Good afternoon and thank you for attending today’s Endeavour Third Quarter 2022 Earnings Call. My name is Jason and I will be the moderator for today’s call. [Operator Instructions] I would now like to pass the conference over to our host, James Marsh..

Good afternoon and welcome to Endeavor’s third quarter 2022 earnings call. A short while ago, we issued a press release, which you can view on our Investor Relations website, 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, Ari Emanuel; and CFO, Jason Lublin, before we open for questions. The purpose of this call is to provide you with the information regarding our third quarter 2022 performance in addition to our financial outlook for the balance of the year.

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 incorrect, 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 they are made and 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. These measures 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 will turn it over to Ari..

Thanks, James. Our business performed well in the quarter despite an increasingly turbulent macro environment. We have built and positioned Endeavor relative to a broad set of secular industry trends that continue to demonstrate resilience and enable us to deliver on our long-term growth strategy.

Today, I want to hit on two of these trends, the competition for premium sports and entertainment content and the demand for live events and experiences. I will then turn it over to Jason who will share more segment level color as well as considerations for the remainder of the year.

First, as it relates to premium sports and entertainment content, the company’s strength lies in its decision we made nearly a decade ago to become a premium content supplier to the diversified and expanding list of tech and media companies who have pivoted to D2C.

Alphabet, Amazon, Apple and Microsoft are in a race to add offerings across multiple categories to attract customers to their ecosystems and convince them to stay. These mega bundles are often packaged and priced as all-in-one subscriptions that deliver strong value.

And these leading tech companies go head-to-head with major streaming and media players, including Disney, Netflix, NBC Universal, Warner Bros. Discovery and Paramount for the best video podcast, gaming and social content.

Every single one of them requires a steady flow of premium entertainment and sports content and we are the leader in these categories. It’s undeniable that premium sports and entertainment content have become the most powerful and efficient means to acquire customers and keep them engaged.

Take Amazon and Thursday Night Football, viewership on Prime has exceeded most common expectations, especially when you consider the strength of the schedule making it both appointment viewing and a powerful promotional tool for the platform.

The NFL and Amazon are also partnering on a first-ever Black Friday game creating more opportunities to drive consumer product sales. Bottom line, Amazon and their competitors understand the network effect generated from premium content and our flywheel is uniquely positioned to deliver it and benefit from it.

Meanwhile, as linear players battle to keep viewers, they have increasingly turned to live sports. You are seeing this play out in new deals for the NFL, Major League Soccer, Formula One, college football across linear as well as SVOD and AVOD services.

Additionally, sports betting is quickly becoming the ultimate live sports viewing complement and yet another way to keep consumers engaged. During the third quarter, we closed our acquisition of sports betting tech leader, OpenBet, helping round out our tech offering in this space.

Once again, we have positioned ourselves on the supply side of this industry, working directly with rights holders and sports books to deliver everything from official data, streaming feeds to betting ads and mobile apps. Beyond sports, the demand for premium talent-led content shows no sign of slowing.

In fact, opportunities for talent are expanding into new formats as both big tech and the incumbents flight tolling top creators to their platforms. We are closing more long-term deals for our clients with studios as we did recently with HBO for the Game of Thrones executive producer and showrunner, Ryan Condal.

We have also moved more Talegent personality into podcast, evident in the launch of Stephen A. Smith’s new podcast, No Mercy. And we are seeing streamers learn more of our clients from the big screen to the small screen, whether it’s Keanu Reeves landing his first television deal with Hulu or Tyler Perry’s new deal with Amazon.

We are also beginning to understand the impact of ad-supported streaming with new tiers being introduced from companies like Disney and Netflix and the launch of new free ad-supported streaming services. We expect this shift towards an ad mile to lead to greater streaming adoption, further supporting the need for more premium content inventory.

This is all to our continued benefit, especially when factoring in the incumbent broadcast and cable networks ongoing content needs. The second broad theme I want to hit is the continued consumer demand for experiences and live entertainment. The UFC has achieved 26th consecutive sellout since restarting events during COVID-19.

UFC 276 set a new record for single event VIP experience revenue via our on-location business and our first ever event in France set a VIP revenue record for a non pay-per-view event. In the third quarter, we serviced 3x as many UFC VIP guests as in the prior year.

Looking at the rest of our portfolio, our UK based big festival music and culinary events sold the greatest number of tickets in its history. Meanwhile, the NFL International games produced strong demand for on-location packages and Super Bowl 57 sales are pacing incredibly well.

In fact, interest in Super Bowl 58 slated for Las Vegas in 2024 is already outpacing last year’s Super Bowl and that’s an event that’s 16 months away.

As for new launches, we recently debuted Frieze Seoul, the fifth installment of our Frieze Art Fairs with more than 100 galleries and 70,000 attendees over the 4 days, making it our strongest inaugural Frieze event ever. As it relates to music and comedy tours, we continue to see strong demand. Booking shows for our talent well into 2024.

Comedy, in particular, is surging. Kevin Hart and Bill Burr sold out the only two arena shows at the Just for Laugh festival. And Bill Burr at Fenway Park became the highest grossing comedy show of all time.

So whether it’s across premium sports and entertainment content landscape or in all forms of live events and experiences, our business continues to perform well despite the macro headwinds.

And while we cannot yet predict those headwinds full impact, we remain confident in our position and the strategy we laid out to capitalize on the most resilient secular trends long-term. I will now turn it over to Jason to walk you through our financials and update you on where we are headed as we look to close out the year..

our high degree of visibility into revenue for the balance of the year, the continued adverse impact of FX, the delayed timing of content deliveries within our non-scripted business, the earlier than anticipated sales of the Miss Universe organization and our ongoing cost discipline.

Even in the face of an uncertain macro environment, we remain confident in our ability to execute on our strategy and the resilience of our business against challenges ahead. With that, I’ll turn it back over to James..

Great. Thank you, Jason. We will now take questions, please..

[Operator Instructions] Our first question is from John Hodulik with UBS. Your line is now open..

Great, thanks, guys. So obviously, a lot going on in the traditional media space right now with the weakening ad market and sort of stronger cord cutting. Do you guys think this changes the calculus companies are making when it comes to sports rights.

I mean, is there any sense that especially traditional companies are sort of becoming more reticent to spend or spend on sports at this point? Does it accelerate the shift of sports from traditional platforms to digital platforms? That’s number one.

And then maybe for Jason, just the margins in the Representation business were really strong this quarter. I mean is this 34% sort of a good level as we start to look out into ‘23? Thanks..

So I’ll take the front end of that question. So premium content continues to be in huge demand, whether that be sports rights or movie or television or podcasts.

The tech players like Amazon and Alphabet and Apple are race-to-add offerings across multiple categories to attract customers into their ecosystems and convince them to stay, as an owner of premium sports like the UFC as well as the guidance represents premium leagues and federations.

More interest in bidders in live sports is a win-win for us and more opportunities to strike broadcast deals for our talent. Apple, as we know, kind of moved in on MLS, MLB. Amazon now is exclusive Thursday Night Football, and they added the Friday night games for Black Friday. Netflix bid on F1 is rolling out their AVOD service.

They are going to add sports. They are going to follow what we believe was Amazon’s process going after international rights for sports, testing it, they are testing their system there and then moving that to the domestic front. They are going to go day and date and live, I think it was just announced with Chris Rock.

YouTube announced 15 MLB regular season games and also ESPN that they are carrying international games during this year’s NFL. It just shows the value of sports. There is going to be a couple of sports coming up, the NBA, ours and some others.

There is going to be multiple players in competition, whether that be from Paramount Plus, Comcast, Apple, Amazon, ESPN and Time Warner Discovery. So I think the value of sports rights as we have seen, even with the Formula 1 deal going to $75 million is only going up. So I do not think it’s going down, even in this environment..

As far as the EBITDA margins go, part of it, the 34% was the mix shift in the quarter between WME or 160over90 business and licensing. But we should be 30 plus margin for this segment on a go-forward basis..

Thanks, guys..

Next question, please..

Our next question comes from Stephen Laszczyk with Goldman Sachs. Your line is now open..

Hey. Great, thanks, guys. An open that maybe for you, Mark.

Now that the deal is closed, could you maybe talk a little bit more about the game plan for integrating OpenBet and IMG Arena over the next few quarters? What are the next steps? Are there any revenue or cost synergies that you think you can act quickly against and that we should keep in mind as we think about modeling the new segment in ‘23.

And then for Jason on FX, we saw some reprieve today, but FX continues to be a headwind. Could you remind us what your specific FX exposure is in of a headwind it was there has been on revenue and EBITDA this year and maybe how that relates to some of the guidance revisions that we saw come through? Thank you..

Just to remind you, we’re in the B2B side of the betting business. We’re not competing like the other players in the space for players and consumers on the supply side to all of them. We have multiple touch points in the company across sports and sports betting ecosystem.

IMG Arena, distributes data and content on behalf of bright holders to sports books. OpenBet offers Sportsbook a betting platform and a content offering ranging from player wallet, account management, trading and odds certainty and creation, excuse me.

As a result, there is I think in this space, there is nice secular tailwinds in the betting space, both internationally and domestically as it rolls out to more states. On the synergies, I would just say both IMG and OpenBet are profitable businesses right now. It’s going to be a new segment for us going into ‘23.

And the combination, we expect to achieve meaningful revenue synergies when IMG has – Arena has the data and the content and OpenBet has player ads and etcetera. So on the revenue side and the cost side, we feel very positive about the business, and it’s a profitable business for us..

On the FX side, roughly 85% of our revenue is denominated in USD. So we do have some top line revenue exposure, mostly in our EE&R segment. Roughly, let’s call it, $750 million ish of exposure, but we expect the impact this year to be on a full year basis roughly $120 million or 2% revenue.

For us, though, the revenue exposure is offset as the cost of those contracts and servicing them are also in that currency. So it has a limited impact on our bottom line as evidenced by us continuing to raise and forecast up our EBITDA guidance..

Great. Thank you..

Next question, operator..

Our next question comes from Ben Swinburne with Morgan Stanley. Your line is now open..

Hey, everybody. It’s Ben. Good afternoon. Ari, I had a question for you around capital allocation. And then I had a question for Jason on sort of sports rights and how those roll through the business. You guys have built this company, as I know you know, through lots of opportunistic and successful M&A. But we are certainly in a new rate environment.

Cost of capital is higher, you’re a public company.

Can you just talk about your sort of philosophy as you look out over the next year plus around continuing to be opportunistic to make sure you don’t miss big opportunities but also recognizing sort of what’s happened to the cost of capital and sort of where investors are focused from a leverage point of view? And then, Jason, IMG and WME Sports rep a lot of these big conferences, I noticed you guys were on the Big 12 deal, which I think had a 70% AAV increase.

We typically don’t think about that business that much. But can you just remind us how you guys get paid for businesses for deals like that as it flows in over the course of those deals and sort of what segment that shows up because obviously, that’s a decent part of the IMG business as well. Thank you..

Well, as you saw, Jason talked about, we’re going to pay down another $250 million. So on the allocation side. As we’ve said to you, we’re going to be sub-4 without sub-4 going into next year. We have a conversion rate of 50%, which I think Jason talked about, which we also indicated that we are going to get to.

We’re always opportunistic as it relates to M&A. We have a different formula for everybody as we kind of create moats around our businesses and see kind of where the opportunity is. Yes, cost of capital is more expensive. However, we’re long-term players. We evaluate everything about where we think it’s best for the shareholder value.

And we continue to be very kind of inquisitive, but with the understanding of where interest rates are going. So right now, we’re looking at the marketplace.

Haven’t seen anything that we want? We closed a bunch of deals that we wanted to do, and that’s where we stand right now?.

Ben, I would just add on the capital allocation. As Ari already said, we’re going to be 3.5x a year roughly at year end. We paid down $250 million of debt and then pay another $250 million this quarter. And based on our free cash flow expectation next year, we will be generating a lot of cash with the company.

And we’re going to look at all things how to maximize shareholder return with our capital, whether that’s continued debt repayment, stock buybacks, dividends as well as M&A. So we’re constantly looking at the best way to maximize shareholder value with our capital over the long-term.

As far as your second question on media rights, typically, what would happen is we would charge a commission percentage on the media rights deal. It can take a variety of different form. Sometimes it might just be on the total value of the deal.

It might sometimes it might just be on the increased value of the deal or there could also be hurdles that you add additional – you were an additional commissions based on certain thresholds. So it’s traditionally just a commission rep agreement on those deals..

Great. Thanks, guys..

Next question, please..

Our next question comes from Jessica Ehrlich with Bank of America. Your line is now open..

Thank you. At least two questions. On ESPN, on UFC, ESPN+ reported some weakness in pay-per-view revenue from UFC. And I think they alluded to the number of matches.

Could you just talk about what’s going on under the surface? And what are you seeing in terms of engagement? And then can you give us some color on like what happened with the equity loss on affiliate line? You said this UFC [indiscernible] but why did the loss widen? And then guidance, why did you bring the revenue guidance? Why did you tie that and bring it down a little bit?.

Thanks. I will take the first one and Jason will jump in on the last..

Hey, Jessica. So, listen, Disney/ESPN they are great partners to us, handful of our events from them with broadcast on ABC kind of a huge amplifier for us. The ratings continue to be very strong. We look at our – that business specifically and the ecosystem on an annual basis, not on a quarter-to-quarter basis.

So marquee events shift from quarter-over-quarter year-over-year. As actually was mentioned on the Disney call, there was a robust performance on ESPN+ largely attributed to the UFC content. The third quarter of last year featured a match up resulted in oversized pay-per-view.

So like every sport, we will have match-ups that drive increased demand based on various factors like rankings and hype. And the good thing is we are fortunate with the UFC, one of the most exciting fast-based sports. And it’s reflected in continued record-breaking achievements and sell-outs 26 over the last fights that we have had.

And our big one is coming up Saturday another sellout. And in the quarter, I think record-breaking sellouts, eight out of – six out of the last eight in this quarter. So, I am not really – it’s just kind of a match-up happened that was bigger in that quarter..

On the losses from affiliates, the majority – the vast majority of that is a charge from Learfield. Learfield took an impairment charge, and that flows through our earnings. So, that’s where that’s coming from.

And then on the revenue guidance, a few things that we have incorporated in our guidance over the balance of the year that brought the revenue down slightly. One was the continued impact that FX is happening on the business. Two, we have some non-scripted content deliveries that have moved – that are pushed from Q4 to Q1.

And lastly, we sold the Miss Universe Organization earlier than we had expected, so originally that we expect the revenue from that in the fourth quarter..

Okay. Thanks..

Next question please Jason..

Our next question comes from Kutgun Maral with RBC Capital Markets. Your line is now open..

Great. Thanks for taking the questions.

I know you spent some time on this in the opening remarks, but can you talk a bit more on what you are seeing across the health of the consumer with your events and experiences? I think we on the other side are just all trying to reconcile what’s going on between these strong results that you and rest of your peers have reported compared to what I think a lot of us are viewing as being an increasingly challenging macro backdrop.

And so I know it’s kind of a tough line to really answer, but how do you think about what’s going on? And how does that inform your near-term outlook? That would be helpful. And just second, sorry, Jason, to follow-up on the FX question. Can you characterize or size the FX hit as being about $120 million.

And I think last quarter, you had sized it as close to $60 million. So, I am just trying to better understand was the FX impact to the financials an incremental $60 million in the back half relative to what you were expecting? Because if so, it kind of seems like your top line guidance tweak wasn’t that punitive.

And in fact, you excess FX, it sounds like everything has been in line to maybe slightly better, but I just want to get a better sense there..

So, on the consumer side, I will take the first part of the question, and Jason will take the second part on the FX issue. So, limited impact on the business to-date. We saw solid performances across the broad platform.

On the own sports side, as I have said in the last answer, UFC sold out all events in the quarter, 26 consecutive sellouts since we came back from COVID, five more ticketed events versus last year. UFC 276 set a new record for single event VIP experience with allocation.

We sold four on-location VIP experience are going into management correct for $40,000, and there were some at $24,000. 281 is the highest premium experience sellout. And I talked about that there was six out of the eight events in the third quarter broke records. On the events and experience side, for on-locations, strong performance at Wimbledon, U.S.

Open, MLB All Star Game, WWE biggest event. And so – and when I look at interest in the Super Bowl 58 is outpacing Super Bowl 56, and we are 16 months away. On the IMG Academy side, I am just giving you a flavor because how we look at it in a broad way, we had a record at the boarding school and a record at our summer camps.

And so from our perspective, that’s going well. I would – also if you just look, as you talked about some people in the same space, Live Nation reported, I think it was 44 million fans and 11,000 events. I mean they are up double digits. Disney saw strong demand at the parks.

And I would just say, I think the way we are looking at it, and we are constantly monitoring this. Spending habits have shifted, but our company has a presence that at every point on the purchase chain, whether it would be premium experiences to concerts, the supply of content for the streamers.

And I would just say during COVID, people were buying stuff and post-COVID and more focused on experiences, and we are the beneficiary on that side of the equation. And with that, I will turn it over to Jason for FX..

The $60 million when we gave you last time was for the balance of the year, and that number as rates continue to move, has grown. The $120 million I gave was from the original budget for the balance of the year for the original budget with the full year impact of FX is $120 million..

Got it. Thank you so much..

Yes. Next question operator..

Our next question is from Bryan Kraft with Deutsche Bank. Your line is now open..

Hi. Good afternoon. Ari, I know that you have expressed a great deal of confidence in the growth outlook for the Representation segment. But I wanted to ask you in light of some of the larger media companies talking about more spending discipline and slowing down the growth in their content budgets.

From your perspective, how are they changing what they are doing to kind of optimize the returns on content investment? I know they are still growing their budgets, but where are they getting more discipline, where are they pulling back on spending? Any color on that, that you could share would be super helpful. Thank you..

I think it’s in their best interest to be to say that there have been at austerity. That being said, from where I sit, we believe our buyers are staying at their content spend levels. Even – I mean, Netflix said, they are going to be at 17%, potentially increasing revenues based on sub growth. Paramount went from $2 billion to $6 billion.

We know Brooke [ph] who is in there right now. I think Disney said they are 30 going to 33 depending on some sports rights. And on the podcast side, we have made – I mean, very high-end deals right now across all the different players.

So, the only thing is Endeavor or EDR is a proxy for content growth and a barometer for overall content, not only in movies and television and it’s going up across the board. We are not feeling any decrease in the spend. I will just give you this.

In the quarter, the total number of scripted and non-scripted shows sold have increased when you compare it to the third quarter of 2021. And global subscriptions have increased when you look at all the different players.

And the only way to keep people engaged in their platforms is through movies, television and if it’s the streamers podcast or sports rights. And now they are moving to AVOD, where they then they have to add more content and Netflix is going to have to go into sports or live.

So, we feel very good about what – and I understand what they have to say, but we are seeing no decrease in our Representation segment. Actually, as I have stated before on these calls, we have increased double digits if you take 2020 out and we don’t see that in any – not decreasing at any point..

I can ask just one follow-up. Thanks Ari. Just one quick follow-up. You mentioned the AVOD launches.

Does – do those AVOD launches trigger new layers of payment to do and your clients because of the way the deals are structured?.

We are not there yet. So, I suspect that at every turn of a new content platform, there might be negotiations for different economic revenue models. Yes, I don’t have what those formulas are right now. But some of them only have the rights for SVOD.

So, that they are not going to have to come back to us that they will have – want to have an AVOD layer for different economics for our clients. But we are not there yet. Once that happens, we will report it..

Alright. Thank you..

Thanks Bryan. Next question Jason..

Our next question is from Doug Mitchelson with Credit Suisse. Your line is now open..

Thanks so much. A couple of quick ones. Ari, I was just curious on podcast renewals. Some of the podcast platforms talk about dramatic improvements for margins in their businesses and increases in profitability as they grow ad revenue.

Do you think the talent is going to maintain share of revenue in the podcast business, or do some of these platforms deserve a greater share of revenue and they were just overspending to start up the business? And the second one, I was just curious on allocation, just how much more runway there is to add events.

And you have already captured the vast majority of the major events like the Olympics and Super Bowls or is there a lot more events that you can sort of plug into that business? Thanks..

So, on the podcasting side over the last two quarters, and I can’t finalize the number for this quarter, but they are making significant overall deals across all those three players. And there is a revenue mix with regard to advertising, etcetera. Will they change those deals, I am not really sure – not really my issue.

We have – some of them have – they are complicated like in the SVOD and the AVOD. They are complicated deals on who gets the revenue mix on advertising, etcetera, and how you are structuring those deals. So, it’s all over the place to say give you one broad answer doesn’t work. And on the allocation side, we added the WWE.

We have now added – we are adding Barrett-Jackson. We have the Super Bowl. We have the Olympics. There is a lot more out there in the space. I think we are a unique company as it relates to that and our offering.

And I mean you can just see what – I mean what we have done at UFC and the revenue increase that we have had there over the years has been pretty substantial. So, when people are realizing that high-end experiences the consumer definitely wants..

Alright. Thank you..

Operator, next question please..

Our next question is from David Karnovsky with JPMorgan. Your line is now open..

Alright. Thank you. I know it’s a small asset, but you did sell Miss Universe recently. So, as you look at your businesses, are there other places where you would want to pair your portfolio, or is this more of a one-off? And then, Jason, can you just walk through the factors driving the higher expected free cash flow conversion to 2023? Thank you..

Why don’t you take those, Jason?.

Sure. Look, on the free cash flow, some of the factors are we – obviously, we are paying – we paid down debt. We are going to continue to pay down debt. That should generate roughly $30 million of incremental cash flow and really also working on our net working capital and our change in net working capital and getting that more stabilized.

We have had some ramp up on the network capital giving pre-Olympic spend and some other things. So, that’s primarily how we are expecting to get additional free cash flow..

And then the question is about optimizing the portfolio with the sale of Miss Universe?.

Yes. Look, we are always looking across the portfolio if we have an asset that doesn’t necessarily fit in the portfolio anymore, and we can get a good return on it, we are always evaluating those opportunities..

Thanks Ari..

Next question please..

There are no more questions at this time. So, I will pass the call back over to the management team for closing remarks..

End of Q&A:.

Great. Thanks everyone for joining us today. We look forward to seeing you next quarter..

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