Announces Plan to Repurchase Shares and Issue
First-Ever Quarterly Dividend
Endeavor Group Holdings, Inc. (NYSE: EDR) (“Endeavor”, “EGH”, or
the “Company”), a global sports and entertainment company, today
released its financial results for the quarterly period ended March
31, 2023.
Highlights
- Announced two significant transactions in April:
- Transformational deal to combine UFC and WWE to form a new,
publicly listed company
- Agreement to sell IMG Academy for an enterprise value of $1.25
billion
- Expect to commence an event-driven share repurchase of up to
$300 million of Class A common stock
- Plan to begin making quarterly cash dividend payments
- Record Q1 revenue and Adjusted EBITDA for Owned Sports
Properties segment
- Saw heightened demand for events, including record attendance
and sponsorship sales at the Miami Open
Q1 2023 Consolidated Financial Results
- Revenue: $1.597 billion
- Net income: $36.3 million
- Adjusted EBITDA: $306.4 million
“This quarter, we continued to deliver solid results and set a
number of financial and attendance records across our owned sports
properties and marquee events,” said Ariel Emanuel, CEO, Endeavor.
“Our agreement to sell IMG Academy, together with the planned share
repurchase and quarterly dividend announced today, are strong
examples of our commitment to maximizing return for our
shareholders. We are excited about the unique opportunity the
proposed combination of UFC and WWE presents, and remain focused on
durable growth as we continue to execute our successful strategy in
content and experiences.”
Segment Operating Results
- Owned Sports Properties segment revenue was $353.3
million for the quarter, up $56.6 million, or 19.1%, compared to
the first quarter of 2022. Growth was primarily driven by an
increase in media rights fees, sponsorships, commercial
pay-per-view, and event-related revenue at UFC, primarily resulting
from an additional Pay-Per-View event in the quarter, as well as
more events with live audiences. Segment results also improved on
increased ticket sales at PBR and increased revenue from PBR's new
team series. The segment’s Adjusted EBITDA was $185.7 million, up
$36.9 million, or 24.8%, year-over-year.
- Events, Experiences & Rights segment revenue was
$800.8 million for the quarter, up $19.9 million, or 2.5%, compared
to the first quarter of 2022. Growth was primarily driven by record
attendance and sponsorship sales at the Miami Open and growth at
IMG Academy, as well as the addition this quarter of
Barrett-Jackson, which was acquired in August 2022. Growth was
partially offset by the discontinuation of On Location’s music
festival business in Mexico, which accounted for $75 million in the
prior-year quarter. The segment’s Adjusted EBITDA was $108.0
million for the quarter, down $18.0 million, or 14.3%,
year-over-year.
- Representation segment revenue was $350.2 million for
the quarter, down $7.1 million, or 2.0%, compared to the first
quarter of 2022. The decrease in segment revenue was primarily
attributable to $14 million of revenue recorded in the prior year
quarter from the restricted Endeavor Content business, which was
sold in January 2022. Segment revenue was also impacted by a
decrease at our 160over90 business due to the disposition of
certain contracts in the quarter, partially offset by revenue
increases at WME. Adjusted EBITDA was $84.2 million for the
quarter, down $17.5 million, or 17.2%, year-over-year.
- Sports Data & Technology segment revenue was $100.9
million, up $55.8 million, or 123.9%, compared to the first quarter
of 2022. Growth was driven by the addition of OpenBet, which we
acquired in September 2022, as well as growth at IMG ARENA. The
segment’s Adjusted EBITDA was $4.5 million for the quarter, down
$2.0 million, or 31.0%, year-over-year, which was affected by
certain costs at IMG ARENA incurred in advance of the sales
cycle.
2023 Full Year Guidance
- Revenue expected between $5.665 billion and $5.815 billion
- Adjusted EBITDA expected between $1.220 billion to $1.275
billion
- Updated guidance primarily reflects expected sale of IMG
Academy
Balance Sheet and Liquidity
At March 31, 2023, cash and cash equivalents totaled $718.7
million, compared to $767.8 million at December 31, 2022. Total
debt was $5.151 billion at March 31, 2023, compared to $5.169
billion at December 31, 2022. Upon close of the sale of IMG
Academy, Endeavor expects to commence repurchases of up to $300
million under an event-driven share repurchase authorization and
pay down an additional $50 million of debt. Endeavor also expects
to start making quarterly cash dividends of up to $25 million from
Endeavor Operating Company to its common unit holders, including
EGH, which, in turn, would dividend its portion each quarter to all
holders of Endeavor’s Class A common stock. Endeavor expects to
declare and pay the first dividend in the third quarter of
2023.
For further information regarding the Company's financial
results, as well as certain non-GAAP financial measures, and the
reconciliations thereof, please refer to the following pages of
this release or visit the Company’s Investor Relation site at
investor.endeavorco.com.
Webcast Details
Endeavor will host an audio webcast to discuss its results and
provide a business update at 2 p.m. PT / 5 p.m. ET today. The event
can be accessed at: https://events.q4inc.com/attendee/338510069
The link to the webcast, as well as a recording, will also be
available within the News/Events section of
investor.endeavorco.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. We intend such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained
in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements in this press release that do not relate to matters of
historical fact should be considered forward-looking statements,
including the Company’s guidance for full year 2023, its expected
long-term value and market position, contemplated debt repayment,
repurchases under the share repurchase authorization and the
commencement of declaring a quarterly cash dividend. The words
“believe,” “may,” “will,” “estimate,” “potential,” “continue,”
“anticipate,” “intend,” “expect,” “could,” “would,” “project,”
“plan,” “target,” and similar expressions are intended to identify
forward-looking statements, though not all forward-looking
statements use these words or expressions. These forward-looking
statements are based on management’s current expectations. These
statements are neither promises nor guarantees and involve known
and unknown risks, uncertainties and other important factors that
may cause actual results, performance or achievements to be
materially different from what is expressed or implied by the
forward-looking statements, including, but not limited to: changes
in public and consumer tastes and preferences and industry trends;
Endeavor’s ability to adapt to or manage new content distribution
platforms or changes in consumer behavior; Endeavor’s dependence on
the relationships of its management, agents, and other key
personnel with clients; Endeavor’s dependence on key relationships
with television and cable networks, satellite providers, digital
streaming partners, corporate sponsors, and other distribution
partners; risks related to Endeavor’s gaming business and
applicable regulatory requirements; risks related to Endeavor’s
organization and structure; and other important factors discussed
in Part I, Item 1A “Risk Factors” in Endeavor’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2022, as any such
factors may be updated from time to time in the Company’s other
filings with the SEC, including without limitation, the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2023, accessible on the SEC’s website at www.sec.gov and
Endeavor’s Investor Relations site at investor.endeavorco.com.
Forward-looking statements speak only as of the date they are made
and, except as may be required under applicable law, Endeavor
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Additional Information Regarding Share Repurchase Authorization
and Quarterly Dividend
Repurchases under the share repurchase authorization may be made
in the open market, in privately negotiated transactions or
otherwise, with the amount and timing of repurchases to be
determined at Endeavor’s discretion, depending on market conditions
and corporate needs and would be structured to occur in accordance
with applicable federal securities laws. This authorization has no
expiration and may be modified, suspended or terminated at any time
at Endeavor’s discretion. It also does not obligate Endeavor to
acquire any particular amount of Class A common stock. In addition,
the ultimate amount of each quarterly dividend referenced above
will be subject to market conditions and cash flow
requirements.
Non-GAAP Financial Measures
We refer to certain financial measures that are not recognized
under United States generally accepted accounting principles
(“GAAP”). Please see “Note Regarding Non-GAAP Financial Measures"
and the reconciliation tables below for additional information and
a reconciliation of the Non-GAAP financial measures to the most
comparable GAAP financial measures.
About Endeavor
Endeavor is a global sports and entertainment company, home to
many of the world’s most dynamic and engaging storytellers, brands,
live events and experiences. The company is comprised of industry
leaders including entertainment agency WME; sports, fashion, events
and media company IMG; and premier mixed martial arts organization
UFC. The Endeavor network specializes in talent representation,
sports operations & advisory, event & experiences
management, media production & distribution, experiential
marketing and brand licensing.
Website Disclosure
Investors and others should note that we announce material
financial and operational information to our investors using press
releases, SEC filings and public conference calls webcasts, as well
as our Investor Relations site at investor.endeavorco.com. We may
also use our website as a distribution channel of material Company
information. In addition, you may automatically receive email
alerts and other information about Endeavor when you enroll your
email address by visiting the “Investor Email Alerts” option under
the Resources tab on investor.endeavorco.com.
Consolidated Statements of
Operations
(Unaudited)
(In thousands, except share and
per share data)
Three Months Ended March
31,
2023
2022
Revenue
$
1,596,837
$
1,473,763
Operating expenses: Direct operating costs
724,282
694,641
Selling, general and administrative expenses
669,213
540,206
Insurance recoveries
-
(993
)
Depreciation and amortization
66,751
65,994
Total operating expenses
1,460,246
1,299,848
Operating income
136,591
173,915
Other (expense) income: Interest expense, net
(85,097
)
(59,272
)
Tax receivable agreement liability adjustment
2,344
(53,497
)
Other income, net
24,433
459,941
Income before income taxes and equity losses of affiliates
78,271
521,087
Provision for (benefit from) income taxes
35,470
(17,234
)
Income before equity losses of affiliates
42,801
538,321
Equity losses of affiliates, net of tax
(6,546
)
(20,655
)
Net income
36,255
517,666
Less: Net income attributable to non-controlling interests
28,224
198,120
Net income attributable to Endeavor Group Holdings, Inc.
$
8,031
$
319,546
Earnings per share of Class A common stock: Basic
$
0.03
$
1.19
Diluted
$
0.03
$
1.16
Weighted average number of shares used in computing earnings
per share: Basic
291,936,777
268,489,176
Diluted(1)
295,285,241
443,038,617
(1) The diluted weighted average number of shares of
295,285,241 for the three months ended March 31, 2023 includes
weighted average Class A common shares outstanding, plus an assumed
exchange of Endeavor Profits Units into 714,931 shares of the
Company’s Class A common stock and additional shares from Stock
Options, RSUs and Phantom Units, as noted in the table below:
Weighted average Class A Common Shares outstanding - Basic
291,936,777
Additional shares assuming exchange of EOC Profits Units
714,931
Additional shares from RSUs, Stock Options and Phantom Units, as
calculated using the treasury stock method
2,633,533
Weighted average Class A Common Shares outstanding - Diluted
295,285,241
Securities that are anti-dilutive for the three months ended
March 31, 2023, are additional shares based on an assumed exchange
of Endeavor Manager Units and Endeavor Operating Units into
158,796,941 shares, additional shares based on an assumed exchange
of 12,488,885 Endeavor Profits Units, as well as additional shares
from Stock Options, RSUs and redeemable non-controlling interests.
Segment Results
(Unaudited)
(In thousands)
Three Months Ended March
31,
2023
2022
Revenue: Owned Sports Properties
$
353,289
$
296,689
Events, Experiences & Rights
800,786
780,935
Representation
350,240
357,321
Sports Data & Technology
100,859
45,043
Eliminations
(8,337
)
(6,225
)
Total Revenue
$
1,596,837
$
1,473,763
Adjusted EBITDA: Owned Sports Properties
$
185,671
$
148,741
Events, Experiences & Rights
107,991
126,001
Representation
84,206
101,705
Sports Data & Technology
4,472
6,482
Corporate
(75,948
)
(68,480
)
Consolidated Balance
Sheets
(Unaudited)
(In thousands, except share
data)
March 31,
December 31,
2023
2022
ASSETS Current Assets: Cash and cash equivalents
$
718,658
$
767,828
Restricted cash
267,605
278,165
Accounts receivable (net of allowance for doubtful accounts of
$57,128 and $54,766, respectively)
991,618
917,000
Deferred costs
283,326
268,524
Assets held for sale
5,984
12,013
Other current assets
271,018
293,206
Total current assets
2,538,209
2,536,736
Property and equipment, net
711,589
696,302
Operating lease right-of-use assets
337,422
346,550
Intangible assets, net
2,190,078
2,205,583
Goodwill
5,302,070
5,284,697
Investments
348,548
336,973
Deferred income taxes
804,981
771,382
Other assets
386,793
325,619
Total assets
$
12,619,690
$
12,503,842
LIABILITIES, REDEEMABLE INTERESTS AND SHAREHOLDERS'
EQUITY Current Liabilities: Accounts payable
$
615,232
$
600,605
Accrued liabilities
531,381
525,239
Current portion of long-term debt
88,686
88,309
Current portion of operating lease liabilities
68,673
65,381
Deferred revenue
730,034
716,147
Deposits received on behalf of clients
247,776
258,414
Liabilities held for sale
—
2,672
Current portion of tax receivable agreement liability
154,893
50,098
Other current liabilities
106,359
107,675
Total current liabilities
2,543,034
2,414,540
Long-term debt
5,062,508
5,080,237
Long-term operating lease liabilities
314,556
327,888
Long-term tax receivable agreement liability
842,935
961,623
Other long-term liabilities
459,693
412,982
Total liabilities
9,222,726
9,197,270
Commitments and contingencies Redeemable
non-controlling interests
254,239
253,079
Shareholders' Equity: Class A common stock, $0.00001 par
value; 5,000,000,000 shares authorized; 299,352,355 and 290,541,729
shares issued and outstanding as of March 31, 2023 and December 31,
2022, respectively
2
2
Class B common stock, $0.00001 par value; 5,000,000,000 shares
authorized; none issued and outstanding as of March 31, 2023 and
December 31, 2022
—
—
Class C common stock, $0.00001 par value; 5,000,000,000 shares
authorized; none issued and outstanding as of March 31, 2023 and
December 31, 2022
—
—
Class X common stock, $0.00001 par value; 4,983,448,411 and
4,987,036,068 shares authorized; 175,912,198 and 182,077,479 shares
issued and outstanding as of March 31, 2023 and December 31, 2022,
respectively
1
1
Class Y common stock, $0.00001 par value; 989,681,838 and
997,261,325 shares authorized; 227,523,031 and 227,836,134 shares
issued and outstanding as of March 31, 2023 and December 31, 2022,
respectively
2
2
Additional paid-in capital
2,248,015
2,120,794
Accumulated deficit
(208,188
)
(216,219
)
Accumulated other comprehensive loss
(14,997
)
(23,736
)
Total Endeavor Group Holdings, Inc. shareholders' equity
2,024,835
1,880,844
Nonredeemable non-controlling interests
1,117,890
1,172,649
Total shareholders' equity
3,142,725
3,053,493
Total liabilities, redeemable interests and shareholders' equity
$
12,619,690
$
12,503,842
Note Regarding Non-GAAP Financial Measures
This press release includes financial measures that are not
calculated in accordance with United States generally accepted
accounting principles (“GAAP”), including Adjusted EBITDA and
Adjusted EBITDA Margin.
Adjusted EBITDA is a non-GAAP financial measure and is defined
as net income (loss), excluding income taxes, net interest expense,
depreciation and amortization, equity-based compensation, merger,
acquisition and earn-out costs, certain legal costs, restructuring,
severance and impairment charges, certain non-cash fair value
adjustments, certain equity earnings, tax receivable agreement
liability adjustment, and certain other items, when applicable.
Adjusted EBITDA margin is a non-GAAP financial measure defined as
Adjusted EBITDA divided by Revenue.
Management believes that Adjusted EBITDA is useful to investors
as it eliminates the significant level of non-cash depreciation and
amortization expense that results from our capital investments and
intangible assets recognized in business combinations, and improves
comparability by eliminating the significant level of interest
expense associated with our debt facilities, as well as income
taxes and the tax receivable agreement, which may not be comparable
with other companies based on our tax and corporate structure.
Adjusted EBITDA and Adjusted EBITDA margin are used as the
primary bases to evaluate our consolidated operating
performance.
Adjusted EBITDA, and Adjusted EBITDA margin have limitations as
analytical tools, and you should not consider them in isolation or
as a substitute for analysis of our results as reported under GAAP.
Some of these limitations are:
- they do not reflect every cash expenditure, future requirements
for capital expenditures, or contractual commitments;
- Adjusted EBITDA does not reflect the significant interest
expense or the cash requirements necessary to service interest or
principal payments on our debt;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced or require improvements in the future, and Adjusted EBITDA
and Adjusted EBITDA margin do not reflect any cash requirement for
such replacements or improvements; and
- they are not adjusted for all non-cash income or expense items
that are reflected in our statements of cash flows.
We compensate for these limitations by using Adjusted EBITDA and
Adjusted EBITDA margin along with other comparative tools, together
with GAAP measurements, to assist in the evaluation of operating
performance.
Adjusted EBITDA and Adjusted EBITDA margin should not be
considered substitutes for the reported results prepared in
accordance with GAAP and should not be considered in isolation or
as alternatives to net income (loss) as indicators of our financial
performance, as measures of discretionary cash available to us to
invest in the growth of our business or as measures of cash that
will be available to us to meet our obligations. Although we use
Adjusted EBITDA and Adjusted EBITDA margin as financial measures to
assess the performance of our business, such use is limited because
it does not include certain material costs necessary to operate our
business. Our presentation of Adjusted EBITDA and Adjusted EBITDA
margin should not be construed as indications that our future
results will be unaffected by unusual or nonrecurring items. These
non-GAAP financial measures, as determined and presented by us, may
not be comparable to related or similarly titled measures reported
by other companies. Set forth below are reconciliations of our most
directly comparable financial measures calculated in accordance
with GAAP to these non-GAAP financial measures on a consolidated
basis.
A reconciliation of the Company’s Adjusted EBITDA guidance to
the most directly comparable GAAP financial measure cannot be
provided without unreasonable efforts and is not provided herein
because of the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for such reconciliations,
including income taxes, equity-based compensation, merger,
acquisition and earn-out costs, certain legal costs, restructuring,
severance and impairment charges, certain non-cash fair value
adjustments, certain equity earnings, tax receivable agreement
liability adjustment, and certain other items reflected in our
reconciliation of historical Adjusted EBITDA, the amounts of which,
could be material.
Adjusted EBITDA
(Unaudited)
(In thousands)
Three Months Ended March
31,
2023
2022
Net income
$
36,255
$
517,666
Provision for (benefit from) income taxes
35,470
(17,234
)
Interest expense, net
85,097
59,272
Depreciation and amortization
66,751
65,994
Equity-based compensation expense (1)
78,691
50,856
Merger, acquisition and earn-out costs (2)
14,534
12,794
Certain legal costs (3)
2,422
1,002
Restructuring, severance and impairment (4)
8,200
518
Fair value adjustment - equity investments (5)
(713
)
(1,653
)
Equity method losses - Learfield IMG College and Endeavor Content
(6)
8,523
24,404
Gain on sale of the restricted Endeavor Content business (7)
—
(463,641
)
Tax receivable agreement liability adjustment (8)
(2,344
)
53,497
Other (9)
(26,494
)
10,974
Adjusted EBITDA
$
306,392
$
314,449
Net income margin
2.3
%
35.1
%
Adjusted EBITDA margin
19.2
%
21.3
%
_________
(1)
Equity-based compensation
represents primarily non-cash compensation expense associated with
our equity-based compensation plans.
The increase for the three months
ended March 31, 2023 as compared to the three months ended March
31, 2022 was primarily due to grants issued under the Endeavor
Group Holdings, Inc.'s 2021 Incentive Award Plan during the three
months ended March 31, 2023. Equity-based compensation was
recognized in all segments and Corporate for three months ended
March 31, 2023 and 2022.
(2)
Includes (i) certain costs of
professional advisors related to mergers, acquisitions,
dispositions or joint ventures and (ii) fair value adjustments for
contingent consideration liabilities related to acquired businesses
and compensation expense for deferred consideration associated with
selling shareholders that are required to retain our employees.
Such costs for the three months
ended March 31, 2023 primarily related to professional advisor
costs, which were approximately $8 million and related to our
Events, Experiences & Rights and Representation segments and
Corporate. Fair value adjustments for contingent consideration
liabilities related to acquired businesses and acquisition earn-out
adjustments of approximately $4 million, which primarily related to
our Events, Experiences & Rights, Representation and Sport Data
& Technology segments.
Such costs for the three months
ended March 31, 2022 primarily related to fair value adjustments
for contingent consideration liabilities related to acquired
businesses and acquisition earn-out adjustments of approximately $8
million, which primarily related to our Events, Experiences &
Rights and Representation segments. Professional advisor costs were
approximately $5 million and related to all of our segments.
(3)
Includes costs related to certain
litigation or regulatory matters in each of our segments and
Corporate.
(4)
Includes certain costs related to
our restructuring activities and non-cash impairment charges.
Such costs for the three months
ended March 31, 2023 primarily relates to the restructuring
expenses in our Events, Experiences & Rights and Representation
segments and Corporate.
Such costs for the three months
ended March 31, 2022 primarily relates to the restructuring
expenses in our Events, Experiences & Rights and Representation
segments.
(5)
Includes the net change in fair
value for certain equity investments with and without readily
determinable fair values, based on observable price changes.
(6)
Relates to losses from the 20%
interest we retained in the restricted Endeavor Content business,
which we sold in January 2022. For the three months ended March,
31, 2022, also relates to equity method losses from our investment
in Learfield IMG College.
(7)
Relates to the gain recorded for
the sale of the restricted Endeavor Content business, net of
transactions costs of $15.0 million.
(8)
For the three months ended March
31, 2023, includes a $2.3 million benefit for the tax receivable
agreement liability related to a change in estimates related to
future TRA payments.
For the three months ended March,
31, 2022, includes a $53.5 million expense for the tax receivable
agreement liability related to the expected realization of certain
tax benefits after concluding that such TRA payments would be
probable based on estimates of future taxable income over the terms
of the TRA.
(9)
For the three months ended March
31, 2023, other was comprised primarily of gains of approximately
$10 million on foreign currency exchange transactions, which
related to all of our segments and Corporate; gains of
approximately $6 million on the sales of certain businesses, which
relates to our Events, Experiences & Rights segment; a gain of
approximately $5 million from the resolution of a contingency; and
a gain of approximately $3 million related to change in the fair
value of forward foreign exchange contracts, which related to our
Events, Experiences & Rights segment and Corporate.
For the three months ended March
31, 2022, other costs were comprised primarily of losses of
approximately $5 million on foreign exchange transactions, which
related to all of our segments and Corporate, an approximately $1
million loss related to change in the fair value of forward foreign
exchange contracts, which related to Corporate and an approximately
$1 million loss on disposal of an asset related to our Events,
Experiences & Rights segment.
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