Endeavor(EDR) - 2024 Q2 - Quarterly Results

Merger and Acquisition Activities - Affiliates of Silver Lake agreed to acquire 100% of Endeavor's outstanding shares at $27.50 per share, subject to regulatory approvals[6] - The Merger Agreement includes covenants restricting the sale of certain assets, excluding TKO and WME's agency representation business[7] - Endeavor entered into a Merger Agreement in April 2024, with Silver Lake acquiring 100% of outstanding shares at $27.50 per share or unit[13] - The Merger Agreement includes quarterly dividends of $0.06 per share for Class A common stock prior to closing[13] - In April 2024, the company entered into a Merger Agreement with affiliates of Silver Lake to acquire 100% of its outstanding shares at $27.50 per share[133] Discontinued Operations - Endeavor Group Holdings initiated the sale of its Sports Data & Technology (SD&T) segment, including OpenBet and IMG ARENA, in Q2 2024, classifying it as discontinued operations[5] - The company recast its financial statements to reflect the SD&T segment as discontinued operations for all periods presented in the Form 8-K[5] - Endeavor's financial statements and disclosures in the 2023 Annual Report were updated to reflect the SD&T segment as discontinued operations[7] - Endeavor initiated the sale of its Sports Data & Technology (SD&T) segment in Q2 2024, classifying it as discontinued operations[13] - The Sports Data & Technology segment was formed on January 1, 2023, and is now considered a discontinued operation[20][21] - The company initiated the sale of its SD&T segment, including OpenBet, in the second quarter of 2024[180] Financial Performance and Revenue - Revenue increased by $483.2 million (9.6%) to $5,490.8 million in 2023 compared to 2022[28] - Owned Sports Properties revenue grew by $483.5 million (36.3%), driven by the acquisition of WWE and higher media rights fees[28] - Events, Experiences & Rights revenue decreased by $18.9 million (0.9%), primarily due to the sale of the Academy and a decline in On Location's music business[28] - Representation revenue increased by $32.3 million (2.1%), driven by growth in nonscripted content production and marketing businesses[28] - Revenue increased by $120.6 million (2.5%) to $5,007.6 million for the year ended December 31, 2022 compared to 2021[29] - Owned Sports Properties revenue increased by $224.1 million (20.2%) driven by UFC growth and PBR events[29] - Events, Experiences & Rights revenue increased by $346.0 million (18.7%) due to the return of live events and acquisitions[30] - Representation revenue decreased by $447.6 million (22.8%) primarily due to the sale of the restricted Endeavor Content business[30] - Total Revenue for 2023 was $5,490.7 million, up from $5,007.6 million in 2022[44] - Adjusted EBITDA for Owned Sports Properties in 2023 was $827.0 million, up from $648.1 million in 2022[44] - Revenue for the Owned Sports Properties segment increased by 36.3% to $1,815.9 million in 2023, driven by the acquisition of WWE and growth in UFC and PBR revenues[46] - Adjusted EBITDA for the Owned Sports Properties segment rose by 27.6% to $827.0 million in 2023, primarily due to the WWE acquisition and revenue growth at UFC and PBR[46] - Revenue for the Events, Experiences & Rights segment decreased by 0.9% to $2,173.4 million in 2023, impacted by the sale of the Academy and declines in On Location's music business[48] - Adjusted EBITDA for the Events, Experiences & Rights segment declined by 22.6% to $228.1 million in 2023, driven by lower revenue and higher direct operating costs[50] - Revenue for the Representation segment increased by 2.1% to $1,544.4 million in 2023, supported by growth in nonscripted content production, marketing, and licensing businesses[52] - Adjusted EBITDA for the Representation segment decreased by 16.7% to $391.1 million in 2023, due to higher selling, general, and administrative expenses[52] - Revenue for the Events, Experiences & Rights segment increased by 18.7% to $2,192.3 million in 2022, driven by the return of live events and the acquisition of the Madrid Open[51] - Adjusted EBITDA for the Events, Experiences & Rights segment grew by 64.8% to $294.8 million in 2022, supported by revenue growth and lower insurance recoveries[51] - Revenue for the year ended December 31, 2022 decreased by $447.6 million (22.8%) to $1,512.2 million, primarily due to the sale of the restricted Endeavor Content business, which contributed $737 million in revenue in the prior year[54] - Excluding the revenue from the restricted Endeavor Content business, revenue for the year ended December 31, 2022 increased by 24% compared to the prior year[54] - Direct operating costs for the year ended December 31, 2022 decreased by $615.6 million (71.0%) to $251.9 million, largely due to the sale of the restricted Endeavor Content business[54] - Selling, general and administrative expenses for the year ended December 31, 2022 increased by $80.0 million (11.3%) to $790.0 million, driven by higher personnel and travel costs[54] - Adjusted EBITDA for the year ended December 31, 2022 increased by $86.4 million (22.5%) to $469.8 million, primarily due to revenue growth excluding the restricted Endeavor Content business[54] - Adjusted EBITDA for Corporate and other for the year ended December 31, 2022 decreased by $39.4 million (14.8%) to $(266.4) million, driven by higher personnel and administrative costs[55] - Adjusted EBITDA for the year ended December 31, 2023 was consistent with the prior year, at $(305,817) thousand[57][58] - Net income for 2023 increased to $557.469 million, up from $321.664 million in 2022[123] - Total comprehensive income for 2023 reached $588.894 million, compared to $429.578 million in 2022[123] - Comprehensive income attributable to Endeavor Group Holdings, Inc. for 2023 was $380.407 million, up from $189.849 million in 2022[123] - Total shareholders' equity at December 31, 2023, was $11.507 billion, up from $3.053 billion at the start of the year[124] - Additional paid-in capital increased to $4.901 billion in 2023 from $2.120 billion in 2022[124] - Nonredeemable noncontrolling interests grew to $6.722 billion in 2023 from $1.172 billion in 2022[124] - Accumulated deficit decreased to $(117.065) million in 2023 from $(216.219) million in 2022[124] - Redeemable noncontrolling interests decreased to $215.458 million in 2023 from $253.079 million at the start of the year[124] - Class A common stock shares increased to 298.698 million in 2023 from 290.541 million in 2022[124] - Total comprehensive income for 2022 was $429.578 million, up from $(412.228) million in 2021[123] - Total Shareholders' Equity Attributable to Endeavor Group Holdings, Inc. at December 31, 2021 was $1,247,046 thousand[126] - Accumulated Deficit at December 31, 2021 was $(296,625) thousand[126] - Additional Paid-In Capital at December 31, 2021 was $1,624,201 thousand[126] - Total Shareholders'/ Members' Equity at December 31, 2021 was $2,121,463 thousand[126] - Redeemable Noncontrolling Interests at December 31, 2021 was $209,863 thousand[126] - Accumulated Other Comprehensive Loss at December 31, 2021 was $(80,535) thousand[126] - Class A Common Stock Shares Amount at December 31, 2021 was 265,553,327[126] - Class X Common Stock Shares Amount at December 31, 2021 was 186,222,061[126] - Class Y Shares at December 31, 2021 was 238,154,296[126] - Net income from continuing operations increased to $551.7 million in 2023, up from $310 million in 2022 and a loss of $495.5 million in 2021[127] - Net cash provided by operating activities from continuing operations was $309.8 million in 2023, down from $481.2 million in 2022[127] - Proceeds from business divestitures, net of cash sold, were $1.08 billion in 2023, compared to $924.8 million in 2022[127] - Depreciation and amortization expenses increased to $310.2 million in 2023, up from $248.7 million in 2022[127] - Equity-based compensation expense rose to $254 million in 2023, compared to $209.4 million in 2022[127] - The company repurchased $200 million of Class A common stock in 2023[127] - Cash, cash equivalents, and restricted cash at the end of 2023 were $1.44 billion, up from $1.05 billion in 2022[127] Risks and Challenges - The company's forward-looking statements highlight risks related to the Merger Agreement, market trends, and integration of acquired businesses[8] - Endeavor faces risks from changes in consumer behavior, reliance on key personnel, and cybersecurity threats[8] - The company's substantial indebtedness and tax-related risks are noted as potential challenges[9] - Endeavor's ability to comply with U.S. and foreign regulations and union requirements is a key risk factor[8] - The company's control by Silver Lake Equityholders and Executive Holdcos presents potential conflicts of interest[9] Business Operations and Events - The UFC produces over 40 live events annually, broadcast in 170+ countries to 900+ million TV households[16] - UFC has approximately 260 million social media followers globally[16] - WWE has over 700 million fans and 360 million social media followers, including talent pages[16] - WWE’s programming is available in over 1 billion households across 160 countries[16] - PBR hosts more than 200 events annually with attendance quadrupling since 1995[16] - Endeavor has a 20-year partnership with Euroleague basketball, potentially extending to 2036[17] - Endeavor sold its Diamond Baseball Holdings (DBH) business, including 10 PDL Clubs, for $280 million in September 2022[17] - The company sold the Academy business in June 2023, impacting the Events, Experiences & Rights segment[18] - The company sold 80% of the restricted Endeavor Content business in January 2022, affecting the Representation segment[19] - The company represents more than 7,000 talent and corporate clients through its Representation segment[19] - The company owns, operates, or represents hundreds of global events annually, including major sports events and fashion weeks[18] - OpenBet processes billions of bets annually and IMG ARENA delivers live streaming and data feeds for over 65,000 sports events annually[20] - The SD&T segment processes billions of bets annually and delivers live streaming and data feeds for more than 65,000 sports events annually[180] Costs and Expenses - Direct operating costs increased by $282.7 million (14.7%) to $2,211.9 million for the year ended December 31, 2023[32] - Selling, general and administrative expenses increased by $312.0 million (13.7%) to $2,590.2 million for the year ended December 31, 2023[33] - Depreciation and amortization increased by $61.5 million (24.7%) to $310.2 million for the year ended December 31, 2023[35] - Interest expense, net increased by $63.9 million (22.6%) to $346.2 million for the year ended December 31, 2023[37] - Direct operating costs for the Owned Sports Properties segment increased by 39.9% to $606.9 million in 2023, largely due to the WWE acquisition and higher UFC expenses[46] - Selling, general, and administrative expenses for the Owned Sports Properties segment rose by 54.0% to $381.6 million in 2023, primarily due to WWE-related costs[46] - Selling, general and administrative expenses for the year ended December 31, 2022 increased by $80.0 million (11.3%) to $790.0 million, driven by higher personnel and travel costs[54] - Equity-based compensation for the year ended December 31, 2023 increased primarily due to equity awards granted under the new TKO equity plan and the WWE plan[61] - Merger, acquisition, and earn-out costs for the year ended December 31, 2023 were approximately $101 million, primarily related to professional advisor costs and bonuses contingent on the closing of the Transactions[61] - Restructuring, severance, and impairment costs for the year ended December 31, 2023 included approximately $75 million related to impairments of intangible assets and goodwill in the Events, Experiences & Rights segment[63] - Direct operating costs include third-party expenses, content production costs, media rights fees, venue rental, athlete compensation, and consumer product merchandise costs[151] - Selling, general, and administrative expenses primarily consist of personnel costs, rent, professional services, and other overhead[152] Debt and Financing - Total outstanding indebtedness as of December 31, 2023, is $5.0 billion under the Senior Credit Facilities[68] - Borrowing capacity under the Senior Credit Facilities is $405 million, with $375 million available as of December 31, 2023[68] - Term loans under the Credit Facilities total $2.2 billion, with interest rates at SOFR plus 2.75% or ABR plus 1.75%[69] - UFC Credit Facilities include $2.7 billion in first lien term loans, with interest rates at SOFR plus 2.75%-3.00% or ABR plus 1.75%-2.00%[70] - Net cash provided by operating activities decreased from $481.2 million in 2022 to $309.8 million in 2023[75] - Net cash provided by investing activities increased from $67.2 million in 2022 to $787.8 million in 2023, primarily due to $1.077 billion from business sales[75] - Net cash used in financing activities increased from $549.9 million in 2022 to $734.2 million in 2023, driven by debt payments and stock repurchases[75] - Net cash flows from discontinued operations changed from $(750.0) million in 2022 to $26.4 million in 2023[76] - On Location revolving credit agreement has $42.9 million in total borrowing capacity, with no borrowings outstanding as of December 31, 2023[72] - The company executed $1.5 billion in interest rate hedges in May 2019, transitioning from LIBOR to SOFR with a new average fixed coupon of 2.05%[69] - Operating activities improved from $330.1 million in 2021 to $481.2 million in 2022, driven by net income of $310.0 million and non-cash items of $410.4 million[77] - Investing activities shifted from $(621.0) million cash used in 2021 to $67.2 million cash provided in 2022, primarily due to $924.8 million from the sale of restricted businesses[77] - Financing activities changed from $960.2 million cash provided in 2021 to $(549.9) million cash used in 2022, mainly due to $578.1 million in net debt payments[78] - Discontinued operations cash used increased from $(34.6) million in 2021 to $(750.0) million in 2022, driven by the acquisition of OpenBet[78] - The company declared and paid quarterly cash dividends of $27.4 million in September 2023 and $27.1 million in December 2023[79] - As of December 31, 2023, the company completed its $300 million share repurchase authorization and does not expect further repurchases[79] - The company has a tax receivable agreement liability of $990.5 million as of December 31, 2023, with $156.2 million paid in February 2024[82][85] - Long-term debt principal repayments total $5,061,164 thousand, with $75,388 thousand due in 2024 and $4,929,717 thousand due in 2025-2026[85] - Operating lease liabilities amount to $421,164 thousand, with $94,924 thousand due in 2024 and $171,383 thousand due in 2025-2026[85] - Purchase obligations and guarantees total $2,973,348 thousand, with $809,009 thousand due in 2024 and $929,240 thousand due in 2025-2026[85] Revenue Recognition - Revenue recognition for commission-based arrangements occurs over time or at the point of client performance, with packaging revenue recognized upon program completion and delivery[90] - Client profit participation revenue is recognized over time based on sales or usage of intellectual property, with estimates subject to change[90] - Package back-end profit participation revenue is recognized over time as sales or usage occurs, based on statements or management estimates[90] - Licensing revenue from merchandise sales is recognized over time based on sales or usage of symbolic intellectual property[90] - Content development-based revenue is recognized when content becomes available for exploitation and is accepted by the customer[92] - Event-based revenue is recognized over the course of the event or contract term, with advance ticket sales recorded as deferred revenue[94] - Pay-per-view revenue is recognized when the event is aired, with initial estimates based on preliminary buy information subject to adjustment[96] - Technology platforms revenue includes fixed-fee and revenue-share licenses, with revenue recognized over the customer development period or as revenue share is generated[97] - Sports streaming and data revenue includes fixed license fees