UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q/A
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto
Commission File Number:
ENDEAVOR GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 83-3340169 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
9601 Wilshire Boulevard, 3
Beverly Hills, CA90210
(Address of principal executive offices) (Zip Code)
(310) 285-9000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock, par value $0.00001 per share | EDR | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a“large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and “emerging"emerging growth company”company" in Rule
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
As of, 2021, 2022, there were 261,483,029285,838,306shares of the registrant’s Class A common stock outstanding, 188,001,676183,847,173shares of the registrant’s Class X common stock outstanding and 238,154,296235,001,875shares of the registrant’s Class Y common stock outstanding.
TABLE OF CONTENTS
Part I – FINANCIAL INFORMATION | ||||
3 | ||||
3 | ||||
4 | ||||
5 | ||||
8 | ||||
12 | ||||
13 | ||||
30 | ||||
43 | ||||
44 | ||||
44 | ||||
44 | ||||
46 | ||||
47 |
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form10-Q/A(the “Quarterly Report” 10-Q (the "Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"). All statements other than statements of present and historical facts contained in this Quarterly Report, including without limitation, statements regarding our expectations, beliefs, plans, strategies, objectives, prospects, assumptions, future events or expected performance, are forward-looking statements.
Without limiting the foregoing, you can generally identify forward-looking statements by the use of forward-looking terminology, including the terms “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “target,” “predict,” “potential,” “contemplate,”"aim," "anticipate," "believe," "could," "mission," "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "target," "predict," "potential," "contemplate," or, in each case, their negative, or other variations or comparable terminology and expressions. The forward-looking statements in this Quarterly Report are only predictions and are based on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including, but not limited to:
1
These risks could cause actual results to differ materially from those implied by forward-looking statements in this Quarterly Report. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.
You should read this Quarterly Report and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we have no obligation to update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
DEFINITIONS
As used in this Quarterly Report, unless we state otherwise or the context otherwise requires:
2
Item 1. Financial Statements (Unaudited)
PART I – FINANCIAL INFORMATION
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
June 30, 2021 | December 31, 2020 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 869,775 | $ | 1,008,485 | ||||
Restricted cash | 224,347 | 181,848 | ||||||
Accounts receivable (net of allowance for doubtful accounts of $64,059 | 597,581 | 445,778 | ||||||
Deferred costs | 154,678 | 234,634 | ||||||
Other current assets | 240,315 | 194,463 | ||||||
Total current assets | 2,086,696 | 2,065,208 | ||||||
Property and equipment, net | 603,012 | 613,139 | ||||||
Operating lease right-of-use | 360,462 | 386,911 | ||||||
Intangible assets, net | 1,592,439 | 1,595,468 | ||||||
Goodwill | 4,399,594 | 4,181,179 | ||||||
Investments | 295,038 | 251,078 | ||||||
Other assets | 966,876 | 540,651 | ||||||
Total assets | $ | 10,304,117 | $ | 9,633,634 | ||||
LIABILITIES, REDEEMABLE INTERESTS AND SHAREHOLDERS’/MEMBERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 522,100 | $ | 554,260 | ||||
Accrued liabilities | 430,993 | 322,749 | ||||||
Current portion of long-term debt | 94,845 | 212,971 | ||||||
Current portion of operating lease liabilities | 59,249 | 58,971 | ||||||
Deferred revenue | 774,213 | 606,530 | ||||||
Deposits received on behalf of clients | 193,083 | 176,572 | ||||||
Other current liabilities | 91,006 | 65,025 | ||||||
Total current liabilities | 2,165,489 | 1,997,078 | ||||||
Long-term debt | 5,255,743 | 5,712,834 | ||||||
Long-term operating lease liabilities | 365,901 | 395,331 | ||||||
Other long-term liabilities | 387,607 | 373,642 | ||||||
Total liabilities | 8,174,740 | 8,478,885 | ||||||
Commitments and contingencies (Note 19) | 0 | |||||||
Redeemable non-controlling interests | 179,140 | 168,254 | ||||||
Redeemable equity | 0 | 22,519 | ||||||
Shareholders’/Members’ Equity: | ||||||||
Class A common stock, $0.00001 | 2 | 0 | ||||||
Class B common stock, $0.00001 par value; 5,000,000,000 | 0 | 0 | ||||||
Class C common stock, $0.00001 par value; 5,000,000,000 | 0 | 0 | ||||||
Class X common stock, $0.00001 | 1 | 0 | ||||||
Class Y common stock, $0.00001 | 2 | 0 | ||||||
Additional paid-in capital | 1,556,791 | 0 | ||||||
Accumulated deficit | (319,597 | ) | 0 | |||||
Members’ capital | 0 | 468,633 | ||||||
Accumulated other comprehensive loss | (98,530 | ) | (190,786 | ) | ||||
Total Endeavor Group Holdings, Inc./Endeavor Operating Company, LLC shareholders’/members’ equity | 1,138,669 | 277,847 | ||||||
Nonredeemable non-controlling interests | 811,568 | 686,129 | ||||||
Total shareholders’/members’ equity | 1,950,237 | 963,976 | ||||||
Total liabilities, redeemable interests and shareholders’/members’ equity | $ | 10,304,117 | $ | 9,633,634 | ||||
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,824,012 |
|
| $ | 1,560,995 |
|
Restricted cash |
|
| 324,899 |
|
|
| 232,041 |
|
Accounts receivable (net of allowance for doubtful accounts of $62,631 and $57,102, respectively) |
|
| 826,715 |
|
|
| 615,010 |
|
Deferred costs |
|
| 222,067 |
|
|
| 255,371 |
|
Assets held for sale |
|
| 19,690 |
|
|
| 885,633 |
|
Other current assets |
|
| 243,646 |
|
|
| 204,697 |
|
Total current assets |
|
| 3,461,029 |
|
|
| 3,753,747 |
|
Property and equipment, net |
|
| 630,280 |
|
|
| 629,807 |
|
Operating lease right-of-use assets |
|
| 357,406 |
|
|
| 373,652 |
|
Intangible assets, net |
|
| 1,915,898 |
|
|
| 1,611,684 |
|
Goodwill |
|
| 4,540,660 |
|
|
| 4,506,554 |
|
Investments |
|
| 483,590 |
|
|
| 298,212 |
|
Other assets |
|
| 347,755 |
|
|
| 260,861 |
|
Total assets |
| $ | 11,736,618 |
|
| $ | 11,434,517 |
|
LIABILITIES, REDEEMABLE INTERESTS AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 600,026 |
|
| $ | 558,863 |
|
Accrued liabilities |
|
| 490,577 |
|
|
| 524,061 |
|
Current portion of long-term debt |
|
| 87,113 |
|
|
| 82,022 |
|
Current portion of operating lease liabilities |
|
| 58,989 |
|
|
| 59,743 |
|
Deferred revenue |
|
| 564,267 |
|
|
| 651,760 |
|
Deposits received on behalf of clients |
|
| 312,336 |
|
|
| 216,632 |
|
Liabilities held for sale |
|
| 4,985 |
|
|
| 507,303 |
|
Other current liabilities |
|
| 150,417 |
|
|
| 105,053 |
|
Total current liabilities |
|
| 2,268,710 |
|
|
| 2,705,437 |
|
Long-term debt |
|
| 5,596,660 |
|
|
| 5,631,714 |
|
Long-term operating lease liabilities |
|
| 345,762 |
|
|
| 363,568 |
|
Other long-term liabilities |
|
| 400,137 |
|
|
| 402,472 |
|
Total liabilities |
|
| 8,611,269 |
|
|
| 9,103,191 |
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
| ||
Redeemable non-controlling interests |
|
| 48,630 |
|
|
| 209,863 |
|
Shareholders' Equity: |
|
|
|
|
|
| ||
Class A common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| 2 |
|
|
| 2 |
|
Class B common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| 0 |
|
|
| 0 |
|
Class C common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| 0 |
|
|
| 0 |
|
Class X common stock, $0.00001 par value; 4,987,036,068 and 5,000,000,000 shares authorized; |
|
| 1 |
|
|
| 1 |
|
Class Y common stock, $0.00001 par value; 997,261,325 and 1,000,000,000 shares authorized; |
|
| 2 |
|
|
| 2 |
|
Additional paid-in capital |
|
| 1,962,051 |
|
|
| 1,624,201 |
|
Retained earnings (accumulated deficit) |
|
| 0 |
|
|
| (296,625 | ) |
Accumulated other comprehensive loss |
|
| (61,265 | ) |
|
| (80,535 | ) |
Total Endeavor Group Holdings, Inc. shareholders' equity |
|
| 1,900,791 |
|
|
| 1,247,046 |
|
Nonredeemable non-controlling interests |
|
| 1,175,928 |
|
|
| 874,417 |
|
Total shareholders' equity |
|
| 3,076,719 |
|
|
| 2,121,463 |
|
Total liabilities, redeemable interests and shareholders' equity |
| $ | 11,736,618 |
|
| $ | 11,434,517 |
|
See accompanying notes to consolidated financial statements
3
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 1,111,272 | $ | 462,914 | $ | 2,180,854 | $ | 1,653,311 | ||||||||
Operating expenses: | ||||||||||||||||
Direct operating costs | 570,955 | 172,643 | 1,117,347 | 853,927 | ||||||||||||
Selling, general and administrative expenses | 785,101 | 302,047 | 1,166,214 | 691,018 | ||||||||||||
Insurance recoveries | (10,210 | ) | (16,841 | ) | (29,867 | ) | (33,960 | ) | ||||||||
Depreciation and amortization | 69,161 | 84,751 | 136,397 | 165,198 | ||||||||||||
Impairment charges | 3,770 | 172,232 | 3,770 | 175,282 | ||||||||||||
Total operating expenses | 1,418,777 | 714,832 | 2,393,861 | 1,851,465 | ||||||||||||
Operating loss | (307,505 | ) | (251,918 | ) | (213,007 | ) | (198,154 | ) | ||||||||
Other (expense) income: | ||||||||||||||||
Interest expense, net | (83,836 | ) | (71,693 | ) | (152,187 | ) | (141,677 | ) | ||||||||
Loss on extinguishment of debt | (28,628 | ) | — | (28,628 | ) | — | ||||||||||
Other income, net | 7,933 | 21,810 | 4,718 | 47,167 | ||||||||||||
Loss before income taxes and equity losses of affiliates | (412,036 | ) | (301,801 | ) | (389,104 | ) | (292,664 | ) | ||||||||
Provision for (benefit from) income taxes | 60,918 | (4,049 | ) | 66,003 | 44,555 | |||||||||||
Loss before equity losses of affiliates | (472,954 | ) | (297,752 | ) | (455,107 | ) | (337,219 | ) | ||||||||
Equity losses of affiliates, net of tax | (43,813 | ) | (198,013 | ) | (59,284 | ) | (209,807 | ) | ||||||||
Net loss | (516,767 | ) | (495,765 | ) | (514,391 | ) | (547,026 | ) | ||||||||
Less: Net loss attributable to non-controlling interests | (190,354 | ) | (29,211 | ) | (163,108 | ) | (25,516 | ) | ||||||||
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions | (6,816 | ) | (466,554 | ) | (31,686 | ) | (521,510 | ) | ||||||||
Net loss attributable to Endeavor Group Holdings, Inc. | $ | (319,597 | ) | $ | 0 | $ | (319,597 | ) | $ | 0 | ||||||
Basic and diluted loss per share of Class A common stock (1) | $ | (1.24 | ) | N/A | $ | (1.24 | ) | N/A | ||||||||
Weighted average number of shares used in computing basic and diluted loss per share | 258,266,323 | N/A | 258,266,323 | N/A |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
| $ | 1,312,515 |
|
| $ | 1,111,272 |
|
| $ | 2,786,278 |
|
| $ | 2,180,854 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Direct operating costs |
|
| 508,385 |
|
|
| 570,955 |
|
|
| 1,203,026 |
|
|
| 1,117,347 |
|
Selling, general and administrative expenses |
|
| 587,499 |
|
|
| 785,101 |
|
|
| 1,127,705 |
|
|
| 1,166,214 |
|
Insurance recoveries |
|
| 0 |
|
|
| (10,210 | ) |
|
| (993 | ) |
|
| (29,867 | ) |
Depreciation and amortization |
|
| 65,612 |
|
|
| 69,161 |
|
|
| 131,606 |
|
|
| 136,397 |
|
Impairment charges |
|
| 0 |
|
|
| 3,770 |
|
|
| 0 |
|
|
| 3,770 |
|
Total operating expenses |
|
| 1,161,496 |
|
|
| 1,418,777 |
|
|
| 2,461,344 |
|
|
| 2,393,861 |
|
Operating income (loss) |
|
| 151,019 |
|
|
| (307,505 | ) |
|
| 324,934 |
|
|
| (213,007 | ) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
| (62,505 | ) |
|
| (83,836 | ) |
|
| (121,777 | ) |
|
| (152,187 | ) |
Loss on extinguishment of debt |
|
| 0 |
|
|
| (28,628 | ) |
|
| 0 |
|
|
| (28,628 | ) |
Tax receivable agreements liability adjustment |
|
| 2,405 |
|
|
| 0 |
|
|
| (51,092 | ) |
|
| 0 |
|
Other (expense) income, net |
|
| (6,133 | ) |
|
| 7,933 |
|
|
| 453,808 |
|
|
| 4,718 |
|
Income (loss) before income taxes and equity losses of affiliates |
|
| 84,786 |
|
|
| (412,036 | ) |
|
| 605,873 |
|
|
| (389,104 | ) |
Provision for (benefit from) income taxes |
|
| 2,699 |
|
|
| 60,918 |
|
|
| (14,535 | ) |
|
| 66,003 |
|
Income (loss) before equity losses of affiliates |
|
| 82,087 |
|
|
| (472,954 | ) |
|
| 620,408 |
|
|
| (455,107 | ) |
Equity losses of affiliates, net of tax |
|
| (39,867 | ) |
|
| (43,813 | ) |
|
| (60,522 | ) |
|
| (59,284 | ) |
Net income (loss) |
|
| 42,220 |
|
|
| (516,767 | ) |
|
| 559,886 |
|
|
| (514,391 | ) |
Less: Net income (loss) attributable to non-controlling interests |
|
| 16,414 |
|
|
| (190,354 | ) |
|
| 214,534 |
|
|
| (163,108 | ) |
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| 0 |
|
|
| (6,816 | ) |
|
| 0 |
|
|
| (31,686 | ) |
Net income (loss) attributable to Endeavor Group Holdings, Inc. |
| $ | 25,806 |
|
| $ | (319,597 | ) |
| $ | 345,352 |
|
| $ | (319,597 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings (loss) per share of Class A common stock(1): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.09 |
|
| $ | (1.24 | ) |
| $ | 1.27 |
|
| $ | (1.24 | ) |
Diluted |
| $ | 0.09 |
|
| $ | (1.24 | ) |
| $ | 1.24 |
|
| $ | (1.24 | ) |
Weighted average number of shares used in computing earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 281,623,228 |
|
|
| 258,266,323 |
|
|
| 275,092,484 |
|
|
| 258,266,323 |
|
Diluted |
|
| 449,733,965 |
|
|
| 258,266,323 |
|
|
| 446,419,024 |
|
|
| 258,266,323 |
|
(1) Basic and diluted loss per share of Class A common stock presented for 2021 is applicable only for the period from May 1, 2021 through June 30, 2021, which is the period following the initial public offering ("IPO") and the related Reorganization Transactions (as defined in note 1 to the unaudited consolidated financial statements). See Note 12 for the calculation of the numbers of shares used in computation of net loss per share of Class A common stock and the basis for computation of net loss per share.
See accompanying notes to consolidated financial statements
4
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended June 30, | Six months ended June 30, | ||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||
Net loss | $ | (516,767 | ) | $ | (495,765 | ) | $ | (514,391 | ) | $ | (547,026 | ) | |||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||
Change in unrealized gains/losses on cash flow hedges: | |||||||||||||||||
Unrealized gain lossess () on forward foreign exchange contracts | 1,570 | 988 | 212 | (2,124 | ) | ||||||||||||
Reclassification of losses to net loss for forward foreign exchange contracts | 7 | — | 7 | — | |||||||||||||
Unrealized (losses) gains on interest rate swaps | (1,802 | ) | (12,465 | ) | 13,274 | (92,464 | ) | ||||||||||
Reclassification of losses to net income (loss) for interest rate swaps | 7,552 | 5,483 | 14,936 | 6,912 | |||||||||||||
Foreign currency translation adjustments | 2,170 | 3,022 | (2,380 | ) | (11,460 | ) | |||||||||||
Reclassification of loss to net income (loss) for business divestiture | — | — | — | 4,231 | |||||||||||||
Total comprehensive loss, net of tax | (507,270 | ) | (498,737 | ) | (488,342 | ) | (641,931 | ) | |||||||||
Less: Comprehensive loss attributable tonon-controlling interests | (187,871 | ) | (29,211 | ) | (160,625 | ) | (25,516 | ) | |||||||||
Less: Comprehensive loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions | (3,703 | ) | (469,526 | ) | (12,021 | ) | (616,415 | ) | |||||||||
Comprehensive loss attributable to Endeavor Group Holdings, Inc. | $ | (315,696 | ) | $ | — | $ | (315,696 | ) | $ | — | |||||||
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income (loss) |
| $ | 42,220 |
|
| $ | (516,767 | ) |
| $ | 559,886 |
|
| $ | (514,391 | ) |
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in unrealized gains/losses on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized (losses) gains on forward foreign exchange contracts |
|
| (197 | ) |
|
| 1,570 |
|
|
| (13 | ) |
|
| 212 |
|
Reclassification of losses (gains) to net income (loss) for forward foreign exchange contracts |
|
| 0 |
|
|
| 7 |
|
|
| (786 | ) |
|
| 7 |
|
Unrealized gains (losses) on interest rate swaps |
|
| 14,031 |
|
|
| (1,802 | ) |
|
| 62,225 |
|
|
| 13,274 |
|
Reclassification of losses to net income (loss) for interest rate swaps |
|
| 7,159 |
|
|
| 7,552 |
|
|
| 14,492 |
|
|
| 14,936 |
|
Foreign currency translation adjustments |
|
| (39,178 | ) |
|
| 2,170 |
|
|
| (39,826 | ) |
|
| (2,380 | ) |
Reclassification of foreign currency translation gains to net income for business divestiture |
|
| 0 |
|
|
| 0 |
|
|
| (127 | ) |
|
| 0 |
|
Total comprehensive income (loss), net of tax |
|
| 24,035 |
|
|
| (507,270 | ) |
|
| 595,851 |
|
|
| (488,342 | ) |
Less: Comprehensive income (loss) attributable to non-controlling interests |
|
| 9,768 |
|
|
| (187,871 | ) |
|
| 228,383 |
|
|
| (160,625 | ) |
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| 0 |
|
|
| (3,703 | ) |
|
| 0 |
|
|
| (12,021 | ) |
Comprehensive income (loss) attributable to Endeavor Group Holdings, Inc. |
| $ | 14,267 |
|
| $ | (315,696 | ) |
| $ | 367,468 |
|
| $ | (315,696 | ) |
See accompanying notes to consolidated financial statements
5
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE INTERESTS AND SHAREHOLDERS’/ MEMBERS’ EQUITY
(In thousands)
(Unaudited)
Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Non- controlling | Redeemable | Members’ | Class A Common Stock | Class X Common Stock | Class Y Common Stock | Additional Paid- | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ Equity Attributable to Endeavor Group Holdings, Inc./ | Nonredeemable Non- controlling | Total Shareholders’/ | |||||||||||||||||||||||||||||||||||||||||||||||||
Interests | Equity | Capital | Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Deficit | Loss | Members’ Equity | Interests | Members’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at April 1, 2021 | $ | 168,773 | $ | 22,519 | $ | 447,320 | — | $ | — | — | $ | — | — | $ | — | $ | — | $ | — | $ | (174,234 | ) | $ | 273,086 | $ | 709,907 | $ | 982,993 | ||||||||||||||||||||||||||||||||
Comprehensive (loss) income prior to Reorganization and IPO | (2,013 | ) | — | (6,816 | ) | — | — | — | — | — | — | — | — | 3,113 | (3,703 | ) | 13,515 | 9,812 | ||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation expense prior to Reorganization and IPO | — | — | — | — | — | — | — | — | — | — | — | — | — | 1,630 | 1,630 | |||||||||||||||||||||||||||||||||||||||||||||
Distributions prior to Reorganization and IPO | — | — | 473 | — | — | — | — | — | — | — | — | — | 473 | (279 | ) | 194 | ||||||||||||||||||||||||||||||||||||||||||||
Effect of Reorganization | 5,729 | (22,519 | ) | (440,977 | ) | 133,712,566 | 1 | 122,021,609 | 1 | 167,208,026 | 2 | 242,017 | — | 80,645 | (118,311 | ) | 135,101 | 16,790 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock sold in IPO, including underwriters’ option, and Private Placement, net of underwriting discounts | — | — | — | 81,873,497 | 1 | — | — | — | — | 1,886,642 | — | — | 1,886,643 | — | 1,886,643 | |||||||||||||||||||||||||||||||||||||||||||||
Use of proceeds, including the UFC Buyout | — | — | — | 42,400,877 | — | 67,910,105 | — | 70,946,270 | — | (702,698 | ) | — | (11,955 | ) | (714,653 | ) | (120,386 | ) | (835,039 | ) | ||||||||||||||||||||||||||||||||||||||||
Comprehensive (loss) income subsequent to Reorganization and IPO | (1,694 | ) | — | — | — | — | — | — | — | — | — | (319,597 | ) | 3,901 | (315,696 | ) | (197,679 | ) | (513,375 | ) | ||||||||||||||||||||||||||||||||||||||||
Equity-based compensation subsequent to Reorganization and IPO | — | — | — | — | — | — | — | — | — | 158,846 | — | — | 158,846 | 276,864 | 435,710 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock due to exchanges subsequent to Reorganization and IPO | — | — | — | 1,880,196 | — | (1,851,331 | ) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock for vested RSUs subsequent to Reorganization and IPO | — | — | — | 1,504,547 | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Contributed capital subsequent to Reorganization and IPO | 5,400 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Distributions subsequent to Reorganization and IPO | — | — | — | — | — | — | — | — | — | (95 | ) | — | — | (95 | ) | — | (95 | ) | ||||||||||||||||||||||||||||||||||||||||||
Accretion of redeemable non-controlling interests subsequent to Reorganization and IPO | 867 | — | — | — | — | — | — | — | — | (867 | ) | — | — | (867 | ) | — | (867 | ) | ||||||||||||||||||||||||||||||||||||||||||
Establishment of non-controlling interests subsequent to Reorganization and IPO | 2,078 | — | — | — | — | — | — | — | — | — | — | — | — | (2,078 | ) | (2,078 | ) | |||||||||||||||||||||||||||||||||||||||||||
Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | — | — | — | — | 5,027 | — | — | 5,027 | (5,027 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
Establishment of tax receivable agreements liability | — | — | — | — | (32,081 | ) | — | — | (32,081 | ) | — | (32,081 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | 179,140 | $ | 0 | $ | — | 261,371,683 | $ | 2 | 188,080,383 | $ | 1 | 238,154,296 | $ | 2 | $ | 1,556,791 | $ | (319,597 | ) | $ | (98,530 | ) | $ | 1,138,669 | $ | 811,568 | $ | 1,950,237 | |||||||||||||||||||||||||||||||
Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Non- controlling | Redeemable | Members’ | Class A Common Stock | Class X Common Stock | Class Y Common Stock | Additional Paid- | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ Equity Attributable to Endeavor Group Holdings, Inc./ | Nonredeemable Non- controlling | Total Shareholders’/ | |||||||||||||||||||||||||||||||||||||||||||||||||
Interests | Equity | Capital | Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Deficit | (Loss) Income | Members’ Equity | Interests | Members’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2021 | $ | 168,254 | $ | 22,519 | $ | 468,633 | — | $ | — | — | $ | — | — | $ | — | $ | — | $ | — | $ | (190,786 | ) | $ | 277,847 | $ | 686,129 | $ | 963,976 | ||||||||||||||||||||||||||||||||
Comprehensive (loss) income prior to Reorganization and IPO | (4,111 | ) | — | (31,686 | ) | — | — | — | — | — | — | — | — | 19,665 | (12,021 | ) | 42,859 | 30,838 | ||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation expense prior to Reorganization and IPO | — | — | 3,444 | — | — | — | — | — | — | — | — | — | 3,444 | 7,636 | 11,080 | |||||||||||||||||||||||||||||||||||||||||||||
Distributions prior to Reorganization and IPO | — | — | (245 | ) | — | — | — | — | — | — | — | — | — | (245 | ) | (8,403 | ) | (8,648 | ) | |||||||||||||||||||||||||||||||||||||||||
Accretion of redeemable non-controlling interests prior to Reorganization and IPO | (271 | ) | — | 271 | — | — | — | — | — | — | — | — | — | 271 | — | 271 | ||||||||||||||||||||||||||||||||||||||||||||
Establishment of non-controlling interests prior to Reorganization and IPO | 2,888 | — | 560 | — | — | — | — | — | — | — | — | — | 560 | (3,448 | ) | (2,888 | ) | |||||||||||||||||||||||||||||||||||||||||||
Effect of Reorganization | 5,729 | (22,519 | ) | (440,977 | ) | 133,712,566 | 1 | 122,021,609 | 1 | 167,208,026 | 2 | 242,017 | — | 80,645 | (118,311 | ) | 135,101 | 16,790 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock sold in IPO, including underwriters’ option, and Private Placement, net of underwriting discounts | — | — | — | 81,873,497 | 1 | — | — | — | — | 1,886,642 | — | — | 1,886,643 | — | 1,886,643 | |||||||||||||||||||||||||||||||||||||||||||||
Use of proceeds, including the UFC Buyout | — | — | — | 42,400,877 | — | 67,910,105 | — | 70,946,270 | — | (702,698 | ) | — | (11,955 | ) | (714,653 | ) | (120,386 | ) | (835,039 | ) | ||||||||||||||||||||||||||||||||||||||||
Comprehensive (loss) income subsequent to Reorganization and IPO | (1,694 | ) | — | — | — | — | — | — | — | — | (319,597 | ) | 3,901 | (315,696 | ) | (197,679 | ) | (513,375 | ) | |||||||||||||||||||||||||||||||||||||||||
Equity-based compensation subsequent to Reorganization and IPO | — | — | — | — | — | — | — | — | — | 158,846 | — | — | 158,846 | 276,864 | 435,710 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock due to exchanges subsequent to Reorganization and IPO | — | — | — | 1,880,196 | — | (1,851,331 | ) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock for vested RSUs subsequent to Reorganization and IPO | — | — | — | 1,504,547 | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Contributed capital subsequent to Reorganization and IPO | 5,400 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Distributions subsequent to Reorganization and IPO | — | — | — | — | — | — | — | — | — | (95 | ) | — | — | (95 | ) | — | (95 | ) | ||||||||||||||||||||||||||||||||||||||||||
Accretion of redeemable non-controlling interests subsequent to Reorganization and IPO | 867 | — | — | — | — | — | — | — | — | (867 | ) | — | — | (867 | ) | — | (867 | ) | ||||||||||||||||||||||||||||||||||||||||||
Establishment of non-controlling interests subsequent to Reorganization and IPO | 2,078 | — | — | — | — | — | — | — | — | — | — | — | — | (2,078 | ) | (2,078 | ) | |||||||||||||||||||||||||||||||||||||||||||
Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | — | — | — | — | 5,027 | — | — | 5,027 | (5,027 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
Establishment of t agreements liability | — | — | — | — | (32,081 | ) | — | — | (32,081 | ) | — | (32,081 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | 179,140 | $ | 0 | $ | — | 261,371,683 | $ | 2 | 188,080,383 | $ | 1 | 238,154,296 | $ | 2 | $ | 1,556,791 | $ | (319,597 | ) | $ | (98,530 | ) | $ | 1,138,669 | $ | 811,568 | $ | 1,950,237 | |||||||||||||||||||||||||||||||
|
| Three Months Ended June 30, 2022 |
| |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||
|
| Non-controlling |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| Retained |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders' |
| |||||||||||||||||||
|
| Interests |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Earnings |
| Loss |
| Holdings, Inc. |
| Interests |
| Equity |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at April 1, 2022 |
| $ | 242,534 |
|
| 275,698,529 |
| $ | 2 |
|
| 176,967,757 |
| $ | 1 |
|
| 235,415,621 |
| $ | 2 |
| $ | 1,696,851 |
| $ | 22,921 |
| $ | (49,428 | ) | $ | 1,670,349 |
| $ | 1,053,575 |
| $ | 2,723,924 |
|
Comprehensive income |
|
| 481 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 25,806 |
|
| (11,539 | ) |
| 14,267 |
|
| 9,287 |
|
| 23,554 |
|
Equity-based compensation |
|
| (3,403 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 46,276 |
|
| — |
|
| — |
|
| 46,276 |
|
| 15,764 |
|
| 62,040 |
|
Issuance of Class A common stock due to exchanges |
|
| — |
|
| 1,753,968 |
|
| — |
|
| (1,767,352 | ) |
| — |
|
| (413,746 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Issuance of Class A common stock due to releases of RSUs |
|
| — |
|
| 1,695,638 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distributions |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (25,602 | ) |
| (25,602 | ) |
Accretion of redeemable non- controlling interests |
|
| 59,700 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (10,973 | ) |
| (48,727 | ) |
| — |
|
| (59,700 | ) |
| — |
|
| (59,700 | ) |
Issuance of Class A common stock due to an acquisition |
|
| — |
|
| 396,917 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 11,014 |
|
| — |
|
| — |
|
| 11,014 |
|
| — |
|
| 11,014 |
|
Establishment and acquisition of non-controlling interests |
|
| (250,682 | ) |
| 6,186,832 |
|
| — |
|
| 8,697,379 |
|
| — |
|
| — |
|
| — |
|
| 210,059 |
|
| — |
|
| — |
|
| 210,059 |
|
| 131,336 |
|
| 341,395 |
|
Non-controlling interests for sale of businesses |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Equity reallocation between controlling and non-controlling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8,730 |
|
| — |
|
| (298 | ) |
| 8,432 |
|
| (8,432 | ) |
| — |
|
Tax receivable agreements in connection with exchanges |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 94 |
|
| — |
|
| — |
|
| 94 |
|
| — |
|
| 94 |
|
Balance at June 30, 2022 |
| $ | 48,630 |
|
| 285,731,884 |
| $ | 2 |
|
| 183,897,784 |
| $ | 1 |
|
| 235,001,875 |
| $ | 2 |
| $ | 1,962,051 |
| $ | 0 |
| $ | (61,265 | ) | $ | 1,900,791 |
| $ | 1,175,928 |
| $ | 3,076,719 |
|
6
|
| Six Months Ended June 30, 2022 |
| |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
| Retained Earnings |
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||
|
| Non-controlling |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| (Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders' |
| |||||||||||||||||||
|
| Interests |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit) |
| Loss |
| Holdings, Inc. |
| Interests |
| Equity |
| |||||||||||||
Balance at January 1, 2022 |
| $ | 209,863 |
|
| 265,553,327 |
| $ | 2 |
|
| 186,222,061 |
| $ | 1 |
|
| 238,154,296 |
| $ | 2 |
| $ | 1,624,201 |
| $ | (296,625 | ) | $ | (80,535 | ) | $ | 1,247,046 |
| $ | 874,417 |
| $ | 2,121,463 |
|
Comprehensive income |
|
| 4,717 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 345,352 |
|
| 22,116 |
|
| 367,468 |
|
| 223,666 |
|
| 591,134 |
|
Equity-based compensation |
|
| (2,276 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 91,798 |
|
| — |
|
| — |
|
| 91,798 |
|
| 19,117 |
|
| 110,915 |
|
Issuance of Class A common stock due to exchanges |
|
| — |
|
| 10,987,413 |
|
| — |
|
| (11,021,656 | ) |
| — |
|
| (3,152,421 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Issuance of Class A common stock due to releases of RSUs |
|
| — |
|
| 2,607,395 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distributions |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (25,953 | ) |
| (25,953 | ) |
Accretion of redeemable non- controlling interests |
|
| 87,008 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (38,281 | ) |
| (48,727 | ) |
| — |
|
| (87,008 | ) |
| — |
|
| (87,008 | ) |
Issuance of Class A common stock due to an acquisition |
|
| — |
|
| 396,917 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 11,014 |
|
| — |
|
| — |
|
| 11,014 |
|
| — |
|
| 11,014 |
|
Establishment and acquisition of non-controlling interests |
|
| (250,682 | ) |
| 6,186,832 |
|
| — |
|
| 8,697,379 |
|
| — |
|
| — |
|
| — |
|
| 211,405 |
|
| — |
|
| — |
|
| 211,405 |
|
| 135,090 |
|
| 346,495 |
|
Non-controlling interests for sale of businesses |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7,884 |
|
| 7,884 |
|
Equity reallocation between controlling and non-controlling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 61,139 |
|
| — |
|
| (2,846 | ) |
| 58,293 |
|
| (58,293 | ) |
| — |
|
Tax receivable agreements in connection with exchanges |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 775 |
|
| — |
|
| — |
|
| 775 |
|
| — |
|
| 775 |
|
Balance at June 30, 2022 |
| $ | 48,630 |
|
| 285,731,884 |
| $ | 2 |
|
| 183,897,784 |
| $ | 1 |
|
| 235,001,875 |
| $ | 2 |
| $ | 1,962,051 |
| $ | 0 |
| $ | (61,265 | ) | $ | 1,900,791 |
| $ | 1,175,928 |
| $ | 3,076,719 |
|
See accompanying notes to consolidated financial statements
7
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE INTERESTS AND SHAREHOLDERS’/ MEMBERS’MEMBERS' EQUITY
(In thousands)
(Unaudited)
Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||
Redeemable Non- controlling Interests | Redeemable Equity | Members’ Capital | Accumulated Other Comprehensive (Loss) Income | Total Endeavor Operating Company, LLC Members’ Equity | Nonredeemable Non-controlling Interests | Total Members’ Equity | ||||||||||||||||||||||
Balance at April 1, 2020 | $ | 197,768 | $ | 43,693 | $ | 1,016,206 | $ | (217,337 | ) | $ | 798,869 | $ | 672,784 | $ | 1,471,653 | |||||||||||||
Comprehensive (loss) income | (20,712 | ) | — | (466,554 | ) | (2,972 | ) | (469,526 | ) | (8,499 | ) | (478,025 | ) | |||||||||||||||
Equity-based compensation expense | — | — | 5,339 | — | 5,339 | 2,876 | 8,215 | |||||||||||||||||||||
Distributions | — | — | (252 | ) | — | (252 | ) | (399 | ) | (651 | ) | |||||||||||||||||
Accretion of redeemable non-controlling interests | (1,752 | ) | — | 1,752 | — | 1,752 | — | 1,752 | ||||||||||||||||||||
Redemption of units | — | — | (7,071 | ) | — | (7,071 | ) | — | (7,071 | ) | ||||||||||||||||||
Balance at June 30, 2020 | $ | 175,304 | $ | 43,693 | $ | 549,420 | $ | (220,309 | ) | $ | 329,111 | $ | 666,762 | $ | 995,873 | |||||||||||||
Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||
Redeemable Non-controlling Interests | Redeemable Equity | Members’ Capital | Accumulated Other Comprehensive (Loss) Income | Total Endeavor Operating Company, LLC Members’ Equity | Nonredeemable Non-controlling Interests | Total Members’ Equity | ||||||||||||||||||||||
Balance at January 1, 2020 | $ | 136,809 | $ | 43,693 | $ | 1,038,678 | $ | (125,404 | ) | $ | 913,274 | $ | 774,309 | $ | 1,687,583 | |||||||||||||
Cumulative transition adjustment of ASU 2016-13 adoption | — | — | (1,803 | ) | — | (1,803 | ) | — | (1,803 | ) | ||||||||||||||||||
Comprehensive (loss) income | (18,608 | ) | — | (521,510 | ) | (94,905 | ) | (616,415 | ) | (6,908 | ) | (623,323 | ) | |||||||||||||||
Equity-based compensation expense | — | — | 9,166 | — | 9,166 | 5,812 | 14,978 | |||||||||||||||||||||
Contributions | — | — | 26,476 | — | 26,476 | — | 26,476 | |||||||||||||||||||||
Distributions | — | — | (2,470 | ) | — | (2,470 | ) | (110,339 | ) | (112,809 | ) | |||||||||||||||||
Accretion of redeemable non-controlling interests | (8,101 | ) | — | 8,101 | — | 8,101 | — | 8,101 | ||||||||||||||||||||
Redemption of units | — | — | (7,218 | ) | — | (7,218 | ) | — | (7,218 | ) | ||||||||||||||||||
Acquisition of non-controlling interests | 65,204 | — | — | — | — | 5,635 | 5,635 | |||||||||||||||||||||
Business deconsolidation | — | — | — | — | — | (1,747 | ) | (1,747 | ) | |||||||||||||||||||
Balance at June 30, 2020 | $ | 175,304 | $ | 43,693 | $ | 549,420 | $ | (220,309 | ) | $ | 329,111 | $ | 666,762 | $ | 995,873 | |||||||||||||
|
| Three Months Ended June 30, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||||
|
| Non-controlling |
|
| Redeemable |
|
|
| Members' |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders'/ |
| |||||||||||||||||||||
|
| Interests |
|
| Equity |
|
|
| Capital |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Holdings, Inc. |
| Interests |
| Members' Equity |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at April 1, 2021 |
| $ | 168,773 |
|
| $ | 22,519 |
|
|
| $ | 447,320 |
|
| — |
| $ | — |
|
| — |
| $ | — |
|
| — |
| $ | — |
| $ | — |
| $ | — |
| $ | (174,234 | ) | $ | 273,086 |
| $ | 709,907 |
| $ | 982,993 |
|
Comprehensive (loss) income prior to Reorganization and IPO |
|
| (2,013 | ) |
|
| — |
|
|
|
| (6,816 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,113 |
|
| (3,703 | ) |
| 13,515 |
|
| 9,812 |
|
Equity-based compensation expense prior to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,630 |
|
| 1,630 |
|
Distributions prior to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| 473 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 473 |
|
| (279 | ) |
| 194 |
|
Effect of Reorganization |
|
| 5,729 |
|
|
| (22,519 | ) |
|
|
| (440,977 | ) |
| 133,712,566 |
|
| 1 |
|
| 122,021,609 |
|
| 1 |
|
| 167,208,026 |
|
| 2 |
|
| 242,017 |
|
| — |
|
| 80,645 |
|
| (118,311 | ) |
| 135,101 |
|
| 16,790 |
|
Issuance of Class A common stock sold in IPO, including underwriters' option, and Private Placement, net of underwriting discounts |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 81,873,497 |
|
| 1 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,886,642 |
|
| — |
|
| — |
|
| 1,886,643 |
|
| — |
|
| 1,886,643 |
|
Use of proceeds, including the UFC Buyout |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 42,400,877 |
|
| — |
|
| 67,910,105 |
|
| — |
|
| 70,946,270 |
|
| — |
|
| (702,698 | ) |
| — |
|
| (11,955 | ) |
| (714,653 | ) |
| (120,386 | ) |
| (835,039 | ) |
Comprehensive (loss) income subsequent to Reorganization and IPO |
|
| (1,694 | ) |
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (319,597 | ) |
| 3,901 |
|
| (315,696 | ) |
| (197,679 | ) |
| (513,375 | ) |
Equity-based compensation subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 158,846 |
|
| — |
|
| — |
|
| 158,846 |
|
| 276,864 |
|
| 435,710 |
|
Issuance of Class A common stock due to exchanges subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 1,880,196 |
|
| — |
|
| (1,851,331 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
8
Issuance of Class A common stock due to vested RSUs subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 1,504,547 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Contributed capital subsequent to Reorganization and IPO |
|
| 5,400 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distributions subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (95 | ) |
| — |
|
| — |
|
| (95 | ) |
| — |
|
| (95 | ) |
Accretion of redeemable non-controlling interests subsequent to Reorganization and IPO |
|
| 867 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (867 | ) |
| — |
|
| — |
|
| (867 | ) |
| — |
|
| (867 | ) |
Establishment of non-controlling interests subsequent to Reorganization and IPO |
|
| 2,078 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,078 | ) |
| (2,078 | ) |
Equity reallocation between controlling and non-controlling interests |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,027 |
|
| — |
|
| — |
|
| 5,027 |
|
| (5,027 | ) |
| - |
|
Establishment of tax receivable agreements liability |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (32,081 | ) |
| — |
|
| — |
|
| (32,081 | ) |
| — |
|
| (32,081 | ) |
Balance at June 30, 2021 |
| $ | 179,140 |
|
| $ | — |
|
|
| $ | — |
|
| 261,371,683 |
| $ | 2 |
|
| 188,080,383 |
| $ | 1 |
|
| 238,154,296 |
| $ | 2 |
| $ | 1,556,791 |
| $ | (319,597 | ) | $ | (98,530 | ) | $ | 1,138,669 |
| $ | 811,568 |
| $ | 1,950,237 |
|
See accompanying notes to consolidated financial statements
9
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net loss | $ | (514,391 | ) | $ | (547,026 | ) | ||||||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 136,397 | 165,198 | ||||||||||||||
Amortization and write-off of original issue discount and deferred financing cost | 28,807 | 10,393 | ||||||||||||||
Loss on extinguishment of debt | 28,628 | — | ||||||||||||||
Amortization of content costs | 73,282 | 25,085 | ||||||||||||||
Impairment charges | 3,770 | 175,282 | ||||||||||||||
(Gain) loss on sale/disposal and impairment of assets | (2,512 | ) | 82 | |||||||||||||
Gain on business acquisition and deconsolidation | — | (30,999 | ) | |||||||||||||
Equity-based compensation expense | 403,508 | 16,975 | ||||||||||||||
Change in fair value of contingent liabilities | 14,378 | (7,048 | ) | |||||||||||||
Change in fair value of equity investments with and without readily determinable fair value | (11,285 | ) | 5,709 | |||||||||||||
Change in fair value of financial instruments | 21,034 | (17,644 | ) | |||||||||||||
Equity losses from affiliates | 59,284 | 209,807 | ||||||||||||||
Net (benefit) provision for allowance for doubtful accounts | (3,916 | ) | 17,676 | |||||||||||||
Net gain on foreign currency transactions | (5,156 | ) | (5,730 | ) | ||||||||||||
Distributions from affiliates | 902 | 4,675 | ||||||||||||||
Income taxes | 42,342 | 29,615 | ||||||||||||||
Other, net | 174 | 718 | ||||||||||||||
Changes in operating assets and liabilities - net of acquisitions: | ||||||||||||||||
(Increase)/decrease in receivables | (141,807 | ) | 247,061 | |||||||||||||
Decrease/(increase) in other current assets | 2,325 | (59,024 | ) | |||||||||||||
Increase in other assets | (490,715 | ) | (104,235 | ) | ||||||||||||
Decrease in deferred costs | 84,250 | 106,121 | ||||||||||||||
Increase in deferred revenue | 124,524 | 112,091 | ||||||||||||||
Increase/(decrease) in accounts payable and accrued liabilities | 44,394 | (77,270 | ) | |||||||||||||
Decrease in other liabilities | (20,416 | ) | (75,607 | ) | ||||||||||||
Net cash (used in) provided by operating activities | (122,199 | ) | 201,905 | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Acquisitions, net of cash acquired | (255,633 | ) | (309,803 | ) | ||||||||||||
Purchases of property and equipment | (27,107 | ) | (40,813 | ) | ||||||||||||
Proceeds from sale of assets | 19,237 | 83,007 | ||||||||||||||
Investments in affiliates | (113,959 | ) | (21,075 | ) | ||||||||||||
Other, net | 4,897 | (1,997 | ) | |||||||||||||
Net cash used in investing activities | (372,565 | ) | (290,681 | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from borrowings | 220,841 | 1,081,677 | ||||||||||||||
Payments on borrowings | (852,341 | ) | (437,065 | ) | ||||||||||||
Contributions | 5,400 | — | ||||||||||||||
Distributions | (8,743 | ) | (69,557 | ) | ||||||||||||
Redemption of units | (14,402 | ) | (5,947 | ) | ||||||||||||
Proceeds from equity offering, net of underwriting discounts and offering expenses | 1,886,643 | — | ||||||||||||||
Payments of contingent consideration related to acquisitions | (1,778 | ) | (2,320 | ) | ||||||||||||
Acquisition of non-controlling interests | (835,683 | ) | — | |||||||||||||
Other, net | (2,439 | ) | (16,115 | ) | ||||||||||||
Net cash provided by financing activities | 397,498 | 550,673 | ||||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 1,055 | (6,418 | ) | |||||||||||||
(Decrease) increase in cash, cash equivalents and restricted cash | (96,211 | ) | 455,479 | |||||||||||||
Cash, cash equivalents and restricted cash at beginning of year | 1,190,333 | 886,073 | ||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 1,094,122 | $ | 1,341,552 | ||||||||||||
|
| Six Months Ended June 30, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||||
|
| Non-controlling |
|
| Redeemable |
|
|
| Members' |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders'/ |
| |||||||||||||||||||||
|
| Interests |
|
| Equity |
|
|
| Capital |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Holdings, Inc. |
| Interests |
| Members' Equity |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at January 1, 2021 |
| $ | 168,254 |
|
| $ | 22,519 |
|
|
| $ | 468,633 |
|
| — |
| $ | — |
|
| — |
| $ | — |
|
| — |
| $ | — |
| $ | — |
| $ | — |
| $ | (190,786 | ) | $ | 277,847 |
| $ | 686,129 |
| $ | 963,976 |
|
Comprehensive (loss) income prior to reorganization and IPO |
|
| (4,111 | ) |
|
| — |
|
|
|
| (31,686 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 19,665 |
|
| (12,021 | ) |
| 42,859 |
|
| 30,838 |
|
Equity-based compensation expense prior to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| 3,444 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,444 |
|
| 7,636 |
|
| 11,080 |
|
Distributions prior to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| (245 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (245 | ) |
| (8,403 | ) |
| (8,648 | ) |
Accretion of redeemable non-controlling interests prior to Reorganization and IPO |
|
| (271 | ) |
|
| — |
|
|
|
| 271 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 271 |
|
| — |
|
| 271 |
|
Establishment of non-controlling interests prior to Reorganization and IPO |
|
| 2,888 |
|
|
| — |
|
|
|
| 560 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 560 |
|
| (3,448 | ) |
| (2,888 | ) |
Effects of Reorganization |
|
| 5,729 |
|
|
| (22,519 | ) |
|
|
| (440,977 | ) |
| 133,712,566 |
|
| 1 |
|
| 122,021,609 |
|
| 1 |
|
| 167,208,026 |
|
| 2 |
|
| 242,017 |
|
| — |
|
| 80,645 |
|
| (118,311 | ) |
| 135,101 |
|
| 16,790 |
|
Issuance of Class A common stock sold in IPO, including underwriters' option, and Private Placement, net of underwriting discounts |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 81,873,497 |
|
| 1 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,886,642 |
|
| — |
|
|
|
| 1,886,643 |
|
|
|
| 1,886,643 |
| ||
Use of proceeds, including the UFC buyout |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 42,400,877 |
|
| — |
|
| 67,910,105 |
|
| — |
|
| 70,946,270 |
|
| — |
|
| (702,698 | ) |
| — |
|
| (11,955 | ) |
| (714,653 | ) |
| (120,386 | ) |
| (835,039 | ) |
Comprehensive (loss) income subsequent to reorganization and IPO |
|
| (1,694 | ) |
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| (319,597 | ) |
| 3,901 |
|
| (315,696 | ) |
| (197,679 | ) |
| (513,375 | ) | |
Equity-based compensation expense subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 158,846 |
|
| — |
|
| — |
|
| 158,846 |
|
| 276,864 |
|
| 435,710 |
|
Issuance of Class A common stock due to exchanges subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 1,880,196 |
|
| — |
|
| (1,851,331 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
10
Issuance of Class A common stock for vested RSUs subsequent to reorganization and IPO |
|
|
|
|
|
|
|
|
|
|
| 1,504,547 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||
Contributed capital subsequent to Reorganization and IPO |
|
| 5,400 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distributions subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (95 | ) |
| — |
|
| — |
|
| (95 | ) |
| — |
|
| (95 | ) |
Accretion of redeemable non-controlling interests subsequent to Reorganization and IPO |
|
| 867 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (867 | ) |
| — |
|
| — |
|
| (867 | ) |
| — |
|
| (867 | ) |
Establishment of non-controlling interests subsequent to Reorganization and IPO |
|
| 2,078 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,078 | ) |
| (2,078 | ) |
Equity reallocation between controlling and non-controlling interests |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,027 |
|
| — |
|
| — |
|
| 5,027 |
|
| (5,027 | ) |
| — |
|
Establishment of tax receivable agreements liability |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (32,081 | ) |
| — |
|
| — |
|
| (32,081 | ) |
| — |
|
| (32,081 | ) |
Balance at June 30, 2021 |
| $ | 179,140 |
|
| $ | — |
|
|
| $ | — |
|
| 261,371,683 |
| $ | 2 |
|
| 188,080,383 |
| $ | 1 |
|
| 238,154,296 |
| $ | 2 |
| $ | 1,556,791 |
| $ | (319,597 | ) | $ | (98,530 | ) | $ | 1,138,669 |
| $ | 811,568 |
| $ | 1,950,237 |
|
See accompanying notes to consolidated financial statements
11
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net income (loss) |
| $ | 559,886 |
|
| $ | (514,391 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 131,606 |
|
|
| 136,397 |
|
Amortization and write-off of original issue discount and deferred financing cost |
|
| 10,202 |
|
|
| 28,807 |
|
Loss on extinguishment of debt |
|
| 0 |
|
|
| 28,628 |
|
Amortization of content costs |
|
| 13,687 |
|
|
| 73,282 |
|
Impairment charges |
|
| 0 |
|
|
| 3,770 |
|
Loss (gain) on sale/disposal and impairment of assets |
|
| 2,333 |
|
|
| (2,512 | ) |
Gain on business divestiture |
|
| (478,641 | ) |
|
| 0 |
|
Equity-based compensation expense |
|
| 111,463 |
|
|
| 403,508 |
|
Change in fair value of contingent liabilities |
|
| 2,216 |
|
|
| 14,378 |
|
Change in fair value of equity investments with and without readily determinable fair value |
|
| (13,542 | ) |
|
| (11,285 | ) |
Change in fair value of financial instruments |
|
| 13,634 |
|
|
| 21,034 |
|
Equity losses of affiliates |
|
| 60,522 |
|
|
| 59,284 |
|
Net provision for (benefit from) allowance for doubtful accounts |
|
| 7,520 |
|
|
| (3,916 | ) |
Net loss (gain) on foreign currency transactions |
|
| 17,762 |
|
|
| (5,156 | ) |
Distributions from affiliates |
|
| 3,586 |
|
|
| 902 |
|
Tax receivable agreements liability adjustment |
|
| 51,092 |
|
|
| 0 |
|
Income taxes |
|
| (31,182 | ) |
|
| 42,342 |
|
Other, net |
|
| 174 |
|
|
| 174 |
|
Changes in operating assets and liabilities - net of acquisitions and divestiture: |
|
|
|
|
|
| ||
Increase in receivables |
|
| (242,321 | ) |
|
| (141,807 | ) |
(Increase)/decrease in other current assets |
|
| (107,451 | ) |
|
| 2,325 |
|
Increase in other assets |
|
| (81,938 | ) |
|
| (490,715 | ) |
Decrease in deferred costs |
|
| 25,584 |
|
|
| 84,250 |
|
(Decrease)/increase in deferred revenue |
|
| (95,481 | ) |
|
| 124,524 |
|
Increase in accounts payable and accrued liabilities |
|
| 38,318 |
|
|
| 44,394 |
|
Increase/(decrease) in other liabilities |
|
| 214,017 |
|
|
| (20,416 | ) |
Net cash provided by (used in) operating activities |
|
| 213,046 |
|
|
| (122,199 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Acquisitions, net of cash acquired |
|
| (431,105 | ) |
|
| (255,633 | ) |
Purchases of property and equipment |
|
| (55,796 | ) |
|
| (27,107 | ) |
Proceeds from business divestiture, net of cash sold |
|
| 649,706 |
|
|
| 0 |
|
Proceeds from sale of assets |
|
| 415 |
|
|
| 19,237 |
|
Investments in affiliates |
|
| (41,214 | ) |
|
| (113,959 | ) |
Other, net |
|
| 1,148 |
|
|
| 4,897 |
|
Net cash provided by (used in) investing activities |
|
| 123,154 |
|
|
| (372,565 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Proceeds from borrowings |
|
| 10,037 |
|
|
| 220,841 |
|
Payments on borrowings |
|
| (49,887 | ) |
|
| (852,341 | ) |
Contributions |
|
| 0 |
|
|
| 5,400 |
|
Distributions |
|
| (25,953 | ) |
|
| (8,743 | ) |
Redemption payments related to pre-IPO units |
|
| (7,067 | ) |
|
| (14,402 | ) |
Proceeds from equity offering, net of underwriting discounts and offering expenses |
|
| 0 |
|
|
| 1,886,643 |
|
Acquisition of non-controlling interests |
|
| 92,487 |
|
|
| (835,683 | ) |
Payments of contingent consideration related to acquisitions |
|
| (11,644 | ) |
|
| (1,778 | ) |
Other, net |
|
| (777 | ) |
|
| (2,439 | ) |
Net cash provided by financing activities |
|
| 7,196 |
|
|
| 397,498 |
|
Change in cash, cash equivalents and restricted cash balances held for sale |
|
| 28,743 |
|
|
| 0 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (16,264 | ) |
|
| 1,055 |
|
Increase (decrease) in cash, cash equivalents and restricted cash |
|
| 355,875 |
|
|
| (96,211 | ) |
Cash, cash equivalents and restricted cash at beginning of year |
|
| 1,793,036 |
|
|
| 1,190,333 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 2,148,911 |
|
| $ | 1,094,122 |
|
See accompanying notes to consolidated financial statements
12
ENDEAVOR GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Endeavor Group Holdings, Inc. (the “Company”"Company" or “EGH”"EGH") was incorporated as a Delaware corporation in January 2019. The Company was formed as a holding company for the purpose of completing an initial public offering (“IPO”("IPO") and other related transactions in order to carry on the business of Endeavor Operating Company, LLC (d.b.a. Endeavor) and its subsidiaries (collectively, “Endeavor”"Endeavor" or “EOC”"EOC"). As the sole managing member of Endeavor Manager, LLC (“("Endeavor Manager”Manager"), which in turn is the sole managing member of EOC, the Company operates and controls all the business and affairs of Endeavor, and through Endeavor and its subsidiaries, conducts the Company’s business. The Company is a global entertainment, sports and contententertainment company.
Prior to the IPO, Endeavor was owned by WME Holdco, LLC (which is referred to as “Holdco”"Holdco" herein and iswas principally owned by executive employees of the Company), affiliates of Silver Lake (which are collectively referred to as “Silver Lake”"Silver Lake" herein), and other investors and executive employees of the Company.
Initial Public Offering
On May 3, 2021, the Company closed an IPO of 24,495,000 shares of Class A common stock at a public offering price of $24.00$24.00 per share, which included 3,195,000 shares of Class A common stock issued pursuant to the underwriters’ option to purchase additional shares of Class A common stock. This option to purchase additional shares of Class A common stock was closed on May 12, 2021.
Reorganization Transactions
Prior to the closing of the IPO, a series of reorganization transactions (the “Reorganization Transactions”) was completed:
Class of Common Stock | Par Value | Votes | Economic Rights | |||||
Class A common stock | $ | 0.00001 | 1 | Yes | ||||
Class B common stock | $ | 0.00001 | None | Yes | ||||
Class C common stock | $ | 0.00001 | None | Yes | ||||
Class X common stock | $ | 0.00001 | 1 | None | ||||
Class Y common stock | $ | 0.00001 | 20 | None |
Basis of Presentation
The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”("SEC") for reporting interim financial information and should be read in conjunction with the Company’s consolidated financial statements and accompanying footnotes in our prospectus dated April 28, 2021, filed withAnnual Report on Form 10-K for the SEC on April 30, 2021 pursuant to Rule 424(b) of the Securities Act of 1933, as amended (referred to herein as the “Prospectus”).year ended December 31, 2021. Certain information and note disclosures normally included in the annual financial statements have been condensed or omitted from these interim financial statements. The interim consolidated financial statements as of June 30, 20212022 and for the three and six months ended June 30, 20212022 and 20202021 are unaudited; however, in the opinion of management, such interim consolidated financial statements reflect all adjustments, consisting solely of normal and recurring adjustments, necessary for a fair statement of its financial position, results of operations and cash flows for the interim periods presented.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying disclosures.
Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, allowance for doubtful accounts, content cost amortization and impairment, the fair value of acquired assets and liabilities associated with acquisitions, the fair value of the Company’s reporting units and the assessment of goodwill, other intangible assets and long-lived assets for impairment, consolidation, investments, redeemable
Management evaluates these estimates using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s consolidated financial statements in future periods.
Recently Adopted Accounting Pronouncements
In JanuaryAugust 2020, the Financial Accounting Standards Board (“FASB”("FASB") issued Accounting Standards Update (“ASU”("ASU")2020-01,Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging(Topic 815): Clarifying the Interactions between Topic 321, Topic 323 and Topic 815(“ASU2020-01”).ASU2020-01clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the fair value measurement alternative. This ASU is effective for annual and interim reporting periods beginning after December 15, 2020. The Company adopted this new guidance on January 1, 2021 with no material impact on its consolidated financial statements.
13
this update arewere effective for public entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. EarlyThe adoption is permitted. The Company is currently evaluatingdid not have a material effect on the effectCompany’s financial position or results of this update on its consolidated financial statements.operations.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASUReporting.Reporting. This ASU provides optional expedients and exceptions for applyingcurrently evaluatingin the effectprocess of assessing the impact of this updateASU on its consolidated financial statements.
In March 2020,2022, the World Health Organization declaredFASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. This ASU clarifies the outbreakguidance in ASC 815 on fair value hedge accounting ofCOVID-19a pandemic. interest rate risk for portfolios of financial assets, expanding the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets. TheCOVID-19pandemic has rapidly changed market and economic conditions globally and has significantly impacted the entertainment and sports industries. amendments in this update are effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. TheCOVID-19pandemic resulted in various governmental restrictions, including government-mandatedstay-at-homeorders, travel restrictions and limitations on social or public gatherings, and began to adoption will not have a significant adverse impact on the Company’s business and operations beginning in March 2020. In particular, this led to a lack of live ticketed events as well as the postponement or cancellation of live sporting events and otherin-personevents, including concerts, fashion shows, public appearances, and experiential marketing events. In addition, many entertainment productions, including film and television shows, were put on hiatus.
In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and financial condition may changeVintage Disclosures. This ASU eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the future, and such changes could be material. Additionally, changesguidance on "vintage disclosures" to estimatesrequire disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. For entities that have already adopted ASU 2016-13, theCOVID-19disruptions could result amendments in other impacts,this update are effective for public entities for fiscal years beginning after December 15, 2022, including butinterim periods within those fiscal years. The adoption will not limited to, additional goodwill, indefinite lived intangibles, long-lived assets and equity-method investment impairment charges, and increased valuation allowances for deferred tax assets. Such changes will be recognized in the period in which they occur.
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This ASU clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The adoption will not have a material effect on the Company’s financial position or results of operations.
2022 ACQUISITIONS
Diamond Baseball Holdings and Madrid Open
In January 2022, the Company acquired four additional Professional Development League clubs (the "PDL Clubs"), which are being operated under the Diamond Baseball Holdings ("DBH") umbrella. DBH will support the PDL Clubs' commercial activities, content strategy and media rights. For these four additional PDL Clubs, the Company paid $64.2 million in cash. In April 2022, the Company acquired the Mutua Madrid Open tennis tournament and additional assets ("Madrid Open"), including the Acciona Open de España golf tournament, from Super Slam Ltd and its affiliates. The Company paid $386.1 million for consideration and transfer fees at closing, an additional $31.8 million of consideration is payable within two years of closing, and $0.6 million of contingent consideration payable within three years of closing.
The Company incurred $7.5 million in transaction related costs in connection with these acquisitions. The costs were expensed as incurred and included in selling, general and administrative expenses in the consolidated statement of operations. The Company’s primary needgoodwill for liquiditythe PDL Clubs was assigned to the Owned Sports Properties segment and the goodwill for the Madrid Open acquisition was assigned to the Events, Experiences & Rights segment. The goodwill is to fund working capital requirements, debt service obligations, acquisitionsdeductible for tax purposes. The weighted average life of finite-lived intangible assets acquired for these four PDL Clubs is 18.7 years and capital expenditures. Asthe intangibles acquired for Madrid Open are indefinite-lived.
The results of these four PDL Clubs and the Madrid Open have been included in the consolidated financial statements since the dates of acquisition. For the six months ended June 30, 2021,2022, these four PDL Clubs and Madrid Open's consolidated revenue and net income included in the consolidated statement of operations from the acquisition dates were $72.2 million and $33.3 million, respectively.
14
Preliminary Allocation of Purchase Price
The acquisitions were accounted for as business combinations and the preliminary fair values of the assets acquired and liabilities assumed in the business combinations are as follows (in thousands):
|
| DBH |
|
| Madrid Open |
| ||
Cash and cash equivalents |
| $ | 0 |
|
| $ | 18,659 |
|
Accounts receivable |
|
| 89 |
|
|
| 2,123 |
|
Deferred costs |
|
| 0 |
|
|
| 1,124 |
|
Other current assets |
|
| 491 |
|
|
| 470 |
|
Property and equipment |
|
| 4,403 |
|
|
| 162 |
|
Right of use assets |
|
| 7,270 |
|
|
| 0 |
|
Other assets |
|
| 103 |
|
|
| 381 |
|
Intangible assets: |
|
|
|
|
|
| ||
Customer relationships |
|
| 1,960 |
|
|
| 0 |
|
Owned Events |
|
| 0 |
|
|
| 407,070 |
|
Other |
|
| 35,410 |
|
|
| 0 |
|
Goodwill |
|
| 25,556 |
|
|
| 15,385 |
|
Accounts payable and accrued expenses |
|
| (93 | ) |
|
| (1,609 | ) |
Other current liabilities |
|
| (56 | ) |
|
| 0 |
|
Operating lease liability |
|
| (9,470 | ) |
|
| 0 |
|
Deferred revenue |
|
| (1,426 | ) |
|
| (20,780 | ) |
Other liabilities |
|
| 0 |
|
|
| (4,474 | ) |
Net assets acquired |
| $ | 64,237 |
|
| $ | 418,511 |
|
The estimated fair values of assets acquired and liabilities assumed are preliminary and subject to change as we finalize purchase price allocations, which is expected within one year of the respective acquisitions.
Other 2022 Acquisition
In May 2022, the Company completed another acquisition for a total purchase price of $15.6 million in return for a 73.5% controlling interest. The Company paid $4.6 million in cash and issued 396,917 shares of EGH Class A common stock valued at $11.0 million. The Company recorded $10.8 million of goodwill and $3.4 million of intangible assets, of which the weighted average useful life ranges from 5 to 7 years. The goodwill was assigned to the Events, Experiences & Rights segment and is not deductible for tax purposes.
2022 DIVESTITURE
In February 2021, the Company signed a new franchise agreement and side letter (the "Franchise Agreements") directly with the Writer’s Guild of America East and the Writer’s Guild of America West (collectively, the "WGA"). These Franchise Agreements included terms that, among other things, prohibited the Company from (a) negotiating packaging deals after June 30, 2022 and (b) having more than a 20% non-controlling ownership or other financial interest in, or being owned or affiliated with any individual or entity that has more than a 20% non-controlling ownership or other financial interest in, any entity or individual engaged in the production or distribution of works written by WGA members under a WGA collective bargaining agreement. As a result, in the third quarter of 2021, the Company began marketing the restricted Endeavor Content business for sale and such assets and liabilities were reflected as held for sale in the consolidated balance sheet as of December 31, 2021. The sale of 80% of the restricted Endeavor Content business closed in January 2022. The Company received cash equivalents totaled $869.8proceeds of $666.3 million includingand divested $16.6 million of cash held atnon-whollyowned consolidated subsidiaries whereand restricted cash distributions may be subject to restriction under applicable operating agreements or debt agreements and, due to such restrictions, may not be readily available to service obligations outsideon the date of those subsidiaries. These balances, which primarily consistsale. The retained 20% interest of the restricted Endeavor China and OLE, were $75 millionContent business is reflected as an equity method investment as of June 30, 2021.
2022 HELD FOR SALE
In the second quarter of 2022, the Company believesbegan marketing a business for sale and due to the progression of the sale process determined that existing cash, cash generated from operationsit met all of the criteria to be classified as held for sale as of June 30, 2022. The business is included in the Company's Events, Experiences & Rights reporting segment. The assets and available capacityliabilities of this business held for borrowings under its credit facilities will satisfy working capital requirements, capital expenditures,sale are $19.7 million and debt service requirements$5.0 million, respectively, which are not material to the Company’s overall financial position. An agreement to sell the business was executed in August 2022 for at leastconsideration of $20.0 million in cash. The sale is expected to close in the succeeding year.
2021 ACQUISITIONS
FlightScope and Next College Student Athlete
In April 2021, the Company acquired the issued and outstanding equity interests of EDH Tennis Limited, the holding company of FlightScope Services sp.Sp. z o.o., comprising the services business of FlightScope (collectively, “FlightScope”). FlightScope is a data collection, audio-visual production and tracking technology specialist for golf and tennis events. In June 2021, the Company acquired
15
acquired Path-to-College businesses, “NCSA”). NCSA consists of companies that offer recruiting and admissions services and related software products to high school student athletes, as well as college athletic departments and admissions officers. The combined aggregate purchase price for these two acquisitions was
The Company
The goodwill for FlightScope and NCSA was assigned to the Events, Experiences & Rights segment. The goodwill is partially deductible for tax purposes. The weighted average life of finite-lived intangible assets acquired for FlightScope and NCSA is 4.4 and 5.2 years, respectively.
Allocation of Purchase Price
The acquisitions were accounted for as business combinations and the preliminary fair values of the assets acquired and liabilities assumed in the business combinations are as follows (in thousands):
|
| FlightScope |
|
| NCSA |
| ||
Cash and cash equivalents |
| $ | 1,042 |
|
| $ | 3,655 |
|
Accounts receivable |
|
| 475 |
|
|
| 5,619 |
|
Deferred costs |
|
| 94 |
|
|
| 1,096 |
|
Other current assets |
|
| 1,640 |
|
|
| 10,238 |
|
Property and equipment |
|
| 1,089 |
|
|
| 2,804 |
|
Right of use assets |
|
| 1,272 |
|
|
| 4,951 |
|
Other assets |
|
| 1,056 |
|
|
| 5,472 |
|
Intangible assets: |
|
|
|
|
|
| ||
Trade names |
|
| 0 |
|
|
| 21,100 |
|
Customer relationships |
|
| 2,700 |
|
|
| 10,000 |
|
Internally developed software |
|
| 15,400 |
|
|
| 37,100 |
|
Goodwill |
|
| 33,550 |
|
|
| 214,106 |
|
Accounts payable and accrued expenses |
|
| (806 | ) |
|
| (20,855 | ) |
Other current liabilities |
|
| (187 | ) |
|
| (10,318 | ) |
Operating lease liability |
|
| (1,272 | ) |
|
| (4,951 | ) |
Deferred revenue |
|
| (631 | ) |
|
| (51,617 | ) |
Other liabilities |
|
| (4,334 | ) |
|
| (31,603 | ) |
Net assets acquired |
| $ | 51,088 |
|
| $ | 196,797 |
|
FlightScope | NCSA | |||||||
Cash and cash equivalents | $ | 1,042 | $ | 3,783 | ||||
Accounts receivable | 475 | 5,619 | ||||||
Deferred costs | 94 | 1,096 | ||||||
Other current assets | 1,640 | 8,856 | ||||||
Property and equipment | 1,090 | 2,804 | ||||||
Right of use assets | 1,272 | — | ||||||
Other assets | 166 | 5,472 | ||||||
Intangible assets: | ||||||||
Trade names | — | 21,100 | ||||||
Customer relationships | 2,700 | 10,000 | ||||||
Internally developed software | 15,400 | 37,100 | ||||||
Goodwill | 30,271 | 193,508 | ||||||
Accounts payable and accrued expenses | (806 | ) | (21,385 | ) | ||||
Other current liabilities | (187 | ) | (8,608 | ) | ||||
Operating lease liability | (1,272 | ) | — | |||||
Deferred revenue | (631 | ) | (37,636 | ) | ||||
Other liabilities | (15,346 | ) | (25,014 | ) | ||||
Net assets acquired | $ | 35,908 | $ | 196,695 | ||||
Cash and cash equivalents | $ | 45,230 | ||
Restricted cash | 86 | |||
Accounts receivable | 10,316 | |||
Deferred costs | 99,184 | |||
Other current assets | 53,893 | |||
Property and equipment | 4,361 | |||
Operating lease right-of-use | 3,509 | |||
Other assets | 74,193 | |||
Intangible assets: | ||||
Trade names | 75,400 | |||
Customer and client relationships | 198,819 | |||
Goodwill | 387,542 | |||
Accounts payable and accrued expenses | (55,927 | ) | ||
Other current liabilities | (28,224 | ) | ||
Deferred revenue | (175,790 | ) | ||
Debt | (217,969 | ) | ||
Operating lease liabilities | (3,509 | ) | ||
Other long-term liabilities | (24,377 | ) | ||
Non-redeemable non-controlling interest | (5,635 | ) | ||
Net assets acquired | $ | 441,102 | ||
June 30, 2021 | December 31, 2020 | |||||||
Licensed program rights, net of accumulated amortization | $ | 32,181 | $ | 19,793 | ||||
Produced programming: | ||||||||
Released, net of accumulated amortization | 5,190 | 4,806 | ||||||
In production | 603,869 | 314,214 | ||||||
In development | 53,632 | 37,392 | ||||||
Total content costs | $ | 694,872 | $ | 376,205 | ||||
Content cost monetized on a title-by-title basis | $ | 675,163 | $ | 358,207 | ||||
Content cost monetized as a film group | 19,709 | 17,998 | ||||||
Total content costs | $ | 694,872 | $ | 376,205 | ||||
5. SUPPLEMENTARY DATA
Accrued Liabilities
The following is a summary of accrued liabilities (in thousands):
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Accrued operating expenses |
| $ | 251,146 |
|
| $ | 302,024 |
|
Payroll, bonuses and benefits |
|
| 167,585 |
|
|
| 162,688 |
|
Other |
|
| 71,846 |
|
|
| 59,349 |
|
Total accrued liabilities |
| $ | 490,577 |
|
| $ | 524,061 |
|
June 30, 2021 | December 31, 2020 | |||||||
Accrued operating expenses | $ | 184,115 | $ | 155,142 | ||||
Payroll, bonuses and benefits | 167,730 | 100,630 | ||||||
Other | 79,148 | 66,977 | ||||||
Total accrued liabilities | $ | 430,993 | $ | 322,749 | ||||
Allowance for Doubtful Accounts
The changes in the allowance for doubtful accounts are as follows (in thousands):
|
| Balance at |
|
| Additions/Charged |
|
|
|
|
|
|
|
|
|
|
| Balance at |
| ||||||
|
| Beginning |
|
| to Costs and |
|
|
|
|
| Foreign |
|
| Assets Held |
|
| End of |
| ||||||
|
| of Year |
|
| Expenses, Net |
|
| Deductions |
|
| Exchange |
|
| for Sale |
|
| Period |
| ||||||
Six Months Ended June 30, 2022 |
| $ | 57,102 |
|
| $ | 9,499 |
|
| $ | (1,729 | ) |
| $ | (1,991 | ) |
| $ | (250 | ) |
| $ | 62,631 |
|
16
Balance at Beginning of Year | Additions/Charged (Credited) to Costs and Expenses | Deductions | Foreign Exchange | Balance at End of Period | ||||||||||||||||
Six months ended June 30, 2021 | $ | 67,975 | $ | 2,378 | $ | (6,352 | ) | $ | 58 | $ | 64,059 |
Supplemental Cash Flow
The Company’s supplemental cash flow information is as follows (in thousands):
|
| Six Months Ended June 30, | |||||||
|
| 2022 |
|
| 2021 |
|
| ||
Supplemental information: |
|
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 98,314 |
|
| $ | 102,393 |
|
|
Cash payments for income taxes |
|
| 19,729 |
|
|
| 20,976 |
|
|
|
|
|
|
|
|
|
| ||
Non-cash investing and financing activities: |
|
|
|
|
|
|
| ||
Capital expenditures included in accounts payable and accrued liabilities |
| $ | 6,617 |
|
| $ | 8,985 |
|
|
Establishment and acquisition of non-controlling interests |
|
| 414,985 |
|
|
| 3,087,301 |
|
|
Tax receivable agreements liability adjustments |
|
| 775 |
|
|
| 32,081 |
|
|
Accretion of redeemable non-controlling interests |
|
| 87,008 |
|
|
| 596 |
|
|
Investment in affiliates retained from a business divestiture |
|
| 196,345 |
|
|
| 0 |
|
|
Deferred consideration in connection with acquisitions |
|
| 31,770 |
|
|
| 0 |
|
|
Issuance of Class A common stock due to an acquisition |
|
| 11,014 |
|
|
| 0 |
|
|
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Supplemental information: | ||||||||
Cash paid for interest | $ | 102,393 | $ | 126,995 | ||||
Cash payments for income taxes | 20,976 | 23,073 | ||||||
Non-cash investing and financing activities: | ||||||||
Capital expenditures included in accounts payable and accrued liabilities | $ | 8,985 | $ | 3,071 | ||||
Contingent consideration provided in connection with acquisitions | 0— | 9,947 | ||||||
Accretion of redeemable non-controlling interests | 596 | (8,101 | ) | |||||
Accrued redemption of units included in accrued liabilities and other current liabilities | 0— | 9,255 | ||||||
Issuance of Class A Common Units | 0— | 26,476 | ||||||
Issuance of promissory note | 0— | 15,885 | ||||||
Establishment and acquisition of non-controlling interests | 3,087,301 | 0— | ||||||
Establishment of tax receivable agreements liability | 32,081 | 0— |
The changes in the carrying value of goodwill are as follows (in thousands):
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Total |
|
| ||||
Balance — December 31, 2021 |
| $ | 2,741,048 |
|
| $ | 1,266,144 |
|
| $ | 499,362 |
|
| $ | 4,506,554 |
|
|
Acquisitions |
|
| 25,556 |
|
|
| 26,195 |
|
|
| 0 |
|
|
| 51,751 |
|
|
Foreign currency translation and other |
|
| (85 | ) |
|
| (7,486 | ) |
|
| (995 | ) |
|
| (8,566 | ) |
|
Assets held for sale |
|
| 0 |
|
|
| (9,079 | ) |
|
| 0 |
|
|
| (9,079 | ) |
|
Balance — June 30, 2022 |
| $ | 2,766,519 |
|
| $ | 1,275,774 |
|
| $ | 498,367 |
|
| $ | 4,540,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Sports Properties | Events, Experiences & Rights | Representation | Total | |||||||||||||
Balance — December 31, 2020 | $ | 2,674,038 | $ | 1,011,217 | $ | 495,924 | $ | 4,181,179 | ||||||||
Acquisitions | 0 | 223,779 | 1,005 | 224,784 | ||||||||||||
Impairment | 0 | (1,979 | ) | (1,791 | ) | (3,770 | ) | |||||||||
Foreign currency translation and other | 0 | 273 | (2,872 | ) | (2,599 | ) | ||||||||||
Balance — June 30, 2021 | $ | 2,674,038 | $ | 1,233,290 | $ | 492,266 | $ | 4,399,594 | ||||||||
Intangible Assets
The following table summarizes information relating to the Company’s identifiable intangible assets as of June 30, 20212022 (in thousands):
Weighted Average Estimated Useful Life (in years) | Gross Amount | Accumulated Amortization | Carrying Value | |||||||||||||
Amortized: | ||||||||||||||||
Trade names | 17.4 | $ | 990,589 | $ | (260,959 | ) | $ | 729,630 | ||||||||
Customer and client relationships | 6.7 | 1,327,550 | (960,750 | ) | 366,800 | |||||||||||
Internally developed technology | 3.9 | 115,757 | (52,550 | ) | 63,207 | |||||||||||
Other | 4.3 | 45,422 | (44,956 | ) | 466 | |||||||||||
2,479,318 | (1,319,215 | ) | 1,160,103 | |||||||||||||
Indefinite-lived: | ||||||||||||||||
Trade names | 343,033 | — | 343,033 | |||||||||||||
Owned events | 89,303 | — | 89,303 | |||||||||||||
Total intangible assets | $ | 2,911,654 | $ | (1,319,215 | ) | $ | 1,592,439 | |||||||||
|
| Weighted Average |
|
| Gross |
|
| Accumulated |
|
| Carrying |
| ||||
Amortized: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Trade names |
|
| 17.3 |
|
| $ | 978,100 |
|
| $ | (315,967 | ) |
| $ | 662,133 |
|
Customer and client relationships |
|
| 6.3 |
|
|
| 1,325,181 |
|
|
| (1,035,631 | ) |
|
| 289,550 |
|
Internally developed technology |
|
| 3.5 |
|
|
| 121,873 |
|
|
| (78,838 | ) |
|
| 43,035 |
|
Other |
|
| 15.3 |
|
|
| 177,723 |
|
|
| (47,681 | ) |
|
| 130,042 |
|
|
|
|
|
| $ | 2,602,877 |
|
| $ | (1,478,117 | ) |
| $ | 1,124,760 |
| |
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Trade names |
|
|
|
| $ | 327,070 |
|
| $ | — |
|
| $ | 327,070 |
| |
Owned events |
|
|
|
|
| 464,068 |
|
|
| — |
|
|
| 464,068 |
| |
Total intangible assets |
|
|
|
| $ | 3,394,015 |
|
| $ | (1,478,117 | ) |
| $ | 1,915,898 |
|
17
The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 20202021 (in thousands):
|
| Weighted Average |
|
| Gross |
|
| Accumulated |
|
| Carrying |
| ||||
Amortized: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Trade names |
|
| 17.3 |
|
| $ | 991,021 |
|
| $ | (291,326 | ) |
| $ | 699,695 |
|
Customer and client relationships |
|
| 6.7 |
|
|
| 1,344,783 |
|
|
| (1,012,509 | ) |
|
| 332,274 |
|
Internally developed technology |
|
| 3.9 |
|
|
| 120,175 |
|
|
| (66,939 | ) |
|
| 53,236 |
|
Other |
|
| 14.3 |
|
|
| 142,657 |
|
|
| (44,608 | ) |
|
| 98,049 |
|
|
|
|
|
| $ | 2,598,636 |
|
| $ | (1,415,382 | ) |
| $ | 1,183,254 |
| |
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Trade names |
|
|
|
| $ | 340,029 |
|
| $ | — |
|
| $ | 340,029 |
| |
Owned events |
|
|
|
|
| 88,401 |
|
|
| — |
|
|
| 88,401 |
| |
Total intangible assets |
|
|
|
| $ | 3,027,066 |
|
| $ | (1,415,382 | ) |
| $ | 1,611,684 |
|
Weighted Average Estimated Useful Life (in years) | Gross Amount | Accumulated Amortization | Carrying Value | |||||||||||||
Amortized: | ||||||||||||||||
Trade names | 17.5 | $ | 970,595 | $ | (232,158 | ) | $ | 738,437 | ||||||||
Customer and client relationships | 6.7 | 1,317,083 | (907,889 | ) | 409,194 | |||||||||||
Internally developed technology | 4.4 | 61,539 | (46,126 | ) | 15,413 | |||||||||||
Other | 4.3 | 45,317 | (44,251 | ) | 1,066 | |||||||||||
2,394,534 | (1,230,424 | ) | 1,164,110 | |||||||||||||
lndefinite-lived: | ||||||||||||||||
Trade names | 341,272 | — | 341,272 | |||||||||||||
Owned events | 90,086 | — | 90,086 | |||||||||||||
Total intangible assets | $ | 2,825,892 | $ | (1,230,424 | ) | $ | 1,595,468 | |||||||||
Intangible asset amortization expense was $46.6$41.4 million and $63.5$46.6 million for the three months ended June 30, 20212022 and 2020,2021, respectively, and $92.4$84.3 million and $123.5$92.4 million for the six months ended June 30, 2022 and 2021, and 2020, respectively.respectively.
7. INVESTMENTS
The following is a summary of the Company’s investments (in thousands):
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Equity method investments |
| $ | 354,894 |
|
| $ | 196,423 |
|
Equity investments without readily determinable fair values |
|
| 128,140 |
|
|
| 101,124 |
|
Equity investments with readily determinable fair values |
|
| 556 |
|
|
| 665 |
|
Total investments |
| $ | 483,590 |
|
| $ | 298,212 |
|
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Equity method investments | $ | 221,225 | $ | 177,663 | ||||
Equity investments without readily determinable fair values | 72,944 | 66,378 | ||||||
Equity investments with readily determinable fair values | 869 | 7,037 | ||||||
Total investments | $ | 295,038 | $ | 251,078 | ||||
Equity Method Investments
As of June 30, 20212022 and December 31, 2020,2021, the Company held various investments in2021,2022, the Company’s equity method investments are primarily comprised of the restricted Endeavor Content business, Learfield IMG College, and Sports News Television Limited. The Company’s ownership of its equity method investments rangesrange from 5%20% to 50%50% as of June 30, 2021.
In June 2021,January 2022, in connection with the Company's sale of 80% of the restricted Endeavor Content business, the Company acquired additional common unitsretained 20% ownership in Learfield IMG Collegethe restricted Endeavor Content business. The investment is accounted for $107.4as an equity method investment. The Company’s share of the net loss of Endeavor Content for the three and six months ended June 30, 2022 was $2.2 millioncash, which increasedthe consolidated statements of operations.
As of June 30, 2022, the Company’s ownership in Learfield IMG College towas approximately 42.3%42%. This investment continues to be accounted for under the equity method of accounting. The Company’s share of the net loss of Learfield IMG College for the three and six months ended June 30, 2022 and 2021 was $61.5$39.3 million, $60.9 million, $18.8 million and $61.5 million, respectively, and is recognized within equity losses of affiliates in the consolidated statementstatements of operations.
Equity Investments without Readily Determinable Fair Values
As of June 30, 2022 and December 31, 2021, the Company held various investments in non-marketable equity instruments of private companies.
The Company performed its assessment on its investments without readily determinable fair values and recorded an increase in fair value of $12.1 million and $6.1 million for the three months ended June 30, 2022 and 2021, respectively, and $14.0 million and $6.1 million for the six months ended June 30, 2020, the Company’s share of the2022 and 2021, respectively, in other (expense) income, net loss of Learfield IMG College was $207.5 million and is recognized within equity losses of affiliates in the consolidated statementstatements of operations. The results of Learfield IMG College include a charge as a result of its annual goodwill and indefinite lived intangibles assets impairment test, primarilyincreases were due to continued losses and the impact ofCOVID-19on Learfield’s IMG College’sbusiness. In addition, the Company recorded total other-than-temporary impairment charges of $5.9 million for one of its other equity method investments, which has been recorded in equity losses of affiliates in the consolidated statement of operations.
Equity Investments with Readily Determinable Fair Values
As of June 30, 2022, the Company had three investments in publicly traded companies. During the three and six months ended June 30, 2020,2022, the Company recorded
18
recorded NaN and $5.2 million, respectively, due to the change in fair value in other (expense) income, net in the consolidated statements of operations. See Note 109 for additional information regarding fair value measurements for these equity investments.
8. FINANCIAL INSTRUMENTS
The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even thoughalthough hedge accounting does not apply or the Company elects not to apply hedge accounting. In addition, the Company enters into interest rate swaps to hedge certain of its interest rate risks on its debt. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions.
As of June 30, 2021,2022, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 12 months from June 30, 2021)2022) (in thousands except for exchange rates):
Foreign Currency |
| Foreign |
|
|
| US Dollar |
|
| Weighted Average | |
British Pound Sterling |
| £ 30,398 |
| in exchange for |
| $ | 38,000 |
|
| £ 0.80 |
Singapore Dollar |
| S$ 4,800 |
| in exchange for |
| $ | 3,506 |
|
| S$ 1.37 |
Foreign Currency | Foreign Currency Amount | US Dollar Amount | Weighted Average Exchange Rate Per $1 USD | |||||||
British Pound Sterling | £35,500 | in exchange for | $ | 48,913 | £0.73 | |||||
Canadian Dollar | C$71,204 | in exchange for | $ | 55,774 | C$1.28 | |||||
Swedish Krona | kr7500 | in exchange for | $ | 878 | kr8.54 | |||||
Australian Dollar | AUD$14,300 | in exchange for | $ | 10,639 | AUD$1.34 | |||||
Singapore Dollar | S$2,600 | in exchange for | $ | 1,932 | S$1.35 |
For forward foreign exchange contracts designated as cash flow hedges, the Company recognized net gains (losses) in accumulated other comprehensive lossincome (loss) of $1.6 millionNaN and $0.9$1.6 million for the three months ended June 30, 2022 and 2021, respectively, and 2020, respectively, and $0.2$0.3 million and $(2.2)$0.2 million for the six months ended June 30, 20212022 and 2020,2021, respectively. The Company reclassified $0.8 million gain into net income for the six months ended June 30, 2022 in connection with the sale of the restricted Endeavor Content business and is included in the gain as described in Note 4. The Company did 0tnot reclassify any gains or losses into net income (loss) for the three months ended June 30, 2022 and for the three and six months ended June 30, 2021 and 2020.
For forward foreign exchange contracts not designated as cash flow hedges, the Company recorded a net loss of $1.8 million and net gain of $1.0 million and $0.5$1.0 million for the three months ended June 30, 20212022 and 2020,2021, respectively, and $0.8a net loss of $3.1 million and $1.2net gain of $0.8 million for the six months ended June 30, 20212022 and 2020,2021, respectively, in other (expense) income, net in the consolidated statements of operations.
In certain circumstances, the Company enters into contracts that are settled in currencies other than the functional or local currencies of the contracting parties. Accordingly, these contracts consist of the underlying operational contract and an embedded foreign currency derivative element. Hedge accounting is not applied to the embedded foreign currency derivative element. The Company recorded a net gain (loss) of $2.2$(1.6) million and $11.1$2.2 million for the three months ended June 30, 20212022 and 2020,2021, respectively, and $(9.2)$(1.1) million and $13.2$(9.2) million for the six months ended June 30, 20212022 and 2020,2021, respectively, in other (expense) income, net in the consolidated statements of operations.
In addition, the Company has entered into interest rate swaps for portions of its 2014 Credit Facilities and other variable interest bearing debt and has designated them cash flow hedges. For the three months ended June 30, 20212022 and 2020,2021, the Company recorded lossesgains (losses) of $1.8$14.5 million and $12.5$(1.8) million in accumulated other comprehensive lossincome (loss) and reclassified losses of $7.6$5.0 million and $5.5$7.6 million into net loss,income (loss), respectively. For the six months ended June 30, 20212022 and 2020,2021, the Company recorded gains (losses) of $13.3$62.2 million and $(92.5)$13.3 million in accumulated other comprehensive lossincome (loss) and reclassified losses of $14.9$12.4 million and $6.9$14.9 million into net loss, respectively.
9. FAIR VALUE MEASUREMENTS
The fair value hierarchy is composed of the following three categories:
Level
Level
Level
19
The following tables present, for each of the fair value hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):
|
| Fair Value Measurements as of |
| |||||||||||||
|
| June 30, 2022 |
| |||||||||||||
|
| Level I |
|
| Level II |
|
| Level III |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investments in equity securities with readily determinable fair values |
| $ | 556 |
|
| $ | — |
|
| $ | — |
|
| $ | 556 |
|
Interest rate swaps |
|
| — |
|
|
| 27,310 |
|
|
| — |
|
| $ | 27,310 |
|
Total |
| $ | 556 |
|
| $ | 27,310 |
|
| $ | — |
|
| $ | 27,866 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | 3,561 |
|
| $ | 3,561 |
|
Interest rate swaps |
|
| — |
|
|
| 978 |
|
|
| — |
|
|
| 978 |
|
Forward foreign exchange contracts |
|
| — |
|
|
| 11,262 |
|
|
| — |
|
|
| 11,262 |
|
Total |
| $ | — |
|
| $ | 12,240 |
|
| $ | 3,561 |
|
| $ | 15,801 |
|
|
| Fair Value Measurements as of |
| |||||||||||||
|
| December 31, 2021 |
| |||||||||||||
|
| Level I |
|
| Level II |
|
| Level III |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investments in equity securities with readily determinable fair values |
| $ | 665 |
|
| $ | — |
|
| $ | — |
|
| $ | 665 |
|
Forward foreign exchange contracts |
|
| — |
|
|
| 2,529 |
|
|
| — |
|
|
| 2,529 |
|
Total |
| $ | 665 |
|
| $ | 2,529 |
|
| $ | — |
|
| $ | 3,194 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | 26,900 |
|
| $ | 26,900 |
|
Interest rate swaps |
|
| — |
|
|
| 48,427 |
|
|
| — |
|
|
| 48,427 |
|
Forward foreign exchange contracts |
|
| — |
|
|
| 13,363 |
|
|
| — |
|
|
| 13,363 |
|
Total |
| $ | — |
|
| $ | 61,790 |
|
| $ | 26,900 |
|
| $ | 88,690 |
|
Fair Value Measurements as of June 30, 2021 | ||||||||||||||||
Level I | Level II | Level III | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in equity securities with readily determinable fair values | $ | 869 | $ | — | $ | — | $ | 869 | ||||||||
Forward foreign exchange contracts | — | 598 | — | 598 | ||||||||||||
Total | $ | 869 | $ | 598 | $ | — | $ | 1,467 | ||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 2 1,371 | $ | 21,371 | ||||||||
Interest rate swaps | — | 79,546 | — | 79,546 | ||||||||||||
Forward foreign exchange contracts | — | 10,966 | — | 10,966 | ||||||||||||
Total | $ | — | $ | 90,512 | $ | 21,371 | $ | 111,883 | ||||||||
Fair Value Measurements as of December 31, 2020 | ||||||||||||||||
Level I | Level II | Level III | Total | |||||||||||||
Assets: | ||||||||||||||||
Investments in equity securities with readily determinable fair values | $ | 7,037 | $ | — | $ | — | $ | 7,037 | ||||||||
Forward foreign exchange contracts | — | 1,794 | — | 1,794 | ||||||||||||
Total | $ | 7,037 | $ | 1,794 | $ | — | $ | 8,831 | ||||||||
Liabilities: | ||||||||||||||||
Contingent consideration | $ | — | $ | — | $ | 9,026 | $ | 9,026 | ||||||||
Interest rate swaps | — | 107,909 | — | 107,909 | ||||||||||||
Forward foreign exchange contracts | — | 5,023 | — | 5,023 | ||||||||||||
Total | $ | — | $ | 112,932 | $ | 9,026 | $ | 121,958 | ||||||||
There have been 0transfers0 transfers of assets or liabilities between the fair value measurement classifications during the three and six months ended June 30, 2021.
Investments in Equity Securities with Readily Determinable Fair Values
The estimated fair value of the Company’s equity securities with readily determinable fair values is based on observable inputs in an active market, which is a Level 1 measurement within the fair value hierarchy.
Contingent Consideration
The Company has recorded contingent consideration liabilities in connection with its acquisitions. Contingent consideration is included in current liabilities and other long-term liabilities in the consolidated balance sheets. Changes in fair value are recognized in selling, general and
The changes in the fair value of contingent consideration were as follows (in thousands):
|
| Six Months Ended June 30, 2022 |
| |
Balance at December 31, 2021 |
| $ | 26,900 |
|
Acquisitions |
|
| 627 |
|
Payments |
|
| (26,183 | ) |
Change in fair value |
|
| 2,217 |
|
Balance at June 30, 2022 |
| $ | 3,561 |
|
Six Months Ended June 30, 2021 | ||||
Balance at December 31, 2020 | $ | 9,026 | ||
Payments | (2,032 | ) | ||
Change in fair value | 14,377 | |||
Balance at June 30, 2021 | $ | 21,371 | ||
Payments made during the six months ended June 30, 2022 primarily related to the settlement of the premium contingent consideration with 32 Equity LLC ("32 Equity"). See Note 11.
Foreign Currency Derivatives
The Company classifies its foreign currency derivatives within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (Note 9)8). As of June 30, 20212022 and December 31, 2020,2021, the Company had $0.6 millionNaN and $1.8$2.3 million in other current assets, $4.2NaN and $0.2 million in assets held for sale, $7.1 million and $4.3$4.5 million in other current liabilities, NaNand $6.8$0.4 million in liabilities held for sale, and $4.1 million and $0.7$8.5 million in other long-term liabilities, respectively, recorded in the consolidated balance sheets related to the Company’s foreign currency derivatives.
20
Interest Rate Swaps
The Company classifies its interest rate swaps within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (Note 9)8). The fair value of the swaps was $79.5 million and $107.9 million asAs of June 30, 20212022 and December 31, 2020, respectively,2021, the Company had $27.3 million and was includedNaN in other assets, and $1.0 million and $48.4 million in other long-term liabilities, respectively, recorded in the consolidated balance sheets.
10. DEBT
The following is a summary of outstanding debt (in thousands):
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
2014 Credit Facilities: |
|
|
|
|
|
| ||
First Lien Term Loan (due May 2025) |
| $ | 2,770,982 |
|
| $ | 2,786,048 |
|
Zuffa Credit Facilities: |
|
|
|
|
|
| ||
Zuffa First Lien Term Loan (due April 2026) |
|
| 2,825,267 |
|
|
| 2,840,767 |
|
Other debt (3.0%-14.50% Notes due at various dates through 2031) |
|
| 149,996 |
|
|
| 159,010 |
|
Total principal |
| $ | 5,746,245 |
|
| $ | 5,785,825 |
|
Unamortized discount |
|
| (22,118 | ) |
|
| (26,077 | ) |
Unamortized issuance costs |
|
| (40,354 | ) |
|
| (46,012 | ) |
Total debt |
| $ | 5,683,773 |
|
| $ | 5,713,736 |
|
Less: current portion |
|
| (87,113 | ) |
|
| (82,022 | ) |
Total long-term debt |
| $ | 5,596,660 |
|
| $ | 5,631,714 |
|
June 30, 2021 | December 31, 2020 | |||||||
2014 Credit Facilities: | ||||||||
First Lien Term Loan (due May 2025) | $ | 2,801,114 | $ | 3,074,230 | ||||
Revolving Credit Facility (due May 2024) | 0 | 163,057 | ||||||
Zuffa Credit Facilities: | ||||||||
Zuffa First Lien Term Loan (due April 2026) | 2,254,635 | 2,447,064 | ||||||
Other debt (2.47%-14.50% Notes due at various dates through 2030) | 365,145 | 339,519 | ||||||
Total principal | 5,420,894 | 6,023,870 | ||||||
Unamortized discount | (24,201 | ) | (40,982 | ) | ||||
Unamortized issuance costs | (46,105 | ) | (57,083 | ) | ||||
Total debt | 5,350,588 | 5,925,805 | ||||||
Less: current portion | (94,845 | ) | (212,971 | ) | ||||
Total long-term debt | $ | 5,255,743 | $ | 5,712,834 | ||||
2014 Credit Facilities
As of June 30, 2022 and December 31, 2021, the Company had $2.8 billion outstanding under a credit agreement that was entered into in connection with the 2014 IMG acquisition (the "2014 Credit Facilities"). The 2014 Credit Facilities consist of a first lien secured term loan (the “First Lien Term Loan”) and a $200.0 million secured revolving credit facility (the "Revolving Credit Facility").
The financial debt covenantscovenant of the 2014 Credit Facilities did not apply as of June 30, 2022 and December 31, 2020,2021 as the Company amended the 2014 Credit Facilities receiving a waiver from the financial covenant for the test periods ended June 30, 2020, September 30, 2020 and December 31, 2020. In April 2021, the Company received a waiver from the financial covenant for the test periods ending June 30, 2021, September 30, 2021 and December 31, 2021. Also, in April 2021,had no borrowings outstanding under the Revolving Credit Facility maturity date was extended from May 2023 to May 2024.
The Company had outstanding letters of credit under the 2014 Credit Facilities totaling $25.3$19.4 million and $24.8$23.8 million as of June 30, 20212022 and December 31, 2020,2021, respectively.
Zuffa Credit Facilities
As of June 30, 2022 and December 31, 2021, the Company completedhas $2.8 billion outstanding under a refinancing of the Zuffa First Lien Term Loan and the Term LoanAdd-on a single term loan (the “New First Lien Term Loan”), which reduced the annualinterest rate margin by 25 basis points to 3.00% for LIBOR loans and reduced the LIBOR floor by 25 basis points to 0.75%. The annual interest rate margin applicable to the New First Lien Term Loan is subject to a 25 basis point step-down to 2.75% for LIBOR loans if the First Lien Leverage Ratio is below3.5-to-1.With the exception of the interest rate margin and the LIBOR floor, the New First Lien Term Loan has similar terms and conditions as the Zuffa First Lien Term Loan and Term LoanAdd-on.
The financial debt covenants of the Zuffa Credit Facilities did not apply as of June 30, 20212022 and December 31, 2020,2021 as Zuffa did not utilize greater than thirty-five percent ofhad 0 borrowings outstanding under the borrowing capacity.
Under the Zuffa Credit Facilities, Zuffa had $10.0 million and 0 outstanding letters of credit under the Zuffa Credit Facilities totaling $10.0 million as of June 30, 20212022 and December 31, 2020.
Other Debt
On Location Revolver
The OLEOn Location ("OL") revolving credit agreement contains a financial covenant that requires OLEOL to maintain a First Lien Leverage Ratio of Consolidated First Lien Debt to Consolidated EBITDA, as defined in the credit agreement, of no more than3-to-1.$2.0$2.0 million that are not cash collateralized exceeds forty40 percent of the total Revolving Commitments as measured on a quarterly basis, as defined in the credit agreement. As of June 30, 2021,2022, the Company was in compliance with the financial debt covenants.
OL had 0letters of credit outstanding under the revolving credit agreement as of June 30, 20212022 and December 31, 2020.
Receivables Purchase Agreement
As of June 30, 20212022 and December 31, 2020,2021, the debt outstanding under these arrangements was $57.0$35.0 million and $83.7$50.5 million, respectively.
21
Zuffa Secured Commercial Loans
As of June 30, 20212022 and December 31, 2020,
2014 Credit Facilities and Zuffa Credit Facilities
The 2014 Credit Facilities and the Zuffa Credit Facilities restrict the ability of certain subsidiaries of the Company to make distributions and other payments to the Company. These restrictions do include exceptions for, among other things, (1) amounts necessary to make tax payments, (2) a limited annual amount for employee equity repurchases, (3) distributions required to fund certain parent entities, (4) other specific allowable situations and (5) a general restricted payment basket. As of June 30, 2021,2022, EGH held cash of $76.4$42.8 million, accounts payablelong-term deferred tax benefits of $3.9$120.4 million
As of June 30, 20212022 and December 31, 2020,2021, the Company’s First Lien Term Loan under the 2014 Credit Facilities and Zuffa’s First Lien Term Loan under its Credit Facilities had an estimated fair value of $5.0$5.3 billion and $5.3$5.6 billion, respectively. The estimated fair values of the Company’s First Lien Term Loan under the 2014 Credit Facilities and Zuffa’s First Lien Term Loan under its Credit Facilities are basedbased on quoted market values for the debt. Since the First Lien Term Loan under the 2014 Credit Facilities and Zuffa’s First Lien Term Loan under its Credit Facilities do not trade on a daily basis in an active market, fair value estimates are based on market observable inputs based on quoted market prices and borrowing rates currently available for debt with similar terms and average maturities, which are classified as Level 2 under the
11. REDEEMABLE NON-CONTROLLING INTERESTS
On Location
In connection with the acquisition of OLE (Note 5),OL in 2020, the Company entered into an Amended and Restated Limited Liability Company Agreement ("OL LLC Agreement") of Endeavor OLE Parent, LLC ("OLE Parent") with 32 Equity. The terms of the agreement provideprovided 32 Equity with certain rights to put its common units in OLE Parent to the Company upon a termination of the CLACommercial License Agreement ("CLA") or at its option at any time following the Lockup Period.Period as defined. The Company also hashad certain call rights to require 32 Equity to sell its common units in OLE Parent to the Company upon a termination of the CLA in the event the aforementioned put rights arewere not exercised. The put/call price iswas an amount equal to fair market value and the exercise of these put/call rights may givewould have given rise to an obligation of the Company to make a premium payment to 32 Equity in certain circumstances. At any time following the Lockup Period, 32 Equity will be entitled to a $41.0 million premium payment from the Company if both (i) 32 Equity or the Company exercise the put/call rights described above or there is a sale or IPO of OLE Parent and (ii) certain performance metrics based on average OLE gross profit or NFL related business gross profit are achieved. The $41.0 million premium payment will also be payable if, prior to January 2, 2026, a sale or IPO of OLE Parent occurs or if 32 Equity exercises its put rights following a termination of the CLA due to an OLE event of default (in which case the
In April 2022, a series of transactions was completed between the carryingCompany and 32 Equity. Per the terms of the OL LLC Agreement, 32 Equity had the right to purchase additional common units in OLE Parent from the Company that would result in 32 Equity having an aggregate ownership percentage interest in OLE Parent of 32% at a price per unit equal to the original acquisition price of its rollover equity. 32 Equity exercised such right and paid the Company cash of $87.9 million. Following this exercise, EOC issued 8,037,483 EOC common units (and 32 Equity obtained an equal number of paired shares of the Company's Class X common stock) in exchange for 32 Equity's non-controlling interests of OLE Parent. The aggregate value of $49.0the shares was $223.7 million based on the volume-weighted average trading price of the Class A common stock for thirty days ending on the day before the close. The Company and $45.032 Equity also agreed to settle the premium contingent consideration resulting in the Company paying 32 Equity $24.0 million respectively.
China
In June 2016, the Company received a contribution of $75.0$75.0 million from third parties in a newly formed subsidiary of the Company that was formed to expand the Company’s existing business in China. Costs incurred for this contribution were $6.9 million and were recognized as a reduction of the proceeds.China ("Endeavor China"). This contribution gave the34%34% ownership of the subsidiary. The holders of thehavehad the right to put their investment to the Company at any time after June 1, 2023 for fair market value. As of June 30, 2021 and December 31, 2020,2021, the estimated redemption value was equal to and below$107.5 million.
In April 2022, the carryingCompany issued 5,693,774 shares of Class A common stock in exchange for the non-controlling partnership interests of Endeavor China. The aggregate value of $85.1the shares was $158.5 million and $91.4 million, respectively.
22
Zuffa
In July 2018, the Company received a contribution of $9.7$9.7 million from third parties (the “RussiaCo-Investors”"Russia Co-Investors")“Russia Subsidiary”"Russia Subsidiary") that was formed to expand the Company’s existing business in Russia and certain other countries in the Commonwealth of Independent States. The terms of this contribution provide the Russia20212022 and December 31, 2020,2021, the estimated redemption value was $9.7$9.7 million.
Frieze
In connection with the acquisition of Frieze in 2016, the terms of the agreement provide the sellers with a put option to sell their remaining 30% interest after fiscal year 2020. The Company also has a call option to buy the remaining 30% interest after fiscal year 2020 or upon termination of employment of the sellers who continued to be employees of Frieze after the acquisition. The price of the put and call option is equal to Frieze’s prior year’s EBITDA multiplied by 7.5.7.5. As of June 30, 20212022 and December 31, 2020,2021, the estimated redemption value was below the carrying value of $22.7$23.6 million and $22.2$23.8 million, respectively.
12. EARNINGS PER SHARE
Earnings per share is calculated utilizing net income available to common stockholders of the Company from May 1, 2021 through June 30, 2021, divided by the weighted average number of shares of Class A Common Stock outstanding during the same period. The Company’sDiluted EPS is calculated by dividing the net income available for common stockholders by the diluted weighted average shares outstanding equity-based compensation awards under its equity-based compensation arrangements (Note 15) were anti-dilutive during thefor that period.
The computation of basic and diluted earnings per share and weighted average shares of the Company’s common stock outstanding for the periods presented below:
|
| Three Months Ended June 30, 2022 |
|
| Six Months Ended June 30, 2022 |
|
| May 1, 2021 - |
| |||
|
|
|
|
|
|
|
|
|
| |||
Basic earnings (loss) per share |
|
|
|
|
|
|
|
|
| |||
Numerator |
|
|
|
|
|
|
|
|
| |||
Consolidated net income (loss) |
| $ | 42,220 |
|
| $ | 559,886 |
|
| $ | (518,352 | ) |
Net income (loss) attributable to NCI (Endeavor Operating Company) |
|
| 14,289 |
|
|
| 185,232 |
|
|
| (168,469 | ) |
Net income (loss) attributable to NCI (Endeavor Manager Units) |
|
| 2,125 |
|
|
| 29,302 |
|
|
| (30,286 | ) |
Net income (loss) attributable to the Company |
|
| 25,806 |
|
|
| 345,352 |
|
|
| (319,597 | ) |
Adjustment to net income attributable to the Company |
|
| 0 |
|
|
| 3,090 |
|
|
| 0 |
|
Net income (loss) attributable to EGH common shareholders |
| $ | 25,806 |
|
| $ | 348,442 |
|
| $ | (319,597 | ) |
Denominator |
|
|
|
|
|
|
|
|
| |||
Weighted average Class A Common Shares outstanding - Basic |
|
| 281,623,228 |
|
|
| 275,092,484 |
|
|
| 258,266,323 |
|
Basic earnings (loss) per share |
| $ | 0.09 |
|
| $ | 1.27 |
|
| $ | (1.24 | ) |
|
| Three Months Ended June 30, 2022 |
|
| Six Months Ended June 30, 2022 |
|
| May 1, 2021 - |
| |||
|
|
|
|
|
|
|
|
|
| |||
Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
| |||
Numerator |
|
|
|
|
|
|
|
|
| |||
Consolidated net income (loss) |
| $ | 42,220 |
|
| $ | 559,886 |
|
| $ | (518,352 | ) |
Net income (loss) attributable to NCI (Endeavor Operating Company) |
|
| 1,302 |
|
|
| 6,709 |
|
|
| (168,469 | ) |
Net income (loss) attributable to NCI (Endeavor Manager Units) |
|
| 0 |
|
|
| 0 |
|
|
| (30,286 | ) |
Net income (loss) attributable to EGH common shareholders |
| $ | 40,918 |
|
| $ | 553,177 |
|
| $ | (319,597 | ) |
|
|
|
|
|
|
|
|
|
| |||
Denominator |
|
|
|
|
|
|
|
|
| |||
Weighted average Class A Common Shares outstanding - Basic |
|
| 281,623,228 |
|
|
| 275,092,484 |
|
|
| 258,266,323 |
|
Additional shares assuming exchange of all Endeavor Profits Units |
|
| 681,521 |
|
|
| 2,450,488 |
|
|
| 0 |
|
Additional shares from RSUs, Stock Options and Phantom Units, as calculated using the treasury stock method |
|
| 1,395,693 |
|
|
| 2,129,737 |
|
|
| 0 |
|
Additional shares assuming exchange of all Endeavor Operating Units and Endeavor Manager Units |
|
| 166,033,523 |
|
|
| 166,746,315 |
|
|
| 0 |
|
Weighted average number of shares used in computing diluted earnings (loss) per share |
|
| 449,733,965 |
|
|
| 446,419,024 |
|
|
| 258,266,323 |
|
|
|
|
|
|
|
|
|
|
| |||
Diluted earnings (loss) per share |
| $ | 0.09 |
|
| $ | 1.24 |
|
| $ | (1.24 | ) |
|
|
|
|
|
|
|
|
|
|
23
|
| Three Months Ended June 30, 2022 |
|
| Six Months Ended June 30, 2022 |
|
| May 1, 2021 - |
| |||
Securities that are anti-dilutive for the period |
|
|
|
|
|
|
|
|
| |||
Stock Options |
|
| 4,177,407 |
|
|
| 2,512,767 |
|
|
| 3,196,364 |
|
Unvested RSUs |
|
| 4,065,048 |
|
|
| 1,283,010 |
|
|
| 7,479,941 |
|
Manager LLC Units |
|
| - |
|
|
| - |
|
|
| 24,722,425 |
|
EOC Common Units |
|
| - |
|
|
| - |
|
|
| 141,245,780 |
|
EOC Profits Interest & Phantom Units |
|
| 12,587,251 |
|
|
| 0 |
|
|
| 15,256,825 |
|
Period Through May 1 - June 30, 2021 | ||||
Basic and diluted net loss per share | ||||
Numerator | ||||
Consolidated Net Loss | $ | (518,352 | ) | |
Net loss attributable to NCI (Endeavor Operating Company Unit) | (168,469 | ) | ||
Net loss attributable to NCI (Endeavor Manager LLC Manager Unit) | (30,285 | ) | ||
Net loss attributable to EGH common shareholders | $ | (319,597 | ) | |
Denominator | ||||
Weighted average Class A Common Shares outstanding - Basic | 258,266,323 | |||
Basic and diluted netloss per share | $ | (1.24 | ) | |
Time Vested RSUs | Market / Market and Time Vested RSUs | |||||||||||||||
Units | Value * | Units | Value * | |||||||||||||
Outstanding at January 1, 2021 | 0 | $ | 0 | 0 | $ | 0 | ||||||||||
Granted | 7,214,581 | $ | 30.51 | 3,117,354 | 28.08 | |||||||||||
Released | (728,103 | ) | $ | 30.81 | (830,857 | ) | 29.03 | |||||||||
Forfeited | (9,191 | ) | $ | 30.81 | (3,907 | ) | 27.07 | |||||||||
Outstanding at June 30, 2021 | 6,477,287 | $ | 30.48 | 2,282,590 | 27.74 | |||||||||||
Vested and releasable at June 30, 2021 | 1,279,936 | $ | 30.53 | 0 | $ | 0 | ||||||||||
Stock Options | ||||||||
Options | Weighted Average Exercise Price | |||||||
Outstanding at Janu a ry 1, 2021 | 0 | $ | 0 | |||||
Granted | 3,213,551 | $ | 24.00 | |||||
Forfeited or expired | (17,187 | ) | $ | 24.00 | ||||
Outstanding at June 30, 2021 | 3,196,364 | $ | 24.00 | |||||
Vested and exercisable at June 30, 2021 | 563,367 | $ | 24.00 | |||||
One-third13. INCOME TAXES
EGH was incorporated as a Delaware corporation in January 2019. It was formed as a holding company for the purpose of completing an IPO and other related transactions. As the sole managing member of Endeavor Manager, which is the sole managing member of EOC, EGH operates and controls all the business and affairs of EOC, and through EOC and its subsidiaries, conducts the Company’s business. EGH is subject to corporate income tax on its share of taxable income or loss of EOC derived through Endeavor Manager. EOC is treated as a partnership for U.S. federal income tax purposes and is therefore not subject to U.S. corporate income tax. However, certain of EOC’s subsidiaries are subject to U.S. or foreign corporate income tax.
In accordance with ASC Topic 740, each interim period is considered integral to the annual period and tax expense is generally determined using an estimate of the annual effective income tax rate (“AETR”("AETR"). The Company would record income tax expense each quarter using the estimated AETR to provide for income taxes on a current Utilizing the AETR in 2020 would not have provided a reliable estimate of the tax provision based on the forecasted impact ofCOVID-19on the Company’s operations and overall economy. Therefore, in accordance with the authoritative guidance for accounting for income taxes in interim periods, EOC computed its income tax
The provision for the three and six months ended June 30, 2020 based upon the actual effective tax rate for that period.
The Company’s effective tax rate differs from the U.S. federal statutory rate primarily due to partnership income not subject to income tax,tax; state and local income taxes,taxes; withholding taxes in foreign jurisdictions that are not based on net incomeincome; and income subject to tax in foreign jurisdictions which differ from the U.S. federal statutory income tax rate andas well as the relative amount of income earned in those jurisdictions.
As of June 30, 20212022 and December 31, 2020,2021, the Company had unrecognized tax benefits of $36.3$41.6 million and $34.4$40.0 million, respectively, for which we are unable to make a reasonable and reliable estimate of the period in which these liabilities will be settled with the respective tax authorities.
The Company records valuation allowances against its net deferred tax assets when it is more likely than not that all, or a portion, of a deferred tax asset will not be realized. The Company evaluates the realizability of its deferred tax assets by assessing the likelihood that its deferred tax assets will be recovered based on all available positive and negative evidence, including historical results, reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. Based on this analysis,During the six months ended June 30, 2022, the Company released a $53.7 million valuation allowance on deferred tax assets due to the expected realization of certain tax benefits based on estimates of future taxable income. The Company has concluded that itsdetermined the remaining net deferred tax assets at EGH, exclusive of deferred tax liabilities associated with indefinite lived intangibles, will not be realized and as a result, has recorded a full valuation allowance as of June 30, 2021.
Tax Receivable Agreements
In connection with the IPO and related transactions, the Company entered into tax receivable agreements (“TRAs”)TRAs with certain persons that held direct or indirect interests in EOC and Zuffa prior to the IPO, (“including management of the Company ("TRA Holders”Holders"). The TRAs generally provide for the payment by EGH of 85%85% of the amount of any tax benefits that EGH actually realizes, or in some cases is deemed to realize, as a result of (i) increases in EGH’s share of the tax basis in the net assets of EOC resulting from any redemptions or exchanges of LLC Units, (ii) increases in tax basis attributable to payments made under the TRAs, (iii) deductions attributable to imputed interest pursuant to the TRAs and (iv) other tax attributes allocated to EGH post-IPO and related transactions that were allocable to the TRA Holders prior to the IPO and related transactions.
As noted above, during the six months ended June 30, 2022, the Company released a valuation allowance of $53.7 million. In connection with the expected realization of certain tax benefits including deferred tax assets, the Company recorded an additional $55.5 million TRA liability. With the exception of the above, the Company has recorded a full valuation allowance with respect to the remaining deferred tax assets subject to the TRA. Certain other tax attributes subject to
24
If the TRA do not result in deferred tax assets. During the six months ended June 30, 2021, the Company has recognized a TRA liability on a portion of such attributes of approximately
14. REVENUE
The following table presents the Company’s revenue disaggregated by primary revenue sources for the three and six months ended June 30, 20212022 and 20202021 (in thousands):
|
| Three Months Ended June 30, 2022 |
| |||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences |
|
| Representation |
|
| Total |
| ||||
Media rights |
| $ | 172,068 |
|
| $ | 174,076 |
|
| $ | 0 |
|
| $ | 346,144 |
|
Media production, distribution and content |
|
| 1,824 |
|
|
| 78,775 |
|
|
| 64,010 |
|
|
| 144,609 |
|
Events and performance |
|
| 158,038 |
|
|
| 375,021 |
|
|
| 0 |
|
|
| 533,059 |
|
Talent representation and licensing |
|
| 0 |
|
|
| 0 |
|
|
| 222,388 |
|
|
| 222,388 |
|
Marketing |
|
| 0 |
|
|
| 0 |
|
|
| 71,557 |
|
|
| 71,557 |
|
Eliminations |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (5,242 | ) |
Total |
| $ | 331,930 |
|
| $ | 627,872 |
|
| $ | 357,955 |
|
| $ | 1,312,515 |
|
|
| Six Months Ended June 30, 2022 |
| |||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences |
|
| Representation |
|
| Total |
| ||||
Media rights |
| $ | 329,033 |
|
| $ | 337,197 |
|
| $ | 0 |
|
| $ | 666,230 |
|
Media production, distribution and content |
|
| 4,124 |
|
|
| 163,999 |
|
|
| 137,753 |
|
|
| 305,876 |
|
Events and performance |
| $ | 295,462 |
|
|
| 952,489 |
|
|
| 0 |
|
|
| 1,247,951 |
|
Talent representation and licensing |
|
| 0 |
|
|
| 0 |
|
|
| 421,559 |
|
|
| 421,559 |
|
Marketing |
|
| 0 |
|
|
| 0 |
|
|
| 155,964 |
|
|
| 155,964 |
|
Eliminations |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (11,302 | ) |
Total |
| $ | 628,619 |
|
| $ | 1,453,685 |
|
| $ | 715,276 |
|
| $ | 2,786,278 |
|
|
| Three Months Ended June 30, 2021 |
| |||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Total |
| ||||
Media rights |
| $ | 162,938 |
|
| $ | 310,857 |
|
| $ | 0 |
|
| $ | 473,795 |
|
Media production, distribution and content |
|
| 1,240 |
|
|
| 92,698 |
|
|
| 133,275 |
|
|
| 227,213 |
|
Events and performance |
|
| 94,687 |
|
|
| 125,117 |
|
|
| 0 |
|
|
| 219,804 |
|
Talent representation and licensing |
|
| 0 |
|
|
| 0 |
|
|
| 145,929 |
|
|
| 145,929 |
|
Marketing |
|
| 0 |
|
|
| 0 |
|
|
| 49,028 |
|
|
| 49,028 |
|
Eliminations |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (4,497 | ) |
Total |
| $ | 258,865 |
|
| $ | 528,672 |
|
| $ | 328,232 |
|
| $ | 1,111,272 |
|
|
| Six Months Ended June 30, 2021 |
| |||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Total |
| ||||
Media rights |
| $ | 340,591 |
|
| $ | 633,983 |
|
| $ | 0 |
|
| $ | 974,574 |
|
Media production, distribution and content |
|
| 3,427 |
|
|
| 177,411 |
|
|
| 192,198 |
|
|
| 373,036 |
|
Events and performance |
|
| 198,328 |
|
|
| 256,888 |
|
|
| 0 |
|
|
| 455,216 |
|
Talent representation and licensing |
|
| 0 |
|
|
| 0 |
|
|
| 292,674 |
|
|
| 292,674 |
|
Marketing |
|
| 0 |
|
|
| 0 |
|
|
| 92,269 |
|
|
| 92,269 |
|
Eliminations |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (6,915 | ) |
Total |
| $ | 542,346 |
|
| $ | 1,068,282 |
|
| $ | 577,141 |
|
| $ | 2,180,854 |
|
Three Months Ended June 30, 2021 | ||||||||||||||||
Owned Sports Properties | Events, Experiences & Rights | Representation | Total | |||||||||||||
Media rights | $ | 162,938 | $ | 310,857 | $ | 0 | $ | 473,795 | ||||||||
Media production, distribution and content | 1,240 | 92,698 | 133,275 | 227,213 | ||||||||||||
Events and performance | 94,687 | 125,117 | 0 | 219,804 | ||||||||||||
Talent representation and licensing | 0 | 0 | 145,929 | 145,929 | ||||||||||||
Marketing | 0 | 0 | 49,028 | 49,028 | ||||||||||||
Eliminations | 0 | 0 | 0 | (4,497 | ) | |||||||||||
Total | $ | 258,865 | $ | 528,672 | $ | 328,232 | $ | 1,111,272 | ||||||||
Six Months Ended June 30, 2021 | ||||||||||||||||
Owned Sports Properties | Events, Experiences & Rights | Representation | Total | |||||||||||||
Media rights | $ | 340,591 | $ | 633,983 | $ | 0 | $ | 974,574 | ||||||||
Media production, distribution and content | 3,427 | 177,411 | 192,198 | 373,036 | ||||||||||||
Events and performance | 198,328 | 256,888 | 0 | 455,216 | ||||||||||||
Talent representation and licensing | 0 | 0 | 292,674 | 292,674 | ||||||||||||
Marketing | 0 | 0 | 92,269 | 92,269 | ||||||||||||
Eliminations | 0 | 0 | 0 | (6,915 | ) | |||||||||||
Total | $ | 542,346 | $ | 1,068,282 | $ | 577,141 | $ | 2,180,854 | ||||||||
Three Months Ended June 30, 2020 | ||||||||||||||||
Owned Sports Properties | Events, Experiences & Rights | Representation | Total | |||||||||||||
Media rights | $ | 103,226 | $ | 46,287 | $ | — | $ | 149,513 | ||||||||
Media production, distribution and content | 1,064 | 37,864 | 81,258 | 120,186 | ||||||||||||
Events and performance | 47,949 | 35,683 | — | 83,632 | ||||||||||||
Talent representation and licensing | — | — | 79,910 | 79,910 | ||||||||||||
Marketing | — | — | 31,672 | 31,672 | ||||||||||||
Eliminations | — | — | — | (1,999 | ) | |||||||||||
Total | $ | 152,239 | $ | 119,834 | $ | 192,840 | $ | 462,914 | ||||||||
Six Months Ended June 30, 2020 | ||||||||||||||||
Owned Sports Properties | Events, Experiences & Rights | Representation | Total | |||||||||||||
Media rights | $ | 226,040 | $ | 262,936 | $ | — | $ | 488,976 | ||||||||
Media production, distribution and content | 3,200 | 113,762 | 150,999 | 267,961 | ||||||||||||
Events and performance | 155,166 | 411,912 | — | 567,078 | ||||||||||||
Talent representation and licensing | — | — | 227,887 | 227,887 | ||||||||||||
Marketing | — | — | 106,688 | 106,688 | ||||||||||||
Eliminations | — | — | — | (5,279 | ) | |||||||||||
Total | $ | 384,406 | $ | 788,610 | $ | 485,574 | $ | 1,653,311 | ||||||||
In the three months ended June 30, 20212022 and 2020,2021, there was revenue recognized of $9.9$16.7 million and $11.0$9.9 million, respectively, from performance obligations satisfied in prior periods. In the six months ended June 30, 20212022 and 2020,2021, there was revenue recognized of $23.0$30.7 millionand $21.8$23.0 million, respectively, from performance obligations satisfied in prior periods.
25
Remaining Performance Obligations
The following table presents the aggregate amount of transaction price allocated to remaining performance obligations for contracts greater than one year with unsatisfied or partially satisfied performance obligations as of June 30, 20212022 (in thousands). The transaction price related to these future obligations does not include any variable consideration.
|
| Years Ending |
| |
Remainder of 2022 |
| $ | 833,850 |
|
2023 |
|
| 1,572,487 |
|
2024 |
|
| 1,199,045 |
|
2025 |
|
| 1,079,046 |
|
2026 |
|
| 200,015 |
|
Thereafter |
|
| 586,687 |
|
|
| $ | 5,471,130 |
|
Years Ending December 31, | ||||
Remainder of 2021 | $ | 871,028 | ||
2022 | 1,409,272 | |||
2023 | 1,252,400 | |||
2024 | 971,381 | |||
2025 | 911,711 | |||
Thereafter | 578,354 | |||
$ | 5,994,146 | |||
Contract Liabilities
The Company records deferred revenue when cash payments are received or due in advance of its performance. The Company’s deferred revenue balance primarily relates to advance payments received related to advertising and sponsorship agreements, event advanced ticket sales and performance tuition. Deferred revenue is included in the current liabilities section and in other long-term liabilities in the consolidated balance sheets.
The following table presents the Company’s contract liabilities as of June 30, 20212022 and December 31, 20202021 (in thousands):
Description |
| December 31, 2021 |
|
| Additions |
|
| Deductions |
|
| Acquisitions |
|
| Held for Sale |
|
| Foreign Exchange |
|
| June 30, 2022 |
| |||||||
Deferred revenue - current |
| $ | 651,760 |
|
| $ | 1,290,101 |
|
| $ | (1,391,296 | ) |
| $ | 20,970 |
|
| $ | (2,366 | ) |
| $ | (4,902 | ) |
| $ | 564,267 |
|
Deferred revenue - noncurrent |
| $ | 62,155 |
|
| $ | 7,999 |
|
| $ | 4,303 |
|
| $ | — |
|
| $ | — |
|
| $ | (186 | ) |
| $ | 74,271 |
|
Description | December 31, 2020 | Additions | Deductions | Acquisitions | Foreign Exchange | June 30, 2021 | ||||||||||||||||||
Deferred revenue - current | $ | 606,530 | $ | 1,008,801 | $ | (883,348 | ) | $ | 38,267 | $ | 3,963 | $ | 774,213 | |||||||||||
Deferred revenue - noncurrent | $ | 19,437 | $ | 6,468 | $ | (16,787 | ) | $ | 18,564 | $ | — | $ | 27,682 |
15. SEGMENT INFORMATION
As of June 30, 2021,2022, the Company has three3 reportable segments: Owned Sports Properties, Events, Experiences & Rights, and Representation. The Company also reports the results for the “Corporate”"Corporate" group. The profitability measure employed by the Company’s chief operating decision maker for allocating resources and assessing operating performance is Adjusted EBITDA. Segment information is presented consistently with the basis for the year ended December 31, 2020.2021. Summarized financial information for the Company’s reportable segments is shown in the following tables (in thousands):
Revenue
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Owned Sports Properties |
| $ | 331,930 |
|
| $ | 258,865 |
|
| $ | 628,619 |
|
| $ | 542,346 |
|
Events, Experiences & Rights |
|
| 627,872 |
|
|
| 528,672 |
|
|
| 1,453,685 |
|
|
| 1,068,282 |
|
Representation |
|
| 357,955 |
|
|
| 328,232 |
|
|
| 715,276 |
|
|
| 577,141 |
|
Eliminations |
|
| (5,242 | ) |
|
| (4,497 | ) |
|
| (11,302 | ) |
|
| (6,915 | ) |
Total consolidated revenue |
| $ | 1,312,515 |
|
| $ | 1,111,272 |
|
| $ | 2,786,278 |
|
| $ | 2,180,854 |
|
26
Three months ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Owned Sports Properties | $ | 258,865 | $ | 152,239 | $ | 542,346 | $ | 384,406 | ||||||||
Events, Experiences & Rights | 528,672 | 119,834 | 1,068,282 | 788,610 | ||||||||||||
Representation | 328,232 | 192,840 | 577,141 | 485,574 | ||||||||||||
Eliminations | (4,497 | ) | (1,999 | ) | (6,915 | ) | (5,279 | ) | ||||||||
Total consolidated revenue | $ | 1,111,272 | $ | 462,914 | $ | 2,180,854 | $ | 1,653,311 | ||||||||
Reconciliation of segment profitability
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Owned Sports Properties |
| $ | 161,270 |
|
| $ | 132,267 |
|
| $ | 310,011 |
|
| $ | 277,816 |
|
Events, Experiences & Rights |
|
| 108,117 |
|
|
| 36,800 |
|
|
| 240,600 |
|
|
| 75,850 |
|
Representation |
|
| 111,221 |
|
|
| 61,685 |
|
|
| 212,926 |
|
|
| 123,168 |
|
Corporate |
|
| (74,253 | ) |
|
| (62,704 | ) |
|
| (142,733 | ) |
|
| (109,320 | ) |
Adjusted EBITDA |
|
| 306,355 |
|
|
| 168,048 |
|
|
| 620,804 |
|
|
| 367,514 |
|
Reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equity (earnings) losses of affiliates |
|
| (1,644 | ) |
|
| 1,158 |
|
|
| (5,393 | ) |
|
| (2,176 | ) |
Interest expense, net |
|
| (62,505 | ) |
|
| (83,836 | ) |
|
| (121,777 | ) |
|
| (152,187 | ) |
Depreciation and amortization |
|
| (65,612 | ) |
|
| (69,161 | ) |
|
| (131,606 | ) |
|
| (136,397 | ) |
Equity-based compensation expense |
|
| (60,607 | ) |
|
| (387,017 | ) |
|
| (111,463 | ) |
|
| (403,508 | ) |
Merger, acquisition and earn-out costs |
|
| (14,568 | ) |
|
| (14,199 | ) |
|
| (27,362 | ) |
|
| (25,184 | ) |
Certain legal costs |
|
| (8,598 | ) |
|
| (574 | ) |
|
| (9,600 | ) |
|
| (4,526 | ) |
Restructuring, severance and impairment |
|
| (1,442 | ) |
|
| (4,026 | ) |
|
| (1,960 | ) |
|
| (4,433 | ) |
Fair value adjustment - equity investments |
|
| 11,691 |
|
|
| 5,905 |
|
|
| 13,344 |
|
|
| 13,704 |
|
Gain on sale of the restricted Endeavor Content business |
|
| 0 |
|
|
| 0 |
|
|
| 463,641 |
|
|
| 0 |
|
Tax receivable agreements liability adjustment |
|
| 2,405 |
|
|
| 0 |
|
|
| (51,092 | ) |
|
| 0 |
|
Other |
|
| (20,689 | ) |
|
| (28,334 | ) |
|
| (31,663 | ) |
|
| (41,911 | ) |
Income (loss) before income taxes and equity losses of affiliates |
| $ | 84,786 |
|
| $ | (412,036 | ) |
| $ | 605,873 |
|
| $ | (389,104 | ) |
Three months ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Owned Sports Properties | $ | 132,267 | $ | 65,502 | $ | 277,816 | $ | 167,796 | ||||||||
Events, Experiences & Rights | 36,800 | (42,655 | ) | 75,850 | 26,468 | |||||||||||
Representation | 61,685 | 52,036 | 123,168 | 120,649 | ||||||||||||
Corporate | (62,704 | ) | (29,046 | ) | (109,320 | ) | (83,538 | ) | ||||||||
Adjusted EBITDA | 168,048 | 45,837 | 367,514 | 231,375 | ||||||||||||
Reconciling items: | ||||||||||||||||
Equity losses (income) losses of affiliates | 1,158 | 1,759 | (2,176 | ) | 1,797 | |||||||||||
Interest expense, net | (83,836 | ) | (71,693 | ) | (152,187 | ) | (141,677 | ) | ||||||||
Depreciation and amortization | (69,161 | ) | (84,751 | ) | (136,397 | ) | (165,198 | ) | ||||||||
Equity-based compensation expense | (387,017 | ) | (9,204 | ) | (403,508 | ) | (16,975 | ) | ||||||||
Merger, acquisition and earn-out costs | (14,199 | ) | 859 | (25,184 | ) | (9,303 | ) | |||||||||
Certain legal costs | (574 | ) | (3,357 | ) | (4,526 | ) | (6,159 | ) | ||||||||
Restructuring, severance and impairment | (4,026 | ) | (195,305 | ) | (4,433 | ) | (212,247 | ) | ||||||||
Fair value adjustment - equity investments | 5,905 | (2,950 | ) | 13,704 | (5,759 | ) | ||||||||||
COVID-19 related costs | 0 | (2,606 | ) | 0 | (12,113 | ) | ||||||||||
Other | (28,334 | ) | 19,610 | (41,911 | ) | 43,595 | ||||||||||
Loss before income taxes and equity losses of affiliate s | $ | (412,036 | ) | $ | (301,801 | ) | $ | (389,104 | ) | $ | (292,664 | ) | ||||
16. COMMITMENTS AND CONTINGENCIES
Claims and Litigation
The Company is involved in legal proceedings, claims and governmental investigations arising in the normal course of business. The types of allegations that arise in connection with such legal proceedings vary in nature, but can include contract, employment, tax and intellectual property matters. The Company evaluates all cases and records liabilities for losses from legal proceedings when the Company determines that it is probable that the outcome will be unfavorable and the amount, or potential range, of loss can be reasonably estimated. While any outcome related to litigation or such governmental proceedings cannot be predicted with certainty, management believes that the outcome of these matters, except as otherwise may be discussed below, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
An employee of the Company is one of several individuals and entities named in a complaint by India’s Director of Enforcement (“DE”("DE"), initially filed in January 2015, alleging violations of the Foreign Exchange Management Act (“FEMA”("FEMA"). The complaint alleges that the employee participated as an advisor in a series of transactions in 2009 that were completed by and on behalf of a client, the Board of Control for Cricket in India (the “BCCI”"BCCI"), and that contravened two provisions of FEMA. The subject transactions were pursued under the direction and control of one of the BCCI’s board members. The Company is not alleged to have possessed any funds improperly or to have made or received any of the payments that are alleged to have violated FEMA. The Company is cooperating with the DE’s investigation which, at present, is in its early stages.
In July 2017, the Italian Competition Authority (“ICA”("ICA") issued a decision opening an investigation into alleged breaches of competition law in Italy, involving inter alia IMG, and relating to bidding for certain media rights of the Serie A and Serie B football leagues. In April 2018, the European Commission conducted“Lega Nazionale”,"Lega Nazionale," and together with the three clubs, the “Plaintiffs”"Plaintiffs") each filed separate claims against IMG and certain other unrelated parties in the Court of Milan, Italy, alleging that IMG engaged in anti-competitive practices with regard to bidding for certain media rights of the Serie A and Serie B football leagues. The Plaintiffs seek damages from all defendants in amounts totallingtotaling EUR 554.6 million in the aggregate relating to the three football clubs and EUR 1,592.2 million relating to Lega Nazionale, along with attorneys’ fees and costs (the “Damages Claims”"Damages Claims"). Since December 2020, four additional football clubs have each filed requests to intervene in the Lega Nazionale proceedings and individually seek to claim amounts in the aggregate totallingtotaling EUR 251.5 million. Ten other clubs also filed requests to intervene in support of Lega Nazionale’s claim or alternatively to individually claim in the amount of EUR 92.1 million, in the case of one club, and unspecified amounts (to be quantified as a percentage of the total amount sought by Lega Nazionale) in the other nine
Zuffa has 5related class-action lawsuits filed against it in the United States District Court for the Northern District of California (the “District Court”"District Court") between December 2014 and March 2015 by a total of 11former UFC fighters. The complaints in the five lawsuits are substantially identical. Each alleges that Zuffa violated Section 2 of the Sherman Act by monopolizing the alleged market for the promotion
27
of elite professional MMA bouts and monopolizing the alleged market for elite professional MMA Fighters’fighters’ services. Plaintiffs claim that Zuffa’s alleged conduct injured them by artificially depressing the compensation they received for their services and their intellectual property rights, and they seek treble damages under the antitrust laws, as well as attorneys’ fees and costs, and injunctive relief. On December 14, 2020, the District Court orally indicated its intention to grant Plaintiffs’plaintiffs’ motion to certify the Bout Class (comprised of fighters who participated in bouts from December 16, 2010 to JuneSeptember 30, 2017) and to deny Plaintiffs’plaintiffs’ motion to certify the Identity Class (a purported class basedbased upon the alleged expropriation and exploitation of fighter identities). The Company is awaiting the official written order from the judge and assuming he rules as previously indicated, then the Company will seek an appeal of this decision. On June 23, 2021, plaintiffs’ lawyers filed a new case against Zuffa and EGH
Commitments
In FebruarySeptember 2021, the Company signed a new franchisean agreement and side letter (the “Franchise Agreements”to acquire the OpenBet business ("OpenBet") directly with the Writer’s Guild of America East and the Writer’s Guild of America West (collectively, the “WGA”Light & Wonder, Inc. (formerly known as Scientific Games Corporation) ("Light & Wonder"). These Franchise Agreements include termsOpenBet consists of companies that among other things, prohibit the Company from (a) negotiating packaging deals after June 30, 2022provide products and (b) having more than a 20%non-controllingownership or other financial interest in, or being owned or affiliated with any individual or entity that has more than a 20%non-controllingownership or other financial interest in, any entity or individual engaged in the production or distribution of works written by WGA members under a WGA collective bargaining agreement. The Franchise Agreements provide for a transition periodservices to sports betting operators for the Company to comepurposes of sports wagering. Based on the amended agreement entered into compliance with certain of its provisions. During the term of the Franchise Agreements, until the Company is in compliance, the Franchise Agreements require that the Company place into escrow (i) an amount equal to Endeavor Content’safter-taxgross profits from the production of works written by WGA members under a WGA collective bargaining agreement and (ii) an amount equal to the Company’s after tax writer commissions and package fees received in connection with such Endeavor Content productions.As a result,June 2022 (which was further amended in August 2021,2022), the Company has begun marketingagreed to pay consideration to Light & Wonder of $800.0 million, consisting of $750.0 million in cash and 2,305,794 newly-issued shares of the restricted Endeavor Content businessCompany's Class A common stock, a value of $50.0 million based on the volume-weighted average trading price of the Class A common stock for sale.
17. RELATED PARTY TRANSACTIONS
The Company has the following related party transactions as of June 30, 20212022 and December 31, 20202021 and for the three and six months ended June 30, 20212022 and 20202021 (in thousands):
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Other current assets |
| $ | 18,046 |
|
| $ | 4,728 |
|
Investments |
|
| 1,570 |
|
|
| 0 |
|
Other assets |
|
| 0 |
|
|
| 322 |
|
Deferred Revenue |
|
| 4,833 |
|
|
| 264 |
|
Current liabilities |
|
| 77 |
|
|
| 320 |
|
Other current liabilities |
|
| 3,490 |
|
|
| 2,111 |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
| $ | 9,842 |
|
| $ | 6,039 |
|
| $ | 17,581 |
|
| $ | 13,039 |
|
Direct operating costs |
|
| (354 | ) |
|
| 724 |
|
|
| 4,342 |
|
|
| 2,857 |
|
Selling, general and administrative expenses |
|
| 605 |
|
|
| 3,304 |
|
|
| 2,466 |
|
|
| 4,430 |
|
Other income (expense), net |
|
| 875 |
|
|
| 875 |
|
|
| (13,250 | ) |
|
| 1,750 |
|
June 30, 2021 | December 31, 2020 | |||||||
Other current assets | $ | 9,071 | $ | 5,572 | ||||
Other assets | 4,670 | 1,400 | ||||||
Current liabilities | 0 | 1,356 | ||||||
Other current liabilities | 657 | 969 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 6,039 | $ | 3,093 | $ | 13,039 | $ | 5,178 | ||||||||
Direct operating costs | 724 | (80 | ) | 2,857 | 1,972 | |||||||||||
Selling, general and administrative expenses | 3,304 | 1,445 | 4,430 | 10,261 | ||||||||||||
Other income, net | 875 | 875 | 1,750 | 1,750 |
As of June 30, 2021,2022, the Company has an equity-method investment in Euroleague, a related party. For the three ended June 30, 20212022 and 2020,2021, the Company recognized revenue of $2.4$(0.4) million, $4.7 $3.4 million,0.12.4million and $(2.4)$4.7 million, respectively, for a management fee to compensate it for representation and technical services it provides to Euroleague in relation to the distribution of media rights. This revenue is included in the Owned Sports Properties segment. Also, for the three and six months ended June 30, 2022 and 2021, and 2020, the
Silver Lake and certain of our executives indirectly own a minority interest in The Raine Group ("Raine"). During the three and six months ended June 30, 2022, the Company paid $15.0 million in transaction costs to Raine for investment banking services in connection with the sale of the restricted Endeavor Content business (Note 4). In addition, during the three and six months ended June 30, 2022, the Company invested $1.6 million in non-marketable funds maintained by Raine.
28
18. SUBSEQUENT EVENTS
In August 2022, the Company entered into a purchase agreement with Silver Lake, stockholders of the Company, to sell the ten PDL Clubs that operate under the DBH umbrella for an aggregate purchase price of approximately $280 million cash, subject to customary adjustments. The closing of this transaction is expected in the fourth quarter of 2022.
In August 2022, the Company acquired 55% of Barrett-Jackson Holdings, LLC ("Barrett-Jackson"), which is engaged in the business of collector car auctions and sales as well as other collector car related events and experiences, in exchange for consideration having an aggregate value of $261.2 million, subject to certain adjustments. The aggregate consideration consists of $248.7 million of cash and 563,935 newly-issued shares of the Company's Class A common stock with a value of $12.5 million based on the volume-weighted average trading price of the Class A common stock for the thirty trading days ending on the day immediately preceding the closing date of such transaction. Considering the proximity of the closing of the acquisition, additional disclosures required under ASC Topic 805, Business Combinations, will be provided in the Company’s next quarterly interim financial statements.
In August 2022, the Company entered into additional interest rate hedges to swap $750 million of its 2014 Credit Facilities from floating interest expense to fixed. The 2014 Credit Facilities pay interest based on LIBOR +2.75%. The LIBOR portion of the facility has been fixed at a coupon of 3.162% until August 31, 2024. Hedge accounting will be applied to these additional interest rate swaps.
29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report and with our audited financial statements and related notes included in our prospectus dated April 28, 2021 filed with the SEC on April 30,Annual Report. 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 under Part I, Item 1A. "Risk Factors" of our 2021 pursuant to Rule 424(b)Annual Report, as updated by Part II, Item 1A. "Risk Factors" of this Quarterly Report, or in other sections of the Securities Act of 1933, as amended (the “Prospectus”). The historical financial data discussed below reflects our historical results of operations2021 Annual Report and financial position and relate to periods prior to the reorganization transactions. As a result, the following discussion does not reflect the significant impact that such events will have on us.
BUSINESS OVERVIEW
Endeavor Group Holdings, Inc. is a premium intellectual property, content, events,global sports and experiencesentertainment company. We own and operate premium sports properties, including the UFC, produce and distribute sports and entertainment content, own and manage exclusive live events and experiences, and represent top sports and entertainment talent, as well as blue chip corporate clients. Founded as a client representation business, we expanded organically and through strategic mergers and acquisitions, investing in new capabilities, including sports operations and advisory, events and experiences management, media production and distribution, brand licensing, and experiential marketing. The addition of these new capabilities and insights transformed our business into an integrated global platform anchored by owned and managed premium intellectual property.
Segments
We operate our business in three segments: (i) Owned Sports Properties; (ii) Events, Experiences & Rights; and (iii) Representation.
Owned Sports Properties
Our Owned Sports Properties segment is comprised of a unique portfolio of scarce sports properties, including UFC, PBRProfessional Bull Riders ("PBR"), Euroleague and Euroleague,Diamond Baseball Holdings ("DBH"), that generate significant growth through innovative rights deals and exclusive live events.
Through the UFC, the world’s premier professional MMA organization, we produce more than 40 live events annually which are broadcast in over 160 countries and territories to approximately one billion TV households. UFC was founded in 1993 and has grown in popularity after hosting more than 500 events and reaching a global audience through an increasing array of broadcast license agreements and our owned FIGHT PASS streaming platform. The value of our content is demonstrated by our licensing arrangements with ESPN and other international broadcasters and our increasing consumer engagement is reflected by the growth of FIGHT PASS subscribers and overall follower growth and engagement across our social channels.
PBR is the world’s premier bull riding circuit with more than 500 bull riders from the United States, Australia, Brazil, Canada, and Mexico, competing in more than 200 bull riding events each year
We have an up Euroleague is one
At the end of 2021 and in January 2022, we acquired ten Professional Development League clubs (the "PDL Clubs"), whose results are included in Owned Sports Properties and are being operated under the DBH umbrella. In August 2022, we entered into a purchase agreement with Silver Lake, stockholders of the most popular indoor sports leaguesCompany, to sell the PDL Clubs for an aggregate purchase price of approximately $280 million cash, subject to customary adjustments. The closing of this transaction is expected to be in the world, averaging attendancefourth quarter of over 8,500 per game in the 2019-2020 season.
Events, Experiences & Rights
In our Events, Experiences & Rights segment, we own, operate, and provide services to a diverse portfolio of over 800 live events annually, including sporting events covering 20 sports across 25 countries, international fashion weeks, art fairs and music, culinary and lifestyle festivals. We own and operate many of these events, including the Miami Open, HSBC Champions, Frieze Art Fair, New York Fashion Week, and Hyde Park Winter Wonderland, and we have a strategic partnership withthe PGA-sanctioned AsianTour.Wonderland. We also operate other events on behalf of third parties, including the AIG Women’s British Open and Fortnite World Cup.Honda Classic. Through On Location, we provide premium experiences, historically providing more than 900 per year for sporting and music events such as the Super Bowl, Ryder Cup, NCAA Final Four and Coachella.
We are one of the largest independent global distributors of sports video programming and data. We sell media rights globally on behalf of more than 150 clients such as the International Olympic Committee, (“IOC”), the NFL,National Football League, and the National Hockey League, (“NHL”), as well as for our owned assets and channels. We also provide league advisory services given the array of experience we have to offer. Through IMG ARENA, we work with more than 470 leading sportsbook brands worldwide to deliver live streaming video and data feeds for more than 45,000 sports events annually, as well as
Additionally, we own and operate IMG Academy, a leading academic and sports training institution located in Florida.
In September 2021, we signed an agreement to acquire the OpenBet business ("OpenBet") of Light & Wonder, Inc. (formerly known as Scientific Games Corporation) ("Light & Wonder"). OpenBet consists of companies that provide products and services to sports betting operators for the purposes of sports wagering. Based on the amended agreement entered into in June 2022 (which was further amended in August 2022), we have agreed to pay consideration to Light & Wonder of $800.0 million, consisting of cash of $750.0 million, expected to be funded with cash on hand, and 2,305,794 newly-issued shares of our Class A common stock, a value of $50.0 million based on the volume-weighted average trading price of the Class A common stock for the twenty trading days ended on June 29, 2022. The closing of this transaction is subject to regulatory approvals and
30
other customary closing conditions and is expected to close in the third quarter of 2022. Upon closing of the acquisition, we expect to create a new reportable segment that will include IMG ARENA and the OpenBet business.
In April 2022, we acquired the Mutua Madrid Open tennis tournament and additional assets, including the Acciona Open de España golf tournament, from Super Slam Ltd and its affiliates. We paid $386.1 million for consideration and transfer fees at closing, an additional $31.8 million of consideration is payable within two years of closing, and $0.6 million of contingent consideration payable within three years of closing.
In August 2022, we acquired 55% of Barrett-Jackson Holdings, LLC ("Barrett-Jackson"), which is engaged in the business of collector car auctions and sales as well as other collector car related events and experiences, in exchange for consideration having an aggregate value of $261.2 million, subject to certain adjustments. The aggregate consideration consists of $248.7 million of cash and 563,935 newly-issued shares of the Company's Class A common stock with a value of $12.5 million based on the volume-weighted average trading price of the Class A common stock for the thirty trading days ending on the day immediately preceding the closing date of such transaction.
Representation
Our Representation segment provides services to more than 7,000 talent and corporate clients and includes our content division, Endeavor Content.clients. Our Representation business deploys a subset of our integrated capabilities on behalf of our clients.
Through our client representation and management businesses, including the WME talent agency and IMG Models, we represent a diverse group of talent across entertainment, sports, and fashion, including actors, directors, writers, athletes, models, musicians, and other artists, in a variety of mediums, such as film, television, books, and live events. Through our 160over90 business, we provide brand strategy, marketing, advertising, public relations, analytics, digital, activation, and experiential services to many of the world’s largest brands. Through IMG Licensing, we provide IP licensing services to a large portfolio of entertainment, sports, and consumer product brands, including representing these clients in the licensing of their logos, trade names and trademarks.
Previously, our Representation segment included our restricted Endeavor Content providesbusiness, which provided a premium alternative to traditional content studios, offering a range of services including content development, production, financing, sales, and advisory services for creators. In February 2021, the Company signed a new franchise agreement and side letter (the “Franchise Agreements”)the Franchise Agreements directly with the Writer’s Guild of America East and the Writer’s Guild of America West (collectively, the “WGA”).WGA. These Franchise Agreements includeincluded terms that, among other things, prohibitprohibited the Company from (a) negotiating packaging deals after June 30, 2022 and (b) having more than a 20% non-controlling ownership or other financial interest in, or being owned or affiliated with any individual or entity that has more than a 20% non-controlling ownership or other financial interest in, any entity or individual engaged in the production or distribution of works written by WGA members under a WGA collective bargaining agreement. As a result, in August 2021,the third quarter, the Company has begunbegan marketing the restricted Endeavor Content business for sale.
Components of Our Operating Results
Revenue
In our Owned Sports Properties segment, we primarily generate revenue via media rights fees,
Direct Operating Costs
Our direct operating costs primarily include third-party expenses associated with the production of events and experiences, content production costs, operation of our training and education facilities, and fees for media rights, including required payments related to sales agency contracts when minimum sales guarantees are not met.
Selling, General and Administrative
Our selling, general and administrative expenses primarily include personnel costs as well as rent, professional service costs and other overhead required to support our operations and corporate structure.
Provision for Income Taxes
EGH was incorporated as a Delaware corporation in January 2019. It was formed as a holding company for the purpose of completing an IPO and other related transactions. As the sole managing member of Endeavor Manager, which is the sole managing member of EOC, EGH operates and controls all the business and affairs of EOC, and through EOC and its subsidiaries, conducts the Company’s business. EGH is subject to corporate income tax on its share of taxable income or loss of EOC, derived from Endeavor Manager. EOC is treated as a partnership for U.S. federal income tax purposes and is therefore not subject to U.S. corporate income tax. However, certain of EOC’s subsidiaries are subject to U.S. or foreign corporate income tax.
In March 2020, the World Health Organization declared the outbreakhas rapidly changed market and economic conditions globally, including significantly impacting the entertainment and sports industries as well as our business, results of operations, financial position and cash flows.
31
UFC Buyout
Substantially simultaneous with the closing of the IPO, we consummated the UFC Buyouttransactions whereby we acquired equity interests in UFC Parent (including warrants of UFC Parent) from the Other UFC Holders (or their affiliates) resulting in Endeavor Operating Company directly or indirectly owning 100% of the equity interests of UFC Parent.
As a result of the UFC Buyout, we no longer attribute income (loss) to
Reorganization
Prior to the closing of the IPO on May 3, 2021, we undertook reorganization transactions, following which Endeavor Group Holdings became a holding company, and its principal asset is an equity interest in a newly formed subsidiary of Endeavor Group Holdings, Endeavor Manager, of which Endeavor Group Holdings serves as the managing member. Endeavor Manager is in turn the managing member of Endeavor Operating Company. Endeavor Group Holdings manages and operates the business and controls the strategic decisions and
After consummation of the IPO and the reorganization transactions, we became subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of Endeavor Manager and Endeavor Operating Company, and we are taxed at the prevailing corporate tax rates. Endeavor Operating Company makes distributions to us in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the Tax Receivable Agreement.
RESULTS OF OPERATIONS
The following is a discussion of our consolidated results of operations for the three and six months ended June 30, 20212022 and 2020.2021. This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue | $ | 1,111,272 | $ | 462,914 | $ | 2,180,854 | $ | 1,653,311 | ||||||||
Operating expenses: | ||||||||||||||||
Direct operating costs | 570,955 | 172,643 | 1,117,347 | 853,927 | ||||||||||||
Selling, general and administrative expenses | 785,101 | 302,047 | 1,166,214 | 691,018 | ||||||||||||
Insurance recoveries | (10,210 | ) | (16,841 | ) | (29,867 | ) | (33,960 | ) | ||||||||
Depreciation and amortization | 69,161 | 84,751 | 136,397 | 165,198 | ||||||||||||
Impairment charges | 3,770 | 172,232 | 3,770 | 175,282 | ||||||||||||
Total operating expenses | 1,418,777 | 714,832 | 2,393,861 | 1,851,465 | ||||||||||||
Operating loss | (307,505 | ) | (251,918 | ) | (213,007 | ) | (198,154 | ) | ||||||||
Other (expense) income: | ||||||||||||||||
Interest expense, net | (83,836 | ) | (71,693 | ) | (152,187 | ) | (141,677 | ) | ||||||||
Loss on extinguishment of debt | (28,628 | ) | — | (28,628 | ) | — | ||||||||||
Other income, net | 7,933 | 21,810 | 4,718 | 47,167 | ||||||||||||
Loss before income taxes and equity losses of affiliates | (412,036 | ) | (301,801 | ) | (389,104 | ) | (292,664 | ) | ||||||||
Provision for (benefit from) income taxes | 60,918 | (4,049 | ) | 66,003 | 44,555 | |||||||||||
Loss before equity losses of affiliates | (472,954 | ) | (297,752 | ) | (455,107 | ) | (337,219 | ) | ||||||||
Equity losses of affiliates, net of tax | (43,813 | ) | (198,013 | ) | (59,284 | ) | (209,807 | ) | ||||||||
Net loss | (516,767 | ) | (495,765 | ) | (514,391 | ) | (547,026 | ) | ||||||||
Net loss attributable to non-controlling interests | (190,354 | ) | (29,211 | ) | (163,108 | ) | (25,516 | ) | ||||||||
Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions | (6,816 | ) | (466,554 | ) | (31,686 | ) | (521,510 | ) | ||||||||
Net loss attributable to Endeavor Group Holdings, Inc. | $ | (319,597 | ) | $ | — | $ | (319,597 | ) | $ | — | ||||||
|
| Three Months Ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
| $ | 1,312,515 |
|
| $ | 1,111,272 |
|
| $ | 2,786,278 |
|
| $ | 2,180,854 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Direct operating costs |
|
| 508,385 |
|
|
| 570,955 |
|
|
| 1,203,026 |
|
|
| 1,117,347 |
|
Selling, general and administrative expenses |
|
| 587,499 |
|
|
| 785,101 |
|
|
| 1,127,705 |
|
|
| 1,166,214 |
|
Insurance recoveries |
|
| — |
|
|
| (10,210 | ) |
|
| (993 | ) |
|
| (29,867 | ) |
Depreciation and amortization |
|
| 65,612 |
|
|
| 69,161 |
|
|
| 131,606 |
|
|
| 136,397 |
|
Impairment charges |
|
| — |
|
|
| 3,770 |
|
|
| — |
|
|
| 3,770 |
|
Total operating expenses |
|
| 1,161,496 |
|
|
| 1,418,777 |
|
|
| 2,461,344 |
|
|
| 2,393,861 |
|
Operating income (loss) |
|
| 151,019 |
|
|
| (307,505 | ) |
|
| 324,934 |
|
|
| (213,007 | ) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
| (62,505 | ) |
|
| (83,836 | ) |
|
| (121,777 | ) |
|
| (152,187 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| (28,628 | ) |
|
| — |
|
|
| (28,628 | ) |
Tax receivable agreements liability adjustment |
|
| 2,405 |
|
|
| — |
|
|
| (51,092 | ) |
|
| — |
|
Other (expense) income, net |
|
| (6,133 | ) |
|
| 7,933 |
|
|
| 453,808 |
|
|
| 4,718 |
|
Income (loss) before income taxes and equity losses of affiliates |
|
| 84,786 |
|
|
| (412,036 | ) |
|
| 605,873 |
|
|
| (389,104 | ) |
Provision for (benefit from) income taxes |
|
| 2,699 |
|
|
| 60,918 |
|
|
| (14,535 | ) |
|
| 66,003 |
|
Income (loss) before equity losses of affiliates |
|
| 82,087 |
|
|
| (472,954 | ) |
|
| 620,408 |
|
|
| (455,107 | ) |
Equity losses of affiliates, net of tax |
|
| (39,867 | ) |
|
| (43,813 | ) |
|
| (60,522 | ) |
|
| (59,284 | ) |
Net income (loss) |
|
| 42,220 |
|
|
| (516,767 | ) |
|
| 559,886 |
|
|
| (514,391 | ) |
Less: Net income (loss) attributable to non-controlling interests |
|
| 16,414 |
|
|
| (190,354 | ) |
|
| 214,534 |
|
|
| (163,108 | ) |
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| — |
|
|
| (6,816 | ) |
|
| — |
|
|
| (31,686 | ) |
Net income (loss) attributable to Endeavor Group Holdings, Inc. |
| $ | 25,806 |
|
| $ | (319,597 | ) |
| $ | 345,352 |
|
| $ | (319,597 | ) |
Revenue
Revenue increased $648.4$201.2 million, or 140.1%18.1%, to $1,111.3$1,312.5 million for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020.
32
Revenue increased $605.4 million, or 27.8%, to $2,786.3 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 as the Company rebounds from the impact of COVID-19 onCOVID-19.
Direct operating costs
Direct operating costs decreased $62.6 million, or 31.9%11.0%, to $2,180.9$508.4 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The decrease was primarily attributable to a decrease of $184 million in media rights and media production costs due to the decrease in media revenue described above, including the expiration of certain contracts in the second quarter of 2021 whose costs were in excess of revenue. Other production and content costs decreased $69 million due to the sale of the restricted Endeavor Content business in January 2022. These decreases were partially offset by an increase of $191 million for costs related to the return of live events and the increase in marketing and experiential activations as described above.
Direct operating costs increased $85.7 million, or 7.7%, to $1,203.0 million for the six months ended June 30, 20212022 compared to the six months ended June 30, 2020.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $483.1decreased $197.6 million, or 159.9%25.2%, to $785.1$587.5 million for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020.2021. The increasedecrease was principally due to increased$377.8$326.4 million of which $251.9 million was due to modificationas the prior period included charges for modifications of certain pre-IPO awards to remove certain forfeiture and discretionary call terms,terms. This decrease was offset by higher cost of personnel and other operating expenses as the business recovers from the impact of
Selling, general and administrative expenses increased $475.2decreased $38.5 million, or 68.8%3.3%, to $1,166.2$1,127.7 million for the six months ended June 30, 20212022 compared to the six months ended June 30, 2020.2021. The increasedecrease was principally due to increasedlower equity-based compensation expense of $386.5$292.0 million of which $251.9 million is due toas the prior period included charges for modifications of certainterms,terms. This decrease was offset by higher cost of personnel and other operating expenses as the business recovers from the impact of
Insurance recoveries
We maintain events cancellation insurance policies for a significant number of our events. For the three and six months ended June 30, 20212022 and 2020,2021, we recognized none, $1.0 million, $10.2 million $29.9 million, $16.8 million and $34.0$29.9 million of insurance recoveries, respectively, which primarily related to cancelled events in our Events, Experiences & Rights and Owned Sports Properties segments due
33
Depreciation and amortization
Depreciation and amortization decreased $15.6$3.5 million, or 18.4%5.1%, to $69.2$65.6 million for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020.2021. Depreciation and amortization decreased $28.8$4.8 million, or 17.4%3.5%, to $136.4$131.6 million for the six months ended June 30, 20212022 compared to the six months ended June 30, 2020. 2021.The decreases were primarily driven by certain UFC intangible assets becoming fully amortized in August 2020.
Impairment charges
Impairment charges were $3.8 million for the three and six months ended June 30, 2021, which were for goodwill in our Events, Experiences & Rights and Representation segments.
Interest expense, net
Interest expense, net decreased $168.5$21.3 million, or 97.8%25.4% to $3.8$62.5 million for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020. Impairment charges2021. Interest expense, net decreased $171.5$30.4 million, or 97.8%20.0% to $3.8$121.8 million for the six months ended June 30, 20212022 compared to the six months ended June 30, 2020. For2021. The decrease was primarily driven by lower indebtedness and lower interest rates associated with our outstanding debt during the three and six months ended June 30, 2020, the impairment charges were for goodwill and intangible assets primarily in our Events, Experiences & Rights and Representation segments, driven by lower projections2022 as of result of the impact ofCOVID-19and restructuring in certain of our businesses.
Loss on extinguishment of debt of $28.6 million for the three and six months ended June 30, 2021 was due to fees and expenses incurred for the early redemption of our term loans issued in May 2020.
Other (expense) income, net
Other (expense) income, net decreased $13.9for the three months ended June 30, 2022 was expense of $6.1 million or 63.6%compared to income of $7.9 million for the three months ended June 30, 2021 compared to2021. The expense for the three months ended June 30, 2020.2022 primarily included $16.1 million for foreign currency transaction losses offset by $11.7 million of gains from changes in fair value of equity investments. The income for the three months ended June 30, 2021 primarily included a $6.1 million gain from a change in the fair value of an equity investment. The income for the three months ended June 30, 2020 primarily included an $11.0 million gain due to the change in the fair value of embedded foreign currency derivatives and $9.0 million related to foreign currency transaction gains.
Other income net decreased $42.5 million, or 90.0% to $4.7 million for the six months ended June 30, 2020 compared to2022 included a gain of $463.6 million for the six months ended June 30, 2020.sale of the restricted Endeavor Content business and $13.3 million of gains from changes in fair value of equity investments partially offset by $20.8 million for foreign currency transaction losses. The income for the six months ended June 30, 2021 included $13.8 million of gains from sales and changes in fair value of equity investments offset by a $9.2 million loss due to the change in the fair value of embedded foreign currency derivatives. The
Provision for (benefit from) income taxes
For the three months ended June 30, 2022, we recorded a provision for income taxes of $2.7 million compared to a provision for income taxes of $60.9 million for the three months ended June 30, 2021. For the six months ended June 30, 2022, we recorded a benefit for income taxes of $14.5 million compared to a provision for income taxes of $66.0 million for the six months ended June 30, 2020 primarily included a $27.1 million gain recognized for the acquisition of the remaining 50% membership interests of FC Diez Media, a $8.1 million gain related to the deconsolidation of Asian Tour Media and a $13.2 million gain due to the change in the fair value of embedded foreign currency derivatives.
Equity losses of affiliates, net of tax
Equity losses of affiliates decreased $154.2$3.9 million to $43.8$39.9 million and decreased $150.5increased $1.2 million to $59.3$60.5 million for the three and six months ended June 30, 2021, respectively,2022 compared to the three and six months ended June 30, 2020. Equity2021. Our equity losses for the three and six months ended June 30, 2021 are primarily due to the losses related to our investment in Learfield IMG College.
If the operating results of Learfield IMG College continue to be weaker than anticipated or if they record impairment charges in the future, our operating results may be adversely impacted and sixit may also result in an other-than-temporary impairment to our carrying value for this equity method investment.
Net income (loss) attributable to non-controlling interests
Subsequent to the IPO and associated reorganization transactions, non-controlling interests primarily relate to interests held by certain former members of Endeavor Operating Company who retained their ownership interests in Endeavor Manager and Endeavor Operating Company.
Net income attributable to non-controlling interests was $16.4 million for the three months ended June 30, 2020 we recorded $195.8 million and $207.5 million, respectively, in equity losses resulting from continued losses and the impact of COVID-19 on Learfield IMG College’s operating results, resulting in goodwill and indefinite-lived intangible asset impairments.
Net lossincome attributableincreased $137.6 was $214.5 million for the six months ended June 30, 2022 compared to net loss attributable to non-controlling interests of $163.1 million for the six months ended June 30, 2021 compared2021. The change was primarily due to the change in the amount of reported net income for the six months ended June 30, 2020. The increase was primarily driven by2022 versus the reported net loss for the six months ended June 30, 2021 as well as the effect of the reorganization transactions offset by net income attributable to the UFC prior to the UFC Buyout.
34
SEGMENT RESULTS OF OPERATIONS
We classify our business into three reporting segments: Owned Sports Properties; Events, Experiences & Rights; and Representation. Our chief operating decision maker evaluates the performance of our segments based on segment Revenue and segment Adjusted EBITDA. Management believes segment Adjusted EBITDA is indicative of operational performance and ongoing profitability and is used to evaluate the operating performance of our segments and for planning and forecasting purposes, including the allocation of resources and capital.
Segment operating results reflect earnings before corporate and unallocated shared expenses. Segment operating results include allocations of certain costs, including facilities, technology, and other shared services costs, which are allocated based on metrics designed to correlate with consumption. These allocations are agreed-upon amounts between the businesses and may differ from amounts that would be negotiated in arm’s length transactions.
The following tables display Revenue and Adjusted EBITDA for each of our segments:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue: | ||||||||||||||||
Owned Sports Properties | $ | 258,865 | $ | 152,239 | $ | 542,346 | $ | 384,406 | ||||||||
Events, Experiences & Rights | 528,672 | 119,834 | 1,068,282 | 788,610 | ||||||||||||
Representation | 328,232 | 192,840 | 577,141 | 485,574 | ||||||||||||
Eliminations | (4,497 | ) | (1,999 | ) | (6,915 | ) | (5,279 | ) | ||||||||
Total Revenue | $ | 1,111,272 | $ | 462,914 | $ | 2,180,854 | $ | 1,653,311 | ||||||||
Adjusted EBITDA: | ||||||||||||||||
Owned Sports Properties | $ | 132,267 | $ | 65,502 | $ | 277,816 | $ | 167,796 | ||||||||
Events, Experiences & Rights | 36,800 | (42,655 | ) | 75,850 | 26,468 | |||||||||||
Representation | 61,685 | 52,036 | 123,168 | 120,649 | ||||||||||||
Corporate | (62,704 | ) | (29,046 | ) | (109,320 | ) | (83,538 | ) |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owned Sports Properties |
| $ | 331,930 |
|
| $ | 258,865 |
|
| $ | 628,619 |
|
| $ | 542,346 |
|
Events, Experiences & Rights |
|
| 627,872 |
|
|
| 528,672 |
|
|
| 1,453,685 |
|
|
| 1,068,282 |
|
Representation |
|
| 357,955 |
|
|
| 328,232 |
|
|
| 715,276 |
|
|
| 577,141 |
|
Eliminations |
|
| (5,242 | ) |
|
| (4,497 | ) |
|
| (11,302 | ) |
|
| (6,915 | ) |
Total Revenue |
| $ | 1,312,515 |
|
| $ | 1,111,272 |
|
| $ | 2,786,278 |
|
| $ | 2,180,854 |
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owned Sports Properties |
| $ | 161,270 |
|
| $ | 132,267 |
|
| $ | 310,011 |
|
| $ | 277,816 |
|
Events, Experiences & Rights |
|
| 108,117 |
|
|
| 36,800 |
|
|
| 240,600 |
|
|
| 75,850 |
|
Representation |
|
| 111,221 |
|
|
| 61,685 |
|
|
| 212,926 |
|
|
| 123,168 |
|
Corporate |
|
| (74,253 | ) |
|
| (62,704 | ) |
|
| (142,733 | ) |
|
| (109,320 | ) |
Owned Sports Properties
The following table sets forth our Owned Sports Properties segment results for the three and six months ended June 30, 20212022 and 2020:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue | $ | 258,865 | $ | 152,239 | $ | 542,346 | $ | 384,406 | ||||||||
Direct operating costs | $ | 81,079 | $ | 48,558 | $ | 173,294 | $ | 139,017 | ||||||||
Selling, general and administrative expenses | $ | 44,389 | $ | 35,980 | $ | 92,102 | $ | 75,421 | ||||||||
Adjusted EBITDA | $ | 132,267 | $ | 65,502 | $ | 277,816 | $ | 167,796 | ||||||||
Adjusted EBITDA margin | 51.1 | % | 43.0 | % | 51.2 | % | 43.7 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 331,930 |
|
| $ | 258,865 |
|
| $ | 628,619 |
|
| $ | 542,346 |
|
Direct operating costs |
| $ | 102,849 |
|
| $ | 81,078 |
|
| $ | 197,565 |
|
| $ | 173,294 |
|
Selling, general and administrative expenses |
| $ | 67,492 |
|
| $ | 44,390 |
|
| $ | 120,364 |
|
| $ | 92,102 |
|
Adjusted EBITDA |
| $ | 161,270 |
|
| $ | 132,267 |
|
| $ | 310,011 |
|
| $ | 277,816 |
|
Adjusted EBITDA margin |
|
| 48.6 | % |
|
| 51.1 | % |
|
| 49.3 | % |
|
| 51.2 | % |
Three months ended June 30, 20212022 compared to three months ended June 30, 2020
Revenue for the three months ended June 30, 20212022 increased $106.6$73.1 million, or 70.0%28.2%, to $258.9$331.9 million, compared to the three months ended June 30, 2020.2021. The increase was driven primarily by growth at UFC due to increased media rights fees, greater sponsorship, licensing, commercial PPV and event related revenue and an increase at PBR primarily due to the increasechange in timing of the number of UFC and PBR events held and the increase in ticket salesUnleash The Beast finals due to the liftingnew team series format scheduled for the second half of restrictions on fan attendancethe year. In addition, the acquisition of ten PDL Clubs in December 2021 and January 2022 that operate under the quarter.
Direct operating costs for the three months ended June 30, 20212022 increased $32.5$21.8 million, or 67.0%26.9%, to $81.1$102.8 million, compared to the three months ended June 30, 2020.2021. The increase was attributable to the increasechange in timing of the numberUnleash the Beast finals at PBR and the acquisition of UFC and PBR events held.
Selling, general and administrative expenses for the three months ended June 30, 20212022 increased $8.4$23.1 million, or 23.4%52.0%, to $44.4$67.5 million, compared to the three months ended June 30, 2020.2021. The increase was primarily attributable to cost$14 million of personnel,expenses incurred by DBH, as well as an increase in travel expenses related to theUFC due to an international event held in 2022 and an increase in the numbercost of UFC and PBR events held.
Adjusted EBITDA for the three months ended June 30, 20212022 increased $66.8$29.0 million, or 101.9%21.9%, to $132.3$161.3 million, compared to the three months ended June 30, 2020.2021. The increase in Adjusted EBITDA was primarily driven by increasedincreases in revenue at UFC and PBR partially offset by the increaseincreases in direct operating costs and selling, general and administrative expenses.
Six months ended June 30, 20212022 compared to six months ended June 30, 2020
Revenue for the six months ended June 30, 20212022 increased $157.9$86.3 million, or 41.1%15.9%, to $542.3$628.6 million, compared to the six months ended June 30, 2020.2021. The increase was driven primarily by media rights fees and event related revenuean increase at PBR from the change in timing of the Unleash The Beast finals due to the new team series format scheduled for the second half of the year, an increase in the number of UFC events held. Thisand the elimination of fan attendance restrictions. The increase was also due to an increase at UFC driven by greater sponsorship, licensing, commercial PPV and event related revenue partially offset by the reduction oflower media rights fees and Residential PPV revenue at PBR primarily due to one less eventsPPV event held in 2022. In addition, the acquisition of ten PDL Clubs in December 2021 and no ticket sales inJanuary 2022 that operate under the first quarter of 2021 due toCOVID-19.
Direct operating costs for the six months ended June 30, 20212022 increased $34.3$24.3 million, or 24.7%14.0%, to $173.3$197.6 million, compared to the six months ended June 30, 2020.2021. The increase was attributable to the acquisition of DBH, the change in timing of the Unleash The Beast finals and an increase in the number of UFCPBR events held, partially offset by PBR cost savings initiatives and holding events atlower event expenses for UFC from having one less expensive venues.
35
Selling, general and administrative expenses for the six months ended June 30, 20212022 increased $16.7$28.3 million, or 22.1%30.7%, to $92.1$120.4 million, compared to the six months ended June 30, 2020.2021. The increase was primarily attributable to $22 million of expenses incurred by DBH and an increase in cost of personnel as well as travel expenses related to the increase in the number of UFC events held, including UFC’s Fight Island 3.0.
Adjusted EBITDA for the six months ended June 30, 20212022 increased $110.0$32.2 million, or 65.6%11.6%, to $277.8$310.0 million, compared to the six months ended June 30, 2020. 2021. The increase in Adjusted EBITDA was primarily driven by increasedincreases in revenue at UFC partially offset by the increaseincreases in direct operating costs and selling, general and administrative expenses.
Events, Experiences & Rights
The following table sets forth our Events, Experiences & Rights segment results for three and six months ended June 30, 20212022 and 2020:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue | $ | 528,672 | $ | 119,834 | $ | 1,068,282 | $ | 788,610 | ||||||||
Direct operating costs | $ | 389,533 | $ | 93,254 | $ | 811,069 | $ | 606,998 | ||||||||
Selling, general and administrative expenses | $ | 112,803 | $ | 88,237 | $ | 213,074 | $ | 199,108 | ||||||||
Adjusted EBITDA | $ | 36,800 | $ | (42,655 | ) | $ | 75,850 | $ | 26,468 | |||||||
Adjusted EBITDA margin | 7.0 | % | -35.6 | % | 7.1 | % | 3.4 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 627,872 |
|
| $ | 528,672 |
|
| $ | 1,453,685 |
|
| $ | 1,068,282 |
|
Direct operating costs |
| $ | 359,044 |
|
| $ | 389,533 |
|
| $ | 895,257 |
|
| $ | 811,069 |
|
Selling, general and administrative expenses |
| $ | 162,790 |
|
| $ | 112,803 |
|
| $ | 324,962 |
|
| $ | 213,074 |
|
Adjusted EBITDA |
| $ | 108,117 |
|
| $ | 36,800 |
|
| $ | 240,600 |
|
| $ | 75,850 |
|
Adjusted EBITDA margin |
|
| 17.2 | % |
|
| 7.0 | % |
|
| 16.6 | % |
|
| 7.1 | % |
Three months ended June 30, 20212022 compared to three months ended June 30, 2020
Revenue for the three months ended June 30, 20212022 increased $408.8$99.2 million, or 341.2%18.8%, to $528.7$627.9 million, compared to the three months ended June 30, 2020.2021. Event and performance revenue increased $250 million primarily due to events returning in 2022 that were cancelled in 2021 or experienced fan restrictions due to COVID-19, including the Masters, NCAA Men’s March Madness and various music events, as well as the Madrid Open and NCSA, which were acquired in April 2022 and June 2021, respectively, and increased enrollment at the Academy. Media rights fees increased $265and media production revenue decreased $151 million primarily due to the return to a full scheduleexpiration of two European soccer matchescontracts in 2021 and the impact ofCOVID-19on the 2019/2020 season, which resulted in matches for most leagues rescheduled to the second halfquarter of 2020. Media production revenue increased $55 million due to the return to a full schedule of events in 2021 as compared to the impact ofCOVID-19on event schedules in 2020, including coverage of the English Premier League, which was partially rescheduled to the second half of 2020, and golf and tennis events which were cancelled. In addition, event and performance revenues increased $89 million attributable to events returning in 2021, including HSBC Women’s World Championship, Honda LPGA, ANA Inspiration, Miami Open, Frieze NY and Miss Universe pageant that were cancelled in 2020 due toCOVID-19,as well as the return of IMG Academy summer camps at full capacity, which were cancelled or had attendance restrictions in 2020.
Direct operating costs for the three months ended June 30, 2021 increased $296.32022 decreased $30.5 million, or 317.7%7.8%, to $389.5$359.0 million, compared to the three months ended June 30, 2020.2021. Media rights expenses,and media production expenses,productions costs decreased $184 million due to the decrease in revenue described above, primarily due to the expiration of certain contracts in the second quarter of 2021 whose costs were in excess of revenue. These decreases were partially offset by an increase in live event and performance costs increased $218of $154 million $38 million and $41 million, respectively, due to the increases in revenue as described above.
Selling, general and administrative expenses for the three months ended June 30, 20212022 increased $24.6$50.0 million, or 27.8%44.3%, to $112.8$162.8 million, compared to the three months ended June 30, 2020.2021. The increase was primarily driven by increased cost of personnel as the business recovers from the impact of COVID-19.
Adjusted EBITDA for the three months ended June 30, 20212022 increased $79.5$71.3 million, or 186.3%193.8%, to $36.8$108.1 million, compared to the three months ended June 30, 2020.2021. The increase in Adjusted EBITDA was primarily driven by the growth in revenue partially offset by the increaseand decreases in related direct operating costs andoffset by increases in selling, general and administrative expenses andas well as a decrease in insurance recoveries related to cancelled events.
Six months ended June 30, 20212022 compared to six months ended June 30, 2020
Revenue for the six months ended June 30, 20212022 increased $279.7$385.4 million, or 35.5%36.1%, to $1,068.3$1,453.7 million, compared to the six months ended June 30, 2020. Media rights fees increased $371 million primarily driven by the impact ofCOVID-19on both the 2019/2020 and 2020/2021 soccer seasons in Europe, which resulted in reduced matches for most leagues in the first half of 2020, and an increased schedule of matches in the second half of 2020 and the first quarter of 2021. Media Production revenue increased $64 million due to the return to a largely full schedule of events in 2021 as compared to the impact of COVID-19 on event schedules in 2020, including coverage of the English Premier League which was partially rescheduled to the second half of 2020, and golf and tennis events which were cancelled. Event and performance revenue decreased $155increased $696 million primarily due primarily to attendanceevents returning in 2022 that were cancelled in 2021 or experienced fan restrictions at the 2021due to COVID-19, including Super Bowl LVI, Miami Open, NCAA Men’s March Madness, Frieze LA and various music events, as well as the cancellation of certain eventsMadrid Open and NCSA, which were acquired in April 2022 and June 2021, respectively, and increased enrollment at the Academy. Media rights fees and media production revenue decreased $310 million primarily due to COVID-19 that were heldthe expiration of two European soccer contracts in the prior year, including Hyde Park Winter Wonderland, Frieze LA and Rio Open. This decrease was partially offset by certain events taking place in 2021 which were cancelled in 2020 due toCOVID-19,including the Miami Open, HSBC Women’s World Championship, Honda LPGA, ANA Inspiration, Frieze NY and Miss Universe pageant, as well as all summer camps taking place at the IMG Academy at full capacity insecond quarter of 2021 that were cancelled or had attendance restrictions in 2020.
Direct operating costs for the six months ended June 30, 20212022 increased $204.1$84.2 million, or 33.6%10.4%, to $811.1$895.3 million, compared to the six months ended June 30, 2020. Media rights expenses2021. Live event and media production expensesperformance costs increased $328$458 million and $47 million, respectively,due to the increases in related revenue. This increase was partially offset by a reductiondecrease in live eventmedia rights and performancemedia production costs of $171$376 million due to the changesdecrease in revenue as described above.
Selling, general and administrative expenses for the six months ended June 30, 20212022 increased $14.0$111.9 million, or 7.0%52.5%, to $213.1$325.0 million, compared to the six months ended June 30, 2020.2021. The increase was primarily driven by increased cost of personnel as the business recovers from the impact of COVID-19.
Adjusted EBITDA for the six months ended June 30, 20212022 increased $49.4$164.8 million, or 186.6%217.2%, to $75.9$240.6 million, compared to the six months ended June 30, 2020.2021. The increase in Adjusted EBITDA was primarily driven by the increasegrowth in revenue partially offset by the increaseincreases in related direct operating costs and selling, general and administrative expenses andas well as a decrease in insurance recoveries related to cancelled events.
36
Representation
The following table sets forth our Representation segment results for three and six months ended June 30, 20212022 and 2020:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue | $ | 328,232 | $ | 192,840 | $ | 577,141 | $ | 485,574 | ||||||||
Direct operating costs | $ | 104,842 | $ | 32,524 | $ | 139,901 | $ | 101,422 | ||||||||
Selling, general and administrative expenses | $ | 161,693 | $ | 108,603 | $ | 313,851 | $ | 263,829 | �� | |||||||
Adjusted EBITDA | $ | 61,685 | $ | 52,036 | $ | 123,168 | $ | 120,649 | ||||||||
Adjusted EBITDA margin | 18.8 | % | 27.0 | % | 21.3 | % | 24.8 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 357,955 |
|
| $ | 328,232 |
|
| $ | 715,276 |
|
| $ | 577,141 |
|
Direct operating costs |
| $ | 51,678 |
|
| $ | 104,843 |
|
| $ | 121,451 |
|
| $ | 139,901 |
|
Selling, general and administrative expenses |
| $ | 194,953 |
|
| $ | 161,692 |
|
| $ | 380,835 |
|
| $ | 313,851 |
|
Adjusted EBITDA |
| $ | 111,221 |
|
| $ | 61,685 |
|
| $ | 212,926 |
|
| $ | 123,168 |
|
Adjusted EBITDA margin |
|
| 31.1 | % |
|
| 18.8 | % |
|
| 29.8 | % |
|
| 21.3 | % |
Three months ended June 30, 20212022 compared to three months ended June 30, 2020
Revenue for the three months ended June 30, 20212022 increased $135.4$29.7 million, or 70.2%9.1%, to $328.2$358.0 million, compared to the three months ended June 30, 2020.2021. The increase was primarily attributable to an increase in content deliveries at Endeavor Contentof $99 million related to client commissions, due primarily to the continued strong demand for our talent and the gradual recovery in client commissionsof live entertainment, predominantly music, and corporate spending on marketing and experiential activations.
Direct operating costs for the three months ended June 30, 2021 increased $72.32022 decreased $53.2 million, or 222.4%50.7%, to $104.8$51.7 million, compared to the three months ended June 30, 2020.2021. The increase was primarilydecrease attributable to the above mentioned increasesale of content deliveries atthe restricted Endeavor Content andbusiness of $69 million was partially offset by an increase in marketing and experiential activations.
Selling, general and administrative expenses for the three months ended June 30, 20212022 increased $53.1$33.3 million, or 48.9%20.6%, to $161.7$195.0 million, compared to the three months ended June 30, 2020.2021. The increase was primarily driven by cost of personnel and travel expenses as the business recovers from the impact of COVID-19.
Adjusted EBITDA for the three months ended June 30, 20212022 increased $9.6$49.5 million, or 18.5%80.3%, to $61.7$111.2 million, compared to the three months ended June 30, 2020.2021. The increase in Adjusted EBITDA was driven by the growth in revenue and decrease in direct operating costs partially offset by the increase in direct operating costs and selling, general and administrative expenses.
Six months ended June 30, 20212022 compared to six months ended June 30, 2020
Revenue for the six months ended June 30, 20212022 increased $91.6$138.1 million, or 18.9%23.9%, to $577.1$715.3 million, compared to the six months ended June 30, 2020.2021. The increase was primarily attributable to an increase in content deliveries at Endeavor Contentof $193 million related to client commissions, due primarily to the continued strong demand for our talent and the gradual recovery in client commissions partially offset by a decline inof live entertainment, predominantly music, and corporate spending on marketing and experiential activations.
Direct operating costs for the six months ended June 30, 2021 increased $38.52022 decreased $18.5 million, or 37.9%13.2%, to $139.9$121.5 million, compared to the six months ended June 30, 2020.2021. The increase was primarilydecrease attributable to the above mentioned increasesale of content deliveries atthe restricted Endeavor Content business of $60 million was partially offset by an increase in marketing and experiential activations due to the impact ofCOVID-19on experiential activations.
Selling, general and administrative expenses for the six months ended June 30, 20212022 increased $50.0$67.0 million, or 19.0%21.3%, to $313.9$380.8 million, compared to the six months ended June 30, 2020.2021. The increase was primarily driven by growth cost of personnel and travel expenses as the business recovers from the impact of COVID-19.
Adjusted EBITDA for the six months ended June 30, 20212022 increased $2.5$89.8 million, or 2.1%72.9%, to $123.2$212.9 million, compared to the six months ended June 30, 2020.2021. The increase in Adjusted EBITDA was driven by the increasegrowth in revenue and decrease in direct operating costs partially offset by the increase in direct operating costs and selling, general and administrative expenses.
Corporate
Corporate primarily consists of overhead, personnel costs, and costs associated with corporate initiatives that are not fully allocated to the operating divisions. Such expenses include compensation and other benefits for corporate office employees, rent, professional fees related to internal control compliance and monitoring, financial statement audits and legal, information technology and insurance that is managed through our corporate office.
The following table sets forth our results for Corporate for the three and six months ended June 30, 20212022 and 2020:
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(in thousands) | ||||||||||||||||
Adjusted EBITDA | $ | (62,704 | ) | $ | (29,046 | ) | $ | (109,320 | ) | $ | (83,538 | ) |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Adjusted EBITDA |
| $ | (74,253 | ) |
| $ | (62,704 | ) |
| $ | (142,733 | ) |
| $ | (109,320 | ) |
Adjusted EBITDA for the three months ended June 30, 2021 declined $33.72022 decreased $11.5 million, or 115.9%18.4%, to $(62.7)$(74.3) million, compared to the three months ended June 30, 2020.2021. The decline was driven by an increase in cost of personnel.
Adjusted EBITDA for the six months ended June 30, 2022 decreased $33.4 million, or 30.6%, to $142.7 million, compared to the six months ended June 30, 2021. The decline was driven by an increase in cost of personnel and other general and administrative expenses.
37
NON-GAAP FINANCIAL
Adjusted EBITDA isCOVID-19 relatedexpenses,tax receivable agreements liability adjustment, and certain other items, including gains/losses on business divestitures, when applicable. Adjusted EBITDA margin is
Management believes that Adjusted EBITDA is useful to investors as it eliminates the significant level
Adjusted EBITDA and Adjusted EBITDA margin are used as the primary bases to evaluate our consolidated operating performance.
Adjusted Net Income isafter taxafter-tax basis, the release of tax valuation allowances and other tax items.
Adjusted Net Income adjusts income or loss attributable to the Company for items that are not considered to be reflective of our operating performance. Management believes that
Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net Income have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
We compensate for these limitations by using Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance.
Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income should not be considered substitutes for the reported results prepared in accordance with GAAP and should not be considered in isolation or as alternatives to net (loss) income as indicators of our financial performance, as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. Although we use Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income as financial measures to assess the performance of our business, such use is limited because it does not include certain material costs necessary to operate our business. Our presentation of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income should not be construed as indications that our future results will be unaffected by unusual or nonrecurring items.
38
Adjusted EBITDA
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Net loss | $ | (516,767 | ) | $ | (495,765 | ) | $ | (514,391 | ) | $ | (547,026 | ) | ||||
Provision for (benefit from) income taxes | 60,918 | (4,049 | ) | 66,003 | 44,555 | |||||||||||
Interest expense, net | 83,836 | 71,693 | 152,187 | 141,677 | ||||||||||||
Depreciation and amortization | 69,161 | 84,751 | 136,397 | 165,198 | ||||||||||||
Equity-based compensation expense (l) | 387,017 | 9,204 | 403,508 | 16,975 | ||||||||||||
Merger, acquisition and earn-out costs(2) | 14,199 | (859 | ) | 25,184 | 9,303 | |||||||||||
Certain legal costs (3) | 574 | 3,357 | 4,526 | 6,159 | ||||||||||||
Restructuring, severance and impairment (4) | 4,026 | 195,305 | 4,433 | 212,247 | ||||||||||||
Fair value adjustment - Droga5 (5) | — | 473 | — | 473 | ||||||||||||
Fair value adjustment - equity investments (5) | (5,905 | ) | 2,950 | (13,704 | ) | 5,759 | ||||||||||
Equity method losses - Learfield IMG College (6) | 42,655 | 195,781 | 61,460 | 207,537 | ||||||||||||
COVID-19 related costs (7) | — | 2,193 | — | 2,403 | ||||||||||||
Other (8) | 28,334 | (19,610 | ) | 41,911 | (43,595 | ) | ||||||||||
Adjusted EBITDA | $ | 168,048 | $ | 45,424 | $ | 367,514 | $ | 221,665 | ||||||||
Net loss margin | (46.5 | %) | (107.1 | %) | (23.6 | %) | (33.1 | %) | ||||||||
Adjusted EBITDA margin | 15.1 | % | 9.8 | % | 16.9 | % | 13.4 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income (loss) |
| $ | 42,220 |
|
| $ | (516,767 | ) |
| $ | 559,886 |
|
| $ | (514,391 | ) |
Provision for (benefit from) income taxes |
|
| 2,699 |
|
|
| 60,918 |
|
|
| (14,535 | ) |
|
| 66,003 |
|
Interest expense, net |
|
| 62,505 |
|
|
| 83,836 |
|
|
| 121,777 |
|
|
| 152,187 |
|
Depreciation and amortization |
|
| 65,612 |
|
|
| 69,161 |
|
|
| 131,606 |
|
|
| 136,397 |
|
Equity-based compensation expense (1) |
|
| 60,607 |
|
|
| 387,017 |
|
|
| 111,463 |
|
|
| 403,508 |
|
Merger, acquisition and earn-out costs (2) |
|
| 14,568 |
|
|
| 14,199 |
|
|
| 27,362 |
|
|
| 25,184 |
|
Certain legal costs (3) |
|
| 8,598 |
|
|
| 574 |
|
|
| 9,600 |
|
|
| 4,526 |
|
Restructuring, severance and impairment (4) |
|
| 1,442 |
|
|
| 4,026 |
|
|
| 1,960 |
|
|
| 4,433 |
|
Fair value adjustment - equity investments (5) |
|
| (11,691 | ) |
|
| (5,905 | ) |
|
| (13,344 | ) |
|
| (13,704 | ) |
Equity method losses - Learfield IMG College and Endeavor Content (6) |
|
| 41,511 |
|
|
| 42,655 |
|
|
| 65,915 |
|
|
| 61,460 |
|
Gain on sale of the restricted Endeavor Content business(7) |
|
| — |
|
|
| — |
|
|
| (463,641 | ) |
|
| — |
|
Tax receivable agreements liability adjustment (8) |
|
| (2,405 | ) |
|
| — |
|
|
| 51,092 |
|
|
| — |
|
Other (9) |
|
| 20,689 |
|
|
| 28,334 |
|
|
| 31,663 |
|
|
| 41,911 |
|
Adjusted EBITDA |
| $ | 306,355 |
|
| $ | 168,048 |
|
| $ | 620,804 |
|
| $ | 367,514 |
|
Net income (loss) margin |
|
| 3.2 | % |
|
| (46.5 | %) |
|
| 20.1 | % |
|
| (23.6 | %) |
Adjusted EBITDA margin |
|
| 23.3 | % |
|
| 15.1 | % |
|
| 22.3 | % |
|
| 16.9 | % |
Adjusted Net Income (Loss)
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income (loss) |
| $ | 42,220 |
|
| $ | (516,767 | ) |
| $ | 559,886 |
|
| $ | (514,391 | ) |
Net (income) loss attributable to non-controlling interests |
|
| (16,414 | ) |
|
| 190,354 |
|
|
| (214,534 | ) |
|
| 163,108 |
|
Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| — |
|
|
| 6,816 |
|
|
| — |
|
|
| 31,686 |
|
Net income (loss) attributable to Endeavor Group Holdings, Inc. |
|
| 25,806 |
|
|
| (319,597 | ) |
|
| 345,352 |
|
|
| (319,597 | ) |
Amortization |
|
| 41,380 |
|
|
| 46,649 |
|
|
| 84,296 |
|
|
| 92,377 |
|
Equity-based compensation expense (1) |
|
| 60,607 |
|
|
| 387,017 |
|
|
| 111,463 |
|
|
| 403,508 |
|
Merger, acquisition and earn-out costs (2) |
|
| 14,568 |
|
|
| 14,199 |
|
|
| 27,362 |
|
|
| 25,184 |
|
Certain legal costs (3) |
|
| 8,598 |
|
|
| 574 |
|
|
| 9,600 |
|
|
| 4,526 |
|
Restructuring, severance and impairment (4) |
|
| 1,442 |
|
|
| 4,026 |
|
|
| 1,960 |
|
|
| 4,433 |
|
Fair value adjustment - equity investments (5) |
|
| (11,691 | ) |
|
| (5,905 | ) |
|
| (13,344 | ) |
|
| (13,704 | ) |
Equity method losses - Learfield IMG College and Endeavor Content (6) |
|
| 41,511 |
|
|
| 42,655 |
|
|
| 65,915 |
|
|
| 61,460 |
|
Gain on sale of the restricted Endeavor Content business(7) |
|
| — |
|
|
| — |
|
|
| (463,641 | ) |
|
| — |
|
Tax receivable agreements liability adjustment (8) |
|
| (2,405 | ) |
|
| — |
|
|
| 51,092 |
|
|
| — |
|
Other (9) |
|
| 20,689 |
|
|
| 28,334 |
|
|
| 31,663 |
|
|
| 41,911 |
|
Tax effects of adjustments (10) |
|
| (10,829 | ) |
|
| 77,550 |
|
|
| 10,275 |
|
|
| 71,231 |
|
Other tax items (11) |
|
| 2,830 |
|
|
| 17,608 |
|
|
| (53,683 | ) |
|
| 17,608 |
|
Adjustments allocated to non-controlling interests (12) |
|
| (62,036 | ) |
|
| (241,635 | ) |
|
| 51,372 |
|
|
| (337,462 | ) |
Adjusted Net Income |
| $ | 130,470 |
|
| $ | 51,475 |
|
| $ | 259,682 |
|
| $ | 51,475 |
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Net loss | $ | (516,767 | ) | $ | (495,765 | ) | $ | (514,391 | ) | $ | (547,026 | ) | ||||
Net loss attributable to non-controlling interests | 190,354 | 29,211 | 163,108 | 25,516 | ||||||||||||
Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions | 6,816 | — | 31,686 | — | ||||||||||||
Net loss attributable to Endeavor Group Holdings, Inc | (319,597 | ) | — | (319,597 | ) | — | ||||||||||
Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions | — | (466,554 | ) | — | (521,510 | ) | ||||||||||
Amortization | 46,649 | 63,494 | 92,377 | 123,458 | ||||||||||||
Equity-based compensation expense (l) | 387,017 | 9,204 | 403,508 | 16,975 | ||||||||||||
Merger, acquisition and earn-out costs(2) | 14,199 | (859 | ) | 25,184 | 9,303 | |||||||||||
Certain legal costs (3) | 574 | 3,357 | 4,526 | 6,159 | ||||||||||||
Restructuring, severance and impairment (4) | 4,026 | 195,305 | 4,433 | 212,247 | ||||||||||||
Fair value adjustment - Droga5 | — | 473 | — | 473 | ||||||||||||
Fair value adjustment - equity investments (5) | (5,905 | ) | 2,950 | (13,704 | ) | 5,759 | ||||||||||
Equity method losses - Learfield IMG College (6) | 42,655 | 195,781 | 61,460 | 207,537 | ||||||||||||
COVID-19 related costs (7) | — | 2,193 | — | 2,403 | ||||||||||||
Other (8) | 28,334 | (19,610 | ) | 41,911 | (43,595 | ) | ||||||||||
Tax effects of adjustments (9) | 77,550 | (6,354 | ) | 71,231 | (4,988 | ) | ||||||||||
Valuation allowance and other tax items (l0) | 17,608 | — | 17,608 | 32,338 | ||||||||||||
Adjustments allocated to non-controlling interests(l1) | (241,635 | ) | (16,328 | ) | (337,462 | ) | (39,693 | ) | ||||||||
Adjusted Net Income (Loss) | $ | 51,475 | $ | (36,948 | ) | $ | 51,475 | $ | 6,866 | |||||||
The increasedecrease for the three and six months ended June 30, 20212022 as compared to the three and six months ended June 30, 20202021 was primarily due to modification of certainthe three and six months ended June 30, 20212022 and 2020.
Such costs for the three months ended June 30, 2022 primarily related to fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition earn-out adjustments of approximately $8 million, which primarily related to our Representation segment. Professional advisor costs were approximately $7 million and related to all of our segments.
Such costs for the three months ended June 30, 2021 primarily related to fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition
39
Such costs for the threesix months ended June 30, 20202022 primarily related to fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition$6$16 million, which primarily related to our Events, Experiences & Rights and Representation segments.segment. Professional advisor costs were approximately $5$12 million primarilyand related to all of our Events, Experiences & Rights segment.
Such costs for the six months ended June 30, 2021 primarily related to fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition
Such costs for the three and six months ended June 30, 20202022 primarily relatedrelates to professional advisor costsa write off of approximately $9 million primarily related toan asset in Corporate and the restructuring expenses in our Events, Experiences & Rights segment.
Such costs for the three and six months ended June 30, 2021 primarily relates to the impairment of goodwill in our Representation and Events, Experiences & Rights segments.
For the three months ended June 30, 2021, other costs were comprised primarily of approximately $29 million related to a loss on debt extinguishment, which related to Corporate, and a gain of approximately $11$2 million related
For the six months ended June 30, 2022, other costs were comprised primarily of losses of approximately $22 million on foreign exchange transactions, which related to all of our segments and Corporate, approximately $3 million of transaction bonuses related to the sale of the restricted Endeavor Content business in our Representation segment, approximately $1 millionrelated to non-cash fair value adjustments of embedded foreign currency derivatives, which related primarily to our Events, Experiences & Rights segment and gainsan approximately $1 million loss on disposal of approximately $9 million on foreign exchange transactions, whichan asset related to all of our segments and Corporate.
For the six months ended June 30, 2021, other costs were comprised primarily of approximately $29 million related to a loss on debt extinguishment, which related primarily to Corporate, and a loss of approximately $9 million related to
LIQUIDITY AND CAPITAL RESOURCES
Historical liquidity and capital resources
Sources and uses of cash
Cash flows from operations have historically funded and the issuance of long-term debt.
Debt facilities
As of June 30, 2021,2022, we had an aggregate of $5.1$5.6 billion outstanding indebtedness under our first lien credit agreement entered into by certain of our subsidiaries in May 2014 in connection with the acquisition of IMG (as amended, restated, modified and/or supplemented from time to time, the “Credit Facilities”"Credit Facilities") and UFC Holdings, LLC’s term loan and revolving credit facilities (the “UFC"UFC Credit Facilities”Facilities" and, collectively with the
40
Credit Facilities, the “Senior"Senior Credit Facilities”Facilities"). As of June 30, 20212022, we had availabletotal borrowing capacity of approximately $370$405 million under the Senior Credit Facilities.
Credit Facilities
As of June 30, 2021,2022, we have borrowed an aggregate of $2.8 billion of term loans under the Credit Facilities. The loans bear interest at a variable interest rate equal to either, at our option, adjusted LIBOR or the Alternate Base Rate (the “ABR”"ABR") plus, in each case, an applicable margin. LIBOR term loans accrue interest at a rate equal to adjusted LIBOR plus 2.75%, with a LIBOR floor of 0.00%. ABR term loans accrue interest at a rate equal to (i) the highest of (a) the Federal Funds Effective Rate plus 0.50%0.5%, (b) the prime rate, (c) adjusted LIBOR for
In May 2020, we issued $260.0 million as a separate tranche of term loans, which accrued interest at a rate equal to adjusted LIBOR plus 8.50%, with a LIBOR floor of 1.00%1%. On June 29, 2021, we repaid the outstanding principal of $256.7 million as well as associated fees and expenses incurred due to early redemption of $28.6 million.
In May 20, 2019, we executed $1.5 billion in interest rate hedges to swap a portion of our debt from floating interest expense to fixed. The LIBOR portion of the facility has been fixed at a coupon of 2.12% for five years commencing from June 2019 until June 2024. As of June 30, 2021,2022, approximately 54% of our Term Loansterm loans is hedged. See Note 11, “Debt”,10, "Debt" to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further detail on the Credit Facilities.
In August 2022, the Company entered into additional interest rate hedges to swap $750 million of its 2014 Credit Facilities from floating interest expense to fixed. The 2014 Credit Facilities pay interest based on LIBOR +2.75%. The LIBOR portion of the facility has been fixed at a coupon of 3.162% until August 31, 2024. Hedge accounting will be applied to these additional interest rate swaps.
As of June 30, 2021,2022, we have the option to borrow incremental term loans in an aggregate amount equal to at least $550.0 million, subject to market demand, and may be able to borrow additional funds depending on our First Lien Leverage Ratio (as defined under the Credit Facilities). The credit agreement governing our Credit Facilities includes certain mandatory prepayment provisions relating to, among other things, the incurrence of additional debt.
The Credit Facilities also include a revolving credit facility which has $200.0 million of capacity with letter of credit and swingline
The revolving facility under the Credit Facilities is subject to a financial covenant if greater than 35% of the borrowing capacity of the revolving credit facility is utilized (excluding cash collateralized letters of credit2021,2022, as we had no borrowingborrowings outstanding under the revolving credit facility.
The Credit Facilities contain certain restrictive covenants around indebtedness, liens, fundamental changes, guarantees, investments, asset sales, and transactions with affiliates.
The borrower’s obligations under the Credit Facilities are guaranteed by certain of our indirect wholly-owned domestic restricted subsidiaries, subject to certain exceptions. All obligations under the Credit Facilities and the related guarantees are secured by a perfected first priority lien on substantially all of the borrower’s and the guarantors’ tangible and intangible assets, in each case, subject to permitted liens and certain exceptions.
UFC Credit Facilities
As of June 30, 2021,2022, we have borrowed an aggregate of $2.3$2.8 billion of first lien term loans under the UFC Credit Facilities. Following a repricing under the UFC Credit Facilities in January 2021, borrowings under the UFC Credit Facilities bear interest at a variable interest rate equal to either, at our option, adjusted LIBOR or the ABR plus, in each case, an applicable margin. LIBOR term loans accrue interest at a rate equal to an adjusted LIBOR0.50%0.5%, (b) the prime rate, (c) adjusted LIBOR for1%1.00% principal amortization payable in equal quarterly installments and mature on April 29, 2026. See Note 11, “Debt,”10, "Debt" to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further detail on the UFC Credit Facilities.
As of June 30, 2021,2022, we have the option to borrow incremental loans in an aggregate amount equal to at least $455.0 million, subject to market demand, and may be able to borrow additional funds depending on our First Lien Leverage Ratio (as defined under the UFC Credit Facilities). The credit agreement governing the UFC Credit Facilities includes certain mandatory prepayment provisions relating to, among other things, the incurrence of additional debt. On June 29, 2021, we repaid $180.2 million of first lien term loans under the UFC Credit Facilities.
The UFC Credit Facilities also include a revolving credit facility, which hadhas $205.0 million of total borrowing capacity and letter of credit and swingline
41
Leverage Ratio. We pay a commitment fee on the revolving credit facility under the UFC Credit Facilities2021,2022, we had no borrowings outstanding under this revolving credit facility and outstanding letters of credit of $10.0 million. The revolving facility under the UFC Credit Facilities matures on April 29, 2024.
The revolving facility under the UFC Credit Facilities is subject to a financial covenant if greater than 35% of the borrowing capacity of the revolving credit facility (excluding cash collateralized letters of credit2021,2022, as we had no borrowings outstanding under this revolving credit facility.
The UFC Credit Facilities contain certain restrictive covenants around indebtedness, liens, fundamental changes, guarantees, investments, asset sales and transactions with affiliates.
The borrower’s obligations under the UFC Credit Facilities are guaranteed by certain of UFC Parent’s indirect wholly-owned domestic restricted subsidiaries, subject to certain exceptions. All obligations under the UFC Credit Facilities and the related guarantees are secured by a perfected first priority lien on substantially all of the borrower’s and the guarantors’ tangible and intangible assets, in each case, subject to permitted liens and certain exceptions.
Restrictions on dividends
Both the Credit Facilities and the UFC Credit Facilities contain restrictions on our ability to make distributions and other payments from the respective credit groups and which therefore limit our ability to receive cash from our operating units to make dividends to the holders of Class A common stock. These restrictions on dividends include exceptions for, among other things, (1) amounts necessary to make tax payments, (2) a limited annual amount for employee equity repurchases, (3) distributions required to fund certain parent entities, (4) other specific allowable situations and (5) a general restricted payment basket, as defined in each of the Credit Facilities and the UFC Credit Facilities.
Other debt
As of June 30, 2021,2022, we had certain other revolving line of credit facilities and long-term debt liabilities, primarily related to Endeavor Content and On Location, with total committed amounts of $400.7$62.9 million, of which $239.1$13.0 million was outstanding and $33.9$46.4 million was available for borrowing based on the supporting asset base. Such facilities have maturity dates in 2023 and 2025, bearing interest at rates ranging from 1.75% toof 2.75%.
Our ability to borrow under the facility depends on there being sufficient borrowing base capacity, which in turn depends on the number and size of productions we are engaged in and the value of future receipts for the productions. The amounts borrowed under the facility will increase if we enter into additional productions, or decrease if we reduce our production activity. The Endeavor Content Facility matures on March 31, 2025. In July 2021, the capacity under the Endeavor Content Facility was increased from $325.0 million to $430.0 million.
Cash Flows Overview
Six months ended June 30, 20212022 and 2020
Six Months Ended June 30, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Net loss, adjusted for non-cash items | $ | 275,246 | $ | 52,768 | ||||
Changes in working capital | 103,837 | 266,656 | ||||||
Changes in non-current assets and liabilities | (501,282 | ) | (117,519 | ) | ||||
Net cash (used in) provided by operating activities | $ | (122,199 | ) | $ | 201,905 | |||
Net cash used in investing activities | $ | (372,565 | ) | $ | (290,681 | ) | ||
Net cash provided by financing activities | $ | 397,498 | $ | 550,673 |
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| Six Months Ended June 30, |
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(in thousands) |
| 2022 |
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| 2021 |
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Net income, adjusted for non-cash items |
| $ | 462,318 |
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| $ | 275,246 |
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Changes in working capital |
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| (320,675 | ) |
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| 103,837 |
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Changes in non-current assets and liabilities |
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| 71,403 |
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| (501,282 | ) |
Net cash provided by (used in) operating activities |
| $ | 213,046 |
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| $ | (122,199 | ) |
Net cash provided by (used in) investing activities |
| $ | 123,154 |
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| $ | (372,565 | ) |
Net cash provided by financing activities |
| $ | 7,196 |
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| $ | 397,498 |
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Cash provided in the six months ended June 30, 2020 tooperating activities improved $335.2 million from $122.2 million of cash used in the six months ended June 30, 2021.2021 to $213.0 million of cash provided in the six months ended June 30, 2022. Cash provided in the six months ended June 30, 2022 was primarily due to net income, adjusted for non-cash items, of $462.3 million offset by the increase in accounts receivable of $242.3 million due to timing of events and the decrease in deferred revenue of $95.5 million due to events taking place in 2022, such as Super Bowl LVI and various music events. Cash used in the six months ended June 30, 2021 primarily represents an increase in other assets of $490.7 million from additional investments in Endeavor Content film assets and an increase in accounts receivable of $141.8 million from the gradual recovery from COVID-19. Cash provided in the six months ended June 30, 2020 primarily represents a decrease in accounts receivable and deferred costs of $247.1 million and $104.2 million due to the adverse impact fromCOVID-19resulting in changes to the timing of collections and payments from modified event and media rights schedules.
Investing activities changedimproved from $290.7 million of cash used in the six months ended June 30, 2020 to $372.6 million of cash used in the six months ended June 30, 2021.2021 to $123.2 million of cash provided in the six months ended June 30, 2022. Cash provided in the six months ended June 30, 2022 primarily reflects net cash proceeds received from the sale of the restricted Endeavor Content business of $649.7 million offset by payments for acquisitions of businesses, capital expenditures and investments in non-controlled affiliates totaling $528.1 million. Cash used in the six months ended June 30, 2021 primarily reflects
Financing activities changeddecreased from $550.7 million of cash provided in the six months ended June 30, 2020 to $397.5 million of cash provided in the six months ended June 30, 2021.2021 to $7.2 million of cash provided in the six months ended June 30, 2022. Cash provided in the six months ended June 30, 2022 primarily reflects net cash proceeds received in connection with the acquisition of non-controlling interests of $92.5 million offset by net payments on debt of $39.9 million, as well as distributions, payments of contingent consideration related to acquisitions and redemption of certain of our equity interests totaling $44.7 million. Cash provided in the six months ended June 30, 2021 primarily reflects proceeds from equity offering,our IPO and private placements, net of underwriting discounts, primarily from the IPO and private placements, of $1,886.6 million partially offset by $835.7 million used for the UFC Buyout and net payments on debt of $631.5 million. Cash provided in the six months ended June 30, 2020 primarily reflects net proceeds from debt of $644.6 million partially offset by distributions of $69.6 million primarily made by UFC.
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Future sources and uses of liquidity
Our sources of liquidity are (1) cash on hand, which includes proceeds received from our initial public offering and the private placements completed in May 2021, (2) cash flows from operations and (3) available borrowings under our Senior Credit Facilities (which borrowings would be subject to certain restrictive covenants contained therein). and (4) proceeds from potential divestitures. Based on our current expectations, we believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments, including long-term debt service for at least the next 12 months. However, theongoing COVID-19 pandemichas had and continues to have a significant impact on cash flows from operations. We expect that the impactof COVID-19 onrevenue and cash flows will vary, but will generally depend on the duration of the pandemic, the extent and effectiveness of mass vaccinations, emerging variants of the virus, additional actions that may be taken by governmental authorities, changes in consumer preferences towards our business and the industries in which we operate and additional postponements or cancellation of live sporting events and other in person events.
We expect that our primary liquidity needs will be cash to (1) provide capital to facilitate organic growth of our business, (2) fund future investments, acquisitions (including Barrett-Jackson, which closed in August, and settle acquisitionOpenBet), and earn-outs and deferred purchase price payments from prior acquisitions, (3) pay operating expenses, including cash compensation to our employees, (4) fund capital expenditures, (5) pay interest and principal when due on our Senior Credit Facilities, (6) make payments under the tax receivable agreement,agreements, (7) pay income taxes, (8) repurchase employee equity (9) make distributions to members and stockholders and (10) reduce our outstanding indebtedness under our Senior Credit Facilities.
We expect to refinance the Senior Credit Facilities prior to the maturity of the outstanding loans, with the first maturity for outstanding term loans under the Senior Credit Facilities occurring in 2025. We currently anticipate being able to secure funding for such refinancing at favorable terms, however our ability to do so may be impacted by many factors, including our growth and other factors specific to our business as well as macro-economicmacro- economic factors beyond our control, including as a resultof COVID-19.
Tax distributions by Endeavor Operating Company
Other than as described below, we expect to retain all our future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends for the foreseeable future.
Subject to funds being legally available, we expect that Endeavor Operating Company will make distributions to each of its members, including the Endeavor Profits Units holders and Endeavor Manager, in amounts sufficient to pay applicable taxes attributable to each member’s allocable share of taxable income of Endeavor Operating Company. Tax distributions made in respect of Endeavor Operating Company Units (but not Endeavor Profits Units) will generally be made pro rata in respect of such Units, as described in the Endeavor Operating Company LLC Agreement. However, in certain situations, tax distributions made to Endeavor Manager may be reduced (relative to those tax distributions made to the other members of Endeavor Operating Company) to reflect the income tax rates to which Endeavor Manager and Endeavor Group Holdings are subject and certain other factors. NonProfitProfits Units.
Tax Receivable Agreement
Generally, we are required under the tax receivable agreementagreements to make payments to certain persons that held direct or indirect interest in EOC and UFC Parent prior to the IPO ("TRA HoldersHolders") that are generally equal to 85% of the applicable cash tax savings, if any, in U.S. federal, state and local income tax or franchise tax that we realize or are deemed to realize (determined by using certain assumptions) as a result of favorable tax attributes that will be available to us as a result of certain transactions contemplated in connection with our IPO, exchanges of Endeavor Operating Company Units for Class A common stock or cash and payments made under the tax receivable agreement.agreements. We will generally be entitled to retain the remaining 15% of these cash tax savings. Payments will be due only after we have filed our U.S. federal and state income tax returns. The first payment would be due after the filing of our tax return for the year ending December 31, 2021, which is due April 15, 2022, but the due date can be extended until October 15, 2022. Payments under the tax receivable agreementagreements will bear interest from the due date of the tax return reflecting the applicable tax benefits. We currently expect to fund these payments from cash flows from operations generated by our subsidiaries as well as from excess tax distributions that we receive from our subsidiaries.
Under the tax receivable agreement,agreements, as a result of certain types of transactions or occurrences, including a transaction resulting in a change of control or a material breach of our obligations under the tax receivable agreement,agreements, we may also be required to make payments to the TRA Holders in amounts equal to the present value of future payments we are obligated to make under the tax receivable agreement.agreements. If the payments under the tax receivable agreementagreements are accelerated, we may be required to raise additional debt or equity to fund such payments. To the extent that we are unable to make payments under the tax receivable agreementagreements as a result of having insufficient funds (including because our credit agreements restrict the ability of our subsidiaries to make distributions to us) such payments will generally be deferred and will accrue interest until paid.
Critical Accounting Estimates
For a description of our policies regarding our critical accounting estimates, see “Critical"Critical Accounting Policies and Estimates”Estimates" in the Prospectus.our 2021 Annual Report. During the six months ended June 30, 2021,2022, there were no significant changes in our critical accounting policies and estimates or the application or the results of the application of those policies to our unaudited consolidated financial statements from those previously disclosed.
Recent Accounting Standards
See Note 3 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further information on certain accounting standards that have been recently adopted or that have not yet been required to be implemented and may be applicable to our future operations.
Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk
Interest rate risk
Our exposure to changes in interest rates relates primarily to the floating interest component on our long-term debt. The Senior Credit Facilities bear interest at floating rates and we regularly monitor and manage interest rate risks. $1.5 billion of our Senior Credit Facilities have been swapped
43
to fixed rates. For the remainder, holding debt levels constant, a 1% increase in the effective interest rates would have increased our annual interest expense by $39$41 million for the six months ended June 30, 2021.
Certain tenors of LIBOR will be eliminated at the end ofwere discontinued on December 31, 2021 and the remaining tenors are expected to be discontinued on or after June 30, 2023. Our loans are benchmarked off tenors, including 1 month and 3 month LIBOR, expiring in June 2023. Our Credit Agreement includes fallback language for the new standard benchmark rate that will be offered, Secured Overnight Financing Rate “SOFR”."SOFR." We cannot quantify the impact of LIBOR’s replacement benchmark rate at this time.
Foreign currency risk
We have operations in several countries outside of the United States, and certain of our operations are conducted in foreign currencies, principally the British Pound and the Euro. The value of these currencies fluctuates relative to the U.S. dollar. These changes could adversely affect the U.S. dollar equivalent of
Holding other variables constant (such as interest rates and debt levels), if the U.S. dollar appreciated by 10% against the foreign currencies used by our operations in the six months ended June 30, 2021,2022, revenues would have decreased by approximately $75.7$52.3 million and operating income would have improved by approximately $7.6$1.4 million.
We regularly review our foreign exchange exposures that may have a material impact on our business and from time to time use foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of potential adverse fluctuations in foreign currency exchange rates arising from these exposures. We do not enter into foreign exchange contracts or other derivatives for speculative purposes.
Item 4. Control Procedures
Limitations on Effectiveness of 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
The Company’s management has evaluated, with the participation of the chief executive officer and the chief financial officer, the effectiveness of our disclosure controls and procedures (as defined in RulesActAct) as of the end of the period covered by this Quarterly Report. Based on this evaluation, the chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. For a description of our legal proceedings, see Note 1916 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.
Item 1A. Risk Factors
Our business, financial condition and operating results can be affected by a number of factors, whether current known or unknown, including but not limited to those described as risk factors, any one or more of which could, directly or indirectly, cause our actual operating results and financial condition to vary materially from past, or anticipated future, operating results and financial condition. For a discussion of these potential risks and uncertainties, see Part II,I, Item 1A. “Risk Factors” of"Risk Factors" in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 which risk factors are incorporated herein by reference, as supplemented by the risk factor below.Annual Report. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and the price of our common stock.
Risks Relating to Legal, Political or Other Regulatory Factors Impacting our Sports Betting Businesses
Our businesses in the sports betting industry are subject to strict government regulations that may limit our existing operations, have an adverse impact on our ability to grow, affect our license eligibility, result in us amending our constituent documents, including our certificate of commonincorporation and bylaws, to allow for the restriction of stock ownership by certain persons or entities, including providing for the non-consensual redemption of shares under certain circumstances, and expose us to fines or other penalties.
In the United States and many other countries, the provision of sports betting products and services by certain of our businesses is subject to extensive and evolving regulation. These regulatory requirements vary from jurisdiction to jurisdiction. Therefore, we are subject to a wide range of complex laws and regulations in the jurisdictions in which we are licensed or operate. Most jurisdictions require that we be licensed, that our key personnel and certain of our security holders and customers be found suitable or be licensed, and that many of our products (including software) be reviewed and approved before they are offered to the public. Licenses, approvals or findings of suitability may causebe revoked, suspended or conditioned. If a license, approval or finding of suitability is required by a regulatory authority and we fail to seek or do not receive the necessary license, approval
44
or finding of suitability, or if it is granted and subsequently revoked, then we may be prohibited from providing our products or services for use in the particular jurisdiction, as well as face repercussions in other jurisdictions up to and including license revocation. We may also become subject to regulation in any new jurisdictions in which we decide to operate in the future, including due to expansion of a customer’s operations. Gaming authorities may levy fines against us or seize certain of our assets if we violate gaming regulations.
To ensure our ability to meet with regulatory requirements, including those applicable to our security holders, we may adopt changes to our constituent documents, including amending our articles of incorporation and our bylaws to allow for the restriction of stock ownership by persons or entities (i) who fail to comply with informational requests or other regulatory requirements under applicable gaming laws, (ii) who are found or are likely to be found unsuitable to hold our stock by gaming authorities, or (iii) whose stock ownership adversely affects or may adversely affect our ability to obtain, maintain, renew or qualify for a license, contract, franchise or other regulatory approval from a gaming authority. Such changes to our constituent documents may include requirements that certain security holders submit to the licensing procedures and background investigations of the authorities that regulate our businesses, and may provide mechanisms for the non-consensual redemption of shares and removal of a security holder who is or may be found unsuitable or fails to comply with regulatory requirements under applicable gaming laws. Any such changes to our constituent documents may inhibit potential investors from becoming significant stockholders or inhibit existing stockholders from retaining or increasing their ownership.
While we currently hold all state and local licenses and related approvals necessary to conduct our present gaming operations, we must periodically apply to renew many of our licenses and registrations. Additionally, new key employees, officers, directors, and certain shareholders must also undergo licensing or suitability investigations. We cannot assure that we will be able to obtain or maintain the necessary licenses or approvals or that the licensing process will not result in delays in or adversely affect our operations. The failure to obtain or retain a required license or approval in any jurisdiction would decrease the geographic areas where we are permitted to operate and generate revenue, may limit our ability to obtain a license in other jurisdictions and may put us at a disadvantage relative to our competitors.
In addition, we are required to provide information relating to our operations to various gaming regulatory agencies. A failure to provide accurate information could result in the imposition of fines or other penalties by the relevant regulatory authority. Furthermore, if additional laws or regulations are adopted or existing laws or regulations are amended or interpreted differently, these regulations could impose additional restrictions or costs that could have a significant adverse effect on us.
We cannot assure that authorities will not seek to restrict our sports betting businesses in their respective jurisdictions or institute enforcement proceedings against us. Further, we cannot assure that any instituted enforcement proceedings will be favorably resolved, or that such proceedings will not have a material adverse impact on our ability to retain and renew existing licenses or to obtain new licenses in other jurisdictions. Our reputation may also be damaged by any legal or regulatory investigation, regardless of whether or not we are ultimately accused of, or found to have committed, any violation.
We may also be required under applicable gaming laws and regulations to obtain approval of applicable gaming authorities to issue securities, incur debt and undertake other financing activities, and our financing counterparties, including lenders, might be subject to various licensing and related approval procedures in the various jurisdictions in which we operate. We and certain of our affiliates, major stockholders (generally persons and entities beneficially owning a specified percentage (typically 5% or more) of our equity securities), directors, officers and key employees are also subject to extensive background investigations and suitability standards in our businesses. Gaming authorities may require us to terminate the employment of any person who refuses to file appropriate applications. Moreover, gaming authorities with jurisdiction over our operations may, in their discretion, require a holder of any securities issued by us to file applications, be investigated, and be found suitable to own our securities, and, if a holder is found unsuitable, we could be sanctioned, including with the loss of approvals that are required for us to continue our gaming operations in the relevant jurisdictions, if such unsuitable person does not timely sell our securities.
Additionally, there are instances in which a state in which a Native American tribe conducts Class III gaming activities disagrees with such tribe regarding the regulation of gaming, including the regulation of gaming suppliers. In those instances, we make every effort to comply with both state and tribal regulations and fulfill our contractual obligations. However, there may be situations where any such disagreement impedes or creates uncertainty with respect to our ability to supply gaming products and services to such tribal customer or otherwise negatively impacts our relationship with such customer or gaming regulators. There are additional complexities that may impact disputes or other interactions with Native American tribe customers. For example, Native American tribes generally enjoy sovereign immunity from lawsuits, similar to the sovereign immunity enjoyed by the individual states and the United States. In addition, certain commercial agreements with Native American tribes are subject to review by regulatory authorities such as the national Indian Gaming Commission, and, among other things, any such review could require substantial modifications to any such agreement we enter into with a Native American tribe customer.
Regulators and investors may perceive sports wagering suppliers and operators similarly and consider their respective regulatory risk to be similar.
While operators that directly provide sports wagering services to their customers are generally perceived to be exposed to a greater degree of enforcement risk than their suppliers, in some jurisdictions certain laws extend to directly impact such suppliers. Furthermore, a supplier’s nexus with a particular jurisdiction may expose it to specific enforcement risks, irrespective of whether there has been an attempt to bring proceedings against any supported operator. In some circumstances, enforcement proceedings brought against an operator may result in action being taken against a supplier (and even brought in the absence of the former). Ultimately, the market pricemay view, or in the future may view, the regulatory risk associated with the business of supplying software and services to sports wagering operators as being comparable with the regulatory risk attaching to operators themselves. In such circumstances, there is an associated risk that investors may apply valuation methods to any such supplier that are the same as the valuation methods used to value operators, and which build in the same regulatory risk even though, in many territories, such suppliers would be considered sufficiently removed from the transactional activity to warrant the application of a discrete risk analysis. If suppliers to our sports wagers operators suffer financial difficulties from realized regulatory risk, they may not be able to offer their services and products, which could restrict the provision of our securities to drop significantly, even ifservices and negatively impact our business is doing well.
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The growth of our Class A common stock. These sharesSports Betting gaming business will depend on the expansion of Class A common stock have been registered under a Registration Statement on Form S-1 (File No. 333-257270), which has been declared effective byonline betting and gaming into new jurisdictions and our ability to obtain required licenses.
Our ability to achieve growth in our sports betting businesses will depend, in large part, upon expansion of online betting and gaming into new jurisdictions, the SEC. The sale or possibilityterms of regulations relating to online betting and gaming and our ability to obtain required licenses. Following the 2018 decision of the saleU.S. Supreme Court to overturn the federal ban on sports betting, a number of shares pursuant to the aforementioned registration statement couldjurisdictions have the effect of increasing the volatilitylegalized sports betting and online gaming and we expect that additional jurisdictions may do so in the market pricefuture. Our ability to further expand our sports betting and online operations is partially dependent on the adoption of regulations permitting such activities. However, the expansion of betting and online gaming in new jurisdictions is dependent on a number of factors that are beyond our Class A common stockcontrol and there can be no assurances of when, or decreasingif, such regulations will be adopted or of the market price itself.
Legislative interpretation and enforcement of certain gaming regulations could adversely affect financial performance and reputation.
Various gambling regulators have implemented additional responsible and safer gambling measures relating to our sports betting businesses including the implementation of bet limits, deposit limits, bonuses and advertising, which could negatively impact our operations, business, results of operations, cash flows or financial condition, particularly if additional gambling regulators follow suit.
We may not be able to capitalize on the expansion of internet or other forms of digital gaming or other trends and changes in the gaming, social and digital gaming industries, including due to laws and regulations governing these industries.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Except as previously disclosed in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 28, 2021, our registration statement on Form S-1 (File No. 333-254908), as amended (the “Registration Statement”), was declared effective by the SEC for our initial public offering of our Class A common stock, pursuant to which we sold a total of 21,300,000 shares of our Class A common stock, par value $0.0001 per share, at a public offering price of $24.00 per share.
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Item 6. Exhibits
Exhibit Number | Description | Form | File No. | Exhibit | Filing Date | Filed/Furnished Herewith |
3.1 | Amended and Restated Certificate of Incorporation of Endeavor Group Holdings, Inc. | 10-Q | 001-40373 | 3.1 | 06/02/2021 |
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3.2 | Amended and Restated Bylaws of Endeavor Group Holdings, Inc. | 10-Q | 001-40373 | 3.2 | 11/15/2021 |
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4.1 | S-1 | 333-254908 | 4.1 | 03/31/2021 |
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10.1† | 8-K | 001-40373 | 10.1 | 06/30/2022 |
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101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document |
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104 | Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101 |
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* Filed herewith
** Furnished herewith
† Schedules have been omitted pursuant to Item 601(a)(5) of Contents
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ENDEAVOR GROUP HOLDINGS, INC. | |||||||
Date: August | By: | /s/ Ariel Emanuel | |||||
Ariel Emanuel | |||||||
Chief Executive Officer | |||||||
(Principal Executive Officer) |
Date: August | By: | /s/ Jason Lublin | ||||
Jason Lublin | ||||||
Chief Financial Officer | ||||||
(Principal Financial Officer) |