|
Stanley Chia |
|
|
|
Chief Executive Officer |
|
|
|
May 7, 2024 |
|
|
|
|
|
|
By: |
/s/ Lawrence Fey |
|
|
|
Lawrence Fey |
|
|
|
Chief Financial Officer |
|
|
|
May 7, 2024 |
40
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) / 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stanley Chia, certify that:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: May 7, 2024 |
|
By: |
/s/ Stanley Chia |
|
|
|
Stanley Chia |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) / 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lawrence Fey, certify that:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: May 7, 2024 |
|
By: |
/s/ Lawrence Fey |
|
|
|
Lawrence Fey |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. § 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Vivid Seats Inc. (the “Company”) for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley Chia, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: May 7, 2024 |
|
By: |
/s/ Stanley Chia |
|
|
|
Stanley Chia |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as a part of the Report or as a separate disclosure document.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. § 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Vivid Seats Inc. (the “Company”) for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lawrence Fey, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: May 7, 2024 |
|
By: |
/s/ Lawrence Fey |
|
|
|
Lawrence Fey |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as a part of the Report or as a separate disclosure document.