PART I

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Non-IFRS Financial Measures

We use EBITDA and Adjusted EBITDA, each a non-IFRS financial measure, in evaluating our operating results and for financial and operational decision-making purposes.

We believe that these measures help identify underlying trends in our business that could otherwise be distorted by the effect of certain expenses that we include in our profit/(loss) from operations and net profit/(loss). We believe that EBITDA and Adjusted EBITDA each provide useful information about our results of operations, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

These non-IFRS financial measures should not be considered in isolation or construed as an alternative to profit/(loss) from operations and net profit/(loss) or any other measure of performance, or as an indicator of our operating performance. Investors are encouraged to review EBITDA, Adjusted EBITDA and the reconciliation to the most directly comparable IFRS measure as set forth below. EBITDA and Adjusted EBITDA presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

The following table shows the reconciliation of EBITDA and Adjusted EBITDA to our (loss)/profit of the period for the periods indicated.

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Not applicable.

Not applicable.

Overriding Risks Related to the Outbreak and Spread of COVID-19The outbreak and global spread of COVID-19 could have a material adverse impact on our business, results of operations, financial condition, cash flows or liquidity.

The outbreak of a novel coronavirus (which causes the disease known as COVID-19), was first identified in December 2019 in Wuhan, China, and has since been declared a pandemic by the World Health Organization as it has spread around the world. Government efforts to contain the spread of COVID-19 through city lockdowns or “stay-at-home” orders, widespread business closures, restrictions on travel and emergency quarantines, among others, and responses by businesses and individuals to reduce the risk of exposure to infection in themselves or others, including reduced travel, cancelation of meetings and events, self-isolation, and implementation of work-at-home policies, among others, have caused significant and unprecedented disruptions to the global economy and normal business operations across sectors and countries. The foregoing will likely adversely affect business confidence and consumer sentiments, continue to be accompanied by significant volatility in financial and commodity markets, and have macro-economic implications, including increased unemployment levels, reduced levels of economic growth and possibly a global recession, the effects of which could be felt well beyond the time the spread of infection is contained.

In terms of our business, sports events throughout the world, including the Tokyo 2020 Summer Olympics and European football league seasons, have been postponed or canceled, and few currently have plans to resume in the near future. Postponement or cancelation of test or qualifying events, as well as disruptions to training schedules for athletes and event volunteers across all sports, are likely to affect the timing and quality of events scheduled to be held months in the future. We expect that the foregoing developments will adversely affect our Mass Participation as well as our Spectator Sports and DPSS segments, and that adverse effect could be material. The impact on us, and the entire sports ecosystem, will depend in part on the duration of the pandemic and the containment responses, and the accompanying restrictions on public gatherings. Moreover, we expect that when stay-at-home restrictions are lifted, they will be lifted in phases, and that restrictions on large public gatherings may well be lifted later than others. Once stay-at-home orders and restrictions on public gatherings are lifted more broadly, it is unclear what ongoing restrictions will be imposed on, or expected of, sports venues in terms of capacity and physical distancing, and what the implications of those restrictions may be on re-engagement with live sports events. In addition, the level of fan re-engagement with live sports events is impossible to predict. We have no control over the timing, scope or content of the restrictions that will impact our business, and expect that these will be affected by a patchwork of regional, national, municipal and local laws and regulations.

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With respect to our mass participation events, we gradually postponed or canceled substantially all of our events, beginning in January in China and expanding to Europe and North America as the pandemic spread. By April 2020, substantially all of our remaining sports events had been canceled or postponed, and there has been a corresponding impact on registrations for upcoming events. The decision to continue, restrict or otherwise modify, postpone, cancel or resume a postponed event will be based on availability of local community resources, ongoing event-specific risk assessment in coordination with the relevant healthcare and government authorities, and any relevant local regulatory restrictions.

With respect to our spectator sports and DPSS operations, sports events of all kinds have been postponed or canceled, which will have an adverse impact on our results of operations in our Spectator Sports and DPSS segments. Broader macro-economic implications, including reduced consumer confidence, could, following the direct disruption of events due to cancelations or postponements, adversely affect attendance at sports events and discretionary spending, which in turn would also adversely affect sponsorship opportunities, as advertisers reduce budgets. Moreover, as we are regularly engaged in negotiations with rights-in partners, rights-out clients, digital media partners, broadcasters, sponsors and other stakeholders, our ability to engage in these negotiations (for new contracts, to extend existing contracts or for acquisitions) may be adversely affected by any of the foregoing as well as the more practical impediments to scheduling and holding meetings, including restrictions on travel, office closures, business continuity concerns and other disruptions. We may also be compelled to accept contract terms that are less favorable to us than those we currently enjoy. Less favorable or unsuccessful contract negotiations could have short-, medium- or longer-term revenue implications for us. To the extent that any of our key counterparties are also adversely affected by the spread of COVID-19 and responses thereto, we could also be adversely affected in any number of respects. Lengthy or renewed shut downs could have an adverse impact on sports clubs due to significant liquidity pressures. In addition, the current and evolving environment raises untested issues, such as contingency plans for games without live audiences and theories of contractual interpretation in relation to a pandemic. More fundamental shifts may see changes in distribution models (including to direct-to-consumer) or acceleration of trends to move distribution activities in-house.

COVID-19 and the responses thereto could have a range of other effects on us. For example, the implementation of business continuity plans in a fast-moving public health emergency could have an adverse effect on our internal controls (potentially giving rise to significant deficiencies or material weaknesses in future years) and could increase our vulnerability to information technology and other systems disruptions.

We currently are unable to predict the duration and severity of the spread of COVID-19, and responses thereto, on our business and operations, and on our results of operations, financial condition, cash flow and liquidity, as these depend on rapidly evolving developments, which are highly uncertain and will be a function of factors beyond our control, such as the continued spread or recurrence of contagion, the implementation of effective preventative and containment measures, the development of effective medical solutions, the extent to which governmental restrictions on travel, public gatherings, mobility and other activities remain in place or are augmented, financial and other market reactions to the foregoing, and reactions and responses of communities and societies. While we expect we will suffer adverse effects, the more severe the outbreak and the longer it lasts, the more likely it is that the effects on us and our business will be materially adverse.

Certain of our contracts have capital commitments and minimum revenue guarantees (see “Item 5. Operating and Financial Review and Prospects – A. Operating Results – Our Revenue-Generation Models – Our Spectator Sports and DPSS Segments”), which are tied to events taking place. Where events have already taken place in 2020 under arrangements providing for a series events, we are in negotiations with rights owners to reduce our capital commitment and minimum revenue guarantee obligations in light of COVID-19 postponements and cancelations. We also are in negotiations with rights owners on how to modify capital commitments and minimum revenue guarantees to reflect potential changes in revenue streams due post-COVID-19 adjustments (for example, hospitality and sponsorship).

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Infront Sports and Media AG has a credit facility, or the Infront credit facility, under which €469.5 was outstanding at April 30, 2020. That credit facility has a leverage ratio covenant (see “Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Indebtedness”), from which we expect we will need relief due to the impact of COVID-19 on our revenue. Failure to do so could result in an acceleration of the debt outstanding under the Infront credit facility unless we and the lenders reach agreement to avoid a default and acceleration. We are in discussion with our lenders with respect to covenant relief.

Each of the following risk factors should be read in the context of the foregoing uncertain trends, events and developments as they affect us (collectively, the COVID-19 Risks), whether or not we make specific reference to the COVID-19 Risks, given the potentially pervasive and fundamental effects of the pandemic on our business.

Efforts to mitigate the impact of the COVID-19 pandemic on our business through new services and solutions may prove unsuccessful.

We are working closely with our partners, rights holders, sponsors and event organizers to assess the impact of COVID-19 on timing and the protocols for future sports events and to manage the financial impact across our value chain. In anticipation that sports events might proceed in the medium- to longer-term without spectators, we are seeking to develop additional digital and broadcast solutions to offer to, and prepare partners for, the expected demand for new forms of live and digital sports consumption. We are also partnering with leading sports organizations to provide innovative online racing and event experiences to keep our athlete communities connected and engaged. These include virtual and eSports events. These efforts to mitigate the impact of the COVID-19 pandemic involve new digital, broadcast and production services for new forms of live and digital sports consumption, and the extent to which audiences and athletes will be willing to engage in virtual and eSports events remains to be seen, and it is therefore unclear whether these efforts ultimately will have a significant positive impact on our business, results of operations, financial condition, cash flows or liquidity and sufficiently offset reductions in historical services and solutions. In addition, these efforts may cause us to incur new costs that could outweigh their ultimate benefit.

Risks Related to Potential Sale

We may be unable to complete the WEH sale.

On March 26, 2020, we entered into the WEH sale agreement with Advance for the sale of 100% of the shares of WEH, through which we conduct the WEH business. The WEH sale is subject to various closing conditions, including regulatory approval, but excluding approval of our shareholders. See “Item 4.A. History and development of the Company – The WEH Sale.” The closing of the WEH sale may not occur as expected, or at all. Should the WEH sale not close, we would retain and continue to operate the WEH business. Should that be the case, however, the WEH business and we, indirectly as the ongoing owners, may suffer from a reputational perspective or otherwise by reason of the failure to have sold the WEH business.

We will now rely on a license agreement with WEH to organize and operate events in China.

We rely on the WEH License Agreement to organize and operate, until the end of 2025, IRONMAN, IRONMAN 70.3, Rock ‘n’ Roll Marathon Series and Epic Series events in China. If WEH were to develop or acquire new sports events during the term of the WEH License Agreement, WEH has agreed to negotiate with us prior to licensing any such new events in China to a third party. The WEH License Agreement subjects us to various qualitative standards (for example, with respect to the usage of trademarks and quality of branded materials and insurance), quantitative standards (for example, with respect to minimum and maximum events per year), as well as to financial obligations and various other obligations relating to the organization, administration and operation of the licensed-in events.

The licensed-in events under the WEH License Agreement represented approximately 20% of our 2019 mass participation sports business globally (excluding the WEH business).

Under the WEH License Agreement, we are obligated to pay damages to WEH in the event of cancelation of licensed-in events other than due to force majeure. It is unclear how this force majeure clause will be interpreted if licensed-in events are canceled due to COVID-19, particularly those sports events that are canceled without a government order to do so. License fees remain due even if events are canceled due to force majeure.

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Risks Related to our Expected Ongoing Business and Industry

Our inability to adapt our business to changing conditions that affect the sports ecosystem could have a material adverse effect on us.

We seek to create value for stakeholders in all parts of the sports ecosystem, from rights owners to brands and advertisers, and from fans to athletes. The sports ecosystem is undergoing significant transformation at the expense of traditional distribution channels as a result of changes in consumer behavior, and in particular the ways in which sports fans consume sports events. We attribute the behavioral change in large part to emerging digital technologies, as well as other alternative distribution platforms. More recently, these changes have been exacerbated by the COVID-19 pandemic, which has encouraged us and other sports organizations to provide more virtual and eSport options, among other digital content, in order to allow athletes and fans to participate in sports events that would otherwise be canceled or that might appear unsafe. Digital cable, internet and wireless content providers continue to improve technologies, content offerings, user interfaces and business models that allow consumers to access video-on-demand and internet-based content with interactive capabilities. As the technology evolves to accommodate multimedia services and products, we need to adapt to, and support, these services and products. However, we may be unable to identify and capitalize on opportunities that present themselves in a timely manner, or at all. For example, our ability to leverage new technologies could suffer if we are unable to offer digital solutions that achieve market acceptance across our sports categories and our markets.

In addition, innovative new technologies, models and platforms have the potential to provide significant opportunities for rights owners to engage more directly and comprehensively with fans and other sports enthusiasts through a wide variety of platforms and technologies, rather than through us. Particularly for sports that have significant global appeal, rights owners may have the financial resources, organizational capability and/or strategic focus to develop in-house capabilities to monetize their rights themselves, to terminate their relationships with us or reduce their level of engagement with us and monetize their rights in-house. For example, we previously worked with FIFA to manage the distribution of the extensive FIFA Films archive dating back to 1930, including film and television coverage of previous editions of FIFA World Cup^™ events and other FIFA events. In 2018, this contract was not renewed as FIFA decided to bring this management capability in-house. The Chinese Basketball Association, or CBA, in 2017, decided to reduce the scope of the relationship between them and us in relation to the CBA League and the CBA All-Star Game. As a result, we are no longer the exclusive partner to the CBA for the sale of sponsorship and media rights for these events. To the extent that FIFA, the CBA or other rights owners choose to develop further in-house capabilities and otherwise engage the ecosystem more directly through such capabilities, it would likely have a material adverse effect on our business, results of operations or prospects.

The impact of the COVID-19 Risks are difficult to predict, and that extends to assessing what the impact will be across the sports ecosystem.    

Our business is sports-centric, and our success is tied to sports generally and, in particular, to changes in popularity of the sports on which we choose to focus.

We are largely dependent on the continued popularity of sports generally and, in particular, the popularity of the sports upon which we have chosen to focus. Changes in popularity of these sports globally or in particular countries or regions could be influenced by competition from other sports or alternative forms of entertainment. A change in sports fans’ or athletes’ tastes, a change in perceptions relating to particular sports (for example, if a particular aspect of such sports become unpopular due to safety or other considerations), or a popularity shift towards sports events that are currently under-represented or not represented at all in our portfolio, could result in reduced engagement in our events or otherwise reduce the value of our rights portfolio. This, in turn, could reduce sponsorship or other advertising demand relating to the sports.

We could also be adversely affected by developments or trends affecting rights owners or other stakeholders in a particular sport. For example, several European football clubs in recent years with whom we have entered into rights-in arrangements have subsequently been relegated to lower level leagues or have suffered financial difficulty. Overall, football accounted for 31%, 48% and 47% of our Spectator Sports segmental revenue in 2019, 2018 and 2017, respectively. Further, the creation of new and/or expansion of existing sports events, such as the envisaged expansion of the 2021 FIFA Club World Cup, could draw away some of the attention and appetite for existing sports events in our portfolio. Our inability to acquire the rights to such new and/or expanded sports events could have a material adverse effect on our business, results of operations or prospects.

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Adverse developments relating to a sport or to key stakeholders in a sport, including but not limited to the COVID-19 Risks, could affect our ability to monetize acquired rights or possibly recover investments we have made in the relationships with the rights owners, and to the extent that any such sport is material to our revenue, could have a material adverse effect on our business, results of operations or prospects.

We may be unable to maintain or enhance our portfolio of sports rights, which is a key component of our growth strategy.

We own, or otherwise have contractual rights to, an extensive portfolio of global, regional and national sports properties from which we seek to generate revenue across the value chain, including events operation, media production and media distribution, sponsorship and marketing, digital solutions and ancillary services. The contractual rights portion of our portfolio is derived from rights-in arrangements and rights-out arrangements, which generally are for fixed terms. We are dependent upon relationships with key rights owners and other stakeholders throughout the sports ecosystem, from which we benefit, including with the leadership of sports federations, to maintain or obtain new rights. We have in the past been, and may in the future be, subject to risks that our partners in our spectator sports or DPSS businesses cease to work with us, develop their own service offerings or products instead of using ours, use alternative intermediaries for certain products or services, or fail to renew existing contracts on terms favorable to us, or at all.

Certain of our key rights-in contracts currently are scheduled to end over the next few years, in particular our contracts with Lega Serie A for media sales relating to Lega Serie A games (by the end of the 2020/21 season), with the German Football Association (Deutscher Fussball-Bund, or DFB) for media and sponsorship rights relating to the DFB Cup (by the end of the 2021/22 season) and with FIFA for Asian media sales and host broadcasting for FIFA World Cup^TM and other FIFA events (by the end of 2022). While we seek to enhance and broaden our portfolio of sports rights, we may not ultimately be able to secure new long-term relationships or maintain our existing relationships (in the latter case, for example, because of changes in leadership and priorities of the relevant rights owners, changes in operating models that contemplate moving monetization efforts in-house, liquidity issues affecting rights owners or other adverse consequences arising from the COVID-19 Risks, or our own management changes) and, if we are able to renew or extend rights-in contracts, the terms we are able to negotiate may not be as profitable as they were before. See also “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Our Revenue-Generation Models—Our Spectator Sports and DPSS Segments.”

In monetizing our rights-in arrangements and otherwise engaging with rights owners, we believe we enjoy a competitive advantage to the extent we can offer a portfolio of sports rights covering key aspects of the relevant sports, and can supplement our engagement with rights owners by applying our in-house DPSS capabilities. For example, for winter sports, we are able to offer a broad range of rights while representing each of the seven Olympic Winter Sports federations. Were we to fail to maintain a particular part of a portfolio, we would not only lose the benefit of the particular contract, but could lose the benefit of the portfolio effect as well.

We may be locked into certain forms of monetization and miss out on other opportunities due to our failure to properly adapt to future developments in our contracts.

We generally seek broad scope in our rights-in contractual provisions to monetize rights. However, the evolving nature of the sports ecosystem may result in new forms of media distribution, sponsorship and/or other forms of potential rights monetization (perhaps unforeseen when the contract was entered into). If we have not provided adequate scope to capture such developments, we may lose out on potential opportunities and the value of our acquired rights may be diminished.

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We derive significant revenue from the monetization of the rights we acquire from rights owners, and our profitability will be adversely affected if we are unable to enter into attractive rights-out arrangements.

For rights we do not own (generally, in our spectator sports business), we seek to monetize rights acquired on a rights-in basis through rights-out arrangements. We seek to leverage our network of relationships with, among others, rights owners, rights-out clients, broadcasters, advertisers and local governments to secure and monetize the rights that are critical to our success. We rely on estimates, third party evaluations, systematic analysis and projections of the market share and future value of licensable content controlled by each content partner, as well as our own models and in-house expertise, to forecast our ability to recoup our investment on the rights-in side, taking into account actual content acquisition costs to be incurred over the duration of the arrangement. To the extent that our actual revenue from rights-out arrangements, which often are of a shorter duration than our rights-in arrangements, underperforms relative to our expectations, our profitability may be materially adversely affected. These risks are heightened when we seek to monetize rights under commission-based rights-in contracts (often for media distribution) that obligate us to provide rights-in partners with minimum revenue guarantees or under full rights buy-out contracts with future payment obligations (as opposed to arrangements providing only for a commission for rights-out deals closed), which could reduce our profit on any such contracts, or in fact trigger a loss on any such contract. See also “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Our Revenue-Generation Models—Our Spectator Sports and DPSS Segments.” Moreover, any time lag between payments we make under our rights-in arrangements and the payments we receive in monetizing such rights through rights-out arrangements could have a material adverse effect on our levels of working capital. The COVID-19 Risks will likely impact both the rights-in arrangements (potentially reducing the rights to monetize) as well as the rights-out arrangements (potentially reducing the alternatives for monetization opportunities as well as our ability to be paid on a timely basis).

The contracts on which we depend in our Spectator Sports and DPSS segments impose numerous obligations on us.

In our Spectator Sports and DPSS segments, which collectively accounted for 68.3%, 74.8% and 73.7% of our revenue in 2019, 2018 and 2017, respectively, we rely on contractual arrangements to obtain the rights we can then monetize, and otherwise to provide a comprehensive suite of sports-related services through our DPSS capabilities, either as part of a rights-in or rights-out arrangement (accounted for under our Spectator Sports segment) or as part of a separate service contract (accounted for under our DPSS segment).

The contracts with our partners that underpin these arrangements are complex, come in a number of different forms and impose numerous obligations on us, including obligations to:

If we are unable to meet our obligations or if we breach any of the other terms of our contractual arrangements, we could be subject to monetary penalties and our rights under such arrangements could be terminated, or could be subject to other remedies including obligations to renegotiate terms. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition or prospects.

Moreover, our contracts are governed by the laws of a variety of jurisdictions, which laws may differ in significant respects from laws in the United States. For example, under Swiss law, the governing law of some of our rights-in contracts, a contract may be terminated at any time with immediate effect for cause, which includes unforeseeable changes in factual circumstances that make it objectively unbearable for a party to continue a contractual relationship. If our contracts are terminated, this could have a material adverse effect on our business, results of operations, financial condition or prospects.

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It is unclear how contractual provisions, including force majeure clauses, will be interpreted in any particular jurisdiction, let alone across our contract base, in light of the COVID-19 Risks.    

We depend on the success of live sports events, which are inherently susceptible to risks, and our exposure to such risks is potentially heightened as a result of the nature of mass participation sports events and the athlete experiences we seek to create.

Live sports events, and, in particular those involving large numbers of athletes or fans, require significant logistical capabilities, including substantial resources for safety and security, and sufficient infrastructure, which can be complex, difficult to coordinate and costly to have in place. In particular, many of our mass participation sports events take place in open-air locations across long distances that are easily accessible to the general public. Even where logistics and infrastructure have been appropriately planned for, public live events, including our owned events, involve risks that may be beyond our control or the control of the relevant organizer (if not us). Such risks may include terrorist attacks, gun violence or other security threats (such as the 2013 Boston Marathon bombing), travel interruption or accidents, traffic incidents, weather-related interruptions, natural catastrophes, public health emergencies (such as the outbreaks of SARS-CoV, MERS-CoV and, most recently, the coronavirus and the attendant COVID-19 Risks), equipment malfunction, labor strikes or other disturbances. Due to the COVID-19 Risks, the industry faces significant rethinking of live sports events, which could be restricted in size or format, or replaced by virtual events.

Over and above the COVID-19 Risks, any of the foregoing could result in personal injuries or deaths, canceled events and other disruptions to events adversely affecting the success of the events. They could also adversely affect our ability to stage events in the future, such as if host cities choose not to partner with us given event-related risks. In certain cases, they could otherwise impact the profitability of our events. We could also be exposed to liability or other losses for which we may not have insurance or suffer reputational harm. As a result of the COVID-19 Risks, it might also become more expensive for us to obtain insurance in the future, and insurance against certain risks, including those related to a pandemic, may be unavailable.

In the case of our mass participation sports events, we focus on creating inspirational sports event experiences for athletes and cultivating highly engaged and dedicated communities of athletes. As a result, factors adversely impacting the enjoyment of athletes during such events, even relatively minor issues, such as adverse weather conditions or poorly functioning infrastructure, to the extent they become associated with, and undercut, our events or, more generally, our brands, could lead to declining popularity of our events in future periods. As we coordinate all aspects of these events, including executing the events on-site, and undertaking the many items in preparation for each event, event cancelations or poor execution could also lead to declining popularity of our events in the future. In addition, our events typically require us to obtain permits from the relevant host cities or municipalities, and restrictive permit conditions, poor delivery of services (including those not directly under our control) or the widespread cancelation of sports events could also harm our brands. Even prior to the sports events cancelations related to the outbreak and global spread of COVID-19, in 2018, two of our sports events in China were canceled on short notice due to circumstances beyond our control. Although in certain jurisdictions we may not be legally required to reimburse athletes for canceled (or otherwise adversely affected) events, we may choose to do so for reputational or other considerations, adversely impacting our results of operations.

Our mass participation sports business could be harmed if the relationships on which we depend were to change adversely or terminate.

In our mass participation sports business, each of our events typically involves an exhaustive checklist of items to be organized and coordinated among numerous parties. Thus, good relationships with these parties are key to a successful event. In particular, for the successful operation and execution of our sports events, we often are dependent on relationships with local authorities and government agencies. Local authorities or government agencies provide us funding (such as in the form of host city fees for our events) and essential services (such as police and security services, traffic control and assistance in obtaining the required approvals and permits) that are integral to the success of the event. For the registration of athletes for many of our mass participation sports events, we use third-party providers. We are also heavily reliant on volunteers for the organization of our mass participation sports events, and a decline in numbers of volunteers or any restrictions on volunteers assisting with events would have a material adverse effect on the profitability of these events. If we are unable to rely on providers or volunteers for services in our mass participation sports business, it could cause disruptions to our events or otherwise adversely impact our relationships with our community of athletes. Any adverse changes in or termination of any of these relationships could have a material adverse effect on our business, results of operations, financial condition or prospects.

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We could be adversely affected by a failure to protect our intellectual property or the intellectual property of our partners.

We have significant intellectual property rights, in particular with respect to our business brands, such as the Infront brand. We regard our intellectual properties as critical to our success, and we depend, to a large extent, on our ability to develop and maintain our intellectual property rights. To do so, we rely upon a combination of trade secrets, confidentiality policies, nondisclosure and other contractual arrangements and copyright, software copyright, trademark, and other intellectual property laws. We also make use of the intellectual property rights from our rights-in partners to monetize the rights acquired through rights-out arrangements. Despite our efforts to protect our or our partners’ intellectual property rights, the steps we take in this regard might not be adequate to prevent, or deter, infringement or other misappropriation of our or our partners’ intellectual property by competitors, former employees or other third parties.

Monitoring and preventing any unauthorized use of our or our partners’ intellectual property is difficult and costly, and any of our or our partners’ intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. Litigation or proceedings before governmental authorities, or administrative and judicial bodies may be necessary to enforce our intellectual property rights and to determine the validity and scope of our rights. Our efforts to protect our intellectual property in such litigation and proceedings may be ineffective and could result in substantial costs and diversion of resources and management time, each of which could substantially harm our operating results. In addition, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all. Any failure in protecting or enforcing our or our partners’ intellectual property rights could have a material adverse effect on our business, results of operations, financial condition or prospects.

We are focused on expanding our business in China, which exposes us to certain risks arising from economic, public health or political developments and regulatory uncertainties.

We intend to continue to grow our presence in China. Economic conditions in China are sensitive to global economic conditions, changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. While China’s economy has grown significantly over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing down in recent years. As a result of the COVID-19 Risks, China’s economic growth is likely to decline, and any severe or prolonged slowdown in the Chinese economy could adversely affect our efforts in China and our growth strategy and could result in a material adverse effect on our business, results of operations, financial condition or prospects. There have also been concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. In addition to the COVID-19 Risks, the Chinese economy was negatively impacted by the tariffs on exports that China and the United States each imposed on the other in an escalating trade war in 2019 and early 2020. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term.

In addition, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of our economic activities in China. In particular, the PRC legal system is based on written statutes and prior court decisions have limited value as precedent. Since these laws and regulations are relatively new and the PRC legal system continues to evolve, the interpretations of many laws, regulations and rules may not be uniform and enforcement of these laws, regulations and rules involves uncertainties. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. Any claim, investigation or proceeding against us could result in a material adverse effect on our business, results of operations, financial condition or prospects. See also “—We are subject to a range of laws, including anti-corruption, anti-money laundering, antitrust/competition and sanctions laws and regulations, and business conduct rules, across a number of jurisdictions and could be adversely affected by failures to be fully compliant” as to the impact of regulation in China.

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We may be unable to expand successfully into new countries and new markets or expand within countries and markets in which we already are present.

Expansion into new countries and new markets, or expansion within countries and markets in which we already are present, could expose us to significant legal and regulatory challenges, political and economic instability or other adverse consequences. Such expansion may require the building of new relationships with stakeholders, which may have different interests or standards (for example, compliance standards) than stakeholders for which our operations have otherwise been designed and for which we may have limited capabilities to leverage. Our lack of experience and operational expertise in these countries or markets could put us in a disadvantageous position relative to our competitors with more experience or capabilities to address the relevant challenges. In addition, we might not be able to register and secure our brands and related intellectual property rights in these markets (for example due to pre-existing trademarks) which would prevent us from operating, or make it very difficult or costly to operate our branded events in these markets. These factors, among others, could cause our expansion into new countries or markets to be unsuccessful or less profitable than what we are otherwise able to achieve, could cause our operating costs to increase unexpectedly or our revenue to decrease or, in general, could otherwise negatively affect our global ambitions.

The markets in which we operate are highly competitive.

While there are a limited number of competitors that cover essentially the entire value chain of the sports ecosystem as we currently do, including offering event organization, media production, media distribution, sponsorship and marketing, digital solutions and sports-related ancillary services, each component of the sports ecosystem is highly competitive. This is the case for various aspects of our business, including our mass participation sports events (the rights to which we generally own), and the monetization of rights through a combination of our rights-in and rights-out arrangements, which depends on our ability to acquire the rights and to monetize profitably such rights and the other services we offer.

In the case of mass participation sports events, we face competition principally from other providers of competitive events. These events may offer athletes the ability to participate in events that represent or are perceived to represent better value for money than what we offer (and there may be low barriers of entry in offering a particular activity to athletes). We may face competition in countries or markets from competitors that have or are able to establish a more significant local presence than we can. In addition, we face competition from other sports and non-sports events that may be more attractive or appealing to potential athletes.

In acquiring rights from rights owners and monetizing those rights through rights-out contracts, we seek to build strong audiences, raise the value of media rights, create effective communication platforms for brands, events and organizations, and ultimately provide the vital link between sports events and consumers. We face competition both in acquiring the rights and in seeking to monetize the rights we do acquire. Notwithstanding prior relationships, rights owners might choose alternative partners. If we are unable to acquire rights, our ability to broaden our rights portfolio and grow our business will be limited. In a competitive environment, we may lose existing business or we may win less profitable business, including to the extent we may be required to increase the prices we pay to our rights-in partners for the rights or to accept lower prices from our rights-out clients.

We also face potential competition from in-house solutions and non-traditional media service providers, such as Facebook, Amazon, Apple, Netflix and Google, and, if they increase their focus on sports-related content, including through over-the-top, or OTT, platforms, we may find it difficult to compete, particularly as some of the potential competition has greater financial, technical and other resources than we do. In China, certain large companies, such as Alibaba, Tencent and Suning, are increasingly investing in sports businesses, including in sports-related content and media channel development. While we are developing our own digital solutions through our in-house DPSS capabilities for existing and new partners in response to competitive threats, it may impact the profitability or effectiveness of the part of our business focused on the traditional sports value chain, which has been built to a significant degree on creating a bridge between our rights-in partners and rights-out clients. Even if we are successful in competing in offering digital solutions, the profitability of such solutions may be less than what we have been able to achieve through traditional rights-in and rights-out arrangements historically, which could have a material adverse effect on our business, results of operations, financial condition or prospects. We could also experience similar competition in ancillary services we provide to the sports ecosystem from existing or new competitors.

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Our partners may expand their internal capabilities or otherwise integrate themselves vertically and more systematically, which could result in a reduction in (high volume) opportunities available to us (thereby potentially increasing competition for opportunities that do exist) or otherwise lead to potential new competitors. See also “—Our inability to adapt our business to changing conditions that affect the sports ecosystem could have a material adverse effect on us.”

Our results of operations are also subject to cyclicality and our financial performance in any one fiscal year is unlikely to be indicative of, or comparable to, our financial performance in different fiscal years.

We experience cyclical trends in our results of operation, particularly in our Spectator Sports and DPSS segments. Some major sports events for which we hold rights or provide services only take place on a biennial basis. This includes the FIS Ski World Championships and the CEV European Volleyball Championships, which occur only in odd years, and the EHF EURO Championships in handball, which occur in even years. Other major sports events occur on a quadrennial basis (such as the FIFA World Cup^™ and UEFA EURO^™ football events). For these events, we may record a portion of the revenue in the years leading up to the event pursuant to our revenue recognition policy. However, the revenue from such events tends to be most significant in the year the event is taking place, which results in significant fluctuations in our results of operations between years. For example, FIFA-related revenue increased in line with the FIFA event cycle, including the 2017 FIFA Confederations Cup Russia^™, leading up to, and including, the 2018 FIFA World Cup Russia^™. The comparability of our results of operations from our DPSS segment is particularly impacted by cyclicality due to our media production contracts for key events held every four years, such as the FIFA World Cup^™ and the FIFA Women’s World Cup^™. Our agreements as host broadcaster for such events are mainly on a cost-plus basis where we are reimbursed for our expensed production costs. As a result, the reimbursement revenues and the reimbursement costs reflected on our consolidated statement of profit or loss can have a significant impact on the comparability of our results of operations, in terms of revenue and cost of sales, but not net income. See also “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Other Factors Affecting our Results of Operations across Segments” for a discussion of the cyclicality of our business and the impact on our results of operations.

Comparing our operating results on a year-to-year basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Moreover, we are unable to predict the impact of the COVID-19 Risks on timing of events, let alone on cyclicality more broadly.

Our results of operations are subject to seasonality and our financial performance in any one interim period is unlikely to be indicative of, or comparable to, our financial performance in subsequent interim periods.

Ultimately, we generate revenue from sports events, and these events occur at different times throughout the year. Most of our event-related revenue as well as event-related expenses are recognized in the month in which an event occurs. In our Mass Participation segment, revenue and direct expenses tend to be higher in the second and third quarters of our fiscal year given our event calendar. In our Spectator Sports segment, revenue and expenses tends to be lower in the third quarter as winter sports events have not yet commenced and there is less activity in European football compared with other quarters. Over the course of the four quarters, fluctuations in gross profit shows a largely similar pattern to fluctuations in revenue. Other than in years of a FIFA World Cup^™, our results of operations in our DPSS segment tend to have less seasonal fluctuations compared to our other segments. See also “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Other Factors Affecting our Results of Operations across Segments” for a discussion of the seasonality of our business and the impact on our results of operations. Comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance.

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Failure to effectively manage changes in our business could place a significant strain on our management and operations.

The successful expansion of our business, both in terms of new countries and new markets, and further penetration into existing countries or markets, requires that we have effective planning and management processes in place and could place a strain on our management systems, infrastructure and other resources. To manage our growth successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls, systems, procedures and resources may not be adequate to support a changing and growing company. Failure to respond effectively to growth and other changes in our business, including as a result of acquisitions, could have a material adverse effect on our business, results of operations, financial condition or prospects.

We may be unable to pursue strategic partnerships, acquisitions and investment opportunities to further complement our service offerings.

We may selectively partner with, invest in or acquire companies that complement or enhance our existing operations as well as those that are strategically beneficial to our long-term goals, including opportunities that help broaden our customer base, expand our service offerings and grow the number of our events. The costs of identifying and consummating partnerships, acquisitions and investments may be significant, and we may not be able to find suitable opportunities at reasonable prices, or at all, in the future. Finding and consummating partnerships, acquisitions or investments requires management time and effort, and finding and consummating such opportunities in new markets can be affected by foreign ownership restrictions, availability of suitable targets, concerns over the possibility of a global recession and uncertain business cases in ways that pose greater risk than initiatives that target established markets. More broadly, opportunities in markets in which we have limited or no prior experience may pose a greater risk. Failure to further expand our service offerings through strategic partnerships, acquisitions and investment opportunities could have a material adverse effect on our business, results of operations, financial condition or prospects.

We may have difficulties integrating completed acquisitions or may face other risks as a result of acquiring new operations.

To the extent we pursue further strategic acquisitions or other investment opportunities to extend or complement our operations, we may be exposed to additional risks, including:

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We may not succeed in addressing these or other risks or any other problems encountered relating to the integration of any acquired business. The inability to integrate successfully the business, technologies, products, personnel or operations of any acquired business, or any significant delay in achieving integration, could have a material adverse effect on our business, results of operations, financial condition or prospects.

A decline in general economic conditions or a disruption of financial markets may affect advertising markets or the discretionary income of consumers, which in turn could adversely affect our profitability.

Our operations are affected by general economic conditions and, in particular, conditions that have a direct impact on the demand for entertainment and leisure activities. Declines in general economic conditions could reduce the level of discretionary income that our sports fans and athletes have to spend on attending or participating in sports events (including our mass participation sports events) or on sports-related programming or consumer products more generally (thereby potentially reducing sponsorship and advertising spending), any of which could adversely impact our revenue. Adverse economic conditions, including volatility and disruptions in financial markets, may also affect other stakeholders in the sports ecosystem, thereby reducing their engagement. For example, declines in consumer spending more broadly could affect advertising spend, which in turn could adversely affect broadcasters. These factors could reduce the prices we can obtain in our rights-out arrangements. The COVID-19 Risks already have had, and are expected to continue to have, adverse impacts on the financial markets and it is expected that they also will have significant adverse impacts on economic conditions, including possibly a global recession, which, in turn, could have a significant impact on consumer and business sentiment.

Security breaches could result in economic loss, damage our reputation, deter athletes and fans from attending the sports events we organize or could result in other negative consequences.

We collect, process and store significant amounts of data concerning our athletes and fans, as well as data pertaining to our business partners and employees. Our systems are vulnerable to software bugs, computer viruses, internet worms, break-ins, phishing attacks, attempts to overload servers with denial-of-service, or other attacks or similar disruptions from unauthorized use of our and third-party computer systems, any of which could lead to system interruptions, delays, or shutdowns, causing loss of critical data, the unauthorized access of data or the inability to access our own data. Functions that facilitate interactivity with other internet platforms could increase the scope of access of hackers to user accounts. Although we have in place systems and processes that are designed to protect our data, prevent data loss, disable undesirable accounts and activities on our platform and prevent or detect security breaches, such measures may not be sufficient, particularly as techniques used to gain unauthorized access to data and systems (or make our own data or systems unavailable to us), disable or degrade service, or sabotage systems, are constantly evolving. If an actual or perceived breach of security occurs to our systems or a third party’s systems, we also could be required to expend significant resources to mitigate the breach of security and to address matters related to any such breach, including notifying users or regulators. In addition, we are subject to various regulatory requirements relating to the security and privacy of such data, including restrictions on the collection and use of personal information of users and are required to take steps to prevent personal data from being divulged, stolen, or tampered with. We are subject, for example, to the EU General Data Protection Regulation, which is significantly more stringent than other similar regulation on the subject matter in the United States, as well as the Cybersecurity Law of the PRC, which became effective in June 2017 and is subject to uncertainties as to the interpretation and application of the law.

Any failure, or perceived failure, by us to maintain the security of our user data or to comply with privacy or data security laws, regulations, policies, legal obligations, or industry standards, may result in governmental enforcement actions and investigations (including fines and penalties, or enforcement orders requiring us to cease operating in a certain way), litigation or adverse publicity. This may expose us to potential liability and may require us to expend significant resources in responding to and defending allegations and claims. Moreover, claims or allegations that we have violated laws and regulations relating to privacy and data security, or have failed to adequately protect data, may result in damage to our reputation and a loss of confidence in us by our athletes, fans or our partners, and could have a material adverse effect on our business, results of operations, financial condition or prospects. If the third parties we work with violate applicable laws or contractual obligations or suffer a security breach, such circumstances also may put us in breach of our obligations under privacy laws and regulations and could in turn have a material adverse effect on our business, results of operations, financial condition or prospects.

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We could be adversely affected by assertions or allegations, even if untrue, that we infringed or violated intellectual property rights of third parties.

Third parties may in the future assert that we have infringed, misappropriated or otherwise violated their copyright or other intellectual property rights, and as we face increasing competition, the possibility of intellectual property rights claims against us grows. Third parties may take action against us if they believe that certain content available on our platform violates their copyright or other intellectual property rights. We may be adversely affected to the extent we are alleged to have infringed on the rights, contractual or otherwise, of third parties, including in our pursuit of new revenue-generating opportunities relating to our brands.

We may also face contractual liability to our licensees in connection with a failure to adequately protect the trademark and other rights granted under licenses, which could have a material adverse effect on our reputation, business, results of operations, financial condition or prospects.

Demand for our content would be adversely affected by unauthorized distribution of that content.

To the extent that live sports events are made available on the internet by pirates or other unauthorized re-broadcasters and these are illegally streamed, demand for our products and services could decline and we could lose the benefit of any associated revenue, which could have a material adverse effect on our reputation, business, results of operations, financial condition or prospects.

We depend upon our strong brands and, therefore, could be adversely affected by any failure to maintain, protect and enhance those brands.

Strong brands and brand recognition are key to our increasing the number of strategic relationships and the level of engagement of our athletes, and, in general, enhancing our attractiveness to various stakeholders in the sports ecosystem, such as rights owners, brands, advertisers, fans and athletes. Since we operate in highly competitive markets, brand maintenance and enhancement, in addition to providing consistent, high quality customer experiences, are key to and directly affect our ability to maintain our market position. We rely on brands, including for our licensed-in events, as well as on our business brands such as Infront, to maintain our market leadership in various areas. Maintaining and enhancing our brands depends largely on our ability to continue to deliver comprehensive, high-quality content and service offerings, which may not always be successful. Our branding efforts may not be successful and not receive anticipated results, and we may incur significant branding costs along the way. In addition, these activities may not be successful or we may be unable to achieve the brand promotion effect we expect. If we do not successfully maintain our brands, our reputation and business prospects could be harmed.

Our brands may be impaired by a number of factors, including any failure to keep pace with technological advances, a decline in the quality or breadth of our offerings (including live sports events organization), any failure to protect our intellectual property rights, or alleged violations by us of law and regulations or public policy. Additionally, if our partners fail to maintain high standards, our business brands, Infront in particular, could be adversely affected. Such factors could be the direct result of negative media coverage. See “—We could be adversely affected by negative media coverage of illegal or unethical conduct of participants in the sports ecosystem or of other negative developments affecting individual sports or individual events.”

Our brands and our business may also be harmed by aggressive marketing and communications strategies of our competitors, as well as by a decline in confidence in our industry and its participants as a result of one or more such participants facing financial difficulties. Any negative, inaccurate, false or malicious publicity relating to our company, our products and services, or our industry, regardless of its veracity, could harm our reputation and brands and materially deter our partners, athletes and fans from seeking our services or participating in or attending our sports events.

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We have a relatively limited history operating as an integrated business and our business and prospects would be adversely affected were we to fail to properly integrate our operations and processes.

Our structure changed significantly in 2019 in anticipation of our initial public offering, or IPO, and is expected to change further following completion of the WEH sale. We have a relatively limited history of operating under our new configuration as an integrated business. Prior to the implementation of the significant changes to our structure, which included a corporate reorganization and the establishment of the VIE structure for our operating entities in China, our constituent business units operated relatively independently of one another as part of a privately owned group, with their own management, financial reporting and internal control and compliance structures. In addition, there were certain areas in which our business units were in direct competition with one another. We continue to work on integrating WSC and Infront China to improve organizational effectiveness and combine the resources and experience of Infront China and WSC to further unlock value in China. In addition, we now present financial statements on a consolidated basis, and although we are not currently planning to integrate our legacy information systems, we have harmonized our management reporting processes. Were we to fail to make the transition to an integrated public company timely and effectively, whether in terms of coordinated operations, effective internal reporting and controls, or otherwise, it could have a material adverse effect on our business or prospects.

We could be adversely affected by negative media coverage of illegal or unethical conduct of participants in the sports ecosystem or of other negative developments affecting individual sports or individual events.

We could be subject to, or otherwise affected by, negative publicity about us or our business, shareholders, affiliates, directors, officers or other employees, as well as our partners, including rights owners, governing bodies that oversee sports or athletes in sports with which we are involved or, more broadly, host cities, our competitors or others who share any of our various business models, or other participants in the sports ecosystem. For example,

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We cannot predict the impact on our business or the broader sports ecosystem of future negative publicity arising from COVID-19 concerns, for example, as to the risks to spectators in close quarters.

The impact of negative publicity can be exacerbated by the increasing popularity of instant messaging applications and social media platforms, which provide individuals with access to a broad audience of users and other interested persons. The availability of information through these applications and platforms is virtually immediate as is its impact, without affording us an opportunity for redress or correction. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. The effect of instant communications on social media can be exacerbated by the increasing prevalence on social media of “influencers.”

Negative publicity of the types described above, even in circumstances where the connection with us is remote, could have a material adverse effect on our reputation, business, results of operations, financial condition or prospects.

We rely on the skills, experience and relationships of our senior management team and other key personnel, the loss of which could adversely affect us.

We believe that our future success depends significantly on our continuing ability to attract, develop, motivate and retain our senior management and a sufficient number of international sports and media specialists and other experienced and skilled employees. We benefit from the track record of our senior management team, including Philippe Blatter, in building strategic personal relationships with key stakeholders throughout the sports ecosystem and successfully growing our operations through acquisitions and strategic partnerships. Our senior management team works closely with seasoned international sports and media specialists who offer deep execution and operational experience combined with their relationships with various stakeholders. Our combined team offers deep industry experience throughout the sports ecosystem, as well as in-depth knowledge of the Chinese sports market.

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Qualified individuals are in high demand, particularly in the sports ecosystem, and we may have to incur significant costs to attract and retain them. The loss of any member of the senior management team or such specialists could be highly disruptive and adversely affect our business operations in respect of a particular stakeholder or more broadly impact our future growth. Moreover, if any of these individuals joins a competitor or undertakes a competing business, we may lose crucial business secrets, personal relationships, technological know-how and other valuable resources, notwithstanding our contractual arrangements designed to mitigate this loss.

We are subject to a range of laws, including anti-corruption, anti-money laundering, antitrust/competition and sanctions laws and regulations, and business conduct rules, across a number of jurisdictions and could be adversely affected by failures to be fully compliant.

As of December 31, 2019, we had offices across three continents and 16 countries. The global nature of our business requires us to comply with a wide variety of laws and regulations in each of the jurisdictions in which we operate. Such laws and regulations vary significantly from jurisdiction to jurisdiction. If we fail to comply with the laws and regulations of a particular jurisdiction, we may be prohibited from promoting and conducting our sports events in that jurisdiction or suffer other adverse consequences. The inability to present sports events over an extended period of time or in a number of jurisdictions could lead to a decline in the revenue streams generated from such events. In addition, our rights-out activities and the marketability of our sports portfolio can be adversely affected by laws and regulations in certain jurisdictions that restrict the advertising of specified products and services, including betting, alcohol, tobacco and over-the-counter pharmaceutical products. In China in particular, governmental authorities promulgate and enforce laws and regulations that cover many aspects of our operations, including the organization of events, the scope of permitted business activities, licenses and permits for various activities and foreign investments. Operators in China are required to obtain various government approvals, licenses and permits to operate. If we fail to obtain and maintain approvals, licenses or permits required for our business, we could be subject to liabilities, penalties and operational disruption and our business could be materially adversely affected. Such failures in China could adversely affect our ability to grow our business in China.

We also are subject to anti-corruption, anti-money laundering and sanctions laws and regulations, and business conduct rules, such as the U.S. Foreign Corrupt Practices Act of 1977, the United Kingdom Bribery Act of 2010, the PRC Anti-Unfair Competition Law of 2017 and the Provisional Regulations on Anti-Commercial Bribery of 1996, as well as economic sanctions programs, including those administered by the United Nations, the European Union and the Office of Foreign Assets Control in the United States and antitrust/competition laws. In Switzerland, we are subject to international economic sanctions implemented through domestic legislation. While we seek to apply a strong culture of compliance and control, our policies and procedures may not be followed at all times or effectively detect and prevent violations of the applicable laws by one or more of our employees, consultants, agents or partners. In addition, some of the countries in which we operate lack a legal system as developed as other locations in which we operate and are perceived to have high levels of corruption. Our continued geographical diversification, including in some emerging markets, development of joint venture relationships and our employment of local agents in the countries in which we operate increase the risk of violations of anti-corruption laws, sanctions or similar laws.

In late June 2019, we received a request for information from the European Commission, DG Competition in connection with an antitrust investigation into sports media rights. The request seeks general information as well as information about certain specific contacts with a competitor. We believe the request is part of an ongoing investigation that included so-called “dawn raid” inspections in April 2018 at the premises of some of our competitors, but which did not include Infront. Following an internal review with the assistance of outside counsel we have responded within the deadline, on September 30, 2019, to the request for information and intend to continue to cooperate fully with the investigation. We understand that DG Competition is still in the process of analyzing our responses. We are unable to predict the outcome of the investigation, the timetable for any action on the part of the competition authorities and any potential adverse consequences for us. Based on what is publicly available about the investigation and the timing of the request for information, we do not believe Infront is a primary target of the investigation at this time.

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Violations of anti-corruption and economic sanctions laws and regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts) and revocations or restrictions of licenses, as well as criminal fines and imprisonment. Violations of antitrust/competition laws could subject us to fines, criminal sanctions and/or civil claims and damages. In addition, any major violations could have a significant impact on our reputation and consequently on our ability to win future business and maintain long-term commercial relationships with our partners. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or prospects.

Misconduct and errors by our employees, seasonal workers, volunteers or outsourced personnel could harm our business and reputation.

We are exposed to a range of operational risks, including the risk of misconduct and errors by our employees, seasonal workers, volunteers or outsourced personnel. We could be materially adversely affected if personal and business information were disclosed to unintended recipients. Also, we could be materially adversely affected if our employees, seasonal workers, volunteers or outsourced personnel were to abscond with our proprietary data, use our know-how to compete with us or carry out their duties in an inappropriate or fraudulent manner. For example, following the discovery in 2019 of the fraudulent activities set out in the Infront Announcement presumed to have been committed by one of Infront’s former senior employees, Infront took various external actions, including alerting affected advertising clients and offering compensation. Infront has reached settlements with the vast majority of affected advertising clients and continues to follow up with a small number of others (including some that have not responded despite repeated outreach). See “Item 15. Controls and Procedures—Internal Control over Financial Reporting.” In addition, considering the manner in which we store and use certain personal information, it is not always possible to identify and deter misconduct or errors by employees, seasonal workers, volunteers or outsourced personnel, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or prevent corruption by our employees (see also “—We are subject to a range of laws, including anti-corruption, anti-money laundering, antitrust/competition and sanctions laws and regulations, and business conduct rules, across a number of jurisdictions and could be adversely affected by failures to be fully compliant”). Any of these occurrences could result in our diminished ability to operate our business, reputational damage, regulatory intervention and financial harm, which could negatively impact our reputation, business, financial condition, results of operations or prospects.

Our current insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not covered by our insurance.

We believe we maintain insurance coverage that is customary for businesses of our size and type. However, we may be unable to insure against certain types of losses or claims, or the cost of such insurance may be prohibitive. Uninsured losses or claims, if they occur, could have a material adverse effect on our reputation, business, results of operations, financial condition or prospects. While we have some event cancelation insurance, that insurance covers only a portion of the events in our Spectator Sports segment. While this coverage may offset some of our losses, including those we anticipate from the COVID-19 Risks, we nonetheless expect a material adverse impact on our 2020 revenues and profitability from the COVID-19 Risks. In addition, as a result of the COVID-19 Risks, it may become more expensive for us to obtain insurance in the future, and insurance against certain risks, including those related to a pandemic, may be unavailable.

Our mass participation sports events are physically demanding. The physical nature of our events exposes our athletes to the risk of serious injury or death. Liability to us resulting from any death or serious injury sustained by one of our athletes while racing, or by spectators or passersby watching or being in proximity to our races, regardless of whether or not covered by our insurance, could have a material adverse effect on our business, results of operations, financial condition or prospects.

Changes and uncertainties in the tax regimes in the countries in which we operate could reduce net returns to our shareholders.

Our tax position could be adversely impacted by changes in tax rates, tax laws, tax practices, tax treaties or tax regulations or changes in the interpretation thereof by the tax authorities in the jurisdictions in which we operate, as well as being affected by certain changes currently proposed by the Organization for Economic Co-operation and Development and its action plan on Base Erosion and Profit Shifting. Such changes may become more likely as a result of recent economic trends in the jurisdictions in which we operate, particularly if such trends continue. See also “—Contractual arrangements in relation to our VIE may be subject to scrutiny by PRC tax authorities and they may determine that we or our VIE owes additional taxes, which could negatively affect our financial condition.”

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Our actual effective tax rate may vary from our expectation and that variance may be material. A number of factors may increase our future effective tax rates, including:

A tax authority may disagree with tax positions that we have taken or could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions. In addition, a tax authority may take the position that material income tax liabilities, interest and penalties are payable by us. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.

We are exposed to foreign currency risk.

We conduct our business in numerous countries and expect to continue to expand our geographic footprint. Because we own assets overseas and derive revenue from our international operations, our exposure to fluctuations in foreign exchange rates relates primarily to our operating activities (when cash flows are denominated in a currency other than euros, resulting in potential transaction exposure risk) and our net investments in subsidiaries with a functional currency other than euros (resulting in potential translation exposure risk). We are also subject to foreign currency fluctuations on our intercompany balances that arise from normal operations and working capital needs, as well as foreign currency fluctuations in cash balances and cash equivalents.

Our reporting currency is the euro and, as we incur expenditures in other currencies, the movement of any of these currencies against the euro could have a material adverse effect on our revenue, cost of revenue and operating margins and could result in exchange losses. We may, from time to time, hedge a portion of our currency exposures and requirements to try to limit any adverse effect of exchange rate fluctuations, but such hedging may not be successful nor sufficient. See also “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Foreign currency risk.”

Our existing indebtedness could adversely affect our financial health and competitive position.

As of December 31, 2019, we had total indebtedness (total interest-bearing liabilities) of €845.7 million, including under the Infront credit facility, under a credit facility entered into by World Triathlon Corporation, or WTC, and under an unsecured senior 364-day term loan facility entered into in March 2019 at the holding company level, which we refinanced in March 2020 (see “Item 5. Operating and Financial Review and Prospects–B. Liquidity and Capital Resources – Indebtedness”). Following the WEH sale, we will no longer include the WTC credit facility (under which €274.6 million was outstanding at April 30, 2020) on our consolidated balance sheet.

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Our indebtedness increases the risk that we may be unable to generate cash sufficient to pay interest and principal when due. In addition, the level and terms of our indebtedness could:

The Infront credit facility has a leverage ratio covenant (see “Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Indebtedness”), from which we expect we will need relief due to the impact of COVID-19 on our revenue. Failure to do so could result in an acceleration of the debt outstanding under the Infront credit facility unless we and the lenders reach agreement to avoid a default and acceleration. We are in discussion with our lenders with respect to covenant relief. In the future, we may be unable to refinance any of our indebtedness on commercially reasonable terms, or at all. Failure to refinance our indebtedness on terms we believe to be acceptable could have a material adverse effect on our business, financial condition, results of operations and cash flow. The COVID-19 Risks heighten this refinancing risk.

The agreements evidencing or governing our indebtedness contain, and any agreements evidencing or governing other future indebtedness may contain, certain restrictive covenants that may limit our ability to engage in certain activities that may otherwise be in our best interests, including to pursue growth strategies, for example, to the extent their require the incurrence of additional indebtedness. We have not previously breached and are not in breach of any of the covenants under any of these facilities; however our failure to comply with any of those covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of all of our indebtedness.

As a result of our net current liabilities position as of December 31, 2019, we were required to consider our ability to continue as a going concern.

As we recorded net current liabilities as of December 31, 2019, the directors have given careful consideration to our future liquidity and performance and our available sources of finance in assessing whether we will have sufficient financial resources to continue as a going concern. Having considered that our cash flow management forecast and analysis for 2020 has presented as a positive result, the directors are confident that we are able to meet in full our financial obligations as they fall due for the next 12 months. Our inability to maintain sufficient liquidity to fund our future operations and meet our obligations would result in substantial doubt about our ability to continue as a going concern.

We have granted, and expect to continue to grant, share-based incentives, which will result in share-based compensation expenses that could have a material adverse effect on our results of operations in affected periods.

We have adopted a Management Equity Incentive Plan, or the option plan, pursuant to which we have granted options, and expect to grant options, as a result of which we recognized share-based compensation expense, beginning in the third quarter of 2019. See “Item 6. Directors, Senior Management and Employees Management—B. Compensation.” We account for expenses for share-based compensation using a fair-value based method and recognize expenses in our consolidated statement of profit or loss in accordance with IFRS. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Judgments and Estimates—Share-based compensation” for further information. We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we expect to continue to grant share-based awards in the future. Expense associated with share-based compensation could have a material adverse effect on our results of operations for the periods in which such expense is recognized.

Risks Related to Our Relationship with Dalian Wanda Group

Dalian Wanda GCL, our controlling shareholder, has had, and is expected to continue to have, effective control over the outcome of shareholder actions in our company, which may be inconsistent with the interests of other shareholders.

Dalian Wanda GCL is our controlling shareholder, with effective voting power, by reason of beneficially owning 100% of our Class B ordinary shares, representing 90.75% of our total voting power. This voting power gives it the power to control certain actions that require shareholder approval under Hong Kong law and our articles of association, including approval of mergers and other business combinations, changes to our articles of association and the number of shares available for issuance. This voting control may cause transactions to occur that might not be beneficial to you as a holder of the ADSs and may prevent transactions that would be beneficial to you. For example, this voting control may prevent a transaction involving a change of control in us, including transactions in which you as a holder of the ADSs might otherwise receive a premium for the ADSs over the then-current market price. In addition, Dalian Wanda GCL is not precluded from causing our direct parent company to sell the controlling interest in us to a third party and may do so without your approval and without providing for a purchase of your ADSs.

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Any adverse change, or perceived adverse change, in our relationship with, or any negative developments affecting, Dalian Wanda Group could have an adverse effect on us.

Wanda Culture is a PRC-based multinational conglomerate. We believe our business has benefited from our association with Dalian Wanda Group, including its brand name and its extensive relationships and resources in China. Over time, we may be unable to continue to benefit from the level of historical cooperation with Dalian Wanda Group. If Dalian Wanda Group were to, or were perceived to, distance itself from us, for example by decreasing its equity stake in us or pursuing activities in China in competition with us, or if there were any other adverse change in Dalian Wanda Group’s relationship with us, it could have a material adverse effect on our business, the effectiveness of the further roll-out of our business in China, our results of operations, our financial condition or prospects.

Adverse developments affecting the Dalian Wanda brand name or reputation, including as a result of negative publicity concerning the Dalian Wanda Group or its chairman, could have an adverse impact on our corporate image or reputation, and have an adverse effect on our marketing efforts. Such developments could involve political or economic events or internal matters within the Dalian Wanda Group, including the departure of its chairman.

We have the right to use trademarks owned by Dalian Wanda Group, including the Wanda name, in our legal entities and for marketing and brand purposes, under a royalty free license with no expiration date; provided, however, that if Dalian Wanda GCL ceases to own, directly or indirectly, a majority of the total voting power of our ordinary shares, the license will terminate. If this were to occur, we would lose our right to use the relevant marks under the agreement, which could have an adverse impact on the effectiveness of our marketing efforts and brands. We also benefit from a support services arrangement, the termination of which would require us to incur costs to replicate the covered services. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Cooperation Agreement with Dalian Wanda Group.”

We may be adversely impacted by conflicts of interest with Dalian Wanda Group.

Conflicts of interest may arise between Dalian Wanda Group and us and, because of Dalian Wanda Group’s controlling ownership interest in us, we may be unable to resolve such conflicts on terms favorable to us, which could have a material adverse effect on our business, results of operations, financial condition or prospects. For example, there may be business opportunities in the future that both we and Dalian Wanda Group are interested in which it decides it wishes to pursue on its own, or we may be limited in our ability to do business with companies viewed by Dalian Wanda Group as competitors. Certain of our directors are also employees of Dalian Wanda Group, which could create, or appear to create, conflicts of interest if and when these directors are faced with decisions with potentially different implications for Dalian Wanda Group and us.

Risks Related to Our Corporate Structure

We are a holding company and our sole material asset is our equity interest in our subsidiaries. Accordingly, we will depend on distributions from our subsidiaries to pay dividends and cover our corporate and other expenses.

We are a holding company and have no material assets other than our equity interest in our subsidiaries. Because we have no independent means of generating revenue, our ability to pay dividends, if any, and cover our corporate and other expenses is dependent on the ability of our subsidiaries to generate revenue to pay such dividends and expenses and then distribute them up to us. The ability of our subsidiaries to make any distributions will be subject, among others, to restrictions in our exiting or future credit facilities or other debt instruments and applicable law and regulations, which could impose withholding taxes on internal distributions. Our existing credit facilities, for example, significantly restrict our ability to pay dividends. To the extent that we need funds and our subsidiaries are restricted from making such distributions or payments under the terms of any financing arrangements or under applicable law or regulation, or otherwise are unable to provide such funds, our liquidity and financial condition could be materially adversely affected.

Risks Related to our Operations in China

While the revenue we derive from our operations in China is relatively low, we expect our operations in China to continue to grow, which presents the following additional risks.

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Risks Related to our VIE Arrangements

If the PRC government finds that the agreements that establish the structure for operating some of our operations in China do not comply with applicable PRC regulations, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

Certain business sectors in the PRC are restricted from foreign investment under the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2019 Version) promulgated by MOFCOM and NDRC in 2019, which replaced the prior Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2018 Version). Our VIE and its subsidiaries are involved in the production and distribution of radio and television programs in China, which is restricted from foreign investment. Due to such foreign investment restrictions in the PRC and other regulatory considerations, we acquired control over, and consolidate the operating results of, WSC through a VIE structure. Our indirectly wholly-owned PRC subsidiary (Infront China), has entered into a series of contractual arrangements with our VIE and its shareholders, which enable us to exercise effective control over our VIE, receive substantially all of the economic benefits of our VIE and have an exclusive option to purchase all or part of the equity interests in our VIE. As a result of these contractual arrangements, we have control over, and are the primary beneficiary of, our VIE and, hence, consolidate its and its subsidiaries’ operating results in our consolidated financial statements.

In the opinion of our PRC legal counsel, Jingtian & Gongcheng, (i) the ownership structure of Infront China and its VIE does not contravene any applicable PRC laws and regulations and (ii) the contractual arrangements with WSC and its nominee shareholders are valid and binding upon each party to such arrangements and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations, and will not contravene any explicit provision of any applicable PRC laws and regulations. However, our PRC legal counsel has advised us that there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations and future PRC laws and regulations, and there can be no assurance that the PRC regulatory authorities will not take a view that is contrary to, or otherwise different from, its opinion stated above. Thus, the PRC government could ultimately take a view contrary to, or otherwise different from, the opinion of our PRC legal counsel. If the PRC government finds that our contractual arrangements do not comply with its applicable restrictions, including restrictions on foreign investment, or if the PRC government otherwise finds that we, our VIE or our or its respective subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate certain business in China, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations or failures, including:

Any of these events could cause disruption to our business operations in China and damage our reputation, which could in turn have a material adverse effect on our business, results of operations, financial condition or prospects. If occurrences of any of these events results in our inability to direct the activities of our VIE that most significantly impact it or its subsidiaries’ economic performance and/or our failure to receive the economic benefits of our VIE and its subsidiaries, we may not be able to consolidate their operating results in our consolidated financial statements.

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We are subject to Chinese foreign exchange controls that could limit our access to cash from our operations in China.

The PRC government imposes foreign exchange controls on the convertibility of the Chinese yuan and, in certain cases, the remittance of currency out of China. Under our current corporate structure, our Hong Kong holding company primarily relies on dividend payments from our subsidiaries, including our PRC subsidiary (Infront China) to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of State Administration of Foreign Exchange by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of State Administration of Foreign Exchange, cash generated from the operations of our PRC subsidiary in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where Chinese yuan is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain State Administration of Foreign Exchange approval or registration to use cash generated from the operations of our PRC subsidiary and our VIE to pay off their respective debt in a currency other than the Chinese yuan owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than the Chinese yuan. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.

Substantial uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law, and it may have a potential impact on the viability of our current corporate structure, corporate governance and business operations.

The Foreign Investment Law, or the FIL, formally adopted by the 2^nd session of the thirteenth National People’s Congress of China on March 15, 2019, and the Regulation on Implementing the Foreign Investment Law approved by the State Council, became effective on January 1, 2020 and replaced the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign-Capital Enterprises to become the legal foundation for foreign investment in China.

Conducting operations through contractual arrangements has been adopted by many PRC-based companies, including us, to obtain and maintain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions or prohibitions in China. The FIL stipulates three forms of foreign investment. However, the FIL does not explicitly stipulate the contractual arrangements as a form of foreign investment. If any other laws, regulations and rules do not incorporate contractual arrangements as a form of foreign investment, our contractual arrangements with our consolidated affiliated entities, as a whole and each of the agreements comprising such contractual arrangements, will not be affected.

Notwithstanding the foregoing, the FIL stipulates that foreign investment includes “foreign investors invest in China through any other methods under laws, administrative regulations, or provisions prescribed by the State Council.” Therefore, there are possibilities that future laws, administrative regulations or provisions of the State Council may stipulate contractual arrangements as a way of foreign investment, and substantial uncertainties exist with respect to whether our contractual arrangements will be recognized as foreign investment, whether our contractual arrangements will be deemed to be in violation of the access requirements for foreign investment and how our contractual arrangements will be treated. There are possibilities that we may be required to unwind the contractual arrangements and/or dispose of our consolidated affiliated entities, which could have a material and adverse impact on our business, financial condition and result of operations.

We rely on contractual arrangements with our VIE and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.

While the revenue contribution of our operations in China is relatively small, we expect to continue to grow our presence in China and hence our revenue from China over time. We will rely on contractual arrangements with our VIE, its shareholders and its subsidiaries to operate our business in China. These contractual arrangements may not be as effective as direct ownership in providing us with control over our VIE. For example, our VIE and its shareholders could breach their contractual arrangements with us by, among others, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests.

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If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in its board of directors, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by our VIE and its shareholders of their respective obligations under the contracts to exercise control over our VIE. The shareholders of our VIE may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we operate a certain portion of our business through the contractual arrangements with our VIE and its shareholders. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation or other legal proceedings and therefore will be subject to uncertainties in the PRC legal system. See “—Any failure by our VIE or its shareholders to perform their respective obligations under our contractual arrangements with them would have a material adverse effect on our business in China.” Therefore, our contractual arrangements with our VIE and its shareholders may not be as effective in controlling our business operations as direct ownership.

Any failure by our VIE or its shareholders to perform their respective obligations under our contractual arrangements with them would have a material adverse effect on our business in China.

If our VIE or its shareholders fail to perform their respective obligations under their contractual arrangements with us that give us effective control over our business operations in China, we could be limited in our ability to enforce such contractual arrangements and we may have to incur substantial costs and expend additional resources to enforce such contractual arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective under PRC law. In addition, if any third parties claim any interest in such shareholders’ equity interests in our VIE, our ability to exercise shareholders’ rights or foreclose the share pledges pursuant to the contractual arrangements may be impaired. If these or other disputes between the shareholders of our VIE and third parties were to impair our control over our VIE, we may not be able to maintain effective control over our business operations in the PRC and thus would not be able to continue to consolidate our VIE’s financial results, which in turn could adversely affect our efforts in China and could have a material adverse effect on our results of operations.

Contractual arrangements in relation to our VIE may be subject to scrutiny by PRC tax authorities and they may determine that we or our VIE owes additional taxes, which could negatively affect our financial condition.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by PRC tax authorities within ten years after the taxable year when the transactions were conducted. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between us and our VIE were not entered into on an arm’s-length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the income of our VIE in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among others, result in a reduction of expense deductions recorded by our VIE for PRC tax purposes, which could in turn increase its tax liabilities without reducing our PRC subsidiary’s tax expenses. In addition, the PRC tax authorities may impose late payment fees and other penalties on our VIE for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially adversely affected if our VIE’s tax liabilities increase or if it is required to pay late payment fees and other penalties.

The shareholders of our VIE may have actual or potential conflicts of interest with us, which may materially adversely affect our business and financial condition.

The shareholders of our VIE may have actual or potential conflicts of interest with us. These shareholders may breach, or cause our VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and our VIE, which could have a material and adverse effect on our ability to effectively control our VIE and receive economic benefits from them. For example, the shareholders may be able to cause our agreements with our VIE to be performed in a manner adverse to us by, among others, failing to remit payments due under the contractual arrangements to us on a timely basis. If conflicts of interest arise, any or all of these shareholders may not act in our best interests and/or such conflicts may not be resolved in our favor.

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Risks Related to PRC Regulatory Issues

Uncertainties with respect to the PRC legal system could adversely affect us.

The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and judicial authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

Government control of currency conversion may limit our ability to use our operating revenue effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Chinese yuan into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration on Foreign Exchange, or SAFE, by complying with certain procedural requirements. Our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents. Approval from, or registration with, appropriate government authorities is required when the Chinese yuan is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.

Because of substantial capital outflows from China in 2016 due to the weakening of the Chinese yuan relative to other currencies, the PRC government imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting processes have been put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further restrict access to foreign currencies in the future for current account transactions. If the foreign exchange control system prevents us from converting the Chinese yuan into foreign currency and remitting the funds out of China, our ability to pay dividends in foreign currencies to our shareholders, including holders of our ADSs, attributable to our operations in China will be adversely affected.

PRC regulations relating to foreign exchange registration and outbound investment approval of overseas investment by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into this subsidiary, limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us, limit our ability to make distributions to you, or may otherwise adversely affect us.

Under regulations promulgated by SAFE, including the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, and its appendices, PRC residents are required to register with qualified banks in connection with their direct establishment or indirect control of an offshore entity, established for the purpose of raising overseas financing based on such PRC residents’ assets or equity interests in PRC domestic enterprises or offshore assets or interests, which is referred to in SAFE Circular 37 as a “special purpose company.” These regulations also require amendment to the registration in the event of any significant changes with respect to the special purpose company, such as an increase or decrease of capital contributed by PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in a special purpose company fails to complete the required SAFE registration, the PRC subsidiary of that special purpose company may be prohibited from making profit distributions and from carrying out subsequent cross-border foreign exchange activities, and the special purpose company may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the requirements described above may result in liability under PRC law for evasion of foreign exchange controls.

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We may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we may not always be able to compel them to comply with all relevant foreign exchange regulations. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by all relevant foreign exchange regulations. The failure or inability of such individuals to comply with the registration requirements set forth in these regulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities in China or our PRC subsidiary’s ability to distribute dividends to, or obtain investments or loans from, our company, or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially adversely affected.

In August 2014, MOFCOM promulgated the Measures for the Administration of Overseas Investment. In December 2017, the National Development and Reform Committee, or NDRC, promulgated the Administrative Measures of Overseas Investment of Enterprises. Pursuant to these regulations, any outbound investment of PRC enterprises is required to be registered with NDRC and MOFCOM or their local branches. These regulations also require amendment to the registration in the event of certain significant changes to the investment. Wanda Culture completed those registrations, as well as the foreign exchange registration in connection with its acquisitions of Infront and WEH, in 2015. In a restructuring of the shareholding in one of our shareholders (Infront International Holdings AG) in 2017, Wanda Sports Industry (Guangzhou) Co., Ltd., a newly established company in the PRC, was inserted into the ownership chain above Infront International Holdings AG and became its direct shareholder. See “Item 4. Information on the Company—A. History and Development of the Company” and “Item 4. Information on the Company—C. Organizational Structure.” It is uncertain whether such restructuring of shareholding needs to be registered with NDRC and MOFCOM or their local branches. We understand that neither Wanda Culture nor Wanda Sports Industry (Guangzhou) Co., Ltd. has made such registration, which may adversely affect the ability of Wanda Sports Industry (Guangzhou) Co., Ltd. to exchange the proceeds of any dividend it may receive from Infront International Holdings AG into Chinese yuan and bring them into China, which may in turn affect our dividend distributions.

As these foreign exchange and outbound investment related regulations are relatively new and their interpretation and implementation have been evolving, it is uncertain how these regulations, and any future regulations concerning outbound investments by PRC companies will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends to our shareholders and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations and our ability to make distributions to you.

Finally, due to the complexity and constantly changing nature of the foreign exchange and outbound investment related regulations as well as the uncertainties involved, we cannot assure you that we and our controlling shareholder have complied or will be able to comply with all such applicable regulations. This may adversely affect our ability to make distributions to you.

Any failure to comply with PRC regulations regarding the legal requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options will be subject to these regulations now that we are an overseas-listed company following the completion of our IPO. Failure to complete SAFE registrations may subject them to fines of up to RMB 300,000 for entities and up to RMB 50,000 for individuals, and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us.

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Furthermore, the Ministry of Finance and the State Administration of Taxation, or SAT, has issued circulars concerning employee stock options and restricted shares. Under these circulars, employees working in the PRC who exercise stock options or transfer share options or are granted restricted shares will be subject to PRC individual income tax. The PRC subsidiaries of an overseas listed company are required to file documents related to employee stock options and restricted shares with the relevant tax authorities and to withhold individual income taxes of employees who exercise their stock option or purchase restricted shares. If the employees fail to pay or the PRC subsidiaries fail to withhold income tax in accordance with relevant laws and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC governmental authorities.

We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law.

We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income.

Under the modified PRC Enterprise Income Tax Law and its implementing rules, enterprises established under the laws of jurisdictions outside of the PRC with “de facto management bodies” located in the PRC may be considered a PRC tax resident enterprise for tax purposes and may be subject to the PRC enterprise income tax at the rate of 25% on their global income. “De facto management body” refers to a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise. SAT issued the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22, 2009. Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located in the PRC. Although Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those controlled by foreign enterprises or individuals, the determining criteria set forth in Circular 82 may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises. If we were to be considered a PRC resident enterprise, we would be subject to PRC enterprise income tax at the rate of 25% on our global income. In such case, our profitability and cash flow may be materially reduced as a result of our global income being taxed under the Enterprise Income Tax Law. We believe that none of our entities outside of the PRC is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”

If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially reduce our net income, and we could be required to withhold 10% withholding on dividends we pay to our shareholders that are non-PRC resident enterprises. In addition, non-resident enterprise shareholders could be subject to PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders and any gain realized on the transfer of ordinary shares by such shareholders could be subject to PRC tax at a rate of 20%. It is unclear whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their respective countries of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs.

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We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

In 2009, SAT issued the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, with retroactive effect from January 1, 2008. Pursuant to SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that has an effective tax rate less than 12.5% or does not tax foreign income of its residents, such non-resident enterprise, being the transferor, must report to the competent tax authority of the PRC resident enterprise this Indirect Transfer.

In 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Public Notice 7. SAT Public Notice 7 extends SAT’s tax jurisdiction to not only Indirect Transfers set forth under SAT Circular 698 but also transactions involving transfers of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Public Notice 7 provides clearer criteria than SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

In 2017, the SAT released Public Notice Regarding Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Public Notice 37, effect from December 1, 2017. SAT Public Notice 37 replaced a series of important circulars, including SAT Circular 698, and revised the rules governing the administration of withholding tax on China-source income derived by the non-resident enterprise.

We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as the transaction through which we acquired Infront. We may be subject to a filing obligation or taxes if we are deemed a transferor in such transactions and may be subject to withholding obligations if we are deemed a transferor in such transactions. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiary may be required to expend time and effort to comply with these regulations, which may increase our operating expenses.

Risks Related to being a Public Company

Our management team has limited experience managing a public company.

We completed our IPO in July 2019, and at that time most members of our management team had limited experience managing a publicly-traded company, interacting with public company investors, and complying with the complex and ever-changing laws, rules, regulations and pronouncements pertaining to public companies. Our management team continues to transition to a public company model subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors, and may not successfully or efficiently manage that transition. These obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could have a material adverse effect on our business, results of operations, financial condition or prospects.

We could be adversely affected if satisfactory progress is not made in discussions between the SEC and the Public Company Accounting Oversight Board, or PCAOB, on the one hand, and Chinese regulators, on the other, regarding improved access to information and audit inspections of accounting firms, including our auditors, by the SEC and PCAOB.

In late 2012, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, against the Chinese affiliates of the “big four” accounting firms (including our auditors). The Rule 102(e) proceedings initiated by the SEC relate to these firms’ inability to produce documents, including audit work papers, in response to the request of the SEC pursuant to Section 106 of the Sarbanes-Oxley Act, as the auditors located in China are not in a position to lawfully produce documents directly to the SEC because of restrictions under PRC law and specific directives issued by the China Securities Regulatory Commission, or CSRC. The issues raised by the proceedings are not specific to our auditors or to us, but affect all audit firms based in China and all companies listed in the United States with significant operations in China.

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In January 2014, the administrative judge reached an initial decision that the Chinese affiliates of the “big four” accounting firms should be barred from practicing before the SEC for six months. Thereafter, the accounting firms filed a petition for review of the initial decision, prompting the SEC Commissioners to review the initial decision, determine whether there had been any violation and, if so, determine the appropriate remedy to be placed on these audit firms. In February 2015, these Chinese affiliates each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit US-listed companies. The settlement requires the firms to follow detailed procedures and to seek to provide the SEC with access to the Chinese firms’ audit documents via the CSRC. If future document productions fail to meet the specified criteria, the SEC retains the authority to impose a variety of additional measures (for example, imposing penalties such as suspensions, restarting the administrative proceedings).

In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, companies listed in the United States with significant operations in China may find it difficult or impossible to retain auditors in respect of their operations in China, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act and could result in delisting. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding companies listed in the United States with significant operations in China and the market price of our ADSs may be adversely affected.

In December 2018, the SEC and the PCAOB staff issued a joint statement on regulatory access to audit and other information internationally that cites the ongoing challenges faced by them in overseeing the financial reporting of companies listed in the United States with operations in China, the absence of satisfactory progress in discussions on these issues with Chinese authorities and the potential for remedial action if significant information barriers persist. If our independent registered public accounting firm was denied, whether temporarily or otherwise, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined to not be in compliance with the requirements of the Exchange Act. In a second joint statement issued on April 21, 2020, SEC and PCAOB staff highlighted that the PCAOB’s inability to inspect audit work papers in China continues.

As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular China’s, and in the context of broader concerns over accounting and disclosure practices, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of Congress that would lead to eventual delisting from U.S. stock exchanges of issuers whose financial statements are audited by accounting firm branches or offices that are not subject to PCAOB inspection. On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act, which in effect would result in the delisting of non-U.S. companies (particularly from China) whose financial statements have, for a period of three years, been audited by an accounting firm branch or office that is not subject to PCAOB inspection. Were this bill to be passed by the House of Representatives and become law, or were other legislative or regulatory action taken to restrict the ability of Chinese issuers to list, or remain listed, in the United States, it could cause investor uncertainty for affected issuers, including us, and the market price of our ADSs could be adversely affected. It is unclear if this bill will be enacted and, if it is, what the ultimate resolution, over which we have no control, of the PCAOB inspection issue will be. Concurrently, Nasdaq has proposed to codify its existing discretion in considering whether to deny initial or continued listing or to apply more stringent criteria when the auditor of a Nasdaq-listed company has not been, or cannot be, inspected by the PCAOB or the auditor does not demonstrate sufficient resources, geographic reach or experience as it relates to the audit. Nasdaq also has proposed to clarify that it may use its discretionary authority to impose additional or more stringent criteria for continued listing where the local jurisdiction restricts access by U.S. securities regulators to information.

The requirements of being a public company, including compliance with the reporting requirements and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

We are a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company prior to our IPO in July 2019. As a public company, we need to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act, related regulations of the SEC and the requirements of the Nasdaq Global Select Market with which we were not required to comply as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will increase our costs and expenses. As a result of becoming a public company, among others:

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We continue to evaluate and monitor developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs these rules and regulations may cause us to incur or the timing of such costs. In addition, being a public company subject to these rules and regulations makes it more difficult and more expensive for us to obtain director and officer liability insurance and we may in the future be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.

If we fail to implement and maintain an effective system of internal controls, including through the remediation of any material weaknesses or significant deficiencies that have been or may be identified, we may be unable to report our results of operations accurately, meet our reporting obligations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.

As a newly public reporting company upon the completion of our IPO, we need to have developed, established and maintained internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal control over financial reporting when required to do so under Section 404 of the Sarbanes-Oxley Act, beginning with our annual report for the fiscal year ending December 31, 2020. For the year ended December 31, 2019 (that is, the last period covered by this annual report), we are not required to provide a report of management on our internal control over financial reporting and our independent registered public accounting firm is not required to conduct an audit of our internal control over financial reporting due to a transition period established by rules of the Securities and Exchange Commission for newly public companies. However, in connection with the audit of our consolidated financial statements for the years ended December 31, 2019, 2018 and 2017, we and our independent registered public accounting firm identified a material weakness and two significant deficiencies in our internal control over financial reporting. See “Item 15. Controls and Procedures – Internal Control over Financial Reporting – Insufficient quantity of dedicated resources and experienced personnel involved in designing and reviewing internal controls.” In addition, following the discovery of the fraudulent activities set out in the Infront Announcement, we and our independent registered public accounting firm identified a second material weakness in our internal control over financial reporting. See “Item 15. Controls and Procedures—Internal Control over Financial Reporting—Lack of sufficient segregation of duties between sales and execution of contracts, invoicing and implementation of services to prevent and detect fraud.” These internal controls ultimately may not prevent future fraudulent activities.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, we may identify other material weaknesses or significant deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, or if we experience delays in the implementation of adequate internal controls over financial reporting due to the COVID-19 outbreak or otherwise, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Generally, if we fail to achieve and maintain an effective internal control environment including those identified to date, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could, in turn, limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from Nasdaq, regulatory investigations and civil or criminal sanctions.

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We are a “controlled company” within the meaning of the rules of the Nasdaq Global Select Market and as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

We are a “controlled company” as defined under the Nasdaq Stock Market Rules because Dalian Wanda GCL beneficially owns more than 50% of our total voting power. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and intend to rely, on certain exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must be independent directors. Even if we cease to be a “controlled company,” Nasdaq Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country, or would permit for a phase-in period to comply with the Nasdaq Stock Market Rules. Certain corporate governance practices in Hong Kong, which is our home country, differ significantly from the Nasdaq Global Select Market corporate governance listing standards. We follow Hong Kong corporate governance practices in lieu of the corporate governance requirements of the Nasdaq Global Select Market, with respect to the composition of our board of directors that we are exempt from due to our “controlled company” status.

To the extent we continue to follow home country practice in the future, you may be afforded less protection than you otherwise would enjoy under the Nasdaq Global Select Market corporate governance listing standards applicable to U.S. domestic issuers.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic reporting companies, including:

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our results on a quarterly basis as press releases distributed pursuant to the rules of the Nasdaq Global Select Market. Press releases relating to financial results and material events are furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC is less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic reporting companies. As a result, you may not be afforded the same protections or be provided with the same information that would be made available to you were you investing in a U.S. domestic reporting company.

The obligation to disclose information publicly may put us at a disadvantage relative to competitors that are private companies.

We are a public company and, as such, are subject to public disclosure obligations, including as part of our reporting obligations to the SEC in periodic reports. This means that we will be providing financial and other information that we would not be required to disclose were we a private company. Many of our competitors are private companies and all our competitors will have access to information we make public, which otherwise would be confidential. These disclosures could give competitors advantages in competing with us. To the extent compliance with our reporting obligations decreases our competitiveness, our public company status could affect our business, prospects and results of operations.

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Risks Related to our ADSs

The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors.

The trading prices of our ADSs have fluctuated since our ADSs became listed on the Nasdaq Global Select Market in July 2019. The trading price of our ADSs has ranged from US$ 2.45 to US$ 6.24 per ADS, and the last reported trading price on May 21, 2020 was US$2.58 per ADS. The trading price of our ADSs may continue to fluctuate widely in response to a variety of factors, many of which are beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations similar to ours that have listed their securities in the United States, including as a result of concerns over the impact of COVID-19 Risks. In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for specific business reasons, including, among others:

Any of these factors may result in large and sudden changes in the volume and trading price of our ADSs.

We cannot rule out being named as a defendant in a future putative shareholder class action lawsuit that could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.

As noted in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal and Administrative Proceedings,” we were until recently the subject of a putative shareholder class action. While the lead plaintiff in that case has filed a notice of voluntary dismissal, the case has been dismissed in its entirety without prejudice and we cannot rule out the possibility that additional claims or lawsuits may be filed in the future. An adverse outcome of any such litigation could have a material adverse effect on our business, financial condition and reputation. In addition, there can be no assurance that our insurance carriers would cover all or part of the defense costs, or any liabilities that could arise from such matters. Defending against putative shareholder class action lawsuits may require us to use a significant portion of our resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business. We also may be subject to claims for indemnification related to any such litigation, and we cannot predict the impact that indemnification claims may have on our business or financial results.

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Under our dual-class share structure with different voting rights, Dalian Wanda GCL, our controlling shareholder, has complete control of the outcome of matters put to a vote of shareholders, which will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and our ADSs may view as beneficial.

Dalian Wanda GCL indirectly holds 100% of our Class B ordinary shares, which entitle their holders to four votes per share (compared with one vote per Class A ordinary share), representing 90.75% of our total voting power.

Because we do not expect to pay dividends in the foreseeable future after our IPO, you must rely on a price appreciation of our ADSs for a return on your investment.

Subject to our possibly distributing a portion of the proceeds from the WEH sale, we currently do not expect to pay any cash dividends on our ordinary shares in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income.

Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Hong Kong law. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which you purchased our ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price and trading volume for our ADSs could decline.

The trading market for our ADSs will be influenced by research or reports that securities or industry analysts publish about our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our ADSs or publishes inaccurate or unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline significantly.

The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.

Sales of substantial amounts of our ADSs or other equity securities in the public market, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs. In addition, we may issue additional ordinary shares or ADSs for future acquisitions. If we pay for our future acquisitions in whole or in part with additionally issued ordinary shares or ADSs, your ownership interest in our company would be diluted and this, in turn, could have a material adverse effect on the price of our ADSs.

The sale of a substantial number of ordinary shares by our controlling shareholder or the co-investors in the public market after the expiration of applicable lock-up restrictions, or the perception that these sales may occur, may depress the market price of our ADSs and could impair our ability to raise capital through the sale of additional equity securities. Certain holders of our ordinary shares will have the right to cause us to register under the Securities Act the sale of their shares, subject to applicable lock-up periods.

Your protections and rights of redress as shareholders differ from the protections and rights you would have were we incorporated in the United States.

We are incorporated in Hong Kong. Most of our directors and members of our senior management team are nationals of, and reside in, jurisdictions outside the United States, including China, and a significant portion of our assets, and the assets of most of our directors and members of senior management, are located outside the United States. As a result, it may be difficult for you to effect service of process on us or individual directors or officers who reside outside the United States and, in the case of China, to obtain recognition and enforcement of judgments in China rendered in courts outside of China.

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The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors would largely be governed by Hong Kong law. The rights of our shareholders and the fiduciary duties of our directors under Hong Kong law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States, particularly Delaware. Certain corporate governance practices in Hong Kong differ significantly from requirements for companies incorporated in other jurisdictions such as the United States and shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. Moreover, ADS holders, so long as they hold ADSs and not the underlying Class A shares, are not shareholders of record and would not have standing to bring legal actions available to shareholders under Hong Kong law.

Shareholder claims that may be brought in the United States, including securities law class actions and breach of fiduciary duty or fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in the absence of mutual and practical cooperation mechanism.

Moreover, as the SEC and PCAOB staff noted in an April 21, 2020 joint statement, or the April joint statement, in which they highlighted various concerns, among others, over disclosure standards, quality of information and standards, and ability of regulators to effectively bring enforcement actions in emerging markets, including China, the PCAOB continues to be unable to inspect audit work papers in China, which would include the audit work papers that relate to the audit of our financial statements. See “– Risks Relating to Being a Public Company – We could be adversely affected if satisfactory progress is not made in discussions between the SEC and the Public Company Accounting Oversight Board, or PCAOB, on the one hand, and Chinese regulators, on the other, regarding improved access to information and audit inspections of accounting firms, including our auditors, by the SEC and PCAOB.” In addition, Article 177 of the Securities Law of the PRC (which became effective March 1, 2020) provides that no overseas securities regulator is allowed to conduct investigations, collect evidence or undertake other activities directly within the territory of the PRC. It further provides that, without the consent of the competent PRC securities regulator and other relevant authorities, no entity or individual may provide documents and materials relating to securities business activities to overseas regulators, which presumably would include the SEC, the Department of Justice and other regulators outside of China in connection with securities fraud or other investigations or enforcement actions.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are incorporated in Hong Kong. Most of our directors and our executive officers reside outside the United States and a substantial portion of our and their assets are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the event that you believe that your rights have been infringed under the federal securities laws of the United States or otherwise. Even if you are successful in bringing an action of this kind, the laws of Hong Kong may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the ordinary shares underlying the ADSs.

Holders of ADSs do not have the same rights as our registered shareholders. As a holder of the ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which attach to the ordinary shares underlying the ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. If we ask for your instructions, then upon receipt of your voting instructions, the depositary will try to vote the underlying ordinary shares in accordance with these instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise any right to vote with respect to the underlying ordinary shares unless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may not receive sufficient advance notice of the meeting to enable you to withdraw the shares underlying the ADSs and become the registered holder of such shares prior to the record date for the general meeting to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. For the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the ordinary shares underlying the ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. The depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the shares underlying the ADSs are voted and you may have no legal remedy if the shares underlying the ADSs are not voted as you requested.

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ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing our ADSs provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial for any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. If we or the depositary were to oppose a jury trial based on this waiver, the court would have to determine whether the waiver was enforceable based on the facts and circumstances of the case in accordance with applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, or by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this would be the case with respect to the deposit agreement and our ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in our ADSs.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have, including outcomes that could be less favorable to the plaintiff(s) in any such action.

Nevertheless, if this jury trial waiver is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or our ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Techniques employed by short sellers may drive down the trading price of our ADSs.

Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality.

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You may experience dilution of your holdings due to the inability to participate in rights offerings.

We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

World Endurance Holdings. WEH’s business has been operating for over 40 years, since the first IRONMAN triathlon, which took place in Hawaii in 1978. During its initial decades, this business mainly licensed the IRONMAN brand to third parties who, as licensees, would organize and operate triathlons under the IRONMAN brand. Following its acquisition by a private equity firm in 2008, the business changed its focus and strategy to become principally an event organizer and operator. As such, it began to own, organize and operate more of the triathlons under the IRONMAN brand and other brands, such as the IRONMAN 70.3 and 5150 brand, and used less frequently, but did not eliminate, licensing.

Under Dalian Wanda GCL’s ownership, in the second half of 2015, WEH embarked on an effort to increase the number of sports events, the number of participating athletes and the range of mass participation sports events offered, eventually adding running, mountain biking, road cycling and trail running events to its portfolio. In 2016, WEH acquired Lagardère Sports’ Endurance Division, adding various triathlon, running, cycling and mountain biking events to the portfolio. In 2017, WEH added to its portfolio the Cape Epic mountain biking event in South Africa and, through the acquisition of Competitor Group Holdings, Inc., the Rock ‘n’ Roll Marathon Series. In May 2019, WEH acquired the Sun-Herald City2Surf, among other events, from Nine’s events and entertainment division (formerly Fairfax Events and Entertainment).

On March 26, 2020, we entered into the WEH sale agreement to dispose of the WEH business. The transaction is expected to close in the second quarter of 2020 and is subject to customary conditions, including regulatory approval. See also “—The WEH Sale.”

Wanda Sports China. Since its establishment in 2015, WSC has developed opportunities for sports events in China, such as the China Cup International Football Tournament and the UCI Tour of Guangxi. To expand our Chinese footprint in running events, WSC acquired Double Heritage Series in 2017, adding marathons in China to our portfolio, such as the Dun Huang Marathon, Wen Jiang Marathon and Cheng Du Double Heritage International Marathon, and partnered with Chengdu City to operate the Chengdu International Marathon in 2018. In the third quarter of 2019, we also secured the operating rights for the Shenyang International Marathon. WSC also has leveraged our mass participation sports portfolio to expand our presence in China by licensing IRONMAN 70.3 triathlons and the Rock ‘n’ Roll Marathon Series in China. In 2018, WSC also acquired a majority stake in Yongda, which focuses on media production related services in China, in particular the production of professional cycling races, such as the UCI Tour of Guangxi. We acquired control over, and consolidate the operating results of, WSC through a VIE structure in 2019.

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The Initial Public Offering

On July 26, 2019, in connection with our IPO, our ADSs commenced trading on the Nasdaq Global Select Market under the symbol “WSG.” We raised approximately US$179.4 million (€160.9 million) in proceeds from the issuance of new shares from our IPO after deducting underwriting commissions.

The WEH Sale

On March 26, 2020, we entered into the WEH sale agreement to sell the WEH business. After giving effect to the WEH sale, we will continue to operate our three business segments, though the Mass Participation segment will only reflect the retained mass participation business. The WEH sale is subject to various customary closing conditions, including regulatory approval, but excluding approval of our shareholders. We expect the WEH sale to close in the second quarter of 2020.

We intend to use the proceeds from the WEH sale to repay the principal amount of US$230 million (€211.5 million) and related interest and fees outstanding under our Senior Term Loan Facility as well as US$50 million (€46.0 million) remaining outstanding under a promissory note issued to Wanda Sports & Media (Hong Kong) Holding Co. Limited, or the pre-IPO promissory note (see “Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Indebtedness”). As for the balance of the proceeds, in light of the many and significant uncertainties we and the broader sports ecosystem face due to the COVID-19 Risks, we continue to evaluate (in the context of developing business conditions) whether we should apply the proceeds to strengthen our balance sheet, use the proceeds for general corporate purposes or, subject to shareholder approval, return capital to our shareholders.

In advance of the WEH sale, we entered into the WEH License Agreement under which we have the right, as licensee, to organize and operate, until the end of 2025, IRONMAN, IRONMAN 70.3, Rock ‘n’ Roll Marathon Series and Epic Series events in China. If WEH were to develop or acquire new sports events during the term of the WEH License Agreement, WEH has agreed to negotiate first with us prior to licensing any such new events in China to a third party. The WEH License Agreement further states that in the course of 2023 the parties shall in good faith negotiate regarding an extension of the term beyond December 31, 2025. Until the consummation of the WEH sale, these licensing arrangements are intra-group.

The WEH License Agreement subjects us to various qualitative standards (e.g., with respect to the usage of trademarks and quality of branded materials and insurance), quantitative standards (e.g., with respect to minimum and maximum events per year), as well as various other obligations relating to the organization, administration and operation of the licensed-in events.

Our payment obligations under the WEH License Agreement are guaranteed by Wanda Sports & Media (Hong Kong) Holding Co. Limited.

Additional Information

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.

Our principal executive offices are located at 9/F, Tower B, Wanda Plaza, 93 Jianguo Road, Chaoyang District, 100022, Beijing, PRC. Our telephone number at this address is +86-10-8585-7456. Our registered office in Hong Kong is located at Room 1903, 19/F, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong. We maintain our website at www.wsg.cn. Our agent for service of process in the United States is WEH.

See “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources —Capital Expenditures” for a discussion of our capital expenditures.

We describe below our spectator sports, DPSS and mass participation business. With respect to the mass participation business, we describe separately the retained mass participation business and (under “—Expected Disposal”) the WEH business, which we expect to dispose of following completion of the WEH sale. Due to the significant uncertainties associated with the COVID-19 Risks, the following does not reflect the potential impact of the COVID-19 Risks. See “Item 3. Key Information – D. Risk Factors – Overriding Risks Related to the Outbreak and Spread of COVID-19.”

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Overview

We are a leading global sports events, media and marketing platform with significant intellectual property rights, long-term relationships and broad execution capabilities through which we create value for stakeholders in all parts of the sports ecosystem, from rights owners, to brands and advertisers and to fans and athletes. We own, or otherwise have contractual rights to, an extensive portfolio of global, regional and national sports properties from which we seek to generate revenue across the value chain, including events operation, media production and media distribution, sponsorship and marketing, digital solutions and ancillary services.

Through Infront, we are the partner of choice for some of the world’s most significant sports federations, leagues and clubs, as well as premier corporate sponsor brands, broadcasters and media companies. We act on behalf of a range of rights owners through long-term rights agreements and have established successful long-term relationships with many of these partners. We connect these rights owners to fans and brands, enabling them to deliver their events and maximize coverage with solutions to achieve the widest possible promotion of their events. To do so, we have built a network of rights-in partners, rights-out clients, digital media partners, broadcasters, advertisers and other stakeholders throughout the sports ecosystem. We deliver media solutions such as host broadcasting, media production and the distribution of sports content in the form of live coverage, programming, archive services and digital solutions, and offer the right fit for brands to reach their target markets through sponsorship arrangements. We delivered approximately 3,700 event days for our partners of our spectator sports and DPSS businesses in 2019.

Through Infront and WSC, we have a global sports event portfolio built around our intellectual property across a range of mass participation sports, including triathlon, running, trail running, corporate fitness, road cycling and obstacle course racing. We seek to own brand-driven, inspirational mass participation sports events across a range of sports and seek to create inspirational sports experiences for athletes and establish engaged and dedicated communities for athletes. We believe that, through our in-depth knowledge of mass participation sports and our technical capabilities, we are well-placed to deliver engaging mass participation sports events to our athletes, partners and fans.

We generate revenue from the following principal sources:

In both our spectator sports and DPSS businesses, we rely on contractual rights to obtain the rights we can then monetize, and otherwise provide a comprehensive suite of sports-related services using our in-house DPSS capabilities, either as part of a rights-in or rights-out arrangement (accounted for under our Spectator Sports segment) or as part of a separate service contract (accounted for under our DPSS segment). See also “Item 5. Operating and Financial Review and Prospects.”

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The Sports Ecosystem in which We Operate

The sports ecosystem consists of multiple, unique sports-related assets, opportunities and stakeholders that, collectively, contribute to a successful and thriving global sports-focused economy.

Historically, the sports and marketing / media industries have been closely interconnected in a value chain connecting live sports events with brands, advertisers, fans and athletes through linear media distribution (television and radio broadcasting). More recently, the sports ecosystem has begun to undergo transformation caused, in large part, by technological developments and related changes in consumer behaviors. See “—The Evolving Sports Ecosystem” for further discussion as to these developments.

Traditional Value Chain

Events. Live sports events (and the intellectual property with respect thereto) are the foundation of the sports ecosystem. The organization of sports events (and, ultimately, consumer interest in participating in or viewing such events) is the primary driver for the creation of value in the sports ecosystem. The types of sports events on offer worldwide vary widely, ranging from local, small-scale events with primarily amateur athletes and families, to premier international sports events, such as the FIFA World Cup^™ and the Olympic Games. The key stakeholders in respect of sports events are the rights owners to those events, which can include international sport federations (such as the International Olympic Committee, FIFA or UCI), national sport federations (such as the DFB), leagues (such as the Lega Serie A or Bundesliga), clubs and other sports event organizers, which, for our mass participation and other sports events include us, as well as the athletes themselves.

Media Production. Media production companies produce audio and visual content in a range of formats allowing for the potential mass enjoyment of a live sports event, which they provide together with production-related services to their clients. These companies coordinate the broadcast signal in an event location, manage the necessary preparations for the broadcasts and produce the actual audio-visual content. These companies also provide post-production services, such as archive management and creation of highlight videos. Market participants differentiate themselves, not only in their ability to distribute and transmit the content while meeting high quality standards, but also in their ability to produce different formats for multiple channels and platforms with specific requirements. The quality and versatility of media production has a direct impact on the value of the media and marketing rights, with higher quality and greater versatility fostering greater audience and sponsorship appeal.

Linear Media Distribution. Media coverage is the engine that drives the exposure for, and interest in, live sports events. Event rights owners seek to add value and generate revenue by selling the media rights to their events, including the sale of television and radio broadcasting rights and, more recently, digital media rights. Broadcasters, including television channels and other media platforms, acquire rights to broadcast sports events. The broadcast of such media allows for further monetization of sports rights through sponsorship and advertising, among others. Media distribution related services and solutions include broadcaster servicing, the handling of technical media distribution and archive services.

Sponsorship and Marketing. We consider sports to be one of the most sought-after markets for brands, as audiences connect emotionally to sports across socio-economic groupings. Through sponsorship arrangements, rights owners can achieve significant value, while brands can benefit from significant potential exposure to achieve brand enhancement. Marketing rights that can be monetized include the acquisition and sale of rights relating to sponsorship, advertising, hospitality, licensing, stadium naming and endorsements.

Ancillary Services. The sports ecosystem provides numerous opportunities to provide value-added services to sports events, strategic partners, athletes and fans. Ancillary services include digital solutions services, sponsor and broadcaster servicing, venue advertising solutions and ticketing for the benefit of rights owners and other stakeholders in the sports ecosystem.

The Evolving Sports Ecosystem

The sports ecosystem continues to evolve. New technologies and models have an impact across the traditional sports value chain, providing significant opportunities for rights owners to engage more directly and fully with fans and other sports enthusiasts through a wide variety of platforms and technologies. At the same time, changes in consumer behavior, such as the development of new sports categories and the trend toward more healthy and active lifestyles and changes in media consumption, continue to change the sports ecosystem.

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Digital disruption. One significant contributor to the evolution of the sports ecosystem is the digital disruption, brought on by emerging digital technologies and related business models. As a result, content distribution is no longer solely linear. Audiences increasingly consume media on mobile and other digital devices, and brands are shifting advertisement budgets towards these platforms. Integration of content on digital platforms provides unprecedented levels of analytical insight of end-users. Data analytics (which is back-end driven based on artificial intelligence, leading to more precise targeting, higher conversion and more income per impression), as well as social media, ad technology and e-commerce are becoming increasingly relevant. We believe sports content, and live events in particular, remains among the most watched programming across distribution channels, even among younger fans who tend to be more digitally focused.

Enhanced consumer engagement. Traditional and emerging sports are increasingly taking advantage of digital distribution channels to reach fans. For example, information about sports can be compiled and integrated through a single platform such as digital hubs, which can be readily accessed on mobile devices. Such direct interaction leads to consumption and sharing of the content that the community cares most about, and deep engagement for consumers is enabled by providing platforms for them to engage with sports in novel ways.

Virtual events. We are partnering with leading sports organizations to provide innovative online racing and event experiences to keep our athlete communities connected and engaged during the continuation of mitigation events due to the COVID-19 pandemic. We recently hosted several virtual IRONMAN races and organized the Chengdu Shuangyi Online Marathon and the Nanning Online Marathon. We are also working to virtualize part of the racing trail for the UCI World Tour of Guangxi.

Emerging sports. The digital realm also allows new types of sports to evolve. For example, eSports, which is generally defined as competitive, professional video game playing, is evolving from a niche activity to a mainstream sport, largely as a result of social media and live streaming, with, we believe, the potential to become a global sport without borders. In anticipation that sports events and games might proceed in the medium- or long-term without spectators as a result of the COVID-19 pandemic, we are developing additional digital and broadcast solutions to offer to, and prepare partners for, the expected demand for new forms of live and digital sports consumption. Our active support of rights holders’ efforts to develop eSports events has enabled us to benefit from rapid growth of the industry. For example, we are currently providing post-production services for La Liga’s EA FIFA tournament, supporting the Lega Serie A’s eSports tournaments and working with the IIHF to organize and promote a virtual world championship for ice hockey fans. In addition, we are also focused on identifying and capturing new consumer groups from drone sports and fantasy sports through new technical capabilities. Niche sports such as surfing, mind games (such as chess) and martial arts that historically did not enjoy much television coverage and were therefore hard to monetize, are now becoming preferred hubs for brands with the growth of technology and digital channels. Emerging digital channels have allowed niche sports to reach a broader audience, which in turn has altered the way fans consume sports content.

Change towards a more healthy and active lifestyle. Products and services focused on a healthier and better active lifestyle are growing globally and becoming increasingly popular. New formats in personal and corporate health events, such as obstacle course races, themed runs and cycling are attracting new consumer groups. Also, wearables and digital services allow for new dimensions in the area of personalized fitness solutions.

Our Role in the Sports Ecosystem and our Value Proposition

We believe that the winners in the evolving sports ecosystem will be the ones able to balance efficient operations tailored to the traditional value chain with targeted initiatives and investments focused on evolving market trends.

Overview of Our Business Model

As a global sports events, media and marketing platform, we create value for stakeholders in all parts of the sports ecosystem, from rights owners to brands and advertisers, and from fans to athletes. We own or otherwise have contractual rights to a portfolio of global, regional and national sports properties and are able to commercialize and deliver high-quality services in relation to all relevant aspects of major international sports events, top-ranked sports leagues and competitions. As the sports ecosystem evolves, we have sought to tailor our capabilities to capture opportunities, including by focusing on innovative digital solutions, expanding our own portfolio of mass participation sports events and, in general, providing digital solutions and services, using our in-house DPSS capabilities, to further develop our sports events, media and marketing platform.

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We seek to develop inspirational events for athletes in our mass participation sports events and to understand the unique nature of each sport to be able to deliver the best media and marketing solutions. In addition, we handle media, sponsorship and marketing rights for international, regional and national sports federations, sports leagues, sports clubs and various other rights owners. We have dedicated teams covering all aspects of event organization and execution and providing a comprehensive suite of specialized sports services, including media production, media distribution, live event and coverage, host broadcasting, innovative digital media solutions, programming, archive services, marketing services, event operations, brand development and advertising solutions.

We have also identified eSports and community sports as new strategic growth areas that complement and also intersect with our other sports-focused businesses. We see various opportunities in the gamification of sports that underpins eSports and community sports. The chance to target fan communities is proving a huge asset for marketers. Being cognizant of this growth area, we established a presence in smaller, community-driven sports as well as in fan-driven communities for more popular sports.

For further information on our business model with respect to the execution process for our Mass Participation segment, see “—Our Segments—Mass Participation—Operations and Key Capabilities.” For further information on our business model with respect to the execution process for our Spectator Sports and DPSS segments, see “—Our Segments—Spectator Sports—Operations and Key Capabilities” and “—Our Segments—Digital, Production, Sports Solutions (DPSS).”

Our Value Proposition

Our goal is to provide value to key stakeholders across the sports ecosystem.

Rights owners. We seek to assist rights owners to build the big moments in sports by developing commercial strategies, utilizing traditional and digital media to produce exciting events, maximizing coverage to achieve a wider promotion, creating effective communication platforms, and recruiting broadcast partners, brands, advertising and other clients, and, in return, promoting financial stability including through the development of long-term relationships.

Media companies and broadcasters. We help create the link between the sports event and the viewer, with the goal to transform the way sports are being perceived. Based on our understanding of the needs of the global media community, our understanding of the unique nature of individual sports and our experience and capacity to tailor productions of any scale, we seek to develop compelling, high quality content that can be effectively delivered.

Brands and advertisers. We create a bridge between the stakeholders and the brands and media rights. We provide brands with a wide network of opportunities, with the goal of creating brand-related conversations across all media through sponsorship and activation strategies. Key to this is developing customized presentation and fan engagement approaches. In addition, we leverage our brands through sponsorship arrangements and monetize our brand ownership accordingly.

Athletes. We seek to create inspirational sports event experiences for athletes and cultivate a highly engaged and dedicated community.

Fans. We seek to deliver unmatched sports event experiences for fans, offering them easy access to engaging content relating to the sports for which they are passionate and the opportunity to engage more fully with their preferred sport.

Host cities and governments. We provide host cities with economic and related benefits, as a result of the influx of athletes and their families and friends, as well as sports fans, attending our events. Athletes may travel to cities for training in advance of events as well as for the events themselves. Cities are particularly interested in the prestige associated with world class events such as ours. For cities that measure visits by foreign visitors, our events can be particularly attractive given the broad range of nationalities of our athletes for many of our events.

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Our Segments

The nature of our engagement with the sports ecosystem depends on whether or not we are the rights owner of the relevant sports events. This split in turn is reflected in our three segments: Spectator Sports and DPSS, where we are generally not the rights owner but offer a range of capabilities and services for the benefit of rights owners, rights-out clients, such as brands and media companies, and other stakeholders, and Mass Participation, where we are generally the rights owner (in other words, we own the relevant intellectual property for the sports event).

Spectator Sports. Our Spectator Sports segment is primarily focused on business where we do not own the intellectual property. We enter into contractual arrangements with a wide range of leading rights owners such as international and national sports federations, sports leagues, sports clubs and various other rights owners in the sports ecosystem (which we refer to as “rights-in” arrangements) and, in turn, enter into, or facilitate, contractual arrangements (which we refer to as “rights-out” arrangements) with clients (which we refer to as “rights-out clients”) to engage the rest of the sports ecosystem. Accordingly, we monetize such rights through media distribution, sponsorship and marketing activities. We also provide services to our rights-in partners and rights-out clients drawing on our in-house DPSS capabilities, including event operation and support, media production, digital solutions and ancillary services. Our Spectator Sports segment includes an extensive portfolio of sports, including football, winter sports and summer sports.

Digital, Production, Sports Solutions (DPSS). We focus on maximizing the potential of our sports events, media and marketing platform by providing a comprehensive suite of specialized sports-related services, including innovative digital media solutions, media and program production, host broadcasting, marketing services, event operations services, brand development services and advertising solutions. Structurally, we have united digital, media production and sports events service-related initiatives and capabilities to drive innovation in traditional media production, deliver growth in new digital properties, create new content formats, new distribution models and partnerships, and revolutionize advertising solutions. We also seek to leverage existing social platforms to increase audiences and revenue streams. We derive our revenue in this area from providing these services to our rights-in partners, rights-out clients and other stakeholders in the sports ecosystem.

In both our Spectator Sports and DPSS segments, we apply our in-house DPSS capabilities. Revenue and costs with respect to these services are generally allocated to our Spectator Sports segment if provided in the same contract that includes a rights-in arrangement with a rights-in partner or as part of a rights-out arrangement with a rights-out client. If we enter into a separate service contract with a rights-in partner, rights-out client or other stakeholder, the related revenue and costs are allocated to our DPSS segment. See also “Item 5. Operating and Financial Review and Prospects.”

Mass Participation. Our Mass Participation segment is built around our intellectual property across a range of mass participation sports, including triathlon, running, road cycling, obstacle course racing and fitness. We seek to own brand-driven, inspirational mass participation sports events across a range of sports. We generally organize, operate and monetize the events ourselves, and derive a significant portion of our revenue from event entry fees and other event-related fees, such as host city fees, and otherwise monetize our intellectual property through sponsorship, merchandising and media distribution opportunities

See “Item 5. Operating and Financial Review and Prospects – A. Operating Results – Segmental Results of Operations,” for our segmental revenue and segmental gross profit (revenue minus cost of sales only) for the years ended December 31, 2019, 2018 and 2017.

Spectator Sports

Our Spectator Sports segment benefits from our full-service sports marketing platform principally in relation to football, winter sports and summer sports events. We handle the media, sponsorship and marketing rights on behalf of a wide variety of leading rights owners, such as international and national sports federations, sports leagues, sports clubs and various other rights owners in the sports ecosystem. Our sports-centric approach allows us to have our fingers on the pulse of each sport and it enables us to develop a network of relationships across multiple levels of client organizations while, at the same time, providing access to top decision-makers in sports and business.

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Operations and Key Capabilities

Our spectator sports business is supported by our full-service sports management and marketing capabilities. These operations are focused on handling of media, sponsorship and marketing rights on behalf of a wide variety of leading rights owners, such as international and national sports federations, sports leagues, sports clubs and various other rights owners in the sports ecosystem.

Rights Acquisition (Rights-In). Our media rights business is fundamentally built on fostering long-term relationships through which we provide services with respect to media, sponsorship and marketing rights. The following table sets out the key performance indicators for our Spectator Sports segment as of the dates indicated.

For a discussion of the contractual models that we use for our rights-in arrangements, see “Item 5. Operating and Financial Review and Prospects – A. Operating Results – Our Revenue-Generation Models – Our Spectator Sports and DPSS Segments.”

Generating Revenue from Rights (Rights Out). The key element to our rights-in/rights-out business model is identifying and exploiting opportunities to generate revenue from the rights we handle on a rights-in basis.

Media Distribution. We distribute content produced by ourselves or by others, and, in doing so, seek to build strong audiences, raise media rights value, create effective communication platforms for brands, events and organizations, and, ultimately, provide the vital link between sports events and the consumer. Our value creation is based on our partnerships with major traditional media providers and broadcasters worldwide as well as digital platforms, with whom we enter into rights-out arrangements for the distribution of content.

Our media distribution organization is organized in a market-based territorial media sales structure, in which teams are typically led by individuals with decades of relevant experience. The organization is designed so that personnel are dedicated to particular sports categories, such as football, as well as to a geographical territory, such as Germany. This structure facilitates an in-depth understanding of the potential markets for media rights and our rights portfolio, which we can leverage to identify and pursue territorial sales opportunities, including through the identification of optimal timing, packaging, and tendering in these territories. In addition to our dedicated territorial sports-focused teams, we also have senior personnel dedicated to specifically targeted clients, such as pan-regional broadcasters, social media outlets, international news agencies and betting agencies.

Our global media sales coordination steering committee meets regularly to discuss effective strategies for media sales across sports or territories, such as potential tenders, sales coordination aspects, movements in the markets with respect to new business and additional rights-in opportunities. The committee also discusses on a regular basis the alignment and the exchange that covers the media sales process which include the coordination between the persons responsible for the market and the persons responsible for our global portfolio.

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Sponsorship and Marketing. We are well-positioned to find brands and provide them with a wide range of sponsorship opportunities, including by providing brands with attractive sports-related platforms to market their products or services. We help companies create brand-related conversations across wide-ranging media through sponsorship and activation strategies by developing customized presentation and fan engagement approaches. We also provide on-site activation through branding as well as through expositions where our partners have the opportunity to have one-on-one interactions with their consumers.

Brands 360. Our spectator sports business has increasingly moved away from a purely traditional rights-in, rights-out business as our rights-in partners and rights-out clients seek our services, using our DPSS capabilities, in a variety of areas. As a result, our engagements with rights-in partners or rights-out clients, in general, have, in many cases, became broader and more sophisticated than was historically the case. We supplement our traditional rights-in, rights-out arrangements with event operation and support, media production, digital solutions and ancillary services.

We established our Brands 360 division in 2018 to promote proximity to brands through three main points: international sales, business intelligence and strategy as well as activation consulting. Our Brands 360 team focuses on supporting companies with large-scale sponsorship engagements to maximize value from these partnerships. The main focus of the team in 2019 was the FIFA Women’s World Cup France^™ and FIBA Basketball World Cup 2019, as well as the implementation of a wide variety of related sponsorship activation programs.

International sales. The Brands 360 international sales department is focused on reaching brands in markets where we do not have a consistent presence or that we have identified as having additional potential. The primary objectives of the international sales department are to create new revenue source through sponsorship sales, establish a well-positioned and profitable virtual ad sales unit and drive additional revenue for our current rights. As secondary objectives, we seek to position us for future rights, establish a testing ground for our sales and create an integrated team. To fulfill its objectives the international sales team continues to work to establish a new offering of sponsorship capabilities, such as through virtual or digital sponsorship packaging on behalf of rights owners, and to offer meaningful international sales solutions and advice for global rights owners.

Business intelligence. The Brands 360 business intelligence department assists our media, sponsorship and digital sales teams by providing optimized value based upon fact-based data analytics. The research analytics section focuses on sales, business and valuation. The marketing and industry expertise section focuses on advisory solutions, sales coordination, best practices, trends, prospecting and the relevant tools. In 2019, the department also focused on building a team of experts that deliver fact-based data and conduct research to enhance rights-in acquisition accuracy as well as rights-out sales tools.

Strategy and activation consulting. The Brands 360 strategy and activation consulting department aims to create a unique brand strategy and activation offering with new unique selling points for our current portfolio. We believe we will be able to differentiate ourselves through our focus on new brands, new markets and new partnerships. In 2019, the department was also focused on delivering successful activation at our key sponsorship events, including the 2019 FIFA Women’s World Cup France^™ and FIBA Basketball World Cup 2019.

Planning & Compliance. We apply a sophisticated and well-integrated planning process in entering into new relationships with our partners. In assessing a particular opportunity and across this business, we utilize a decentralized and detailed bottom-up project-by-project (financial) planning strategy. For every potential and existing project, a plan is developed and maintained to track both anticipated levels of income and cash flows to be generated over the next five years (or if longer, the end of the contractual term) in consideration of relevant contractual terms, revenue recognition principles and other factors. To assess the feasibility of achieving the plan, we factor in both historical contract performance and visibility of future developments.

In entering into new relationships and otherwise, we believe that compliance with relevant laws and regulations is a key feature of how we conduct our business and is fundamental to our success. To this end, we have developed the Infront Compliance Management System, or ICMS, which is based on the UK Bribery Act and has been in place since 2012. The ICMS is designed to promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law. It is tailored to our spectator sports and DPSS businesses and the compliance-related risks, with dedicated guidelines for associated persons and issues, for example, relating to gifts and hospitality. Compliance management is also embedded within the organization through a compliance board and compliance desks with dedicated compliance officers. In addition, compliance whistle-blower hotlines have been set up in the major locations and in multiple languages, and are managed by external law firms. We also provide training on compliance to new employees. Further, each year every Infront employee has to certify that he/she has completed related web-based e-learning programs. Infront also has a biannual compliance week to provide additional information and insights on the topic.

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Our Sports and Strategic Partners

Our Spectator Sports segment is built around football (distinguished from American football), winter sports and summer sports and the related rights owners and other stakeholders.

Football. Football is the most popular sport around the world and features countless tournaments, league and league cup matches as well as friendly matches globally. With 51 rights-in partners as of December 31, 2019, we are engaged at all levels of football, including partnerships with global football federations, regional and national football associations, leagues, competitions and clubs.

We believe that we serve some of the most prestigious clients in the business. Our rights have been obtained in many cases as a result of long-term, successful partnerships with high-profile rights owners, such as FIFA, as well as top European leagues, national football associations and over 30 football clubs across Europe. We also co-own, organize and develop the China Cup International Football Tournament, an annual international football event in China at which the Chinese national team plays against national teams from Europe, Asia and South-America.

FIFA. Since 1999, we have been involved in various specialized areas supporting FIFA, including FIFA World Cup^™ events and other FIFA events. Today, we continue our partnership with FIFA, delivering capabilities in a variety of areas, which together, are designed to extend the frontiers of the world’s most popular football event. As part of our Spectator Sports segment, we handle the exclusive sale of all television, radio, broadband internet and mobile broadcasting rights in 26 Asian territories (not including Japan, North and South Korea, Malaysia and the Middle-East) to FIFA events until the end of 2022. This contract, which relates to FIFA events since 2015 including the 2018 FIFA World Cup Russia^™, covers such rights also for the current FIFA event cycle, including the 2019 Women’s FIFA World Cup France^™ and the 2022 FIFA World Cup Qatar^™.

In addition to this arrangement, we provide a number of additional services to FIFA through our DPSS segment. This includes the host broadcasting of the FIFA World Cup^™ and other FIFA events (more than 100 such events have been broadcasted since 1999), as well as LED advertising solutions. See “—Our Segments—Digital, Production, Sports Solutions (DPSS).”

German football. At the center of our engagement with German football is our over 35 years long-standing relationship with the DFB, which is the largest single country sports federation worldwide, with over seven million members. We manage until the end of the 2021/22 season the advertising and marketing rights of the DFB Cup (the German football cup competition), and other DFB events. Under our existing contract with DFB, we also distribute all DFB media rights for the DFB Cup until the end of the 2021/22 season, which consists of live and delayed media rights that are available for all platforms across the international market including German speaking territories. For the same period, we also acquired the sponsorship rights for the DFB Cup. We have also built a significant German football club marketing business. We currently manage the portfolio of marketing rights (advertising boards, shirts, hospitality, etc.), up until 2031 depending on the club, for 11 clubs in the top four German football leagues:

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Italian football. We have a broad-based engagement with Italian football, underpinned by significant client relationships with the Lega Serie A, the premier Italian football league. Through our agreement with Lega Serie A, which was entered into in 2009 (current contract is in effect until the end of the 2020/21 season), we serve as the league’s exclusive strategic media advisor for the sale of domestic and international media rights for the Lega Serie A games, as well as the Coppa Italia (the annual Italian football cup competition) and the Supercoppa Italiana (the annual football competition usually held the week before the Italian football season begins between the winner of the Lega Serie A and the Coppa Italia). We also provide media production services to the Lega Serie A, see “—Our Segments—Digital, Production, Sports Solutions (DPSS)—Media Production.”

We are also actively involved in Italian football through club marketing and media agreements entered into with Italian football clubs running up until 2025 (depending on the club). These agreements include marketing and/or media rights for several leading football teams, including Lazio Roma, Inter Milan and AC Milan. We believe that these partnerships not only strengthen our assets in the Italian football market, but also serve as a strategic relationship tool to support our partnership with Lega Serie A noted above. Further, we also handle on behalf of various Italian football clubs Lega Serie A-related archive sales.

French football. Since 2012, we have focused on establishing a portfolio of club marketing rights and media agreements with French football clubs. In addition to the services we provide to various football clubs and the premier French football league (Ligue de Football Professionnel), or LFP, through our DPSS segment (see “—Our Segments—Digital, Production, Sports Solutions (DPSS)—Sports Services”), we also provide assistance to the LFP on their marketing activities, sponsorship and stadium advertising.

Chinese football. We co-own (together with the Chinese Football Association), organize and develop the China Cup International Football Tournament. The 2019 edition of the tournament took place in Guangxi, China with the national football teams of China, Uzbekistan, Uruguay and Thailand participating.

Other football. We also enjoy partnerships with other national leagues and teams. For example, in October 2019, we extended our partnership with the Scottish Professional Football League, or SPFL, to the end of the 2024/25 season, and will act as its exclusive international media rights partner for its four leagues (SPFL Ladbrokes Premiership, SPFL Ladbrokes Championship and SPFL Ladbrokes League One & Two) and two cup competitions (Tunnock’s Caramel Wafer Cup and Betfred Cup). As part of this extended partnership, we also cover the development of a dedicated eSports league for the SPFL. We also exploit the full global rights until the end of the 2021/22 season for all media types relating to the Portuguese Allianz Cup, the cup competition contested exclusively by Portuguese football clubs competing in the first and second leagues of Portuguese football. All matches for the Portuguese Allianz Cup are produced in HD. We also entered into a new partnership with the English Premier League, for free-to-air rights across sub-Saharan Africa for three years commencing with the 2019/20 season.

Winter Sports. We represent all seven Olympic Winter Sports federations (being all winter sports federations recognized by the International Olympic Committee) and various other major rights owners in winter sports through long-standing relationships. As of December 31, 2019, we had business relating to all important winter sports through 73 rights-in partners. We believe we have deep connections with a broad portfolio of partners, from international federations to local organizing committees.

The following provides an overview of our relationships relating to winter sports as part of our Spectator Sports segment.

Ice Hockey. Since 1981, we have had a relationship with the IIHF which is the worldwide governing body for ice hockey. Our ice hockey activities include two key properties on an international level: the IIHF Ice Hockey World Championships and the Champions Hockey League (CHL), an ice hockey tournament featuring top hockey teams from the first-tier leagues of countries across Europe. We are engaged to handle the global media rights, marketing and media production for the IIHF Ice Hockey World Championships and the CHL until the end of 2033 (further to a 10-year prolongation agreed in September 2019) and until June 2028, respectively. We also obtained the right to produce and organize the IIHF’s first eSports tournament at the 2021 competition in Finland.

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In addition, we provide various digital and media production services to the IIHF in connection with the IIHF Ice Hockey World Championships as well as to the CHL, see “—Our Segments—Digital, Production, Sports Solutions (DPSS).”

Skiing. We are involved in media and sponsorship marketing for many of the most prestigious international skiing properties. We have had a relationship with the FIS, which is the worldwide governing body for skiing, since 1992. We handle on behalf of the FIS the worldwide media, marketing, media production and hospitality rights to 2019-2025 FIS Alpine and Nordic Ski, Freestyle Skiing and Snowboard World Championships, including of television, internet and mobile, both for linear and on-demand. We also manage the entire production operation and all marketing-related activities.

In addition, we have established relationships directly with 28 national ski federations and many organizing committees in the top skiing countries of the world across various ski disciplines. Through these relationships, we handle the commercial rights (for durations up to 2031), ranging from advertising, media and broadcasting rights, for all FIS-sanctioned World Cup events (except those staged in Austria and Switzerland) across the disciplines of alpine skiing, ski jumping, cross-country, Nordic-combined and snowboard and freestyle skiing covering, in aggregate, over 200 races per season. We also have the sponsorship and marketing rights until 2022 for the Four Hills Tournament (Vierschanzentournee), an annual ski jumping tournament composed of four ski jumping events, of which two take place in Germany and two in Austria.

Biathlon. Since 1992, we have had a relationship with the International Biathlon Union, or IBU, which is the worldwide governing body for biathlons. We handle all marketing rights to the IBU World Cup, IBU World Championship Biathlon, IBU Cup and the IBU Junior Cup until the end of the 2028/29 season pursuant to an extension of the exclusive marketing partnership agreement with the IBU.

Bobsleigh/Skeleton. Since 1999, we have had a relationship with the International Bobsleigh and Skeleton Federation, or IBSF, which is the sports’ worldwide governing body. Until 2022, we have the right to market the key sponsorship packages and manage the worldwide distribution of media rights to the top IBSF-sanctioned events, being the BMW IBSF Bobsleigh and Skeleton World Championships and the BMW IBSF World Cup Bob and Skeleton, a multi-race series over a season for bobsleigh.

Curling. Since 2008, we have had a relationship with the World Curling Federation, or WCF, which is the worldwide governing body for curling, and our current arrangement was renewed in 2018 through to 2022. Under this contract we handle, on behalf of the WCF, the media rights worldwide (with the exception of Canada, the United States and Japan) related to the World Curling Championships and the European Curling Championships, the media rights related to the Pacific Asia Curling Championships in China, Hong Kong and South Korea, and the marketing rights worldwide for the World Curling Championships and European Curling Championships.

Luge. Since 1998, we have had a relationship with the International Luge Federation (Fédération Internationale de Luge de Course), or FIL, which is the worldwide governing body for the sport, and have an agreement with FIL under which we provide until the end of the luge season in 2022 for sponsorship and marketing services relating to the luge World Championships, World Cup and European Championships.

Skating. In January 2019, we entered into an agreement with the International Skating Union, or ISU, which is the worldwide governing body for skating. Under this agreement we, as the ISU’s exclusive media rights partner, handle from the 2019/20 season until the 2022/23 season the worldwide media rights (excluding China, Korea, Japan, the United States and Canada) relating to the ISU’s flagship events, such as the ISU World Championships and ISU European Championships across all disciplines (for example, figure skating, speed skating and short track), as well as the World Cups and Grand Prix competitions.

In addition to these Olympic winter sports, our winter sports portfolio also includes engagements in ski mountaineering in cooperation with the International Ski Mountaineering Federation, or ISMF, the sport’s worldwide governing body. We are responsible for sponsorship, marketing, media distribution and production opportunities relating to the ISMF World Cup, World Championships and European Championships.

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Summer Sports. As of December 31, 2019, we had 34 rights-in partners creating an extensive summer sports portfolio, which covers handball, volleyball, basketball, badminton, motorsport, professional cycling, rugby, tennis and golf with long-term partnerships. We believe we benefit from a well-balanced portfolio of summer sports with varying geographical focus and a strong position in emerging markets.

The following provides an overview of our relationships relating to summer sports as part of our Spectator Sports segment.

Basketball. In 2016, we entered into a long-term business partnership (until the end of 2033) with the International Basketball Federation, or FIBA, which is the worldwide governing body for basketball. We serve as FIBA’s exclusive partner for the sale and marketing of the worldwide sponsorship rights and licensing rights outside of the host country of the relevant FIBA competitions. We handle these rights in relation to the FIBA Basketball World Cups and their qualifiers, the FIBA continental cups (for example the FIBA AsiaCup and the FIBA AmeriCup) and their qualifiers, and the Youth World Cups. In addition, we became in 2017 FIBA’s exclusive domestic commercial rights partner in China for FIBA’s flagship competition, the FIBA Basketball World Cup 2019, held from August 31 to September 15, which was staged across eight Chinese cities and represents the first time that such an event was held in China. In addition, we delivered the commercial program of the FIBA Basketball World Cup 2019, serving as their exclusive partner for their worldwide sponsorship, merchandising, licensing and hospitality.

We are also the exclusive commercial partner to the Turkish Basketball Federation in relation to the development and sale of certain commercial rights related to various Turkish national basketball teams, leagues and events active in the Turkish Basketball League (Basketbol Süper Ligi), the top professional Turkish basketball division. We also entered into two agreements with the National Basketball Association, or NBA, in 2019. Under one agreement, we will represent the NBA with respect to the sale of its sponsorship rights in Italy until June 30, 2021. This marks the NBA’s first agreement with a sports marketing company to represent its sponsorship business in Italy. Under the other agreement, we distributed hospitality packages for the NBA’s first-ever regular season game in France as part of the NBA Global Games series, in which the Charlotte Hornets faced the Milwaukee Bucks in Paris in January 2020.

Handball. We have worked with the European Handball Federation, or EHF, which is the governing body for handball in Europe, since the first EHF Handball European Championship in 1994. Currently, we, together with Perform Group, are the exclusive media and marketing partner to the EHF, offering a full range of services across media rights, sponsorship and marketing solutions until 2030. This partnership relates to EHF’s EURO competitions (including the EHF Handball European Championships (which Infront co-founded in 1992) and their qualifiers, the EHF EURO Youth competitions and EHF EURO Beach competitions) and the EHF’s club team competitions (including for the EHF Champions League and the EHF European Cup and their respective qualifiers). In addition, we provide various digital and media production services to the EHF in connection with the EHF EURO Competitions and their qualifiers, see “—Our Segments—Digital, Production, Sports Solutions (DPSS).”

Volleyball. Our relationship with the European Volleyball Federation (Confédération Européenne de Volleyball), or CEV, which is the governing body for volleyball in Europe, started in 1993 when we became their exclusive media rights partner. In February 2020 we entered into a 12-year expansion with the CEV until 2033, for its flagship national team competitions and club tournaments. For the first time the media rights for all CEV events across all three disciplines will be distributed by us. The scope covers all national men’s and women’s volleyball events including the EuroVolley, CEV European Volleyball Leagues and Olympic Qualification as well as the club competitions CEV Champions League, CEV Cup and CEV Challenge Cup. It also includes the CEV European Championships in Beach Volleyball and Snow Volleyball as well as all CEV-run continental events in both disciplines as of July 1, 2020. In addition to media rights distribution, we provide various digital and media production services to the CEV, see “—Our Segments—Digital, Production, Sports Solutions (DPSS).”

Badminton. In 2016, we became the commercial rights partner of the Badminton World Federation, or BWF, which is the worldwide governing body for badminton. This was the first time the BWF has worked with an exclusive partner for both media and sponsorship rights distribution. We acquired the rights to handle on behalf of the BWF, until the end of 2025, its commercial rights on a worldwide basis (including sponsorship, media (sales), marketing and betting rights) in relation to the BWF World Tour and other BWF major events (including the BWF World Championships, the Sudirman Cup and the finals of the Thomas & Uber Cup). In addition, we provide various digital and media production services to the BWF in connection with the BWF World Tour and other BWF major events, see “—Our Segments—Digital, Production, Sports Solutions (DPSS).”

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Professional Cycling. We have a partnership with UCI, the worldwide governing body for sports cycling, which covers various services. We handle the commercial rights relating to the nine-day Tour de Suisse until 2029 and the multi-stage UCI Tour of Guangxi until 2022.

Established in 2017, the UCI Urban Cycling World Championships are the world championship events for freestyle BMX, cross-country eliminator and trials, and take place in China. We entered into a partnership agreement with the UCI under which we, until 2019, are entitled to co-organize the UCI Urban Cycling World Championships and handle the domestic media rights in relation thereto.

Motorsport. We are responsible for the worldwide media rights distribution of the FIA World Endurance Championships, an auto racing world championship staged across Europe, the Americas, Asia and the Middle East, and sanctioned by the International Automobile Federation (Fédération Internationale de l’Automobile or FIA), which is the worldwide governing body for many auto racing events, until the end of the 2020 season. The cornerstone event of the FIA World Endurance Championships is the annual “24 Hours of Le Mans,” a race beginning in mid-afternoon and finishing the following day at the same hour the race started the previous day and is considered one of the most prestigious automobile races in the world. In 2017, we signed a long-term partnership agreement until the end of 2019, and further extended it until the end of 2021, with the General German Automobile Club (Allgemeiner Deutscher Automobil-Club e.V.), or ADAC, for the marketing of the ADAC motor racing series and classic events. This agreement allows us to market the ADAC GT Masters, one of the world’s leading grand tourer-based auto racing series, and a range of racing series from the broad portfolio of ADAC Motorsport, which is a division of ADAC. In February 2019, we acquired Youthstream, the owner of the exclusive media, sponsorship and global promotional rights to the FIM MXGP Motocross World Championship until the 2036 season. The agreement covers several other events including the Monster Energy FIM Motocross of Nations, the FIM Women’s Motocross World Championship, the FIM Snowcross World Championship, the European Motocross Championship and the Motocross of European Nations.

Other summer sports. In addition, we also entered into various long-term agreements with French rugby club Stade Toulousain (until 2027), the French National Rugby League, and the Italian and French Golf Federations to support their respective marketing rights. In September 2019, we expanded our portfolio through a long-term strategic partnership with World Athletics (formerly known as International Association of Athletics Federations), including international media rights relating to the Diamond League series events from 2025 for a period of five years, the right to organize an annual Diamond League in China for ten years, from 2020-2029, as well as the creation of a new annual World Athletics event in China to be organized by us, and a ten-year international media rights agreement for a second international tour known as the World Athletics Continental Tour, which will consist of a series of one-day meetings around the world due to be launched by World Athletics in 2020 (the majority of which are currently postponed or canceled). We also entered into a new six-year agreement with The International Olympic Committee for the media rights to Sub-Saharan Africa for all Olympic events until 2024.

Digital, Production, Sports Solutions (DPSS)

Our DPSS segment includes our digital solutions, media production and service-related initiatives and capabilities to drive innovation in traditional media production, deliver growth in new digital properties, create new content formats, new distribution models and partnerships, and revolutionize advertising solutions as well as to leverage existing social platforms to increase audiences and revenue streams. We assist sports federations, organizing committees and other rights owners to broadcast their events in the most engaging and effective way. For a discussion of the contractual models that we use for our DPSS business, see “Item 5. Operating and Financial Review and Prospects – A. Operating Results – Our Revenue-Generation Models – Our Spectator Sports and DPSS Segments.”

Digital Solutions

We have been in the forefront of innovation for over 10 years, as shown above. We view ourselves as an innovation leader in the digital evolution of sports, with an established digital solutions services platform that enables us to develop new and disruptive technology solutions to shape our business model and create further value for our partners in the evolving sports ecosystem.

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Our digital capabilities focus primarily on B2B (business-to-business) and some B2C (business-to-consumer) solutions designed to drive engagement and excitement with sports fans and enthusiasts and present monetization opportunities for rights owners. An example of the designed B2C solutions is the social media video content services we provide to FIFA, including in connection with the 2018 FIFA World Cup Russia^™. We believe that these solutions, which include the application of cutting-edge technologies in digital media solutions, such as virtual advertising, artificial intelligence and data science, allow us to apply our business model across sports categories and geographies efficiently, while capturing new customer groups and minimizing our service costs.

We seek to improve our digital solutions offerings and provide digital solutions services mainly through our iX.co platform and our Infront Lab. In addition, cognizant of the opportunities in eSports, we also seek growth in this field.

iX.co. We established Infront Digital in 2016 (following the acquisition of our interest in Omnigon) and rebranded it to “iX.co” in May 2019. iX.co has a dedicated and experienced team of over 308 members across seven global offices (as of December 31, 2019) that provide an expanding number of technological solutions to engage the sports ecosystem for the benefit of rights owners and brands. The platform has been designed to provide appealing digital content for both athletes and fans while at the same time allowing us to build a data repository to enable us to better understand the interests and demands of fans. Among other things, we are better able to target digital sponsorship packages and sell advertising to properly engaged audiences.

iX.co also includes platform development such as applications, websites, gamification, content services and fan engagement activations. Through iX.co, we provide our clients with efficient and scalable solutions to better capture audiences by leveraging our Corebine platform, a content management and fan engagement platform designed specifically for mobile websites and applications. iX.co’s offerings include the application of artificial intelligence to reduce production and service costs, increase volume and quality and enable new solutions that were previously deemed impossible.

In 2018, we acquired a 10% (economic) stake in COPA90, an independent football media business providing attractive digital football content offering the potential to engage new fans and communities. COPA90 provides us with the ability to reach volume targets on a global scale with a context that is driven by people, groups and publishers that hold influential standing amongst key audiences.

In the third quarter of 2019, Infront also completed its investment in Level99, an eSports creative agency, and acquired a controlling stake, with existing management holding the remainder. In the fourth quarter of 2019, we entered into a digital consultancy partnership with the French Rugby League (LNR), launching a new English-speaking website dedicated to the Top 14 league for the coverage of relevant key markets worldwide. The agreement, which comprises a 360° digital approach, also includes the launch of social accounts, editorial management and content activation.

We also are focused on identifying and applying digital solutions to promote our owned events. We believe that by using digital capabilities to develop innovative content and distribution mediums, we will capture higher engagement from our community, and at the same time help reach a wider global audience. For example, we boost community engagement in broadcasting through innovative digital channels (for example, OTT platforms) and official social media platforms (for example, Facebook, YouTube, Instagram, Snapchat and Twitter), which improves the stickiness of our athlete community, fosters greater loyalty and enhances the network effects.

Infront Lab. We established our Infront Lab to identify technologies and related collaborations, that can benefit from our market know-how and other capabilities, to offer new products and services for sports stakeholders. For example:

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eSports. The eSports market, which generally refers to organized competitions of video games between professional players, emerged in the early 2000s and since has grown to become an influential industry, especially among the younger generation. The eSports audience has grown from 225.5 million in 2014 to 454.4 million in 2018, and is expected to achieve a CAGR of 14.3% from 2018 to 2022, reaching an estimated 777.2 million in 2022. We see various opportunities in eSports, depending on the partner, ranging from supporting eSports publishers, events and leagues though services we provide, to supporting teams, players and influencers and building our own eSports communities.

Media Production

We are a leading player in sports media production, providing rights owners and viewers with quality, exciting and innovative sports coverage. We provide a range of services, from basic services such as match streaming, video on demand, near-live clip based content to new, multi-media solutions such as white label applications and web players. Our media production projects have been recognized with prestigious industry awards, including the International Broadcasting Convention Awards (2006, 2010 and 2014), SPORTEL Golden Podium Awards (2002 and 2011) and others, acknowledging our innovative approaches and dedication to quality.

Our media production services include essentially every aspect and scale of sports multimedia production. We help sports federations, organizing committees and other rights owners to broadcast their events in the most engaging and effective way possible with support ranging from the host broadcast design and operation for all kinds of major sports events to digital media and post-production as well as archive management. We provide our large scale media production services through HBS, which was founded in 1999 as the host broadcaster of the 2002 FIFA World Cup Korea/Japan^™ and since then also operated as the host broadcaster for, among others, the:

The number of HBS employees varies in accordance with the active projects, from approximately 60 employees to more than 3,000 employees when we are delivering major sports events.

We have been at the forefront of digital media production innovation for many years. In 2009, we broadcasted Europe’s first 3D football match, the French Ligue 1 match between Olympique Lyon and Paris Saint-Germain. In 2013, HBS broadcast the first 4K-resolution production at the FIFA Confederations Cup^™ and, in 2018, HBS implemented the first production of all FIFA World Cup Russia^™ matches in ultra HD with 360-degree for virtual reality experience.

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Our media production activities include the following:

Partnership with FIFA. Since 1999, we have worked with FIFA and served as FIFA’s host broadcaster for, among others, the:

We are also mandated by FIFA as host broadcaster for the 2022 FIFA World Cup Qatar^™.

Italian and French Football Production. In addition to the FIFA World Cup^™ flagship projects, we also provide end-to-end media production services for most of Lega Serie A games as well as for the Italian Cup (Coppa Italia) and Italian Supercup (Supercoppa Italiana) under arrangements that are generally set to expire at the end of the 2020/21 season (June 2021), and we handle the quality control of the production of the French Ligue 1 matches until June 2020.

Other Media Production Business. We also focus on producing other single-sport or multi-sport events, including the:

We provided consulting services to the UEFA (planning and management of the International Broadcast Centre) in connection with UEFA EURO 2016^™, the European football championship, and UEFA has mandated us to provide similar services for UEFA EURO 2020^™.

International Games Broadcast Services. We set up in 2004 International Games Broadcast Services, or IGBS, a joint venture with IMG Media, which is dedicated to the production of multi-sport events. IGBS has been the host production partner for the:

For broadcasts of the Rugby World Cup 2019 games in Japan, for the first time we used 8K-resolution production, augmented reality graphics and Hawk-Eye Smart Replay technology.

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Sports Services

We provide a comprehensive set of support services designed to contribute to the operational success of our sports media and marketing capabilities. These services include:

We provide consulting and support services to clients in connection with the design, planning and creation of platform-specific content across multiple digital outlets. On the fan engagement side, we seek to provide solutions to enable clients to engage directly with fans by providing innovative and easy to implement gamification tools. For example, we worked together with the IIHF and created and implemented the new content strategy for the IIHF Ice Hockey World Championships 2017, including social media, editorial and multimedia content planning, and fan engagement campaigns. In addition, we also provide a number of other services to the IIHF, including overall venue and event management, marketing implementation responsibility, event services and consulting, commercial legal advice during the organizational phase, digital strategy, host broadcasting, online broadcast services, B2B client and VIP hospitality services and management of the television production. We are also engaged with the CHL’s digital offering, including, among others, the design and support of the CHL’s website and app, content creation for social media and numerous fan engagement tools including predictor games and fan votes. We also provide a number of additional services to the EHF, including the use of official event logo and composition of logo and official mascots, full digital, online and social media integration as well as VIP hospitality tickets.

We further support and provide services, including shirt sponsorship, hospitality services and LED advertising to a number of French football clubs, such as AS Monaco FC, Lille OSC, FC Nantes and Toulouse FC. In addition, we provide VIP hospitality services to the LFP and serve as hospitality sales agent for major sports events in the Stade de France, the national stadium of France located in Paris.

LED boards have emerged at the forefront of perimeter board advertising. We own 17 LED outdoor systems as of December 31, 2019. We provide these systems to major rights owners such as FIFA, UEFA, the EHF, national federations in various sports and football clubs, as well as for multi-day events, and other sports such as tennis, basketball and volleyball.

The latest addition to our advertising offering is an innovative, machine learning-driven virtual advertising solution, Viz Eclipse, one of our main collaborations in the artificial intelligence area. Viz Eclipse is a product developed through our partnership with Vizrt to increase value creation through virtual advertising. This solution enables us to create targeted, unobtrusive advertisements overlaid into content. Using Viz Eclipse, we are able to offer localization (marketing different products in different locations for the same client), regional sales (differentiating the brands marketed depending upon on the location of the consumer) and content access (differentiating the brands or products marketed depending on how the content is accessed (such as a live event, a replay, the highlights and the social media highlights)).

In 2019, we also made an investment in District Technologies (“District”), a Singapore-based company that harnesses technology to add augmented-reality and location-based technology, including GPS and Bluetooth beacons, to running and exploration. This strategic partnership allows us to operate as the exclusive partner of the District Race app and the associated District Races in Europe, which are currently planned for Berlin and London.

Mass Participation

In 2019, the retained mass participation business organized, operated and licensed 113 mass participation sports events in 12 countries on two continents. The following table sets out the key performance indicators for the Mass Participation segment for the periods indicated.

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Our focus is on the premium segment of the mass participation sports market where we believe athlete engagement is higher, price elasticity (which measures demand relative to a change in price) is lower and there are increased opportunities for further monetization of rights. To compete successfully in this segment of the market, we seek to deliver high levels of athlete satisfaction through top-tier event organization and execution.

We coordinate all aspects of mass participation sports events, from obtaining the permits to negotiating host venue agreements, marketing and driving athlete registration, managing and maintaining the respective websites, procuring staff, executing the events on-site, selling and managing sponsorship agreements, producing and selling of merchandise relating to our events, and managing all communications to athletes. We believe that, through our in-depth knowledge of sports event operations, our insights into our athletes and the mass participation ecosystem, and our excellent organizational and technical capabilities, we are well placed to deliver engaging mass participation sports events and related value-added services to our athletes, partners and fans.

Our Sports Events

Our Mass Participation segment covers a wide range of mass participation sports events, including elite, amateur and corporate properties. We are focused on the experience of the athletes, who are highly motivated and deeply engaged, and strive in our events to capture the imagination of endurance athletes worldwide.

We believe the breadth and diversity of our mass participation sports offerings allows individuals to participate in multiple types of events. Athletes can choose among a wide variety of mass participation sports events and enrich their experiences in, or objectives to compete in, one event by also participating in other events. This may include, for example, an athlete choosing to run a marathon, an obstacle course race or trail run.

Triathlons. Pursuant to the terms of the WEH License Agreement, we organize and operate IRONMAN 70.3 events in China (i.e., licensed-in events). Established in 2006, IRONMAN 70.3 is the half-distance version of the IRONMAN triathlon series and was created as a more accessible event requiring less training and thereby making it easier for athletes to race throughout the year. This event consists of a 70.3-mile race: a 1.2-mile (1.9 km) swim, a 56-mile (90 km) bike ride and a 13.1-mile (21.1 km) half-marathon. In 2019, we organized four IRONMAN 70.3 events in China (four events in 2018). There were approximately 4,300 gross-paid athletes in our IRONMAN 70.3 events in China in 2019 (compared to approximately 3,700 gross-paid athletes in 2018). The average entry fee for each gross-paid athlete for our licensed-in IRONMAN 70.3 events was €194 in 2019 (€190 in 2018).

We also organize and operate races affiliated with IRONMAN 70.3 series, such as the IRONKIDS events. IRONKIDS offers various events for children. These affiliated events take place often as part of an IRONMAN 70.3 weekend.

Running. Our running events portfolio includes a portfolio of marathons and half-marathons, and corporate fitness events. In 2019, we organized and operated 57 running events, with approximately 0.5 million gross-paid athletes in aggregate (59 events with approximately 0.6 million gross-paid athletes in 2018). We believe that, like triathlon events, running events create an appealing platform for brands and create opportunities to increase revenue through license fees, sponsorships and merchandising.

Road Running. Our road running portfolio includes a substantial array of marathons, including the Rock ‘n’ Roll Marathon Series in China (which we organize and operate pursuant to the WEH License Agreement), and shorter distance events. The Rock ‘n’ Roll Marathon Series is designed to provide a different feel from other marathons, by combining running, travel and entertainment for participating athletes. For example, live bands and cheer teams line the streets of these marathons and the events are concluded by a headliner music concert. In 2019, we organized and operated five Rock ‘n’ Roll Marathon Series events in China (five events in China in 2018).

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In addition to the licensed-in Rock ‘n’ Roll Marathon Series events, we also own and operate a significant number of other marathons. In China, we acquired the Double Heritage Series of marathons in 2017, which includes the Dun Huang Marathon, Wen Jiang Marathon and Chengdu Double Heritage International Marathon. We also acquired the exclusive rights (including management of the event as well as all marketing, commercial TV and media rights) to the Rome Marathon, one of the top 10 European marathons, from 2020 to 2023. Our portfolio also includes city marathons and half-marathons, among others, the Chengdu Marathon and the Shenyang International Marathon for which we secured the operating rights for a period of three years in the third quarter of 2019.

Our road running portfolio also includes a number of 5 km to 10 km races, such as the Vienna Night Run, which takes place annually in the center of Austria’s historic capital city as well as other 5-km and 10-km races that occur in conjunction with our city marathon or half-marathon weekends.

Trail running. We also consider trail running (races on hiking trails instead of roads or tracks) to be an increasingly popular mass participation sports event category. In April 2019 we acquired Threshold, which added trail running sports events to our portfolio.

Corporate Fitness. We also organize and operate our own short-distance running events in the corporate fitness market aimed at people of all ages and taking place in a non-competitive and community-oriented setting. Our B2Run running series took place in 38 host cities across seven countries in 2019, and attracted approximately 11,000 companies to rally their employees and approximately 250,000 participating athletes in 2019 (compared to approximately 11,000 companies and approximately 225,000 participating athletes in 36 host cities across seven countries in 2018). The average entry fee per gross-paid athlete for our B2Run running series events in Germany and Switzerland was €24 in 2019 and €25 in both 2018 and 2017. Strengthening our portfolio is the acquisition in April 2019 of the Vienna Business Run, a popular annual 4.1-km road race.

Road Cycling. In 2019, we organized two road cycling events with approximately 4,000 gross-paid athletes in aggregate. In a bid to expand our portfolio through the acquisition of promising sport event organizers, we acquired UK-based Threshold Sports in April 2019. The Deloitte Ride Across Britain took place in September 2019 with nearly 1,000 cyclists participating in the 980-mile (1,500 km) ride over nine days. It was the 10^th edition of the event and the first time we have been involved following our acquisition of Threshold Sports. The other event in our portfolio is the Granfondo Campagnolo Roma, which we organize through an exclusive commercial agreement.

Obstacle Course Racing. A relative newcomer in our portfolio of mass participation sports events is obstacle course racing (races in which competitors, traveling on foot, must overcome various physical challenges in the form of obstacles). Our obstacle running portfolio is currently focused on Germany, with the intention to further expand internationally, and organized around two brands, XLETIX Challenges and Muddy Angel Runs (women-only 5km mud races), which we acquired in 2018. There were 25 obstacle course racing events under these brands in 2019 with approximately 190,000 participating athletes in aggregate (26 events with approximately 180,000 participating athletes in 2018).

Operations and Key Capabilities

We organize, operate and monetize our mass participation sports events ourselves, and derive a significant portion of our revenue from event entry fees and other event-related fees, such as host city fees, and otherwise monetize our intellectual property through sponsorship, event and product licensing, merchandising and media distribution opportunities. Our events revenue consists primarily of event entry fees, revenue generated by fees charged to participating athletes, expo fees, rentals at the events by outside parties, host city fees, amounts received from the city or local organizing committee to support a hosted event, photo commissions and revenue earned from an outside photography service for exclusive access to our athletes on course at events.

We have, over time, developed proprietary tools to improve efficiency and to create additional business and monetization opportunities. We have also developed unique capabilities in connection with our events including the development and use of measurement tools for athlete satisfaction, metrics around athlete retention and development, and systems for the accurate and timely budgeting and delivery of our events.

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Event Organization. We have the operational capabilities and efficiencies to successfully organize and operate events worldwide. We have established processes that we consider to be best-in-class, which provide full-service capabilities and know-how to match the complexities and minute organizational details required to operate and efficiently deploy events globally. As each event typically involves an exhaustive checklist of items to be organized and coordinated among numerous parties, good relationships with parties in the process are key to make our events a success. We believe that our success in putting on events is evident by the continued significant interest and engagement that we see from sports enthusiasts worldwide in our events.

We have built valuable relationships with host cities and local authorities. Our relationships with local authorities are vital to our event organization process, because we rely on their cooperation to receive necessary permits, obtain permission to block roads, and receive the necessary security coverage.

We benchmark all aspects of our performance. We believe our experience, proprietary capabilities and global scale allows us to provide safe, top-tier and highly engaging experiences for our athletes that lead them to compete in more events, thus driving further engagement and to foster our community of athletes while delivering events on time and on budget and offering the potential for scalability in terms of further expansion of our mass participation sports events portfolio.

Further Monetization of Brand and Event Rights. Many of our mass participation sports events attract favorable demographics of athletes from a sponsorship perspective. We seek to create further value from our events through sponsorship, merchandising and other activities.

For our mass participation sports events, we seek to enter into multiple-year sponsorship contracts and derive additional value from such relationships. Our merchandising revenue include the sale of apparel and other merchandise at events on-site as well as through e-commerce platforms.

We believe we can further enhance our events business by developing our in-house production of inspiring series, increasing the scale of our event production coverage and integrating generated content. We are currently also developing and further exploring our broadcasting and distributing possibilities to create live coverage for our portfolio of mass participation sports events. Through partnerships we believe we can create valuable sponsor assets and are better able to leverage our portfolio of mass participation sports events.

Competition

The full-service sports marketing industry is fragmented by nature, consisting of a small number of global full-service companies and numerous smaller companies focusing on specific sports. There are only a number of companies that compete with us on a global and all commercial lines basis. On the global level and with respect to all of our commercial lines, we compete with Endeavor and Lagardère Sports. From a business perspective, we compete across many different industries and within many different markets. We believe our primary sources of competition include, but are not limited to:

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Information Technologies

We have focused on, and will continue to invest in, our technological infrastructure.

Infront has an integrated technology platform focusing on fan data, analytics and digital sports marketing. This technology platform includes a CRM for fan relationship management as well as data management capabilities for fan tracking, targeting and re-marketing, data analytics for fan segmentation, content optimization and profiling, content analytics for social listening, content automation and optimization and monetization from ad technologies, merchandising and subscriptions. Infront’s CRM solution further supports the process for contracts’ management from the initial negotiations to signing thereof. Infront also has consolidated financial systems in place focused on, among others, forecasting, (long-term liquidity) planning, accommodating increased reporting requirements under IFRS, periodic reporting of cash flows and creating visibility and control of bank balances and payment flows through an integrated treasury management system. Infront has processes in place for regular back-ups, including off-site storage of data, and the implementation of a data back up and replication concept. All core business applications are running on centralized servers on Infront’s headquarters in Zug, and key knowledge about Infront’s IT infrastructure and business applications is present in an in-house team.

Intellectual Property

In our Mass Participation segment, we are the owners of a portfolio of brands across a range of sports, including running, obstacle course races and road cycling.

We own trademarks related to owned events such as the B2Run running series and XLETIX Challenges. Our trademarks are in the form of plain-text words or design logos, or both. Our trademark coverage varies by country, largely depending on whether we have events or licensees in that country. As at the end of 2019, excluding the WEH business, we held approximately four trademarks registered in the United States, and approximately 348 trademarks registered in jurisdictions outside of the United States.

Our trademark registrations apply to various specific classes of goods and services. Most of our trademark registrations relate to the conducting of athletic events. Others of our trademark registrations apply to apparel and other consumer products.

Seasonality

Most of the event-related revenue as well as event-related expenses are recognized in the month in which an event occurs. In our Mass Participation segment, revenue and direct expenses tend to be higher in the second and third quarters of our fiscal year given our event calendar. In our Spectator Sports segment, revenue and expenses tends to be lower in the third quarter as winter sports events have not yet commenced and there is less activity in European football compared with other quarters. Over the course of the four quarters, fluctuations in gross profit shows a largely similar pattern to fluctuations in revenue. Other than in years of a FIFA World Cup^™, our results of operations in our DPSS segment tend to have less seasonal fluctuations compared to our other segments as a result of limited seasonality in the event-related DPSS business, such as the Lega Serie A host broadcast production, which spans a large portion of the year, as well as lack of seasonality in other portions of the business, such as digital media advisory.

Generally, our overhead expenses, such as personnel as well as office and administration expenses, do not show the same volatility throughout the year compared with fluctuations in revenue and gross profit, as they are not primarily impacted by peaks in operational activities in the same way as direct project income and expenditure. Our depreciation and amortization expenses as well as our financial expenses are generally also stable throughout the year.

Expected Disposal

WEH’s Mass Participation Business

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WEH has a global mass participation sports event portfolio built principally around the strength of globally recognized brands and related intellectual property in mass participation sports owned by it, including triathlon, running and mountain biking. WEH seeks to create inspirational sports experiences for athletes and establish highly engaged and dedicated communities for athletes. WEH believes that, through its in-depth knowledge of mass participation sports, global insights into athletes and technical capabilities, WEH is well-placed to deliver engaging mass participation sports events to athletes, partners and fans worldwide. In addition, WEH is able to develop unique insights from the wealth of data generated from athletes enabling it to amplify athlete engagement, increase effectiveness of sponsorship arrangements and otherwise maximize the income potential for sports events, including through targeted services and cross-selling opportunities.

WEH generally organizes, operates and monetizes the events itself, and derives a significant portion of revenue from event entry fees and other event-related fees, such as host city fees, and otherwise monetizes its intellectual property through sponsorship, event and product licensing, merchandising and media distribution opportunities.

WEH’s portfolio includes iconic triathlon, running and mountain biking events globally and is built around a stable of globally recognized brands, including IRONMAN, IRONMAN 70.3, the Rock ‘n’ Roll Marathon Series, and the Cape Epic mountain biking event. In 2019, WEH owned 162 mass participation sports events in 20 countries on six continents. The following table sets out the key performance indicators for WEH’s mass participation business for the periods indicated.

WEH’s focus is on the premium segment of the mass participation sports market where it believes athlete engagement is higher, price elasticity (which measures demand relative to a change in price) is lower and there are increased opportunities for further monetization of rights. To compete successfully in this segment of the market, WEH seeks to deliver high levels of athlete satisfaction through top-tier event organization and execution.

WEH undertakes its event organization and related activities relating to triathlon, running and mountain biking principally from its headquarters in Tampa, Florida.

Triathlons. WEH organizes, operates and licenses triathlons worldwide. In 2019, it organized or licensed 181 (out of which four were events licensed by WEH to WSC) triathlon events with over 273,000 gross-paid athletes (186 events with over 254,000 gross-paid athletes in 2018).

IRONMAN. Established in 1978, this full-distance event consists of a 140.6-mile race: a 2.4-mile (3.8 km) swim, a 112-mile (180 km) bike ride and a 26.2-mile (42.2 km) marathon. The completion of an IRONMAN triathlon is regarded by athletes as the pinnacle of endurance athletic accomplishments. In 2019, there were 41 IRONMAN full-distance events in 24 countries (41 events in 2018). The IRONMAN World Championship is held annually in Kailua-Kona, Hawaii and involves approximately 2,500 qualified and eligible athletes each year. Worldwide, there were approximately 80,000 gross-paid athletes in IRONMAN owned events in 2019 (approximately 73,000 gross-paid athletes in 2018). The average entry fee for each gross-paid athlete for IRONMAN events globally was €517 in 2019 (€494 in 2018 and €507 in 2017).

IRONMAN 70.3. Established in 2006, IRONMAN 70.3 is the half-distance version of the IRONMAN triathlon series and was created as a more accessible event requiring less training and thereby making it easier for athletes to race throughout the year. This event consists of a 70.3-mile race: a 1.2-mile (1.9 km) swim, a 56-mile (90 km) bike ride and a 13.1-mile (21.1 km) half-marathon. In 2019, there were 113 IRONMAN 70.3 events in 50 countries (109 events in 2018), including the IRONMAN 70.3 World Championship in Nice, France (unlike the full-distance IRONMAN World Championship, the location of the IRONMAN 70.3 World Championship changes from year to year, with recent championships in Canada, United States, Austria, Australia and South Africa). The IRONMAN 70.3 World Championship currently involves over 5,200 athletes. Worldwide, there were approximately 150,000 gross-paid athletes in IRONMAN 70.3 owned events in 2019 (compared to approximately 133,000 gross-paid athletes in 2018). The average entry fee for each gross-paid athlete for IRONMAN 70.3 events globally was €250 in 2019 (€229 in 2018 and €239 in 2017).

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5150. Established in 2012, the 5150 Series is our shorter distance triathlon series (Olympic triathlon distance), consisting of a 51.5-km race: a 1.5-km (0.9 mile) swim, a 40-km (24.8-mile) bike ride and a 10-km (6.2-mile) run.

WEH also owns, organizes and operates races affiliated with the IRONMAN or IRONMAN 70.3 series, such as the IRONKIDS and Iron Girl events. IRONKIDS offers various events for children. Iron Girl, a women-only event series, include running, walking, triathlon and duathlon races. These affiliated events take place globally, often as part of an IRONMAN or IRONMAN 70.3 weekend. In addition to IRONMAN-affiliated events, WEH also owns and operates the Noosa and Mooloolaba Triathlons, which are annual Olympic distance triathlons held in the Australian state of Queensland, and the Hamburg Triathlon, which includes both sprint and Olympic distance triathlons.

From time to time, WEH manages mass participation sports events for third parties, for example, ITU-sanctioned events as part of the ITU’s World Triathlon Series. It also has a cooperation framework with the International Triathlon Union, or ITU, to develop and grow the sport of triathlon globally. This cooperation focuses on standardizing rules, further collaborating on anti-doping efforts, fostering national federation relations, sanctioning, and developing collaborative marketing initiatives to grow the sport at the age-group level.

Running. WEH’s running events portfolio includes a portfolio of marathons and half-marathons and trail runs. In 2019, WEH organized or licensed 46 running events, with approximately 0.5 million gross-paid athletes in aggregate in these events (48 events with approximately 0.4 million gross-paid athletes in these events). We believe that, like triathlon events, running events create an appealing platform for brands and create opportunities to increase revenue through license fees, sponsorships and merchandising.     

Road Running. WEH’s road running portfolio includes a substantial array of marathons, including the Rock ‘n’ Roll Marathon Series, and shorter distance events. Established in 1998 and acquired by WEH in 2017, the Rock ‘n’ Roll Marathon Series is designed to provide a different feel from other marathons, by combining running, travel and entertainment for participating athletes. For example, live bands and cheer teams line the streets of these marathons and the events are concluded by a headliner music concert. In 2019, there were 30 Rock ‘n’ Roll Marathon Series events (including the licensed-in events) in ten countries (34 events in eight countries in 2018). Worldwide, there were over 300,000 gross-paid athletes in Rock ‘n’ Roll Marathon Series events in 2019 (over 350,000 gross-paid athletes in 2018).

In addition to the Rock ‘n’ Roll Marathon Series, WEH also owns and operates a significant number of other marathons globally. Its portfolio also includes a number of city marathons and half-marathons, among others, the Standard Chartered Singapore Marathon; the Auckland Marathon; the Hawkes Bay International Marathon; the Runaway Noosa Marathon; the Queenstown International Marathon; and the Santa Cruz Half Marathon.

Its road running portfolio also includes a number of 5 km to 10 km races, such as the Across the Bay 10 km race, which takes place annually in Maryland (United States), as well as other 5-km and 10-km races that occur in conjunction with our city marathon or half-marathon weekends.

In May 2019, WEH acquired a portfolio of events, including The Sun-Herald City2Surf, a fun run which takes place in Sydney, Australia, with participants running to Bondi Beach. In addition, the events portfolio included other mass participation sports events in Australia, including the Sydney Morning Herald Half Marathon, the Melbourne Corporate Triathlon and Carman’s Women’s Fun Run.

Trail running. WEH also has trail running (races on hiking trails instead of roads or tracks) in its portfolio. It hosts the Ultra Trail Australia, which includes, among other races, a 100km race taking place on trails located in some of Australia’s most scenic locations. In 2019, WEH acquired the Tarawera Ultra Trail in New Zealand, which includes a 160-km race, among other races.

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Mountain Biking. WEH’s mountain biking events aim to marry a passion for outdoor adventure and exploration with endurance riding, and all take place in iconic locations.

In 2019, WEH organized eight mountain biking events with approximately 7,600 gross-paid athletes in aggregate (nine events with approximately 8,900 gross-paid athletes in 2018). Among these events is the Cape Epic, an annual mountain bike stage race held in the Western Cape of South Africa, what we believe is the preeminent event of mountain biking. Its mountain biking portfolio also includes, among others, the Swiss Epic, The Pioneer (a six-day mountain bike stage race through New Zealand’s Southern Alps) and the Cape to Cape, an Australian mountain biking multi-stage endurance race. These events are complemented by ownership of other mountain biking events such as Port to Port, Motatapu and Wines2Whales.

Operations and Key Capabilities

WEH organizes, operates and monetizes its mass participation sports events itself, and derives a significant portion of our revenue from event entry fees and other event-related fees, such as host city fees, and otherwise monetizes its intellectual property through sponsorship, event and product licensing, merchandising and media distribution opportunities. WEH’s events revenue consists primarily of event entry fees, revenue generated by fees charged to participating athletes, expo fees, rentals at the events by outside parties, host city fees, amounts received from the city or local organizing committee to support a hosted event, photo commissions and revenue earned from an outside photography service for exclusive access to its athletes on course at events.

Information Technologies

WEH has an integrated CRM platform that contains over 3 million unique athletes and allows WEH to utilize tools for email marketing, customer service, e-commerce and captures all athlete event data with split timings. WEH’s CRM system also feeds its data warehouse that enables data analysis, business intelligence, or BI, reporting and market segmentation. Key knowledge about WEH’s IT infrastructure is present in an in-house team. The 2019 roadmap for information technology to enhance WEH’s business unit integration includes an athlete survey tool, new POS system for onsite merchandise, sales and inventory management with automated contract generation and social integration.

Intellectual Property

In its Mass Participation segment, WEH is the owner of a portfolio of iconic brands across a range of sports, including triathlon, running, mountain biking and trail running.

WEH holds the rights, in the United States and various other countries, to the name “IRONMAN” and its logo, and the associated “M-DOT” logo for marketing competitions involving swimming, biking, and running. WEH owns an additional number of trademarks around our mass participation sports events, including trademarks such as IRONMAN 70.3 as well as trademarks related to other owned events such as the Rock N’ Roll Marathon Series and the Cape Epic series. Trademarks are in the form of plain-text words or design logos, or both. WEH’s trademark coverage varies by country, largely depending on whether it has events or licensees in that country. As at the end of 2019, WEH held approximately 174 trademarks registered in the United States, and approximately 1,018 trademarks registered in jurisdictions outside of the United States.

Seasonality

Most of the event-related revenue as well as event-related expenses are recognized in the month in which an event occurs. In WEH’s mass participation business, revenue and direct expenses tend to be higher in the third and fourth quarters of its fiscal year given the event calendar.

Generally, WEH’s overhead expenses, such as personnel as well as office and administration expenses, do not show the same volatility throughout the year compared with fluctuations in revenue and gross profit, as they are not primarily impacted by peaks in operational activities in the same way as direct project income and expenditure. Depreciation and amortization expenses as well as financial expenses are generally also stable throughout the year.

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The following diagram illustrates our corporate structure, including our significant subsidiaries and our VIE, as of the date of this annual report.

Contractual Arrangements with our VIE and its Shareholders

While the revenue contribution of our operations in China is relatively small, we expect to continue to grow our presence in China and hence our revenue from China over time.

Due to foreign investment restrictions in the PRC and other regulatory considerations, we conduct certain business activities in China through our VIE, and its subsidiaries, based on a series of contractual arrangements. As a result of these contractual arrangements, we exert effective control over our VIE and consolidate its and its subsidiaries’ operating results in our consolidated financial statements under IFRS. These contractual arrangements may not be as effective as direct ownership in providing us with control over our VIE. If our VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us effective control over our business operations in the PRC and may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure will be effective under PRC law. For details of these and other risks associated with our corporate structure and contractual arrangements with our VIE, see “Item 3. Key Information – D. Risk Factors – Risks Related to Our Corporate Structure” and “ – Risks Related to our Operations in China – Risks Related to our VIE Arrangements.”

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We summarize below the contractual arrangements by and among Infront China, our VIE and its shareholders. In the opinion of Jingtian & Gongcheng Attorneys at Law, our PRC counsel:

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations. We have been further advised by our PRC counsel that if the PRC government were to find that the contractual arrangements do not comply with applicable restrictions, including restrictions on foreign investment, or if the PRC government were to otherwise find that we, our VIE, or our or its respective subsidiaries are in violation of PRC law or regulations or lack the necessary permits or licenses to operate our business in China, we could be subject to severe penalties, including being prohibited from continuing operating the businesses currently operated by our VIE and its subsidiaries in China.

Pledge Contract

Pursuant to the pledge contract dated March 14, 2019 by and among Infront China, our VIE and its shareholders, the shareholders of our VIE pledged all of their equity interests in our VIE to Infront China, to secure our VIE’s and its shareholders’ performance of their respective obligations under, where applicable, the exclusive call option agreement, exclusive services agreement and powers of attorney (described below). Such pledge of equity interests in our VIE has been registered under PRC law. If our VIE or any of its shareholders breaches its contractual obligations under these agreements, Infront China will be entitled to certain rights, including but not limited to the rights to auction or privately sell the pledged equity interests. Without the prior written consent of Infront China, the shareholders of our VIE may not transfer the pledged equity interests, or place or permit the existence of any other encumbrance on the pledged equity interests.

Exclusive Call Option Contract

Pursuant to the exclusive call option contract dated March 14, 2019 by and among Infront China, our VIE and its shareholders, the shareholders of our VIE granted Infront China an irrevocable and exclusive right to purchase, or to designate one or more persons to purchase, all or part of the equity interests held by the shareholders of our VIE at a price equals to the lower of (i) the actual capital contributions paid in the portion of the registered capital by the relevant shareholder for the equity interests to be purchased and (ii) the lowest price permitted under PRC law. Without the prior written consent of Infront China, the shareholders of our VIE may not transfer their equity interests in our VIE, or create any other encumbrance on their equity interests in our VIE.

Exclusive Services Agreement

Pursuant to the exclusive services agreement dated March 14, 2019 by and between Infront China and our VIE, our VIE engaged Infront China as the exclusive provider of specified business support and technical and consulting services. Our VIE may not accept the same or similar services provided by any third party during the term of the agreement. Infront China is permitted to engage other persons to perform the services contemplated by the agreement. Our VIE agrees to pay to Infront China specified service fees equal to the sum of 100% of the net profit of our VIE (the amount can be adjusted by consent of Infront China) on an annual basis.

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Powers of Attorney

Pursuant to the respective powers of attorney dated March 14, 2019 issued by each shareholder of our VIE, each shareholder of our VIE irrevocably authorized Infront China to act on such shareholder’s behalf as his/her exclusive agent and attorney with respect to all matters concerning such shareholder’s shareholding in our VIE.

Our group’s principal office is in Tower B, Wanda Plaza, 93 Jianguo Road, Chaoyang District, Beijing, where we lease and occupy office space with an aggregate floor area of approximately 353.6 square meters. We also lease and occupy office space located in Tower C, Oriental Media Centre, 4 Guanghua Road, Chaoyang District, Beijing with an aggregate floor area of approximately 1,034.5 square meters.

Infront’s headquarters are in Zug (Switzerland), where we lease and occupy an aggregate floor area of approximately 5,613 square meters.

In addition to our headquarters, we (excluding the WEH business) have over 53 offices in 16 countries worldwide. We lease substantially all of the properties we use to operate our business. We believe that our facilities and offices are adequate to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities, principally through leasing of additional properties, to accommodate our future expansion plans.

In addition, the COVID-19 Risks have begun to have broader macro-economic implications, including the possibility of a global recession, which could adversely impact discretionary spending and, in turn, product sponsorship.

We currently are unable to predict the extent and duration of the effects of the COVID-19 Risks. For a discussion of our cost management measures as well as our ongoing discussions with rights owners in respect of our capital commitment and minimum revenue guarantee obligations, see “Item 3. Key Information – D. Risk Factors – Overriding Risks Related to the Outbreak and Spread of COVID-19.”

We had €163.2 million in cash and cash equivalents as of December 31, 2019, and €198.1 million as of March 31, 2020. Our cash and cash equivalents primarily consist of cash placed with banks and cash on hand, as well as short-term deposits or other financial institutions, which have original maturities of three months or less at the time of purchase and are readily convertible to known amounts of cash. We expect the WEH sale to close in the second quarter of 2020. We intend to use the proceeds from the WEH sale to repay the principal amount of US$230 million (€211.5 million) and related interest and fees outstanding under our Senior Term Loan Facility as well as US$50 million (€46.0 million) remaining outstanding under the pre-IPO promissory note (see “– B. Liquidity and Capital Resources – Indebtedness”). As for the balance of the proceeds, in light of the many and significant uncertainties we and the broader sports ecosystem face due to the COVID-19 Risks, we continue to evaluate (in the context of developing business conditions) whether we should apply the proceeds to strengthen our balance sheet, use the proceeds for general corporate purposes or, subject to shareholder approval, return capital to our shareholders.

Our approach to managing liquidity is to ensure, as far as possible, that we are able to meet our liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation. In March 2020, we completed our 364-day term loan refinancing to reduce our finance costs in the context of the challenging global environment created by COVID-19. See “–B. Liquidity and Capital Resources – Indebtedness.” The Infront credit facility has a leverage ratio covenant (see “– B. Liquidity and Capital Resources – Indebtedness”), from which we expect we will need relief due to the impact of COVID-19 on our revenue. Failure to do so could result in an acceleration of the debt outstanding under the Infront credit facility unless we and the lenders reach agreement to avoid a default and acceleration. We are in discussion with our lenders with respect to covenant relief. As we recorded net current liabilities as of December 31, 2019, the directors have given careful consideration to our future liquidity and performance and our available sources of finance in assessing whether we will have sufficient financial resources to continue as a going concern. Having considered that our cash flow management forecast and analysis for 2020 has presented as a positive result, the directors are confident that we are able to meet in full our financial obligations as they fall due for the next 12 months.

WEH Sale. Following the completion of the WEH sale, our Mass Participation segment will no longer include the WEH business, namely the operations described under “Item 4.B. Business Overview – Expected Disposal.” Our historical financial statements have not been restated to give effect to the WEH sale and, accordingly, the following discussion covers our entire consolidated business during the periods indicated, without giving effect (pro forma or otherwise) to the WEH sale. As of and for year ended December 31, 2019, the WEH business represented 25% of our revenue and 27% of our gross profit for the period, and 47% of our total assets and recorded a net loss of €259.5 million, mainly due to impairment losses.

Overview

We are a global sports events, media and marketing platform with significant intellectual property rights, long-term relationships and broad execution capabilities through which we create value for stakeholders in all parts of the sports ecosystem, from rights owners to brands and advertisers, and from fans to athletes. We own, or otherwise have contractual rights to, an extensive portfolio of global, regional and national sports properties from which we seek to generate revenue across the value chain, including events operation and support, media production and media distribution, sponsorship and marketing, digital solutions and ancillary services.

The nature of our engagement with the sports ecosystem depends on whether or not we are the rights owner of the relevant sports events. This split, in turn, is reflected in our three segments: Mass Participation, where we are generally the rights owner (in other words, we own the relevant intellectual property for the sports event), and Spectator Sports and DPSS, where we are generally not the rights owner but offer a range of capabilities and services for the benefit of rights owners, rights-out clients, such as brands and media companies, and other stakeholders. For a more detailed description of our segments, see “Item 4. Information on the Company – B. Business Overview – Our Segments.”

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In both our Spectator Sports and DPSS segments, we apply our in-house DPSS capabilities. Revenue and costs with respect to these services are generally allocated to our Spectator Sports segment if provided in the same contract that includes a rights-in arrangement with a rights-in partner or as part of a rights-out arrangement with a rights-out client. If we enter into a separate service contract with a rights-in partner, rights-out client or other stakeholder, the related revenue and costs are allocated to our DPSS segment. As we provide DPSS services to our partners in our Spectator Sports segment in connection with rights-in or rights-out arrangements, we report cost of sales relating to the provision of such services. We often do not recognize additional revenue from the provision of these services.

The following table presents our segmental revenue and segmental gross profit (revenue minus cost of sales only) for the periods indicated.

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Our Revenue-Generation Models    

We generate revenue based on various models, depending as a threshold matter on whether or not we own the intellectual property to be monetized.

Our Spectator Sports and DPSS Segments    

In our Spectator Sports and DPSS segments, we rely on contractual arrangements to obtain the rights we can then monetize, and otherwise to provide a comprehensive suite of sports-related services through our DPSS capabilities, either as part of a rights-in or rights-out arrangement (accounted for under our Spectator Sports segment) or as part of a separate service contract (accounted for under our DPSS segment).

We have built a contracts portfolio based on long-standing relationships. In our portfolio, we seek to maintain a well-diversified and balanced mix of rights-in arrangements and a comprehensive service offering, which we consider essential to reduce dependency on any single counterparty or revenue stream. No single rights-in or services contract in our current portfolio accounted for more than 10% of our revenue (excluding reimbursement revenues, see discussion below of the “cost-plus” model) in 2019, 2018 and 2017.

The following table sets forth the various contractual models from which we derive revenue in our Spectator Sports and DPSS segments, including examples of our relationships that apply to each model.

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Our holistic approach to engaging with partners means that the requirements of our counterparties generally dictate the particular contract model used in each case. The determination of which contractual model is applied, can have significant implications for our results of operations, including due to the different accounting treatment applicable to each model.

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Where we provide a minimum revenue guarantee, we record the contingent liabilities which arise as a result thereof similarly to capital commitments incurred as part of the full rights buy-out contractual model. See “Item 5. Operating and Financial Review and Prospects – F. Tabular Presentation of Contractual Obligations” for a discussion of such commitments. However, unlike the full rights buy-out model, payments of the minimum revenue guarantee to the rights owner are not, in general, expensed as cost of sales. Such costs are only reflected in our consolidated statement of profit or loss as revenue reduction in cases where the revenue achieved is below the minimum revenue guarantee and it is determined that such costs will not be reimbursed in future periods. Depending on the contract, the revenue in excess of the minimum revenue guarantee is split between us and the rights owner.

While such amounts may have a negligible direct gross profit impact, to incentivize us to control costs, our rights-out clients generally consider the level of reimbursement revenues and reimbursement costs when assessing our performance and determining our compensation on the overall project, and can therefore indirectly lead to higher or lower commissions and gross margins.

Given the cyclical nature of the events for which we provide media production services on a cost-plus basis and the significance of such events, the reimbursement revenues and reimbursement costs reflected on our consolidated statement of profit or loss can have a significant impact on the comparability of our results of operations, in terms of revenue and cost of sales, but not (generally) gross profit, between periods. See “—Other Factors Affecting our Results of Operations across Segments—Cyclicality.”

Our spectator sports and DPSS businesses are generally based on multi-year rights-in and services contracts and, accordingly, our results of operations from these businesses are impacted by the duration of the contracts in our portfolio, our ability to renegotiate terms prior to expiration, our ability to extend or renew contracts, and our ability to replace contracts that we are unable to, or chose not to, renew.

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The remaining duration as of December 31, 2019 of our rights-in contracts ranged from one month to 21 years. As of December 31, 2019, the remaining duration of our services contracts ranged from three months to 6.5 years. For a comprehensive overview of our contract portfolio and duration of such rights, see “Item 4. Information on the Company – B. Business Overview – Our Segments.” The following sets out the historical revenue from contractual arrangements from our spectator sports and DPSS businesses that are set to expire through 2022:

During the life of a contract, we engage with our counterparties to identify their needs and requirements going forward and how we can add value in addressing them. Through this process, we have historically had success in retaining and expanding existing relationships. As we enter into new contracts, the contractual model and the scope of our contractual relationship can change (the scope may either expand or contract), which can have significant implications on our levels of revenue and profitability achieved from a particular relationship. In the case of a full rights buy-out arrangement, we may, in return for wider rights, increase future payment obligations and, therefore, increase capital commitments going forward. In the case of commission with minimum revenue guarantee arrangement, we may change the risk-return profile if the minimum revenue guarantee is lowered or removed against a lower commission rate. Furthermore, profit share elements might be introduced or changed.

We might also shift contractual models in a particular relationship, for example a full rights buy-out model may switch to a commission-based model or vice versa. While, depending on the contractual parameters, the impact in terms of gross profit might not be affected by such changes, they can have a significant impact on the comparability of our results of operations from period to period. For example, if we shift from a full rights buy-out model to a commission-based model, revenue would be lower because, instead of the entire project revenue being recognized, only the commission earned would be accounted for. At the same time, the associated cost of sales will be lower as compared to a full rights buy-out model as no acquisition costs associated with the contract are incurred. Assuming the same gross profit, the absolute profit margin under the contract would be expected to increase significantly.

Reflecting the strength of the relationships that we have established with rights-in partners, rights-out clients and other stakeholders and the scope of capabilities we are able to offer in the evolving sports ecosystem, we currently anticipate that we will continue to derive significant business from many of the counterparties of contracts set to expire beyond the current term of the relevant contract, including with FIFA and Lega Serie A. We expect to continue to work with FIFA on various projects (including host broadcast production as well as media and sponsorship sales) and to leverage our long-term relationship with Lega Serie A beyond the terms of our existing contracts. We continue to engage with these and other counterparties to identify the nature and scope of our future business in anticipation of the expiry of current contracts.

Our Mass Participation Segment

In our mass participation sports business, we derive a significant portion of our revenue directly from participating athletes themselves, principally in the form of entry fees, which accounted for 45%, 44% and 43% of our Mass Participation segmental revenue in 2019, 2018 and 2017, respectively.

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The table below presents a breakdown of our entry fees as between the WEH business and the retained mass participation business for the periods indicated. The increase between 2019 and 2018 for the WEH business was attributable to growth in the number of gross-paid athletes, resulting from, among others, the addition of new mass participation sports events, such as Sun-Herald City2Surf, and the continued strong demand for participation in IRONMAN and IRONMAN 70.3 events. The increase between 2019 and 2018 for the retained mass participation business was attributable to an increase in gross-paid athletes resulting from the addition of newly acquired mass participation sports events (such as Threshold events, Megamarsch and Vienna Business Run), as well as the organic growth of existing mass participation sports events.