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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 March 31, 2024

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: 001-41797

TKO GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

92-3569035

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

200 Fifth Ave, 7th Floor

New York, NY 10010

(Address of principal executive offices)

(646) 558-8333

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, 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

TKO

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  x

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 April 30, 2024, there were 80,690,075 shares of the Registrant’s Class A common stock outstanding and 89,616,891 shares of the Registrant’s Class B common stock outstanding.

 


Table of Contents

 TKO GROUP HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

TABLE OF CONTENTS

Page #

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

6

Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

6

Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

7

Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023

8

Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

9

Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

10

Notes to Consolidated Financial Statements

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3. Quantitative and Qualitative Disclosures about Market Risk

38

Item 4. Controls and Procedures

38

Part II – OTHER INFORMATION

39

Item 1. Legal Proceedings

39

Item 1A. Risk Factors

39

Item 6. Exhibits

39

Signatures

41


2


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 fact contained in this Quarterly Report, including without limitation, statements regarding the anticipated benefits of and costs associated with the Transactions (as defined below); our expectations surrounding the Transactions and our ability to grow our business and bolster our financial position; our expected contractual obligations and capital expenditures; our future results of operations and financial position; industry and business trends; the impact of market conditions and other macroeconomic factors on our business, financial condition and results of operations; our future business strategy, plans, market growth and our objectives for future operations; and our competitive market position within our industry 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," "expect," "intend," "plan," "estimate," "project," "predict," "potential," “target,” "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:

difficulties with the integration and in realizing the expected benefits of the Transactions, including the business combination;

the unfavorable outcome of legal proceedings that may be instituted against TKO Group Holdings, UFC, WWE and their affiliates in connection with the Transactions, including the business combination;

the inability to capture all or part of the anticipated cost and revenue synergies;

potential liabilities that are not known, probable or estimable at this time;

the inability to maintain the listing of our Class A common stock on the NYSE;

the risk of adverse tax consequences of the Merger and the Conversion;

the inability to retain WWE or UFC management, employees and/or talent;

the impact of future domestic and international industry trends on our business and our future growth, business strategy and objectives for future operations;

the inability to renew or replace our distribution rights agreements on equal or more favorable terms;

the possibility we may be adversely affected by other economic, business and/or competitive factors; 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, 2023 (the “2023 Annual 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 (the “SEC”).

These risks could cause our 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.

3


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 investor.tkogrp.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 Quarterly 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 calls and webcasts, and by postings on our investor relations site at investor.tkogrp.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 TKO when you enroll your email address by visiting the “Investor Email Alerts” option under the Resources tab on investor.tkogrp.com.

DEFINITIONS

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

“we,” “us,” “our,” “TKO Group Holdings,” “TKO,” the “Company,” and similar references refer (1) prior to the consummation of the Transactions to Zuffa Parent, LLC, and (2) after the consummation of the Transactions to TKO Group Holdings, Inc. and its consolidated subsidiaries.

“Board” refers to the board of directors of TKO Group Holdings.

“business combination” refers to the combination of the businesses of WWE and TKO OpCo.

“Class A common stock” refers to the Class A common stock, par value $0.00001 per share, of TKO.

“Class B common stock” refers to the Class B common stock, par value $0.00001 per share, of TKO.

“DGCL” refers to the General Corporation Law of the State of Delaware.

“Endeavor” refers to Endeavor Group Holdings, Inc., a Delaware corporation.

“Endeavor OpCo” refers to Endeavor Operating Company, LLC, a Delaware limited liability company and subsidiary of Endeavor.

“fully-diluted basis” means on a basis calculated assuming the full cash exercise (and not net settlement but, for the avoidance of doubt, including the conversion of the Convertible Notes (to the extent not converted prior to closing of the Transaction)) of all outstanding options, warrants, restricted stock units, performance stock units, dividend equivalent rights and other rights and obligations (including any promised equity awards and assuming the full issuance of the shares underlying such awards) to acquire voting interests of TKO Group Holdings (without regard to any vesting provisions and, with respect to any promised awards whose issuance is conditioned in full or in part based on achievement of performance goals or metrics, assuming achievement at target performance) and the full conversion, exercise, exchange, settlement of all issued and outstanding securities convertible into or exercisable, exchangeable or settleable for voting interests of TKO Group Holdings, not including any voting interests of TKO Group Holdings reserved for issuance pursuant to future awards under any option, equity bonus, share purchase or other equity incentive plan or arrangement of TKO Group Holdings (other than promised awards described above), and any other interests or shares, as applicable, that may be issued or exercised. For the avoidance of doubt, this definition assumes no net settlement or other reduction in respect of withholding tax obligations in connection with the issuance, conversion, exercise, exchange or settlement of such rights or obligations to acquire interests of TKO Group Holdings as described in the foregoing.

“NYSE” refers to the New York Stock Exchange.

“Services Agreement” means the services agreement dated as of September 12, 2023, by and between Endeavor and TKO OpCo.

4


“TKO OpCo” refers to TKO Operating Company, LLC (f/k/a Zuffa Parent LLC), a Delaware limited liability company and our direct subsidiary.

“TKO OpCo Units” refers to all of the existing equity interests in TKO OpCo.

“Transactions” refer, collectively, to the transactions pursuant to the Transaction Agreement (defined below) pursuant to which: (i) WWE undertook certain internal restructuring steps; (ii) Whale Merger Sub Inc. (“Merger Sub”) merged with and into WWE (the “Merger”), with WWE surviving the Merger (the “Surviving Entity”) and becoming a direct wholly owned subsidiary of the Company; (iii) immediately following the Merger, the Company caused the Surviving Entity to be converted into a Delaware limited liability company (“WWE LLC”) and the Company became the sole managing member of WWE LLC (the “Conversion”); and (iv) following the Conversion, TKO Group Holdings, Inc. (x) contributed all of the equity interests of WWE LLC to TKO OpCo in exchange for 49% of the membership interests in TKO OpCo on a fully diluted basis, and (y) issued to Endeavor OpCo and certain of Endeavor’s other subsidiaries a number of shares of our Class B common stock representing, in the aggregate, approximately 51% of the total voting power of the Company’s stock on a fully-diluted basis, in exchange for a payment equal to the par value of such Class B common stock.

“Transaction Agreement” refers to the transaction agreement, dated as of April 2, 2023, by and among Endeavor, Endeavor OpCo, TKO OpCo, WWE, the Company, and Merger Sub.

“UFC” refers to the Ultimate Fighting Championship.

“WWE” refers to World Wrestling Entertainment, Inc. (n/k/a World Wrestling Entertainment, LLC).

“Zuffa” refers to Zuffa Parent, LLC (n/k/a TKO Operating Company, LLC or TKO OpCo).

 

5


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TKO GROUP HOLDINGS, INC.

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

As of March 31,

As of December 31,

2024

2023

Assets

Current assets:

Cash and cash equivalents

$

245,812

$

235,839

Accounts receivable (net of allowance for doubtful accounts of $1,191 and $1,093, respectively)

171,555

135,436

Other current assets

164,393

121,155

Total current assets

581,760

492,430

Property, buildings and equipment, net

611,756

608,416

Intangible assets, net

3,483,021

3,563,663

Finance lease right-of-use assets, net

259,890

255,709

Operating lease right-of-use assets, net

36,376

35,508

Goodwill

7,666,148

7,666,485

Investments

15,993

16,392

Other assets

67,322

52,136

Total assets

$

12,722,266

$

12,690,739

Liabilities, Non-controlling Interests and Stockholders' Equity

Current liabilities:

Accounts payable

$

22,587

$

42,040

Accrued liabilities

405,672

267,363

Current portion of long-term debt

22,321

22,367

Current portion of finance lease liabilities

10,953

8,135

Current portion of operating lease liabilities

4,900

4,246

Deferred revenue

111,782

118,992

Other current liabilities

12,276

8,997

Total current liabilities

590,491

472,140

Long-term debt

2,708,361

2,713,948

Long-term finance lease liabilities

249,168

245,288

Long-term operating lease liabilities

33,046

32,911

Deferred tax liabilities

372,953

372,860

Other long-term liabilities

137,865

3,046

Total liabilities

4,091,884

3,840,193

Commitments and contingencies (Note 16)

 

 

Redeemable non-controlling interests

12,354

11,594

Stockholders' equity:

Class A common stock: ($0.00001 par value; 5,000,000,000 shares authorized;
   82,420,074 and 82,292,902 shares issued and outstanding as of
March 31, 2024 and December 31, 2023, respectively)

1

1

Class B common stock: ($0.00001 par value; 5,000,000,000 shares authorized;
   89,616,891 and 89,616,891 shares issued and outstanding as of
March 31, 2024 and December 31, 2023, respectively)

1

1

Additional paid-in capital

4,275,901

4,244,537

Accumulated other comprehensive loss

(2,059)

(332)

Accumulated deficit

(239,067)

(135,227)

Total TKO Group Holdings, Inc. stockholders’ equity

4,034,777

4,108,980

Nonredeemable non-controlling interests

4,583,251

4,729,972

Total stockholders' equity

8,618,028

8,838,952

Total liabilities, redeemable non-controlling interests and stockholders' equity

$

12,722,266

$

12,690,739


See accompanying notes to consolidated financial statements.

6


TKO GROUP HOLDINGS, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended March 31,

2024

2023

Revenue

$

629,711

$

306,730

Operating expenses:

Direct operating costs

201,015

89,152

Selling, general and administrative expenses

531,880

56,346

Depreciation and amortization

107,161

15,152

Total operating expenses

840,056

160,650

Operating (loss) income

(210,345)

146,080

Other expenses:

Interest expense, net

(64,466)

(53,908)

Other expense, net

(271)

(329)

(Loss) income before income taxes and equity losses of affiliates

(275,082)

91,843

(Benefit from) provision for income taxes

(25,522)

3,630

(Loss) income before equity losses of affiliates

(249,560)

88,213

Equity (earnings) losses of affiliates, net of tax

(50)

263

Net (loss) income

(249,510)

87,950

Less: Net (loss) income attributable to non-controlling interests

(145,670)

348

Less: Net income attributable to TKO Operating Company, LLC prior to the Transactions

87,602

Net loss attributable to TKO Group Holdings, Inc.

$

(103,840)

$

Basic and diluted net loss per share of Class A common stock (1)

$

(1.26)

N/A

Weighted average number of common shares used in computing basic and diluted net loss per share

82,351,654

N/A

(1)Basic and diluted net loss per share of Class A common stock is applicable only for the period from January 1, 2024 through March 31, 2024, which is the period following the Transactions (as defined in Note 1 to the unaudited consolidated financial statements). See Note 13, Earnings Per Share, for the calculation of the number 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.

7


TKO GROUP HOLDINGS, INC.

Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)

Three Months Ended March 31,

2024

2023

Net (loss) income

$

(249,510)

$

87,950

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments

(2,188)

(31)

Cash flow hedges:

Change in net unrealized gains

537

453

Amortization of cash flow hedge fair value to net income

(76)

(76)

Total comprehensive (loss) income, net of tax

(251,237)

88,296

Less: Comprehensive (loss) income attributable to non-controlling interests

(145,670)

348

Less: Comprehensive income attributable to TKO Operating Company, LLC prior to the Transactions

87,948

Comprehensive loss attributable to TKO Group Holdings, Inc.

$

(105,567)

$


See accompanying notes to consolidated financial statements.

8


TKO GROUP HOLDINGS, INC.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Accumulated

Total TKO

Nonredeemable

Common Stock

Additional

Other

Group Holdings,

Non-

Total

Class A

Class B

Paid - in

Comprehensive

Accumulated

Inc. Stockholders'/

Controlling

Stockholders'/

Shares

Amount

Shares

Amount

Capital

(Loss) Income

Deficit

Equity

Interests

Equity

Balance, December 31, 2023

82,293

$

1

89,617

$

1

$

4,244,537

$

(332)

$

(135,227)

$

4,108,980

$

4,729,972

$

8,838,952

Comprehensive loss

(1,727)

(103,840)

(105,567)

(146,430)

(251,997)

Distributions to members

(302)

(302)

(342)

(644)

Contributions from members

2,790

2,790

Stock issuances and other, net

127

Equity-based compensation

27,435

27,435

27,435

Principal stockholder contributions

1,492

1,492

1,492

Equity reallocation between controlling and non-controlling interests

2,739

2,739

(2,739)

Balance, March 31, 2024

82,420

$

1

89,617

$

1

$

4,275,901

$

(2,059)

$

(239,067)

$

4,034,777

$

4,583,251

$

8,618,028

Three Months Ended March 31, 2023

Accumulated

Other

Members'

Comprehensive

Capital

Income

Total

Balance, December 31, 2022

$

568,070 

$

846 

$

568,916 

Comprehensive income

87,602 

346 

87,948 

Distributions to members

(101,425)

(101,425)

Contributions from members

5,795 

5,795 

Balance, March 31, 2023

$

560,042 

$

1,192 

$

561,234 


See accompanying notes to consolidated financial statements.

9


TKO GROUP HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended March 31,

2024

2023

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$

(249,510)

$

87,950 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

107,161 

15,152 

Amortization and impairments of content costs

7,728 

3,914 

Amortization and write-off of original issue discount and deferred financing costs

2,689 

2,588 

Equity-based compensation

30,225 

5,795 

Income taxes

(29,771)

860 

Equity (earnings) losses of affiliates

(50)

263 

Net provision for allowance for doubtful accounts

398 

107 

Other, net

9 

(128)

Changes in operating assets and liabilities, net of acquisition:

Accounts receivable

(36,482)