UNITED STATES
証券取引委員会
ワシントンDC20549
フォーム
証券取引所法第13条または15条（d）に基づく四半期報告書 |
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報告期間が終了した2023年6月30日をもって |
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または |
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証券取引法のセクション13または15(d)に基づく移行報告書 |
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移行期間：___から___まで |
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報告書番号：
（会社設立時の指定名）
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（設立または組織の州または管轄区域） |
（国税庁雇用者識別番号） |
(主要執行オフィスの住所)
(
（登録者の電話番号（市外局番を含む））
（法人格の設立または組織の州またはその他の管轄区域）
（変更された場合は、前回の報告以来の元の名称または前の住所）
法第12条（b）に基づく登録証券
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各クラスの名称 |
取引シンボル |
登録されている各取引所の名称 |
登録者（1）が1934年の証券取引法第13条または第15条（d）によって義務付けられたすべての報告書を過去12か月間提出したか（または登録者がそのような報告書を提出する必要があった短い期間について）をチェックマークで示し、（2）過去90日間、その報告書の提出要件に適合していたかをチェックマークで示します。
規則405に基づく提出が必要なすべてのインタラクティブデータファイルを過去12か月間（または登録者がそのようなファイルを提出する必要があった短い期間）に登録者が電子的に提出したかどうかを示してください。
申請者が大型加速装置、加速装置、ノンアクセル装置、小規模報告会社、または新興グロース会社である場合は、註記欄にチェックマークを付けてください。規則120億2に記載されている「大型加速装置」、「加速装置」、「小規模報告会社」、「新興グロース会社」の定義を参照してください。
大規模な加速ファイラー ☐ |
加速ファイラー ☐ |
より小規模な報告会社 |
新興成長企業 ☐ |
新興成長企業の場合は、証券取引法第13条（a）に基づく新しいまたは改訂された財務会計基準の遵守に対する延長移行期間を使用しないことを選択したかどうかにチェックマークをつけてください。
規制緩和法の規則120.2で定義される「シェル企業」であるかどうかをチェックマークで示してください。 はい いいえ
2024年10月31日現在、発行済み
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未来に関する声明：
この第10-Qフォームに関する四半期報告書（以下、「四半期報告書」という）には、1995年の民事訴訟改革法に基づく前向きな発言が含まれています。当社は、このような前向きな発言が1933年証券法（以下、「証券法」という）のセクション27Aおよび1934年証券取引所法（以下、「取引所法」という）のセクション21Eに含まれる前向きな声明の安全な港として適用されることを意図しています。この四半期報告書に含まれる、現在の事実および歴史的事実以外のすべての記述は、以下に定義する取引に関連する費用と見込まれる利益を含むがこれに限定されない記述、取引（以下定義されるもの）に関する見込みと当社がビジネスを成長させ財務状況を強化する能力、契約義務や資本支出の見込み、今後の事業運営と財務状況、戦略的取引に関する見込み（エンデバーアセット取得を含む）、資本還元プログラムにおける措置に関する見込み、株式の買取りおよび配当の金額と頻度を含む ; 業種とビジネスのトレンド、市況および他の宏観経済要因が当社のビジネス、財務状況および事業運営に与える影響；将来のビジネス戦略、計画、市場成長および将来の事業運営目標；および業界内での当社の競争市場ポジションは前進を意味する記述です。
上記を制限することなく、一般的に、企業は、「目的」、「予測する」、「信じる」、「できる」、「使命」、「可能性がある」、「するべきである」、「期待する」、「意図する」、「計画する」、「推定する」、「プロジェクトする」、「予測する」、「潜在的な」、「目標」といった先行的な用語、もしくはそれらの否定形、その他の変化や比較可能な用語や表現を使用して先行的な声明を一般的に特定することができます。この四半期報告書の先行的な声明は予測であり、当社のビジネス、財務状況、および業績に影響を与えると信じられる将来の出来事と財務トレンドについての現在の期待と予測に基づいています。これらの先行的な声明は、この四半期報告書の日付のみを基準にしており、一連の既知および未知のリスク、不確実性、仮定に影響を受けます。
これらのリスクは、この四半期報告書に含まれる見通しのコメントと実際の結果とを実質的に異なるものにする可能性があります。さらに、私たちは変化する環境で事業を展開しています。新しいリスク要因や不確実性が時折浮かび上がる可能性があり、全てのリスク要因や不確実性を経営陣が予測することは不可能です。たとえ私たちの業績、財務状況、流動性、および業種の発展がこの四半期報告書に記載された見通しのコメントと一致している場合でも、それらの結果や発展が後の期間の結果や発展を示すものであるとは限りません。
全セクターの方は、この四半期報告書およびここで参照している書類を完全に理解して読んでいただくべきです。実際の将来の結果が私たちの予想と大きく異なる可能性があることを理解してください。私たちは、すべての前向きな見通しにこれらの警告文をつけています。該当法に従うべき以外は、いかなる新しい情報、将来の出来事、変化した状況によっても、掲載されている前向きな見通しについて更新や修正の義務はありません。
3
利用可能な情報とウェブサイトの開示
SECとは、年次、四半期、現在の報告書、委任状声明書、その他の情報を提出する義務があります。 SECに提出した書類は、SECのウェブサイトを通じて一般公開されています。 これらの列挙のある手続き、イベント、または開発以外の、過去の事実に基づかないすべての声明は、フォワードルッキングな声明である可能性があります。.
当社についての詳細情報は、当社の投資家向け関連ウェブサイトでオンラインで入手できます。 investor.tkogrp.com私たちがSECに提出する書類およびその報告書への修正は、当該資料をSECに電子提出後、合理的な期間内で無料で当社のウェブサイトで利用可能です。私たちのウェブサイトに掲載された情報またはアクセス可能な情報は、この四半期報告書に取り込まれていません。
投資家やその他の方々は、当社はプレスリリース、SECファイリング、公開会議およびウェブキャスト、および当社の投資家向けサイトに投稿することで、投資家に対して重要な財務情報および運営情報を公表していることに注意すべきです。 investor.tkogrp.com当社はその他の会社情報の流通経路としてウェブサイトを利用する場合もあります。さらに、リソースタブの「投資家用メールアラート」オプションを訪れてメールアドレスを登録すると、TKOに関するメールアラートやその他の情報を自動的に受け取ることができます。 investor.tkogrp.com.
定義
この四半期報告書において使用される用語について、特に別段の記載がない限り、またはその文脈が別の意味を必要とする場合を除き、
4
5
第I部. 財務FINANIAL INFORMATION
アイテム1. 金融 Statements
グループホールディングス株式会社へ
結果バランスシート
（千ドル単位、株式データを除く）
(未監査)
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2021年9月30日時点 |
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2023年12月31日現在 |
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2024 |
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2023 |
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資産 |
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流動資産: |
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現金及び現金同等物 |
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$ |
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$ |
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貸倒引当金（$14,562を除く） |
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その他の流動資産 |
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流動資産合計 |
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有形固定資産 |
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無形資産、純額 |
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ファイナンスリースの使用権資産、正味額 |
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使用中リース資産、正味額 |
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のれん |
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投資 |
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その他の資産 |
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総資産 |
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$ |
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$ |
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負債、非支配株主持分および株主資本 |
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流動負債： |
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支払調整 |
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$ |
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$ |
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未払費用 |
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長期借入金の短期部分 |
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ファイナンスリース債務の当期償還部分 |
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運用リース債務の流動部分 |
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前払収益 |
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その他の流動負債 |
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流動負債合計 |
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新規買債務 |
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長期資金リース債務 |
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新規買オペレーティングリース債務 |
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繰延税金負債 |
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その他の長期負債 |
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負債合計 |
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（注18） |
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償還可能な非支配持分 |
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株主資本： |
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A類普通株式：($ |
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Bクラス普通株式: ($ |
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追加の資本金 |
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その他の総合損失 |
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( |
) |
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( |
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累積欠損 |
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( |
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( |
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合計TKOグループホールディングス株主資本 |
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償還不能な非支配持分 |
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株主資本合計 |
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負債合計、譲渡可能な非支配株式持分および株主資本 |
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$ |
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$ |
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連結財務諸表に関する注記を参照してください。
6
TKOグループホールディングス株式会社。
株主資本の合同記録操作のポイント
（千ドル、株および株当たりデータを除く）
(未監査)
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9月30日までの3か月間 |
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9月30日までの9ヶ月間 |
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2024 |
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2023 |
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2024 |
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2023 |
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売上高 |
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$ |
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$ |
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$ |
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$ |
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営業費用： |
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直接稼働コスト |
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販売、一般および管理費用 |
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減価償却費および償却費 |
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営業費用合計 |
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営業利益 |
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その他の経費: |
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金利費用、純額 |
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( |
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( |
) |
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( |
) |
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( |
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その他の収益（費用）、純額 |
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( |
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( |
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関連会社の税引前利益（損失） |
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( |
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所得税引当金 |
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関連会社の純利益及び利益の損失前 |
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( |
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関連会社の利益による損失、税引後 |
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( |
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( |
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( |
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当期純利益 |
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( |
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非支配株主に帰属する当期純利益からの減少分 |
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( |
) |
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( |
) |
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( |
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取引前のTKO運営会社LLCに帰属する当座純利益 |
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— |
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— |
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TKO Group Holdings, Inc.に帰属する当期純利益（損失） |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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A種普通株式1株当たりの基本的な純利益（損失） |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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A種普通株式1株当たりの希薄化後純利益（損失） |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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希薄化後株式発行済株式数の加重平均数（基本純利益（損失）１株当たり） |
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希薄化後1株当たりの純利益（損失）計算に使用される普通株式の加重平均株式数 |
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連結財務諸表に関する注記を参照してください。
7
TKOグループホールディングス株式会社。
包括利益（損失）の連結財務諸表包括利益（損失）
営業活動によるキャッシュフロー：
(未監査)
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9月30日までの3か月間 |
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9月30日までの9ヶ月間 |
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2024 |
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2023 |
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2024 |
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2023 |
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当期純利益 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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その他の総合的な所得（損失）税引後純額： |
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外貨翻訳調整 |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
キャッシュフローヘッジ: |
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未実現純利益(損失)の変動 |
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( |
) |
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( |
) |
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ネット利益へのキャッシュフローヘッジ公正価値の減価償却 |
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( |
) |
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( |
) |
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( |
) |
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( |
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法人税調整後の総包括利益（損失） |
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( |
) |
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非支配株主に帰属する包括利益（損失）からの減少分 |
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( |
) |
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( |
) |
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( |
) |
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取引前のTKO運営会社に帰属する包括利益の減少 |
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— |
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— |
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TKOグループホールディングスに帰属する包括利益（損失） |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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連結財務諸表に関する注記を参照してください。
8
TKOグループホールディングス株式会社。
株主資本の合計S株主資本の合計Sの諸表
営業活動によるキャッシュフロー：
(未監査)
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Three Months Ended September 30, 2024 |
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Accumulated |
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Total TKO |
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Nonredeemable |
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Common Stock |
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Additional |
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Other |
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Group Holdings, |
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Non- |
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Total |
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Class A |
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Class B |
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Paid - in |
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Comprehensive |
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Accumulated |
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Inc. Stockholders' |
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Controlling |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Loss |
|
|
Deficit |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
||||||||||
Balance, June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distributions to members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Contributions from members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock issuances and other, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Excise taxes on repurchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Taxes paid related to net settlement upon vesting of equity awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Principal stockholder contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Equity reallocation between controlling and non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
Balance, September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
Nine Months Ended September 30, 2024 |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
Deficit |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
||||||||||
Balance, December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions to members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Contributions from members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock issuances and other, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Repurchases and retirements of common stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Excise taxes on repurchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Taxes paid related to net settlement upon vesting of equity awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Principal stockholder contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Equity reallocation between controlling and non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
Balance, September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
See accompanying notes to consolidated financial statements.
9
TKO GROUP HOLDINGS, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
|
|
Three Months Ended September 30, 2023 |
|
|||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
Total TKO |
|
|
Nonredeemable |
|
|
|
|
|||||||||||
|
|
|
|
|
Common Stock |
|
|
Additional |
|
|
Other |
|
|
|
|
|
Group Holdings, |
|
|
Non- |
|
|
Total |
|
||||||||||||||||||||
|
|
Members |
|
|
Class A |
|
|
Class B |
|
|
Paid - in |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Inc. Stockholders' |
|
|
Controlling |
|
|
Stockholders' |
|
|||||||||||||||||
|
|
Capital |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Deficit |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||||
Balance, June 30, 2023 |
|
$ |
|
|
|
— |
|
|
$ |
|
|
|
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Comprehensive income (loss) prior to reorganization and acquisition |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Distributions to members prior to reorganization and acquisition |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Contributions from members prior to reorganization and acquisition |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Effects of reorganization and acquisition |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Distributions to members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Contributions from members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock issuances and other, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Conversions of convertible debt |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, September 30, 2023 |
|
$ |
- |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
|
|
Nine Months Ended September 30, 2023 |
|
|||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
Total TKO |
|
|
Nonredeemable |
|
|
|
|
|||||||||||
|
|
|
|
|
Common Stock |
|
|
Additional |
|
|
Other |
|
|
|
|
|
Group Holdings, |
|
|
Non- |
|
|
Total |
|
||||||||||||||||||||
|
|
Members |
|
|
Class A |
|
|
Class B |
|
|
Paid - in |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Inc. Stockholders' |
|
|
Controlling |
|
|
Stockholders' |
|
|||||||||||||||||
|
|
Capital |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income |
|
|
Deficit |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
|||||||||||
Balance, December 31, 2022 |
|
$ |
|
|
|
— |
|
|
$ |
- |
|
|
|
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Comprehensive income (loss) prior to reorganization and acquisition |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Distributions to members prior to reorganization and acquisition |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Contributions from members prior to reorganization and acquisition |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Effects of reorganization and acquisition |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Distributions to members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Contributions from members |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock issuances and other, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Conversions of convertible debt |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, September 30, 2023 |
|
$ |
- |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
See accompanying notes to consolidated financial statements.
10
TKO GROUP HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Amortization and impairments of content costs |
|
|
|
|
|
|
||
Amortization and write-off of original issue discount and deferred financing cost |
|
|
|
|
|
|
||
Loss on impairment of assets held for sale |
|
|
|
|
|
— |
|
|
Equity-based compensation |
|
|
|
|
|
|
||
Income taxes |
|
|
|
|
|
|
||
Other, net |
|
|
|
|
|
|
||
Changes in operating assets and liabilities, net of acquisition: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Other current assets |
|
|
( |
) |
|
|
|
|
Other noncurrent assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable and accrued liabilities |
|
|
|
|
|
|
||
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Purchases of property, buildings and equipment and other assets |
|
|
( |
) |
|
|
( |
) |
Investments in affiliates, net |
|
|
( |
) |
|
|
— |
|
Cash acquired from WWE |
|
|
— |
|
|
|
|
|
Payment of deferred consideration in the form of a dividend to former WWE shareholders |
|
|
— |
|
|
|
( |
) |
Proceeds from infrastructure improvement incentives |
|
|
|
|
|
— |
|
|
Proceeds from sales of property and equipment |
|
|
|
|
|
— |
|
|
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from borrowings |
|
|
|
|
|
— |
|
|
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
Payments for financing costs |
|
|
— |
|
|
|
( |
) |
Distributions to members |
|
|
( |
) |
|
|
( |
) |
Taxes paid related to net settlement upon vesting of equity awards |
|
|
( |
) |
|
|
— |
|
Proceeds from principal stockholder contributions |
|
|
|
|
|
— |
|
|
Repurchase and retirement of common stock |
|
|
( |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Effects of exchange rate movements on cash |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
|
|
$ |
|
||
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash payments for income taxes |
|
$ |
|
|
$ |
|
||
NON-CASH INVESTING AND FINANCING TRANSACTIONS: |
|
|
|
|
|
|
||
Capital expenditures included in current liabilities |
|
$ |
|
|
$ |
|
||
Acquisition of WWE, net of deferred consideration |
|
$ |
— |
|
|
$ |
|
|
Capital contribution from parent for equity-based compensation |
|
$ |
|
|
$ |
|
||
Principal stockholder contributions |
|
$ |
|
|
$ |
— |
|
|
Convertible notes exchanged for common stock |
|
$ |
— |
|
|
$ |
|
|
Excise taxes on repurchases of common stock |
|
$ |
|
|
$ |
— |
|
|
See accompanying notes to consolidated financial statements.
11
TKO GROUP HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. DESCRIPTION OF BUSINESS
TKO Group Holdings, Inc. (the “Company” or “TKO”) was incorporated as a Delaware corporation in March 2023, under the name New Whale Inc., and was formed for the purpose of facilitating the business combination of the Ultimate Fighting Championship (“UFC”) and World Wrestling Entertainment, LLC (f/k/a World Wrestling Entertainment, Inc.) (“WWE”) businesses under TKO Operating Company, LLC (f/k/a Zuffa Parent, LLC) (“Zuffa” or “TKO OpCo”), which owns and operates the UFC and WWE businesses (the “Transactions”), as contemplated within the Transaction Agreement, dated as of April 2, 2023, by and among Endeavor Group Holdings, Inc. (“Endeavor” or “EGH”), Endeavor Operating Company, LLC, TKO OpCo, WWE, TKO, and Whale Merger Sub Inc. (the “Transaction Agreement”). On September 12, 2023, the Transactions were completed with the newly-formed TKO combining the UFC and WWE businesses. See Note 4, Acquisition of WWE, for further details. Under the terms of the Transaction Agreement, (A) EGH and/or its subsidiaries received (1) a
TKO OpCo is the accounting acquirer and predecessor to TKO. Financial results and information included in the accompanying consolidated financial statements include (1) prior to the consummation of the Transactions, financial results and information of Zuffa and its consolidated subsidiaries, which includes UFC and its subsidiaries, and (2) after the consummation of the Transactions, financial results and information of TKO Group Holdings, Inc., and its consolidated subsidiaries, which includes UFC and WWE and their respective subsidiaries.
Unless the context suggests otherwise, references to the “Company” or “TKO” refer to Zuffa and its consolidated subsidiaries prior to the consummation of the Transactions and to TKO Group Holdings, Inc. and its consolidated subsidiaries after the consummation of the Transactions.
TKO is a premium sports and entertainment company which operates leading combat sports and sports entertainment brands. The Company monetizes its brands through four principal activities: Media rights and content, Live events, Sponsorship, and Consumer products licensing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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, 2023 (the “2023 Annual Report”). 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, 2024 and for the three and nine months ended September 30, 2024 and 2023 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. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. All intercompany balances are eliminated in consolidation.
TKO is the sole managing member of TKO OpCo and maintains a controlling financial interest in TKO OpCo. As sole managing member, the Company operates and controls all of the business affairs of TKO OpCo. As a result, the Company is the primary beneficiary and thus consolidates the financial results of TKO OpCo and reports a non-controlling interest representing the economic interest in TKO OpCo held by the other members of TKO OpCo. As of September 30, 2024, the Company owned
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, the allowance for doubtful accounts, content cost amortization and impairment, 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
12
assets and long-lived assets for impairment, determination of useful lives of intangible assets and long-lived assets acquired, the fair value of equity-based compensation, leases, 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.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements
In August 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. This ASU requires that a joint venture apply a new basis of accounting upon formation. The amendments in this update are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025, with an option to apply the amendments retrospectively. Early adoption is permitted in any interim or annual period in which financial statements have not yet been issued. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532, Disclosure Update and Simplification, which was issued in 2018. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If, by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the ASC and will not become effective. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The update should be applied retrospectively to all prior periods presented in the financial statements. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires that an entity annually disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate) as well as income taxes paid disaggregated by jurisdiction. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
In March 2024, the FASB issued ASU 2024-02, Codification Improvements – Amendments to Remove References to the Concepts Statements. This ASU amends the Accounting Standards Codification (“ASC”) to remove references to various FASB Concepts Statements to simplify the ASC and draw a distinction between authoritative and nonauthoritative literature. The amendments in this update apply to all reporting entities within the scope of the affected accounting guidance, and are effective for public entities for fiscal years beginning after December 15, 2024. Early adoption is permitted in any interim or annual period in which financial statements have not yet been issued. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU improves expense disclosures by requiring disclosure of additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2026 and should be applied either prospectively to financial statements issued for reporting periods after the effective date of the ASU or retrospectively to any or all periods presented in the financial statements. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.
13
4. ACQUISITION OF WWE
Transactions Overview
On September 12, 2023 (the “Closing Date”), the transaction between EGH and WWE was completed with the newly-formed TKO combining the UFC and WWE businesses. Under the terms of the Transaction Agreement, (A) EGH and/or its subsidiaries received (1) a
WWE is an integrated media and entertainment company that has been involved in the sports entertainment business for four decades. WWE is principally engaged in the production and distribution of unique and creative content through various channels, including content rights agreements for its flagship programs, Raw, SmackDown and NXT, premium live event programming, monetization across social media outlets, live events, and licensing of various WWE-themed products.
The Transactions have been accounted for as a reverse acquisition of WWE using the acquisition method of accounting in accordance with the guidance of ASC 805, Business Combinations (“ASC 805”), with TKO OpCo, the legal acquiree, treated as the accounting acquirer. Based on this determination, the Company has allocated the purchase price to the fair value of WWE’s identifiable assets and liabilities as of the Closing Date, with the excess purchase price recorded as goodwill. The goodwill was assigned entirely to the WWE segment and is not deductible for tax purposes.
The weighted average life of finite-lived intangible assets acquired was
In connection with the Transactions, the Company incurred transaction costs of $
Consideration Transferred
The fair value of the consideration transferred in the reverse acquisition was $
Pursuant to the Transactions, awards of WWE RSUs and PSUs outstanding immediately prior to the completion of the Transactions were converted into awards of TKO RSUs or PSUs, as applicable, on the same terms and conditions as were applicable immediately prior to the Closing Date (the “Replacement Awards”). The portion of the fair-value-based measure of the Replacement Awards that is attributable to pre-combination vesting is purchase consideration and is valued at approximately $
Allocation of Purchase Price
The purchase price is allocated to the underlying WWE assets acquired and liabilities assumed based on their estimated fair values on the Closing Date, with any excess purchase price recorded as goodwill. Goodwill is primarily attributable to the synergies that are expected to arise as a result of the Transactions and other intangible assets that do not qualify for separate recognition. The purchase price allocation reflects fair value estimates, including measurement period adjustments, based on management analysis, including work performed by third-party valuation specialists. The effects of measurement period adjustments made during the three and nine months ended September 30, 2024 were not material to the Company’s consolidated financial statements.
14
A summary of the final purchase price allocation is as follows:
Cash and cash equivalents |
|
$ |
|
|
Accounts receivable |
|
|
|
|
Other current assets |
|
|
|
|
Property, buildings and equipment |
|
|
|
|
Intangible assets |
|
|
|
|
Trademarks and trade names |
|
|
|
|
Customer relationships |
|
|
|
|
Other |
|
|
|
|
Goodwill |
|
|
|
|
Finance lease right of use assets |
|
|
|
|
Operating lease right of use assets |
|
|
|
|
Investments |
|
|
|
|
Other assets |
|
|
|
|
Deferred tax liabilities |
|
|
( |
) |
Accounts payable and accrued liabilities |
|
|
( |
) |
Current portion of long-term debt |
|
|
( |
) |
Deferred revenue |
|
|
( |
) |
Finance lease liabilities |
|
|
( |
) |
Operating lease liabilities |
|
|
( |
) |
Other long-term liabilities |
|
|
( |
) |
Additional paid-in-capital (1) |
|
|
( |
) |
Net assets acquired |
|
$ |
|
|
The fair value of the nonredeemable non-controlling interest of $
Consolidated Statement of Operations for the period from September 12, 2023 through September 30, 2023
The following supplemental information presents the financial results of WWE operations included in the Consolidated Statement of Operations for the period from September 12, 2023 through September 30, 2023 (in thousands):
Revenue |
|
$ |
|
|
Net loss |
|
|
( |
) |
Supplemental Pro Forma Financial Information
The following presents unaudited pro forma results of operations for the three and nine months ended September 30, 2023 as if the Transactions had occurred as of January 1, 2022 (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
|
September 30, |
|
|
September 30, |
|
||
|
|
2023 |
|
|
2023 |
|
||
Pro forma revenue |
|
$ |
|
|
$ |
|
||
Pro forma net income |
|
|
|
|
|
|
||
The pro forma information includes the historical operating results of Zuffa and WWE prior to the Transactions, with adjustments directly attributable to the business combination. Pro forma adjustments have been made to reflect the adjustment of nonrecurring transaction costs of $
15
5. REVENUE
The Company derives its revenue principally from the following sources: (i) media rights and content fees associated with the distribution of content, (ii) ticket sales at live events and site fees, (iii) sponsorship and advertising sales, and (iv) consumer product licensing.
Disaggregated Revenue
The following table presents the Company’s revenue disaggregated by primary revenue sources (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
UFC Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Media rights and content |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Live events |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sponsorship |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consumer products licensing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total UFC Segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
WWE Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Media rights and content |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Live events |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sponsorship |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consumer products licensing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total WWE Segment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Remaining Performance Obligations
The transaction price related to the Company’s future performance obligations does not include any variable consideration related to sales or usage-based royalties. The variability related to these sales or usage-based royalties will be resolved in the periods when the licensee generates sales related to the intellectual property license.
The following table presents the aggregate amount of the transaction price allocated to remaining performance obligations for contracts greater than one year for their initial term prior to opt-out provisions with unsatisfied or partially satisfied performance obligations as of September 30, 2024 (in thousands):
|
$ |
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
Total remaining performance obligations |
|
$ |
|
Revenue from Prior Period Performance Obligations
The Company did
Contract Liabilities (Deferred Revenues)
The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance. The Company’s deferred revenue balance primarily relates to advance payments received related to its content distribution rights agreements, consumer product licensing agreements and sponsorship arrangements, as well as memberships for the Company’s subscription services. Deferred revenue is included in the current liabilities section and in other long-term liabilities in the consolidated balance sheets.
16
The following table presents the Company’s deferred revenue as of September 30, 2024 and December 31, 2023 (in thousands):
|
|
As of |
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|||||
|
|
December 31, |
|
|
|
|
|
|
|
|
Foreign |
|
|
September 30, |
|
|||||
Description |
|
2023 |
|
|
Additions |
|
|
Deductions |
|
|
Exchange |
|
|
2024 |
|
|||||
Deferred revenue - current |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
Deferred revenue - non-current |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
6. SUPPLEMENTARY DATA
Property, Buildings and Equipment, net
Property, buildings and equipment, net consisted of the following (in thousands):
|
|
As of |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Buildings and improvements |
|
$ |
|
|
$ |
|
||
Office, computer and other equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Land and land improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total Property, buildings and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense for property, buildings and equipment totaled $
During the second quarter of 2024, the Company reclassified cost and accumulated depreciation of $
Allowance for Doubtful Accounts
The changes in the allowance for doubtful accounts are as follows (in thousands):
|
|
As of |
|
|
Charged to |
|
|
|
|
|
|
|
|
As of |
|
|||||
|
|
December 31, |
|
|
Costs and |
|
|
|
|
|
Foreign |
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
Expenses |
|
|
Deductions |
|
|
Exchange |
|
|
2024 |
|
|||||
Nine Months Ended September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|||
17
Film and Television Content Costs
The following table presents the Company’s unamortized content costs, which are included as a component of other assets in the consolidated balance sheets (in thousands):
|
|
Predominantly Monetized Individually |
|
|
Predominantly Monetized as a Film Group |
|
||||||||||
|
|
As of |
|
|
As of |
|
||||||||||
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Licensed and acquired program rights |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Produced programming: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
In release |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Completed but not released |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
In production |
|
|
|
|
|
|
|
|
|
|
|
|
||||
In development |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total film and television costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2024, substantially all of the “in release” and “completed but not released” content costs that are monetized individually are estimated to be amortized over the next
As of September 30, 2024, substantially all of the “licensed and acquired program rights” and “in release” content costs monetized as a film group are estimated to be amortized over the next
Amortization and impairment of content costs, which are included as a component of direct operating costs in the consolidated statement of operations, consisted of the following (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Content production amortization expense - assets monetized individually |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Content production amortization expense - assets monetized as a film group |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Content production impairment charges (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total amortization and impairment of content costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other current assets
The following is a summary of other current assets (in thousands):
|
|
As of |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Prepaid taxes |
|
$ |
|
|
$ |
|
||
Amounts due from the Group (Note 21) |
|
|
|
|
|
|
||
Assets held for sale |
|
|
|
|
|
|
||
Prepaid event and production-related costs |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
18
Accrued Liabilities
The following is a summary of accrued liabilities (in thousands):
|
|
As of |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Legal settlements (Note 18) |
|
$ |
|
|
$ |
— |
|
|
Payroll-related costs |
|
|
|
|
|
|
||
Event and production-related costs |
|
|
|
|
|
|
||
Interest |
|
|
|
|
|
|
||
Legal and professional fees |
|
|
|
|
|
|
||
Accrued capital expenditures |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
7. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in the carrying value of Goodwill are as follows (in thousands):
|
|
UFC (1) |
|
|
WWE (2) |
|
|
Total |
|
|||
Balance — December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Foreign exchange and other |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance — September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
There were
Intangible Assets, net
The following table summarizes information relating to the Company’s identifiable intangible assets as of September 30, 2024 (in thousands):
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|||
|
|
Estimated Useful Life |
|
|
|
|
Accumulated |
|
|
|
|
|||
|
|
(in years) |
|
Gross Amount |
|
|
Amortization |
|
|
Carrying Value |
|
|||
Trademarks and trade names |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other (1) |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 2023 (in thousands):
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|||
|
|
Estimated Useful Life |
|
|
|
|
Accumulated |
|
|
|
|
|||
|
|
(in years) |
|
Gross Amount |
|
|
Amortization |
|
|
Carrying Value |
|
|||
Trademarks and trade names |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other (1) |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
19
Amortization of intangible assets was $
8. INVESTMENTS
The following is a summary of the Company’s investments (in thousands):
|
|
As of |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Equity method investments |
|
$ |
|
|
$ |
|
||
Nonmarketable equity investments without readily determinable fair values |
|
|
|
|
|
|
||
Total investment securities |
|
$ |
|
|
$ |
|
||
Equity Method Investments
In July 2024, the Company paid $
The Company recognized equity earnings of $
Nonmarketable Equity Investments Without Readily Determinable Fair Values
As of September 30, 2024 and December 31, 2023, the Company held various investments in nonmarketable equity instruments of private companies.
The Company did
The fair value measurements of the Company’s equity investments and nonmarketable equity investments without readily determinable fair values are classified within Level 3 as significant unobservable inputs are used as part of the determination of fair value. Significant unobservable inputs may include variables such as near-term prospects of the investees, recent financing activities of the investees, and the investees' capital structure, as well as other economic variables, which reflect assumptions market participants would use in pricing these assets. For equity investments without readily determinable fair values, the Company has elected to use the measurement alternative to fair value that will allow these investments to be recorded at cost, less impairment, and adjusted for subsequent observable price changes.
20
9. DEBT
The following is a summary of the Company’s outstanding debt (in thousands):
|
|
As of |
|
|||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
First Lien Term Loan (due |
|
$ |
|
|
$ |
|
||
Secured Commercial Loans |
|
|
|
|
|
|
||
Total principal |
|
|
|
|
|
|
||
Unamortized discount |
|
|
( |
) |
|
|
( |
) |
Unamortized debt issuance cost |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Less: Current portion of long-term debt |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
$ |
|
|
$ |
|
||
First Lien Term Loan (due April 2026)
As of September 30, 2024 and December 31, 2023, the Company had $
Payments under the First Lien Term Loan include
In April 2024, the Company borrowed $
The Credit Facilities contain a financial covenant that requires the Company 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
The Company had $
The Credit Facilities restrict the ability of certain subsidiaries of the Company to make distributions and other payments to the Company. These restrictions 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, which generally provides for no restrictions as long as the Total Leverage Ratio (as defined in the Credit Agreement) is less than
The estimated fair values of the Company’s First Lien Term Loan are based on quoted market values for the debt. As of September 30, 2024 and December 31, 2023, the face amount of the Company’s First Lien Term Loan approximates its fair value.
21
Secured Commercial Loans
As of September 30, 2024 and December 31, 2023, the Company had $
The Secured Commercial Loans contain a financial covenant that requires the Company to maintain a Debt Service Coverage Ratio of consolidated debt to Adjusted EBITDA as defined in the applicable loan agreements of no more than
10. FINANCIAL INSTRUMENTS
In October 2018, in connection with the Secured Commercial Loans, the Company entered into a swap for $
In May 2023, the Company amended its Secured Commercial Loans and associated interest rate swap to replace the LIBOR reference rate with Term SOFR. The swap requires the Company to pay a fixed rate of
Prior to the May 2023 amendment the fair value of the swap was based on commonly quoted monthly LIBOR rates. Subsequent to this amendment, the fair value of the swap is based on commonly quoted monthly Term SOFR rates. Both the LIBOR and Term SOFR reference rates are considered observable inputs representing a Level 2 measurement within the fair value hierarchy. The fair value of the swap was
11. STOCKHOLDERS’ EQUITY
Endeavor Share Purchase
On April 4, 2024, WME IMG, LLC (“WME IMG”), an indirect subsidiary of Endeavor, entered into a stock purchase agreement with Vincent K. McMahon, pursuant to which WME IMG agreed to purchase
Share Repurchase
On April 7, 2024, the Company entered into a stock purchase agreement with Mr. McMahon, pursuant to which the Company agreed to purchase
As of September 30, 2024, the Company owned
As of September 30, 2024, EGH and its subsidiaries collectively controlled
22
12. NON-CONTROLLING INTERESTS
Nonredeemable Non-Controlling Interest in TKO OpCo
In connection with the business acquisition of WWE described in Note 4, Acquisition of WWE, on September 12, 2023, the Company became the sole managing member of TKO OpCo and, as a result, consolidates the financial results of TKO OpCo. The Company reports a non-controlling interest representing the economic interest in TKO OpCo held by the other members of TKO OpCo. TKO OpCo’s operating agreement provides that holders of membership interests in TKO OpCo (“Common Units”) may, from time to time, require TKO OpCo to redeem all or a portion of their Common Units (and an equal number of shares of TKO Class B common stock) for cash or, at the Company’s option, for shares of TKO Class A common stock on a
Redeemable Non-Controlling Interest in the UFC
In July 2018, the Company received an investment of $
The changes in carrying value of the redeemable non-controlling interest for the nine months ended September 30, 2024 were as follows (in thousands):
Balance — December 31, 2023 |
|
$ |
|
|
Net income attributable to non-controlling interest holders |
|
|
|
|
Balance — September 30, 2024 |
|
$ |
|
13. EQUITY-BASED COMPENSATION
Equity-based compensation expense, which is included within direct operating costs and selling, general and administrative expenses on the Company’s consolidated statements of operations, consisted of the following (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
EGH 2021 Plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Replacement Awards under WWE 2016 Plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
TKO 2023 Plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
EGH 2021 Plan
The terms of each award, including vesting and forfeiture, are determined by the administrator of the EGH 2021 Plan. Key grant terms include one or more of the following: (a) time-based vesting over a - to
23
The following table summarizes the RSU award activity under the EGH 2021 Plan for the nine months ended September 30, 2024:
|
|
Time Vested RSUs |
|
|
Market / Market and Time |
|
||||||||||
|
|
Units |
|
|
Weighted- |
|
|
Units |
|
|
Weighted- |
|
||||
Outstanding at January 1, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
Transfers |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The following table summarizes the stock option award activity under the EGH 2021 Plan for the nine months ended September 30, 2024:
|
|
Stock Options |
|
|||||
|
|
Units |
|
|
Weighted-Average |
|
||
Outstanding at January 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
— |
|
|
$ |
— |
|
Forfeited or expired |
|
|
— |
|
|
$ |
— |
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Vested and exercisable at September 30, 2024 |
|
|
|
|
$ |
|
||
Replacement Awards
The following table summarizes the RSU award activity under the WWE 2016 Plan for the nine months ended September 30, 2024:
|
|
Time Vested RSUs |
|
|||||
|
|
Units |
|
|
Weighted- |
|
||
Outstanding at January 1, 2024 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
The following table summarizes the PSU award activity under the WWE 2016 Plan for the nine months ended September 30, 2024:
|
|
Time Vested PSUs |
|
|||||
|
|
Units |
|
|
Weighted- |
|
||
Outstanding at January 1, 2024 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
TKO 2023 Plan
The terms of each award, including vesting and forfeiture, are determined by the administrator of the TKO 2023 Plan. Key grant terms include time-based vesting over a
In January 2024, WWE entered into an Independent Services Contractor and Merchandising Agreement (the “DJ Services Agreement”) with Dwayne Johnson, a member of the Company’s board of directors, pursuant to which Mr. Johnson agreed to provide
24
to WWE certain promotional and other services. See Note 21, Related Party Transactions, for further discussion. As consideration for Mr. Johnson’s services provided under the DJ Services Agreement, the Company granted Mr. Johnson RSUs for an aggregate value of $
The following table summarizes the RSU award activity under the TKO 2023 Plan for the nine months ended September 30, 2024:
|
|
Time Vested RSUs |
|
|||||
|
|
Units |
|
|
Weighted- |
|
||
Outstanding at January 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
14. EARNINGS PER SHARE
Basic earnings per share is calculated utilizing net income (loss) available to common stockholders of the Company during the three and nine months ended September 30, 2024 and 2023, divided by the weighted average number of shares of TKO Class A common stock outstanding during the same period. Diluted earnings per share is calculated by dividing the net income (loss) available to common stockholders by the diluted weighted average shares outstanding during the same period. The Company’s outstanding equity-based compensation awards under its equity-based compensation arrangements (refer to Note 13, Equity-based Compensation) were anti-dilutive during the nine months ended September 30, 2024 and three and nine months ended September 30, 2023.
25
The following table presents the computation of basic and diluted net earnings (loss) per share and weighted average number of shares of the Company’s common stock outstanding for the periods presented (dollars in thousands, except share and per share data):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to TKO Group Holdings, Inc. |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustment to net income attributable to TKO Group Holdings, Inc. from the assumed conversion of Class B shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income (loss) attributable to TKO Group Holdings, Inc. used in computing diluted earnings (loss) per share |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average Class A Common Shares outstanding - Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Additional shares from RSUs and PSUs, as calculated using the treasury stock method |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Additional shares from the assumed conversion of Class B shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Weighted average number of shares used in computing diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings (loss) per share |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted earnings (loss) per share |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities that are anti-dilutive this period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested RSUs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Unvested PSUs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Shares outstanding under Convertible Notes |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
TKO Class B Common Shares |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
15. INCOME TAXES
TKO Group Holdings, Inc. was incorporated as a Delaware corporation in March 2023. As the sole managing member of TKO OpCo, TKO Group Holdings, Inc. operates and controls all the business and affairs of UFC and WWE. TKO Group Holdings, Inc. is subject to corporate income taxes on its share of taxable income of TKO OpCo. TKO OpCo is treated as a partnership for U.S. federal income tax purposes and is therefore generally not subject to U.S. corporate income tax, other than entity-level income taxes in certain U.S. state and local jurisdictions. TKO OpCo’s foreign subsidiaries are subject to entity-level taxes, and TKO OpCo’s U.S. subsidiaries are subject to foreign withholding taxes on sales in certain foreign jurisdictions which are included as a component of foreign current taxes.
As discussed in Note 4, Acquisition of WWE, the Transactions are accounted for as a reverse acquisition of WWE using the acquisition method of accounting in accordance with ASC 805. As a result, TKO recorded a fair value step-up on the acquired WWE net assets in the amount of $
In accordance with ASC 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 records 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 that are noted in the relevant period. During the three and nine months ended September 30, 2024, the Company treated the legal settlement related to UFC antitrust lawsuits of $
The provision for income taxes for the three months ended September 30, 2024 and 2023 was $
26
30, 2024 and 2023 was $
The Company’s effective tax rate differs from the U.S. federal statutory rate primarily due to state and local income taxes, non-controlling interest, withholding taxes in foreign jurisdictions that are not based on net income, and increased income subject to tax in foreign jurisdictions which differ from the U.S. federal statutory income tax rate.
As of September 30, 2024 and December 31, 2023, the Company had unrecognized tax benefits of $
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.
Other Matters
On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 ("IRA"). The IRA, in addition to other 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. For the three and nine months ended September 30, 2024 and the year ended December 31, 2023, the Company was not subject to CAMT. The Company will continue to assess the potential tax effects of the CAMT on the Company’s 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"). Various jurisdictions have adopted or are in the process of enacting legislation to adopt GloBE rules and other countries are expected to adopt GloBE rules in the future. While 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’s impact related to the adoption of the GloBE rules, effective January 1, 2024, was not material to the Company’s consolidated financial position.
16. RESTRUCTURING CHARGES
Beginning in the third quarter of 2023, the Company implemented an ongoing cost reduction program, primarily related to realizing synergy opportunities and integrating the combined operations of WWE and UFC, which resulted in the recording of termination benefits for a workforce reduction of certain employees and contract termination costs for independent contractors in the WWE segment and Corporate group. As a result, the Company recorded restructuring charges of $
Changes in the Company’s restructuring liability through September 30, 2024 were as follows (in thousands):
Balance — December 31, 2023 |
|
$ |
|
|
Restructuring charges (excluding equity-based compensation expense) |
|
|
|
|
Payments |
|
|
( |
) |
Balance — September 30, 2024 |
|
$ |
|
27
17. CONTENT PRODUCTION INCENTIVES
The Company has access to various governmental programs that are designed to promote content production within the United States of America and certain international jurisdictions. These programs primarily consist of nonrefundable tax credits issued by a jurisdiction on an annual basis for qualifying expenses incurred during the year in the production of certain entertainment content created in whole or in part within the jurisdiction. The Company recognizes these benefits when we have reasonable assurance regarding the realizable amount of the tax credits.
During the three and nine months ended September 30, 2024 and 2023, the Company recorded content production incentives of $
During the three and nine months ended September 30, 2024, the Company recorded infrastructure improvement incentives of $
18. COMMITMENTS AND CONTINGENCIES
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, among others, 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.
UFC Legal Proceedings
28
WWE Legal Proceedings
As announced in June 2022, a Special Committee of independent members of WWE’s board of directors (the “Special Committee”) was formed to investigate alleged misconduct by WWE’s then-Chief Executive Officer, Vincent K. McMahon (the “Special Committee Investigation”). Mr. McMahon initially resigned from all positions held with WWE on July 22, 2022 but remained a stockholder with a controlling interest and served as Executive Chairman of WWE’s board of directors from January 9, 2023 through September 12, 2023, at which time Mr. McMahon became Executive Chair of the Board of Directors of the Company. Although the Special Committee investigation is complete and, in January 2024, Mr. McMahon resigned from his position as Executive Chair and member of the Company’s Board of Directors, as well as other positions, employment and otherwise, at TKO and its subsidiaries, WWE has received, and may receive in the future, regulatory, investigative and enforcement inquiries, subpoenas, demands and/or other claims and complaints arising from, related to, or in connection with these matters. On July 17, 2023, federal law enforcement agents executed a search warrant and served a federal grand jury subpoena on Mr. McMahon. No charges have been brought in these investigations. WWE has received voluntary and compulsory legal demands for documents, including from federal law enforcement and regulatory agencies, concerning the investigation and related subject matters.
On January 25, 2024, a former WWE employee filed a lawsuit against WWE, Mr. McMahon and another former WWE executive in the United States District Court for the District of Connecticut alleging, among other things, that she was sexually assaulted by Mr. McMahon and asserting claims under the Trafficking Victims Protection Act.
On November 17, 2023, a purported former stockholder of WWE, Laborers’ District Council and Contractors’ Pension Fund of Ohio (“Laborers”), filed a verified class action complaint on behalf of itself and similarly situated former WWE stockholders in the Court of Chancery of the State of Delaware (“Delaware Court”), captioned Laborers District Council and Contractors’ Pension Fund of Ohio v. McMahon, C.A. No. 2023-1166-JTL (“Laborers Action”). On November 20, 2023, another purported former WWE stockholder, Dennis Palkon, filed a verified class action complaint on behalf of himself and similarly situated former WWE stockholders in the Delaware Court, captioned Palkon v. McMahon, C.A. No. 2023-1175-JTL (“Palkon Action”). The Laborers and Palkon Actions allege breach of fiduciary duty claims against former WWE directors Vincent K. McMahon, Nick Khan, Paul Levesque, George A. Barrios, Steve Koonin, Michelle D. Wilson, and Frank A. Riddick III (collectively, the “Individual Defendants”), arising out of the Transactions. On April 24, 2024, the City of Pontiac Reestablished General Employees’ Retirement System (“Pontiac”), a purported former stockholder of WWE, filed another verified class action complaint on behalf of itself and similarly situated former WWE stockholders in the Delaware Court captioned City of Pontiac Reestablished General Employees’ Retirement System v. McMahon, C.A. No. 2024-0432 (“Pontiac Action”). The Pontiac Action similarly alleges breach of fiduciary duty claims against the Individual Defendants and added claims against WWE and TKO for denying stockholders their appraisal rights under DGCL § 262, as well as claims against EGH for aiding and abetting the alleged breaches of fiduciary duties and for civil conspiracy to violate DGCL § 262. On May 2, 2024, the Court entered an order consolidating the Laborers, Palkon and Pontiac actions under the caption In re World Wrestling Entertainment, Inc. Merger Litigation, C.A. No. 2023-1166-JTL (“Consolidated Action”). On August 8, 2024, the Delaware Court appointed the Laborers and Palkon plaintiffs as co-lead plaintiffs, and the co-lead plaintiffs subsequently designated the Palkon complaint as operative. As a result, WWE, TKO and EDR are no longer defendants. On October 24, 2024, the Delaware Court entered a stipulation dismissing all claims against Messrs. Koonin and Riddick, who, therefore, are no longer defendants.
19. SEGMENT INFORMATION
Prior to the acquisition of WWE, the Company operated as a single reportable segment. Subsequent to the acquisition of WWE and effective September 12, 2023, the Company identified
The Company also reports the results for the “Corporate” group. The Corporate group reflects operations not allocated to the UFC or WWE segments and primarily consists of general and administrative expenses. These expenses relate largely to corporate activities, including information technology, facilities, legal, human resources, finance, accounting, treasury, investor relations, corporate communications, community relations and compensation to TKO’s management and board of directors, which support both reportable segments. Corporate expenses also include service fees paid by the Company to Endeavor related to certain corporate activities as well as certain revenue generating activities under the Services Agreement.
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 CODM for allocating resources and assessing operating performance is Adjusted EBITDA. The Company defines Adjusted EBITDA as net income, excluding income taxes, net interest expense, depreciation and amortization, equity-based compensation, merger and acquisition costs, certain legal costs, restructuring, severance and impairment charges, and certain other items when applicable. Adjusted EBITDA includes amortization expenses directly related to supporting the
29
operations of the Company’s segments, including content production asset amortization. The Company believes the presentation of Adjusted EBITDA is relevant and useful for investors because it allows investors to view the Company’s segment performance in the same manner as the Company’s CODM to evaluate segment performance and make decisions about allocating resources. Additionally, the Company believes that Adjusted EBITDA is a primary measure used by media investors, analysts and peers for comparative purposes.
The Company does not disclose assets by segment information. The Company does not provide assets by segment information to the Company’s CODM, as that information is not typically used in the determination of resource allocation and assessing business performance of each reportable segment. A significant portion of the Company’s assets following the Transactions are comprised of goodwill and intangible assets arising from the Transactions.
The following tables present summarized financial information for each of the Company’s reportable segments (in thousands):
Revenue
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
UFC |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
WWE |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total consolidated revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reconciliation of segment profitability
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
UFC |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
WWE |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity (earnings) losses of affiliates |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Equity-based compensation expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Merger and acquisition costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Certain legal costs (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Restructuring, severance and impairment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other adjustments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income (loss) before income taxes and equity (earnings) losses of affiliates |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
20. LEASES
On May 21, 2024, the Company amended its WWE global headquarters lease to reduce the leased space by approximately
30
21. RELATED PARTY TRANSACTIONS
EGH and its subsidiaries
EGH and its subsidiaries (collectively, the “Group”), which collectively own approximately
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Event and other licensing revenues earned from the Group |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expenses incurred with the Group included in direct operating costs (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses incurred with the Group included in selling, general and administrative expenses (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net expense resulting from Group transactions included within net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Outstanding amounts due to and from the Group were as follows (in thousands):
|
|
|
|
As of |
|
|||||
|
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
Classification |
|
2024 |
|
|
2023 |
|
||
Amounts due from the Group |
|
Other current assets |
|
|
|
|
|
|
||
Amounts due to the Group |
|
Other current liabilities |
|
|
( |
) |
|
|
( |
) |
The Company also reimburses the Group for third party costs they incur on the Company’s behalf. The Company reimbursed $
Vincent McMahon
Vincent K. McMahon, who served as Executive Chair of the Company’s Board of Directors until January 26, 2024, previously controlled a significant portion of the voting power of the issued and outstanding shares of the Company’s common stock.
Mr. McMahon has agreed to make future payments to certain counterparties personally. In accordance with the SEC’s Staff Accounting Bulletin Topic 5T, Miscellaneous Accounting, Accounting for Expenses or Liabilities Paid by Principal Stockholders (“Topic 5T”), the Company concluded that these amounts should be recognized by the Company as expenses in the period in which they become probable and estimable.
As of December 31, 2023, total liabilities of $
In connection with and/or arising from the investigation conducted by a Special Committee of the former WWE board of directors, Mr. McMahon has agreed to reimburse the Company for additional costs incurred in connection with and/or arising from the same matters. During the three and nine months ended September 30, 2024, Mr. McMahon made payments of $
Dwayne Johnson
Dwayne Johnson (also known by his stage name “The Rock”) is an actor, film producer, entrepreneur and professional wrestler who has provided talent related services to WWE for decades. Mr. Johnson is represented by talent agency William Morris Endeavor, an affiliate of TKO. On January 23, 2024, the Company’s board of directors appointed Mr. Johnson as a WWE director designee on the TKO Board.
31
On January 22, 2024, WWE and Mr. Johnson entered into the DJ Services Agreement, pursuant to which Mr. Johnson agreed to provide to WWE certain promotional and other services. WWE also entered into an IP Assignment Agreement with certain affiliates of Mr. Johnson, pursuant to which WWE assigned to Mr. Johnson (via one of his affiliates) “The Rock” trademark and certain related trademarks, service marks, ring names, taglines and other intellectual property assets (the “Assigned IP”).
Under the terms of the DJ Services Agreement, Mr. Johnson further agreed to license the Assigned IP and Mr. Johnson’s name, likeness and certain other intellectual property rights to WWE for use in connection with certain categories of licensed products related to professional wrestling for up to
As discussed in Note 13, Equity-based Compensation, as consideration for Mr. Johnson’s services pursuant to the DJ Services Agreement, and in respect of the intellectual property grants and licenses made by Mr. Johnson and his affiliates in connection therewith, Mr. Johnson received an RSU award for an aggregate value of $
Mr. Johnson also receives annual royalties from WWE and will be entitled to receive royalties in connection with the sale of licensed products that utilize the Assigned IP and his name, likeness and other intellectual property rights in accordance with the DJ Services Agreement. For the three and nine months ended September 30, 2024, the Company paid $
22. SUBSEQUENT EVENTS
Endeavor Asset Acquisition
On October 23, 2024, the Company and TKO OpCo entered into a definitive agreement with subsidiaries of Endeavor to acquire the Professional Bull Riders (“PBR”), On Location, and IMG businesses. Under the terms of the agreement, TKO will acquire the Endeavor assets for total consideration of $
The transaction is expected to close in the first half of 2025, subject to the satisfaction or waiver of certain customary closing conditions, including receipt of required regulatory approvals and the affirmative vote of holders of a majority of the voting power of TKO common stock in favor of adopting the transaction agreement (which has been satisfied by delivery of a written consent by such stockholders).
Capital Return Program
On October 24, 2024, the Company announced that its board of directors has authorized a share repurchase program of up to $
TKO will determine at its discretion the timing and the amount of any repurchases based on its evaluation of market conditions, share price, and other factors. Repurchases under the share repurchase program may be made in the open market, in privately negotiated transactions or otherwise, and TKO is not obligated to acquire any particular amount under the share repurchase program. The share repurchase program has no expiration, is expected to be completed within approximately three to four years and may be modified, suspended, or discontinued at any time.
TKO's dividend will be paid quarterly to holders of TKO’s Class A common stock. TKO intends to begin making quarterly cash dividend payments on
32
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 the information set forth in our unaudited consolidated financial statements and related notes included in this Quarterly Report and with our audited financial statements and related notes included in our 2023 Annual Report. The historical financial data discussed below reflects our historical results of operations and financial position and relates to periods prior to the Transactions. As a result, the following discussion does not reflect the significant impact that such events will have on us. This discussion contains forward-looking statements based upon management’s current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various known and unknown factors, including those set forth under Part I, Item 1A. “Risk Factors” of our 2023 Annual Report or in other sections of the 2023 Annual Report and this Quarterly Report.
Overview
TKO is a premium sports and entertainment company which operates leading combat sports and sports entertainment brands. The Company monetizes its brands through four principal activities: Media rights and content, Live events, Sponsorship, and Consumer products licensing.
TKO was formed through the combination of Zuffa Parent, LLC (n/k/a TKO Operating Company, LLC) which owns and operates the Ultimate Fighting Championship (“UFC”), a preeminent combat sports brand and a subsidiary of Endeavor Group Holdings, Inc. (“Endeavor”), a global sports and entertainment company, and World Wrestling Entertainment, Inc. (n/k/a/ World Wrestling Entertainment, LLC) (“WWE”), a renowned sports entertainment business. The Transactions unite two complementary sports and sports entertainment brands in a single company supported by Endeavor’s capabilities in premium IP ownership, talent representation, live events and experiences. For additional information regarding the terms of the Transactions, see Note 4, Acquisition of WWE, to our unaudited consolidated financial statements included in this Quarterly Report.
Segments
As of September 30, 2024, we operated our business under two reportable segments, UFC and WWE. In addition, we also report results for the “Corporate” group, which incurs expenses that are not allocated to the business segments.
UFC
The UFC segment reflects the business operations of UFC. Revenue from our UFC segment principally consists of media rights fees associated with the distribution of its programming content; ticket sales and site fees associated with the business’s global live events; sponsorships; and consumer product licensing agreements of UFC-branded products.
WWE
The WWE segment reflects the business operations of WWE. Revenue from our WWE segment principally consists of media rights fees associated with the distribution of its programming content; ticket sales and site fees associated with the business’s global live events; sponsorships; and consumer product licensing agreements of WWE-branded products.
Corporate
Corporate reflects operations not allocated to the UFC or WWE segments and primarily consists of general and administrative expenses. These expenses relate largely to corporate activities, including information technology, facilities, legal, human resources, finance, accounting, treasury, investor relations, corporate communications, community relations and compensation to TKO’s management and board of directors, which support both reportable segments. Corporate expenses also include service fees paid by the Company to Endeavor under the Services Agreement, inclusive of fees paid for revenue producing services related to the segments.
Components of Our Operating Results
Revenue
TKO primarily generates revenue via domestic and international media rights fees, ticket sales and site fees at our live events, sponsorships, and consumer products licensing.
Direct Operating Costs
TKO’s direct operating costs primarily include costs associated with our athletes and talent, production, marketing, venue costs related to our live events, and commissions and direct costs with distributors, as well as certain service fees paid to Endeavor.
33
Selling, General and Administrative
TKO’s selling, general and administrative expenses primarily include personnel costs as well as rent, travel, professional service and legal costs, legal settlements and certain service fees paid to Endeavor.
Provision for Income Taxes
TKO Group Holdings, Inc. was incorporated as a Delaware corporation in March 2023. As the sole managing member of TKO OpCo, TKO Group Holdings, Inc. operates and controls all the business and affairs of UFC and WWE. TKO Group Holdings, Inc. is subject to corporate income taxes on its share of taxable income of TKO OpCo. TKO OpCo is treated as a partnership for U.S. federal income tax purposes and is therefore generally not subject to U.S. corporate income tax. TKO OpCo’s foreign subsidiaries are subject to entity-level taxes. TKO OpCo’s U.S. subsidiaries are subject to withholding taxes on sales in certain foreign jurisdictions which are included as a component of foreign current taxes. TKO OpCo is subject to entity-level income taxes in certain U.S. state and local jurisdictions.
RESULTS OF OPERATIONS
(dollars in millions, except where noted)
The following is a discussion of our consolidated results of operations for the three and nine months ended September 30, 2024 and 2023. This information is derived from our accompanying consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue |
|
$ |
681.2 |
|
|
$ |
449.1 |
|
|
$ |
2,162.1 |
|
|
$ |
1,061.0 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct operating costs |
|
|
207.1 |
|
|
|
130.3 |
|
|
|
667.9 |
|
|
|
302.3 |
|
Selling, general and administrative expenses |
|
|
239.6 |
|
|
|
193.2 |
|
|
|
1,004.1 |
|
|
|
313.0 |
|
Depreciation and amortization |
|
|
98.1 |
|
|
|
31.7 |
|
|
|
309.1 |
|
|
|
61.9 |
|
Total operating expenses |
|
|
544.8 |
|
|
|
355.2 |
|
|
|
1,981.1 |
|
|
|
677.2 |
|
Operating income |
|
|
136.4 |
|
|
|
93.9 |
|
|
|
181.0 |
|
|
|
383.8 |
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
(62.7 |
) |
|
|
(60.6 |
) |
|
|
(192.9 |
) |
|
|
(172.4 |
) |
Other income (expense), net |
|
|
1.4 |
|
|
|
(0.7 |
) |
|
|
1.9 |
|
|
|
(1.6 |
) |
Income (loss) before income taxes and equity (earnings) losses of affiliates |
|
|
75.1 |
|
|
|
32.6 |
|
|
|
(10.0 |
) |
|
|
209.8 |
|
Provision for income taxes |
|
|
17.8 |
|
|
|
11.2 |
|
|
|
31.8 |
|
|
|
17.7 |
|
Income (loss) before equity (earnings) losses of affiliates |
|
|
57.3 |
|
|
|
21.4 |
|
|
|
(41.8 |
) |
|
|
192.1 |
|
Equity (earnings) losses of affiliates, net of tax |
|
|
(0.4 |
) |
|
|
(0.6 |
) |
|
|
(0.7 |
) |
|
|
0.3 |
|
Net income (loss) |
|
|
57.7 |
|
|
|
22.0 |
|
|
|
(41.1 |
) |
|
|
191.8 |
|
Less: Net income (loss) attributable to non-controlling interests |
|
|
34.6 |
|
|
|
(22.5 |
) |
|
|
(19.5 |
) |
|
|
(21.7 |
) |
Less: Net income attributable to TKO Operating Company, LLC prior to the Transactions |
|
|
— |
|
|
|
66.4 |
|
|
|
— |
|
|
|
235.4 |
|
Net income (loss) attributable to TKO Group Holdings, Inc. |
|
$ |
23.1 |
|
|
$ |
(21.9 |
) |
|
$ |
(21.6 |
) |
|
$ |
(21.9 |
) |
Revenue
Revenue increased by $232.1 million, or 52%, to $681.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
34
Revenue increased by $1,101.1 million, or 104%, to $2,162.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Direct Operating Costs
Direct operating costs increased by $76.8 million or 59% to $207.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Direct operating costs increased by $365.6 million or 121% to $667.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
35
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $46.4 million, or 24%, to $239.6 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Selling, general and administrative expenses increased by $691.1 million, or 221%, to $1,004.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Depreciation and Amortization
Depreciation and amortization increased $66.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily due to $66.5 million of expenses associated with the acquisition of WWE.
Depreciation and amortization increased $247.2 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily due to $246.8 million of incremental expenses associated with the acquisition of WWE.
36
Interest Expense, Net
Interest expense, net increased $2.1 million, or 3%, to $62.7 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily driven by higher interest rates on variable rate debt slightly offset by lower indebtedness.
Interest expense, net increased $20.5 million, or 12%, to $192.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily driven by higher interest rates on variable rate debt slightly offset by lower indebtedness.
Provision for Income Taxes
For the three months ended September 30, 2024, TKO recorded a provision for income taxes of $17.8 million compared to $11.2 million for the three months ended September 30, 2023. This increase was primarily due to the new corporate structure as a result of the Transactions.
For the nine months ended September 30, 2024, TKO recorded a provision for income taxes of $31.8 million compared to $17.7 million for the nine months ended September 30, 2023. This increase was primarily related to the new corporate structure as a result of the Transactions and the legal settlement for UFC antitrust lawsuits of $375.0 million that resulted in a $44.0 million discrete tax benefit that was recognized in the current year period.
Net Income (Loss) Attributable to Non-Controlling Interests
Net income (loss) attributable to non-controlling interests was income of $34.6 million and a loss of $22.5 million for the three months ended September 30, 2024 and 2023, respectively. The change was primarily due to the change in the amount of reported net income for the three months ended September 30, 2024 as compared to the reported net income for the three months ended September 30, 2023 as well as the effect of the Transactions.
Net income (loss) attributable to non-controlling interests was a loss of $19.5 million and a loss of $21.7 million for the nine months ended September 30, 2024 and 2023, respectively. The change was primarily due to the change in the amount of reported net loss for the nine months ended September 30, 2024 as compared to the reported net income for the nine months ended September 30, 2023 as well as the effect of the Transactions.
Segment Results of Operations
As of September 30, 2024, we classified our business into two reportable segments: UFC and WWE. 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 Adjusted EBITDA 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 expenses. These segment results of operations should be read in conjunction with our discussion of the Company’s consolidated results of operations included above.
The following tables set forth Revenue and Adjusted EBITDA for each of our segments for the three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
UFC |
|
$ |
354.9 |
|
|
$ |
397.5 |
|
|
$ |
1,062.3 |
|
|
$ |
1,009.4 |
|
WWE |
|
|
326.3 |
|
|
|
51.6 |
|
|
|
1,099.8 |
|
|
|
51.6 |
|
Total Revenue |
|
$ |
681.2 |
|
|
$ |
449.1 |
|
|
$ |
2,162.1 |
|
|
$ |
1,061.0 |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
UFC |
|
$ |
195.6 |
|
|
$ |
238.3 |
|
|
$ |
622.6 |
|
|
$ |
612.8 |
|
WWE |
|
|
175.3 |
|
|
|
22.0 |
|
|
|
566.8 |
|
|
|
22.0 |
|
Corporate |
|
|
(60.9 |
) |
|
|
(20.6 |
) |
|
|
(176.3 |
) |
|
|
(48.9 |
) |
Total Adjusted EBITDA |
|
$ |
310.0 |
|
|
$ |
239.7 |
|
|
$ |
1,013.1 |
|
|
$ |
585.9 |
|
37
UFC
The following table sets forth our UFC segment results for the three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Media rights and content |
|
$ |
216.3 |
|
|
$ |
266.7 |
|
|
$ |
681.4 |
|
|
$ |
702.5 |
|
Live events |
|
|
51.4 |
|
|
|
51.9 |
|
|
|
155.8 |
|
|
|
115.6 |
|
Sponsorship |
|
|
74.0 |
|
|
|
63.8 |
|
|
|
184.3 |
|
|
|
148.0 |
|
Consumer products licensing |
|
|
13.2 |
|
|
|
15.1 |
|
|
|
40.8 |
|
|
|
43.3 |
|
Total Revenue |
|
$ |
354.9 |
|
|
$ |
397.5 |
|
|
$ |
1,062.3 |
|
|
$ |
1,009.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct operating costs |
|
$ |
114.8 |
|
|
$ |
117.7 |
|
|
$ |
316.7 |
|
|
$ |
289.7 |
|
Selling, general and administrative expenses |
|
$ |
44.5 |
|
|
$ |
42.0 |
|
|
$ |
123.0 |
|
|
$ |
106.5 |
|
Adjusted EBITDA |
|
$ |
195.6 |
|
|
$ |
238.3 |
|
|
$ |
622.6 |
|
|
$ |
612.8 |
|
Adjusted EBITDA margin |
|
|
55 |
% |
|
|
60 |
% |
|
|
59 |
% |
|
|
61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Metrics |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Number of events |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numbered events |
|
|
3 |
|
|
|
4 |
|
|
|
10 |
|
|
|
11 |
|
Fight Nights |
|
|
7 |
|
|
|
9 |
|
|
|
22 |
|
|
|
23 |
|
Total events |
|
|
10 |
|
|
|
13 |
|
|
|
32 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Location of events |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
6 |
|
|
|
9 |
|
|
|
24 |
|
|
|
26 |
|
International |
|
|
4 |
|
|
|
4 |
|
|
|
8 |
|
|
|
8 |
|
Total events |
|
|
10 |
|
|
|
13 |
|
|
|
32 |
|
|
|
34 |
|
WWE
The following table sets forth our WWE segment results for the three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Media rights and content |
|
$ |
227.4 |
|
|
$ |
37.3 |
|
|
$ |
709.2 |
|
|
$ |
37.3 |
|
Live events |
|
|
51.1 |
|
|
|
5.4 |
|
|
|
245.4 |
|
|
|
5.4 |
|
Sponsorship |
|
|
21.7 |
|
|
|
2.6 |
|
|
|
60.2 |
|
|
|
2.6 |
|
Consumer products licensing |
|
|
26.1 |
|
|
|
6.3 |
|
|
|
85.0 |
|
|
|
6.3 |
|
Total Revenue |
|
$ |
326.3 |
|
|
$ |
51.6 |
|
|
$ |
1,099.8 |
|
|
$ |
51.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct operating costs |
|
$ |
86.4 |
|
|
$ |
10.5 |
|
|
$ |
314.2 |
|
|
$ |
10.5 |
|
Selling, general and administrative expenses |
|
$ |
64.6 |
|
|
$ |
19.1 |
|
|
$ |
218.8 |
|
|
$ |
19.1 |
|
Adjusted EBITDA |
|
$ |
175.3 |
|
|
$ |
22.0 |
|
|
$ |
566.8 |
|
|
$ |
22.0 |
|
Adjusted EBITDA margin |
|
|
54 |
% |
|
|
43 |
% |
|
|
52 |
% |
|
|
43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Metrics |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Number of events |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Premium live events |
|
|
3 |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
Televised events |
|
|
26 |
|
|
|
5 |
|
|
|
77 |
|
|
|
5 |
|
Non-televised events |
|
|
14 |
|
|
|
5 |
|
|
|
49 |
|
|
|
5 |
|
Total events |
|
|
43 |
|
|
|
10 |
|
|
|
136 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Location of events |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
32 |
|
|
10 |
|
|
|
103 |
|
|
10 |
|
||
International |
|
|
11 |
|
|
0 |
|
|
|
33 |
|
|
0 |
|
||
Total events |
|
43 |
|
|
10 |
|
|
136 |
|
|
10 |
|
||||
38
Corporate
Corporate expenses relate largely to corporate activities, including information technology, facilities, legal, human resources, finance, accounting, treasury, investor relations, corporate communications, community relations and compensation to TKO’s management and board of directors, which support both reportable segments. Corporate expenses also include service fees paid by the Company to Endeavor related to corporate activities as well as revenue generating activities under the Services Agreement.
The following table displays results for Corporate for the three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Adjusted EBITDA |
|
$ |
(60.9 |
) |
|
$ |
(20.6 |
) |
|
$ |
(176.3 |
) |
|
$ |
(48.9 |
) |
Adjusted EBITDA for the three months ended September 30, 2024 decreased by $40.3 million, or 196%, compared to the three months ended September 30, 2023. The acquisition of WWE contributed incremental corporate expenses of $11.9 million, primarily driven by the cost of personnel and other general and administrative expenses. The remaining decrease was attributable to $20.2 million resulting from increases in cost of personnel, including TKO executive compensation, and other public company expenses following the Transactions, as well as $8.2 million of higher services fees paid to Endeavor. The costs associated with WWE's portion of the service fees did not commence until March 2024.
Adjusted EBITDA for the nine months ended September 30, 2024 decreased by $127.4 million, or 261%, compared to the nine months ended September 30, 2023. The acquisition of WWE contributed incremental corporate expenses of $52.3 million, primarily driven by the cost of personnel and other general and administrative expenses. The remaining decrease was attributable to $54.2 million resulting from increases in cost of personnel, including TKO executive compensation, and other public company expenses following the Transactions, as well as $20.9 million of higher service fees paid to Endeavor. The costs associated with WWE's portion of the service fees did not commence until March 2024.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA is a non-GAAP financial measure and is defined as net income, excluding income taxes, net interest expense, depreciation and amortization, equity-based compensation, merger and acquisition costs, certain legal costs, restructuring, severance and impairment charges, and certain other items when applicable. Adjusted EBITDA margin is a non-GAAP financial measure defined as Adjusted EBITDA divided by Revenue.
TKO management believes that Adjusted EBITDA and Adjusted EBITDA margin are useful to investors as these measures eliminate the significant level of non-cash depreciation and amortization expense that results from its capital investments and intangible assets, and improve comparability by eliminating the significant level of interest expense associated with TKO’s debt facilities, as well as income taxes which may not be comparable with other companies based on TKO’s tax and corporate structure.
Adjusted EBITDA and Adjusted EBITDA margin are used as the primary bases to evaluate TKO’s consolidated operating performance.
Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of TKO’s results as reported under GAAP. Some of these limitations are:
TKO management compensates for these limitations by using Adjusted EBITDA and Adjusted EBITDA margin along with other comparative tools, together with GAAP measurements, to assist in the evaluation of TKO’s operating performance.
Adjusted EBITDA and Adjusted EBITDA margin should not be considered substitutes for the reported results prepared in accordance with GAAP and should not be considered in isolation or as alternatives to net income as indicators of TKO’s financial performance, as measures of discretionary cash available to it to invest in the growth of its business or as measures of cash that will be
39
available to TKO to meet its obligations. Although TKO uses Adjusted EBITDA and Adjusted EBITDA margin as financial measures to assess the performance of its business, such use is limited because it does not include certain material costs necessary to operate TKO’s business. TKO’s presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed as indications that its future results will be unaffected by unusual or nonrecurring items. These non-GAAP financial measures, as determined and presented by TKO, may not be comparable to related or similarly titled measures reported by other companies. Set forth below are reconciliations of TKO’s most directly comparable financial measures calculated in accordance with GAAP to these non-GAAP financial measures on a consolidated basis.
Adjusted EBITDA and Adjusted EBITDA Margin
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
57.7 |
|
|
$ |
22.0 |
|
|
$ |
(41.1 |
) |
|
$ |
191.8 |
|
Provision for income taxes |
|
|
17.8 |
|
|
|
11.2 |
|
|
|
31.8 |
|
|
|
17.7 |
|
Interest expense, net |
|
|
62.7 |
|
|
|
60.6 |
|
|
|
192.9 |
|
|
|
172.4 |
|
Depreciation and amortization |
|
|
98.1 |
|
|
|
31.7 |
|
|
|
309.1 |
|
|
|
61.9 |
|
Equity-based compensation expense (1) |
|
|
20.0 |
|
|
|
24.6 |
|
|
|
74.6 |
|
|
|
36.1 |
|
Merger and acquisition costs (2) |
|
|
8.9 |
|
|
|
67.5 |
|
|
|
11.8 |
|
|
|
82.5 |
|
Certain legal costs (3) |
|
|
44.6 |
|
|
|
6.3 |
|
|
|
395.8 |
|
|
|
6.8 |
|
Restructuring, severance and impairment (4) |
|
|
1.6 |
|
|
|
15.1 |
|
|
|
39.7 |
|
|
|
15.1 |
|
Other adjustments |
|
|
(1.4 |
) |
|
|
0.7 |
|
|
|
(1.5 |
) |
|
|
1.6 |
|
Total Adjusted EBITDA |
|
$ |
310.0 |
|
|
$ |
239.7 |
|
|
$ |
1,013.1 |
|
|
$ |
585.9 |
|
Net income (loss) margin |
|
|
8 |
% |
|
|
5 |
% |
|
|
(2 |
)% |
|
|
18 |
% |
Adjusted EBITDA margin |
|
|
46 |
% |
|
|
53 |
% |
|
|
47 |
% |
|
|
55 |
% |
Liquidity and Capital Resources
Sources and Uses of Cash
Cash flows from operations are used to fund TKO’s day-to-day operations, revenue-generating activities, and routine capital expenditures, as well as to service its long-term debt, and are expected to be used to fund our capital return programs.
Credit Facilities
As of September 30, 2024, there is currently outstanding an aggregate of $2.7 billion of first lien term loans under a credit agreement dated August 18, 2016 (as amended and/or restated, the “Credit Agreement”), by and among Zuffa Guarantor, LLC, UFC Holdings, LLC, as borrower, the lenders party hereto and Goldman Sachs Bank USA, as Administrative Agent, which was entered into in connection with the acquisition of Zuffa by EGH in 2016. The facilities under the Credit Agreement consist of (i) a first lien secured term loan (the “First Lien Term Loan”) and (ii) 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 “Revolving Credit Facility”, and, together with the First Lien Term Loan, the “Credit
40
Facilities”). The Credit Facilities are secured by liens on substantially all of the assets of Zuffa Guarantor, LLC, UFC Holdings, LLC and certain subsidiaries thereof.
Following a repricing under the Credit Facilities in January 2021, term loan borrowings under the Credit Facilities bore interest at a variable interest rate equal to either, at its 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 (as defined in the Credit Agreement), 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%. In June 2023, the parties amended the terms of the First Lien Term Loan to replace the adjusted LIBOR reference rate with Term Secured Overnight Financing Rate (“SOFR”) plus a credit spread adjustment (as defined in the Credit Agreement). The term loans under the Credit Facilities include 1% principal amortization payable in equal quarterly installments and mature on April 29, 2026.
As of September 30, 2024, the Company had the option to borrow incremental term 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 its First Lien Leverage Ratio. The Credit Agreement includes certain mandatory prepayment provisions relating to, among other things, the incurrence of additional debt.
The Revolving Credit Facility 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 loan borrowings under the Credit Facilities bear interest at a variable interest rate equal to either, at TKO’s 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. In April 2023, the parties amended the terms of the Revolving Credit Facility to replace adjusted LIBOR reference rate used for the facility with SOFR plus 2.75-3.00%. The Company pays a commitment fee of 0.25-0.50%, based on the First Lien Leverage Ratio and letter of credit fees of 0.125%.
As of September 30, 2024, the Company had no borrowings outstanding under the Revolving Credit Facility and $10.0 million outstanding letters of credit. In April 2024, the Company borrowed $150.0 million under the Revolving Credit Facility to fund certain share repurchases that occurred during the second quarter of 2024. In June 2024, the Company fully repaid the $150.0 million outstanding. In May 2024, the Company entered into an amendment to the Credit Agreement, which extended the Revolving Credit Facility’s maturity by twelve months to October 29, 2025.
The Revolving Credit Facility 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 September 30, 2024, as the Company had no borrowings outstanding under the Revolving Credit Facility.
The Credit Agreement contains 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 TKO OpCo’s indirect wholly owned domestic restricted subsidiaries, subject to certain exceptions.
The Credit Agreement contains specified restrictions on the ability to make distributions and other payments. 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, which generally provides for no restrictions as long as the Total Leverage Ratio (as defined in the Credit Agreement) is less than 5.0x.
Other Debt
In October 2018, UFC entered into a $28.0 million Loan Agreement and a $12.0 million Loan Agreement in order to finance the purchase of a building and its adjacent land (the “Secured Commercial Loans”). The Secured Commercial Loans have identical terms except the $28.0 million Loan Agreement is secured by a deed of trust for UFC’s headquarters building and underlying land in Las Vegas and the $12.0 million Loan Agreement is secured by a deed of trust for the acquired building and its adjacent land, also located in Las Vegas. The Secured Commercial Loans bore interest at a rate of LIBOR + 1.62% (with a LIBOR floor of 0.88%). In May 2023, the parties amended the terms of the Secured Commercial Loans to replace the adjusted LIBOR reference rate with SOFR, and bear interest at a rate of SOFR plus 1.70%. Principal amortization of 4% is payable in monthly installments with any remaining balance payable on the final maturity date of November 1, 2028.
41
The applicable loan agreements each contain a financial covenant that requires UFC to maintain a Debt Service Coverage Ratio as defined in the applicable loan agreements of no more than 1.15-to-1 as measured on an annual basis (the “Secured Commercial Loan Covenant”). As of September 30, 2024, UFC was in compliance with the Secured Commercial Loan Covenant.
Capital Return Programs
On October 24, 2024, the Company announced that its board of directors has authorized a share repurchase program of up to $2.0 billion of its Class A common stock and the approval of a quarterly cash dividend program pursuant to which holders of TKO’s Class A common stock will receive their pro rata share of $75.0 million expected quarterly distributions to be made by TKO OpCo.
TKO will determine at its discretion the timing and the amount of any repurchases based on its evaluation of market conditions, share price, and other factors. Repurchases under the share repurchase program may be made in the open market, in privately negotiated transactions or otherwise, and TKO is not obligated to acquire any particular amount under the share repurchase program. The share repurchase program has no expiration, is expected to be completed within approximately three to four years and may be modified, suspended, or discontinued at any time.
TKO’s dividend will be paid quarterly to holders of TKO’s Class A common stock. TKO intends to begin making quarterly cash dividend payments on March 31, 2025. Future declarations of quarterly dividends are subject to the determination and discretion of TKO based on its consideration of various factors, such as its results of operations, financial condition, market conditions, earnings, cash flow requirements, restrictions in its debt agreements and legal requirements and other factors that TKO deems relevant.
Cash Flows Overview
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash provided by operating activities |
|
$ |
526.6 |
|
|
$ |
247.7 |
|
Net cash (used in) provided by investing activities |
|
$ |
(65.1 |
) |
|
$ |
47.6 |
|
Net cash used in financing activities |
|
$ |
(239.6 |
) |
|
$ |
(285.3 |
) |
Operating activities increased from $247.7 million of cash provided in the nine months ended September 30, 2023 to $526.6 million of cash provided in the nine months ended September 30, 2024. Cash provided in the nine months ended September 30, 2024 was primarily due to an increase in accounts payable and accrued liabilities of $344.3 million driven by the $375.0 million charge under the settlement agreement in the UFC antitrust lawsuits and the timing of bonus payments, partially offset by a decrease in net income for the period of $232.9 million, which included certain non-cash items, including depreciation and amortization of $247.2 million and equity-based compensation of $38.5 million.
Investing activities decreased from $47.6 million of cash provided in the nine months ended September 30, 2023 to $65.1 million of cash used in the nine months ended September 30, 2024. Cash used in the nine months ended September 30, 2024 primarily reflects payments for property, buildings and equipment of $54.6 million and investments in affiliates of $21.5 million, partially offset by infrastructure improvement incentives received of $11.0 million. Cash used in the nine months ended September 30, 2023 primarily reflects $381.2 million of cash acquired from WWE as part of the Transactions, partially offset by the payment of $321.0 million of deferred compensation in the form of a divided to former WWE shareholders and payments for property, buildings and equipment of $12.6 million.
Financing activities increased from $285.3 million of cash used in the nine months ended September 30, 2023 to $239.6 million of cash used in the nine months ended September 30, 2024. Cash used in the nine months ended September 30, 2024 primarily reflects share repurchases of $165.0 million, distributions to Endeavor and its subsidiaries of $41.8 million and net payments on debt of $33.5 million. Cash used in the nine months ended September 30, 2023 primarily reflects distributions to Endeavor and subsidiaries of $260.5 million and net payments on debt of $24.5 million.
Future Sources and Uses of Liquidity
TKO’s sources of liquidity are (1) cash on hand, (2) cash flows from operations and (3) available borrowings under the Credit Facilities (which borrowings would be subject to certain restrictive covenants contained therein). Based on its current expectations, TKO believes that these sources of liquidity will be sufficient to fund its working capital requirements and to meet its commitments, including long-term debt service, for at least the next 12 months.
TKO expects that its primary liquidity needs will be cash to (1) provide capital to facilitate organic growth of its business, (2) pay operating expenses, including cash compensation to its employees, athletes and talent, (3) fund capital expenditures and investments, (4) pay interest and principal when due on the Credit Facilities, (5) pay income taxes, (6) reduce its outstanding indebtedness under the Credit Facilities, (7) fund the legal settlements described in Note 18, Commitments and Contingencies, to our unaudited consolidated financial statements included in this Quarterly Report, (8) fund share repurchases as authorized by the Board and (9) make distributions
42
to members and, in accordance with the Company’s cash management policy, to TKO stockholders, including the planned quarterly dividend when declared by the Board.
TKO expects to refinance the Credit Facilities prior to the maturity of the outstanding loans in 2026. It currently anticipates being able to secure funding for such refinancing at favorable terms; however, its ability to do so may be impacted by many factors, including TKO’s growth and other factors specific to its business as well as macro-economic factors beyond its control.
Recent Accounting Pronouncements
See Note 3, Recent Accounting Pronouncements, to our unaudited consolidated financial statements included 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.
Critical Accounting Estimates
For a description of our policies regarding our critical accounting estimates, see “Critical Accounting Estimates” in our 2023 Annual Report. During the nine months ended September 30, 2024, 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 2023 Annual Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
TKO is exposed to market risks in the ordinary course of its business. Market risk represents the risk of loss that may impact TKO’s financial position due to adverse changes in financial market prices and rates.
Interest Rate Risk
Our exposure to changes in interest rates relates primarily to the floating interest component on our long-term debt. The Credit Facilities bear interest at floating rates and we regularly monitor and manage interest rate risks. Holding debt levels constant as of September 30, 2024, a 1% increase in the effective interest rates would have increased our annual interest expense by approximately $27 million.
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 Brazilian Real. The value of these currencies fluctuates relative to the U.S. dollar. These changes could adversely affect the U.S. dollar equivalent of TKO’s non-U.S. dollar revenue and operating costs and expenses and reduce international demand for its content and services, all of which could negatively affect TKO’s 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 TKO’s operations in the nine months ended September 30, 2024, revenues would have decreased by approximately $5.1 million and operating income would have decreased by approximately $0.3 million.
We regularly review our foreign exchange exposures that may have a material impact on our business and from time to time use foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of potential adverse fluctuations in foreign currency exchange rates arising from these exposures. TKO does not enter into foreign exchange contracts or other derivatives for speculative purposes.
Credit Risk
TKO maintains its cash and cash equivalents with various major banks and other high quality financial institutions, and its deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions and the 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. Controls and Procedures
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.
43
Evaluation of Disclosure Controls and Procedures
The Company’s management has evaluated, with the participation of the Chief Executive Officer and the 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 Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024.
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 September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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, refer to Note 18, Commitments and Contingencies, to our unaudited consolidated financial statements included in this Quarterly Report, which is incorporated herein by reference.
Item 1A. Risk Factors
Our business, financial condition and operating results can be affected by a number of factors, whether currently 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 2023 Annual 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 2023 Annual Report.
We may fail to complete the Endeavor Asset Acquisition if certain required conditions, many of which are outside our control, are not satisfied.
The completion of the Endeavor Asset Acquisition is subject to various customary closing conditions, including, but not limited to, (i) the absence of any order, writ, judgment, injunction, decree, ruling, stipulation, directive, assessment, subpoena, verdict, determination or award issued, promulgated or entered, by or with any governmental entity that has the effect of making the Endeavor Asset Acquisition illegal or otherwise restraining or prohibiting the consummation of the Endeavor Asset Acquisition, (ii) subject to certain exceptions, the accuracy of the representations and warranties of the parties and (iii) compliance in all material respects by each party with its obligations under the transaction agreement. Despite the parties’ best efforts, we may not be able to satisfy or receive the various closing conditions and obtain the necessary approvals in a timely fashion or at all.
We may fail to realize the anticipated benefits of the Endeavor Asset Acquisition and may assume unanticipated liabilities.
The success of the Endeavor Asset Acquisition will depend on, among other things, our ability to integrate the transferred businesses in a manner that realizes the various benefits, growth opportunities and synergies that we have identified. Our ability to achieve the anticipated benefits of the Endeavor Asset Acquisition is subject to a number of risks and uncertainties.
Failure to complete the Endeavor Asset Acquisition could negatively impact our stock price, future business and financial results.
If the Endeavor Asset Acquisition is not completed, we will be subject to several risks, including the following:
44
The planned issuance of Class B common stock to the EDR Parties will dilute the percentage ownership interests of our other stockholders.
If the Endeavor Asset Acquisition is completed, the Company expects to issue approximately 26.1 million shares of Class B common stock to the EDR Parties, who currently beneficially hold approximately 53.4% of the Company’s total outstanding shares of common stock. The issuance of Class B common stock to the EDR Parties will cause a reduction in the relative percentage interest of the Company’s other current stockholders in the Company’s earnings, if any, voting power, and market capitalization. The issuance will result in (i) an approximate 6% reduction of equity ownership and (ii) an approximate 6% reduction in the total voting power of the Company’s Class A common stock.
We cannot guarantee we will conduct share repurchases or pay dividends in any specified amounts or particular frequency.
On October 24, 2024, we announced that our board of directors has authorized a share repurchase program of up to $2.0 billion of our Class A common stock. We will determine at our discretion the timing and the amount of any repurchases under the share repurchase program based on our evaluation of market conditions, share price, and other factors. Repurchases under the share repurchase program may be made in the open market, in privately negotiated transactions or otherwise. The program has no expiration date and we are not obligated to acquire any particular number or dollar value of shares thereunder. While we expect the share repurchase program to be completed within approximately three to four years, the program may not be fully implemented in that timeframe or at all. In addition, the program may be modified, suspended, or discontinued at any time. 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.
In addition, on October 24, 2024, we announced that our board of directors has approved a quarterly cash dividend program pursuant to which holders of our Class A common stock will receive their pro rata share of $75.0 million quarterly distributions to be made by TKO OpCo. We currently intend to begin making quarterly cash dividend payments on March 31, 2025, subject to satisfying applicable legal and contractual requirements. Future declarations of quarterly dividends are subject to our determination and discretion based on our consideration of various factors, such as our results of operations, financial condition, market conditions, earnings, cash flow requirements, restrictions in our debt agreements and legal requirements and other factors that we deems relevant. Our board may, at its discretion, decrease or entirely discontinue the dividend program at any time. 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.
45
Item 6. Exhibits
|
|
|
|
|
|
|
Exhibit Number |
Description |
Form |
File No. |
Exhibit |
Filing Date |
Filed/Furnished Herewith |
2.1# |
424(b)(3) |
333-271893 |
Annex A |
08/22/2023 |
|
|
3.1 |
Amended and Restated Certificate of Incorporation of TKO Group Holdings, Inc. |
S-8 |
333-274480 |
4.1 |
09/12/2023 |
|
3.2 |
S-8 |
333-274480 |
4.2 |
09/12/2023 |
|
|
4.1 |
8-K |
001-41797 |
4.1 |
09/12/2023 |
|
|
4.2 |
8-K |
001-16131 |
4.1 |
12/16/2016 |
|
|
4.3 |
8-K |
001-16131 |
4.1 |
12/16/2016 |
|
|
4.4 |
8-K |
001-16131 |
4.2 |
09/12/2023 |
|
|
10.1# |
8-K |
001-41797 |
10.1 |
10/24/2024 |
|
|
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 With Embedded Linkbase Documents. |
|
|
|
|
* |
104 |
Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101. |
|
|
|
|
* |
* Filed herewith.
** Furnished herewith.
# Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant undertakes to furnish supplemental copies of any of the omitted schedules or similar attachments upon request by the SEC.
46
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.
|
|
|
|
|
|
|
TKO GROUP HOLDINGS, INC.
|
||
|
|
|
|
|
Date: |
November 6, 2024 |
By: |
/s/ ANDREW SCHLEIMER |
|
|
|
|
Andrew Schleimer |
|
|
|
|
Chief Financial Officer |
|
|
|
|
(principal financial officer and authorized |
|
|
|
|
signatory) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: |
November 6, 2024 |
By: |
/s/ SHANE KAPRAL |
|
|
|
|
Shane Kapral |
|
|
|
|
Chief Accounting Officer |
|
|
|
|
(principal accounting officer and authorized |
|
|
|
|
signatory) |
|
|
|
|
|
|
47