Vivid Seats Inc

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 (“US 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 US GAAP for comprehensive annual financial statements. In our opinion, all adjustments considered necessary for a fair presentation of the results of operations for the interim periods have been included and are of a normal, recurring nature. The results reflected in 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 during the three months ended December 31, 2023, with no material impact on our consolidated financial statements.

Issued Accounting Standards Not Yet Adopted

Segment Reporting-Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of adopting the amendments on our future 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 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 amendments, which are expected to result in enhanced disclosures, on our future 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 consolidated financial statements.

3. 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 headquartered in Las Vegas, Nevada. The purchase 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 purchase consideration allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. The primary areas that are not yet finalized relate to the valuations of certain acquired prepaid expenses, income tax assets and income tax liabilities. As a result, these allocations are subject to change during the one-year measurement period. There wereno changes to the preliminary purchase price allocation during thenine months ended September 30, 2024.

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. There were no changes between the preliminary purchase price allocation and the final purchase price allocation during the one-year measurement period.

4. Revenue Recognition

We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We havetwo reportable segments: Marketplace and Resale.

In our Marketplace segment, we primarily act as an intermediary between ticket buyers, sellers and partners through which we earn revenue processing ticket sales for live events and attractions and from facilitating the booking of hotel rooms and packages from our websites and mobile applications, including Vivid Seats, Vegas.com and Wavedash (our “Owned Properties”), and from numerous distribution partners (our “Private Label”). 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.

Marketplace revenues consisted of the following (in thousands):

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

In our Resale segment, we primarily acquire tickets to resell on secondary ticket marketplaces, including our own. Resale revenues were $34.0 million and $93.1 million during the three and nine months ended September 30, 2024, respectively, and $33.7 million and $84.5 million during the three and nine months ended September 30, 2023, respectively.

At September 30, 2024, Deferred revenue was $24.6 million, which primarily relates to our Vivid Seats Rewards loyalty program. Stamps earned under the program expire intwo tothree years, if not converted to credits, and credits expire intwo tofour years, if not redeemed. We expect to recognize all outstanding deferred revenue in thenext seven years.

At December 31, 2023, $34.7 million was recorded as Deferred revenue, of which $6.1 million and $20.2 million was recognized as revenue during the three and nine months ended September 30, 2024, respectively. At December 31, 2022, $32.0 million was recorded as Deferred revenue, of which $1.9 million and $13.6 million was recognized as revenue during the three and nine months ended September 30, 2023, respectively.

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.

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

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):

We recorded an allowance for credit losses of $12.3 million and $10.0 million at September 30, 2024 and December 31, 2023, respectively, to reflect potential challenges in collecting funds from distribution partners and ticket sellers, particularly for amounts due upon usage of store credits previously issued to buyers.

There wereno write-offs for thethree and nine months ended September 30, 2024 and 2023.

7. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Recovery of future customer compensation represents expected recoveries of compensation from ticket sellers and partners for cancellation charges related to previously recorded sales transactions. Recovery of future customer compensation costs decreased by $6.0 million at September 30, 2024 compared to December 31, 2023, primarily due to a decrease in the volume of future events and a decrease in estimated future cancellation rates. A related provision for expected compensation to customers is included in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

8. Goodwill and Intangible Assets

Goodwill

Goodwill is included in our Marketplace segment. The following table summarizes the changes in the carrying amount of goodwill (in thousands):

We had recorded $377.1 million of cumulative impairment charges related to our goodwill as of September 30, 2024 and December 31, 2023.

Definite-Lived Intangible Assets

The following table summarizes components of our definite-lived intangible assets (in thousands):

Amortization expense on our definite-lived intangible assets was $10.2 million and $30.3 million for the three and nine months ended September 30, 2024, respectively, and $2.9 million and $7.5 million for the three and nine months ended September 30, 2023, respectively. Amortiza tion expense is presented in Depreciation and amortization in the Condensed Consolidated Statements of Operations.

9. Investments

On July 3, 2023, we invested $6.0 million in a privately held company in the form of a convertible promissory note (the “Note”) and a warrant to purchase up to 1,874,933 shares of the company’s stock (the “Warrant”). Interest on the Note accrues at 8% per annum and outstanding principal and accrued interest is due and payable at the earlier of July 3, 2030 or a change in control of the company. The Warrant is exercisable until the date that is three years after the Note is repaid, subject to certain accelerating events.

We account for the Note in accordance with ASC Topic 320, Investments-Debt and Equity Securities. The Note is classified as an available-for-sale security and is recorded at fair value with the change in unrealized gains and losses reported as a separate component in the Condensed Consolidated Statements of Comprehensive Income until realized. The Note’s unrealized gain for the three and nine months ended September 30, 2024 was $0.2 million. The Note’s amortized cost was $3.1 million and $2.7 million at September 30, 2024 and December 31, 2023, respectively. We did not recognize any credit losses related to the Note during the nine months ended September 30, 2024.

We account for the Warrant in accordance with ASC Topic 815, Derivatives and Hedging, pursuant to which we record the derivative instrument in the Condensed Consolidated Balance Sheets at fair value with changes in fair value recognized in Other income in 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 US GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

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

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

Level 3- Measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. These fair value measurements require significant judgment.

Financial instruments recorded at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

The fair value of the Note is determined using the income approach, utilizing Level 3 inputs. The estimated fair value of the Warrant is determined using the Black-Scholes option pricing model, which requires us to make assumptions and judgments about the variables used in the calculation related to the expected term, the expected volatility, the risk-free rate of interest, and the expected dividend yield. Because of the inherent uncertainty of this valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.

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

The following table provides a reconciliation of the financial instruments measured at fair value using Level 3 significant unobservable inputs (in thousands):

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):

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 and nine months ended September 30, 2024, $2.4 million and $5.4 million of accrued customer credits were redeemed, respectively, and we recognized $5.0 million and $11.5 million of revenue from breakage, respectively. During the three and nine months ended September 30, 2023, $2.6 million and $7.8 million of accrued customer credits were redeemed, respectively, and we recognized $7.7 million and $18.4 million of revenue from breakage, respectively. Breakage amounts are net of reductions in associated accounts receivable balances.

Accrued future customer compensation represents an estimate of the amount of customer compensation due from cancellation charges in the future. These provisions, which are based on historic experience, revenue volumes for future events and our 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 from ticket sellers and partners 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 and nine months ended September 30, 2024, we recognized a net increase in revenue of $1.3 million and $1.2 million, respectively, and during the three and nine months ended September 30, 2023, we recognized a net increase in revenue of $1.5 million and $0.2 million, respectively, in each case from the reversals of previously recorded revenue and changes to accrued future customer compensation related to event cancellations where the performance obligations were satisfied in prior periods.

12. Debt

Our outstanding debt is comprised of the following (in thousands):

June 2017 Term Loans

In June 2017, we entered into a $575.0 million first lien debt facility, comprising a $50.0 million revolving credit facility and a $525.0 million term loan (the “June 2017 First Lien Loan”), and a second lien credit facility, comprising a $185.0 million second lien term loan (the “June 2017 Second Lien Loan”). The June 2017 First Lien Loan was amended to upsize the committed amount by $115.0 million in July 2018. In October 2019, we paid off the June 2017 Second Lien Loan balance. The revolving credit facility component of the first lien debt facility was retired in May 2020. In October 2021, we made an early principal payment related to the June 2017 First Lien Loan of $148.2 million in connection with, and using the proceeds from, the merger transaction with Horizon Acquisition Corporation (the “Merger Transaction”) and a related private investment in public equity. In February 2022, we repaid the outstanding balance of $190.7 million from the June 2017 First Lien Loan and refinanced the remaining balance with a $275.0 million term loan (as discussed in the “February 2022 First Lien Loan” section below).

February 2022 First Lien Loan

In February 2022, we entered into an amendment which refinanced the remaining balance of the June 2017 First Lien Loan with a $275.0 million term loan (the “February 2022 First Lien Loan”) and added a $100.0 million revolving credit facility (the “Revolving Facility”) with a maturity date of February 3, 2027. On June 14, 2024, we refinanced the remaining $269.5 million balance of the February 2022 First Lien Loan, which carried an interest rate of SOFR (as defined herein) (subject to a 0.5% floor) plus a margin of 3.25%, with a $395.0 million term loan (as discussed in the “June 2024 First Lien Loan” section below).

June 2024 First Lien Loan

On June 14, 2024, we entered into an amendment which refinanced the remaining balance of the February 2022 First Lien Loan with a $395.0 million term loan (the “June 2024 First Lien Loan”) with a maturity date of February 3, 2029.

The terms of the June 2024 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 June 2024 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 (collectively, the “Guarantors”). The June 2024 First Lien Loan requires quarterly amortization payments of $1.0 million. The Revolving Facility does not require periodic payments. All obligations under the June 2024 First Lien Loan are secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our and the Guarantors’ assets. The June 2024 First Lien Loan carries an interest rate of SOFR (subject to a 0.5% floor) plus a margin of 3.00%; provided that such margin may be reduced to 2.75% if the corporate rating assigned to us by Moody’s Investors Service, Inc. and S&P Global Ratings is at least Ba3/BB- (in each case, stable or better). The effective interest rate on the June 2024 First Lien Loan was 8.15% per annum at September 30, 2024.

The June 2024 First Lien Loan is held by third-party financial institutions and is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium. Because the fair value was estimated using quoted prices that are directly observable in the marketplace, it is estimated on a Level 2 basis. At September 30, 2024, the fair value of the June 2024 First Lien Loan approximated the carrying value.

We are subject to certain reporting and compliance-related covenants to remain in good standing under the June 2024 First Lien Loan. These covenants, among other things, limit our ability to incur additional indebtedness and, in certain circumstances, to enter into transactions with affiliates, create liens, merge or consolidate and make certain payments. Non-compliance with these covenants and failure to remedy could result in the acceleration of the loans or foreclosure on the collateral. As of September 30, 2024, we were in compliance with all debt covenants related to the June 2024 First Lien Loan and hadno outstanding borrowings under the Revolving Facility.

The refinancing of the February 2022 First Lien Loan with the June 2024 First Lien Loan was accounted for as a debt modification. During the three and nine months ended September 30, 2024, we recognized an expense ofzero and $1.7 million, respectively, for third-party fees incurred in relation to the debt modification, which is presented in Other income in the Condensed Consolidated Statements of Operations.

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 458.3 million (approximately $3.1 million), which had an original maturity date of June 24, 2026 and was subject to a fixed interest rate of 1.27% per annum. On April 4, 2024, we paid off the Shoko Chukin Bank Loan balance in its entirety.

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 18,132,776 shares of our Class A common stock at an exercise price of $11.50 per share (the“Public Warrants”), of which warrants to purchase 5,166,666 shares were issued to Horizon Sponsor, LLC. The Public Warrants are traded on The Nasdaq Stock Market LLC under the symbol “SEATW.” As of September 30, 2024, there were 6,766,853 Public Warrants outstanding.

Private Warrants

We issued to Horizon Sponsor, LLC warrants to purchase 6,519,791 shares of our Class A common stock at an exercise price of $11.50 per share (the“Private Warrants”). As of September 30, 2024, there were 6,519,791 Private Warrants outstanding.

Exercise Warrants

We issued to Horizon Sponsor, LLC warrants to purchase 17,000,000 shares of our Class A common stock at an exercise price of $10.00 per share (the “$10 Exercise Warrants”) and warrants to purchase 17,000,000 shares of our Class A common stock at an exercise of $15.00 per share (the “$15 Exercise Warrants” and, together with the $10 Exercise Warrants, the “Exercise Warrants”). As of September 30, 2024, there were 34,000,000 Exercise Warrants outstanding (comprised of 17,000,000 $10 Exercise Warrants and 17,000,000 $15 Exercise Warrants).

Intermediate Warrants

Hoya Intermediate issued to Hoya Topco, LLC (“Hoya Topco”) warrants to purchase 3,000,000 of its common units (“Intermediate Units”) at an exercise price of $10.00 per unit (the “$10 Intermediate Warrants”) and warrants to purchase 3,000,000 Intermediate Units at an exercise of $15.00 per unit (the “$15 Intermediate Warrants” and, together with the $10 Intermediate Warrants, the “Intermediate Warrants”).

A portion of the Intermediate Warrants, consisting of 1,000,000 $10 Intermediate Warrants and 1,000,000 $15 Intermediate Warrants (together, the “Option Contingent Warrants”), were issued in tandem with stock options we issued to members of our management team and would only become exercisable by Hoya Topco if such a stock option was forfeited or expired unexercised. On December 7, 2023, Hoya Topco voluntarily terminated all of the Option Contingent Warrants.

As of September 30, 2024, there were 4,000,000 Intermediate Warrants outstanding (comprised of 2,000,000 $10 Intermediate Warrants and 2,000,000 $15 Intermediate Warrants).

The following assumptions were used to calculate the fair value of the Intermediate Warrants:

For the three and nine months ended September 30, 2024, the fair value of the Intermediate Warrants decreased by $4.0 million and $5.7 million, respectively. For three and nine months ended September 30, 2023, the fair value of the Intermediate Warrants (including the Option Contingent Warrants) decreased by $1.7 million and $1.0 million, respectively. The change in fair value of the Intermediate Warrants (including, for thethree and nine months ended September 30, 2023, the Option Contingent Warrants) is presented in Other income in the Condensed Consolidated Statements of Operations.

Upon the valid exercise of an Intermediate Warrant for Intermediate Units, we will issue an equivalent number of shares of our Class B common stock to Hoya Topco.

Mirror Warrants

Hoya Intermediate issued to us warrants to purchase 17,000,000 Intermediate Units at an exercise price of $10.00 per unit (the “$10 Mirror Warrants”), warrants to purchase 17,000,000 Intermediate Units at an exercise of $15.00 per unit (the “$15 Mirror Warrants”) and warrants to purchase 24,652,557 Intermediate Units at an exercise price of $11.50 per unit (the “$11.50 Mirror Warrants” and, together with the $10 Mirror Warrants and the $15 Mirror Warrants, the “Mirror Warrants”). Upon the valid exercise of a Public, Private or Exercise Warrant, Hoya Intermediate will issue to us an equivalent number of Intermediate Units. Similarly, if a Public, Private or Exercise Warrant is tendered, an equivalent number of Mirror Warrants will be tendered. As of September 30, 2024, there were 47,286,644 Mirror Warrants outstanding (comprised of 17,000,000 $10 Mirror Warrants,17,000,000 $15 Mirror Warrants and 13,286,644 $11.50 Mirror Warrants).

14. Equity

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 Share Repurchase Program”). As of September 30, 2024, we had repurchased approximately 4.1 million shares of our Class A common stock for approximately $22.8 million under the 2024 Share Repurchase Program, for which we had recorded approximately $0.3 million in commissions and excise taxes. As of September 30, 2024, approximately $77.2 million remained available for future repurchases under the 2024 Share Repurchase Program.

In May 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 Share Repurchase Program”). The 2022 Share Repurchase Program’s authorization was fully utilized during 2022 and the three months ended March 31, 2023. Cumulatively, we repurchased approximately 5.3 million shares of our Class A common stock for approximately $40.0 million under the 2022 Share Repurchase Program, for which we recorded approximately $0.1 million in commissions and excise taxes.

Share repurchases are accounted for as Treasury stock in the Condensed Consolidated Balance Sheets.

Accumulated Other Comprehensive Income

The following table presents the changes in each component of Accumulated other comprehensive income attributable to Class A common stockholders (in thousands):

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 management's opinion, could have a material effect on our business, financial position or results of operations other than those matters discussed below.

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 class members. Other class members were notified in 2022 that they are eligible to submit a claim for a coupon. As of September 30, 2024 and December 31, 2023, a liability of $0.9 million was recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets related to expected claim submissions and credit redemptions as of the measurement date.

We have been a defendant in multiple class action lawsuits related to customer compensation for cancellations, primarily as a result of COVID-19 restrictions. A final order approving the settlement of one such lawsuit was entered by the court in November 2021, pursuant to which we paid $4.5 million (after insurance) to fund a claims settlement pool in 2021 that was fully disbursed in 2022. A final order approving the settlement of another such lawsuit was entered by the court on January 31, 2023, pursuant to which we paid $3.3 million (after insurance) to cover legal and administrative fees and approved claims (payments for which were made in August 2023). We hadno accrued liability as of September 30, 2024 and December 31, 2023 related to these matters.

We are a defendant in a lawsuit related to an alleged violation of the Illinois Biometric Information Privacy Act. An order preliminarily approving the settlement of this lawsuit was entered by the court on September 27, 2024, which remains subject to final court approval and which will be covered in full by insurance. As of September 30, 2024, a liability of $0.3 million was recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets related to this matter. We hadno accrued liabilityas of December 31, 2023 related to this matter.

Indirect Taxes

In 2018, the U.S. Supreme Court issued its decision in South Dakota v. Wayfair Inc., which overturned previous case law that had precluded state and local governments from imposing sales tax collection requirements on retailers without a physical presence. In response, most jurisdictions have adopted laws that attempt to impose tax collection obligations on out-of-state companies, and we have registered and begun collecting tax where required by statute. It is reasonably possible that state or local governments will continue to adopt or interpret laws such that we 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 thereto.

To the extent we have sales for international events, we may be required to register with various foreign jurisdictions and to collect and remit indirect taxes. It is reasonably possible that foreign jurisdictions may continue to adopt or interpret laws that impact the amount we are required to collect and remit. A successful assertion by one or more such jurisdictions could result in material tax liabilities, including uncollected taxes on past sales, as well as penalties and interest. Based on our analysis of certain foreign indirect tax regulations, specifically related to event ticket sales, we have recorded liabilities in the jurisdictions where we believe a risk of loss is probable and estimable.

As of September 30, 2024 and December 31, 2023, a liability of $5.4 million and $3.2 million, respectively, was recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets related to uncollected indirect taxes, including sales taxes. This liability is inclusive of both U.S. and foreign jurisdictions where we believe it is probable we should remit but have not collected all required amounts from customers and is reduced by abatements received. The net expense related to uncollected indirect taxes during the three and nine months ended September 30, 2024 was $0.5 million and $2.6 million, respectively, which is recorded in General and administrative expenses in the Condensed Consolidated Statements of Operations.

2024 Sponsorship Loan

On August 23, 2024, we and a privately held company entered into a sponsorship and custom content partnership agreement that provides us with various marketing services in exchange for our issuance of an interest-free loan payable in installments that could total a maximum of $5.0 million (the“Sponsorship Loan”). We account for the Sponsorship Loan as a note receivable in accordance with ASC Topic 310, Receivables. As of September 30, 2024, we have disbursed $2.0 million of the Sponsorship Loan (the “2024 Sponsorship Loan”). If certain conditions are met, we will issue an additional interest-free $1.5 million loan in each of September 2025 and September 2026. While there is no stated maturity date for the 2024 Sponsorship Loan, we are entitled to a portion of advertising revenue received by the counterparty until the 2024 Sponsorship Loan is repaid in full. The 2024 Sponsorship Loan had a carrying value of $1.8 million as of September 30, 2024, which is presented in Other non-current assets in the Condensed Consolidated Balance Sheets. Additionally, we recognized less than $0.1 million of imputed interest income for the 2024 Sponsorship Loan during the three and nine months ended September 30, 2024, which is presented in Interest expense – net in the Condensed Consolidated Statements of Operations.

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 Chief Executive Officer (“CEO”) of Eldridge Industries, LLC (“Eldridge”), which owns greater than 10% of Viral Nation. For Viral Nation’s services, we incurred an expense ofless than $0.1 million and $0.3 million during the three and nine months ended September 30, 2024, respectively, and $0.1 million during the three and nine months ended September 30, 2023, which is presented in Marketing and selling expenses in the Condensed Consolidated Statements of Operations.

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. In connection with a partnership with Rolling Stone, we incurred zero expense during the three and nine months ended September 30, 2024 and an expense of $0.2 million and $0.7 million during the three and nine months ended September 30, 2023, respectively, which is presented in Marketing and selling expenses in the Condensed Consolidated Statements of Operations.

Los Angeles Dodgers

The Los Angeles Dodgers (the “Dodgers”) is a Major League Baseball team based in Los Angeles, California. Todd Boehly, a member of our Board, owns greater than 10% of the Dodgers. In connection with a 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 an expense of $1.0 million and $2.1 million during the three and nine months ended September 30, 2024, respectively, and an expense of $1.1 million during the three and nine months ended September 30, 2023, which is presented in Marketing and selling expenses in the Condensed Consolidated Statements of Operations.

In connection with the Merger Transaction, we entered into a Tax Receivable Agreement (the “TRA”) with the existing Hoya Intermediate unitholders. For more information, see “Tax Receivable Agreement” in Note 17, Income Taxes.

17. Income Taxes

For the three and nine months ended September 30, 2024, we recorded a $4.3 million and $7.1 million income taxexpense in continuing operations, respectively. Our effective income tax rate differed from the 21% U.S. federal statutory rate due to a redeemable noncontrolling interests adjustment for VSI’s allocable share of Hoya Intermediate’s income, state taxes, equity-based compensation and limitations on compensation deductions. For thethree and nine months ended September 30, 2023, we recorded a $2.6 million income taxexpense and a $21.6 million income taxbenefit in continuing operations, respectively. Our effective income tax rate differed from the 21% U.S. federal statutory rate due to the release of our valuation allowance on our U.S. net operating losses, interest limitations and tax credit carryforwards.

As of September 30, 2024 and December 31, 2023, our deferred tax assets were primarily the result of our investment in partnership, the TRA, net operating losses, interest limitations and tax credit carryforwards. As of each reporting date, we consider new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. 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 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.

In connection with the Merger Transaction, we entered into the TRA with the existing Hoya Intermediate unitholders that provides for our payment to such unitholders of 85% of the amount of 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 September 30, 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 September 30, 2024, $3.5 million is expected to be due within the next 12 months.

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, non-employee 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”) awards are denominated in a hypothetical equivalent number of shares of our Class A common stock. The value of each RSU is equal to the fair value of our Class A common stock on the grant date. Each RSU converts into a share of our Class A common stock upon vesting.

During the nine months ended September 30, 2024 and 2023, we granted to certain employees 10.8 million and 2.7 million RSUs, respectively, at a weighted average grant date fair value of $5.32 per share and $7.21 per share, respectively. RSUs granted to employees vest over three years, with one-third vesting on the first anniversary of the grant date and the remaining portion vesting on a quarterly basis thereafter, subject to the employee’s continued employment through the applicable vesting date.

During the nine months ended September 30, 2024 and 2023, we granted to our directors 0.3 million and 0.1 million RSUs, respectively, at a weighted average grant date fair value of $5.24 per share and $7.68 per share, respectively. RSUs granted to directors fully vest on the earlier of (i) one day prior to the date of our first annual meeting of stockholders following the grant date and (ii) the first anniversary of the grant date, subject to the director’s continued service on our Board through the applicable vesting date.

During the nine months ended September 30, 2024 and 2023, we granted to certain consultants less than 0.1 million and less than 0.1 million RSUs, respectively, at a weighted average grant date fair value of $3.72 per share and $7.98 per share, respectively. RSUs granted to consultants either fully vest on the first anniversary of the grant date or in equal annual installments over three years, subject to the consultant’s continued service through the applicable vesting date.

A summary of the total activity for RSUs is as follows (in thousands, except per share data):

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.

No stock options were granted during the nine months ended September 30, 2024.

In March 2023, we granted to certain employees 3.6 million stock options with an exercise price of $7.17 per share and a grant date fair value of $3.30 per option. Stock options granted to employees vest over three years, with one-third vesting on the first anniversary of the grant date and the remaining portion vesting on a quarterly basis thereafter, subject to the employee’s continued employment through the applicable vesting date. Stock options granted to employees have a contractual term often years from the grant date and a fair value that is estimated on the grant date using the Black-Scholes option pricing model.

In June 2023, we granted to certain consultants 0.9 million stock options divided into three tranches of 0.2 million,0.3 million and 0.4 million, respectively, with exercise prices of $7.98, $17.00 and $23.00 per share, respectively, and grant date fair values of $3.22, $1.87 and $1.44 per option, respectively. Stock options granted to consultants vest in equal annual installments over three years, subject to the consultant’s continued service through the applicable vesting date. Stock options granted to consultants have a contractual term ofseven years from the grant date and a fair value that is estimated on the grant date using the Hull-White model.

The following assumptions were used to calculate the fair value of the stock options:

A summary of the total activity for stock options is as follows (in thousands, except per option data):

Compensation Expense

For the three and nine months ended September 30, 2024, equity-based compensation expense related to RSUs was $8.5 million and $22.4 million, respectively, compared to $3.9 million and $10.5 million for thethree and nine months ended September 30, 2023, respectively. Unrecognized compensation expense relating to unvested RSUs as of September 30, 2024 was approximately $59.4 million, which is expected to be recognized over a weighted average period of approximatelyone year.

For the three and nine months ended September 30, 2024, equity-based compensation expense related to stock options was $2.3 million and $8.1 million, respectively, compared to $2.8 million and $7.3 million for thethree and nine months ended September 30, 2023, respectively. Unrecognized compensation expense relating to unvested stock options as of September 30, 2024 was $9.7 million, which is expected to be recognized over a weighted average period of approximatelyone year.

For the three and nine months ended September 30, 2024, equity-based compensation expense excludes $0.2 million and $0.6 million, respectively, related to capitalized development costs.

Profits Interests and Phantom Units

On June 10, 2024, the Board of Managers of Hoya Topco (the “Hoya Topco Board”) approved the redemption, repurchase and cancellation by Hoya Topco (using Hoya Topco’s funds) of all of its outstanding profits interests held by our employees (including the Class B-1, Class D and Class E Units discussed in our 2023 Form 10-K). Accordingly, we recognized equity-based compensation expense related to the profits interests ofzero and $3.3 million for thethree and nine months ended September 30, 2024, respectively, and $1.0 million and $3.0 million for thethree and nine months ended September 30, 2023, respectively.

On June 10, 2024, the Hoya Topco Board also approved the repurchase and cancellation by Hoya Topco (using Hoya Topco’s funds) of all of its outstanding phantom units held by our employees. The phantom units held service and performance conditions, requiring us to recognize a liability for the fair value of the outstanding phantom units only when we conclude it is probable that the performance conditions will be achieved. Accordingly, we recognized equity-based compensation expense related to the phantom units ofzero and $5.0 million for thethree and nine months ended September 30, 2024, respectively. There wasno equity-based compensation expense previously recognized related to the phantom units.

Hoya Topco hadno outstanding profits interests or phantom units held by our employees, and we hadno unrecognized equity-based compensation expense related thereto, as of September 30, 2024.

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 net income per share, and we do not present basic and diluted net income per share of Class B common stock. However, our Class B common stockholders are allocated income in Hoya Intermediate (our operating entity) according to their weighted average percentage ownership of Intermediate Units during each quarter.

Net income attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate’s net income in each quarterly period by Hoya Topco’s weighted average percentage ownership of Intermediate Units during the period. 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 September 30, 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 thenet income attributable to Hoya Topco’s redeemable noncontrolling interest (in thousands):

Net income attributable to Class A common stockholders–basic is calculated by subtracting the portion of Hoya Intermediate’s net income attributable to redeemable noncontrolling interests from our total net income, which includes our net income for activities outside of our investment in Hoya Intermediate, including income tax expense (benefit) for VSI’s portion of income, as well as the full results of Hoya Intermediate on a consolidated basis.

Net income per Class A common stock–diluted is based on the average number of shares of our Class A common stock used for the basic earnings per share calculation, adjusted for the weighted average number of Class A common share equivalents outstanding for the period determined using the treasury stock and if-converted methods, as applicable. Net income attributable to Class A common stockholders–diluted is adjusted for (i) our share of Hoya Intermediate’s consolidated net income after giving effect to Intermediate Units that convert into potential shares of our Class A common stock, to the extent it is dilutive, and (ii) the impact of changes in the fair value of the Intermediate Warrants, to the extent they are dilutive.

The following table sets forth the computation of basic and dilutednet 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):

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.

The following table presents potentially dilutive securities excluded from the computation of dilutednet income per share of Class A common stock for the periods presented that could potentially dilute earnings per share in the future: