Endeavor Group Holdings, Inc. [EDR] Filings

10-Q 1 edr-20220930.htm 10-Q 10-Q

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, 2022


☐	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, there were 289,423,865 shares of the registrant’s Class A common stock outstanding, 183,110,405 shares of the registrant’s Class X common stock outstanding and 229,875,648 shares of the registrant’s Class Y common stock outstanding.

Table of Contents

TABLE OF CONTENTS


Part I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	3
Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	3
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	4
Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2022 and 2021	5
Consolidated Statements of Redeemable Interests and Shareholders’/Members' Equity for the Three and Nine Months Ended September 30, 2022 and 2021	8
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	11
Notes to Consolidated Financial Statements	12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	45
Part II – OTHER INFORMATION
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 5. Other Information	45
Item 6. Exhibits	46

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:

•

changes in public and consumer tastes and preferences and industry trends;

•

impacts from changes in discretionary and corporate spending on entertainment and sports events due to factors beyond our control, such as adverse economic conditions, on our operations;

•

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

•

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

•

our reliance on our professional reputation and brand name;

•

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

•

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

•

our ability to identify, sign, and retain clients;

•

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

•

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

•

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

•

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

•

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

•

immigration restrictions and related factors;

•

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

•

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

•

our substantial indebtedness;

•

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

•

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

•

fluctuations in foreign currency exchange rates;

•

litigation and other proceedings to the extent uninsured or underinsured;

•

our ability to comply with the U.S. and foreign governmental regulations to which we are subject;

•

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

•

risk related to our gaming business and applicable regulatory requirements;

•

our control by Messrs. Emanuel and Whitesell, the Executive Holdcos, and the Silver Lake Equityholders;

•

risk related to our organization and structure;

•

risks related to tax matters;

•

risks related to our Class A common stock; and

•

other important factors that could cause actual results, performance or achievements to differ materially from those described in Part I, Item 1A. "Risk Factors" and Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 ("2021 Annual Report"), as updated by Part II, Item 1A. "Risk Factors" of this Quarterly Report, and Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report and in our subsequent filings with the Securities and Exchange Commission.

These risks could cause actual results to differ materially from those implied by forward-looking statements in this Quarterly Report. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.

You should read this Quarterly Report and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we have no obligation to update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

DEFINITIONS

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

•

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

•

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

•

"Endeavor Group Holdings" refers to Endeavor Group Holdings, Inc. ("EGH").

•

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

•

"Endeavor Manager Units" refers to the common interest units in Endeavor Manager.

•

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

•

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

•

"Endeavor Profits Units" refers to the profits units of Endeavor Operating Company and that are economically similar to stock options (other than with respect to Endeavor Full Catch-up Profits Units which, upon our achievement of a price per share that would have fully satisfied their preference on distributions, were converted into Endeavor Operating Company Units). Each Endeavor Profits Unit (other than Endeavor Full Catch-Up Profits Units) has a per unit hurdle price, which is economically similar to the exercise price of a stock option.

•

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

•

"Other UFC Holders" refers to the other persons that held equity interests in UFC Parent prior to the IPO and certain of their affiliates.

•

"reorganization transactions" refers to the internal reorganization completed in connection with our May 2021 initial public offering, following which Endeavor Group Holdings manages and operates the business and control the strategic decisions and day-to-day operations of Endeavor Operating Company through Endeavor Manager and includes the operations of Endeavor Operating Company in its consolidated financial statements.

•

"Silver Lake Equityholders" refers to certain affiliates of Silver Lake that are our stockholders.

•

"UFC LLC Agreement" refers to the limited liability company agreement which governs the management of UFC Parent and the rights of UFC's Parent's equityholders.

•

"UFC Parent" refers to Zuffa Parent LLC, which owns and operations the Ultimate Fighting Championship ("UFC"), the professional mixed martial arts ("MMA") organization.

Item 1. Financial Statements (Unaudited)

PART I – FINANCIAL INFORMATION

ENDEAVOR GROUP HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	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; 289,330,904 and 265,553,327 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		2			2
Class B common stock, $0.00001 par value; 5,000,000,000 shares authorized; none issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Class C common stock, $0.00001 par value; 5,000,000,000 shares authorized; none issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Class X common stock, $0.00001 par value; 4,987,036,068 and 5,000,000,000 shares authorized; 183,173,428 and 186,222,061 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		1			1
Class Y common stock, $0.00001 par value; 997,261,325 and 1,000,000,000 shares authorized; 229,875,648 and 238,154,296 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		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

See accompanying notes to consolidated financial statements

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,
	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	)


(Loss) earnings per share of Class A common stock(1):
Basic	$	(0.04	)	$	0.16		$	1.22		$	(1.07	)
Diluted	$	(0.04	)	$	0.16		$	1.19		$	(1.07	)
Weighted average number of shares used in computing (loss) earnings per share:
Basic		285,870,317			262,891,070			278,724,574			261,048,116
Diluted		289,806,633			435,922,511			450,758,061			261,048,116

(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

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

ENDEAVOR GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE INTERESTS AND SHAREHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

Three Months Ended September 30, 2022

Endeavor Group Holdings, Inc. [EDR] Filings
10-Q	[2022-11-10]
10-Q	[2022-08-12]
10-Q	[2022-05-12]
10-K	[2022-03-16]
10-Q	[2021-11-15]
10-Q	[2021-08-16]
S-1	[2021-06-30]
10-Q	[2021-06-02]
S-1	[2021-03-31]
S-1	[2019-05-23]