Endeavor’s IPO filing Thursday offers a hard look at the company’s financial performance during the past three years during a period of rapid growth for the company that’s home to UFC, WME, Professional Bull Riders and a clutch of other assets.
Endeavor is selling itself as a new-model media company with a growth platform built up over the past decade. But the spree of investments, acquisitions and restructuring over the past five years has led to a net income loss of $98 million in 2016 and $173 million in 2017. Net income was positive in 2018 ($231 million), thanks mostly to a nearly $400 million gain on the sale of the IMG College sports marketing unit.
Adjusted earnings before interest, taxes, depreciation and amortization, balanced for one-time events, were $355.1 million in 2016, $516.1 million in 2017 and $551 million in 2018, on revenue that jumped from $2.3 billion in 2016 to $3.6 billion last year. The acquisition of MMA giant UFC for $4 billion in August 2016 greatly expanded Endeavor’s earnings power. But it also added to the company’s debt load. At present, Endeavor is shouldering about $4.6 billion in debt and $500 million in cash on hand. The company is valued at present at about $9.9 billion.
The prospectus filing signals the start of the company’s roadshow with Wall Streeters and investment firms to generate enthusiasm for the IPO. There’s still no timetable for the IPO date. Endeavor plans to trade on the New York Stock Exchange under the EDR symbol.
Endeavor will have controlling shareholders that command more than 50% of the voting power in the company, which gives them a tight grip on the board of directors and management decisions — similar to the Redstone family’s control of CBS and Viacom and the Roberts family’s control of Comcast. Endeavor CEO Ari Emanuel and chairman Patrick Whitesell are among those voting shareholders, along with private equity giant Silver Lake that has financed Endeavor’s expansion since 2012.
The roughly 350-page prospectus offers a host of other details about Endeavor’s operations. The timing is tough for the company as WME and its largest Hollywood rivals are in the midst of litigation and franchise agreement negotiations with the WGA that has led to writers severing ties with their agents, at least for now. That’s not the business climate Endeavor wants to sell to investors. The WGA and Association of Talent Agents are set to resume negotiations next week.
Among the highlights of the prospectus:
- Emanuel’s 2018 compensation package hit about $5.3 million, including $1 million salary and $4 million in bonuses. Emanuel and Whitesell signed contract extensions in March that will keep them at the company through the end of 2028. Both received nearly $600,000 lump sum payment after reaching the contract extension. And both are set to see their base salary climb to $4 million once Endeavor formally goes public. Whitesell took in about $5 million in compensation last year.
- Endeavor president Mark Shapiro received $10.2 million in 2018 compensation. That included a salary of $1.7 million, an equity grant valued at $5.8 million and nearly $2.7 million in bonuses.
- Endeavor’s Representation division will house the talent agent operations of WME and IMG Models, as well as the Endeavor Content unit. Endeavor Content is the production-distribution operation but it also offers finance-arranging and advisory services to outside entities, as well as WME clients.
- For the first quarter of this year, revenue in the Representation division was up 20% over the year-ago period to $322 million. The gains were credited to “talent and brand representation businesses, including Fusion Marketing and IMG Live and licensing.”
- Adjusted EBITDA for the Representation division grew 47% year-over-year to $80.3 million. Earnings were fueled by the strong revenue gains but “partially offset by increases in costs related to personnel, facilities and content production.”
- The sale last month of Endeavor’s 49% stake in advertising agency Droga5 to consulting giant Accenture yielded $233 million.
- Silver Lake increased its investment in Endeavor by $406 million in August 2017 and by $256 million in January 2019.