UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30,March 31, 20222023
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-40373
ENDEAVOR GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 83-3340169 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
9601 Wilshire Boulevard, 3rd Floor
Beverly Hills, CA 90210
(Address of principal executive offices) (Zip Code)
(310) 285-9000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock, par value $0.00001 per share | EDR | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer | ☐ |
Non-accelerated filer |
| Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 8, 2022,April 28, 2023, there were 289,423,865299,972,938 shares of the registrant’s Class A common stock outstanding, 183,110,405175,617,906 shares of the registrant’s Class X common stock outstanding and 229,875,648227,523,031 shares of the registrant’s Class Y common stock outstanding.
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the "Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of present and historical facts contained in this Quarterly Report, including without limitation, statements regarding our expectations, beliefs, plans, strategies, objectives, prospects, assumptions, future events or expected performance, are forward-looking statements.
Without limiting the foregoing, you can generally identify forward-looking statements by the use of forward-looking terminology, including the terms "aim," "anticipate," "believe," "could," "mission," "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "target," "predict," "potential," "contemplate," or, in each case, their negative, or other variations or comparable terminology and expressions. The forward-looking statements in this Quarterly Report are only predictions and are based on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including, but not limited to:
1
1
These risks could cause actual results to differ materially from those implied by forward-looking statements in this Quarterly Report. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.
You should read this Quarterly Report and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we have no obligation to update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Available Information and Website Disclosure
We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.
You also can find more information about us online at our investor relations website located at www.investor.endeavorco.com. Filings we make with the SEC and any amendments to those reports are available free of charge on our website as soon as reasonably practicable after we electronically file such material with the SEC. The information posted on or accessible through our website is not incorporated into this Annual Report.
Investors and others should note that we announce material financial and operational information to our investors using press releases, SEC filings and public conference call webcasts, and by postings on our investor relations site at investor.endeavorco.com. We may also use our website as a distribution channel of material Company information. In addition, you may automatically receive email alerts and other information about Endeavor when you enroll your email address by visiting the “Investor Email Alerts” option under the Resources tab on investor.endeavorco.com.
DEFINITIONS
As used in this Quarterly Report, unless we state otherwise or the context otherwise requires:
2
Item 1. Financial Statements (Unaudited)
PART I – FINANCIAL INFORMATION
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
3
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 970,782 |
|
| $ | 1,560,995 |
|
Restricted cash |
|
| 294,203 |
|
|
| 232,041 |
|
Accounts receivable (net of allowance for doubtful accounts of $65,695 and $57,102, respectively) |
|
| 893,369 |
|
|
| 615,010 |
|
Deferred costs |
|
| 247,864 |
|
|
| 255,371 |
|
Assets held for sale |
|
| 27,301 |
|
|
| 885,633 |
|
Other current assets |
|
| 253,620 |
|
|
| 204,697 |
|
Total current assets |
|
| 2,687,139 |
|
|
| 3,753,747 |
|
Property and equipment, net |
|
| 642,891 |
|
|
| 629,807 |
|
Operating lease right-of-use assets |
|
| 324,340 |
|
|
| 373,652 |
|
Intangible assets, net |
|
| 2,199,670 |
|
|
| 1,611,684 |
|
Goodwill |
|
| 5,237,971 |
|
|
| 4,506,554 |
|
Investments |
|
| 407,435 |
|
|
| 298,212 |
|
Other assets |
|
| 416,469 |
|
|
| 260,861 |
|
Total assets |
| $ | 11,915,915 |
|
| $ | 11,434,517 |
|
LIABILITIES, REDEEMABLE INTERESTS AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 540,142 |
|
| $ | 558,863 |
|
Accrued liabilities |
|
| 580,001 |
|
|
| 524,061 |
|
Current portion of long-term debt |
|
| 89,039 |
|
|
| 82,022 |
|
Current portion of operating lease liabilities |
|
| 59,355 |
|
|
| 59,743 |
|
Deferred revenue |
|
| 609,715 |
|
|
| 651,760 |
|
Deposits received on behalf of clients |
|
| 279,402 |
|
|
| 216,632 |
|
Liabilities held for sale |
|
| 4,866 |
|
|
| 507,303 |
|
Other current liabilities |
|
| 186,289 |
|
|
| 105,053 |
|
Total current liabilities |
|
| 2,348,809 |
|
|
| 2,705,437 |
|
Long-term debt |
|
| 5,338,364 |
|
|
| 5,631,714 |
|
Long-term operating lease liabilities |
|
| 308,828 |
|
|
| 363,568 |
|
Other long-term liabilities |
|
| 496,378 |
|
|
| 402,472 |
|
Total liabilities |
|
| 8,492,379 |
|
|
| 9,103,191 |
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
| ||
Redeemable non-controlling interests |
|
| 254,699 |
|
|
| 209,863 |
|
Shareholders' Equity: |
|
|
|
|
|
| ||
Class A common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| 2 |
|
|
| 2 |
|
Class B common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| — |
|
|
| — |
|
Class C common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| — |
|
|
| — |
|
Class X common stock, $0.00001 par value; 4,987,036,068 and 5,000,000,000 shares authorized; |
|
| 1 |
|
|
| 1 |
|
Class Y common stock, $0.00001 par value; 997,261,325 and 1,000,000,000 shares authorized; |
|
| 2 |
|
|
| 2 |
|
Additional paid-in capital |
|
| 2,061,760 |
|
|
| 1,624,201 |
|
Accumulated deficit |
|
| (10,039 | ) |
|
| (296,625 | ) |
Accumulated other comprehensive loss |
|
| (61,223 | ) |
|
| (80,535 | ) |
Total Endeavor Group Holdings, Inc. shareholders' equity |
|
| 1,990,503 |
|
|
| 1,247,046 |
|
Nonredeemable non-controlling interests |
|
| 1,178,334 |
|
|
| 874,417 |
|
Total shareholders' equity |
|
| 3,168,837 |
|
|
| 2,121,463 |
|
Total liabilities, redeemable interests and shareholders' equity |
| $ | 11,915,915 |
|
| $ | 11,434,517 |
|
|
| March 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 718,658 |
|
| $ | 767,828 |
|
Restricted cash |
|
| 267,605 |
|
|
| 278,165 |
|
Accounts receivable (net of allowance for doubtful accounts of $57,128 and $54,766, respectively) |
|
| 991,618 |
|
|
| 917,000 |
|
Deferred costs |
|
| 283,326 |
|
|
| 268,524 |
|
Assets held for sale |
|
| 5,984 |
|
|
| 12,013 |
|
Other current assets |
|
| 271,018 |
|
|
| 293,206 |
|
Total current assets |
|
| 2,538,209 |
|
|
| 2,536,736 |
|
Property and equipment, net |
|
| 711,589 |
|
|
| 696,302 |
|
Operating lease right-of-use assets |
|
| 337,422 |
|
|
| 346,550 |
|
Intangible assets, net |
|
| 2,190,078 |
|
|
| 2,205,583 |
|
Goodwill |
|
| 5,302,070 |
|
|
| 5,284,697 |
|
Investments |
|
| 348,548 |
|
|
| 336,973 |
|
Deferred income taxes |
|
| 804,981 |
|
|
| 771,382 |
|
Other assets |
|
| 386,793 |
|
|
| 325,619 |
|
Total assets |
| $ | 12,619,690 |
|
| $ | 12,503,842 |
|
LIABILITIES, REDEEMABLE INTERESTS AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 615,232 |
|
| $ | 600,605 |
|
Accrued liabilities |
|
| 531,381 |
|
|
| 525,239 |
|
Current portion of long-term debt |
|
| 88,686 |
|
|
| 88,309 |
|
Current portion of operating lease liabilities |
|
| 68,673 |
|
|
| 65,381 |
|
Deferred revenue |
|
| 730,034 |
|
|
| 716,147 |
|
Deposits received on behalf of clients |
|
| 247,776 |
|
|
| 258,414 |
|
Liabilities held for sale |
|
| — |
|
|
| 2,672 |
|
Current portion of tax receivable agreement liability |
|
| 154,893 |
|
|
| 50,098 |
|
Other current liabilities |
|
| 106,359 |
|
|
| 107,675 |
|
Total current liabilities |
|
| 2,543,034 |
|
|
| 2,414,540 |
|
Long-term debt |
|
| 5,062,508 |
|
|
| 5,080,237 |
|
Long-term operating lease liabilities |
|
| 314,556 |
|
|
| 327,888 |
|
Long-term tax receivable agreement liability |
|
| 842,935 |
|
|
| 961,623 |
|
Other long-term liabilities |
|
| 459,693 |
|
|
| 412,982 |
|
Total liabilities |
|
| 9,222,726 |
|
|
| 9,197,270 |
|
Commitments and contingencies (Note 16) |
|
|
|
|
|
| ||
Redeemable non-controlling interests |
|
| 254,239 |
|
|
| 253,079 |
|
Shareholders' Equity: |
|
|
|
|
|
| ||
Class A common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| 2 |
|
|
| 2 |
|
Class B common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| — |
|
|
| — |
|
Class C common stock, $0.00001 par value; 5,000,000,000 shares authorized; |
|
| — |
|
|
| — |
|
Class X common stock, $0.00001 par value; 4,983,448,411 and 4,987,036,068 shares authorized; |
|
| 1 |
|
|
| 1 |
|
Class Y common stock, $0.00001 par value; 989,681,838 and 997,261,325 shares authorized; |
|
| 2 |
|
|
| 2 |
|
Additional paid-in capital |
|
| 2,248,015 |
|
|
| 2,120,794 |
|
Accumulated deficit |
|
| (208,188 | ) |
|
| (216,219 | ) |
Accumulated other comprehensive loss |
|
| (14,997 | ) |
|
| (23,736 | ) |
Total Endeavor Group Holdings, Inc. shareholders' equity |
|
| 2,024,835 |
|
|
| 1,880,844 |
|
Nonredeemable non-controlling interests |
|
| 1,117,890 |
|
|
| 1,172,649 |
|
Total shareholders' equity |
|
| 3,142,725 |
|
|
| 3,053,493 |
|
Total liabilities, redeemable interests and shareholders' equity |
| $ | 12,619,690 |
|
| $ | 12,503,842 |
|
See accompanying notes to consolidated financial statements
34
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Revenue |
| $ | 1,221,416 |
|
| $ | 1,391,303 |
|
| $ | 4,007,694 |
|
| $ | 3,572,157 |
|
| $ | 1,596,837 |
|
| $ | 1,473,763 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Direct operating costs |
|
| 398,518 |
|
|
| 673,215 |
|
|
| 1,601,544 |
|
|
| 1,790,562 |
|
|
| 724,282 |
|
|
| 694,641 |
|
Selling, general and administrative expenses |
|
| 601,469 |
|
|
| 520,626 |
|
|
| 1,729,174 |
|
|
| 1,686,840 |
|
|
| 669,213 |
|
|
| 540,206 |
|
Insurance recoveries |
|
| — |
|
|
| (12,233 | ) |
|
| (993 | ) |
|
| (42,100 | ) |
|
| — |
|
|
| (993 | ) |
Depreciation and amortization |
|
| 63,571 |
|
|
| 71,661 |
|
|
| 195,177 |
|
|
| 208,058 |
|
|
| 66,751 |
|
|
| 65,994 |
|
Impairment charges |
|
| 689 |
|
|
| 754 |
|
|
| 689 |
|
|
| 4,524 |
| ||||||||
Total operating expenses |
|
| 1,064,247 |
|
|
| 1,254,023 |
|
|
| 3,525,591 |
|
|
| 3,647,884 |
|
|
| 1,460,246 |
|
|
| 1,299,848 |
|
Operating income (loss) |
|
| 157,169 |
|
|
| 137,280 |
|
|
| 482,103 |
|
|
| (75,727 | ) | ||||||||
Operating income |
|
| 136,591 |
|
|
| 173,915 |
| ||||||||||||||||
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest expense, net |
|
| (75,608 | ) |
|
| (55,783 | ) |
|
| (197,385 | ) |
|
| (207,970 | ) |
|
| (85,097 | ) |
|
| (59,272 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28,628 | ) | ||||||||
Tax receivable agreements liability adjustment |
|
| (10,405 | ) |
|
| — |
|
|
| (61,497 | ) |
|
| — |
| ||||||||
Other income (expense), net |
|
| 9,325 |
|
|
| (7,719 | ) |
|
| 463,133 |
|
|
| (3,001 | ) | ||||||||
Income (loss) before income taxes and equity losses of affiliates |
|
| 80,481 |
|
|
| 73,778 |
|
|
| 686,354 |
|
|
| (315,326 | ) | ||||||||
Tax receivable agreement liability adjustment |
|
| 2,344 |
|
|
| (53,497 | ) | ||||||||||||||||
Other income, net |
|
| 24,433 |
|
|
| 459,941 |
| ||||||||||||||||
Income before income taxes and equity losses of affiliates |
|
| 78,271 |
|
|
| 521,087 |
| ||||||||||||||||
Provision for (benefit from) income taxes |
|
| 8,515 |
|
|
| (7,718 | ) |
|
| (6,020 | ) |
|
| 58,285 |
|
|
| 35,470 |
|
|
| (17,234 | ) |
Income (loss) before equity losses of affiliates |
|
| 71,966 |
|
|
| 81,496 |
|
|
| 692,374 |
|
|
| (373,611 | ) | ||||||||
Income before equity losses of affiliates |
|
| 42,801 |
|
|
| 538,321 |
| ||||||||||||||||
Equity losses of affiliates, net of tax |
|
| (84,504 | ) |
|
| (17,883 | ) |
|
| (145,026 | ) |
|
| (77,167 | ) |
|
| (6,546 | ) |
|
| (20,655 | ) |
Net (loss) income |
|
| (12,538 | ) |
|
| 63,613 |
|
|
| 547,348 |
|
|
| (450,778 | ) | ||||||||
Less: Net (loss) income attributable to non-controlling interests |
|
| (2,499 | ) |
|
| 21,128 |
|
|
| 212,035 |
|
|
| (141,980 | ) | ||||||||
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (31,686 | ) | ||||||||
Net (loss) income attributable to Endeavor Group Holdings, Inc. |
| $ | (10,039 | ) |
| $ | 42,485 |
|
| $ | 335,313 |
|
| $ | (277,112 | ) | ||||||||
Net income |
|
| 36,255 |
|
|
| 517,666 |
| ||||||||||||||||
Less: Net income attributable to non-controlling interests |
|
| 28,224 |
|
|
| 198,120 |
| ||||||||||||||||
Net income attributable to Endeavor Group Holdings, Inc. |
| $ | 8,031 |
|
| $ | 319,546 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
(Loss) earnings per share of Class A common stock(1): |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Earnings per share of Class A common stock: |
|
|
|
|
|
| ||||||||||||||||||
Basic |
| $ | (0.04 | ) |
| $ | 0.16 |
|
| $ | 1.22 |
|
| $ | (1.07 | ) |
| $ | 0.03 |
|
| $ | 1.19 |
|
Diluted |
| $ | (0.04 | ) |
| $ | 0.16 |
|
| $ | 1.19 |
|
| $ | (1.07 | ) |
| $ | 0.03 |
|
| $ | 1.16 |
|
Weighted average number of shares used in computing (loss) earnings per share: |
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted average number of shares used in computing earnings per share: |
|
|
|
|
|
| ||||||||||||||||||
Basic |
|
| 285,870,317 |
|
|
| 262,891,070 |
|
|
| 278,724,574 |
|
|
| 261,048,116 |
|
|
| 291,936,777 |
|
|
| 268,489,176 |
|
Diluted |
|
| 289,806,633 |
|
|
| 435,922,511 |
|
|
| 450,758,061 |
|
|
| 261,048,116 |
|
|
| 295,285,241 |
|
|
| 443,038,617 |
|
(1) Basic and diluted income (loss) per share of Class A common stock presented for 2021 is applicable only for the period from May 1, 2021 through September 30, 2021, which is the period following the initial public offering ("IPO") and the related Reorganization Transactions (as defined in note 1 to the unaudited consolidated financial statements). See Note 12 for the calculation of the numbers of shares used in computation of net income (loss) per share of Class A common stock and the basis for computation of net income (loss) per share.
See accompanying notes to consolidated financial statements
4
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net (loss) income |
| $ | (12,538 | ) |
| $ | 63,613 |
|
| $ | 547,348 |
|
| $ | (450,778 | ) |
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in unrealized gains/losses on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized losses on forward foreign exchange contracts |
|
| (1,023 | ) |
|
| (628 | ) |
|
| (1,036 | ) |
|
| (416 | ) |
Reclassification of gains to net (loss) income for forward foreign exchange contracts |
|
| (38 | ) |
|
| (1,475 | ) |
|
| (824 | ) |
|
| (1,468 | ) |
Unrealized gains (losses) on interest rate swaps |
|
| 45,083 |
|
|
| (41 | ) |
|
| 107,308 |
|
|
| 13,233 |
|
Reclassification of losses to net (loss) income for interest rate swaps |
|
| 5 |
|
|
| 7,677 |
|
|
| 14,497 |
|
|
| 22,613 |
|
Foreign currency translation adjustments |
|
| (42,890 | ) |
|
| (1,128 | ) |
|
| (82,716 | ) |
|
| (3,508 | ) |
Reclassification of foreign currency translation gains to net income for business divestiture |
|
| — |
|
|
| — |
|
|
| (127 | ) |
|
| — |
|
Total comprehensive (loss) income, net of tax |
|
| (11,401 | ) |
|
| 68,018 |
|
|
| 584,450 |
|
|
| (420,324 | ) |
Less: Comprehensive (loss) income attributable to non-controlling interests |
|
| (2,084 | ) |
|
| 22,814 |
|
|
| 226,299 |
|
|
| (137,811 | ) |
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12,021 | ) |
Comprehensive (loss) income attributable to Endeavor Group Holdings, Inc. |
| $ | (9,317 | ) |
| $ | 45,204 |
|
| $ | 358,151 |
|
| $ | (270,492 | ) |
See accompanying notes to consolidated financial statements
5
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net income |
| $ | 36,255 |
|
| $ | 517,666 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
| ||
Change in unrealized gains/losses on cash flow hedges: |
|
|
|
|
|
| ||
Unrealized gains on forward foreign exchange contracts |
|
| — |
|
|
| 184 |
|
Reclassification of gains to net income for forward foreign exchange contracts |
|
| — |
|
|
| (786 | ) |
Unrealized (losses) gains on interest rate swaps |
|
| (1,036 | ) |
|
| 48,194 |
|
Reclassification of (gains) losses to net income for interest rate swaps |
|
| (11,802 | ) |
|
| 7,333 |
|
Foreign currency translation adjustments |
|
| 22,331 |
|
|
| (648 | ) |
Reclassification of foreign currency translation losses (gains) to net income for business divestitures |
|
| 3,270 |
|
|
| (127 | ) |
Total comprehensive income, net of tax |
|
| 49,018 |
|
|
| 571,816 |
|
Less: Comprehensive income attributable to non-controlling interests |
|
| 31,924 |
|
|
| 218,615 |
|
Comprehensive income attributable to Endeavor Group Holdings, Inc. |
| $ | 17,094 |
|
| $ | 353,201 |
|
See accompanying notes to consolidated financial statements
6
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE INTERESTS AND SHAREHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
|
| Three Months Ended September 30, 2022 |
| |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||
|
| Non-controlling |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders' |
| |||||||||||||||||||
|
| Interests |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Holdings, Inc. |
| Interests |
| Equity |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at July 1, 2022 |
| $ | 48,630 |
|
| 285,731,884 |
| $ | 2 |
|
| 183,897,784 |
| $ | 1 |
|
| 235,001,875 |
| $ | 2 |
| $ | 1,962,051 |
| $ | - |
| $ | (61,265 | ) | $ | 1,900,791 |
| $ | 1,175,928 |
| $ | 3,076,719 |
|
Comprehensive income |
|
| (921 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (10,039 | ) |
| 722 |
|
| (9,317 | ) |
| (1,163 | ) |
| (10,480 | ) |
Equity-based compensation |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 43,754 |
|
| — |
|
| — |
|
| 43,754 |
|
| 1,373 |
|
| 45,127 |
|
Issuance of Class A common stock due to exchanges |
|
| — |
|
| 658,573 |
|
| — |
|
| (724,356 | ) |
| — |
|
| (5,126,227 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Issuance of Class A common stock due to releases of RSUs |
|
| — |
|
| 70,718 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distributions |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (329 | ) |
| (329 | ) |
Accretion of redeemable non- controlling interests |
|
| (3,160 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,160 |
|
| — |
|
| — |
|
| 3,160 |
|
| — |
|
| 3,160 |
|
Issuance of Class A common stock due to an acquisition |
|
| — |
|
| 2,869,729 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 59,240 |
|
| — |
|
| — |
|
| 59,240 |
|
| — |
|
| 59,240 |
|
Establishment and acquisition of non-controlling interests |
|
| 210,150 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Non-controlling interests for sale of businesses |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (4,644 | ) |
| (4,644 | ) |
Equity reallocation between controlling and non-controlling interests |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,489 | ) |
| — |
|
| (680 | ) |
| (7,169 | ) |
| 7,169 |
|
| — |
|
Tax receivable agreements in connection with exchanges |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 44 |
|
| — |
|
| — |
|
| 44 |
|
| — |
|
| 44 |
|
Balance at September 30, 2022 |
| $ | 254,699 |
|
| 289,330,904 |
| $ | 2 |
|
| 183,173,428 |
| $ | 1 |
|
| 229,875,648 |
| $ | 2 |
| $ | 2,061,760 |
| $ | (10,039 | ) | $ | (61,223 | ) | $ | 1,990,503 |
| $ | 1,178,334 |
| $ | 3,168,837 |
|
6
|
| Nine Months Ended September 30, 2022 |
|
| Three Months Ended March 31, 2023 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||||||||||||||||||||||||||
|
| Non-controlling |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders' |
|
| Non-controlling |
| Class A Common Stock |
|
| Class X Common Stock |
|
| Class Y Common Stock |
|
| Paid-In |
| Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders' |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| Interests |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Holdings, Inc. |
| Interests |
| Equity |
|
| Interests |
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Loss |
|
| Holdings, Inc. |
|
| Interests |
|
| Equity |
| ||||||||||||||||||||||||||
Balance at January 1, 2022 |
| $ | 209,863 |
|
| 265,553,327 |
| $ | 2 |
| 186,222,061 |
| $ | 1 |
| 238,154,296 |
| $ | 2 |
| $ | 1,624,201 |
| $ | (296,625 | ) | $ | (80,535 | ) | $ | 1,247,046 |
| $ | 874,417 |
| $ | 2,121,463 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2023 |
| $ | 253,079 |
|
| 290,541,729 |
|
| $ | 2 |
|
|
| 182,077,479 |
|
| $ | 1 |
|
|
| 227,836,134 |
|
| $ | 2 |
|
| $ | 2,120,794 |
|
| $ | (216,219 | ) |
| $ | (23,736 | ) |
| $ | 1,880,844 |
|
| $ | 1,172,649 |
|
| $ | 3,053,493 |
| ||||||||||||||||||||||||||||||||||||||||
Comprehensive income |
|
| 3,796 |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 335,313 |
| 22,838 |
| 358,151 |
| 222,503 |
| 580,654 |
|
|
| 17,409 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,031 |
|
|
| 9,063 |
|
|
| 17,094 |
|
|
| 14,515 |
|
|
| 31,609 |
| |||||||||||
Equity-based compensation |
|
| (2,276 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| 135,552 |
| — |
| — |
| 135,552 |
| 20,490 |
| 156,042 |
|
|
| (1,527 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 77,166 |
|
|
| — |
|
|
| — |
|
|
| 77,166 |
|
|
| 4,990 |
|
|
| 82,156 |
| |||||||||||
Issuance of Class A common stock due to exchanges |
|
| — |
|
| 11,645,986 |
| — |
| (11,746,012 | ) |
| — |
| (8,278,648 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| — |
|
| 6,165,281 |
|
|
| — |
|
|
| (6,165,281 | ) |
|
| — |
|
|
| (313,103 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||
Issuance of Class A common stock due to releases of RSUs |
|
| — |
|
| 2,678,113 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| — |
|
| 2,645,345 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||
Distributions |
|
| — |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (26,282 | ) |
| (26,282 | ) |
|
| (6,567 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19,724 | ) |
|
| (19,724 | ) | ||||||||||
Accretion of redeemable non- controlling interests |
|
| 83,848 |
|
| — |
| — |
| — |
| — |
| — |
| — |
| (35,121 | ) |
| (48,727 | ) |
| — |
| (83,848 | ) |
| — |
| (83,848 | ) |
|
| 1,387 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,387 | ) |
|
| — |
|
|
| — |
|
|
| (1,387 | ) |
|
| — |
|
|
| (1,387 | ) | ||||||||
Issuance of Class A common stock due to an acquisition |
|
| — |
|
| 3,266,646 |
| — |
| — |
| — |
| — |
| — |
| 70,254 |
| — |
| — |
| 70,254 |
| — |
| 70,254 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Establishment and acquisition of non-controlling interests |
|
| (40,532 | ) |
| 6,186,832 |
| — |
| 8,697,379 |
| — |
| — |
| — |
| 211,405 |
| — |
| — |
| 211,405 |
| 135,090 |
| 346,495 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling interests |
|
| (715 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,475 |
|
|
| 2,475 |
| ||||||||||||||||||||||||||||||||||||||||
Non-controlling interests for sale of businesses |
|
| — |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 3,240 |
| 3,240 |
|
|
| (8,827 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||
Equity reallocation between controlling and non-controlling interests |
|
| — |
|
| — |
| — |
| — |
| — |
| — |
| — |
| 54,650 |
| — |
| (3,526 | ) |
| 51,124 |
| (51,124 | ) |
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 57,339 |
|
|
| — |
|
|
| (324 | ) |
|
| 57,015 |
|
|
| (57,015 | ) |
|
| — |
| |||||||||
Tax receivable agreements in connection with exchanges |
|
| — |
|
| — |
| — |
| — |
| — |
| — |
| — |
| 819 |
| — |
| — |
| 819 |
| — |
| 819 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 |
| $ | 254,699 |
|
| 289,330,904 |
| $ | 2 |
| 183,173,428 |
| $ | 1 |
| 229,875,648 |
| $ | 2 |
| $ | 2,061,760 |
| $ | (10,039 | ) | $ | (61,223 | ) | $ | 1,990,503 |
| $ | 1,178,334 |
| $ | 3,168,837 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity impact of tax receivable agreement and deferred taxes arising from EOC units and Endeavor Manager units exchanges |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,897 | ) |
|
| — |
|
|
| — |
|
|
| (5,897 | ) |
|
| — |
|
|
| (5,897 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 |
| $ | 254,239 |
|
| 299,352,355 |
|
| $ | 2 |
|
|
| 175,912,198 |
|
| $ | 1 |
|
|
| 227,523,031 |
|
| $ | 2 |
|
| $ | 2,248,015 |
|
| $ | (208,188 | ) |
| $ | (14,997 | ) |
| $ | 2,024,835 |
|
| $ | 1,117,890 |
|
| $ | 3,142,725 |
|
See accompanying notes to consolidated financial statements
7
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE INTERESTS AND MEMBERS'SHAREHOLDERS' EQUITY
(In thousands)thousands, except share data)
(Unaudited)
|
| Three Months Ended September 30, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||||
|
| Non-controlling |
|
| Redeemable |
|
|
| Members' |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders'/ |
| |||||||||||||||||||||
|
| Interests |
|
| Equity |
|
|
| Capital |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Holdings, Inc. |
| Interests |
| Members' Equity |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at July 1, 2021 |
| $ | 179,140 |
|
| $ | — |
|
|
| $ | — |
|
| 261,371,683 |
| $ | 2 |
|
| 188,080,383 |
| $ | 1 |
|
| 238,154,296 |
| $ | 2 |
| $ | 1,556,791 |
| $ | (319,597 | ) | $ | (98,530 | ) | $ | 1,138,669 |
| $ | 811,568 |
| $ | 1,950,237 |
|
Comprehensive (loss) income subsequent to Reorganization and IPO |
|
| (4,114 | ) |
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 42,485 |
|
| 2,719 |
|
| 45,204 |
|
| 26,928 |
|
| 72,132 |
|
Equity-based compensation subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 55,174 |
|
| — |
|
| — |
|
| 55,174 |
|
| 5,048 |
|
| 60,222 |
|
Issuance of Class A common stock due to exchanges subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 545,951 |
|
| — |
|
| (565,259 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Issuance of Class A common stock due to vested RSUs subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 53,040 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distributions subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 95 |
|
| — |
|
| — |
|
| 95 |
|
| (162 | ) |
| (67 | ) |
Accretion of redeemable non-controlling interests subsequent to Reorganization and IPO |
|
| 33,821 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (33,821 | ) |
| — |
|
| — |
|
| (33,821 | ) |
| — |
|
| (33,821 | ) |
Establishment of non-controlling interests subsequent to Reorganization and IPO |
|
| 43 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (43 | ) |
| (43 | ) |
Non-controlling interests for sale of businesses |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,868 | ) |
| (2,868 | ) |
Equity reallocation between controlling |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,399 |
|
| — |
|
| — |
|
| 2,399 |
|
| (2,399 | ) |
| — |
|
Balance at September 30, 2021 |
| $ | 208,890 |
|
| $ | — |
|
|
| $ | — |
|
| 261,970,674 |
| $ | 2 |
|
| 187,515,124 |
| $ | 1 |
|
| 238,154,296 |
| $ | 2 |
| $ | 1,580,638 |
| $ | (277,112 | ) | $ | (95,811 | ) | $ | 1,207,720 |
| $ | 838,072 |
| $ | 2,045,792 |
|
| Three Months Ended March 31, 2022 |
| |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| Total Shareholders' |
|
|
|
|
|
|
| |||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
| Retained Earnings |
|
| Other |
|
| Equity Attributable |
|
| Nonredeemable |
|
| Total |
| |||||||||||||
|
| Non-controlling |
| Class A Common Stock |
|
| Class X Common Stock |
|
| Class Y Common Stock |
|
| Paid-In |
|
| (Accumulated |
|
| Comprehensive |
|
| to Endeavor Group |
|
| Non-controlling |
|
| Shareholders' |
| ||||||||||||||||||||||
|
| Interests |
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit) |
|
| Loss |
|
| Holdings, Inc. |
|
| Interests |
|
| Equity |
| |||||||||||||
Balance at January 1, 2022 |
| $ | 209,863 |
| $ | 265,553,327 |
|
|
| 2 |
|
| $ | 186,222,061 |
|
|
| 1 |
|
| $ | 238,154,296 |
|
|
| 2 |
|
| $ | 1,624,201 |
|
| $ | (296,625 | ) |
| $ | (80,535 | ) |
| $ | 1,247,046 |
|
| $ | 874,417 |
|
| $ | 2,121,463 |
|
Comprehensive income |
|
| 4,236 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 319,546 |
|
|
| 33,655 |
|
|
| 353,201 |
|
|
| 214,379 |
|
|
| 567,580 |
|
Equity-based compensation |
|
| 1,127 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,522 |
|
|
| — |
|
|
| — |
|
|
| 45,522 |
|
|
| 3,353 |
|
|
| 48,875 |
|
Issuance of Class A common stock due to exchanges |
|
| — |
|
| 9,233,445 |
|
|
| — |
|
|
| (9,254,304 | ) |
|
| — |
|
|
| (2,738,675 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of Class A common stock due to releases of RSUs |
|
| — |
|
| 911,757 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Distributions |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (351 | ) |
|
| (351 | ) | |
Accretion of redeemable non- controlling interests |
|
| 27,308 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,308 | ) |
|
| — |
|
|
| — |
|
|
| (27,308 | ) |
|
| — |
|
|
| (27,308 | ) |
Acquisition of non-controlling interests |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,346 |
|
|
| — |
|
|
| — |
|
|
| 1,346 |
|
|
| 3,754 |
|
|
| 5,100 |
|
Non-controlling interests for sale of businesses |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,884 |
|
|
| 7,884 |
|
Equity reallocation between controlling and non-controlling interests |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 52,409 |
|
|
| — |
|
|
| (2,548 | ) |
|
| 49,861 |
|
|
| (49,861 | ) |
|
| — |
|
Equity impact of tax receivable agreement and deferred taxes arising from EOC units and Endeavor Manager units exchanges |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 681 |
|
|
| — |
|
|
| — |
|
|
| 681 |
|
|
| — |
|
|
| 681 |
|
Balance at March 31, 2022 |
| $ | 242,534 |
| $ | 275,698,529 |
|
|
| 2 |
|
| $ | 176,967,757 |
|
|
| 1 |
|
| $ | 235,415,621 |
|
|
| 2 |
|
| $ | 1,696,851 |
|
| $ | 22,921 |
|
| $ | (49,428 | ) |
| $ | 1,670,349 |
|
| $ | 1,053,575 |
|
| $ | 2,723,924 |
|
See accompanying notes to consolidated financial statements
8
|
| Nine Months Ended September 30, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
| Total Shareholders' |
|
|
|
|
| |||||||||||||||
|
| Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
| Other |
| Equity Attributable |
| Nonredeemable |
| Total |
| |||||||||||||||
|
| Non-controlling |
|
| Redeemable |
|
|
| Members' |
| Class A Common Stock |
| Class X Common Stock |
| Class Y Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| to Endeavor Group |
| Non-controlling |
| Shareholders'/ |
| |||||||||||||||||||||
|
| Interests |
|
| Equity |
|
|
| Capital |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Holdings, Inc. |
| Interests |
| Members' Equity |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at January 1, 2021 |
| $ | 168,254 |
|
| $ | 22,519 |
|
|
| $ | 468,633 |
|
| — |
| $ | — |
|
| — |
| $ | — |
|
| — |
| $ | — |
| $ | — |
| $ | — |
| $ | (190,786 | ) | $ | 277,847 |
| $ | 686,129 |
| $ | 963,976 |
|
Comprehensive (loss) income prior to reorganization and IPO |
|
| (4,111 | ) |
|
| — |
|
|
|
| (31,686 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 19,665 |
|
| (12,021 | ) |
| 42,859 |
|
| 30,838 |
|
Equity-based compensation expense prior to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| 3,444 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,444 |
|
| 7,636 |
|
| 11,080 |
|
Distributions prior to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| (245 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (245 | ) |
| (8,403 | ) |
| (8,648 | ) |
Accretion of redeemable non-controlling interests prior to Reorganization and IPO |
|
| (271 | ) |
|
| — |
|
|
|
| 271 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 271 |
|
| — |
|
| 271 |
|
Establishment of non-controlling interests prior to Reorganization and IPO |
|
| 2,888 |
|
|
| — |
|
|
|
| 560 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 560 |
|
| (3,448 | ) |
| (2,888 | ) |
Effects of Reorganization |
|
| 5,729 |
|
|
| (22,519 | ) |
|
|
| (440,977 | ) |
| 133,712,566 |
|
| 1 |
|
| 122,021,609 |
|
| 1 |
|
| 167,208,026 |
|
| 2 |
|
| 242,017 |
|
| — |
|
| 80,645 |
|
| (118,311 | ) |
| 135,101 |
|
| 16,790 |
|
Issuance of Class A common stock sold in IPO, including underwriters' option, and Private Placement, net of underwriting discounts |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 81,873,497 |
|
| 1 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,886,642 |
|
| — |
|
| — |
|
| 1,886,643 |
|
| — |
|
| 1,886,643 |
|
Use of proceeds, including the UFC buyout |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 42,400,877 |
|
| — |
|
| 67,910,105 |
|
| — |
|
| 70,946,270 |
|
| — |
|
| (702,698 | ) |
| — |
|
| (11,955 | ) |
| (714,653 | ) |
| (120,386 | ) |
| (835,039 | ) |
Comprehensive (loss) income subsequent to reorganization and IPO |
|
| (5,808 | ) |
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (277,112 | ) |
| 6,620 |
|
| (270,492 | ) |
| (170,751 | ) |
| (441,243 | ) |
Equity-based compensation expense subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 214,020 |
|
| — |
|
| — |
|
| 214,020 |
|
| 281,912 |
|
| 495,932 |
|
Issuance of Class A common stock due to exchanges subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 2,426,147 |
|
| — |
|
| (2,416,590 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
9
Issuance of Class A common stock for vested RSUs subsequent to reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| 1,557,587 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Contributed capital subsequent to Reorganization and IPO |
|
| 5,400 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distributions subsequent to Reorganization and IPO |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (162 | ) |
| (162 | ) |
Accretion of redeemable non-controlling interests subsequent to Reorganization and IPO |
|
| 34,688 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (34,688 | ) |
| — |
|
| — |
|
| (34,688 | ) |
| — |
|
| (34,688 | ) |
Establishment of non-controlling interests subsequent to Reorganization and IPO |
|
| 2,121 |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,121 | ) |
| (2,121 | ) |
Non-controlling interests for sale of businesses |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,868 | ) |
| (2,868 | ) |
Equity reallocation between controlling |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7,426 |
|
| — |
|
| — |
|
| 7,426 |
|
| (7,426 | ) |
| — |
|
Establishment of tax receivable |
|
| — |
|
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (32,081 | ) |
| — |
|
| — |
|
| (32,081 | ) |
| — |
|
| (32,081 | ) |
Balance at September 30, 2021 |
| $ | 208,890 |
|
| $ | — |
|
|
| $ | — |
|
| 261,970,674 |
| $ | 2 |
|
| 187,515,124 |
| $ | 1 |
|
| 238,154,296 |
| $ | 2 |
| $ | 1,580,638 |
| $ | (277,112 | ) | $ | (95,811 | ) | $ | 1,207,720 |
| $ | 838,072 |
| $ | 2,045,792 |
|
See accompanying notes to consolidated financial statements
10
ENDEAVOR GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| Nine Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net income (loss) |
| $ | 547,348 |
|
| $ | (450,778 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 195,177 |
|
|
| 208,058 |
|
Amortization and write-off of original issue discount and deferred financing cost |
|
| 16,986 |
|
|
| 33,887 |
|
Loss on extinguishment of debt |
|
| — |
|
|
| 28,628 |
|
Amortization of content costs |
|
| 18,535 |
|
|
| 319,844 |
|
Impairment charges |
|
| 689 |
|
|
| 4,524 |
|
Gain on business divestitures and sale/disposal/impairment of assets |
|
| (507,560 | ) |
|
| (2,408 | ) |
Equity-based compensation expense |
|
| 159,851 |
|
|
| 464,393 |
|
Change in fair value of contingent liabilities |
|
| 2,243 |
|
|
| 14,414 |
|
Change in fair value of equity investments with and without readily determinable fair value |
|
| (13,833 | ) |
|
| (12,134 | ) |
Change in fair value of financial instruments |
|
| 20,793 |
|
|
| 26,812 |
|
Equity losses of affiliates |
|
| 145,026 |
|
|
| 77,167 |
|
Net provision for (benefit from) allowance for doubtful accounts |
|
| 12,173 |
|
|
| (5,837 | ) |
Net loss on foreign currency transactions |
|
| 28,353 |
|
|
| 6,156 |
|
Distributions from affiliates |
|
| 5,205 |
|
|
| 3,881 |
|
Tax receivable agreements liability adjustment |
|
| 61,497 |
|
|
| — |
|
Income taxes |
|
| (29,024 | ) |
|
| 26,048 |
|
Other, net |
|
| (869 | ) |
|
| (1,431 | ) |
Changes in operating assets and liabilities - net of acquisitions and divestitures: |
|
|
|
|
|
| ||
Increase in receivables |
|
| (299,431 | ) |
|
| (298,304 | ) |
Increase in other current assets |
|
| (51,176 | ) |
|
| (48,510 | ) |
Increase in other assets |
|
| (39,479 | ) |
|
| (699,667 | ) |
Decrease in deferred costs |
|
| 2,964 |
|
|
| 6,883 |
|
(Decrease)/increase in deferred revenue |
|
| (43,626 | ) |
|
| 228,995 |
|
Increase in accounts payable and accrued liabilities |
|
| 92,752 |
|
|
| 169,914 |
|
Increase in other liabilities |
|
| 80,575 |
|
|
| 87,534 |
|
Net cash provided by operating activities |
|
| 405,169 |
|
|
| 188,069 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Acquisitions, net of cash acquired |
|
| (1,434,518 | ) |
|
| (258,493 | ) |
Purchases of property and equipment |
|
| (94,757 | ) |
|
| (40,974 | ) |
Proceeds from business divestitures, net of cash sold |
|
| 910,845 |
|
|
| — |
|
Proceeds from sale of assets |
|
| 3,448 |
|
|
| 19,337 |
|
Investments in affiliates |
|
| (46,730 | ) |
|
| (139,733 | ) |
Other, net |
|
| 663 |
|
|
| 11,233 |
|
Net cash used in investing activities |
|
| (661,049 | ) |
|
| (408,630 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Proceeds from borrowings |
|
| 10,033 |
|
|
| 319,948 |
|
Payments on borrowings |
|
| (324,017 | ) |
|
| (974,806 | ) |
Contributions |
|
| — |
|
|
| 5,400 |
|
Distributions |
|
| (26,283 | ) |
|
| (8,836 | ) |
Redemption payments related to pre-IPO units |
|
| (7,765 | ) |
|
| (16,147 | ) |
Proceeds from equity offering, net of underwriting discounts and offering expenses |
|
| — |
|
|
| 1,886,643 |
|
Acquisition of non-controlling interests |
|
| 92,487 |
|
|
| (835,039 | ) |
Payments of contingent consideration related to acquisitions |
|
| (11,644 | ) |
|
| (2,136 | ) |
Other, net |
|
| (982 | ) |
|
| (3,972 | ) |
Net cash (used in) provided by financing activities |
|
| (268,171 | ) |
|
| 371,055 |
|
Change in cash, cash equivalents and restricted cash balances held for sale |
|
| 25,952 |
|
|
| (59,504 | ) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (29,952 | ) |
|
| (2,593 | ) |
(Decrease) increase in cash, cash equivalents and restricted cash |
|
| (528,051 | ) |
|
| 88,397 |
|
Cash, cash equivalents and restricted cash at beginning of year |
|
| 1,793,036 |
|
|
| 1,190,333 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 1,264,985 |
|
| $ | 1,278,730 |
|
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net income |
| $ | 36,255 |
|
| $ | 517,666 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 66,751 |
|
|
| 65,994 |
|
Amortization and write-off of original issue discount and deferred financing cost |
|
| 4,656 |
|
|
| 5,099 |
|
Amortization of content costs |
|
| 4,026 |
|
|
| 9,848 |
|
(Gain) loss on sale/disposal and impairment of assets |
|
| (1,097 | ) |
|
| 1,108 |
|
Gain on business divestiture |
|
| (6,183 | ) |
|
| (478,641 | ) |
Equity-based compensation expense |
|
| 78,691 |
|
|
| 50,856 |
|
Change in fair value of contingent liabilities |
|
| (177 | ) |
|
| 790 |
|
Change in fair value of equity investments with and without readily determinable fair value |
|
| (681 | ) |
|
| (1,851 | ) |
Change in fair value of financial instruments |
|
| (16,991 | ) |
|
| 6,915 |
|
Equity losses of affiliates |
|
| 6,546 |
|
|
| 20,655 |
|
Net provision for allowance for doubtful accounts |
|
| 2,083 |
|
|
| 5,128 |
|
Net (gain) loss on foreign currency transactions |
|
| (5,248 | ) |
|
| 8,487 |
|
Distributions from affiliates |
|
| 1,369 |
|
|
| 2,009 |
|
Tax receivable agreement liability adjustment |
|
| (2,344 | ) |
|
| 53,497 |
|
Income taxes |
|
| 26,462 |
|
|
| (25,787 | ) |
Other, net |
|
| 226 |
|
|
| (442 | ) |
Changes in operating assets and liabilities - net of acquisitions and divestiture: |
|
|
|
|
|
| ||
Increase in receivables |
|
| (73,379 | ) |
|
| (157,050 | ) |
Decrease/(increase) in other current assets |
|
| 21,302 |
|
|
| (4,960 | ) |
Increase in other assets |
|
| (55,225 | ) |
|
| (37,183 | ) |
(Increase)/decrease in deferred costs |
|
| (11,824 | ) |
|
| 87,278 |
|
Increase/(decrease) in deferred revenue |
|
| 10,068 |
|
|
| (153,627 | ) |
Increase/(decrease) in accounts payable and accrued liabilities |
|
| 23,590 |
|
|
| (92,547 | ) |
Decrease in tax receivable agreement liability |
|
| (12,559 | ) |
|
| — |
|
Increase in other liabilities |
|
| 405 |
|
|
| 58,660 |
|
Net cash provided by (used in) operating activities |
|
| 96,722 |
|
|
| (58,098 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Acquisitions, net of cash acquired |
|
| (12,237 | ) |
|
| (64,168 | ) |
Purchases of property and equipment |
|
| (55,055 | ) |
|
| (21,840 | ) |
Proceeds from business divestiture, net of cash sold |
|
| 9,275 |
|
|
| 649,706 |
|
Proceeds from sale of assets |
|
| 1,218 |
|
|
| 110 |
|
Investments in affiliates |
|
| (18,888 | ) |
|
| (18,708 | ) |
Other, net |
|
| 1,567 |
|
|
| (361 | ) |
Net cash (used in) provided by investing activities |
|
| (74,120 | ) |
|
| 544,739 |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Proceeds from borrowings |
|
| — |
|
|
| 7,037 |
|
Payments on borrowings |
|
| (22,161 | ) |
|
| (21,528 | ) |
Payments under tax receivable agreement |
|
| (37,534 | ) |
|
| — |
|
Distributions |
|
| (26,291 | ) |
|
| (351 | ) |
Redemption payments related to pre-IPO units |
|
| (1,500 | ) |
|
| (7,067 | ) |
Acquisition of non-controlling interests |
|
| (500 | ) |
|
| 4,600 |
|
Payments of contingent and deferred consideration related to acquisitions |
|
| (1,971 | ) |
|
| (1,697 | ) |
Other, net |
|
| 95 |
|
|
| (137 | ) |
Net cash used in financing activities |
|
| (89,862 | ) |
|
| (19,143 | ) |
Change in cash, cash equivalents and restricted cash balances held for sale |
|
| 4,062 |
|
|
| 28,736 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| 3,468 |
|
|
| 319 |
|
(Decrease) increase in cash, cash equivalents and restricted cash |
|
| (59,730 | ) |
|
| 496,553 |
|
Cash, cash equivalents and restricted cash at beginning of year |
|
| 1,045,993 |
|
|
| 1,793,036 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 986,263 |
|
| $ | 2,289,589 |
|
See accompanying notes to consolidated financial statements
119
ENDEAVOR GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Endeavor Group Holdings, Inc. (the "Company" or "EGH") was incorporated as a Delaware corporation in January 2019. The Company was formed as a holding company for the purpose of completing an initial public offering ("IPO"), which closed in May 2021, and other related transactions in order to carry on the business of Endeavor Operating Company, LLC (d.b.a. Endeavor) and its subsidiaries (collectively, "Endeavor" or "EOC"). As the sole managing member of Endeavor Manager, LLC ("Endeavor Manager"), which in turn is the sole managing member of EOC, the Company operates and controls all the business and affairs of Endeavor, and through Endeavor and its subsidiaries, conducts the Company’s business. The Company is a global sports and entertainment company.
Prior to the IPO, Endeavor was owned by WME Holdco, LLC (which is referred to as "Holdco" herein and was principally owned by executive employees of the Company), affiliates of Silver Lake (which are collectively referred to as "Silver Lake" herein), and other investors and executive employees of the Company.
Initial Public Offering
On May 3, 2021, the Company closed an IPO of 24,495,000 shares of Class A common stock at a public offering price of $24.00 per share, which included 3,195,000 shares of Class A common stock issued pursuant to the underwriters’ option to purchase additional shares of Class A common stock. This option to purchase additional shares of Class A common stock closed on May 12, 2021.
Reorganization Transactions
Prior to the closing of the IPO, a series of reorganization transactions was completed. Subsequent to the closing of the IPO, several new and current investors purchased in the aggregate 75,584,747 shares of Class A common stock at a price per share of $24.00. Then, through a series of transactions, EOC acquired the equity interests of the minority unitholders of Zuffa, which owns and operates the Ultimate Fighting Championship. This resulted in EOC directly or indirectly owning 100% of the equity interests of Zuffa.
Basis of Presentation
The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for reporting interim financial information and should be read in conjunction with the Company’s consolidated financial statements and accompanying footnotes in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. Certain information and note disclosures normally included in the annual financial statements have been condensed or omitted from these interim financial statements. The interim consolidated financial statements as of September 30, 2022March 31, 2023 and for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 are unaudited; however, in the opinion of management, such interim consolidated financial statements reflect all adjustments, consisting solely of normal and recurring adjustments, necessary for a fair statement of its financial position, results of operations and cash flows for the interim periods presented. Certain prior year amounts were reclassified to conform to the current year presentation, including impacts for changes in the Company’s reportable segments as described in Note 15.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying disclosures.
Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, allowance for doubtful accounts, the fair value of acquired assets and liabilities associated with acquisitions, the fair value of the Company’s reporting units and the assessment of goodwill, other intangible assets and long-lived assets for impairment, consolidation, investments, redeemable non-controlling interests, the fair value of equity-based compensation, tax receivable agreementsagreement liability, income taxes and contingencies.
Management evaluates these estimates using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and as such, these estimates may ultimately differ from actual results. Changes in estimates resulting from weakness in the economic environment or other factors beyond the Company’s control could be material and would be reflected in the Company’s consolidated financial statements in future periods.
12
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU addresses issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. The amendments in this update were effective for public entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption did not have a material effect on the Company’s financial position or results of operations.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. Adoption of the expedients and exceptions is permitted upon issuance of this update through December 31, 2022. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. This ASU clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets, expanding the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets. The amendments in this update arewere effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption will not have aCompany adopted this guidance on January 1, 2023 with no material effect on the Company’s financial position or results of operations.
In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on "vintage disclosures" to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. For entities that have already adopted ASU 2016-13, which the Company has, the amendments in this update arewere effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption will not have aCompany adopted this guidance on January 1, 2023 with no material effect on the Company’s financial position or results of operations.
In September 2022, the FASB issued ASU 2022-04, Liabilities–Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This ASU enhances the transparency of supplier finance programs. The amendments in this update were effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2023 with no material effect on the Company’s financial position or results of operations.
10
In December 2022, the FASB issued ASU 2022-05, Transition for Sold Contracts. This ASU amends the transition guidance in ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, to make targeted improvements to its guidance on long-duration contracts issued by an insurance entity. The amendments in this update were effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2023 with no material effect on the Company’s financial position or results of operations.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. Adoption of the expedients and exceptions was permitted upon issuance of this update through December 31, 2022. However, in December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848, in order to defer the sunset date of ASC 848 until December 31, 2024. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This ASU clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equitythat security. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The adoption will not have a material effect on the Company’s financial position or results of operations.
In September 2022,March 2023, the FASB issued ASU 2022-04, Liabilities–Supplier Finance Programs (Subtopic 405-50)2023-01, Leases (Topic 842): Disclosure of Supplier Finance Program Obligations.Common Control Arrangements. This ASU enhances the transparency of supplier finance programs.amends certain provisions in Topic 842, Leases, that apply to arrangements between related parties under common control. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2022, including2023, and interim periods within those fiscal years. The adoption will not have a material effect on the Company’s financial position or results of operations.
In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force). This ASU allows a reporting entity to elect to account for its tax equity investments by using the proportional amortization method regardless of the program from which it receives income tax credits, provided certain conditions are met. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The adoption will not have a material effect on the Company’s financial position or results of operations.
2023 ACQUISITION
In March 2023, the Company completed an acquisition for a total purchase price of $16.8 million including contingent consideration with a fair value of $0.8 million. The Company recorded $13.6 million of goodwill and $7.5 million of intangible assets, of which the weighted average useful life ranges from 4 to 8 years. The goodwill was assigned to the Representation segment and is deductible for tax purposes.
2022 ACQUISITIONS
Diamond Baseball Holdings Madrid Open, Barrett-Jackson, and OpenBet
In January 2022, the Company acquired four additional Professional Development League clubs (the "PDL Clubs"), which were being operated under the Diamond Baseball Holdings ("DBH") umbrella. DBH supported the PDL Clubs' commercial activities, content strategy and media rights. ForThe combined aggregate purchase price for these four additional PDL Clubs, the Company paidacquisitions was $64.2 million in cash.
In April 2022, the Company acquired the Mutua Madrid Open tennis tournament and additional assets ("Madrid Open"), including the Acciona Open de España golf tournament, from Super Slam Ltd and its affiliates. The Company paid $386.1 million for consideration and transfer fees at closing, an additional $31.8 million of consideration is payable within two years of closing, and $0.6 million of contingent consideration payable within three years of closing.
In August 2022, the Company acquired 55% of Barrett-Jackson Holdings, LLC ("Barrett-Jackson"), which is engaged in the business of collector car auctions and sales as well as other collector car related events and experiences, in exchange for consideration having an aggregate value of $256.9million. The aggregate consideration consisted of $244.4 million of cash and 563,935 newly-issued shares of the Company's Class A common stock valued at $12.5 million.
In September 2022, the Company acquired the OpenBet business ("OpenBet") of Light & Wonder, Inc. (formerly known as Scientific Games Corporation) ("Light & Wonder"). OpenBet consists of companies that provide products and services to sports betting operators for the purposes of sports wagering. The Company paid consideration to Light & Wonder of $847.1 million, consisting of $800.4 million of cash and 2,305,794 newly-issued shares of the Company's Class A common stock valued at $46.7 million.
13
The Company incurred $31.60.6 million in transaction related costs in connection with these acquisitions. The costs were expensed as incurred and included in selling, general and administrative expenses in the consolidated statement of operations.
The goodwill for the PDL Clubs was assigned to the Owned Sports Properties segment and the goodwill for the Madrid Open, Barrett-Jackson, and OpenBet acquisitions was assigned to the Events, Experiences & Rights segment. The goodwill is partially deductible for tax purposes. The weighted average life of finite-lived intangible assets acquired for these four PDL Clubs iswas 18.7 years andyears. In September 2022, the intangibles acquired for Madrid Open are indefinite-lived. The intangibles acquired for Barrett-Jackson and OpenBet include both indefinite-lived intangibles and finite-lived intangibles with a weighted average life of Company sold its PDL Clubs that operated under the DBH umbrella.6.2 and 11.1 years, respectively.
The results11
Preliminary Allocation of Purchase Price
The acquisitions were accounted for as business combinations and the preliminary fair values of the assets acquired and liabilities assumed in the business combinations are as follows (in thousands):
|
| DBH |
|
| Madrid Open |
|
| Barrett-Jackson |
|
| OpenBet |
|
|
|
| |||||
Cash and cash equivalents |
| $ | — |
|
| $ | 18,659 |
|
| $ | 10,783 |
|
| $ | 49,795 |
| ||||
Accounts receivable |
|
| 89 |
|
|
| 2,123 |
|
|
| 1,706 |
|
|
| 34,062 |
|
| $ | 89 |
|
Deferred costs |
|
| — |
|
|
| 1,124 |
|
|
| — |
|
|
| 12,276 |
| ||||
Other current assets |
|
| 491 |
|
|
| 470 |
|
|
| 1,386 |
|
|
| 12,653 |
|
|
| 491 |
|
Property and equipment |
|
| 4,403 |
|
|
| 162 |
|
|
| 4,290 |
|
|
| 6,889 |
|
|
| 4,403 |
|
Right of use assets |
|
| 7,270 |
|
|
| — |
|
|
| 9,054 |
|
|
| 8,401 |
|
|
| 7,270 |
|
Investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,100 |
| ||||
Other assets |
|
| 103 |
|
|
| 381 |
|
|
| — |
|
|
| 6,033 |
|
|
| 103 |
|
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Trade names |
|
| — |
|
|
| — |
|
|
| 120,900 |
|
|
| 70,000 |
| ||||
Customer relationships |
|
| 1,960 |
|
|
| — |
|
|
| 12,300 |
|
|
| 135,000 |
|
|
| 1,960 |
|
Internally developed software |
|
| — |
|
|
| — |
|
|
| 1,300 |
|
|
| 155,000 |
| ||||
Owned events |
|
| — |
|
|
| 407,070 |
|
|
| — |
|
|
| — |
| ||||
Other |
|
| 35,410 |
|
|
| — |
|
|
| — |
|
|
| 14,500 |
|
|
| 35,410 |
|
Goodwill |
|
| 25,585 |
|
|
| 15,385 |
|
|
| 328,854 |
|
|
| 468,192 |
|
|
| 25,585 |
|
Accounts payable and accrued expenses |
|
| (93 | ) |
|
| (1,609 | ) |
|
| (7,009 | ) |
|
| (13,784 | ) |
|
| (93 | ) |
Other current liabilities |
|
| (56 | ) |
|
| — |
|
|
| — |
|
|
| (14,517 | ) |
|
| (56 | ) |
Operating lease liability |
|
| (9,470 | ) |
|
| — |
|
|
| (4,458 | ) |
|
| (8,401 | ) |
|
| (9,470 | ) |
Deferred revenue |
|
| (1,455 | ) |
|
| (20,780 | ) |
|
| (667 | ) |
|
| (5,983 | ) |
|
| (1,455 | ) |
Debt |
|
| — |
|
|
| — |
|
|
| (11,439 | ) |
|
| — |
| ||||
Other liabilities |
|
| — |
|
|
| (4,474 | ) |
|
| — |
|
|
| (84,130 | ) | ||||
Redeemable non-controlling interests |
|
| — |
|
|
| — |
|
|
| (210,150 | ) |
|
| — |
| ||||
Net assets acquired |
| $ | 64,237 |
|
| $ | 418,511 |
|
| $ | 256,850 |
|
| $ | 847,086 |
|
| $ | 64,237 |
|
Except for DBH, the estimated fair values of assets acquired and liabilities assumed are preliminary and subject to change as we finalize purchase price allocations, which is expected within one year of the respective acquisitions.
Other 2022 Acquisitions
In May 2022, the Company completed an acquisition for a total purchase price of $15.6 million in return for a 73.5% controlling interest. The Company paid $4.6 million in cash and issued 396,917 shares of EGH Class A common stock valued at $11.0 million. In September 2022, the Company completed another acquisition for a total purchase price of $3.9 million including contingent consideration with a fair value of $0.9 million. The Company recorded $13.8 million of goodwill and $4.2 million of intangible assets, of which the weighted average useful life ranges from 5 to 10 years. The goodwill for both acquisitions was assigned to the Events, Experiences & Rights segment and is partially deductible for tax purposes.
14
2022 DIVESTITURES
Endeavor ContentDIVESTITURE
In February 2021, the Company signed a new franchise agreement and side letter (the "Franchise Agreements") directly with the Writer’s Guild of America East and the Writer’s Guild of America West (collectively, the "WGA"). These Franchise Agreements included terms that, among other things, prohibited the Company from (a) negotiating packaging deals after June 30, 2022 and (b) having more than a 20% non-controlling ownership or other financial interest in, or being owned or affiliated with any individual or entity that has more than a 20% non-controlling ownership or other financial interest in, any entity or individual engaged in the production or distribution of works written by WGA members under a WGA collective bargaining agreement. As a result, in the third quarter of 2021, the Company began marketing the restricted Endeavor Content business for sale and such assets and liabilities were reflected as held for sale in the consolidated balance sheet as of December 31, 2021. The sale of 80% of the restricted Endeavor Content business closed in January 2022. The Company received cash proceeds of $666.3 million and divested $16.6 million of cash and restricted cash on the date of sale. The retained 20% interest of the restricted Endeavor Content business is reflectedaccounted for as an equity method investment as of September 30, 2022 and was valued at $196.3 million at the date of sale. The fair value of the retained 20% interest of the restricted Endeavor Content business was determined using the market approach. The key input assumption was the transaction price paid for the Company's 80% interest in the restricted Endeavor Content business. The Company recorded a net gain of $463.6 million, inclusive of a $121.1 million gain related to the remeasurement of the retained interest in the restricted Endeavor Content business to fair value and $15.0 million of transaction costs, in other income, (expense), net during the ninethree months ended September 30,March 31, 2022. The restricted Endeavor Content business was included in the Company’s Representation segment prior to the sale.
Diamond Baseball Holdings
In September 2022, the Company closed the sale of the ten PDL Clubs that operated under the DBH umbrella to Silver Lake, stockholders of the Company, for an aggregate purchase price of $280.1 million in cash. The Company recorded a net gain of $23.3 million in other income (expense), net during the nine months ended September 30, 2022. The business was included in the Company's Owned Sports Properties segment.
2022 HELD FOR SALE
In the second and third quarters of 2022, the Company began marketing two businesses for sale and due to the progression of the sale processes, determined that each met all of the criteria to be classified as held for sale as of September 30, 2022. The businesses are included in the Company's Events, Experiences & Rights reporting segment. The aggregate assets and liabilities of these businesses held for sale are $27.3 million and $4.9 million, respectively, which are not material to the Company’s overall financial position. Subsequent to September 30, 2022, the Company sold one of the held for sale businesses.
2021 ACQUISITIONS
FlightScope, Next College Student Athlete, and Mailman
In April 2021, the Company acquired 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, “FlightScope”). FlightScope is a data collection, audio-visual production and tracking technology specialist for golf and tennis events. In June 2021, the Company acquired the Path-to-College business of Reigning Champs, LLC, whose primary business is Next College Student Athlete (collectively, with the other acquired Path-to-College businesses, “NCSA”). NCSA consists of companies that offer recruiting and admissions services and related software products to high school student athletes, as well as college athletic departments and admissions officers. In July 2021, the Company acquired 100% of the equity interests of Wishstar Enterprises Limited, the holding company of multiple entities (collectively, "Mailman"). Mailman is a digital sports agency and consultancy serving global sports properties. The combined aggregate purchase price for these three acquisitions was $290.8 million.
The Company incurred $4.6 million in transaction related costs in connection with these acquisitions. The costs were expensed as incurred and included in selling, general and administrative expenses in the consolidated statement of operations.
The goodwill for FlightScope and NCSA was assigned to the Events, Experiences & Rights segment and the goodwill for Mailman was assigned to the Representation and Events, Experiences & Rights segments. The goodwill is partially deductible for tax purposes. The weighted average life of finite-lived intangible assets acquired for FlightScope, NCSA, and Mailman is 4.4, 5.2, and 7.6 years, respectively.
15
Allocation of Purchase Price
The acquisitions were accounted for as business combinations and the fair values of the assets acquired and liabilities assumed in the business combinations are as follows (in thousands):
|
| FlightScope |
|
| NCSA |
|
| Mailman |
| |||
Cash and cash equivalents |
| $ | 1,042 |
|
| $ | 3,655 |
|
| $ | 16,598 |
|
Accounts receivable |
|
| 475 |
|
|
| 5,619 |
|
|
| 11,292 |
|
Deferred costs |
|
| 94 |
|
|
| 1,096 |
|
|
| 476 |
|
Other current assets |
|
| 1,640 |
|
|
| 10,238 |
|
|
| 1,713 |
|
Property and equipment |
|
| 1,089 |
|
|
| 2,804 |
|
|
| 585 |
|
Right of use assets |
|
| 1,272 |
|
|
| 4,951 |
|
|
| 359 |
|
Investments |
|
| — |
|
|
| — |
|
|
| 1,239 |
|
Other assets |
|
| 1,056 |
|
|
| 5,472 |
|
|
| 2,085 |
|
Intangible assets: |
|
|
|
|
|
|
|
|
| |||
Trade names |
|
| — |
|
|
| 21,100 |
|
|
| 800 |
|
Customer relationships |
|
| 2,700 |
|
|
| 10,000 |
|
|
| 12,400 |
|
Internally developed software |
|
| 15,400 |
|
|
| 37,100 |
|
|
| — |
|
Goodwill |
|
| 33,550 |
|
|
| 214,106 |
|
|
| 22,342 |
|
Accounts payable and accrued expenses |
|
| (806 | ) |
|
| (20,855 | ) |
|
| (16,255 | ) |
Other current liabilities |
|
| (187 | ) |
|
| (10,318 | ) |
|
| (1,606 | ) |
Debt |
|
| — |
|
|
| — |
|
|
| (4,338 | ) |
Operating lease liability |
|
| (1,272 | ) |
|
| (4,951 | ) |
|
| (359 | ) |
Deferred revenue |
|
| (631 | ) |
|
| (51,617 | ) |
|
| (972 | ) |
Other liabilities |
|
| (4,334 | ) |
|
| (31,603 | ) |
|
| (3,485 | ) |
Net assets acquired |
| $ | 51,088 |
|
| $ | 196,797 |
|
| $ | 42,874 |
|
5. SUPPLEMENTARY DATA
Accrued Liabilities
The following is a summary of accrued liabilities (in thousands):
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Accrued operating expenses |
| $ | 244,453 |
|
| $ | 302,024 |
|
| $ | 287,999 |
|
| $ | 254,737 |
|
Payroll, bonuses and benefits |
|
| 247,102 |
|
|
| 162,688 |
|
|
| 140,274 |
|
|
| 176,315 |
|
Other |
|
| 88,446 |
|
|
| 59,349 |
|
|
| 103,108 |
|
|
| 94,187 |
|
Total accrued liabilities |
| $ | 580,001 |
|
| $ | 524,061 |
|
| $ | 531,381 |
|
| $ | 525,239 |
|
Allowance for Doubtful Accounts
The changes in the allowance for doubtful accounts are as follows (in thousands):
|
| Balance at |
|
| Additions/Charged |
|
|
|
|
|
|
|
|
|
|
| Balance at |
| ||||||
|
| Beginning |
|
| to Costs and |
|
|
|
|
| Foreign |
|
| Assets Held |
|
| End of |
| ||||||
|
| of Year |
|
| Expenses, Net |
|
| Deductions |
|
| Exchange |
|
| for Sale |
|
| Period |
| ||||||
Nine Months Ended September 30, 2022 |
| $ | 57,102 |
|
| $ | 12,577 |
|
| $ | (203 | ) |
| $ | (3,581 | ) |
| $ | (200 | ) |
| $ | 65,695 |
|
|
| Balance at |
|
| Additions/Charged |
|
|
|
|
|
|
|
| Balance at |
| |||||
|
| Beginning |
|
| to Costs and |
|
|
|
|
| Foreign |
|
| End of |
| |||||
|
| of Year |
|
| Expenses, Net |
|
| Deductions |
|
| Exchange |
|
| Period |
| |||||
Allowance for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Three Months Ended March 31, 2023 |
| $ | 54,766 |
|
| $ | 6,268 |
|
| $ | (4,185 | ) |
| $ | 279 |
|
| $ | 57,128 |
|
1612
Supplemental Cash Flow
The Company’s supplemental cash flow information is as follows (in thousands):
|
| Nine Months Ended September 30, |
| Three Months Ended March 31, | ||||||||||||||
|
| 2022 |
|
| 2021 |
|
|
| 2023 |
|
| 2022 |
|
| ||||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash paid for interest |
| $ | 160,217 |
|
| $ | 145,966 |
|
|
| $ | 82,834 |
|
| $ | 47,038 |
|
|
Cash payments for income taxes |
|
| 33,309 |
|
|
| 27,185 |
|
|
|
| 14,708 |
|
|
| 7,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures included in accounts payable and accrued liabilities |
| $ | 8,037 |
|
| $ | 15,931 |
|
|
| $ | 22,922 |
|
| $ | 11,639 |
|
|
Contingent consideration provided in connection with acquisitions |
|
| 1,500 |
|
|
| 4,472 |
|
|
|
| 844 |
|
|
| — |
|
|
Establishment and acquisition of non-controlling interests |
|
| 414,985 |
|
|
| 3,087,301 |
|
| |||||||||
Tax receivable agreements liability adjustments |
|
| 819 |
|
|
| 32,081 |
|
| |||||||||
Accretion of redeemable non-controlling interests |
|
| 83,849 |
|
|
| 34,417 |
|
|
|
| 1,387 |
|
|
| 27,308 |
|
|
Investment in affiliates retained from a business divestiture |
|
| 202,220 |
|
|
| — |
|
|
|
| — |
|
|
| 196,345 |
|
|
Deferred consideration in connection with acquisitions |
|
| 31,770 |
|
|
| — |
|
| |||||||||
Issuance of Class A common stock in connection with acquisitions |
|
| 70,254 |
|
|
| — |
|
| |||||||||
Items arising from EOC units and Endeavor Manager units exchanges: |
|
|
|
|
|
| ||||||||||||
Establishment of liabilities under tax receivable agreement |
|
| 38,544 |
|
|
| 3,858 |
|
| |||||||||
Deferred tax asset |
|
| 32,647 |
|
|
| 4,539 |
|
|
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in the carrying value of goodwill are as follows (in thousands):
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Total |
|
| ||||
Balance — December 31, 2021 |
| $ | 2,741,048 |
|
| $ | 1,266,144 |
|
| $ | 499,362 |
|
| $ | 4,506,554 |
|
|
Acquisitions |
|
| 25,585 |
|
|
| 826,221 |
|
|
| — |
|
|
| 851,806 |
|
|
Divestiture |
|
| (91,960 | ) |
|
| — |
|
|
| — |
|
|
| (91,960 | ) |
|
Impairment |
|
| — |
|
|
| (689 | ) |
|
| — |
|
|
| (689 | ) |
|
Foreign currency translation and other |
|
| (635 | ) |
|
| (13,830 | ) |
|
| (1,278 | ) |
|
| (15,743 | ) |
|
Assets held for sale |
|
| — |
|
|
| (11,997 | ) |
|
| — |
|
|
| (11,997 | ) |
|
Balance — September 30, 2022 |
| $ | 2,674,038 |
|
| $ | 2,065,849 |
|
| $ | 498,084 |
|
| $ | 5,237,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Sports Data |
|
| Total |
|
| |||||
Balance — December 31, 2022 |
| $ | 2,674,038 |
|
| $ | 2,112,403 |
|
| $ | 498,256 |
|
| $ | — |
|
| $ | 5,284,697 |
|
|
Acquisitions |
|
| — |
|
|
| — |
|
|
| 13,607 |
|
|
| — |
|
|
| 13,607 |
|
|
Reclassification |
|
| — |
|
|
| (607,427 | ) |
|
| — |
|
|
| 607,427 |
|
|
| — |
|
|
Foreign currency translation and other |
|
| — |
|
|
| 1,706 |
|
|
| 5 |
|
|
| 2,055 |
|
|
| 3,766 |
|
|
Balance — March 31, 2023 |
| $ | 2,674,038 |
|
| $ | 1,506,682 |
|
| $ | 511,868 |
|
| $ | 609,482 |
|
| $ | 5,302,070 |
|
|
The reclassification of goodwill during the three months ended March 31, 2023 reflects the relative fair value allocation of the goodwill related to the businesses that were reclassified into the new segment, Sports Data & Technology, as described in Note 15.
Intangible Assets
The following table summarizes information relating to the Company’s identifiable intangible assets as of September 30, 2022March 31, 2023 (in thousands):
|
| Weighted Average |
|
| Gross |
|
| Accumulated |
|
| Carrying |
|
| Weighted Average |
|
| Gross |
|
| Accumulated |
|
| Carrying |
| ||||||||
Amortized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Trade names |
|
| 17.1 |
|
| $ | 1,045,525 |
|
| $ | (329,005 | ) |
| $ | 716,520 |
|
|
| 17.1 |
|
| $ | 1,053,861 |
|
| $ | (359,474 | ) |
| $ | 694,387 |
|
Customer and client relationships |
|
| 6.9 |
|
|
| 1,448,375 |
|
|
| (1,045,532 | ) |
|
| 402,843 |
|
|
| 6.9 |
|
|
| 1,468,241 |
|
|
| (1,090,655 | ) |
|
| 377,586 |
|
Internally developed technology |
|
| 6.0 |
|
|
| 279,176 |
|
|
| (83,400 | ) |
|
| 195,776 |
|
|
| 6.5 |
|
|
| 279,392 |
|
|
| (101,851 | ) |
|
| 177,541 |
|
Other |
|
| 4.3 |
|
|
| 45,188 |
|
|
| (44,180 | ) |
|
| 1,008 |
|
|
| 4.3 |
|
|
| 49,295 |
|
|
| (44,726 | ) |
|
| 4,569 |
|
|
|
|
|
| $ | 2,818,264 |
|
| $ | (1,502,117 | ) |
| $ | 1,316,147 |
|
|
|
|
| $ | 2,850,789 |
|
| $ | (1,596,706 | ) |
| $ | 1,254,083 |
| ||
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Trade names |
|
|
|
| $ | 438,369 |
|
| $ | — |
|
| $ | 438,369 |
|
|
|
|
|
| 450,069 |
|
|
| — |
|
|
| 450,069 |
| ||
Owned events |
|
|
|
|
| 431,154 |
|
|
| — |
|
|
| 431,154 |
|
|
|
|
|
| 471,737 |
|
|
| — |
|
|
| 471,737 |
| ||
Other |
|
|
|
|
| 14,000 |
|
|
| — |
|
|
| 14,000 |
|
|
|
|
|
| 14,189 |
|
|
| — |
|
|
| 14,189 |
| ||
Total intangible assets |
|
|
|
| $ | 3,701,787 |
|
| $ | (1,502,117 | ) |
| $ | 2,199,670 |
|
|
|
|
| $ | 3,786,784 |
|
| $ | (1,596,706 | ) |
| $ | 2,190,078 |
|
1713
The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 20212022 (in thousands):
|
| Weighted Average |
|
| Gross |
|
| Accumulated |
|
| Carrying |
|
| Weighted Average |
|
| Gross |
|
| Accumulated |
|
| Carrying |
| ||||||||
Amortized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Trade names |
|
| 17.3 |
|
| $ | 991,021 |
|
| $ | (291,326 | ) |
| $ | 699,695 |
|
|
| 17.1 |
|
| $ | 1,048,530 |
|
| $ | (343,895 | ) |
| $ | 704,635 |
|
Customer and client relationships |
|
| 6.7 |
|
|
| 1,344,783 |
|
|
| (1,012,509 | ) |
|
| 332,274 |
|
|
| 6.9 |
|
|
| 1,464,584 |
|
|
| (1,073,017 | ) |
|
| 391,567 |
|
Internally developed technology |
|
| 3.9 |
|
|
| 120,175 |
|
|
| (66,939 | ) |
|
| 53,236 |
|
|
| 6.5 |
|
|
| 276,094 |
|
|
| (92,573 | ) |
|
| 183,521 |
|
Other |
|
| 14.3 |
|
|
| 142,657 |
|
|
| (44,608 | ) |
|
| 98,049 |
|
|
| 4.2 |
|
|
| 45,255 |
|
|
| (44,654 | ) |
|
| 601 |
|
|
|
|
|
| $ | 2,598,636 |
|
| $ | (1,415,382 | ) |
| $ | 1,183,254 |
|
|
|
|
| $ | 2,834,463 |
|
| $ | (1,554,139 | ) |
| $ | 1,280,324 |
| ||
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Trade names |
|
|
|
| $ | 340,029 |
|
| $ | — |
|
| $ | 340,029 |
|
|
|
|
|
| 447,559 |
|
|
| — |
|
|
| 447,559 |
| ||
Owned events |
|
|
|
|
| 88,401 |
|
|
| — |
|
|
| 88,401 |
|
|
|
|
|
| 463,481 |
|
|
| — |
|
|
| 463,481 |
| ||
Other |
|
|
|
|
| 14,219 |
|
|
| — |
|
|
| 14,219 |
| |||||||||||||||||
Total intangible assets |
|
|
|
| $ | 3,027,066 |
|
| $ | (1,415,382 | ) |
| $ | 1,611,684 |
|
|
|
|
| $ | 3,759,722 |
|
| $ | (1,554,139 | ) |
| $ | 2,205,583 |
|
Intangible asset amortization expense was $39.141.2 million and $48.642.9 million for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively, and $123.4 million and $141.0 million for the nine months ended September 30, 2022 and 2021, respectively.respectively.
7. INVESTMENTS
The following is a summary of the Company’s investments (in thousands):
|
| September 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Equity method investments |
| $ | 281,385 |
|
| $ | 196,423 |
|
| $ | 202,721 |
|
| $ | 209,523 |
|
Equity investments without readily determinable fair values |
|
| 125,744 |
|
|
| 101,124 |
|
|
| 145,689 |
|
|
| 127,297 |
|
Equity investments with readily determinable fair values |
|
| 306 |
|
|
| 665 |
|
|
| 138 |
|
|
| 153 |
|
Total investments |
| $ | 407,435 |
|
| $ | 298,212 |
|
| $ | 348,548 |
|
| $ | 336,973 |
|
Equity Method Investments
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company held various investments in non-marketable equity instruments of private companies. As of September 30, 2022,March 31, 2023, the Company’s equity method investments are primarily comprised of the restricted Endeavor Content business (now calledoperating under the name Fifth Season) and Sports News Television Limited. The Company’s ownership of its equity method investments rangedranges from 6% to 50% as of September 30, 2022.March 31, 2023.
In January 2022, in connection with the Company's sale of 80% of the restricted Endeavor Content business, the Company retained 20% ownership in the restricted Endeavor Content business.business ("Fifth Season"). The investment is accounted for as an equity method investment. The Company’s share of the net loss of Fifth Season for the three and nine months ended September 30,March 31, 2023 and 2022 waswere $4.48.5 million and $9.52.9 million, respectively, and iswas recognized within equity losses of affiliates in the consolidated statements of operations.
As of September 30, 2022,March 31, 2023, the Company’s ownership in Learfield IMG College was approximately 42%. The Company’s share of the net loss of Learfield IMG College for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 was $78.7none million, $137.5 million, $14.8 million and $76.321.5 million, respectively, and iswas recognized within equity losses of affiliates in the consolidated statements of operations. The Company'sCompany is no longer recognizing its share of their net losses given that the results of Learfield IMG College for the three and nine months ended September 30, 2022 included a $investment carrying value is 56.1zero million charge as a result of its annual goodwill and indefinite lived intangibles asset impairment test, primarily due to continued losses..
Equity Investments without Readily Determinable Fair Values
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company held various investments in non-marketable equity instruments of private companies.
TheFor the three months ended March 31, 2023 and 2022, the Company performed its assessment on its investments without readily determinable fair values and recorded an increase in fair value of $0.50.7 million and $0.91.9 million, for the three months ended September 30, 2022 and 2021, respectively, and $14.5 million and $0.9 million for the nine months ended September 30, 2022 and 2021, respectively, in other income, (expense), net in the consolidated statements of operations. The net increases were due to observable price changes partially offset by impairments. For the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021, the Company sold investments for net proceeds of $3.0 million, $3.3 million and $4.8 million, respectively, and a related gain of $3.0 million, $3.3 million and $2.6 million, respectively.changes. For the three months ended September 30, 2021,March 31, 2023, the Company sold notwo investments.
18
Equity Investments with Readily Determinable Fair Values
Asinvestments for net consideration of September 30, 2022, the Company had three investments in publicly traded companies. During the three and nine months ended September 30, 2022, the Company did not sell any investments in publicly traded companies. As of September 30, 2022 and December 31, 2021, the Company’s equity investments with readily determinable fair values were valued at $0.32.3 million and recorded related gains of $0.71.1 million, respectively. Formillion. No investments were sold during the three and nine months ended September 30, 2022, the Company recorded $(0.3) million and $(0.9) million, respectively, due to the change in fair value in other income (expense), net in the consolidated statements of operations. For the three and nine months ended September 30, 2021, the company recorded $(0.1) million and $5.1 million, respectively, due to the change in fair value in other income (expense), net in the consolidated statements of operations. See Note 9 for additional information regarding fair value measurements for these equity investments.March 31, 2022.
8. FINANCIAL INSTRUMENTS
The Company enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, although hedge accounting does not apply or the Company elects not to apply hedge accounting. In addition, the Company enters into interest rate swaps to hedge certain of its interest rate risks on its debt. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. Prior to the sale
14
As of September 30, 2022,March 31, 2023, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 12 months from September 30, 2022,March 31, 2023, with the exception of fournine contracts which mature within 18 15months from such date) (in thousands except for exchange rates):
|
|
|
| |||||
|
|
|
|
| ||||
|
|
|
|
| ||||
|
|
|
|
|
Foreign Currency |
| Foreign |
|
|
| US Dollar |
|
| Weighted Average | |
British Pound Sterling |
| £86,056 |
| in exchange for |
| $ | 105,741 |
|
| £ 0.81 |
Euro |
| €20,355 |
| in exchange for |
| $ | 21,823 |
|
| € 0.93 |
Singapore Dollar |
| S$ 9,600 |
| in exchange for |
| $ | 7,333 |
|
| S$ 1.31 |
For forward foreign exchange contracts designated as cash flow hedges, the Company recognized net gains (losses) in accumulated other comprehensive income (loss)loss of $none0.3 and $(0.6) million for the three months ended September 30, 2022 and 2021, respectively, and $0.3 million and $(0.4) million for the nine months ended September 30, 2022 and 2021, respectively.March 31, 2022. The Company reclassified a $0.8 million gain into net income for the ninethree months ended September 30,March 31, 2022 in connection with the sale of the restricted Endeavor Content business and is included in the gain as described in Note 4. The Company did notnot recognize any net gains or losses in accumulated other comprehensive loss and did not reclassify any gains or losses into net income (loss) for the three months ended September 30, 2022. The Company reclassified a $March 31, 2023.1.5 million gain into net income (loss) for the three and nine months ended September 30, 2021.
For forward foreign exchange contracts not designated as cash flow hedges, the Company recorded a net lossgain (loss) of $4.33.2 million and net gain of $$(0.61.3) million for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively, and a net loss of $7.4 million and net gain of $1.4 million for the nine months ended September 30, 2022 and 2021, respectively, in other income, (expense), net in the consolidated statements of operations.
In certain circumstances, the Company enters into contracts that are settled in currencies other than the functional or local currencies of the contracting parties. Accordingly, these contracts consist of the underlying operational contract and an embedded foreign currency derivative element. Hedge accounting is not applied to the embedded foreign currency derivative element. The Company recorded a net lossgain of $7.70.9 million and $1.20.5 million for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively, and $8.8 million and $10.4 million for the nine months ended September 30, 2022 and 2021, respectively, in other income, (expense), net in the consolidated statements of operations.
In addition, the Company has entered into interest rate swaps for $1.5 billionportions of its 2014 Credit Facilities and other variable interest bearing debt and has designated them cash flow hedges. The LIBOR portion of the facility from these interest rate swaps has been fixed at a coupon of 2.12% commencing from June 2019 until June 2024. In August 2022, the Company entered into additional interest rate hedges to swap additional $750 million of its 2014 Credit Facilities from floating interest expense to fixed. The LIBOR portion of the facility from these interest rate swaps has been fixed at a coupon of 3.162% until August 2024. Hedge accounting is applied to these additional interest rate swaps, similar to the pre-existing interest rate swaps. For the three months ended September 30,March 31, 2023 and 2022, and 2021, the Company recorded (losses) gains (losses) of $45.1 million and $(0.11.0) million in accumulated other comprehensive income (loss) and reclassified losses of none and $7.7 million into net income (loss), respectively. For the nine months ended September 30, 2022 and 2021, the Company recorded gains of $107.3 million and $13.247.7 million in accumulated other comprehensive income (loss) and reclassified lossesgains (losses) of $12.411.8 million and $$(22.67.3) million into net income, (loss).respectively.
9. FAIR VALUE MEASUREMENTS
The fair value hierarchy is composed of the following three categories:
Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
19
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurements.
The following tables present, for each of the fair value hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):
|
| Fair Value Measurements as of |
|
| Fair Value Measurements as of |
| ||||||||||||||||||||||||||
|
| September 30, 2022 |
|
| March 31, 2023 |
| ||||||||||||||||||||||||||
|
| Level I |
|
| Level II |
|
| Level III |
|
| Total |
|
| Level I |
|
| Level II |
|
| Level III |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Investments in equity securities with readily determinable fair values |
| $ | 306 |
|
| $ | — |
|
| $ | — |
|
| $ | 306 |
|
| $ | 138 |
|
| $ | — |
|
| $ | — |
|
| $ | 138 |
|
Interest rate swaps |
|
| — |
|
|
| 71,497 |
|
|
| — |
|
|
| 71,497 |
|
|
| — |
|
|
| 60,430 |
|
|
| — |
|
|
| 60,430 |
|
Forward foreign exchange contracts |
|
| — |
|
|
| 2,412 |
|
|
| — |
|
| $ | 2,412 |
|
|
| — |
|
|
| 1,077 |
|
|
| — |
|
|
| 1,077 |
|
Total |
| $ | 306 |
|
| $ | 73,909 |
|
| $ | — |
|
| $ | 74,215 |
|
| $ | 138 |
|
| $ | 61,507 |
|
| $ | — |
|
| $ | 61,645 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | 4,377 |
|
| $ | 4,377 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,167 |
|
| $ | 3,167 |
|
Forward foreign exchange contracts |
|
| — |
|
|
| 20,803 |
|
|
| — |
|
|
| 20,803 |
|
|
| — |
|
|
| 6,489 |
|
|
| — |
|
|
| 6,489 |
|
Total |
| $ | — |
|
| $ | 20,803 |
|
| $ | 4,377 |
|
| $ | 25,180 |
|
| $ | — |
|
| $ | 6,489 |
|
| $ | 3,167 |
|
| $ | 9,656 |
|
|
| Fair Value Measurements as of |
|
| Fair Value Measurements as of |
| ||||||||||||||||||||||||||
|
| December 31, 2021 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||
|
| Level I |
|
| Level II |
|
| Level III |
|
| Total |
|
| Level I |
|
| Level II |
|
| Level III |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Investments in equity securities with readily determinable fair values |
| $ | 665 |
|
| $ | — |
|
| $ | — |
|
| $ | 665 |
|
| $ | 153 |
|
| $ | — |
|
| $ | — |
|
| $ | 153 |
|
Forward foreign exchange contracts |
|
| — |
|
|
| 2,529 |
|
|
| — |
|
|
| 2,529 |
| ||||||||||||||||
Interest rate swaps |
|
| — |
|
|
| 75,865 |
|
|
| — |
|
|
| 75,865 |
| ||||||||||||||||
Total |
| $ | 665 |
|
| $ | 2,529 |
|
| $ | — |
|
| $ | 3,194 |
|
| $ | 153 |
|
| $ | 75,865 |
|
| $ | — |
|
| $ | 76,018 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | 26,900 |
|
| $ | 26,900 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,524 |
|
| $ | 4,524 |
|
Interest rate swaps |
|
| — |
|
|
| 48,427 |
|
|
| — |
|
|
| 48,427 |
| ||||||||||||||||
Forward foreign exchange contracts |
|
| — |
|
|
| 13,363 |
|
|
| — |
|
|
| 13,363 |
|
|
| — |
|
|
| 11,107 |
|
|
| — |
|
|
| 11,107 |
|
Total |
| $ | — |
|
| $ | 61,790 |
|
| $ | 26,900 |
|
| $ | 88,690 |
|
| $ | — |
|
| $ | 11,107 |
|
| $ | 4,524 |
|
| $ | 15,631 |
|
15
There have been no transfers of assets or liabilities between the fair value measurement classifications during the three and nine months ended September 30, 2022.March 31, 2023.
Investments in Equity Securities with Readily Determinable Fair Values
The estimated fair value of the Company’s equity securities with readily determinable fair values is based on observable inputs in an active market, which is a Level 1 measurement within the fair value hierarchy.
Contingent Consideration
The Company has recorded contingent consideration liabilities in connection with its acquisitions. Contingent consideration is included in current liabilities and other long-term liabilities in the consolidated balance sheets. Changes in fair value are recognized in selling, general and administrative expenses. The estimated fair value of the contingent consideration is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.
The changes in the fair value of contingent consideration were as follows (in thousands):
|
| Nine Months Ended September 30, 2022 |
| |
Balance at December 31, 2021 |
| $ | 26,900 |
|
Acquisitions |
|
| 1,500 |
|
Payments |
|
| (26,183 | ) |
Change in fair value |
|
| 2,243 |
|
Foreign currency translation |
|
| (83 | ) |
Balance at September 30, 2022 |
| $ | 4,377 |
|
Payments made during the nine months ended September 30, 2022 primarily related to the settlement of the premium contingent consideration with 32 Equity LLC ("32 Equity"). See Note 11.
Foreign Currency Derivatives
The Company classifies its foreign currency derivatives within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (Note 8). As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had $2.11.0 million and $2.3none million in other current assets, none andless than $0.2 million in assets held for sale, $0.30.1 million and none in other assets, $11.63.6 million and $4.56.0 million in other current liabilities, noneand $0.4 million in liabilities held for sale, and $9.22.9 million and $8.55.1 million in other long-term liabilities, respectively, recorded in the consolidated balance sheets related to the Company’s foreign currency derivatives.
20
Interest Rate Swaps
The Company classifies its interest rate swaps within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (Note 8). AsThe fair value of September 30, 2022the swaps was $60.4 million and $75.9 million as of March 31, 2023 and December 31, 2021, the Company had $71.5 million2022, respectively, and nonewas included in other assets and none and $48.4 million in other long-term liabilities, respectively, recorded in the consolidated balance sheets related to the Company’s interest rate swaps.sheets.
10. DEBT
The following is a summary of outstanding debt (in thousands):
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
2014 Credit Facilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
First Lien Term Loan (due May 2025) |
| $ | 2,513,449 |
|
| $ | 2,786,048 |
|
| $ | 2,298,383 |
|
| $ | 2,305,916 |
|
Zuffa Credit Facilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Zuffa First Lien Term Loan (due April 2026) |
|
| 2,817,517 |
|
|
| 2,840,767 |
|
|
| 2,752,017 |
|
|
| 2,759,767 |
|
Other debt (3.25%-14.50% Notes due at various dates through 2031) |
|
| 152,417 |
|
|
| 159,010 |
| ||||||||
Other debt (3.25%-14.50% Notes due at various dates through 2033) |
|
| 147,056 |
|
|
| 153,490 |
| ||||||||
Total principal |
| $ | 5,483,383 |
|
| $ | 5,785,825 |
|
|
| 5,197,456 |
|
|
| 5,219,173 |
|
Unamortized discount |
|
| (19,645 | ) |
|
| (26,077 | ) |
|
| (15,854 | ) |
|
| (17,523 | ) |
Unamortized issuance costs |
|
| (36,335 | ) |
|
| (46,012 | ) |
|
| (30,408 | ) |
|
| (33,104 | ) |
Total debt |
| $ | 5,427,403 |
|
| $ | 5,713,736 |
|
|
| 5,151,194 |
|
|
| 5,168,546 |
|
Less: current portion |
|
| (89,039 | ) |
|
| (82,022 | ) |
|
| (88,686 | ) |
|
| (88,309 | ) |
Total long-term debt |
| $ | 5,338,364 |
|
| $ | 5,631,714 |
|
| $ | 5,062,508 |
|
| $ | 5,080,237 |
|
2014 Credit Facilities
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had $2.52.3 billion and $2.8 billion, respectively, outstanding under a credit agreement that was entered into in connection with the 2014 IMG acquisition (the "2014 Credit Facilities"). The 2014 Credit Facilities consist of a first lien secured term loan (the “First Lien Term Loan”) and a $200.0 million secured revolving credit facility (the "Revolving Credit Facility"). In September 2022, we repaid $250.0 million of term loans under the 2014 Credit Facilities.
The financial debt covenant of the 2014 Credit Facilities did not apply as of September 30, 2022March 31, 2023 and December 31, 20212022 as the Company had no borrowings outstanding under the Revolving Credit Facility.
The Company had outstanding letters of credit under the 2014 Credit Facilities totaling $19.319.5 million and $23.819.4 million as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
Zuffa Credit Facilities
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company has $2.8 billion outstanding under a credit agreement that was entered into in connection with the 2016 Zuffa acquisition (the "Zuffa Credit Facilities"). The Zuffa Credit Facilities consist of a first lien secured term loan (the "Zuffa First Lien Term Loan") and a secured revolving credit facility in an aggregate principal amount of $205.0 million, letters of credit in an aggregate face amount not in excess of $40.0 million and swingline loans in an aggregate principal amount not in excess of $15.0 million (collectively, the "Zuffa Revolving Credit Facility"). The Zuffa Credit Facilities are secured by liens on substantially all of the assets of Zuffa.
The financial debt covenantscovenant of the Zuffa Credit Facilities did not apply as of September 30, 2022March 31, 2023 and December 31, 20212022 as Zuffa had no borrowings outstanding under the Zuffa Revolving Credit Facility.
Under the Zuffa Credit Facilities, Zuffa had $10.0 million and no outstanding letters of credit under as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
16
Other Debt
On Location Revolver
The On Location ("OL") revolving credit agreement contains a financial covenant that requires OL to maintain a First Lien Leverage Ratio of Consolidated First Lien Debt to Consolidated EBITDA, as defined in the credit agreement, of no more than 3-to-1. The Company is only required to meet the First Lien Leverage Ratio if the sum of outstanding borrowings on the Revolving Credit Facility plus outstanding letters of credit exceeding $2.0 million that are not cash collateralized exceeds forty percent of the total Revolving Commitments as measured on a quarterly basis, as defined in the credit agreement. As of September 30, 2022 and DecemberMarch 31, 2021,2023, the Company was in compliance with the financial debt covenants.covenant.
OL had no letters of credit outstanding under the revolving credit agreement as of September 30, 2022March 31, 2023 and December 31, 2021.2022.
Receivables Purchase Agreement
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the debt outstanding under these arrangements was $28.223.7 million and $50.528.2 million, respectively.
21
Zuffa Secured Commercial Loans
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, Zuffa was in compliance with its financial debt covenant under the Zuffa Secured Commercial Loans.
2014 Credit Facilities and Zuffa Credit Facilities
The 2014 Credit Facilities and the Zuffa Credit Facilities restrict the ability of certain subsidiaries of the Company to make distributions and other payments to the Company. These restrictions do include exceptions for, among other things, (1) amounts necessary to make tax payments, (2) a limited annual amount for employee equity repurchases, (3) distributions required to fund certain parent entities, (4) other specific allowable situations and (5) a general restricted payment basket. As of September 30, 2022, EGH held cash of $40.7 million, long-term deferred tax benefits of $132.9 million in other assets and a tax receivable agreements liability of $200.0 million, of which $41.2 million is in other current liabilities and $158.8 million is in other long-term liabilities. As of DecemberMarch 31, 2021,2023, EGH held long-term deferred tax benefits of $61.5789.9 million, in other assets and aan intercompany note receivable from EOC of $50.0 million, as well as tax receivable agreementsagreement liability ("TRA") of $133.8997.8 million, of which $41.2842.9 million is in other current liabilitieswas classified as long-term and $92.6154.9 million is in otherwas classified as current. As of December 31, 2022, EGH held long-term liabilities. Otherwise, EGH has no material separate cash flows, assets or liabilities other than the investments in its subsidiaries.deferred income taxes of $756.4 million as well as a TRA of $1,011.7 million, of which $961.6 million was classified as long-term and $50.1 million was classified as current. All its business operations are conducted through its operating subsidiaries; it has no material independent operations. EGH has no other material commitments or guarantees. As a result of the restrictions described above, substantially all of the subsidiaries’ net assets are effectively restricted in their ability to be transferred to EGH as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company’s First Lien Term Loan under the 2014 Credit Facilities and Zuffa’s First Lien Term Loan under its Credit Facilities had an estimated fair value of $5.15.0 billion and $5.65.0 billion, respectively. The estimated fair values of the Company’s First Lien Term Loan under the 2014 Credit Facilities and Zuffa’s First Lien Term Loan under its Credit Facilities are based on quoted market values for the debt. Since the First Lien Term Loan under the 2014 Credit Facilities and Zuffa’s First Lien Term Loan under its Credit Facilities do not trade on a daily basis in an active market, fair value estimates are based on market observable inputs based on quoted market prices and borrowing rates currently available for debt with similar terms and average maturities, which are classified as Level 2 under the fair value hierarchy.
11. REDEEMABLE NON-CONTROLLING INTERESTS
On Location
In connection with the acquisition of OL in 2020, the Company entered into an Amended and Restated Limited Liability Company Agreement ("OL LLC Agreement") of Endeavor OLE Parent, LLC ("OLE Parent") with 32 Equity. The terms of the agreement provided 32 Equity with certain rights to put its common units in OLE Parent to the Company upon a termination of the Commercial License Agreement ("CLA") or at its option at any time following the Lockup Period as defined. The Company also had certain call rights to require 32 Equity to sell its common units in OLE Parent to the Company upon a termination of the CLA in the event the aforementioned put rights were not exercised. The put/call price was an amount equal to fair market value and the exercise of these put/call rights would have given rise to an obligation of the Company to make a premium payment to 32 Equity in certain circumstances. The premium payment was recognized as a separate unit of account from the non-controlling interest. As of December 31, 2021, the estimated redemption value of the non-controlling interest was $57.9 million.
In April 2022, a series of transactions was completed between the Company and 32 Equity. Per the terms of the OL LLC Agreement, 32 Equity had the right to purchase additional common units in OLE Parent from the Company that would result in 32 Equity having an aggregate ownership percentage interest in OLE Parent of 32% at a price per unit equal to the original acquisition price of its rollover equity. 32 Equity exercised such right and paid the Company cash of $87.9 million. Following this exercise, EOC issued 8,037,483 EOC common units (and 32 Equity obtained an equal number of paired shares of the Company's Class X common stock) in exchange for 32 Equity's non-controlling interests of OLE Parent. The aggregate value of the shares was $223.7 million based on the volume-weighted average trading price of the Class A common stock for thirty days ending on the day before the close. The Company and 32 Equity also agreed to settle the premium contingent consideration resulting in the Company paying 32 Equity $24.0 million in cash (Note 9). In addition, the Company issued 495,783 shares of Class A common stock to several employees of the Company in exchange for the employees' direct or indirect interests in OLE Parent based on the same valuation. As a result of these transactions, OLE Parent became an indirect wholly-owned subsidiary of EOC.
China
In June 2016, the Company received a contribution of $75.0 million from third parties in a newly formed subsidiary of the Company that was formed to expand the Company’s existing business in China ("Endeavor China"). This contribution gave the non-controlling interests holders approximately 34% ownership of the subsidiary. The holders of the non-controlling interests had the right to put their investment to the Company at any time after June 1, 2023 for fair market value. As of December 31, 2021, the estimated redemption value was $107.5 million.
In April 2022, the Company issued 5,693,774 shares of Class A common stock in exchange for the non-controlling partnership interests of Endeavor China. The aggregate value of the shares was $158.5 million based on the volume-weighted average trading price of the Class A common stock for thirty days ending on the day before the close. In addition, EOC issued 659,896 common units in EOC to several employees of the Company, including members of management (and such employees obtained an equal number of paired shares of the Company's Class X common stock), in exchange for the employees' direct or indirect interests in Endeavor China based on the same valuation. As a result of these transactions, Endeavor China became an indirect wholly-owned subsidiary of EOC.
22
Barrett-Jackson
In connection with the acquisition of Barrett-Jackson Holdings, LLC ("Barrett-Jackson") in August 2022, (Note 4), the terms of the agreement provide the sellers a put option to sell their remaining ownership to IMG Auction Company, LLC, a subsidiary of the Company. The first election is between April and July 2029 for 29.9% of the total issued and outstanding units of Barrett-Jackson at that time and the second election is between April and July 2031 for any remaining ownership at that time. The purchase price of the put right is equal to Barrett-Jackson's EBITDA, as defined, multiplied by 13. This redeemable non-controlling interest was recognized at the acquisition date at fair value of $210.1 million. As of March 31, 2023 and December 31, 2022, the estimated redemption value was below the carrying value of $220.0 million and $207.9 million, respectively.
Zuffa
In July 2018, the Company received a contribution of $9.7 million from third parties (the "Russia Co-Investors") in a newly formed subsidiary of the Company (the "Russia Subsidiary") that was formed to expand the Company’s existing business in Russia and certain other countries in the Commonwealth of Independent States. The terms of this contribution provide the Russia Co-Investors with a put option to sell their ownership in the Russia Subsidiary five years and nine months after the consummation of the contribution. The purchase price of the put option is the greater of the total investment amount, defined as the Russia Co-Investors’ cash contributions less cash distributions, or fair value. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the estimated redemption value was $9.9 million and $9.7 million.million, respectively.
Frieze
In connection with the acquisition of Frieze in 2016, the terms of the agreement provide the sellers with a put option to sell their remaining 30% interest after fiscal year 2020. The Company also has a call option to buy the remaining 30% interest after fiscal year 2020 or upon termination of employment of the sellers who continued to be employees of Frieze after the acquisition. The price of the put and call option is equal to Frieze’s prior year’s EBITDA multiplied by 7.5. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the estimated redemption value was below the carrying value of $23.524.0 million and $23.824.6 million, respectively.
17
12. EARNINGS PER SHARE
EarningsBasic earnings per share is calculated utilizing net income available to common stockholders of the Company divided by the weighted average number of shares of Class A Common Stock outstanding during the same period. Diluted EPS is calculated by dividing the net income available for common stockholders by the diluted weighted average shares outstanding for that period.
The computation of basic and diluted earnings per share and weighted average shares of the Company’s common stock outstanding for the periods is presented below:below (in thousands, except share and per share data):
|
| Three Months Ended September 30, 2022 |
|
| Three Months Ended September 30, 2021 |
|
| Nine Months Ended September 30, 2022 |
|
| May 1, 2021 - |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic (loss) earnings per share |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated net (loss) income |
| $ | (12,538 | ) |
| $ | 63,613 |
|
| $ | 547,348 |
|
| $ | (457,841 | ) |
Net (loss) income attributable to NCI (Endeavor Operating Company) |
|
| (1,879 | ) |
|
| 17,177 |
|
|
| 183,353 |
|
|
| (154,395 | ) |
Net (loss) income attributable to NCI (Endeavor Manager Units) |
|
| (620 | ) |
|
| 3,951 |
|
|
| 28,682 |
|
|
| (26,334 | ) |
Net (loss) income attributable to the Company |
|
| (10,039 | ) |
|
| 42,485 |
|
|
| 335,313 |
|
|
| (277,112 | ) |
Adjustment to net (loss) income attributable to the Company |
|
| — |
|
|
| — |
|
|
| 4,348 |
|
|
| (1,399 | ) |
Net (loss) income attributable to EGH common shareholders |
| $ | (10,039 | ) |
| $ | 42,485 |
|
| $ | 339,661 |
|
| $ | (278,511 | ) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average Class A Common Shares outstanding - Basic |
|
| 285,870,317 |
|
|
| 262,891,070 |
|
|
| 278,724,574 |
|
|
| 261,048,116 |
|
Basic (loss) earnings per share |
| $ | (0.04 | ) |
| $ | 0.16 |
|
| $ | 1.22 |
|
| $ | (1.07 | ) |
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Basic earnings per share |
|
|
|
|
|
| ||
Numerator |
|
|
|
|
|
| ||
Consolidated net income |
| $ | 36,255 |
|
| $ | 517,666 |
|
Net income attributable to NCI (Endeavor Operating Company) |
|
| 26,559 |
|
|
| 170,943 |
|
Net income attributable to NCI (Endeavor Manager) |
|
| 1,665 |
|
|
| 27,177 |
|
Net income attributable to EGH common shareholders |
| $ | 8,031 |
|
| $ | 319,546 |
|
Denominator |
|
|
|
|
|
| ||
Weighted average Class A Common Shares outstanding - Basic |
|
| 291,936,777 |
|
|
| 268,489,176 |
|
Basic earnings per share |
| $ | 0.03 |
|
| $ | 1.19 |
|
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Diluted earnings per share |
|
|
|
|
|
| ||
Numerator |
|
|
|
|
|
| ||
Consolidated net income |
| $ | 36,255 |
|
| $ | 517,666 |
|
Net income attributable to NCI (Endeavor Operating Company) |
|
| 26,644 |
|
|
| 5,407 |
|
Net income attributable to NCI (Endeavor Manager) |
|
| 1,665 |
|
|
| — |
|
Net income attributable to EGH common shareholders |
| $ | 7,946 |
|
| $ | 512,259 |
|
Denominator |
|
|
|
|
|
| ||
Weighted average Class A Common Shares outstanding - Basic |
|
| 291,936,777 |
|
|
| 268,489,176 |
|
Additional shares assuming exchange of EOC Profits Units |
|
| 714,931 |
|
|
| 4,219,455 |
|
Additional shares from RSUs, Stock Options and Phantom Units, as calculated using the treasury stock method |
|
| 2,633,533 |
|
|
| 2,863,781 |
|
Additional shares assuming exchange of all Endeavor Operating Units and Endeavor Manager Units |
|
| — |
|
|
| 167,466,205 |
|
Weighted average number of shares used in computing diluted earnings per share |
|
| 295,285,241 |
|
|
| 443,038,617 |
|
Diluted earnings per share |
| $ | 0.03 |
|
| $ | 1.16 |
|
|
|
|
|
|
|
|
23
|
| Three Months Ended September 30, 2022 |
|
| Three Months Ended September 30, 2021 |
|
| Nine Months Ended September 30, 2022 |
|
| May 1, 2021 - |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted (loss) earnings per share |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated net (loss) income |
| $ | (12,538 | ) |
| $ | 63,613 |
|
| $ | 547,348 |
|
| $ | (457,841 | ) |
Net (loss) income attributable to NCI (Endeavor Operating Company) |
|
| (1,879 | ) |
|
| (5,507 | ) |
|
| 8,645 |
|
|
| (154,395 | ) |
Net loss attributable to NCI (Endeavor Manager Units) |
|
| (620 | ) |
|
| — |
|
|
| — |
|
|
| (26,334 | ) |
Net (loss) income attributable to the Company |
|
| (10,039 | ) |
|
| 69,120 |
|
|
| 538,703 |
|
|
| (277,112 | ) |
Adjustment to net (loss) income attributable to the Company |
|
| (1,422 | ) |
|
| — |
|
|
| (1,803 | ) |
|
| (1,399 | ) |
Net (loss) income attributable to EGH common shareholders |
| $ | (11,461 | ) |
| $ | 69,120 |
|
| $ | 536,900 |
|
| $ | (278,511 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Denominator |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average Class A Common Shares outstanding - Basic |
|
| 285,870,317 |
|
|
| 262,891,070 |
|
|
| 278,724,574 |
|
|
| 261,048,116 |
|
Additional shares assuming exchange of all Endeavor Profits Units |
|
| — |
|
|
| 3,569,639 |
|
|
| 1,884,386 |
|
|
| — |
|
Additional shares from RSUs, Stock Options and Phantom Units, as calculated using the treasury stock method |
|
| — |
|
|
| 202,490 |
|
|
| 1,875,609 |
|
|
| — |
|
Additional shares assuming exchange of all Endeavor Operating Units and Endeavor Manager Units |
|
| — |
|
|
| 169,259,312 |
|
|
| 167,046,923 |
|
|
| — |
|
Additional shares assuming redemption of redeemable non-controlling interests |
|
| 3,936,316 |
|
|
| — |
|
|
| 1,226,569 |
|
|
| — |
|
Weighted average number of shares used in computing diluted (loss) earnings per share |
|
| 289,806,633 |
|
|
| 435,922,511 |
|
|
| 450,758,061 |
|
|
| 261,048,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted (loss) earnings per share |
| $ | (0.04 | ) |
| $ | 0.16 |
|
| $ | 1.19 |
|
| $ | (1.07 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2022 |
|
| Three Months Ended September 30, 2021 |
|
| Nine Months Ended September 30, 2022 |
|
| May 1, 2021 - |
| ||||||||||||
Securities that are anti-dilutive for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Stock Options |
|
| 4,131,574 |
|
|
| 2,654,007 |
|
|
| 2,512,767 |
|
|
| 3,217,374 |
|
|
| 4,150,684 |
|
|
| 2,512,767 |
|
Unvested RSUs |
|
| 6,925,143 |
|
|
| 7,125,939 |
|
|
| 1,261,040 |
|
|
| 7,576,141 |
|
|
| 3,264,592 |
|
|
| 1,268,888 |
|
Manager LLC Units |
|
| 24,524,798 |
|
|
| — |
|
|
| — |
|
|
| 25,340,263 |
|
|
| 22,977,488 |
|
|
| — |
|
EOC Common Units |
|
| 143,438,952 |
|
|
| — |
|
|
| — |
|
|
| 143,087,739 |
|
|
| 135,819,453 |
|
|
| — |
|
EOC Profits Interest & Phantom Units |
|
| 15,777,736 |
|
|
| — |
|
|
| — |
|
|
| 16,238,545 |
|
|
| 12,488,885 |
|
|
| — |
|
Redeemable non-controlling interests |
|
| 7,608,312 |
|
|
| — |
|
13. INCOME TAXES
EGH was incorporated as a Delaware corporation in January 2019. It was formed as a holding company for the purpose of completing an IPO and other related transactions. As the sole managing member of Endeavor Manager, which is the sole managing member of EOC, EGH operates and controls all the business and affairs of EOC, and through EOC and its subsidiaries, conducts the Company’s business. EGH is subject to corporate income tax on its share of taxable income or loss of EOC derived through Endeavor Manager. EOC is treated as a partnership for U.S. federal income tax purposes and is therefore not subject to U.S. corporate income tax. However, certain of EOC’s subsidiaries are subject to U.S. or foreign corporate income tax.
In accordance with ASC Topic 740, each interim period is considered integral to the annual period and tax expense is generally determined using an estimate of the annual effective income tax rate ("AETR"). The Company would recordrecords income tax expense each quarter using the estimated AETR to provide for income taxes on a current year-to-date basis, adjusted for discrete items, if any, that are noted in the relevant period. In accordance with the authoritative guidance for accounting for income taxes in interim periods, the Company computed its income tax provision for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 based upon the AETR.
2418
The provision for (benefit from) income taxes for the three months ended September 30,March 31, 2023 and 2022 and 2021 is $8.535.5 million and $(7.717.2) million, respectively, based on pretax income of $80.578.3 million and $73.8521.1 million, respectively. The effective tax rate is 10.645.3% and (10.53.3)%) for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively. The (benefit from) provision for income taxes for the nine months ended September 30, 2022 and 2021 is $(6.0) million and $58.3 million, respectively, based on pretax income (loss) of $686.4 million and $(315.3) million, respectively. The effective tax rate is (0.9%) and (18.5%) for the nine months ended September 30, 2022 and 2021, respectively. The tax expense for the three months ended September 30, 2022March 31, 2023 differs from the same period in 20212022 primarily due to additional estimated annual pre-tax income in 2022, which affects the AETR, partially offset by the release of a $12.256.5 million valuation allowance on deferred tax assets in 2022. The tax expense for the ninethree months ended September 30, 2022 differs from the same period in 2021 primarily due to the release of a $65.9 million valuation allowance on deferred tax assets inMarch 31, 2022. The release of the valuation allowance was due to the expected realization of certain tax benefits in connection with a tax receivable agreement ("TRA") liability. In addition, during the nine months ended September 30, 2021, $7.4 million of deferred tax liabilities associated with indefinite lived intangibles were recorded as a result of the IPO and tax expense of $10.2 million was recorded related to a change in tax rate in the United Kingdom. Any tax balances reflected on the September 30, 2022March 31, 2023 balance sheet wouldwill be adjusted accordingly to reflect the actual financial results for the year ending December 31, 2022.2023.
The Company’s effective tax rate differs from the U.S. federal statutory rate primarily due to partnership income not subject to income tax; state and local income taxes;taxes, withholding taxes in foreign jurisdictions that are not based on net income;income, and increased income subject to tax in foreign jurisdictions which differ from the U.S. federal statutory income tax rate as well as the relative amount of income earned in those jurisdictions.rate.
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had unrecognized tax benefits of $41.542.7 million and $40.042.4 million, respectively, for which we are unable to make a reasonable and reliable estimate of the period in which these liabilities will be settled with the respective tax authorities.
The Company records valuation allowances against its net deferred tax assets when it is more likely than not that all, or a portion, of a deferred tax asset will not be realized. The Company evaluates the realizability of its deferred tax assets by assessing the likelihood that its deferred tax assets will be recovered based on all available positive and negative evidence, including historical results, reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. During the nine months ended September 30, 2022, the Company released a $65.9 million valuation allowance on deferred tax assets due to the expected realization of certain tax benefits based on estimates of future taxable income. The Company has determined the remaining net deferred tax assets at EGH, exclusive of deferred tax liabilities associated with indefinite lived intangibles, will not be realized and as a result, has recorded a valuation allowance as of September 30, 2022.
Inflation Reduction Act of 2022Other Matters
On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 ("IRA"). The IRA, amongin addition to other things,provisions, creates a 15% corporate alternative minimum tax ("CAMT") on adjusted financial statement income for applicable corporations. The CAMT is effective for tax years beginning after December 31, 2022. Additionally, theThe IRA establishes a 1% excise tax on stock repurchases made by publicly traded US corporations and is effective for stock repurchases after December 31, 2022. While we continue to evaluate the potential tax effects of the IRA, we are currentlydid not expecting the IRA to have a material impact on our consolidated financial statements.
In December 2022, the Organization for Economic Co-operation and Development ("OECD") proposed Global Anti-Base Erosion Rules, which provides for changes to numerous long-standing tax principles including the adoption of a global minimum tax rate of 15% for multinational enterprises ("GloBE rules"). While various jurisdictions are in the process of enacting legislation to adopt GloBE rules, only South Korea and Japan have enacted such legislation. Other countries are expected to adopt GloBE rules in 2023 with effective dates beginning in 2024. Changes in tax laws in the various countries in which the Company operates can negatively impact the Company's results of operations and financial position in future periods. The Company will continue to monitor legislative and regulatory developments in this area.
Tax Receivable AgreementsAgreement
In connection with the IPO and related transactions, the Company entered into TRAsa TRA with certain persons that held direct or indirect interests in EOC and Zuffa prior to the IPO including management of the Company ("TRA Holders"). The TRAsTRA generally provideprovides for the payment by EGH of 85% of the amount of any tax benefits that EGH actually realizes, or in some cases is deemed to realize, as a result of the following attributes: (i) increases in EGH’s share of the tax basis in the net assets of EOC resulting from any redemptions or exchanges of LLC Units, (ii) increases in tax basis attributable to payments made under the TRAs,TRA, (iii) deductions attributable to imputed interest pursuant to the TRAsTRA and (iv) other tax attributes (including tax basis) allocated to EGH post-IPO and related transactions that were allocable to the TRA Holders prior to the IPO and related transactions.
In connection with the expected realization of certain tax benefits including deferred tax assets, the Company has a $200.0 million TRA liability as of September 30, 2022.
If the existing valuation allowance recorded against deferred tax assets is released in a future period as a result of having sufficient taxable income, among other criteria, or other tax attributes subject to the TRAs are determined to be payable, additional TRA liabilities may be recorded. If the relevant criteria are met in 2022, the Company would release a valuation allowance and record the associated TRA liability, each of which we would expect to be material.
25
14. REVENUE
The following table presents the Company’s revenue disaggregated by primary revenue sources for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 (in thousands):. As described in Note 15, the Company created a fourth segment, Sports Data & Technology. Accordingly, prior year amounts of the Company's disaggregated revenue were reclassified to conform to the current presentation:
|
| Three Months Ended September 30, 2022 |
|
| Three Months Ended March 31, 2023 |
| ||||||||||||||||||||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences |
|
| Representation |
|
| Total |
|
| Owned Sports Properties |
|
| Events, Experiences |
|
| Representation |
|
| Sports Data |
|
| Total |
| |||||||||
Media rights |
| $ | 200,310 |
|
| $ | 133,600 |
|
| $ | — |
|
| $ | 333,910 |
| ||||||||||||||||||||
Media rights and data |
| $ | 189,042 |
|
| $ | 124,000 |
|
| $ | — |
|
| $ | 69,063 |
|
| $ | 382,105 |
| ||||||||||||||||
Technology platforms and services |
|
| — |
|
|
| 15,268 |
|
|
| — |
|
|
| 31,796 |
|
|
| 47,064 |
| ||||||||||||||||
Media production, distribution and content |
|
| 1,026 |
|
|
| 84,160 |
|
|
| 61,387 |
|
|
| 146,573 |
|
|
| 1,966 |
|
|
| 62,312 |
|
|
| 69,135 |
|
|
| — |
|
|
| 133,413 |
|
Events and academy |
|
| 200,936 |
|
|
| 222,845 |
|
|
| — |
|
|
| 423,781 |
| ||||||||||||||||||||
Events and performance |
|
| 162,281 |
|
|
| 599,206 |
|
|
| — |
|
|
| — |
|
|
| 761,487 |
| ||||||||||||||||
Talent representation and licensing |
|
| — |
|
|
| — |
|
|
| 244,370 |
|
|
| 244,370 |
|
|
| — |
|
|
| — |
|
|
| 202,862 |
|
|
| — |
|
|
| 202,862 |
|
Marketing |
|
| — |
|
|
| — |
|
|
| 82,578 |
|
|
| 82,578 |
|
|
| — |
|
|
| — |
|
|
| 78,243 |
|
|
| — |
|
|
| 78,243 |
|
Eliminations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,796 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,337 | ) |
Total |
| $ | 402,272 |
|
| $ | 440,605 |
|
| $ | 388,335 |
|
| $ | 1,221,416 |
|
| $ | 353,289 |
|
| $ | 800,786 |
|
| $ | 350,240 |
|
| $ | 100,859 |
|
| $ | 1,596,837 |
|
|
| Nine Months Ended September 30, 2022 |
| |||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences |
|
| Representation |
|
| Total |
| ||||
Media rights |
| $ | 529,343 |
|
| $ | 470,797 |
|
| $ | — |
|
| $ | 1,000,140 |
|
Media production, distribution and content |
|
| 5,150 |
|
|
| 248,159 |
|
|
| 199,140 |
|
|
| 452,449 |
|
Events and academy |
|
| 496,398 |
|
|
| 1,175,334 |
|
|
| — |
|
|
| 1,671,732 |
|
Talent representation and licensing |
|
| — |
|
|
| — |
|
|
| 665,929 |
|
|
| 665,929 |
|
Marketing |
|
| — |
|
|
| — |
|
|
| 238,542 |
|
|
| 238,542 |
|
Eliminations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21,098 | ) |
Total |
| $ | 1,030,891 |
|
| $ | 1,894,290 |
|
| $ | 1,103,611 |
|
| $ | 4,007,694 |
|
19
|
| Three Months Ended September 30, 2021 |
| |||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Total |
| ||||
Media rights |
| $ | 156,973 |
|
| $ | 162,365 |
|
| $ | — |
|
| $ | 319,338 |
|
Media production, distribution and content |
|
| 1,510 |
|
|
| 81,818 |
|
|
| 399,473 |
|
|
| 482,801 |
|
Events and academy |
|
| 130,038 |
|
|
| 202,150 |
|
|
| — |
|
|
| 332,188 |
|
Talent representation and licensing |
|
| — |
|
|
| �� |
|
|
| 201,106 |
|
|
| 201,106 |
|
Marketing |
|
| — |
|
|
| — |
|
|
| 64,144 |
|
|
| 64,144 |
|
Eliminations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,274 | ) |
Total |
| $ | 288,521 |
|
| $ | 446,333 |
|
| $ | 664,723 |
|
| $ | 1,391,303 |
|
|
| Nine Months Ended September 30, 2021 |
|
| Three Months Ended March 31, 2022 |
| ||||||||||||||||||||||||||||||
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Total |
|
| Owned Sports Properties |
|
| Events, Experiences & Rights |
|
| Representation |
|
| Sports Data |
|
| Total |
| |||||||||
Media rights |
| $ | 497,564 |
|
| $ | 796,348 |
|
| $ | — |
|
| $ | 1,293,912 |
| ||||||||||||||||||||
Media rights and data |
| $ | 156,965 |
|
| $ | 118,085 |
|
| $ | — |
|
| $ | 45,043 |
|
| $ | 320,093 |
| ||||||||||||||||
Technology platforms and services |
|
| — |
|
|
| 22,371 |
|
|
| — |
|
|
| — |
|
|
| 22,371 |
| ||||||||||||||||
Media production, distribution and content |
|
| 4,937 |
|
|
| 259,229 |
|
|
| 591,671 |
|
|
| 855,837 |
|
|
| 2,300 |
|
|
| 63,011 |
|
|
| 73,744 |
|
|
| — |
|
|
| 139,055 |
|
Events and academy |
|
| 328,366 |
|
|
| 459,038 |
|
|
| — |
|
|
| 787,404 |
| ||||||||||||||||||||
Events and performance |
|
| 137,424 |
|
|
| 577,468 |
|
|
| — |
|
|
| — |
|
|
| 714,892 |
| ||||||||||||||||
Talent representation and licensing |
|
| — |
|
|
| — |
|
|
| 493,780 |
|
|
| 493,780 |
|
|
| — |
|
|
| — |
|
|
| 199,171 |
|
|
| — |
|
|
| 199,171 |
|
Marketing |
|
| — |
|
|
| — |
|
|
| 156,413 |
|
|
| 156,413 |
|
|
| — |
|
|
| — |
|
|
| 84,406 |
|
|
| — |
|
|
| 84,406 |
|
Eliminations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,189 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,225 | ) |
Total |
| $ | 830,867 |
|
| $ | 1,514,615 |
|
| $ | 1,241,864 |
|
| $ | 3,572,157 |
|
| $ | 296,689 |
|
| $ | 780,935 |
|
| $ | 357,321 |
|
| $ | 45,043 |
|
| $ | 1,473,763 |
|
In the three months ended September 30,March 31, 2023 and 2022, and 2021, there was revenue recognized of $12.814.0 million and $14.6 million, respectively, from performance obligations satisfied in prior periods. In the nine months ended September 30, 2022 and 2021, there was revenue recognized of $42.4 millionand $36.817.4 million, respectively, from performance obligations satisfied in prior periods.
26
Remaining Performance Obligations
The following table presents the aggregate amount of transaction price allocated to remaining performance obligations for contracts greater than one year with unsatisfied or partially satisfied performance obligations as of September 30, 2022March 31, 2023 (in thousands). The transaction price related to these future obligations does not include any variable consideration.
|
| Years Ending |
|
| Years Ending |
| ||
Remainder of 2022 |
| $ | 391,316 |
| ||||
2023 |
|
| 1,659,804 |
| ||||
Remainder of 2023 |
| $ | 1,405,289 |
| ||||
2024 |
|
| 1,253,988 |
|
|
| 1,481,813 |
|
2025 |
|
| 1,092,802 |
|
|
| 1,264,164 |
|
2026 |
|
| 198,750 |
|
|
| 306,846 |
|
2027 |
|
| 227,859 |
| ||||
Thereafter |
|
| 576,626 |
|
|
| 507,421 |
|
|
| $ | 5,173,286 |
|
| $ | 5,193,392 |
|
Contract Liabilities
The Company records deferred revenue when cash payments are received or due in advance of its performance. The Company’s deferred revenue balance primarily relates to advance payments received related to advertising and sponsorship agreements, event advanced ticket sales and performance tuition. Deferred revenue is included in the current liabilities section and in other long-term liabilities in the consolidated balance sheets.
The following table presents the Company’s contract liabilities as of September 30, 2022March 31, 2023 and December 31, 20212022 (in thousands):
Description |
| December 31, 2021 |
|
| Additions |
|
| Deductions (1) |
|
| Acquisitions |
|
| Held for Sale |
|
| Foreign Exchange |
|
| September 30, 2022 |
| |||||||
Deferred revenue - current |
| $ | 651,760 |
|
| $ | 1,901,792 |
|
| $ | (1,960,241 | ) |
| $ | 26,974 |
|
| $ | (2,903 | ) |
| $ | (7,667 | ) |
| $ | 609,715 |
|
Deferred revenue - noncurrent |
| $ | 62,155 |
|
| $ | 12,447 |
|
| $ | (3,980 | ) |
| $ | 2,082 |
|
| $ | — |
|
| $ | (289 | ) |
| $ | 72,415 |
|
(1) As of September 30, 2022, the balance in deductions also included $3.6 million and $0.8 million in deferred revenue - current and deferred revenue - noncurrent, respectively, primarily due to the divestiture of DBH (Note 4).
Description |
| As of |
|
| Additions |
|
| Deductions |
|
| Acquisitions |
|
| Foreign Exchange |
|
| As of |
| ||||||
Deferred revenue - current |
| $ | 716,147 |
|
| $ | 857,300 |
|
| $ | (855,960 | ) |
| $ | 10,516 |
|
| $ | 2,031 |
|
| $ | 730,034 |
|
Deferred revenue - noncurrent |
| $ | 91,838 |
|
| $ | 29,497 |
|
| $ | (445 | ) |
| $ | — |
|
| $ | 245 |
|
| $ | 121,135 |
|
15. SEGMENT INFORMATION
AsSubsequent to the acquisition of September 30, 2022,OpenBet and effective January 1, 2023, the Company created a fourth segment, Sports Data & Technology, to align with how the Company's chief operating decision maker ("CODM") manages the businesses. This segment consists of the Company's sports data and technology business, IMG ARENA, and OpenBet, the Company's recently acquired sports betting content, platform and service provider business, both of which were previously included in the Company's Events, Experiences & Rights segment. As a result, the Company now has the following threefour reportable segments: Owned Sports Properties, Events, Experiences & Rights, Representation, and Representation.Sports Data & Technology. The Company also reports the results for the "Corporate" group. All prior period amounts related to the segment change have been retrospectively reclassified to conform to the new presentation.
The profitability measure employed by the Company’s chief operating decision makerCODM for allocating resources and assessing operating performance is Adjusted EBITDA. Segment information is presented consistently with the basis for the year ended December 31, 2021. Summarized financial information for the Company’s reportable segments is shown in the following tables (in thousands):
Revenue
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Owned Sports Properties |
| $ | 402,272 |
|
| $ | 288,521 |
|
| $ | 1,030,891 |
|
| $ | 830,867 |
|
| $ | 353,289 |
|
| $ | 296,689 |
|
Events, Experiences & Rights |
|
| 440,605 |
|
|
| 446,333 |
|
|
| 1,894,290 |
|
|
| 1,514,615 |
|
|
| 800,786 |
|
|
| 780,935 |
|
Representation |
|
| 388,335 |
|
|
| 664,723 |
|
|
| 1,103,611 |
|
|
| 1,241,864 |
|
|
| 350,240 |
|
|
| 357,321 |
|
Sports Data & Technology |
|
| 100,859 |
|
|
| 45,043 |
| ||||||||||||||||
Eliminations |
|
| (9,796 | ) |
|
| (8,274 | ) |
|
| (21,098 | ) |
|
| (15,189 | ) |
|
| (8,337 | ) |
|
| (6,225 | ) |
Total consolidated revenue |
| $ | 1,221,416 |
|
| $ | 1,391,303 |
|
| $ | 4,007,694 |
|
| $ | 3,572,157 |
|
| $ | 1,596,837 |
|
| $ | 1,473,763 |
|
2720
Reconciliation of segment profitability
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| |||||
Owned Sports Properties |
| $ | 195,749 |
|
| $ | 134,679 |
|
| $ | 505,760 |
|
| $ | 412,495 |
|
| $ | 185,671 |
|
| $ | 148,741 |
|
Events, Experiences & Rights |
|
| 49,668 |
|
|
| 84,993 |
|
|
| 290,268 |
|
|
| 160,843 |
|
|
| 107,991 |
|
|
| 126,001 |
|
Representation |
|
| 132,923 |
|
|
| 141,801 |
|
|
| 345,849 |
|
|
| 264,969 |
|
|
| 84,206 |
|
|
| 101,705 |
|
Sports Data & Technology |
|
| 4,472 |
|
|
| 6,482 |
| ||||||||||||||||
Corporate |
|
| (75,258 | ) |
|
| (78,156 | ) |
|
| (217,991 | ) |
|
| (187,476 | ) |
|
| (75,948 | ) |
|
| (68,480 | ) |
Adjusted EBITDA |
|
| 303,082 |
|
|
| 283,317 |
|
|
| 923,886 |
|
|
| 650,831 |
|
|
| 306,392 |
|
|
| 314,449 |
|
Reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Equity losses (earnings) of affiliates |
|
| 1,333 |
|
|
| 3,052 |
|
|
| (4,060 | ) |
|
| 876 |
| ||||||||
Equity earnings of affiliates |
|
| (1,977 | ) |
|
| (3,749 | ) | ||||||||||||||||
Interest expense, net |
|
| (75,608 | ) |
|
| (55,783 | ) |
|
| (197,385 | ) |
|
| (207,970 | ) |
|
| (85,097 | ) |
|
| (59,272 | ) |
Depreciation and amortization |
|
| (63,571 | ) |
|
| (71,661 | ) |
|
| (195,177 | ) |
|
| (208,058 | ) |
|
| (66,751 | ) |
|
| (65,994 | ) |
Equity-based compensation expense |
|
| (48,388 | ) |
|
| (60,885 | ) |
|
| (159,851 | ) |
|
| (464,393 | ) |
|
| (78,691 | ) |
|
| (50,856 | ) |
Merger, acquisition and earn-out costs |
|
| (30,529 | ) |
|
| (13,107 | ) |
|
| (57,891 | ) |
|
| (38,291 | ) |
|
| (14,534 | ) |
|
| (12,794 | ) |
Certain legal costs |
|
| (1,604 | ) |
|
| 266 |
|
|
| (11,204 | ) |
|
| (4,260 | ) |
|
| (2,422 | ) |
|
| (1,002 | ) |
Restructuring, severance and impairment |
|
| (869 | ) |
|
| (2,179 | ) |
|
| (2,829 | ) |
|
| (6,612 | ) |
|
| (8,200 | ) |
|
| (518 | ) |
Fair value adjustment - equity investments |
|
| 291 |
|
|
| (90 | ) |
|
| 13,635 |
|
|
| 13,614 |
|
|
| 713 |
|
|
| 1,653 |
|
Gain on sale of the restricted Endeavor Content business |
|
| — |
|
|
| — |
|
|
| 463,641 |
|
|
| — |
|
|
| — |
|
|
| 463,641 |
|
Tax receivable agreements liability adjustment |
|
| (10,405 | ) |
|
| — |
|
|
| (61,497 | ) |
|
| — |
| ||||||||
Tax receivable agreement liability adjustment |
|
| 2,344 |
|
|
| (53,497 | ) | ||||||||||||||||
Other |
|
| 6,749 |
|
|
| (9,152 | ) |
|
| (24,914 | ) |
|
| (51,063 | ) |
|
| 26,494 |
|
|
| (10,974 | ) |
Income (loss) before income taxes and equity losses of affiliates |
| $ | 80,481 |
|
| $ | 73,778 |
|
| $ | 686,354 |
|
| $ | (315,326 | ) | ||||||||
Income before income taxes and equity losses of affiliates |
| $ | 78,271 |
|
| $ | 521,087 |
|
16. COMMITMENTS AND CONTINGENCIES
Claims and Litigation
The Company is involved in legal proceedings, claims and governmental investigations arising in the normal course of business. The types of allegations that arise in connection with such legal proceedings vary in nature, but can include contract, employment, tax and intellectual property matters. The Company evaluates all cases and records liabilities for losses from legal proceedings when the Company determines that it is probable that the outcome will be unfavorable and the amount, or potential range, of loss can be reasonably estimated. While any outcome related to litigation or such governmental proceedings cannot be predicted with certainty, management believes that the outcome of these matters, except as otherwise may be discussed below, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
An employee of the Company is one of several individuals and entities named in a complaint by India’s Director of Enforcement ("DE"), initially filed in January 2015, alleging violations of the Foreign Exchange Management Act ("FEMA"). The complaint alleges that the employee participated as an advisor in a series of transactions in 2009 that were completed by and on behalf of a client, the Board of Control for Cricket in India (the "BCCI"), and that contravened two provisions of FEMA. The subject transactions were pursued under the direction and control of one of the BCCI’s board members. The Company is not alleged to have possessed any funds improperly or to have made or received any of the payments that are alleged to have violated FEMA. The Company is cooperating with the DE’s investigation which, at present, is in its early stages.
In July 2017, the Italian Competition Authority ("ICA") issued a decision opening an investigation into alleged breaches of competition law in Italy, involving inter alia IMG, and relating to bidding for certain media rights of the Serie A and Serie B football leagues. In April 2018, the European Commission conducted on-site inspections at a number of companies that are involved with sports media rights, including the Company. The inspections were part of an ongoing investigation into the sector and into potential violations of certain antitrust laws that may have taken place within it. The Company investigated these ICA matters, as well as other regulatory compliance matters. In May 2019, the ICA completed its investigation and fined the Company approximately EUR 0.3 million. As part of its decision, the ICA acknowledged the Company’s cooperation and ongoing compliance efforts since the investigation commenced. In July 2019, three football clubs (the "Original Plaintiffs") and in June 2020, the Serie A football league (Lega Nazionale Professionisti Serie A or "Lega Nazionale," and together with the three clubs, the "Plaintiffs") each filed separate claims against IMG and certain other unrelated parties in the Court of Milan, Italy, alleging that IMG engaged in anti-competitive practices with regard to bidding for certain media rights of the Serie A and Serie B football leagues.league. The Plaintiffs seek damages from all defendants deriving from the lower value of the media rights in amounts totaling EUR 554.6 million in the aggregate relating to the three football clubs and EUR 1,592.21,750 million relating to Lega Nazionale, along with attorneys’ fees and costs (the "Damages Claims").costs. Since December 2020, four additional football clubs have each filed requests to intervene in the Lega Nazionale proceedings and individually seek to claim amountsdamages deriving from the lower value of the media rights in the aggregate totaling EUR 251.5 million. The Original Plaintiffs and these four additional clubs are also seeking additional damages relating to alleged lost profits and additional charges, quantified in the fourth quarter of 2022 in amounts totaling EUR 1,675 million. Ten other clubs also filed requests to intervene in support of Lega Nazionale’s claim or alternatively to individually claim damages deriving from the lower value of the media rights in the amount of EUR 92.1284.9 million, in the case of one club,five clubs, and unspecified amounts (to be quantified as a percentage of the total amount sought by Lega Nazionale) in the other ninefive cases. Collectively, the interventions of these 14 clubs are the "Interventions." In December 2022, one further football club filed a separate claim against IMG and certain other unrelated parties seeking damages from all defendants deriving from the lower value of the media rights in the amounts of EUR 326.9 million, in addition to alleged additional damages relating to lost profits and additional charges which have not yet been quantified. The Company has defended in its submissions to date, and intends to continue to defend, against all of the Damages Claims,damages claims, Interventions and any related claims, and management believes that the Company has meritorious defenses to these claims, including the absence of standing of the clubs, and the absence of actual damage. The Company may also be subject to regulatory and other claims and actions with respect to these ICA and other regulatory matters. Any judgment entered against the Company or settlement entered into, including with respect to claims or actions brought by other parties, could materially and adversely impact the Company’s business, financial condition and results of operations.
2821
Zuffa has five related class-action lawsuits filed against it in the United States District Court for the Northern District of California (the "District Court") between December 2014 and March 2015 by a total of eleven former UFC fighters. The complaints in the five lawsuits are substantially identical. Each alleges that Zuffa violated Section 2 of the Sherman Act by monopolizing the alleged market for the promotion of elite professional MMA bouts and monopolizing the alleged market for elite professional MMA fighters’ services. Plaintiffs claim that Zuffa’s alleged conduct injured them by artificially depressing the compensation they received for their services and their intellectual property rights, and they seek treble damages under the antitrust laws, as well as attorneys’ fees and costs, and injunctive relief. On December 14, 2020, the District Court orally indicated its intention to grant plaintiffs’ motion to certify the Bout Class (comprised of fighters who participated in bouts from December 16, 2010 to September 30, 2017) and to deny plaintiffs’ motion to certify the Identity Class (a purported class based upon the alleged expropriation and exploitation of fighter identities). The Company is awaiting the official written order from the judge and assuming he rules as previously indicated, then the Company will seek an appeal of this decision. On June 23, 2021, plaintiffs’ lawyers filed a new case against Zuffa and EGH alleging substantially similar claims but providing for a class period from July 1, 2017 to present. Management believes that the Company has meritorious defenses against the allegations and intends to defend itself vigorously.
17. RELATED PARTY TRANSACTIONS
The Company has the following related party transactions as of September 30, 2022March 31, 2023 and December 31, 20212022 and for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 (in thousands):
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Other current assets |
| $ | 22,109 |
|
| $ | 4,728 |
|
| $ | 17,582 |
|
| $ | 17,827 |
|
Investments |
|
| 2,174 |
|
|
| — |
|
|
| 2,617 |
|
|
| 2,146 |
|
Other assets |
|
| — |
|
|
| 322 |
| ||||||||
Accrued liabilities |
|
| 10,800 |
|
|
| — |
|
|
| 1,500 |
|
|
| — |
|
Deferred revenue |
|
| 2,350 |
|
|
| 264 |
|
|
| 812 |
|
|
| 825 |
|
Other current liabilities |
|
| 2,006 |
|
|
| 2,431 |
|
|
| 5,249 |
|
|
| 3,801 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Month Ended March 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Revenue |
| $ | 9,365 |
|
| $ | 641 |
|
| $ | 26,946 |
|
| $ | 13,680 |
|
| $ | 14,744 |
|
| $ | 7,739 |
|
Direct operating costs |
|
| 9,661 |
|
|
| 772 |
|
|
| 14,003 |
|
|
| 3,629 |
|
|
| 4,494 |
|
|
| 4,696 |
|
Selling, general and administrative expenses |
|
| 859 |
|
|
| 1,768 |
|
|
| 3,325 |
|
|
| 6,198 |
|
|
| 954 |
|
|
| 1,861 |
|
Other (expense) income, net |
|
| (9,925 | ) |
|
| 875 |
|
|
| (23,175 | ) |
|
| 2,625 |
|
|
| (625 | ) |
|
| (14,125 | ) |
As of September 30, 2022,March 31, 2023, the Company has an equity-method investment in Euroleague, a related party. For the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, the Company recognized revenue of $0.5 million, $3.8 million, $0.2 million and $0.23.7 million, respectively, for a management fee to compensate it for representation and technical services it provides to Euroleague in relation to the distribution of media rights. This revenue is included in the Owned Sports Properties segment. Also, for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, the Company recognized revenue of $(0.3) million, $5.14.0 million, $(0.1) million and $0.12.8 million, respectively, for production services provided to Euroleague as well as direct operating costs of $3.13.6 million and $5.51.4 million, less than a hundred thousand, $(0.2) million, respectively, for the procurement of a license for gaming rights from Euroleague, which are included in the Events, ExperiencesSports Data & RightsTechnology segment. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had a receivable of $5.19.8 million and $1.48.4 million, respectively, and a payable of $0.23.1 million and $1.41.0 million, respectively.
Silver Lake and certain of our executives indirectly own a minority interest in The Raine Group ("Raine"). During the three and nine months ended September 30,March 31, 2023 and 2022, the Company recorded expenseexpenses of $10.81.5 million and $25.815.0 million, respectively, related toin transaction costs with Raine for investment banking services in connection with the sale of the restricted Endeavor Content business and the acquisitions of OpenBet and Barrett-Jacksoncertain businesses (Note 4). AsIn addition, as of September 30,March 31, 2023 and December 31, 2022, the Company had accrued liabilitiesinvestments of $10.82.6 million. million and $2.1 million, respectively, in a non-marketable fund maintained by Raine.
In addition, duringconnection with the nine months ended September 30,IPO and related transactions, the Company entered into a TRA with certain persons that held direct or indirect interests in EOC and Zuffa prior to the IPO. The TRA generally provides for the payment by EGH of 85% of the amount of any tax benefits that EGH actually realizes, or in some cases is deemed to realize (Note 13). As of March 31, 2023 and December 31, 2022, the Company investedhad $2.2997.8 million in non-marketable funds maintained by Raine.and $1,011.7 million recorded, respectively, of which $364.3 million and $390.1 million, respectively, is due to related parties.
22
18. SUBSEQUENT EVENTS
WWE Transaction
In September 2022,April 2023, the Company soldentered into a transaction agreement with World Wrestling Entertainment, Inc. ("WWE") to, among other things, form a new publicly traded company ("New PubCo") consisting of the ten PDL Clubs that operated underUFC and WWE businesses. Upon close, which is expected in the DBH umbrella to Silver Lake,second half of 2023, (A) EGH and/or its subsidiaries will hold (1) a 51% controlling non-economic voting interest in New PubCo and (2) a 51% economic interest in an operating subsidiary ("HoldCo"), which will own all of the assets of the UFC and WWE businesses, and (B) the stockholders of WWE will hold (1) a 49% voting interest in New PubCo and (2) a 100% economic interest in New PubCo, which will in turn hold a 49% economic interest in HoldCo.
Amendments to Revolvers
In April 2023, the Company (Note 4)executed amendments on the Revolving Credit Facility and the Zuffa Revolving Credit Facility to extend the maturities by six months to November 18, 2024 and October 29, 2024, respectively. Additionally, the adjusted LIBOR reference rate used for both facilities was replaced with an adjusted Term Secured Overnight Financing Rate ("SOFR").
IMG Academy Transaction
In April 2023, the Company entered into a purchase agreement to sell all of the issued and outstanding Class A Units of IMG Academy Parent, LLC in exchange for estimated aggregate cash proceeds equal to approximately $1.1 billion, subject to certain adjustments. The closing of this transaction is expected in the third quarter of 2023.
2923
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report and with our audited financial statements and related notes included in our 20212022 Annual Report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A. "Risk Factors" of our 20212022 Annual Report, as updated by Part II, Item 1A. "Risk Factors" in this Quarterly Report or in other sections of the 20212022 Annual Report and this Quarterly Report.
BUSINESS OVERVIEW
Endeavor is a global sports and entertainment 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, sports data and technology, 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
WeSubsequent to the acquisition of OpenBet and effective January 1, 2023, the Company created a fourth segment, Sports Data & Technology, to align with how our chief operating decision maker manages our businesses. As a result, we now operate our business in threefour segments: (i) Owned Sports Properties; (ii) Events, Experiences & Rights; (iii) Representation and (iii) Representation.(iv) Sports Data & Technology. All prior period amounts related to the segment changes have been retrospectively reclassified to conform to the current presentation.
Owned Sports Properties
Our Owned Sports Properties segment is comprised of a unique portfolio of scarcepremium sports properties, including UFC, Professional Bull Riders ("PBR")PBR and Euroleague, that generate significant growth through innovative rights deals and exclusive live events.Euroleague.
Through the UFC, the world’s premier professional MMA organization, we produce more than 40 live events annually which are broadcast in over 160170 countries and territories to approximately one billionover 900 million TV households. UFC was founded in 1993 and has grown in popularity, after hostinghaving now hosted more than 500600 events and reaching a global audience through an increasing array of global 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 reflectedevidenced by the growth of FIGHT PASS subscribers and overall follower growth and engagement across our social channels - now reaching 188228 million followers.
PBR is the world’s premier bull riding circuit with more than 500800 bull riders from the United States, Australia, Brazil, Canada, and Mexico, currently competing in more than 200 bull riding events each year pre-pandemic. PBR is one of America’s fastest growing sportsannually and with its annual attendance for its premier series quadrupling since its inception in 1995.
We have an up to 20-year partnership with Euroleague basketball, 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.
At the end of 2021 and in January 2022, we acquired ten Major League Baseball Professional Development League clubs (the "PDL Clubs"), whose results were included in Owned Sports Properties andwhich were being operated under the Diamond Baseball Holdings ("DBH") umbrella. In September 2022, we sold the DBH business, including the PDL Clubs, to Silver Lake, stockholders of the Company, for an aggregate purchase price of $280 million cash.
In April 2023, we entered into a transaction agreement with World Wrestling Entertainment, Inc. (“WWE”) to, among other things, form a new publicly traded company ("New PubCo") consisting of the UFC and WWE businesses where (A) EGH and/or its subsidiaries will hold (1) a 51% controlling non-economic voting interest in New PubCo and (2) a 51% economic interest in an operating subsidiary ("HoldCo"), which will own all of the assets of the UFC and WWE businesses, and (B) the stockholders of WWE will hold (1) a 49% voting interest in New PubCo and (2) a 100% economic interest in New PubCo, which will in turn hold a 49% economic interest in HoldCo (the "Transactions"). Subject to and upon closing of the Transactions, which is expected in the second half of 2023, New PubCo is expected to be included in our Owned Sports Properties segment.
Events, Experiences & Rights
In our Events, Experiences & Rights segment, we own, operate, and provide services to a diverse portfolioor represent hundreds of over 800 liveglobal events annually, including sportinglive sports events covering 2015 sports across more than 25 countries, international fashion weeks, art fairs and music, culinary and lifestyle festivals.festivals and major attractions. We own and operate many of these events, including the Miami Open HSBC Champions,and Madrid Open, Frieze Art Fair,art fairs, Barrett-Jackson, New York Fashion Week,Week: The Shows, and Hyde Park Winter Wonderland. We also operate other events on behalf of third parties, including the AIG Women’s Open and Honda Classic. Through On Location, we provide premium live event experiences historically providingglobally, servicing more than 900 per year1,200 events and experiences for sporting and music events such as the Super Bowl, the Aer Lingus Classic college football game, the Ryder Cup, the NCAA Final Four, Coachella and Coachella.the next three Olympic Games.
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, the National Football League,ATP Tour and the National Hockey League, as well as for our owned assets and channels. We also provide league advisory services givenOur production business is one of the arraylargest creators of experience we have to offer. Through IMG ARENA, we work withsports programming, responsible for thousands of hours of content on behalf of more than 470 leading sportsbook brands worldwide to deliver live streaming video200 federations, associations and data feeds for more than 45,000 sports events, annually,including the English Premier League, The R&A, DP World Tour, and our owned asset, UFC, 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 clientsowned channels Sport 24 and our owned assets via Endeavor Streaming.EDGEsport.
Additionally, we own and operate IMG Academy, a leading academicsports and education brand with an innovative suite of on-campus and online programming, including its Bradenton, Florida boarding school and sports training institution located in Florida,camps, IMG Academy+ online coaching, as well as Next College Student Athlete, ("NCSA"), which provides recruiting and admissions services to high school student athletes and college athletic departments and admissions officers (collectively, the "Academy"). In April 2023, we entered into a purchase agreement to sell all of the issued and outstanding Class A Units of IMG Academy Parent LLC, which is expected to close in the third quarter of 2023.
In April 2022, we acquired the Mutua Madrid Open tennis tournament and additional assets, including the Acciona Open de España golf tournament, from Super Slam Ltd and its affiliates. We paid $386.1 million for consideration and transfer fees at closing, an additional $31.8 million of consideration is payable within two years of closing, and $0.6 million of contingent consideration payable within three years of closing.
In August 2022, we acquired 55% of Barrett-Jackson Holdings, LLC ("Barrett-Jackson"), which is engaged in the business of collector car auctions and sales as well as other collector car related events and experiences, in exchange for consideration having an aggregate value of $256.9 million. The aggregate consideration consisted of $244.4 million of cash and 563,935 newly-issued shares of our Class A common stock valued at $12.5 million.
3024
In September 2022, we acquired the OpenBet business ("OpenBet") of Light & Wonder, Inc. (formerly known as Scientific Games Corporation) ("Light & Wonder") for consideration of $847.1 million, consisting of $800.4 million of cash and 2,305,794 newly-issued shares of our Class A common stock valued at $46.7 million. OpenBet consists of companies that provide products and services to sports betting operators for the purposes of sports wagering. We will create a new reportable segment that will include IMG ARENA and the OpenBet business in 2023.
Representation
Our Representation segment provides services to more than 7,000 talent and corporate clients. Our Representation business deploys a subset of our integrated capabilities on behalf of our clients.
Through our client representation and management businesses, including the WME talent agency and IMG Models, we represent a diverse group of talent across entertainment, sports, and fashion, including actors, directors, writers, athletes, models, musicians, and other artists, in a variety of mediums, such as film, television, books, and live events. Through our 160over90 business, we provide brand strategy, marketing, advertising, public relations, analytics, digital, activation, and experiential services to many of the world’s largest brands. Through IMG Licensing, we provide IP licensing services to a large portfolio of entertainment, sports, and consumer product brands, including representing these clients in the licensing of their logos, trade names and trademarks.
Previously, our Representation segment included our restricted Endeavor Content business (which now operates under the name Fifth Season), which provided a premium alternative to traditional content studios, offering a range of services including content development, production, financing, sales, and advisory services for creators. In February 2021, the Company signed the Franchise Agreements directly with the WGA. These Franchise Agreements included terms that, among other things, prohibited the Company from (a) negotiating packaging deals after June 30,January 2022, and (b) having more than a 20% non-controlling ownership or other financial interest in, or being owned or affiliated with any individual or entity that has more than a 20% non-controlling ownership or other financial interest in, any entity or individual engaged in the production or distribution of works written by WGA members under a WGA collective bargaining agreement. As a result, in the third quarter, the Company began marketing the restricted Endeavor Content business for sale and such assets and liabilities were reflected as held for sale in the consolidated balance sheet as of December 31, 2021. The sale ofwe sold 80% of the restricted Endeavor Content business closed in January 2022.connection with a franchise agreement and side letter that we signed directly with the Writer's Guild of America East and the Writer's Guild of America West (collectively, the "WGA"). Our retained 20% interest is reflectedaccounted for as an equity method investment as of September 30, 2022 and is not part of the Representation segment.
The collective bargaining agreement between the WGA, of which WME’s writer clients are members, on the one hand, and the alliance of Motion Picture and Television Producers (“AMPTP”), on the other hand, expired May 1, 2023, without agreement on new terms. As a result, the WGA has instructed our WGA-member clients to strike AMPTP companies until a new agreement is reached. As agents for these writers, WME cannot negotiate on the WGA-member writer clients’ behalf during the duration of the strike. The impact the strike is likely to have on our representation business as well as our consolidated results will depend on its scope and duration.
Sports Data & Technology
Our Sports Data & Technology segment, which was formed on January 1, 2023, is comprised of our sports data and technology business, IMG ARENA, and OpenBet, which were both previously included in our Events, Experiences & Rights segment. IMG ARENA delivers live streaming and data feeds for more than 65,000 sports events annually to sportsbooks, rightsholders and media partners around the globe. This data also powers IMG ARENA's portfolio of on-demand virtual sports products and front-end solutions, including the UFC Event Centre. Our OpenBet business specializes in betting engine products, services and technology, processing billions of bets annually, as well as trading, pricing and risk management tools; player account and wallet solutions; innovative front-end user experiences and user interfaces; and content offerings, such as BetBuilder, DonBest pricing feeds and a sports content aggregation platform.
Components of Our Operating Results of Operations
Revenue
In our Owned Sports Properties segment, we primarily generate revenue via media rights fees, pay-per-view, sponsorships, ticket sales, subscriptions, and license fees. 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 Representation segment, we generate revenue primarily through commissions, packaging fees, marketing and consulting fees, production fees, and content licensing fees. In our Sports Data & Technology segment, we primarily generate revenue via media and data rights fees, software license fees, and service fees, by providing media, data and technology platforms that offer tailored solutions for sportsbooks as well as proprietary trading and pricing solutions.
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 and data, including required payments related to sales agency contracts when minimum sales guarantees are not met.
Selling, General and Administrative
Our selling, general and administrative expenses primarily include personnel costs as well as rent, professional service costs and other overhead required to support our operations and corporate structure.
Provision for Income Taxes
EGH was incorporated as a Delaware corporation in January 2019. It was formed as a holding company for the purpose of completing an IPOinitial public offering ("IPO") and other related transactions. As the sole managing member of Endeavor Manager, which is the sole managing member of EOC, EGH operates and controls all the business and affairs of EOC, and through EOC and its subsidiaries, conducts the Company’s business. EGH is subject to corporate income tax on its share of taxable income or loss of EOC, derived from Endeavor Manager. EOC is treated as a partnership for U.S. federal income tax purposes and is therefore not subject to U.S. corporate income tax. However, certain of EOC’s subsidiaries are subject to U.S. or foreign corporate income tax.
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 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 beginning in March 2020. While activity has resumed in all of our businesses and restrictions have been lessened or lifted, restrictions could in the future be increased or reinstated.
UFC Buyout
Substantially simultaneous with the closing of the IPO, we consummated transactions whereby we acquired equity interests in UFC Parent (including warrants of UFC Parent) from the Other UFC Holders (or their affiliates) resulting in Endeavor Operating Company directly or indirectly owning 100% of the equity interests of UFC Parent (the "UFC Buyout").
As a result of the UFC Buyout, we no longer attribute income (loss) to non-controlling interests related to UFC in our consolidated statement of operations and recognized a reduction in nonredeemable non-controlling interests on our consolidated balance sheet. Furthermore, restrictions on dividends under the UFC LLC Agreement are no longer in place after the UFC Buyout, although restrictions from the UFC Credit Facilities remain in place.
3125
ReorganizationOrganization
Prior to the closing of the IPO on May 3, 2021, we undertook reorganization transactions, following which Endeavor Group Holdings became a holding company, and its principal asset is an equity interest in a newly formed subsidiary of Endeavor Group Holdings, Endeavor Manager, of which Endeavor Group Holdings serves as the managing member. Endeavor Manager is in turn the managing member of Endeavor Operating Company. Endeavor Group Holdings manages and operates the business and controls the strategic decisions and day-to-day operations of Endeavor Manager as its sole managing member, and Endeavor Operating Company as its indirect sole managing member, and also has a substantial financial interest in Endeavor Manager and, indirectly, Endeavor Operating Company. Accordingly, Endeavor Group Holdings consolidates the results of operations of Endeavor Manager and Endeavor Operating Company, and a portion of Endeavor Group Holding’s net income (loss) is allocated to non-controlling interests to reflect the entitlements of certain former members of Endeavor Operating Company who retain ownership interests in Endeavor Manager and Endeavor Operating Company.
After consummation of the IPO and the reorganization transactions, we became subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of Endeavor Manager and Endeavor Operating Company, and we are taxed at the prevailing corporate tax rates. Endeavor Operating Company makes distributions to us in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the tax receivable agreementsagreement ("TRA"). The Company entered into the TRAsTRA with certain persons that held direct or indirect interests in EOC and UFC Parent prior to the IPO. The TRAsTRA generally provideprovides for the payment by EGH of 85% of the amount of any tax benefits that EGH actually realizes as further described below under "Liquidity and Capital Resources—Future sources and uses of liquidity—Tax receivable agreements"agreement".
RESULTS OF OPERATIONS
The following is a discussion of our consolidated results of operations for the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022. This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP.
|
| Three Months Ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
| $ | 1,221,416 |
|
| $ | 1,391,303 |
|
| $ | 4,007,694 |
|
| $ | 3,572,157 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Direct operating costs |
|
| 398,518 |
|
|
| 673,215 |
|
|
| 1,601,544 |
|
|
| 1,790,562 |
|
Selling, general and administrative expenses |
|
| 601,469 |
|
|
| 520,626 |
|
|
| 1,729,174 |
|
|
| 1,686,840 |
|
Insurance recoveries |
|
| — |
|
|
| (12,233 | ) |
|
| (993 | ) |
|
| (42,100 | ) |
Depreciation and amortization |
|
| 63,571 |
|
|
| 71,661 |
|
|
| 195,177 |
|
|
| 208,058 |
|
Impairment charges |
|
| 689 |
|
|
| 754 |
|
|
| 689 |
|
|
| 4,524 |
|
Total operating expenses |
|
| 1,064,247 |
|
|
| 1,254,023 |
|
|
| 3,525,591 |
|
|
| 3,647,884 |
|
Operating income (loss) |
|
| 157,169 |
|
|
| 137,280 |
|
|
| 482,103 |
|
|
| (75,727 | ) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
| (75,608 | ) |
|
| (55,783 | ) |
|
| (197,385 | ) |
|
| (207,970 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28,628 | ) |
Tax receivable agreements liability adjustment |
|
| (10,405 | ) |
|
| — |
|
|
| (61,497 | ) |
|
| — |
|
Other income (expense), net |
|
| 9,325 |
|
|
| (7,719 | ) |
|
| 463,133 |
|
|
| (3,001 | ) |
Income (loss) before income taxes and equity losses of affiliates |
|
| 80,481 |
|
|
| 73,778 |
|
|
| 686,354 |
|
|
| (315,326 | ) |
Provision for (benefit from) income taxes |
|
| 8,515 |
|
|
| (7,718 | ) |
|
| (6,020 | ) |
|
| 58,285 |
|
Income (loss) before equity losses of affiliates |
|
| 71,966 |
|
|
| 81,496 |
|
|
| 692,374 |
|
|
| (373,611 | ) |
Equity losses of affiliates, net of tax |
|
| (84,504 | ) |
|
| (17,883 | ) |
|
| (145,026 | ) |
|
| (77,167 | ) |
Net (loss) income |
|
| (12,538 | ) |
|
| 63,613 |
|
|
| 547,348 |
|
|
| (450,778 | ) |
Less: Net (loss) income attributable to non-controlling interests |
|
| (2,499 | ) |
|
| 21,128 |
|
|
| 212,035 |
|
|
| (141,980 | ) |
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (31,686 | ) |
Net (loss) income attributable to Endeavor Group Holdings, Inc. |
| $ | (10,039 | ) |
| $ | 42,485 |
|
| $ | 335,313 |
|
| $ | (277,112 | ) |
32
|
| Three Months Ended March 31, |
| |||||
(in thousands) |
| 2023 |
|
| 2022 |
| ||
Revenue |
| $ | 1,596,837 |
|
| $ | 1,473,763 |
|
Operating expenses: |
|
|
|
|
|
| ||
Direct operating costs |
|
| 724,282 |
|
|
| 694,641 |
|
Selling, general and administrative expenses |
|
| 669,213 |
|
|
| 540,206 |
|
Insurance recoveries |
|
| — |
|
|
| (993 | ) |
Depreciation and amortization |
|
| 66,751 |
|
|
| 65,994 |
|
Total operating expenses |
|
| 1,460,246 |
|
|
| 1,299,848 |
|
Operating income |
|
| 136,591 |
|
|
| 173,915 |
|
Other (expense) income: |
|
|
|
|
|
| ||
Interest expense, net |
|
| (85,097 | ) |
|
| (59,272 | ) |
Tax receivable agreement liability adjustment |
|
| 2,344 |
|
|
| (53,497 | ) |
Other income, net |
|
| 24,433 |
|
|
| 459,941 |
|
Income before income taxes and equity losses of affiliates |
|
| 78,271 |
|
|
| 521,087 |
|
Provision for (benefit from) income taxes |
|
| 35,470 |
|
|
| (17,234 | ) |
Income before equity losses of affiliates |
|
| 42,801 |
|
|
| 538,321 |
|
Equity losses of affiliates, net of tax |
|
| (6,546 | ) |
|
| (20,655 | ) |
Net income |
|
| 36,255 |
|
|
| 517,666 |
|
Less: Net income attributable to non-controlling interests |
|
| 28,224 |
|
|
| 198,120 |
|
Net income attributable to Endeavor Group Holdings, Inc. |
| $ | 8,031 |
|
| $ | 319,546 |
|
Revenue
Revenue decreased $169.9increased $123.1 million, or 12.2%8.4%, to $1,221.4$1,596.8 million for the three months ended September 30, 2022March 31, 2023 compared to the three months ended September 30, 2021.March 31, 2022.
Excluding the revenue attributable to the restricted Endeavor Content business, revenue for the three months ended September 30, 2022 increased 15% compared to the three months ended September 30, 2021.
Revenue increased $435.5 million, or 12.2%, to $4,007.7 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.
Excluding the revenue attributable to the restricted Endeavor Content business, revenue for the nine months ended September 30, 2022 increased 27% compared to the nine months ended September 30, 2021.26
Direct operating costs
Direct operating costs decreased $274.7increased $29.6 million, or 40.8%4.3%, to $398.5$724.3 million for the three months ended September 30, 2022March 31, 2023 compared to the three months ended September 30, 2021. A decreaseMarch 31, 2022. The increase was primarily attributable to an increase of $285$28 million related tofor betting data costs and $21 million in connection with the sale of the restricted Endeavor Content business wasrevenue increases mentioned above for UFC and PBR. These increases were partially offset by the increases in costs associated with the revenue growth as described above.
Direct operating costs decreased $189.0 million, or 10.6%, to $1,601.5 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease was driven by the $345 milliona decrease related to the sale of the restricted Endeavor Content business recorded in the prior year and thea decrease in media rights and media production costs of $391 million due to the decrease in revenue described above, primarily due to the expiration of certain contracts in the second quarter of 2021 whose costs were in excess of revenue. These decreases were partially offset by increases of $545 million for costs related to live events and marketing and experiential activations due toactivation costs in connection with the increases in revenue as describeddecreases mentioned above.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $80.8$129.0 million, or 15.5%23.9%, to $601.5$669.2 million for the three months ended September 30, 2022March 31, 2023 compared to the three months ended September 30, 2021.March 31, 2022. The increase was primarilyprincipally due to higher cost of personnel, including equity-based compensation of $28 million, driven by growth in the business, the inclusion of Barrett-Jackson and OpenBet, and the continued ramp up ahead of the Olympics, as well as increases in travel expenses and other operating expenses.professional fees.
Selling, general and administrative expenses increased $42.3 million, or 2.5%, to $1,729.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was primarily due to higher cost of personnel, travel expenses and other operating expenses. The increase was partially offset by lower equity-based compensation expense as the prior period included charges for modifications of certain pre-IPO awards to remove certain forfeiture and discretionary call terms.
33
Insurance recoveries
We maintain events cancellation insurance policies for a significant number of our events. For the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, we recognized none $1.0 million, $12.2 million and $42.1$1.0 million of insurance recoveries, respectively, which primarily related to cancelled events in our Events, Experiences & Rights and Owned Sports Properties segments due to COVID-19.
Depreciation and amortization
Depreciation and amortization decreased $8.1increased $0.8 million, or 11.3%1.1%, to $63.6$66.8 million for the three months ended September 30, 2022March 31, 2023 compared to the three months ended September 30, 2021. DepreciationMarch 31, 2022. The increase was primarily driven by new capital expenditures being placed into service and amortization decreased $12.9 million, or 6.2%, to $195.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.The decreases were primarily drivenintangibles acquired through acquisitions partially offset by certain intangible assets becoming fully amortized partially offset by intangible assets acquired through acquisitions.
Impairment charges
Impairment charges of $0.7 million for the three and nine months ended September 30, 2022, related to goodwill in our Events, Experiences & Rights segment.
Impairment charges of $0.8 million and $4.5 million for the three and nine months ended September 30, 2021, respectively, related to goodwill in our Events, Experiences & Rights and Representation segments.amortized.
Interest expense, net
Interest expense, net increased $19.8$25.8 million, or 35.5%43.6% to $75.6$85.1 million for the three months ended September 30, 2022March 31, 2023 compared to the three months ended September 30, 2021.March 31, 2022. The increase was primarily driven by higher interest rates and higher average debt outstanding duringoffset by lower indebtedness.
Tax receivable agreement liability adjustment
For the three months ended September 30, 2022 as comparedMarch 31, 2023, the Company recorded a $2.3 million benefit for the tax receivable agreement liability related to a change in estimates related to future TRA payments.
For the three months ended September 30, 2021.
Interest expense, net decreased $10.6 million, or 5.1% to $197.4 million forMarch 31, 2022, the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease was primarily driven by lower average debt outstanding partially offset by higher interest rates during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.
Loss on extinguishment of debt of $28.6 million for the nine months ended September 30, 2021 was due to fees and expenses incurred for the early redemption of our term loans issued in May 2020.
Tax receivable agreements liability adjustment
The Company recorded $(10.4)a $53.5 million and $(61.5) million of adjustments in the three and nine months ended September 30, 2022, respectively,expense for the tax receivable agreementsagreement liability related to the expected realization of certain tax benefits after concluding that such TRA payments would be probable based on estimates of future taxable income over the terms of the TRAs.TRA.
Other income, (expense), net
Other income, (expense), net for the three months ended September 30, 2022March 31, 2023 was income of $9.3$24.4 million compared to expense of $7.7$459.9 million for the three months ended September 30, 2021.March 31, 2022. The income for the three months ended September 30, 2022 primarilyMarch 31, 2023 included a gaingains of $23.3$9.6 million, for the sale of DBH partially offset by $12.4$6.2 million forand $3.3 million due to foreign currency transaction losses.transactions, the sales of certain businesses and the change in the fair value of forward foreign exchange contracts, respectively. The expenseincome for the three months ended September 30, 2021 was primarily attributable to foreign currency transaction losses.
Other income (expense), net for the nine months ended September 30,March 31, 2022 included a gain of $463.6 million for the sale of the restricted Endeavor Content business a gain of $23.3 million for the sale of DBH and $16.6 million of gains from changes in fair value of equity investments partially offset by $33.2$4.7 million for foreign currency transaction losses and $8.8 million of losses due to the change in the fair value of embedded foreign currency derivatives. The expense for the nine months ended September 30, 2021 included $15.7 million of foreign currency transaction losses and $10.4 million of losses due to the change in the fair value of embedded foreign currency derivatives partially offset by $23.1 million of gains primarily from sales and changes in the fair value of equity investments.losses.
Provision for (benefit from) income taxes
For the three months ended September 30, 2022,March 31, 2023, we recorded a provision for income taxes of $8.5$35.5 million compared to a benefit from income taxes of $7.7$17.2 million for the three months ended September 30, 2021. For the nine months ended September 30, 2022, we recorded a benefit from income taxes of $6.0 million compared to a provision for income taxes of $58.3 million for the nine months ended September 30, 2021.March 31, 2022. The tax expense for the three months ended September 30, 2022March 31, 2023 differs from the same period in 20212022 primarily due to additional estimated annual pre-tax income in 2022 partially offset by the release of a $12.2$56.5 million valuation allowance on deferred tax assets in 2022. The tax expense for the ninethree months ended September 30, 2022 differs from the same period in 2021 primarily due to the release of a $65.9 million valuation allowance on deferred tax assets inMarch 31, 2022. The release of the valuation allowance was due to the expected realization of certain tax benefits in connection with the recording of a TRA liability. In addition, during the nine months ended September 30, 2021, $7.4 million of deferred tax liabilities associated with indefinite lived intangibles were recorded as a result of the IPO and tax expense of $10.2 million was recorded related to a change in tax rate in the United Kingdom.
On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 ("IRA"). The IRA, among other things, creates a 15% corporate alternative minimum tax ("CAMT") on adjusted financial statement income for applicable corporations. The CAMT is effective for tax years beginning after December 31, 2022. Additionally, the IRA establishes a 1% excise tax on stock repurchases made by publicly traded US corporations and is effective for stock repurchases after December 31, 2022. While we continue to evaluate the potential tax effects of the IRA, we are currently not expecting the IRA to have a material impact on our consolidated financial statements.
34
Equity losses of affiliates, net of tax
Equity losses of affiliates increased $66.6decreased $14.1 million to $84.5 million and increased $67.9 million to $145.0$6.5 million for the three and nine months ended September 30, 2022March 31, 2023 compared to the three and nine months ended September 30, 2021. Our equityMarch 31, 2022. The losses recorded for the three months ended March 31, 2023 related primarily related to our investment in Learfield IMG College and the 20% interest we retained in the restricted Endeavor Content business, which we sold in January 2022.
During The losses recorded for the three and nine months ended September 30,March 31, 2022 and the three and nine months ended September 30, 2021, we recorded $78.7 million and $137.5 million, respectively, and $17.9 million and $77.2 million, respectively, in equity losses resulting from losses related primarily to our investmentinvestments in Learfield IMG College. ForCollege and the three and nine months ended September 30, 2022, our share of the results of Learfield IMG College included a $56.1 million charge as a result of its annual goodwill and indefinite lived intangible asset impairment test, primarily due to continued losses.restricted Endeavor Content business.
Net (loss) income attributable to non-controlling interests
Subsequent to the IPO and associated reorganization transactions, non-controlling interests primarily relate to interests held by certain former members of Endeavor Operating Company who retained their ownership interests in Endeavor Manager and Endeavor Operating Company.
Net loss attributable to non-controlling interests was $2.5 million for the three months ended September 30, 2022 compared to net income attributable to non-controlling interests of $21.1 million for the three months ended September 30, 2021. The change was primarily due to the change in the amount of reported net loss for the three months ended September 30, 2022 versus the reported net income for the three months ended September 30, 2021.
Net income attributable to non-controlling interests was $212.0$28.2 million for the ninethree months ended September 30, 2022March 31, 2023 compared to net loss attributable to non-controlling interests of $142.0$198.1 million for the ninethree months ended September 30, 2021.March 31, 2022. The change was primarily driven by the significant decrease in net income in the comparable periods due to the changerecognition of the gain on the sale of the restricted Endeavor Content business in the amount of reported net income for the nine months ended September 30, 2022 versus the reported net loss for the nine months ended September 30, 2021 as well as the effect of the reorganization transactions.prior period.
27
SEGMENT RESULTS OF OPERATIONS
We classify our business into threefour reporting segments: Owned Sports Properties; Events, Experiences & Rights; Representation; and Representation.Sports Data & Technology. Our chief operating decision maker evaluates the performance of our segments based on segment Revenue and segment Adjusted EBITDA. Management believes segment Adjusted EBITDA is indicative of operational performance and ongoing profitability and is used to evaluate the operating performance of our segments and for planning and forecasting purposes, including the allocation of resources and capital.
Segment operating results reflect earnings before corporate and unallocated shared expenses. Segment operating results include allocations of certain costs, including facilities, technology, and other shared services costs, which are allocated based on metrics designed to correlate with consumption. These allocations are agreed-upon amounts between the businesses and may differ from amounts that would be negotiated in arm’s length transactions.
The following tables display Revenue and Adjusted EBITDA for each of our segments:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Owned Sports Properties |
| $ | 402,272 |
|
| $ | 288,521 |
|
| $ | 1,030,891 |
|
| $ | 830,867 |
|
| $ | 353,289 |
|
| $ | 296,689 |
|
Events, Experiences & Rights |
|
| 440,605 |
|
|
| 446,333 |
|
|
| 1,894,290 |
|
|
| 1,514,615 |
|
|
| 800,786 |
|
|
| 780,935 |
|
Representation |
|
| 388,335 |
|
|
| 664,723 |
|
|
| 1,103,611 |
|
|
| 1,241,864 |
|
|
| 350,240 |
|
|
| 357,321 |
|
Sports Data & Technology |
|
| 100,859 |
|
|
| 45,043 |
| ||||||||||||||||
Eliminations |
|
| (9,796 | ) |
|
| (8,274 | ) |
|
| (21,098 | ) |
|
| (15,189 | ) |
|
| (8,337 | ) |
|
| (6,225 | ) |
Total Revenue |
| $ | 1,221,416 |
|
| $ | 1,391,303 |
|
| $ | 4,007,694 |
|
| $ | 3,572,157 |
|
| $ | 1,596,837 |
|
| $ | 1,473,763 |
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Owned Sports Properties |
| $ | 195,749 |
|
| $ | 134,679 |
|
| $ | 505,760 |
|
| $ | 412,495 |
|
| $ | 185,671 |
|
| $ | 148,741 |
|
Events, Experiences & Rights |
|
| 49,668 |
|
|
| 84,993 |
|
|
| 290,268 |
|
|
| 160,843 |
|
|
| 107,991 |
|
|
| 126,001 |
|
Representation |
|
| 132,923 |
|
|
| 141,801 |
|
|
| 345,849 |
|
|
| 264,969 |
|
|
| 84,206 |
|
|
| 101,705 |
|
Sports Data & Technology |
|
| 4,472 |
|
|
| 6,482 |
| ||||||||||||||||
Corporate |
|
| (75,258 | ) |
|
| (78,156 | ) |
|
| (217,991 | ) |
|
| (187,476 | ) |
|
| (75,948 | ) |
|
| (68,480 | ) |
Owned Sports Properties
The following table sets forth our Owned Sports Properties segment results for the three and nine months ended September 30, 2022March 31, 2023 and 2021:2022:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 402,272 |
|
| $ | 288,521 |
|
| $ | 1,030,891 |
|
| $ | 830,867 |
|
Direct operating costs |
| $ | 131,537 |
|
| $ | 102,641 |
|
| $ | 329,102 |
|
| $ | 275,935 |
|
Selling, general and administrative expenses |
| $ | 72,345 |
|
| $ | 48,060 |
|
| $ | 192,709 |
|
| $ | 140,162 |
|
Adjusted EBITDA |
| $ | 195,749 |
|
| $ | 134,679 |
|
| $ | 505,760 |
|
| $ | 412,495 |
|
Adjusted EBITDA margin |
|
| 48.7 | % |
|
| 46.7 | % |
|
| 49.1 | % |
|
| 49.6 | % |
35
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
(in thousands) |
|
|
|
|
|
| ||
Revenue |
| $ | 353,289 |
|
| $ | 296,689 |
|
Direct operating costs |
| $ | 115,773 |
|
| $ | 94,716 |
|
Selling, general and administrative expenses |
| $ | 52,654 |
|
| $ | 52,872 |
|
Adjusted EBITDA |
| $ | 185,671 |
|
| $ | 148,741 |
|
Adjusted EBITDA margin |
|
| 52.6 | % |
|
| 50.1 | % |
Three months ended September 30, 2022March 31, 2023 compared to three months ended September 30, 2021March 31, 2022
Revenue for the three months ended September 30, 2022March 31, 2023 increased $113.8$56.6 million, or 39.4%19.1%, to $402.3$353.3 million, compared to the three months ended September 30, 2021.March 31, 2022. The increase was driven primarily by growth atan increase in UFC of $46 million, which was due to increasedhigher media rights fees, greater sponsorship, licensing, commercial PPV and event related revenue driven by andue to one additional PPV event, as well as more events with live audiences this year. PBR revenue increased $9 million primarily due to an increase in ticket sales due to greater demand and an increase at PBR primarily due toin revenue from the new team series format. In addition, the acquisition of ten PDL Clubs in December 2021 and January 2022 that operated under the DBH umbrella contributed $33 million. DBH was sold in September 2022.teams series.
Direct operating costs for the three months ended September 30, 2022March 31, 2023 increased $28.9$21.1 million, or 28.2%22.2%, to $131.5$115.8 million, compared to the three months ended September 30, 2021.March 31, 2022. The increase is duewas attributable to increases in athlete, production, marketing and event expenses for UFC primarily from having four PPV events in the changescurrent quarter, three of which were outside the U.S., as compared to three domestic PPV events in revenue described above.2022. PBR direct operating costs also increased driven by event growth.
Selling, general and administrative expenses for the three months ended September 30, 2022 increased $24.3March 31, 2023 decreased $0.2 million, or 50.5%0.4%, to $72.3$52.7 million, compared to the three months ended September 30, 2021.March 31, 2022. The increasedecrease was primarily attributable to $14 million of expenses incurredcosts associated with Diamond Baseball Holdings, which was sold in September 2022, partially offset by DBH, an increase in travel expenses related to UFC due to an increase in events held outside of Las Vegas, including in Europe, and an increase in cost of personnel.personnel to support the growth of the business.
Adjusted EBITDA for the three months ended September 30, 2022March 31, 2023 increased $61.1$36.9 million, or 45.3%24.8%, to $195.7$185.7 million, compared to the three months ended September 30, 2021.March 31, 2022. The increase in Adjusted EBITDA was primarily driven by increases in revenue partially offset by increases in direct operating costs and selling, general and administrative expenses.costs.
Nine months ended September 30, 2022 compared to nine months ended September 30, 202128
Direct operating costs for the nine months ended September 30, 2022 increased $53.2 million, or 19.3%, to $329.1 million, compared to the nine months ended September 30, 2021. The increase is due to the change in revenue described above partially offset by lower athlete costs for UFC.
Selling, general and administrative expenses for the nine months ended September 30, 2022 increased $52.5 million, or 37.5%, to $192.7 million, compared to the nine months ended September 30, 2021. The increase was primarily attributable to $37 million of expenses incurred by DBH and an increase in cost of personnel and travel expenses.
Adjusted EBITDA for the nine months ended September 30, 2022 increased $93.3 million, or 22.6%, to $505.8 million, compared to the nine months ended September 30, 2021. The increase in Adjusted EBITDA was primarily driven by increases in revenue partially offset by increases in direct operating costs and selling, general and administrative expenses.
Events, Experiences & Rights
The following table sets forth our Events, Experiences & Rights segment results for three and nine months ended September 30, 2022March 31, 2023 and 2021:2022:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenue |
| $ | 440,605 |
|
| $ | 446,333 |
|
| $ | 1,894,290 |
|
| $ | 1,514,615 |
|
| $ | 800,786 |
|
| $ | 780,935 |
|
Direct operating costs |
| $ | 224,598 |
|
| $ | 235,645 |
|
| $ | 1,119,855 |
|
| $ | 1,046,714 |
|
| $ | 508,975 |
|
| $ | 509,631 |
|
Selling, general and administrative expenses |
| $ | 169,125 |
|
| $ | 138,567 |
|
| $ | 494,087 |
|
| $ | 351,642 |
|
| $ | 185,671 |
|
| $ | 150,300 |
|
Adjusted EBITDA |
| $ | 49,668 |
|
| $ | 84,993 |
|
| $ | 290,268 |
|
| $ | 160,843 |
|
| $ | 107,991 |
|
| $ | 126,001 |
|
Adjusted EBITDA margin |
|
| 11.3 | % |
|
| 19.0 | % |
|
| 15.3 | % |
|
| 10.6 | % |
|
| 13.5 | % |
|
| 16.1 | % |
Three months ended September 30, 2022March 31, 2023 compared to three months ended September 30, 2021March 31, 2022
Revenue for the three months ended September 30, 2022 decreased $5.7March 31, 2023 increased $19.9 million, or 1.3%2.5%, to $440.6$800.8 million, compared to the three months ended September 30, 2021.March 31, 2022. Event and performance revenue increased $22 million primarily due to Barrett-Jackson, which was acquired in August 2022, increases from tennis events, including the Miami Open, and growth at the Academy, partially offset by the discontinuance of On Location's music festival business in Mexico. which was $75 million in the prior year quarter. Media rights fees and media production revenue decreased $26increased $6 million primarily due to the new biennial Arabian Gulf Cup event partially offset by the timing of the 2021 UEFA Euro Championship and the 2021 CONCACAF World Cupworld cup qualifying matches which take place every four years. Total event and academy revenue increased $21 million primarily due to new events, including Frieze Seoul, and events returning in 2022 that were cancelled in 2021, including the Aer Lingus Classic and various music events, as well as growth in Academy due to increased enrollment in summer camps and NCSA memberships. These increases in event and academy revenue were partially offset by certain events held in Q2 2022 that were held in Q3 2021 as well as the 2021 Ryder Cup, which is a biennial event.prior year quarter.
Direct operating costs for the three months ended September 30, 2022March 31, 2023 decreased $11.0$0.7 million, or 4.7%0.1%, to $224.6$509.0 million, compared to the three months ended September 30, 2021.March 31, 2022. The decrease isincrease was due to the changesincreases in related revenue described above.above but were more than offset by the lack of music festivals in the three months ended March 31, 2023.
Selling, general and administrative expenses for the three months ended September 30, 2022March 31, 2023 increased $30.6$35.4 million, or 22.1%23.5%, to $169.1$185.7 million, compared to the three months ended September 30, 2021.March 31, 2022. The increase was primarily driven by increased cost of personnel includingrelated to the build outinclusion of Barrett-Jackson in the current year, the continued ramp up ahead of the Olympics business, and the expense incurred by Barrett Jackson, acquired in August 2022.growth of the business.
Adjusted EBITDA for the three months ended September 30, 2022March 31, 2023 decreased $35.3$18.0 million, or 41.6%14.3%, to $49.7$108.0 million, compared to the three months ended September 30, 2021.March 31, 2022. The decrease in Adjusted EBITDA was primarily driven by increases inan increase selling, general and administrative expenses and insurance recoveries received in the prior year related to cancelled events.
36
Nine months ended September 30, 2022 compared to nine months ended September 30, 2021
Revenue for the nine months ended September 30, 2022 increased $379.7 million, or 25.1%, to $1,894.3 million, compared to the nine months ended September 30, 2021. Event and academy revenue increased $716 million primarily due to events returning in 2022 that were cancelled in 2021 or experienced fan restrictions due to COVID-19, including Super Bowl LVI, NCAA Men’s March Madness, Miami Open, and various music events. Increases were also due to the Madrid Open, which was acquired in April 2022, as well as growth in Academy due to increased enrollment and NCSA, which was acquired in June 2021. Media rights fees and media production revenue decreased $337 million primarily due to the expiration of two European soccer contracts in the second quarter of 2021 that were not renewed.
Direct operating costs for the nine months ended September 30, 2022 increased $73.1 million, or 7.0%, to $1,119.9 million, compared to the nine months ended September 30, 2021. Live event and performance costs increased $462 million due to the increases in related revenue. This increase was partially offset by an increase in revenue and a slight decrease in media rights and media production costs of $391 million due to the decrease in revenue described above, primarily due to the expiration of certain contracts in the second quarter of 2021 whose costs were in excess of revenue.
Selling, general and administrative expenses for the nine months ended September 30, 2022 increased $142.4 million, or 40.5%, to $494.1 million, compared to the nine months ended September 30, 2021. The increase was primarily driven by increased cost of personnel, including the buildout of the Olympics business, and the expenses incurred by NCSA, acquired in June 2021.
Adjusted EBITDA for the nine months ended September 30, 2022 increased $129.4 million, or 80.5%, to $290.3 million, compared to the nine months ended September 30, 2021. The increase in Adjusted EBITDA was primarily driven by the growth in revenue partially offset by increases in related direct operating costs and selling, general and administrative expenses as well as a decrease in insurance recoveries related to cancelled events.costs.
Representation
The following table sets forth our Representation segment results for three and nine months ended September 30, 2022March 31, 2023 and 2021:2022:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenue |
| $ | 388,335 |
|
| $ | 664,723 |
|
| $ | 1,103,611 |
|
| $ | 1,241,864 |
|
| $ | 350,240 |
|
| $ | 357,321 |
|
Direct operating costs |
| $ | 52,163 |
|
| $ | 341,895 |
|
| $ | 173,614 |
|
| $ | 481,796 |
|
| $ | 54,512 |
|
| $ | 69,773 |
|
Selling, general and administrative expenses |
| $ | 203,016 |
|
| $ | 181,322 |
|
| $ | 583,851 |
|
| $ | 495,173 |
|
| $ | 211,739 |
|
| $ | 185,882 |
|
Adjusted EBITDA |
| $ | 132,923 |
|
| $ | 141,801 |
|
| $ | 345,849 |
|
| $ | 264,969 |
|
| $ | 84,206 |
|
| $ | 101,705 |
|
Adjusted EBITDA margin |
|
| 34.2 | % |
|
| 21.3 | % |
|
| 31.3 | % |
|
| 21.3 | % |
|
| 24.0 | % |
|
| 28.5 | % |
Three months ended September 30, 2022March 31, 2023 compared to three months ended September 30, 2021March 31, 2022
Revenue for the three months ended September 30, 2022March 31, 2023 decreased $276.4$7.1 million, or 41.6%2.0%, to $388.3$350.2 million, compared to the three months ended September 30, 2021.March 31, 2022. The decrease was primarily attributable to the $334$14 million of revenue related to the restricted Endeavor Content business recorded in the prior year, which was sold in January 2022. This2022, as well as a decrease wasat our marketing and experiential business due primarily to the disposition of certain contracts in the quarter. These decreases were partially offset by an increase of $62$13 million related to client commissions, due primarily to the continued strong demand for our talent and the recovery of live entertainment, predominantlyagency business driven by television, music and corporate spending on marketing and experiential activations as the prior year continued to be impacted by COVID-19. Excluding the revenue attributable to the restricted Endeavor Content business, revenue for the three months ended September 30, 2022 increased 17% compared to the three months ended September 30, 2021.fashion.
Direct operating costs for the three months ended September 30, 2022March 31, 2023 decreased $289.7$15.3 million, or 84.7%21.9%, to $52.2$54.5 million, compared to the three months ended September 30, 2021.March 31, 2022. The decrease was primarily attributable to the above mentioned sale of the restricted Endeavor Content business.business and to decreases in marketing and experiential activations.
Selling, general and administrative expenses for the three months ended September 30, 2022March 31, 2023 increased $21.7$25.9 million, or 12.0%13.9%, to $203.0$211.7 million, compared to the three months ended September 30, 2021.March 31, 2022. The increase was primarily driven by cost of personnel and travel expenses partially offset by the sale of the restricted Endeavor Content business in January 2022.
Adjusted EBITDA for the three months ended September 30, 2022 decreased $8.9 million, or 6.3%, to $132.9 million, compared to the three months ended September 30, 2021. The decrease was primarily attributable to the $26 million of Adjusted EBITDA in the prior year related to the restricted Endeavor Content business, which was sold in January 2022. This was partially offset by the revenue growth from the rest of the segment, as discussed above, net of the increases in selling, general and administrative expenses.
Nine months ended September 30, 2022 compared to nine months ended September 30, 2021
Revenue for the nine months ended September 30, 2022 decreased $138.3 million, or 11.1%, to $1,103.6 million, compared to the nine months ended September 30, 2021. The decrease was primarily attributable to the $407 million of revenue related to the restricted Endeavor Content business recorded in prior year, which was sold in January 2022. This decrease was partially offset by an increase of $254 million related to client commissions, due primarily to the continued strong demand for our talent and the recovery of live entertainment, predominantly music, and corporate spending on marketing and experiential activations as the prior year was impacted by COVID-19. Excluding the revenue attributable to the restricted Endeavor Content business, revenue for the nine months ended September 30, 2022 increased 32% compared to the nine months ended September 30, 2021.
Direct operating costs for the nine months ended September 30, 2022 decreased $308.2 million, or 64.0%, to $173.6 million, compared to the nine months ended September 30, 2021. The decrease attributable to the sale of the restricted Endeavor Content business of $345 million was partially offset by an increase in marketing and experiential activations due to the increase in revenue described above.
37
Selling, general and administrative expenses for the nine months ended September 30, 2022 increased $88.7 million, or 17.9%, to $583.9 million, compared to the nine months ended September 30, 2021. The increase was primarily driven by cost of personnel and travel expenses partially offset by the sale of the restricted Endeavor Content business.
Adjusted EBITDA for the ninethree months ended September 30, 2022 increased $80.9March 31, 2023 decreased $17.5 million, or 30.5%17.2%, to $345.8$84.2 million, compared to the ninethree months ended September 30, 2021.March 31, 2022. The increasedecrease in Adjusted EBITDA was primarily due to the growth in revenue, excluding the Endeavor Content business which was sold in January 2022, partially offsetdriven by the increase in selling, general and administrative expenses.expenses and decreases in revenue partially offset by a decrease in direct operating costs.
29
Sports Data & Technology
The following table sets forth our Sports Data & Technology segment results for three months ended March 31, 2023 and 2022:
|
| Three Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
(in thousands) |
|
|
|
|
|
| ||
Revenue |
| $ | 100,859 |
|
| $ | 45,043 |
|
Direct operating costs |
| $ | 54,152 |
|
| $ | 26,688 |
|
Selling, general and administrative expenses |
| $ | 42,005 |
|
| $ | 11,872 |
|
Adjusted EBITDA |
| $ | 4,472 |
|
| $ | 6,482 |
|
Adjusted EBITDA margin |
|
| 4.4 | % |
|
| 14.4 | % |
Three months ended March 31, 2023 compared to three months ended March 31, 2022
Revenue for the three months ended March 31, 2023 increased $55.8 million, or 123.9%, to $100.9 million, compared to the three months ended March 31, 2022. The increase was primarily driven by OpenBet, which was acquired in September 2022, and growth in existing betting data contracts at IMG ARENA.
Direct operating costs for the three months ended March 31, 2023 increased $27.5 million, or 102.9%, to $54.2 million, compared to the three months ended March 31, 2023. The increase was primarily driven by costs associated with the revenue growth described above, as well as new betting data costs in advance of the sales cycle at IMG ARENA.
Selling, general and administrative expenses for the three months ended March 31, 2023 increased $30.1 million, or 253.8%, to $42.0 million, compared to the three months ended March 31, 2022. The increase was primarily due to the inclusion of OpenBet, which was acquired in September 2022.
Adjusted EBITDA for the three months ended March 31, 2023 decreased $2.0 million, or 31.0%, to $4.5 million, compared to the three months ended March 31, 2023. Adjusted EBITDA was benefited from the inclusion of OpenBet but was more than offset by the new betting data costs at IMG ARENA that were incurred in advance of the sales cycle.
Corporate
Corporate primarily consists of overhead, personnel costs, and costs associated with corporate initiatives that are not fully allocated to the operating divisions. Such expenses include compensation and other benefits for corporate office employees, rent, professional fees related to internal control compliance and monitoring, financial statement audits and legal, information technology and insurance that is managed through our corporate office.
The following table sets forth our results for Corporate for the three and nine months ended September 30, 2022March 31, 2023 and 2021:2022:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Adjusted EBITDA |
| $ | (75,258 | ) |
| $ | (78,156 | ) |
| $ | (217,991 | ) |
| $ | (187,476 | ) |
| $ | (75,948 | ) |
| $ | (68,480 | ) |
Adjusted EBITDA for the three months ended September 30, 2022 improved $2.9March 31, 2023 decreased $7.5 million, or 3.7%10.9%, to $(75.3)$(75.9) million, compared to the three months ended September 30, 2021.March 31, 2022. The improvement was driven by a decrease in cost of personnel.
Adjusted EBITDA for the nine months ended September 30, 2022 decreased $30.5 million, or 16.3%, to $(218.0) million, compared to the nine months ended September 30, 2021. The decreasedecline was driven by an increase in cost of personnel and other generalan increase in travel and administrativeentertainment expenses.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA is a non-GAAP financial measure and is defined as net income (loss), excluding 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, tax receivable agreementsagreement liability adjustment, and certain other items, including gains/losses on business divestitures, 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 and the tax receivable agreement, which may not be comparable with other companies based on our tax and corporate 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 measureEBITDA and is defined as net income (loss) attributable to Endeavor Group Holdings adjusted to exclude our share (excluding those relating to certain 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 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 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 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:
30
We compensate for these limitations by using Adjusted EBITDA and Adjusted EBITDA margin and Adjusted Net Income along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance.
Adjusted EBITDA and 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 (loss) income as indicators of our financial performance, as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our
38
obligations. Although we use Adjusted EBITDA and 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 and 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
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Net (loss) income |
| $ | (12,538 | ) |
| $ | 63,613 |
|
| $ | 547,348 |
|
| $ | (450,778 | ) | ||||||||
Net income |
| $ | 36,255 |
|
| $ | 517,666 |
| ||||||||||||||||
Provision for (benefit from) income taxes |
|
| 8,515 |
|
|
| (7,718 | ) |
|
| (6,020 | ) |
|
| 58,285 |
|
|
| 35,470 |
|
|
| (17,234 | ) |
Interest expense, net |
|
| 75,608 |
|
|
| 55,783 |
|
|
| 197,385 |
|
|
| 207,970 |
|
|
| 85,097 |
|
|
| 59,272 |
|
Depreciation and amortization |
|
| 63,571 |
|
|
| 71,661 |
|
|
| 195,177 |
|
|
| 208,058 |
|
|
| 66,751 |
|
|
| 65,994 |
|
Equity-based compensation expense (1) |
|
| 48,388 |
|
|
| 60,885 |
|
|
| 159,851 |
|
|
| 464,393 |
|
|
| 78,691 |
|
|
| 50,856 |
|
Merger, acquisition and earn-out costs (2) |
|
| 30,529 |
|
|
| 13,107 |
|
|
| 57,891 |
|
|
| 38,291 |
|
|
| 14,534 |
|
|
| 12,794 |
|
Certain legal costs (3) |
|
| 1,604 |
|
|
| (266 | ) |
|
| 11,204 |
|
|
| 4,260 |
|
|
| 2,422 |
|
|
| 1,002 |
|
Restructuring, severance and impairment (4) |
|
| 869 |
|
|
| 2,179 |
|
|
| 2,829 |
|
|
| 6,612 |
|
|
| 8,200 |
|
|
| 518 |
|
Fair value adjustment - equity investments (5) |
|
| (291 | ) |
|
| 90 |
|
|
| (13,635 | ) |
|
| (13,614 | ) |
|
| (713 | ) |
|
| (1,653 | ) |
Equity method losses - Learfield IMG College and Endeavor Content (6) |
|
| 83,171 |
|
|
| 14,831 |
|
|
| 149,086 |
|
|
| 76,291 |
|
|
| 8,523 |
|
|
| 24,404 |
|
Gain on sale of the restricted Endeavor Content business(7) |
|
| — |
|
|
| — |
|
|
| (463,641 | ) |
|
| — |
|
|
| — |
|
|
| (463,641 | ) |
Tax receivable agreements liability adjustment (8) |
|
| 10,405 |
|
|
| — |
|
|
| 61,497 |
|
|
| — |
| ||||||||
Tax receivable agreement liability adjustment (8) |
|
| (2,344 | ) |
|
| 53,497 |
| ||||||||||||||||
Other (9) |
|
| (6,749 | ) |
|
| 9,152 |
|
|
| 24,914 |
|
|
| 51,063 |
|
|
| (26,494 | ) |
|
| 10,974 |
|
Adjusted EBITDA |
| $ | 303,082 |
|
| $ | 283,317 |
|
| $ | 923,886 |
|
| $ | 650,831 |
|
| $ | 306,392 |
|
| $ | 314,449 |
|
Net (loss) income margin |
|
| (1.0 | %) |
|
| 4.6 | % |
|
| 13.7 | % |
|
| (12.6 | %) | ||||||||
Net income margin |
|
| 2.3 | % |
|
| 35.1 | % | ||||||||||||||||
Adjusted EBITDA margin |
|
| 24.8 | % |
|
| 20.4 | % |
|
| 23.1 | % |
|
| 18.2 | % |
|
| 19.2 | % |
|
| 21.3 | % |
Adjusted Net Income
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net (loss) income |
| $ | (12,538 | ) |
| $ | 63,613 |
|
| $ | 547,348 |
|
| $ | (450,778 | ) |
Net (income) loss attributable to non-controlling interests |
|
| 2,499 |
|
|
| (21,128 | ) |
|
| (212,035 | ) |
|
| 141,980 |
|
Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 31,686 |
|
Net (loss) income attributable to Endeavor Group Holdings, Inc. |
|
| (10,039 | ) |
|
| 42,485 |
|
|
| 335,313 |
|
|
| (277,112 | ) |
Amortization |
|
| 39,153 |
|
|
| 48,646 |
|
|
| 123,449 |
|
|
| 141,023 |
|
Equity-based compensation expense (1) |
|
| 48,388 |
|
|
| 60,885 |
|
|
| 159,851 |
|
|
| 464,393 |
|
Merger, acquisition and earn-out costs (2) |
|
| 30,529 |
|
|
| 13,107 |
|
|
| 57,891 |
|
|
| 38,291 |
|
Certain legal costs (3) |
|
| 1,604 |
|
|
| (266 | ) |
|
| 11,204 |
|
|
| 4,260 |
|
Restructuring, severance and impairment (4) |
|
| 869 |
|
|
| 2,179 |
|
|
| 2,829 |
|
|
| 6,612 |
|
Fair value adjustment - equity investments (5) |
|
| (291 | ) |
|
| 90 |
|
|
| (13,635 | ) |
|
| (13,614 | ) |
Equity method losses - Learfield IMG College and Endeavor Content (6) |
|
| 83,171 |
|
|
| 14,831 |
|
|
| 149,086 |
|
|
| 76,291 |
|
Gain on sale of the restricted Endeavor Content business(7) |
|
| — |
|
|
| — |
|
|
| (463,641 | ) |
|
| — |
|
Tax receivable agreements liability adjustment (8) |
|
| 10,405 |
|
|
| — |
|
|
| 61,497 |
|
|
| — |
|
Other (9) |
|
| (6,749 | ) |
|
| 9,152 |
|
|
| 24,914 |
|
|
| 51,063 |
|
Tax effects of adjustments (10) |
|
| (8,952 | ) |
|
| 19,176 |
|
|
| 1,323 |
|
|
| 90,407 |
|
Other tax items (11) |
|
| (12,241 | ) |
|
| — |
|
|
| (65,924 | ) |
|
| 17,608 |
|
Adjustments allocated to non-controlling interests (12) |
|
| (67,416 | ) |
|
| (66,566 | ) |
|
| (16,044 | ) |
|
| (404,028 | ) |
Adjusted Net Income |
| $ | 108,431 |
|
| $ | 143,719 |
|
| $ | 368,113 |
|
| $ | 195,194 |
|
The decreaseincrease for the three months ended September 30, 2022March 31, 2023 as compared to the three months ended September 30, 2021March 31, 2022 was primarily due to grants issued under the Endeavor Group Holdings, Inc.'s 2021 Incentive Award Plan that were issued in connection withduring the IPO.
The decrease for the ninethree months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was primarily due to modification of certain pre-IPO equity-based awards primarily to remove certain forfeiture and discretionary call terms as well as grants under the 2021 Incentive Award Plan that were issued in connection with the IPO.
March 31, 2023. Equity-based compensation was recognized in all segments and Corporate for the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022.
39
Such costs for the three months ended September 30, 2022March 31, 2023 primarily related to professional advisor costs, which were approximately $21$8 million and primarily related to our Events, Experiences & Rights segmentand Representation segments and Corporate. Fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition earn-out adjustments wereof approximately $10$4 million, which primarily related to our Events, Experiences & Rights, Representation segment.and Sport Data & Technology segments.
Such costs for the three months ended September 30, 2021 primarily related to professional advisor costs, which were approximately $9 million and primarily related to Corporate. Fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition earn-out adjustments were approximately $4 million, which primarily related to our Representation and Events, Experiences & Rights segments.
Such costs for the nine months ended September 30,March 31, 2022 primarily related to professional advisor costs of approximately $33 million and related to all of our segments. Fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition earn-out adjustments were approximately $25 million, which primarily related to our Representation segment.
Such costs for the nine months ended September 30, 2021 primarily related to fair value adjustments for contingent consideration liabilities related to acquired businesses and acquisition earn-out adjustments of approximately $24$8 million, which primarily related to our Events, Experiences & Rights and Representation segments. Professional advisor costs were approximately $14$5 million and primarily related to all of our Events, Experiences & Rights segment and Corporate.segments.
Such costs for the three months ended September 30, 2022March 31, 2023 primarily relatedrelates to restructuring expenses in our Events, Experiences & Rights segment.
Such costs for the three months ended September 30, 2021 primarily related to the impairment of goodwill in our Representation segment.
Such costs for the nine months ended September 30, 2022 primarily related to a write off of an asset in Corporate and the restructuring expenses in our Events, Experiences & Rights and Representation segments.segments and Corporate.
Such costs for the ninethree months ended September 30, 2021March 31, 2022 primarily relatedrelates to the impairment of goodwillrestructuring expenses in our Representation and Events, Experiences & Rights and Representation segments.
31
For the three months ended March, 31, 2022, includes a $53.5 million expense for the tax receivable agreement liability related to the expected realization of certain tax benefits after concluding that such TRA payments would be probable based on estimates of future taxable income over the terms of the TRAs.TRA.
For the three months ended March 31, 2022, other costs were comprised primarily of 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 the acquisition of businesses, which have Debt facilities As of Credit Facilities As of In May 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. In August 2022, the Company entered into $750 million of an additional interest rate hedge 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 3.162% commencing from August 2022 until August 2024. As of As of 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. 32 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. This covenant was not applicable on The Credit Facilities contain certain restrictive covenants around indebtedness, liens, fundamental changes, guarantees, investments, asset sales, and transactions with affiliates. The borrower’s obligations under the Credit Facilities are guaranteed by certain of our indirect wholly-owned domestic restricted subsidiaries, subject to certain exceptions. All obligations under the Credit Facilities and the related guarantees are secured by a perfected first priority lien on substantially all of the borrower’s and the guarantors’ tangible and intangible assets, in each case, subject to permitted liens and certain exceptions. UFC Credit Facilities As of As of The UFC Credit Facilities also include a revolving credit facility, which has $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 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 applicable on The UFC Credit Facilities contain certain restrictive covenants around indebtedness, liens, fundamental changes, guarantees, investments, asset sales and transactions with affiliates. The borrower’s obligations under the UFC Credit Facilities are guaranteed by certain of UFC Parent’s indirect wholly-owned domestic restricted subsidiaries, subject to certain exceptions. All obligations under the UFC Credit Facilities and the related guarantees are secured by a perfected first priority lien on substantially all of the borrower’s and the guarantors’ tangible and intangible assets, in each case, subject to permitted liens and certain exceptions. Restrictions on dividends Both the Credit Facilities and the UFC Credit Facilities contain restrictions on our ability to make distributions and other payments from the respective credit groups and which therefore limit our ability to receive cash from our operating units to make dividends to the holders of Class A common stock. These restrictions on dividends include exceptions for, among other things, (1) amounts necessary to make tax payments, (2) a limited annual amount for employee equity repurchases, (3) distributions required to fund certain parent entities, (4) other specific allowable situations and (5) a general restricted payment basket, as defined in each of the Credit Facilities and the UFC Credit Facilities. Other debt As of Our On Location revolving credit agreement has $42.9 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 Cash Flows Overview Nine Months Ended September 30, (in thousands) 2022 2021 Net income, adjusted for non-cash items $ 662,590 $ 741,224 Changes in working capital (291,564 ) 64,987 Changes in non-current assets and liabilities 34,143 (618,142 ) Net cash provided by operating activities $ 405,169 $ 188,069 Net cash used in investing activities $ (661,049 ) $ (408,630 ) Net cash (used in) provided by financing activities $ (268,171 ) $ 371,055 Three Months Ended March 31, (in thousands) 2023 2022 Net cash provided by (used in) operating activities $ 96,722 $ (58,098 ) Net cash (used in) provided by investing activities $ (74,120 ) $ 544,739 Net cash used in financing activities $ (89,862 ) $ (19,143 ) Investing activities Financing activities Future sources and uses of liquidity Our sources of liquidity are (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) and (4) proceeds from the potential We expect that our primary liquidity needs will be cash to (1) provide capital to facilitate organic growth of our business, (2) fund future investments, acquisitions and earn-outs and deferred purchase price payments from prior acquisitions, (3) pay operating expenses, including cash compensation to our employees, (4) fund capital expenditures, (5) pay interest and principal when due on our Senior Credit Facilities, (6) make payments under the tax receivable We may also use our cash to effect equity repurchases of our Class A common stock under our stock repurchase authorization and/or to pay cash dividends. On May 7, 2023, we approved an 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 Tax distributions by Endeavor Operating Company Other than as described above and below, we expect to retain all our future earnings for use in the operation and expansion of our Subject to funds being legally available, we expect that Endeavor Operating Company will make distributions to each of its members, including the Endeavor Profits Units holders and Endeavor Manager, in amounts sufficient to pay applicable taxes attributable to each member’s allocable share of taxable income of Endeavor Operating Company. Tax distributions made in respect of Endeavor Operating Company Units (but not Endeavor Profits Units) will generally be made pro rata in respect of such Units, as described in the Endeavor Operating Company LLC Agreement. However, in certain situations, tax distributions made to Endeavor Manager may be reduced (relative to those tax distributions made to the other members of Endeavor Operating Company) to reflect the income tax rates to which Endeavor Manager and Endeavor Group Holdings are subject and certain other factors. Non pro-rata tax distributions may be paid to holders of Endeavor Profits Units. Tax Receivable Generally, we are required under the tax receivable Under the tax receivable Critical Accounting Estimates For a description of our policies regarding our critical accounting estimates, see "Critical Accounting Policies and Estimates" of Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Recent Accounting Standards See Note 3 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further information on certain accounting standards that have been recently adopted or that have not yet been required to be implemented and may be applicable to our future operations. Item 3. Quantitative and Qualitative Disclosures 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. $2.25 billion of our Senior Credit Facilities have been swapped to fixed rates. For the remainder, holding debt levels constant as of March 31, 2023, a 1% increase in the effective interest rates would have increased our annual interest expense by Certain tenors of LIBOR were discontinued on December 31, 2021 and the remaining tenors are expected to be discontinued on or after June 30, 2023. Our loans are benchmarked off 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 the 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. We maintain our cash and cash equivalents with various major banks and other high-quality financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions and, in the event of failure of any of the financial institutions where we maintain our cash and cash equivalents or any inability to access or delays in our ability to access our funds could adversely affect our business and financial position. Item 4. 35 Limitations on Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of Disclosure Controls and Procedures The Company’s management has evaluated, with the participation of Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended PART II—OTHER INFORMATION Item 1. Legal Proceedings From time to time we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. For a description of our legal proceedings, see Note 16 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report. Item 1A. Risk Factors Our business, financial condition and operating results can be affected by a number of factors, whether current known or unknown, including but not limited to those described as risk factors, any one or more of which could, directly or indirectly, cause our actual operating results and financial condition to vary materially from past, or anticipated future, operating results and financial condition. For a discussion of these potential risks and uncertainties, see Part I, Item 1A. "Risk Factors" in our The pendency of the Transactions could cause disruptions to our business. In April 2023, we entered into an agreement with WWE, pursuant to which, among other things, we and WWE agreed to combine the businesses of UFC and WWE to form a new publicly listed company. The pendency of the proposed Transactions could cause disruptions in our business, including affecting relationships with existing and future customers, clients, partners and employees, which could have an adverse effect on our business, financial condition and results of operations, regardless of whether the 36 The Transactions may not be completed within the There can be no assurance that the Transactions will be completed in the intended timeframe, or at all. The Failure to complete the Transactions could negatively impact our businesses or financial results of and the stock price of our Class A common stock. If the Transactions are not completed, our ongoing business may be adversely affected, and we will be subject to several risks and consequences, including, but not limited to, the following: In addition, if the Transactions are not completed, we may experience negative reactions from the financial markets and from our customers, clients, partners and employees. We also could be subject to litigation related to a failure to complete the Transactions, including the merger. If the Transactions, including the merger, are not completed, we cannot assure our stockholders that the risks described above will not materialize and Risks Related to Our Class A Common Stock We cannot guarantee that we will repurchase our Class A common stock pursuant to our stock repurchase authorization or that our stock repurchase authorization will enhance long-term stockholder value. Stock repurchases could also increase the volatility of the price of our Class A common stock and could diminish our cash reserves. We have approved an event-driven repurchase authorization that, subject to the We cannot guarantee we will pay dividends in any specified amounts or particular frequency. We intend to start making quarterly cash dividends of up to $25 million. Such dividends would be made from Endeavor Operating Company to its common unit holders, including EGH, which, in turn, would dividend its portion of such dividends to holders of shares of our Class A common stockholders. Any future declaration, amount and payment of dividends will be at our sole discretion and depend upon factors, such as our results of operations, financial condition, earnings, capital requirements, restrictions in our debt agreements and legal requirements. Although we currently intend to pay regular quarterly cash dividends, we cannot provide any assurances that any such regular dividends will be paid in any specified amount or at any particular frequency, if at all. 37 Item 6. Exhibits Exhibit Number Description Form File No. Exhibit Filing Date Filed/Furnished Herewith 3.1 Amended and Restated Certificate of Incorporation of Endeavor Group Holdings, Inc. 10-Q 001-40373 3.1 06/02/2021 3.2 Amended and Restated Bylaws of Endeavor Group Holdings, Inc. 10-Q 001-40373 3.2 11/15/2021 4.1 S-1 333-254908 4.1 03/31/2021 10.1† 10-Q 001-40373 10.2 08/12/2022 10.2 * 31.1 * 31.2 * 32.1 ** 32.2 ** 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document * 104 Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101 * Exhibit Number Description Form File No. Exhibit Filing Date Filed/Furnished Herewith 2.1+ 8-K 001-40373 2.1 04/03/2023 3.1 Amended and Restated Certificate of Incorporation of Endeavor Group Holdings, Inc. 10-Q 001-40373 3.1 06/02/2021 3.2 Amended and Restated Bylaws of Endeavor Group Holdings, Inc. 10-Q 001-40373 3.2 11/15/2021 4.1 S-1 333-254908 4.1 03/31/2021 10.1 8-K 001-40373 10.1 04/03/2023 10.2 10-K 001-40373 10.37 02/28/2023 10.3 + * 10.4 * 31.1 * 31.2 * 32.1 ** 32.2 ** 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document * 38 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document * 104 Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101 * * Filed herewith ** Furnished herewith SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENDEAVOR GROUP HOLDINGS, INC. Date: By: /s/ Ariel Emanuel Ariel Emanuel Chief Executive Officer (Principal Executive Officer) Date: By: /s/ Jason Lublin Jason Lublin Chief Financial Officer (Principal Financial Officer)a gain of approximately $23 million related to the sale of DBH, which related to our Owned Sports Properties segment, losses of approximately $13$5 million on foreign exchange transactions, which related to all of our segments and Corporate, aan approximately $1 million loss of approximately $8 million related to non-cashchange in the fair value adjustments of embedded foreign currency derivatives, which related primarily to our Events, Experiences & Rights segment, and losses of approximately $4 million related toforward foreign exchange hedge contracts.For the three months ended September 30, 2021, other costs were comprised primarily of losses of approximately $13 million on foreign exchange transactions, which related to all of our segments and Corporate, approximately a $2 million gain from an earnout related to the sale of an investment related to our Representation segment and a $2 million fee received from our Learfield IMG College investment in our Events, Experiences & Rights segment.For the nine months ended September 30, 2022, other costs were comprised primarily of losses of approximately $33 million on foreign exchange transactions, which related to all of our segments and Corporate, a gain of approximately $23 million related to the sale of DBH, which related to our Owned Sports Properties segment, a loss of approximately $9 million related to non-cash fair value adjustments of embedded foreign derivatives, which related primarily to our Events, Experiences & Rights segment, and losses of approximately $7 million related to foreign exchange hedge contracts, which related to our Events, Experiences & Rights segmentCorporate and Corporate.For the nine months ended September 30, 2021, other costs were comprised primarily ofan approximately $29$1 million related to a loss on debt extinguishment, which related primarily to Corporate, lossesdisposal of approximately $15 million on foreign exchange transactions, which related to all of our segments and Corporate, and a loss of approximately $10 million related to non-cash fair value adjustments of embedded foreign currency derivatives primarilyan asset related to our Events, Experiences & Rights segment.(10)Reflects the tax effect of the adjustments noted above.40(11)Such items for the three and nine months ended September 30, 2022 reflects the release of a valuation allowance on deferred tax assets due to the expected realization of certain tax benefits in connection with a TRA liability. Such items for the nine months ended September 30, 2021 includes $7.4 million of deferred tax liabilities associated with indefinite lived intangibles recorded as a result of the IPO and tax expense of $10.2 million related to a change in tax rate in the United Kingdom.(12)Prior to the IPO and associated reorganization transactions, reflects the share of adjustments attributable to the non-controlling interests in UFC. Subsequent to the IPO and associated reorganization transactions, reflects the share of adjustments attributable to the non-controlling interests of certain former members of Endeavor Operating Company who retain ownership interests in Endeavor Manager and Endeavor Operating Company.historically been funded primarily through equity contributions from our pre-IPO institutional investors, the issuance of long-term debt and proceeds received from our initial public offering and private placement.other sales of our equity.September 30, 2022,March 31, 2023, we had an aggregate of $5.3$5.1 billion outstanding indebtedness under our first lien credit agreement entered into by certain of our subsidiaries in May 2014 in connection with the acquisition of IMG (as amended, restated, modified and/or supplemented from time to time, the "Credit Facilities") 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"). As of September 30, 2022,March 31, 2023, we had total borrowing capacity of $405 million under the Senior Credit Facilities, of which approximately $376 million was available to borrow.September 30, 2022,March 31, 2023, we have borrowed an aggregate of $2.5$2.3 billion of term loans under the Credit Facilities. The loans bear interest at a variable interest rate equal to either, at our option, adjusted LIBOR or the Alternate Base Rate (the "ABR") 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 0.5%, (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 September 2022, we repaid $250.0 million of term loans under the Credit Facilities.In May 2020, we issued $260.0 million as a separate tranche of term loans, which accrued interest at a rate equal to adjusted LIBOR plus 8.50%, with a LIBOR floor of 1%. In June 2021, we repaid the outstanding principal of $256.7 million as well as associated fees and expenses incurred due to early redemption of $28.6 million.September 30, 2022,March 31, 2023, approximately 90%98% of our term loansTerm Loans is hedged. See Note 10, "Debt" to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further detail on the Credit Facilities.September 30, 2022,March 31, 2023, we have the option to borrow incremental term loans in an aggregate amount equal to at least $550.0 million, subject to market demand, and may be able to borrow additional funds depending on our First Lien Leverage Ratio (as defined under the Credit Facilities). The credit agreement governing our Credit Facilities includes certain mandatory prepayment provisions relating to, among other things, the incurrence of additional debt.On June 29, 2021, we repaid $163.1 million under the revolving credit facility. As of September 30, 2022,March 31, 2023, we had no borrowings outstanding under this revolving credit facility and outstanding letters of credit of $19.3$19.5 million. The revolving facility matures on MayNovember 18, 2024.September 30, 2022,March 31, 2023, as we had no borrowingsborrowing outstanding under the revolving credit facility.41September 30, 2022,March 31, 2023, we have borrowed an aggregate of $2.8 billion of first lien term loans under the UFC Credit Facilities. Following a repricing under the UFC Credit Facilities in January 2021, borrowingsBorrowings 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 0.5%, (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 1.00% principal amortization payable in equal quarterly installments and mature on April 29, 2026. See Note 10, "Debt" to our unaudited consolidated financial statements included elsewhere in this Quarterly Report for further detail on the UFC Credit Facilities.September 30, 2022,March 31, 2023, we have the option to borrow incremental loans in an aggregate amount equal to at least $455.0 million, subject to market demand, and may be able to borrow additional funds depending on our First Lien Leverage Ratio (as defined under the UFC Credit Facilities). The credit agreement governing the UFC Credit Facilities includes certain mandatory prepayment provisions relating to, among other things, the incurrence of additional debt. On June 29, 2021, we repaid $180.2 million of first lien term loans under the UFC Credit Facilities. On October 27, 2021, we amended the facility to provide for a $600 million term loan, which we borrowed in full.September 30, 2022,March 31, 2023, we had no borrowings outstanding under this revolving credit facility and outstanding letters of credit of $10.0 million. The revolving facility under the UFC Credit Facilities matures on AprilOctober 29, 2024.September 30, 2022,March 31, 2023, as we had no borrowings outstanding under this revolving credit facility.September 30, 2022,March 31, 2023, we had certain other revolving line of credit facilities and long-term debt liabilities, primarily related to On Location, with total committed amounts of $62.9 million, of which $13.0$10.0 million was outstanding and $49.9$47.0 million was available for borrowing based on the supporting asset base. Such facilities have maturity dates in 2023 and 2025, bearing interest at rates of 2.75% plus LIBOR.September 30, 2022,March 31, 2023, we had no borrowings outstanding under the OL Credit Facility and no letters of credit outstanding. The OL Credit Facility matures on the earlier of August 2026 or the date that is 91 days prior to the maturity date of the term loans under the Credit Facilities. The OL Credit Facility contains restrictions that are substantially similar to those in the Credit Facilities and the UFC Credit Facilities.4233NineThree months ended September 30,March 31, 2023 and 2022 and 2021OperatingCash provided by operating activities increasedimproved from $188.1$58.1 million of cash used in the three months ended March 31, 2022 to $96.7 million of cash provided in the ninethree months ended September 30, 2021 to $405.2 million of cash provided in the nine months ended September 30, 2022.March 31, 2023. Cash provided in the ninethree months ended September 30, 2022March 31, 2023 was primarily due to net income adjusted forof $36.3 million, which included non-cash items of $669.1$158.1 million, offset by the increase in accounts receivable of $299.4$73.4 million due to timing of events, such as Super Bowl LVII, NCAA March Madness and Miami Open, as well as timing of collections from customers, and other assets of $55.2 million due to the buildup to the Olympics. Cash used in the three months ended March 31, 2022 was primarily due to the increase in accounts receivable of $157.1 million due to the timing of events and the decrease in deferred revenue of $43.6$153.6 million due to events taking place in 2022,the quarter, such as Super Bowl LVI and various music events. Cash provided in the nine months ended September 30, 2021 primarily represents a net loss of $450.8 million from the continued recovery from COVID-19 and higher amortization of content costs of $319.8 million from content deliveries at Endeavor Contentevents, partially offset by an increase in other assetsnet income of $699.7$517.7 million, from additional investments in Endeavor Content film assets.which included non-cash items of $276.3 million.increasedchanged from $408.6$544.7 million of cash provided in the three months ended March 31, 2022 to $74.1 million of cash used in the ninethree months ended September 30, 2021 to $661.1 million of cash used in the nine months ended September 30, 2022.March 31, 2023. Cash used in the ninethree months ended September 30, 2022March 31, 2023 primarily reflects payments for acquisitions of businesses, primarily for OpenBet, Madrid Open and Barrett Jackson of $1,434.5 million as well as capital expenditures and investments in non-controlled affiliates totaling $141.5$86.2 million partially offset by cash proceeds received from the sale of certain businesses and assets of $10.5 million. Cash provided in the three months ended March 31, 2022 primarily reflects net cash proceeds received from the sale of the restricted Endeavor Content business and the sale of DBH of $910.8 million. Cash used in the nine months ended September 30, 2021 primarily reflects$649.7 million offset by payments for acquisitions of businesses, primarily for NCSA, Mailman and FlightScope, of $258.5 million,capital expenditures and investments in non-controlled affiliates primarily Learfield IMG College, of $139.7totaling $104.7 million.decreasedincreased from $371.1 million of cash provided in the nine months ended September 30, 2021 to $268.2$19.1 million of cash used in the ninethree months ended September 30, 2022.March 31, 2022 to $89.9 million of cash used in the three months ended March 31, 2023. Cash used in the ninethree months ended September 30,March 31, 2023 primarily reflects payments for the tax receivable agreement, distributions and debt of $37.5 million, $26.3 million and $22.2 million, respectively. Cash used in the three months ended March 31, 2022 primarily reflects net payments on debt of $314.0$14.5 million as well as distributions, payments of contingent consideration related to acquisitions and redemption of certain pre-IPOof our equity interests totaling $45.7 million offset by net cash proceeds received in connection with the acquisition of non-controlling interests of $92.5$7.1 million. Cash provided in the nine months ended September 30, 2021 primarily reflects proceeds from the equity offerings, net of underwriting discounts, primarily from the IPO and private placements, of $1,886.6 million partially offset by $835.7 million used for the UFC Buyout and net payments on debt of $654.9 million.divestitures.sale of the Academy business. 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.agreements,agreement, (7) pay income taxes, (8) make distributions to members, and (9) reduce our outstanding indebtedness under our Senior Credit Facilities.expected additional $250event-driven repurchase authorization that permits us to repurchase shares of our Class A common stock in an aggregate amount of up to $300 million, reductionsubject to and contingent upon the sale IMG Academy and the receipt of debtproceeds therefrom. Any such repurchases may be made at any time and from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by the endCompany with the amount and timing of 2022.repurchases to be determined at our discretion, depending on market conditions and corporate needs. This share repurchase authorization has no expiration and may be modified, suspended or terminated at any time at our discretion and does not obligate us to acquire any particular amount of shares. We also anticipate making quarterly cash dividends of up to $25 million. The dividends would be paid from Endeavor Operating Company to its common unit holders, including EGH, which, in turn, would dividend its portion of such dividends to holders of shares of our Class A common stock. Any future declaration, amount and payment of dividends will be at our sole discretion and depend upon factors, such as our results of operations, financial condition, earnings, capital requirements, restrictions in our debt agreements and legal requirements. Although we currently intend to pay regular quarterly cash dividends, we cannot provide any assurances that any regular dividends will be paid in any specified amount or at any particular frequency, if at all.macro-economicmacro- economic factors beyond our control.business and do not anticipate paying any cash dividends for the foreseeable future.business.4334AgreementsAgreementagreementsagreement to make payments to certain persons that held direct or indirect interest in EOC and UFC Parent prior to the 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 our IPO, exchanges of Endeavor Operating Company Units for Class A common stock or cash and payments made under the tax receivable agreements.agreement. We will generally be entitled to retain the remaining 15% of these cash tax savings. Payments will be due only after we have filed our U.S. federal and state income tax returns. Payments under the tax receivable agreementsagreement 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. The amounts payable under the tax receivable agreementsagreement will vary depending upon a number of factors, including tax rates in effect, as well as the amount, character and timing of the taxable income of EGH in the future. IfAs of March 31, 2023, the existing valuation allowance recorded against deferred tax assets is released inCompany has a future period as a result of having sufficient taxable income, among other criteria, or other tax attributes subject to the tax receivable agreements are determined to be payable, additional tax receivable agreements liabilities may be recorded. We continue to evaluate the possibility that during 2022, the relevant criteria may be met, and at that time, we would release a valuation allowance, which such benefit may exceed $700 million. In addition, we would record the associated tax receivable agreementsagreement liability which if based onof $997.8 million recorded for all exchanges that have occurred as of September 30, 2022, would exceed $900 million.this date.agreements,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 agreements,agreement, we may also be required to make payments to the TRA Holders in amounts equal to the present value of future payments we are obligated to make under the tax receivable agreements.agreement, calculated utilizing assumptions set forth in the tax receivable agreement. If the payments under the tax receivable agreementsagreement 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 agreementsagreement 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.20212022 Annual Report. During the ninethree months ended September 30, 2022,March 31, 2023, there were no significant changes in our critical accounting policies and estimates or the application or the results of the application of those policies to our unaudited consolidated financial statements from those previously disclosed in the 20212022 Annual Report.$32 million for the nine months ended September 30, 2022.$28 million.LIBOR tenors, including 1 month and 3 month LIBOR, expiring in June 2023. Our Senior Credit Agreement includesFacilities include 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.ninethree months ended September 30, 2022,March 31, 2023, revenues would have decreased by approximately $72.6$31.7 million and operating income would have improved by approximately $0.6$1.2 million.44Credit riskControlControls and Proceduresthe chief executive officerour Chief Executive Officer and the chief financial officer,our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, the chief executive officerour Chief Executive Officer and chief financial officerChief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022.March 31, 2023.September 30, 2022March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.20212022 Annual Report and Part II, Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, which risk factors are incorporated herein by reference.Report. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and the price of our common stock. Other than the risk factors set forth below, there have been no material changes in our risk factors to those included in our 20212022 Annual Report.Item 2. Unregistered Sales of Equity Securities and Use of ProceedsRisks Related to the Proposed TransactionsExcept as previously disclosedCompany's Current Reportproposed Transactions are completed. In addition, the pursuit of the Transactions may place a significant burden on Form 8-K filed withmanagement and internal resources and may also divert management’s time and attention from the Securitiesday-to-day operation of our remaining businesses and Exchange Commission on August 11, 2022the execution of our other strategic initiatives. In addition, we have incurred and will continue to incur other significant costs, expenses and fees for professional services and other transaction costs in connection with an acquisition, no unregistered salesthe Transactions, and many of these fees and costs are payable regardless of whether or not the Transactions are consummated. Any of the Company's equity securities were made duringforegoing could adversely affect our business, our financial condition and our results of operations and prospects.three months ended September 30, 2022.intended timeframe, or at all, and the failure to complete the Transactions could adversely affect our business, results of operations, financial condition, and the market price of our Class A common stock.sharestransaction agreement contains a number of conditions that must be satisfied or waived prior to the completion of the merger, including, among others, (i) the affirmative vote of holders of a majority of the voting power of WWE’s Class A common stock relating to such acquisition were offered and sold in private placements exempt from registration under Section 4(a)(2)favor of adopting the transaction agreement (which was satisfied on April 2, 2023 upon the delivery of a written consent by Vincent K. McMahon), (ii) the expiration of the Securities Act.waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) obtaining other applicable regulatory approvals, (iv) the absence of any order or legal requirement that enjoins, restrains or otherwise prevents the consummation of the Transactions, (v) the effectiveness of New PubCo’s registration statement on Form S-4 and the absence of any stop order or other proceeding that suspends or otherwise threatens such effectiveness, (vi) the registration, and the authorization for listing on the NYSE, of New PubCo Class A common stock, (vii) the consummation of an internal reorganization of WWE and (viii) delivery by us to WWE of certain required audited financial statements of UFC Parent, and the operating level of operating income reflected in such financial statements to be no less than 92.5% of the operating income reflected in the unaudited financial statements of UFC Parent previously provided to WWE. There can be no assurance that all required approvals will be obtained or that all closing conditions will otherwise be satisfied (or waived, if applicable), and, if all required approvals are obtained and all closing conditions are satisfied (or waived, if applicable), we can provide no assurance as to the terms, conditions and timing of such approvals or that the Transactions will be completed in a timely manner or at all. Many of the conditions to completion of the Transactions are not within our control, and we cannot predict when or if these conditions will be satisfied (or waived, as applicable). Even if regulatory approval is obtained, it is possible conditions will be imposed that could result in a material delay in, or the abandonment of, the Transactions or otherwise have an adverse effect on us.Item 5. Other InformationOn November 8, 2022, Christian Muirhead ceased performingIf the functionsTransactions are not completed within the intended timeframe or at all, we may be subject to a number of material risks. The price of our Class A common stock may decline to the extent that current market prices reflect a market assumption that the Transactions will be completed. In addition, some costs related to the Transactions must be paid whether or not the Transactions are completed, and responsibilities of chief communications officerwe have incurred, and in his capacity of Co-Chairman of WME Talent Agency, reports solelywill continue to Mark Shapiro, the Company’s President, resultingincur, significant costs, expenses and fees for professional services and other transaction costs in Mr. Muirhead ceasing to be an executive officer of the Company. In connection with the foregoing, on November 8, 2022, Mr. Muirhead’s employment agreement, datedTransaction, as well as the diversion of April 19, 2022, was amended to reflect these changes (the “Amendment”).management and resources towards the Transactions, for which we will have received little or no benefit if completion of the Transactions does not occur. We may also experience negative reactions from our investors, customers, partners, suppliers, and employees.The foregoing summaryAmendment isTransactions.is qualified in its entirety by referencethey may materially affect our business, financial results and stock prices.Amendment,sale of IMG Academy and proceeds therefrom, permits us to repurchase up to $300 million shares of our Class A common stock. The timing and amount of repurchases of shares of our Class A common stock under this authorization, if any, are subject to our discretion and may depend upon several factors, including, for example, market and business conditions, the trading price of our Class A common stock, our cost of capital and the nature of other investment opportunities. In addition, the Inflation Reduction Act of 2022 imposes a copynon-deductible 1% excise tax on the fair market value of stock repurchases, net of stock issuances, that exceed $1 million in a taxable year, which is attached hereto as Exhibit 10.2will make our stock repurchase authorization more expensive to us. Our stock repurchase authorization may be modified, suspended or terminated at any time at our discretion without prior notice and incorporated herein by reference.does not obligate us to acquire any particular amount of shares. Repurchases under this authorization could affect our stock price and increase its volatility, and the existence of this authorization could cause our stock price to be higher than it would be in the absence of such authorization and could potentially reduce the market liquidity for our stock. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our Class A common stock may decline below the levels at which we repurchased shares of stock.45† Schedules+ Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.4639November 10, 2022May 9, 2023November 10, 2022May 9, 2023