Endeavor Group Holdings, Inc. (NYSE:EDR) Q4 2023 Earnings Call Transcript

Endeavor Group Holdings, Inc. (NYSE:EDR) Q4 2023 Earnings Call Transcript February 28, 2024

Endeavor Group Holdings, Inc. misses on earnings expectations. Reported EPS is $0.06 EPS, expectations were $0.16. EDR isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello, and welcome to the Endeavor Fourth Quarter and Full Year 2023 Results Conference Call. I’ll now hand it over to James Marsh, SVP and Head of Investor Relations. Please go ahead.

James Marsh: Good morning, and welcome to Endeavor’s fourth quarter and full year 2023 earnings call. A short while ago, we issued a press release, which you can view on our Investor Relations site, investor.endeavorco.com. A recording of this call will also be available via that site for at least 30 days. Today, you will hear from Endeavor’s CEO, Ariel Emanuel; and CFO, Jason Lublin. In light of our previously announced and ongoing review of strategic alternatives, we will not be taking questions following Ariel and Jason’s prepared remarks. The purpose of this call is to provide you with the information regarding our fourth quarter and full year 2023 performance. I do want to remind everyone that the information discussed will include forward-looking statements and/or projections that involve risks, uncertainties and assumptions as well as described in the Risk Factors section of our filings with the Securities and Exchange Commission, including our 10-Qs and 10-K.

If these risks or uncertainties ever materialize or any assumptions prove inaccurate, our results may differ materially from those expressed or implied by such forward-looking statements and projections. Forward-looking statements speak only as of the date that they are made, and we undertake no obligation to update them publicly and let new information or future events, except as legally required. Our commentary today will also include non-GAAP financial measures, which we believe provide an additional tool for investors to use in evaluating ongoing operating results and trends. This measure should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our press release issued today as well as in the non-GAAP financial information posted on our IR website.

With that, I’ll turn it over to our CEO, Ariel Emanuel.

Ariel Emanuel: Thanks, James, and good morning, everyone. 2023 marked a transformational year for Endeavor in ways that further cemented our leading positions in sports and entertainment and demonstrated the value we are creating for shareholders. We closed our acquisition of WWE launched TKO and immediately began leveraging the Endeavor flywheel to create synergies and unlock growth across areas, including media rights and partnerships. We strengthened and expanded our representation capabilities through strategic tuck-in acquisitions in sports, country music, literary and non-scripted content. We inked landmark sports rights deals at IMG and achieved new attendance milestones across our owned events portfolio. We sold IMG Academy at an enterprise value of $1.25 billion.

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Q&A Session

We implemented Endeavor’s share repurchase program and quarterly cash dividend payments. And we began a review of strategic alternatives to ensure we are maximizing value for our shareholders. With regard to our review of strategic alternatives for the company, we are still engaged in the process and we’ll provide an update when there is more information to share. Now turning to some highlights from the fourth quarter and full year. Starting with our owned Sports Properties segment, which includes TKO, just five months in, TKO is off to a strong start. The fourth quarter marked the company’s first full quarter and closed out a standout year. UFC delivered record financial performance in 2023 and WWE had its highest revenue year ever for live events.

Since closing the transaction, both businesses have broken viewership and attendance records at live events announced new international events with significant site fees, inked sizable partnership agreements and secured media rights fee increases domestically and internationally. Meanwhile, TKO has also made meaningful progress on integration including merging UFC and WWE’s global partnerships teams to create a unified sports marketing powerhouse focused on creating new revenue opportunities. We’re encouraged by TKO’s continued momentum into 2024 most recently demonstrated by WWE’s deal with Netflix to bring Raws live programming into the leading global streamer 52 weeks a year, beginning in 2025. Following earlier rights renewals for SmackDown and NXT this new deal for Raw is yet another proof point for the compelling rationale of bringing WWE together with UFC under one roof and harnessing the power of the Endeavor flywheel.

Together, these deals delivered an increase of more than 1.4x in AAV. Exceeding expectations on guidance and demonstrating TKO’s ability to capitalize on the evolving media landscape as well as the quality and value of its premium content. The segment also includes PBR, where events in 2023 drew 1.25 million fans. PBR sold out nearly 40 events and set more than 50 revenue records throughout the year. Beyond live events, PBR’s brand partnerships have significant momentum going into this year. We finished 2023 with nine new national partnerships, headlined by Anheuser-Busch. Overall, the PBR partnership business has nearly doubled since 2020 and following a second successful Teams League season in 2023, which generated a 28% increase in TV viewership and average more than 1 million viewers on CBS.

PBR announced its expansion to 10 teams for the upcoming 2024 season, including a first-ever team in Brooklyn. In our Events, Experiences & Rights segment, during the fourth quarter, IMG’s Media team and WME Sports jointly negotiated landmark partnerships for the National Women’s Soccer League with CBS Sports, ESPN, Prime Video and Scripps Sports. And to start this year, the team negotiated an NCAA renewal with ESPN that covers 40 NCAA championships, including the women’s basketball tournament. Like the NWSL deal, this agreement showcases the value of our industry-leading teams when it comes to representing and negotiating sports media rights. Our marquee events across sports and the greater culture in the quarter and throughout 2023, expanded in key areas.

ART has become an increasingly meaningful vertical for IMG’s events business. We are kicking off our 2024 ART Fair season tomorrow with Frieze Los Angeles. And later in the year, we will be expanding our presence in New York and Chicago following acquisitions of the Armory Show and Expo Chicago, two of the longest-running contemporary and modern art fairs in the U.S. In London, attendance grew at our Hyde Park Winter Wonderland Holiday Festival. We sold more than three million tickets across 45 days, making it one of the most successful assets in our global events portfolio. At our own tennis tournaments, the Miami open and Madrid open, we achieved record attendance in 2023. The Miami Open welcomed a record 386,000 fans and set record partnership sales.

Similarly, the Madrid Open expanded to 12 days and marked its biggest year ever with record attendance of 325,000. In 2023, we became a significant minority partner in Fanatics new company, Fanatics events, with a plan to build the largest network of sports fan festivals in the world. The festivals will bring communities together to celebrate all aspects of Fandom, including sports, fashion, music and entertainment. We look forward to our first event in Q3. We’ve also benefited from continued strength in consumer spending on premium experiences. In 2023, On Location hosted Notre Dame and Navy fans in Ireland and sold out the Aer Lingus classic college football game. We’ve since extended our agreement with the stadium for another three years.

Similarly, on location signed a 5-year extension in 2023 with the NCAA for the Men’s and Women’s Final Four. Pivoting to our representation segment. WME delivered solid financial performance last year despite the industry headwinds from the WGA and SAG after strikes and executed a series of strategic tuck-in acquisitions that strengthened and extended our representation capabilities in the attractive literary, country music and sports markets. In film and TV, WME clients were involved in six of the top 10 grossing films at the domestic box office. Including Christopher Nolan’s critically acclaimed Oppenheimer, which landed in the top three. WME was responsible for arranging the essential casting and creative elements for nearly 300 scripted series on broadcast, cable and streaming channels.

including Emmy Award winners, The Bear and Succession. In music, WME clients headlined major festivals throughout 2023, including 25 artists at Coachella and 59 at Lollapalooza. Our leading presence in country music and in Nashville was also on full display at the 2023 CMAs, where WME clients took home trophies in eight of the 12 categories. In sports, WME continues to gain momentum with player signings across all the major sports as well as coaching and broadcasting. During the year, our teams negotiated over $1.1 billion in NFL contracts with more than $700 million guaranteed including the highest paying offensive and defensive player contracts in NFL history. And as women’s sports continue to grow, WME is stride for stride representing more highest paid female athletes of 2023 than any other agency.

Additionally, WME represented the most lottery picks in the NBA draft, more than any other agency. During the year, WME also executed more than 4,000 brand partnerships deals signed more than 75 new clients in the podcasting space and closed more than 100 audio deals with major podcast networks. WME also closed deals for more than 300 new books with 48 books debuting on the New York Times bestseller list. In addition to the agency, our representation segment includes the consumer product licensing business of IMG, which ranked number one for the fifth year in a row in licensed Global’s top global licensing agents 2023 report and 160over90, our cultural marketing agency, whose major clients include multiple Fortune 500 brands, including Amazon, Marriott, USAA and Visa.