Endeavor Group Holdings, Inc. (NYSE: EDR) (“Endeavor” or the
“Company”), a global sports and entertainment company, today
released its financial results for the quarterly period ended June
30, 2023.
Highlights
- $1.436 billion in Q2 2023 revenue, reflecting year-over-year
growth across all four reporting segments
- Transaction to combine UFC and WWE within TKO Group Holdings,
Inc. expected to close in mid- to late September 2023
- Completed sale of IMG Academy at an enterprise value of $1.25
billion, allowing the Company to commence share repurchases of up
to $300 million of Class A common stock in the third quarter
- Expect to begin making quarterly cash dividend payments at the
end of Q3
Q2 2023 Consolidated Financial Results
- Revenue: $1.436 billion
- Net income: $666.5 million
- Adjusted EBITDA: $304.9 million
“We delivered solid results this quarter at Endeavor and are
closing in on the launch of TKO Group Holdings,” said Ariel
Emanuel, CEO, Endeavor. “Our share repurchase plan and dividend
payment initiatives will begin in the third quarter, and we remain
focused on maintaining prudent capital allocation and delivering
long term sustainable growth for the company.”
Segment Operating Results
- Owned Sports Properties segment revenue was $340.1
million for the quarter, up $8.2 million, or 2.5%, compared to the
second quarter of 2022. Growth was primarily driven by higher live
event revenue from having two more events in the current year with
live audiences, higher media rights fees and sponsorships, and an
increase in commercial pay-per-view, all at UFC. Revenue was
partially offset by $30 million from Diamond Baseball Holdings
included in the prior year that was sold in September 2022. The
segment’s Adjusted EBITDA was $179.2 million, up $18.0 million, or
11.1%, year-over-year.
- Events, Experiences & Rights segment revenue was
$591.1 million for the quarter, up $23.3 million, or 4.1%, compared
to the second quarter of 2022. Growth was primarily driven by new
media production deals, including with Major League Soccer; a
strong Madrid Open tennis tournament; as well as Barrett-Jackson,
which was acquired in August 2022; and growth at IMG Academy.
Growth was partially offset by On Location’s music business and
Endeavor Streaming. The segment’s Adjusted EBITDA was $76.6 million
for the quarter, down $16.0 million, or 17.3%, year-over-year.
- Representation segment revenue was $381.1 million for
the quarter, up $23.2 million, or 6.5%, compared to the second
quarter of 2022. Growth was primarily attributable to the delivery
of projects in Endeavor’s nonscripted content production business,
as well as increases across our fashion business and new projects
and increased spend from 160over90’s corporate clients, partially
offset by the impact of the Writers Guild of America strike on WME.
Adjusted EBITDA was $107.1 million for the quarter, down $4.1
million, or 3.7%, year-over-year.
- Sports Data & Technology segment revenue was $130.6
million, up $70.2 million, or 116.3%, compared to the second
quarter of 2022. Growth was driven by the inclusion of OpenBet,
which we acquired in September 2022, as well as growth at IMG
ARENA. The segment’s Adjusted EBITDA was $13.7 million for the
quarter, down $1.8 million, or 11.7%, year-over-year. The segment
was affected by certain costs at IMG ARENA incurred in advance of
the sales cycle.
Balance Sheet and Liquidity
At June 30, 2023, cash and cash equivalents totaled $1.616
billion compared to $718.7 million at March 31, 2023. Total debt
was $5.110 billion at June 30, 2023, compared to $5.151 billion at
March 31, 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 Relations 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/878718431
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, commencement of repurchases
under the share repurchase authorization and the timing thereof and
the expected declaration and payment of a quarterly cash dividend
and timing thereof. 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; impacts from labor
disputes and work stoppages by unions and guilds such as the
Writers Guild of America and SAG-AFTRA, of which many of Endeavor
clients are members; 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 and its Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 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.
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue
$
1,436,212
$
1,312,515
$
3,033,049
$
2,786,278
Operating expenses: Direct operating costs
584,014
508,385
1,308,296
1,203,026
Selling, general and administrative expenses
632,671
587,499
1,301,884
1,127,705
Insurance recoveries
—
—
—
(993
)
Depreciation and amortization
61,078
65,612
127,829
131,606
Total operating expenses
1,277,763
1,161,496
2,738,009
2,461,344
Operating income
158,449
151,019
295,040
324,934
Other (expense) income: Interest expense, net
(90,307
)
(62,505
)
(175,404
)
(121,777
)
Tax receivable agreement liability adjustment
10,174
2,405
12,518
(51,092
)
Other income (expense), net
741,657
(6,133
)
766,090
453,808
Income before income taxes and equity losses of affiliates
819,973
84,786
898,244
605,873
Provision for (benefit from) income taxes
140,441
2,699
175,911
(14,535
)
Income before equity losses of affiliates
679,532
82,087
722,333
620,408
Equity losses of affiliates, net of tax
(12,997
)
(39,867
)
(19,543
)
(60,522
)
Net income
666,535
42,220
702,790
559,886
Less: Net income attributable to non-controlling interests
263,361
16,414
291,585
214,534
Net income attributable to Endeavor Group Holdings, Inc.
$
403,174
$
25,806
$
411,205
$
345,352
Earnings per share of Class A common stock: Basic
$
1.34
$
0.09
$
1.37
$
1.27
Diluted
$
1.29
$
0.09
$
1.35
$
1.24
Weighted average number of shares used in computing earnings
per share: Basic
301,011,276
281,623,228
296,499,094
275,092,484
Diluted(1)
311,046,135
449,733,965
299,810,998
446,419,024
(1) The diluted weighted average number of shares of
311,046,135 and 299,810,998 for the three and six months ended June
30, 2023, respectively, includes weighted average Class A common
shares outstanding, plus an assumed exchange of Endeavor Profits
Units into 1,031,047 and 872,989 shares of the Company’s Class A
common stock, respectively, and additional shares from RSUs, Stock
Options, and Phantom Units, as noted in the table below:
Weighted average Class A Common Shares outstanding - Basic
301,011,276
296,499,094
Additional shares assuming exchange of all Endeavor Profits Units
1,031,047
872,989
Additional shares from RSUs, stock options and Phantom Units, as
calculated using the treasury stock method
2,244,297
2,438,915
Additional shares assuming redemption of redeemable non-controlling
interests
6,759,515
—
Weighted average Class A Common Shares outstanding - Diluted
311,046,135
299,810,998
Securities that are anti-dilutive for the three and six
months ended June 30, 2023, are additional shares based on an
assumed exchange of Endeavor Manager Units and Endeavor Operating
Units into 157,319,043 shares, as well as additional shares from
Stock Options, RSUs and redeemable non-controlling interests.
Segment Results
(Unaudited)
(In thousands)
Three Months Ended June 30, Six Months Ended June
30,
2023
2022
2023
2022
Revenue: Owned Sports Properties
$
340,088
$
331,930
$
693,377
$
628,619
Events, Experiences & Rights
591,078
567,808
1,391,864
1,348,743
Representation
381,149
357,955
731,389
715,276
Sports Data & Technology
130,565
60,371
231,424
105,414
Eliminations
(6,668
)
(5,549
)
(15,005
)
(11,774
)
Total Revenue
$
1,436,212
$
1,312,515
$
3,033,049
$
2,786,278
Adjusted EBITDA: Owned Sports Properties
$
179,234
$
161,270
$
364,905
$
310,011
Events, Experiences & Rights
76,583
92,563
184,574
218,564
Representation
107,149
111,221
191,355
212,926
Sports Data & Technology
13,737
15,554
18,209
22,036
Corporate
(71,786
)
(74,253
)
(147,734
)
(142,733
)
Consolidated Balance
Sheets
(Unaudited)
(In thousands, except share
data)
June 30,
December 31,
2023
2022
ASSETS Current Assets: Cash and cash equivalents
$
1,616,493
$
767,828
Restricted cash
327,907
278,165
Accounts receivable (net of allowance for doubtful accounts of
$53,594 and $54,766, respectively)
982,191
917,000
Deferred costs
277,577
268,524
Assets held for sale
5,984
12,013
Other current assets
397,983
293,206
Total current assets
3,608,135
2,536,736
Property and equipment, net
472,152
696,302
Operating lease right-of-use assets
329,384
346,550
Intangible assets, net
2,167,746
2,205,583
Goodwill
5,090,554
5,284,697
Investments
344,013
336,973
Deferred income taxes
809,873
771,382
Other assets
494,730
325,619
Total assets
$
13,316,587
$
12,503,842
LIABILITIES, REDEEMABLE INTERESTS AND SHAREHOLDERS'
EQUITY Current Liabilities: Accounts payable
$
673,690
$
600,605
Accrued liabilities
501,968
525,239
Current portion of long-term debt
98,981
88,309
Current portion of operating lease liabilities
70,317
65,381
Deferred revenue
582,093
716,147
Deposits received on behalf of clients
309,262
258,414
Liabilities held for sale
—
2,672
Current portion of tax receivable agreement liability
154,893
50,098
Other current liabilities
242,151
107,675
Total current liabilities
2,633,355
2,414,540
Long-term debt
5,011,424
5,080,237
Long-term operating lease liabilities
304,752
327,888
Long-term tax receivable agreement liability
838,555
961,623
Other long-term liabilities
431,303
412,982
Total liabilities
9,219,389
9,197,270
Commitments and contingencies Redeemable
non-controlling interests
231,340
253,079
Shareholders' Equity: Class A common stock, $0.00001 par value;
5,000,000,000 shares authorized;302,912,176 and 290,541,729 shares
issued and outstanding as of June 30, 2023and December 31, 2022,
respectively
3
2
Class B common stock, $0.00001 par value; 5,000,000,000 shares
authorized;none issued and outstanding as of June 30, 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 June 30, 2023 and
December 31, 2022
—
—
Class X common stock, $0.00001 par value; 4,983,448,411 and
4,987,036,068 shares authorized;174,400,744 and 182,077,479 shares
issued and outstanding as of June 30, 2023and December 31, 2022,
respectively
1
1
Class Y common stock, $0.00001 par value; 989,681,838 and
997,261,325 shares authorized;227,073,690 and 227,836,134 shares
issued and outstanding as of June 30, 2023and December 31, 2022,
respectively
2
2
Additional paid-in capital
2,309,320
2,120,794
Retained earnings (accumulated deficit)
194,986
(216,219
)
Accumulated other comprehensive income (loss)
36
(23,736
)
Total Endeavor Group Holdings, Inc. shareholders' equity
2,504,348
1,880,844
Nonredeemable non-controlling interests
1,361,510
1,172,649
Total shareholders' equity
3,865,858
3,053,493
Total liabilities, redeemable interests and shareholders' equity
$
13,316,587
$
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, net gains on the sale of
businesses, 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.
Adjusted EBITDA
(Unaudited)
(In thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income
$
666,535
$
42,220
$
702,790
$
559,886
Provision for (benefit from) income taxes
140,441
2,699
175,911
(14,535
)
Interest expense, net
90,307
62,505
175,404
121,777
Depreciation and amortization
61,078
65,612
127,829
131,606
Equity-based compensation expense (1)
61,760
60,607
140,451
111,463
Merger, acquisition and earn-out costs (2)
16,381
14,568
30,915
27,362
Certain legal costs (3)
1,489
8,598
3,911
9,600
Restructuring, severance and impairment (4)
13,736
1,442
21,936
1,960
Fair value adjustment - equity investments (5)
(68
)
(11,691
)
(781
)
(13,344
)
Equity method losses - Learfield IMG College and Endeavor Content
(6)
6,580
41,511
15,103
65,915
Net gain on sale of the restricted Endeavor Content business(7)
—
—
—
(463,641
)
Net gain on sale of the Academy business(8)
(736,978
)
—
(736,978
)
—
Tax receivable agreement liability adjustment (9)
(10,174
)
(2,405
)
(12,518
)
51,092
Other (10)
(6,170
)
20,689
(32,664
)
31,663
Adjusted EBITDA
$
304,917
$
306,355
$
611,309
$
620,804
Net income margin
46.4
%
3.2
%
23.2
%
20.1
%
Adjusted EBITDA margin
21.2
%
23.3
%
20.2
%
22.3
%
(1)
Equity-based compensation represents
primarily non-cash compensation expense associated with our
equity-based compensation plans. Equity-based compensation was
recognized in all segments and Corporate for three and six months
ended June 30, 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 June
30, 2023 primarily related to professional advisor costs, which
were approximately $14 million and primarily related to our Owned
Sport Properties segment. Fair value adjustments for contingent
consideration liabilities related to acquired businesses and
acquisition earn-out adjustments were approximately $2 million,
which primarily related to our Representation and Sports Data &
Technology segments.
Such costs for the three months ended June
30, 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 Representation segment. Professional
advisor costs were approximately $7 million and related to all of
our segments.
Such costs for the six months ended June
30, 2023 primarily related to professional advisor costs, which
were approximately $25 million and primarily related to our Owned
Sport Properties segment and Corporate. Fair value adjustments for
contingent consideration liabilities related to acquired businesses
and acquisition earn-out adjustments were approximately $6 million,
which primarily related to our Events, Experiences & Rights,
Representation and Sports Data & Technology segments.
Such costs for the six months ended June
30, 2022 primarily related to fair value adjustments for contingent
consideration liabilities related to acquired businesses and
acquisition earn-out adjustments of approximately $16 million,
which primarily related to our Representation segment. Professional
advisor costs were approximately $12 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 and six months
ended June 30, 2023 primarily relates to a loss of approximately $9
million due to an other-than-temporary impairment for one of our
equity method investments, which related to our Events, Experiences
& Rights segment; and the restructuring expenses in our Events,
Experiences & Rights and Representation segments and
Corporate.
Such costs for the three and six months
ended June 30, 2022 primarily relates to a write off of an asset in
Corporate and 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 equity method losses from the
20% interest we retained in the restricted Endeavor Content
business, which we sold in January 2022. For the three months and
six months ended June 30, 2022, also related 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, which were contingent on the sale
closing.
(8)
Relates to the gain recorded for the sale
of the Academy business, net of transactions costs of $5.5 million,
which were contingent on the sale closing.
(9)
For the three and six months ended June
30, 2023, the adjustment for the tax receivable agreement liability
related to a change in estimates of future TRA payments.
For the three and six months ended June
30, 2022, the adjustment 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.
(10)
For the three months ended June 30, 2023,
other costs were comprised of gains of approximately $5 million on
foreign currency exchange transactions, which related to all of our
segments and Corporate; and a gain of approximately $3 million
related to the change in the fair value of forward foreign exchange
contracts, which related primarily to our Events, Experiences &
Rights segment and Corporate.
For the three months ended June 30, 2022,
other costs were comprised primarily of losses of approximately $17
million on foreign currency exchange transactions, which related to
all of our segments and Corporate and approximately $2 million
related to non-cash fair value adjustments of embedded foreign
currency derivatives, which related primarily to our Events,
Experiences & Rights segment.
For the six months ended June 30, 2023,
other costs were comprised primarily of gains of approximately $14
million on foreign currency exchange transactions, which related to
all of our segments and Corporate; a gain of approximately $6
million related to the change in the fair value of forward foreign
exchange contracts, which related to our Events, Experiences &
Rights segment and Corporate; gains of approximately $6 million on
the sales of certain businesses, which relates to our Events,
Experiences & Rights segment; and a gain of approximately $5
million from the resolution of a contingency.
For the six months ended June 30, 2022,
other costs were comprised primarily of losses of approximately $22
million on foreign currency exchange transactions, which related to
all of our segments and Corporate, approximately $1 million related
to non-cash fair value adjustments of embedded foreign currency
derivatives, which related primarily to our Events, Experiences
& Rights segment and an approximately $1 million loss on
disposal of an asset related to our Events, Experiences &
Rights segment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808280093/en/
Investors: investor@endeavorco.com Press:
press@endeavorco.com
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