Endeavor beats expectations for second quarter ahead of UFC-WWE merger

Endeavor Group Holdings, the diversified media company led by Ari Emanuel, topped Wall Street expectations Tuesday after reporting second-quarter 2023 net income of $666.5 million, or earnings of $1.29 per share reported diluted earnings of $1.43 billion.

Analysts polled by Zacks Investment Research were expecting earnings of 31 cents a share on sales of $1.42 billion.

Adjusted EBITDA for the quarter was $304.9 million. As of June 30, Endeavor’s cash and cash equivalents totaled $1.62 billion and debt totaled $5.11 billion.

In the Owned Sports Properties segment, which includes the UFC mixed martial arts franchise, revenue grew 2.5% year over year to $340.1 million, driven by higher live event revenue through two more events with live audiences in the current year and increased media rights due to fees and sponsorships and an increase in commercial pay-per-view, all at UFC. Segment revenue was partially offset by $30 million from Diamond Baseball Holdings included in the prior year; This device was sold last September. Adjusted EBITDA for the segment increased 11.1% year over year to $179.2 million.

In the Events, Experiences & Rights segment, revenue increased 4.1% year over year to $591.1 million, driven by new media production deals including with Major League Soccer. a strong Madrid Open tennis tournament; Barrett-Jackson, which was acquired in August 2022; and growth at the IMG Academy. Growth was partially offset by music business performance from On Location and Endeavor Streaming. The segment’s Adjusted EBITDA fell 17.3% year over year to $76.6 million.

In the representation segment, revenue increased 6.5% year over year to $381.1 million, primarily due to Endeavor’s non-scripted content production business, as well as gains in the fashion business and new projects, and higher spending from 160over90s Corporate customers, which were partially offset by the impact of The Writers Guild of America strike against WME. The segment’s Adjusted EBITDA fell 3.7% year over year to $107.1 million.

In the Sports, Data and Technology segment, revenue grew 116.3% year-over-year to $130.6 million due to the inclusion of OpenBet, which was acquired in September 2022, as well as growth at IMG Arena. The segment’s Adjusted EBITDA fell 11.7% year over year to $13.7 million due to certain costs at IMG Arena that were incurred prior to the sales cycle, the company said.

The latest quarterly results come as Endeavor plans to complete the UFC-WWE merger in mid to late September.

Upon closing of the transaction, the two companies will create a $21.4 billion entertainment giant called TKO Group Holdings. The deal values ​​UFC at $12.1 billion and WWE at $9.3 billion. Under the terms of the transaction, existing WWE shareholders will contribute all of their existing equity to the new parent company, which the parties intend to list on the New York Stock Exchange under the ticker symbol TKO. Endeavor will hold a controlling 51% interest in the new company, while existing WWE shareholders will hold a 49% interest.

During the quarter, Endeavor completed the sale of IMG Academy valued at $1.25 billion, which allowed the company to complete a share repurchase program of up to $300 million of Class A common stock in the third quarter start. Endeavor also expects to begin paying a quarterly cash dividend beginning late in the third quarter.