Despite benefitting from demand for its sports and entertainment content, live events and premium experiences, Endeavor Group Holdings swung to a net loss of $303.5 million in its first quarter of 2024, compared to a profit of $36.26 million a year ago.
The net loss included $92.65 million in restructuring and impairment charges, $25.6 million in costs related to mergers and acquisitions and $11.3 million in legal costs related to a $335 million settlement with mixed martial arts fighters, who alleged in multiple antitrust suits that the UFC shut down competition and served as a monopoly, holding down fighter pay.
Here are the top-line results:
Net loss: $303.5 million, compared to a profit of $36.26 million a year ago.
Revenue: $1.85 billion, compared to $1.93 billion expected by analysts surveyed Zacks Investment Research.
Earnings Per Share: A loss of 46 cents per share , compared to earnings of 36 cents per share expected by analysts surveyed Zacks Investment Research.
Adjusted EBITDA: $374.1 million, compared to $306.4 million in the prior year period.
The latest quarterly results come as Endeavor has entered into an agreement to be acquired at an equity value of $13 billion and taken private by its majority owner Silver Lake. Executives did not hold a conference call to discuss its first quarter results due to the pending transaction.
“We remain focused on maintaining our momentum through the year while working toward the close of our take-private transaction with Silver Lake,” Endeavor CEO Ari Emanuel said in a statement
In Endeavor’s Owned Sports Properties segment, which includes TKO Group Inc., revenue surged 94% year over year to $685.4 million, which was primarily attributed to the WWE acquisition, which contributed $317 million in revenue during the first quarter, and revenue increases at UFC across partnerships, live events, and consumer products licensing, partially offset by lower revenue from holding one less numbered event compared to the prior year period.
The segment’s results also benefited from increased ticket sales and partnerships at PBR and increased revenue from PBR’s team series. Adjusted EBITDA for the segment increased 61% year over year to $299 million.
In the Representation segment, which includes WME, revenue fell 1.4% year over year to $345.3 million, primarily impacted by certain fashion projects that took place in the year ago period that did not occur during the quarter, primarily offset by growth in WME’s music, talent, sports, and comedy divisions. Adjusted EBITDA fell 22.6% to $65.2 million.
In the Events, Experiences and Rights segment, revenue fell 7% year over year to $$744.9 million, primarily impacted by a $90 million decrease from the sale of IMG Academy in June 2023 and the timing of media rights associated with certain biennial events that took place in the year-ago period that did not take place during the quarter. This was partially offset by increases from On Location, the Miami Open, and growth from other events, including Barrett-Jackson’s Scottsdale event. Adjusted EBITDA for the segment fell 11.2% year over year to $95.9 million.
In the Sports, Data and Technology segment, revenue slipped 10.1% year over year to $10.1 million, primarily impacted by the loss of certain data rights at IMG ARENA, offset by growth across clients at OpenBet. Adjusted EBITDA was a loss of $9.5 million for the quarter, down $13.9 million year-over-year.
Endeavor ended the first quarter with $778.6 million in cash and cash equivalents and $5.01 billion in total debt, compared to $1.167 billion in cash and cash equivalents and $5.028 billion in debt during the previous quarter.
Under the terms of the agreement, the private equity firm, which is Endeavor’s majority owner with approximately 71% of the company’s voting power, will acquire 100% of the outstanding shares it does not already own, other than rolled interests.
Endeavor stockholders will receive $27.50 per share in cash, representing a 55% premium to the unaffected share price of $17.72 per share at market close on Oct. 25, the last full day of trading prior to the company announcing a review of strategic alternatives.
The deal, which was unanimously approved by Endeavor’s special committee of independent directors, will be financed through a combination of new and reinvested equity from Silver Lake and additional capital anchored by Mubadala Investment Company, DFO Management, LLC, Lexington Partners, and funds managed by Goldman Sachs Asset Management. It will also include equity rolled over by members of the Endeavor management team including Emanuel, executive chairman Patrick Whitesell, and president and chief operating officer Mark Shapiro, and new debt financing fully committed by Goldman Sachs, USA, JP Morgan, N.A., Morgan Stanley Senior Funding, Inc., Bank of America, N.A., Barclays PLC, Deutsche Bank AG New York, and Royal Bank of Canada.
Upon completion, Endeavor’s common stock will no longer be listed on any public market. The merger agreement requires Endeavor to declare and pay a dividend in respect of each issued and outstanding share of the company’s Class A common stock at a price equal to $0.06 per share in each calendar quarter prior to the closing of the transaction. The transaction, which is subject to the satisfaction of customary closing conditions and required regulatory approvals, is expected to close by the end of the first quarter of 2025.
TKO is not party to this transaction and will remain a publicly traded company that will continue to benefit from its connectivity to Endeavor’s expertise, relationships and significant capabilities.
When consolidating TKO’s value into Endeavor, Silver Lake estimates the company has a total enterprise value of $25 billion, making the deal the largest private equity sponsor public-to-private investment transaction in over a decade, and the largest ever in the media and entertainment sector. On the unaffected date, the equity value was $8.2 billion, and the premium to be paid by Silver Lake represents $4.6 billion more equity value to all Endeavor stockholders.
Endeavor, which had a market capitalization of $12.37 billion as of Wednesday’s close, has seen its shares climb 13.4% year to date and 6.2% in the past year, but are down 3.9% since going public in 2021.
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