Endeavor posts Q4 loss, raises 2022 revenue and adjusts earnings guidance

Endeavor posts Q4 loss, raises 2022 revenue and adjusts earnings guidance

Endeavor ended 2021 with more than $467 million in red ink, but also provided updated financial guidance for 2022 that indicates the company is seeing tailwinds with growing consumer demand fueling operations sports, entertainment and talent shows.

Endeavor ended the last quarter of 2021 with a net loss of $16.7 million on revenue of $1.5 billion. For the full year, Endeavor posted a loss of $467.5 million on revenue of $5.1 billion. Sequentially, in Q3 last year, Endeavor had net income of $63.6 million.

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Endeavor CEO Ari Emanuel told investors in a conference call Wednesday that all indications for 2022 are for significant growth in key operations such as UFC, PBR, WME and its On Location hospitality service. Endeavor is in a “unique position at the center of sports and entertainment,” Emanuel told Wall Street analysts. “It allows us to capitalize on a wide range of secular trends.”

Emanuel was pressed by analysts on the loss of future packaging fee opportunities at WME following the 2019 and 2020 battle with the Writers Guild of America, on the UFC’s growth overseas and whether the content spending arms race for streaming platforms is beginning to slow down. Endeavor’s boss went on to point to the tailwinds benefiting his “platform agnostic” business.

“The need for content remains at an all-time high,” Emanuel said. “Our global scale and volume of deals allow us to achieve maximum value on behalf of our own and represented IP.”

Specifically on content spending, Emanuel was asked if he was concerned about a shift in strategy for HBO Max, with Discovery CEO David Zaslav soon to take the helm at Warner Bros. Discovery. Zaslav, as Wall Streeters well know, has a reputation for fiscal prudence.

“I’m not really nervous if he decides he doesn’t want to spend what everybody else is spending,” Emanuel said. “There are seven or eight players in the market.”

The UFC had its best year financially in the 28-year history of the MMA league, Emanuel rejoiced. Ticket sales, PPV sales, sponsorships and merchandise sales are all headed up. Endeavor’s Q4 report beat prior earnings guidance and adjusted EBITDA for the quarter. It provided updated guidance for the company’s full-year targets of $5.2 billion to $5.45 billion in revenue and $1.07 billion to $1.12 billion.

The company noted that its talent representation unit, comprised largely of WME, posted double-digit revenue growth in the quarter, which is no surprise given the increase in demand and production in recent months. The return of major sports to regular and predictable schedules has also been good for Endeavour’s media rights, sponsorship and sports betting activities.

Emanuel and Endeavor CFO Jason Lublin told analysts that many of Endeavor’s businesses are seeing revenue and activity return to pre-pandemic levels in 2019. He dismissed the agency arm as enjoying a “great comeback” with growth of double digits, which will be sustained this year as tours and theater return to pre-pandemic norms.

Moreover, profit margins in the talent representation segment will improve significantly now that it no longer includes the scripted side of Endeavor Content, which has consumed a lot of capital for content development needs. Endeavor was forced to sell the production arm earlier this year to South Korea’s CJ ENM for $775 million due to tougher conflict-of-interest rules set in 2020 by the Writers Guild of America.

Endeavor’s creative agency 160over90, which specializes in creating immersive live experiences for corporate clients, is also having a strong year, Lublin said.

The representation segment delivered $717.9 million for the quarter, up 161% from the pandemic-hit Q4 2020. For the full year, revenue was up more than 100% to $2 billion. Adjusted earnings before interest taxes amortization were $118.4 million for the quarter, up 138% year over year and $383.4 million for the year (up 81%).

Endeavor’s owned sports properties segment saw revenue grow 3% year-over-year to $277.3 million for the quarter and 16% to $1.1 billion for the year. Earnings were fueled by higher media rights fees in international markets for the UFC and an increase in PBR events compared to the year-ago quarter. Adjusted EBITDA was $125.1 million for the quarter, up 2% for the quarter and 17% for the year to $537.6 million for the year.

The Events, Experiences and Rights segment saw a 23% year-over-year increase in revenue to $516.7 million for the quarter and a 28% gain for the full year to $2 billion. Adjusted EBITDA reached $54.7 million for the quarter (up 29%) and grew 264% for the year to $215.6 million.

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