Endeavor closed out 2021 with more than $467 million in red ink, but it also delivered updated 2022 financial guidance that indicates the company sees the wind at its back with rising consumer demand fueling its sports, entertainment and talent representation operations.
Endeavor closed out the final quarter of 2021 with a net loss of $16.7 million on revenue of $1.5 billion. For the full year, Endeavor posted a $467.5 million loss, on revenue of $5.1 billion. Sequentially, in Q3 of last year, Endeavor delivered net income of $63.6 million.
Endeavor CEO Ari Emanuel told investors on 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 stands in “a unique position at the center of sports and entertainment,” Emanuel told Wall Street analysts. “It enables us to capitalize on a wide range of secular trends.”
Emanuel was pressed by analysts about losing out on future packaging fee opportunities at WME following the battle in 2019 and 2020 with the Writers Guild of America, on UFC’s growth overseas and and whether the arm’s race of content spending for streaming platforms is starting to slow down. The Endeavor chief kept pointing to tailwinds that benefit 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 command maximum value on behalf of our own and represented-IP.”
On content spending specifically, Emanuel was asked if he was worried about a shift in strategy for HBO Max with Discovery CEO David Zaslav soon to take the helm of the combined Warner Bros. Discovery. Zaslav, as Wall Streeters well know, has a reputation for being fiscally prudent.
“I’m not really nervous if he decides he doesn’t want to spend what everybody else is spending,” Emanuel said. “There’s seven or eight players in the marketplace.”
UFC logged its best year on a financial basis in the MMA league’s 28-year history, Emanuel enthused. Ticket sales, PPV sales, sponsorship and merchandising sales numbers are all pointing upward. Endeavor’s Q4 report exceeded its previous guidance on earnings and adjusted EBITDA for the quarter. It gave 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, largely comprised of WME, saw double-digit revenue growth in the quarter, which is no surprise given the surge in demand and production in recent months. The return of major sports to regular and predictable schedules has also been good for Endeavor’s media rights, sponsorship and sports betting activities.
Emanuel and Endeavor CFO Jason Lublin told analysts that much of Endeavor’s businesses are seeing revenue and activity return to pre-pandemic 2019 levels. He signed out the representation arm as enjoying “a great rebound” with double-digit growth that will sustain this year as touring 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 ate up 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 because of tougher conflict-of-interest rules established in 2020 by the Writers Guild of America.
Endeavor’s 160over90 creative agency that specializes in crafting live immersive experiences for corporate clients is also having a strong year, Lublin said.
The Representation segment delivered $717.9 million for the quarter, up or 161%, compared to the pandemic-battered Q4 2020. For the full year, revenue was up more than 100% to $2 billion. Adjusted earnings before interest taxes depreciation and amortization was $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 inch up 3% year-over-year to $277.3 million for the quarter, and up 16%, to $1.1 billion, for the year. The gains were fueled by higher media rights fees in international markets for UFC and an increase in PBR events compared to the year-ago quarter. Adjusted EBITDA came in at $125.1 million for the quarter, up 2% for the quarter and up 17% for the year, to $537.6 million for the year.
The Events, Experiences & Rights segment posted revenue hike of 23% year-over year, to $516.7 million for the quarter and a 28% gain for the full year, to $2 billion. Adjusted EBITDA hit $54.7 million for the quarter (up 29%) and was up 264% for the year to $215.6 million.