Endeavor Group Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 13 speakers on the call.

Operator

Afternoon. Thank you for attending the Endeavor Group Holdings Second Quarter 2023 Earnings Call. My name is Matt, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, James Marsh.

Operator

James, please go ahead.

Speaker 1

Good afternoon, and welcome to Endeavour's Q2 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 Endeavour's CEO, Ari Emanuel and CFO, Jason Lublin, Before President and CEO, Mark Shapiro joins us for Q and A. The purpose of this call is to provide you with information regarding our Q2 2023 performance in addition to our financial outlook for the balance of the year.

Speaker 1

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 ks. If these risks or uncertainties ever materialize or any assumptions prove incorrect, Our results may differ materially from those expressed or implied in such forward looking statements and projections. Forward looking statements speak only as of the date they are made, We undertake no obligation to update them publicly in light of 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.

Speaker 1

Reconciliations between GAAP and non GAAP metrics for all of our reported results can be found in our press release issued today as well as in the non GAAP financial information posted in our IR website. With that, I'll turn it over to our CEO, Ari Emanuel.

Speaker 2

Thanks, James, and good afternoon, everyone. We delivered solid results in the 2nd quarter, reflecting ongoing demand for premium content and live events. Before I share highlights from our 4 segments, I'd like to note 2 deals in particular. First, we closed our sale of IMG Academy at an enterprise value of $1,250,000,000 As previously announced, we will now commence our share repurchase and dividend payment initiatives in the Q3. 2nd, having completed antitrust reviews for our proposed combination of UFC and WWE, we are closing in on the launch of TKO Group Holdings, which we currently expect in mid to late September.

Speaker 2

As we have discussed, exposure to TKO via our 51% controlling ownership Offers compelling upside for Endeavor. Planning is underway to begin maximizing revenue and cost synergies immediately upon closing. And I'm bullish on the TKO outlook and the progress of the WWE media renewal discussions. We will give further clarity on those initiatives in due course. Now turning to highlights within our segments.

Speaker 2

In owned sports properties, UFC 2 87 in Miami Drew 19,000 fans and generated ticket sales of $11,900,000 making it the highest grossing event ever at the Kaseya Center and 6th highest in UFC history. We're also excited about UFC's upcoming return to Sydney, Australia after securing a 4 year AUD16 million investment from the New South Wales Government to host multiple events, inclusive of site fees. The first of those events, UFC 293, We'll take place this September just ahead of our new multiyear agreement that will make Foxtel Group the exclusive distributor of all UFC pay per views in Australia beginning in 2024. Within our Events, Experiences and Rights segment, our owned events got off to a strong start in the 2nd quarter. Of note, the Madrid Open Tennis Tournament, now in its 2nd year as part of Endeavor, set a new attendance record with more than 325,000 Fans across 12 days.

Speaker 2

Our Taste of London Food Festival similarly set an attendance record attracting more than 56 1,000 guests across 5 days. At on location, we're seeing strong demand for upcoming live events. Tickets have already sold out for the 2023 Aer Lingus College Football Classic between Notre Dame and Navy, which is expected to draw nearly 40,000 fans from the U. S. To Ireland.

Speaker 2

Reportedly, this event is projected to set a world record for the largest number of Americans traveling internationally for a single sporting event. Additionally, On Location's early ticket and suite sales for Super Bowl 58 in Las Vegas are off to a record start. And with exactly 1 year to go to Paris 2024, we're optimistic about the anticipation and demand we're seeing in the lead up to the games. At IMG Media, we wrapped another successful Premier League season, producing live coverage and distributing content to millions of International fans in more than 180 countries. Also, IMG Media was chosen to produce the BBC's Highly anticipated coverage of the FIFA Women's World Cup, which is now underway in Australia and New Zealand.

Speaker 2

IMG is managing the incoming live match feed, Studio presentation and highlight programming for the BBC's 33 fixtures throughout the tournament. Within our Sports Data and Technology segment, IMG Arena secured worldwide data and streaming rights for the National Women's Soccer League. And at OpenBet, following the successful launch of their online sportsbook partnership with OPAP, Greece's leading gaming company, OpenVet will soon be expanding into their retail network of more than 4,000 shops and 20,000 terminals. This significant development demonstrates our focus on pursuing durable growth within the sports betting ecosystem and capitalizing on opportunities in newly emerging sports betting markets globally. Finally, within our Representation segment, despite the beginning of the WGA strike within the quarter, WME verticals outside of film and television performed well.

Speaker 2

Broadway is coming back strong, comedy tours are selling out, We're having our best year for music touring. In country music, in particular, more than 100 WME clients participated in nearly 200 performance slots throughout CMA Fest week in June. Also in the quarter, WME celebrated many awards and nominations for clients, including at the Tony Awards where the creative team behind Kimberly Akimbo took home 5 awards, including Best Musical, making it the 7th musical from WME talent to win in this Category over the last 10 years. More recently, more than 110 WME clients were involved in Emmy nominated projects, including a combined 40 nominations for Succession and The Bear. And as a sign of continued momentum for WME Sports, We had 5 1st round and 3 lottery picks in the NBA draft, the most of any agency, and represent the world's number 1 tennis players, Iga Swiatek, who won at Roland Garros and Carlos Alcaraz, who took home his first Wimbledon title last month.

Speaker 2

WME also recently completed several tuck in acquisitions that deepened and broadened our representation capabilities within several growing categories. In music, WME acquired Red11 to further scale its position in country music and touring. And in books, WME acquired Washington, D. C.-based literary agency Ross Yoon expanding our literary and commercial nonfiction offering. As just one example of the opportunity this presents, Ross Yoon represents Kai Bird, author of the book American Prometheus, which inspired the hugely successful film Oppenheimer that was written, directed and produced by our client, Christopher Nolan, and features clients including Matt Damon, Robert Downey Jr.

Speaker 2

And Kenneth Brana. These acquisitions, along with our capabilities and expertise across the Andeavor Flywheel, further enhance our ability to build holistic businesses Around our WME clients. Before I turn the call over to Jason, I'd like to close with some thoughts on the strikes. I've been through many strikes over my more than 35 years of representing actors, writers and creatives of all types whose livelihoods depend upon the entertainment economy. Time and again, our industry has navigated change and now is no exception.

Speaker 2

As we adjust to new distribution models and technologies. There are real issues to work through, and we continue to stand with our clients, advocate on their behalf and push for a resolution that protects their creative and commercial interests. With that, I'll now turn things over to Jason to walk you through the quarter in detail.

Speaker 3

Thanks, Ari, and good afternoon, everyone. I'll start by walking you through our financial results for the Q2. I'll then provide some color on what we're seeing in each of our operating segments. All comparisons will be to the Q2 of 2022. For the quarter ended June 30, 2023, we generated $1,436,000,000 in consolidated revenue, up $123,700,000 or 9.4 percent.

Speaker 3

Net income for the quarter was $666,500,000 compared to $42,200,000 The change in net income was largely driven by the gain from the sale of the IMG Academy, which we completed at the end of June. Adjusted EBITDA for the quarter was $304,900,000 down 1,400,000 Now I'll walk you through each of our segments. Our Owned Sports Properties segment generated revenue of $340,100,000 in the quarter, up $8,200,000 or 2.5 percent. While the segment's adjusted EBITDA for the quarter was 179,200,000 up $18,000,000 or 11.1 percent. As a reminder, the prior year quarter included $30,000,000 of revenue related to Diamond Baseball Holdings, which we sold in September of 2022.

Speaker 3

Revenue growth in the segment was primarily driven by increased live event revenue at UFC, largely from 2 more events held outside of the Apex, higher media rights fees and sponsorships and an increase in commercial pay per view. In the quarter, we signed a new multi year rights agreement with Molla in Indonesia. The increase in our aggregate AAV Remains approximately 100 percent over prior deals since we began tracking in Q2 of 2021. At PBR, we set 11 event revenue records, including 8 sold out performances. We signed long term partnership extensions with ARIAT and Pendleton Whiskey, and we inked new partnerships with Bass Pro Shops for PBR's Team Series and Unleash the Beast Series.

Speaker 3

Now turning to Events, Experiences and Rights. The segment recorded revenue of $591,100,000 in the quarter, Up $23,300,000 or 4.1 percent. Segment adjusted EBITDA was 76,600,000 down $16,000,000 or 17.3 percent. Revenue growth was driven by record ticket sales at the Madrid Open, The inclusion of Barrett Jackson, increased media production revenue at IMG Media and increased revenue at IMG Academy. Revenue growth was partially offset by decreases in on locations music business as well as decreases at Endeavor Streaming.

Speaker 3

Segment adjusted EBITDA for the quarter was impacted by On Location's ongoing IOC investment, which began in the Q3 of last year and is inclusive of personnel, marketing and technology costs. Declines have been devastating due to runoff of legacy deals and changes in client spending trends. A challenging comparison for the Masters and NCAA Final 4 given weather and matchups. And lastly, timing related shifts in certain Sponsorship deal signings for soccer clubs we represent, which we expect to close in Q3. The decline in segment adjusted EBITDA This was partially offset by growth in our Events, Media Production and IMG Academy businesses.

Speaker 3

Moving on to our Representation segment, Revenue was $381,100,000 up $23,200,000 or 6.5 percent, while adjusted EBITDA was $107,100,000 down $4,100,000 or 3.7 percent. The increase in segment revenue was primarily attributed to the content deliveries within our non scripted content production business as well as growth at our onesixninety business. The increase was partially offset by the early stage impact of the rider strike, which had an impact on segment adjusted EBITDA in the quarter. Now turning to our Sports Data and Technology segment. Revenue was $130,600,000 up $70,200,000 or 116.3 percent, while adjusted EBITDA was $13,700,000 down $1,800,000 or 11.7%.

Speaker 3

Revenue growth in this segment was attributed to the addition of Open Bet, which we acquired in Q3 of last year, as well as growth in the existing betting data contracts at IMG Segment adjusted EBITDA, which benefited from the inclusion of Open Bet, was offset by increased data costs at IMG Arena in advance of the sales cycle. As we've previously noted, these new data costs continue to create temporary pressure on segment margins, which we anticipated. We continue to expect to monetize these data rights in the upcoming sales cycle. Performance in the quarter remains consistent with our previous commentary of the segment being back half loaded for the year. Moving on to our capital structure.

Speaker 3

We ended the quarter with $5,110,000,000 in debt and $1,620,000,000 in cash, resulting in approximately $3,490,000,000 in net debt. Our net leverage was 3.06 times at quarter end. In July, we completed our voluntary pay down of $50,000,000 of debt. Later this month, we expect to commence our share repurchase of up $300,000,000 of Class A common stock. At quarter end, we also intend to distribute our 1st quarterly dividend in an amount up to $25,000,000 to holders of our Class A common stock and our other equity holders at Endeavor Operating Company.

Speaker 3

Now related to our outlook, This is the first time in 63 years both WGA and SAG AFTRA are striking simultaneously. We currently estimate the strikes will adversely impact our revenue by approximately $25,000,000 per month on average, which largely flows through to adjusted EBITDA. However, without knowing the scope, duration and shape of the eventual recovery, especially given that the SAG after strike is a relatively new development Having taken effect only on July 14, it would be premature to speculate the aggregate dollar impact for the balance of the calendar year. Accordingly, we encourage investors not to rely on our previously communicated annual guidance estimates. We We plan to provide further updates on the impacts of the strike during our Q3 earnings call and we expect to update new guidance targets during the ordinary course of future earnings announcements As and when these waiver disputes are resolved and we have greater visibility.

Speaker 3

Beyond the impact of the strike, our other businesses In aggregate, remain on track with our adjusted EBITDA expectations. Despite near term disruptions related to the strike, We continue to be focused on executing our strategy. With that, I'll turn it back to you, James.

Speaker 1

Great. Thanks, Jason. Operator, can we open up the call for questions, please?

Operator

Absolutely. The first question is from the line of John Hodulik with UBS. Your line is now open.

Speaker 4

Okay, great. Thanks, guys. I guess, first, just a housekeeping question. On Jason, your latest comments there, I mean, why withdraw guidance Versus sort of update the guidance for the strike, I guess, unless something else has changed in the business?

Speaker 3

Yes. Sure, John. First of all, as you know, we provide annual guidance, not monthly. And currently forecasting Our annual guidance is complicated. The situation we're in is largely unprecedented.

Speaker 3

The added complexity of the recent development with the SAG after strike, Unknown duration and hard to figure out the ultimate shape of recovery. So at this time, we believe it's not prudent to try to forecast our business on an annual basis, Just too many moving parts based on what we know today. That said, we are providing transparency by giving our best estimate of our current monthly impact. So you have the inputs to make your own assumptions on the ultimate impact of the strike. Excluding the strike, our businesses are on track.

Speaker 3

Q2 results are just ahead of Street expectations and year to date we've done roughly $3,000,000,000 in revenue and over $600,000,000 in adjusted EBITDA. And as we said, adjusted EBITDA for the rest of the business is in line with our previous expectations. And we'll also plan to update more in Q3. As we know more, we'll share more with everybody.

Speaker 5

Yes, I think John, it's Mark. I'd just remind you, I mean last quarter Ari was very specific on, hey, we're getting our arms around this rider strike. We're going to come on the call next quarter and we're going to be able to quantify what kind of hit and how long lasting that's going to be. Now as we're getting ready to do that bang, just 3 weeks ago we get hit with the SAG after a strike, right, which is something as Jason said, we haven't Seeing in 60 plus years, so this is a once in a generation event. So we need some time to get our arms around that and give you guys the kind of clarity And transparency you're looking for.

Speaker 5

In the meantime, you're going to get monthly guidance, which we've just given you here. And just to underscore the other part of your question, No, there's nothing to see here, if you will. I mean, the business is doing well. We're tracking well on all of our other businesses. There's no watch out points, if you will.

Speaker 5

Even WME outside of the strike is doing really well. Sports is doing well. Music, as I'm sure you've read about, is on fire. Comedy is great. Broadway is doing well.

Speaker 5

Our speakers bureau, Our folks are getting booked right and left for speaking engagements. But we're being prudent here because remember the second half of the year has some of our big events, Some of our big headline assets, Winter Wonderland is our biggest event that doesn't take place till December. We have a Conor McGregor Fight that we budgeted for in the second half. We have 4 freeze events and I'll just remind you when it comes to Sports Data and Technology and IMG Media, We're loaded in the back half on both of those businesses. So again, good shape, but still a lot of wood to chop in the last 6 months.

Speaker 6

Okay, great. And so just to make

Speaker 4

sure I understand sort of what you're saying there, Jason, the $25,000,000 a month If it lasts for 6 months sort of the rest of the year, effectively the guidance goes from $1,250,000,000 to in the neighborhood of $1,100,000,000 in EBITDA for the year. Is that Do I got that right?

Speaker 3

So John, look, we're not going to give guidance for the year, but what I would say is Given what we know now and noting that the SAG after strike is less than 30 days old and based on our best estimates Of the impact of the strike, given what the business has performed to date through the 1st 6 months and the fact that the rest of our business is generally aligned, I definitely that's a reasonable way to look at the business and to look at our numbers. That being said, we'll of course update in Q3 as well to give Any changes to that view are based on actuals for Q3 impact of the strike and anything we're seeing different. But I think that's a reasonable basis to look at the

Speaker 5

Including up or down, the events that these strikes get settled earlier than most people anticipate. Correct.

Speaker 2

So as he's saying, in math class, you'd have gotten an A.

Speaker 4

Thanks, Ari. And now my actual question, I mean, we're sort of halfway through earnings here. And The weakness in the linear TV ecosystem is definitely front and center. And I guess, either from Mark or Ari, I mean, Any evidence that you're seeing that, that weakness is translating into sort of less appetite for sports rights? Thanks.

Speaker 2

Well, here's what I'd say. We continue to see live sports as a long term driver of demand despite near term issues regarding linear channels. Scarcity value of professional sports leagues, teams, franchises, as you know, It's true. Rising consumer engagement and viewership, they're spending on experiences and sports betting Adjustments, consistency on delivering appointment viewing ahead of can't miss moments. So Legacy Broadcasters still represents the lion's share of sports rights in revenues with big tech companies and SVODs Seeing as newcomers despite significant investment in the space, we just saw Max saying they might have A sports tier, same thing with Peacock.

Speaker 2

Clearly, the ecosystem is entering a Generational change, and we continue to feel Live Sports remained up and to the right. We also think that the properties like UFC and WWE are premium content, appointment television and feel Great about the value of those rights.

Speaker 4

Thanks, Sean.

Speaker 7

Operator, next question please.

Operator

Thank you for your question. Next question is from the line of Ben Swinburne with Morgan Stanley. Your line is now open.

Speaker 6

Thanks. Good afternoon, guys. I think, Jason, you mentioned the buyback or maybe it was already starting later this month. I just wanted to give us a little Specificity, any reason why it can't start after you guys finish reporting this evening? And then I guess, Ari, are you thinking about anything on the cost side at WME?

Speaker 6

I mean, I think Jason said the revenue hit will largely flow through To EBITDA, which suggests the cost structure is pretty fixed. But I'm just wondering as this sort of strike continues to move along, how you guys are thinking about The expense side of the equation. And then if I can just ask one more, I apologize, but John asked 3, so I figured it's fair. What are you thinking for capital allocation once this TKO deal closes? That business generates Massive free cash flow rapidly delevers and it's going to close in the not too distant future.

Speaker 6

Anything you can share with us Sort of post close strategy around use of cash flow and capital allocation.

Speaker 3

We may have to go back through that one. We might have to go through it back to this, but we'll try if we miss anything, let us know.

Speaker 1

Thank

Speaker 3

you. As far as the buyback, we need to be in an open window. So, and we need a few days into that open window before we can execute it. So, We don't just be a little bit before we can start that program. So that's more just technical in nature.

Speaker 3

As far as cost structure, we've addressed some of the cost structure already, as you can imagine, On some of the variable costs, so when we gave that $25,000,000 number largely flowing through that sort of already indicated Took into account what we've been able to do on the cost side. We're saying largely flow through because we do think there's potentially an opportunity to get a little bit more as time goes on. But keep in mind, There's a lot of aspects of the agency that are still operating very well as Ari said in full force. So we want to make sure we're not doing anything that's impacting those sides of the business as well.

Speaker 5

But we would never, I mean obviously Ben, I mean never waste a crisis, right? I mean we've been through this before with COVID. We are tight on all controls. Efficiency is the word of the moment. And whether it comes to Pruning our portfolio or just freezing hiring in T and E, you can bet we're lifting all levers.

Speaker 4

And the third question, please?

Speaker 2

What was the third question?

Speaker 6

TKO capital allocation given the cash flow and the leverage there, What do you think you might do with all that capital potential?

Speaker 3

I mean, to be honest, Ben, right now we're just focused on closing the transaction. We're not going to speculate, but yes, we know it's going to be highly cash rated business with a good leverage profile and we at that point in time we'll address and make The right capital allocation decisions on behalf TKO will make the right capital allocation decisions on behalf of TKO at the time.

Speaker 1

Thank you. Thanks, Matt.

Speaker 7

Operator, next question please.

Operator

Thank you for your question. Next question is from the line of RECOR ISL. Your line is now open.

Speaker 8

Great. Good afternoon, and thanks for taking the question. Maybe switching gears a bit, There's a lot of focus on TKO, but I was actually hoping to dig in a bit on the non TKO part of the company because looking at the stock today, These assets seem particularly disconnected with other public or private valuations. So Ari or Mark, can you share your views on what gets you most excited about the outlook for these remaining businesses. And then Jason, I know there's a lot going on here, and I don't expect guidance, but is there anything you could share on the financial profile you see ahead for the non TKO Group, particularly around free cash flow.

Speaker 8

Thanks.

Speaker 2

So, I would say the following. We operate in a large global and fast growing marketplace. I think the combined TAM For sports, entertainment, music, live events, premium experience is roughly about $500,000,000,000 Endeavor operates in the most durable layers of sports and entertainment value chain. Our management team has a long history of operating in an ever changing sports and entertainment industry. I would just say to you, we look at our business.

Speaker 2

We sold the production business for $1,000,000,000 We sold the Academy for $1,200,000 I think, I don't believe that anybody valued those assets at that with those numbers. We hear the speculation regarding Kering and CAA in our Representation segment. We're larger than that even with the acquisition that they made of ICM. So if let's just say that's Close to the valuation they're talking about, just that portion alone that the representation segment It's greater than that. And then I think when people look at on location, IMG Media And our bedding business, it's a significant business, the remaining assets.

Speaker 2

And hopefully, they'll now begin to realize And be able to look at those without UFC in there and we'll get the value accretion that we think those remaining assets deserve.

Speaker 5

Yes, cut down. I mean, clearly you can hear it. I mean, we struggle frankly with how undervalued EDR is these days for exactly the reasons Ari talked about. We're excited primarily because we have Some terrific rights renewals in front of us both in representing WWE for the time being and owning UFC And the synergy upside that will exist both cost and revenue at TKO. I would say secondly, We see meaningful growth in events and experiences, especially when you consider the Olympics in Paris for 2024.

Speaker 5

On top of that, we see increased shareholder returns As leverage drops below 3 times after the TKO launch. And then finally, the demand for content, The demand for premium content, which is where we play, premium content, UFC, WWE, All the entertainment programming that we package, that's not going anywhere anytime soon. So owning or representing it, We sit at the center as you know and we find ourselves in a very attractive space. So with those that kind of financial profile and that debt leverage being Less than three times after the TKL launch, we're excited about the prospects for Endeavor.

Speaker 3

And on the free cash flow, as we said on the Q1 call, we're going to revisit free cash flow for the company in 2024 given a lot of the Anomalies in 2023, but what I will reiterate what we did have said prior is that we certainly expect the remaining assets of EDR to be Free cash flow positive on a go forward basis.

Speaker 8

Understood. Thanks everyone.

Speaker 7

Thanks, Cai Cai.

Operator

Thank you for your question. The next question is from the line of Brian Kraft with Deutsche Bank. Your line is now open.

Speaker 5

Hi, thanks. Good afternoon. I guess a follow-up question on the strikes. If the writers and actors are back to work sometime before the end of the year. How should we think about the impact on 2024?

Speaker 5

Will the negative impact in 2023 Translate more or less into a similar positive impact in 2024 as that production shifts into next year?

Speaker 2

Thanks. Here's what I would say. Having gone through multiple strikes, I think it will be months not days Until the strike kind of gets settled and things start back up. So things that were shut down that we're filming will start up And then there will be the preproduction and then going into production. So you're talking months not days until that pipeline.

Speaker 2

When it ends, again, we do not know, etcetera. So it's complicated. That's kind of Not since the 60s, it's unlike any strike that's happened in a long time. It's going to be months. So let's just say it's in the back half.

Speaker 2

We'll have more updates as Jason said in a couple of earlier questions And then we'll give you kind of where we think as it begin at the beginning of 2024, maybe to the tail end of 2023, we do not know. And

Speaker 5

Brian, to Ari's point, it'll take a while to ramp up, but we live in the comp business. So we look forward to this getting wrapped up, our clients having better economics with each of their deals, Us prospering from a return to normal business with better economics in 2024. So that bodes for a strong picture. And I would just say on top of that, non scripted while we haven't seen it yet because the studios have been bankrolling cash, we're just beginning to see now A ramp up in orders for non scripted. So that will also inert to our benefit in 2024.

Speaker 5

Here's the one thing that

Speaker 2

you can take away from this. Unlike most negotiations that all of us have gone through, the one answer that we do know, this strike will come to an end. This deal both these deals will come to an end. I don't know when,

Speaker 5

but they definitely will. One time and temporary. Yes.

Speaker 7

Great. Thanks, Brian. Operator, next question please.

Operator

Thank you for your question. The next question is from the line of Steven Lachik with Goldman Sachs. Line is now open.

Speaker 9

Thanks. Good afternoon. Maybe you could just expand on the demand for non scripted. To the extent you're seeing an uptick In demand, I mean, production or orders from studios, and any commentary on maybe how that could offset some of the headwinds in the Representation segment From the strike over the next quarter or so, that would be helpful.

Speaker 5

Great. Thanks, Stephen. Yes, look, we're leaning in, in a big way. Ari mentioned Endeavor Content, which obviously we sold for a big number and a big multiple. We're now leaning in On that same strategy for non scripted, so I'm sure you've seen some headlines, some investments we've made, an acquisition we made with Asylum Entertainment.

Speaker 5

We think non scripted is a real strong play for us and we're ramping up in that area. In terms of the studios and ordering, I think everybody thought, oh, Strike, they're shutting everything down. Now SAG after Strike, they're for sure shutting down. They're Our ordering game shows in reality and not scripted like crazy. Well, frankly, they didn't do that out of the gate.

Speaker 5

They're bankrolling cash and that's why you see some of this cash flow a little better With each of these earnings reports, we're now seeing for the first time this week that they're starting to ramp up, which means they see a prolonged strike And they need to fill the pipe with something. So that's beginning to take place. And I would tell you in the shape and form it's taking place, They're actually coming back and ordering shows that they passed on prior to. So look, we hope we'll be in a good place here where the strike's over To Ari's point, ramp up begins, production gets going, pipeline gets filled, but oh yes, they've made all these non scripted commitments. And by the way, we happen to have investments in ownership in companies that will benefit us on both sides.

Speaker 9

Got it. Thanks for that. And then maybe just one more if I could on the Sports Data and Technology segment for Jason. I think I heard you say that the growth is going to be back end loaded. I wasn't sure if you meant that sequential growth off of 2Q's revenue performance.

Speaker 3

We basically met the majority of the EBITDA in the segment is weighted in Q3 and Q4 for the year.

Speaker 9

Got it. Thank you.

Speaker 2

I'll tell you.

Operator

Thank you for your question.

Speaker 5

Clearly you saw the news today with ESPN and ESPN Bet and Barstool and Penn Entertainment. I mean we're not the only ones that Thanks. Sports betting is a major part of the ecosystem.

Speaker 7

Great. Thank you. Operator, next question please.

Operator

Thank you for your question. The next question is from the line of Jessica Reek Erawick with Wolfe Securities. Your line is now open.

Speaker 10

Thank you. Kind of a 3 parter On content, going back to the Stripe. You're reporting at the tail end of most companies. We've heard everybody talking about content and becoming more efficient. Do you think that the industry is structurally changing how they're thinking about content And are you seeing an increase in 3rd party licensing?

Speaker 10

Can that mitigate some of this impact for some of these And then, I mean, it seems pretty obvious, but unless there's a global strike or strikes that a lot of this will move offshore, A lot of the production, how does that impact your business? And I guess just a small thing, but Ari and Mark, like how do you plan to split your

Speaker 5

Two record Jessica, four questions. Yes. Here's what I would say to you.

Speaker 2

We don't see any pullback. I mean, we're in a strike now. In content spend, There's been many indications, new programming kind of gets you subs and maintains your subs. Sports does the same thing. Netflix and other people have been buying stuff internationally always.

Speaker 2

There's I don't believe that yet If there's more efficiency, I think there's 6 to 7 buyers with Sony and Paramount Also on the movie side and the direct to consumer business. So from my perspective, Content spend has continued. It's actually increased. Hopefully, it doesn't the strike does not hurt the theatrical business. But again, as I said in the past, they've got to continue the pipeline even though linear is going down and cable is going down.

Speaker 2

They got to continue for their SVOD Strategy and now the theatrical business with all these movies coming out is still performed. They're picking up they've always picked Shows from international territories make a lot of Netflix doing that. So we feel good about that. And I would say to you is One of our strength is that we're a global company. And so when you say kind of we have our eyes all over the world, 1 for sports, but also for non scripted businesses as Mark So we're covered in that space on a go forward basis.

Speaker 2

Okay. Thanks. Next question.

Operator

Thank you for your question. Next question is from the line of David Joyce with Seaport Research. Your line is now open.

Speaker 11

Thank you. Given that one of the opportunity sets For the pending TKO creation is on the international front in terms of building out the footprint. I was wondering what the international opportunities are For representation, what might you be doing in terms of organic footprint build in terms of Agencies or through acquisitions, and what's the gestation period for acquisitions or organic builds

Speaker 5

Yes, David,

Speaker 7

look, I think this kind

Speaker 5

of dovetails a little bit with Jessica's question in terms of localized content. It just goes hand in hand with the demand for content that we're not just seeing in this country. We're seeing globally, and we are geographically spaced to take advantage of that. So we are in 38 different countries, meaning WME, IMG, Endeavor as offices and boots in the ground in 38 different countries from Japan to Shanghai, Beijing, Singapore, obviously all the way across Europe Into Australia and New Zealand, I mean, we're covered everywhere and the way to sell shows and the way to sign new clients and celebrities and actors and writers It's of course be there and have your ear to the ground knowing who's hot, what's trending, where the zeitgeist is going. So we see that as a major area of growth for us.

Speaker 5

In fact, you'll probably see us open up more offices globally where we see Opportunity in content everywhere from India to Korea.

Speaker 1

Thanks, David. Next question, operator.

Operator

Thank you for your question. Next Next question is from the line of Tom Champion with Piper Sandler. Your line is now open.

Speaker 12

Hi, good afternoon. So a little bit of Uncertainty in the business related to the strike, but curious if you could just talk about the consumer appetite Spend on experiences, yes, just overall view of the consumer. And then Maybe if you could talk a little bit about, sports data and technology. I think you referenced a new deal in Greece. And Mark, I think you've talked in the past about Non traditional venues here domestically, what's the opportunity that we should be watching for in that part of the business?

Speaker 12

Thank you.

Speaker 5

Yes, I mean, look, Ari and I can jump on each other here with regard to consumer events and experiences. I mean, look, it's hot, Right. We've got a whole new world of what the definition of going back to work is, right? The 5 day work week is Largely dead and not coming back anytime soon. So folks out there, whether you're in the U.

Speaker 5

S. Or you're the youth in China, They have more time on their hands and they're looking for more ways whether they have the money or its credit to spend their discretionary time And income and we're seeing that across the board. We represent the WWE and they're reporting sellouts every which way they go. UFC, obviously, you've seen the trend line there and the ticket sales we're getting, record ticket sales for our last Five events in the UFC, Madrid Open, biggest attendance we've ever had and highest ticket yield Miami Open, Biggest attendance we've ever had and highest ticket yield. Even Super Bowl 58, we just finished we just hit the benchmark of $100,000,000 For the Las Vegas Super Bowl, which is upcoming, we just hit the $100,000,000 mark.

Speaker 5

I mean, ways off and people are pre ordering tickets Just to make sure they get a seat at these premium events and it does go back to premium. And I would just tell you finally in August we've got our Aer Lingus College Football Classic Which is in Ireland, it's Notre Dame versus Navy and it's completely sold out. And On Location is going to do record performance in terms of premium experiences. We couldn't feel better. Festival of the business is strong.

Speaker 5

Music touring business is strong. Everybody wants to play. Our food festivals, Taste of London was a record number for us. So look, we don't see that falling away Anytime soon. And on the Sports Data and Technology, all I would tell you there is, This is a natural part of the content ecosystem.

Speaker 5

I mean sports betting, sports viewing, sports participation, Merch, commerce, you see what's happening with Fanatics and the way they're expanding their business and getting into sports betting as well. It's become something especially the young people want to do as they're viewing, multitask and get engaged in a much deeper and meaningful way. And we feel great about it. Our launch in Greece with OPAP and OpenBet has been a monster success for just a few weeks out. And of course, we're licking our chops with the fact that Brazil is now legalized gambling and that's going to open up that whole region to us.

Speaker 5

So Sports Data and Technology, you see some of the other sports betting companies and the way they're jumping and gaining Genius Sports Radar, the Stock prices and rice and we feel good about the opportunity to really layer in there.

Speaker 7

Thanks, Tom. Next question please, operator.

Speaker 12

Thanks a lot.

Operator

Thank you for your question. There are currently no further

Speaker 7

Next question please operator.

Speaker 1

That's it. I just want to

Speaker 7

thank you all for joining us and participating in the call today. Thank you.

Operator

That concludes the conference call. Thank you for your participation. You may now disconnect your

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Earnings Conference Call
Endeavor Group Q2 2023
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