filings.toolsItem 16. Form 10-K Summary
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Item 16. Form 10-K Summary
None.
SIGNAT****URES
Pursuant to the requirements of Section 13 or 15(d) 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: | February 26, 2025 | By: | /s/ ARIEL EMANUEL | |
| Ariel Emanuel | ||||
| Executive Chair and Chief Executive Officer | ||||
| (principal executive officer) | ||||
| By: | /s/ ANDREW SCHLEIMER | |||
| Andrew Schleimer | ||||
| Chief Financial Officer | ||||
| (principal financial officer) | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title or Capacity | Date | ||
| /s/ ARIEL EMANUEL | Executive Chair, Chief Executive Officer and Director | February 26, 2025 | ||
| Ariel Emanuel | (principal executive officer) | |||
| /s/ ANDREW SCHLEIMER | Chief Financial Officer | February 26, 2025 | ||
| Andrew Schleimer | (principal financial officer) | |||
| /s/ SHANE KAPRAL | Deputy Chief Financial Officer | February 26, 2025 | ||
| Shane Kapral | (principal accounting officer) | |||
| /s/ MARK SHAPIRO | President and Chief Operating Officer | February 26, 2025 | ||
| Mark Shapiro | and Director | |||
| /s/ NICK KHAN | President of WWE and Director | February 26, 2025 | ||
| Nick Khan | ||||
| /s/ PETER C.B. BYNOE | Director | February 26, 2025 | ||
| Peter C.B. Bynoe | ||||
| /s/ EGON P. DURBAN | Director | February 26, 2025 | ||
| Egon P. Durban | ||||
| /s/ DWAYNE JOHNSON | Director | February 26, 2025 | ||
| Dwayne Johnson | ||||
| /s/ BRAD KEYWELL | Director | February 26, 2025 | ||
| Brad Keywell | ||||
| /s/ STEVEN R. KOONIN | Lead Independent Director | February 26, 2025 | ||
| Steven R. Koonin | ||||
| /s/ JONATHAN A. KRAFT | Director | February 26, 2025 | ||
| Jonathan A. Kraft | ||||
| /s/ SONYA E. MEDINA | Director | February 26, 2025 | ||
| Sonya E. Medina | ||||
| /s/ NANCY R. TELLEM | Director | February 26, 2025 | ||
| Nancy R. Tellem | ||||
| /s/ CARRIE WHEELER | Director | February 26, 2025 | ||
| Carrie Wheeler |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTIN****G FIRM
To the Stockholders and Board of Directors TKO Group Holdings, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of TKO Group Holdings, Inc. and subsidiaries (the Company) as of December 31, 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ / members’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition - contracts with multiple performance obligations
As discussed in Notes 2 and 16 to the consolidated financial statements, the Company’s revenue is recognized when control of the promised goods or services is transferred to its customers. For customer contracts with more than one distinct performance obligation, the total contract consideration is allocated based on management’s estimate of each distinct performance obligation’s relative stand-alone selling price (“SSP”). The Company’s primary sources of revenue include media rights and content, live events, sponsorships, and consumer products licensing. For the year ended December 31, 2024, the Company recorded revenue of $2,804.3 million.
We identified the assessment of revenue recognition for certain contracts with multiple performance obligations as a critical audit matter. Specifically, for certain multi-year fixed fee contracts, complex auditor judgment was required in assessing the Company’s identification of distinct performance obligations and evaluating the method and significant assumptions used to estimate the SSP for those identified distinct performance obligations.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s revenue processes, including controls related to the identification of distinct performance obligations and the method and significant assumptions used to determine the estimated SSP for those identified distinct performance obligations. For a selection of new and amended multi-year fixed fee contracts, we obtained and
F-2
evaluated the Company’s revenue recognition accounting analysis by (1) inspecting the contracts to gain an understanding of contractual terms and conditions, evaluating the rights and obligations of the Company, and comparing them to other similar customer contracts to identify distinct performance obligation, (2) interviewing the Company’s business development personnel to gain an understanding of the nature and estimated value of commitments made to customers, (3) evaluating the method and significant assumptions used to estimate SSP by comparing the SSP to current pricing patterns in similar customer contracts, and (4) testing that the estimated SSPs were accurately applied in allocating the transaction price to each distinct performance obligation.
/s/ KPMG LLP
We have served as the Company's auditor since 2024.
New York, New York
February 26, 2025
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of TKO Group Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of TKO Group Holdings, Inc. and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders'/members’ equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
New York, New York
February 27, 2024 (February 26, 2025, as to Note 19)
We began serving as the Company's auditor in 2016. In 2024 we became the predecessor auditor.
F-4
TKO GROUP HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 525,556 | $ | 235,839 | ||||
| Accounts receivable (net of allowance for doubtful accounts of $3,132 and $1,093, respectively) | 184,056 | 135,436 | ||||||
| Other current assets | 159,955 | 121,155 | ||||||
| Total current assets | 869,567 | 492,430 | ||||||
| Property, buildings and equipment, net | 533,757 | 608,416 | ||||||
| Intangible assets, net | 3,263,469 | 3,563,663 | ||||||
| Finance lease right-of-use assets, net | 239,585 | 255,709 | ||||||
| Operating lease right-of-use assets, net | 31,678 | 35,508 | ||||||
| Goodwill | 7,664,219 | 7,666,485 | ||||||
| Investments | 32,162 | 16,392 | ||||||
| Other assets | 65,499 | 52,136 | ||||||
| Total assets | $ | 12,699,936 | $ | 12,690,739 | ||||
| Liabilities, Non-controlling Interests and Stockholders'/Members' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 29,681 | $ | 42,040 | ||||
| Accrued liabilities | 479,098 | 267,363 | ||||||
| Current portion of long-term debt | 26,513 | 22,367 | ||||||
| Current portion of finance lease liabilities | 13,056 | 8,135 | ||||||
| Current portion of operating lease liabilities | 4,727 | 4,246 | ||||||
| Deferred revenue | 101,237 | 118,992 | ||||||
| Other current liabilities | 16,345 | 8,997 | ||||||
| Total current liabilities | 670,657 | 472,140 | ||||||
| Long-term debt | 2,732,761 | 2,713,948 | ||||||
| Long-term finance lease liabilities | 229,847 | 245,288 | ||||||
| Long-term operating lease liabilities | 28,473 | 32,911 | ||||||
| Deferred tax liabilities | 312,210 | 372,860 | ||||||
| Other long-term liabilities | 7,457 | 3,046 | ||||||
| Total liabilities | 3,981,405 | 3,840,193 | ||||||
| Commitments and contingencies (Note 21) | ||||||||
| Redeemable non-controlling interests | 21,864 | 11,594 | ||||||
| Stockholders'/Members' equity: | ||||||||
| Class A common stock: ($0.00001 par value; 5,000,000,000 shares authorized;81,203,161 and 82,292,902 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively) | 1 | 1 | ||||||
| Class B common stock: ($0.00001 par value; 5,000,000,000 shares authorized;89,616,891 and 89,616,891 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively) | 1 | 1 | ||||||
| Additional paid-in capital | 4,385,297 | 4,244,537 | ||||||
| Accumulated other comprehensive loss | (2,548 | ) | (332 | ) | ||||
| Accumulated deficit | (291,728 | ) | (135,227 | ) | ||||
| Total TKO Group Holdings, Inc. stockholders’/members' equity | 4,091,023 | 4,108,980 | ||||||
| Nonredeemable non-controlling interests | 4,605,644 | 4,729,972 | ||||||
| Total stockholders'/members' equity | 8,696,667 | 8,838,952 | ||||||
| Total liabilities, redeemable non-controlling interests and stockholders'/members' equity | $ | 12,699,936 | $ | 12,690,739 |
See accompanying notes to consolidated financial statements
F-5
TKO GROUP HOLDINGS, INC.
Consolidated Stateme****nts of Operations
(In thousands, except share and per share data)
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Revenue | $ | 2,804,341 | $ | 1,674,968 | $ | 1,140,147 | ||||||
| Operating expenses: | ||||||||||||
| Direct operating costs | 899,875 | 514,598 | 325,586 | |||||||||
| Selling, general and administrative expenses | 1,228,722 | 549,091 | 210,142 | |||||||||
| Depreciation and amortization | 392,842 | 164,616 | 60,032 | |||||||||
| Total operating expenses | 2,521,439 | 1,228,305 | 595,760 | |||||||||
| Operating income | 282,902 | 446,663 | 544,387 | |||||||||
| Other expenses: | ||||||||||||
| Interest expense, net | (249,115 | ) | (239,042 | ) | (139,567 | ) | ||||||
| Other income (expense), net | 563 | (186 | ) | (1,271 | ) | |||||||
| Income before income taxes and equity losses of affiliates | 34,350 | 207,435 | 403,549 | |||||||||
| Provision for income taxes | 25,706 | 31,446 | 14,318 | |||||||||
| Income before equity losses of affiliates | 8,644 | 175,989 | 389,231 | |||||||||
| Equity losses of affiliates, net of tax | 2,267 | 266 | 209 | |||||||||
| Net income | 6,377 | 175,723 | 389,022 | |||||||||
| Less: Net (loss) income attributable to non-controlling interests | (3,031 | ) | (32,453 | ) | 1,747 | |||||||
| Less: Net income attributable to TKO Operating Company, LLC prior to the Transactions | — | 243,403 | 387,275 | |||||||||
| Net income (loss) attributable to TKO Group Holdings, Inc. | $ | 9,408 | $ | (35,227 | ) | $ | — | |||||
| Basic net earnings (loss) per share of Class A common stock (1) | $ | 0.12 | $ | (0.43 | ) | N/A | ||||||
| Diluted net earnings (loss) per share of Class A common stock (1) | $ | 0.02 | $ | (0.43 | ) | N/A | ||||||
| Weighted average number of common shares used in computing basic earnings (loss) per share | 81,340,472 | 82,808,019 | N/A | |||||||||
| Weighted average number of common shares used in computing diluted net earnings (loss) per share | 171,874,540 | 82,808,019 | N/A |
(1)
Basic and diluted net earnings (loss) per share of Class A common stock is applicable only for the period from September 12, 2023 through December 31, 2024, which is the period following the Transactions (as defined in Note 1 to the audited consolidated financial statements). See Note 12 for the calculation of the number of shares used in computation of net earnings (loss) per share of Class A common stock and the basis for computation of net earnings (loss) per share.
See accompanying notes to consolidated financial statements
F-6
TKO GROUP HOLDINGS, INC.
Consolidated Statements of Compreh****ensive Income (Loss)
(In thousands)
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Net income | $ | 6,377 | $ | 175,723 | $ | 389,022 | ||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||
| Foreign currency translation adjustments | (4,731 | ) | (851 | ) | (1,192 | ) | ||||||
| Cash flow hedges: | ||||||||||||
| Change in net unrealized gains (losses) | 382 | (279 | ) | 4,866 | ||||||||
| Amortization of cash flow hedge fair value to net (loss) income | (304 | ) | (304 | ) | (304 | ) | ||||||
| Total comprehensive income, net of tax | 1,724 | 174,289 | 392,392 | |||||||||
| Less: Comprehensive (loss) income attributable to non-controlling interests | (3,031 | ) | (32,453 | ) | 1,747 | |||||||
| Less: Comprehensive income attributable to TKO Operating Company, LLC prior to the Transactions | — | 242,064 | 390,645 | |||||||||
| Comprehensive income (loss) attributable to TKO Group Holdings, Inc. | $ | 4,755 | $ | (35,322 | ) | $ | — |
See accompanying notes to consolidated financial statements
F-7
TKO GROUP HOLDINGS, INC.
Consolidated S****tatements of Stockholders’/Members’ Equity
(In thousands)
| Total TKO | ||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | Group Holdings, | Nonredeemable | Total | |||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional | Other | Inc. Stockholders'/ | Non- | Stockholders'/ | |||||||||||||||||||||||||||||||||||||||
| Members | Class A | Class B | Paid - in | Comprehensive | Accumulated | Members' | Controlling | Members' | ||||||||||||||||||||||||||||||||||||
| Capital | Shares | Amount | Shares | Amount | Capital | (Loss) Income | Deficit | Equity | Interests | Equity | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | 1,251,416 | — | $ | — | — | $ | — | $ | — | $ | **(**2,524 | ) | $ | — | $ | 1,248,892 | $ | — | $ | 1,248,892 | |||||||||||||||||||||||
| Comprehensive income | 387,275 | — | — | — | — | — | 3,370 | — | 390,645 | — | 390,645 | |||||||||||||||||||||||||||||||||
| Accretion of redeemable non-controlling interests | 1,539 | — | — | — | — | — | — | — | 1,539 | — | 1,539 | |||||||||||||||||||||||||||||||||
| Distributions to members | (1,095,904 | ) | — | — | — | — | — | — | — | (1,095,904 | ) | — | (1,095,904 | ) | ||||||||||||||||||||||||||||||
| Contributions from members | 23,744 | — | — | — | — | — | — | — | 23,744 | — | 23,744 | |||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | 568,070 | — | $ | — | — | $ | — | $ | — | $ | 846 | $ | — | $ | 568,916 | $ | — | $ | 568,916 | ||||||||||||||||||||||||
| Comprehensive income (loss) prior to reorganization and acquisition | 243,403 | — | — | — | — | — | (1,339 | ) | — | 242,064 | — | 242,064 | ||||||||||||||||||||||||||||||||
| Distributions to members prior to reorganization and acquisition | (259,898 | ) | — | — | — | — | — | — | — | (259,898 | ) | — | (259,898 | ) | ||||||||||||||||||||||||||||||
| Contributions from members prior to reorganization and acquisition | 15,243 | — | — | — | — | — | — | — | 15,243 | — | 15,243 | |||||||||||||||||||||||||||||||||
| Effects of reorganization and acquisition | (566,818 | ) | 83,161 | 1 | 89,617 | 1 | 4,166,883 | 256 | — | 3,600,323 | 4,815,501 | 8,415,824 | ||||||||||||||||||||||||||||||||
| Comprehensive (loss) income subsequent to reorganization and acquisition | — | — | — | — | — | — | (95 | ) | (35,227 | ) | (35,322 | ) | (34,139 | ) | (69,461 | ) | ||||||||||||||||||||||||||||
| Distributions to members | — | — | — | — | — | — | — | — | — | (36,689 | ) | (36,689 | ) | |||||||||||||||||||||||||||||||
| Contributions from members | — | — | — | — | — | — | — | — | — | 3,395 | 3,395 | |||||||||||||||||||||||||||||||||
| Equity impacts of deferred taxes arising from changes in ownership | — | — | — | — | — | 2,038 | — | — | 2,038 | — | 2,038 | |||||||||||||||||||||||||||||||||
| Stock issuances and other, net | — | 265 | — | — | — | 16 | — | — | 16 | — | 16 | |||||||||||||||||||||||||||||||||
| Repurchase of Class A common stock | — | (1,309 | ) | — | — | — | — | (100,000 | ) | (100,000 | ) | — | (100,000 | ) | ||||||||||||||||||||||||||||||
| Conversions of convertible debt | — | 176 | — | — | — | 4,226 | — | — | 4,226 | — | 4,226 | |||||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | — | 38,471 | — | — | 38,471 | — | 38,471 | |||||||||||||||||||||||||||||||||
| Principal stockholder contributions | — | — | — | — | — | 14,807 | — | — | 14,807 | — | 14,807 | |||||||||||||||||||||||||||||||||
| Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | 18,096 | — | — | 18,096 | (18,096 | ) | — | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | — | 82,293 | $ | 1 | 89,617 | $ | 1 | $ | 4,244,537 | $ | **(**332 | ) | $ | **(**135,227 | ) | $ | 4,108,980 | $ | 4,729,972 | $ | 8,838,952 | ||||||||||||||||||||||
| Comprehensive (loss) income | — | — | — | — | — | — | (4,653 | ) | 9,408 | 4,755 | (5,265 | ) | (510 | ) | ||||||||||||||||||||||||||||||
| Distributions to members | — | — | — | — | — | — | — | — | — | (67,256 | ) | (67,256 | ) | |||||||||||||||||||||||||||||||
| Contributions from members | — | — | — | — | — | — | — | — | — | 6,926 | 6,926 | |||||||||||||||||||||||||||||||||
| Equity impacts of deferred taxes arising from changes in ownership | — | — | — | — | — | 2,568 | — | — | 2,568 | — | 2,568 | |||||||||||||||||||||||||||||||||
| Stock issuances and other, net | — | 764 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Repurchases and retirements of common stock | — | (1,854 | ) | — | — | — | — | — | (165,000 | ) | (165,000 | ) | — | (165,000 | ) | |||||||||||||||||||||||||||||
| Excise taxes on repurchase of common stock | — | — | — | — | — | — | — | (909 | ) | (909 | ) | — | (909 | ) | ||||||||||||||||||||||||||||||
| Taxes paid related to net settlement upon vesting of equity awards | — | — | — | — | — | (5,657 | ) | — | — | (5,657 | ) | — | (5,657 | ) | ||||||||||||||||||||||||||||||
| Equity-based compensation | — | — | — | — | — | 87,710 | — | — | 87,710 | — | 87,710 | |||||||||||||||||||||||||||||||||
| Adjustment of redeemable non-controlling interests to redemption value | — | — | — | — | — | (8,036 | ) | — | — | (8,036 | ) | — | (8,036 | ) | ||||||||||||||||||||||||||||||
| Principal stockholder contributions | — | — | — | — | — | 7,879 | — | — | 7,879 | — | 7,879 | |||||||||||||||||||||||||||||||||
| Equity reallocation between controlling and non-controlling interests | — | — | — | — | — | 56,296 | 2,437 | — | 58,733 | (58,733 | ) | — | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | — | 81,203 | $ | 1 | 89,617 | $ | 1 | $ | 4,385,297 | $ | **(**2,548 | ) | $ | **(**291,728 | ) | $ | 4,091,023 | $ | 4,605,644 | $ | 8,696,667 |
See accompanying notes to consolidated financial statements
F-8
TKO GROUP HOLDINGS, INC.
Consolidated Sta****tements of Cash Flows
(In thousands)
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net income | $ | 6,377 | $ | 175,723 | $ | 389,022 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 392,842 | 164,616 | 60,032 | |||||||||
| Amortization and impairments of content costs | 25,199 | 23,798 | 14,535 | |||||||||
| Amortization of original issue discount and deferred financing costs | 10,446 | 10,589 | 10,635 | |||||||||
| Loss on impairment of assets | 27,933 | — | — | |||||||||
| Equity-based compensation | 94,636 | 57,109 | 23,744 | |||||||||
| Income taxes | (70,253 | ) | 6,831 | 2,334 | ||||||||
| Equity losses of affiliates | 2,267 | 266 | 209 | |||||||||
| Net provision for allowance for doubtful accounts | 2,525 | 188 | 3,288 | |||||||||
| Other, net | 582 | 1,328 | 3 | |||||||||
| Changes in operating assets and liabilities, net of acquisition: | ||||||||||||
| Accounts receivable | (52,677 | ) | 15,066 | (26,404 | ) | |||||||
| Other current assets | (29,114 | ) | 11,596 | 9,979 | ||||||||
| Other noncurrent assets | (34,813 | ) | (17,082 | ) | (16,786 | ) | ||||||
| Accounts payable and accrued liabilities | 220,851 | 38,188 | 19,657 | |||||||||
| Deferred revenue | (17,721 | ) | (17,209 | ) | 10,731 | |||||||
| Other liabilities | 4,330 | (2,626 | ) | 744 | ||||||||
| Net cash provided by operating activities | 583,410 | 468,381 | 501,723 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Purchases of property, buildings and equipment and other assets | (74,949 | ) | (48,633 | ) | (12,404 | ) | ||||||
| Investments in affiliates, net | (23,464 | ) | 765 | (875 | ) | |||||||
| Proceeds from the sale of assets | 28,365 | — | — | |||||||||
| Proceeds from infrastructure improvement incentives | 11,000 | — | — | |||||||||
| Cash acquired from WWE | — | 381,153 | — | |||||||||
| Payment of deferred consideration in the form of a dividend to former WWE shareholders | — | (321,006 | ) | — | ||||||||
| Other, net | — | — | 15 | |||||||||
| Net cash (used in) provided by investing activities | (59,048 | ) | 12,279 | (13,264 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Proceeds from borrowings | 2,900,000 | 100,000 | — | |||||||||
| Repayment of long-term debt | (2,892,477 | ) | (133,406 | ) | (82,600 | ) | ||||||
| Repurchase of Class A common stock | (165,000 | ) | (100,000 | ) | — | |||||||
| Redemption of profit units | — | — | (2,877 | ) | ||||||||
| Payments for financing costs | (8,260 | ) | (286 | ) | — | |||||||
| Taxes paid related to net settlement upon vesting of equity awards | (5,657 | ) | — | — | ||||||||
| Distributions to members | (67,256 | ) | (296,587 | ) | (1,095,904 | ) | ||||||
| Proceeds from principal stockholder contributions | 6,387 | 5,807 | — | |||||||||
| Net cash used in financing activities | (232,263 | ) | (424,472 | ) | (1,181,381 | ) | ||||||
| Effects of exchange rate movements on cash | (2,382 | ) | (923 | ) | (1,192 | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 289,717 | 55,265 | (694,114 | ) | ||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 235,839 | 180,574 | 874,688 | |||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 525,556 | $ | 235,839 | $ | 180,574 | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||
| Cash paid for interest | $ | 267,508 | $ | 226,503 | $ | 118,315 | ||||||
| Cash payments for income taxes | $ | 89,018 | $ | 23,202 | $ | 14,794 | ||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | ||||||||||||
| Purchases of property and equipment recorded in accrued expenses and accounts payable | $ | 12,075 | $ | 22,796 | $ | 3,759 | ||||||
| Acquisition of WWE, net of deferred consideration | $ | — | $ | 8,111,055 | $ | — | ||||||
| Accretion of redeemable non-controlling interests | $ | 8,036 | $ | — | $ | (1,539 | ) | |||||
| Capital contribution from parent for equity-based compensation | $ | 6,926 | $ | 18,638 | $ | 23,744 | ||||||
| Principal stockholder contributions | $ | 1,492 | $ | 9,000 | $ | — | ||||||
| Excise taxes on repurchases of common stock | $ | 909 | $ | — | $ | — | ||||||
| Convertible notes exchanged for common stock | $ | — | $ | 4,226 | $ | — |
See accompanying notes to consolidated financial statements
F-9
1. DESCRIPTIO****N 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 51.0% controlling non-economic voting interest in TKO on a fully-diluted basis and (2) a 51.0% economic interest in the operating subsidiary on a fully diluted basis, TKO OpCo, which owns all of the assets of the UFC and WWE businesses, and (B) the stockholders of WWE received (1) a 49.0% voting interest in TKO on a fully diluted basis and (2) a 100% economic interest in TKO, which in turn holds a 49.0% economic interest in TKO OpCo on a fully-diluted basis.
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 media and content properties 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting financial information.
Principles of Consolidation
The consolidated financial statements include the accounts of all wholly-owned subsidiaries and other subsidiaries in which a controlling voting interest is maintained, which is typically present when the Company owns a majority of the voting interest in an entity and the non-controlling interests do not hold any substantive participating rights. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is consolidated. All intercompany transactions and balances have been eliminated. Non-controlling interest in subsidiaries are reported as a component of equity or temporary equity in the consolidated balance sheets with disclosure of the net income (loss) and comprehensive income (loss) attributable to the Company and the non-controlling interests on the consolidated statements of operations and the consolidated statements of comprehensive income (loss). The equity method of accounting is used for investments in affiliates and joint ventures where the Company has significant influence over operating and financial policies but not control. Investments in which the Company does not have significant influence over operating and financial policies are accounted for either at fair value if the fair value is readily determinable or at cost, less impairment, adjusted for subsequent observable price changes if the fair value is not readily determinable.
TKO is the sole managing member of TKO OpCo and maintains a controlling financial interest in TKO OpCo. As sole managing member, the Company ultimately controls 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 December 31, 2024, the Company owned 47.5% of TKO OpCo.
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Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying disclosures.
Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, allowance for doubtful accounts, 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 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.
Revenue Recognition
Under ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), our sales revenue is recognized when products are delivered or as services are performed. Revenue is recognized when control of the promised goods or services is transferred to our customers either at a point in time or over time, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
We have various types of contracts with multiple performance obligations, primarily consisting of multi-year media rights, site fees, consumer products licensing and sponsorship agreements. The transaction price in these types of contracts is allocated on a relative stand-alone selling price basis. We typically determine the stand-alone selling price of individual performance obligations based on management estimates, unless stand-alone selling prices are observable through past transactions. Estimates used to determine a performance obligation’s stand-alone selling price impact the amount and timing of revenue recognized, but not the total amount of revenue to be recognized under the arrangement.
Our pay-per-view programming revenue and consumer products licensing revenue include variable consideration in the form of 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.
Our payment terms vary by the type of products or services offered, and are generally subject to contractual payment terms, which may include advance payment requirements. The time between invoicing and when payment is due is not significant. Our contracts with customers do not result in significant obligations associated with returns, refunds or warranties. Our revenues do not include material amounts of variable consideration other than the sales or usage based royalties earned related to our consumer products licensing and certain media rights and content contracts which are subject to contractual payment terms.
The following are the primary sources of revenue earned by the Company:
Media Rights and Content
Broadcast rights fees received from distributors of the Company’s live event and television programming, both domestically and internationally, are recorded when the live event or program has been delivered and is available for distribution. Any advance payments received from customers are deferred upon collection and recognized into revenue as content is delivered. Revenue from the Company’s pay-per-view programming is recognized when the event is aired and, for those contracts with variable fees, is based upon its initial estimate of the number of buys achieved. This initial estimate is based on preliminary buy information received from certain pay-per-view distributors and any adjustments to the estimated amounts are recorded when final information is received. Pay-per-view programming is distributed through cable, satellite, and digital providers to residential and commercial establishments. The Company’s customer is the cable, satellite, and certain digital providers on residential buys and the Company records its royalties earned on the sales of pay-per-view programming. For other residential buys through UFC-branded digital platforms, the Company’s customer is the end user, and the Company records the amount paid by the end customer. On commercial buys, the Company recognizes the amount paid by the establishment. The Company owns and operates its own over-the-top (“OTT”) platforms, UFC FIGHT PASS and WWE Network, that engage customers through a monthly subscription-based model. Access to UFC FIGHT PASS and WWE Network is provided to subscribers and revenue is recognized ratably over each paid monthly membership period. Revenue for UFC FIGHT PASS and WWE Network is deferred for subscriptions paid in advance until earned. The Company recognizes revenue for UFC FIGHT PASS and WWE Network gross of third-party distributor fees as the Company is the principal in the arrangement.
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Live Events
Live event revenue consists of ticket sales, site fees and VIP package sales for events at third-party venues, each of which generally represents distinct performance obligations. Revenue for ticket sales and site fees collected in advance of the events is recorded as deferred revenue until the events occur. The Company recognizes revenue gross of third-party commissions and fees as the Company is the principal in the arrangement.
Sponsorship
Through our sponsorship packages, the Company offers our customers a full range of promotional vehicles, including arena and octagon signage, digital and broadcast content, on-air announcements, special appearances by fighters and talent as well as other forms of advertisement. The Company allocates the transaction price to all performance obligations contained within a sponsorship arrangement based upon their relative stand-alone selling price. Stand-alone selling prices are typically consistent with the rate card used to determine pricing for individual components. After allocating revenue to each performance obligation, the Company recognizes sponsorship revenue when the promotional services are delivered. Revenue is recognized gross of third-party commissions and fees as the Company is the principal in the arrangement. Our control is evidenced by our sole ability to monetize the sponsorship inventory and being primarily responsible to our customers.
Consumer Products Licensing
Revenue is derived from licensing the Company’s logos, trade names, trademarks and related symbolic intellectual property to third party manufacturers and distributors of branded merchandise. Revenue from royalties is recognized based on the Company’s estimates of sales that occurred with subsequent adjustments recognized upon receipt of a statement or other information from the customer. Many licensing agreements include minimum guarantees, which set forth the minimum royalty to be paid to the Company during a given contract year. The Company will recognize the minimum guarantee revenue ratably over its related royalty period until such point that it is more likely than not that the total revenue during the royalty period will exceed the minimum royalty. If during the royalty period, management determines that total revenue will exceed the minimum royalty, the revenue recognized during each reporting period will reflect royalties earned on the underlying product sales.
Direct Operating Costs
Direct operating costs primarily include third-party expenses associated with our athletes and talent, production, marketing, venue costs related to the Company’s live events, and commissions and direct costs with distributors, as well as certain service fees paid to Endeavor.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily include personnel costs as well as rent, travel, professional service costs and other overhead required to support the Company’s operations and corporate structure, including certain service fees paid to Endeavor.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposit accounts and highly liquid money market accounts with original maturities of three months or less at the time of purchase.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are maintained with various major banks and other high-quality financial institutions. The Company periodically evaluates the relative credit standings of these banks and financial institutions. The Company’s accounts receivable are typically unsecured and a significant portion relates to trade receivables for events from various distributors, who collect and remit payments to the Company from individual operators as well as large broadcast and cable television and streaming networks with whom the Company licenses content. Significant portions of trade receivables also relate to third party venues.
As of December 31, 2024, there was one customer that accounted for 10% or more of the Company's accounts receivable. As of December 31, 2023, there were no customers that accounted for 10% or more of the Company’s accounts receivable. For the year ended December 31, 2024, there were two customers, one included within the UFC segment and one included within the WWE segment, who accounted for more than 10% of the Company's revenue. For the years ended December 31, 2023 and 2022, there was one customer included within the UFC segment who accounted for more than 10% of the Company’s revenue.
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Derivative Instruments and Hedging Activities
The Company uses interest rate swaps to manage exposure to the risk associated with interest rates on variable rate borrowings. The Company does not use derivatives for trading or speculative purposes. The Company recognizes derivative financial instruments at fair value as either assets or liabilities in the consolidated balance sheets.
The accounting for changes in fair value (i.e., gains or losses) of the interest rate swap agreements depends on whether they have been designated and qualify as part of a hedging relationship and the type of hedging relationship. Changes in the fair value of derivative instruments accounted for as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) until the hedged item affects earnings. For derivatives not designated as cash flow hedges, changes in fair value are recognized in earnings.
Accounts Receivable
Accounts receivable are recorded at net realizable value. Accounts receivable are presented net of an allowance for doubtful accounts, which is an estimate of expected losses. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of significant customers based on known delinquent activity or disputes and ongoing credit evaluations in addition to evaluating the historical loss rate on the pool of receivables. Accounts receivable includes unbilled receivables, which are established when revenue is recognized, but due to contractual restraints over the timing of invoicing, the Company does not have the right to invoice the customer by the balance sheet date.
Deferred Costs
Deferred costs principally relate to payments made to third-party vendors in advance of events taking place, upfront contractual payments and prepayments on media and licensing rights fees and advances for content production or overhead costs. These costs are recognized when the event takes place or over the respective period of the media and licensing rights.
Property, Buildings and Equipment
Property, buildings and equipment are stated at historical cost less accumulated depreciation. Depreciation is charged against income over the estimated useful lives of the assets using the straight-line method. The estimated useful lives of property and equipment are as follows:
| Years | ||
| Buildings | 35 - 40 years | |
| Leasehold improvements | Lesser of useful life or lease term | |
| Furniture, fixtures, office and other equipment | 2 - 28.5 years | |
| Production equipment | 3 - 7 years | |
| Computer hardware and software | 2 - 5 years |
Costs of normal repairs and maintenance are charged to expense as incurred.
Leases
The Company determines whether a contract contains a lease at contract inception. The Company has elected the short-term lease exemption, whereby leases with initial terms of one year or less are not capitalized and instead expensed generally on a straight-line basis over the lease term. The Company has also elected to not separate lease components from non-lease components across all lease categories. Instead, each separate lease component and non-lease component are accounted for as a single lease component. The Company is primarily a lessee with a lease portfolio comprised mainly of real estate and equipment leases. The right-of-use asset and lease liability are measured at the present value of the future minimum lease payments, with the right-of-use asset being subject to adjustments such as initial direct costs, prepaid lease payments and lease incentives. Due to the rate implicit in each lease not being readily determinable, the Company uses its incremental collateralized borrowing rate to determine the present value of the lease payments. The lease term includes periods covered by options to extend when it is reasonably certain the Company will exercise such options as well as periods subsequent to an option to terminate the lease if it is reasonably certain the Company will not exercise the termination option. Operating lease costs are recognized on a straight-line basis over the lease term. For finance leases, the Company records interest expense on the lease liability and straight-line amortization of the right-of-use asset over the lease term. Variable lease costs are recognized as incurred.
Business Combinations
The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses, including management’s estimation of the fair value of any contingent consideration, is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition
F-13
date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of operations.
Goodwill
Goodwill is tested annually as of October 1 for impairment and at any time upon the occurrence of certain events or substantive changes in circumstances that indicate the carrying amount of goodwill may not be recoverable. The Company has the option to perform a qualitative assessment to determine if an impairment is “more likely than not” to have occurred. If the Company can support the conclusion that the fair value of a reporting unit is greater than its carrying amount under the qualitative assessment, the Company would not need to perform the quantitative impairment test for that reporting unit. If the Company cannot support such a conclusion or the Company does not elect to perform the qualitative assessment, then the Company must perform the quantitative impairment test. When the Company performs a quantitative test, it records the amount of goodwill impairment, if any, as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Charges resulting from an impairment test are recorded in impairment charges in the consolidated statements of operations.
Intangible Assets
Intangible assets consist primarily of trade names and customer relationships. Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. The estimated useful lives of finite-lived intangible assets are as follows:
| Years | ||
| Trademarks and trade names | 7 - 25 years | |
| Customers relationships | 1 - 18 years | |
| Internally developed technology | 1 - 8 years | |
| Other | 2 - 4 years |
For intangible assets that are amortized, the Company evaluates assets for recoverability when there is an indication of potential impairment or when the useful lives are no longer appropriate. If the undiscounted cash flows from a group of assets being evaluated is less than the carrying value of that group of assets, the fair value of the asset group is determined and the carrying value of the asset group is written down to fair value and an impairment loss is recognized for the difference between the fair value and carrying value, which is recorded in impairment charges in the consolidated statements of operations.
Investments
For equity method investments, the Company periodically reviews the carrying value of its investments to determine if there has been an other-than-temporary decline in fair value below carrying value. For equity investments without readily determinable fair value, the Company performs a qualitative assessment at each reporting period. A variety of factors are considered when determining if an impairment exists, including, among others, the financial condition and business prospects of the investee, as well as the Company’s investment intent.
Content Costs
The Company incurs costs to produce and distribute film and television content, which are either monetized on a title-by-title basis or as a group through subscriptions from customers. These costs include development costs, direct costs of production as well as direct negative costs incurred in the physical production of the film. From time to time, the Company acquires films to distribute exclusively through its UFC Fight Pass subscription network. The Company also licenses films for distribution exclusively through its UFC Fight Pass subscription network. Content costs are included in other assets in the consolidated balance sheets. Depending on the predominant monetization strategy, content costs are amortized over the estimated period of ultimate revenue subject to an individual-film-forecast model or over the estimated usage of the film group. Such amortization is recorded in direct operating expenses in the consolidated statements of operations.
The Company produces live sports and taped content, which represent content costs predominantly monetized on a title-by-title basis that has a limited life to sell in secondary markets. As such, the Company recognizes all of the revenue associated with film and television costs when the programs are delivered and made available for telecast in the initial market resulting in simultaneously expensing all of the related film and television costs. Costs incurred in acquiring, licensing, and producing content for distribution on UFC Fight Pass are predominantly monetized as a film group, and are amortized straight-line over the shorter of the license term or the estimated period of use, which is currently three years. These estimates are reviewed at the end of each reporting period and adjustments, if any, will result in changes to amortization rates.
F-14
Unamortized content costs are also tested for impairment based on the predominant monetization strategy whenever there is an impairment indication, as a result of certain triggering events or changes in circumstances, whereby the fair value of the individual film and television content or collectively with others as a film group may be less than its unamortized costs. The impairment test compares the estimated fair value of the individual film and television content or collectively with others as a film group to the carrying value of the unamortized content costs. Where the unamortized content costs exceed the fair value, the excess is recorded as an impairment charge in the consolidated statements of operations. No impairment charges were recognized during the years ended December 31, 2024, 2023 or 2022.
Content Production Incentives
As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for profit business entities, the Company accounts for content production incentives by analogy to International Accounting Standard ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance.
The Company has access to various governmental programs primarily related to WWE that are designed to promote content production within the United States and certain international jurisdictions. Tax incentives earned with respect to expenditures on qualifying film production activities are included as an offset to other assets in the consolidated balance sheets. Tax incentives earned with respect to expenditures on qualifying capital projects are included as an offset to property, buildings and equipment, net in the consolidated balance sheets. Tax incentives earned with respect to expenditures on qualifying television and other production activities are recorded as an offset to production expenses within direct operating costs within the consolidated statements of operations. The Company recognizes these benefits when we have reasonable assurance regarding the realizable amount of the tax credits. The realizable amount is recorded within accounts receivable in the consolidated balance sheets until the Company receives the funds from the respective governmental jurisdiction.
Debt Issuance Costs
Costs incurred in connection with the issuance of the Company’s long-term debt have been recorded as a direct reduction against the debt and amortized over the life of the associated debt as a component of interest expense using the effective interest method. Costs incurred with the issuance of the Company’s revolving credit facilities have been deferred and amortized over the term of the facilities as a component of interest expense using the straight-line method. These deferred costs are included in other assets in the consolidated balance sheets.
Fair Value Measurements
The Company accounts for certain assets and liabilities at fair value. Fair value measurements are categorized within a fair value hierarchy, which is comprised of three categories. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The carrying values reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturities of these financial instruments.
The Company’s assets measured at fair value on a nonrecurring basis include investments, long-lived assets and goodwill. These assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment (Note 6 and Note 7). The resulting fair value measurements of the assets are considered to be Level 3 measurements.
Non-controlling Interests
Non-controlling interests in consolidated subsidiaries represent the component of equity in consolidated subsidiaries held by third parties. Any change in ownership of a subsidiary while the controlling financial interest is retained is accounted for as an equity transaction between the controlling and non-controlling interests. In addition, when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary will be initially measured at fair value and the difference between the carrying value and fair value of the retained interest will be recorded as a gain or loss.
Non-controlling interests with redemption features, such as put options, that are not solely within the Company’s control are considered redeemable non-controlling interests. Redeemable non-controlling interests are considered to be temporary equity and are reported in the mezzanine section between total liabilities and shareholders’ equity in the consolidated balance sheets. Redeemable non-controlling interests are recorded at the greater of carrying value, which is adjusted for the non-controlling interests’ share of net income or loss, or estimated redemption value at each reporting period. If the carrying value, after the income or loss attribution, is below the estimated redemption value at each reporting period, the Company remeasures the redeemable non-controlling interests to its redemption value.
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Equity-Based Compensation
Incentive Awards
Equity-based compensation is accounted for in accordance with ASC Topic 718-10, Compensation-Stock Compensation. The Company records compensation costs related to its incentive awards. Equity-based compensation cost is measured at the grant date based on the fair value of the award. Compensation cost for time-based awards is recognized ratably over the applicable vesting period with forfeitures recognized as they occur. Compensation cost for performance-based awards with a performance condition is reassessed each period and recognized based upon the probability that the performance conditions will be achieved. See Note 13, Equity-Based Compensation, for further discussion of the Company’s equity-based compensation.
Replacement Awards
Pursuant to the Transaction Agreement, the Company converted each WWE equity award of restricted stock units (“RSUs”) and performance stock units (“PSUs”) held by WWE directors, officers and employees into TKO RSUs and PSUs of equal value and vesting conditions (with such performance-vesting conditions equitably adjusted), respectively (the “Replacement Awards”). The value of the Replacement Awards was determined using the closing price of WWE Class A common stock, par value $0.01 per share (“WWE Class A common stock”), on the day immediately preceding the closing of the Transactions. The portion of the Replacement Awards issued in connection with the Transactions that was associated with services rendered prior to the date of the Transactions was included in the total consideration transferred.
With regards to the remaining unvested portion of the Replacement Awards, equity-based compensation costs of RSUs are recognized over the total remaining service period on a straight-line basis with forfeitures recognized as they occur. RSUs have a service requirement and generally vest in equal annual installments over a three-year period. Unvested RSUs accrue dividend equivalents at the same rate as are paid on shares of TKO Class A common stock, par value $0.00001 per share (the “TKO Class A common stock”). The dividend equivalents are subject to the same vesting schedule as the underlying RSUs.
PSUs, which are subject to certain performance conditions and have a service requirement, generally vest in equal installments over a three-year period. Until such time as the performance conditions are met, stock compensation costs associated with these PSUs are re-measured each reporting period based upon the fair market value of the Company’s common stock and the estimated performance attainment on the reporting date. The ultimate number of PSUs that are issued to an employee is the result of the actual performance of the Company at the end of the performance period compared to the performance conditions. Compensation costs for PSUs are recognized using a graded-vesting attribution method over the vesting period based upon the probability that the performance conditions will be achieved, with forfeitures recognized as they occur. Unvested PSUs accrue dividend equivalents once the performance conditions are met at the same rate as are paid on shares of TKO Class A common stock. The dividend equivalents are subject to the same vesting schedule as the underlying PSUs.
Earnings per Share
Earnings per share (“EPS”) is computed in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing the net income (loss) available to holders of TKO Class A common stock by the weighted average number of shares outstanding for the period. Diluted EPS is calculated by dividing the net income (loss) available for holders of TKO Class A common stock by the diluted weighted average shares outstanding for that period. Diluted EPS includes the determinants of basic EPS and, in addition, reflects the dilutive effect of additional shares of TKO Class A common stock issuable in exchange for redemption of certain non-controlling interests, outstanding convertible debt instruments, as well as under the Company’s share based compensation plans (if dilutive), with adjustments to net income (loss) available for common stockholders for dilutive potential common shares.
Shares of the Company’s Class B common stock, par value $0.00001 per share (the “TKO Class B common stock”) do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings (loss) per share of TKO Class B common stock under the two-class method has not been presented. However, shares of TKO Class B common stock outstanding for the period are considered potentially dilutive shares of TKO Class A common stock under application of the if-converted method and are included in the computation of diluted earnings (loss) per share, except when the effect would be anti-dilutive.
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. ultimately controls 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.
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The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Significant factors considered by the Company in estimating the probability of the realization of deferred tax assets include expectations of future earnings and taxable income, as well as the application of tax laws in the jurisdictions in which the Company operates. A valuation allowance is provided when the Company determines that it is “more likely than not” that a portion of a deferred tax asset will not be realized.
ASC 740 prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is “more likely than not” to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established or is required to pay amounts in excess of the liability, the Company’s effective tax rate in a given financial statement period may be affected.
The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the consolidated statements of operations. Accrued interest and penalties are included in the related tax liability line in the consolidated balance sheets.
Foreign Currency
The Company has operations outside of the United States. Therefore, changes in the value of foreign currencies affect the consolidated financial statements when translated into U.S. Dollars. The functional currency for substantially all subsidiaries outside the U.S. is the local currency. Financial statements for these subsidiaries are translated into U.S. Dollars at period end exchange rates as to the assets and liabilities and monthly average exchange rates as to revenue, expenses and cash flows. For these countries, currency translation adjustments are recognized in shareholders’ equity as a component of accumulated other comprehensive income (loss), whereas transaction gains and losses are recognized in other (expense) income, net in the consolidated statements of operations. The Company recognized $0.6 million, $1.1 million and $1.3 million of realized and unrealized foreign currency transaction losses for the years ended December 31, 2024, 2023 and 2022, respectively.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
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 Company adopted this guidance for the year ended December 31, 2024 on a retrospective basis. See Note 19, Segment Information, for further detail.
In July 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718). This ASU amends or supersedes various SEC paragraphs within the FASB Accounting Standards Codification (“ASC”) to conform to past SEC announcements and guidance issued by the SEC. The Company adopted this guidance on July 1, 2023 with no material effect on the Company’s financial position or results of operations.
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. This ASU clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets, expanding the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and non-prepayable financial assets. The amendments in this update were effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2023 with no material effect on the Company’s financial position or results of operations.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. Adoption of the expedients and exceptions was permitted upon issuance of this update through December 31, 2022. However, in December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848, in order to defer the sunset date of ASC 848 until December 31, 2024. The Company adopted this guidance on April 1, 2023 with no material effect on the Company’s financial position or results of operations.
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Recently Issued Accounting Pronouncements
In August 2023, the FASB issued 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 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 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, and in January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. ASU 2024-03, as clarified by ASU 2025-01, 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 interim periods within annual reporting periods beginning after December 15, 2027, and should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date, or (2) 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.
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 51.0% controlling non-economic voting interest in TKO on a fully-diluted basis and (2) a 51.0% economic interest on a fully-diluted basis in the operating subsidiary, TKO OpCo, which owns all of the assets of the UFC and WWE businesses after the closing of the Transactions, and (B) the stockholders of WWE received (1) a 49.0% voting interest in TKO on a fully-diluted basis and (2) a 100% economic interest in TKO, which in turn holds a 49.0% economic interest in TKO OpCo on a fully-diluted basis.
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
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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 preliminary 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 20.3 years, which consisted of trademarks and trade names with a weighted average life of 25.0 years, customer relationships with a weighted average life of 11.3 years and other intangible assets with a weighted average life of 3.6 years. See Note 6, Goodwill and Intangible Assets, for the estimated annual amortization of intangible assets acquired in the Transactions for the next five years and thereafter.
In connection with the Transactions, the Company incurred transaction costs of $1.9 million and $83.8 million for the years ended December 31, 2024 and 2023, respectively, which were expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations.
Consideration Transferred
The fair value of the consideration transferred in the reverse acquisition was $8,432.1 million, which consisted of 83,161,123 shares of TKO Class A common stock valued at $8,061.8 million, Replacement Awards valued at $49.3 million and $321.0 million of deferred consideration which was paid on September 29, 2023 to former WWE shareholders in the form of a special dividend.
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 portion of the fair-value-based measure of the Replacement Awards that is attributable to pre-combination vesting is purchase consideration and was valued at approximately $49.3 million.
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 year ended December 31, 2024 were not material to the Company’s consolidated financial statements.
A summary of the final purchase price allocation is as follows:
| Cash and cash equivalents | $ | 381,153 | ||
| Accounts receivable | 105,237 | |||
| Other current assets | 89,256 | |||
| Property, buildings and equipment | 398,004 | |||
| Intangible assets | ||||
| Trademarks and trade names | 2,188,200 | |||
| Customer relationships | 900,500 | |||
| Other | 128,300 | |||
| Goodwill | 5,063,067 | |||
| Finance lease right of use assets | 257,359 | |||
| Operating lease right of use assets | 12,337 | |||
| Investments | 12,007 | |||
| Other assets | 25,928 | |||
| Deferred tax liabilities | (379,601 | ) | ||
| Accounts payable and accrued liabilities | (124,280 | ) | ||
| Current portion of long-term debt | (16,934 | ) | ||
| Deferred revenue | (54,190 | ) | ||
| Finance lease liabilities | (255,940 | ) | ||
| Operating lease liabilities | (12,224 | ) | ||
| Other long-term liabilities | (2,527 | ) | ||
| Additional paid-in-capital (1) | (283,591 | ) | ||
| Net assets acquired | $ | 8,432,061 |
(1)
The additional paid-in-capital amount represents incremental goodwill related to deferred tax liabilities recorded at TKO’s parent company in connection with the acquisition of WWE.
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The fair value of the nonredeemable non-controlling interest of $4,521.8 million was calculated as EGH’s initial 51.9% ownership interest in TKO OpCo’s net assets. TKO OpCo’s net assets differ from TKO consolidated net assets primarily due to the net deferred tax liabilities for which the non-controlling interest does not have economic rights.
Consolidated Statement of Operations for the period from September 12, 2023 through December 31, 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 December 31, 2023 (in thousands):
| Revenue | $ | 382,767 | ||
| Net loss | $ | (73,279 | ) |
Supplemental Pro Forma Financial Information
The following unaudited pro forma results of operations for the years ended December 31, 2023 and 2022, respectively, as if the Transactions had occurred as of January 1, 2022 (in thousands):
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Pro forma revenue | $ | 2,618,567 | $ | 2,431,670 | ||||
| Pro forma net income | 241,526 | 60,611 |
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 $271.1 million, of which $187.3 million was incurred by WWE prior to the Transactions. The remaining pro forma adjustments are primarily related to incremental intangible asset amortization to be incurred based on the fair values and useful lives of each identifiable intangible asset, incremental service fees paid by the Company to Endeavor pursuant to the Services Agreement, incremental compensation expense for two key executives, including salaries, bonuses and TKO equity awards granted, and incremental equity-based compensation related to the Replacement Awards.
5. SUPPLEMENTARY DATA
Property, Buildings and Equipment, net
Property, buildings and equipment, net consisted of the following (in thousands):
| As of | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Buildings and improvements | $ | 377,532 | $ | 394,481 | ||||
| Land and land improvements | 50,539 | 80,919 | ||||||
| Furniture and fixtures | 80,664 | 74,862 | ||||||
| Office, computer and other equipment | 130,600 | 126,082 | ||||||
| Construction in progress | 36,114 | 20,389 | ||||||
| 675,449 | 696,733 | |||||||
| Less: accumulated depreciation | (141,692 | ) | (88,317 | ) | ||||
| Total Property, buildings and equipment, net | $ | 533,757 | $ | 608,416 |
Depreciation expense for property, buildings and equipment totaled $67.6 million, $29.9 million and $13.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
During the second quarter of 2024, the Company reclassified cost and accumulated depreciation of $53.4 million and $5.6 million, respectively, related to property, buildings and equipment associated with the previous WWE media production center in Stamford, Connecticut as held for sale, as the Company moved media production to the new WWE headquarters. During the year ended December 31, 2024, the Company recognized impairment charges of $27.9 million within the WWE segment as a result of reducing the carrying value of assets held for sale to their fair value less cost to sell, which is included as a component of selling, general and administrative expenses within the Company’s consolidated statements of operations. The Company received net proceeds of $28.0 million upon completion of the sale of these assets during the fourth quarter of 2024.
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Valuation and Qualifying Accounts
| Balance at | Charged to | Balance at | ||||||||||||||||||
| Beginning | Costs and | Foreign | End of | |||||||||||||||||
| of Year | Expenses | Deductions | Exchange | Year | ||||||||||||||||
| Allowance for doubtful accounts | ||||||||||||||||||||
| Year Ended December 31, 2024 | $ | 1,093 | $ | 4,324 | $ | (2,286 | ) | $ | 1 | $ | 3,132 | |||||||||
| Year Ended December 31, 2023 | $ | 2,355 | $ | 1,749 | $ | (3,010 | ) | $ | (1 | ) | $ | 1,093 | ||||||||
| Year Ended December 31, 2022 | $ | 479 | $ | 2,176 | $ | (295 | ) | $ | (5 | ) | $ | 2,355 | ||||||||
| Deferred tax valuation allowance | ||||||||||||||||||||
| Year Ended December 31, 2024 | $ | 15,689 | $ | 13,226 | $ | — | $ | (97 | ) | $ | 28,818 | |||||||||
| Year Ended December 31, 2023 | $ | 94 | $ | 15,604 | $ | — | $ | (9 | ) | $ | 15,689 | |||||||||
| Year Ended December 31, 2022 | $ | 1,849 | $ | 17 | $ | (1,771 | ) | $ | (1 | ) | $ | 94 |
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 | |||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Licensed and acquired program rights | $ | — | $ | — | $ | 24,646 | $ | 21,413 | ||||||||
| Produced programming: | ||||||||||||||||
| In release | 24 | 1,410 | 1,655 | 2,049 | ||||||||||||
| Completed but not released | 3 | 2,045 | — | — | ||||||||||||
| In production | 949 | 1,350 | 920 | 819 | ||||||||||||
| In development | 8 | — | — | — | ||||||||||||
| Total film and television costs | $ | 984 | $ | 4,805 | $ | 27,221 | $ | 24,281 |
As of December 31, 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 12 months.
As of December 31, 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 three years.
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):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Content production amortization expense - assets monetized individually | $ | 5,262 | $ | 5,028 | $ | — | ||||||
| Content production amortization expense - assets monetized as a film group | 19,937 | 18,770 | 14,535 | |||||||||
| Content production impairment charges | — | — | — | |||||||||
| Total amortization and impairment of content costs | $ | 25,199 | $ | 23,798 | $ | 14,535 |
Other current assets
The following is a summary of other current assets (in thousands):
| As of | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Prepaid taxes | $ | 68,345 | $ | 57,885 | ||||
| Amounts due from the Group (Note 22) | 37,353 | 11,599 | ||||||
| Prepaid event and production-related costs | 29,236 | 8,145 | ||||||
| Prepaid insurance | 8,490 | 7,500 | ||||||
| Other | 16,531 | 36,026 | ||||||
| Total | $ | 159,955 | $ | 121,155 |
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Accrued Liabilities
The following is a summary of accrued liabilities (in thousands):
| As of | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Legal settlements | $ | 250,000 | $ | — | ||||
| Payroll-related costs | 104,838 | 100,982 | ||||||
| Event and production-related costs | 49,025 | 51,015 | ||||||
| Legal and professional fees | 23,329 | 18,730 | ||||||
| Interest | 20,817 | 41,634 | ||||||
| Accrued capital expenditures | 11,699 | 29,550 | ||||||
| Other | 19,390 | 25,452 | ||||||
| Total | $ | 479,098 | $ | 267,363 |
6. 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, 2022 | $ | 2,602,639 | $ | — | $ | 2,602,639 | ||||||
| Acquisitions | — | 5,063,774 | 5,063,774 | |||||||||
| Foreign exchange | — | 72 | 72 | |||||||||
| Balance — December 31, 2023 | 2,602,639 | 5,063,846 | 7,666,485 | |||||||||
| Acquisitions | — | (707 | ) | (707 | ) | |||||||
| Foreign exchange | — | (1,559 | ) | (1,559 | ) | |||||||
| Balance — December 31, 2024 | $ | 2,602,639 | $ | 5,061,580 | $ | 7,664,219 |
(1)
Reflects goodwill resulting from the Company’s election to apply pushdown accounting to reflect EGH’s new basis of accounting in the UFC’s assets and liabilities, including goodwill, which occurred during 2016.
(2)
Reflects goodwill resulting from the Company's business acquisition of WWE. See Note 4, Acquisition of WWE, for further information.
There were no dispositions or impairments to goodwill during the years ended December 31, 2024 and 2023.
Intangible Assets, net
The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 2024 (in thousands):
| Gross Amount | Accumulated Amortization | Carrying Value | ||||||||||
| Trademarks and trade names | $ | 2,892,076 | $ | (441,557 | ) | $ | 2,450,519 | |||||
| Customer relationships | 1,255,010 | (528,187 | ) | 726,823 | ||||||||
| Other (1) | 148,705 | (62,578 | ) | 86,127 | ||||||||
| Total intangible assets | $ | 4,295,791 | $ | (1,032,322 | ) | $ | 3,263,469 |
(1)
Other intangible assets as of December 31, 2024 primarily consisted of talent roster, internally developed software and content library assets acquired through the business combination with WWE in September 2023. See Note 4, Acquisition of WWE, for further information.
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The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 2023 (in thousands):
| Gross Amount | Accumulated Amortization | Carrying Value | ||||||||||
| Trademarks and trade names | $ | 2,891,826 | $ | (314,685 | ) | $ | 2,577,141 | |||||
| Customer relationships | 1,254,210 | (388,640 | ) | 865,570 | ||||||||
| Other (1) | 145,438 | (24,486 | ) | 120,952 | ||||||||
| Total intangible assets | $ | 4,291,474 | $ | (727,811 | ) | $ | 3,563,663 |
(1)
Other intangible assets as of December 31, 2023 primarily consisted of talent roster, internally developed software and content library assets acquired through the business combination with WWE in September 2023. See Note 4, Acquisition of WWE, for further information.
Amortization of intangible assets was $304.5 million, $129.3 million, and $46.7 million during the years ended December 31, 2024, 2023 and 2022, respectively, which is recognized within depreciation and amortization in the consolidated statements of operations.
Estimated annual intangible amortization, including amortization of intangible assets acquired in the Transactions, for the next five years and thereafter is as follows (in thousands):
| UFC | WWE (1) | Total | ||||||||||
| 2025 | $ | 41,783 | $ | 206,084 | $ | 247,867 | ||||||
| 2026 | 40,954 | 200,489 | 241,443 | |||||||||
| 2027 | 40,285 | 169,275 | 209,561 | |||||||||
| 2028 | 39,401 | 153,501 | 192,902 | |||||||||
| 2029 | 39,295 | 153,501 | 192,796 | |||||||||
| Thereafter | 184,182 | 1,994,719 | 2,178,901 | |||||||||
| Total remaining amortization | $ | 385,901 | $ | 2,877,568 | $ | 3,263,469 |
(1)
Based on fair values acquired through the business acquisition of WWE. See Note 4, Acquisition of WWE, for further information.
Annual Impairment Assessments
During the years ended December 31, 2024, 2023 and 2022, the Company completed its annual impairment review of goodwill and intangibles. The Company did not record any impairment charges related to such reviews during the years ended December 31, 2024, 2023 or 2022.
7. INVESTMENTS
The following is a summary of the Company’s investments (in thousands):
| As of | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Equity method investments | $ | 17,053 | $ | 3,775 | ||||
| Nonmarketable equity investments without readily determinable fair values | 15,109 | 12,617 | ||||||
| Total investment securities | $ | 32,162 | $ | 16,392 |
Equity Method Investments
The Company has an approximately 7% ownership stake in Monkey Spirit, LLC, which owns the IP license to distribute Howler Head branded products and beverages. During the year ended December 31, 2024, the Company recognized an other-than-temporary impairment charge of $2.7 million to fully write off this investment due to the business's decision to wind down operations.
In July 2024, the Company paid $15.0 million in exchange for an approximately 5% ownership stake in EverPass, LLC, which owns a live sports media platform that assists in distributing live sports and entertainment content to bars, restaurants, hotels and other commercial venues. The Company also made an additional pro rata capital contribution of $2.0 million in September 2024. The Company has accounted for this investment using the equity method of accounting and will recognize its proportionate share of income or loss in future periods.
Excluding the impact of the impairment charge noted above, the Company recognized equity earnings of $0.4 million, equity losses of $0.3 million and equity losses of $0.2 million for the years ended December 31, 2024, 2023 and 2022, respectively, from our equity method investments. During the years ended December 31, 2024 and 2023, the Company received distributions of $1.5 million
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and $0.8 million, respectively, from our equity method investments. The Company did not receive distributions from our equity method investments during the year ended December 31, 2022.
Nonmarketable Equity Investments Without Readily Determinable Fair Values
As of December 31, 2024 and 2023, the Company held various investments in nonmarketable equity instruments of private companies.
The Company did not record any impairment charges on these investments during the years ended December 31, 2024, 2023 or 2022. In addition, there were no observable price change events that were completed during the years ended December 31, 2024, 2023 or 2022.
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.
8. DEBT
The following is a summary of the Company’s outstanding debt (in thousands):
| As of | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| First Lien Term Loan (due November 2031) | $ | 2,750,000 | $ | 2,728,766 | ||||
| Secured Commercial Loans | 30,267 | 31,867 | ||||||
| Total principal | 2,780,267 | 2,760,633 | ||||||
| Unamortized discount | (8,362 | ) | (8,367 | ) | ||||
| Unamortized debt issuance cost | (12,631 | ) | (15,951 | ) | ||||
| Total debt | 2,759,274 | 2,736,315 | ||||||
| Less: Current portion of long-term debt | (26,513 | ) | (22,367 | ) | ||||
| Total long-term debt | $ | 2,732,761 | $ | 2,713,948 |
First Lien Term Loan (due November 2031)
As of December 31, 2024 and 2023, the Company had $2.8 billion and $2.7 billion, respectively, outstanding under a credit agreement dated August 18, 2016 (as amended and/or restated, the “First Lien Credit Agreement”), by and among Zuffa Guarantor, LLC (“Zuffa Guarantor”), UFC Holdings, LLC (“UFC Holdings”), 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. TKO Operating Company, LLC and TKO Group Holdings, Inc. are holding companies with limited business operations, cash flows, assets and liabilities other than the equity interests in the borrower entities Zuffa Guarantor and UFC Holdings. On November 21, 2024 (the “Credit Agreement Closing Date”), UFC Holdings entered into the Fifth Refinancing Amendment (the “Credit Agreement Amendment”) to the First Lien Credit Agreement (as previously amended and/or restated, the “Existing Credit Agreement” and, as further amended by the Credit Agreement Amendment, the “Credit Agreement”).
The Credit Agreement Amendment amended the Existing Credit Agreement to, among other things, (i) refinance and replace the outstanding first lien secured term loans (the “Existing Term Loans”) with a new class of first lien secured term loans in an aggregate principal amount of $2,750.0 million (the “New Term Loans”), which now mature on November 21, 2031, (ii) refinance the existing secured revolving credit facility (the “Existing Revolving Credit Facility”) in an aggregate principal amount of $205.0 million, which now matures on November 21, 2029 (the “New Revolving Credit Facility,” and, together with the New Term Loans, the “Credit Facilities”), and (iii) make certain other changes to the Existing Credit Agreement including as summarized below. The Credit Facilities are secured by liens on substantially all of the assets of Zuffa Guarantor and UFC Holdings and certain subsidiaries thereof.
The New Term Loans accrue interest at an annual interest rate equal to Term Secured Overnight Financing Rate ("SOFR") plus 2.25%, with a SOFR floor of 0.00%, which totaled 6.77% as of December 31, 2024. The New Term Loans include 1% principal amortization payable in equal quarterly installments, with any remaining balance payable on the final maturity date of November 21, 2031.
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The loans made pursuant to the New Revolving Credit Facility accrue interest at a variable interest rate equal to Term SOFR plus 2.00%-2.25%, depending on the First Lien Leverage Ratio (as defined in the Credit Agreement), with a SOFR floor of 0.00%.
On the Credit Agreement Closing Date, UFC Holdings borrowed $2,750.0 million of New Term Loans under the Credit Agreement to (i) repay the entire amount outstanding under the Existing Term Loans and (ii) pay fees and expenses incurred in connection with entering into the Credit Agreement Amendment. The Company incurred $19.4 million in transactions costs related to the Credit Agreement Amendment. Of this amount, $16.2 million related to modification arrangements which are included within selling, general and administrative expenses on the Company’s consolidated statements of operations, while the remaining $3.2 million associated with new lenders entering the syndication were capitalized as a component of long-term debt on the Company's consolidated balance sheets.
In April 2024, UFC Holdings borrowed $150.0 million under its Existing Revolving Credit Facility to fund certain share repurchases that occurred during the second quarter of 2024, as discussed in Note 10, Stockholders’ Equity. In June 2024, UFC Holdings fully repaid the $150.0 million outstanding. As of December 31, 2024 and 2023, there was no outstanding balance under the New Revolving Credit Facility.
The New Revolving Credit Facility contains a financial covenant that requires the Company to maintain, commencing with the fiscal quarter ending June 30, 2025, a First Lien Leverage Ratio of Consolidated First Lien Debt to Consolidated EBITDA of 8.25-to-1. Prior to the Credit Agreement Closing Date, Zuffa Guarantor was required to maintain a First Lien Leverage Ratio of no more than 6.5-to-1. Pursuant to the terms of the Credit Agreement Amendment, following the Credit Agreement Closing Date, the Company is only required to comply with the foregoing financial covenant if the sum of outstanding borrowings under the New Revolving Credit Facility is (excluding any letters of credit, whether drawn or undrawn) is greater than the greater of (i) $85.0 million and (ii) forty percent of the borrowing capacity of the New Revolving Credit Facility. Prior to the Credit Agreement Closing Date, this applicable testing condition was thirty-five percent of the borrowing capacity of the Existing Revolving Credit Facility. This covenant did not apply as of December 31, 2024 and 2023 as UFC Holdings had no borrowings outstanding under either of the revolving credit facilities.
UFC Holdings had no outstanding letters of credit as of December 31, 2024 and 2023.
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 5.0x.
As of December 31, 2024, TKO Group Holdings, Inc. held net long-term deferred income tax liabilities of $310.6 million. Otherwise, TKO Group Holdings, Inc. has no material separate cash flows or assets or liabilities other than the investments in its subsidiaries. All its business operations are conducted through its operating subsidiaries; it has no material independent operations. TKO Group Holdings, Inc. has no other material commitments or guarantees. As a result of the restrictions described above, substantially all of the subsidiaries’ net assets are effectively restricted from being transferred to TKO Group Holdings, Inc. as of December 31, 2024.
The estimated fair values of the Company’s New Term Loans are based on quoted market values for the debt. As of December 31, 2024 and 2023, the face amount of the Company’s New Term Loans and Existing Term Loans approximates its fair value.
Secured Commercial Loans
As of December 31, 2024 and 2023, the Company had $30.3 million and $31.9 million, respectively, of secured loans outstanding, which were entered into in October 2018 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 one of the Loan Agreements is secured by a deed of trust for the UFC’s headquarters building located at 6650 S. Torrey Pines Drive, Las Vegas, Nevada and underlying land and the other Loan Agreement is secured by a deed of trust for a building located at 6650 El Camino Road, Las Vegas, Nevada and its adjacent land. 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.
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 less than 1.15-to-1 as measured on
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an annual basis. As of December 31, 2024 and 2023, the Company was in compliance with its financial debt covenant under the Secured Commercial Loans.
Debt Maturities
The Company will be required to repay the following principal amounts in connection with its debt obligations (in thousands):
| 2025 | $ | 29,100 | ||
| 2026 | 29,100 | |||
| 2027 | 29,100 | |||
| 2028 | 52,967 | |||
| 2029 | 27,500 | |||
| Thereafter | 2,612,500 | |||
| $ | 2,780,267 |
9. FINANCIAL INSTRUMENTS
In October 2018, in connection with the Secured Commercial Loans, the Company entered into a swap for $40.0 million notional effective November 1, 2018 with a termination date of November 1, 2028. The swap required the Company to pay a fixed rate of 4.99% and receive the total of LIBOR plus 1.62%, which totaled 3.97% as of December 31, 2018. The Company entered into this swap to hedge certain of its interest rate risks on its variable rate debt. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. The Company has designated the interest rate swap as a cash flow hedge, and all changes in fair value are recognized in other comprehensive income until the hedged interest payments affect earnings.
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 4.99% and receive the total of SOFR plus 1.70%, which totaled 6.24% as of December 31, 2024.
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 $0.7 million and $0.3 million as of December 31, 2024 and 2023, respectively, and was included in other assets in the consolidated balance sheets. The total change in fair value of the swap’s asset position included in accumulated other comprehensive loss was a decrease of $0.4 million, an increase of $0.3 million and a decrease of $4.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. The Company reclassified $0.3 million of the increase in fair value into net income during each of the years ended December 31, 2024, 2023 and 2022, respectively, representing the amortization of the cash flow hedge fair value to net income.
10. STOCKHOLDERS’/MEMBERS’ EQUITY
Amendment and Restatement of Certificate of Incorporation
On September 12, 2023, the Company amended and restated its certificate of incorporation to, among other things, provide for the (a) authorization of 5,000,000,000 shares of Class A common stock with a par value of $0.00001 per share, (b) authorization of 5,000,000,000 shares of Class B common stock with a par value of $0.00001 per share, (c) authorization of 1,000,000,000 shares of preferred stock with a par value of $0.00001 per share, and (d) establishment of a board of directors consisting of eleven members, each of which will serve for one-year terms. On January 23, 2024, the board of directors increased the size of the board from eleven to thirteen.
Holders of TKO Class A common stock and holders of TKO Class B common stock are entitled to one vote per share on all matters on which shareholders generally are entitled to vote and, except as otherwise required, will vote together as a single class. Holders of TKO Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the affairs of the Company.
On September 12, 2023, the Company issued 83,161,123 shares of TKO Class A common stock to the historic WWE stockholders and 89,616,891 shares of TKO Class B common stock to EGH and certain of its subsidiaries.
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Secondary Offering & Share Repurchases
In November 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with TKO OpCo, Morgan Stanley & Co. LLC, as representative of the various underwriters (collectively, the “Underwriters”), and Mr. McMahon, in connection with the underwritten secondary offering by Mr. McMahon of 8,400,000 shares of TKO Class A common stock at an offering price of $79.80 per share (the “Secondary Offering”). The Secondary Offering closed on November 14, 2023. The Company did not offer any shares of TKO Class A common stock in the Secondary Offering and did not receive any proceeds from the sale of shares of Common Stock in the Secondary Offering.
Pursuant to the Underwriting Agreement, the Company agreed to purchase 1,308,729 shares of TKO Class A common stock from the Underwriters, at a price of $76.41 per share, which was equal to the price being paid by the Underwriters to Mr. McMahon, resulting in an aggregate purchase price of approximately $100.0 million (the “Share Repurchase”). The Company funded the Share Repurchase with approximately $100.0 million of borrowings under the Revolving Credit Facility. All shares repurchased have been retired.
On April 7, 2024, the Company entered into a stock purchase agreement with Mr. McMahon, pursuant to which the Company agreed to purchase 1,853,724 shares of TKO Class A common stock held by Mr. McMahon at a per share price of $89.01 for an aggregate of $165.0 million (the “Share Repurchase”). The Company funded the Share Repurchase with approximately $150.0 million of borrowings under the Revolving Credit Facility and with cash on hand. All shares repurchased have been retired.
As of December 31, 2024, the Company owned 47.5% of TKO OpCo, and EGH and its subsidiaries owned 52.5% of TKO OpCo.
As of December 31, 2024, EGH and its subsidiaries collectively controlled 53.9% of the voting interests in TKO through their ownership of both Class A common stock and Class B common stock.
Endeavor Share Purchases
In April 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 1,642,970 shares of TKO Class A common stock held by Mr. McMahon at a per share price of $89.01 for an aggregate amount of $146.2 million.
In December 2024, WME IMG and Endeavor OpCo purchased 863,847 shares of TKO Class A common stock in the open market at an average per share price of $145.32 for an aggregate amount of $125.5 million.
These shares of TKO Class A common stock purchased by WME IMG and Endeavor OpCo are included in the calculation of Endeavor’s total voting interest in TKO as of December 31, 2024.
Subsequent to December 31, 2024, and through the date of this Annual Report, Endeavor OpCo purchased an additional 1,897,650 shares of TKO Class A common stock for an aggregate amount of $300.9 million under Endeavor's 10b5-1 trading plan for the Company. The trading plan was terminated on February 14, 2025.
Capital Return Program
On October 24, 2024, the Company announced that its board of directors had 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 pursuant to which holders of TKO's Class A common stock will receive their pro rata share of approximately $75 million in quarterly distributions to be made by TKO OpCo.
The Company 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 the Company 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.
In February 2025, we announced that our inaugural quarterly cash dividend will be paid on March 31, 2025. Future declarations of quarterly dividends are subject to the determination and discretion of the Company 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 the Company deems relevant.
Principal Stockholder Contributions
During the years ended December 31, 2024 and 2023, the Company received cash contributions of $6.4 million and $5.8 million, and non-cash capital contributions of $1.5 million and $9.0 million, respectively. The cash contributions represented amounts reimbursed to the Company by Mr. McMahon, a principal holder of TKO Class A common stock, in connection with and/or arising from the
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investigation conducted by a Special Committee of the former WWE board of directors. The non-cash capital contributions represented amounts paid personally by Mr. McMahon to certain counterparties. See Note 22, Related Party Transactions, for additional information.
11. 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 one-for-one basis. In connection with any redemption or exchange, the Company will receive a corresponding number of Common Units, increasing the total ownership interest in TKO OpCo. Changes in the ownership interest in TKO OpCo while the Company retains its controlling interest in TKO OpCo will be accounted for as equity reallocation transactions. As such, future redemptions or direct exchanges of Common Units in TKO OpCo by the other members of TKO OpCo will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital.
Redeemable Non-Controlling Interest in the UFC
In July 2018, the Company received an investment of $9.7 million by third parties (the “Russia Co-Investors”) in a newly formed subsidiary of the Company (the “Russia Subsidiary”) that was formed to expand the Company’s existing UFC business in Russia and certain other countries in the Commonwealth of Independent States. The terms of this investment provide the Russia Co-Investors with a put option to sell their ownership in the Russia Subsidiary beginning five years and six months after the consummation of the investment. The purchase price of the put option is the greater of the total investment amount, defined as the Russia Co-Investors’ cash contributions less cash distributions, or fair value. As of December 31, 2024 and 2023, the estimated redemption value was $21.9 million and $11.2 million, respectively.
The changes in carrying value of the redeemable non-controlling interest were as follows (in thousands):
| Balance — December 31, 2021 | $ | 9,700 | ||
| Net income attributable to non-controlling interest holders | 1,747 | |||
| Accretion | (1,539 | ) | ||
| Balance — December 31, 2022 | $ | 9,908 | ||
| Net income attributable to non-controlling interest holders | 1,686 | |||
| Balance — December 31, 2023 | $ | 11,594 | ||
| Net income attributable to non-controlling interest holders | 2,234 | |||
| Accretion | 8,036 | |||
| Balance — December 31, 2024 | $ | 21,864 |
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12. EARNINGS PER SHARE
Basic earnings per share is calculated utilizing net income (loss) available to common stockholders of the Company during the year ended December 31, 2024 and during the period from September 12, 2023 through December 31, 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 periods. The Company’s outstanding equity-based compensation awards under its equity-based compensation arrangements (see Note 13, Equity-based Compensation) were anti-dilutive during the periods.
The following table presents the computation of based 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):
| Year Ended | Period From | |||||||
| December 31, | September 12 - | |||||||
| 2024 | December 31, 2023 | |||||||
| Basic and diluted net loss per share | ||||||||
| Numerator | ||||||||
| Net income (loss) attributable to TKO Group Holdings, Inc. | $ | 9,408 | $ | (35,227 | ) | |||
| Effect of dilutive securities: | ||||||||
| Adjustment to net income attributable to TKO Group Holdings, Inc. from the assumed conversion of Class B shares | (6,613 | ) | — | |||||
| Net income (loss) attributable to TKO Group Holdings, Inc. used in computing diluted earnings (loss) per share | $ | 2,795 | $ | (35,227 | ) | |||
| Denominator | ||||||||
| Weighted average Class A Common Shares outstanding - Basic | 81,340,472 | 82,808,019 | ||||||
| Effect of dilutive securities: | ||||||||
| Additional shares from RSUs and PSUs, as calculated using the treasury stock method | 917,177 | — | ||||||
| Additional shares from the assumed conversion of Class B shares | 89,616,891 | — | ||||||
| Weighted average number of shares used in computing diluted earnings (loss) per share | 171,874,540 | 82,808,019 | ||||||
| Basic earnings (loss) per share | $ | 0.12 | $ | (0.43 | ) | |||
| Diluted earnings (loss) per share | $ | 0.02 | $ | (0.43 | ) | |||
| Securities that are anti-dilutive this period | ||||||||
| Unvested RSUs | — | 1,636,626 | ||||||
| Unvested PSUs | — | 327,403 | ||||||
| TKO Class B Common Shares | — | 89,616,891 |
13. EQUITY-BASED COMPENSATION
In connection with the initial public offering of EGH, EGH’s board of directors adopted the Endeavor Group Holdings, Inc. 2021 Incentive Award Plan, which became effective April 28, 2021 and was amended and restated effective April 24, 2023 (the “EGH 2021 Plan”). Under the EGH 2021 Plan, EGH granted stock options and RSUs to certain employees and service providers of TKO OpCo.
In addition to the Replacement Awards described in Note 2, Summary of Significant Accounting Policies, the Company’s Board of Directors approved and adopted the TKO Group Holdings, Inc. 2023 Incentive Award Plan (the “TKO 2023 Plan”) on September 12, 2023. A total of 10,000,000 shares of TKO Class A common stock have been authorized for issuance under the TKO 2023 Plan. The TKO 2023 Plan provides for the grant of incentive or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash based awards and dividend equivalents. Awards may be granted under the TKO 2023 Plan to directors, officers, employees, consultants, advisors and independent contractors of the Company and its affiliates (including TKO OpCo and its subsidiaries).
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Equity-based compensation expense by plan, which is included within selling, general and administrative expenses on the Company’s consolidated statements of operations, consisted of the following (in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| EGH 2021 Plan | $ | 6,926 | $ | 18,638 | $ | 23,744 | ||||||
| Replacement Awards under WWE 2016 Plan | 27,746 | 31,747 | — | |||||||||
| TKO 2023 Plan | 59,964 | 6,724 | — | |||||||||
| Equity-based compensation expense | $ | 94,636 | $ | 57,109 | $ | 23,744 |
As of December 31, 2024, total unrecognized equity-based compensation expense for unvested awards and the related remaining weighted average period for expensing is summarized below (dollars in thousands):
| Unrecognized Compensation Costs | Period Remaining (in years) | |||||||
| EGH 2021 Plan | $ | 4,507 | 1.50 | |||||
| Replacement Awards under WWE 2016 Plan | 20,878 | 0.96 | ||||||
| TKO 2023 Plan | 140,395 | 2.16 | ||||||
| Equity-based unrecognized compensation expense | $ | 165,780 |
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 two- to five-year period; (b) market-based vesting conditions at graduated levels upon the EGH’s attainment of certain market price per share thresholds; and (c) expiration dates (if applicable). Granted awards may include time-based vesting conditions only, market-based vesting conditions only, or both.
The following table summarizes the RSU award activity under the EGH 2021 Plan for the year ended December 31, 2024:
| Time Vested RSUs | Market / Market and Time Vested RSUs | |||||||||||||||
| Units | Weighted- Average Grant-Date Fair Value | Units | Weighted- Average Grant-Date Fair Value | |||||||||||||
| Outstanding at January 1, 2024 | 605,610 | $ | 25.74 | 5,115 | $ | 24.65 | ||||||||||
| Granted | — | $ | — | — | $ | — | ||||||||||
| Transfers | 12,227 | $ | 24.43 | — | $ | — | ||||||||||
| Vested | (379,555 | ) | $ | 27.86 | — | $ | — | |||||||||
| Forfeited | (1,786 | ) | $ | 21.73 | — | $ | — | |||||||||
| Outstanding at December 31, 2024 | 236,496 | $ | 22.30 | 5,115 | $ | 24.65 | ||||||||||
| Vested and exercisable at December 31, 2024 | 2,274 | $ | 30.25 | — | $ | — |
The following table summarizes the stock option award activity under the EGH 2021 Plan for the year ended December 31, 2024:
| Stock Options | ||||||||
| Units | Weighted- Average Exercise Price | |||||||
| Outstanding at January 1, 2024 | 286,836 | $ | 26.04 | |||||
| Granted | — | $ | — | |||||
| Exercised | — | $ | — | |||||
| Forfeited or expired | — | $ | — | |||||
| Outstanding at December 31, 2024 | 286,836 | $ | 26.04 | |||||
| Vested and exercisable at December 31, 2024 | 258,064 | $ | 25.51 |
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The total grant-date fair value of RSUs and stock options which vested under the EGH 2021 Plan during the years ended December 31, 2024, 2023 and 2022 was $10.7 million, $9.8 million and $9.1 million, respectively. The total intrinsic value of RSUs and stock options which vested under the EGH 2021 Plan during the years ended December 31, 2024, 2023 and 2022 was $9.9 million, $7.1 million and $6.4 million, respectively.
Replacement Awards
Prior to the Transactions, the terms of each WWE award, including vesting and forfeiture, were determined by the administrator of WWE’s 2016 Omnibus Incentive Plan (the “WWE 2016 Plan”).
There have been no changes to the terms of the Replacement Awards during the year ended December 31, 2024. Key grant terms include one or more of the following: (a) time-based vesting over a one- to five-year period; (b) market-based vesting conditions at graduated levels upon the Company’s attainment of certain market price per share thresholds; and (c) expiration dates (if applicable). Granted awards may include time-based vesting conditions only, market-based vesting conditions only, or both.
The following table summarizes the RSU award activity under the WWE 2016 Plan for the year ended December 31, 2024:
| Time Vested RSUs | ||||||||
| Units | Weighted- Average Grant-Date Fair Value | |||||||
| Outstanding at January 1, 2024 | 701,090 | $ | 100.65 | |||||
| Vested | (259,847 | ) | $ | 100.65 | ||||
| Forfeited | (188,643 | ) | $ | 100.65 | ||||
| Outstanding at December 31, 2024 | 252,600 | $ | 100.65 |
The total grant-date fair value of RSUs which vested under the WWE 2016 Plan during the years ended December 31, 2024 and 2023 was $26.2 million and $21.1 million, respectively. The total intrinsic value of RSUs which vested under the WWE 2016 Plan during the years ended December 31, 2024 and 2023 was $24.9 million and $17.0 million, respectively. No RSUs vested under the WWE 2016 Plan during the year ended December 31, 2022.
The following table summarizes the PSU award activity under the WWE 2016 Plan for the year ended December 31, 2024:
| Time Vested PSUs | ||||||||
| Units | Weighted- Average Grant-Date Fair Value | |||||||
| Outstanding at January 1, 2024 | 327,403 | $ | 93.84 | |||||
| Vested | (136,885 | ) | $ | 100.65 | ||||
| Forfeited | (6,038 | ) | $ | 100.65 | ||||
| Outstanding at December 31, 2024 | 184,480 | $ | 126.94 |
The total grant-date fair value of PSUs which vested under the WWE 2016 Plan during the years ended December 31, 2024 and 2023 was $13.8 million and $5.5 million, respectively. The total intrinsic value of PSUs which vested under the WWE 2016 Plan during the years ended December 31, 2024 and 2023 was $13.1 million and $4.4 million, respectively. No PSUs vested under the WWE 2016 Plan during the year ended December 31, 2022.
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 six-month to four-year period.
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 to WWE certain promotional and other services. See Note 22, 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 $30.0 million. During year ended December 31, 2024, the Company recorded equity-based compensation expenses of approximately $17.7 million associated with these RSUs, which are included within direct operating costs in the Company’s consolidated statement of operations. The units associated with these awards are included in the table below.
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The following table summarizes the RSU award activity under the TKO 2023 Plan for the year ended December 31, 2024:
| Time Vested RSUs | ||||||||
| Units | Weighted- Average Grant-Date Fair Value | |||||||
| Outstanding at January 1, 2024 | 935,536 | $ | 91.23 | |||||
| Granted | 1,630,439 | $ | 91.95 | |||||
| Vested | (416,450 | ) | $ | 88.14 | ||||
| Forfeited | (42,516 | ) | $ | 85.86 | ||||
| Outstanding at December 31, 2024 | 2,107,009 | $ | 92.51 | |||||
| Vested and exercisable at December 31, 2024 | 267,150 | $ | 78.22 |
The weighted average grant-date fair value of RSUs granted under the TKO 2023 Plan during the year ended December 31, 2023 was $91.23. No RSUs were granted under the TKO 2023 Plan during the year ended December 31, 2022.
The total grant-date fair value of RSUs which vested under the TKO 2023 Plan during the year ended December 31, 2024 was $36.7 million. The total intrinsic value of RSUs which vested under the TKO 2023 Plan during the year ended December 31, 2024 was $42.5 million. No RSUs vested under the TKO 2023 Plan during the years ended December 31, 2023 and 2022.
14. EMPLOYEE BENEFITS
The Company sponsors two 401(k) defined contribution plans (the “Plans”) covering substantially all of its employees. Under the Plans, participants are allowed to make contributions based on a percentage of their salaries, subject to a statutorily prescribed annual limit. The Company makes matching contributions of 50% of each participant’s contributions under the Plans, up to 5% of eligible compensation (maximum 2.5% matching contributions) for Zuffa participants, and up to 6% of eligible compensation (maximum 3% matching contributions) for WWE participants. The Company may also make additional discretionary contributions to the Plans. Employer matching contributions and discretionary contributions were $4.9 million, $1.5 million and $0.8 million during the years ended December 31, 2024, 2023 and 2022, respectively.
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. ultimately controls 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 $3.3 billion and deferred tax liabilities in the amount of $379.6 million, all of which was recorded through goodwill as of the Closing Date.
For the years ended December 31, 2024, 2023 and 2022, the effective tax rate was 74.8%, 15.2% and 3.5%, respectively.
Income before income taxes includes the following components (in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| United States | $ | 27,733 | $ | 201,091 | $ | 399,244 | ||||||
| Foreign | 6,617 | 6,344 | 4,305 | |||||||||
| Total income before income taxes | $ | 34,350 | $ | 207,435 | $ | 403,549 |
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The income tax provision consists of the following (in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Current: | ||||||||||||
| U.S. federal, state and local | $ | 40,154 | $ | 5,739 | $ | 816 | ||||||
| Foreign | 43,692 | 25,485 | 13,184 | |||||||||
| Total Current | 83,846 | 31,224 | 14,000 | |||||||||
| Deferred: | ||||||||||||
| U.S. federal, state and local | (58,096 | ) | (54 | ) | 460 | |||||||
| Foreign | (44 | ) | 276 | (142 | ) | |||||||
| Total Deferred | (58,140 | ) | 222 | 318 | ||||||||
| Total provision for income taxes | $ | 25,706 | $ | 31,446 | $ | 14,318 |
The Company’s effective tax rate differs from the U.S. federal statutory rate primarily due to partnership income not subject to income tax and withholding taxes in foreign jurisdictions that are not based on net income. The effective tax rate based on the actual provision shown in the consolidated statements of operations differs from the U.S. statutory federal income tax rate as follows (in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| U.S. statutory federal income tax of 21% | $ | 7,214 | $ | 43,561 | $ | 84,743 | ||||||
| Partnership income not subject to tax | (6,357 | ) | (48,535 | ) | (83,839 | ) | ||||||
| Tax impact of foreign operations | 29,240 | 24,546 | 12,072 | |||||||||
| UK ORIP Tax | 2,894 | 1,215 | 859 | |||||||||
| Provision to return | — | — | 968 | |||||||||
| Permanent differences | 1,289 | 345 | — | |||||||||
| Nondeductible officers compensation | 7,943 | 4,465 | — | |||||||||
| Opening balance remeasurement | — | 4,270 | — | |||||||||
| Valuation allowance | 13,068 | 1 | (1,756 | ) | ||||||||
| Unrecognized tax benefits | 3,075 | 539 | (4 | ) | ||||||||
| U.S. state and local taxes | (6,825 | ) | 864 | 1,275 | ||||||||
| Foreign tax credit, net of expiration | (25,606 | ) | — | — | ||||||||
| Other | (229 | ) | 175 | — | ||||||||
| Total provision for income taxes | $ | 25,706 | $ | 31,446 | $ | 14,318 |
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Principal components of deferred tax assets and liabilities are as follows (in thousands):
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Deferred tax assets: | ||||||||
| Compensation and severance | $ | 10,388 | $ | 14,244 | ||||
| Net operating loss, capital loss and tax credits carried forward | 37,435 | 29,615 | ||||||
| Lease liability | 31,175 | 34,481 | ||||||
| Accrued expenses | 30,880 | — | ||||||
| Other | 2,037 | 3,453 | ||||||
| Total gross deferred tax assets | 111,915 | 81,793 | ||||||
| Less: valuation allowance | (28,818 | ) | (15,689 | ) | ||||
| Net deferred tax assets | 83,097 | 66,104 | ||||||
| Deferred tax liabilities: | ||||||||
| Property, buildings, and equipment | (31,634 | ) | (33,995 | ) | ||||
| Intangible assets | (328,960 | ) | (365,751 | ) | ||||
| Lease asset | (30,584 | ) | (34,522 | ) | ||||
| Investments | (643 | ) | (592 | ) | ||||
| Other | (1,840 | ) | (2,445 | ) | ||||
| Net deferred tax liabilities | (393,661 | ) | (437,305 | ) | ||||
| Total net deferred tax (liabilities) assets | $ | (310,564 | ) | $ | (371,201 | ) |
As of December 31, 2024 and 2023, the Company had foreign net operating losses of $10.9 million and $12.1 million, respectively, which expire over various time periods ranging from 5 years to no expiration. In addition, as of December 31, 2024, the Company has foreign tax credit carryforwards of $26.4 million, which expire in years 2032 through 2034.
ASC 740 requires that a valuation allowance be recorded against deferred tax assets when it is more likely than not that some or all of the Company’s deferred tax asset will not be realized upon available positive and negative evidence. After reviewing all available positive and negative evidence as of December 31, 2024 and 2023, the Company recorded a valuation allowance of $28.8 million and $15.7 million, respectively, against foreign tax credits and certain foreign deferred tax assets. The Company recorded an increase in valuation allowance of $13.1 million, an increase in valuation allowance of $15.6 million and a decrease in valuation allowance of $1.7 million for the years ended December 31, 2024, 2023 and 2022, respectively, which was recorded in the respective year’s provision for income taxes.
The Company had unrecognized tax benefits of $4.7 million, $5.5 million and $0.9 million, respectively, as of December 31, 2024, 2023 and 2022. The aggregate changes to the liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Beginning balance | $ | 5,494 | $ | 880 | $ | 951 | ||||||
| Acquisitions | — | 2,549 | — | |||||||||
| Gross increases | 3,895 | 2,126 | — | |||||||||
| Gross decreases | (4,666 | ) | (61 | ) | — | |||||||
| Translation adjustments | 25 | — | (71 | ) | ||||||||
| Ending balance | $ | 4,748 | $ | 5,494 | $ | 880 |
The Company recognizes interest and penalties related to uncertain tax benefits in its provisions for income taxes. The Company had accrued interest and penalties of $0.4 million and $0.2 million as of December 31, 2024 and 2023, respectively.
As of December 31, 2024 and 2023, approximately $4.5 million and $0.5 million, respectively, would affect the Company’s effective tax rate upon resolution of the uncertain tax positions.
The Company is regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments in excess of amounts claimed and the payment of additional taxes. The Company believes that its tax return positions comply with applicable tax law and that it has adequately provided for reasonably foreseeable assessments of additional taxes. Additionally, the Company believes
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that any assessments in excess of the amounts provided for will not have a material adverse impact in the consolidated financial statements.
The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. As of December 31, 2024, the Company is subject to review by U.S. federal taxing authorities for 2020 and subsequent years. The Company's U.S. corporate tax returns are under IRS examination for the years 2020 through 2022. The Company has ongoing state and local audits beginning with tax year 2017 and onward. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not anticipate that the resolution of these audits will have a material adverse effect on the Company's consolidated financial position.
Other Matters
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. 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 products licensing.
Disaggregated Revenue
The following table presents the Company’s revenue disaggregated by primary revenue sources (in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Revenue: | ||||||||||||
| UFC Segment: | ||||||||||||
| Media rights and content | $ | 879,427 | $ | 870,551 | $ | 794,397 | ||||||
| Live events | 220,400 | 167,942 | 125,271 | |||||||||
| Sponsorship | 251,407 | 196,296 | 166,845 | |||||||||
| Consumer products licensing | 55,007 | 57,412 | 53,634 | |||||||||
| Total UFC Segment revenue | 1,406,241 | 1,292,201 | 1,140,147 | |||||||||
| WWE Segment: | ||||||||||||
| Media rights and content | 865,460 | 249,496 | — | |||||||||
| Live events | 338,555 | 87,705 | — | |||||||||
| Sponsorship | 82,991 | 17,957 | — | |||||||||
| Consumer products licensing | 111,094 | 27,609 | — | |||||||||
| Total WWE Segment revenue | 1,398,100 | 382,767 | — | |||||||||
| Total revenue | $ | 2,804,341 | $ | 1,674,968 | $ | 1,140,147 |
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 with unsatisfied or partially satisfied performance obligations as of December 31, 2024 (in thousands):
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| 2025 | $ | 2,188,922 | ||
| 2026 | 1,355,059 | |||
| 2027 | 1,223,063 | |||
| 2028 | 1,175,579 | |||
| 2029 | 938,654 | |||
| Thereafter | 80,400 | |||
| Total remaining performance obligations | $ | 6,961,677 |
Revenue from Prior Period Performance Obligations
The Company did not recognize any significant revenue from performance obligations satisfied in prior periods during the years ended December 31, 2024, 2023 and 2022.
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 products licensing agreements and sponsorship arrangements, as well as memberships for the Company’s subscription services and site fees. Deferred revenue is included in the current liabilities section and in other long-term liabilities in the consolidated balance sheets.
The following table presents the Company’s deferred revenue as of December 31, 2024 and 2023 (in thousands):
| As of | As of | |||||||||||||||||||||||
| December 31, | Foreign | December 31, | ||||||||||||||||||||||
| Description | 2023 | Acquisitions | Additions | Deductions | Exchange | 2024 | ||||||||||||||||||
| Deferred revenue - current | $ | 118,992 | $ | — | $ | 1,227,298 | $ | (1,245,021 | ) | $ | (32 | ) | $ | 101,237 | ||||||||||
| Deferred revenue - non-current | 672 | — | 2,500 | (672 | ) | — | $ | 2,500 |
17. 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 $17.3 and $41.4 million for the years ended December 31, 2024 and 2023, respectively. These amounts include equity-based compensation expenses of $3.3 million and $19.9 million for the years ended December 31, 2024 and 2023, respectively. These restructuring charges are recorded in accrued liabilities and additional paid-in-capital on the consolidated balance sheets and within direct operating costs and selling, general and administrative expenses in the consolidated statements of operations, respectively.
Changes in the Company’s restructuring liability through December 31, 2024 were as follows (in thousands):
| Balance — December 31, 2022 | $ | — | ||
| Restructuring charges (excluding share-based compensation expense) | 21,459 | |||
| Payments | (11,734 | ) | ||
| Balance — December 31, 2023 | $ | 9,725 | ||
| Restructuring charges (excluding share-based compensation expense) | 13,978 | |||
| Payments | (20,471 | ) | ||
| Balance — December 31, 2024 | $ | 3,232 |
18. 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 years ended December 31, 2024 and 2023, the Company recorded content production incentives of $13.6 million and $13.1 million related to qualifying content production activities, respectively. These incentives are recorded as an offset to production
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expenses within direct operating costs on the Company’s consolidated statements of operations. The Company did not record any content production incentives during the year ended December 31, 2022.
During the year ended December 31, 2024, the Company recorded infrastructure improvement incentives of $11.0 million related to qualifying capital expenditures associated with the buildout of WWE's new leased corporate headquarters and media production facilities. These incentives are recorded as an offset to property, buildings and equipment, net in the consolidated balance sheets. The Company did not record any infrastructure improvement incentives during the year ended December 31, 2023.
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 two reportable segments: UFC and WWE, to align with how the Company’s chief operating decision maker (the “CODM”), the Chief Executive Officer, manages the businesses, evaluates financial results, and makes key operating decisions. The UFC segment consists entirely of the operations of the Company’s UFC business which was the sole reportable segment prior to the acquisition of WWE, while the WWE segment consists entirely of the operations of the WWE business acquired on September 12, 2023.
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.
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 operations of the Company’s segments, including content production asset amortization. The Company's CODM considers budget-to-actual and quarter-over-quarter variances when making decisions about allocating capital and personnel to the segments. 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 represent 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)
UFC
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Revenue | $ | 1,406,241 | $ | 1,292,201 | $ | 1,140,147 | ||||||
| Direct operating costs (1) | 430,223 | 383,388 | 325,586 | |||||||||
| Selling, general and administrative expenses (1) | 175,024 | 153,149 | 133,932 | |||||||||
| Adjusted EBITDA | 800,994 | 755,664 | 680,629 |
WWE
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Revenue | $ | 1,398,100 | $ | 382,767 | $ | — | ||||||
| Direct operating costs (1) | 426,900 | 125,685 | — | |||||||||
| Selling, general and administrative expenses (1) | 290,032 | 94,101 | — | |||||||||
| Adjusted EBITDA | 681,168 | 162,981 | — |
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(1)
Direct operating costs and selling, general and administrative expenses included in the measure of Adjusted EBITDA for each segment excludes reconciling items included in the reconciliation of segment profitability below.
Revenue
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| UFC | $ | 1,406,241 | $ | 1,292,201 | $ | 1,140,147 | ||||||
| WWE | 1,398,100 | 382,767 | — | |||||||||
| Total consolidated revenue | $ | 2,804,341 | $ | 1,674,968 | $ | 1,140,147 |
Reconciliation of segment profitability
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| UFC | $ | 800,994 | $ | 755,664 | $ | 680,629 | ||||||
| WWE | 681,168 | 162,981 | — | |||||||||
| Corporate | (230,923 | ) | (109,557 | ) | (51,919 | ) | ||||||
| Total Adjusted EBITDA | 1,251,239 | 809,088 | 628,710 | |||||||||
| Reconciling items: | ||||||||||||
| Equity (earnings) losses of affiliates | (411 | ) | 266 | 209 | ||||||||
| Interest expense, net | (249,115 | ) | (239,042 | ) | (139,567 | ) | ||||||
| Depreciation and amortization | (392,842 | ) | (164,616 | ) | (60,032 | ) | ||||||
| Equity-based compensation expense (1) | (94,636 | ) | (57,109 | ) | (23,744 | ) | ||||||
| Merger and acquisition costs (2) | (21,172 | ) | (83,832 | ) | — | |||||||
| Certain legal costs (3) | (401,062 | ) | (34,238 | ) | (753 | ) | ||||||
| Restructuring, severance and impairment (4) | (41,911 | ) | (21,459 | ) | — | |||||||
| Debt transaction costs (5) | (16,230 | ) | — | — | ||||||||
| Other adjustments | 490 | (1,623 | ) | (1,274 | ) | |||||||
| Income before income taxes and equity (earnings) losses of affiliates | $ | 34,350 | $ | 207,435 | $ | 403,549 |
(1)
Equity-based compensation represents non-cash compensation expense for awards issued under Endeavor’s 2021 Plan subsequent to its April 28, 2021 IPO, for the Replacement Awards and for awards issued under the 2023 Incentive Award Plan. For the year ended December 31, 2024, equity-based compensation includes $17.7 million of expense associated with certain services provided by an independent contractor in the WWE segment. For the year ended December 31, 2024 and 2023, equity-based compensation includes $3.3 million and $19.9 million, respectively, of expense associated with accelerated vesting of the Replacement Awards related to the workforce reduction of certain employees in the WWE segment and Corporate.
(2)
Includes (i) certain costs of professional fees and bonuses related to the Transactions and payable contingent on the closing of the Transactions primarily incurred during the year ended December 31, 2023 and (ii) certain costs of professional advisors related to other strategic transactions, primarily the Endeavor Asset Acquisition, incurred during the year ended December 31, 2024.
(3)
Includes costs related to certain litigation matters including antitrust lawsuits for UFC and WWE and matters where Mr. McMahon has agreed to make future payments to certain counterparties personally. For the year ended December 31, 2024, these costs include settlement charges of $375.0 million regarding the UFC antitrust lawsuit, as described in Note 21, Commitments and Contingencies. For the year ended December 31, 2023, these costs included the settlement of a WWE antitrust matter for $20.0 million.
(4)
Includes costs resulting from the Company’s cost reduction program during the years ended December 31, 2024 and 2023, as described in Note 17, Restructuring Charges. Additionally, during the year ended December 31, 2024, the Company recorded impairment charges of $27.9 million as a result of reducing the carrying value of WWE assets held for sale to their fair value less cost to sell, as described in Note 5, Supplementary Data.
(5)
For the year ended December 31, 2024, the Company incurred certain costs associated with the Credit Agreement Amendment, as described in Note 8, Debt.
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Geographic information
Revenue by major geographic region is based upon the geographic location of where our revenue is generated. The information below summarizes our revenue by geographic area:
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| North America | $ | 2,167,168 | $ | 1,280,727 | $ | 893,774 | ||||||
| Europe/Middle East/Africa | 407,439 | 228,103 | 129,511 | |||||||||
| Asia Pacific | 187,259 | 134,647 | 86,936 | |||||||||
| Latin America | 42,475 | 31,491 | 29,926 | |||||||||
| Total revenue | $ | 2,804,341 | $ | 1,674,968 | $ | 1,140,147 |
The Company's property, buildings and equipment were almost entirely located in the United States at December 31, 2024 and 2023.
20. LEASES
As of December 31, 2024, the Company’s lease portfolio consisted of operating and finance leases, in which the Company is the lessee, primarily for real estate property for offices around the world. In addition, the Company has various live event production service arrangements that contain operating and finance equipment leases. The Company’s real estate leases have remaining lease terms of approximately one year to 26 years, some of which include one or more options to renew. These renewal terms can extend the lease term and are included in the lease term when it is reasonably certain that the Company will exercise the option. The Company’s equipment leases, which are included as part of various operating service arrangements, generally have remaining lease terms of approximately one year to six years. Generally, no covenants are imposed by the Company’s lease agreements.
On May 21, 2024, the Company amended its WWE global headquarters lease to reduce the leased space by approximately 20,025 rentable square feet. The lease reduction will result in rental savings of approximately $13.9 million over the remainder of the initial 15-year base term. The lease amendment requires a partial termination fee of approximately $2.2 million to be paid in installments through November 15, 2025. No other material changes were made to the existing lease terms. The lease amendment was accounted for as a lease modification during the second quarter of 2024, which resulted in a reduction to the Company’s finance lease liability and finance lease right-of-use asset of $21.4 million and $20.8 million, respectively, and a gain on the partial termination of $0.6 million recorded as a component of other income (expense), net, within the Company’s consolidated statement of operations for the year ended December 31, 2024.
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Quantitative Disclosures Related to Leases
The following table provides quantitative disclosure about the Company’s operating and finance leases for the periods presented (dollars in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Lease costs | ||||||||||||
| Finance lease costs: | ||||||||||||
| Amortization of right-of-use assets | $ | 20,724 | $ | 5,427 | $ | — | ||||||
| Interest on lease liabilities | 19,446 | 5,997 | — | |||||||||
| Operating lease costs | 7,156 | 4,525 | 1,158 | |||||||||
| Other short-term and variable lease costs | 1,086 | 1,480 | 936 | |||||||||
| Total lease costs | $ | 48,412 | $ | 17,429 | $ | 2,094 | ||||||
| Other information | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||
| Operating cash flows from finance leases | $ | 19,446 | $ | 4,945 | $ | — | ||||||
| Operating cash flows from operating leases | $ | 4,769 | $ | 3,382 | $ | 1,748 | ||||||
| Finance cash flows from finance leases | $ | 12,111 | $ | 938 | $ | — | ||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities (1) | $ | 22,937 | $ | 257,359 | $ | — | ||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities (1) | $ | 1,857 | $ | 14,630 | $ | 7,378 | ||||||
| As of | ||||||||||||
| December 31, | December 31, | |||||||||||
| 2024 | 2023 | |||||||||||
| Weighted-average remaining lease term (in years) - finance leases | 23.0 | 25.2 | ||||||||||
| Weighted-average remaining lease term (in years) - operating leases | 7.8 | 8.9 | ||||||||||
| Weighted-average discount rate - finance leases | 8.2 | % | 8.1 | % | ||||||||
| Weighted-average discount rate - operating leases | 6.8 | % | 6.9 | % |
(1)
The amounts for the year ended December 31, 2023 are primarily related to the assets acquired from WWE as discussed in Note 4, Acquisition of WWE.
Maturity of lease liabilities as of December 31, 2024 were as follows (in thousands):
| Operating | Finance | |||||||
| Leases | Leases | |||||||
| 2025 | $ | 6,727 | $ | 30,426 | ||||
| 2026 | 6,723 | 32,371 | ||||||
| 2027 | 6,234 | 24,287 | ||||||
| 2028 | 4,705 | 18,209 | ||||||
| 2029 | 3,893 | 18,209 | ||||||
| Thereafter | 14,882 | 447,746 | ||||||
| Total future minimum lease payment | 43,164 | 571,248 | ||||||
| Less: imputed interest | (9,964 | ) | (328,345 | ) | ||||
| Present value of future minimum lease payments | $ | 33,200 | $ | 242,903 |
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21. COMMITMENTS AND CONTINGENCIES
The Company has certain commitments, including various service contracts with vendors as well as service fees paid by the Company to Endeavor under the Services Agreement. The following is a summary of the Company’s annual commitments under these agreements as of December 31, 2024 (in thousands):
| 2025 | $ | 186,294 | ||
| 2026 | 125,262 | |||
| 2027 | 101,278 | |||
| 2028 | 98,538 | |||
| 2029 | 93,010 | |||
| Thereafter | 75,608 | |||
| Total | $ | 679,990 |
Upon the close of the Endeavor Asset Acquisition, we expect to terminate the Services Agreement and enter into a new agreement with Endeavor with respect to transition services. The commitments in the table above include $68.2 million, $70.7 million, $71.4 million, $72.2 million, $72.9 million and $51.1 million related to the Services Agreement in 2025, 2026, 2027, 2028, 2029 and thereafter, respectively.
The Company’s future commitments related to its debt obligations and its operating and finance leases are separately disclosed in Note 8, Debt, and Note 20, Leases, respectively.
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 $3.25 billion, based on the volume-weighted average sales price of TKO’s Class A common stock for the twenty five trading days ending on October 23, 2024. Endeavor will receive approximately 26.1 million common units of TKO OpCo and will subscribe for an equal number of shares of TKO’s Class B common stock (subject to certain customary purchase price adjustments to be settled at the closing in equity and cash). Upon the close of the Endeavor Asset Acquisition, Endeavor expected to own approximately 61% of the voting interests of TKO through its holdings of shares of TKO Class A common stock and TKO Class B common stock which are paired with common units of TKO OpCo.
The transaction is expected to close in the first quarter 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 interests of TKO common stock in favor of adopting the transaction agreement (which has been satisfied by delivery of a written consent by such stockholders). The transaction will be accounted for as a merger between entities under common control due to Endeavor’s control of the Company and the Endeavor assets being acquired. Therefore, upon closing of the Endeavor Asset Acquisition, the net assets of the Endeavor assets being acquired will be combined with those of the Company at their historical carrying amounts and the results will be presented on a combined basis for historical periods because they were under common control for all periods presented.
Legal Proceedings
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
Five related class-action lawsuits were filed against Zuffa between December 2014 and March 2015 by a total of eleven former UFC fighters. The lawsuits, which were substantially identical, were transferred to the United States District Court for the District of Nevada and consolidated into a single action in June 2015, captioned Le et al. v. Zuffa, LLC, No. 2:15-cv-1045-RFB-BNW (D. Nev.) (the “Le” case). The lawsuit alleged that Zuffa violated Section 2 of the Sherman Act by monopsonizing an alleged market for the services of elite professional MMA athletes. The fighter plaintiffs claimed that Zuffa’s alleged conduct injured them by artificially depressing the compensation they received for their services. The plaintiffs sought treble damages under the antitrust laws, as well as attorneys’ fees and costs, and, in some instances, injunctive relief. On August 9, 2023, the district court certified the lawsuit as a damages class action, encompassing the period from December 16, 2010 to June 30, 2017. The fighter plaintiffs in the Le case abandoned their claim for injunctive relief, so the only relief the fighter plaintiffs would have sought at trial was damages. On June 24, 2021, another
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lawsuit, Johnson et al. v. Zuffa, LLC et al., No. 2:21-cv-1189-RFB-BNW (D. Nev.) (the “Johnson” case), was filed by a putative class of former UFC fighters and covering the period from July 1, 2017, to the present. The Johnson case alleged substantially similar claims to the Le case and sought injunctive relief. On September 26, 2024, following the court's denial of an earlier proposed settlement agreement, the Company reached an agreement with the plaintiffs to settle all claims asserted in the Le case for an aggregate amount of $375.0 million payable in installments over an agreed-upon period of time by the Company (the “Updated Settlement Agreement”). The terms of the Updated Settlement Agreement have been memorialized in a long-form agreement, which the court preliminarily approved on October 22, 2024 and finally approved on February 6, 2025. In connection with the Updated Settlement Agreement, the Company recorded charges of $375.0 million during the year ended December 31, 2024, which are included as a component of selling, general and administrative expenses in the consolidated statements of operations. The Company paid $125.0 million of the aggregate $375.0 million settlement amount into escrow in late October 2024, shortly following receipt of preliminary approval, and another $125.0 million into escrow in February 2025 shortly following receipt of final approval, in accordance with the terms of the Updated Settlement Agreement. The Company expects to make an additional payment covering the remaining $125.0 million in the second quarter of 2025. The Company anticipates that the settlement amount will be deductible for tax purposes. No trial date has been set in the Johnson action.
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, claims and/or 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. On January 10, 2025, the United States Securities and Exchange Commission settled charges against Mr. McMahon for failing to disclose certain settlement agreements to WWE’s Board of Directors, legal department, accountants, financial reporting personnel, or auditor, and in so doing, circumventing WWE’s system of internal accounting controls and causing material misstatements in WWE’s 2018 and 2021 financial statements. No charges have been brought against the Company.
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 October 23, 2024, five unnamed plaintiffs filed a lawsuit against Mr. McMahon, Linda McMahon, WWE, and TKO in Maryland court, alleging sexual abuse by a former WWE employee during the 1980s.
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 Mr. 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. The remaining Individual Defendants filed answers to the complaint on October 28, 2024 and discovery is currently underway.
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22. RELATED PARTY TRANSACTIONS
EGH and its subsidiaries
EGH and its subsidiaries (collectively, the “Group”), who collectively own approximately 53.9% of the voting interest in TKO as of December 31, 2024, provide various services to the Company and, upon consummation of the Transactions, such services are provided pursuant to the Services Agreement. Revenue and expenses associated with such services are as follows (in thousands):
| Year Ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Event and other licensing revenues earned from the Group | $ | 30,748 | $ | 16,501 | $ | 10,743 | ||||||
| Expenses incurred with the Group included in direct operating costs (1) | 31,455 | 21,780 | 17,489 | |||||||||
| Expenses incurred with the Group included in selling, general and administrative expenses (2) | 37,555 | 24,981 | 25,370 | |||||||||
| Net expense resulting from Group transactions included within net income (loss) | $ | (38,262 | ) | $ | (30,260 | ) | $ | (32,116 | ) |
(1)
These expenses primarily consist of production and consulting services as well as commissions paid to the Group.
(2)
These expenses primarily consist of service fees paid to the Group. The Company believes that these service fees are a reasonable allocation of costs related to representation, executive leadership, back-office and corporate functions and other services provided by the Group.
Outstanding amounts due to and from the Group were as follows (in thousands):
| As of December 31, | ||||||||||
| Classification | 2024 | 2023 | ||||||||
| Amounts due from the Group | Other current assets | $ | 37,353 | $ | 11,599 | |||||
| Amounts due to the Group | Other current liabilities | (10,973 | ) | (5,473 | ) |
The Company also reimburses the Group for third party costs they incur on the Company’s behalf. The Company reimbursed $9.4 million, $9.3 million and $5.4 million of such costs during the years ended December 31, 2024, 2023 and 2022, respectively.
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 interests 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. These payments are considered non-cash capital contributions and are included as a component of principal stockholder contributions in our consolidated statements of stockholders’/members’ equity.
In connection with the acquisition of WWE, the Company assumed $3.5 million of liabilities related to future payments owed by Mr. McMahon to certain counterparties. During the year ended December 31, 2023, the Company recorded $3.5 million of expenses associated with payments made directly by Mr. McMahon to certain counterparties. These costs are included within selling, general and administrative expenses in our consolidated statements of operations. During the years ended December 31, 2024 and 2023, Mr. McMahon made payments of $1.5 million and $5.5 million, respectively, associated with these liabilities to certain counterparties directly. Additionally, during the year ended December 31, 2023, the Company recorded $3.5 million of costs associated with payments made directly by Mr. McMahon related to WWE’s global headquarters lease. These costs are included within finance lease right-of-use assets, net in our consolidated balance sheets. Since these liabilities existed when Mr. McMahon controlled a significant portion of the voting interests of the Company’s common stock, these payments are considered non-cash capital contributions and are included as principal stockholder contributions in our consolidated statements of stockholders’ equity.
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 years ended December 31, 2024 and 2023, Mr. McMahon reimbursed the Company $6.4 million and $5.8 million, respectively, associated with these costs. These payments are considered capital contributions and are included as principal stockholder contributions in our consolidated statements of stockholders' equity.
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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.
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 10 years, subject to certain earlier termination rights.
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 $30.0 million. During the year ended December 31, 2024, the Company recorded equity-based compensation expense of $17.7 million associated with this award, which is included within direct operating costs in our consolidated statements of operations.
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 year ended December 31, 2024, the Company paid $0.9 million of royalties that were earned by Mr. Johnson. In addition, Mr. Johnson is entitled to reimbursement for certain travel expenses associated with delivering services under the DJ Services Agreement, of which $2.6 million was incurred by the Company during the year ended December 31, 2024, and is included as a component of selling, general and administrative expenses in our consolidated statements of operations.
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