Endeavor Swings to Q1 Profit on Endeavor Content Sale, Big Gains for Events and Representation
Endeavor swung wide to a profit in Q1, fueled by the sale of Endeavor Content and big year-over-year gains for its events and talent representation units.
Endeavor on Thursday posted net income of $517 million on revenue of $1.47 billion. The black ink was driven by a $463.6 million one-time gain stemming from the sale last year of the Endeavor Content division, which was acquired by South Korea’s CJ ENM for $775 million.
Excluding the Endeavor Content gain, Endeavor’s adjusted earnings before interest, taxes, depreciation and amortization came in it about $129.2 million.
The company raised its full-year 2022 revenue guidance slightly, predicting it will come in between $5.235 billion and $5.47 billion, up from the $5.2 billion to $5.45 billion forecast from last quarter, and adjusted EBITDA guidance of $1.1 billion to $1.15 billion.
Endeavor had operational momentum in its Events, Experiences and Rights division as well as the Representation segment, which was powered by a strong performance from WME. Endeavor’s Owned Sports Properties unit saw smaller gains, in part because of the timing of pay-per-view events in the quarter for UFC compared to the same frame last year.
“Our growth in the first quarter was driven by our ability to respond to the high demand for premium content and live events,” said Endeavor chief executive Ariel Emanuel. “We feel great about where we sit relative to the secular tailwinds across all of our businesses, and we’ve raised our guidance for the fourth quarter in a row to reflect our positive outlook for the balance of the year.”
Endeavor recently passed the one-year anniversary of its IPO on April 29, 2021. Shares held up well by staying about the $24 debut price but with the broader market gyrations of the past few weeks, Endeavor shares have plunged more than 40% for the year to date. On Thursday, shares gained 33 cents for the day to close at $18.35.
Emanuel and Jason Lublin, Endeavor’s chief financial officer, were pressed during a conference call with analysts for their views about the potential for the content spending boom to ebb some in the coming months. Speculation about the content bubble of the past few years ending amid slowing streaming subscriber growth rates and inflation concerns among consumers.
“From where Endeavor sits on the supply side, we simply do not see content spending reducing,” Emanuel said flatly in his opening remarks.
Emanuel emphasized that Endeavor’s operations in TV, film, music, digital, sports and talent representation gives the company a good barometer of where business trends are headed among top content buyers.
Endeavor’s team sees little sign of a slowdown over the next year or so, given that contracts are usually locked in by now for projects targeted for release within a year or two. He also noted that Amazon and Apple are diving deeper into sports, which is also good news for Endeavor.
“We are the proxy for content spend. It isn’t decreasing because that’s how they get subs,” Emanuel said. “They’ve made these bets on building SVOD services, but they also have to defend the legacy services.”
For the quarter, revenue at Owned Sports Properties segment was up 5% year-over-year to $296.7 million for the quarter. Adjusted EBITDA was up 2% to $148.7 million. Endeavor emphasized that all of UFC’s pay-per-view events in the quarter were sellouts, and its PBR division logged seven sold-out shows and and set house revenue records at 10 events.
Events, Experiences and Rights saw a 53% spike in revenue to $825.8 million. Adjusted EBITDA was up 239% year-over-year to $132.5 million.
Representation saw a 44% gain to $357.3 million in revenue and adjusted EBITDA climbed 65% to $101.7 million. The talent agency business is so strong that WME’s Q1 revenue was 24% higher than the comparable frame in 2019.
Endeavor’s cash position improved in the quarter to $2.03 billion, compared to $1.56 billion at the end of Q4. But that cash pile will be dented soon as Endeavor completes its acquisition of Open Bet for $1.2 billion.
Endeavor’s total debt remains high for the company’s market cap at $5.7 billion. Lublin told analysts the company is still on target to bring its debt load down to less than four times earnings.
Variety's Cynthia Littleton contributed to this post.