Endeavor(US:EDR)2022-11-11 02:49Financial Data and Key Metrics Changes - For Q3 2022, the company generated $1.221 billion in consolidated revenue, down $170 million or 12% compared to the previous year, primarily due to the sale of the restricted Endeavor content business [18] - Net loss for the quarter was $12.5 million, compared to net income of $63.6 million a year ago, influenced by $85 million of losses from affiliates [18] - Adjusted EBITDA for the quarter was $303.1 million, up $19.8 million or 7% [19] - Free cash flow was $153.2 million, representing a 50.5% conversion of adjusted EBITDA to free cash flow [19] Business Segment Data and Key Metrics Changes - Owned Sports Properties segment generated revenue of $402.3 million, up $113.8 million or 39%, with adjusted EBITDA of $195.7 million, up 45% [20] - Events, Experiences & Rights segment recorded revenue of $440.6 million, down $5.7 million or roughly 1%, with adjusted EBITDA of $49.7 million, down nearly 42% [22] - Representation segment revenue was $388.3 million, a decrease of $276.4 million or nearly 42%, but would have been up 17% excluding the restricted Endeavor Content business [26] Market Data and Key Metrics Changes - The demand for premium sports and entertainment content remains strong, with tech companies like Amazon and Alphabet competing for sports rights [7] - The UFC achieved 26 consecutive sellouts since resuming events post-COVID, indicating strong consumer demand for live events [12] - The company noted record attendance at various events, including the NFL International games and the Super Bowl 57 sales pacing well [13] Company Strategy and Industry Competition - The company is positioned as a premium content supplier, benefiting from the competition among tech and media companies for sports and entertainment content [7] - The acquisition of OpenBet is expected to enhance the company's offerings in the sports betting space, creating synergies with IMG Arena [25] - The company remains confident in its long-term growth strategy despite macroeconomic challenges, focusing on resilient industry trends [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macro headwinds and capitalize on long-term growth opportunities [15] - The company anticipates a tightening of revenue guidance for 2022, projecting revenue between $5.235 billion and $5.325 billion, representing a year-over-year growth of 21% [28] - Management highlighted the ongoing demand for live events and experiences, with strong performance across various segments [49] Other Important Information - The company ended the quarter with $5.5 billion in debt and $970.8 million in cash, with plans to pay down an additional $250 million of debt [27] - The company expects free cash flow conversion of approximately 40% for the full year 2022 and around 50% for 2023 [27] Q&A Session Summary Question: Impact of weakening ad market on sports rights spending - Management noted that premium content remains in high demand, and traditional companies are still investing in sports rights despite market challenges [32] Question: Integration plans for OpenBet and IMG Arena - Management indicated that both businesses are profitable and expect to achieve meaningful revenue synergies from their integration [35] Question: Capital allocation strategy in a higher cost of capital environment - Management emphasized a focus on debt repayment and maximizing shareholder value through various means, including potential M&A opportunities [39][40] Question: Engagement and pay-per-view revenue for UFC on ESPN - Management explained that pay-per-view revenue can fluctuate based on matchups, but overall engagement remains strong with record-breaking sellouts [45] Question: FX exposure and its impact on revenue - Management clarified that while FX exposure is a headwind, it has limited impact on the bottom line due to offsetting costs [36][50] Question: Portfolio optimization following the sale of Miss Universe - Management stated that they continuously evaluate their portfolio for optimization opportunities, including potential asset sales [59]