EX-99.3 5 d28024dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

On November 3, 2023 (the “Closing Date”), Vivid Seats Inc. (“Vivid Seats” or the “Company”) completed its acquisition of VDC Holdco, LLC (“VDC”) pursuant to the Agreement and Plan of Merger, dated November 3, 2023, among the Company, VDC, Viva Merger Sub I, LLC (“Merger Sub I”), Viva Merger Sub II, LLC (“Merger Sub II”), the unitholders named therein (the “Unitholders”) and the Unitholders’ representative named therein (the “Merger Agreement”). The Merger Agreement provides for the Company’s acquisition of VDC (the indirect parent company of Vegas.com, LLC) through a two-step merger, consisting of (i) Merger Sub I merging with and into VDC, with VDC continuing as the surviving company and becoming a wholly owned subsidiary of the Company, and (ii) VDC subsequently merging with and into Merger Sub II, with Merger Sub II continuing as the surviving company and as a wholly owned subsidiary of the Company (collectively, the “Acquisition”). The consideration paid in the Acquisition consisted of $153.6 million in cash and approximately 15.6 million shares of the Company’s Class A common stock (the “Class A Shares”), which was provided to the previous shareholders of VDC (“Selling Shareholders”). The Company financed the cash portion of the purchase consideration with cash on hand.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The unaudited pro forma condensed combined balance sheet as of September 30, 2023 gives effect to the Acquisition as if the transaction had been completed on September 30, 2023 and combines the unaudited consolidated balance sheets of Vivid Seats and VDC as of September 30, 2023. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2022 and the nine months ended September 30, 2023 give effect to the Acquisition as if it had been consummated on January 1, 2022, the first day of Vivid Seats’ fiscal year. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2023 combines the unaudited condensed consolidated statement of operations for Vivid Seats and the unaudited consolidated statement of income of VDC for the nine month periods ended September 30, 2023. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 combines the audited consolidated statement of operations of Vivid Seats and the audited consolidated statement of operations of VDC for the year ended December 31, 2022.

The historical financial statements of Vivid Seats and VDC have been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events to give effect to the Acquisition. The unaudited pro forma adjustments are based upon available information and certain assumptions that Vivid Seats’ management believes are reasonable.

The unaudited pro forma condensed combined financial information should be read in conjunction with:

 

  •  

the accompanying notes to the unaudited pro forma condensed combined financial information;

 

  •  

the unaudited condensed consolidated financial statements of Vivid Seats as of and for the three and nine months ended September 30, 2023 and the related notes included in Vivid Seats’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 filed with the Securities and Exchange Commission (the “SEC”) on November 7, 2023;

 

  •  

the audited consolidated financial statements of Vivid Seats as of and for the year ended December 31, 2022 and the related notes included in Vivid Seats’ Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 7, 2023 (as amended by Amendment No. 1 thereto filed with the SEC on May 9, 2023);

 

  •  

the unaudited consolidated financial statements of VDC as of and for the nine months ended September 30, 2023 and the related notes; and

 

  •  

the audited consolidated financial statements of VDC as of and for the year ended December 31, 2022 and the related notes.

Accounting for the Acquisition

The Acquisition will be accounted for using the acquisition method of accounting in accordance with ASC 805—Business Combinations (“ASC 805”). Vivid Seats’ management has evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the Acquisition and concluded, based on a consideration of the pertinent facts and circumstances, that Vivid Seats will be the acquirer for financial accounting purposes. Accordingly, Vivid Seats’ cost to acquire VDC has been allocated to the acquired assets and liabilities based upon their estimated fair values. Any differences between the estimated fair value of the consideration transferred and the estimated fair value of the identified assets acquired and liabilities assumed will be recorded as goodwill. The

allocation of the purchase consideration is preliminary and is dependent upon estimates of certain valuations that are not yet finalized and subject to change. Refer to Note 1 – Basis of Presentation to the accompanying notes for more information.

The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the Acquisition occurred as of the dates indicated. The unaudited pro forma condensed combined financial information also should not be considered indicative of the future results of operations or financial position of Vivid Seats.

The pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information as required by SEC rules. Differences between these preliminary estimates and the final business combination accounting may be material.

VIVID SEATS INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of September 30, 2023

(in thousands, except share and per share data)

 

     Historical                
     Vivid Seats Inc.   VDC
Reclassified
(Note 2)		               Pro Forma
Combined
     As of
  September 30,  
2023		   As of
September 30,
2023		    Transaction
Accounting
    Adjustments    		          As of
  September 30,  
2023
ASSETS             
Current assets:             
Cash and cash equivalents     $ 268,678      $ 34,032       $ (28,281)        (a )     $ 115,079  
          (5,751)        (b )   
          (153,599)        (d )   
Restricted cash      1,056       284        —          1,340  
Accounts receivable – net      64,829       454        —          65,283  
Inventory – net      21,533       —        —          21,533  
Prepaid expenses and other current assets      49,407       2,775        —          52,182  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Total current assets     $ 405,503      $ 37,545       $ (187,631)         $ 255,417  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Property and equipment – net      10,240       1,998        (1,721)        (f )      10,517  
Right-of-use assets – net      9,291       763        —          10,054  
Intangible assets – net      113,873       6,129        87,755        (f )      207,757  
Goodwill      759,971       45,748        5,751        (b )      960,596  
          249,096        (d )   
          (13,936)        (e )   
          (86,034)        (f )   
Deferred tax assets      77,376       1,435        (29,282)        (g )      49,529  
Investments      6,042       —        —          6,042  
Other non-current assets      2,780       452        —          3,232  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Total assets     $ 1,385,076      $ 94,070       $ 23,998         $ 1,503,144  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

LIABILITIES AND SHAREHOLDERS’ DEFICIT             
Current liabilities:             
Accounts payable     $ 219,118      $ 32,222       $ 2,760        (c )     $ 254,100  
Accrued expenses and other current liabilities      197,247       12,775        (222)        (a )      209,800  
Deferred revenue      34,447       6,942        —          41,389  
Current maturities of long-term debt      3,308       2,700        (2,700)        (a )      3,308  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Total current liabilities     $ 454,120      $ 54,639       $ (162)         $ 508,597  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Long-term debt- net      265,875       17,275        (17,275)        (a )      265,875  
Long-term lease liabilities      15,931       136        —          16,067  
Tax Receivable Agreement liability      98,977       —        —          98,977  
Other non-current liabilities      29,745       —        —          29,745  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Total long-term liabilities     $ 410,528      $ 17,411       $ (17,275)         $ 410,664  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Commitments and contingencies             
Redeemable noncontrolling interests      640,717       —        —          640,717  
Shareholders’ deficit:             

Class A common stock, $0.0001 par value; 500,000,000 shares authorized at September 30, 2023; 101,803,392 issued and outstanding at September 30, 2023; 117,356,648 pro forma issued and outstanding at September 30, 2023

     $ 11      $ —       $ 2        (d )     $ 13  

Class B common stock, $0.0001 par value; 250,000,000 shares authorized, 99,800,000 issued and outstanding at September 30, 2023; 99,800,000 pro forma issued and outstanding at September 30, 2023

      10       —        —          10  

Additional paid-in capital

      884,523       —        95,495        (d )      980,018  

Treasury stock, at cost, 5,291,497 shares at September 30, 2023 (historical and pro forma)

      (40,106 )      —        —          (40,106 ) 

Accumulated deficit

      (964,561 )      22,020        (8,084)        (a )      (996,603 ) 
          (2,760)        (c )   
          (13,936)        (e )   
          (29,282)        (g )   
  

 

 

 

  

 

 

 

   

 

 

 

   

 

 

    

 

 

 

Accumulated other comprehensive loss      (166 )      —        —          (166 ) 
  

 

 

 

  

 

 

 

   

 

 

 

   

 

 

    

 

 

 

Total Shareholders’ deficit     $ (120,289 )     $ 22,020       $ 41,435         $ (56,834 ) 
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

Total liabilities, Redeemable noncontrolling interests, and Shareholders’ deficit

     $ 1,385,076      $ 94,070       $ 23,998         $ 1,503,144  
  

 

 

 

  

 

 

 

   

 

 

 

     

 

 

 

See the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.

VIVID SEATS INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2023

(in thousands, except share and per share data)

 

     Historical                  
     Vivid Seats Inc.   VDC
Reclassified
(Note 2)		                 Pro Forma
Combined		  
     For the nine
months ended
  September 30,  
2023		   For the nine
months ended
September 30,
2023		      Transaction
Accounting
    Adjustments    		          For the nine
months ended
  September 30,  
2023		  

Revenues

     $ 514,576      $ 77,784       $ —        $ 592,360  

Costs and expenses:

             

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

      130,838       11,128        —          141,966  

Marketing and selling

      196,970       23,424        —          220,394  

General and administrative

      107,921       18,161        —          126,082  

Depreciation and amortization

      8,603       1,593        13,529     (c)      23,725  

Change in fair value of contingent consideration

      (998 )      —        —          (998)  
  

 

 

 

  

 

 

     

 

 

       

 

 

  

Income from operations

      71,242       23,478        (13,529)          81,191  

Other (income) expense:

             

Interest expense – net

      8,596       1,519        (1,519)     (a)      8,596  

Other (income) expense

      (365 )      70        —          (295)  
  

 

 

 

  

 

 

     

 

 

       

 

 

  

Income before income taxes

      63,011       21,889        (12,010)          72,890  

Income tax (benefit) expense

      (21,605 )      4,577        1,482     (d)      (15,546)  
  

 

 

 

  

 

 

     

 

 

       

 

 

  

Net income

      84,616       17,312        (13,492)          88,436  

Net income attributable to redeemable noncontrolling interests

      35,045       —        1,767     (e)      36,812  
  

 

 

 

  

 

 

     

 

 

       

 

 

  

Net income attributable to Class A Common Stockholders

     $ 49,571      $ 17,312       $ (15,259)         $ 51,624  
  

 

 

 

  

 

 

     

 

 

       

 

 

  

Net income per Class A common stock – see Note 6

             

Basic

     $ 0.57              $ 0.51  

Diluted

     $ 0.43              $ 0.34  

Weighted average Class A common stock outstanding

             

Basic

      86,403,617               101,956,873  

Diluted

      196,307,731               211,860,987  

See the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.

VIVID SEATS INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2022

(in thousands, except share and per share data)

 

     Historical               
     Vivid Seats Inc.   VDC
Reclassified
(Note 2)		              Pro Forma
Combined
     For the
year ended
  December 31,  
2022		   For the
year ended
  December 31,  
2022		    Transaction
Accounting
    Adjustments    		         For the
year ended
  December 31,  
2022

Revenues

     $ 600,274      $ 91,359       $ —          $ 691,633  

Costs and expenses:

              

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

      140,508       13,127        —           153,635  

Marketing and selling

      248,375       25,393        —           273,768  

General and administrative

      127,619       22,178        2,760      (b)      152,557  

Depreciation and amortization

      7,732       6,729        13,537      (c)      27,998  

Change in fair value of contingent consideration

      (2,065 )      -        —           (2,065)  
  

 

 

 

  

 

 

 

   

 

 

 

      

 

 

 

Income from operations

      78,105       23,932        (16,297)           85,740  

Other (income) expense:

              

Interest expense – net

      12,858       1,972        (1,972)      (a)      12,858  

Loss on extinguishment of debt

      4,285       —        —           4,285  

Other income

      (8,227 )      (3,816)        —           (12,043)  
  

 

 

 

  

 

 

 

   

 

 

 

      

 

 

 

Income before income taxes

      69,189       25,776        (14,325)           80,640  

Income tax (benefit) expense

      (1,590 )      5,559        (4,075)      (d)      (106)  
  

 

 

 

  

 

 

 

   

 

 

 

      

 

 

 

Net income

     70,779       20,217        (10,250)           80,746  

Net income attributable to redeemable noncontrolling interests

      42,117       —        2,326      (e)      44,443  
  

 

 

 

  

 

 

 

   

 

 

 

      

 

 

 

Net income attributable to Class A Common Stockholders

     $ 28,662      $ 20,217       $ (12,576)          $ 36,303  
  

 

 

 

  

 

 

 

   

 

 

 

      

 

 

 

Net income per Class A Common Stock – see Note 6

              

Basic

     $ 0.36               $ 0.38  

Diluted

     $ 0.36               $ 0.37  

Weighted average Class A Common Stock outstanding

              

Basic

      80,257,247                95,810,503  

Diluted

      198,744,381                214,297,637  

See the accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information

VIVID SEATS INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1 – Basis of Presentation

The unaudited pro forma condensed combined financial information has been prepared by Vivid Seats in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined financial information presented is for illustrative purposes only and is not necessarily indicative of what Vivid Seats’ condensed combined statements of operations or condensed combined balance sheet would have been had the Acquisition been consummated as of the dates indicated or will be for any future periods. The unaudited pro forma condensed combined financial information does not purport to project the future financial position or results of operations of Vivid Seats following the Acquisition. The pro forma condensed combined financial information reflects financing and transaction accounting adjustments Vivid Seats management believes are necessary to fairly present Vivid Seats’ unaudited pro forma financial position and results of operations following the Acquisition as of and for the periods indicated. The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies, or revenue enhancements that the combined company may achieve as a result of the Acquisition, nor does it reflect the costs to integrate the operations of Vivid Seats and VDC.

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805, with Vivid Seats as the accounting acquirer, using the fair value concepts defined in ASC Topic 820, Fair Value Measurement (“ASC 820”), and based on the historical consolidated financial statements of Vivid Seats and VDC. Under ASC 805, all assets acquired and liabilities assumed in a business combination are recognized and measured at their assumed acquisition date fair value, while transaction costs associated with the business combination are expensed as incurred. Under ASC 805, the excess of purchase consideration over the estimated fair value of the identified assets acquired and liabilities assumed, if any, is allocated to goodwill.

The allocation of the purchase consideration in the unaudited combined pro forma financial information depends upon certain estimates and assumptions, all of which are preliminary. The allocation of the purchase consideration has been made for the purpose of developing the unaudited pro forma condensed combined financial information. The final determination of fair values of assets acquired and liabilities assumed relating to the Acquisition may differ materially from the amounts reflected herein.

The financing and transaction accounting adjustments represent Vivid Seats’ best estimates and are based upon currently available information and certain assumptions that Vivid Seats believes are reasonable under the circumstances. Vivid Seats is not aware of any material transactions between Vivid Seats and VDC during the periods presented. Accordingly, adjustments to eliminate transactions between Vivid Seats and VDC have not been reflected in the unaudited pro forma condensed combined financial information.

Vivid Seats is conducting a comprehensive review of VDC’s accounting policies. As a result of this review, Vivid Seats may identify differences between the accounting policies of the two companies, which when conformed, could have a material impact on the combined results of VDC and Vivid Seats. Based upon the preliminary analysis performed, Vivid Seats has determined that no significant adjustments are required to conform the accounting policies of VDC to Vivid Seats, with exception to those reflected in Note 2 – Vivid Seats and VDC Reclassification Adjustments.

Note 2 – Vivid Seats and VDC Reclassification Adjustments

During the preparation of this unaudited pro forma condensed combined financial information, Vivid Seats’ management performed a preliminary analysis of VDC’s financial information to identify potential differences in account classifications and financial statement presentation. Based upon the preliminary analysis performed, Vivid Seats has made reclassification adjustments to conform VDC’s historical financial statement presentation to Vivid Seats’ historical financial statement

presentation, which are reflected in the tables below. The Company is currently performing a full and detailed review of VDC’s accounting policies and financial statement presentation, which may differ materially from the amounts set forth below.

 

VDC Historical

Consolidated Balance Sheet

Line Items

   

Vivid Historical

Consolidated Balance Sheet

Line Items

    VDC Historical
Consolidated
Balances as of
September 30,
2023		      Reclassifications          VDC
Reclassified
as of
September 30,
2023		  

Cash and cash equivalents

   

Cash and cash equivalents

    $ 34,032      $ —        $ 34,032  

Restricted Cash

   

Restricted cash

      284        —          284  

Accounts receivable

   

Accounts receivable – net

      402        52     (a)      454  

Other receivables

         52        (52)     (a)      —  

Prepaid expenses

   

Prepaid expenses and other current assets

      2,775        —          2,775  

Property and equipment, net

   

Property and equipment – net

      1,998        —          1,998  

Goodwill

   

Goodwill

      45,748        —          45,748  

Intangible assets, net

   

Intangible assets – net

      6,129        —          6,129  

Deferred income taxes

   

Deferred tax assets

      1,435        —          1,435  

Operating lease right-of-use-asset

   

Right-of-use assets – net

      763        —          763  

Security deposit

   

Other non-current assets

      452        —          452  

Accounts payable

   

Accounts payable

      18,823        13,399     (b)      32,222  

Accrued expenses

         12,034        (12,034)     (c)      —  
  

Accrued expenses and other current liabilities

      —        12,775     (c)      12,775  

Deferred merchant bookings

         13,371        (13,371)     (b)      —  

Contract liabilities

   

Deferred revenue

      6,942        —          6,942  

Current maturities of long-term debt

   

Current maturities of long-term debt

      2,700        —          2,700  

Current maturities of operating lease liability

         741        (741)     (c)      —  

Other payables

         28        (28)     (b)      —  

Long-term debt, less current maturities

   

Long-term debt- net

      17,275        —          17,275  

Operating lease liability, less current maturities

   

Long-term lease liabilities

      136        —          136  

Members’ Equity

  

Accumulated deficit

      22,020        —          22,020  

 

 

(a)

Reflects the reclassification of other receivables to accounts receivable - net.

 

(b)

Reflects the reclassification of deferred merchant bookings and other payables to accounts payable.

 

(c)

Reflects the reclassification of accrued expenses and current maturities of operating lease liability to accrued expenses and other current liabilities.

Refer to the table below for a summary of adjustments made to present VDC’s statement of operations for the nine months ended September 30, 2023 to conform with that of Vivid Seats’ (amounts in thousands):

 

VDC Historical

Consolidated Statement of Income

Line Items

   

Vivid Seats Historical

Consolidated Statement of Operations

Line Items

    VDC nine
months ended
September 30,
2023		      Reclassifications             VDC
Reclassified
nine months
ended
September 30,
2023		  

Revenue

   

Revenues

    $ 77,784      $ —         $ 77,784  

Cost of revenue, exclusive of depreciation and amortization

   

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

      11,128        —           11,128  

Paid search fees and marketing

   

Marketing and selling

      23,424        —           23,424  

General and administrative expenses

   

General and administrative

      5,325        12,836        (a)        18,161  

Salaries and wages

         10,023        (10,023)        (a)        —  

Depreciation and amortization

   

Depreciation and amortization

      1,593        —           1,593  

License fee

         1,875        (1,875)        (a)        —  

Rent expense

         941        (941)        (a)        —  

Interest expense

   

Interest expense – net

      1,875        (356)        (b)        1,519  

Interest income

         (356)        356        (b)        —  

Breakage loss (income)

         70        (70)        (c)        —  
  

Other income

      —        70        (c)        70  

Income tax expense

   

Income tax (benefit) expense

      4,577        —           4,577  

(Gain) loss on sale of property and equipment

         (3)        3        (a)        —  

 

(a)

Reflects the reclassification of salaries and wages, license fee, rent expense, and (gain) loss on sale of property and equipment to general and administrative.

 

(b)

Reflects the reclassification of interest income to interest expense - net.

 

(c)

Reflects the reclassification of breakage loss (income) to other income.

Refer to the table below for a summary of adjustments made to present VDC’s statement of operations for the year ended December 31, 2022 to conform with that of Vivid Seats’ (amounts in thousands):

 

VDC Historical

Consolidated Statement of Operations

Line Items

   

Vivid Seats Historical

Consolidated Statement of Operations

Line Items

    VDC
year ended
December 31,
2022		      Reclassifications             VDC
Reclassified
year ended
December 31,
2022		  

Revenue

   

Revenues

    $ 91,359      $ —         $ 91,359  

Cost of revenue, exclusive of depreciation and amortization

   

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

      13,127        —           13,127  

Paid search fees and marketing

   

Marketing and selling

      25,393        —           25,393  

General and administrative expenses

   

General and administrative

      5,012        17,166        (a)        22,178  

Salaries and wages

         13,058        (13,058)        (a)        —  

Depreciation and amortization

   

Depreciation and amortization

      6,729        —           6,729  

License fee

         2,500        (2,500)        (a)        —  

Rent expense

         1,603        (1,603)        (a)        —  

Interest expense

   

Interest expense – net

      1,972        —           1,972  

Breakage income

         (3,209)        3,209        (b)        —  

Other income

   

Other income

     (607)        (3,209)        (b)        (3,816)  

Loss on sale of property and equipment

         5        (5)        (a)        —  

Provision for Income Taxes

   

Income tax (benefit) expense

      5,559        —           5,559  

 

(a)

Reflects the reclassification of salaries and wages, license fee, rent expense, and loss on sale of property and equipment to general and administrative.

(b)

Reflects the reclassification of breakage income to other income.

Note 3 – Preliminary Purchase Price Allocation

Estimated Purchase Consideration

In accordance with the terms and conditions of the Merger Agreement, the previous shareholders of VDC (“Selling Shareholders”) received cash consideration of $153.6 million, in addition to 15.6 million Class A Shares. The Class A Shares have an estimated fair value of $95.5 million, based on a share price of $6.14 per share on the Acquisition Date.

The preliminary estimated total purchase consideration reflected in the unaudited pro forma condensed combined financial information is $249.1 million, which consists of the following (in thousands except share and per share data):

 

Cash consideration

         $ 153,599  

Share consideration

      

Shares of Vivid Seats as of November 3, 2023

          15,553,256     
     

 

 

  

Vivid Seats share price on November 3, 2023

    $ 6.14     
     

 

 

  

Estimated value of Vivid Seats common stock issued to Selling Shareholders

         $ 95,497  
     

 

 

  

Preliminary fair value of estimated total purchase consideration

         $         249,096  
     

 

 

  

Preliminary Purchase Price Allocation

Under the acquisition method of accounting, the identifiable assets acquired, and liabilities assumed will be recognized and measured at fair value as of the Acquisition Date. The determination of fair value used in the transaction-related adjustments presented herein are preliminary and based on management estimates of fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the Acquisition.

The allocation is dependent upon certain valuation and other analyses that have not yet been finalized. Accordingly, the pro forma purchase price allocation will be subject to further adjustments as additional information becomes available and as estimates are finalized. There can be no assurances that these final valuations and analyses will not result in significant changes to the estimates set forth below.

The following table sets forth a preliminary allocation of the purchase consideration to the identifiable tangible and intangible assets acquired and liabilities acquired in the Acquisition, assuming the Acquisition had been consummated on September 30, 2023. The amounts reflected below are based on the unaudited consolidated balance sheet of VDC as of September 30, 2023, with the excess reflected as goodwill (in thousands):

 

Preliminary fair value of estimated purchase consideration

      $         249,096  

Assets

   

Restricted cash

   

  $

        284

 

Accounts receivable – net

      454  

Prepaid expenses and other current assets

      2,775  

Property and equipment – net

      277  

Right-of-use assets – net

      763  

Intangible assets – net

      93,884  

Goodwill

      200,625  

Deferred tax assets

      1,435  

Other non-current assets

      452  
  

 

 

  

Total assets

      300,949  

Liabilities

   

Accounts payable

      32,222  

Accrued expenses and other current liabilities

      6,942  

Deferred revenue

      12,553  

Long-term lease liabilities

      136  
  

 

 

  

Total liabilities

      51,853  
  

 

 

  

Acquired net assets

      $         249,096  
  

 

 

  

The intangible assets, which are recognized at their preliminary fair value in the unaudited pro forma condensed combined balance sheet, consist of the following (dollars in thousands):

 

     Amount      Estimated Useful
Life		  

Trademarks

      27,543        Indefinite-lived  

Supplier relationships

      25,853        4 years  

Customer relationships

      13,272        3 years  

Developed technology

      27,216        3 years  
  

 

 

     
   $         93,884     
  

 

 

     

Note 4 – Transaction Accounting Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet

 

  (a)

Reflects payment of cash and cash equivalents of $28.3 million to settle VDC’s outstanding debt of $20.0 million (of which $2.7 million was reflected as a current liability) and accrued interest of $0.2 million prior to consummation of the Acquisition, in addition to paying a dividend of $8.1 million to the Selling Shareholders. The dividend is reflected as an increase to accumulated deficit.

 

  (b)

Reflects the payment of $5.8 million in transaction costs incurred by VDC in connection with the Acquisition that had not been recognized as of September 30, 2023. The reduction in cash and cash equivalents from the payment of these transaction costs is reflected as an increase to Goodwill. Following payment of the outstanding debt, the dividend to Selling Shareholders, and the payment of VDC’s transaction costs, the amount of cash and cash equivalents acquired in the Acquisition is zero.

 

  (c)

Represents $2.8 million of incremental transaction costs incurred by Vivid Seats in connection with the Acquisition which had not been recognized as of September 30, 2023.

 

  (d)

Represents the payment of purchase consideration by Vivid Seats in connection with the Acquisition, consisting of $153.6 million in cash and cash equivalents and the issuance of 15.6 million Class A Shares to Selling Shareholders. The issuance of Class A Shares results in an increase to additional paid-in capital of $95.5 million, which reflects a share price of $6.14 per share for the Class A Shares.

 

  (e)

Represents the elimination of remaining historical equity account balances of VDC as of September 30, 2023 after consideration of the dividend paid to Selling Shareholders (see Adjustment (a)).

 

  (f)

Reflects the de-recognition of historical intangible assets recognized by VDC as of September 30, including $1.7 million of capitalized software classified within Property and equipment – net, and the recognition of $93.9 million of intangible assets in connection with the Acquisition. Refer to Note 3 – Preliminary Purchase Price Allocation for the estimated intangible asset balances acquired and reflected in the unaudited condensed combined pro forma financial information.

 

  (g)

Represents the elimination of the historical deferred tax assets recognized by VDC of $1.4 million, in addition to a reduction in the deferred tax assets recognized by Vivid Seats of $27.9 million following the Acquisition. In connection with the Acquisition, the Company contributed the acquired VDC entities to Hoya Intermediate, LLC (“the partnership”). The reduction in deferred tax assets is primarily related to the Company’s investment in the partnership and is reflected as an increase to accumulated deficit.

Note 5 – Transaction Accounting Adjustments to the Unaudited Pro Forma Condensed Combined Statements of Operations

 

  (a)

Reflects the elimination of historical interest expense (net) incurred by VDC of $1.5 million and $2.0 million for the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively. In connection with the Acquisition, all historical debt balances of VDC were extinguished.

 

  (b)

In connection with the Acquisition, Vivid Seats expects to incur $3.3 million of non-recurring transaction expenses, of which $0.5 million were incurred as of September 30, 2023. Unrecognized costs of $2.8 million are reflected as an increase to general and administrative expenses during the year ended December 31, 2022.

 

  (c)

Reflects incremental amortization expense of $13.5 million during both the nine months ended September 30, 2023 and the year ended December 31, 2022. The incremental amortization is associated with the step-up in fair value of the acquired intangibles described in Note 3 - Preliminary Purchase Price Allocation.

  (d)

Represents a decrease in income tax benefit of $1.5 million during the nine months ended September 30, 2023, which relates primarily to an assumed decrease in the amount of valuation allowance released by the Company during the period of $3.4 million, an increase in expense on taxable income of $2.7 million, and elimination of VDC’s historical income tax expense of $4.6 million. The unaudited condensed combined pro forma financial information for the year ended December 31, 2022 reflects incremental tax benefit of $4.1 million, consisting of the elimination of VDC’s historical income tax expense of $5.6 million and $1.5 million of income tax expense incurred by the Company following the Acquisition

 

  (e)

In connection with the Acquisition, Selling Shareholders received 15.6 million Class A Shares. The increased quantity of Class A Shares, combined with the income attributable to the Acquisition results in a $1.8 million and $2.3 million increase to net income attributable to redeemable noncontrolling interests during the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively.

Note 6 – Earnings Per Share

Represents the net income per share calculated using the weighted average shares outstanding and the issuance of additional Class A Shares in connection with the Acquisition (“Acquisition Shares”), assuming that the Acquisition Shares were issued on January 1, 2022.

 

     Historical      Pro Forma  
     Nine Months Ended      Year Ended      Nine Months Ended      Year Ended  
(in thousands, except share and per share data)    September 30, 2023      December 31, 2022      September 30, 2023      December 31, 2022  

Net income per Class A Common Stock:

            

Numerator – basic:

            

Net income

    $ 84,616      $ 70,779      $ 88,436      $ 80,746  

Less: Income attributable to redeemable noncontrolling interests

      (35,045 )       (42,117 )       (36,812 )       (44,443 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income attributable to Class A Common Stockholders – basic

    $ 49,571      $ 28,662      $ 51,624      $ 36,303  

Denominator – basic:

            

Weighted average Class A Common Stock outstanding – basic

      86,403,617        80,257,247        101,956,873        95,810,503  
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income per Class A Common Stock – basic

    $ 0.57      $ 0.36      $ 0.51      $ 0.38  
  

 

 

     

 

 

     

 

 

     

 

 

  

Numerator – diluted:

            

Net income attributable to Class A Common Stockholders – basic

    $ 49,571      $ 28,662      $ 51,624      $ 36,303  

Net income effect of dilutive securities:

            

Effect of dilutive Exercise Warrants

      —        55        —        55  

Effect of RSUs

      68        6        68        6  

Effect of noncontrolling interests

      33,874        42,056        19,432        42,898  
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income attributable to Class A Common Stockholders – diluted

    $ 83,513      $ 70,779      $ 71,124      $ 79,262  

Denominator – diluted:

            

Weighted average Class A Common Stock outstanding – basic

      86,403,617        80,257,247        101,956,873        95,810,503  

Weighted average effect of dilutive securities:

            

Effect of dilutive Exercise Warrants

      —        258,906        —        258,906  

Effect of RSUs

      389,828        28,228        389,828        28,228  

Effect of noncontrolling interests

      109,514,286        118,200,000        109,514,286        118,200,000  
  

 

 

     

 

 

     

 

 

     

 

 

  

Weighted average Class A Common Stock outstanding – diluted

      196,307,731        198,744,381        211,860,987        214,297,637  
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income per Class A Common Stock – diluted

    $ 0.43      $ 0.36      $ 0.34      $ 0.37