UFC Owner Endeavor Sees Sports Revenue Surge 19% to $353 Million

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Endeavor Group Holdings, the diversified media operation run by Ari Emanuel, reported net income of $36.3 million or 3 cents per share on revenue of $1.597 billion for its first quarter of 2023 Tuesday. Analysts surveyed by Zacks Investment Research were expecting earnings per share of 33 cents on revenue of $1.59 billion.

In its Owned Sports Properties segment, which includes the UFC mixed martial-arts franchise, revenue climbed 19.1% year over year to $353.3 million, with growth primarily driven by an increase in media rights fees, sponsorships, commercial pay-per-view and event-related revenue at UFC. An additional pay-per-view event in the quarter as well as more live-audience events helped spur growth, as did increased ticket sales at Professional Bull Riders. The segment’s adjusted EBITDA increased 24.8% year over year to $185.7 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,” Endeavor CEO Ari Emanuel said in a statement.

The sports segment’s performance in the latest quarterly results comes after Endeavor announced in April that it would merge the Ultimate Fighting Championship with Worldwide Wrestling Entertainment to create a $21.4 billion live sports and entertainment company. The deal, which was unanimously approved by Endeavor’s and WWE’s boards of directors, values UFC at $12.1 billion and WWE at $9.3 billion. It is expected to close in the second half of 2023.

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In Endeavor’s Events, Experiences & Rights segment, revenue grew 2.5% year over year to $800.8 million, with growth primarily driven by record attendance and sponsorship 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 million, down 14.3% year over year.

In the Representation segment, revenue fell 2% year over year to $350.2 million. Adjusted EBITDA for the segment fell 17.2% year over year to $84.2 million.

In the Sports Data & Technology segment, revenue surged 123.9% year over year to $100.9 million, with growth driven by the addition of OpenBet, which was acquired in September 2022, as well as growth at IMG Arena. However, the segment’s adjusted EBITDA fell 31% year over year to $4.5 million, due to “certain costs at IMG Arena incurred in advance of the sales cycle.”

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In addition to the WWE-UFC merger, Endeavor is also selling global sports education institution IMG Academy to BPEA EQT, a unit of private equity firm EQT, in an all-cash deal valued at $1.25 billion. The transaction, which is expected to close in the third quarter of 2023, will see IMG Academy partner with BPEA EQT’s portfolio company Nord Anglia Education, which operates some of the world’s leading premium international schools.

Upon close of the sale of IMG Academy, Endeavor expects to begin a share repurchase of up to $300 million and pay down an additional $50 million of debt. As of March 31, Endeavor’s cash and cash equivalents totaled $718.7 million while its debt totaled $5.151 billion, compared to $767.8 million and $5.169 billion, respectively, as of December 31.

It also expects to start making quarterly cash dividends of up to $25 million. Endeavor expects to declare and pay the first dividend in the third quarter of 2023.

“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,” Emanuel said. “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.”

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Looking ahead, the company expects full year 2023 revenue to be in the range of $5.665 billion to $5.815 billion and adjusted EBITDA to be in the range of $1.22 billion and $1.275 billion. The updated guidance primarily reflects the expected sale of IMG Academy.

“Our updated guidance does not include any potential impact from the writers’ strike and the scope and duration of the strike are currently unknown,” chief financial officer Jason Lublin told analysts during the company’s earnings call. He added that Endeavor is monitoring the strike and plans to incorporate its impact into the company’s guidance for the second quarter.

Emanuel noted that Endeavor supports and remains in conversations with its clients impacted by the strike. The company plans to leverage its unscripted programming as well as its backlog of scripted programming. Depending on the duration of the strike, it may also bring some international shows to the United States.

“While the writers’ strike is likely to have an impact on our representation segment if it carries on for any great length, the depth of that impact will be determined by several factors that we will quantify over the term of the work stoppage,” he added. “Given the diversification of Endeavor, we remain well positioned to continue capitalizing on the most resilient secular trends, benefiting premium content and live events.”

Additionally, the company has pulled free cash flow guidance for the remainder of 2023 due to uncertainty related to the closing of the UFC-WWE and IMG transactions. Endeavor shares popped 3% in after-hours trading following the earnings announcement.

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