filings.toolsTKO Group Holdings 10-Q 2024-09-30
Filed 2024-11-06. 5 sections, 213K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended September 30, 2024 | |
| or | |
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ______ to ______ |
Commission File Number: 001-41797
TKO GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 92-3569035 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
200 Fifth Ave, 7th Floor
New York**,** NY 10010
(Address of principal executive offices)
(646) 558-8333
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Class A Common Stock, par value $0.00001 per share | TKO | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | Non-Accelerated Filer ☒ | Smaller Reporting Company ☐ | Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of October 31, 2024, there were 81,149,701 shares of the Registrant’s Class A common stock outstanding and 89,616,891 shares of the Registrant’s Class B common stock outstanding.
TABL****E OF CONTENTS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of present and historical fact contained in this Quarterly Report, including without limitation, statements regarding the anticipated benefits of and costs associated with the Transactions (as defined below); our expectations surrounding the Transactions and our ability to grow our business and bolster our financial position; our expected contractual obligations and capital expenditures; our future results of operations and financial position; our expectations regarding strategic transactions, including the Endeavor Asset Acquisition; our expectations regarding actions under our capital return program, including the amount and frequency of share repurchases and dividends; industry and business trends; the impact of market conditions and other macroeconomic factors on our business, financial condition and results of operations; our future business strategy, plans, market growth and our objectives for future operations; and our competitive market position within our industry are forward-looking statements.
Without limiting the foregoing, you can generally identify forward-looking statements by the use of forward-looking terminology, including the terms “aim,” "anticipate," "believe," "could," “mission,” "may," "will," "should," "expect," "intend," "plan," "estimate," "project," "predict," "potential," “target,” "contemplate," or, in each case, their negative, or other variations or comparable terminology and expressions. The forward-looking statements in this Quarterly Report are only predictions and are based on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including but not limited to:
difficulties with the integration and in realizing the expected benefits of the Transactions, including the business combination;
the unfavorable outcome of legal proceedings that may be instituted against TKO Group Holdings, UFC, WWE and their affiliates in connection with the Transactions, including the business combination;
the inability to capture all or part of the anticipated cost and revenue synergies;
potential liabilities that are not known, probable or estimable at this time;
the inability to maintain the listing of our Class A common stock on the NYSE;
the risk of adverse tax consequences of the Merger and the Conversion;
the inability to retain WWE or UFC management, employees and/or talent;
the impact of future domestic and international industry trends on our business and our future growth, business strategy and objectives for future operations;
the inability to renew or replace our distribution rights agreements on equal or more favorable terms;
the possibility we may be adversely affected by other economic, business and/or competitive factors; and
other important factors that could cause actual results, performance or achievements to differ materially from those described in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report”), as updated by Part II, Item 1A. "Risk Factors" in this Quarterly Report and Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report and in our subsequent filings with the Securities and Exchange Commission (the “SEC”).
These risks could cause our actual results to differ materially from those implied by forward-looking statements in this Quarterly Report. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.
You should read this Quarterly Report and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we have no obligation to update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Available Information and Website Disclosure
We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.
You can also find more information about us online at our investor relations website located at investor.tkogrp.com. Filings we make with the SEC and any amendments to those reports are available free of charge on our website as soon as reasonably practicable after we electronically file such material with the SEC. The information posted on or accessible through our website is not incorporated into this Quarterly Report.
Investors and others should note that we announce material financial and operational information to our investors using press releases, SEC filings and public conference calls and webcasts, and by postings on our investor relations site at investor.tkogrp.com. We may also use our website as a distribution channel for material Company information. In addition, you may automatically receive email alerts and other information about TKO when you enroll your email address by visiting the “Investor Email Alerts” option under the Resources tab on investor.tkogrp.com.
DEFINITIONS
As used in this Quarterly Report, unless we state otherwise or the context otherwise requires:
“we,” “us,” “our,” “TKO Group Holdings,” “TKO,” the “Company,” and similar references refer (1) prior to the consummation of the Transactions to Zuffa Parent, LLC, and (2) after the consummation of the Transactions to TKO Group Holdings, Inc. and its consolidated subsidiaries.
“Board” refers to the board of directors of TKO Group Holdings.
“business combination” refers to the combination of the businesses of WWE and TKO OpCo.
“Class A common stock” refers to the Class A common stock, par value $0.00001 per share, of TKO.
“Class B common stock” refers to the Class B common stock, par value $0.00001 per share, of TKO.
“DGCL” refers to the General Corporation Law of the State of Delaware.
“Endeavor” refers to Endeavor Group Holdings, Inc., a Delaware corporation.
"Endeavor Asset Acquisition" refers to the transactions contemplated by the Transaction Agreement, dated as of October 24, 2024, by and among TKO OpCo, the Company, Endeavor OpCo, IMG Worldwide, LLC (“IMG Worldwide” and, together with EOC, the “EDR Parties”); and Trans World International, LLC (“Trans World International”), pursuant to which, among other things and subject to the satisfaction or waiver of the conditions specified therein, the EDR Parties will directly or indirectly contribute, assign and transfer to TKO Opco the Professional Bull Riders, On Location and IMG businesses currently operated by the EDR Parties.
“Endeavor OpCo” refers to Endeavor Operating Company, LLC, a Delaware limited liability company and subsidiary of Endeavor.
“fully-diluted basis” means on a basis calculated assuming the full cash exercise (and not net settlement but, for the avoidance of doubt, including the conversion of the Convertible Notes (to the extent not converted prior to closing of the Transaction)) of all outstanding options, warrants, restricted stock units, performance stock units, dividend equivalent rights and other rights and obligations (including any promised equity awards and assuming the full issuance of the shares underlying such awards) to acquire voting interests of TKO Group Holdings (without regard to any vesting provisions and, with respect to any promised awards whose issuance is conditioned in full or in part based on achievement of performance goals or metrics, assuming achievement at target performance) and the full conversion, exercise, exchange, settlement of all issued and outstanding securities convertible into or exercisable, exchangeable or settleable for voting interests of TKO Group Holdings, not including any voting interests of TKO Group Holdings reserved for issuance pursuant to future awards under any option, equity bonus, share purchase or other equity incentive plan or arrangement of TKO Group Holdings (other than promised awards described above), and any other interests or shares, as applicable, that may be issued or exercised. For the avoidance of doubt, this definition assumes no net settlement or other reduction in respect of withholding tax obligations in connection with the issuance, conversion, exercise, exchange or settlement of such rights or obligations to acquire interests of TKO Group Holdings as described in the foregoing.
“NYSE” refers to the New York Stock Exchange.
“Services Agreement” means the services agreement dated as of September 12, 2023, by and between Endeavor and TKO OpCo.
“TKO OpCo” refers to TKO Operating Company, LLC (f/k/a Zuffa Parent LLC), a Delaware limited liability company and our direct subsidiary.
“TKO OpCo Units” refers to all of the existing equity interests in TKO OpCo.
“Transactions” refer, collectively, to the transactions pursuant to the Transaction Agreement (defined below) pursuant to which: (i) WWE undertook certain internal restructuring steps; (ii) Whale Merger Sub Inc. (“Merger Sub”) merged with and into WWE (the “Merger”), with WWE surviving the Merger (the “Surviving Entity”) and becoming a direct wholly owned subsidiary of the Company; (iii) immediately following the Merger, the Company caused the Surviving Entity to be converted into a Delaware limited liability company (“WWE LLC”) and the Company became the sole managing member of WWE LLC (the “Conversion”); and (iv) following the Conversion, TKO Group Holdings, Inc. (x) contributed all of the equity interests of WWE LLC to TKO OpCo in exchange for 49% of the membership interests in TKO OpCo on a fully diluted basis, and (y) issued to Endeavor OpCo and certain of Endeavor’s other subsidiaries a number of shares of our Class B common stock representing, in the aggregate, approximately 51% of the total voting power of the Company’s stock on a fully-diluted basis, in exchange for a payment equal to the par value of such Class B common stock.
“Transaction Agreement” refers to the transaction agreement, dated as of April 2, 2023, by and among Endeavor, Endeavor OpCo, TKO OpCo, WWE, the Company, and Merger Sub.
“UFC” refers to the Ultimate Fighting Championship.
“WWE” refers to World Wrestling Entertainment, Inc. (n/k/a World Wrestling Entertainment, LLC).
“Zuffa” refers to Zuffa Parent, LLC (n/k/a TKO Operating Company, LLC or TKO OpCo).
PART I. FINAN****CIAL INFORMATION
Item 1. Financial Statements
TKO GROUP HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
| As of September 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 457,410 | $ | 235,839 | ||||
| Accounts receivable (net of allowance for doubtful accounts of $2,417 and $1,093, respectively) | 250,585 | 135,436 | ||||||
| Other current assets | 185,822 | 121,155 | ||||||
| Total current assets | 893,817 | 492,430 | ||||||
| Property, buildings and equipment, net | 528,200 | 608,416 | ||||||
| Intangible assets, net | 3,325,151 | 3,563,663 | ||||||
| Finance lease right-of-use assets, net | 233,032 | 255,709 | ||||||
| Operating lease right-of-use assets, net | 33,539 | 35,508 | ||||||
| Goodwill | 7,663,992 | 7,666,485 | ||||||
| Investments | 33,163 | 16,392 | ||||||
| Other assets | 59,509 | 52,136 | ||||||
| Total assets | $ | 12,770,403 | $ | 12,690,739 | ||||
| Liabilities, Non-controlling Interests and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 31,712 | $ | 42,040 | ||||
| Accrued liabilities | 613,392 | 267,363 | ||||||
| Current portion of long-term debt | 22,171 | 22,367 | ||||||
| Current portion of finance lease liabilities | 9,591 | 8,135 | ||||||
| Current portion of operating lease liabilities | 4,675 | 4,246 | ||||||
| Deferred revenue | 67,707 | 118,992 | ||||||
| Other current liabilities | 14,185 | 8,997 | ||||||
| Total current liabilities | 763,433 | 472,140 | ||||||
| Long-term debt | 2,697,327 | 2,713,948 | ||||||
| Long-term finance lease liabilities | 224,645 | 245,288 | ||||||
| Long-term operating lease liabilities | 30,318 | 32,911 | ||||||
| Deferred tax liabilities | 372,953 | 372,860 | ||||||
| Other long-term liabilities | 5,875 | 3,046 | ||||||
| Total liabilities | 4,094,551 | 3,840,193 | ||||||
| Commitments and contingencies (Note 18) | ||||||||
| Redeemable non-controlling interests | 13,754 | 11,594 | ||||||
| Stockholders' equity: | ||||||||
| Class A common stock: ($0.00001 par value; 5,000,000,000 shares authorized;81,146,843 and 82,292,902 shares issued and outstanding as of September 30, 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 September 30, 2024 and December 31, 2023, respectively) | 1 | 1 | ||||||
| Additional paid-in capital | 4,370,367 | 4,244,537 | ||||||
| Accumulated other comprehensive loss | (2,998 | ) | (332 | ) | ||||
| Accumulated deficit | (322,810 | ) | (135,227 | ) | ||||
| Total TKO Group Holdings, Inc. stockholders’ equity | 4,044,561 | 4,108,980 | ||||||
| Nonredeemable non-controlling interests | 4,617,537 | 4,729,972 | ||||||
| Total stockholders' equity | 8,662,098 | 8,838,952 | ||||||
| Total liabilities, redeemable non-controlling interests and stockholders' equity | $ | 12,770,403 | $ | 12,690,739 |
See accompanying notes to consolidated financial statements.
TKO GROUP HOLDINGS, INC.
Consolidated Stateme****nts of Operations
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | 681,273 | $ | 449,058 | $ | 2,162,145 | $ | 1,060,973 | ||||||||
| Operating expenses: | ||||||||||||||||
| Direct operating costs | 207,092 | 130,312 | 667,899 | 302,253 | ||||||||||||
| Selling, general and administrative expenses | 239,660 | 193,211 | 1,004,142 | 313,033 | ||||||||||||
| Depreciation and amortization | 98,148 | 31,698 | 309,128 | 61,900 | ||||||||||||
| Total operating expenses | 544,900 | 355,221 | 1,981,169 | 677,186 | ||||||||||||
| Operating income | 136,373 | 93,837 | 180,976 | 383,787 | ||||||||||||
| Other expenses: | ||||||||||||||||
| Interest expense, net | (62,644 | ) | (60,636 | ) | (192,868 | ) | (172,439 | ) | ||||||||
| Other income (expense), net | 1,381 | (696 | ) | 1,885 | (1,560 | ) | ||||||||||
| Income (loss) before income taxes and equity (earnings) losses of affiliates | 75,110 | 32,505 | (10,007 | ) | 209,788 | |||||||||||
| Provision for income taxes | 17,777 | 11,156 | 31,829 | 17,655 | ||||||||||||
| Income (loss) before equity (earnings) losses of affiliates | 57,333 | 21,349 | (41,836 | ) | 192,133 | |||||||||||
| Equity (earnings) losses of affiliates, net of tax | (389 | ) | (671 | ) | (712 | ) | 309 | |||||||||
| Net income (loss) | 57,722 | 22,020 | (41,124 | ) | 191,824 | |||||||||||
| Less: Net income (loss) attributable to non-controlling interests | 34,586 | (22,471 | ) | (19,527 | ) | (21,683 | ) | |||||||||
| Less: Net income attributable to TKO Operating Company, LLC prior to the Transactions | — | 66,377 | — | 235,393 | ||||||||||||
| Net income (loss) attributable to TKO Group Holdings, Inc. | $ | 23,136 | $ | (21,886 | ) | $ | (21,597 | ) | $ | (21,886 | ) | |||||
| Basic net earnings (loss) per share of Class A common stock | $ | 0.29 | $ | (0.26 | ) | $ | (0.27 | ) | $ | (0.26 | ) | |||||
| Diluted net earnings (loss) per share of Class A common stock | $ | 0.28 | $ | (0.26 | ) | $ | (0.27 | ) | $ | (0.26 | ) | |||||
| Weighted average number of common shares used in computing basic earnings (loss) per share | 80,966,252 | 83,161,406 | 81,399,221 | 83,161,406 | ||||||||||||
| Weighted average number of common shares used in computing diluted net earnings (loss) per share | 171,601,095 | 83,161,406 | 81,399,221 | 83,161,406 |
See accompanying notes to consolidated financial statements.
TKO GROUP HOLDINGS, INC.
Consolidated Statements of Compreh****ensive Income (Loss)
(In thousands)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net income (loss) | $ | 57,722 | $ | 22,020 | $ | (41,124 | ) | $ | 191,824 | |||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||
| Foreign currency translation adjustments | (825 | ) | (300 | ) | (2,101 | ) | (1,432 | ) | ||||||||
| Cash flow hedges: | ||||||||||||||||
| Change in net unrealized gains (losses) | (923 | ) | 57 |
Showing the first 8K of 180K characters. Open the full section
Item 3. Quantitative and Qualitative Disclosures about Market Risk
TKO is exposed to market risks in the ordinary course of its business. Market risk represents the risk of loss that may impact TKO’s financial position due to adverse changes in financial market prices and rates.
Interest Rate Risk
Our exposure to changes in interest rates relates primarily to the floating interest component on our long-term debt. The Credit Facilities bear interest at floating rates and we regularly monitor and manage interest rate risks. Holding debt levels constant as of September 30, 2024, a 1% increase in the effective interest rates would have increased our annual interest expense by approximately $27 million.
Foreign Currency Risk
We have operations in several countries outside of the United States, and certain of our operations are conducted in foreign currencies, principally the British Pound and the Brazilian Real. The value of these currencies fluctuates relative to the U.S. dollar. These changes could adversely affect the U.S. dollar equivalent of TKO’s non-U.S. dollar revenue and operating costs and expenses and reduce international demand for its content and services, all of which could negatively affect TKO’s business, financial condition and results of operations in a given period or in specific territories.
Holding other variables constant (such as interest rates and debt levels), if the U.S. dollar appreciated by 10% against the foreign currencies used by TKO’s operations in the nine months ended September 30, 2024, revenues would have decreased by approximately $5.1 million and operating income would have decreased by approximately $0.3 million.
We regularly review our foreign exchange exposures that may have a material impact on our business and from time to time use foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of potential adverse fluctuations in foreign currency exchange rates arising from these exposures. TKO does not enter into foreign exchange contracts or other derivatives for speculative purposes.
Credit Risk
TKO maintains its cash and cash equivalents with various major banks and other high quality financial institutions, and its deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions and the failure of any of the financial institutions where we maintain our cash and cash equivalents or any inability to access or delays in our ability to access our funds could adversely affect our business and financial position.
Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
The Company’s management has evaluated, with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PA****RT II. OTHER INFORMATION
It****em 1. Legal Proceedings
From time to time, we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. For a description of our legal proceedings, refer to Note 18, Commitments and Contingencies, to our unaudited consolidated financial statements included in this Quarterly Report, which is incorporated herein by reference.
Item 1A. Risk Factors
Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described as risk factors, any one or more of which could, directly or indirectly, cause our actual operating results and financial condition to vary materially from past, or anticipated future, operating results and financial condition. For a discussion of these potential risks and uncertainties, see Part I, Item 1A. "Risk Factors" in our 2023 Annual Report. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and the price of our common stock. Other than the risk factors set forth below, there have been no material changes in our risk factors to those included in our 2023 Annual Report.
We may fail to complete the Endeavor Asset Acquisition if certain required conditions, many of which are outside our control, are not satisfied.
The completion of the Endeavor Asset Acquisition is subject to various customary closing conditions, including, but not limited to, (i) the absence of any order, writ, judgment, injunction, decree, ruling, stipulation, directive, assessment, subpoena, verdict, determination or award issued, promulgated or entered, by or with any governmental entity that has the effect of making the Endeavor Asset Acquisition illegal or otherwise restraining or prohibiting the consummation of the Endeavor Asset Acquisition, (ii) subject to certain exceptions, the accuracy of the representations and warranties of the parties and (iii) compliance in all material respects by each party with its obligations under the transaction agreement. Despite the parties’ best efforts, we may not be able to satisfy or receive the various closing conditions and obtain the necessary approvals in a timely fashion or at all.
We may fail to realize the anticipated benefits of the Endeavor Asset Acquisition and may assume unanticipated liabilities.
The success of the Endeavor Asset Acquisition will depend on, among other things, our ability to integrate the transferred businesses in a manner that realizes the various benefits, growth opportunities and synergies that we have identified. Our ability to achieve the anticipated benefits of the Endeavor Asset Acquisition is subject to a number of risks and uncertainties.
Failure to complete the Endeavor Asset Acquisition could negatively impact our stock price, future business and financial results.
If the Endeavor Asset Acquisition is not completed, we will be subject to several risks, including the following:
payment for certain costs relating to the Endeavor Asset Acquisition, whether or not the Endeavor Asset Acquisition is completed, such as legal, accounting, financial advisor and printing fees;
negative reactions from the financial markets, including potential declines in the price of our Class A common stock due to the fact that current prices may reflect a market assumption that the Endeavor Asset Acquisition will be completed;
diverted attention of our management to the Endeavor Asset Acquisition rather than to our operations and pursuit of other opportunities that could have been beneficial to us; and
negative impact on our future growth plan, including with regard to potential acquisitions for which we may otherwise have been able to provide a stronger foundation.
The planned issuance of Class B common stock to the EDR Parties will dilute the percentage ownership interests of our other stockholders.
If the Endeavor Asset Acquisition is completed, the Company expects to issue approximately 26.1 million shares of Class B common stock to the EDR Parties, who currently beneficially hold approximately 53.4% of the Company’s total outstanding shares of common stock. The issuance of Class B common stock to the EDR Parties will cause a reduction in the relative percentage interest of the Company’s other current stockholders in the Company’s earnings, if any, voting power, and market capitalization. The issuance will result in (i) an approximate 6% reduction of equity ownership and (ii) an approximate 6% reduction in the total voting power of the Company’s Class A common stock.
We cannot guarantee we will conduct share repurchases or pay dividends in any specified amounts or particular frequency.
On October 24, 2024, we announced that our board of directors has authorized a share repurchase program of up to $2.0 billion of our Class A common stock. We will determine at our discretion the timing and the amount of any repurchases under the share repurchase program based on our evaluation of market conditions, share price, and other factors. Repurchases under the share repurchase program may be made in the open market, in privately negotiated transactions or otherwise. The program has no expiration date and we are not obligated to acquire any particular number or dollar value of shares thereunder. While we expect the share repurchase program to be completed within approximately three to four years, the program may not be fully implemented in that timeframe or at all. In addition, the program may be modified, suspended, or discontinued at any time. Repurchases under this authorization could affect our stock price and increase its volatility, and the existence of this authorization could cause our stock price to be higher than it would be in the absence of such authorization and could potentially reduce the market liquidity for our stock. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our Class A common stock may decline below the levels at which we repurchased shares of stock.
In addition, on October 24, 2024, we announced that our board of directors has approved a quarterly cash dividend program pursuant to which holders of our Class A common stock will receive their pro rata share of $75.0 million quarterly distributions to be made by TKO OpCo. We currently intend to begin making quarterly cash dividend payments on March 31, 2025, subject to satisfying applicable legal and contractual requirements. Future declarations of quarterly dividends are subject to our determination and discretion based on our consideration of various factors, such as our results of operations, financial condition, market conditions, earnings, cash flow requirements, restrictions in our debt agreements and legal requirements and other factors that we deems relevant. Our board may, at its discretion, decrease or entirely discontinue the dividend program at any time. We cannot provide any assurances that any such regular dividends will be paid in any specified amount or at any particular frequency, if at all.
It****em 6. Exhibits
- Filed herewith.
** Furnished herewith.
Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant undertakes to furnish supplemental copies of any of the omitted schedules or similar attachments upon request by the SEC.
SIGNAT****URES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TKO GROUP HOLDINGS, INC. | ||||
| Date: | November 6, 2024 | By: | /s/ ANDREW SCHLEIMER | |
| Andrew Schleimer | ||||
| Chief Financial Officer | ||||
| (principal financial officer and authorized | ||||
| signatory) | ||||
| Date: | November 6, 2024 | By: | /s/ SHANE KAPRAL | |
| Shane Kapral | ||||
| Chief Accounting Officer | ||||
| (principal accounting officer and authorized | ||||
| signatory) | ||||