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EDR Endeavor

Filed: 30 Apr 21, 4:02pm
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Filed Pursuant to Rule 424(b)(4)
Registration No. 333-254908

Prospectus

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Class A Common Stock  21,300,000 Shares

 

 

This is an initial public offering of shares of Class A common stock of Endeavor Group Holdings, Inc. All of the 21,300,000 shares of Class A common stock being offered are being sold by the Company.

Prior to this offering, there has been no public market for the Class A common stock.

We currently conduct our business through Endeavor Operating Company and its subsidiaries. Prior to the closing of this offering, we intend to complete an internal reorganization through a series of transactions, which we refer to as the “reorganization transactions.” After the completion of this offering, Endeavor Group Holdings will manage and operate the business and control the strategic decisions and day-to-day operations of Endeavor Operating Company through Endeavor Manager and include the operations of Endeavor Operating Company in our consolidated financial statements.

Following this offering, Endeavor Group Holdings, Inc. will have five classes of authorized common stock: Class A common stock, Class B common stock, Class C common stock, Class X common stock, and Class Y common stock. The Class A common stock offered hereby and the Class X common stock will have one vote per share. The Class Y common stock will have 20 votes per share. The Class B and Class C common stock will be non-voting. Our Chief Executive Officer, Ariel Emanuel, and our Executive Chairman, Patrick Whitesell, and their affiliates, together with affiliates of Silver Lake, will hold a majority of our issued and outstanding Class Y common stock and Class X common stock after this offering and, as a group, will control more than a majority of the combined voting power of our common stock. As a result, they will be able to control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and by-laws, and the approval of any merger or sale of substantially all of our assets.

Affiliates of, or certain funds and accounts advised by, each of Capital Research and Management Company, Coatue Management, L.L.C., Dragoneer Investment Group LLC, Elliott Investment Management L.P., Fertitta Capital, Fidelity Management & Research Company LLC, Kraft Group LLC, MSD Capital, L.P., Mubadala Investment Company, Silver Lake, Tako Ventures, LLC, Tencent, Third Point LLC and Zeke Capital Advisors, LLC (the “private placement investors”) have entered into an agreement (the “Subscription Agreement”) with us and affiliates of KKR (as defined herein) to purchase an aggregate of 74,543,080 shares of our common stock which will be 56,336,830 shares of our Class A common stock from us and 18,206,250 shares of Class A common stock from affiliates of KKR, in each case, in a private placement at a price per share equal to $24.00. The aggregate proceeds from this concurrent private placement will be $1,789.0 million, which includes proceeds of $1,352.1 million to us and proceeds of $437.0 million to affiliates of KKR. Our agreement with the private placement investors will also require us, within 60 days following the closing of this offering, to register their shares of Class A common stock on a Form S-1 registration statement. We intend to file such registration statement on or around June 30, 2021. Our agreements with the Private Placement Investors are contingent upon, and are scheduled to close immediately subsequent to, the closing of this offering, as well as the satisfaction of certain conditions to closing as further described in the section titled “Concurrent Private Placements.”

We have been approved to list the Class A common stock on the New York Stock Exchange (the “Exchange”) under the symbol “EDR.”

We will be a “controlled company” under the corporate governance rules of the Exchange applicable to listed companies, and therefore we will be permitted to, and we intend to, elect not to comply with certain corporate governance requirements thereunder. See “Management—Controlled Company.”

 

 

Investing in our Class A common stock involves risks. See “Risk Factors” on page 36 to read about factors you should consider before buying shares of our Class A common stock.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

   Per Share   Total 

Initial public offering price

  $24.00  $511,200,000

Underwriting discount(1)

  $1.38615   $29,524,995 

Proceeds, before expenses, to us

  $22.61385   $481,675,005 

 

(1)

See “Underwriting.”

To the extent that the underwriters sell more than 21,300,000 shares of Class A common stock, the underwriters have the option to purchase up to an additional 3,195,000 shares from us at the initial public offering price less the underwriting discount within 30 days from the date of this prospectus.

KKR Capital Markets LLC and Raine Securities LLC are acting as our financial advisors in connection with this offering.

The underwriters expect to deliver the shares against payment in New York, New York on May 3, 2021.

 

 

 

 

Morgan Stanley

 

Goldman Sachs & Co. LLC

 

J.P. Morgan

 Deutsche Bank Securities

 

 

Barclays

 Citigroup Credit Suisse Evercore ISI HSBC Jefferies 

Moelis &

Company

 

Piper Sandler

 

RBC Capital

Markets

 

UBS Investment

Bank

 

CODE Advisors

 DBO Partners LionTree Academy Securities R. Seelaus & Co., LLC 

Ramirez & Co., Inc.

 Siebert Williams Shank

Prospectus dated April 28, 2021.


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TABLE OF CONTENTS

 

INDUSTRY AND MARKET DATA

   ii 

TRADEMARKS

   ii 

BASIS OF PRESENTATION

   ii 

PROSPECTUS SUMMARY

   1 

THE OFFERING

   22 

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA

   29 

RISK FACTORS

   36 

FORWARD-LOOKING STATEMENTS

   71 

ORGANIZATIONAL STRUCTURE

   73 

USE OF PROCEEDS

   86 

DIVIDEND POLICY

   87 

CAPITALIZATION

   88 

DILUTION

   90 

UNAUDITED PRO FORMA FINANCIAL INFORMATION

   92 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

   102 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   104 

BUSINESS

   142 

MANAGEMENT

   157 

EXECUTIVE COMPENSATION

   163 

PRINCIPAL STOCKHOLDERS

   198 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   202 

DESCRIPTION OF CAPITAL STOCK

   215 

SHARES AVAILABLE FOR FUTURE SALE

   221 

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

   224 

UNDERWRITING

   228 

CONCURRENT PRIVATE PLACEMENTS

   238 

LEGAL MATTERS

   239 

EXPERTS

   240 

WHERE YOU CAN FIND MORE INFORMATION

   241 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

   F-1 

 

 

Through and including May 23, 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 

We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give to you. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of the date hereof.

 

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INDUSTRY AND MARKET DATA

Industry and market data used throughout this prospectus were obtained through Company research, surveys and studies conducted by third parties and industry and general publications. Certain information contained under the heading “Business” is based on studies, analyses, and surveys prepared by AdAge, ActionNetwork, Activate, Inc., the American Gaming Association, Ampere Analysis, Billboard, The Business Research Company, the Bureau of Economic Analysis, The Center for Generational Kinetics, LLC, Expedia, Forbes, H2 Global, License Global, Licensing International, the Organization for Economic Co-operation and Development (the “OECD”), Technavio, and the University of Texas at Austin. While we are not aware of any misstatements regarding the industry data presented herein, estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Risk Factors” and “Forward-Looking Statements.”

TRADEMARKS

This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

BASIS OF PRESENTATION

Organizational Structure

In connection with the closing of this offering, we will effect what we refer to herein as the “reorganization transactions.” Unless otherwise stated or the context otherwise requires, all information in this prospectus reflects the consummation of the reorganization transactions, the UFC Buyout, the concurrent private placements and this offering. See “Organizational Structure” for a description of the reorganization transactions and a diagram depicting our organizational structure before and after giving effect to the reorganization transactions, the UFC Buyout, the concurrent private placements and this offering.

As used in this prospectus, unless we state otherwise or the context otherwise requires:

 

  

“we,” “us,” “our,” “Endeavor,” the “Company,” and similar references refer (a) after giving effect to the reorganization transactions, to Endeavor Group Holdings and its consolidated subsidiaries, and (b) prior to giving effect to the reorganization transactions, to Endeavor Operating Company and its consolidated subsidiaries.

 

  

“Endeavor Catch-Up Profits Units” refer to the Endeavor Full Catch-Up Profits Units and the Endeavor Partial Catch-Up Profits Units.

 

  

“Endeavor Full Catch-Up Profits Units” refer to the Endeavor Profits Units that are designated as “catchup” units. Endeavor Full Catch-Up Profits Units have a per unit hurdle price and are entitled to receive a preference on distributions once the hurdle price applicable to such unit has been met. Upon our achievement of a price per share that would have fully satisfied such preference on distributions, the Endeavor Full Catch-Up Profits Units will be converted into Endeavor Operating Company Units.

 

  

“Endeavor Group Holdings” refers to Endeavor Group Holdings, Inc., a Delaware corporation and the issuer in this offering.

 

  

“Endeavor Manager” refers to Endeavor Manager, LLC, a Delaware limited liability company and a direct subsidiary of Endeavor Group Holdings following the reorganization transactions.

 

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“Endeavor Manager Units” refers to the common interest units in Endeavor Manager.

 

  

“Endeavor Operating Company” refers to Endeavor Operating Company, LLC, a Delaware limited liability company and a direct subsidiary of Endeavor Manager’s and indirect subsidiary of ours following the reorganization transactions.

 

  

“Endeavor Operating Company Units” refers to all of the existing equity interests in Endeavor Operating Company (other than the Endeavor Profits Units) that will be reclassified into Endeavor Operating Company’s non-voting common interest units upon the consummation of the reorganization transactions.

 

  

“Endeavor Partial Catch-Up Profits Units” refer to the Endeavor Profits Units that are designated as “catchup” units. Endeavor Partial Catch-Up Profits Units have a per unit hurdle price and are entitled to receive a preference on distributions once the hurdle price applicable to such unit has been met. Upon our achievement of a price per share that would have fully satisfied such preference on distributions, the Endeavor Partial Catch-Up Profits Units will be converted into Endeavor Profits Units (without any such preference) with a reduced per unit hurdle price to take into account such prior preference.

 

  

“Endeavor Phantom Units” refers to the phantom units outstanding, which, following this offering, and subject to certain conditions and limitations, will entitle the holder to cash equal to the value of a number of Endeavor Manager Units, Endeavor Operating Company Units, or Endeavor Profits Units, or of equity settled to the equivalent number of Endeavor Manager Units, Endeavor Operating Company Units, or Endeavor Profits Units.

 

  

“Endeavor Profits Units” refers to the profits units of Endeavor Operating Company that will remain outstanding following this offering. Endeavor Profits Units will be economically similar to stock options (other than with respect to Endeavor Full Catch-up Profits Units which, upon achievement of a price per share that would have fully satisfied their preference on distributions, will be economically similar to Endeavor Operating Company Units). Each Endeavor Profits Unit (other than Endeavor Full Catch-Up Profits Units) has a per unit hurdle price, which is economically similar to the exercise price of a stock option. After the consummation of this offering, certain senior officers and employees, including Ariel Emanuel and Patrick Whitesell, will hold Endeavor Profits Units.

 

  

“Executive Holdcos” refers to Endeavor Executive Holdco, LLC, Endeavor Executive PIU Holdco, LLC, and Endeavor Executive II Holdco, LLC, each a management holding company, the equity owners of which include current and former senior officers, employees, or other service providers of Endeavor Operating Company, and which will be controlled by Messrs. Emanuel and Whitesell.

 

  

“Management Holdcos” refers to WME Holdco, LLC and certain other management holding companies, the equity owners of which include current and former senior officers, employees or other service providers of Endeavor Operating Company.

We are a holding company and, immediately after the consummation of the reorganization transactions and this offering, our principal asset will be our indirect ownership interests in Endeavor Operating Company.

Presentation of Financial Information

Endeavor Operating Company, LLC is the predecessor of the issuer, Endeavor Group Holdings, Inc., for financial reporting purposes. Endeavor Group Holdings, Inc. will be the audited financial reporting entity following this offering. Accordingly, this prospectus contains the following historical financial statements:

 

  

Endeavor Group Holdings, Inc. Other than the audited balance sheets as of December 31, 2020 and 2019, the historical financial information of Endeavor Group Holdings, Inc. has not been included in this prospectus as it has no business transactions or activities to date other than those incidental to its

 

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formation and preparation of this prospectus and registration statement of which this prospectus forms a part. Endeavor Group Holdings, Inc. had no other assets or liabilities during the periods presented in this prospectus.

 

  

Endeavor Operating Company, LLC. As we will have no other interest in any operations other than those of Endeavor Operating Company, LLC and its subsidiaries, the historical consolidated financial information included in this prospectus is that of Endeavor Operating Company, LLC and its subsidiaries.

The unaudited pro forma financial information of Endeavor Group Holdings, Inc. presented in this prospectus has been derived by the application of pro forma adjustments to the historical consolidated financial statements of Endeavor Operating Company, LLC and its subsidiaries included elsewhere in this prospectus. These pro forma adjustments give effect to the reorganization transactions described in “Organizational Structure,” the UFC Buyout, the concurrent private placements and other transactions including the consummation of this offering, as if all such transactions had occurred on January 1, 2020, in the case of the unaudited pro forma consolidated statements of operations, and as of December 31, 2020, in the case of the unaudited pro forma consolidated balance sheet. See “Unaudited Pro Forma Financial Information” for a complete description of the adjustments and assumptions underlying the pro forma financial information included in this prospectus.

 

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LETTER FROM OUR CEO

As challenging a year as 2020 was, it underscored the strength, creativity, and resilience of our people who mobilized time and time again in the face of overwhelming odds. We made difficult decisions but worked as a team to find creative solutions and best position the business for the future.

As the global pandemic unfolded, we developed the protocols necessary to help our businesses safely restart operations, providing a model for other professional sports, events, and programs. UFC and PBR were two of the first sports organizations to responsibly return last spring, and we followed in the summer by hosting the WNBA’s season at IMG Academy. In the fall, we brought New York Fashion Week to life, becoming one of the first major events to resume in New York City. Meanwhile, we delivered virtual solutions to our more consumer-dependent live events and experiences—from speaking and book tours to art fairs to sports training—while Endeavor Content relied on our global network and local expertise to relocate and restart productions. In a year when the unique ability of content to unite people and elevate important issues was never more apparent, we were proud to do our part in ensuring the most powerful stories were heard, while supporting our clients in using their platforms to amplify diverse voices.

The power of the Endeavor platform has been on full display as we have brought commercial activity back online, guided our clients through an unprecedented set of events, and fostered innovation of new digital business models that will drive growth well into the future. The events of 2020 reminded us of the enduring value of premium intellectual property and content, while reinforcing the strength of our position within the sports and entertainment ecosystem.

We remain committed to our mission of:

 

  

Leading and innovating on behalf of our premium sports and entertainment properties

 

  

Expanding our reach across new and emerging content formats

 

  

Cultivating an environment that encourages prudent risk taking and cross-platform integration

 

  

Aggressively advocating on behalf of those who’ve placed their trust in us

 

  

Embracing diversity, inclusion, and equality across our platform—content, clients, and employees

 

  

Defining success based on long-term growth and innovation, not short-term gains

We believe being a public company will enable us to accelerate this mission and further the vision we set out in 1995 to build a company for where the world was headed.

We hope you’ll join us.

 

 

LOGO

ARIEL EMANUEL

 

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PROSPECTUS SUMMARY

Our Company

Endeavor is a premium intellectual property, content, events, and experiences 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.

We believe that our unique business model gives us a competitive advantage in the industries in which we operate. Our direct ownership of scarce sports properties positions us to directly benefit from the generally rising value of sports assets, while giving us direct control to make decisions that sustain the long-term value of our properties. Our dual role as an intellectual property owner and as a trusted advisor to clients and rights holders allows us to make connections across our platform, increasing the earnings of our clients and the value of our sports and entertainment properties. We possess category leading capabilities in various industries, each of which contributes to our financial success. The integration of our broad range of capabilities, along with our owned and managed premium sports and entertainment properties, drives network effects across our platform. We measure these effects by evaluating the impact that activity in one business segment has on growth in another. Our management team has successfully executed a mergers and acquisitions and organic-driven growth strategy that has transformed our business from a pure representation model to an integrated global platform. After we founded Endeavor in 1995, we gained scale in representation by merging with the venerable William Morris Agency to form WME in 2009, which was followed by our acquisition of IMG in 2014, adding marketing and licensing, events, media production and distribution, and the sports training institution, IMG Academy. The acquisition of a controlling interest in the UFC in 2016 served as a major step forward in the transformation of our business. We have also built businesses primarily organically that take advantage of our unique role within the sports and entertainment ecosystem.



 

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We operate across three segments: (i) Owned Sports Properties, (ii) Events, Experiences & Rights, and (iii) Representation, which are covered in greater detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Business Overview.” Our segments are presented in the table below:

 

 

LOGO

We have a 6,400+ person team operating in 28 countries. We generate revenue in both a principal and an agency capacity and use risk mitigation strategies including pre-sales and licensing when we take on investment risk in content or sports rights. Our business benefits from strong revenue visibility via sports rights fee payments, predictable client commissions, content rights payments, recurring annual or quadrennial events, corporate client retainers, licensing agreements, and annual tuition payments. We believe that visibility into our performance provides us with a stable and growing revenue base.

Our business delivered strong revenue growth prior to the impact of COVID-19. For the year ended December 31, 2019, we generated $4,571.0 million in revenue, net loss of $530.7 million, Adjusted Net Income of $240.9 million and Adjusted EBITDA of $733.5 million. COVID-19 has had a significant impact on our 2020



 

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financial performance. For the year ended December 31, 2020, we generated $3,478.7 million in revenue, net loss of $625.3 million, Adjusted Net Income of $84.8 million and Adjusted EBITDA of $572.5 million. For a

discussion of Adjusted Net Income and Adjusted EBITDA and reconciliations to the most closely comparable GAAP measures, see “Prospectus Summary—Summary Historical and Pro Forma Consolidated Financial and Other Data.” For a discussion of factors impacting our financial performance, see “Risk Factors—Risks Related to Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Industry Dynamics

In response to the consistently high demand for premium sports and entertainment content, we have grown the scope and scale of our platform with the addition of owned premium intellectual property and new content capabilities. We have successfully positioned our business to benefit from continuous technological disruption and resulting increased demand for premium content.

The impact of increasing consumer adoption of digital platforms in sports, entertainment, and social media is changing the way that our clients conduct business. We have adapted our advisory strategies and added capabilities to enable us to prosper as new industry trends develop. The insights that we gain across our platform allow us to spot these trends early. We have made organic investments and pursued mergers and acquisitions with the benefit of these insights. We believe our acquisition of marketing business 160over90, for example, positioned us to be a leader in the transition of traditional media marketing budgets to experiential and digital platforms. We created an alternative to the traditional studio model through Endeavor Content in part to fulfill a demand for streaming video and podcast content. We also developed sports data distribution capabilities through IMG ARENA to address the emergence of online sports gaming services. We built and acquired streaming service capabilities via Endeavor Streaming to provide critical infrastructure to support our entertainment and sports clients as they increased their premium AVOD and SVOD product offerings.

Our Integrated Global Platform

Our global platform is comprised of premium owned assets and an integrated set of capabilities. These capabilities include Sports Operations & Advisory, Events & Experiences Management, Client Representation, Media Production & Distribution, Experiential Marketing, and Brand Licensing. We believe that our integrated set of global capabilities is an essential attribute of our growth strategy.

Sports Operations & Advisory

We own, manage, operate and monetize a unique portfolio of scarce sports properties that generate significant revenue and cash flow through innovative rights deals and exclusive live events. We acquired our first sports organization, PBR, in 2015. Our most transformative acquisition was the UFC in 2016, adding a one-of-a-kind, global, and category defining sports organization to our portfolio.

Events & Experiences Management

We own, operate, or represent more than 800 events annually around the globe, including live sports events covering more than 15 sports across more than 25 countries (e.g. Miami Open), international fashion weeks (e.g. New York Fashion Week), art fairs (e.g. Frieze London), and music, culinary, and lifestyle festivals (e.g. Hyde Park Winter Wonderland). In January 2020, we acquired On Location, a leading provider of premium live event experiences across sports and music in North America with more than 900 experiences built around annual events like the Super Bowl, Ryder Cup, NCAA Final Four, and Coachella. We also operate IMG Academy, a sports training institution serving more than 1,200 full-time students and approximately 10,000 camp participants annually, and dozens of professional athletes, teams, leagues, and corporate clients annually.



 

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Media Production & Distribution

We are a full-service content production and distribution platform with experience in development, financing, production, marketing and sales, servicing hundreds of creators, sports leagues and federations, events and other brands, as well as our owned sports intellectual property. Our state-of-the-art studios produce tens of thousands of hours of sports programming annually for leading sports properties, such as the English Premier League, Wimbledon, and Ryder Cup, as well as for our owned assets including UFC and PBR. Endeavor Content provides a premium alternative to traditional studios, offering a range of services including content development, production, financing, sales, and advisory services to creators. The studio has financed and/or sold more than 200 projects, including “La La Land,” “Just Mercy,” “Hamilton,” “Normal People,” and “See.”

We are also one of the largest independent global distributors of sports and entertainment programming and possess deep relationships with a wide variety of broadcasters and media partners around the world. We sell media rights globally on behalf of more than 150 clients such as the NFL, IOC, and NHL and for our owned assets including UFC and PBR. We believe that our collective offering is more important than ever, as premium content is consistently in high demand and in short supply.

Client Representation

We represent many of the world’s greatest creators, performers, influencers, athletes, and models across entertainment, sports, and fashion. In 2019, WME was named music touring agency of the year by Billboard, booking more than 37,000 concert dates, while its clients took home more Grammys than any other agency in 2019 and 2020. For the past several years, WME clients have won more Academy Awards than any other agency and in 2019, WME clients were involved in all of the top 10 domestic grossing films.

Brand Licensing

We are a leading provider of licensing services to entertainment, sports, and consumer products brands, having earned a No. 1 ranking based on total retail sales of $16 billion, according to License Global magazine in 2020. We license our owned intellectual property including the UFC and PBR, and represent third party brands across the automotive, fashion, lifestyle, entertainment, athletics, legends, personalities, corporate, sports league, and event categories. Our clients include Anheuser-Busch InBev, Jeep, Lamborghini, Epic Games (Fortnite), Arnold Palmer, Harvard, the Gap, and the NFL. Through our licensing activities, we source incremental revenue opportunities for our clients, while enhancing their brand with consumers.

Experiential Marketing

Our corporate marketing services are delivered by 160over90, our premium, full-service marketing business that provides experiential, influencer, digital and cultural marketing, and public relations expertise. We work on behalf of some of the world’s largest consumer facing brands that collectively spend over $80 billion in worldwide advertising annually according to AdAge, including Anheuser-Busch InBev, AT&T, and Coca–Cola.

Our Competitive Strengths

Ownership of Intellectual Property

We believe that our Company is distinguished by our ownership of intellectual property, including UFC, a global sports property and the premier mixed martial arts sports organization, and PBR, an internationally renowned Western lifestyle competitive series. UFC was founded in 1993 and has grown in popularity after hosting more than 500 events, growing its fan base to approximately 625 million fans, and reaching a global audience of approximately 1 billion households through an increasing array of broadcast license agreements and



 

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our owned FIGHT PASS streaming platform. In 2020, FIGHT PASS subscriptions were up over 40%, and UFC set a record for the most global Pay-Per-View buys in its history. Meanwhile, social media followers across platforms increased by more than 65% year-over-year in 2020, and we grew to more than 10 million subscribers on YouTube, second only to the NBA in terms of global sports organizations. PBR, meanwhile, 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 also have a strategic partnership with Euroleague, the elite European professional basketball league, which is one of the most popular indoor sports leagues in the world, averaging attendance of over 8,500 per game in the 2019-2020 season.

Perpetual Demand for Premium Content

Our platform allows us to participate in industries that are benefitting from increasing demand for content in all forms. We are positioned at the center of this demand through our owned sports properties, media production and distribution, and client representation businesses. We operate across all genres and benefit regardless of how and where the demand for this content is fulfilled. Disruption has increased the value of sports media rights as illustrated in consistent increases in Contract Average Annual Values (AAV) over previous contracts. Additionally, as digital video distribution services such as ESPN+, Disney+, Peacock, HBO Max, and others have proliferated in recent years, demand has surged with more than 500 original shows airing in 2019, compared to 288 in 2012, according to an industry study.

Positioned Where the Consumer is Going in Experiential

According to Expedia and The Center for Generational Kinetics (“2018 Expedia and The Center for Generational Kinetics, LLC”), 74% of Americans place more value on experiences than products or things. A University of Texas at Austin research paper published in May 2020 found that consumers were happier when spending on experiences as opposed to material items. This trend has driven us to invest in our portfolio of more than 800 events globally across sports, music, art, fashion, and culinary. Through IMG Academy, we offer an elite academic and athletic experience, with 90% of graduates moving on to play collegiate sports (compared to 7% nationally). On Location, meanwhile, is a leading provider of premium entertainment and travel experiences, offering a large portfolio of events, tours, and hospitality packages.

Creating Asymmetric Risk / Reward Opportunities

We believe that the insights that we have gained from our vast network reduce the risk of organic investment and strategic mergers and acquisitions. Our team evaluates potential merger and acquisition opportunities with the benefit of data and industry knowledge that enables us to identify integration synergies and better forecast revenue growth potential. Our role as an industry counterpart often avails us early insights into strategic processes. We also frequently have the opportunity to invest in and support new business ventures that we have negotiated on behalf of our clients, and our commission structure allows us to participate alongside them in their commercial success.

Platform Integration Drives Upside for Our Stakeholders

Our commitment to business unit collaboration has allowed us to enhance returns for our owned and managed intellectual property, content and experiences, and for our clients. From 2017 through 2019, we grew revenue at a 23% CAGR, driven by industry tailwinds, geographic expansion, organic reinvestment, and strategic acquisitions. In 2020, our focus turned to realizing further cost efficiencies across the business and identifying complementary business extensions in the virtual/digital space. The practical linkages between our business units manifest themselves in myriad examples that result in maximizing revenue generation opportunities, improved client acquisition and retention, and proprietary acquisition and investment opportunities. Each of our owned



 

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assets and capabilities reinforces the others, creating a global platform that is very difficult to replicate. We have executed multi-pronged growth strategies on behalf of many of our clients, and we leverage our network to forge meaningful partnerships between our talent and brands. Additionally, we have realized top line and cost synergies as we have integrated more than 20 acquisitions.

Strong Revenue Visibility

Our services are underpinned by highly visible and recurring revenue streams across the platform. A primary example is our seven-year UFC media rights deal with ESPN. We have numerous similarly contracted revenue streams from media rights contracts in our media rights and distribution business. Our work with recurring annual events such as Wimbledon and quadrennial events such as the Rugby World Cup adds to the recurring revenue nature of our business. We also have retainer-based agreements with many of our marketing clients and our representation business benefits from revenue visibility, as measured by industry award recognitions, predictable production volumes, and residual income streams. Finally, our four-year tuition-based IMG Academy provides a high degree of revenue visibility.

Our Growth Strategies

Leverage Our Platform to Expand Globally and Increase Platform Productivity

We intend to continue leveraging our integrated global platform to maximize the growth potential of our business. We believe that our integrated capabilities and global reach allow us to deepen relationships with existing clients, attract new clients and partners, and access proprietary acquisition and investment opportunities that contribute to our growth and strengthen our network.

Expand our Experiential Offering

The concert, sports, and live entertainment categories have been increasingly prioritized over material goods by younger demographics. With a portfolio of more than 800 owned or managed events across Endeavor and 900 experiences curated by On Location, we believe we are well positioned to take advantage of these continuing secular trends and create new offerings and investment opportunities. IMG Academy, meanwhile, is a sports training institution with the ability to expand its campus footprint as well as its products and offerings, such as the addition of virtual training.

Invest in Adjacent High Growth Industry Segments

Our global platform has enabled us to enter new, fast-growing industry segments where we are able to leverage long standing business partnerships and relevant commercial insights to accelerate scale. Our existing footprint helps to facilitate organic investment in new adjacent industry segments. We have successfully executed against these opportunities that have emerged in sports gaming (IMG ARENA), streaming (Endeavor Streaming), podcasting (Endeavor Content), experiential marketing (160over90), and partnerships with our clients (Talent Ventures).

Emphasize Strategic Growth Through Mergers and Acquisitions on Our Unique Platform

Our disciplined mergers and acquisitions strategy has been focused on investing in intellectual property and acquiring capabilities for our global platform. We have successfully completed more than 20 mergers and acquisitions since 2014. We will continue to invest in mergers and acquisitions to complement our internal capabilities and enhance the value of our network.



 

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Our Business and Industry Opportunity

Global Content Spend (Film & TV) Industry

Our client representation business is largely driven by demand for content creators and performers in film and television. Our market constituents for our client representation and media businesses include linear and digital media distributors. The combined spend in both global film and television content was $128 billion in 2019 according to Ampere Analysis. A primary growth driver for global content spend has been the dramatic expansion of the global over-the-top (“OTT”) media industry. To capitalize on this growth and generate revenue, streaming services are both investing in original content and acquiring licensed content.

Global Experiences (Sporting Events, Concerts & Performing Arts Ticket Segments)

The sporting events, concerts, and performing arts segments are core to our owned sports properties and experiences operations. Our market constituents primarily include retail consumers, sponsors and corporate customers. The global sporting events, concerts, and performing arts ticket segment was $79 billion in 2019 and is expected to grow at a 5% CAGR to $102 billion by 2024, according to Technavio. According to the Bureau of Economic Analysis, average annual US consumer expenditure growth on experience-related services is 66% higher vs. goods (2014—2019). Additionally, according to data from the OECD collected over a 40-year period from 1979 to 2019, U.S. experiential spend grew 2.2x faster than the real GDP.

Global Sports Media Rights Expenditure

Spending on media rights continues to be a significant component of revenues in the sports industry with rights values appreciating consistently over the past decade. Our market constituents include linear and digital distributors, which acquire sports media rights and broadcast sports content. In 2019, global sports media rights spend was $39 billion, having grown at a 9% CAGR since 2017, according to The Business Research Company (via MRDC), and this is expected to grow at an 8% CAGR to $53 billion in 2023. The rise of streaming, increased legalization of sports betting, increased competition from tech entrants, and continued viewership appeal attribute to the projected growth on the rights price tags.

Global Marketing and Licensing

We are active in the global marketing and brand licensing industries, which totaled $67 billion in 2019 based on the collective reported revenues of $51 billion from IPG, WPP, Omnicom, and Dentsu, plus $16 billion reflecting the royalty revenue for brand owners per Licensing International’s 2020 Global Licensing Survey. Our market constituents include corporate clients seeking brand marketing or IP owners looking to license their brands. Our licensing work is closely attached to the global brand licensing industry of $16 billion which increased 5% in 2019.

Global Sports Gaming

The global sports gaming industry comprised of land-based and interactive sports betting grew at a 10% CAGR from 2017 to 2019 reaching $42 billion (Gross Win) in 2019 and is expected to grow at a 12% CAGR through 2024 to $76 billion, according to H2 Global. As of February 2021, 25 total states across the United States have legalized sports betting, and sports betting is currently operational in 20 states according to the American Gaming Association. Based on current legislative momentum and individual state need for tax revenues, ActionNetwork predicts that 30-33 states will legalize sports betting by the end of 2021.



 

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Recent Developments

COVID-19 Pandemic

While we believe the long-term value of premium intellectual property, content, and experiences is enduring, the near-term impact to our business as a result of COVID-19 has been significant. We experienced disruption across our business units and geographies given the hiatus of live sports and entertainment events coupled with film and television series production stoppages and the interruption of the school year and sports camp schedule. We navigated the early phase of the crisis by undertaking all appropriate measures to address the safety of our personnel, taking necessary steps to ensure adequate liquidity to fund operations, imposing cost cuts, and reducing and realigning our workforce to best position the business for future success.

As the situation evolved, we stayed in close contact with government and health officials, our clients, sports and media partners, and students. UFC and PBR were among the first professional sports in North America to implement safety protocols and return from the COVID-19 shutdown, in May and April 2020, respectively. Since resuming, UFC has held some of its most watched PPV events in the ESPN+ era, starting in Florida and continuing in Abu Dhabi followed by our owned Apex venue in Las Vegas.

As more sports resumed action, we leveraged our experience with UFC and PBR to provide insights to promote best practices throughout the industry. Similarly, as film and television production resumed, we have been committed to creating a safe work environment for our employees, clients, and partners. While we expect to benefit from the significant pent up global demand for content, the path to full capacity will be gradual.

We have focused our time during this period to explore innovation and identify ways to become a more efficient company. Our business units are investing in new digitally focused in-home entertainment business models that are complementary to our core businesses. Further, we believe that a meaningful portion of the cost savings that we have realized through the crisis may continue once commercial activity normalizes, which we expect would have a positive effect on our long-term operating margins and free cash flow generation. See “Risk Factors—Risks Relating to Our Business—The impact of the COVID-19 global pandemic could materially and adversely affect our business, financial condition, and results of operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview— Impact of the COVID-19 Pandemic” for additional information.

Acquisitions

On January 14, 2021, we entered into a Membership Interests Purchase Agreement (the “Reigning Champs Purchase Agreement”), to acquire the path-to-college business of Reigning Champs, LLC (“Reigning Champs”). Pursuant to the Reigning Champs Purchase Agreement, we agreed to acquire all of the issued and outstanding membership interests or other equity securities of all of the subsidiaries within the path-to-college business of Reigning Champs (collectively, the “Reigning Champs PTC Business”) for an aggregate cash purchase price of $200 million. We refer to this proposed acquisition of the Reigning Champs PTC Business as the “Reigning Champs Acquisition.” The Reigning Champs PTC Business 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. We expect the closing of the Reigning Champs Acquisition to take place following the closing of this offering. There is no guarantee that we will close the Reigning Champs Acquisition on the terms described herein or at all.

On April 1, 2021, we entered into a Share Purchase Agreement (the “FlightScope Purchase Agreement”), to acquire all of the issued and outstanding equity interests of EDH Tennis Limited, the holding company of FlightScope Services sp. z o.o., comprising the services business of FlightScope (collectively, the “FlightScope Services Business”) and simultaneously closed the acquisition. Pursuant to the FlightScope Purchase Agreement,



 

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we acquired the FlightScope Services Business for an aggregate cash purchase price of approximately $60 million (approximately $35 million was paid upfront as initial consideration, and the remainder will be paid as deferred consideration in two installments in 2022 and 2024). The FlightScope Services Business is a data collection, audio-visual production and tracking technology specialist for golf and tennis events.

Credit Facility Amendment

On April 19, 2021, the Company entered into an amendment to the credit agreement governing the Credit Facilities (as defined below) to, among other things, waive the financial covenant for the test periods ending June 30, 2021, September 30, 2021 and December 31, 2021. In addition, subject to completion of an IPO (as defined in the credit agreement), the amendment will also extend the maturity date of the Revolving Credit Facility to May 18, 2024.

Risks Associated with Our Business

An investment in our Class A common stock involves a high degree of risk. You should carefully consider the risks summarized in the “Risk Factors” section of this prospectus immediately following this prospectus summary, including:

 

  

the COVID-19 pandemic’s significant adverse impact on our business;

 

  

changes in public and consumer tastes and preferences and industry trends that could reduce demand for our services and content;

 

  

our ability to generate revenue from discretionary and corporate spending on entertainment and sports events is subject to many factors, including many that are beyond our control, such as general macroeconomic conditions;

 

  

our ability to adapt to or manage new content distribution platforms or changes in consumer behavior resulting from new technologies could adversely affect our business;

 

  

our ability to maintain a professional reputation among our businesses, key personnel, and clients;

 

  

our dependence on the relationships of our agents, managers, and other key personnel with clients across many categories could adversely affect our business;

 

  

our failure to identify, sign, and retain clients;

 

  

the highly competitive nature of the markets in which we operate, both within the United States and internationally;

 

  

our dependence on key relationships with television and cable networks, satellite providers, digital streaming partners and other distribution partners, as well as corporate sponsors;

 

  

our ability to protect our trademarks and other intellectual property rights;

 

  

our ability to comply with extensive U.S. and foreign governmental regulations;

 

  

we are signatory to certain franchise agreements of unions and guilds and are subject to certain licensing requirements of the states in which we operate, and are signatories to certain collective bargaining agreements and depend upon unionized labor for the provision of certain of our services;

 

  

our substantial indebtedness;

 

  

we are a holding company and our principal asset after completion of this offering will be our indirect equity interests in Endeavor Operating Company, and accordingly we are dependent upon distributions from Endeavor Operating Company to pay taxes and other expenses;



 

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provisions in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a third party;

 

  

we will be required to pay certain of our pre-IPO investors, including the Other UFC Holders (collectively, the “pre-IPO investors”) for certain tax benefits we may claim (or are deemed to realize) in the future, and the amounts we may pay could be significant; and

 

  

we are controlled by Messrs. Emanuel and Whitesell, Executive Holdcos and certain affiliates of Silver Lake, whose interest in our business may be different than an investor in this offering.

Corporate History

The Endeavor Agency, L.L.C. was founded in 1995 by Ariel Emanuel and several partners. In 2009, The Endeavor Agency, L.L.C. merged with the William Morris Agency, LLC (founded in 1898) to form William Morris Endeavor Entertainment, LLC (“WME”), with Ariel Emanuel and Patrick Whitesell becoming WME’s Co-Chief Executive Officers.

In May 2012, affiliates of Silver Lake made a strategic minority investment in WME, the first of several investments by affiliates of Silver Lake in us or our affiliates (e.g., UFC, Learfield IMG College).

In 2014, WME acquired media, sports, and fashion leader IMG Worldwide Holdings, Inc. (“IMG”) (founded in 1960) (the “IMG Acquisition”) and formed Endeavor Operating Company, with additional equity capital from, among others, affiliates of Silver Lake.

Since the IMG Acquisition, additional investments have been made in Endeavor by, among others, affiliates of Silver Lake (and now Silver Lake’s equity stake is primarily held in vehicles which began their investment periods in 2014 or later), the Canada Pension Plan Investment Board, and GIC Private Limited, Singapore’s sovereign wealth fund. Endeavor has also completed a series of organic growth initiatives, entered into several strategic joint ventures, and made a number of additional acquisitions.

In 2016, Endeavor, together with affiliates of Silver Lake and affiliates of Kohlberg Kravis Roberts & Co. L.P. (collectively, “KKR”) and certain other investors (collectively with certain other persons that hold equity interests in UFC Parent and certain of their affiliates, the “Other UFC Holders”), acquired Zuffa Parent, LLC (“UFC Parent”), which owns and operates the Ultimate Fighting Championship (“UFC”), the world’s premier professional mixed martial arts (“MMA”) organization (the “UFC Acquisition”). We have a controlling financial interest over the business and affairs of UFC Parent and have consolidated UFC Parent’s financial results from the date of the UFC Acquisition. We currently own 50.1% of UFC Parent’s common equity.

Additional acquisitions include: Frieze, a leading arts event and media company; Professional Bull Riders (“PBR”), the premier professional bull riding organization; 160over90, a full-service branding and marketing agency; and NeuLion, a video streaming services leader. In addition, we formed Endeavor China, a strategic partnership with Sequoia Capital China, a venture capital and private equity firm, Tencent Holdings Limited, a provider of media, entertainment, internet and mobile services in China, and affiliates of FountainVest Partners, a China-focused private equity firm.

On December 31, 2018, we completed the merger of our IMG College business with Learfield Communications, LLC (“Learfield”), a provider of integrated marketing solutions in college sports, to form Learfield IMG College. In connection with the merger, we sold approximately 13% of the equity interests in Learfield IMG College to affiliates of Silver Lake for $250 million. We received cash proceeds totaling



 

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$399.2 million and approximately 36% of the equity interests of Learfield IMG College, which is recognized as an equity method investment. The results of operations of our IMG College business are presented as discontinued operations for all periods prior to its disposal.

On January 2, 2020, we acquired On Location Experiences (“On Location”), a premium experiential hospitality business that serves iconic rights holders with extensive experience in ticketing, curated hospitality, live event production, and travel management in sports and entertainment. The National Football League (“NFL”) is a minority investor and strategic partner of On Location.

UFC Buyout

On February 16, 2021, Endeavor Operating Company entered into a Transaction Agreement (the “Transaction Agreement”) with the Other UFC Holders and certain of their affiliates pursuant to which Endeavor Operating Company will directly or indirectly acquire equity interests in UFC Parent (including warrants of UFC Parent or common equity received by warrant holders from the exercise of 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 (the “UFC Buyout”). We currently own 50.1% of UFC Parent’s common equity, or 44.0% of UFC Parent on a diluted basis, and have consolidated UFC Parent’s financial results from the date of the UFC acquisition in 2016.

Pursuant to the Transaction Agreement, we will issue Endeavor Operating Company Units to (i) certain of the Other UFC Holders as consideration for the acquisition of interests of UFC Parent held by such Other UFC Holders (a portion of which Endeavor Operating Company Units will subsequently be sold by certain of the Other UFC Holders, as described below); and (ii) certain of the Other UFC Holders as consideration for the acquisition of all or only a portion of the interests of UFC Parent held by such Other UFC Holders (with the balance of the equity interests in UFC Parent retained by the Other UFC Holders to be sold to Endeavor Operating Company or its designee for cash, as described below), and certain of which Endeavor Operating Company Units will promptly be exchanged by such holders for Endeavor Manager Common Units. Certain holders of profit units in UFC Parent (the “UFC profits units”) will receive Endeavor Operating Company Units or Endeavor Manager Common Units. The Other UFC Holders that receive Endeavor Operating Company Units and/or Endeavor Manager Common Units will also receive paired shares of our Class X common stock corresponding on a 1:1 basis to the Endeavor Operating Company Units or Endeavor Manager Common Units they receive. Additionally, certain of the Other UFC Holders that receive Endeavor Operating Company Units will also receive paired shares of our Class Y common stock corresponding on a 1:1 basis to the Endeavor Operating Company Units they receive. Furthermore certain of the Other UFC Holders or their affiliates will each merge with and into Endeavor Group Holdings in a series of mergers, whereby we will acquire the existing interests in Endeavor Operating Company held by them. As consideration for the mergers, we will issue to certain affiliates of such Other UFC Holders, including certain affiliates of Silver Lake, shares of Class A common stock and Class Y common stock and rights to receive payments under the tax receivable agreement described herein. Based on the initial public offering price of $24.00 per share, we anticipate issuing after the consummation of such transactions (after giving effect to the use of proceeds from this offering and the concurrent private placements to purchase from certain Other UFC Holders Endeavor Operating Company Units and Class A common stock and the sale of Class A common stock by affiliates of KKR in the concurrent private placements as further described below) 42,400,877 shares of Class A common stock, 58,753,559 Endeavor Operating Company Units, 9,156,546 Endeavor Manager Units, 67,910,105 shares of Class X common stock and 70,946,278 shares of Class Y common stock to the Other UFC Holders in the aggregate.



 

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The Endeavor Operating Company Units that will be held by the Other UFC Holders will be subject to the same general rights and obligations as all other holders of the Endeavor Operating Company Units after this offering, including with respect to transfer restrictions and redemption rights, as more fully described under “Certain Relationships and Related Party Transactions—Limited Liability Company Agreement of Endeavor Operating Company.” Additionally, certain of such holders will be entitled to customary registration rights, as described under the heading “Certain Relationships and Related Party Transactions—Registration Rights Agreement,” and will be a party to the tax receivable agreement, as described under “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

Moreover, in accordance with the Transaction Agreement, we have agreed to use $835.7 million of the net proceeds from this offering and the concurrent private placements to purchase Endeavor Operating Company Units (or interests in UFC Parent) or Class A common stock directly from certain of the Other UFC Holders (or their affiliates) at a price per unit (with respect to Endeavor Operating Company Units) or a price per share (with respect to Class A common stock) equal to the initial public offering price per share of Class A common stock sold in this offering. Additionally, affiliates of KKR, who are Other UFC Holders, will sell 18,206,250 shares of Class A common stock for aggregate proceeds of $437.0 million in the concurrent private placements to the private placement investors at a price per share equal to $24.00. Certain of the Other UFC Holders (or their affiliates) will also receive rights to receive payments under the tax receivable agreement described herein.

The UFC Buyout will be conditioned upon the substantially concurrent closing of (i) this offering and (ii) the concurrent private placements, with aggregate minimum net cash proceeds (including, with respect to the concurrent private placements, funds used to purchase shares of Class A common stock from the persons referenced in the immediately preceding paragraph ) of at least $1,750 million. We estimate that our net proceeds from this offering and the concurrent private placements will be approximately $1,787.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us based on the initial offering price of $24.00 per share. The UFC Buyout will also be subject to certain other customary closing conditions, including certain regulatory approvals, as more fully described in the Transaction Agreement filed as an exhibit to the registration statement of which this prospectus forms a part.

The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Transaction Agreement filed as an exhibit to the registration statement of which this prospectus forms a part. The representations, warranties and covenants contained in the Transaction Agreement are made only for the purposes of the Transaction Agreement and are made as of specific dates and are solely for the benefit of the parties to the Transaction Agreement.

The Reorganization Transactions

“Up-C” Structure

This offering is being conducted through what is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they decide to undertake an initial public offering. The Up-C structure can provide tax benefits and associated cash flow advantages to both the issuer corporation and the existing owners of the partnership or limited liability company in the initial public offering.

We currently conduct our business through Endeavor Operating Company and its subsidiaries. Prior to the closing of this offering, we intend to complete an internal reorganization through a series of transactions, which we refer to as the “reorganization transactions.” After the completion of this offering, Endeavor Group Holdings will manage and operate the business and control the strategic decisions and day-to-day operations of Endeavor Operating Company through Endeavor Manager and include the operations of Endeavor Operating Company in our consolidated financial statements.



 

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Capital and Voting Structure

In connection with the reorganization transactions:

 

  

we will amend and restate our certificate of incorporation and will be authorized to issue five classes of common stock, which we refer to collectively as our “common stock” and which are summarized in the following table:

 

Class of Common Stock

  Votes  Economic
Rights

Class A common stock

  1  Yes

Class B common stock

  None  Yes

Class C common stock

  None  Yes

Class X common stock

  1  None

Class Y common stock

  20  None

Voting shares of our common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders. We will issue shares of our Class A common stock to the investors in this offering and the investors in the concurrent private placements. No shares of our Class B common stock and Class C common stock will be outstanding upon the closing of this offering. We do not intend to list our Class B common stock, Class C common stock, Class X common stock or Class Y common stock on any stock exchange;

 

  

Endeavor Manager, a newly formed subsidiary of Endeavor Group Holdings, will become the sole managing member of Endeavor Operating Company, and Endeavor Group Holdings will become the sole managing member of Endeavor Manager;

 

  

Endeavor Manager will issue to the equityholders of certain management holding companies common interest units in Endeavor Manager, which we refer to as “Endeavor Manager Units,” along with paired shares of our Class X common stock, as consideration for the acquisition of Endeavor Operating Company Units held by such management holding companies;

 

  

we will (i) issue to affiliates of certain of our pre-IPO investors, including certain affiliates of Silver Lake, shares of our Class Y common stock, Class A common stock, and rights to receive payments under the tax receivable agreement described below and (ii) issue to affiliates of certain other of our pre-IPO investors shares of our Class A common stock, in each case as consideration for the acquisition of Endeavor Operating Company Units held by such pre-IPO investors;

 

  

all of the existing equity interests in Endeavor Operating Company (other than certain profits units, which will remain outstanding after this offering) will be reclassified into Endeavor Operating Company’s non-voting common interest units, which we refer to as “Endeavor Operating Company Units;”

 

  

we will issue to the holders of Endeavor Operating Company Units (other than Endeavor Manager) paired shares of our Class X common stock and, in certain instances, Class Y common stock, in each case equal to the number of Endeavor Operating Company Units held by each of them upon completion of this offering and in exchange for the payment by such holders of the aggregate par value of the Class X common stock and Class Y common stock that is received;

 

  

Endeavor Profits Units (other than Endeavor Catch-Up Profits Units) that will remain outstanding following this offering will be economically similar to stock options. Each such Endeavor Profits Unit has a per unit hurdle price, which is economically similar to the exercise price of a stock option;

 

  

Endeavor Full Catch-Up Profits Units that will remain outstanding following this offering will have a per unit hurdle price and will be entitled to receive a preference on distributions once the hurdle price applicable to such unit has been met. Upon our achievement of a price per share that would have fully



 

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satisfied such preference on distributions, the Endeavor Full Catch-Up Profits Units will be converted into Endeavor Operating Company Units; and

 

  

Endeavor Partial Catch-Up Profits Units that will remain outstanding following this offering will have a per unit hurdle price and are entitled to receive a preference on distributions once the hurdle price applicable to such unit has been met. Upon our achievement of a price per share that would have fully satisfied such preference on distributions, the Endeavor Partial Catch-Up Profits Units will be converted into Endeavor Profits Units (without any such preference) with a reduced per unit hurdle price to take into account such prior preference. Such per unit hurdle price is economically similar to the exercise price of a stock option.

Ownership of Economic Interests

Upon completion of the reorganization transactions, the concurrent private placements, the UFC Buyout and this offering, and based on the initial offering price of $24.00 per share, except as set forth in the footnotes below, the economic interests in Endeavor Group Holdings owned by investors in this offering and our pre-IPO equityholders will be as follows:

 

  Endeavor Group
Holdings
  Fully Converted  Fully Converted
Diluted
 
  Shares  %  Shares  %  Shares  % 
  (1)     (2)     (3)    

Shareholders of Endeavor Group Holdings

      

Investors in this offering

  21,300,000   8.4  21,300,000   5.0  21,300,000   5.0

Investors in the concurrent private placements (other than Silver Lake and related parties)

  69,820,745   27.5  69,820,745   16.4  69,820,745   16.2

Silver Lake and related parties

  91,978,947   36.2  91,978,947   21.7  91,978,947   21.4

Affiliates of our other pre-IPO investors

  70,650,579   27.8  70,650,579   16.6  70,650,579   16.4

Sub-Total

  253,750,271   100.0  253,750,271   59.8  253,750,271   59.0

Members of Endeavor Manager (other than Endeavor Group Holdings)

  —     0.0  30,132,501   7.1  30,132,501   7.0

Sub-Total

  —     0.0  30,132,501   7.1  30,132,501   7.0

Members of Endeavor Operating Company (other than Endeavor Manager)

      

Silver Lake and related parties

  —     0.0  82,138,074   19.3  82,138,074   19.1

Affiliates of our other pre-IPO investors

  —     0.0  26,051,913   6.1  26,051,913   6.1

Messrs. Emanuel and Whitesell and Executive Holdcos

  —     0.0  32,550,111   7.7  37,654,485   8.8

Sub-Total

  —     0.0  140,740,098   33.1  145,844,472   33.9
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  
253,750,271
 
  100.0  424,622,870   100.0  429,727,244   100.0
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

Reflects the number of shares of our Class A common stock then outstanding. If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares owned by investors in this offering, and in the table above, would be 24,495,000.

(2)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock.



 

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(3)

Reflects the number of shares of our Class A common stock (excluding approximately 9,094,852 restricted stock units and 3,233,644 options based on the initial public offering price of $24.00 per share that we intend to grant to certain directors, employees, and other service providers in connection with this offering) that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock , assuming that we achieved a price per share that would have fully satisfied all Endeavor Catch-Up Units’ preferences on distributions and all Endeavor Profits Units were thereafter exchanged into Endeavor Operating Company Units in respect of their in-the-money value at such initial offering price per unit hurdle price.

The economic rights in Endeavor Group Holdings owned by Messrs. Emanuel and Whitesell and Executive Holdcos as members of Endeavor Operating Company as reflected in the table above will vary depending on, among other things, the extent to which the Endeavor Profits Units are in the money. The following table summarizes the Endeavor Operating Company Units and Endeavor Profits Units owned by Messrs. Emanuel and Whitesell and Executive Holdcos and their applicable performance-based vesting conditions and hurdle prices:

 

       Endeavor Operating Company 
   Weighted Average
Per-Unit
   Basic   Fully Converted
Diluted
   Fully Converted
Diluted
 
   Hurdle Price   Units   Units   Units 
   (1)   (2)   (3)   (4) 

Endeavor Operating Company Units

   —      32,550,111    32,550,111    32,550,111 

Endeavor Full Catch-Up Profits Units

   —      —      3,809,522    3,809,522 

Endeavor Profits Units (other than the Endeavor Catch-Up Units)

  $17.68      878,493    3,337,048 

Endeavor Partial Catch-Up Profits Units

  $23.16    —      416,359    11,919,786 

Total

        

 

(1)

Reflects distribution thresholds, expressed as a per unit hurdle price on a weighted-average basis (similar to an exercise price for stock options). Subject to certain restrictions, Endeavor Profits Units will be exchangeable by their holders into a number of Endeavor Operating Company Units that will generally be equal to (a) the amount to which the holder of such Endeavor Profits Units would be entitled to receive if an amount equal to the fair market value of Endeavor Operating Company as of the date of the exchange were distributed to the members of Endeavor Operating Company in accordance with the terms of the Endeavor Operating Company Agreement, divided by (b) the per unit value of an Endeavor Operating Company Unit.

(2)

Reflects the number of Endeavor Operating Company Units then outstanding based on the initial offering price of $24.00 per share.

(3)

Reflects the number of Endeavor Operating Company Units that would be outstanding if all Endeavor Profits Units were exchanged into Endeavor Operating Company Units in respect of their in-the-money value, based on the initial offering price of $24.00 per share, and that all Endeavor Catch-Up Profits Units have been fully converted to Endeavor Operating Company Units or Endeavor Profits Units (without any preference), as applicable.

(4)

Reflects the number of Endeavor Operating Company Units that would be outstanding if all Endeavor Profits Units were exchanged into Endeavor Operating Company Units on a one-to-one basis (regardless of their in-the-money value).

Additionally, in accordance with certain agreements with non-affiliate holders of Endeavor Operating Company Units, we will be required to make certain cash payments or issue additional shares of Class A common stock, at our option, to such holders (the “Minimum Cash Returns”). Based on the initial public offering price per share of Class A common stock sold in this offering of $24.00 per share, we will be required to make cash payments or issue shares of Class A common stock at the initial public offering price, at our option, in an aggregate amount of $0.8 million to such holders.



 

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Ownership of Voting Rights.

Upon completion of the reorganization transactions, the concurrent private placements, the UFC Buyout and this offering, and based on the initial offering price of $24.00 per share, the combined voting power in Endeavor Group Holdings will be as follows:

 

   If the underwriters do not exercise
their option to purchase additional
shares of Class  A common stock
  If the underwriters exercise in full
their option to purchase additional
shares of Class  A common stock
 
   Votes  Votes 
   Total   %  Total   % 

Investors in this offering

   21,300,000    0.4  24,495,000    0.5

Investors in the concurrent private placements (other than Silver Lake and related parties)

   69,820,745    1.3  69,820,745    1.3

Silver Lake and related parties

   3,562,010,741    68.4  3,562,010,741    68.4

Affiliates of our other pre-IPO investors

   439,615,492    8.4  439,615,492    8.4

Members of Endeavor Manager (other than Endeavor Group Holdings)

   30,132,501    0.6  30,132,501    0.6

Messrs. Emanuel and Whitesell, Executive Holdcos

   1,083,945,802    20.8  1,083,945,802    20.8
  

 

 

   

 

 

  

 

 

   

 

 

 

Total

   5,206,825,281    100  5,210,020,281    100.0
  

 

 

   

 

 

  

 

 

   

 

 

 

Upon completion of the reorganization transactions, the concurrent private placements, the UFC Buyout and this offering, and based on the initial offering price of $24.00 per share, the voting rights in Endeavor Group Holdings will be owned as follows:

 

  Shares  Votes 
  Class A  Class X  Class Y  Total  % 
  (1)  (2)  (3)       

Shareholders of Endeavor Group Holdings

     

Investors in this offering

  21,300,000   —     —     21,300,000   0.4

Investors in the concurrent private placements (other than Silver Lake and related parties)

  69,820,745   —     —     69,820,745   1.3

Silver Lake and related parties

  91,978,947   —     87,256,612   1,837,111,187   35.3

Affiliates of our other pre-IPO investors

  70,650,579   —     11,482,062   300,291,819   5.8

Sub-Total

  253,750,271   —     98,738,674   2,228,523,751   42.8

Members of Endeavor Manager (other than Endeavor Group Holdings)

  —     30,132,501   —     30,132,501   0.6

Sub-Total

  —     30,132,501   —     30,132,501   0.6

Members of Endeavor Operating Company (other than Endeavor Manager)

     

Silver Lake and related parties

  —     82,138,074   82,138,074   1,724,899,554   33.1

Affiliates of our other pre-IPO investors

  —     26,051,913   5,663,588   139,323,673   2.7

Messrs. Emanuel and Whitesell and Executive Holdcos

  —     51,616,467   51,616,467   1,083,945,802   20.8

Sub-Total

  —     159,806,454   139,418,129   2,948,169,029   56.6
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  253,750,271   189,938,955   238,156,803   5,206,825,281   100.0
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares of Class A common stock owned by investors in this offering, and in the table above, would be 24,495,000.



 

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(2)

Members of Endeavor Manager (other than Endeavor Group Holdings) will receive one share of our Class X common stock for each Endeavor Manager Unit owned by them. Members of Endeavor Operating Company (other than Endeavor Manager) will receive one share of our Class X common stock for each Endeavor Operating Company Unit and Endeavor Profits Unit owned by them, as applicable.

(3)

Silver Lake and related parties, affiliates of certain of our other pre-IPO investors, Messrs. Emanuel and Whitesell, and Executive Holdcos will receive one share of our Class Y common stock for each share of Class A common stock, Endeavor Operating Company Unit, and Endeavor Profits Unit owned by them, as applicable.

At such time that Endeavor Profits Units are exchanged into a number of Endeavor Operating Company Units, the holders exchanging such Endeavor Profits Units will receive a number of shares of our Class X common stock and shares of our Class Y common stock such that they will hold one share of our Class X common stock and one share of Class Y common stock for each Endeavor Operating Company Unit into which such Endeavor Profits so exchanged.



 

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The following diagram depicts our organizational structure following the reorganization transactions, the concurrent private placements, the UFC Buyout, this offering and the application of the net proceeds from this offering and the concurrent private placements (at the initial public offering price of $24.00 per share). For purposes of depicting ownership of voting power in Endeavor Group Holdings, the below diagram takes into account shares of Class X common stock and Class Y common stock held by investors in this offering and our pre-IPO equityholders (including holders of all Endeavor Manager Units and Endeavor Operating Company Units). For purposes of depicting ownership of economic interests in Endeavor Group Holdings, the below diagram does not take into account (a) any performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such initial offering price, and (b) any Endeavor Profits Units. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our organization:

 

 

LOGO

 

(1)

Other pre-IPO investors include Jasmine Ventures Pte Ltd. and Canada Pension Plan Investment.

(2)

Endeavor Manager members include current senior officers, employees, former employees and other service providers of Endeavor Operating Company.

Endeavor Group Holdings is a holding company and, immediately after the consummation of the reorganization transactions and this offering, our principal asset will be our indirect ownership interests in Endeavor Operating Company. The total number of Endeavor Operating Company Units and Endeavor Profits Units indirectly owned by us, the other members of Endeavor Manager and the members of Endeavor Operating Company (other than Endeavor Manager) at any given time will equal the sum of the outstanding shares of our

 

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Class A common stock, Class B common stock, Class C common stock and our Class X common stock. For additional information regarding our stockholders and the holders of Endeavor Operating Company Units, Endeavor Profits Units and Endeavor Manager Units, see “Organizational Structure” and “Principal Stockholders.”

Exchange Mechanics

Following this offering, the members of Endeavor Operating Company (other than Endeavor Manager) will have the right from time to time to cause Endeavor Operating Company to redeem any or all of their Endeavor Operating Company Units (and paired shares of Class X common stock) in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings. Upon the disposition of the Class A common stock received by members of Endeavor Operating Company from the exchange of their Endeavor Operating Company Units (and corresponding cancelation of paired shares of Class X common stock), or a Triggering Event (as defined below), any shares of Class Y common stock that are paired with such Class A common stock as a result of the redemption or exchange will be cancelled/redeemed for no consideration.

Following this offering, the members of Endeavor Manager (other than Endeavor Group Holdings) will have the right from time to time, subject to certain restrictions, to cause Endeavor Manager to redeem any or all of their vested Endeavor Manager Units (and paired shares of Class X common stock) in exchange for, at our election, either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings.

Proceeds

We estimate that our net proceeds from this offering and the concurrent private placements will be approximately $1,787.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, based on the initial offering price of $24.00 per share and assuming the underwriters’ option to purchase additional shares is not exercised. If the underwriters exercise their option to purchase additional shares in full, we expect to receive approximately $1,863.8 million of net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, based on the initial offering price of $24.00 per share. We intend to (1) use $835.7 million of the net proceeds from this offering and the concurrent private placements to purchase Endeavor Operating Company Units (or interests in UFC Parent) directly from certain of the Other UFC Holders (or their affiliates) and holders of UFC Profit Units at a price per unit (with respect to Endeavor Operating Company Units) equal to the initial public offering price per share of Class A common stock sold in this offering and (2) contribute $951.5 million of the net proceeds from this offering and the concurrent private placements to Endeavor Manager (or $1,028.1 million if the underwriters exercise their option to purchase additional shares in full) in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering (provided that we may reduce such contribution amount, without reducing the number of Endeavor Manager Units we receive, by the amount of any expenses we pay in connection with this offering, the concurrent private placements and the UFC Buyout (which we estimate will be approximately $76.1 million) that are not otherwise paid or for which we are not otherwise reimbursed by Endeavor Operating Company). Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units.



 

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Tax Receivable Agreement

In connection with the transactions described herein, we will acquire existing equity interests in Endeavor Operating Company held by certain of our pre-IPO investors in exchange for the issuance of shares of our Class A common stock, Class Y common stock and rights to receive payments under a tax receivable agreement and will acquire certain existing interests in Endeavor Operating Company (or of UFC Parent) from certain of the Other UFC Holders (or their affiliates) in exchange for cash and rights to receive payments under the tax receivable agreement. As a result of these acquisitions, we will succeed to certain tax attributes of certain of our pre-IPO investors and will receive the benefit of tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries. In addition, redemptions or exchanges of Endeavor Operating Company Units in exchange for shares of our Class A common stock or cash are expected to produce favorable tax attributes that would not be available to us in the absence of such redemptions or exchanges. We intend to enter into a tax receivable agreement with certain of our pre-IPO investors and certain affiliates of our pre-IPO investors, including certain affiliates of Silver Lake and certain management holding vehicles (or their members), and certain of the Other UFC Holders, whom we refer to collectively as the “Post-IPO TRA Holders,” that will provide for the payment by us to the Post-IPO TRA Holders (or their transferees of Endeavor Operating Company Units or other assignees) of 85% of the amount of cash 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 certain tax attributes and tax attributes resulting from payments made under the tax receivable agreement. See “Organizational Structure—Tax Receivable Agreement” and “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

Our Principal Equityholders

Following the completion of the reorganization transactions, the concurrent private placements, the UFC Buyout, and this offering, Messrs. Emanuel and Whitesell and entities controlled by Messrs. Emanuel and Whitesell, together with certain affiliates of Silver Lake that will be our stockholders upon the completion of this offering (the “Silver Lake Equityholders”), as a group, will control approximately 89.2% of the combined voting power of our outstanding common stock (or 89.2% if the underwriters exercise their option to purchase additional shares in full) based on the initial public offering price of $24.00 per share. As a result, Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and by-laws and the approval of any merger or sale of substantially all of our assets. Because Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will collectively control, as a group, more than 50% of the combined voting power of our outstanding common stock, we will be a “controlled company” under the corporate governance rules for Exchange-listed companies. Therefore we will be permitted to, and we intend to, elect not to comply with certain corporate governance requirements of the Exchange. See “Management—Controlled Company,” “Principal Stockholders” and “Certain Relationships and Related Party Transactions—Stockholders Agreement” for additional information.

Mr. Emanuel has successfully served as our Co-Chief Executive Officer from 2009 to 2017 and as our Chief Executive Officer since 2017, and Mr. Whitesell has successfully served as our Co-Chief Executive Officer from 2009 to 2017 and as our Executive Chairman since 2017. Combined, Messrs. Emanuel and Whitesell have nearly 60 years of experience in the entertainment industry. Each Executive Holdco is managed by an executive committee composed of Messrs. Emanuel and Whitesell.

Silver Lake is a global technology investment firm, with more than $79 billion in combined assets

under management and committed capital, and a team of investment and operating professionals based in North America, Europe and Asia.



 

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Corporate Information

We were formed as a Delaware corporation in January 2019. We have no material assets and have not engaged in any business or other activities except in connection with the reorganization transactions and this offering. Our corporate headquarters are located at 9601 Wilshire Boulevard, 3rd Floor, Beverly Hills, CA 90210, and our telephone number is (310) 285-9000. Our website address is www.endeavorco.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus.



 

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THE OFFERING

 

Class A common stock offered by us

21,300,000 shares.

 

Option to purchase additional shares

We have granted the underwriters the right to purchase an additional 3,195,000 shares of Class A common stock from us within 30 days from the date of this prospectus.

 

Class A common stock sold in the concurrent private placements

Immediately subsequent to the closing of this offering, and subject to certain conditions to closing as described in the section titled “Concurrent Private Placements,” the private placement investors will purchase in the aggregate of 74,543,080 shares of our common stock, which, will be 56,336,830 shares of our Class A common stock from us and 18,206,250 shares of Class A common stock from affiliates of KKR, in each case, in a private placement at a price per share equal to $24.00. Additionally, the Company has the option to designate certain of the Private Placement Investors to purchase Class A common stock directly from certain of its investors at a price per share of $24.00, with the number of shares being purchased from such existing investors reducing the number of shares of Class A common stock purchased from the Company in the concurrent private placements.

 

 The aggregate proceeds from this concurrent private placement will be $1,789.0 million, which includes proceeds of $1,352.1 million to us and proceeds of $437.0 million to affiliates of KKR. Additionally, we have the option to designate certain of the Private Placement Investors to purchase Class A common stock directly from certain of our existing investors that sign a joinder to the Subscription Agreement at a price per share of $24.00, with the number of shares being purchased from such investors reducing the number of shares of Class A common stock purchased from us in the concurrent private placements. We will not receive any proceeds with respect to the shares that will be sold by certain of our investors. Our agreement with the private placement investors will also require us to, within 60 days following the closing of this offering, register their shares of Class A common stock on a Form S-1 registration statement. We intend to file such registration statement on or around June 30, 2021. The sale of the shares in the private placements are contingent upon the completion of this offering.

 

Class A common stock to be outstanding immediately after this offering and the concurrent private placements

253,750,271 shares (or 256,945,271 shares if the underwriters exercise their option to purchase additional shares in full).

 

 If, immediately after this offering, the concurrent private placements and the application of the net proceeds from this offering and the concurrent private placements, all of the members of Endeavor


 

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 Operating Company and Endeavor Manager were to elect to have their Endeavor Operating Company Units or Endeavor Manager Units, as applicable, and corresponding shares of Class X common stock, redeemed and we elected to redeem such units in exchange for shares of our Class A common stock 424,622,870 shares of our Class A common stock would be outstanding (34.9% of which would be owned by non-affiliates of the Company) (427,817,870 shares (34.5% of which would be owned by non-affiliates of the Company) if the underwriters exercise their option to purchase additional shares in full).

 

Class B common stock to be outstanding immediately after this offering and the concurrent private placements

None. Shares of our Class B common stock have economic but no voting rights (except as required by applicable law). Shares of our Class B common stock are automatically convertible into shares of our Class A common stock immediately after the resale of such shares to an unaffiliated third party.

 

Class C common stock to be outstanding immediately after this offering and the concurrent private placements

None. Shares of our Class C common stock have economic but no voting rights (except as required by applicable law).

 

Class X common stock to be outstanding immediately after this offering and the concurrent private placements

189,938,955 shares. Shares of our Class X common stock have voting but no economic rights (including rights to dividends and distributions upon liquidation) and will be issued in the reorganization transactions and the UFC Buyout to the members of Endeavor Manager (other than Endeavor Group Holdings) in an amount equal to the number of Endeavor Manager Units held by such persons and to other members of Endeavor Operating Company in an amount equal to the number of Endeavor Operating Company Units and Endeavor Operating Company Profits Units held by such persons. When a member of Endeavor Manager exercises its right from time to time to cause Endeavor Manager to redeem any or all of its Endeavor Manager Units as described elsewhere in this prospectus, a corresponding number of shares of our Class X common stock held by such member will be simultaneously cancelled. When a holder of Endeavor Operating Company Units exercises its right from time to time to cause Endeavor Operating Company to redeem any or all of its Endeavor Operating Company Units as described elsewhere in this prospectus, a corresponding number of shares of our Class X common stock held by such member will be simultaneously canceled.

 

Class Y common stock to be outstanding immediately after this offering and the concurrent private placements

238,156,803 shares. Shares of our Class Y common stock have voting but not economic rights (including rights to dividends and



 

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distributions upon liquidation). We will issue shares of our Class Y common stock to affiliates of certain of our pre-IPO investors, including certain affiliates of Silver Lake, in consideration for Endeavor Operating Company Units acquired by Endeavor Group Holdings from such pre-IPO investors in the reorganization transactions and the UFC Buyout. We will also issue paired shares of our Class Y common stock to certain other holders of Endeavor Operating Company Units and Endeavor Operating Company Profits Units (other than Endeavor Manager), equal to the number of Endeavor Operating Company Units and Endeavor Operating Company Profits Units held. See “Organizational Structure.”

 

Voting rights

Each share of our Class A common stock entitles its holder to one vote per share, representing an aggregate of 4.9% of the combined voting power of our outstanding common stock upon the completion of this offering, the concurrent private placements and the UFC Buyout and the application of the net proceeds from this offering and the concurrent private placements (or 4.9% if the underwriters exercise their option to purchase additional shares in full).

 

 Shares of our Class B and Class C common stock do not entitle holders to any voting rights (except as required by applicable law).

 

 Each share of our Class X common stock entitles its holder to one vote per share, representing an aggregate of 3.6% of the combined voting power of our outstanding common stock upon the completion of this offering, the concurrent private placements and the UFC Buyout and the application of the net proceeds from this offering and the concurrent private placements (or 3.6% if the underwriters exercise their option to purchase additional shares in full).

 

 Each share of our Class Y common stock entitles its holder to 20 votes per share, representing an aggregate of 91.5% of the combined voting power of our outstanding common stock upon the completion of this offering, the concurrent private placements and the UFC Buyout and the application of the net proceeds from this offering and the concurrent private placements (or 91.5% if the underwriters exercise their option to purchase additional shares in full).

 

 All classes of our common stock with voting rights generally vote together as a single class on all matters submitted to a vote of our stockholders. See “Description of Capital Stock.”

 

Redemption rights

The members of Endeavor Operating Company (other than Endeavor Manager) will have the right from time to time to cause Endeavor Operating Company to redeem any or all of their Endeavor Operating Company Units, (and paired shares of Class X common stock), in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common



 

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stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings. Upon the disposition of the Class A common stock received by members of Endeavor Operating Company from the exchange of their Endeavor Operating Company Units (and paired shares of Class X common stock), or a Triggering Event, any paired shares of Class Y common stock will be cancelled/redeemed for no consideration.

 

 The holders of Endeavor Profits Units will have the right from time to time, subject to certain restrictions, to cause Endeavor Operating Company to exchange their vested Endeavor Profits Units into (1) a number of Endeavor Operating Company Units that will generally be equal to (a) the amount to which the holder of such Endeavor Profits Units would be entitled to receive if an amount equal to the fair market value of Endeavor Operating Company as of the date of such exchange were distributed in cash to the members of Endeavor Operating Company in accordance with the terms of the Endeavor Operating Company Agreement divided by (b) the per unit value of an Endeavor Operating Company Unit at the time of the exchange and (2) a corresponding number of shares of our Class X common stock and Class Y common stock.

 

 The members of Endeavor Manager (other than Endeavor Group Holdings) will have the right from time to time, subject to certain restrictions, to cause Endeavor Manager to redeem any or all of their vested Endeavor Manager Units (and paired shares of our Class X common stock), in exchange for, at our election, either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings.

 

 

Each share of our Class Y common stock will automatically be canceled/redeemed (a) upon any sale or other transfer of (i) the paired Endeavor Operating Company Unit (or the paired Class A common stock in the case that the Endeavor Operating Company Unit and paired share of Class X common stock is redeemed and converted) in the case of affiliates of certain of our pre-IPO investors, including certain affiliates of Silver Lake, and other holders of Endeavor Operating Company Units (other than Endeavor Manager), and (ii) those paired shares of Class A common stock, in the case of affiliates of certain other pre-IPO investors, in each case subject to certain limited exceptions, such as transfers to certain permitted transferees, or (b) upon the earlier of (i) the date on which neither Messrs. Emanuel nor Whitesell is employed as our Chief Executive Officer or Executive Chairman and (ii) the date on which neither Messrs. Emanuel nor Whitesell own shares of our Class A common stock representing, and/or own securities that if redeemed for shares of our Class A common stock would represent an ownership interest



 

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in our Class A common stock representing, at least 25% of the shares of our Class A common stock owned by Messrs. Emanuel and Whitesell (or that would be owned by Messrs. Emanuel and Whitesell if all relevant securities they own were redeemed for shares of our Class A common stock), respectively, as of the completion of this offering (together with (i), a “Triggering Event”). See “Organizational Structure,” “Description of Capital Stock” and “Principal Stockholders.”

 

Use of proceeds

We estimate that our net proceeds from this offering and the concurrent private placements will be approximately $1,787.2 million (or approximately $1,863.8 million if the underwriters exercise their option to purchase additional shares in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by us, based on the initial offering price of $24.00 per share. We intend to (1) use $835.7 million of the net proceeds from this offering and the concurrent private placements to purchase Endeavor Operating Company Units (or interests in UFC Parent) directly from certain of the Other UFC Holders (or their affiliates) at a price per unit (with respect to Endeavor Operating Company Units) equal to the initial public offering price per share of Class A common stock sold in this offering and (2) contribute $951.5 million of the net proceeds from this offering and the concurrent private placements to Endeavor Manager (or $1,028.1 million if the underwriters exercise their option to purchase additional shares in full) in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering (provided that we may reduce such contribution amount, without reducing the number of Endeavor Manager Units we receive, by the amount of any expenses we pay in connection with this offering, the concurrent private placements and the UFC Buyout (which we estimate will be approximately $76.1 million) that are not otherwise paid or for which we are not otherwise reimbursed by Endeavor Operating Company). Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units. We intend to cause Endeavor Operating Company to use the net proceeds we contribute to it from this offering and the concurrent private placements for working capital and general corporate purposes. We may also use a portion of the net proceeds from this offering and the concurrent private placements to fund our current or future joint ventures, investments or acquisitions of complementary businesses or other assets, including the Reigning Champs Acquisition.

 

Dividend policy

We do not expect to pay any dividends or other distributions on our Class A common stock in the foreseeable future. We currently intend to retain future earnings. See “Dividend Policy.”


 

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Proposed Exchange symbol

“EDR”

 

Risk factors

You should read the “Risk Factors” section of this prospectus for a discussion of factors that you should consider carefully before deciding to invest in shares of our Class A common stock.

Unless we indicate otherwise or the context otherwise requires, the information in this prospectus:

 

  

gives effect to the reorganization transactions and the reclassification of existing ownership interests in Endeavor Operating Company into Endeavor Operating Company Units;

 

  

gives effect to the UFC Buyout;

 

  

gives effect to the issuance of an aggregate of 56,336,830 shares of our Class A common stock and the sale of 18,206,250 shares of Class A common stock from affiliates of KKR, in each case, to the private placement investors in each case, upon the closing of the concurrent private placements;

 

  

the initial public offering price of $24.00 per share;

 

  

assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock from us;

 

  

excludes shares issuable pursuant to stock options, restricted stock units, or other equity-based awards with respect to an aggregate amount of 21,700,000 shares of Class A common stock, that are initially reserved for issuance under the Endeavor Group Holdings, Inc. 2021 Incentive Award Plan (the “2021 Incentive Award Plan”) following the completion of this offering including shares issuable pursuant to stock options and restricted stock units with respect to an aggregate amount of 12,328,496 shares to be granted in connection with this offering (the “IPO Awards”). See “Executive Compensation—2021 Incentive Award Plan;”

 

  

excludes shares issuable pursuant to restricted stock units pursuant to potential future equity-based awards to Mr. Emanuel and Mr. Whitesell, as further described under “Executive Compensation - New Equity Awards;”

 

  

excludes 30,132,501 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Manager Units (together with corresponding shares of our Class X common stock);

 

  

excludes 140,740,098 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units (together with corresponding shares of our Class X common stock);

 

  

excludes 3,809,522 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units (and paired shares of Class X common stock) issuable upon the exercise of the exchange rights of the holders of Endeavor Profits Units that will remain outstanding with a weighted-average per unit hurdle price of $23.16;

 

  

excludes 3,337,048 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units (and paired shares of Class X common stock) issuable upon the exercise of the exchange rights of the holders of Endeavor Full Catch-Up Profits Units that will remain outstanding;

 

  

excludes 11,919,786 shares of Class A common stock reserved for issuance upon the exchange of Endeavor Operating Company Units (and paired shares of Class X common stock) issuable upon the exercise of the exchange rights of the holders of Endeavor Partial Catch-Up Profits Units that will remain outstanding with a weighted-average per unit hurdle price of $23.16;



 

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excludes Endeavor Phantom Units, which, at the time of this offering, and subject to certain conditions and limitations, would entitle their holders to cash equal to the value of (a) 659,131 Endeavor Operating Company Units, the initial offering price of $24.00 per share, and excluding 354,902 Endeavor Phantom Units that track the value of Endeavor Profits Units, or (b) 1,014,033 Endeavor Operating Company Units, if all performance-based vesting conditions of Endeavor Phantom Units with such conditions were satisfied and all Endeavor Phantom Units that track the value of Endeavor Profits Units instead tracked the value of Endeavor Operating Company Units on a one-to-one basis (regardless of such Endeavor Profits Units’ in-the-money value). The Company has historically settled Endeavor Phantom Units in cash, but may in its discretion settle these in Endeavor Manager Units, Endeavor Operating Company Units, Endeavor Profits Units or shares of our Class A common stock.



 

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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth our summary historical consolidated financial and other data for the periods presented. We were formed as a Delaware corporation in January 2019 and have not, to date, conducted any activities other than those incidental to our formation and the preparation of this prospectus and the registration statement of which this prospectus forms a part.

The consolidated statements of operations data for the years ended December 31, 2018, 2019 and 2020 and the consolidated balance sheet data as of December 31, 2019 and 2020 have been derived from Endeavor Operating Company’s audited consolidated financial statements included elsewhere in this prospectus.

The unaudited pro forma consolidated statements of operations for the year ended December 31, 2020 give effect to (i) the reorganization transactions described under “Organizational Structure,” (ii) the creation or acquisition of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iii) the adoption of the 2021 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, (iv) the concurrent private placements and the application of the net proceeds from the concurrent private placements as described under “Use of Proceeds,” (v) the UFC Buyout and the fees and expenses related thereto, and (vi) this offering and the application of the net proceeds as described under “Use of Proceeds,” as if each had occurred on January 1, 2020. The unaudited pro forma consolidated balance sheet as of December 31, 2020 gives effect to (i) the reorganization transactions described under “Organizational Structure,” (ii) the acquisition or creation of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iii) the adoption of the 2021 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, (iv) the concurrent private placements and the application of the net proceeds from the concurrent private placements as described under “Use of Proceeds,” (v) the UFC Buyout and the fees and expenses related thereto, and (vi) this offering and the application of the net proceeds from this offering as described under “Use of Proceeds,” as if each had occurred on December 31, 2020.

The summary historical and unaudited pro forma consolidated financial and other data presented below do not purport to be indicative of the results that can be expected for any future period and should be read together with “Capitalization,” “Unaudited Pro Forma Financial Information,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our respective consolidated financial statements and related notes thereto included elsewhere in this prospectus.



 

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Consolidated Statements of Operations Data:

 

   Years Ended
December 31,
  Pro Forma
Year Ended
December 31,
 
   2018  2019  2020  2020 
(In thousands, except per share data)             

Revenue

  $3,613,478  $4,570,970  $3,478,743  $3,478,743 

Total operating expenses

   3,720,897   4,360,434   3,631,961   4,007,152 
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating (loss) income from continuing operations

   (107,419  210,536   (153,218  (528,409

Interest expense, net

   (277,200  (270,944  (284,586  (284,586

Loss from continuing operations, net of tax

   (463,694  (525,661  (625,318  (991,595

Income (loss) from discontinued operations, net of tax (including gain on sale in 2018)

   694,998   (5,000  —     —   

Net (loss) income

   231,304   (530,661  (625,318  (991,595

Net (loss) income attributable to non-controlling interests

   (85,241  23,158   29,616  
  

 

 

  

 

 

  

 

 

  

Net income (loss) attributable to Endeavor Operating Company, LLC

  $316,545  $(553,819 $(654,934 
  

 

 

  

 

 

  

 

 

  

Loss attributable to non-controlling interests

      (348,061
     

 

 

 

Loss attributable to Endeavor Group Holdings, Inc.

     $(643,534
     

 

 

 

Pro forma loss per share data:

     

Basic and diluted loss per share of Class A common stockholders:

     

Basic

     $(2.54

Diluted

     $(2.54

Weighted average number of shares used in computing loss per share

     

Basic

      253,750,271 

Diluted

      253,750,271 

Selected Other Data:

     

Adjusted EBITDA(2)

  $551,086  $733,503  $572,547  

Net income (loss) margin

   6.4  (11.6)%   (18.0)%  

Adjusted EBITDA margin(2)

   15.3  16.0  16.5 

Adjusted Net Income(2)

  $100,117  $240,868  $84,811  


 

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Consolidated Balance Sheet Data:

 

   As of
December 31,
   Pro Forma
As of
December 31,
 
(In thousands)  2019   2020   2020 (1) 

Cash and cash equivalents

  $705,348   $1,008,485   $1,960,353 

Total assets

   9,292,299    9,633,634    10,582,727 

Long-term debt, including current portion

   5,045,273    5,925,805    5,925,805 

Total liabilities

   7,424,214    8,478,885    8,554,340 

Redeemable non-controlling interests

   136,809    168,254    176,823 

Redeemable equity

   43,693    22,519    —   

Members’ equity/shareholders’ equity

   913,274    277,847    898,947 

Nonredeemable non-controlling interests

   774,309    686,129    952,617 

Total members’/shareholders’ equity

   1,687,583    963,976    1,851,564 

 

(1)

Excludes any potential cash payments or issuances of Class A common stock pursuant to the Minimum Cash Returns.

 

(2)

Adjusted EBITDA is a non-GAAP financial measure and is defined as net income (loss), excluding the results of discontinued operations, income taxes, net interest expense, depreciation and amortization, equity-based compensation, merger, acquisition and earn-out costs, certain legal costs, restructuring, severance and impairment charges, certain non-cash fair value adjustments, certain equity earnings, COVID-19 related expenses and certain other items when applicable. Adjusted EBITDA margin is a non-GAAP financial measure and is defined as Adjusted EBITDA divided by revenue.

Management believes that Adjusted EBITDA is useful to investors as it eliminates the significant level of non-cash depreciation and amortization expense that results from our capital investments and intangible assets recognized in business combinations, and improves comparability by eliminating the significant level of interest expense associated with our debt facilities, as well as income taxes, which may not be comparable with other companies based on our tax structure.

Adjusted EBITDA and Adjusted EBITDA margin are used as the primary bases to evaluate our consolidated operating performance.

Adjusted Net Income is a non-GAAP financial measure and is defined as net income (loss) attributable to Endeavor Operating Company, adjusted to exclude the results of discontinued operations and our share (excluding those relating to non-controlling interests) of the adjustments used to calculate Adjusted EBITDA, other than income taxes, net interest expense and depreciation, on an after-tax basis, the release of tax valuation allowances and other tax items.

Adjusted Net Income adjusts income or loss from continuing operations attributable to the Company for items not considered reflective of our operating performance. Management believes that such non-GAAP information is useful to investors and analysts as it provides a better understanding of the performance of our continuing operations for the periods presented and, accordingly, facilitates the development of future projections and earnings growth prospects.

Other companies may define Adjusted EBITDA, Adjusted EBITDA margin, or Adjusted Net Income differently, and as a result our measures of Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net Income may not be directly comparable to those of other companies. Although we use Adjusted EBITDA and Adjusted EBITDA margin as financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business. Adjusted



 

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EBITDA, Adjusted EBITDA margin, and Adjusted Net Income should be considered in addition to, and not as a substitute for, net income (loss) in accordance with GAAP as a measure of performance. Our presentation of Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net Income should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items. 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:

 

  

they do not reflect every cash expenditure, future requirements for capital expenditures, or contractual commitments;

 

  

Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;

 

  

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net Income do not reflect any cash requirement for such replacements or improvements; and

 

  

they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.

 

  

Because of these limitations, Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net Income are not intended as alternatives to net income (loss) as an indicator of our operating performance and should not be considered 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. 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. Our GAAP-based measures can be found in our consolidated financial statements and related notes included elsewhere in this prospectus.

The following table reconciles net (loss) income to Adjusted EBITDA:

 

   Years Ended
December 31,
 
(In thousands)  2018  2019  2020 

Net income (loss)

  $231,304  $(530,661 $(625,318

(Income) loss from discontinued operations, net of tax (including gain on sale in 2018)

   (694,998  5,000   —   

Provision for income taxes

   88,235   3,371   8,507 

Interest expense, net

   277,200   270,944   284,586 

Depreciation and amortization

   365,959   280,749   310,883 

Equity-based compensation expense(1)

   149,138   101,188   91,271 

Merger, acquisition and earn-out costs(2)

   66,577   49,869   22,178 

Certain legal costs(3)

   26,677   29,681   12,520 

Restructuring, severance and impairment(4)

   38,363   42,441   271,868 

Fair value adjustment—Droga5(5)

   38,962   3,734   405 

Fair value adjustment—equity investments(6)

   (67,318  11,759   469 

Equity method losses—Learfield IMG College(7)

   —     366,797   250,726 

COVID-19 related costs(8)

   —     —     2,692 

Other(9)

   30,987   98,631   (58,240
  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $551,086  $733,503  $572,547 
  

 

 

  

 

 

  

 

 

 

Net income (loss) margin

   6.4  (11.6)%   (18.0)% 

Adjusted EBITDA margin

   15.3  16.0  16.5


 

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The following table reconciles net income (loss) to Adjusted Net Income:

 

   Years Ended
December 31,
 
(In thousands)  2018  2019  2020 

Net income (loss)

  $231,304  $(530,661 $(625,318

Net loss (income) attributable to non-controlling interests

   85,241   (23,158  (29,616
  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to Endeavor Operating Company, LLC

   316,545   (553,819  (654,934

(Income) loss from discontinued operations, net of tax (including gain on sale in 2018)

   (694,998  5,000   —   

Amortization

   301,162   209,243   225,492 

Equity-based compensation expense(1)

   149,138   101,188   91,271 

Merger, acquisition and earn-out costs(2)

   66,577   49,869   22,178 

Certain legal costs(3)

   26,677   29,681   12,520 

Restructuring, severance and impairment(4)

   38,363   42,441   271,868 

Fair value adjustment—Droga5(5)

   38,962   3,734   405 

Fair value adjustment—equity investments(6)

   (67,318  11,759   469 

Equity method losses—Learfield IMG College(7)

   —     366,797   250,726 

COVID-19 related costs(8)

   —     —     2,692 

Other(9)

   30,987   98,631   (58,240

Tax effects of adjustments(10)

   (9,295  (29,757  (25,528

Adjustments allocated to non-controlling interests(11)

   (135,990  (93,899  (69,272

Valuation allowance and other tax items(12)

   39,307   —     15,164 
  

 

 

  

 

 

  

 

 

 

Adjusted Net Income

  $100,117  $240,868  $84,811 
  

 

 

  

 

 

  

 

 

 

 

(1)

Equity-based compensation expense represents primarily non-cash compensation expense associated with our equity-based compensation plans.

 

    

The decrease for the year ended December 31, 2020 as compared to the year ended December 31, 2019 was primarily due to fewer awards being granted in 2020. For the year ended December 31, 2019 and 2020, equity-based compensation expense primarily related to our Owned Sports Properties and Representation segments and Corporate.

 

    

The decrease for the year ended December 31, 2019 as compared to the year ended December 31, 2018 was primarily due to lower expense recorded for modifications offset by expense for new awards granted in 2019 and a full year of expense from grants awarded in 2018. In 2018 and 2019, equity-based compensation expense primarily related to our Owned Sports Properties and Representation segments and Corporate.

 

(2)

Includes (i) certain costs of professional advisors related to mergers, acquisitions, dispositions, or joint ventures and (ii) fair value adjustments for contingent consideration liabilities related to acquired businesses and compensation expense for deferred consideration associated with selling shareholders that are required to remain our employees.

 

    

Such costs for the year ended December 31, 2020 primarily related to professional advisor costs of approximately $13 million and primarily related to our Events, Experiences & Rights segment. Acquisition earn-out adjustments were approximately $9 million primarily related to our Representation segment.

 

    

Such costs for the year ended December 31, 2019 primarily related to our Representation segment, of which the largest component was earn-out adjustments, as well as our Events, Experiences & Rights segment, of which the largest component was professional advisor costs. Acquisition earn-out adjustments were approximately $34 million.



 

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Such costs for the year ended December 31, 2018 primarily related to our Representation segment, of which the largest component was earn-out adjustments as well as approximately $31 million of professional advisor costs primarily related to our Representation and Events, Experiences & Rights segments. Acquisition earn-out adjustments were approximately $36 million.

 

(3)

Includes costs related to certain litigation or regulatory matters impacting all of our segments and Corporate.

 

(4)

Includes certain costs related to our restructuring activities and non-cash impairment charges.

 

    

Such costs for the year ended December 31, 2020 included approximately $220 million related to the impairment of intangible assets and goodwill, approximately $19 million related to the impairment of certain other assets and investments, and approximately $32 million for severance and restructuring expenses, in each case primarily related to COVID-19, and primarily related to our Owned Sports Properties and Events, Experiences & Rights segments and Corporate.

 

    

Such costs for the year ended December 31, 2019 included approximately $29 million related to the impairment of certain investments and approximately $14 million for severance and restructuring expenses and primarily related to our Representation and Events, Experiences & Rights segments.

 

    

Such costs for the year ended December 31, 2018 primarily related to severance and restructuring expenses, including costs related to the cessation of operations of certain events and the impairment of related assets, and had a comparable impact on our Events, Experiences & Rights and Representation segments.

 

(5)

Reflects the change in fair value of our investment in Droga5, which was accounted for using the fair value option through the disposal of our interest in April 2019; such non-cash fair value adjustments relate to our Representation segment; and adjustment for cash items including receipt of working capital adjustments and other amounts after disposal.

 

(6)

Includes the net change in fair value for certain equity investments with and without readily determinable fair values, based on observable price changes, in accordance with ASU 2016-01 and ASU 2018-03 effective January 1, 2018.

 

(7)

Relates to equity method losses, including impairment charges, from our investment in Learfield IMG College following the merger of our IMG College business with Learfield in December 2018. Prior to its disposal in December 2018, income or loss from our IMG College business is classified as discontinued operations.

 

(8)

Includes COVID-19 related expenses that are non-recurring and incremental costs that would have otherwise not been incurred. Such adjustment does not include the write off of $11.0 million of deferred event costs, net of insurance recoveries, which is adjusted in our Events, Experiences & Rights segment profitability measure.

 

(9)

For the year ended December 31, 2020, other costs primarily comprised of a gain of approximately $27 million related to the consolidation of a previously held equity interest in FC Diez Media, a gain of approximately $15 million related to the sale of an investment, a gain of approximately $8 million associated with the deconsolidation of Asian Tour Media Pte. Ltd., a gain of approximately $13 million related to non-cash fair value adjustments of embedded foreign currency derivatives and approximately $3 million increase related to purchase price adjustments to deferred revenue and ticket inventory at On Location, which related primarily to our Events, Experiences & Rights segment.

 

    

For the year ended December 31, 2019, other costs primarily comprised charges of approximately $17 million related to the impairment of a note receivable due from an equity investment related to our Representation segment, approximately $39 million related to non-cash fair value adjustments of embedded foreign currency derivatives related to our Events, Experiences & Rights segment,



 

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 approximately $7 million of costs associated with the refinancing of our UFC Credit Facilities, which related primarily to our Owned Sports Properties segment, charges of approximately $28 million related to our prior initial public offering costs and $5 million related to a premium on the redemption of certain equity units held by an investor, which related to Corporate.

 

    

For the year ended December 31, 2018, other costs primarily comprised charges of approximately $19 million of costs associated with the refinancing of our Credit Facilities, which related primarily to Corporate, approximately $19 million related to the non-cash fair value adjustment of our UFC warrant liability at the Owned Sports Properties segment, as well as approximately $8 million of losses on foreign exchange transactions, which related primarily to our Events, Experiences & Rights segment and Corporate. In 2018, these charges were partially offset by approximately $18 million of a gain on disposal of a business, which related to our Representation segment.

 

(10)

Reflects the U.S. and non-U.S. tax impacts with respect to each adjustment noted above, as applicable.

 

(11)

Reflects the share of the adjustments noted above that are allocated to our non-controlling interests, net of tax.

 

(12)

Such items for the year ended December 31, 2020 relate to $34.3 million tax expense recorded as a result of acquisitions and subsequent tax restructurings, and the release of $19.1 million of valuation allowances on net deferred U.S. tax assets, exclusive of deferred tax liabilities on indefinite lived intangible assets, state income taxes, and foreign tax credits.

 

    

Such items for the year ended December 31, 2018 relate to a $21.8 million net tax expense recorded as a result of our acquisition of NeuLion and subsequent tax restructuring and $17.5 million related to the tax impact of losses recognized on certain agreements for foreign statutory purposes, subject to limitation under foreign tax law.



 

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RISK FACTORS

Investing in our Class A common stock involves substantial risks. You should carefully consider the following factors, together with all of the other information included in this prospectus, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes included elsewhere in this prospectus, before investing in our Class A common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our Class A common stock could decline if one or more of these risks or uncertainties develop into actual events, causing you to lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur. While we believe these risks and uncertainties are especially important for you to consider, we may face other risks and uncertainties that could adversely affect our business. Please also see “Forward-Looking Statements” for more information.

Risks Related to Our Business

The impact of the COVID-19 global pandemic could continue to materially and adversely affect our business, financial condition and results of operations.

In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world implemented measures to reduce the spread of COVID-19. Numerous state and local jurisdictions, including in markets where we operate, imposed “shelter-in-place” orders, quarantines, travel restrictions, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. For example, the federal and state governments in the United States imposed social distancing measures and restrictions on movement, at times only allowing essential businesses to remain open and restricting or regulating the way in which many businesses were able to operate. Such orders or restrictions resulted in work stoppages, slowdowns and delays, travel restrictions and cancellation of events, among other effects.

These measures began to have a significant adverse impact on our business and operations beginning in March 2020, including in the following ways: the inability to hold live ticketed PBR and UFC events and the early cancellation of the 2019-2020 Euroleague season adversely impacted our Owned Sports Properties segment; the postponement or cancellation of live sporting events and other in-person events adversely impacted our Events, Experiences & Rights segment; stoppages of entertainment productions, including film, television shows, and music events, as well as reduced corporate spending on marketing, experiential and activation, adversely impacted our Representation segment. 

While activity has resumed in certain of our businesses and restrictions have been lessened or lifted—for example, major sporting events for which we have media rights have restarted without, or with limited numbers of, fans and have gradually increased permitted fan attendance, film and television productions have begun in certain areas around the world, fashion photo shoots have taken place virtually, and students have returned to IMG Academy—restrictions impacting certain of our businesses remain in effect in locations where we are operating and could in the future be reduced or increased, or removed or reinstated. As a result of this and numerous other uncertainties, including the duration of the pandemic, potential for a resurgence of cases, impact of variants, enduring and additional actions that may be taken by governmental authorities to control the spread of COVID-19, including the continuing rollout of vaccines, availability of vaccine doses to the general public, “shelter-in-place” orders, quarantines, travel restrictions, social distancing measures, immigration restrictions, additional postponements or cancellations of live sporting events and other in-person events, and changes in consumer preferences towards our business and the industries in which we operate, we are unable to accurately predict the full impact of COVID-19 on our business, results of operations, financial position and cash flows; however, its impact may be significant. The ongoing pandemic has had a significant impact on our cash flows from operations. We expect that any recovery will continue to be gradual and that the wider impact on revenue and cash flows will vary, but will generally depend on the factors listed above and the general uncertainty surrounding COVID-19.

 

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As an example, for those live events that resume, attendance may continue at significantly reduced levels throughout 2021, and any resumption may bring increased costs to comply with new health and safety guidelines. Given the ongoing uncertainty, we have taken several steps to preserve capital and increase liquidity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of the COVID-19 Pandemic.” We cannot assure you that such measures and our cash flows from operations, cash and cash equivalents, or cash available under our Senior Credit Facilities (as defined below) will be sufficient to meet our working capital requirements and commitments, including long-term debt service, in the foreseeable future.

We will continue to assess the situation, including abiding by any government-imposed restrictions, market by market. We are unable to accurately predict the ultimate impact that COVID-19 will have on our operations going forward due to the aforementioned uncertainties. We may be unable to accurately predict the impact, operating costs and effectiveness of continuing to adapt certain aspects of our business or restarting certain of our businesses that have not been fully operational during this period, or the future ways in which we will need to adapt our businesses to further changes or consumer behaviors arising out of the pandemic. In addition, any broader global deterioration in economic conditions, which may have an adverse impact on discretionary consumer spending, could also impact our business. For instance, consumer spending may be negatively impacted by general macroeconomic conditions, including a rise in unemployment and decreased consumer confidence resulting from the pandemic. Changing consumer behaviors as a result of COVID-19 may also have a material impact on our revenue for the foreseeable future.

In the past, governments have taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to financial markets. If these actions are not successful, the return of adverse economic conditions may cause a material impact on our ability to raise capital, if needed, on a timely basis and on acceptable terms, or at all.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our liquidity, indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

Changes in public and consumer tastes and preferences and industry trends could reduce demand for our services and content offerings and adversely affect our business.

Our ability to generate revenues is highly sensitive to rapidly changing consumer preferences and industry trends, as well as the popularity of the talent, brands, and owners of IP we represent, and the assets we own. Our success depends on our ability to offer premium content through popular channels of distribution that meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. Our operations and revenues are affected by consumer tastes and entertainment trends, including the market demand for the distribution rights to live sports events, which are unpredictable and may be affected by changes in the social and political climate, or global issues such as the COVID-19 pandemic. Changes in consumers’ tastes or a change in the perceptions of our brands and business partners, whether as a result of the social and political climate or otherwise, could adversely affect our operating results. Our failure to avoid a negative perception among consumers or anticipate and respond to changes in consumer preferences, including in the form of content creation or distribution, could result in reduced demand for our services and content offerings or those of our clients and owned assets across our platform, which could have an adverse effect on our business, financial condition and results of operations.

Consumer tastes change frequently and it is a challenge to anticipate what offerings will be successful at any point in time. We may invest in our content and owned assets, including in the creation of original content, before learning the extent to which it will achieve popularity with consumers. For example, as of December 31, 2020 we have committed to spending approximately $2.2 billion in guaranteed payments for media, event, or other representation rights and similar expenses, regardless of our ability to profit from these rights. Specifically,

 

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our results of operations have been negatively impacted in the years ended December 31, 2020 and 2019 due to the costs associated with acquired media rights to major soccer events in excess of revenue, which will continue to adversely impact our results of operations for the term of certain of these contracts, two of which expire in 2021 and the last in 2024. A lack of popularity of these, our other content offerings, or our owned assets, as well as labor disputes, unavailability of a star performer, equipment shortages, cost overruns, disputes with production teams, or adverse weather conditions, could have an adverse effect on our business, financial condition and results of operations.

Our ability to generate revenue from discretionary and corporate spending on entertainment and sports events, such as corporate sponsorships and advertising, is subject to many factors, including many that are beyond our control, such as general macroeconomic conditions.

Our business depends on discretionary consumer and corporate spending. Many factors related to corporate spending and discretionary consumer spending, including economic conditions affecting disposable consumer income such as unemployment levels, fuel prices, interest rates, changes in tax rates, and tax laws that impact companies or individuals and inflation can significantly impact our operating results. While consumer and corporate spending may decline at any time for reasons beyond our control, the risks associated with our businesses become more acute in periods of a slowing economy or recession, which may be accompanied by reductions in corporate sponsorship and advertising and decreases in attendance at live entertainment and sports events, among other things. There can be no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions, or by any future deterioration in economic conditions, thereby possibly impacting our operating results and growth. A prolonged period of reduced consumer or corporate spending, such as those during the COVID-19 pandemic, could have an adverse effect on our business, financial condition, and results of operations.

We may not be able to adapt to or manage new content distribution platforms or changes in consumer behavior resulting from new technologies.

We must successfully adapt to and manage technological advances in our industry, including the emergence of alternative distribution platforms. If we are unable to adopt or are late in adopting technological changes and innovations that other entertainment providers offer, it may lead to a loss of consumers viewing our content, a reduction in revenues from attendance at our live events, a loss of ticket sales, or lower ticket fees. It may also lead to a reduction in our clients’ ability to monetize new platforms. Our ability to effectively generate revenue from new distribution platforms and viewing technologies will affect our ability to maintain and grow our business. Emerging forms of content distribution may provide different economic models and compete with current distribution methods (such as television, film, and pay-per-view (“PPV”)) in ways that are not entirely predictable, which could reduce consumer demand for our content offerings. We must also adapt to changing consumer behavior driven by advances that allow for time shifting and on-demand viewing, such as digital video recorders and video-on-demand, as well as internet-based and broadband content delivery and mobile devices. If we fail to adapt our distribution methods and content to emerging technologies and new distribution platforms, while also effectively preventing digital piracy, our ability to generate revenue from our targeted audiences may decline and could result in an adverse effect on our business, financial condition, and results of operations.

Because our success depends substantially on our ability to maintain a professional reputation, adverse publicity concerning us, one of our businesses, our clients, or our key personnel could adversely affect our business.

Our professional reputation is essential to our continued success and any decrease in the quality of our reputation could impair our ability to, among other things, recruit and retain qualified and experienced agents, managers, and other key personnel, retain or attract agency clients or customers, or enter into multimedia, licensing, and sponsorship engagements. Our overall reputation may be negatively impacted by a number of factors, including negative publicity concerning us, members of our management or our agents, managers, and

 

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other key personnel. In addition, we are dependent for a portion of our revenues on the relationships between content providers and the clients and key brands, such as sports leagues and federations, that we represent, many of whom are significant public personalities with large social media followings whose actions generate significant publicity and public interest. Any adverse publicity relating to such individuals or entities that we employ or represent, or to our company, including from reported or actual incidents or allegations of illegal or improper conduct, such as harassment, discrimination, or other misconduct, could result in significant media attention, even if not directly relating to or involving Endeavor, and could have a negative impact on our professional reputation. This could result in termination of licensing or other contractual relationships, or our employees’ ability to attract new customer or client relationships, or the loss or termination of such employees’ services, all of which could adversely affect our business, financial condition, and results of operations. Our professional reputation could also be impacted by adverse publicity relating to one or more of our owned or majority owned brands, events, or businesses.

We depend on the relationships of our agents, managers, and other key personnel with clients across many categories, including television, film, professional sports, fashion, music, literature, theater, digital, sponsorship and licensing.

We depend upon relationships that our agents, managers, and other key personnel have developed with clients across many content categories, including, among others, television, film, professional sports, fashion, music, literature, theater, digital, sponsorship, and licensing. The relationships that our agents, managers, and other key personnel have developed with studios, brands, and other key business contacts help us to secure access to sponsorships, endorsements, professional contracts, productions, events, and other opportunities for our clients. Due to the importance of those industry contacts to us, a substantial deterioration in these relationships, or substantial loss of agents, managers, or other key personnel who maintain these relationships, could adversely affect our business. In particular, our client management business is dependent upon the highly personalized relationships between our agent and manager teams and their respective clients. A substantial deterioration in the team managing a client may result in a deterioration in our relationship with, or the loss of, the clients represented by that agent or manager. The substantial loss of multiple agents or managers and their associated clients could have an adverse effect on our business, financial condition, and results of operations. Most of our agents, managers, and other key personnel are not party to long-term contracts and, in any event, can leave our employment with little or no notice. We can give no assurance that all or any of these individuals will remain with us or will retain their associations with key business contacts.

Our success depends, in part, on our continuing ability to identify, recruit, and retain qualified and experienced agents and managers. If we fail to recruit and retain suitable agents or if our relationships with our agents change or deteriorate, it could adversely affect our business.

Our success depends, in part, upon our continuing ability to identify, recruit, and retain qualified and experienced agents and managers. There is great competition for qualified and experienced agents and managers in the entertainment and sports industry, and we cannot assure you that we will be able to continue to hire or retain a sufficient number of qualified persons to meet our requirements, or that we will be able to do so under terms that are economically attractive to us. Any failure to retain certain agents and managers could lead to the loss of sponsorship, multimedia, and licensing agreements, and other engagements and have an adverse effect on our business, financial condition, and results of operations.

Our failure to identify, sign, and retain clients could adversely affect our business.

We derive substantial revenue from the engagements, sponsorships, licensing rights, and distribution agreements entered into by the clients with whom we work. We depend on identifying, signing, and retaining as clients those artists, athletes, models, and businesses whose identities or brands are in high demand by the public and, as a result, are deemed to be favorable candidates for engagements. Our competitive position is dependent on our continuing ability to attract, develop, and retain clients whose work is likely to achieve a high degree of

 

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value and recognition as well as our ability to provide such clients with sponsorships, endorsements, professional contracts, productions, events, and other opportunities. Our failure to attract and retain these clients, an increase in the costs required to attract and retain such clients, or an untimely loss or retirement of these clients could adversely affect our financial results and growth prospects. We have not entered into written agreements with many of the clients we represent. These clients may decide to discontinue their relationship with us at any time and without notice. In addition, the clients with whom we have entered into written contracts may choose not to renew their contracts with us on reasonable terms or at all or they may breach or seek to terminate these contracts. If any of our clients decide to discontinue their relationships with us, whether they are under a contract or not, we may be unable to recoup costs expended to develop and promote them and our financial results may be adversely affected. Further, the loss of such clients could lead other of our clients to terminate their relationships with us.

We derive substantial revenue from the sale of multimedia rights, licensing rights, and sponsorships. A significant proportion of this revenue is dependent on our commercial agreements with entertainment and sports events. Our failure to renew or replace these key commercial agreements on similar or better terms could have an adverse effect on our business, financial condition and results of operations.

Our business involves potential internal conflicts of interest and includes our client representation businesses representing both talent and content rights holders and distributors while our content businesses produce content, which may create a conflict of interest.

Increasingly, we must manage actual and potential internal conflicts of interest in our business due to the breadth and scale of our platform. Different parts of our business may have actual or potential conflicts of interest with each other, including our client representation, media production, events production, sponsorship, and content development businesses. Although we attempt to manage these conflicts appropriately, any failure to adequately address or manage internal conflicts of interest could adversely affect our reputation, and the willingness of clients and third parties to work with us may be affected if we fail, or appear to fail, to deal appropriately with actual or perceived internal conflicts of interest, which could have an adverse effect on our business, financial condition, and results of operations.

The markets in which we operate are highly competitive, both within the United States and internationally.

We face competition from a variety of other domestic and foreign companies. We face competition from alternative providers of the content, services, and events we and our clients offer and from other forms of entertainment and leisure activities in a rapidly changing and increasingly fragmented environment. Any increased competition, which may not be foreseeable, or our failure to adequately address any competitive factors, could result in reduced demand for our content, live events, clients, or key brands, which could have an adverse effect on our business, financial condition, and results of operations.

We depend on the continued service of the members of our executive management and other key employees, as well as management of acquired businesses, the loss or diminished performance of whom could adversely affect our business.

Our performance is substantially dependent on the performance of the members of our executive management and other key employees, as well as management of acquired businesses. We seek to acquire businesses that have strong management teams and often rely on these individuals to conduct day-to-day operations and pursue growth. Although we have entered into employment and severance protection agreements with certain members of our senior management team and we typically seek to sign employment agreements with the management of acquired businesses, we cannot be sure that any member of our senior management or management of the acquired businesses will remain with us or that they will not compete with us in the future. The loss of any member of our senior management team could impair our ability to execute our business plan and growth strategy, have a negative impact on our revenues and the effective working relationships that our

 

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executive management have developed, and cause employee morale problems and the loss of additional key employees, agents, managers, and clients.

We depend on key relationships with television and cable networks, satellite providers, digital streaming partners and other distribution partners, as well as corporate sponsors.

A key component of our success is our relationships with television and cable networks, satellite providers, digital streaming and other distribution partners, as well as corporate sponsors. We are dependent on maintaining these existing relationships and expanding upon them to ensure we have a robust network with whom we can work to arrange multimedia rights sales and sponsorship engagements, including distribution of our owned, operated, or represented events. Our television programming for our owned, operated, and represented events is distributed by television and cable networks, satellite providers, PPV, digital streaming, and other media. Because a portion of our revenues are generated, directly and indirectly, from this distribution, any failure to maintain or renew arrangements with distributors and platforms, the failure of distributors or platforms to continue to provide services to us, or the failure to enter into new distribution opportunities on terms favorable to us could adversely affect our business. We regularly engage in negotiations relating to substantial agreements covering the distribution of our television programming by carriers located in the United States and abroad. We have an important relationship with ESPN as they are the exclusive domestic home to all UFC events. We have agreements with multiple PPV providers globally and distribute a portion of our owned, operated, or represented events through PPV, including certain events that are sold exclusively through PPV. Any adverse change in these relationships or agreements or a deterioration in the perceived value of our clients, sponsorships, or these distribution channels could have an adverse effect on our business, financial condition and results of operations.

Owning and managing certain events for which we sell media and sponsorship rights, ticketing and hospitality exposes us to greater financial risk. If the live events that we own and manage are not financially successful, our business could be adversely affected.

We act as a principal by owning and managing certain live events for which we sell media and sponsorship rights, ticketing and hospitality, such as UFC’s events, the Miami Open, the Miss Universe competition, the Professional Bull Riders’ events, and On Location’s experiences. Organizing and operating a live event involves significant financial risk as we bear all or most event costs, including a significant amount of up-front costs. In addition, we typically book our live events many months in advance of holding the event and often agree to pay a fixed guaranteed amount prior to receiving any related revenue. Accordingly, if a planned event fails to occur or there is any disruption in our ability to live stream or otherwise distribute, whether as a result of technical difficulties or otherwise, we could lose a substantial amount of these up-front costs, fail to generate the anticipated revenue, and be forced to issue refunds for media and sponsorship rights, advertising fees, and ticket sales. If we are forced to postpone a planned event, we would incur substantial additional costs in order to stage the event on a new date, may have reduced attendance and revenue, and may have to refund fees. We could be compelled to cancel or postpone all or part of an event for many reasons, including poor weather, issues with obtaining permits or government regulation, performers failing to participate, as well as operational challenges caused by extraordinary incidents, such as terrorist or other security incidents, mass-casualty incidents, natural disasters, public health concerns including pandemics, or similar events. Such incidents have been shown to cause a nationwide disruption of commercial and leisure activities. We often have cancellation insurance policies in place to cover a portion of our losses if we are compelled to cancel an event, but our coverage may not be sufficient and is subject to deductibles. If the live events that we own and manage are not financially successful, we could suffer an adverse effect on our business, financial condition and results of operations.

 

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Our recent acquisitions have caused us to grow rapidly, and we will need to continue to make changes to operate at our current size and scale. We may face difficulty in further integrating the operations of the businesses acquired in our recent transactions, and we may never realize the anticipated benefits and cost synergies from all of these transactions. If we are unable to manage our current operations or any future growth effectively, our business could be adversely affected.

Our recent acquisitions have caused us to grow rapidly, and we may need to continue to make changes to operate at our current size and scale. If we fail to realize the anticipated benefits and cost synergies from our recent acquisitions, or if we experience any unanticipated or unidentified effects in connection with these transactions, including write-offs of goodwill, accelerated amortization expenses of other intangible assets, or any unanticipated disruptions with important third-party relationships, our business, financial condition, and results of operations could be adversely affected. Moreover, our recent acquisitions involve risks and uncertainties including, without limitation, those associated with the integration of operations, financial reporting, technologies and personnel, and the potential loss of key employees, agents, managers, clients, customers, or strategic partners. Because the integration of the businesses acquired in our recent transactions have and will require significant time and resources, and we may not be able to manage the process successfully, these acquisitions may not be accretive to our earnings and they may negatively impact our results of operations. If our operations continue to grow, we will be required, among other things, to upgrade our management information systems and other processes and to obtain more space for our expanding administrative support and other headquarters personnel. Our continued growth could strain our resources and we could experience operating difficulties, including difficulties in hiring, training, and managing an increasing number of employees. These difficulties could result in the erosion of our brand image and reputation and could have an adverse effect on our business, financial condition, and operating results.

We may be unsuccessful in our strategic acquisitions, investments and commercial agreements, and we may pursue acquisitions, investments or commercial agreements for their strategic value in spite of the risk of lack of profitability.

We face significant uncertainty in connection with acquisitions, investments, and commercial agreements. To the extent we choose to pursue certain commercial, investment, or acquisition strategies, we may be unable to identify suitable targets for these deals, or to make these deals on favorable terms. If we identify suitable acquisition candidates, investments, or commercial partners, our ability to realize a return on the resources expended pursuing such deals, and to successfully implement or enter into them will depend on a variety of factors, including our ability to obtain financing on acceptable terms, requisite governmental approvals, as well as the factors discussed below. Additionally, we may decide to make or enter into acquisitions, investments, or commercial agreements with the understanding that such acquisitions, investments, or commercial agreements will not be profitable, but may be of strategic value to us. Our current and future acquisitions, investments, including existing investments accounted for under the equity method, or commercial agreements may also require that we make additional capital investments in the future, which would divert resources from other areas of our business. We cannot provide assurances that the anticipated strategic benefits of these deals will be realized in the long-term or at all.

We may fail to identify or assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring a company, making an investment or entering into a commercial agreement and, as such, may not obtain sufficient warranties, indemnities, insurance, or other protections. This could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes, a loss of anticipated tax benefits, or other adverse effects on our business, operating results, or financial condition. Additionally, some warranties and indemnities may give rise to unexpected and significant liabilities. Future acquisitions and commercial arrangements that we may pursue could result in dilutive issuances of equity securities and the incurrence of further debt.

Our compliance with regulations may limit our operations and future acquisitions.

We are also subject to laws and regulations, including those relating to antitrust, that could significantly affect our ability to expand our business through acquisitions or joint ventures. For example, the Federal Trade

 

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Commission and the Antitrust Division of the U.S. Department of Justice with respect to our domestic acquisitions and joint ventures, and the European Commission, the antitrust regulator of the European Union (the “E.U.”), with respect to our European acquisitions and joint ventures, have the authority to challenge our acquisitions and joint ventures on antitrust grounds before or after the acquisitions or joint ventures are completed. State agencies, as well as comparable authorities in other countries, may also have standing to challenge these acquisitions and joint ventures under state or federal antitrust law. Our failure to comply with all applicable laws and regulations could result in, among other things, regulatory actions or legal proceedings against us, the imposition of fines, penalties, or judgments against us, or significant limitations on our activities. Multiple or repeated failures by us to comply with these laws and regulations could result in increased fines, actions or legal proceedings against us. Gaming authorities may levy fines against us or seize certain of our assets if we violate gaming regulations. In addition, the regulatory environment in which we operate is subject to change. New or revised requirements imposed by governmental regulatory authorities could have adverse effects on us, including increased costs of compliance. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and regulations by these governmental authorities.

Our business and operations are subject to a variety of regulatory requirements in the United States and abroad, including, among other things, with respect to labor, tax, import and export, anti-corruption, data privacy and protection and communications monitoring and interception. Compliance with these regulatory requirements may be onerous and expensive, especially where these requirements are inconsistent from jurisdiction to jurisdiction or where the jurisdictional reach of certain requirements is not clearly defined or seeks to reach across national borders. Regulatory requirements in one jurisdiction may make it difficult or impossible to do business in another jurisdiction. We may also be unsuccessful in obtaining permits, licenses or other authorizations required to operate our business. While we have implemented policies and procedures designed to achieve compliance with these laws and regulations, we cannot be sure that we or our personnel will not violate applicable laws and regulations or our policies regarding the same.

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. Our failure, or the failure of any of our major stockholders, directors, officers, key employees, products, or technology, to obtain or retain a required license or approval in one jurisdiction could negatively impact our ability (or the ability of any of our major stockholders, directors, officers, key employees, products, or technology) to obtain or retain required licenses and approvals in other jurisdictions.

We share control in joint venture projects, other investments, and strategic alliances, which limits our ability to manage third-party risks associated with these projects.

We participate in a number of joint ventures, other non-controlling investments, and strategic alliances and may enter into additional joint ventures, investments, and strategic alliances in the future. In these joint ventures, investments, and strategic alliances, we often have shared control over the operation of the assets and businesses. As a result, such investments and strategic alliances may involve risks such as the possibility that a partner in an investment might become bankrupt, be unable to meet its capital contribution obligations, have economic or business interests or goals that are inconsistent with our business interests or goals, or take actions that are contrary to our instructions or to applicable laws and regulations. In addition, we may be unable to take action without the approval of our partners, or our partners could take binding actions without our consent. Consequently, actions by a partner or other third party could expose us to claims for damages, financial penalties, additional capital contributions, and reputational harm, any of which could have an adverse effect on our business, financial condition, and results of operations.

Preparing our financial statements requires us to have access to information regarding the results of operations, financial position, and cash flows of our joint ventures and other investments. Any deficiencies in their internal controls over financial reporting may affect our ability to report our financial results accurately or

 

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prevent or detect fraud. Such deficiencies also could result in restatements of, or other adjustments to, our previously reported or announced operating results, which could diminish investor confidence and reduce the market price for our Class A common stock. Additionally, if our joint ventures and other investments are unable to provide this information for any meaningful period or fail to meet expected deadlines, we may be unable to satisfy our financial reporting obligations or timely file our periodic reports.

Our key personnel may be adversely impacted by immigration restrictions and related factors.

Our ability to retain our key personnel is impacted, at least in part, by the fact that a portion of our key personnel in the United States is comprised of foreign nationals who are not United States citizens. In order to be legally allowed to work in the United States, these individuals generally hold immigrant visas (which may or may not be tied to their employment with us) or green cards, the latter of which makes them permanent residents in the United States.

The ability of these foreign nationals to remain and work in the United States is impacted by a variety of laws and regulations, as well as the processing procedures of various government agencies. Changes in applicable laws, regulations, or procedures could adversely affect our ability to hire or retain these key personnel and could affect our costs of doing business and our ability to deliver services to our clients. In addition, if the laws, rules or procedures governing the ability of foreign nationals to work in the United States were to change or if the number of visas available for foreign nationals permitted to work in the United States were to be reduced, our business could be adversely affected, if, for example, we were unable to retain an employee who is a foreign national.

Corresponding issues apply with respect to our key personnel working in countries outside of the United States relating to citizenship and work authorizations. Similar changes in applicable laws, regulations or procedures in those countries could adversely affect our ability to hire or retain key personnel internationally.

The business of our agents and managers and the clients we represent is international in nature and may require them to frequently travel or live abroad. The ability of our key personnel and talent to travel internationally for their work is impacted by a variety of laws and regulations, policy considerations of foreign governments, the processing procedures of various government agencies and geopolitical actions, including war and terrorism, or natural disasters including earthquakes, hurricanes, floods, fires, as well as pandemics, such as the COVID-19 pandemic. In addition, our productions and live events internationally subject us to the numerous risks involved in foreign travel and operations and also subject us to local norms and regulations, including regulations requiring us to obtain visas for our key personnel and, in some cases, hired talent. Actions by the clients we represent that are out of our control may also result in certain countries barring them from travelling internationally, which could adversely affect our business. If our key personnel and talent were prevented from conducting their work internationally for any reason, it could have an adverse effect on our business, financial condition, and results of operations.

We rely on technology, such as our information systems, to conduct our business. Failure to protect our technology against breakdowns and security breaches could adversely affect our business.

We rely on technology, such as our information systems, content distribution systems, ticketing systems, and payment processing systems, to conduct our business. This technology is vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners, and vendors, or from attacks by malicious third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including organized criminal groups, “hacktivists,” nation states, and others. The techniques used to breach security safeguards evolve rapidly, and they may be difficult to detect for an extended period of time, and the measures we take to safeguard our technology may not adequately prevent such incidents.

 

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While we have taken steps to protect our confidential and personal information and that of our clients and other business relationships and have invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of such confidential information. Such incidents could adversely affect our business operations, reputation, and client relationships. Any such breach would require us to expend significant resources to mitigate the breach of security and to address matters related to any such breach, including the payment of fines. Although we maintain an insurance policy that covers data security, privacy liability, and cyber-attacks, our insurance may not be adequate to cover losses arising from breaches or attacks on our systems. We also may be required to notify regulators about any actual or perceived personal data breach as well as the individuals who are affected by the incident within strict time periods.

Furthermore, we have a large number of operating entities throughout the world and, therefore, operate on a largely decentralized basis. We are also in the process of integrating the technology of our acquired companies. The resulting size and diversity of our technology systems, as well as the systems of third-party vendors with whom we contract, increase the vulnerability of such systems to breakdowns and security breaches. In addition, we rely on technology at live events, the failure or unavailability of which, for any significant period of time, could affect our business, our reputation and the success of our live events. We also rely on technology to provide our digital offerings, live streaming, and virtual events, which may be vulnerable to hacking, denial of service attacks, human error and other unanticipated problems or events that could result in interruptions in our service and to unauthorized access to, or alteration of, the content and data contained on our systems and those of our third-party vendors. Any significant interruption or failure of the technology upon which we rely, or any significant breach of security, could result in decreased performance and increased operating costs, adversely affecting our business, financial condition, and results of operations.

In addition, our use of social media presents the potential for further vulnerabilities. For instance, we may be subject to boycotts, spam, spyware, ransomware, phishing and social engineering, viruses, worms, malware, DDOS attacks, password attacks, man-in-the-middle attacks, cybersquatting, impersonation of employees or officers, abuse of comments and message boards, fake reviews, doxing, and swatting. While we have internal policies in place to protect against these vulnerabilities, we can make no assurances that we will not be adversely affected should one of these events occur. Additionally, there is an increased risk that we may experience cybersecurity-related events such as COVID-19-themed phishing attacks and other security challenges as a result of most of our employees and our service providers working remotely from non-corporate-managed networks during the ongoing COVID-19 pandemic and potentially beyond.

Unauthorized disclosure of sensitive or confidential client or customer information could harm our business and standing with our clients and customers.

The protection of our client, customer, employee, and other company data is critical to us. We collect, store, transmit, and use personal information relating to, among others, our clients, IMG Academy students, employees, consumers, and event participants. We also collect certain data through our 160over90 marketing ventures and our Endeavor Content offerings, which may include a range of talent and production information and data provided to us by our clients. During the COVID-19 pandemic, we also have been collecting certain COVID-related health and wellness information about our employees and others. We rely on commercially available systems, software, tools, and monitoring to provide security for processing, transmission, and storage of confidential client and customer information. Our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, payment card terminal tampering, computer viruses, misplaced, lost or stolen data, programming or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of client or customer information, whether by us or our third-party service providers, could damage our reputation, result in the loss of clients and customers, expose us to risk of litigation and liability or regulatory investigations or actions, disrupt our operations, and harm our business. In addition, as a result of recent security breaches, the media and public scrutiny of information security and privacy has become more intense. As a result, we may incur significant costs to change our business practices or modify our service offerings in connection with the protection of personally identifiable information.

 

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Regulatory action for alleged privacy violations could result in significant fines.

Regulators may impose significant fines for privacy and data protection violations. Our business operations involve the collection, transfer, use, disclosure, security, and disposal of personal or sensitive information in various locations around the world, including the E.U. As a result, our business is subject to complex and evolving U.S. and international laws and regulations regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, changes to our business practices, penalties, increased cost of operations, or otherwise harm our business. For example, the European Union’s General Data Protection Regulation (“GDPR”) creates requirements for in-scope businesses regarding personal data, broadly defined as information relating to an identifiable person. Non-compliance with the GDPR carries significant monetary penalties of up to the higher of 4% of a company’s worldwide total revenue or €20 million. However, there can be no assurances that we will be successful in our efforts to comply with the GDPR or other privacy and data protection laws and regulations, or that violations will not occur, particularly given the complexity of both these laws and our business, as well as the uncertainties that accompany new laws. In addition, in June 2018, California passed the California Consumer Privacy Act of 2018 (the “CCPA”), which became operational on January 1, 2020 and imposes significant data privacy and potential statutory damages related to data protection for the data of California residents. The effects of this legislation potentially are far-reaching and may require us to modify our data processing practices and policies and to incur significant costs and expenses in an effort to comply. Further, on November 3, 2020, the California Privacy Rights Act (the “CPRA”) was voted into law by California residents. The CPRA significantly amends the CCPA, and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also creates a new California data protection agency specifically tasked to enforce the law, which would likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA will go into effect on January 1, 2023, and become enforceable on July 1, 2023. Similar laws have been proposed in other states and at the federal level. Other international laws are also in place or pending, and such laws may have potentially conflicting requirements that would make compliance challenging.

We may be unable to protect our trademarks and other intellectual property rights, and others may allege that we infringe upon their intellectual property rights.

We have invested significant resources in brands associated with our business such as “Endeavor,” “WME,” “William Morris Endeavor,” “IMG” and “UFC” in an attempt to obtain and protect our public recognition. These brands are essential to our success and competitive position. We have also invested significant resources in the premium content that we produce.

Our trademarks and other intellectual property rights are critical to our success and our competitive position. Our intellectual property rights may be challenged and invalidated by third parties and may not be strong enough to provide meaningful commercial competitive advantage. If we fail to maintain our intellectual property, our competitors might be able to enter the market, which would harm our business. Further, policing unauthorized use and other violations of our intellectual property is difficult, particularly given our global scope, so we are susceptible to others infringing, diluting or misappropriating our intellectual property rights. If we are unable to maintain and protect our intellectual property rights adequately, we may lose an important advantage in the markets in which we compete. In particular, the laws of certain foreign countries do not protect intellectual property rights in the same manner as do the laws of the United States and, accordingly, our intellectual property is at greater risk in those countries even where we take steps to protect such intellectual property. While we believe we have taken, and take in the ordinary course of business, appropriate available legal steps to reasonably protect our intellectual property, we cannot predict whether these steps will be adequate to prevent infringement or misappropriation of these rights.

 

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From time to time, in the ordinary course of our business, we become involved in opposition and cancellation proceedings with respect to some of our intellectual property or third-party intellectual property. Any opposition and cancellation proceedings or other litigation or dispute involving the scope or enforceability of our intellectual property rights or any allegation that we infringe, misappropriate or dilute upon the intellectual property rights of others, regardless of the merit of these claims, could be costly and time-consuming. If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a third party with respect to a claim, or if we are required to, or decide to, cease use of a brand, rebrand or obtain non-infringing intellectual property (such as through a license), it could result in harm to our competitive position and could adversely affect our business and financial condition.

Through new and existing legal and illegal distribution channels, consumers have increasing options to access entertainment video. Piracy, in particular, threatens to damage our business. Furthermore, in light of the compelling consumer proposition, piracy services are subject to rapid global growth. The success of our streaming video solutions (e.g. FIGHT PASS) is directly threatened by the availability and use of pirated alternatives. The value that streaming services are willing to pay for content that we develop may be reduced if piracy prevents these services from realizing adequate revenues on these acquisitions.

Lastly, in the event of a bankruptcy, our intellectual property licenses could be affected in numerous ways. There is a concern that a bankruptcy can result in us losing intellectual property rights. Although some protections are granted via the United States Bankruptcy Code, the United States Bankruptcy Code definition of intellectual property only includes trade secrets, patents and patent applications, copyrights, and mask works and does not include trademarks. Because we rely heavily on the licensing of trademarks, we are at risk of losing rights in the event of a bankruptcy.

As a result of our operations in international markets, we are subject to risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to such markets.

We provide services in various jurisdictions abroad through a number of brands and businesses that we own and operate, as well as through joint ventures, and we expect to continue to expand our international presence. We face, and expect to continue to face, additional risks in the case of our existing and future international operations, including:

 

  

political instability, adverse changes in diplomatic relations and unfavorable economic conditions in the markets in which we have international operations or into which we may expand;

 

  

more restrictive or otherwise unfavorable government regulation of the entertainment and sports industry, which could result in increased compliance costs or otherwise restrict the manner in which we provide services and the amount of related fees charged for such services;

 

  

limitations on the enforcement of intellectual property rights;

 

  

enhanced difficulties of integrating any foreign acquisitions;

 

  

limitations on the ability of foreign subsidiaries to repatriate profits or otherwise remit earnings;

 

  

adverse tax consequences;

 

  

less sophisticated legal systems in some foreign countries, which could impair our ability to enforce our contractual rights in those countries;

 

  

limitations on technology infrastructure;

 

  

variability in venue security standards and accepted practices; and

 

  

difficulties in managing operations due to distance, language and cultural differences, including issues associated with (i) business practices and customs that are common in certain foreign countries but might be prohibited by U.S. law and our internal policies and procedures and (ii) management and

 

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operational systems and infrastructures, including internal financial control and reporting systems and functions, staffing and managing of foreign operations, which we might not be able to do effectively or on a cost—efficient basis.

If our goodwill or intangible assets become impaired, we may be required to record an additional significant charge to earnings.

We review our goodwill for impairment annually as of October 1 and at any time upon the occurrence of certain events or substantive changes in circumstances that indicate the carrying amount of goodwill may not be recoverable. If such goodwill or intangible assets are deemed to be impaired, an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the assets would be recognized. In the year ended December 31, 2020, we recorded $220.5 million of goodwill and intangible asset impairment charges primarily at our Events, Experiences & Rights segment, driven by lower projections as a result of the impact of COVID-19 and restructuring in certain of our businesses. In the future, any further impacts to our business, including as a result of COVID-19, could result in additional impairments and additional significant charges to earnings. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of the COVID-19 Pandemic.”

Participants and spectators in connection with our live entertainment and sports events are subject to potential injuries and accidents, which could subject us to personal injury or other claims and increase our expenses, as well as reduce attendance at our live entertainment and sports events, causing a decrease in our revenue.

There are inherent risks to participants and spectators involved with producing, attending, or participating in live entertainment and sports events. Injuries and accidents have occurred and may occur from time to time in the future, which could subject us to substantial claims and liabilities for injuries. Incidents in connection with our entertainment and sports events at any of our venues or venues that we rent could also result in claims, reducing operating income or reducing attendance at our events, causing a decrease in our revenues. There can be no assurance that the insurance we maintain will be adequate to cover any potential losses. The physical nature of many of our live sports events exposes the athletes that participate to the risk of serious injury or death. These injuries could include concussions, and many sports leagues and organizations have been sued by athletes over alleged long-term neurocognitive impairment arising from concussions. Although the participants in certain of our live sports events, as independent contractors, are responsible for maintaining their own health, disability and life insurance, we may seek coverage under our accident insurance policies, if available, or our general liability insurance policies, for injuries that athletes incur while competing. To the extent such injuries are not covered by our policies, we may self-insure medical costs for athletes for such injuries. Liability to us resulting from any death or serious injury, including concussions, sustained by athletes while competing, to the extent not covered by our insurance, could adversely affect our business, financial condition, and operating results.

We are subject to extensive U.S. and foreign governmental regulations, and our failure to comply with these regulations could adversely affect our business.

Our operations are subject to federal, state and local laws, statutes, rules, regulations, policies, and procedures in the United States and around the world, which are subject to change at any time, governing matters such as:

 

  

licensing laws for talent agencies, such as California’s Talent Agencies Act and the New York General Business Law;

 

  

licensing laws for athlete agents;

 

  

licensing laws for the promotion and operation of MMA events;

 

  

licensing laws for the supply of sports betting data, gaming software, and other products to gambling operators;

 

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licensing, permitting and zoning requirements for operation of our offices, locations, venues, and other facilities;

 

  

health, safety, and sanitation requirements;

 

  

the service of food and alcoholic beverages;

 

  

the welfare and protection of animals;

 

  

working conditions, labor, minimum wage and hour, citizenship, immigration, visas, harassment and discrimination, and other labor and employment laws and regulations;

 

  

human rights and human trafficking, including compliance with the U.K. Modern Slavery Act and similar current and future legislation;

 

  

our employment of youth workers and compliance with child labor laws;

 

  

compliance with the U.S. Americans with Disabilities Act of 1990 and the U.K.’s Disability Discrimination Act 1995;

 

  

compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act 2010 (the “Bribery Act”) and similar regulations in other countries, which prohibit U.S. companies and their intermediaries from engaging in bribery or other prohibited payments to foreign officials and require companies to keep books and records that accurately and fairly reflect the transactions of the company and to maintain an adequate system of internal accounting controls;

 

  

compliance with applicable antitrust and fair competition laws;

 

  

compliance with international trade controls, including applicable import/export regulations, and sanctions and international embargoes that may limit or restrict our ability to do business with specific individuals or entities or in specific countries or territories;

 

  

compliance with anti-money laundering and countering terrorist financing rules, currency control regulations, and statutes prohibiting tax evasion and the aiding or abetting of tax evasion;

 

  

marketing activities;

 

  

environmental protection regulations;

 

  

compliance with current and future privacy and data protection laws imposing requirements for the processing and protection of personal or sensitive information, including the GDPR and the E.U. e-Privacy Regulation;

 

  

compliance with cybersecurity laws imposing country-specific requirements relating to information systems and network design, security, operations, and use;

 

  

tax laws; and

 

  

imposition by foreign countries of trade restrictions, restrictions on the manner in which content is currently licensed and distributed, ownership restrictions, or currency exchange controls.

Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, reputational harm, adverse media coverage, and other collateral consequences. Multiple or repeated failures by us to comply with these laws and regulations could result in increased fines or proceedings against us. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business,

 

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results of operations, and financial condition. While we attempt to conduct our business and operations in a manner that we believe to be in compliance with such laws and regulations, there can be no assurance that a law or regulation will not be interpreted or enforced in a manner contrary to our current understanding. In addition, the promulgation of new laws, rules, and regulations could restrict or unfavorably impact our business, which could decrease demand for our services, reduce revenue, increase costs, or subject us to additional liabilities. For example, some legislatures have proposed laws in the past that would impose potential liability on us and other promoters and producers of live events for incidents that occur at our events, particularly relating to drugs and alcohol or the spread of the COVID-19 virus.

In the United States and certain foreign jurisdictions, we may have direct and indirect interactions with government agencies and state-affiliated entities in the ordinary course of our business. In particular, athletic commissions and other applicable regulatory agencies require us to obtain licenses for promoters, medical clearances, licenses for athletes, or permits for events in order for us to promote and conduct our live events and productions. In the event that we fail to comply with the regulations of a particular jurisdiction, whether through our acts or omissions or those of third parties, we may be prohibited from promoting and conducting our live events and productions in that jurisdiction. The inability to present our live events and productions in jurisdictions could lead to a decline in various revenue streams in such jurisdictions, which could have an adverse effect on our business, financial condition, and results of operations.

We operate in a number of countries which are considered to be at a heightened risk for corruption. Additionally, we operate in industry segments, such as sports marketing, that have been the subject of past anti-corruption enforcement efforts. As a global company, a risk exists that our employees, contractors, agents, or managers could engage in business practices prohibited by applicable U.S. laws and regulations, such as the FCPA, as well as the laws and regulations of other countries prohibiting corrupt payments to government officials and others, such as the U.K. Bribery Act. There can be no guarantee that our compliance programs will prevent corrupt business practices by one or more of our employees, contractors, agents, managers, or vendors, or that regulators in the U.S. or in other markets will view our program as adequate should any such issue arise.

We are also required to comply with economic sanctions laws imposed by the United States or by other jurisdictions where we do business, which may restrict our transactions in certain markets, and with certain customers, business partners, and other persons and entities. As a result, we are not permitted to, directly or indirectly (including through a third-party intermediary), procure goods, services, or technology from, or engage in transactions with, individuals and entities subject to sanctions. While we believe we have been in compliance with sanctions requirements, there can be no guarantee that we will remain in compliance. Any violation of anti-corruption or sanctions laws could result in fines, civil and criminal sanctions against us or our employees, prohibitions on the conduct of our business (e.g., debarment from doing business with International Development Banks and similar organizations), and damage to our reputation, which could have an adverse effect on our business, financial condition, and results of operations.

In addition, following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the European Union on January 31, 2020 and entered into a transition period that expired on December 31, 2020. The United Kingdom will continue its ongoing and complex negotiations with the European Union relating to the future trading relationship between the parties. Significant political and economic uncertainty remains about whether the terms of the relationship will differ materially from the terms before withdrawal. The developments, or the perception that any of them could occur, may result in increased legal and regulatory complexities, potential higher costs of conducting business in Europe as well as less demand for concerts and other live entertainment in the United Kingdom and the E.U. Brexit has also contributed to significant volatility and uncertainty in global stock markets and currency exchange rates, and such volatility could continue to occur as the negotiation process progresses.

 

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We are signatory to certain franchise agreements of unions and guilds and are subject to certain licensing requirements of the states in which we operate. We are also signatories to certain collective bargaining agreements and depend upon unionized labor for the provision of some of our services. Our clients are also members of certain unions and guilds that are signatories to collective bargaining agreements. Any expiration, termination, revocation or non-renewal of these franchises, collective bargaining agreements, or licenses and any work stoppages or labor disturbances could adversely affect our business.

Certain of our business, clients, or employees at some of the locations in which we operate are subject to collective bargaining and/or franchise agreements. These collective bargaining and/or franchise agreements regularly expire and require negotiation in the ordinary course of business. Upon the expiration of any of these collective bargaining and/or franchise agreements, however, we, the trade associations with which we are affiliated, and/or our clients’ unions may be unable to negotiate new collective bargaining and/or franchise agreements on satisfactory terms or at all. Our operations may be interrupted as a result of labor disputes or difficulties and delays in the process of renegotiating. Certain of such unions and guilds have in the past gone on strike, and in the future may do so again. In addition, our operations at one or more of our facilities may also be interrupted as a result of labor disputes by outside unions attempting to unionize one or more groups of employees (even if not employed by us) at a venue even though we do not currently have unionized labor at that venue. There have also been efforts to unionize the MMA athletes that participate in UFC’s events. A work stoppage at one or more of our operated venues or at our promoted events could have an adverse effect on our business, financial condition and results of operations. We cannot predict the effect that a potential work stoppage would have on our business.

We are party to certain collective bargaining agreements that require contributions to various multiemployer pension, health, and welfare plans that cover unionized employees. Required contributions to these plans could unexpectedly increase during the term of a collective bargaining agreement due to the Employee Retirement Income Security Act of 1974, as amended, which requires additional contributions to be made when a pension fund enters into critical status, which may occur for reasons that are beyond our control. In addition, we may be required by law to fulfill our pension withdrawal liability with respect to any multiemployer pension plans from which we may withdraw or partially withdraw. Our potential withdrawal liability will increase if a multiemployer pension plan in which we participate has significant underfunded liabilities. Any unplanned multiemployer pension liabilities could have an adverse effect on our business, financial condition, and results of operations.

Our talent agency business is and was signatory, through a trade association, The Association of Talent Agents (“ATA”), to certain franchise agreements with the unions and guilds that represent certain of its clients (for example, with the Directors Guild of America). The agency is also subject to licensing and other requirements of certain states in which we operate. Our ability to maintain, renew, or operate without such licenses and franchises is not guaranteed. For example, the Writer’s Guild of America East and the Writer’s Guild of America West (collectively, the “WGA”), terminated its previous 1976 franchise agreement, the Artists’ Manager Basic Agreement, with the ATA, effective April 6, 2019 and while the parties were attempting to negotiate a new franchise agreement, the WGA instructed its members to terminate writing representation services. Furthermore, the WGA and certain writers filed a lawsuit in state court in California against WME and other talent agencies alleging, among other things, breach of fiduciary duty and unfair competition under California law (the “State Court Action”). In addition, on June 24, 2019, WME filed a lawsuit in federal court in California against the WGA alleging violations of Section 1 of the Sherman Act (the “Federal Court Action”). In August 2019, the WGA voluntarily dismissed the State Court Action and instead refiled its claims as counterclaims in the Federal Court Action. The WGA claims included breach of fiduciary duty, unfair competition, violations of Section 1 of the Sherman Act, violations of the California Cartwright Act and RICO, among others. The case was resolved and dismissed with prejudice upon WME signing a new franchise agreement and side letter directly with the WGA on February 5, 2021 (the “Franchise Agreements”).

The Franchise Agreements include terms that prohibit WME 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

 

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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 (any such entity or individual, a “Restricted Production Entity” and the restrictions set forth in clause (b), the “Restricted Production Entity Limit”). The Franchise Agreements provide for a transition period (the “Transition Period”) for WME to come into compliance with certain of its provisions, including the Restricted Production Entity Limit. During the term of the Franchise Agreements, until we are in compliance, the Franchise Agreements require that we place into escrow (i) Endeavor Content’s after-tax gross profits from the production of works written by WGA members under a WGA collective bargaining agreement and (ii) WME’s after-tax writer commissions and package fees received in connection with such Endeavor Content productions.

Given Endeavor’s current ownership of certain Restricted Production Entities exceeds 20% (including with respect to certain portions of the Endeavor Content business), we will need to reduce our ownership in those Restricted Production Entities to 20% or less by the end of the Transition Period in order to come into compliance and not be in violation of the Franchise Agreements. The potential consequences of any failure to comply may include, among other things, failure to access such escrowed funds during the term until we are in compliance, WGA’s termination of the Franchise Agreements, and, as a result, WGA member clients’ termination of WME as their agency for writing representation services.

Furthermore, the Restricted Production Entity Limit set forth in the Franchise Agreements applies to WME, its agents, employees, partners, principals and shareholders, other than a de minimis holder of general stock (defined as a shareholder that (i) does not hold more than 5% of Endeavor and (ii) does not have voting or other control of the operation or management of Endeavor (a “De Minimis Shareholder”)). We do not have control over who acquires our shares in the public markets, and cannot limit the percentage of our shares held by any given shareholder. In the event that a shareholder of the Company (other than a De Minimis Shareholder) acquires a greater than 20% ownership or other financial interest in a Restricted Production Entity, we would also be in violation of the Franchise Agreements and the potential consequences set forth above would similarly apply.

The outcome of any similar disputes with unions or guilds that represent our clients, including the commercial landscape that will exist in the future with our clients after such disputes, could have an adverse effect on our business. As with the WGA dispute, any revocation, non-renewal or termination of our or our clients’ franchises or licenses, including but not limited to the Franchise Agreements, including the limitation on our client representation business’ ability to generate new future packaging revenues or its ability to affiliate with other Endeavor companies that produce content, or any disputed application of, or unexpected change in franchise or licensing requirements (whether applicable to us, our clients or otherwise), could have an adverse effect on our business, financial condition, and results of operations.

We cannot be certain that additional financing will be available on reasonable terms when required, or at all.

From time to time, we may need additional financing, whether in connection with our capital improvements, acquisitions, or otherwise. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets and other factors. For example, if borrowings available 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”) and UFC Holdings, LLC’s term loan and revolving credit facilities (the “UFC Credit Facilities” and, collectively with the Credit Facilities, the “Senior Credit Facilities”), or borrowings under certain of our other debt facilities, are insufficient or unavailable at a reasonable cost, we may be required to adopt one or more alternatives to raise cash, such as incurring additional indebtedness, selling our assets, seeking to raise additional equity capital, or restructuring, which alternatives may not be available to us on favorable terms when required, or at all. Any of the foregoing could have a material adverse effect on our business. In addition, if we raise additional funds through the issuance of equity, equity-linked or debt securities, those

 

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securities may have rights, preferences, or privileges senior to the rights of our Class A common stock, and our then existing stockholders may experience dilution.

Unfavorable outcomes in legal proceedings may adversely affect our business and operating results.

Our results may be affected by the outcome of pending and future litigation. Unfavorable rulings in our legal proceedings could result in material liability to us or have a negative impact on our reputation or relations with our employees or third parties. The outcome of litigation, including class action lawsuits, is difficult to assess or quantify. Plaintiffs in class action lawsuits may seek recovery of very large or indeterminate amounts and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. UFC is currently named in five related class-action lawsuits filed against it alleging that UFC violated Section 2 of the Sherman Act by monopolizing the alleged market for the promotion of elite professional MMA bouts and monopolizing the alleged market for elite professional MMA fighters’ services. Additionally, IMG is currently named in four claims against it in Milan, Italy alleging anti-competitive practices. See “Business—Legal Proceedings.” If we are unable to resolve these or other matters favorably, our business, operating results, and our financial condition may be adversely affected.

In addition, we are currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal), or lawsuits by governmental agencies or private parties. If the results of these investigations, proceedings, or suits are unfavorable to us or if we are unable to successfully defend against third-party lawsuits, we may be required to pay monetary damages or may be subject to fines, penalties, injunctions, or other censure that could have an adverse effect on our business, financial condition, and results of operations. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could have an adverse effect on our business, results of operations, and financial condition.

Risks Related to Our Organization and Structure

We are a holding company and our principal asset after completion of this offering will be our indirect equity interests in Endeavor Operating Company and, accordingly, we are dependent upon distributions from Endeavor Operating Company to pay taxes and other expenses.

We are a holding company and, upon completion of the reorganization transactions and this offering, our principal asset will be our indirect ownership of Endeavor Operating Company. See “Organizational Structure.” We have no independent means of generating revenue. As the indirect sole managing member of Endeavor Operating Company, we intend to cause Endeavor Operating Company to make distributions to its equityholders, including the members of Endeavor Operating Company (including Endeavor Profits Units holders) and Endeavor Manager, in amounts sufficient to cover the taxes on their allocable share of the taxable income of Endeavor Operating Company. As the sole managing member of Endeavor Manager, we intend to cause Endeavor Manager, to the extent it is able, to make non-pro rata distributions to us such that we will be able to cover all applicable taxes payable by us, any payments we are obligated to make under the tax receivable agreement we intend to enter into as part of the reorganization transactions and other costs or expenses, but we will be limited in our ability to cause Endeavor Operating Company to make distributions to its equityholders (including for purposes of paying corporate and other overhead expenses and dividends) under the Senior Credit Facilities. In addition, certain laws and regulations may result in restrictions on Endeavor Manager’s ability to make distributions to us, Endeavor Operating Company’s ability to make distributions to its equityholders, or the ability of Endeavor Operating Company’s subsidiaries to make distributions to it.

To the extent that we need funds and Endeavor Manager, Endeavor Operating Company or Endeavor Operating Company’s subsidiaries are restricted from making such distributions, under applicable law or regulation, as a result of covenants in the Senior Credit Facilities or otherwise, we may not be able to obtain such

 

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funds on terms acceptable to us or at all and, as a result, could suffer an adverse effect on our liquidity and financial condition. In certain situations, including where Endeavor Operating Company does not have sufficient cash to make tax distributions to all of its members in the full amount provided for in the Endeavor Operating Company Agreement, tax distributions made to Endeavor Manager may be reduced (relative to those tax distributions made to 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. Tax distributions will generally be treated as advances of other distributions made under the Endeavor Operating Company Agreement, but no adjustments will be made to the exchange ratio for members of Endeavor Operating Company or Endeavor Manager who exercise the redemption rights described above to account for prior tax distributions (and tax distributions paid prior to such an exercise of redemption rights will not reduce distributions otherwise payable to Endeavor Manager in respect of Endeavor Operating Company Units acquired in connection with the exercise of such redemption rights).

Under the limited liability company agreement of Endeavor Operating Company (the “Endeavor Operating Company Agreement”), we expect Endeavor Operating Company, from time to time, to make distributions in cash to its equityholders, including the members of Endeavor Operating Company (including the Endeavor Profits Units holders) and Endeavor Manager, in amounts sufficient to cover the taxes on their allocable share of the taxable income of Endeavor Operating Company. We further expect that, under the limited liability company agreement of Endeavor Manager (the “Endeavor Manager LLC Agreement”), Endeavor Manager may make non-pro rata distributions in cash to us using the proceeds it receives from any such tax distributions by Endeavor Operating Company. As a result of (i) potential differences in the amount of net taxable income indirectly allocable to us and to Endeavor Operating Company’s other equityholders, (ii) the lower tax rate applicable to corporations as opposed to individuals, (iii) the favorable tax benefits that we anticipate from (a) redemptions or exchanges of Endeavor Operating Company Units (and paired shares of Class X common stock), in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, (b) payments under the tax receivable agreement and (c) the acquisition of interests in Endeavor Operating Company from its equityholders (other than Endeavor Group Holdings and Endeavor Manager) and (iv) the fact that tax distributions made in respect of Endeavor Operating Company Units will generally be made pro rata in respect of such Units as described in the Endeavor Operating Company Agreement, we expect that these tax distributions may be in amounts that exceed our tax liabilities. Our board of directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, the payment of obligations under the tax receivable agreement and the payment of other expenses. We will have no obligation to distribute such cash (or other available cash) to our stockholders. No adjustments to the exchange ratio for Endeavor Operating Company Units or Endeavor Manager Units and corresponding shares of common stock will be made as a result of any cash distribution by us or any retention of cash by us. To the extent we do not distribute such cash as dividends on our Class A common stock and instead, for example, hold such cash balances, or lend them to Endeavor Operating Company, this may result in shares of our Class A common stock increasing in value relative to the value of Endeavor Operating Company Units. The holders of Endeavor Operating Company Units may benefit from any value attributable to such cash balances if they acquire shares of Class A common stock in exchange for their Endeavor Operating Company Units (and paired shares of Class X common stock).

We are controlled by Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders, whose interests in our business may be different than yours, and our board of directors has delegated significant authority to an Executive Committee and to Messrs. Emanuel and Whitesell.

Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will, as a group, control approximately 89.4% of the combined voting power of our common stock (or 89.5% if the underwriters exercise their option to purchase additional shares in full) after the completion of this offering and the application of the net proceeds from this offering as a result of their ownership of shares of our Class A common stock and Class X common stock, each share of which is entitled to 1 vote on all matters submitted to a vote of our stockholders, and Class Y common stock, each share of which is entitled to 20 votes on all matters submitted to a vote of our stockholders.

Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will collectively have the ability to substantially control our Company, including the ability to control any action requiring the

 

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general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and stockholder amendments to our by-laws, and the approval of any merger or sale of substantially all of our assets. This concentration of ownership and voting power may also delay, defer, or even prevent an acquisition by a third party or other change of control of our Company, and may make some transactions more difficult or impossible without the support of Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders, even if such events are in the best interests of minority stockholders. This concentration of voting power may have a negative impact on the price of our Class A common stock. In addition, because shares of our Class Y common stock each have 20 votes per share on matters submitted to a vote of our stockholders, Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will be able to control our Company as long as they own Class Y common stock representing more than a majority of the total voting power of our issued and outstanding common stock, voting together as a single class. Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will continue to control the outcome of matters submitted to stockholders so long as they collectively hold 123,972,031 shares of Class Y common stock, which represents 18.2% of the outstanding shares of all our common stock outstanding upon the closing of this offering. Holders of Class Y common stock would continue to control the outcome of matters submitted to stockholders where Class Y common stock represents 18.2% of the outstanding shares of all our common stock.

Additionally, prior to a Triggering Event, pursuant to Section 141(a) of the Delaware General Corporation Law (“DGCL”), the Executive Committee will have all of the power and authority (including voting power) of the board of directors. The Executive Committee will have the authority to approve any actions of the Company, except for matters that must be approved by the Audit Committee of the board (or both the Executive Committee and the Audit Committee), or by a committee qualified to grant equity to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for purposes of exempting transactions pursuant to Section 16b-3 thereunder, or as required under Delaware law, SEC rules and the rules of the Exchange. The Executive Committee will consist of Messrs. Emanuel and Whitesell and two directors nominated to our board of directors by the Silver Lake Equityholders. The Executive Committee will further delegate to Messrs. Emanuel and Whitesell the authority to manage the business of the Company with power and authority to approve any actions of the Company, except for certain specified actions that require the approval of the Executive Committee and as required under Delaware law, SEC rules and the rules of the Exchange. See “Management—Structure of the Board of Directors.”

Messrs. Emanuel’s and Whitesell’s, Executive Holdcos’, and the Silver Lake Equityholders’ interests may not be fully aligned with yours, which could lead to actions that are not in your best interest. Because Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders hold part of their economic interest in our business through Endeavor Operating Company, rather than through the public company, they may have conflicting interests with holders of shares of our Class A common stock. For example, Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders may have different tax positions from us, which could influence their decisions regarding whether and when we should dispose of assets or incur new or refinance existing indebtedness, and whether and when we should undergo certain changes of control within the meaning of the tax receivable agreement or terminate the tax receivable agreement. In addition, the structuring of future transactions may take into consideration these tax or other considerations even where no similar benefit would accrue to us. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.” Messrs. Emanuel’s and Whitesell’s, Executive Holdcos’, and the Silver Lake Equityholders’ significant ownership in us and resulting ability to effectively control us may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our Class A common stock might otherwise receive a premium for your shares over the then-current market price.

Section 203 of the DGCL may affect the ability of an “interested stockholder” to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an “interested stockholder.” An “interested stockholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a

 

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corporation. We have elected in our amended and restated certificate of incorporation not to be subject to Section 203 of the DGCL. Nevertheless, our amended and restated certificate of incorporation will contain provisions that will become operative following a Triggering Event and that will have a similar effect to Section 203 of the DGCL, except that they provide that Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders and their respective affiliates and direct and indirect transferees will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions.

Our amended certificate of incorporation will provide that, to the fullest extent permitted by law, Endeavor Group Holdings renounces any interest or expectancy in a transaction or matter that may be a corporate opportunity for Endeavor Group Holdings and Messrs. Emanuel and Whitesell (other than in their capacity as officers and employees of the Company), Executive Holdcos, the Silver Lake Equityholders, or any of our non-employee directors have no duty to present such corporate opportunity to Endeavor Group Holdings and they may invest in competing businesses or do business with our clients or customers. To the extent that Messrs. Emanuel and Whitesell, Executive Holdcos, the Silver Lake Equityholders, or our non-employee directors invest in other businesses, they may have differing interests than our other stockholders. In addition, we may in the future partner with or enter into transactions with our pre-IPO investors or their affiliates, including with respect to future investments, acquisitions, and dispositions.

For additional information regarding the share ownership of, and our relationship with, the Silver Lake Equityholders, you should read the information under the headings “Principal Stockholders” and “Certain Relationships and Related Party Transactions.”

We cannot predict the impact our capital structure and the concentrated control by Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders may have on our stock price or our business.

We cannot predict whether our multiple share class capital structure, combined with the concentrated control by Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders, will result in a lower trading price or greater fluctuations in the trading price of our Class A common stock, or will result in adverse publicity or other adverse consequences. In addition, some indices are considering whether to exclude companies with multiple share classes from their membership. For example, in July 2017, FTSE Russell, a provider of widely followed stock indices, stated that it plans to require new constituents of its indices to have at least five percent of their voting rights in the hands of public stockholders. In addition, in July 2017, S&P Dow Jones, another provider of widely followed stock indices, stated that companies with multiple share classes will not be eligible for certain of their indices. As a result, our Class A common stock will likely not be eligible for these stock indices. We cannot assure you that other stock indices will not take a similar approach to FTSE Russell or S&P Dow Jones in the future. Exclusion from indices could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.

We have a substantial amount of indebtedness, which could adversely affect our business.

As of December 31, 2020, we had an aggregate of $5.7 billion outstanding indebtedness under our Senior Credit Facilities, with the ability to borrow up to approximately $207.2 million more under revolving credit facilities under our Senior Credit Facilities, consisting primarily of availability under the UFC Credit Facilities. Additionally, as of December 31, 2020, we had certain other revolving line of credit facilities and long-term debt liabilities, primarily related to Endeavor Content, with total committed amounts of $240.0 million, of which $185.4 million was outstanding and $11.7 million was available for borrowing based on the supporting asset base, and similar to our Senior Credit Facilities, these facilities include restrictive covenants that may restrict certain business operations of the respective businesses who have borrowed from these facilities.

If we cannot generate sufficient cash flow from operations to service this debt, we may need to refinance this debt, dispose of assets, or issue equity to obtain necessary funds. Additionally, our credit rating has in the past and may in the future be downgraded. We do not know whether we will be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.

 

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This substantial amount of indebtedness could:

 

  

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures or other purposes;

 

  

require us to refinance in order to accommodate the maturity of the term loans under our Credit Facilities in 2025 and the term loans under our UFC Credit Facilities in 2026;

 

  

increase our vulnerability to adverse economic and industry conditions, which could lead to a downgrade in our credit rating and may place us at a disadvantage compared to competitors who may have proportionately less indebtedness;

 

  

increase our cost of borrowing and cause us to incur substantial fees from time to time in connection with debt amendments or refinancings; and

 

  

limit our ability to obtain necessary additional financing for working capital, capital expenditures, or other purposes in the future, plan for or react to changes in our business and the industries in which we operate, make future acquisitions or pursue other business opportunities, and react in an extended economic downturn.

Despite this substantial indebtedness, we may still have the ability to incur significantly more debt. The incurrence of additional debt could increase the risks associated with this substantial leverage, including our ability to service this indebtedness. In addition, because a portion of the borrowings under our credit facilities bear interest at a variable rate, our interest expense could increase, exacerbating these risks. Of the aggregate principal balance of $5.7 billion outstanding under the Senior Credit Facilities as of December 31, 2020, $1.5 billion has been fixed through interest rate swaps leaving $4.2 billion of floating rate debt under those facilities. A 1% increase in the interest rates charged on the outstanding amount of our floating rate debt would increase our annual interest expense by $42 million.

Restrictive covenants in the Senior Credit Facilities may restrict our ability to pursue our business strategies.

The credit agreements governing the terms of the Senior Credit Facilities restrict, among other things, asset dispositions, mergers and acquisitions, dividends, stock repurchases and redemptions, other restricted payments, indebtedness, loans and investments, liens, and affiliate transactions. The Senior Credit Facilities also contain customary events of default, including a change in control. These covenants, among other things, limit our ability to fund future working capital needs and capital expenditures, engage in future acquisitions or development activities, or otherwise realize the value of our assets and opportunities fully. Such covenants could limit the flexibility of our subsidiaries in planning for, or reacting to, changes in the entertainment and sports industry. Our ability to comply with these covenants is subject to certain events outside of our control. Additionally, we have in the past, and may in the future need to amend or obtain waivers to our existing covenants, and cannot guarantee that we will be able to obtain those amendments or waivers on commercially reasonable terms or at all. If we are unable to comply with these covenants, the lenders under the Senior Credit Facilities could terminate their commitments and accelerate repayment of our outstanding borrowings, which also may result in the acceleration of or default under any other debt we may incur in the future to which a cross-acceleration or cross-default provision applies. If such an acceleration were to occur, we may be unable to obtain adequate refinancing for our outstanding borrowings on favorable terms, or at all. We have pledged a significant portion of our assets as collateral under our Senior Credit Facilities. If we are unable to repay our outstanding borrowings when due, the lenders under the Senior Credit Facilities will also have the right to proceed against the collateral granted to them to secure the indebtedness owed to them, which may have an adverse effect on our business, financial condition, and operating results.

We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.

Our ability to make payments on, or to refinance our respective obligations under, our indebtedness will depend on future operating performance and on economic, financial, competitive, legislative, regulatory, and

 

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other factors. Many of these factors are beyond our control. Additionally, the terms of the UFC Credit Facilities restrict the ability of our UFC subsidiaries to make distributions to us, which may limit us from using funds from our UFC subsidiaries to make payments on our indebtedness under the Credit Facilities. Our consolidated cash balance also includes cash from other consolidated non-wholly owned entities, such as our Endeavor China business. These businesses may have restrictions in their ability to distribute cash to the rest of the company, including under the terms of applicable operating agreements or debt agreements, which may require the approval of certain of our investors based on the timing and amount of distribution. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our respective obligations under our indebtedness or to fund our other needs. In order for us to satisfy our obligations under our indebtedness, we must continue to execute our business strategy. If we are unable to do so, we may need to refinance all or a portion of our indebtedness on or before maturity.

We will be exempt from certain corporate governance requirements since we will be a “controlled company” within the meaning of the Exchange rules, and as a result our stockholders will not have the protections afforded by these corporate governance requirements.

Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will control, as a group, more than 50% of our combined voting power upon the completion of this offering. As a result, we will be considered a “controlled company” for the purposes of the Exchange rules and corporate governance standards, and therefore we will be permitted to, and we intend to, elect not to comply with certain corporate governance requirements of the Exchange, including those that would otherwise require our board of directors to have a majority of independent directors and require that we either establish Compensation and Nominating and Corporate Governance Committees, each comprised entirely of independent directors, or otherwise ensure that the compensation of our executive officers and nominees for directors are determined or recommended to the board of directors by the independent members of the board of directors. Accordingly, holders of our Class A common stock will not have the same protections afforded to stockholders of companies that are subject to all of the rules and corporate governance standards of the Exchange, and the ability of our independent directors to influence our business policies and affairs may be reduced. We expect to remain a controlled company until Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders no longer control, as a group, more than 50% of our combined voting power. Each member of our control group holds Class A common stock and Class X common stock, each of which has 1 vote per share, and Class Y common stock, which has a 20-vote per share feature. See “Management—Controlled Company.” The shares of Class Y common stock held by our control group will be canceled/redeemed for no consideration upon the earlier of (i) the disposition of (a) the paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) and (b) the shares of Class A common stock (as a result of a redemption of paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock)) paired with such Class Y common stock, as applicable, and (ii) with respect to all shares of Class Y common stock, a Triggering Event. Because there is no time-based sunset date for our Class Y common stock, we may continue to be a controlled company indefinitely.

We will be required to pay certain of our pre-IPO investors, including certain Other UFC Holders, for certain tax benefits we may claim (or are deemed to realize) in the future, and the amounts we may pay could be significant.

In connection with the transactions contemplated by this offering, we will acquire existing equity interests in Endeavor Operating Company from certain of our pre-IPO investors in exchange for the issuance of shares of our Class A common stock, Class Y common stock and rights to receive payments under the tax receivable agreement and will acquire certain existing interests in Endeavor Operating Company (or in UFC Parent) from certain of the Other UFC Holders in exchange for cash and rights to receive payments under the tax receivable agreement. As a result of these acquisitions, we will succeed to certain tax attributes of certain of our pre-IPO investors and will receive the benefit of tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries. In addition, redemptions or exchanges of Endeavor Operating Company Units from members of

 

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Endeavor Operating Company (other than Endeavor Manager) in exchange for shares of our Class A common stock or cash are expected to produce favorable tax attributes that would not be available to us in the absence of such redemptions or exchanges.

We intend to enter into the tax receivable agreement with the Post-IPO TRA Holders that will provide for the payment by us to the Post-IPO TRA Holders (or their transferees of Endeavor Operating Company Units or other assignees) of 85% of the amount of cash 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 (i) any tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries resulting from (a) the acquisition of equity interests in Endeavor Operating Company from certain of our pre-IPO investors and the acquisition of interests in Endeavor Operating Company (or UFC Parent) from certain of the Other UFC Holders, (b) future redemptions or exchanges by us of Endeavor Operating Company Units from members of Endeavor Operating Company (other than Endeavor Manager) in exchange for shares of our Class A common stock or cash or (c) payments made under the tax receivable agreement, (ii) any net operating losses or certain other tax attributes of certain pre-IPO investors or Other UFC Holders that are available to us to offset income or gain earned after the mergers, (iii) any existing tax basis associated with Endeavor Operating Company Units, the benefit of which is allocable to us as a result of the exchanges of such Endeavor Operating Company Units for shares of our Class A common stock or cash, and (iv) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement. The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the covered tax attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made.

The actual tax benefit, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including, among others, the timing of redemptions or exchanges by members of Endeavor Operating Company, the price of our Class A common stock at the time of the redemptions or exchanges, the extent to which such redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable, and the portion of our payments under the tax receivable agreement constituting imputed interest.

Future payments under the tax receivable agreement could be substantial. Assuming that all units eligible to be redeemed for cash or Class A common stock would be exchanged for Class A common stock by Endeavor Group Holdings at the time of the offering and that we will have sufficient taxable income to utilize all of the tax attributes covered by the tax receivable agreement when they are first available to be utilized under applicable law, we estimate that payments to the Post-IPO TRA Holders under the tax receivable agreement would aggregate to approximately $2,324.2 million over the next 15 years and for yearly payments over that time to range between approximately $104.3 million to $201.3 million per year, based on the initial public offering price of $24.00. The payments under the tax receivable agreement are not conditioned upon any Post-IPO TRA Holder’s continued ownership of us.

In addition, the Post-IPO TRA Holders (or their transferees or other assignees) will not reimburse us for any payments previously made if any covered tax benefits are subsequently disallowed, except that any excess payments made to any Post-IPO TRA Holder (or such holder’s transferees or assignees) will be netted against future payments that would otherwise be made under the tax receivable agreement, if any, after our determination of such excess. We could make payments to the Post-IPO TRA Holders under the tax receivable agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity.

In addition, the tax receivable agreement provides that, upon certain mergers, asset sales or other forms of business combination, or certain other changes of control, our or our successor’s obligations with respect to tax benefits would be based on certain assumptions, including that we or our successor would have sufficient taxable

 

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income to fully utilize the tax benefits covered by the tax receivable agreement. As a result, upon a change of control, we could be required to make payments under the tax receivable agreement that are greater than the specified percentage of our actual cash tax savings, which could negatively impact our liquidity.

In addition, the tax receivable agreement will provide that in the case of a change in control of the Company or a material breach of our obligations under the tax receivable agreement, the Post-IPO TRA Holders will have the option to terminate the tax receivable agreement, and we will be required to make a payment to the Post-IPO TRA Holders covered by such termination in an amount equal to the present value of future payments (calculated using a discount rate equal to the lesser of 6.50 % or LIBOR plus 200 basis points, which may differ from our, or a potential acquirer’s, then-current cost of capital) under the tax receivable agreement, which payment would be based on certain assumptions, including those relating to our future taxable income. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our, or a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying, or preventing certain mergers, asset sales, other forms of business combinations, or other changes of control. These provisions of the tax receivable agreement may result in situations where the Post-IPO TRA Holders have interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make payments under the tax receivable agreement that are substantial, significantly in advance of any potential actual realization of such further tax benefits, and in excess of our, or a potential acquirer’s, actual cash savings in income tax.

Finally, because we are a holding company with no operations of our own, our ability to make payments under the tax receivable agreement is dependent on the ability of our subsidiaries to make distributions to us. The Senior Credit Facilities restrict the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the tax receivable agreement. To the extent that we are unable to make payments under the tax receivable agreement as a result of restrictions in our Senior Credit Facilities, such payments will be deferred and will accrue interest until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.

Risks Related to this Offering and Our Class A Common Stock

Future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress the price of our Class A common stock.

Additional sales of a substantial number of shares of our Class A common stock in the public market after this offering, or the perception that such sales may occur, could have an adverse effect on our stock price and could impair our ability to raise capital through the sale of additional stock. Upon the completion of this offering, we will have 253,750,271 shares of Class A common stock issued and outstanding (or 256,945,271 shares of Class A common stock if the underwriters exercise their option to purchase additional shares). In addition, 170,872,599 shares of Class A common stock may be issued upon the exercise of the redemption rights of our pre-IPO equityholders (other than outstanding Endeavor Profits Units and Endeavor Catchup Profits Units described below) described elsewhere in this prospectus. Furthermore, redemptions or exchanges of Endeavor Manager Units and Endeavor Operating Company Units (and the corresponding shares of Class X common stock) into Class A common stock will have a dilutive effect on the number of outstanding shares of our Class A common stock, even if the indirect or direct economic ownership of Endeavor Operating Company or Endeavor Manager, as applicable, by holders of our Class A common stock remain unchanged. The Class A common stock offered hereby will be freely tradable without restriction under the Securities Act of 1933, as amended (the “Securities Act”), except for any Class A common stock that may be held or acquired by our directors, executive officers, and other affiliates (as that term is defined in the Securities Act), which will be restricted securities under the Securities Act. The shares of Class A common stock not being offered hereby or issuable as described above will be restricted securities. Restricted securities may not be sold in the public market unless they are registered under the Securities Act or an exemption from registration is available.

 

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Under the Registration Rights Agreement described under the heading “Certain Relationships and Related Party Transactions—Registration Rights Agreement,” certain of our equityholders immediately following the completion of the reorganization transactions and the UFC Buyout, but prior to the completion of this offering, including Executive Holdcos and the Silver Lake Equityholders (our “Principal Stockholders”), will have demand and piggyback rights that will require us to file registration statements registering their Class A common stock (including shares of Class A common stock issuable upon the exercise by members of Endeavor Operating Company (other than Endeavor Manager) or members of Endeavor Manager (other than us) of their redemption rights described elsewhere in this prospectus) or to include sales of such Class A common stock in registration statements that we may file for ourselves or other stockholders. Additionally, as described under “Concurrent Private Placements,” the private placement investors will also have the right to require us to register their shares of Class A common stock on a Form S-1 registration statement within 60 days following the closing of this offering. We intend to file such registration statement on or around June 30, 2021. Additionally, we will bear common stock sold under these registration statements will be freely tradable in the public market. In the event that such registration rights are exercised and a large number of Class A common stock is sold in the public market, such sales could reduce the trading price of our Class A common stock. These sales could also impede our ability to raise future capital. all expenses in connection with any such registrations, including reimbursement of the reasonable fees and disbursements of one law firm for the selling stockholders (except that selling stockholders will be responsible for their pro rata share of underwriters’ commissions and discounts). See “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

We and each of our executive officers and directors, the Silver Lake Equityholders and certain of our other existing equityholders have agreed with the underwriters that for a period of 180 days after the date of this prospectus, we and they will not offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any of our common stock, or any options or warrants to purchase any of our common stock or any securities convertible into, exchangeable for or that represent the right to receive our common stock (including, without limitation, Endeavor Operating Company Units and Endeavor Manager Units), subject to specified exceptions including that we may, during such 180-day period, (i) offer, contract to sell or issue Class A common stock or securities convertible into Class A common stock (including Endeavor Operating Company Units or Endeavor Manager Units) in connection with an acquisition or business combination (including the filing of a registration statement on Form S-4 or other appropriate form with respect thereto) or the entering into of a joint venture, provided that the aggregate number of shares of Class A common stock that may be issued (excluding any shares of Class A common stock, Endeavor Manager Units or Endeavor Operating Company Units offered or contracted to be sold pursuant to a signed agreement in connection with an acquisition, business combination, joint venture or any similar transaction solely to the extent no shares of Class A common stock, Endeavor Operating Company Units or Endeavor Manager Units are issued during the 180-day period) shall not exceed 10% of the total number of shares of Class A common stock (determined after giving effect to the assumed exchange of all Endeavor Operating Company Units and Endeavor Manager Units then outstanding for newly issued shares of Class A common stock) issued and outstanding as of the closing of this offering and provided further that the acquirer of such common stock agrees in writing to be bound by the obligations and restrictions of our lock-up agreement and (ii) offer or issue Endeavor Operating Company Units to our employees or employees of any of our subsidiaries who are not employees of such entity as of the date of this prospectus. Morgan Stanley & Co. LLC may, in its discretion, at any time without prior notice (except with respect to common stock held by our executive officers and directors as described in the lock-up agreement), release all or any portion of the common stock from the restrictions in any such agreement. See “Underwriting” for more information. In addition, the Management Equityholders will be subject to market standoff restrictions with us in the Endeavor Manager LLC Agreement and Endeavor Operating Company LLC Agreement that restricts certain transfers of such shares of Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock, including equity awards issued under our equity incentive plans for one year following the closing of this offering, covering an aggregate of 170,872,599 shares of Class A common stock. Notwithstanding the foregoing, up to 4,950,000 shares of our outstanding Class A common stock may be sold beginning at the commencement of trading on the second trading day on which our common stock is traded on NYSE and up to an additional 1,300,000 shares of our outstanding Class A common

 

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stock on the effective date of the Resale Registration Statement. After the lock-up agreements and market standoff restrictions expire, up to an additional 164,742,419 shares of Class A common stock (including shares of Class A common stock issuable upon the exercise by members of Endeavor Operating Company (other than Endeavor Manager) or Endeavor Manager (other than us) of their redemption rights described elsewhere in this prospectus) may be sold by these equityholders in the public market either in a registered offering or pursuant to an exemption from registration, such as Rule 144 promulgated under the Securities Act (“Rule 144”). Of these shares, 124,344,980 shares may be immediately sold under Rule 144 without being subject to the volume, manner of sale and other restrictions of such rule. See “Shares Available for Future Sale” for a more detailed description of the restrictions on selling Class A common stock after this offering.

In addition, subject to certain restrictions:

 

  

the holders of 3,809,522 Endeavor Full Catch-up Profits Units (assuming our achievement of a $25.10 price per share that would fully satisfy their preference on distributions and result in their conversion into Endeavor Operating Company Units), will be able to exchange their Endeavor Operating Company Units and paired shares of our Class X common stock and Class Y common stock, as described in “Organizational Structure”. These holders may subsequently acquire shares of Class A common stock upon the exercise of their redemption rights;

 

  

the holders of 3,337,048 Endeavor Profits Units, which have a weighted-average per unit hurdle price of $17.68, will be able to exchange their Endeavor Profits Units into Endeavor Operating Company Units and paired shares of our Class X common stock and Class Y common stock, as described in “Organizational Structure”. These holders may subsequently acquire shares of Class A common stock upon the exercise of their redemption rights; and

 

  

the holders of 11,919,786 Endeavor Partial Catch-Up Profits Units, which have a per unit hurdle price of $23.16 (assuming our achievement of a $25.10 price per share that would fully satisfy their preference on distributions and result in their conversion into Endeavor Profits Units), will be able to exchange their Endeavor Profits Units and paired shares of our Class X common stock, as described in “Organizational Structure.” These holders may subsequently acquire shares of our Class A common stock upon the exercise of their redemption rights.

In addition, we have initially reserved for issuance under our 2021 Incentive Award Plan 21,700,000 shares of Class A common stock. In connection with this offering, we will grant the IPO Awards under our 2021 Incentive Award Plan. Moreover, if the price of our Class A common stock increases over time we will issue additional restricted stock units pursuant to potential future equity-based awards to Mr. Emanuel and Mr. Whitesell, as further described under “Executive Compensation - New Equity Awards.” Any shares of Class A common stock that we issue, including under our 2021 Incentive Award Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchase Class A common stock in this offering. Moreover, while in the past the Company has historically settled Endeavor Phantom Units in cash, it may in its discretion settle these in equity in the future, which would dilute the percentage ownership held by the investors who purchase Class A common stock in this offering.

The price of our Class A common stock may be volatile, and you may be unable to resell your Class A common stock at or above the initial public offering price or at all.

After this offering, the market price for our Class A common stock is likely to be volatile, in part because our Class A common stock has not previously been traded publicly. In addition, the market price for our Class A common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:

 

  

trends and changes in consumer preferences in the industries in which we operate;

 

  

changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the consumer and advertising marketplaces;

 

  

changes in key personnel;

 

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our entry into new markets;

 

  

changes in our operating performance;

 

  

investors’ perceptions of our prospects and the prospects of the businesses in which we participate;

 

  

fluctuations in quarterly revenue and operating results, as well as differences between our actual financial and operating results and those expected by investors;

 

  

the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

 

  

announcements relating to litigation;

 

  

guidance, if any, that we provide to the public, any changes in such guidance or our failure to meet such guidance;

 

  

changes in financial estimates or ratings by any securities analysts who follow our Class A common stock, our failure to meet such estimates or failure of those analysts to initiate or maintain coverage of our Class A common stock;

 

  

downgrades in our credit ratings or the credit ratings of our competitors;

 

  

the development and sustainability of an active trading market for our Class A common stock;

 

  

investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives;

 

  

the inclusion, exclusion, or deletion of our Class A stock from any trading indices;

 

  

future sales of our Class A common stock by our officers, directors, and significant stockholders;

 

  

other events or factors, including those resulting from system failures and disruptions, hurricanes, wars, acts of terrorism, other natural disasters, or responses to such events;

 

  

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; and

 

  

changes in accounting principles.

These and other factors may lower the market price of our Class A common stock, regardless of our actual operating performance. As a result, our Class A common stock may trade at prices significantly below the initial public offering price.

In addition, the stock markets, including the Exchange, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

If you invest in our Class A common stock, you will experience dilution to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book deficit per share of our Class A common stock.

Purchasers of our Class A common stock in this offering will experience immediate and substantial dilution in net tangible book deficit per share to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book deficit per share of our Class A common stock. After giving effect to the reorganization transactions, the estimated impact of the tax receivable agreement, this offering and the application of the net proceeds from this offering, on a fully exchanged and converted basis, our pro forma net tangible book deficit would have been approximately $(3,748.3) million, or $(8.83) per share,

 

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representing an immediate decrease in net tangible book deficit of $12.56 per share to existing equityholders and an immediate dilution in net tangible book deficit of $32.83 per share to new investors in this offering. For a further description of the dilution that you will experience immediately after the closing of this offering, see “Dilution.”

We do not expect to pay any cash dividends for the foreseeable future.

We currently expect to retain all of 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 following the completion of this offering. The declaration and payment of future dividends to holders of our Class A common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, legal requirements, tax obligations, restrictions in the debt instruments of our subsidiaries, including the Senior Credit Facilities, and other factors deemed relevant by our board of directors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Historical Liquidity and Capital Resources—Debt Facilities” for more information on the restrictions the Senior Credit Facilities impose on our ability to declare and pay cash dividends. As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their respective jurisdictions of organization, agreements of our subsidiaries, or covenants under future indebtedness that we or they may incur.

We will have broad discretion in the use of the net proceeds from this offering.

Our management will have broad discretion in the application of a portion of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess how a portion of the net proceeds are being used. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management may not apply the net proceeds from this offering in ways that ultimately increase the value of your investment. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

If we are unable to effectively implement or maintain a system of internal control over financial reporting, we may not be able to accurately or timely report our financial results and our stock price could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires us to evaluate the effectiveness of our internal controls over financial reporting as of the end of each fiscal year, including a management report assessing the effectiveness of our internal controls over financial reporting, and a report issued by our independent registered public accounting firm on that assessment, in each case beginning with the filing of our second Annual Report on Form 10-K. In fiscal year 2019, we identified a material weakness with our internal controls over financial reporting that resulted from not having a sufficiently documented risk assessment process to identify and analyze risks of misstatement due to error and/or fraud, and not having sufficiently documented compliance communication and investigation policies. This deficiency did not result in any error or restatement of our financial statements. We have since enhanced the documentation of our risk assessment process and controls to identify and analyze risks of misstatement due to error or fraud, and implemented process and controls over our enhanced compliance communication and investigation policies. Such controls have operated effectively over a sufficient period of time to conclude we have fully remediated this material weakness. In the future, it is possible that additional material weaknesses or significant deficiencies may be identified that we may be unable to remedy before the requisite deadline for those reports. Our ability to comply with the annual internal control reporting requirements will depend on the effectiveness of our financial reporting and data systems and controls across our company. We expect these systems and controls to require

 

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additional investment as we become increasingly more complex and our business grows. To effectively manage this complexity, we will need to continue to maintain and revise our operational, financial and management controls, and our reporting systems and procedures. Any weaknesses or deficiencies or any failure to implement required new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results and cause us to fail to meet our financial reporting obligations, or result in material misstatements in our financial statements, which could adversely affect our business and reduce our stock price.

Provisions in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent our acquisition by a third party.

Our certificate of incorporation and by-laws will contain several provisions that may make it more difficult or expensive for a third party to acquire control of us without the approval of our board of directors. These provisions, which may delay, prevent, or deter a merger, acquisition, tender offer, proxy contest or other transaction that stockholders may consider favorable, include the following, some of which may only become effective upon the Triggering Event:

 

  

the 20 vote per share feature of our Class Y common stock;

 

  

the fact that our Class Y common stock retains its 20 vote per share feature until such share of Class Y common stock is canceled/redeemed for no consideration upon, subject to certain exceptions, (i) the disposition of (a) the paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) and/or (b) the shares of Class A common stock (as a result of a redemption of paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) paired with such Class Y common stock or as a result of other transfers thereof) or (ii) a Triggering Event;

 

  

the division of our board of directors into three classes and the election of each class for three-year terms;

 

  

the sole ability of the Executive Committee, prior to the Triggering Event, to fill a vacancy on the board of directors;

 

  

prior to a Triggering Event and subject to certain exceptions, the vesting of all the power and authority of our board of directors to our Executive Committee;

 

  

advance notice requirements for stockholder proposals and director nominations;

 

  

after the Triggering Event, provisions limiting stockholders’ ability to call special meetings of stockholders, to require special meetings of stockholders to be called and to take action by written consent;

 

  

after the Triggering Event, in certain cases, the approval of holders representing at least 662/3% of the total voting power of the shares entitled to vote generally in the election of directors will be required for stockholders to adopt, amend or repeal our by-laws, or amend or repeal certain provisions of our certificate of incorporation;

 

  

the required approval of holders representing at least 662/3% of the total voting power of the shares entitled to vote at an election of the directors to remove directors; and

 

  

the ability of our governing body to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our governing body.

These provisions of our certificate of incorporation and by-laws could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our Class A common stock in the future, which could reduce the market price of our Class A common stock. For more information, see “Description of Capital Stock.”

 

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In the event of a merger, consolidation or tender or exchange offer, holders of our Class A common stock shall not be entitled to receive excess economic consideration for their shares over that payable to the holders of the Class C common stock.

No shares of Class C common stock, the primary purpose of which is to be available for issuance in connection with acquisitions, joint ventures, investments or other commercial arrangements, will be issued and outstanding upon the closing of this offering. If we choose to issue Class C common stock in the future, the holders of our Class A common stock shall not be entitled to receive economic consideration for their shares in excess of that payable to the holders of the then outstanding shares of Class C common stock in the event of a merger, consolidation or tender or exchange offer, even though our Class C common stock does not have the right to vote. This would result in a lesser payment to the holders of Class A common stock than if there are no shares of Class C common stock outstanding at the time of such merger, consolidation or tender or exchange offer. For more information, see “Description of Capital Stock.”

The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits and the federal district courts of the United States for the resolution of any complaint asserting a cause of action under the Securities Act may have the effect of discouraging lawsuits against our directors and officers.

Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, (A) the Court of Chancery of the State of Delaware be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of our company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director (including any director serving as a member of the Executive Committee), officer, agent or other employee or stockholder of our company to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the amended and restated certificate of incorporation or our by-laws or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein or, if such court does not have subject matter jurisdiction thereof, the federal district court located in the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, the exclusive forum provision shall not apply to claims seeking to enforce any liability or duty created by the Exchange Act. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers. It is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.

Transformation into a public company may increase our costs and disrupt the regular operations of our business.

We have historically operated as a privately owned company and we have incurred, and expect to in the future incur, significant additional legal, accounting, reporting, and other expenses as a result of having publicly traded common stock, including, but not limited to, increased costs related to auditor fees, legal fees, directors’ fees, directors and officers insurance, investor relations, and various other costs. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under the Exchange Act, the Sarbanes-Oxley Act and the Dodd–Frank Wall Street Reform and Consumer Protection Act, 2010, as well as rules implemented by the Securities and Exchange Commission (the “SEC”) and the Public Company

 

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Accounting Oversight Board. Compliance with these rules and regulations will make some activities more difficult, time-consuming, or costly, and increase demand, and, as a result, may place a strain on our systems and resources. Moreover, the additional demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, which could have an adverse effect on our business, financial condition, and results of operations.

Risks Related to Tax Matters

Tax matters may cause significant variability in our financial results.

Our businesses are subject to income taxation in the United States, as well as in many tax jurisdictions throughout the world. Tax rates in these jurisdictions may be subject to significant change. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors including, but not limited to, projected levels of taxable income, pre-tax income being lower than anticipated in countries with lower statutory rates or higher than anticipated in countries with higher statutory rates, increases or decreases to valuation allowances recorded against deferred tax assets, tax audits conducted and settled by various tax authorities, adjustments to income taxes upon finalization of income tax returns, the ability to claim foreign tax credits, and changes in tax laws and their interpretations in countries in which we are subject to taxation.

We may be required to pay additional taxes as a result of the new partnership audit rules.

The Bipartisan Budget Act of 2015 changed the rules applicable to U.S. federal income tax audits of partnerships, including entities such as Endeavor Operating Company that are taxed as partnerships. Under these rules (which generally are effective for taxable years beginning after December 31, 2017), subject to certain exceptions, audit adjustments to items of income, gain, loss, deduction, or credit of an entity (and any holder’s share thereof) is determined, and taxes, interest, and penalties attributable thereto, are assessed and collected, at the entity level. Although it is uncertain how these rules will continue to be implemented, it is possible that they could result in Endeavor Operating Company (or any of its applicable subsidiaries that are or have been treated as partnerships for U.S. federal income tax purposes) being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as an indirect member of Endeavor Operating Company (or such other entities), could be required to indirectly bear the economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment.

Under certain circumstances, Endeavor Operating Company may be eligible to make an election to cause holders of Endeavor Operating Company Units to take into account the amount of any understatement, including any interest and penalties, in accordance with such holders’ interest in Endeavor Operating Company in the year under audit. We will decide whether to cause Endeavor Operating Company to make this election in our sole

 

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discretion. If Endeavor Operating Company does not make this election, the then-current holders of Endeavor Operating Company Units (including Endeavor Group Holdings as an indirect member of Endeavor Operating Company) would economically bear the burden of the understatement even if such holders had a different percentage interest in Endeavor Operating Company during the year under audit, unless, and only to the extent, Endeavor Operating Company is able to recover such amounts from current or former impacted holders of Endeavor Operating Company. Similar rules also apply with respect to any of Endeavor Operating Company’s subsidiaries that are or have been treated as partnerships for U.S. federal income tax purposes.

The changes created by these new rules are sweeping, and in many respects, dependent on the promulgation of future regulations or other guidance by the U.S. Department of the Treasury.

The tax classification of Endeavor Operating Company could be challenged.

We intend that Endeavor Operating Company has been and will continue to be treated as a partnership for federal and, if applicable, state or local income tax purposes and not as an association taxable as a corporation. However, if any taxing authority were to successfully assert otherwise, the tax consequences resulting therefrom would be materially different than those described elsewhere in this prospectus.

We may be required to fund withholding tax upon certain exchanges of Endeavor Operating Company Units into shares of our common stock by non-U.S. holders

In the event of a transfer by a non-U.S. transferor of an interest in a partnership that is engaged in a U.S. trade or business, the transferee generally must withhold tax in an amount equal to ten percent of the amount realized (as determined for U.S. federal income tax purposes) by the transferor on such transfer. After the reorganization transactions, holders of Endeavor Operating Company Units may include non-U.S. holders. Pursuant to the Endeavor Operating Company Agreement, any non-U.S. holders’ Endeavor Operating Company Units may be redeemed for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock (which redemption, if made for shares of Class A common stock, would be effectuated via a direct purchase by Endeavor Group Holdings). It is expected that we would have to withhold ten percent of the amount realized (as determined for U.S. federal income tax purposes) by the non-U.S. holders in respect of any such transactions. We may not have sufficient cash to satisfy such withholding obligation, and, we may be required to incur additional indebtedness or sell shares of our Class A common stock in the open market to raise additional cash in order to satisfy our withholding tax obligations.

We may incur certain tax liabilities attributable to our pre-IPO investors and Other UFC Holders as a result of the transactions contemplated to occur in connection with this offering.

In connection with the transactions contemplated to occur in connection with this offering, certain of our pre-IPO investors and certain Other UFC Holders, including certain affiliates of Silver Lake, will merge with and into Endeavor Group Holdings. See “Organizational Structure—Reorganization Transactions—Pre-IPO Investors Mergers” and “Prospectus Summary—UFC Buyout.” As the successor to these merged entities, Endeavor Group Holdings will generally succeed to and be responsible for any outstanding or historical tax liabilities of the merged entities, including any liabilities that might be incurred as a result of the mergers described in the previous sentence. Any such liabilities for which Endeavor Group Holdings is responsible could have an adverse effect on our liquidity and financial condition.

Our ability to use certain net operating loss carryforwards and certain other tax attributes may be limited.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income and taxes may be limited. In general, an

 

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“ownership change” occurs if there is a cumulative change in ownership of the relevant corporation by “5% shareholders” (as defined under U.S. income tax laws) that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. If our corporate subsidiaries experience one or more ownership changes in connection with this offering and other transactions in our stock, then we may be limited in our ability to use our corporate subsidiaries’ net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that such subsidiaries earn. Any such limitations on the ability to use net operating loss carryforwards and other tax assets could adversely impact our business, financial condition, and operating results.

General Risks

We may face labor shortages that could slow our growth.

The successful operation of our business depends upon our ability to attract, motivate, and retain a sufficient number of qualified employees. Shortages of labor may make it increasingly difficult and expensive to attract, train, and retain the services of a satisfactory number of qualified employees and could adversely impact our events and productions. Competition for qualified employees could require us to pay higher wages, which could result in higher labor costs and could have an adverse effect on our business, financial condition, and results of operations.

We also rely on contingent workers and volunteers in order to staff our live events and productions, and our failure to manage our use of such workers effectively could adversely affect our business, financial condition, and results of operations. We could potentially face various legal claims from contingent workers and volunteers in the future, including claims based on new laws or stemming from employees being misclassified. We may be subject to shortages, oversupply, or fixed contractual terms relating to contingent workers. Our ability to manage the size of, and costs associated with, the contingent workforce may be subject to additional constraints imposed by local laws.

Exchange rates may cause fluctuations in our results of operations.

Because we own assets overseas and derive revenues from our international operations, we may incur currency translation losses or gains due to changes in the values of foreign currencies relative to the U.S. Dollar. We cannot, however, predict the effect of exchange rate fluctuations upon future operating results. Although we cannot predict the future relationship between the U.S. Dollar and the currencies used by our international businesses, principally the British Pound and the Euro, we experienced a foreign exchange rate net loss of $2.1 million for the year ended December 31, 2020. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.”

Costs associated with, and our ability to, obtain insurance could adversely affect our business.

Heightened concerns and challenges regarding property, casualty, liability, business interruption, cancellation, and other insurance coverage have resulted from terrorist and related security incidents along with varying weather-related conditions and incidents, including those in connection with the COVID-19 pandemic. As a result, we may experience increased difficulty obtaining high policy limits of coverage at a reasonable cost and with reasonable deductibles. We cannot assure you that future increases in insurance costs and difficulties obtaining high policy limits and reasonable deductibles will not adversely impact our profitability, thereby possibly impacting our operating results and growth. We have a significant investment in property and equipment at each of our venues, which are generally located near major cities and which hold events typically attended by a large number of people.

We cannot assure you that our insurance policy coverage limits, including insurance coverage for property, casualty, liability and business interruption losses, and acts of terrorism, would be adequate should one or

 

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multiple adverse events occur, or that our insurers would have adequate financial resources to sufficiently or fully pay our related claims or damages. We cannot assure you that adequate coverage limits will be available, offered at a reasonable cost, or offered by insurers with sufficient financial soundness. The occurrence of such an incident or incidents affecting any one or more of our venues could have an adverse effect on our financial position and future results of operations if asset damage or company liability were to exceed insurance coverage limits, or if an insurer were unable to sufficiently or fully pay our related claims or damages.

No public market currently exists for our Class A common stock, and there can be no assurance that an active public market for our Class A common stock will develop.

Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price for our Class A common stock will be determined through negotiations between us and the representative of the underwriters and may not be indicative of the market price of our Class A common stock after this offering. If you purchase shares of our Class A common stock, you may not be able to resell those shares of Class A common stock at or above the initial public offering price. We cannot predict the extent to which investor interest in our Class A common stock will lead to the development of an active trading market on the Exchange or otherwise or how liquid that market might become. If an active public market for our Class A common stock does not develop, or is not sustained, it may be difficult for you to sell your Class A common stock at a price that is attractive to you or at all.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us or our business, the price of our Class A common stock and trading volume could decline.

The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our Class A common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrades our Class A common stock or publishes inaccurate or unfavorable research about us or our business, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which could cause our stock price and trading volume to decline. In addition, if our operating results fail to meet the expectations of securities analysts, our stock price would likely decline.

In making your investment decision, you should understand that we have not authorized any other party to provide you with information concerning this initial public offering or us.

You should carefully evaluate all of the information in this prospectus. We have in the past received, and may continue to receive, a high degree of media coverage, including coverage that is not directly attributable to statements made by our officers or employees, that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided by us, our officers, or our employees. We have not authorized any other party to provide you with information concerning this initial public offering or us.

Future changes to U.S. and foreign tax laws could adversely affect us.

The Group of Twenty (“the G20”), the OECD, the U.S. Congress and Treasury Department and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations, including, but not limited to, transfer pricing, country-by-country reporting and base erosion. As a result, the tax laws in the United States and other countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes could have an adverse effect on our worldwide tax liabilities, business, financial condition, and results of operations.

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. You should not place undue reliance on forward-looking statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project” or, in each case, their negative, or other variations or comparable terminology and expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the forward-looking statements contained in this prospectus are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:

 

  

the impact of the COVID-19 global pandemic on our business, financial condition, liquidity and results of operations;

 

  

our need to anticipate and address changes in public and consumer tastes and preferences and industry trends;

 

  

the effect of factors beyond our control, such as adverse economic conditions, on our operations;

 

  

our ability to adapt to or manage new content distribution platforms or changes in consumer behavior resulting from new technologies;

 

  

our reliance on our professional reputation and brand name;

 

  

our dependence on the relationships of our management, agents, and other key personnel with clients across many content categories;

 

  

our ability to identify, sign, and retain clients;

 

  

our ability to identify, recruit, and retain qualified and experienced agents and managers;

 

  

our ability to represent clients and also develop and sell content, which may create a conflict of interest;

 

  

our ability to avoid or manage conflicts of interest arising from our client and business relationships;

 

  

the loss or diminished performance of members of our executive management and other key employees;

 

  

our dependence on key relationships with television and cable networks, satellite providers, digital streaming partners, corporate sponsors, and other distribution partners;

 

  

our ability to consummate acquisitions including the Reigning Champs Acquisition;

 

  

our ability to effectively manage the integration of and recognize economic benefits from the businesses acquired in our recent and future transactions, our operations at our current size, and any future growth;

 

  

the conduct of our operations through joint ventures and other investments with third parties;

 

  

immigration restrictions and related factors;

 

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failure in technology, including at live events, or security breaches of our information systems;

 

  

the unauthorized disclosure of sensitive or confidential client or customer information;

 

  

our ability to protect our trademarks and other intellectual property rights, including our brand image and reputation, and the possibility that others may allege that we infringe upon their intellectual property rights;

 

  

the risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to both domestic and international markets;

 

  

fluctuations in foreign currency exchange rates;

 

  

litigation and other proceedings to the extent uninsured or underinsured;

 

  

our compliance with certain franchise and licensing requirements of unions and guilds and dependence on unionized labor;

 

  

our substantial indebtedness and our ability to maintain compliance with restrictive covenants in the documents governing such indebtedness; and

 

  

the future trading prices of our Class A common stock and the impact of securities analysts’ reports on these prices.

These and other factors are more fully discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in this prospectus. These risks could cause actual results to differ materially from those implied by forward-looking statements in this prospectus. 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 prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

All information contained in this prospectus is materially accurate and complete as of the date of this prospectus. You should keep in mind, however, that any forward-looking statement made by us in this prospectus, or elsewhere, speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no obligation to update any forward-looking statements in this prospectus after the date of this prospectus, except as required by federal securities laws. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters and attributable to us or any other person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to within this prospectus. In light of these risks and uncertainties, you should keep in mind that any event described in a forward-looking statement made in this prospectus or elsewhere might not occur.

 

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ORGANIZATIONAL STRUCTURE

This offering is being conducted through what is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they decide to undertake an initial public offering. The Up-C structure can provide tax benefits and associated cash flow advantages to both the issuer corporation and the existing owners of the partnership or limited liability company in the initial public offering.

Structure Prior to the Reorganization Transactions

We currently conduct our business through Endeavor Operating Company and its subsidiaries. Prior to the consummation of the reorganization transactions described below and this offering, all of Endeavor Operating Company’s outstanding equity interests, including its Class A common units, profits units and investment incentive units, are owned by the following persons:

 

  

WME Holdco, LLC, which we refer to as “WME Holdco,” and certain other management holding companies, which we refer to collectively as the “Management Holdcos.” Each of the Management Holdco’s equityholders include current and former senior officers, employees or other service providers of Endeavor Operating Company and its subsidiaries and certain other investors;

 

  

certain entities that are affiliates of Silver Lake;

 

  

certain other institutional pre-IPO investors (including Other UFC Holders); and

 

  

certain other persons, including senior officers and advisers of Endeavor Operating Company and its subsidiaries.

 

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The following diagram depicts Endeavor Operating Company’s organizational structure prior to the reorganization transactions. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within Endeavor Operating Company’s organizational structure.

 

LOGO

Class A Common Units

Prior to the commencement of the reorganization transactions, the Class A common units are owned by WME Holdco, certain affiliates of Silver Lake, and certain pre-IPO investors.

Endeavor Operating Company’s existing Class A common units are entitled to participate pro rata in residual distributions by Endeavor Operating Company, subject to certain preferences.

Profits Units

Prior to the commencement of the reorganization transactions, Endeavor Operating Company will have limited liability company interests outstanding in the form of profits units, which are entitled to participate in a sale or other specified capital transactions subject to certain preferences and their respective hurdle amounts or, in certain cases, distributions of operating cash flow from Endeavor Operating Company. Certain profits units are designated as “catch-up” units and are entitled to receive a preference on distributions once the distribution threshold applicable to such units has been met.

 

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The profits units were issued directly to, and are currently held by:

 

  

the Management Holdcos, on behalf of certain members of the management of Endeavor Operating Company to whom the Management Holdcos, in turn, issued corresponding management units; and

 

  

certain senior officers of Endeavor Operating Company.

Certain of the profits units (and the corresponding management units) vest over specified time periods, subject to the continued service of the applicable employee on each annual vesting date and, in certain cases, acceleration upon an initial public offering. Certain of the profits units (and the corresponding management units) are subject to performance-based vesting based on achievement of certain performance targets.

Certain of the profits units (and the corresponding management units) are subject to forfeiture and repurchase provisions upon certain termination events. If any management units of the Management Holdcos are forfeited for any reason, then the corresponding profits units of Endeavor Operating Company held by the Management Holdcos will be forfeited for no consideration as described below. Each of the Management Holdcos has the right to repurchase vested management units from management members upon a termination of employment for fair market value, subject to a discount under certain circumstances. If any of the Management Holdcos exercises its right to repurchase vested management units from a management member, then the management units held by the management member will be redeemed in exchange for the corresponding profits units, and the applicable Management Holdco will exercise its corresponding right to require Endeavor Operating Company to repurchase the corresponding profits units. If the repurchase price of the management units is less than fair market value (including any situation where the relevant management units are forfeited, as described in the first sentence of this paragraph), then the repurchase price for the corresponding profits units of Endeavor Operating Company will be reduced accordingly.

Investment Incentive Units

Prior to the commencement of the reorganization transactions, Endeavor Operating Company will also have 100 limited liability company interests outstanding in the form of investment incentive units, all held by WME Holdco, which represent the right to receive, upon dispositions of certain specified investments, a non-pro rata priority distribution equal to 5% of the gain, if any, realized by Endeavor Operating Company on such specified investments.

Reorganization Transactions

Prior to the closing of this offering, we intend to complete an internal reorganization through a series of transactions, which we refer to as the “reorganization transactions.” In connection with the reorganization transactions:

General

 

  

we will amend and restate our certificate of incorporation and will be authorized to issue five classes of common stock, which we refer to collectively as our “common stock” and which are summarized in the following table:

 

Class of Common Stock

  Votes  Economic
Rights

Class A common stock

  1  Yes

Class B common stock

  None  Yes

Class C common stock

  None  Yes

Class X common stock

  1  None

Class Y common stock

  20  None

 

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Voting shares of our common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders. We will issue shares of our Class A common stock to the investors in this offering and the investors in the concurrent private placements. No shares of our Class B common stock or Class C common stock will be outstanding upon the closing of this offering. We do not intend to list our Class B common stock, Class C common stock, Class X common stock or Class Y common stock on any stock exchange;

 

  

Endeavor Manager, a newly formed subsidiary of Endeavor Group Holdings, will become the sole managing member of Endeavor Operating Company, and Endeavor Group Holdings will become the sole managing member of Endeavor Manager;

 

  

Endeavor Manager will issue to the equityholders of certain management holding companies common interest units in Endeavor Manager, which we refer to as “Endeavor Manager Units,” along with paired shares of our Class X common stock, as consideration for the acquisition of Endeavor Operating Company Units held by such management holding companies;

 

  

we will (i) issue to affiliates of certain of our pre-IPO investors, including certain affiliates of Silver Lake, shares of our Class Y common stock, Class A common stock and rights to receive payments under the tax receivable agreement described below and (ii) issue to affiliates of certain other of our pre-IPO investors shares of our Class A common stock, in each case as consideration for the acquisition of Endeavor Operating Company Units held by such pre-IPO investors;

 

  

all of the existing equity interests in Endeavor Operating Company (other than certain profits units, which will remain outstanding after this offering) will be reclassified into Endeavor Operating Company’s non-voting common interest units, which we refer to as “Endeavor Operating Company Units;”

 

  

we will issue to the holders of Endeavor Operating Company Units (other than Endeavor Manager) paired shares of our Class X common stock and, in certain instances, Class Y common stock, in each case equal to the number of Endeavor Operating Company Units held by each of them upon completion of this offering and in exchange for the payment by such holders of the aggregate par value of the Class X common stock and Class Y common stock that is received;

 

  

Endeavor Profits Units that will remain outstanding following this offering will be economically similar to stock options. Each Endeavor Profits Unit has a per unit hurdle price, which is economically similar to the exercise price of a stock option.

 

  

Endeavor Full Catch-Up Profits Units that will remain outstanding following this offering will have a per unit hurdle price and will be entitled to receive a preference on distributions once the hurdle price applicable to such unit has been met. Upon our achievement of a price per share that would have fully satisfied such preference on distributions, the Endeavor Full Catch-Up Profits Units will be converted into Endeavor Operating Company Units; and

 

  

Endeavor Partial Catch-Up Profits Units that will remain outstanding following this offering will have a per unit hurdle price and are entitled to receive a preference on distributions once the hurdle price applicable to such unit has been met. Upon our achievement of a price per share that would have fully satisfied such preference on distributions, the Endeavor Partial Catch-Up Profits Units will be converted into Endeavor Profits Units (without any such preference) with a reduced per unit hurdle price to take into account such prior preference.

Pre-IPO Investors Mergers

 

  

certain of our pre-IPO investors, including certain affiliates of Silver Lake, will each merge with and into Endeavor Group Holdings in a series of mergers, whereby we will acquire the existing equity interests in Endeavor Operating Company held by them. As consideration for the mergers, we will issue to certain affiliates of such pre-IPO investors, including certain affiliates of Silver Lake, shares of our Class Y common stock and/or Class A common stock and rights to receive payments under the tax receivable agreement described below. The number of shares of Class Y common stock and Class A common stock to be issued in the mergers will be based on the value of the existing equity interests in Endeavor Operating Company that we acquire in the mergers, which will be determined based on a

 

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hypothetical liquidation of Endeavor Operating Company using the initial public offering price per share of our Class A common stock in this offering;

 

  

certain other of our pre-IPO investors who are affiliates of other pre-IPO investors will merge with and into Endeavor Group Holdings in a series of mergers, whereby we will acquire the existing equity interests in Endeavor Operating Company held by them. As consideration for the mergers, we will issue to certain affiliates of such pre-IPO investors shares of our Class A common stock. The number of shares of Class A common stock to be issued in the mergers will be based on the value of the existing equity interests in Endeavor Operating Company that we acquire in the mergers, which will be determined based on a hypothetical liquidation of Endeavor Operating Company using the initial public offering price per share of our Class A common stock in this offering;

 

  

we will contribute the existing equity interests in Endeavor Operating Company that we acquire in the mergers to Endeavor Manager in exchange for an equal number of Endeavor Manager Units;

Management Holdcos Restructuring

 

  

certain of the Management Holdcos will distribute a portion of their Endeavor Operating Company Units to certain senior executives of Endeavor Operating Company in liquidation of such senior executives’ interests in such Management Holdcos;

 

  

such senior executives will contribute all or a portion of their Endeavor Operating Company Units to Executive Holdcos in exchange for interests in Executive Holdcos. Executive Holdcos will be managed by an executive committee composed of Messrs. Emanuel and Whitesell, and its equityholders will consist only of such senior executives;

 

  

certain of the Management Holdcos will then merge with and into Endeavor Manager, whereby Endeavor Manager will acquire Endeavor Operating Company Units held by such Management Holdcos. As consideration for the mergers, Endeavor Manager will issue Endeavor Manager Units to the members of the Management Holdcos, along with paired shares of our Class X common stock;

 

  

the equity interests in Executive Holdcos and Endeavor Manager held by the senior executives and other employees of Endeavor Operating Company and its subsidiaries will be subject to the same vesting provisions as the equity interests in the Management Holdcos previously held by them;

Issuances of Class X and Class Y Common Stock

 

  

the holders of Endeavor Operating Company Units (other than Endeavor Manager) will subscribe for and purchase paired shares of our Class X common stock at a purchase price of $0.00001 per share, and, in certain instances, Class Y common stock at a purchase price of $0.00001 per share, in each case in an amount equal to the number of Endeavor Operating Company Units held by each such person;

Redemption Rights

 

  

the members of Endeavor Operating Company (other than Endeavor Manager) will have the right from time to time to cause Endeavor Operating Company to redeem any or all of their Endeavor Operating Company Units (and paired shares of Class X common stock), in exchange for, at our election (subject to certain exceptions), either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings;

 

  

the members of Endeavor Manager (other than Endeavor Group Holdings) will have the right from time to time, subject to certain restrictions, to cause Endeavor Manager to redeem any or all of their vested Endeavor Manager Units (and paired shares of Class X common stock), in exchange for, at our election, either cash (based on the market price of a share of our Class A common stock) or shares of our Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings;

 

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shares of our Class Y common stock will automatically be cancelled/redeemed for no consideration, upon, subject to certain exceptions, (i) the disposition of (a) the paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) and/or (b) the shares of Class A common stock received as a result of a redemption of paired Endeavor Operating Company Units (and the corresponding shares of Class X common stock) or as a result of other transfers thereof paired with such Class Y common stock, or (ii) with respect to all shares of Class Y common stock, a Triggering Event;

 

  

from time to time, subject to certain restrictions, members of Executive Holdcos desiring to transfer a portion of their vested interests in Executive Holdcos (i) can elect to cause Executive Holdcos to distribute to them a portion of Endeavor Operating Company Units and corresponding shares of Class X common stock and Class Y common stock indirectly owned by such members in redemption of its corresponding interests in Executive Holdcos and (ii) immediately thereafter shall be required to exercise their redemption and exchange rights as members of Endeavor Operating Company as described above;

 

  

from time to time, subject to certain restrictions, the senior officers that directly or indirectly hold Endeavor Profits Units will have the right to, if applicable, (i) cause the applicable Management Holdco to distribute to them any vested Endeavor Profits Units indirectly owned by them in redemption for their corresponding interests in such Management Holdco, (ii) immediately thereafter shall be required to cause Endeavor Operating Company to convert their vested Endeavor Profits Units into (1) a number of Endeavor Operating Company Units that will generally be equal to (a) the amount to which the holder of such Endeavor Profits Units would be entitled to receive if an amount equal to the fair market value of Endeavor Operating Company as of the date of such exchange were distributed in cash to the members of Endeavor Operating Company in accordance with the terms of the Endeavor Operating Company Agreement divided by (b) the per unit value of an Endeavor Operating Company Unit at the time of the exchange and (2) a corresponding number of paired shares of our Class X common stock and Class Y common stock, and (iii) immediately thereafter shall be required to exercise their redemption and exchange rights as members of Endeavor Operating Company as described above; and

 

  

all holders of Endeavor Operating Company Units, Endeavor Manager Units and Endeavor Profits Units will be prohibited from exercising the redemption and exchange rights described above until at least the later of 180 days after the closing of this offering and the end of the 2021 calendar year.

UFC Buyout

On February 16, 2021, Endeavor Operating Company entered into a Transaction Agreement with the Other UFC Holders and certain of their affiliates pursuant to which Endeavor Operating Company will directly or indirectly acquire equity interests in UFC Parent (including warrants of UFC Parent or common equity received by warrant holders from the exercise of 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.

Pursuant to the Transaction Agreement, we will issue Endeavor Operating Company Units to (i) certain of the Other UFC Holders as consideration for the acquisition of the interests of UFC Parent held by such Other UFC Holders (a portion of which Endeavor Operating Company Units will subsequently be sold by certain of the Other UFC Holders, as described below); and (ii) certain of the Other UFC Holders as consideration for the acquisition of all or only a portion of the interests of UFC Parent held by such Other UFC Holders (with the balance of the interests in UFC Parent retained by the Other UFC Holders to be sold to Endeavor Operating Company or its designee for cash, as described below), and certain of which Endeavor Operating Company Units will promptly be exchanged by such holders for Endeavor Manager Common Units. Certain holders of UFC Profit Units will receive Endeavor Operating Company Units or Endeavor Manager Common Units on the same vesting terms. The Other UFC Holders that receive Endeavor Operating Company Units and/or Endeavor

 

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Manager Common Units will also receive paired shares of our Class X common stock corresponding on a 1:1 basis to the Endeavor Operating Company Units or Endeavor Manager Common Units they receive. Additionally, certain of the Other UFC Holders that receive Endeavor Operating Company Units will also receive paired shares of our Class Y common stock corresponding on a 1:1 basis to the Endeavor Operating Company Units they receive. Certain Other UFC Holders will merge with and into Endeavor Group Holdings, and affiliates of such Other UFC Holders will receive shares of Class A common stock in such mergers in exchange for Endeavor Operating Company Units. Based on the initial public offering price of $24.00 per share, we anticipate issuing after the consummation of such transactions (after giving effect to the use of proceeds from this offering and the concurrent private placements to purchase from certain Other UFC Holders Endeavor Operating Company Units and Class A common stock and the sale of Class A common stock by affiliates of KKR in the concurrent private placements as further described below) 42,400,877 shares of Class A common stock, 58,753,559 Endeavor Operating Company Units, 9,156,546 Endeavor Manager Units, 67,910,105 shares of Class X common stock and 70,946,278 shares of Class Y common stock to the Other UFC Holders in the aggregate. Furthermore, certain of the Other UFC Holders or their affiliates will each merge with and into Endeavor Group Holdings in a series of mergers, whereby we will acquire the existing interests in Endeavor Operating Company held by them. As consideration for the mergers, we will issue to certain affiliates of such Other UFC Holders, including certain affiliates of Silver Lake, shares of Class A common stock and Class Y common stock and rights to receive payments under the tax receivable agreement described herein.

Moreover, in accordance with the Transaction Agreement, we have agreed to use $835.7 million of the net proceeds from this offering and the concurrent private placements to purchase Endeavor Operating Company Units (or interests in UFC Parent) or Class A common stock directly from certain of the Other UFC Holders (or their affiliates) at a price per unit (with respect to Endeavor Operating Company Units) or a price per share (with respect to Class A common stock) equal to the initial public offering price per share of Class A common stock sold in this offering. Additionally, affiliates of KKR, who are Other UFC Holders, will sell 18,206,250 shares of Class A common stock for aggregate proceeds of $437.0 million in the concurrent private placements to the private placement investors at a price per share equal to $24.00.

For a full description of the UFC Buyout, see “Prospectus Summary—UFC Buyout.”

This Offering, the Concurrent Private Placements and Our Post-IPO Structure

Based on the initial public offering price of $24.00 per share, we estimate that the net proceeds from this offering and the concurrent private placements will be $1,787.2 million (or $1,863.8 million if the underwriters exercise their option to purchase additional shares in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to (1) use $835.7 million of the net proceeds from this offering and the concurrent private placements to purchase Endeavor Operating Company Units (or interests in UFC Parent) directly from certain of the Other UFC Holders (or their affiliates) at a price per unit (with respect to Endeavor Operating Company Units) equal to the initial public offering price per share of Class A common stock sold in this offering and (2) contribute $951.5 million of the net proceeds from this offering and the concurrent private placements to Endeavor Manager (or $1,028.1 million if the underwriters exercise their option to purchase additional shares in full) in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering (provided that we may reduce such contribution amount, without reducing the number of Endeavor Manager Units we receive, by the amount of any expenses we pay in connection with this offering, the concurrent private placements and the UFC Buyout (which we estimate will be approximately $76.1 million) that are not otherwise paid or for which we are not otherwise reimbursed by Endeavor Operating Company). Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units. We intend to cause Endeavor Operating Company to use the net proceeds we contribute to it from this offering and the concurrent private placements for working capital and general corporate purposes. We may also use a portion of the net proceeds from this offering

 

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and the concurrent private placements to fund our current or future joint ventures, investments or acquisitions of complementary businesses or other assets, including the Reigning Champs Acquisition.

We estimate that the offering expenses (other than the underwriting discounts) will be approximately $12.7 million. All of such offering expenses will be paid for or otherwise borne by Endeavor Operating Company. See “Use of Proceeds” for further details.

We are a holding company, and immediately after the consummation of the reorganization transactions and this offering our principal asset will be our indirect ownership interests in Endeavor Operating Company. The total number of Endeavor Operating Company Units indirectly owned by us and other members of Endeavor Manager and directly owned by the members of Endeavor Operating Company at any given time will equal the sum of the outstanding shares of our Class A common stock, Class B common stock, Class C common stock and Class X common stock. Shares of our Class X common stock cannot be transferred except in connection with a transfer or exchange of Endeavor Operating Company Units or Endeavor Manager Units into shares of our Class A common stock, subject to certain exceptions, such as to permitted transferees. Shares of our Class Y common stock cannot be transferred, subject to certain exceptions, such as to permitted transferees.

Because we will have a controlling financial interest in Endeavor Manager, as its sole managing member, and Endeavor Operating Company, as its indirect sole managing member, we will consolidate the financial results of Endeavor Manager and Endeavor Operating Company. A portion of our net income (loss) will be allocated to the non-controlling interest to reflect (i) the entitlement of the members of Endeavor Operating Company (other than Endeavor Manager) to a portion of Endeavor Operating Company’s net income (loss) attributable to Endeavor Operating Company and (ii) the members of Endeavor Manager (other than Endeavor Group Holdings) to a portion of Endeavor Manager’s net income (loss). We will account for the reorganization transactions in a manner consistent with a common-control transaction and will initially measure the interests of the pre-IPO members of Endeavor Operating Company and the non-controlling members of Endeavor Manager in the assets and liabilities of Endeavor Operating Company at their carrying amounts as of the date of the completion of the reorganization transactions.

 

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The following diagram depicts our organizational structure following the reorganization transactions, this offering, the concurrent private placements, the UFC Buyout and the application of the net proceeds from this offering and the concurrent private placements at the initial public offering price of $24.00 per share, and assuming no exercise of the underwriters’ option to purchase additional shares). For purposes of depicting ownership of voting power in Endeavor Group Holdings, the below diagram takes into account shares of Class X common stock and Class Y common stock held by investors in this offering and our pre-IPO equityholders (including holders of all Endeavor Manager Units and Endeavor Operating Company Units). For purposes of depicting ownership of economic interests in Endeavor Group Holdings, the below diagram does not take into account (a) any performance-based vesting Endeavor Operating Company Units whose vesting conditions would not be satisfied at such initial offering price, and (b) any Endeavor Profits Units. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our organization:

 

LOGO

 

(1)

Other pre-IPO investors include Jasmine Ventures Pte Ltd. and Canada Pension Plan Investment.

(2)

Endeavor Manager members include current senior officers, employees, former employees and other service providers of Endeavor Operating Company.

For additional information regarding our stockholders and the holders of Endeavor Operating Company Units, Endeavor Profits Units and Endeavor Manager Units, see “Principal Stockholders.”

 

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Ownership of Economic Interests

Upon completion of the reorganization transactions, the concurrent private placements, the UFC Buyout, and this offering, except as set forth in the footnotes below, the economic interests in Endeavor Group Holdings owned by investors in this offering and our pre-IPO equityholders will be as follows (excluding any equity grants issued in connection with this offering):

 

  Endeavor Group
Holdings Basic
  Fully Converted
Basic
  Fully Converted
Diluted
 
  Shares  %  Shares  %  Shares  % 
  (1)     (2)     (3)    

Shareholders of Endeavor Group Holdings

      

Investors in this offering

  21,300,000   8.4  21,300,000   5.0  21,300,000   5.0

Investors in the concurrent private placements (other than Silver Lake and related parties)

  69,820,745   27.5  69,820,745   16.4  69,820,745   16.2

Silver Lake Partners and related parties

  91,978,947   36.2  91,978,947   21.7  91,978,947   21.4

Affiliates of our other pre-IPO investors

  70,650,579   27.8  70,650,579   16.6  70,650,579   16.4

Sub-Total

  253,750,271   100.0  253,750,271   59.8  253,750,271   59.0

Members of Endeavor Manager (other than Endeavor Group Holdings)

  —     0.0  30,132,501   7.1  30,132,501   7.0

Sub-Total

  —     0.0  30,132,501   7.1  30,132,501   7.0

Members of Endeavor Operating Company (other than Endeavor Manager)

      

Silver Lake Partners and related parties

  —     0.0  82,138,074   19.3  82,138,074   19.1

Affiliates of our other pre-IPO investors

  —     0.0  26,051,913   6.1  26,051,913   6.1

Messrs. Emanuel and Whitesell and Executive Holdcos

  —     0.0  32,550,111   7.7  37,654,485   8.8

Sub-Total

  —     0.0  140,740,098   33.1  145,844,472   33.9
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  253,750,271   100.0  424,622,870   100.0  429,727,244   100.0
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

Reflects the number of shares of our Class A common stock then outstanding. If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares owned by investors in this offering, and in the table above, would be 24,495,000.

(2)

Reflects the number of shares of our Class A common stock that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock.

(3)

Reflects the number of shares of our Class A common stock (excluding approximately 9,094,852 restricted stock units and 3,233,644 options based on the initial public offering price of $24.00 per share that we intend to grant to certain directors, employees and other service providers in connection with this offering) that would be outstanding if all Endeavor Manager Units and Endeavor Operating Company Units were exchanged for shares of our Class A common stock, assuming that we achieved a price per share that would have fully satisfied all Endeavor Catch-Up Units’ preferences on distributions and all Endeavor Profits Units were thereafter exchanged into Endeavor Operating Company Units in respect of their in-the-money value at such initial offering price per unit hurdle price.

The economic rights in Endeavor Group Holdings owned by Messrs. Emanuel and Whitesell and Executive Holdcos as members of Endeavor Operating Company as reflected in the table above will vary depending on, among other things, the satisfaction of certain performance-based vesting conditions and the extent to which the Endeavor Profits Units are in the money. The following table summarizes the Endeavor Operating Company

 

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Units and Endeavor Profits Units owned by Messrs. Emanuel and Whitesell and Executive Holdcos and their applicable performance-based vesting conditions and hurdle prices:

 

       Endeavor Operating Company 
   Weighted
Average
Per-Unit
   Basic   Fully Converted
Diluted
   Fully Converted
Diluted
 
   Hurdle Price   Units   Units   Units 
   (1)   (2)   (3)   (4) 

Endeavor Operating Company Units

   —      32,550,111    32,550,111    32,550,111 

Endeavor Full Catch-Up Profits Units

   —      —      3,809,522    3,809,522 

Endeavor Profits Units (other than the Endeavor Catch-Up Units)

  $17.68      878,493    3,337,048 

Endeavor Partial Catch-Up Profits Units

  $23.16    —      416,359    11,919,786 

Total

        

 

(1)

Reflects distribution thresholds, expressed as a per unit hurdle price on a weighted-average basis (similar to an exercise price for stock options). Subject to certain restrictions, Endeavor Profits Units will be exchangeable by their holders into a number of Endeavor Operating Company Units that will generally be equal to (a) the amount to which the holder of such Endeavor Profits Units would be entitled to receive if an amount equal to the fair market value of Endeavor Operating Company as of the date of such exchange were distributed in cash to the members of Endeavor Operating Company in accordance with the terms of the Endeavor Operating Company Agreement, divided by (b) the per unit value of an Endeavor Operating Company Unit.

(2)

Reflects the number of Endeavor Operating Company Units then outstanding, based on the initial offering price of $24.00 per share.

(3)

Reflects the number of Endeavor Operating Company Units that would be outstanding if all Endeavor Profits Units were exchanged into Endeavor Operating Company Units in respect of their in-the-money value, based on the initial offering price of $24.00 per share, and that all Endeavor Catch-Up Profits Units have been fully converted to Endeavor Operating Company Units or Endeavor Profits Units (without any preference), as applicable.

(4)

Reflects the number of Endeavor Operating Company Units that would be outstanding if all Endeavor Profits Units were exchanged into Endeavor Operating Company Units on a one-to-one basis (regardless of their in-the-money value).

Ownership of Voting Rights.

Upon completion of the reorganization transactions, the concurrent private placements, the UFC Buyout, and this offering, the combined voting power in Endeavor Group Holdings will be as follows:

 

   If the underwriters do not exercise
their option to purchase additional
shares of Class  A common stock
   If the underwriters exercise in full
their option to purchase additional
shares of Class  A common stock
 
   Votes   Votes 
   Total   %   Total   % 

Investors in this offering

   21,300,000    0.4   24,495,000    0.5

Investors in the concurrent private placements (other than Silver Lake and related parties)

   69,820,745    1.3   69,820,745    1.3

Silver Lake and related parties

   3,562,010,741    68.4   3,562,010,741    68.4

Affiliates of our other pre-IPO investors

   439,615,492    8.4   439,615,492    8.4

Members of Endeavor Manager (other than Endeavor Group Holdings)

   30,132,501    0.6   30,132,501    0.6

Messrs. Emanuel and Whitesell, Executive Holdcos

   1,083,945,802    20.8   1,083,945,802    20.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   5,206,825,281    100.0   5,210,020,281    100.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Upon completion of the reorganization transactions, the concurrent private placements, the UFC Buyout, and this offering, and based on the initial offering price of $24.00 per share, the voting rights in Endeavor Group Holdings will be owned as follows:

 

   Shares   Votes 
   Class A   Class X   Class Y   Total   % 
   (1)   (2)   (3)         

Shareholders of Endeavor Group Holdings

          

Investors in this offering

   21,300,000    —      —      21,300,000    0.4

Investors in the concurrent private placements

   69,820,745    —      —      69,820,745    1.3

Silver Lake and related parties

   91,978,947    —      87,256,612    1,837,111,187    35.3

Affiliates of our other pre-IPO investors

   70,650,579    —      11,482,062    300,291,819    5.8

Sub-Total

   253,750,271    —      98,738,674    2,228,523,751    42.8

Members of Endeavor Manager (other than Endeavor Group Holdings)

   —      30,132,501    —      30,132,501    0.6

Sub-Total

   —      30,132,501    —      30,132,501    0.6

Members of Endeavor Operating Company (other than Endeavor Manager)

          

Silver Lake and related parties

   —      82,138,074    82,138,074    1,724,899,554    33.1

Affiliates of our other pre-IPO investors

   —      26,051,913    5,663,588    139,323,673    2.7

Messrs. Emanuel and Whitesell and Executive Holdcos

   —      51,616,467    51,616,467    1,083,945,802    20.8

Sub-Total

   —      159,806,454    139,418,129    2,948,169,029    56.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   253,750,271    189,938,955    238,156,803    5,206,825,281    100.0% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

If the underwriters exercise in full their option to purchase additional shares of our Class A common stock, the number of shares of Class A common stock owned by investors in this offering, and in the table above, would be 24,495,000.

(2)

Members of Endeavor Manager (other than Endeavor Group Holdings) will receive one share of our Class X common stock for each Endeavor Manager Unit owned by them. Members of Endeavor Operating Company (other than Endeavor Manager) will receive one share of our Class X common stock for each Endeavor Operating Company Unit and Endeavor Profits Unit owned by them, as applicable.

(3)

Silver Lake and related parties, affiliates of certain of our other pre-IPO investors, Messrs. Emanuel and Whitesell and Executive Holdcos will receive one share of our Class Y common stock for each share of Class A common stock, Endeavor Operating Company Unit and Endeavor Profits Unit owned by them, as applicable.

At such time that Endeavor Profits Units are exchanged into a number of Endeavor Operating Company Units, the holders exchanging such Endeavor Profits Units will receive a number of shares of our Class X common stock and shares of our Class Y common stock for each Endeavor Operating Company Unit into which such Endeavor Profits Units were so exchanged.

See “Certain Relationships and Related Party Transactions” and “Description of Capital Stock” for more information on the rights associated with our capital stock and Endeavor Operating Company Units.

Tax Receivable Agreement

In connection with the transactions undertaken in connection with this offering, we will acquire existing equity interests in Endeavor Operating Company from certain of our pre-IPO investors in the mergers described

 

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above in exchange for the issuance of shares of our Class A common stock, Class Y common stock and rights to receive payments under a tax receivable agreement and will acquire existing interests in Endeavor Operating Company (or in UFC Parent) from certain of the Other UFC Holders in exchange for cash and rights to receive payments under the tax receivable agreement. As a result of these acquisitions, we will succeed to certain tax attributes of certain of our pre-IPO investors and will receive the benefit of tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries. In addition, redemptions or exchanges of Endeavor Operating Company Units from members of Endeavor Operating Company (other than Endeavor Manager) in exchange for shares of our Class A common stock or cash are expected to produce favorable tax attributes that would not be available to us in the absence of such redemptions or exchanges.

We intend to enter into a tax receivable agreement with the Post-IPO TRA Holders, that will provide for the payment by us to the Post-IPO TRA Holders (or their transferees of Endeavor Operating Company Units or other assignees) of 85% of the amount of cash 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 (i) any tax basis in the assets of Endeavor Operating Company and certain of its subsidiaries resulting from (a) the acquisition of equity interests in Endeavor Operating Company from certain of our pre-IPO investors in the mergers described above and the acquisition of interests in Endeavor Operating Company (or UFC Parent) from certain of the Other UFC Holders, (b) redemptions or exchanges by us of Endeavor Operating Company Units from certain members of Endeavor Operating Company in exchange for shares of our Class A common stock, or cash or (c) payments under the tax receivable agreement, (ii) any net operating losses or certain other tax attributes of certain pre-IPO investors or Other UFC Holders that are available to us to offset income or gain earned after the mergers, (iii) any existing tax basis associated with Endeavor Operating Company Units the benefit of which is allocable to us as a result of the acquisition by us of such Endeavor Operating Company Units, and (iv) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement. The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the covered tax attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made. The Post-IPO TRA Holders (or their transferees or assignees) will not reimburse us for any payments previously made if such basis increases or other benefits are subsequently disallowed, except that excess payments made to any Post-IPO TRA Holder (or such holder’s transferees or assignees) will be netted against future payments that would otherwise be made under the tax receivable agreement, if any, after our determination of such excess. We could make future payments to the Post-IPO TRA Holders (or their transferees or assignees) under the tax receivable agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity. Assuming that all units eligible to be redeemed for cash or Class A common stock would be exchanged for Class A common stock by Endeavor Group Holdings at the time of the offering and that we will have sufficient taxable income to utilize all of the tax attributes covered by the tax receivable agreement when they are first available to be utilized under applicable law, we estimate that payments to the Post-IPO TRA Holders under the tax receivable agreement would aggregate to approximately $2,324.2 million over the next 15 years and for yearly payments over that time to range between approximately $104.3 million to $201.3 million per year, based on the public offering price of $24.00 per share. See “Risk Factors—Risks Related to Our Organization and Structure—We will be required to pay certain of our pre-IPO investors, including certain Other UFC Holders, for certain tax benefits we may claim (or are deemed to realize) in the future, and the amounts we may pay could be significant” and “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

 

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USE OF PROCEEDS

We estimate that our net proceeds from this offering and the concurrent private placements will be approximately $1,787.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us based on the initial offering price of $24.00 per share, and assuming the underwriters’ option to purchase additional shares is not exercised. If the underwriters exercise their option to purchase additional shares in full, we expect to receive approximately $1,863.8 million of net proceeds based on the initial offering price of $24.00 per share. We intend to (1) use $835.7 million of the net proceeds from this offering and the concurrent private placements to purchase Endeavor Operating Company Units (or interests in UFC Parent) directly from certain of the Other UFC Holders (or their affiliates) at a price per unit (with respect to Endeavor Operating Company Units) equal to the initial public offering price per share of Class A common stock sold in this offering and (2) contribute $951.5 million of the net proceeds from this offering and the concurrent private placements to Endeavor Manager (or $1,028.1 million if the underwriters exercise their option to purchase additional shares in full) in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of our Class A common stock in this offering (provided that we may reduce such contribution amount, without reducing the number of Endeavor Manager Units we receive, by the amount of any expenses we pay in connection with this offering, the concurrent private placements and the UFC Buyout (which we estimate will be approximately $76.1 million) that are not otherwise paid or for which we are not otherwise reimbursed by Endeavor Operating Company). Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units.

We intend to cause Endeavor Operating Company to use the remaining net proceeds we contribute to it from this offering and the concurrent private placements for working capital and general corporate purposes. We may also use a portion of the net proceeds from this offering and the concurrent private placements to fund our current or future joint ventures, investments or acquisitions of complementary businesses or other assets, including the Reigning Champs Acquisition as further described in “Recent Developments—Acquisitions”.

 

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DIVIDEND POLICY

We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the growth of our business. If we decide to pay cash dividends in the future, the declaration and payment of such dividends will be at the sole discretion of the Executive Committee, prior to the Triggering Event, and thereafter our board of directors and may be discontinued at any time. In determining the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, restrictions in our debt agreements, including the Senior Credit Facilities, our actual and anticipated future earnings, cash flow, debt service and capital requirements, the amount of distributions to us from Endeavor Operating Company and other factors that our board of directors may deem relevant. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Debt Facilities” for more information on the restrictions the Senior Credit Facilities impose on our ability to declare and pay cash dividends. Because we are a holding company, our cash flow and ability to pay dividends depends upon the financial results and cash flows of our operating subsidiaries and the distribution or other payment of cash to us in the form of dividends or otherwise from Endeavor Operating Company. See “Risk Factors—Risks Related to this Offering and Our Class A Common Stock—We do not expect to pay any cash dividends for the foreseeable future.”

Following the consummation of this offering, we expect that Endeavor Operating Company will make distributions to each of its members, including Endeavor Manager and holders of Endeavor Profits Units, in respect of the U.S. federal, state and local income tax liability attributable to each member’s allocable share of taxable income of Endeavor Operating Company, calculated using an assumed tax rate equal to the highest marginal combined income tax rate applicable to an individual or corporation resident in Los Angeles, California or New York, New York (whichever rate is higher), taking into account the deductibility of applicable state and local income taxes for U.S. federal income tax purposes (which are subject to substantial limitations for tax years 2018 through 2025). Tax distributions will be made quarterly, on an estimated basis. 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 Agreement. However, in certain situations, tax distributions made to Endeavor Manager may be reduced (relative to those tax distributions made to 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. Tax distributions made to a member of Endeavor Operating Company will generally be treated as an advance of and shall be credited against future distributions to such member and no adjustments will be made to the exchange ratio for members of Endeavor Operating Company or Endeavor Manager who exercise the redemption rights described above to account for prior tax distributions (and tax distributions paid prior to such an exercise of redemption rights will not reduce distributions otherwise payable to Endeavor Manager in respect of Endeavor Operating Company Units acquired in connection with the exercise of such redemption rights). We expect that Endeavor Manager will further distribute the proceeds of any such tax distributions to us on a non-pro rata basis.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2020 (i) on an actual basis, (ii) on a pro forma basis to reflect the reorganization transactions described under “Organizational Structure,” and the estimated impact of the tax receivable agreement and, (iii) on a pro forma as adjusted basis to reflect:

 

  

the sale of 21,300,000 shares of our Class A common stock in this offering at the initial public offering price of $24.00 per share, after deducting the underwriters’ discounts and commissions;

 

  

the issuance of an aggregate of 56,336,830 shares of our Class A common stock to the private placement investors and the sale of 18,206,250 shares of our Class A common stock to the private placement investors by the Other UFC Holders (or their affiliates), in each case, upon the closing of the concurrent private placements, at a price of $24.00 per share;

 

  

the UFC Buyout and the fees and expenses related thereto; and

 

  

the application of the net proceeds of this offering and the concurrent private placements as described under “Use of Proceeds.”

This table should be read in conjunction with “Use of Proceeds,” “Unaudited Pro Forma Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes of us and Endeavor Operating Company appearing elsewhere in this prospectus.

 

   As of December 31, 2020 
(in thousands)  Actual  Pro
Forma
  Pro
Forma As
Adjusted(1)
 

Cash and cash equivalents

  $1,008,485  $1,008,845  $1,960,353 
  

 

 

  

 

 

  

 

 

 

Total indebtedness(2)

  $5,925,805  $5,925,805  $5,925,805 

Redeemable non-controlling interests

   168,254   190,773   176,823 

Redeemable equity

   22,519   —     —   

Equity:

    

Class A common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 5,000,000,000 shares authorized, 115,506,314 shares issued and outstanding, pro forma; 5,000,000,000 shares authorized, 253,750,271 shares issued and outstanding, pro forma as adjusted

   —     1   2 

Class B common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 5,000,000,000 shares authorized, no shares issued and outstanding, pro forma; 5,000,000,000 shares authorized, no shares issued and outstanding, pro forma as adjusted

   —     —     —   

Class C common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 5,000,000,000 shares authorized, no shares issued and outstanding, pro forma; 5,000,000,000 shares authorized, no shares issued and outstanding, pro forma as adjusted

   —     —     —   

Class X common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 5,000,000,000 shares authorized, 122,028,850 shares issued and outstanding, pro forma; 5,000,000,000 shares authorized, 189,938,955 shares issued and outstanding, pro forma as adjusted

   —     1   1 

Class Y common stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 1,000,000,000 shares authorized, 189,938,955 shares issued and outstanding, pro forma; 1,000,000,000 shares authorized, 238,156,803 shares issued and outstanding, pro forma as adjusted

   —     2   2 

Preferred stock, par value $0.00001 per share, no shares authorized, issued and outstanding, actual; 1,000,000,000 shares authorized, no shares issued and outstanding, pro forma; 1,000,000,000 shares authorized, no shares issued and outstanding, pro forma as adjusted

   —     —     —   

Additional paid-in capital

   —     197,016   1,266,115 

Accumulated deficit

   —     —     (279,438

Members’ capital

   468,633   —     —   

Accumulated comprehensive loss

   (190,786  (100,865  (87,735
  

 

 

  

 

 

  

 

 

 

Total members’ equity/shareholders’ equity

   277,847   96,155   898,947 

Nonredeemable non-controlling interests

   686,129   817,083   952,617 
  

 

 

  

 

 

  

 

 

 

Total equity

   963,976   913,238   1,851,564 
  

 

 

  

 

 

  

 

 

 

Total capitalization

  $7,080,554  $7,029,816  $7,954,192 
  

 

 

  

 

 

  

 

 

 

 

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(1)

Excludes any cash payments or issuances of Class A common stock pursuant to the Minimum Cash Returns.

(2)

Represents borrowings under the Senior Credit Facilities, consisting of (i) our first lien term loan under the Credit Facilities, (ii) our first lien term loan under the UFC Credit Facilities, and (iii) our borrowings under other debt facilities. Under the Senior Credit Facilities’ and other debt facilities, we also had up to $207.2 million and $11.7 million, respectively, of borrowing availability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding the Senior Credit Facilities.

 

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DILUTION

If you invest in our Class A common stock, you will experience dilution to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book deficit per share of our Class A common stock immediately after this offering and the concurrent private placement. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the book value per share attributable to the Class A common stock held by existing equityholders (including all shares issuable upon exchange or conversion).

Our pro forma net tangible book deficit as of December 31, 2020 would have been approximately $(4,672.6) million, or $(21.39) per share of our common stock. Pro forma net tangible book deficit represents the amount of total tangible assets less total liabilities, and pro forma net tangible book deficit per share represents pro forma net tangible book deficit divided by the number of shares of common stock outstanding, in each case after giving effect to the reorganization transactions (based on the initial public offering price of $24.00 per share), the estimated impact of the tax receivable agreement and assuming that all Endeavor Operating Company Units or Endeavor Manager Units are redeemed or exchanged for newly-issued shares of our Class A common stock.

After giving effect to the reorganization transactions, the estimated impact of the tax receivable agreement and assuming that all Endeavor Operating Company Units or Endeavor Manager Units are redeemed or exchanged for newly-issued shares of our Class A common stock on a one-for-one basis, and after giving further effect (i) to the sale of 21,300,000 shares of Class A common stock in this offering at the initial public offering price of $24.00 per share and the application of the net proceeds from this offering, (ii) the sale of 56,336,830 shares of Class A common stock from us and 18,206,250 shares of Class A common stock from affiliates of KKR, in each case, in the concurrent private placements at a price of $24.00 per share and the application of the net proceeds from the concurrent private placements, and (iii) the UFC Buyout, our pro forma as adjusted net tangible book deficit would have been approximately $(3,748.3) million, or $(8.83) per share, representing an immediate decrease in net tangible book deficit of $12.56 per share to existing equityholders and an immediate dilution in net tangible book deficit of $32.83 per share to new investors.

The following table illustrates the per share dilution:

 

Initial public offering price per share

    $24.00 

Pro forma net tangible book deficit per share as of December 31, 2020(1)

  $(21.39  

Decrease in pro forma net tangible book deficit per share attributable to new investors

   12.56   
  

 

 

   

Pro forma adjusted net tangible book deficit per share after this offering and the concurrent private placements(2)

     (8.83
    

 

 

 

Dilution in pro forma net tangible book deficit per share to new investors

    $32.83 
    

 

 

 

 

(1)

Reflects 218,486,808 outstanding shares of Class A common stock, including 102,962,494 shares of Class A common stock issuable upon the redemption or exchange of Endeavor Operating Company Units and Endeavor Manager Units outstanding immediately prior to this offering in exchange for shares of Class A common stock on a one-for-one basis. Does not reflect the exchange of any Endeavor Profits Units for Endeavor Operating Company Units.

(2)

Reflects 424,622,870 outstanding shares, consisting of (i) 21,300,000 shares of Class A common stock to be issued in this offering, (ii) 74,543,080 shares of Class A common stock to be issued in the concurrent private placements, (iii) 110,310,982 shares of Class A common stock and Endeavor Operating Company Units and

 

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 Endeavor Manager Units associated with the UFC Buyout, and (iv) the 218,468,808 outstanding shares described in note (1) above.

Dilution is determined by subtracting pro forma net tangible book deficit per share after this offering and the concurrent private placements from the initial public offering price per share of Class A common stock.

The following table sets forth, on a pro forma basis as of December 31, 2020, the number of shares of Class A common stock purchased from us, the total consideration paid to us and the average price per share paid by the existing equityholders and by new investors purchasing shares in this offering and the concurrent private placements, at the initial public offering price of $24.00 per share, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and after giving effect to the reorganization transactions, and after giving further effect to this offering and the application of the net proceeds from this offering:

 

   Shares of Class A
Common Stock Purchased
  Total Consideration  Average
Price
 
   Number   Percent  Amount   Percent  Per Share 

Existing stockholders(1)

   248,433,776    72.2 $3,860.6    62.7 $15.54 

New investors

   21,300,000    6.2 $511.2    8.3 $24.00 

Private placement investors

   74,543,080    21.7 $1,789.0    29.0 $24.00 
  

 

 

   

 

 

  

 

 

   

 

 

  

Total

   344,276,856    100.0 $6,160.8    100.0                   
  

 

 

   

 

 

  

 

 

   

 

 

  

 

(1)

Reflects approximately $3.86 billion of consideration paid by existing equityholders in respect of shares of Class A common stock and Endeavor Operating Company Units and Endeavor Manager Units (together with corresponding shares of Class X common stock). Does not reflect the exchange of any Endeavor Profits Units for Endeavor Operating Company Units.

To the extent the underwriters’ option to purchase additional shares is exercised, there will be further dilution to new investors.

We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

 

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2020 give effect to (i) the reorganization transactions described under “Organizational Structure,” (ii) the creation or acquisition of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iii) the adoption of the 2021 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, (iv) the concurrent private placements and the application of the net proceeds from the concurrent private placements as described under “Use of Proceeds,” (v) the UFC Buyout, and (vi) this offering and the application of the net proceeds as described under “Use of Proceeds,” as if each had occurred on January 1, 2020. The unaudited pro forma consolidated balance sheet as of December 31, 2020 gives effect to (i) the reorganization transactions described under “Organizational Structure,” (ii) the acquisition or creation of certain tax assets in connection with this offering and the reorganization transactions and the creation or acquisition of related liabilities in connection with entering into the tax receivable agreement with the Post-IPO TRA Holders, (iii) the adoption of the 2021 Incentive Award Plan, the expected issuance of the IPO grants upon the completion of this offering, and the modification of certain pre-IPO equity-based awards, (iv) the concurrent private placements and the application of the net proceeds from the concurrent private placements as described under “Use of Proceeds,” (v) the UFC Buyout and the fees and expenses related thereto, and (vi) this offering and the application of the net proceeds as described under “Use of Proceeds,” as if each had occurred on December 31, 2020.

The unaudited pro forma financial information has been derived from Endeavor Operating Company’s historical consolidated financial statements to give effect to pro forma events that are directly attributable to the reorganization transactions and the offering. The unaudited pro forma consolidated financial information reflects pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions we believe are reasonable, but are subject to change.

Our historical financial information for the year ended December 31, 2020 has been derived from Endeavor Operating Company’s audited consolidated financial statements and accompanying notes included elsewhere in this prospectus. The unaudited pro forma financial information does not purport to be indicative of our results of operations or financial position had the relevant transactions occurred on the dates assumed and does not project our results of operations or financial position for any future period or date.

The unaudited pro forma financial information presented assumes no exercise by the underwriters of the option to purchase up to an additional 3,195,000 shares of Class A common stock from us.

The unaudited pro forma financial information should be read together with “Capitalization,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our and Endeavor Operating Company’s respective consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 

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Unaudited Pro Forma Consolidated Statement of Operations

Year Ended December 31, 2020

 

(In thousands, except per share data)  Endeavor
Operating
Company,
LLC

Actual
  Adjustments
for the
Reorganization
Transactions
  As Adjusted
Before this
Offering
  Adjustments
for this
Offering,
UFC Buyout
and the Use
of Proceeds
  Endeavor
Group
Holdings, Inc.
Pro Forma
 

Revenue

  $3,478,743  $—    $3,478,743  $—    $3,478,743 

Operating expenses:

      

Direct operating costs

   1,745,275   —     1,745,275   —     1,745,275 

Selling, general and administrative expenses

   1,442,316   —     1,442,316   375,191(a)   1,817,507 

Insurance recoveries

   (86,990  —     (86,990  —     (86,990

Depreciation and amortization

   310,883   —     310,883   —     310,883 

Impairment charges

   220,477   —     220,477   —     220,477 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   3,631,961   —     3,631,961   375,191   4,007,152 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating loss

   (153,218  —     (153,218  (375,191  (528,409

Other (expense) income:

      

Interest expense, net

   (284,586  —     (284,586  —     (284,586

Other income (expense), net

   81,087   —     81,087   —     81,087 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before income taxes and equity losses of affiliates

   (356,717  —     (356,717  (375,191  (731,908

Provision for (benefit from) income taxes

   8,507   (4,882)(b)   3,625   (4,032)(b)   (407
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before equity losses of affiliates

   (365,224  4,882   (360,342  (371,159  (731,501

Equity losses of affiliates, net of tax

   (260,094  —     (260,094  —     (260,094
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

   (625,318  4,882   (620,436  (371,159  (991,595

Net income (loss) attributable to non-controlling interests

   29,616   (307,931)(c)(d)   (278,315  (69,746)(c)(d)   (348,061
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income attributable to Endeavor Group Holdings, Inc.

  $(654,934 $312,813  $(342,121 $(301,413 $(643,534
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Pro forma loss per share data:

      

Basic and diluted loss per share of Class A Common stockholders:

      

Basic

      $(2.54

Diluted

      $(2.54

Weighted average number of shares used in computing loss per share(e)

      

Basic

       253,750,271 

Diluted

       253,750,271 

See accompanying notes to unaudited pro forma financial information.

 

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Unaudited Pro Forma Consolidated Balance Sheet

As of December 31, 2020

 

 

(In thousands, except per interest and share
data)

  Endeavor
Operating
Company, LLC
Actual
   Adjustments
for the
Reorganization
Transactions
  As Adjusted
Before this
Offering
   Adjustments
for this
Offering, UFC
Buyout and
the Use of
Proceeds(f)
  Endeavor
Group
Holdings, Inc.
Pro Forma
 

Assets

        

Current Assets:

        

Cash and cash equivalents

  $1,008,485   $—    $1,008,485   $951,868(f)  $1,960,353 

Restricted cash

   181,848    —     181,848    —     181,848 

Accounts receivable

   445,778    —     445,778    —     445,778 

Deferred costs

   234,634    —     234,634    —     234,634 

Other current assets

   194,463    —     194,463    —     194,463 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Total current assets

   2,065,208    —     2,065,208    951,868   3,071,076 

Property and equipment, net

   613,139    —     613,139    —     613,139 

Operating lease right-of-use assets

   386,911    —     386,911    —     386,911 

Intangible assets, net

   1,595,468    —     1,595,468    —     1,595,468 

Goodwill

   4,181,179    —     4,181,179    —     4,181,179 

Investments

   251,078    —     251,078    —     251,078 

Other assets

   540,651    —     540,651    (2,775)(n)   537,876 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Total assets

  $9,633,634   $—    $9,633,634   $949,093  $10,582,727 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Liabilities, redeemable interests and members’/shareholders’ equity

        

Current Liabilities:

        

Accounts payable

  $554,260   $—    $554,260   $(2,374)(n)  $551,886 

Accrued liabilities

   322,749    —     322,749    —     322,749 

Current portion of long-term debt

   212,971    —     212,971    —     212,971 

Current portion of operating lease liabilities

   58,971    —     58,971    —     58,971 

Deferred revenue

   606,530    —     606,530    —     606,530 

Deposits received on behalf of clients

   176,572    —     176,572    —     176,572 

Other current liabilities

   65,025    —     65,025    —     65,025 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Total current liabilities

   1,997,078    —     1,997,078    (2,374  1,994,704 

Long-term debt

   5,712,834    —     5,712,834    —     5,712,834 

Tax receivable agreement obligations

   —      45,539(j)   45,539    30,637(j)   76,176 

Long-term debt operating lease liabilities

   395,331    —     395,331    —     395,331 

Other long-term liabilities

   373,642    5,199(j)   378,841    (3,546)(h)(j)   375,295 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Total liabilities

   8,478,885    50,738   8,529,623    24,717   8,554,340 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Redeemable non-controlling interests

   168,254    22,519(k)   190,773    (13,950)(h)   176,823 

Redeemable equity

   22,519    (22,519)(k)   —      —     —   

 

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(In thousands, except per interest and
share data)

  Endeavor
Operating
Company, LLC
Actual
  Adjustments
for the
Reorganization
Transactions
  As Adjusted
Before this
Offering
  Adjustments
for this
Offering, UFC
Buyout and
the Use of
Proceeds(f)
  Endeavor
Group
Holdings, Inc.
Pro Forma
 

Members’/Shareholders’ Equity:

      

Class A common stock (par value, $0.00001), shares authorized and shares outstanding

   —     1(i)   1   1(i)   2 

Class B common stock (par value, $0.00001), shares authorized and shares outstanding

   —     —     —     —     —   

Class C common stock (par value, $0.00001), shares authorized and shares outstanding

   —     —     —     —     —   

Class X common stock (par value, $0.00001), shares authorized and shares outstanding

   —     1(i)   1   —  (i)   1 

Class Y common stock (par value, $0.00001), shares authorized and shares outstanding

   —     2(i)   2   —  (i)   2 

Additional paid-in capital

   —     197,016(g)   197,016   1,069,099(g)   1,266,115 

Accumulated deficit

   —     —     —     (279,438)(m)   (279,438

Members’ capital

   468,633   (468,633)(k)   —     —     —   

Accumulated other comprehensive loss

   (190,786  89,921   (100,865  13,130(l)   (87,735
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Endeavor Operating Company, LLC/Endeavor Group Holdings, Inc. members’/shareholders’ equity

   277,847   (181,692  96,155   802,792   898,947 

Nonredeemable non-controlling interest

   686,129   130,954(l)   817,083   135,534   952,617 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total members’/shareholders’ equity

   963,976   (50,738  913,238   938,326   1,851,564 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities, in redeemable interests and members’/shareholders’ equity

  $9,633,634  $—    $9,633,634  $949,093  $10,582,727 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See accompanying notes to unaudited pro forma financial information.

 

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Notes to Unaudited Pro Forma Financial Information

 

(a)

Reflects the effects of the following equity-based compensation expenses:

 

  

$135.3 million of equity-based compensation expense for the year ended December 31, 2020 in relation to new awards under the 2021 Incentive Award Plan to be issued to certain employees and executives of the Company in connection with the offering and vesting over periods greater than one year commencing on the awards’ grant date, which for pro forma purposes would be January 1, 2020. Such awards will be granted by Endeavor Group Holdings, accordingly none of the related expense is attributable to non-controlling interests.

 

  

$243.9 million of equity-based compensation expense at Endeavor Operating Company for the year ended December 31, 2020 in relation to the modification of certain pre-IPO equity-based awards primarily to remove certain forfeiture and discretionary call terms.

 

  

$4.0 million of equity-based compensation expense reversal at Endeavor Operating Company for the year ended December 31, 2020 in relation to elimination of put rights in connection with the offering (refer to note (h)).

 

(b)

Endeavor Operating Company has been, and will continue to be, treated as a partnership for U.S. federal and state income tax purposes. Following the reorganization, we will be subject to U.S. federal income taxes, in addition to state, local and international taxes, with respect to our allocable share of any taxable income of Endeavor Operating Company. As a result, the consolidated statement of operations reflects adjustments to our income tax expense to reflect the effective tax rate of (1.02%) for the year ended December 31, 2020. In addition, following further adjustments for this offering, the UFC Buyout and the use of proceeds, the pro forma consolidated statement of operations reflects adjustments to our income tax expense to reflect the effective tax rate of 0.06% for the year ended December 31, 2020. The effective tax rates include provisions for U.S. federal income taxes and our estimate of the total apportioned statutory rate for all state, local and/or foreign jurisdictions.

 

(c)

As described in “Organizational Structure,” upon completion of the reorganization transactions, Endeavor Group Holdings will become the sole managing member of Endeavor Manager, which will be the sole managing member of Endeavor Operating Company. Endeavor Group Holdings will initially own less than 100% of the economic interest in Endeavor Operating Company through Endeavor Manager but will have the sole voting rights and control the management of Endeavor Operating Company.

Upon completion of the reorganization transactions and prior to the offering, Endeavor Group Holdings’ indirect ownership percentage in Endeavor Operating Company will be 52.87%. Net loss attributable to non-controlling interests will represent 47.13% of net loss.

Immediately following the completion of this offering, Endeavor Group Holdings’ indirect ownership percentage in Endeavor Operating Company will be 59.75%. Net loss attributable to non-controlling interests will represent 40.25% of net loss. These amounts have been determined based on an assumption that the underwriters’ option to purchase 3,195,000 additional shares of our Class A common stock is not exercised. If the underwriters’ option to purchase additional shares is exercised in full, Endeavor Group Holdings’ indirect ownership percentage in Endeavor Operating Company will increase to 60.06% and the ownership percentage held by non-controlling interests will decrease to 39.94%.

 

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(d)

Reflects the effects on net loss attributable to non-controlling interests relating to the following ($ in thousands):

 

Adjustments for the Reorganization Transactions

  

Historical loss apportioned to non-controlling interest(1)

  $(308,681

Additional corporation tax benefit allocable to non-controlling interest(2)

   750 
  

 

 

 
  $(307,931

Adjustments for this Offering and the Use of Proceeds

  

Change in allocation of historical loss to non-controlling interest(3)

  $45,074 

Additional stock-based compensation expense apportioned to non-controlling interest(4)

   (98,133

Additional income tax expense apportioned to non-controlling interest(5)

   428 

Change in allocation of historical income to non-controlling interest for the UFC Buyout(6)

   (17,114
  

 

 

 
  $(69,746

 

 (1)

This allocation is computed based upon the non-controlling interest in Endeavor Operating Company of 47.13%, upon completion of the reorganization transactions and prior to the offering, multiplied by historical net loss attributable to Endeavor Operating Company of $654.9 million.

 (2)

This allocation is computed based upon the non-controlling interest in Endeavor Manager of 15.37%, upon completion of the reorganization transactions and prior to the offering, multiplied by additional corporation tax benefit of $4.9 million for the year ended December 31, 2020.

 (3)

Computed based upon the 6.88% decrease in the non-controlling interest in Endeavor Operating Company from 47.13% to 40.25%, multiplied by historical net loss attributable to Endeavor Operating Company of $654.9 million.

 (4)

This allocation is computed based upon the non-controlling interest in Endeavor Operating Company of 40.25%, multiplied by additional net stock-based compensation expense of $243.9 million at Endeavor Operating Company for the year ended December 31, 2020 (refer note (a)).

 (5)

Computed based upon the non-controlling interest in Endeavor Manager of 10.62% multiplied by additional income tax benefit of $4.0 million, as a result of the increase in our proportionate interest in Endeavor Operating Company following the use of proceeds of this offering, for the year ended December 31, 2020.

 (6)

Computed based upon the increase in the ownership interest at Endeavor Group Holdings in UFC multiplied by the historical net income attributable to Endeavor Operating Company.

 

(e)

The weighted average number of shares underlying the basic loss per share calculation reflects only the 253,750,271 shares of Class A common stock as they are the only outstanding shares after the offering which participate in the economics of Endeavor Group Holdings. The weighted average number of shares underlying the diluted loss per share calculation similarly reflects the 253,750,271 shares of Class A common stock outstanding after the offering as any conversion of the Class A common stock options would have an anti-dilutive effect on loss per share. Additionally, the exchange of Endeavor Operating Company Units or Endeavor Manager Units together with paired shares of Class X common stock would not have a dilutive effect on loss per share as loss attributable to Endeavor Group Holdings would increase proportionately with each exchange.

 

(f)

The following sets forth the estimated sources and uses of funds in connection with this offering, assuming the issuance of 21,300,000 shares of Class A common stock at the initial public offering price of $24.00 per share, the concurrent private placements at a price of $24.00 per share and the UFC Buyout:

 

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Sources:

 

  

$511.2 million gross cash proceeds to us from the offering of Class A common stock in this offering; and

 

  

$1,352.1 million gross cash proceeds to us from the sale of Class A common stock in the concurrent private placements.

Uses:

 

  

we will use $76.1 million to pay underwriting discounts and commissions and offering expenses (which will be borne by Endeavor Operating Company through a reduction in the contributions described immediately below), $0.4 million of which has been paid as of December 31, 2020 and is classified as other assets on the consolidated balance sheet (refer to note (n));

 

  

we will use $835.7 million to purchase Endeavor Operating Company Units (or interests in UFC Parent) directly from certain of the Other UFC Holders (or their affiliates) at a price per unit (with respect to Endeavor Operating Company Units) equal to the initial public offering price per share of Class A common stock sold in this offering;

We will contribute $951.5 million to Endeavor Manager in exchange for a number of Endeavor Manager Units equal to the contribution amount, prior to reduction for offering expenses, divided by the price paid by the underwriters for shares of our Class A common stock in this offering. Endeavor Manager will then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units. Endeavor Operating Company will use such remaining proceeds for working capital and general corporate purposes.

 

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(g)

Reflects the effects on additional paid-in capital relating to the following ($ in thousands):

 

Adjustments for the Reorganization Transactions

  

Par value of Class A, X and Y common stock issued

  $(4.1

Proportionate allocation of historical member’s capital to Endeavor Group Holdings(1)

   247,757 

Basis differences in Endeavor Operating Company (refer to note (j))

   (58,774

Deferred tax assets, net of valuation allowances, recognized (refer to note (j))

   53,576 

TRA liability (refer to note (j))

   (45,539
  

 

 

 
  $197,016 

Adjustments for this Offering and the Use of Proceeds

  

Proceeds from offering and private placements of Class A common stock

  $1,863,284 

Less: par value of shares of Class A common stock issued

   (0.2

Reduction of proceeds for offering costs

   (66,024

Reduction for the UFC Buyout

   (449,359

Change in Endeavor Operating Company’s net assets after the offering and the UFC Buyout attributable to the non-controlling interest

  

 

(383,033

Issuance of new equity-based compensation awards in Endeavor Group Holdings upon the consummation of this offering (refer to note (a))

   135,304 

Basis differences in Endeavor Operating Company (refer to note (j))

   (36,480

Change in deferred tax assets, net of valuation allowances, recognized (refer to note (j))

   36,043 

Change in TRA liability (refer to note (j))

   (30,636
  

 

 

 
  $1,069,099 

 

 (1)

This allocation is computed based upon Endeavor Group Holdings’ interest in Endeavor Operating Company of 52.87%, upon completion of the reorganization transactions and prior to the offering, multiplied by historical members’ capital of $468.6 million.

 

(h)

Reflects the elimination, in connection with the offering, of certain put rights previously granted to certain senior executives whereby such individuals could elect to sell vested equity interests to Endeavor Operating Company. As of December 31, 2020, Endeavor Group Holdings had $13.9 million recorded in redeemable non-controlling interest and $4.0 million in other long-term liabilities in relation to such put rights, which is being reclassified to nonredeemable non-controlling interest and derecognized, respectively.

 

(i)

Represents the par value of shares of our Class A, Class X and Class Y common stock that we will issue in connection with the reorganization transactions, the concurrent private placements and the UFC Buyout. See reorganization transactions as described in “Organizational Structure.”

 

(j)

In connection with the mergers of certain of the pre-IPO investors with and into Endeavor Group Holdings, we will acquire each entities’ respective units of Endeavor Operating Company and will succeed to their aggregate historical tax basis.

Adjustments for the Reorganization Transactions

As part of the reorganization, the total tax benefit from this step-up in tax basis is approximately $1,109.3 million and will be amortized over 15 years pursuant to Section 197 of the U.S. Internal Revenue Code of 1986, as amended. We estimate that it is more likely than not that we will not realize the full benefit represented by the deferred tax asset and therefore, recorded a valuation allowance resulting in a net

 

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deferred tax asset of $53.6 million. In addition, as part of these mergers, we will enter into a tax receivable agreement with the Post-IPO TRA Holders to pay them 85% of the tax savings realized. We have recorded a TRA liability of $45.5 million, which represents 85% of the tax savings that we are more likely than not expected to realize. The $8.1 million difference between the net deferred tax asset and the TRA liability is recorded as an increase in additional paid-in capital.

Adjustments for the Offering and Use of Proceeds

There is an increase of $36.0 million in the net deferred tax asset described above. Accordingly, the related TRA liability increased by $30.6 million. The difference between such increases is recorded as an increase to additional paid-in capital. Additionally, the deferred tax liability increased by $36.5 million.

 

(k)

Represents the elimination of $468.6 million of historical members’ capital in Endeavor Operating Company, and related recognition of $247.8 million and $220.9 million of additional paid-in capital and nonredeemable non-controlling interests, respectively, in consolidated Endeavor Group Holdings as described in notes (g) and (l). In addition, redeemable equity for put rights previously granted of $22.5 million (refer to note (h)) are reclassed to redeemable non-controlling interests in consolidated Endeavor Group Holdings. See reorganization transactions as described in “Organizational Structure.”

 

(l)

Reflects the effects on nonredeemable non-controlling interest relating to the following ($ in thousands):

 

Adjustments for the Reorganization Transactions

  

Proportionate allocation of historical capital to nonredeemable non-controlling interest(1)

  $220,875 

Proportionate allocation of historical accumulated other comprehensive loss to nonredeemable non-controlling interest(1)

   (89,921
  

 

 

 
  $130,954 

Adjustments for this Offering and the Use of Proceeds

  

Reduction for the UFC Buyout

  $(396,435

Change in Endeavor Operating Company’s net assets after the offering and the UFC Buyout attributable to the nonredeemable non-controlling interest.

   383,032 

Change in allocation of accumulated other comprehensive loss to nonredeemable non-controlling interest(2)

   (13,130

Elimination of equity unit put rights—reclassification of redeemable non-controlling interest to nonredeemable non-controlling interest (refer note (h))

   13,950 

Elimination of equity unit put rights—proportionate allocation of credit to income to nonredeemable non-controlling interest

   2,380 

Effects of the equity-based compensation expenses at Endeavor Operating Company for modification of certain pre-IPO equity-based awards-proportionate allocation of expense to nonredeemable non-controlling interest

   145,737 
  

 

 

 
  $135,534 

 

 (1)

This allocation is computed based upon the nonredeemable non-controlling interest in Endeavor Operating Company of 47.13%, upon completion of the reorganization transactions and prior to the offering, multiplied by historical members’ capital of $468.6 million, and accumulated other comprehensive loss of $190.8 million, respectively.

 (2)

Computed based upon the 6.88% decrease in the nonredeemable non-controlling interest in Endeavor Operating Company from 47.13% to 40.25%, following the offering and use of

 

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 proceeds, multiplied by historical members’ capital of $468.6 million, and accumulated other comprehensive loss of $190.8 million, respectively.

 

(m)

Reflects the effects on retained earnings relating to the following ($ in thousands):

 

Adjustments for this Offering and the Use of Proceeds

  

Elimination of equity unit put rights – proportionate allocation of non-recurring credit to income to retained earnings(1)

  $1,603 

Reflects the effects of equity-based compensation expenses (refer to note (a))(1)

   (281,041
  

 

 

 
  $(279,438

 

 (1)

This allocation is computed based upon the ownership interest in Endeavor Operating Company of 59.75%, following the offering and use of proceeds, multiplied by the non-recurring income of $4.0 million for the termination of put rights (refer to note (h)) and $243.9 million non-recurring equity-based compensation expense (refer to note (a)). In addition, the effects of equity-based compensation expenses includes $135.3 million for new awards granted by Endeavor Group Holdings (refer to note (a)).

 

(n)

Reflects the reclassification of capitalized pre-IPO offering costs from other assets to additional paid-in capital and the settlement of such unpaid costs in accounts payable as of December 31, 2020.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

We were formed as a Delaware corporation in January 2019 and have not, to date, conducted any activities other than those incident to our formation and the preparation of this prospectus and the registration statement of which this prospectus forms a part.

The selected historical consolidated statements of operations data for the years ended December 31, 2018, 2019 and 2020 and the selected historical consolidated balance sheet data as of December 31, 2019 and 2020 presented below have been derived from Endeavor Operating Company’s audited consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated statements of operations data for the years ended December 31, 2016 and 2017 and the selected historical consolidated balance sheet data as of December 31, 2016, 2017 and 2018 presented below have been derived from Endeavor Operating Company’s audited consolidated financial statements not included in this prospectus.

The results of operations for the periods presented below are not necessarily indicative of the results to be expected for any future period. Please refer to the footnotes below as well as the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview—Factors that May Influence Future Results of Operations” for additional information on the factors that impact the comparability of the information presented below.

You should read the following information in conjunction with “Capitalization,” “Unaudited Pro Forma Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our respective consolidated financial statements and related notes thereto included elsewhere in this prospectus.

The following table sets forth selected historical consolidated financial data of Endeavor Operating Company for the periods presented.

Consolidated Statements of Operations Data:

 

   Years Ended December 31, 
(in thousands, except per share
data)
  2016(1)  2017(2)  2018  2019  2020 

Revenue

  $2,366,960  $3,020,116  $3,613,478  $4,570,970  $3,478,743 

Total operating expenses

   2,364,114   3,078,241   3,720,897   4,360,434   3,631,961 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income (loss) from continuing operations

   2,846   (58,125  (107,419  210,536   (153,218

Interest expense, net

   (197,707  (261,226  (277,200  (270,944  (284,586

Loss from continuing operations, net of tax

   (129,130  (200,159  (463,694  (525,661  (625,318

Income (loss) from discontinued operations, net of tax (including gain on sale in 2018)

   30,814   26,991   694,998   (5,000  —   

Net (loss) income

   (98,316  (173,168  231,304   (530,661  (625,318

Net (loss) income attributable to non-controlling interests

   (58,417  (111,919  (85,241  23,158   29,616 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income attributable to Endeavor Operating Company, LLC

  $(39,899 $(61,249 $316,545  $(553,819 $(654,934
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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Consolidated Balance Sheet Data:

 

   As of December 31, 
(in thousands)  2016(1)   2017(2)   2018   2019   2020 

Cash and cash equivalents

  $368,181   $800,026   $768,080   $705,348   $1,008,485 

Total assets, including discontinued operations

   8,308,228    8,893,460    9,665,132    9,292,299    9,633,634 

Long-term debt, including current portion

   4,405,608    4,587,545    4,642,013    5,045,273    5,925,805 

Total liabilities, including discontinued operations

   6,034,382    6,257,278    6,674,443    7,424,214    8,478,885 

Redeemable non-controlling interests

   140,669    149,368    155,666    136,809    168,254 

Redeemable equity

   —      —      43,693    43,693    22,519 

Members’ equity

   599,282    1,258,015    1,585,066    913,274    277,847 

Nonredeemable non-controlling interests

   1,533,895    1,228,799    1,206,264    774,309    686,129 

Total members’ equity

   2,133,177    2,486,814    2,791,330    1,687,583    963,976 

 

(1)

The consolidated statement of operations data for the year ended December 31, 2016 and the consolidated balance sheet data as of December 31, 2016 includes the effects of the UFC Acquisition since August 18, 2016.

(2)

The consolidated balance sheet data as of December 31, 2017 includes the effects of the issuance of 508.2 million Class A common units for approximately $1.3 billion.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this prospectus, as well as the information presented under “Selected Historical Consolidated Financial Data.” The historical consolidated financial data discussed below reflect our historical results of operations and financial position and relate to periods prior to the reorganization transactions described in “Organizational Structure” and do not give effect to pro forma adjustments. As a result, the following discussion does not reflect the significant impact that such events will have on us. See “Organizational Structure” and “Unaudited Pro Forma Financial Information” for more information.

The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this prospectus, particularly in “Risk Factors” and “Forward-Looking Statements.” Unless otherwise indicated, references in this prospectus to 2018, 2019 and 2020 are to our fiscal years ended December 31, 2018, 2019 and 2020, respectively.

BUSINESS OVERVIEW

Endeavor is a premium intellectual property, content, events, and experiences 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, PBR and Euroleague, 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 1 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. PBR is one of America’s fastest growing sports with annual attendance for its premier series quadrupling since its inception in 1995.

 

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We have an up to 20-year partnership with Euroleague, which could extend into 2036, to manage and capitalize on all of the commercial business of the league, including media rights, sponsorship, content production, licensing, digital distribution, events staging, and hospitality, for which we receive a management fee. Euroleague is one of the most popular indoor sports leagues in the world, averaging attendance 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 with the PGA-sanctioned Asian Tour. We also operate other events on behalf of third parties, including the AIG Women’s British Open and Fortnite World Cup. Through On Location, we are a leader in providing more than 900 premium experiences 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, and 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 for on-demand virtual sports products including our own UFC Event Centre. We also leverage the technology derived from IMG ARENA to provide streaming video solutions to our clients and our owned assets via Endeavor Streaming.

Additionally, we own and operate IMG Academy, a leading academic and sports training institution located in Florida.

Representation

Our Representation segment provides services to more than 7,000 talent and corporate clients and includes our content division, Endeavor Content. 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 also 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. Endeavor Content provides a premium alternative to traditional content studios, offering a range of services including content development, production, financing, sales, and advisory services for creators.

Components of Our Operating Results

Revenues

In our Owned Sports Properties segment, we primarily generate revenue via media rights fees, sponsorships, ticket sales, subscriptions, license fees, and pay-per-view. In our Events, Experiences & Rights segment, we primarily generate revenue from media rights sales, production service and studio fees, sponsorships, ticket and premium experience sales, subscriptions, streaming fees, tuition, profit sharing, and commissions. In our

 

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Representation segment, we generate revenue primarily through commissions, packaging fees, marketing and consulting fees, production fees, and content licensing 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

Endeavor Operating Company is a limited liability company, which is treated as a partnership for U.S. federal income tax purposes and is therefore not subject to U.S. corporate income taxes. Endeavor Operating Company’s U.S. and foreign corporate subsidiaries are subject to entity-level taxes. Endeavor Operating Company is also subject to entity-level income taxes in certain U.S. state and local jurisdictions.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The COVID-19 pandemic has 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.

The COVID-19 pandemic has resulted in various governmental restrictions, including the declaration of a federal National Emergency, multiple cities’ and states’ declarations of states of emergency, restrictions to businesses deemed non-essential, quarantines, “shelter-in-place” orders, restrictions on travel, limitations on social or public gatherings, and other social distancing measures. These measures began to have a significant adverse impact on our business and operations beginning in March 2020, including the lack of ticketed PBR and UFC events and the early cancellation of the 2019-2020 Euroleague season adversely impacting our Owned Sports Properties segment; the postponement or cancellation of live sporting events and other in-person events adversely impacting our Events, Experiences & Rights segment; and stoppages of entertainment productions, including film, television shows and music events, as well as reduced corporate spending on marketing, experiential and activation, adversely impacting our Representation segment. Furthermore, following the merger of our IMG College business with Learfield, the operating results of the merged business have been weaker than anticipated driven by lower than expected sales and have been further impacted by COVID-19 as a result of the delay, cancellation of or shortened college football season and the prohibition of fans by many teams, which has resulted in impairment charges at Learfield IMG College adversely impacting our equity earnings. We also recognized goodwill and intangible asset impairment charges primarily at our Events, Experiences & Rights segment, driven by lower projections as a result of the impact of COVID-19 and restructuring in certain of our businesses. In the future, any further impact to our business as a result of COVID-19 could result in additional impairments of goodwill, intangibles, long-term investments and long-lived assets.

In response to the COVID-19 pandemic, we implemented cost-savings initiatives across the organization, including salary reductions, hiring freezes, furloughs, reduced work arrangements, and reductions of our workforce, eliminating costs for consultants, reducing travel and expenses, reducing our marketing spend, cancelling internal company events, and reducing other operating expenses, capital expenditures, and acquisition activity. We believe the actions we have taken and continue to implement will enhance our financial flexibility and provide us the ability to scale up quickly as the impact of the COVID-19 pandemic subsides.

 

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Additionally, in order to protect the health and safety of our employees, particularly given the severity of the pandemic in New York, California and London, we have continued to limit access to our corporate offices and our corporate workforce has spent, and continues to spend, a significant amount of time working from home during this period. Access to our offices will remain limited until we are able to safely and responsibly re-open them on a broader basis in accordance with governmental and public health guidance, as well as health and safety policies tailored to our operations. In addition to other cost-cutting measures taken during COVID-19, we have negotiated rent deferrals under certain of our leases for some portion of the work-from-home period. This deferred rent will be repaid into 2022.

While activity has resumed in certain of our businesses and restrictions have been lessened or lifted—for example, major sporting events for which we have media rights have restarted without, or with limited numbers of, fans and have gradually increased permitted fan attendance, film and television productions have begun in certain areas around the world, fashion photo shoots have taken place virtually, and students have returned to IMG Academy—restrictions impacting certain of our businesses remain in effect in locations where we are operating and could in the future be reduced or increased, or removed or reinstated. As a result of this and numerous other uncertainties, including the duration of the pandemic, potential for a resurgence of cases, impact of variants, enduring and additional actions that may be taken by governmental authorities to control the spread of COVID-19, including the continuing rollout of vaccines, availability of vaccine doses to the general public, “shelter-in-place” orders, quarantines, travel restrictions, social distancing measures, immigration restrictions, additional postponements or cancellations of live sporting events and other in-person events, and changes in consumer preferences towards our business and the industries in which we operate, we are unable to accurately predict the full impact of COVID-19 on our business, results of operations, financial position and cash flows, but acknowledge that its impact on our business and results of operations may be material. The ongoing pandemic has had a significant impact on our cash flows from operations. We expect that recovery will continue to be gradual and that the wider impact on revenue and cash flows will vary, but will generally depend on the factors listed above and the general uncertainty surrounding COVID-19. As an example, for those live events that resume, attendance may continue at significantly reduced levels throughout 2021, and any resumption may bring increased costs to comply with new health and safety guidelines. Given the ongoing uncertainty, we have taken several steps to preserve capital and increase liquidity, as described above. We cannot assure you that such measures and our cash flows from operations, cash and cash equivalents, or cash available under our Senior Credit Facilities (as defined below) will be sufficient to meet our working capital requirements, our cash requirements for current and future joint ventures, investments and acquisitions, and our commitments, including long-term debt service, in the foreseeable future.

Factors that May Influence Future Results of Operations

Our financial results of operations may not be comparable from period to period due to several factors. Key factors affecting our results of operations are summarized below.

Industry Growth

Our financial profile is associated with several secular trends in the industries we serve. Demand for our services and owned assets is, in part, driven by the growth of our underlying end markets and how much capital our clients invest to support their businesses. We are also impacted by how much consumers spend to access content and immersive experiences. The level of consumer spending depends, in turn, on consumer content consumption trends as well as preferences related to specific formats of consumption.

Our Owned Sports Properties segment benefits from the growth of the global sports market, which according to The Business Research Company (via MRDC) was $144 billion in 2019 and includes revenues from sports media rights, tickets, sponsorship, and merchandising. This figure is expected to increase to $172 billion by 2023, reflecting a 4% CAGR. Spending on sports media rights continues to be a significant component of revenues in the sports industry with rights values appreciating consistently over the past decade. Our market

 

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constituents include linear and digital distributors, which acquire sports media rights and broadcast sports content. In 2019, global sports media rights spend was $39 billion, having grown at a 9% CAGR since 2017, according to The Business Research Company (via MRDC), and this is expected to grow at an 8% CAGR to $53 billion in 2023. The rise of streaming, increased legalization of sports betting, increased competition from tech entrants, and continued viewership appeal attribute to the projected growth on the rights price tags.

Our Events, Experiences & Rights segment also benefits from the growth in demand for sports media as well as live events. According to Technavio (Infiniti Research’s “Global Ticket Market 2018-2022” and “Ticket Market by Event Type, Source, and Geography—Forecast and Analysis 2020-2024”), the global sporting events, concerts, and performing arts ticket industry segment was $79 billion in 2019 and is expected to grow at a 5% CAGR to $102 billion by 2024. This growth has also benefited from secular tailwinds as consumers, particularly millennials, continue to seek more unique tactile experiences that they can document and broadcast through social media.

Our Representation segment is driven by growth in the television and film industry, demand for live music events, as well as marketing spend by brands. According to Ampere Analysis, the combined spend in both global film and television content was $128 billion in 2019 and is expected to grow at a 7% CAGR to $183 billion by 2024. Television subscription fees across traditional cable, satellite and OTT distribution channels are rising, increasing the value of television and film content. The proliferation of acquirers of content, including broadcast networks, cable networks, satellite providers and OTT providers such as Netflix, Amazon, Hulu, HBO Max, ViacomCBS, and Comcast, has increased the competition for high-quality, original programming as well as library content. The film industry is also benefitting from growth in digital home viewing and premium movie-going experiences. As a sign of the importance of live events across the media landscape, in 2018 the top-earning musicians generated more of their income from touring than from any other source, according to Billboard. Additionally, sponsorships have become a key strategy for brands to obtain exposure, achieve better recall, communicate themes and achieve increased consumer engagement.

Our ability to generate revenue is highly sensitive to rapidly changing consumer preferences and industry trends, as well as the popularity of the talent and brands we represent, and the assets, including sports leagues and events, that we own. In the near term, we also expect our ability to generate revenue will be impacted by our ability to adapt to changes in the industries in which we operate due to the impact of COVID-19, such as safety protocols allowing talent to return to production sets, music venues, and other live events, and transitioning to digital offerings where in person attendance is restricted. In addition, our success depends on our ability to offer premium content through popular channels of distribution that meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. We believe our platform, at the core of the entertainment, sports, and content ecosystem, is highly responsive to changing consumer preferences and industry trends, with the ability to create, procure and cultivate satisfying consumer content, all while successfully completing strategic acquisitions and further expanding our capabilities. Our longevity, industry-leading access, scale and global footprint are emblematic of our ability to address challenges and risks related to our business and our growth strategy.

Organic Growth Investments

We have built businesses organically that take advantage of our unique role within the sports and entertainment ecosystem, and we will continue to invest in such areas. For example, we developed sports data distribution capabilities through IMG ARENA to address the emergence of online sports gaming services. We grew IMG ARENA primarily organically and the business now provides video feeds to more than 470 sportsbook brands globally and distributes data and streaming for more than 45,000 sporting events annually. We used this technology as the foundation for Endeavor Streaming, our content streaming services platform which provides streaming video solutions to our clients and our owned assets.

In 2017, we started Endeavor Content, a premium content studio providing a full-service alternative to traditional studios, offering a range of services including content development, production, financing, sales, and

 

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advisory services for creators. Since its inception, Endeavor Content has financed and/or sold more than 200 projects, including “La La Land,” “Just Mercy,” “Hamilton,” “Normal People,” and “See.”

Acquisitions

A key component of our growth strategy is to utilize the breadth and scale of our platform to identify attractive opportunities to either enhance our existing businesses or grow our portfolio of owned assets. Our platform and agency-driven insights allow us to identify new industry trends and related acquisition opportunities, and we often benefit from inbound and proprietary opportunities. We have a core competency in evaluating and integrating these acquisitions with a disciplined approach.

In April 2016, we acquired experiential marketing agencies Fusion Marketing and IMG Live to strengthen our marketing capabilities and, in August 2016, we acquired a controlling financial interest in UFC, the world’s premier professional MMA organization. These acquisitions increased our portfolio of owned assets and reinforced our leading position in the entertainment and sports industry. Immediately after the closing of this offering, we will consummate the UFC Buyout whereby we will acquire equity interests in UFC Parent from the Other UFC Holders. See “—UFC Buyout.”

In January 2018, we acquired 160over90, a full-service branding and marketing service group specializing in the higher education, sports and lifestyle sectors. Subsequently, we rebranded our marketing capabilities (including Fusion Marketing, IMG Live and others) under the 160over90 brand. In May 2018, we acquired NeuLion, a technology product and service provider specializing in digital video broadcasting, streaming and distribution, and monetization of live and on-demand content to internet-enabled devices. These acquisitions complement our platform by broadening our brand management and digital streaming capabilities.

In January 2020, we acquired On Location, a premium experiential hospitality business that serves iconic rights holders with extensive experience in ticketing, curated hospitality, live event production, and travel management in the worlds of sports and entertainment. The NFL is a minority owner and strategic partner in On Location.

These and future acquisitions may make it more difficult to evaluate our performance period over period. We have significant goodwill and intangible assets from prior acquisitions. The amortization of definite-lived intangibles assets will continue to adversely impact our results of operations. Future acquisitions may increase such goodwill and intangible asset balances, further adversely impacting our results of operations. We remain focused on executing our long-term goals and objectives, which include integrating our acquisitions and continuing to seek opportunities to further enhance our platform.

Timing of Events

Our financial results and liquidity needs vary from quarter-to-quarter or year-to-year depending on the timing of our owned and represented events, signing of business transactions on behalf of our clients (e.g., film production, book releases, or music tours), and representing entities tied to marquee global occasions (e.g., the Super Bowl). However, given the scale, breadth, and diversity of our clients and our portfolio of owned assets, we are not dependent on any one single client. Because our results may vary significantly from quarter-to-quarter or year-to-year, our financial results for one quarter or one year cannot necessarily be compared to another quarter or year and may not be indicative of our future financial performance in subsequent quarters or years.

Equity Method Investment in Learfield IMG College

Effective December 31, 2018, we completed the merger of our IMG College business with Learfield to form Learfield IMG College. Our financial results are impacted by our 36% ownership of the equity interests of Learfield IMG College, which is recognized as an equity method investment. Following the merger, the

 

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combined business performed weaker than anticipated and the operating results have been further adversely impacted in 2020 by the impact of COVID-19 on college sports. Such operating performance has resulted in Learfield IMG College recognizing impairment charges that have adversely impacted our results. As a result, we have recognized equity losses of affiliates, net of tax, of approximately $366.8 million and $250.7 million for the years ended December 31, 2019 and December 31, 2020, respectively. Our operating results may continue to be adversely impacted by the operating results of Learfield IMG College. The carrying value of our investment as of December 31, 2020, was approximately $107.6 million.

Market and Economic Conditions.

Our business depends on discretionary consumer and corporate spending. Many factors related to corporate spending and discretionary consumer spending, including economic conditions affecting disposable consumer income such as pandemics (e.g., COVID-19), unemployment levels, fuel prices, interest rates, changes in tax rates and tax laws that impact companies or individuals and inflation, can impact our operating results. While consumer and corporate spending may decline at any time for reasons beyond our control, the impacts on our results of operations become more acute in periods of a slowing economy or recession, which may be accompanied by changes in corporate sponsorship and advertising and decreases in attendance at live entertainment and sports events. During periods of reduced economic activity, many consumers have historically reduced their discretionary spending and advertisers have reduced their sponsorship and advertising expenditures, which can result in a reduction in sponsorship opportunities. A prolonged period of reduced consumer or corporate spending (including as a result of the continued COVID-19 pandemic), could have an adverse effect on our business, financial condition and results of operations.

Risks Associated with Future Results of Operations

For additional information on the risks associated with future results of operations, please see “Risk Factors—Risks Related to Our Business,” “Risk Factors—Risks Related to Our Business—The impact of the COVID-19 global pandemic could continue to materially and adversely affect our business, financial condition, and results of operations,” “Risk Factors—Risks Related to Our Business—Changes in public and consumer tastes and preferences and industry trends could reduce demand for our services and content offerings and adversely affect our business,” “Risk Factors—Risks Related to Our Business—Our ability to generate revenue from discretionary and corporate spending on entertainment and sports events, such as corporate sponsorships and advertising, is subject to many factors, including many that are beyond our control, such as general macroeconomic conditions,” “Risk Factors—Risks Related to Our Business—Owning and managing certain events for which we sell media and sponsorship rights, ticketing and hospitality exposes us to greater financial risk. If the live events that we own and manage are not financially successful, our business could be adversely affected,” “Risk Factors—Risks Related to Our Business—We are signatory to certain franchise agreements of unions and guilds and are subject to certain licensing requirements of the states in which we operate. We are also signatories to certain collective bargaining agreements and depend upon unionized labor for the provision of some of our services. Our clients are also members of certain unions and guilds that are signatories to collective bargaining agreements. Any expiration, termination, revocation or non-renewal of these franchises, collective bargaining agreements, or licenses and any work stoppages or labor disturbances could adversely affect our business” and “Business—Growth Strategies.”

UFC Buyout

Substantially simultaneous with the closing of this offering, we will consummate the UFC Buyout whereby we will acquire 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. We currently own 50.1% of UFC Parent’s common equity, or 44.0% of UFC Parent on a diluted basis, and have consolidated UFC Parent’s financial results from the date of the UFC Acquisition in 2016.

 

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As a result of the UFC Buyout, we will no longer attribute income (loss) to non-controlling interests in our consolidated statement of operations and will recognize a reduction in nonredeemable non-controlling interests on our consolidated balance sheet. Furthermore, restrictions on dividends under the UFC LLC Agreement will no longer be in place after the UFC Buyout, although restrictions from the UFC Credit Facilities will remain in place. For a further description of the UFC Buyout, see “Prospectus Summary—UFC Buyout.”

Reorganization

Prior to the closing of this offering, we will undertake the reorganization transactions described in “Organizational Structure.” Following the reorganization transactions and this offering, Endeavor Group Holdings will be a holding company, and its principal asset will be an equity interest in a newly formed subsidiary of Endeavor Group Holdings, Endeavor Manager, of which Endeavor Group Holdings will serve as the managing member. Endeavor Manager will in turn be the managing member of Endeavor Operating Company. Endeavor Group Holdings will manage and operate the business and control the strategic decisions and day-to-day operations of Endeavor Manager as its sole managing member, and Endeavor Operating Company as its indirect sole managing member, and will also have a substantial financial interest in Endeavor Manager and Endeavor Operating Company. Accordingly, Endeavor Group Holdings will consolidate the results of operations of Endeavor Manager and Endeavor Operating Company, and a portion of Endeavor Group Holding’s net income (loss) will be allocated to non-controlling interests to reflect the entitlements of certain former members of Endeavor Operating Company who will retain ownership interests in Endeavor Manager and Endeavor Operating Company following the reorganization transactions.

After consummation of this offering and the reorganization transactions described above, we will become 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 will be taxed at the prevailing corporate tax rates. We intend to cause Endeavor Operating Company to make 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. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

In addition, we have begun implementing and will continue to implement additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to continue to incur expenses related to these steps and, among other things, additional directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We have recognized and will continue to recognize certain non-recurring costs as part of our transition to a publicly traded company, consisting of professional fees and other expenses.

 

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RESULTS OF OPERATIONS

The following is a discussion of our consolidated results of operations for the years ended December 31, 2018, 2019 and 2020. This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP. The results of operations of the IMG College business are presented as discontinued operations for the periods prior to its disposal effective December 31, 2018.

 

   Years ended December 31, 
   2018  2019  2020 
(in thousands)          

Revenue

  $3,613,478  $4,570,970  $3,478,743 

Operating expenses:

    

Direct operating costs

   1,722,134   2,323,269   1,745,275 

Selling, general and administrative expenses

   1,632,804   1,753,938   1,442,316 

Insurance recoveries

   —     —     (86,990

Depreciation and amortization

   365,959   280,749   310,883 

Impairment charges

   —     2,478  220,477
  

 

 

  

 

 

  

 

 

 

Total operating expenses

   3,720,897   4,360,434   3,631,961 
  

 

 

  

 

 

  

 

 

 

Operating (loss) income from continuing operations

   (107,419  210,536   (153,218

Other (expense) income:

    

Interest expense, net

   (277,200  (270,944  (284,586

Other income (expense), net

   57,519   (69,226  81,087 
  

 

 

  

 

 

  

 

 

 

Loss from continuing operations before income taxes and equity losses of affiliates

   (327,100  (129,634  (356,717

Provision for income taxes

   88,235   3,371   8,507 
  

 

 

  

 

 

  

 

 

 

Loss from continuing operations before equity losses of affiliates

   (415,335  (133,005  (365,224

Equity losses of affiliates, net of tax

   (48,359  (392,656  (260,094
  

 

 

  

 

 

  

 

 

 

Loss from continuing operations, net of tax

   (463,694  (525,661  (625,318

Income (loss) from discontinued operations, net of tax (including gain on sale in 2018)

   694,998   (5,000  —   
  

 

 

  

 

 

  

 

 

 

Net income (loss)

   231,304   (530,661  (625,318

Net (loss) income attributable to non-controlling interests

   (85,241  23,158   29,616 
  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to Endeavor Operating Company, LLC

  $316,545  $(553,819 $(654,934
  

 

 

  

 

 

  

 

 

 

Revenue

Revenue decreased $1,092.2 million, or 23.9%, to $3,478.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019 (excluding the impact of On Location, revenue decreased 30.2% in the year ended December 31, 2020 compared to the year ended December 31, 2019).

 

  

Owned Sports Properties increased by $16.9 million, or 1.8%. The increase in our Owned Sports Properties segment was driven by increased rights fees at UFC of $20.0 million, in addition to a $24.9 million increase from a contract termination fee, partially offset by the lower number of events as well as the lack of ticket sales for UFC and PBR events and the early cancellation of the Euroleague season from the impact of COVID-19.

 

  

Events, Experiences & Rights decreased by $390.7 million, or 19.7%. The decline was primarily attributable to COVID-19 related impacts which resulted in the postponement or cancellation of live

 

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sporting events and other in-person events starting in mid-March and was partially offset by $289.5 million related to the acquisition of On Location.

 

  

Representation decreased by $729.9 million, or 43.6%. The decline was primarily driven by the impact of COVID-19 on talent and brand representation due to the stoppages of entertainment productions, including film, television shows, and music events, as well as reduced corporate spending on marketing and activation starting in mid-March.

Revenue increased $957.5 million, or 26.5%, to $4,571.0 million for the year ended December 31, 2019 compared to 2018.

 

  

Owned Sports Properties increased by $163.0 million, or 21.1%. The growth was primarily driven by increased media rights fees from the UFC long-term domestic media rights and residential pay-per-view contracts with ESPN that became effective in the first half of 2019.

 

  

Events, Experiences & Rights increased by $433.0 million, or 27.9%, compared to the period prior. The growth was attributable to increased media rights fees, primarily related to major soccer events, which only had a partial year in 2018.

 

  

Representation increased by $367.7 million, or 28.1%. The growth was primarily driven by talent and brand representation, delivery of additional film and television projects at Endeavor Content, and growth in 160over90 and Licensing.

Direct operating costs

Direct operating costs decreased $578.0 million, or 24.9%, to $1,745.3 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The decrease was primarily attributable to approximately $541 million of reduced event costs, media rights fees and sports production costs resulting from the postponement or cancellation of sports and live events due to COVID-19 (of which approximately $75 million relates to timing of deferred media rights costs that will be recognized as direct operating costs during 2021 when such sports events occur) and approximately $222 million of lower content amortization expenses due to a reduction in content delivery in 2020, partially offset by approximately $234 million of increases in costs related to On Location acquired in January 2020.

Direct operating costs increased $601.1 million, or 34.9%, to $2,323.3 million for the year ended December 31, 2019 compared to 2018. Approximately $335 million of the increase was attributable to media rights fees, primarily related to major soccer events, which only had a partial year in 2018, as well as growth in IMG ARENA. Approximately $195 million of the increase was attributable to content amortization expenses primarily related to the delivery of film and television projects at Endeavor Content. The remaining increase related to higher costs in owned events and sports production and 160over90.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased $311.6 million, or 17.8%, to $1,442.3 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The decrease principally reflects our COVID-19 related cost savings initiatives including lower cost of personnel resulting from pay reductions, furloughs and workforce reductions, and reduced travel and other operating expenses. This decrease was partially offset by $56.9 million of selling, general and administrative costs associated with On Location. We expect that certain of our SG&A costs will increase as COVID-19 related restrictions ease over time and business activity increases.

Selling, general and administrative expenses increased $121.1 million, or 7.4%, to $1,753.9 million for the year ended December 31, 2019 compared to 2018. The increase principally reflects higher personnel related costs, primarily related to acquisitions including NeuLion and growth in our existing businesses, and higher professional service costs including offering costs incurred, offset by a decrease of $48.0 million in equity-based compensation expense.

 

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In connection with this offering, based on the initial offering price of $24.00 per share, we would expect to incur a one-time equity-based compensation charge of $222.6 million relating to the treatment of existing equity interests in Endeavor Operating Company as a result of the reorganization transactions (which charge, for the avoidance of doubt, will not involve the issuance of any equity).

Insurance recoveries

We maintain events cancellation insurance policies for a significant number of our events. For the year ended December 31, 2020, we recorded $87.0 million of insurance recoveries which primarily relate to cancelled events in our Events, Experiences & Rights segment, as well as in PBR in our Owned Sports Properties segment, due to COVID-19.

Depreciation and amortization

Depreciation and amortization increased $30.1 million, or 10.7%, to $310.9 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily driven by the amortization of intangible assets recognized in connection with our 2020 acquisitions of On Location and the remaining 50% of the membership interests of FC Diez Media.

Depreciation and amortization decreased $85.2 million to $280.7 million for the year ended December 31, 2019 compared to 2018. The decrease was primarily driven by certain intangible assets related to the UFC Acquisition becoming fully amortized, partially offset by the amortization of intangible assets recognized in connection with the acquisition of NeuLion in May 2018.

Impairment charges

For the year ended December 31, 2020, we recorded $220.5 million of goodwill and intangible asset impairment charges primarily at our Events, Experiences & Rights segment, driven by lower projections as a result of the impact of COVID-19 and restructuring in certain of our businesses.

Interest expense, net

Interest expense, net increased $13.6 million to $284.6 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, principally due to lower short-term rates, partially offset by higher indebtedness incurred through additional borrowings.

Interest expense, net decreased $6.3 million to $270.9 million for the year ended December 31, 2019 compared to 2018, principally due to lower short-term interest rates.

Other income (expense), net

Other income (expense), net changed from expense of $69.2 million for the year ended December 31, 2019 to income of $81.1 million for the year ended December 31, 2020. The expense for the year ended December 31, 2019 primarily included a $27.4 million impairment of equity investments and related note receivable and a $39.3 million loss related to the change in the fair value of embedded foreign currency derivatives. The income for the year ended December 31, 2020 included gains of $27.1 million, $8.1 million, $15.3 million and $12.7 million recorded for the acquisition of the remaining 50% of the membership interests of FC Diez Media, the deconsolidation of Asian Tour Media, the gain on the sale of an investment and the change in the fair value of embedded foreign currency derivatives, respectively.

Other income (expense), net changed from income of $57.5 million for the year ended December 31, 2018 to expense of $69.2 million for the year ended December 31, 2019. The income of $57.5 million for the year

 

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ended December 31, 2018 was primarily driven by a net increase in the fair value for certain equity investments and a gain on the disposal of a business partially offset by an increase in the fair value of the UFC warrant liabilities. The expense of $69.2 million for the year ended December 31, 2019 was primarily driven by a $27.4 million impairment of equity investments and related note receivable and a $39.3 million loss related to the change in the fair value of embedded foreign currency derivatives.

Provision for income taxes

The provision for income taxes increased $5.1 million to $8.5 million for the year ended December 31, 2020 compared to 2019. The change is primarily due to tax expense of $24.1 million related to the On Location Events acquisition and subsequent tax restructuring, $10.2 million to revise the tax provision related to a prior year acquisition and subsequent tax restructuring, offset by a $7.2 million decrease in unrecognized tax benefits, and the release of $19.1 million of valuation allowances on net deferred U.S. tax assets, exclusive of deferred tax liabilities on indefinite lived intangible assets, state income taxes, and foreign tax credits.

The provision for income taxes decreased $84.9 million to $3.4 million for the year ended December 31, 2019 compared to 2018. The decrease in the provision was primarily due to net tax expense of $21.8 million related to the 2018 acquisition of NeuLion and subsequent tax restructuring, and $17.5 million of tax expense related to the tax impact of losses recognized on certain agreements for foreign statutory purposes subject to limitation under foreign tax law in 2018 as compared to 2019, and in 2019, a $31.3 million decrease in tax expense related to foreign operations and a $14.8 million decrease in state income taxes.

Equity losses of affiliates, net of tax

Equity losses of affiliates decreased $132.6 million to $260.1 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. Equity losses were primarily due to the $250.7 million of losses from our Learfield IMG College investment. The decrease in equity losses of affiliates was primarily driven by lower equity method impairments.

Equity losses of affiliates increased $344.3 million to $392.7 million for the year ended December 31, 2019 compared to 2018. The increase in equity losses of affiliates was primarily driven by our investment in Learfield IMG College. The results of Learfield IMG College for the year ended December 31, 2019 include a charge as a result of its annual goodwill and indefinite-lived intangible assets impairment test. Additionally, during the year ended December 31, 2019, the Company recorded an other-than-temporary impairment of $117.0 million resulting from continued losses and limited expectations for recovery.

Income (loss) from discontinued operations, net of tax

Loss from discontinued operations was $5.0 million for the year ended December 31, 2019 compared to income from discontinued operations of $695.0 million for the year ended December 31, 2018. The loss for the year ended December 31, 2019 reflects an amendment to the working capital adjustment related to the disposal of our IMG College business. The income for the year ended December 31, 2018 reflects the gain we recorded on the sale of our IMG College business of $729.3 million, partially offset by the results of the IMG College business which were adversely affected by professional fees related to the merger with Learfield.

Net (loss) income attributable to non-controlling interests

Net income attributable to non-controlling interests increased $6.5 million to $29.6 million for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily driven by an increase in net income from UFC offset by the net loss allocated to the non-controlling interest holders from the acquisition of On Location.

Net income attributable to non-controlling interests was $23.2 million for the year ended December 31, 2019 compared to net loss attributable to non-controlling interests of $85.2 million for the year ended

 

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December 31, 2018. The change to net income was primarily driven by UFC generating net income for the year ended December 31, 2019 as compared to a net loss for 2018, as well as the partial year impact of the redemption of the UFC Class P Units that occurred in the third quarter of 2019.

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.

 

   Years ended December 31, 
(in thousands)  2018   2019   2020 

Revenue:

      

Owned Sports Properties

  $772,732   $935,765   $952,624 

Events, Experiences & Rights

   1,551,222    1,984,221    1,593,509 

Representation

   1,306,129    1,673,796    943,873 

Eliminations

   (16,605   (22,812   (11,263
  

 

 

   

 

 

   

 

 

 

Total Revenue

  $3,613,478   $4,570,970   $3,478,743 
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA:

      

Owned Sports Properties

  $271,186   $417,203   $457,589 

Events, Experiences & Rights

   125,326    146,888    59,224 

Representation

   333,618    375,061    211,977 

Corporate

   (179,044   (205,649   (145,240

Owned Sports Properties

The following table sets forth our Owned Sports Properties segment results for the years ended December 31, 2018, 2019 and 2020:

 

   Years ended December 31, 
   2018  2019  

 

   2020 
(in thousands)              

Revenue

  $772,732  $935,765    $952,624 

Direct operating costs

  $350,317  $332,427    $312,935 

Selling, general and administrative expenses

  $140,734  $180,107    $185,835 

Adjusted EBITDA

  $271,186  $417,203    $457,589 

Adjusted EBITDA margin

   35.1  44.6    48.0

December 31, 2020 compared to December 31, 2019

Revenue for the year ended December 31, 2020 increased $16.9 million, or 1.8%, to $952.6 million, compared to the year ended December 31, 2019. The increase was driven by increased rights fees at UFC of $20.0 million, in addition to a $24.9 million increase from a contract termination fee, partially offset by the impacts from COVID-19 as UFC and PBR had fewer events and events that occurred had limited to no ticket revenue from April through September, and the cancellation of the 2019-2020 Euroleague season in March.

 

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Direct operating expenses for the year ended December 31, 2020 decreased $19.5 million, or 5.9%, to $312.9 million, compared to the year ended December 31, 2019. The decrease was attributable to reduced event costs at the UFC by holding certain events at the UFC APEX facilities during 2020 and a reduction in the number of events at PBR in 2020.

Selling, general and administrative expenses for the year ended December 31, 2020 increased $5.7 million, or 3.2%, to $185.8 million, compared to the year ended December 31, 2019. The increase was primarily attributable to higher cost of personnel of approximately $10 million partially offset by cost savings initiatives in other operating expenses. Corporate allocations remained relatively unchanged in 2020 from 2019.

Adjusted EBITDA for the year ended December 31, 2020 increased $40.4 million, or 9.7%, to $457.6 million, compared to the year ended December 31, 2019. The increase in Adjusted EBITDA was primarily due to increased revenue at UFC as well as decreased direct operating costs, partially offset by declines in PBR and Euroleague due to the COVID-19 related impacts described above.

December 31, 2019 compared to December 31, 2018

Revenue for the year ended December 31, 2019 increased $163.0 million, or 21.1%, to $935.8 million, compared to the year ended December 31, 2018. The increase was primarily driven by increased UFC media rights fees. UFC signed new long-term domestic media rights and residential pay-per-view contracts with ESPN that became effective in the first half of 2019. The domestic residential pay-per-view contract with ESPN helps reduce variability in our live events revenues through a fixed media rights fee. The revenue increase of $278.0 million in Media rights was offset by decreased Events and performance revenue of $116.4 million, which primarily related to the transition of sales of residential pay-per-view for UFC events from cable and satellite providers on an event-by-event basis to inclusion in the long-term media rights contract with ESPN.

Direct operating expenses for the year ended December 31, 2019 decreased $17.9 million, or 5.1%, to $332.4 million, compared to the year ended December 31, 2018. The decrease was primarily attributable to a decline in production expenses related to The Ultimate Fighter, which was not produced in 2019, and a reduction in commission expense associated with domestic residential pay-per-view after entering into the fixed media rights fee arrangement with ESPN.

Selling, general and administrative expenses for the year ended December 31, 2019 increased $39.4 million, or 28.0%, to $180.1 million, compared to the year ended December 31, 2018. The increase was primarily related to cost of personnel associated with opening the UFC Shanghai Performance Institute and the UFC APEX facilities in Las Vegas in addition to other operating expenses. Corporate allocations remained relatively unchanged in 2019 from 2018.

Adjusted EBITDA for the year ended December 31, 2019 increased $146.0 million, or 53.8%, to $417.2 million, compared to the year ended December 31, 2018. The increase in Adjusted EBITDA was due to the ESPN contracts signed in 2019 for the U.S. television rights and U.S. pay-per-view rights as well as improved live event revenue, additional events, and improved sponsorship revenue and was partially offset by the increase in selling, general and administrative expenses.

Events, Experiences & Rights

The following table sets forth our Events, Experiences & Rights segment results for the years ended December 31, 2018, 2019 and 2020:

 

   Years ended December 31, 
   2018  2019  2020 
(in thousands)          

Revenue

  $1,551,222  $1,984,221  $1,593,509 

Direct operating costs

  $1,069,265  $1,461,451  $1,246,793 

Selling, general and administrative expenses

  $354,463  $388,005  $387,203 

Adjusted EBITDA

  $125,326  $146,888  $59,224 

Adjusted EBITDA margin

   8.1  7.4  3.7

 

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December 31, 2020 compared to December 31, 2019

Revenue for the year ended December 31, 2020 decreased $390.7 million, or 19.7%, to $1,593.5 million, compared to the year ended December 31, 2019. Revenue decreased $680.2 million primarily from our media rights and live event revenues attributable to COVID-19 related event cancellations or delays, partially offset by $289.5 million related to the acquisition of On Location in January 2020. Revenue declined due to the delay of the soccer season in Europe which resulted in modified schedules for most leagues, as well as the cancellation or delay of major tennis and golf events which negatively impacted our media rights and sports production revenues. Events revenue declined due to the cancellations of the Miami Open and Hyde Park Winter Wonderland as well as other cancelled or postponed events, motorsports and exhibitions. Excluding the impact of the On Location acquisition, revenue decreased 34.3% for 2020 compared to 2019.

Direct operating expenses for the year ended December 31, 2020 decreased $214.7 million, or 14.7%, to $1,246.8 million, compared to the year ended December 31, 2019. Direct operating expenses decreased $445.1 million primarily from a reduction in media rights fees of $137.3 million (of which approximately $75 million relates to timing of deferred media rights costs that will be recognized as direct operating costs during 2021 when such sports events occur) and live event costs of $284.3 million due to COVID-19 related event cancellations or delays, partially offset by $230.4 million of direct operating expenses from On Location.

Selling, general and administrative expenses for the year ended December 31, 2020 decreased $0.8 million, or 0.2%, to $387.2 million compared to the year ended December 31, 2019. Selling, general and administrative expenses decreased $57.7 million primarily from our cost savings initiatives implemented across the segment, which focused on cost of personnel, travel and other operating expenses as a result of COVID-19; such decrease was primarily offset by selling, general and administrative expenses from On Location of $56.9 million. Corporate allocations remained relatively unchanged in 2020 from 2019.

Adjusted EBITDA for the year ended December 31, 2020 decreased $87.7 million, or 59.7%, to $59.2 million, compared to the year ended December 31, 2019. The decrease in Adjusted EBITDA was primarily due to declines in revenue and related direct operating expenses as noted above and was partially offset by On Location and the benefit from the cost savings initiatives implemented across the segment, as well as insurance recoveries related to certain events of $81.4 million.

December 31, 2019 compared to December 31, 2018

Revenue for the year ended December 31, 2019 increased $433.0 million, or 27.9%, to $1,984.2 million, compared to the year ended December 31, 2018. Approximately $304 million of the increase is attributable to the sale of media rights, primarily related to major soccer events, which only had a partial year in 2018. The increase in revenue was also driven by growth in events, including the King Tut exhibition, as well as strong growth from sports production, gaming rights and IMG Academy.

Direct operating expenses for the year ended December 31, 2019 increased $392.2 million, or 36.7%, to $1,461.5 million, compared to the year ended December 31, 2018. The increase was primarily attributable to increased media rights fees of $349.1 million primarily related to major soccer event rights and increased event costs of $34.0 million.

Selling, general and administrative expenses for the year ended December 31, 2019 increased $33.5 million, or 9.5%, to $388.0 million, compared to the year ended December 31, 2018. The increase was primarily attributable to increased cost of personnel and other operating expenses. Corporate allocations remained relatively unchanged in 2019 from 2018.

Adjusted EBITDA for the year ended December 31, 2019 increased $21.6 million, or 17.2%, to $146.9 million, compared to the year ended December 31, 2018. The increase in Adjusted EBITDA was primarily due to organic growth of our events and IMG Academy businesses partially offset by increased losses from media contracts related to major soccer events in the first full calendar year of the contracts.

 

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Representation

The following table sets forth our Representation segment results for the years ended December 31, 2018, 2019 and 2020:

 

   Years ended December 31, 
   2018  2019  2020 
(in thousands)          

Revenue

  $1,306,129  $1,673,796  $943,873 

Direct operating costs

  $313,715  $550,589  $190,259 

Selling, general and administrative expenses

  $659,085  $744,394  $543,813 

Adjusted EBITDA

  $333,618  $375,061  $211,977 

Adjusted EBITDA margin

   25.5  22.4  22.5

December 31, 2020 compared to December 31, 2019

Revenue for the year ended December 31, 2020 decreased $729.9 million, or 43.6%, to $943.9 million, compared to the year ended December 31, 2019. The decrease was due to the impact of COVID-19 on talent and brand representation due to stoppages of entertainment productions, including film, television shows, and music events, disruption of Endeavor Content film and television projects, as well as reduced corporate spending on marketing and activation.

Direct operating expenses for the year ended December 31, 2020 decreased $360.3 million, or 65.4%, to $190.3 million, compared to the year ended December 31, 2019. The decline is primarily due to lower content amortization expenses of approximately $222 million due to a reduction in content delivery in 2020 and approximately $93 million due to the reduction of experiential marketing activations.

Selling, general and administrative expenses for the year ended December 31, 2020 decreased $200.6 million, or 26.9%, to $543.8 million, compared to the year ended December 31, 2019. The decline was primarily related to cost savings initiatives across the segment focused on cost of personnel, travel and operating expenses in response to COVID-19. Corporate allocations remained relatively unchanged in 2020 from 2019.

Adjusted EBITDA for the year ended December 31, 2020 decreased $163.1 million, or 43.5%, to $212.0 million, compared to the year ended December 31, 2019. The decrease in Adjusted EBITDA was primarily due to declines in revenue and related direct operating expenses as noted above, which were partially offset by cost savings initiatives.

December 31, 2019 compared to December 31, 2018

Revenue for the year ended December 31, 2019 increased $367.7 million, or 28.1%, to $1,673.8 million, compared to the year ended December 31, 2018. The increase in revenue was primarily driven by strong growth in our talent and brand representation, delivery of additional film and television projects at Endeavor Content, and growth in marketing and licensing.

Direct operating expenses for the year ended December 31, 2019 increased $236.9 million, or 75.5%, to $550.6 million, compared to the year ended December 31, 2018. The increase was primarily related to higher content amortization expenses of approximately $195 million primarily from the delivery of film and television projects in 2019.

Selling, general and administrative expenses for the year ended December 31, 2019 increased $85.3 million, or 12.9%, to $744.4 million, compared to the year ended December 31, 2018. The increase in selling, general and administrative expenses primarily related to increased cost of personnel. Corporate allocations remained relatively unchanged in 2019 from 2018.

 

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Adjusted EBITDA for the year ended December 31, 2019 increased $41.4 million, or 12.4%, to $375.1 million, compared to the year ended December 31, 2018. The increase in Adjusted EBITDA was primarily due to the revenue growth and related direct operating expenses noted above particularly client and brand representation as well as licensing, partially offset by an increase in costs related to personnel and higher content amortization 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 years ended December 31, 2018, 2019 and 2020:

 

   Years ended December 31, 
   2018   2019   2020 
(in thousands)            

Adjusted EBITDA

  $(179,044  $(205,649  $(145,240

December 31, 2020 compared to December 31, 2019

Adjusted EBITDA improved $60.4 million for the year ended December 31, 2020 to $(145.2) million compared to the year ended December 31, 2019. The decrease in expenses was primarily due to lower cost of personnel, travel, and professional fees associated with a cost reduction effort which began in March 2020 in response to COVID-19.

December 31, 2019 compared to December 31, 2018

Adjusted EBITDA of $(205.6) million for the year ended December 31, 2019 represents an increase of $26.6 million as compared to the year ended December 31, 2018. The increase in expenses was primarily driven by additional corporate personnel and rent required to support the growth of our business, as well as an increase in resources supporting digital efforts across the company.

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA is a non-GAAP financial measure and is defined as net income (loss), excluding the results of discontinued operations, income taxes, net interest expense, depreciation and amortization, equity-based compensation, merger, acquisition and earn-out costs, certain legal costs, restructuring, severance and impairment charges, certain non-cash fair value adjustments, certain equity earnings, COVID-19 related expenses, and certain other items when applicable. Adjusted EBITDA margin is a non-GAAP financial measure defined as Adjusted EBITDA divided by Revenue.

Management believes that Adjusted EBITDA is useful to investors as it eliminates the significant level of non-cash depreciation and amortization expense that results from our capital investments and intangible assets recognized in business combinations, and improves comparability by eliminating the significant level of interest expense associated with our debt facilities, as well as income taxes, which may not be comparable with other companies based on our tax structure.

Adjusted EBITDA and Adjusted EBITDA margin are used as the primary bases to evaluate our consolidated operating performance.

 

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Adjusted Net Income is a non-GAAP financial measure and is defined as net income (loss) attributable to Endeavor Operating Company adjusted to exclude the results of discontinued operations and our share (excluding those relating to non-controlling interests) of the adjustments used to calculate Adjusted EBITDA, other than income taxes, net interest expense and depreciation, on an after tax basis, the release of tax valuation allowances and other tax items.

Adjusted Net Income adjusts income or loss from continuing operations attributable to the Company for items that are not considered to be reflective of our operating performance. Management believes that such non-GAAP information is useful to investors and analysts as it provides a better understanding of the performance of our continuing operations for the periods presented and, accordingly, facilitates the development of future projections and earnings growth prospects.

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 income as indicators of our financial performance. 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. These non-GAAP financial measures, as determined and presented by us, may not be comparable to related or similarly titled measures reported by other companies. Set forth below are reconciliations of our most directly comparable financial measures calculated in accordance with GAAP to these non-GAAP financial measures on a consolidated basis.

Adjusted EBITDA

 

(in thousands)  Years ended December 31, 
  2018  2019  2020 

Net income (loss)

  $231,304  $(530,661 $(625,318

(Income) loss from discontinued operations, net of tax (including gain on sale in 2018)

   (694,998  5,000   —   

Provision for income taxes

   88,235   3,371   8,507 

Interest expense, net

   277,200   270,944   284,586 

Depreciation and amortization

   365,959   280,749   310,883 

Equity-based compensation expense(1)

   149,138   101,188   91,271 

Merger, acquisition and earn-out costs(2)

   66,577   49,869   22,178 

Certain legal costs(3)

   26,677   29,681   12,520 

Restructuring, severance and impairment(4)

   38,363   42,441   271,868 

Fair value adjustment—Droga5(5)

   38,962   3,734   405 

Fair value adjustment—equity investments(6)

   (67,318  11,759   469 

Equity method losses—Learfield IMG College(7)

   —     366,797   250,726 

COVID-19 related costs(8)

   —     —     2,692 

Other(9)

   30,987   98,631   (58,240
  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $551,086  $733,503  $572,547 
  

 

 

  

 

 

  

 

 

 

Net income (loss) margin

   6.4  (11.6)%   (18.0)% 

Adjusted EBITDA margin

   15.3  16.0  16.5

 

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Adjusted Net Income

 

(in thousands)  Years ended December 31, 
  2018   2019   2020 

Net income (loss)

  $231,304   $(530,661  $(625,318

Net loss (income) attributable to non-controlling interests

   85,241    (23,158   (29,616
  

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Endeavor Operating Company, LLC

   316,545    (553,819   (654,934

(Income) loss from discontinued operations, net of tax (including gain on sale in 2018)

   (694,998   5,000    —   

Amortization

   301,162    209,243    225,492 

Equity-based compensation expense(1)

   149,138    101,188    91,271 

Merger, acquisition and earn-out costs(2)

   66,577    49,869    22,178 

Certain legal costs(3)

   26,677    29,681    12,520 

Restructuring, severance and impairment(4)

   38,363    42,441    271,868 

Fair value adjustment—Droga5(5)

   38,962    3,734    405 

Fair value adjustment—equity investments(6)

   (67,318   11,759    469 

Equity method losses—Learfield IMG College(7)

   —      366,797    250,726 

COVID-19 related costs(8)

   —      —      2,692 

Other(9)

   30,987    98,631    (58,240

Tax effects of adjustments(10)

   (9,295   (29,757   (25,528

Adjustments allocated to non-controlling interests(11)

   (135,990   (93,899   (69,272

Valuation allowance and other tax items(12)

   39,307    —      15,164 
  

 

 

   

 

 

   

 

 

 

Adjusted Net Income

  $100,117   $240,868   $84,811 
  

 

 

   

 

 

   

 

 

 

 

(1)

Equity-based compensation expense represents primarily non-cash compensation expense associated with our equity-based compensation plans.

The decrease for the year ended December 31, 2020 as compared to the year ended December 31, 2019 was primarily due to fewer awards being granted in 2020. For the year ended December 31, 2019 and 2020, equity-based compensation expense primarily related to our Owned Sports Properties and Representation segments and Corporate.

The decrease for the year ended December 31, 2019 as compared to the year ended December 31, 2018 was primarily due to lower expense recorded for modifications offset by expense for new awards granted in 2019 and a full year of expense from grants awarded in 2018. In 2018 and 2019, equity-based compensation expense primarily related to our Owned Sports Properties and Representation segments and Corporate.

(2)

Includes (i) certain costs of professional advisors related to mergers, acquisitions, dispositions or joint ventures and (ii) fair value adjustments for contingent consideration liabilities related to acquired businesses and compensation expense for deferred consideration associated with selling shareholders that are required to remain our employees.

Such costs for the year ended December 31, 2020 primarily related to professional advisor costs of approximately $13 million and primarily related to our Events, Experiences & Rights segment. Acquisition earn-out adjustments were approximately $9 million primarily related to our Representation segment.

Such costs for the year ended December 31, 2019 primarily related to our Representation segment, of which the largest component was earn-out adjustments, as well as our Events, Experiences & Rights segment, of which the largest component was professional advisor costs. Acquisition earn-out adjustments were approximately $34 million.

Such costs for the year ended December 31, 2018 primarily related to our Representation segment, of which the largest component was earn-out adjustments as well as approximately $31 million of professional advisor costs primarily related to our Representation and Events, Experiences & Rights segments. Acquisition earn-out adjustments were approximately $36 million.

 

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(3)

Includes costs related to certain litigation or regulatory matters impacting all of our segments and Corporate.

(4)

Includes certain costs related to our restructuring activities and non-cash impairment charges.

Such costs for the year ended December 31, 2020 included approximately $220 million related to the impairment of intangible assets and goodwill, approximately $19 million related to the impairment of certain other assets and investments and approximately $32 million for severance and restructuring expenses, in each case primarily related to COVID-19, and primarily related to our Owned Sports Properties and Events, Experiences & Rights segments and Corporate.

Such costs for the year ended December 31, 2019 included approximately $29 million related to the impairment of certain investments and approximately $14 million for severance and restructuring expenses and primarily related to our Representation and Events, Experiences & Rights segments.

Such costs for the year ended December 31, 2018 primarily related to severance and restructuring expenses, including costs related to the cessation of operations of certain events and the impairment of related assets, and had a comparable impact on our Events, Experiences & Rights and Representation segments.

(5)

Reflects the change in fair value of our investment in Droga5, which was accounted for using the fair value option through the disposal of our interest in April 2019; such non-cash fair value adjustments relate to our Representation segment; and adjustment for cash items including receipt of working capital adjustments and other amounts after disposal.

(6)

Includes the net change in fair value for certain equity investments with and without readily determinable fair values, based on observable price changes, in accordance with ASU 2016-01 and ASU 2018-03 effective January 1, 2018.

(7)

Relates to equity method losses, including impairment charges, from our investment in Learfield IMG College following the merger of our IMG College business with Learfield in December 2018. Prior to its disposal in December 2018, income or loss from our IMG College business is classified as discontinued operations.

(8)

Includes COVID-19 related expenses that are non-recurring and incremental costs that would have otherwise not been incurred. Such adjustment does not include the write off of $11.0 million of deferred event costs, net of insurance recoveries, which is adjusted in our Events, Experiences & Rights segment profitability measure.

(9)

For the year ended December 31, 2020, other costs primarily comprised of a gain of approximately $27 million related to the consolidation of a previously held equity interest in FC Diez Media, a gain of approximately $15 million related to the sale of an investment, a gain of approximately $8 million associated with the deconsolidation of Asian Tour Media Pte. Ltd., a gain of approximately $13 million related to non-cash fair value adjustments of embedded foreign currency derivatives and approximately $3 million increase related to purchase price adjustments to deferred revenue and ticket inventory at On Location, which related primarily to our Events, Experiences & Rights segment.

For the year ended December 31, 2019, other costs primarily comprised charges of approximately $17 million related to the impairment of a note receivable due from an equity investment related to our Representation segment, approximately $39 million related to non-cash fair value adjustments of embedded foreign currency derivatives related to our Events, Experiences & Rights segment, approximately $7 million of costs associated with the refinancing of our UFC Credit Facilities, which related primarily to our Owned Sports Properties segment, charges of approximately $28 million related to our prior initial public offering costs and $5 million related to a premium on the redemption of certain equity units held by an investor, which related to Corporate.

For the year ended December 31, 2018, other costs primarily comprised charges of approximately $19 million of costs associated with the refinancing of our Credit Facilities, which related primarily to Corporate, approximately $19 million related to the non-cash fair value adjustment of our UFC warrant liability at the Owned Sports Properties segment, as well as approximately $8 million of losses on foreign exchange transactions, which related primarily to our Events, Experiences & Rights segment and Corporate. In 2018, these charges were partially offset by approximately $18 million of a gain on disposal of a business, which related to our Representation segment.

 

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(10)

Reflects the U.S. and non-U.S. tax impacts with respect to each adjustment noted above, as applicable.

(11)

Reflects the share of the adjustments noted above that are allocated to our non-controlling interests, net of tax.

(12)

Such items for the year ended December 31, 2020 relate to a $34.3 million tax expense recorded as a result of acquisitions and subsequent tax restructurings, and the release of $19.1 million of valuation allowances on net deferred U.S. tax assets, exclusive of deferred tax liabilities on indefinite lived intangible assets, state income taxes, and foreign tax credits.

Such items for the year ended December 31, 2018 relate to a $21.8 million net tax expense recorded as a result of our acquisition of NeuLion and subsequent tax restructuring and $17.5 million related to the tax impact of losses recognized on certain agreements for foreign statutory purposes, subject to limitation under foreign tax law.

Quarterly financial data

The following tables present selected historical consolidated statements of operations data, as well as Adjusted EBITDA and Adjusted Net (Loss) Income, for each of the quarters in the years ended December 31, 2019 and 2020. This quarterly data has been derived from our unaudited consolidated financial statements. The annual impacts of such quarterly adjustments noted below for the years ended December 31, 2019 and 2020 are described above.

 

  Three months ended 
(in thousands) March 31,
2019
  June 30,
2019
  Sept. 30,
2019
  Dec. 31,
2019
  March 31,
2020
  June 30,
2020
  Sept. 30,
2020
  Dec. 31,
2020
 

Revenue

 $1,009,706  $1,038,846  $1,224,476  $1,297,942  $1,190,397  $462,914  $864,492  $960,940 

Operating (loss) income from continuing operations

  (22,557  32,921   124,178   75,994   53,764   (251,918  66,581   (21,645

Net loss

  (152,642  (67,654  (183,356  (127,009  (51,261  (495,765  (21,819  (56,473

Adjusted EBITDA

  83,980   165,695   263,799   220,029   176,241   45,424   178,331   172,551 

Adjusted Net Income (Loss)

  232   46,995   107,223   86,418   43,814   (36,948  8,398   69,547 

Adjusted EBITDA

 

  Three months ended 
(in thousands) Mar. 31,
2019
  June 30,
2019
  Sept. 30,
2019
  Dec. 31,
2019
  Mar. 31,
2020
  June 30,
2020
  Sept. 30,
2020
  Dec. 31,
2020
 

Net loss

 $(152,642 $(67,654 $(183,356 $(127,009 $(51,261 $(495,765 $(21,819 $(56,473

Loss from discontinued operations, net of tax

  —     5,000   —     —     —     —     —     —   

(Benefit from) provision for income taxes

  (22,429  13,652   6,629   5,519   48,604   (4,049  (941  (35,107

Interest expense, net

  71,366   70,718   63,351   65,509   69,984   71,693   71,277   71,632 

Depreciation and amortization

  78,511   64,842   67,092   70,304   80,447   84,751   76,471   69,214 

Equity-based compensation expense

  9,905   35,542   19,006   36,735   7,771   9,204   20,602   53,694 

Merger, acquisition and earn-out costs

  12,357   13,777   10,284   13,451   10,162   (859  6,682   6,193 

Certain legal costs

  4,658   5,152   15,005   4,866   2,802   3,357   1,646   4,715 

Restructuring, severance and impairment

  3,088   28,922   2,209   8,222   16,942   195,305   952   58,669 

Fair value adjustment—Droga5

  10,080   (6,346  —     —     —     473   —     (68

Fair value adjustment—equity investments

  7,044   239   966   3,510   2,809   2,950   (1,547  (3,743

Equity method losses—Learfield IMG College

  6,896   12,287   239,301   108,313   11,756   195,781   31,354   11,835 

COVID-19 related costs

  —     —     —     —     210   2,193   426   (137

Other

  55,146   (10,436  23,312   30,609   (23,985  (19,610  (6,772  (7,873
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

 $83,980  $165,695  $263,799  $220,029  $176,241  $45,424  $178,331  $172,551 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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Adjusted Net Income (Loss)

 

  Three months ended 
(in thousands) March 31,
2019
  June 30,
2019
  Sept. 30,
2019
  Dec. 31,
2019
  March 31,
2020
  June 30,
2020
  Sept. 30,
2020
  Dec. 31,
2020
 

Net loss

 $(152,642 $(67,654 $(183,356 $(127,009 $(51,261 $(495,765 $(21,819 $(56,473

Net loss (income) attributable to non-controlling interests

  17,948   9,770   (42,827  (8,049  (3,695  29,211   (58,430  3,298 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss attributable to Endeavor Operating Company, LLC

  (134,694  (57,884  (226,183  (135,058  (54,956  (466,554  (80,249  (53,175

Loss from discontinued operations, net of tax

  —     5,000   —     —     —     —     —     —   

Amortization

  62,342   48,481   48,082   50,338   59,964   63,494   55,315   46,719 

Equity-based compensation expense

  9,905   35,542   19,006   36,735   7,771   9,204   20,602   53,694 

Merger, acquisition and earn-out costs

  12,357   13,777   10,284   13,451   10,162   (859  6,682   6,193 

Certain legal costs

  4,658   5,152   15,005   4,866   2,802   3,357   1,646   4,715 

Restructuring, severance and impairment

  3,088   28,922   2,209   8,222   16,942   195,305   952   58,669 

Fair value adjustment—Droga5

  10,080   (6,346  —     —     —     473   —     (68

Fair value adjustment—equity investments

  7,044   239   966   3,510   2,809   2,950   (1,547  (3,743

Equity method losses—Learfield IMG College

  6,896   12,287   239,301   108,313   11,756   195,781   31,354   11,835 

COVID-19 related costs

  —     —     —     —     210   2,193   426   (137

Other

  55,146   (10,436  23,312   30,609   (23,985  (19,610  (6,772  (7,873

Tax effects of adjustments

  (11,964  2,063   (4,686  (15,170  1,366   (6,354  (6,960  (13,580

Adjustments allocated to non-controlling interests

  (24,626  (29,802  (20,073  (19,398  (23,365  (16,328  (13,051  (16,528

Valuation allowance and other tax items

  —     —     —     —     32,338   —     —     (17,174
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted Net Income (Loss)

 $232  $46,995  $107,223  $86,418  $43,814  $(36,948 $8,398  $69,547 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LIQUIDITY AND CAPITAL RESOURCES

Historical liquidity and capital resources

Sources and uses of cash

Cash flows from operations have historically funded our day-to-day operations, revenue-generating activities, and routine capital expenditures, as well as serviced our long-term debt. Our other principal use of cash has been acquisitions of businesses, which have been funded primarily through equity contributions from our pre-IPO institutional investors and the issuance of long-term debt.

Debt facilities

As of December 31, 2020, we had an aggregate of $5.7 billion outstanding indebtedness under our Senior Credit Facilities (as defined above) and available borrowing capacity of approximately $207.2 million under the Senior Credit Facilities, consisting primarily of availability under the UFC Credit Facilities.

Credit Facilities

As of December, 31, 2020, we have borrowed an aggregate of $3.1 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

 

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Alternate Base Rate (the “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%, (b) the prime rate, (c) adjusted LIBOR for a one-month interest period plus 1.00% and (d) 1.00%, plus (ii) 1.75%. The term loans under the Credit Facilities include 1% principal amortization payable in equal quarterly installments and mature on May 18, 2025.

In May 2020, we issued a separate tranche of term loans which accrue interest at a rate equal to adjusted LIBOR plus 8.50%, with a LIBOR floor of 1.00%.

On 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 December 31, 2020, approximately 49% of our Term Loans is hedged. See Note 12, “Debt”, to our audited consolidated financial statements, respectively, included elsewhere in this prospectus, for further detail on the Credit Facilities.

As of December 31, 2020, we have the option to borrow incremental term loans in an aggregate amount equal to at least $290.0 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 loan sub-limits of up to $75.0 million and $20.0 million, respectively. Revolving credit facility borrowings under the 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 revolving loans accrue interest at a rate equal to adjusted LIBOR plus 2.00-2.50%, depending on the First Lien Leverage Ratio, with a LIBOR floor of 0.00%. ABR revolving loans accrue interest at a rate equal to (i) the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) the prime rate, (c) adjusted LIBOR for a one-month interest period plus 1.00% and (d) 1.00%, plus (ii) 1.00-1.50%, depending on the First Lien Leverage Ratio. We pay Letter of Credit fees of 0.125% and a commitment fee of 0.25-0.50%, based on our First Lien Leverage Ratio. As of December 31, 2020, we had $163.1 million outstanding under this revolving credit facility and outstanding letters of credit of $24.8 million. The revolving facility matures on May 18, 2023.

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 credit and non-cash collateralized letters of credit of up to $50.0 million) at the end of each quarter. In April 2020, we entered into an amendment with the revolving credit facility lenders that waived testing of the covenant for the 2020 fiscal quarters ended June 30, September 30, and December 31 (the “Covenant Waiver”) subject to certain other requirements including a requirement to maintain minimum liquidity (consisting of undrawn amounts under the revolving credit facility plus cash and cash equivalents) as of the last day of each fiscal quarter. This Covenant Waiver expired on December 31, 2020.

On April 19, 2021, the Company entered into a similar amendment to the credit agreement governing the Credit Facilities to, among other things, waive the financial covenant for the test periods ending June 30, 2021, September 30, 2021 and December 31, 2021. In addition, subject to completion of an IPO (as defined in the credit agreement), the amendment will also extend the maturity date of the Revolving Credit Facility to May 18, 2024.

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

 

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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 December 31, 2020, we have borrowed an aggregate of $2.4 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 LIBOR plus 2.75%-3.00%, depending on the First Lien Leverage Ratio, in each case with a LIBOR floor of 0.75%. ABR term loans accrue interest at a rate equal to (i) the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) the prime rate, (c) adjusted LIBOR for a one-month interest period plus 1.00% and (d) 1.75%, plus (ii) 1.75%-2.00%. The term loans under the UFC Credit Facilities include 1% principal amortization payable in equal quarterly installments and mature on April 29, 2026. See Note 12, “Debt,” to our audited consolidated financial statements included elsewhere in this prospectus for further detail on the UFC Credit Facilities.

As of December 31, 2020, 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.

The UFC Credit Facilities also include a revolving credit facility which had $205.0 million of total borrowing capacity and letter of credit and swingline loan sub-limits of up to $40.0 million and $15.0 million, respectively. Revolving credit facility borrowings under the UFC Credit Facilities bear interest at a variable interest rate equal to either, at our option, adjusted LIBOR or ABR plus, in each case, an applicable margin. LIBOR revolving loans accrue interest at a rate equal to an adjusted LIBOR plus 3.50-4.00%, depending on the First Lien Leverage Ratio, in each case with a LIBOR floor of 0.00%. ABR revolving loans accrue interest at a rate equal to (i) the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) the prime rate, (c) adjusted LIBOR for a one-month interest period plus 1.00% and (d) 1.00%, plus (ii) 2.50-3.00%, depending on the First Lien Leverage Ratio. We pay a commitment fee on the revolving credit facility under the UFC Credit Facilities of 0.25-0.50%, based on the First Lien Leverage Ratio and Letter of Credit fees of 0.125%. As of December 31, 2020, we have no borrowings outstanding under this revolving credit facility and $10.0 million of outstanding letters of credit. 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 credit and non-cash collateralized letters of credit of up to $10.0 million) is utilized at the end of any fiscal quarter. This covenant was not tested on December 31, 2020, 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

 

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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 maintain the 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. The UFC LLC Agreement contains certain covenants restricting distributions and other payments, including the ability to elect to participate in certain permitted distributions ahead of common equity holders, subject in each case to certain exceptions.

Other debt

As of December 31, 2020, 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 $240.0 million, of which $185.4 million was outstanding and $11.7 million was available for borrowing based on the supporting asset base. Such facilities have maturity dates in 2025, bearing interest at rates ranging from 1.75% to 2.75%.

Other debt includes our Endeavor Content facility (the “Endeavor Content Facility,” which is an asset-based facility (“ABL”) used to fund television and film production). As of December 31, 2020, our Endeavor Content Facility had total capacity of $200.0 million, and we had $153.9 million borrowed. In February 2021, we amended the ABL to increase the total capacity to $325.0 million. 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.

Other debt also includes our On Location revolving credit agreement, which has $20.0 million of total borrowing capacity and letter of credit and swingline loan sub-limits of up to $3.0 million each (the “OL Credit Facility”). As of December 31, 2020, we had $19.6 million outstanding under the OL Credit Facility and no letters of credit outstanding. The OL Credit Facility matures on February 27, 2025.

Both the Endeavor Content Facility and the OL Credit Facility contain restrictions that are substantially similar to those in the Credit Facilities and the UFC Credit Facilities.

 

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Cash Flows Overview

Years ended December 31, 2018, 2019 and 2020

 

   Years ended December 31, 
(in thousands)  2018   2019   2020 

Net loss from continuing operations, adjusted for non-cash items

  $200,147   $562,920   $313,929 

Changes in working capital

   165,780    (30,890   176,381 

Changes in non-current assets and liabilities

   (244,796   (134,127   (329,092
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities from continuing operations

  $121,131   $397,903   $161,218 

Net cash (used in) provided by investing activities from continuing operations

  $(164,809  $46,083   $(315,792

Net cash provided by (used in) financing activities from continuing operations

  $11,616   $(428,140  $453,989 

Discontinued operations:

      

Net cash provided by (used in) operating activities

  $36,544   $(5,000  $—   

Net cash used in investing activities

   (6,951   —      —   

Net cash used in financing activities

   (64   —      —   
  

 

 

   

 

 

   

 

 

 

Net cash flows provided by (used in) discontinued operations

  $29,529   $(5,000  $—   
  

 

 

   

 

 

   

 

 

 

December 31, 2020 compared to December 31, 2019

Cash provided by operating activities from continuing operations decreased $236.7 million primarily due to the impact of COVID-19 on our results of operations. Operating cash flow was adversely impacted as television and film productions were put on hiatus, while concerts and live event marketing programs were cancelled, reducing the commissions and fees earned in 2020, the cancellation of live events, restrictions on live attendance, and reduced enrollment in our full-time and camp programs. This was partially offset by event cancellation insurance proceeds and cost reduction initiatives, implemented in March 2020 that reduced cash compensation, travel & entertainment, and other operating expenses.

Investing activities from continuing operations changed from $46.1 million of cash provided in the year ended December 31, 2019 to $315.8 million of cash used in the year ended December 31, 2020. The change in cash used for investing is primarily due to higher payments for acquisitions of businesses, primarily On Location, of $317.9 million for the year ended December 31, 2020 as compared to $5.4 million for the year ended December 31, 2019 and lower amounts of proceeds received for the sale of our investments.

Financing activities from continuing operations changed from $428.1 million of cash used in the year ended December 31, 2019 to $454.0 million of cash provided in the year ended December 31, 2020. Cash provided in the year ended December 31, 2020 primarily reflects net proceeds from debt of $649.5 million offset by distributions of $123.2 million primarily made by UFC. Cash used in the year ended December 31, 2019 primarily reflects $537.7 million for the redemption of all Zuffa’s Class P Units, $512.7 million for the redemption of certain of our equity interests, and $165.0 million related to payments under our equity buyback plan and tax distributions to equity investors, partially offset by contributions of $470.6 million from our equity investors and net proceeds from debt of $391.3 million.

December 31, 2019 compared to December 31, 2018

Cash provided by operating activities from continuing operations increased $276.8 million primarily due to higher operating cash flow in our Owned Sports Properties segment from growth in media rights revenue as well

 

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as collection of receipts in 2019 from 2018 pay-per view revenue. Additionally, our Representation segment drove an increase in operating cash flow from growth in TV and film productions. These were offset by lower receipts of advance payments in connection with media rights fees primarily related to major soccer events in our Events, Experiences & Rights segment.

Investing activities from continuing operations changed from $164.8 million of cash used in 2018 to $46.1 million of cash provided in 2019. Cash provided in 2019 reflects $206.8 million of proceeds from the sale of our investment of Droga5 in April 2019 offset by capital expenditures of $135.4 million and investments in non-controlled affiliates of $27.1 million. Cash used in 2018 reflects payments for the acquisition of businesses, primarily NeuLion and 160over90, of $440.3 million, capital expenditures of $187.9 million and investments in non-controlled affiliates of $68.8 million offset by $399.2 million of proceeds from the disposal of IMG College and $120.0 million of proceeds from the maturity of short-term investments.

Financing activities from continuing operations changed from $11.6 million of cash provided in 2018 to $428.1 million of cash used in 2019. Cash used in 2019 reflects the acquisition of non-controlling interests, the redemption of certain of our equity interests, tax distributions to equity investors, payments for contingent liabilities for business acquisitions and payments under our equity buyback plan offset by $470.6 million of contributions from our equity investors and net proceeds from debt of $391.3 million. Cash provided in 2018 reflects the redemption of certain of our equity interests, payments under our equity buyback plan and tax distributions to equity investors, offset by $425.0 million of contributions from our equity investors and net proceeds from debt of $33.2 million.

Future sources and uses of liquidity

Our initial sources of liquidity will be (1) cash on hand, (2) cash flows from operations, (3) available borrowings under our Senior Credit Facilities (which borrowings would be subject to certain restrictive covenants contained therein), (4) net proceeds from this offering and (5) proceeds from the concurrent private placements. 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, the ongoing COVID-19 pandemic has had a significant impact on cash flows from operations for the year ended December 31, 2020. We expect that the wider impact of COVID-19 on revenue and cash flows will vary, but will generally depend on the duration of the outbreak, impact of variants, varying rollout of the vaccine, 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. Given the ongoing uncertainty, we have taken several steps to preserve capital and increase liquidity. In March 2020, we borrowed $160.0 million under the revolving credit facility under our Credit Facilities and $150.0 million under the revolving credit facility under our UFC Credit Facilities. In addition, in May 2020, we raised $260.0 million of incremental term loans under the Credit Facilities to fund general corporate purposes, and in June 2020 we raised $150.0 million of incremental term loans under the UFC Credit Facilities, which was used to repay all outstanding borrowings under its revolving credit facility. In April 2020, we obtained a waiver of the quarterly covenant tests applicable under the Credit Facilities for the test periods June 30, 2020, September 30, 2020 and December 31, 2020. We reduced our outstanding borrowings under the revolving credit facility under our Credit Facilities as of March 31, 2021 such that the quarterly covenant test is not applicable. In April 2021, we obtained a waiver of the financial covenant for the test periods ending June 30, 2021, September 30, 2021 and December 31, 2021.

We cannot assure you that such measures and our cash flows from operations, cash and cash equivalents or cash available under our Senior Credit Facilities will be sufficient to meet our working capital requirements and to meet our commitments, including long-term debt service, in the foreseeable future, particularly in light of the ongoing nature of the COVID-19 pandemic. Due to the uncertainty of COVID-19 (including any broader global deterioration in economic conditions or the extension of governmental restrictions imposed as a result thereof), we may need to extend measures or take additional measures to preserve liquidity.

 

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Our cash and cash equivalents consist primarily of cash on deposit with banks and liquid investments in money market funds. As of December 31, 2020, cash and cash equivalents totaled $1,008.5 million, including cash held at non-wholly owned consolidated subsidiaries of $421 million where 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 outside of those subsidiaries. These balances primarily consist of UFC ($282 million), Endeavor China ($95 million) and On Location ($26 million) as of December 31, 2020. In addition, $62 million of cash in certain wholly-owned foreign subsidiaries and content production entities may not be readily available to service obligations outside of those subsidiaries.

We expect that our primary liquidity needs will be cash to (1) provide capital to facilitate organic growth of our business, (2) fund future acquisitions and settle acquisition earn-outs from prior acquisitions, (3) pay operating expenses, including cash compensation to our employees, (4) fund capital expenditures, (5) pay interest and principal due on our Senior Credit Facilities, (6) make payments under the tax receivable agreement, (7) pay income taxes, (8) repurchase employee equity and (9) make distributions to members and stockholders.

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-economic factors beyond our control, including as a result of COVID-19. See “Risk Factors—Risks Related to Our Business—We cannot be certain that additional financing will be available on reasonable terms when required, or at all.”

Tax distributions by Endeavor Operating Company

As described in “Dividend Policy,” following the consummation of this offering, 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 following the completion of this offering.

Following this offering and 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 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. Non pro-rata tax distributions may be paid to holders of Endeavor Profit Units. In addition, prior to this offering, Endeavor Operating Company will pay a distribution to its members in respect of taxable income estimated to be allocable to such members for periods prior to the offering, and Endeavor Operating Company may fund additional distributions payable to such members (or their successors) following this offering to the extent such estimates of taxable income were understated.

Tax Receivable Agreement

Generally, we are required under the tax receivable agreement described in “Certain Relationships and Related Party Transactions—Tax Receivable Agreement” to make payments to the Post-IPO TRA Holders 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 this offering, exchanges of Endeavor Operating Company Units for Class A common stock or cash and payments made under the tax receivable agreement. We will generally be entitled to retain the remaining 15% of

 

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these cash tax savings. Assuming that all units eligible to be redeemed for cash or Class A common stock would be exchanged for Class A common stock by Endeavor Group Holdings at the time of the offering and that we will have sufficient taxable income to utilize all of the tax attributes covered by the tax receivable agreement when they are first available to be utilized under applicable law, we estimate that payments to the Post-IPO TRA Holders under the tax receivable agreement would aggregate to approximately $2,324.2 million over the next 15 years and for yearly payments over that time to range between approximately $104.3 million to $201.3 million per year, based on the public offering price of $24.00 per share. Such 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 agreement 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, 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, we may also be required to make payments to the Post-IPO TRA Holders in amounts equal to the present value of future payments we are obligated to make under the tax receivable agreement. If the payments under the tax receivable agreement 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 agreement 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. For a full description of the tax receivable agreement, see “Risk Factors—Risks Related to Our Organization and Structure—We will be required to pay certain of our pre-IPO investors, including certain Other UFC Holders, for certain tax benefits we may claim (or are deemed to realize) in the future, and the amounts we may pay could be significant” and “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

Qualitative and Quantitative Disclosures about 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 to fixed rates. For the remainder, holding debt levels constant, a 1% increase in the effective interest rates would have increased our interest expense by $42 million for the year ended December 31, 2020.

Certain tenors of LIBOR will be eliminated at the end of 2021 and June 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”. 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 our non-U.S. dollar revenue and operating costs and expenses and reduce international demand for our content and services, all of which could negatively affect our business, financial condition and results of operations in a given period or in specific territories.

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 2020, revenues would have decreased by

 

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approximately $99.8 million for the year ended December 31, 2020 and operating loss from continuing operations would have improved by approximately $18.4 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.

Off-Balance Sheet Arrangements

We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any activities that expose us to any liability that is not reflected in our combined financial statements except for those described under “Contractual Obligations, Commitments and Contingencies” below.

Contractual Obligations, Commitments and Contingencies

The following table represents our contractual obligations as of December 31, 2020, aggregated by type.

 

   Payments due by period 
   Total   2021   2022-2023   2024-2025   After 2025 
(in thousands)                    

Long-term debt, principal repayments(1)

  $ 6,023,870   $230,959   $239,104   $3,191,515   $2,362,292 

Long-term debt, interest payments(2)

   1,078,084    226,552    445,466    368,574    37,492 

Operating lease liabilities(3)

   573,417    87,149    158,642    145,928    181,698 

Purchase obligations/guarantees(4)

   2,190,394    757,110    791,134    432,409    209,741 

Payments to members/employees(5)

   578,664    216,501    269,886    62,097    30,180 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $10,444,429   $1,518,271   $1,904,232   $4,200,523   $2,821,403 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The principal balance of certain term loans is repaid on a quarterly basis at an amortization rate of 0.25% per quarter, with the balance due at maturity. See Note 12, “Debt,” to our audited consolidated financial statements included elsewhere in this prospectus for further detail.

(2)

Variable interest rate payments on our long-term debt are calculated based on the current interest rate as of December 31, 2020 and the scheduled maturity of the underlying loans. Interest payments also include a commitment fee of 0.50% that we are required to pay on the unused balance of our revolving credit facilities under the Senior Credit Facilities.

(3)

Our operating leases are primarily for office facilities, equipment and vehicles. Certain of these leases contain provisions for rent escalations or lease concessions.

(4)

We routinely enter into purchase or guarantee arrangements for media, event or other representation rights as well as for advancements for content production or overhead costs with various organizations.

(5)

Certain members receive guaranteed payments from us under contracts through 2028. These payments are made through periodic draws and annual profit-sharing contributions. We are also obligated to several of our employees under employment agreements that expire at various dates through 2026.

Subsequent to December 31, 2020, we completed a repricing of the UFC Credit Facilities in January 2021. As a result, approximately $11 million, $24 million, $24 million and $4 million in lower interest payments should be reflected in the “2021”, “2022-2023”, “2024-2025”, and “After 2025” columns, respectively. Subsequent to December 31, 2020, we committed to additional annual guaranteed payments to members and increased our commitments under employment agreements by $80 million, of which $24 million, $47 million, $9 million and less than $0.1 million is due in 2021, 2022-2023, 2024-2025 and after 2025, respectively. Subsequent to December 31, 2020, we entered into new arrangements and amended certain existing agreements increasing our purchase obligations/guarantees by $29 million, of which $(8) million, $20 million and $17 million is due in 2021, 2022-2023 and 2024-2025, respectively.

 

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The payments that we may be required to make under the tax receivable agreement may be significant and are not reflected in the contractual obligations tables set forth above as they are dependent upon future taxable income. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements requires us to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates.

We believe the following estimates related to certain of our critical accounting policies, could potentially produce materially different results if we were to change underlying assumptions, estimates or judgments. See Note 2, “Summary of Significant Accounting Policies,” to our audited consolidated financial statements included elsewhere in this prospectus for a summary of our significant accounting policies.

Revenue Recognition

We have revenue recognition policies for our various operating segments that are appropriate to the circumstances of each business.

Effective January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method to contracts not completed as of January 1, 2018. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers either at a point in time or over time, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. ASC 606 requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates, and changes in those estimates. For further information regarding the impact of the adoption of this standard refer to Note 2, “Summary of Significant Accounting Policies” and Note 18, “Revenue” to our audited consolidated financial statements included elsewhere in this prospectus.

Arrangements with Multiple Performance Obligations

We have various types of contracts with multiple performance obligations, primarily consisting of multi-year sponsorship and media rights agreements. The transaction price in these types of contracts is allocated on a relative standalone selling price basis. We typically determine the standalone selling price of individual performance obligations based on management estimates, unless standalone selling prices are observable through past transactions. Estimates used to determine a performance obligation’s standalone selling price impact the amount and timing of revenue recognized, but not the total amount of revenue to be recognized under the arrangement.

Principal versus Agent

We enter into many arrangements that require management to determine whether we are acting as a principal or an agent. This determination involves judgment and requires evaluation as to whether the Company controls the goods or services before they are transferred to the customer. As part of this analysis, the Company considers whether we are primarily responsible for fulfillment of the promise to provide the specified service, have inventory risk and have discretion in establishing prices. For events, this determination is primarily based on whether an event is owned by us or whether we are providing an event management service. For media rights distribution, this determination is primarily based on whether we have control over the media rights including inventory risk and setting pricing with customers. For rebillable expenses related to advertising and brand

 

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activation services, this determination is primarily based on whether we are primarily responsible for fulfillment of the services to the customer. If our determinations were to change, the amounts of our revenue and operating expenses may be different.

Timing of Recognition

Commission-based Representation and Licensing Revenue

For arrangements where we earn commissions or royalties based on a client’s sales, earnings or back-end profits, we recognize revenue either over time or at the point in time that our client performs in accordance with the terms of their engagement. We earn packaging revenue directly from studios/production companies (in lieu of receiving a commission from a client) for our role in arranging the creation, development and/or production of a program to be exhibited on broadcast or cable television, streaming, video-on-demand or similar platforms. A package typically involves an initial fee per episode as well as a back-end profit participation paid directly from a studio. We generally recognize the initial fee when a program is completed and delivered to the network.

When our commission is generated from an arrangement that involves an underlying license of intellectual property, we recognize such revenue in accordance with the sales-or usage-based royalty exception under ASC 606. Such arrangements primarily include:

 

  

Client profit participation: primarily relates to our client’s participation in the net profitability of an episodic television series or feature film in which they have played a role. Once the profit participation metric is achieved, we recognize commission revenue related to the sales or usage of the underlying functional intellectual property over time as the sales or usage occurs. The amount of revenue recognized is based on either statements received or management’s best estimate of sales or usage in a period when statements are received on a lag. If our estimates and judgments were to change, the timing and amount of revenue recognized may be different.

 

  

Package back-end profit participation: relates to our right to participate in the profitability of a television program, which is generally equal to a percentage of a contractually defined profitability measure. Once the profit participation metric is achieved, we recognize revenue related to the sales or usage of the underlying functional intellectual property over time as the sales or usage occurs. The amount of revenue recognized is based on either statements received or management’s best estimate of sales or usage in a period, if statements are received on a lag. If our estimates and judgments were to change, the timing and amount of revenue recognized may be different.

 

  

Licensing: relates to royalties or commissions from sales of licensed merchandise. The nature of the licensing arrangements is typically symbolic intellectual property, inclusive of logos, trade names, and trademarks related to merchandise sales. We recognize revenue related to the sales or usage of the underlying symbolic intellectual property over time as the sales or usage occurs. The amount of revenue recognized is based on either statements received or management’s best estimate of sales or usage in a period, if statements are received on a lag. If our estimates and judgments were to change, the timing and amount of revenue recognized may be different.

Content Development-based Revenue

Revenue from production services and studio fees for the production and licensing of original content, including television properties, documentaries, and films, is recognized when the content becomes available for exploitation and has been accepted by the customer. Revenue from production services of live entertainment and sporting events is recognized at the time of the event on a per event basis. Revenue from production services of editorial video content is recognized when the content is delivered to and accepted by the customer and the license period begins. Revenue for license fees that include a royalty is recognized in the period the royalty is generated following the sales and usage-based royalty exception for licenses of functional intellectual property.

 

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Content Distribution and Sales-based Revenue

License fees from live entertainment and sporting event media rights are recognized when the event is aired. License fees for non-live event programming are recognized when the program has been delivered and is available for exploitation. Commission revenue from distribution and sales arrangements for television properties, documentaries and films of independent production companies is recognized when the underlying content becomes available for view or telecast and has been accepted by the customer.

Event-based Revenue

We earn revenue from events that we control in addition to providing event related services to events controlled by third parties. For controlled events (owned or licensed), revenue is generally recognized for each performance obligation over the course of the event, multiple events, or contract term in accordance with the pattern of delivery for the particular revenue source. Advance ticket sales, participation entry fees, hospitality sales and bundled experience packages are recorded as deferred revenue pending the event date. For event management related services to third party controlled events, revenue is generally recognized over the course of the event, multiple events, or contract term in accordance with the pattern of delivery for the service. If such revenues were recognized based on another basis, or if we made different determinations about which method to apply to a given arrangement, the timing of our revenue and operating expenses may be different.

Service Fee-based Revenue

We provide marketing and consultancy services to brands with expertise in brand strategy, activation, sponsorships, endorsements, creative development and design, digital and original content, public relations, live events, branded impact, and B2B services. Marketing revenue is either recognized over time, based on the number of labor hours incurred, costs incurred or time elapsed based on the Company’s historical practice of transferring similar services to customers, or at a point in time for live event activation engagements. Consulting fees are typically recognized over time, based on the number of labor hours incurred.

Revenue from our digital streaming video solutions is generally recognized upon delivery of the offering to the consumer or over the course of an over-the-top distribution platform subscription agreement term. Revenues from subscription services based on usage, such as data volume, are generally recognized as services are utilized by the customer.

Revenue from our sports academy is recognized ratably over the period of the athletes’ enrollment or attendance at a facility, as the services provided are substantially the same throughout the service period.

If such revenues were recognized based on another basis, or if we made different determinations about which method to apply to a given arrangement, the timing of our revenue and operating expenses may be different.

PPV Revenue

We recognize revenue from PPV programming from owned live sporting events when the event is aired. PPV programming is distributed through cable, satellite and digital providers. We receive a fixed license fee for our domestic residential PPV programming under a long-term contract. For our international and commercial PPV, the amount of revenue recognized is based upon management’s initial estimate of variable consideration related to the number of buys achieved. This initial estimate is based on preliminary buy information received from certain PPV distributors and is subject to adjustment as new information regarding the number of buys is received, which is generally up to 120 days subsequent to the live event. If our estimates of buys achieved were to change, the timing and amount of our revenue may be different.

 

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Content Costs

Effective July 1, 2019, the Company early adopted ASU 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials on a prospective basis.

We incur costs to produce and distribute film and episodic content, which are either monetized on a title-by-title basis or as a group through subscriptions from customers. These costs include development costs, direct costs of production as well as allocations of overhead and capitalized interest, where applicable. Our content costs are predominately monetized on a title-by-title basis. Depending on the predominant monetization strategy, content costs are amortized over the estimated period of ultimate revenue subject to an individual-film-forecast model based on our estimate of ultimate revenue or over the estimated usage of the film group. Participations and residuals are expensed in line with the amortization of production costs.

Unamortized content costs are also tested for impairment based on the predominant monetization strategy whenever there is an impairment indication, as a result of certain triggering events or changes in circumstances, that the fair value of the individual film and television content or collectively with others as a film group may be less than its unamortized costs. The impairment test compares the estimated fair value of the individual content or collectively with others as a group to the carrying value of the unamortized content costs. Where the unamortized content costs exceed the fair value, the excess is recorded as an impairment charge in direct operating costs.

We amortize rights costs for multi-year sports programming arrangements during the applicable seasons based on the estimated relative value of each season in the arrangement.

Goodwill

Goodwill is tested annually as of October 1 for impairment and at any time upon the occurrence of certain events or substantive changes in circumstances that indicate the carrying amount of goodwill may not be recoverable. We perform our goodwill impairment test at the reporting unit level, which is one level below the operating segment level. We have three operating and reportable segments, consistent with the way management makes decisions and allocates resources to the business and we have ten reporting units across these three segments.

We have the option to perform a qualitative assessment to determine if an impairment is more likely than not to have occurred. A qualitative assessment includes, but is not limited to, consideration of the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, and industry and market conditions. If we can support the conclusion that it is “not more likely than not” that the fair value of a reporting unit is less than its carrying amount under the qualitative assessment, we would not need to perform the quantitative impairment test for that reporting unit.

If we cannot support such a conclusion or we do not elect to perform the qualitative assessment then we must perform the quantitative impairment test. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate. We apply what we believe to be the most appropriate valuation methodology for each of our reporting units. We believe our estimates of fair value are consistent with how a marketplace participant would value our reporting units.

The discounted cash flow analyses are sensitive to our estimates of future revenue growth and margins for these businesses along with discount rates. Our long-term cash flow projections are estimates and inherently subject to uncertainty, particularly during periods of adverse economic conditions. Significant estimates and

 

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assumptions specific to each reporting unit include revenue growth, profit margins, terminal value growth rates, discount rates and other assumptions deemed reasonable by management. Where a market approach is utilized, we use judgment in identifying the relevant comparable-company market multiples. These estimates and assumptions may vary between each reporting unit depending on the facts and circumstances specific to that unit. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ.

If the carrying amount of a reporting unit exceeds its fair value, such excess is recognized as an impairment. During the year ended December 31, 2020, we recognized goodwill impairment charges, triggered by the COVID-19 pandemic, of $158.5 million.

We believe that the estimates and assumptions we made in our quantitative analysis are reasonable, but they are susceptible to change from period to period. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions, significant client losses, changes in spending levels of our existing clients or a different economic outlook than currently estimated by management, including the duration and severity of the COVID-19 pandemic, could have a significant impact on the estimated fair value of our reporting units and could result in an impairment charge in the future.

Intangible Assets

For finite-lived intangible assets that are amortized, we evaluate assets for recoverability when there is an indication of potential impairment or when the useful lives are no longer appropriate. If the estimated undiscounted future cash flows from a group of assets being evaluated is less than the carrying value of that group of assets, an impairment would be measured as the difference between the fair value of the group’s long-lived assets and the carrying value of the group’s long-lived assets. We define an asset group by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. If identified, the impairment is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts, but only to the extent the carrying value of each asset is above its fair value.

Identifiable indefinite-lived intangible assets are tested annually for impairment as of October 1 and at any time upon the occurrence of certain events or substantive changes in circumstances that indicate the carrying amount of an indefinite-lived intangible may not be recoverable. We have the option to perform a qualitative assessment to determine if an impairment is “more likely than not” to have occurred. In the qualitative assessment, we must evaluate the totality of qualitative factors, including any recent fair value measurements, that impact whether an indefinite-lived intangible asset has a carrying amount that “more likely than not” exceeds its fair value. We must then conduct a quantitative analysis if we (1) determine that such an impairment is “more likely than not” to exist, or (2) forego the qualitative assessment entirely. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of the asset groups, estimates of future cash flows and the discount rate used to determine fair values. If we had established different asset groups or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

During the year ended December 31, 2020, we recognized identifiable intangible asset impairment charges, triggered by the COVID-19 pandemic, of $6.6 million related to tradenames, $20.1 million related to owned events, and $35.3 million related to music and sports supply agreements related to our recent acquisition of On Location.

 

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Equity-Based Compensation

We grant profits unit awards to certain executives, employees and service providers. These awards represent an indirect interest that entitles the recipient to share in the appreciation of the equity value of Endeavor Operating Company above certain distribution thresholds as of the date of grant.

We record compensation costs related to our equity awards issued to executives and other employees based on the grant date fair value of the award. Compensation cost for time-based awards is recognized ratably over the applicable vesting period and compensation cost for awards with a performance condition is reassessed each period and recognized based upon the probability that the performance conditions will be achieved. The awards with a performance condition are expensed when the achievement of performance conditions is probable.

We estimate the fair value of equity awards using an option-pricing model, which requires us to make certain estimates and assumptions, such as:

Value of Equity—As our units are not publicly traded, we estimate the fair value of our equity, as discussed further under the ‘Valuation of Equity’ section below.

Expected term—The expected term represents the period that our awards are expected to be outstanding and is determined based on historical data and current expectations.

Expected volatility—As we do not have a public market trading history, the expected volatility is estimated based on the historical volatility of public companies that are deemed to be comparable to us over the expected term of the award. Industry peers consist of several public companies in our industry which are either similar in size, stage of life cycle or financial leverage.

Risk-Free Interest Rate—We base the risk-free interest rate on the U.S. Treasury yield curve in effect at the time the awards are granted.

Expected Dividends—We do not anticipate paying any cash dividends in the near future and therefore use an expected dividend yield of zero.

The assumptions used in our option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our equity-based compensation expense could be materially different in the future.

Valuation of Equity

We consider objective and subjective factors to determine our best estimate of the fair value of our equity, including but not limited to, the following factors:

 

  

recent private stock sale transactions;

 

  

our historical financial results and estimated trends and prospects for our future financial performance;

 

  

our performance and market position relative to our competitors and similar publicly traded companies;

 

  

the likelihood of achieving a liquidity event, such as our initial public offering or sale, given internal company and external market conditions;

 

  

the economic and competitive environment, including the industry in which we operate; and

 

  

third-party valuations of our total company equity

We use a hybrid model consisting of a probability weighted expected return model (“PWERM”) and option-pricing model (“OPM”) under sale and IPO scenarios over various time horizons to derive our equity value. A

 

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PWERM involves a forward-looking analysis of the potential future outcomes available to the enterprise, the estimation of ranges of future and present value under each outcome, and the application of a probability factor to weigh each outcome as of the estimate date. Both the PWERM and OPM are commonly used techniques for enterprise valuation.

The valuations took into account the factors described above and used a combination of financial and market-based methodologies to determine our business enterprise value.

Investments

We have various equity investments that we account for under the equity method, as equity investments with readily determinable fair values and equity investments without readily determinable fair values. The fair value of these investments is dependent on the performance of the investee companies as well as volatility inherent in the external markets for these investments. In assessing the potential impairment of these investments, we consider these factors as well as the forecasted financial performance of the investees and market values, where available. If these forecasts are not met or market values indicate an other-than-temporary decline in value, impairment charges may be required. We also remeasure our equity investments without readily determinable fair values when there is an observable transaction in a similar class of security to our investment.

Income Taxes

Endeavor Operating Company is a limited liability company, which is treated as a partnership for U.S. federal and state income tax purposes and is therefore not subject to U.S. corporate income taxes. Endeavor Operating Company’s income, except for the corporate subsidiaries, is generally subject to tax at the partner level. Endeavor Operating Company’s U.S. and foreign corporate subsidiaries are subject to entity-level taxes. Endeavor Operating Company is also subject to entity-level income taxes in certain U.S. state and local jurisdictions.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Significant factors considered by us in estimating the probability of the realization of deferred tax assets include expectations of future earnings and taxable income, as well as application of tax laws in the jurisdictions in which we operate. A valuation allowance is provided when we determine that it is “more likely than not” that a portion of a deferred tax asset will not be realized. Our deferred tax positions may change if our estimates regarding future realization of deferred tax assets were to change.

A minimum probability threshold for a tax position must be met before a financial statement benefit is recognized. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The tax benefits ultimately realized by us may differ from those recognized in our financial statements based on a number of factors, including our decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and our success in supporting its filing positions with taxing authorities.

We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the consolidated statements of operations. Accrued interest and penalties are included in the related tax liability line in the consolidated balance sheet.

Consolidation

We typically consolidate entities in which we own more than 50% of the voting common stock and control operations, as well as variable interest entities (“VIE”) for which we are deemed the primary beneficiary.

 

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Evaluating whether an entity in which we have a variable interest is a VIE and whether we are the primary beneficiary requires management to make significant judgments involving evaluating the fair value and capitalization of the investee along with the most significant activities of the entity and the party that has power over those activities.

Business Combinations

We account for our business combinations under the acquisition method of accounting. Identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any non-controlling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and non-controlling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives, among other items. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of operations.

Non-controlling Interests

Non-controlling interests in consolidated subsidiaries represent the component of common equity in consolidated subsidiaries held by third parties. Non-controlling interests with redemption features, such as put options, that are redeemable outside of our control are considered redeemable non-controlling interests and are classified as temporary equity on the consolidated balance sheet. Redeemable non-controlling interests are recorded at the greater of carrying value, which is adjusted for the non-controlling interests’ share of net income or loss, or estimated redemption value at each reporting period. Estimating the fair value or other redemption value requires management to make significant estimates and assumptions specific to each non-controlling interest including revenue growth, profit margins, terminal value growth rates, discount rates under the income approach and other assumptions such as market multiples for comparable companies. These estimates and assumptions may vary between each redeemable non-controlling interest depending on the facts and circumstances specific to that consolidated subsidiary.

 

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BUSINESS

Our Company

Endeavor is a premium intellectual property, content, events, and experiences 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.

We believe that our unique business model gives us a competitive advantage in the industries in which we operate. Our direct ownership of scarce sports properties positions us to directly benefit from the generally rising value of sports assets, while giving us direct control to make decisions that sustain the long-term value of our properties. Our dual role as an intellectual property owner and as a trusted advisor to clients and rights holders allows us to make connections across our platform, increasing the earnings of our clients and the value of our sports and entertainment properties. We generally participate in the upside related to the commercial success of content with limited risk and we benefit from demand from both traditional and next generation distributors. We own and manage a diverse mix of live and virtual events and experiences in the sports, entertainment, fashion, and art categories. The insights we gain from our connectivity across the sports and entertainment ecosystem may enable us to spot trends before they emerge and make strategic investments to enhance our growth.

We possess category leading capabilities in various industries, each of which contributes to our financial success. The integration of our broad range of capabilities, along with our owned and managed premium sports and entertainment properties, drives network effects across our platform. We measure these effects by evaluating the impact that activity in one business segment has on growth in another. We believe that, as our client offerings have expanded, we have increased new signings and improved retention in our representation business. The scale and quality of our relationships with content creators has made us more valuable to traditional media and streaming customers, increasing the number of projects we develop and sell. Our premium sports and entertainment properties are increasingly relevant to our brand clients seeking high quality event inventory to maximize experiential and digital impressions. We believe our deep relationships and insights better position us to deploy capital efficiently and improve our strategic investment decisions.

Our management team has successfully executed a mergers and acquisitions and organic-driven growth strategy that has transformed our business from a pure representation model to an integrated global platform. After we founded Endeavor in 1995, we gained scale in representation by merging with the venerable William Morris Agency to form WME in 2009, which was followed by our acquisition of IMG Worldwide in 2014, adding marketing and licensing, events, media production and distribution, and the sports training institution, IMG Academy. The acquisition of a controlling interest in the UFC in 2016 served as a major step forward in the transformation of our business. We acquired 160over90 in 2018, to augment our capabilities in brand and experiential marketing, and purchased On Location in 2020, to accelerate our growth in the premium events and experiences category. We have acquired and integrated more than 20 companies that have expanded our portfolio of owned intellectual property and broadened our set of capabilities. We have also built businesses primarily organically that take advantage of our unique role within the sports and entertainment ecosystem. Sports betting data and streaming services provider IMG ARENA and content studio Endeavor Content are examples of new businesses that we created to amplify our presence in markets we already serve.

 

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We operate across three segments: (i) Owned Sports Properties, (ii) Events, Experiences & Rights, and (iii) Representation, which are covered in greater detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Business Overview.” Our segments are presented in the table below:

 

LOGO

We have a 6,400+ person team operating in 28 countries. We generate revenue in both a principal and an agency capacity and use risk mitigation strategies including pre-sales and licensing when we take on investment risk in content or sports rights. Our business benefits from strong revenue visibility via sports rights fee payments, predictable client commissions, content rights payments, recurring annual or quadrennial events, corporate client retainers, licensing agreements, and annual tuition payments. We believe that visibility into our performance provides us with a stable and growing revenue base.

Our business has delivered strong revenue growth prior to the impact of COVID-19. For the year ended December 31, 2019, we generated $4,571.0 million in revenue, net loss of $530.7 million, Adjusted Net Income of $240.9 million and Adjusted EBITDA of $733.5 million. COVID-19 has had a significant impact on our financial performance. For the year ended December 31, 2020, we generated $3,478.8 million in revenue, net loss of $625.3 million, Adjusted Net Income of $84.8 million and Adjusted EBITDA of $572.5 million. For a

 

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discussion of Adjusted Net Income and Adjusted EBITDA and reconciliations to the most closely comparable GAAP measures, see “Prospectus Summary—Summary Historical and Pro Forma Consolidated Financial and Other Data.”

Industry Dynamics

In response to the consistently high demand for premium sports and entertainment content, we have grown the scope and scale of our platform with the addition of owned premium intellectual property and new content capabilities. We have stayed true to our original mission to meet demand for great sports and entertainment independent of how that content is consumed or distributed. This strategy allows us to successfully position our business to benefit from continuous technological disruption and resulting increased demand for premium content.

The ubiquity of smart phones and high-speed data connections has enabled seamless mobile consumption of premium entertainment and live sports. The proliferation of subscription video-on-demand alternatives has served to expand premium entertainment content choice. Short form and social video platforms have democratized content creation and distribution, creating new categories of entertainment and next generation creators. Social media has also given fans the opportunity to directly connect with talent and share events and experiences. According to the Activate Technology & Media Outlook 2020 report, the average American adult spends 12 hours a day consuming technology and media, of which 41% is spent on video. Gaming, virtual and augmented reality, and 5G connectivity are the next wave of technologies expanding the already massive industry segments that we serve.

The impact of increasing consumer adoption of digital platforms in sports, entertainment, and social media is changing the way that our clients conduct business. We have adapted our advisory strategies and added capabilities to enable us to prosper as new industry trends develop. The insights that we gain across our platform allow us to spot these trends early. We have made organic investments and pursued mergers and acquisitions with the benefit of these insights. We believe our acquisition of marketing business 160over90, for example, positioned us to be a leader in the transition of traditional media marketing budgets to experiential and digital platforms. We created an alternative to the traditional studio model through Endeavor Content in part to fulfill a demand for streaming video and podcast content. We also developed sports data distribution capabilities through IMG ARENA to address the emergence of online sports gaming services. We built and acquired streaming service capabilities via Endeavor Streaming to provide critical infrastructure to support our entertainment and sports clients as they increased their premium AVOD and SVOD product offerings.

The convergence of the live and digital content categories has been a driver of our events and experiences strategy. As consumers elect to spend more of their discretionary entertainment budgets on lifestyle and experiences activities that can be shared across social platforms, we have increased the scale and variety of our premium live and virtual experiences across sports, entertainment, and fashion.

Our Integrated Global Platform

Our global platform is comprised of premium owned assets and an integrated set of capabilities. These capabilities include Sports Operations & Advisory, Events & Experiences Management, Client Representation, Media Production & Distribution, Experiential Marketing, and Brand Licensing. Our leadership teams prioritize both business segment goals and company-level objectives. We emphasize this collaboration to optimize each revenue generation opportunity, improve client retention, and increase the flow of acquisition and investment opportunities. We believe that our integrated set of global capabilities is an essential attribute of our growth strategy.

Sports Operations & Advisory

We own, manage, operate and monetize a unique portfolio of scarce sports properties that generate significant revenue and cash flow through innovative rights deals and exclusive live events. We acquired our first

 

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sports organization, PBR, in 2015. Our most transformative acquisition was the UFC in 2016, adding a one-of-a-kind, global, and category defining sports organization to our portfolio. We continue to leverage our competency in sports property ownership and management to design and execute strategies for our long-term partners, such as our up to 20-year partnership with Euroleague, and clients, such as the English Premier League, European Tour, and Rugby World Cup.

Events & Experiences Management

We own, operate, or represent more than 800 events annually around the globe, including live sports events covering more than 15 sports across more than 25 countries (e.g. Miami Open), international fashion weeks (e.g. New York Fashion Week), art fairs (e.g. Frieze London), and music, culinary, and lifestyle festivals (e.g. Hyde Park Winter Wonderland). In January 2020, we acquired On Location, a leading provider of premium live event experiences across sports and music in North America with more than 900 experiences built around annual events like the Super Bowl, Ryder Cup, NCAA Final Four, and Coachella. We also operate IMG Academy, a sports training institution serving more than 1,200 full-time students and approximately 10,000 camp participants, and dozens of professional athletes, teams, leagues, and corporate clients annually.

Media Production & Distribution

We are a full-service content production and distribution platform with experience in development, financing, production, marketing and sales, servicing hundreds of creators, sports leagues and federations, events and other brands, as well as our owned sports intellectual property. Our state-of-the-art studios produce tens of thousands of hours of sports programming annually for leading sports properties, such as the English Premier League, Wimbledon, and Ryder Cup, as well as for our owned assets including UFC and PBR. Endeavor Content offers a range of services including content development, production, financing, sales, and advisory services for creators. The studio has financed and/or sold more than 200 projects, including “La La Land,” “Just Mercy,” “Hamilton,” “Normal People,” and “See.”

We are also one of the largest independent global distributors of sports and entertainment programming and possess deep relationships with a wide variety of broadcasters and media partners around the world. We sell media rights globally on behalf of more than 150 clients such as the NFL, IOC, and NHL and for our owned assets including UFC and PBR. 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 for on-demand virtual sports products including our own UFC Event Centre. We leverage the technology derived from IMG ARENA to provide streaming video solutions to our clients and our owned assets via Endeavor Streaming. We believe that our collective offering is more important than ever, as premium content is consistently in high demand and in short supply.

Client Representation

We represent many of the world’s greatest creators, performers, influencers, athletes, and models across entertainment, sports, and fashion. In 2019, WME was named music touring agency of the year by Billboard, booking more than 37,000 concert dates, while its clients took home more Grammys than any other agency in 2019 and 2020. For the past several years, WME clients have won more Academy Awards than any other agency and in 2019, WME clients were involved in all of the top 10 domestic grossing films. We represent six of the 10 highest paid actors (2020), the two highest paid female athletes (2020), and manage five of the 10 highest paid models (2018 – last year published), according to Forbes. We are responsible for arranging the essential elements for premium entertainment content distributed through broadcast, cable, and streaming channels, with more than 350 series in 2020. We have also assembled talent and negotiated deals for 14 of the top 20 Netflix series and original movies, and 8 of the top 10 most watched broadcast shows in 2020. We are dedicated to helping our clients increase the monetization potential of their intellectual property, build enduring brands, diversify and grow their businesses, and expand their geographic reach.

 

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Brand Licensing

We are a leading provider of licensing services to entertainment, sports, and consumer products brands, having earned a No. 1 ranking based on total retail sales of $16 billion, according to License Global magazine in 2020. We license our owned intellectual property including the UFC and PBR, and represent third party brands across the automotive, fashion, lifestyle, entertainment, athletics, legends, personalities, corporate, sports league, and event categories. Our clients include Anheuser-Busch InBev, Jeep, Lamborghini, Epic Games (Fortnite), Arnold Palmer, Harvard, the Gap, and the NFL. Through our licensing activities, we source incremental revenue opportunities for our clients, while enhancing their brand with consumers.

Experiential Marketing

Our corporate marketing services are delivered by 160over90, our premium, full-service marketing business that provides experiential, influencer, digital and cultural marketing, and public relations expertise. We work on behalf of some of the world’s largest consumer facing brands that collectively spend over $80 billion in worldwide advertising annually according to AdAge, including Anheuser-Busch InBev, AT&T, and Coca-Cola. Through our platform of owned and operated events and represented clients, our marketing services have access to unique content and activation opportunities, which we believe provides us with a competitive advantage.

Our Platform at Work

The architecture of our company drives powerful network effects that reinforce the value of the platform. We believe the greater the depth of our capabilities and global reach, the greater our ability to retain clients and drive new signings. The more top-tier clients we bring to market, the more relevant we become to streamers, linear networks, and corporate partners. The more sports, events, and experiences inventory we have, the more opportunity we can deliver to our global sponsors. We also believe that our growing global insights enhance our judgment on investments made, while the more we are able to learn from our clients, the more we can enhance the value and growth we deliver long term.

Below are just a few examples where we’ve deepened our relationships with our clients and partners by delivering our integrated platform.

NFL

WME—On the league side, WME has been the NFL’s entertainment agency of record and recently added NFL Films as a client. We also represent various teams and players directly.

IMG—

 

  

IMG Media’s Sport24 channel shows games across the globe in-flight.

 

  

IMG Licensing licenses the NFL brand internationally and brokered a deal with Fortnite enabling players to select NFL uniforms for in-game use.

Endeavor Streaming—Through Endeavor Streaming, we operate the NFL’s OTT product, Game Pass, in the US and in China.

160over90—Through 160over90, we partnered on the NFL100 campaign, celebrating the league’s 100th season in 2019.

Endeavor ContentEndeavor Content produces the NFL Honors annually.

On Location—In 2020, we acquired On Location, the NFL’s official hospitality and VIP experiences partner for the Super Bowl and all major NFL events.

 

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UFC

WME—Prior to Endeavor acquiring a majority stake in UFC in 2016, WME had represented UFC for over a decade.

Endeavor—

 

  

We used the capabilities of our platform to take significant costs out of the business.

 

  

Leaning on our global sports knowledge and sales expertise, we secured a record 7-year deal with ESPN/ESPN+ for UFC’s linear and pay-per-view rights in the US.

IMG—

 

  

We leveraged IMG’s sales infrastructure and expertise to drive higher international media rights and sponsorship fees.

 

  

IMG Licensing increased UFC’s licensing roster globally.

 

  

IMG ARENA launched UFC’s first-ever sports betting product.

 

  

IMG Events helped expand UFC’s live events to China, Russia, South America, and the Middle East.

Endeavor Streaming—Endeavor Streaming powers UFC’s FIGHT PASS platform.

SERENA WILLIAMS

WME—

 

  

On the talent side, WME has represented Serena Williams for most of her career, and she joined our Harry Walker Agency speaker roster in 2020.

 

  

Among her numerous deals, we brokered the largest ever, female athlete marketing deal for her with Nike, as well as a recent four-year deal with 160over90 client AB InBev’s Michelob Ultra brand.

 

  

In 2021, we closed a significant multi-year deal for her S Productions banner at Amazon.

Endeavor Content—Endeavor Content brought Serena’s comeback documentary to HBO.

IMG—Serena unveiled her S by Serena clothing line at our IMG-owned New York Fashion Week.

VISA

 

  

160over90 has been Visa’s global sports sponsorship agency since 2014 and we’ve increased our business with them significantly over that period.

 

  

We currently manage the entirety of their sponsorship activity across sports including the FIFA Men’s and Women’s Cups, the Olympic Games, and the NFL, and that work has crossed over into entertainment.

 

  

It has also created numerous opportunities for us to integrate Visa across our platform, including a unique partnership between Visa and our owned New York Fashion Week.

 

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STREAMING

WME—

 

  

14 of the top 20 Netflix shows, 3 of the top 5 Amazon original series/movies, and more than half of the shows on Apple TV+ each feature multiple WME clients.

 

  

WME has landed major syndication deals for the likes of “The Office,” as well as the “Law & Order” & “Chicago” franchises, with Peacock.

Endeavor Content—Endeavor Content sells across the streaming spectrum, including 18 television projects and 5 films to Apple since Apple TV+’s launch in late 2019.

IMG—

 

  

IMG Licensing brokers licensing deals for Endeavor Content-sold streaming hits like Netflix’s “Queer Eye” and Hulu’s “Killing Eve”.

 

  

IMG Media negotiates sports rights on behalf of numerous global sports organizations and leagues with the likes of Facebook, ESPN+, and Peacock, and through IMG ARENA provides data and video streams on behalf of many of these organizations to sportsbooks.

Endeavor Streaming—Endeavor Streaming powers UFC’s FIGHT PASS and other streaming platforms and owned events.

Our Competitive Strengths

Ownership of Intellectual Property

We believe that our Company is distinguished by our ownership of intellectual property, including UFC, a global sports property and the premier mixed martial arts sports organization, and PBR, an internationally renowned Western lifestyle competitive event series. UFC was founded in 1993 and has grown in popularity after hosting more than 500 events, growing its fan base to approximately 625 million fans, and now reaching a global audience of approximately 1 billion households through an increasing array of broadcast license agreements and our owned FIGHT PASS streaming platform. In 2020, FIGHT PASS subscriptions were up over 40%, and UFC set a record for the most global Pay-Per-View buys in its history. Meanwhile, social media followers across platforms increased by more than 65% year-over-year in 2020, and we grew to more than 10 million subscribers on YouTube, second only to the NBA in terms of global sports organizations. 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 interactions 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. PBR’s two primary US tours have averaged over 10% annual attendance growth since PBR was acquired in 2015. We also have an up to 20-year strategic partnership with Euroleague, consisting of an initial 10-year term that began in 2016 with a 10-year renewal provision subject to certain conditions. Euroleague is one of the most popular indoor sports leagues in the world, averaging attendance of over 8,500 per game in the 2019-2020 season. As sports property owners, we retain control over the organization, promotion and marketing of UFC and PBR, and the monetization of their events and media distribution. To complement these sports properties, we also own marquee events including the Miami Open, HSBC Champions, Frieze Art Fair, New York Fashion Week, and Winter Wonderland.

Perpetual Demand for Premium Content

Our platform allows us to participate in industries that are benefitting from increasing demand for content in all forms. We are positioned at the center of this demand through our owned sports properties, media production

 

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and distribution, and client representation businesses. We operate across all genres and benefit regardless of how and where the demand for this content is fulfilled. Premium sports and entertainment content values have consistently appreciated as new distribution modes and technology broaden access and enhance the consumer experience. The value of sports programming has significantly increased as media networks and over-the-top services rely on premium sports to differentiate their offerings and retain subscribers. Disruption has increased the value of sports media rights as illustrated in consistent increases in Contract Average Annual Values (AAV) over previous contracts. For example, the NFL’s Monday Night Football deal announced in September 2011 was renewed with ESPN for a reported AAV of $1.9 billion, a 72% increase over the prior deal. Similarly, in November 2018, Fox Sports reached an extension with Major League Baseball (“MLB”) for the period 2022-2028. The AAV on the new deal was $729 million, a 40% increase over the prior deal. As digital video distribution services such as ESPN+, Disney+, Peacock, HBO Max, and others have proliferated in recent years, demand has surged with more than 500 original shows airing in 2019, compared to 288 in 2012, according to an industry study. Additionally, commercially successful movies and television programming have lasting resonance that drives consumption at release and over time across multiple points of purchase. The long tail of premium content has thereby enabled significant value creation to accrue to the creators who we represent.

Positioned Where the Consumer is Going in Experiential

According to 2018 Expedia and The Center for Generational Kinetics, LLC, 74% of Americans place more value on experiences than products or things. A University of Texas at Austin research paper published in May 2020 found that consumers were happier when spending on experiences as opposed to material items. This trend has driven us to invest in our portfolio of more than 800 events globally across sports, music, art, fashion, and culinary. Our premium events include UFC, PBR, Miami Open, Frieze Art Fair, Hyde Park Winter Wonderland, and New York Fashion Week. Through IMG Academy, we offer an elite academic and athletic experience, with 90% of graduates moving on to play collegiate sports (compared to 7% nationally). On Location, meanwhile, is a leading provider of premium entertainment and travel experiences, offering a large portfolio of events, tours, and hospitality packages across sports and music events including the Super Bowl, the Ryder Cup, NCAA Final Four, and Coachella.

Creating Asymmetric Risk / Reward Opportunities

We believe that the insights that we have gained from our vast network reduce the risk of organic investment and mergers and acquisitions. Our team evaluates potential merger and acquisition opportunities with the benefit of data and industry knowledge that enables us to identify integration synergies and better forecast revenue growth potential. Our role as an industry counterpart often avails us early insights into strategic processes. We often have the opportunity to invest in and support new business ventures that we have negotiated on behalf of our clients, and our commission structure allows us to participate alongside them in their commercial success.

Platform Integration Drives Upside for Our Stakeholders

Our commitment to business unit collaboration has allowed us to enhance returns for our owned and managed intellectual property, content and experiences, and for our clients. From 2017 through 2019, we grew revenue at a 23% CAGR, driven by industry tailwinds, geographic expansion, organic reinvestment, and strategic acquisitions. In 2020, our focus turned to realizing further cost efficiencies across the business and identifying complementary business extensions in the virtual/digital space. The practical linkages between our business units manifest themselves in myriad examples that result in maximizing revenue generation opportunities, improved client acquisition and retention, and proprietary acquisition and investment opportunities. Each of our owned assets and capabilities reinforces the others, creating a global platform that is very difficult to replicate. We have executed multi-pronged growth strategies on behalf of clients such as Dwayne “The Rock” Johnson, Mark Wahlberg, Maria Sharapova, Serena Williams, and many others. We also leverage our network to forge meaningful partnerships between our talent and brands. Through our deep relationships and expertise in sports

 

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like golf and tennis, we were able to enter the sports betting data industry via IMG ARENA. Our sports rights and representation businesses have similarly helped unlock investment and advisory opportunities for properties such as the European Tour, Euroleague, and the Asian Tour. We have realized top line and cost synergies as we have integrated more than 20 acquisitions including IMG, UFC, PBR, 160over90 and, most recently, On Location.

Strong Revenue Visibility

Our services are underpinned by highly visible and recurring revenue streams across the platform. A primary example is our 7-year UFC media rights deal with ESPN. We have numerous similarly contracted revenue streams from media rights contracts in our media rights and distribution business. Our work with recurring annual events such as Wimbledon and quadrennial events such as the Rugby World Cup adds to the recurring revenue nature of our business. We also have retainer-based agreements with many of our marketing clients and visibility into commissions on licensing arrangements. Our representation business benefits from revenue visibility, as measured by industry award recognitions, predictable production volumes, and residual income streams from past client bookings and content packages. We also benefit from strong revenue visibility from annual owned and operated events like the Miami Open and New York Fashion Week which have been running successfully for decades. Finally, our four-year tuition-based IMG Academy provides a high degree of revenue visibility.

Our Growth Strategies

Leverage Our Platform to Expand Globally and Increase Platform Productivity

We intend to continue leveraging our integrated global platform to maximize the growth potential of our business. The convergence of the sports, entertainment, live events, and technology ecosystems has expanded use cases, exposure and monetization opportunities for our premium intellectual property, content and experiences, and our clients. We believe that our integrated capabilities and global reach allow us to deepen relationships with existing clients, attract new clients and partners, and access proprietary acquisition and investment opportunities that contribute to our growth and strengthen our network. We have had success moving our clients across the platform increasing their monetization capacity and improving our growth.

Expand our Experiential Offering

The concert, sports, and live entertainment categories have been increasingly prioritized over material goods by younger demographics. With a portfolio of more than 800 owned or managed events across Endeavor and 900 experiences curated by On Location, we believe we are well positioned to take advantage of these continuing secular trends and create new offerings and investment opportunities. IMG Academy, meanwhile, is a sports training institution with the ability to expand its campus footprint as well as its products and offerings, such as the addition of virtual training.

Invest in Adjacent High Growth Industry Segments

Our global platform has enabled us to enter new, fast-growing industry segments where we are able to leverage long standing business partnerships and relevant commercial insights to accelerate scale. Many of our businesses have historically grown faster than their industry benchmarks in Global Media Rights Expenditure, Premium Content and Global Sports Gaming, to name a few. Our 2017-2019 growth in each of these areas has been higher than the industry during the same time period as our platform allows us to identify areas of growth early and benefit from constant technological disruption. Our existing footprint helps to facilitate organic investment in new adjacent industry segments. We have successfully executed against these opportunities that have emerged in sports gaming (IMG ARENA), streaming (Endeavor Streaming), podcasting (Endeavor Content), experiential marketing (160over90), and partnerships with our clients (Talent Ventures).

 

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Emphasize Strategic Growth Through Mergers and Acquisitions on Our Unique Platform

Our disciplined mergers and acquisitions strategy has been focused on investing in intellectual property and acquiring capabilities for our global platform. We have successfully completed more than 20 mergers and acquisitions since 2014. We will continue to invest in mergers and acquisitions to complement our internal capabilities and enhance the value of our network. We believe that a highly curated owned intellectual property asset base, diverse client mix, and global capabilities set further enhances the ecosystem connectivity that makes our platform the ideal home for numerous future acquisition targets that fit the profile of our investment strategy. We also will opportunistically seek to monetize and or dispose of certain assets, such as our stake in Droga5 which we divested in 2019.

Our Business and Industry Opportunity

Global Content Spend (Film & TV) Industry

Our client representation business is largely driven by demand for content creators and performers in film and television. Our market constituents for our client representation and media businesses include linear and digital media distributors. The combined spend in both global film and television content was $128 billion in 2019 according to Ampere Analysis. Total global content spend is comprised of original and acquired content across film and television and is estimated by Ampere Analysis to have grown at a 9% CAGR since 2017. A primary growth driver for global content spend has been the dramatic expansion of the global OTT media industry. To capitalize on this growth and generate revenue, streaming services are both investing in original content and acquiring licensed content.

Global Experiences (Sporting Events, Concerts & Performing Arts Ticket Segments)

The sporting events, concerts, and performing arts segments are core to our owned sports properties and experiences operations. Our market constituents primarily include retail consumers, sponsors and corporate customers. The global sporting events, concerts, and performing arts ticket segment was $79 billion in 2019 and is expected to grow at a 5% CAGR to $102 billion by 2024, according to Technavio. The global sporting events segment, representing the largest segment of the global ticketing segment, reached $49 billion in 2019 and is expected to grow at a CAGR of 5% to $64 billion in 2024, largely driven by the increasing popularity of sports and rising consumer preferences for in-person events. While less substantial than sports, the performing arts ticket segment reached $9 billion in 2019 and is expected to grow at a 4% CAGR to $11 billion in 2024, driven by growing demand for unique live art performances. The concert ticket segment was $21 billion in 2019 and is projected to grow at a 5% CAGR to $27 billion in 2024. According to the Bureau of Economic Analysis, average annual US consumer expenditure growth on experience-related services is 66% higher vs. goods (2014—2019). Additionally, according to data from the OECD, U.S. experiential spend grew 2.2x faster than the real GDP from 1979 to 2019.

Global Sports Media Rights Expenditure

Spending on media rights continues to be a significant component of revenues in the sports industry with rights values appreciating consistently over the past decade. Our market constituents include linear and digital distributors, which acquire sports media rights and broadcast sports content. In 2019, global sports media rights spend was $39 billion, having grown at a 9% CAGR since 2017, according to The Business Research Company (via MRDC), and this is expected to grow at an 8% CAGR to $53 billion in 2023. The rise of streaming, increased legalization of sports betting, increased competition from tech entrants, and continued viewership appeal attribute to the projected growth on the rights price tags. The contract values underpinning industry revenues are locked-in long-term, offering a high degree of visibility.

Global Marketing and Licensing

We are active in the global marketing and brand licensing industries, which totaled $67 billion in 2019 based on the collective reported revenues of $51 billion from IPG, WPP, Omnicom, and Dentsu, plus $16 billion

 

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reflecting the royalty revenue for brand owners per Licensing International’s 2020 Global Licensing Survey. Our market constituents include corporate clients seeking brand marketing or IP owners looking to license their brands. Our licensing work is closely attached to the global brand licensing industry of $16 billion which increased 5% in 2019.

Global Sports Gaming

The global sports gaming industry comprised of land-based and interactive sports betting grew at a 10% CAGR from 2017 to 2019 reaching $42 billion (Gross Win) in 2019 and is expected to grow at a 12% CAGR through 2024 to $76 billion, according to H2 Global. With regards to the United States, the U.S. Supreme Court struck down the Professional & Amateur Sports Protection Act (“PASPA”) on May 14, 2018, thus enabling the legalization of sports betting on a state-by-state basis and permitting Delaware to become the first state to fully legalize sports betting less than a month after the decision. As of February 2021, 25 total states across the United States have legalized sports betting, and sports betting is currently operational in 20 states according to the American Gaming Association. Based on current legislative momentum and individual state need for tax revenues, ActionNetwork predicts that 30-33 states will legalize sports betting by the end of 2021. Our constituents include more than 470 sportsbook brands globally who license IMG ARENA’s data.

Recent Developments

While we believe the long-term value of premium intellectual property, content, and experiences is enduring, the near-term impact to our business as a result of COVID-19 has been significant. We experienced disruption across our business units and geographies given the hiatus of live sports and entertainment events coupled with film and television series production stoppages and the interruption of the school year and sports camp schedule. We navigated the early phase of the crisis by undertaking all appropriate measures to address the safety of our personnel, taking necessary steps to ensure adequate liquidity to fund operations, imposing cost cuts, and reducing and realigning our workforce to best position the business for future success.

As the situation evolved, we stayed in close contact with government and health officials, our clients, sports and media partners, and students. UFC and PBR were among the first professional sports in North America to implement safety protocols and return from the COVID-19 shutdown, in May and April 2020, respectively. Since resuming, UFC has held some of its most watched PPV events in the ESPN+ era, starting in Florida and continuing in Abu Dhabi followed by our owned Apex venue in Las Vegas.

As more sports resumed action, we leveraged our experience with UFC and PBR to provide insights to promote best practices throughout the industry. Similarly, as film and television production resumed, we have been committed to creating a safe work environment for our employees, clients, and partners. While we expect to benefit from the significant pent up global demand for content, the path to full capacity will be gradual.

We have focused our time during this period to explore innovation and identify ways to become a more efficient company. Our business units are investing in new digitally focused in-home entertainment business models that are complementary to our core businesses. Further, we believe that a meaningful portion of the cost savings that we have realized through the crisis may continue once commercial activity normalizes, which we expect would have a positive effect on our long-term operating margins and free cash flow generation. See “Risk Factors—Risks Relating to Our Business— The impact of the COVID-19 global pandemic could continue to materially and adversely affect our business, financial condition, and results of operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview— Impact of the COVID-19 Pandemic” for additional information.

Intellectual Property and Other Proprietary Rights

We consider intellectual property to be very important to the operation of our business and to driving growth in our revenues, particularly with respect to professional engagements, sponsorships, licensing rights, and

 

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media distribution agreements. Our intellectual property includes the “Endeavor,” “WME,” “William Morris Endeavor,” “IMG,” “UFC,” “Miss Universe” and “PBR” brands in addition to the trademarks and copyrights associated with our content, events, and the rights to use the intellectual property of our commercial partners. Substantially all of our IP and owned assets that we acquire is protected by trademarks and copyright, whether registered or unregistered.

Competition

The entertainment, sports, and content industries in which we participate are highly competitive. We face competition from alternative providers of the services, content, and events we and our clients and owned assets offer and from other forms of entertainment and leisure activities.

In our Events, Experiences & Rights segment, we face competition from other live, filmed, televised and streamed entertainment, including competition from other companies in the media rights industry. In our Representation segment, we compete with other agencies that represent and/or manage clients including talent and brands. In our Owned Sports Properties segment, we face competition from sports leagues, associations, promotions, and events. For a discussion of risks relating to competition, see “Risk Factors—The markets in which we operate are highly competitive, both within the United States and internationally.”

Properties

The following table sets forth the location, use and size of our significant corporate and other facilities as of December 31, 2020. We own the multi-sport academy in Bradenton, Florida and the corporate offices and studio in Las Vegas, Nevada listed below, and we lease the other properties listed. The leases expire at various times through 2030, subject to renewal and early termination options.

 

Location

  

Use

  

Approximate Size

Beverly Hills, California  Corporate offices  300,000 square feet
New York, New York  Corporate offices  345,000 square feet
Las Vegas, Nevada  Corporate offices and studios  313,000 square feet
Nashville, Tennessee  Corporate offices  53,000 square feet
London, England  Corporate offices and studios  283,000 square feet
Cleveland, Ohio  Corporate offices  33,200 square feet
Bradenton, Florida  Multi-sports academy  500 acres

In addition, we lease several other offices that are not material to our operations.

Employees

As of December 31, 2020 we had approximately 6,400 employees in 28 countries. This includes over 4,300 employees in five countries in the Americas, over 1,650 employees in 13 countries in EMEA, and over 425 employees in 10 countries in APAC. We have invested and focused extensively on the training and development of our employees, from both a personnel and technology perspective. We believe that our relations with our employees are good.

Legal Proceedings

UFC has five related class-action lawsuits filed against it in the United States