Endeavor Group Holdings Q3 Earnings Report, Explained
Endeavor is the majority owner of the UFC. Here's how they did in Q3 and why it matters.
Breaking down the Endeavor Earnings Call
In this article, my job will be to summarize the important information from the Endeavor Holdings Group, Inc. earnings report and translate it into lamens terms. Feel free to scroll down to the bottom to view a very short summary.
Disclaimer: The following is not financial advice. Investing in financial markets poses risk and potential loss of funds. The Main Card is not responsible for any losses sustained from investment actions taken as a result of the information provided in this article.
Endeavor Group Holdings, Inc. (NYSE: EDR), the global media conglomerate and majority owner of the UFC released its financial results yesterday evening for the quarterly period ending September 30, 2022.
“Our business performed well in the quarter despite a turbulent macroeconomic environment,” remarked Ariel Emanuel, CEO of Endeavor.
Indeed, Endeavor posted relatively positive numbers despite the current market climate–many analysts are estimating a recession may be on the horizon.
Here’s the most important info (for the company itself).
Q3 2022 Consolidated Financial Results - What you need to know
Revenue: $1.221 billion
Net loss: $12.5 million; net loss margin of 1%
Repaid $250 million of debt
$800M (USD) OpenBet acquisition finalized
I’ll get to what all that means in a second.
If you’re only here to understand how the UFC is doing, this is what was said about the promotion's performance.
“Owned Sports Properties segment revenue was $402.3 million for the quarter, up $113.8 million, or 39% compared to the third quarter of 2021. Growth was driven by an increase in media rights fees and live events, partnership, consumer product, and licensing revenues at UFC, as well as an additional pay-per-view event and more events with live audiences versus the prior year.”
Translation: In Q3, The UFC contributed to a major sector of Endeavor’s business by having more live events. The UFC held eight live events, all sellouts, as opposed to only four in Q2.
It's a positive sign to see that Endeavor is calling out the UFC specifically. The financial well-being of the company as a whole, however, has direct implications on the value of the UFC as a promotion. Here are some other highlights for Endeavor in Q3 as a multinational conglomerate.
Revenue
Revenue is (literally) how much money a company makes performing normal business functions. According to the earnings release, Endeavor posted quarterly revenue of $1.22 billion, ~$20 million lower than expected resulting in a 1.79% miss on earnings.
Translation: Endeavor was expected to make $1.24 billion this quarter, but they missed that mark. It means that they underperformed slightly, but the implications are relative (not a do-or-die miss).
Revenue is expected to be between $5.235 billion and $5.325 billion for the year. Owned sports properties revenue (which includes the UFC) was the only segment that was up in revenue compared to Endeavor’s other business segments.
Endeavor also accrued a net loss of $12.5 million.
Translation: “Net loss” means Endeavor spent $12.5 million more than what they brought in. In other words, their expenses were more than their revenue; $12.5 million more to be exact. (Check out this article to learn more.)
A net loss happens when profits fall below the level of expenses and cost of goods sold (COGS) in a given time.
Net Loss (or Net Profit) = Revenues - Expenses
Debt Repayment
According to the report, Endeavor repaid $250 million of debt in the third quarter with the intent to repay an additional $250 million of debt by year’s end. The company successfully repaid $250 million in Q2 2022 as well.
Translation: Endeavor has debt, which means they borrowed money, and now it’s time to pay it back. Essentially, Endeavor just made a $250 million credit card payment. Similar to personal loans and credit cards, it's good when companies say they are going to pay back what they say they will, and it seems Endeavor has been consistently doing this.
OpenBet Acquisition
On September 27th, 2021, Endeavor announced it would acquire the sports betting platform OpenBet for an estimated $1.2 billion.
A year later, the acquisition was finalized for $800 million.
“The addition of OpenBet to our sports betting portfolio will enable us to further capitalize on the massive tailwinds in the fast-evolving sports betting ecosystem and lead the way in defining the future of sports betting entertainment,” said Emanuel in September.
OpenBet will coincide with Endeavor’s sports content and data business, IMG ARENA. OpenBet will bolster the already successful business line to form a fourth operating segment for Endeavor, known as Sports Data & Technology, beginning January 2023.
“…we’ll look to create and unlock meaningful value for our rights holder and sportsbook customers, helping deliver the most compelling offerings for sports fans globally,” said Emanuel in the press release.
IMG ARENA works with more than 470 leading sportsbook brands, leagues, and federations worldwide to deliver official FastPath live-streaming video and data feeds for more than 45,000 sports events annually.
Translation: OpenBet + IMG Arena is a strategic sports gambling match made in heaven.
Final thoughts and Summary
Based on what we’ve learned here, Endeavor is doing just fine given the financial climate. The UFC’s performance in live events contributed greatly to the overall financial well-being of the company.
After increasing by roughly 5% throughout the session and nearly 6% after earnings, Endeavor stock shares outperformed the market on Friday.
Translation: The stock price went up indicating that people were confident in Endeavor’s performance. This is a good sign for the continued growth of the business in 2022.
Previous Prediction: Earnings beat
I wrote a story earlier this week about the UFC’s Q3 performance by the numbers. I claimed that the UFC was pulling its weight, and sure enough, I was right.
Here’s what I said in that article: “Due to the continued outstanding performance of the UFC, which Endeavor mentioned helped drive its Q2 beat on earnings, and the acquisition of OpenBet, it’s fair to say the stock slide isn’t an indication of an earnings miss in Q3.”
In terms of an earnings beat, I was wrong as Endeavor missed revenue targets, but did beat earnings-per-share (EPS) by almost 18%. Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability. Endeavor’s EPS in Q3 was $.32, 17.36% higher than expected. That’s a win.
This weekend, UFC 281 at Madison Square Garden will look to continue the momentum as Middleweight champion Isreal Adesanya is challenged for his throne by previous foe Alex "Poatan" Pereira. The fight headlines a stacked card which features a women’s Strawweight championship bout between Carla Esperanza and Weili Zhang as well as a Lightweight barn burner between Dustin “The Diamond” Poirier and Michael Chandler.