After a brutal year, UFC owner Endeavor mounts a comeback
Endeavor Group Holdings Inc., the powerful owner of UFC and the WME talent agency that was on the ropes a year ago, appears to be staging a Hollywood comeback.
About a month after going public, Endeavor posted a profit of $2.4 million in the first quarter, compared with a staggering loss of $51.3 million a year earlier.
The Beverly Hills company’s business got a big boost from its sports properties segment, where revenue grew 22% to $283.5 million in the quarter, due to more events and higher media rights and sponsorship fees at mixed martial arts circuit UFC. Endeavor said it also had net proceeds of about $1 billion related to its IPO in April and private placements.
“The past year has been by far one of the most challenging, but also one of the most rewarding for our company,” Chief Executive Ari Emanuel said in an earnings call with investors Wednesday. “We were tested in every possible way, and our teams rose to meet every challenge.”
Endeavor’s profits — which surprised analysts who were expecting a net loss in the quarter — represents a big reversal from 2020, when many in Hollywood were openly questioning the company’s future. Some analysts expressed worries about the company’s heavy debt load, which was listed at $5.9 billion at the end of the first quarter.
The company had planned to go public in 2019, only to suspend its efforts due to market conditions. Endeavor’s business relies on live events and the representation business — areas that were hurt by the pandemic as Hollywood productions and concerts were canceled or postponed. Like other entertainment companies, Endeavor took cost-cutting measures, affecting a third of its workforce.
When Endeavor yanked its IPO on Thursday, the move marked a rare and humbling stumble for Hollywood power agent Ari Emanuel, and left questions about what’s next for his firm.
But the outlook has brightened considerably in recent months. On Wednesday, Endeavor executives said they are seeing demand for live events roar back.
The company recently purchased the remaining shares of UFC it didn’t own and is reaping benefits from that acquisition. UFC was one of the first sports to resume last year and landed several partnerships with companies such as Zappos and Panini America.
Endeavor also is seeing strong attendance for events it hosted this year such as the Great Ocean Road Running Festival in Australia and art fair Frieze New York. A concert scheduled in Mexico with the band Dead & Co. has already sold out its January weekend date for next year, Endeavor President Mark Shapiro told investors Wednesday.
The company also said that its On Location business was named the global hospitality provider for the Olympic and Paralympic Games for three games, starting in 2024.
“That covers what we are seeing across our businesses — a lot of bright lights,” Shapiro said.
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Still, Endeavor did see declines in its other businesses, with representation down 15%; and its events, experiences and rights segment dropping 19% from a year earlier.
The company plans to reduce its debt by $600 million in the third quarter.
Executives said Endeavor is well positioned to capitalize on the growing consolidation in the industry, with recent deals including Amazon buying MGM, and streamers continuing to look for more content to attract global audiences.
“There’s a finite number of creators and intellectual properties to meet that demand, therefore increasing the value of talent we represent and the content we own,” Emanuel said. “So all in all, prices are going to go up in every situation.”
The pandemic has caused studios to change how they release movies, with some titles opening in theaters and on streaming services on the same day. Emanuel said the agency is negotiating on behalf of its clients “to make sure that we get the proper economics as we go forward.”
Endeavor shares closed down 25 cents, or 0.8%, to $29.39 on Wednesday. After hours, the stock was trading at $29.05 a share.
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