Endeavor Group Holdings, Inc. [EDR] Filings

10-Q 1 edr-20210930.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, 2021 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 5, 2021, there were 264,109,869 shares of the registrant’s Class A common stock outstanding, 187,258,129 shares of the registrant’s Class X common stock outstanding and 238,154,296 shares of the registrant’s Class Y common stock outstanding.

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TABLE OF CONTENTS


Part I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	4
Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	4
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	5
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020	6
Consolidated Statements of Redeemable Interests and Shareholders’/ Members’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	9
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	10
Notes to Consolidated Financial Statements	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3. Quantitative and Qualitative Disclosures about Market Risk	49
Item 4. Controls and Procedures	49
Part II – OTHER INFORMATION
Item 1. Legal Proceedings	49
Item 1A. Risk Factors	49
Item 6. Exhibits	51

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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:



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



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



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



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



our reliance on our professional reputation and brand name;



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



our ability to identify, sign, and retain clients;



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



our ability to 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;



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;

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

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 contemplated that are found in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Part II, Item 1A., “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 and in Amendment No.1 to our Quarterly Report on Form 10-Q/A for the quarterly period ended June 30, 2021.

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



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



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



“Endeavor Profits Units” refers to the profits units of Endeavor Operating Company 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.



“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.

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

“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.



“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.

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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,
	2021			2020
ASSETS
Current Assets:
Cash and cash equivalents	$	1,028,709		$	1,008,485
Restricted cash		250,021			181,848
Accounts receivable (net of allowance for doubtful accounts of $60,278 and $67,975, respectively)		639,429			445,778
Deferred costs		230,305			234,634
Assets held for sale		960,677			—
Other current assets		200,959			194,463
Total current assets		3,310,100			2,065,208
Property and equipment, net		598,433			613,139
Operating lease right-of-use assets		363,040			386,911
Intangible assets, net		1,554,108			1,595,468
Goodwill		4,415,891			4,181,179
Investments		285,842			251,078
Other assets		203,444			540,651
Total assets	$	10,730,858		$	9,633,634
LIABILITIES, REDEEMABLE INTERESTS AND SHAREHOLDERS'/MEMBERS' EQUITY
Current Liabilities:
Accounts payable	$	556,179		$	554,260
Accrued liabilities		503,953			322,749
Current portion of long-term debt		75,858			212,971
Current portion of operating lease liabilities		60,643			58,971
Deferred revenue		636,531			606,530
Deposits received on behalf of clients		235,308			176,572
Liabilities held for sale		548,846			—
Other current liabilities		89,805			65,025
Total current liabilities		2,707,123			1,997,078
Long-term debt		5,032,543			5,712,834
Long-term operating lease liabilities		364,608			395,331
Other long-term liabilities		371,902			373,642
Total liabilities		8,476,176			8,478,885
Commitments and contingencies (Note 20)
Redeemable non-controlling interests		208,890			168,254
Redeemable equity		—			22,519
Shareholders'/Members' Equity:
Class A common stock, $.00001 par value; 5,000,000,000 shares authorized; 261,970,674 shares issued and outstanding as of September 30, 2021		2			—
Class B common stock, $.00001 par value; 5,000,000,000 shares authorized; none issued and outstanding as of September 30, 2021		—			—
Class C common stock, $.00001 par value; 5,000,000,000 shares authorized; none issued and outstanding as of September 30, 2021		—			—
Class X common stock, $.00001 par value; 5,000,000,000 shares authorized; 187,515,124 shares issued and outstanding as of September 30, 2021		1			—
Class Y common stock, $.00001 par value; 1,000,000,000 shares authorized; 238,154,296 shares issued and outstanding as of September 30, 2021		2			—
Additional paid-in capital		1,580,638			—
Accumulated deficit		(277,112	)		—
Members' capital		-			468,633
Accumulated other comprehensive loss		(95,811	)		(190,786	)
Total Endeavor Group Holdings, Inc./Endeavor Operating Company, LLC shareholders'/members' equity		1,207,720			277,847
Nonredeemable non-controlling interests		838,072			686,129
Total shareholders'/members' equity		2,045,792			963,976
Total liabilities, redeemable interests and shareholders'/members' equity	$	10,730,858		$	9,633,634

See accompanying notes to consolidated financial statements

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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,
	2021			2020			2021			2020
Revenue	$	1,391,303		$	864,492		$	3,572,157		$	2,517,803
Operating expenses:
Direct operating costs		673,215			422,070			1,790,562			1,275,997
Selling, general and administrative expenses		520,626			318,933			1,686,840			1,009,951
Insurance recoveries		(12,233	)		(19,563	)		(42,100	)		(53,523	)
Depreciation and amortization		71,661			76,471			208,058			241,669
Impairment charges		754			—			4,524			175,282
Total operating expenses		1,254,023			797,911			3,647,884			2,649,376
Operating income (loss)		137,280			66,581			(75,727	)		(131,573	)
Other (expense) income:
Interest expense, net		(55,783	)		(71,277	)		(207,970	)		(212,954	)
Loss on extinguishment of debt		—			—			(28,628	)		—
Other (expense) income, net		(7,719	)		16,409			(3,001	)		63,576
Income (loss) before income taxes and equity losses of affiliates		73,778			11,713			(315,326	)		(280,951	)
(Benefit from) provision for income taxes		(7,718	)		(941	)		58,285			43,614
Income (loss) before equity losses of affiliates		81,496			12,654			(373,611	)		(324,565	)
Equity losses of affiliates, net of tax		(17,883	)		(34,473	)		(77,167	)		(244,280	)
Net income (loss)		63,613			(21,819	)		(450,778	)		(568,845	)
Less: Net income (loss) attributable to non-controlling interests		21,128			58,430			(141,980	)		32,914
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions		—			(80,249	)		(31,686	)		(601,759	)
Net income (loss) attributable to Endeavor Group Holdings, Inc.	$	42,485		$	—		$	(277,112	)	$	—
Income (loss) per share of Class A common stock(1):
Basic	$	0.16		N/A			$	(1.07	)	N/A
Diluted	$	0.16		N/A			$	(1.07	)	N/A
Weighted average number of shares used in computing income (loss) per share:
Basic		262,891,070		N/A				261,048,116		N/A
Diluted		435,922,511		N/A				261,048,116		N/A

(1)

Basic and diluted income (loss) per share of Class A common stock 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 15 for the calculation of the numbers of shares used in computation of net loss per share of Class A common stock and the basis for computation of net loss per share.

See accompanying notes to consolidated financial statements

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ENDEAVOR GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	63,613		$	(21,819	)	$	(450,778	)	$	(568,845	)
Other comprehensive income (loss), net of tax:
Change in unrealized gains/losses on cash flow hedges:
Unrealized (losses) gains on forward foreign exchange contracts		(628	)		184			(416	)		(1,940	)
Reclassification of gains to net income (loss) for forward foreign exchange contracts		(1,475	)		—			(1,468	)		—
Unrealized (losses) gains on interest rate swaps		(41	)		(719	)		13,233			(93,183	)
Reclassification of losses to net income (loss) for interest rate swaps		7,677			8,048			22,613			14,960
Foreign currency translation adjustments		(1,128	)		6,488			(3,508	)		(4,972	)
Reclassification of loss to net income (loss) for business divestiture		—			—			—			4,231
Total comprehensive income (loss), net of tax		68,018			(7,818	)		(420,324	)		(649,749	)
Less: Comprehensive income (loss) attributable to non-controlling interests		22,814			58,430			(137,811	)		32,914
Less: Net loss attributable to Endeavor Operating Company, LLC prior to the reorganization transactions		—			(66,248	)		(12,021	)		(682,663	)
Comprehensive income (loss) attributable to Endeavor Group Holdings, Inc.	$	45,204		$	—		$	(270,492	)	$	—

See accompanying notes to consolidated financial statements

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ENDEAVOR GROUP HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE INTERESTS AND SHAREHOLDERS’/ MEMBERS’ EQUITY

(In thousands, except share data)

(Unaudited)


	Three Months Ended September 30, 2021
																											Total Shareholders'
																								Accumulated			Equity Attributable
	Redeemable																		Additional					Other			to Endeavor Group		Nonredeemable		Total
	Non-controlling		Redeemable		Members'		Class A Common Stock				Class X Common Stock				Class Y Common Stock				Paid-In		Accumulated			Comprehensive			Holdings, Inc./		Non-controlling		Shareholders'/
	Interests		Equity		Capital		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Members' Equity		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	$

Endeavor Group Holdings, Inc. [EDR] Filings
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]