Endeavor's First Quarterly Earnings Report

Friends,

Less than six weeks after raising over half a billion dollars through an IPO — on top of nearly $1.7 billion in private placements — UFC’s parent company Endeavor has released its first quarterly earnings report.

Here are the details (source):

• Total revenue came in at $1.07 billion, which was down about 10% year-over-year but in line with analysts’ expectations.

• Endeavor posted net income of $2.4 million, compared to a loss of $51.4 million for the same quarter last year.

• EBITDA beat analysts’ expectations at $199.5 million.

• Endeavor has $880.9 million in cash on hand, down from $1 billion in December.

• Endeavor has only paid down about $50 million of its near $6 billion in debt this year. Still, the company said that they expect to reduce debt by $600 million in Q3.

Today, we’ll run through a couple of things I thought were interesting.

As a reminder, here’s how Endeavor’s business is broken down:

Live Events, Experiences & Rights (43% of 2019 revenue)

• On-Location Experiences (NFL)

• Streaming Rights (Olympics, NFL, NHL)

• IMG Events

Talent Representation (36% of 2019 revenue)

• IMG

• William Morris

Owned Sports Properties (20% of 2019 revenue)

• Ultimate Fighting Championship

• Professional Bull Riders

• Euroleague (pro basketball)

IP Scarcity Increases Content Value

As the media & content industry continues to consolidate — think Discovery-Warner Media & Amazon-MGM — Endeavor CEO Ari Emanuel spoke specifically about how he believes industry consolidation is a net positive for the company.

My take? He’s right. With increasing demand & short supply, premium sports IP has never been more valuable. This is exactly why Endeavor has shifted its focus from low(er) margin businesses like talent representation & seasonal events to fully owned sports properties like the UFC and Professional Bull Riders.

Despite leagues like the NFL and NBA losing billions of dollars during the COVID-19 pandemic, live sports content has proven to be the most resilient component. Sure, they lost money due to no in-person attendance, but unique IP is in demand no matter where the games are played or what platform they are on.

For example, Endeavor said its owned sports properties saw revenue rise by more than 22% year-over-year to $283.5 million, most of which was driven by the UFC.

Now, they have officially acquired the remaining minority stake in the UFC that they didn’t already own and will look to expand that business through their unique & holistic offering.

Remember, the UFC already reaches about 1 billion households annually through its deal with Disney’s direct-to-consumer streaming platform ESPN+.

Endeavor Heads To The Olympics

Earlier this week, the International Olympic Committee (IOC) announced that On Location Experiences, the ticketing and experiences company owned by Endeavor, would be the exclusive hospitality service provider for the Olympics.

Even more interesting: Rather than shifting travel packages and VIP experiences between different companies each Olympic Games, as they have historically done, the committee named On Location experiences as its exclusive partner for the next three games — Paris (2024), Northern Italy (2026), and Los Angeles (2028).

At a reported $1.3 billion, that makes it one of, if not the, largest deal in hospitality history. But on the other side, industry experts suggest that the deal could result in more than $3 billion in revenue for the company over the next eight years.

Considering Endeavor purchased On Location Experiences for $660 million just last year, this is a significant win for the entertainment giant. Also, don’t forget, the NFL is a 25-30% ownership partner in On Location Experiences, so it’s a nice win for them too — not that they needed the money though :)

I hope each of you has a great weekend. Talk to everyone on Monday.

Want to Invest In Professional Sports?

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