# Vivid Seats Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [Vivid Seats Inc.](/companies/seat.md) (CIK 1856031)
- Form: 10-Q
- Filed: 2022-05-10
- Accepted by EDGAR: May 10, 2022, 10:59 ET
- Period: 2022-03-31
- Accession: 0000950170-22-008705
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1856031/000095017022008705/seat-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1856031/000095017022008705/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $110.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $13.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $3.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $76.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | $1.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | $0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | $0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 198,414,147 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $23.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $693.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-03-31 | $314.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $461.9m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $1.27bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $540.0m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2022-03-31 | $266.4m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2022-03-31 | −$875.2m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 33,167 characters.

*Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section of our 2021 Form 10-K and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our filings with the SEC.*

### 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 live events deliver some of life’s most exciting moments. Our platform provides ticket buyers and sellers with an easy-to-use and trusted marketplace experience that enables fans to purchase tickets to live events and create new memories. We believe we differentiate from competitors by offering extensive breadth and depth of ticket listings at a competitive value. During the three months ended March 31, 2022 and 2021, our revenues were $130.8 million and $24.1 million, respectively, and Marketplace Gross Order Value ("Marketplace GOV") was $742.1 million and $116.5 million, respectively. Our net income was $3.1 million and net loss was $20.3 million for the three months ended March 31, 2022 and 2021, respectively.

### Our Business Model

We operate our business in two segments, Marketplace and Resale.

#### Marketplace

Through our Marketplace segment, we act as an intermediary between ticket buyers and ticket sellers. We earn revenue processing ticket sales from our Owned Properties, consisting of the Vivid Seats website and mobile applications, and from our Private Label offering, which comprises numerous distribution partners. Using our online platform, we process customer payments, coordinate ticket deliveries, and provide customer service to ticket buyers.

A key component of our platform is Skybox, a proprietary enterprise resource planning tool used by many of our ticket sellers. Skybox is a free-to-use system that helps ticket sellers manage ticket inventories, adjust pricing, and fulfill orders across multiple secondary ticket marketplaces.

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. We do not hold ticket inventory in the Marketplace segment. We incur costs for developing and maintaining our platform, providing back-office and customer support to ticket buyers and ticket sellers, processing payments, and shipping tickets. We also incur substantial marketing costs, primarily related to online advertising.

#### Resale

In our Resale segment, we 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 best-in-class seller software and tools.

### Key Business Metrics and Non-GAAP Financial Measures

We use the following metrics to evaluate our performance, identify trends, formulate financial projections, and make strategic decisions. We believe that 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, 2022 | 2021 |
| --- | ---: | ---: |
| Marketplace GOV(1) | $742,138 | $116,473 |
| Total Marketplace orders(2) | 2,019 | 293 |
| Total Resale orders(3) | 68 | 13 |
| Adjusted EBITDA(4) | $21,012 | $4,187 |

(1) 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 event cancellations that occurred during that period. Marketplace GOV was negatively impacted by event cancellations in the amount of $34.8 million during the three months ended March 31, 2022 and $18.5 million during the three months ended March 31, 2021, though as a percentage of total Marketplace GOV the impact of event cancellations decreased significantly in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

(2) Total Marketplace orders represent the volume of Marketplace segment orders placed on our platform during a period, net of event cancellations that occurred during that period. During the three months ended March 31, 2022, our Marketplace segment experienced 91,400 event cancellations, compared to 51,775 event cancellations during the three months ended March 31, 2021, though as a percentage of Total Marketplace orders the impact of event cancellations decreased significantly in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

(3) Total Resale orders represent the volume of Resale segment orders sold by our Resale team in a period, net of event cancellations that occurred during that period. During the three months ended March 31, 2022, our Resale segment experienced 2,559 event cancellations, compared to 1,141 event cancellations during the three months ended March 31, 2021, though as a percentage of Total Resale orders the impact of event cancellations decreased significantly in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

(4) Adjusted EBITDA is not a measure defined under GAAP. 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 period-to-period comparisons of our business performance. Refer to the *Adjusted EBITDA* section below for a reconciliation to its most directly comparable GAAP measure.

#### Marketplace GOV

Marketplace GOV is a key driver of our Marketplace segment’s revenue. Marketplace GOV represents the total transactional amount of Marketplace orders in a period, inclusive of fees, exclusive of taxes, and net of event 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.

Our Marketplace GOV is impacted by seasonality, and typically sees increased activity in the fourth quarter when all major sports leagues are in season and we experience increases in order volume for theater and concert events during the holiday season. Quarterly fluctuations in our Marketplace GOV result from the number of cancellations, the popularity and demand of performers, tours, teams, and events, and the length and team composition of sports playoff series and championship games.

Our Marketplace GOV increased during the three months ended March 31, 2022 as a result of higher orders processed.

#### Total Marketplace Orders

Total Marketplace orders represent the volume of Marketplace segment orders placed on our platform in a period, net of event cancellations. An order can include one or more tickets and/or parking passes. Total Marketplace orders allow us to monitor order volume and better identify trends within our Marketplace segment. Total Marketplace orders increased during the three months ended March 31, 2022 as a result of higher orders processed.

#### Total Resale Orders

Total Resale orders represent the volume of Resale segment orders sold in a period, net of event cancellations. An order can include one or more tickets and/or parking passes. Total Resale orders allow us to monitor order volume and better identify trends within our Resale segment.

#### Adjusted EBITDA

We present Adjusted EBITDA, which is a non-GAAP 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 the control of management or not reflective of ongoing performance related directly to the operation of our business segments.

Adjusted EBITDA is a key measurement 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 period-to-period comparisons of our business performance and highlighting trends in our operating results.

The following is a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss) (in thousands):

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net income (loss) | $3,138 | $(20,251) |
| Income tax expense | 76 | — |
| Interest expense | 3,942 | 16,319 |
| Depreciation and amortization | 1,385 | 295 |
| Sales tax liability(1) | 922 | 2,261 |
| Transaction costs(2) | 1,402 | 3,546 |
| Equity-based compensation(3) | 3,597 | 1,091 |
| Loss on extinguishment of debt(4) | 4,285 | — |
| Litigation, settlements and related costs(5) | (14) | 641 |
| Severance related to COVID-19(6) | — | 285 |
| Change in fair value of warrants(7) | 2,279 | — |
| **Adjusted EBITDA** | **$21,012** | **$4,187** |

(1) We have historically incurred sales tax expense in jurisdictions where we expected to remit sales tax payments but were not yet collecting from customers. During the second half of 2021, we began collecting sales tax from customers in all required states. The sales tax liability presented herein represents the exposure for sales tax prior to the date we began collecting sales tax from customers reduced by abatements received, inclusive of any penalties and interest assessed by the jurisdictions. Discussions with jurisdictions regarding our liability for uncollected sales taxes continued into 2022.

(2) Transaction costs consist of legal; accounting; tax and other professional fees; personnel-related costs, which consist of retention bonuses; and integration costs. Transaction costs recognized in 2022 were related to the merger transaction with Horizon Acquisition Corporation (the "Merger Transaction"), the acquisition of Betcha Sports, Inc. ("Betcha"), and refinancing of the remaining June 2017 First Lien Loan with a new February 2022 First Lien Loan. Transaction costs recognized in 2021 were related to the Merger Transaction, to the extent they were not eligible for capitalization.

(3) We incur equity-based compensation expenses for profits interests issued prior to the Merger Transaction and equity granted according to the 2021 Incentive Award Plan ("2021 Plan"), which we do not consider to be indicative of our core operating performance. The 2021 Plan was approved and adopted in order to facilitate the grant of equity incentive awards to our employees and directors. The 2021 Plan became effective on October 18, 2021.

(4) Losses incurred resulted from the extinguishment of the June 2017 First Lien Loan in February 2022.

(5) These amounts relate to external legal costs, settlement costs and insurance recoveries, which were unrelated to our core business operations.

(6) These charges relate to severance costs resulting from significant reductions in employee headcount due to the effects of the COVID-19 pandemic.

(7) These expenses relate to the revaluation of Hoya Intermediate Warrants following the Merger Transaction.

### Impact of COVID-19

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Almost immediately, mitigation measures implemented or recommended by governmental authorities and private organizations restricted attendance at live events throughout North America producing large-scale event cancellations and meaningfully reduced activity on our platform. Beginning in the second quarter of 2021, and continuing into the first quarter of 2022, we have seen a recovery in ticket orders as mitigation measures ease. The COVID-19 pandemic is evolving, and the ultimate pace and timing of recovery is uncertain. If economic conditions caused by the pandemic were to worsen, our financial condition, cash flows, and results of operations may be further materially impacted.

### Key Factors Affecting our Performance

There have been no material changes from the “Key Factors Affecting Our Performance” in the Management’s Discussion and Analysis section disclosed in our 2021 Form 10-K. Our financial position and results of operations depend to a significant extent on those factors.

### Results of Operations

### Comparison of the Three Months Ended March 31, 2022 and 2021

The following table sets forth our results of operations (in thousands, except percentages):

|  | Three Months Ended March 31, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $130,772 | $24,114 | $106,658 | 442% |
| **Costs and expenses:** |  |  |  |  |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 32,164 | 3,925 | 28,239 | 719% |
| Marketing and selling | 54,228 | 7,955 | 46,273 | 582% |
| General and administrative | 29,275 | 15,871 | 13,404 | 84% |
| Depreciation and amortization | 1,385 | 295 | 1,090 | 369% |
| **Income (loss) from operations** | **13,720** | **(3,932)** | **17,652** | **449%** |
| **Other expenses:** |  |  |  |  |
| Interest expense – net | 3,942 | 16,319 | (12,377) | (76)% |
| Loss on extinguishment of debt | 4,285 | — | 4,285 | 100% |
| Other expenses | 2,279 | — | 2,279 | 100% |
| **Income (loss) before income taxes** | **3,214** | **(20,251)** | **23,465** | **116%** |
| Income tax expense | 76 | — | 76 | 100% |
| **Net income (loss)** | **3,138** | **(20,251)** | **23,389** | **115%** |
| Net loss attributable to Hoya Intermediate, LLC shareholders prior to reverse recapitalization | — | (20,251) | 20,251 | 100% |
| Net income attributable to redeemable noncontrolling interests | 1,879 | — | 1,879 | 100% |
| **Net income (loss) attributable to Class A Common Stockholders** | **$1,259** | **$—** | **$1,259** | **100%** |

### Revenues

The following table presents revenues by segment (in thousands, except percentages):

| Revenues: | Three Months Ended March 31, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Marketplace | $110,516 | $21,993 | $88,523 | 403% |
| Resale | 20,256 | 2,121 | 18,135 | 855% |
| **Total revenues** | **$130,772** | **$24,114** | **$106,658** | **442%** |

Total revenues increased $106.7 million, or 442% for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase, which occurred in both our Marketplace and Resale segments, resulted from an increase in new orders processed resulting from the resumption of live events. The pandemic and resulting mitigation measures had a significant adverse effect on order volume and event cancellations during the three months ended March 31, 2021. In the second quarter of 2021, most local governments began to lift large scale restrictions on live events such that there was a significant increase in live events held in the first quarter of 2022 as compared to the first quarter of 2021.

#### Marketplace

The following table presents revenues in our Marketplace segment by event category (in thousands, except percentages):

| Revenues: | Three Months Ended March 31, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Concerts | $58,673 | $7,014 | $51,659 | 737% |
| Sports | 38,915 | 14,138 | 24,777 | 175% |
| Theater | 12,615 | 783 | 11,832 | 1,511% |
| Other | 313 | 58 | 255 | 440% |
| **Total Marketplace revenues** | **$110,516** | **$21,993** | **$88,523** | **403%** |

Marketplace revenues increased $88.5 million, or 403% during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in Marketplace revenues resulted primarily from an overall increase in new orders processed on our Marketplace platform.

Total Marketplace orders increased 1.7 million, or 589%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in orders resulted from the increase in events held after restrictions on fan attendance due to the COVID-19 pandemic were reduced or lifted. These increases occurred across all event categories.

Cancellation charges, which are recognized as a reduction to revenues, were $16.0 million for the three months ended March 31, 2022, compared to $1.4 million for the three months ended March 31, 2021. Cancellation charges for the three months ended March 31, 2022 were higher than the three months ended March 31, 2021 due to an overall increase in volume, MLB cancellations due to the now settled labor dispute, and other large concert tour cancellations.

Marketplace revenues by business model consisted of the following (in thousands, except percentages):

| Revenues: | Three Months Ended March 31, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Owned Properties | $83,666 | $18,196 | $65,470 | 360% |
| Private Label | 26,850 | 3,797 | 23,053 | 607% |
| **Total Marketplace revenues** | **$110,516** | **$21,993** | **$88,523** | **403%** |

The increases in revenue from both Owned Properties and Private Label during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 resulted primarily from the increase in order volume as COVID-19 restrictions were lifted and more events occurred with larger audiences.

#### Resale

Revenue for our Resale segment increased $18.1 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase resulted primarily from higher order volume. Total Resale orders increased 0.1 million, or 423%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Cancellation charges, classified as a reduction of revenue, negatively impacted Resale revenue by $0.2 million and $1.1 million for the three months ended March 31, 2022 and 2021.

### Cost of Revenues (exclusive of Depreciation and Amortization)

The following table presents cost of revenues by segment (in thousands, except percentages):

| Cost of revenues: | Three Months Ended March 31, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Marketplace | $16,409 | $2,700 | $13,709 | 508% |
| Resale | 15,755 | 1,225 | 14,530 | 1,186% |
| **Total cost of revenues** | **$32,164** | **$3,925** | **$28,239** | **719%** |

Total cost of revenues increased $28.2 million, or 719%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase to total cost of revenues resulted from higher order volume in both our Marketplace and Resale segments.

#### Marketplace

Marketplace cost of revenues increased $13.7 million, or 508%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in cost of revenues is consistent with the increase in total Marketplace orders, which increased by 1.7 million orders, or 589%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

#### Resale

Resale cost of revenues increased $14.5 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase resulted from an increase in total Resale orders of 0.1 million orders, or 423%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in Resale cost of revenues is not consistent with the increase in Resale revenues due to lower margins and cancellations in 2022 compared to 2021. Cancellation charges, classified as a reduction of cost of revenues, were not material for the three months ended March 31, 2022 and 2021.

### Marketing and Selling

The following table presents marketing and selling expenses (in thousands, except percentages):

| Marketing and selling: | Three Months Ended March 31, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Online | $49,850 | $7,789 | $42,061 | 540% |
| Offline | 4,378 | 166 | 4,212 | 2,537% |
| **Total marketing and selling** | **$54,228** | **$7,955** | **$46,273** | **582%** |

29

Marketing and selling expenses, which are entirely attributable to our Marketplace segment, increased $46.3 million, or 582%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in expenses primarily resulted from greater spending on online advertising during the three months ended March 31, 2022. Our spending on online advertising increased by $42.1 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. As restrictions on the attendance of live events were reduced or lifted, we increased our spending on marketing to capitalize on the increase in live event attendance. In addition, in the first quarter of 2022, we continued our increased marketing efforts which started in the fourth quarter of 2021 with offline channels, including broadcast TV and radio, as part of our brand awareness efforts.

### General and Administrative

The following table presents general and administrative expenses (in thousands, except percentages):

| General and administrative: | Three Months Ended March 31, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Personnel expenses | $19,737 | $6,671 | $13,066 | 196% |
| Non-income tax expenses | 1,239 | 2,362 | (1,123) | (48)% |
| Other | 8,299 | 6,838 | 1,461 | 21% |
| **Total general and administrative** | **$29,275** | **$15,871** | **$13,404** | **84%** |

Total general and administrative expenses increased $13.4 million, or 84%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in personnel expenses of $13.1 million. The increase was due to a higher employee headcount and an increase in costs for our outsourced customer service provider.

### Depreciation and Amortization

Depreciation and amortization expenses increased $1.1 million, or 369%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to the intangibles acquired as part of the Betcha acquisition during the fourth quarter of 2021.

### Other Expenses

#### Interest expense – net

Interest expense decreased $12.4 million, or 76%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. We paid off the May 2020 First Lien Loan and made a partial payment of the outstanding principal on the June 2017 First Lien Loan in the fourth quarter of 2021. In addition, we further reduced our outstanding debt balance and effective interest rate on February 3, 2022 when we refinanced the June 2017 First Lien Loan with the February 2022 First Lien Loan.

#### Loss on extinguishment of debt

Loss on extinguishment of debt was $4.3 million during the three months ended March 31, 2022 due to the refinancing of the June 2017 First Lien Loan with the February 2022 First Lien Loan.

#### Other expenses

Other expenses were $2.3 million during the three months ended March 31, 2022 primarily due to the fair value remeasurement of the Hoya Intermediate Warrants.

### Liquidity and Capital Resources

We have historically financed our operations primarily through cash generated from our operating activities. 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 sources of funds are cash generated from operations and proceeds from borrowings, including our term loans. In response to the COVID-19 pandemic, we borrowed $50.0 million under our revolving credit facility in March 2020 and subsequently entered into the May 2020 First Lien Loan (defined below). We received $251.5 million in net cash proceeds from the May 2020 First Lien Loan, which we used to repay the $50.0 million in outstanding borrowings under the revolving credit facility in May 2020 and to fund our operations. As noted in the “Liquidity and Capital Resources—Loan Agreements” section below, we repaid the May 2020 First Lien Loan in connection with, and using the proceeds from, the Merger Transaction and the private investment in public equity financing (“PIPE Subscription”). Our existing cash and cash equivalents are sufficient to fund our liquidity needs for the next 12 months.

As of March 31, 2022, we had $314.1 million of cash and cash equivalents. Cash and cash equivalents 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, 2022, we generated positive cash flows from our operating activities.

#### Loan Agreements

In response to the COVID-19 pandemic, we borrowed $50.0 million under the Revolving Facility in March 2020. We then entered into the May 2020 First Lien Loan, which resulted in $251.5 million in net cash proceeds. We used the net cash proceeds from the May 2020 First Lien Loan to immediately repay the $50.0 million in outstanding borrowings under the Revolving Facility and to fund our operations. The Revolving Facility was terminated in full simultaneously with the repayment in May 2020.

The May 2020 First Lien Loan, which is pari passu with the June 2017 First Lien Loan, carries a variable interest rate of LIBOR plus an applicable margin of 9.50%, or a base rate plus an applicable margin of 8.50%. The May 2020 First Lien Loan matures in May 2026, subject to an earlier springing maturity date of June 30, 2024 if the June 2017 First Lien Loan, or a refinancing thereof with scheduled payments of principal prior to June 30, 2024, remains outstanding as of that date. The effective interest rate on the May 2020 First Lien Loan, which fluctuates based on certain paid-in-kind elections, was 11.50% per annum as of December 31, 2020. We made no payments during 2020 on the May 2020 First Lien Term Loan. Interest incurred under the May 2020 First Lien Loan was capitalized into the principal quarterly in August and November 2020, resulting in an outstanding principal of $275.7 million as of December 31, 2020. Additional interest was capitalized into the principal in the first nine months of 2021, resulting in an outstanding principal of $304.1 million as of September 30, 2021. On October 18, 2021, we repaid this loan in full in connection with, and using the proceeds from, the Merger Transaction and the PIPE Subscription and incurred a $28.0 million prepayment penalty.

We had an outstanding loan balance of $465.7 million under the June 2017 First Lien Loan as of December 31, 2021. In the three months ended March 31, 2022, we repaid $190.7 million of the outstanding June 2017 First Lien Loan. On February 3, 2022, we entered into an amendment which refinances the remaining June 2017 First Lien Loan with a new $275.0 million February 2022 First Lien Loan with a maturity date of February 3, 2029, adds a new revolving credit facility in an aggregate principal amount of $100.0 million with a maturity date of February 3, 2027, replaces the LIBOR based floating interest rate with a term SOFR based floating interest rate and revises the springing financial covenant to require 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 will carry an interest rate of SOFR plus 3.25%. The SOFR rate for the February 2022 First Lien Loan is subject to a 0.5% floor.

As of March 31, 2022, we are only party to one credit facility, the February 2022 First Lien Loan.

#### Tax Receivable Agreement

In connection with the Merger Transaction, we entered into a Tax Receivable Agreement with the existing Hoya Intermediate shareholders that will provide for payment to Hoya Intermediate shareholders of 85% of the amount of the tax savings, if any, that we realize (or, under certain circumstances, is deemed to realize) as a result of, or attributable to, (i) increases in the tax basis of assets owned directly or indirectly by Hoya Intermediate or its subsidiaries from, among other things, any redemptions or exchanges of Hoya Intermediate common units (ii) existing tax basis (including depreciation and amortization deductions arising from such tax basis) in long-lived assets owned directly or indirectly by Hoya Intermediate and its subsidiaries, and (iii) certain other tax benefits (including deductions in respect of imputed interest) related to Hoya Intermediate making payments under the Tax Receivable Agreement.

### Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $23,534 | $30,761 |
| Net cash used in investing activities | (3,441) | (1,726) |
| Net cash used in financing activities | (195,568) | (1,603) |
| **Net increase (decrease) in cash and cash equivalents** | **$(175,475)** | **$27,432** |

#### Cash Provided by Operating Activities

Net cash provided by operating activities was $23.5 million for the three months ended March 31, 2022 due to $3.1 million in net income, non-cash charges of $12.4 million, and net cash inflows from a $8.0 million change in net operating assets. The net cash inflows from the change in our net operating assets were primarily due to the increase in operations as COVID-19 mitigation measures continue to ease.

Net cash provided by operating activities was $30.8 million for the three months ended March 31, 2021 due to $20.3 million in net loss, non-cash charges of $13.3 million, and net cash inflows from a $37.7 million change in net operating assets. The net cash inflows from the change in net operating assets were primarily due to a $37.9 million increase in accounts payable. The increase in accounts payable resulted primarily from an increase in amounts payable to ticket sellers as sales increased in the first quarter of 2021.

#### Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2022 was $3.4 million and was primarily related to capital spending on development activities related to our platform.

Net cash used in investing activities for the three months ended March 31, 2021 was $1.7 million related to capital spending on development activities related to our platform.

#### Cash Used in Financing Activities

Net cash used in financing activities for the three months ended March 31, 2022 was $195.6 million and was due to the repayment of the June 2017 First Lien Loan in connection with the refinancing.

Net cash used in financing activities for the three months ended March 31, 2021 was $1.6 million related to payments on our June 2017 First Lien Loan.

### Critical Accounting Policies and Estimates

Accounting policies and estimates are considered critical when they require management to make subjective and complex judgments, estimates and assumptions about matters that have a material impact on the presentation of our financial statements and accompanying notes. For a description of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. During the three months ended March 31, 2022, there were no material changes to our critical accounting policies from those discussed in the 2021 Form 10-K.

### Recent Accounting Pronouncements

Refer to Note 2, New Accounting Standards, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements and issued accounting pronouncements not yet adopted.

## Market risk

As filed, 1,084 characters.

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. We maintain floating-rate debt that bears interest based on market rates plus an applicable spread. Because our interest rate is tied to market rates, we will be susceptible to fluctuations in interest rates if we do not hedge the interest rate exposure arising from our floating-rate borrowings. A hypothetical 1% increase or decrease in interest rates, assuming rates are above our interest rate floor, would not have a material impact on interest expense based on amounts outstanding under the June 2017 First Lien Loan and February 2022 First Lien Loan during the three months ended March 31, 2022.

## Controls and procedures

As filed, 3,195 characters.

#### 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 Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Our management, with the participation of our principal executive officer and principal financial officer, 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 Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective at reasonable assurance levels as of March 31, 2022 due to the reasons described below.

#### Material Weakness

In connection with the audit of our consolidated financial statements as of December 31, 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, establishment of clearly defined roles within our finance and accounting functions and the number of personnel in our finance and accounting functions with an appropriate level of technical accounting and SEC reporting experience, which in the aggregate, constitute a material weakness.

#### Remediation Activities

As part of our plan to remediate this material weakness, we are performing a full review of our internal control procedures. We have implemented, and plan to continue to implement, new controls and new processes. We have begun to hire and plan to continue to hire additional qualified personnel and establish more robust processes to support our internal control over financial reporting, including clearly defined roles and responsibilities and appropriate segregation of duties.

#### Changes in Internal Control over Financial Reporting

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, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 622 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in our 2021 Form 10-K. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors disclosed in our 2021 Form 10-K.

Filed May 10, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-008705. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.