Q1 2021 Endeavor Group Holdings Inc Earnings Call
Assumptions as described in the risk factors section of our filings with Securities and Exchange Commission, including our IPO prospectus as updated by our first quarter 10-Q.
These risks or uncertainties ever materialized or any assumptions prove incorrect our results may differ materially from those expressed or implied by such forward looking statements and projections.
Forward looking statements speak only as of the day. They are made and we undertake no obligation to update them publicly in light of new information or future events, except as legally required.
Our commentary today will also include non-GAAP financial measures, which we believe provide an additional tool for investors to use in evaluating ongoing operating results and trends.
These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.
Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our press release issued today as well as on our IR site with that I'll hand, it over to Larry.
Thanks Sam.
Last year has been by fall of 1 of the most challenging but also 1 of the most rewarding for our company.
We were tested every possible way.
Our teams rose to meet every challenge demonstrating resilience and ingenuity of that return.
Despite the setback COVID-19 provided we've weathered the storm and laid a strong foundation for the remainder of 2021 and beyond.
Shortly Marc Shapiro will walk you through some more specific examples of the and Jason will share more details around our financial results and guidance for the year.
First I wanted to spend a few minutes on the encouraging recovery signs of emerging across our portfolio.
How the convergence of technologies Sports Entertainment media and gaming play to our strength.
As an integrated company that both loans and represents IP and content.
As more states and countries loosen travel and gathering restrictions and vaccination rates increase we are beginning to experience accelerated demand across our 800 plus global events portfolio.
As you might recall, the UFC and PBR for 2 of the first sports organization to resume live events last year and 2 of the first to bring for crowds back.
This provides a blueprint for other events across our portfolio of freeze art fair to Euro League basketball.
Every on sales brings new perspective, and insight into the pent up demand globally from consumers.
Much of the demand is coming via our events and experienced business, which includes on location acquired in January 2020, just before the pandemic took hold.
We are thrilled to be able to share on this call that the international Olympic Committee ILC today named on location the official global hospitality provider for the Olympics.
In parallel the games covering 3 Olympics.
Gaining with Paris 2024.
The significant relationship Mark the first time of the IFC has appointed the company as a global hospitality provider for multiple of editions of the games.
Other distinguished partners 2 on location include NFL, NCAA and PGA Championship.
As well as more than 500 music tours and festivals like Coachella.
Just as we're seeing the demand for live events and experience of all kinds of we are witnessing strong demand for all forms of premium content across all distribution platforms.
The ever consolidating media landscape around US is a testament to the enduring value of premium IP and the desire for streaming leaders to gain scale through investments and differentiated content.
We view the combination of Warner media and discovery, along with Amazon's acquisition of MGM as proof point that content into the high demand and short supply and that our positioning in this ecosystem favor as long term growth as investments continue.
Technology leaders and incumbent media companies have to power their ASP on an Eva services, while still program in the or linear channel.
And as demand increases there.
There is a finite number of IP creators to meet that demand, thereby increasing the value of talent, we represent in the content for.
For represent.
1 thing I'll continue to underscore in these earnings calls is that we are agnostic of.
The distribution of creators for all of distribution platforms.
To give you a snapshot just within TV repair talent from Reuters the actors showrooms with IP.
Then sell the series more than 350 in 2020 to broadcasters cable channels streamers, social and gaming platforms.
Within streaming alone we remain 1 of the largest suppliers of content to the biggest platforms like Netflix and Amazon and increasingly to the newer platforms like HBO, Max and paranoia plus.
As we look the sports rights the same concept around supply and demand applies.
There is a scarcity in Reits and more competition than ever across both traditional networks and asphalt to secure those rates.
As a result.
<unk> deals are being negotiated beyond our 7 year domestic deal for the UFC with ESPN at ESPN plus we also are seeing increased demand for rights internationally as evidenced by our recent UFC rights deal in China.
And as a reminder, we're selling media rights globally on behalf of more than 150 clients such as the NFL and NHL and in addition to our own properties.
And over 160 territories.
We are all so often packaging these rights with the original programming and our endeavor streaming platform provides streaming services for the organizations like the NFL NBA and UEFA.
Sports betting is another growing industry, particularly in the United States.
AMG Arena, we work with more than 470, leading sports book brands worldwide to deliver live streaming video and data feeds for more than 45000 sports events annually.
The point on making is that the re benefit from all trends in media content sports events, and gaming and remain well positioned to continue capitalizing on and growing alongside the high growth industries in which we operate.
With that I'll turn it over to Mark Shapiro to walk you through our business in greater detail.
Thanks Ari.
Across our own sports portfolio, we are indeed benefiting from some of the tailwind that already mentioned.
Those weighted existed before the pandemic, but at the same time, the pent up demand of the experience economy is really lighting of fuse across the entire range of our businesses. As you noted UFC and PBR with 2 of the first sports organizations to resume live events from the spring of 2020 for.
For PBR since coming back online and at the attendance continues to increase we are actually seeing of double digit uptick in spending from advertisers who are eager to reach live audiences and ratings on CBS are up 29% this quarter compared to Q1.2020.
Euro League. Meanwhile, resume live events in the fall of 2020 and held their final for event in Germany, just last week, which was streamed across Facebook Twitch and tick tock for the first time.
Even though we didn't have crowds in Cologne due to pandemic related restrictions, we anticipate being back to full capacity for the next season commences in the fall of 2021.
Similar to the pacing, we're seeing of PBR and UFC.
Which we'll discuss in a moment I'm happy to say, we're seeing strong demand on the advertising and sponsorship side of the business in Europe.
Now turning to the UFC in spite of the pandemic UFC had a phenomenal 2020 and that momentum continued into the first quarter. This year, we believe that the pandemic actually helped accelerate ufc's move into the mainstream.
On the event side in 2020, we delivered 41 of 42 planned events and in the first quarter of 2021, we held 11 events, including a few pay per view of events with ticketed fans in attendance.
Now on the media side of the business, while many sports I'm sure. You've all seen are still struggling to return to 2019 ratings and viewership levels. The UFC on ESPN. This year is up 7% among average total viewers versus 2019 on.
On the streaming side. The same success, we continue to be the anchor tenant of the entire ESPN plus platform. The original guidance provided by Disney in April 2019 was for ESPN plus to have 8 to 12 million subs by 2024.
Disney is now saying they will be of 20 to 30 million subs by 2020 for and they are already at 14 million subs. According to their most recent earnings report. There is no question UFC is the biggest driver of the ESPN plus platform.
Disney on ESPN continues to be exceptional partners leveraging vast components of the massive global platform to drive UFC awareness in fact in January of this year, we held our first UFC events on the ABC harking back to the Glory days of Muhammad Ali Boxing on ABC Sports. This was the first.
Ever live MMA event on the network. The event became the second most viewed UFC fight night since February 2019.
Beyond media and beyond streaming the UFC is hitting on all growth levers at the moment 1 of the key differentiators for the UFC versus other major sports organizations as if we control it's off the bottom along with Dana White, we are the single decision maker, we control all aspects, allowing us to efficiently unlock extra.
Ordinary value for UFC across the entire endeavor platform.
On the partnership front in January we closed the multiyear licensing partnership was apples in which the company will manufacture and distribute officially license UFC merchandise. We also closed the multiyear deal with Panini America, making them Ufc's official and exclusive collectible trading card partner in that.
Same range, we now of a partnership with Dapper Labs of company. We were early investor in that will Usher in the UFC as the second sports organization to launch an ft platform akin to NBA top shot later this year, the speed and action of UFC lends itself well to Cree.
<unk> these digital moments, which will feature current as well as historical highlights.
In February we closed the first of its kind content deal for a sports organization with Tic Toc. This multi year relationship provides for Tictoc dedicated resources at UFC headquarters and seeks to bring fans up close and personal to their favorite fighters with exclusive behind the scenes content.
Also in February we secured a multiyear content deal with China's may view as Ufc's exclusive distributor in China for all of live events will do will also distribute of New Asia addition of Dana whites contender series and partner with our UFC performance Institute in Shanghai.
And in March we announced the significant multiyear deal with draft Kings, making them Ufc's first official sports book and Daily Fantasy partner in the U S and Canada dry <unk> also hired our creative and experiential marketing agency 160 over 90 to handle all of their partnership and sponsorship management there.
<unk> and the social media now hiring 160 over 90 is just 1 example of endeavor leveraging 1 asset of the platform to drive another.
That endeavor, we call this architecture and Youll hear already and I speak about our architecture process and success stories frequently on these calls.
Our architecture strategy and structure was actually developed and initiated with the help of Harvard business School professors back in 2019.
Now become the backbone of the way we operate internally.
And finally on the gaming front, our IMG Arena business continues to power Ufc's first official product in this space, providing the data and video streams that allow for live betting opportunities for every UFC event. The pandemic created a surge in at home bedding during the shutdown.
And given the UFC was the only game in town for quite some time the stay at home environment helped attract more fans to the UFC, particularly among the 18 to 34 demographic.
Pivoting to our IMG arena business more broadly, which sits within our events experiences and REIT segment, we are ramping up our data and video stream efforts in the U S where sports betting has now legal and more than 2 dozen states. We also continue to bring new sports, including more niche properties like volleyball onto our platform at the same time.
Given our extraordinary partnerships with the PGA tour, the PGA of America, which has the PGA championship of the Ryder Cup and the ACP. We are further investing in sports like golf and tennis 2 of the more popular betting sports from a global perspective.
At the end of the quarter, we finalized the deal to acquire flight scope of European based leading data collection AAV production and tracking technology specialist, who is best in class technology, and tennis and golf, we will look to our pivot into major U S sports like football and basketball this will be of big Boon to our IMG.
Arena platform.
Moving on to our events and experiences businesses, social distancing mandates and government restrictions on travel on mass gatherings continue to of course limit most of our activity in the first quarter reopening rates in mass gatherings are increasing at various and varying paces around the world. We're fortunate that our global.
Footprint enables us the nimbly respond to those changing circumstances I will give you. Some examples in may we resumed our great Ocean Road running festival in Australia were 9000 runners participated making it the largest showing in the events history of.
Also last month, we hosted freeze New York the first major art fair to return in the U S. Since the onset of the pandemic. The event featured more than 60, physical galleries and posted strong ticket sales for its 5 day run at the shed in New York City.
Additionally, I should mention this summer we will be launching our own NFC proprietary platform in partnership with O toy to feature digital works of art under the freeze umbrella.
On Monday, we launched our Australian fashion week in Sydney, we of a new title sponsor we have of full slate of consumer shows we of the biggest slate of designers participating since 2015, and the events largest media evaluation ever before the shows of even been staged.
And for those events in the near term those coming up the outlook is truly no different increase.
The increased demand for our taste of London event in July quickly led to the addition of a second weekend for the first time on event history.
Weekend in camping passes to August the Big Festival also on the U K. It's 1 of our most popular culinary events of the U K sold out within hours of going on sale.
Similarly, we're seeing brisk ticket sales for upcoming concerts, the pre sale for the first event of on locations, Mexico based Beach concert series, featuring WMA clients that the company sold out both its January 2022 weekend dates and the next event featuring WMA clients Luke Bryan had its fat.
The sellout and its 7 year history.
Following this year's Super Bowl on location offered of pre sale for experiences to next year's event and the most exclusive packages sold out immediately another area were seeing brisk sales.
In fact, even before we begin our general on sales the spring sales were up significantly over our previously best selling Super Bowl in Miami.
I mentioned earlier the strong response from advertisers, we're seeing across our own sports properties.
We're actually seeing this elevated level of sponsor interest across the entire event portfolio from Blue chip events like the rugby World Cup 2023, where Mastercard has just signed on the niche events like the Melbourne Marathon with Nike coming on at other fall return.
When you look at our events portfolio in its entirety. The pandemic was a catalyst for new digital products and solutions that have become what we believe will be enduring top line revenue generating enhancements going forward.
For instance, we created virtual art fairs to complement the iconic onsite experience freeze is known for in cities like London, New York, and Los Angeles, and soon to be Seoul, South Korea debuted in September 'twenty 2.
Extensions like this will live on and serves the diversify our product offerings and connect our France and more customized and on demand ways. We believe this will drive memberships subscription offerings loyalty programs and enhanced CRM capabilities. A short these extensions can convert quickly to new rep.
The 2 drivers for our events.
And help capture digital AD dollars for.
Finally within our events experiences right segment I wanted to touch on IMG Academy, our leading sports training institution, which we continue to invest in from both the physical campus standpoint and via digital products.
While social business, the mandates and global travel restrictions limited our camp and event business last year severely and even into this last quarter boarding school enrollment. This year has now exceeded 2018.19 enrollment of pre pandemic year in our camp sales, especially.
For July our pacing strong.
When you layer on college recruiting leader and CSA net college student athlete, which we've just acquired we're bullish on the opportunity to add new recruiting and college prep digital products to the academy slate of offerings not to mention leveraging the CSA database of clients to drive further camp sales.
Year round at the Academy.
And now I want to transition to a representation segment.
Similar to our event based businesses fewer television and film productions and live concerts continue to impact the first quarter.
But what I can't underscore enough and as we look for the remainder of the year on beyond is what already mentioned near the top of the call and Thats. The correlation between the seemingly infinite demand for content and a finite number of IP creators, which directly benefits our industry, leading talent agency WMA.
We are fortunate to have a significant base of multi of hyphenate clients at WMA, who move effortlessly across lanes from linear TV streaming and films to music audio and social media, we of countless film and TV clients, who are booked solid for the next year plus.
Musical agents are landing multiyear TV streaming deals, we're seeing an uptick in signings of digitally native talent and gamers and we have more and more clients tapping into endeavors talent ventures arm to form brand partnerships. The go beyond traditional endorsement deals given the <unk> talent equity in the.
Brand and therefore of vested interest in its promotion.
Turning to endeavor content last week, we began production on rore for Apple is the.
E episode of anthology series that explores issues women face through unexpected and heightened lenses. We are producing roller in partnership with made up stories and we have a half dozen other series in various stages of production for Apple Hulu Netflix Peacock in the Amazon Prime.
Our partnership with made up stories and the slate we have across the sea of streaming platforms is the perfect illustration of the insatiable demand for content and the pricing power, we're able to leverage in a crowded buyers marketplace. Additionally.
Additionally, we're not only servicing U S growth year, but I should point out. It's a prime example of capitalizing on local language content demand as 2 of the series are Australia network orders.
As it relates to the music side of the representation business, we typically book at WMA more than 30000 concert dates annually.
We're heavily back at work for tours festivals residencies as much of this corner of the representation business was the bullseye for the pandemic completely shutting down our music concert business. It is not as on an exact $1.80.
We have high demand, coupled with favorable pricing and yields and artists of all kinds of.
Our desperate to get back out and tour to see to greet their fans.
We're locking down the major arena tours for 2022 and to make up for a year away from performing live. Many of these tours are multiyear spanning broad territories across north and South America, Europe and Asia.
Now transitioning from the brand client side of our business, although the first quarter bears the lingering effects of 2020, we're seeing brands begin to ramp spending back up after a year of pressing pause on many fronts the <unk>.
<unk> brought out both of the comfort and the <unk> side of consumers as we are all forced the stay at home.
As such brand licensing is increasingly becoming a core part of company's marketing Playbooks and we saw that.
As a result in the first quarter IMG licensing saw an increase in games and collectibles home of comfort products in health and wellness offerings from a new deal between Hasbro on fortnite to create collectibles to client cosmopolitan expanding its cosmo living home collection to include new bedding products and just last.
Week, Walmart announced that will carry on new GAAP home line and the deal brokered by IMG and the terrific story picked up by the Wall Street Journal.
Turning to the marketing side of our business, our leading experiential marketing agency 160 over 90 has been focused on developing and executing the strategies to meet the needs of brands as they shift more AD dollars towards digital and live events and experiences.
We are capitalizing on the it spending shifts with clients like Marriott Inbev.
Inbev visa invesco.
And Audi.
Who are aggressively turning up their efforts to activate across the resurgence of expanding in person audiences.
On the health and wellness front, we're working with companies like Greenlee foods in their lifelike plant based food brand what started as of 1 campaign project for 160 over 90 has evolved into another architecture success story for US we renamed the agency of record last quarter partnering them with more than a half dozen WMA clients for.
For campaigns and event Activations, and then endeavor content non scripted team got the assignment to work with them on the production side to bring their campaigns for life.
Today, We also announced the 160 over 90 formed a partnership with Obsidian works. The marketing agency founded by longtime <unk> client, Michael B, Jordan and his business partner Chad easterly. This alignment is designed to help brands more authentically reach millennial Gen Z and underrepresented communities huge open road.
Here for us to make an impact as a multicultural agency.
Well that covers what we're seeing across our businesses a lot of bright lights and with that I'll hand, it over to Jason to walk you through our first quarter results in greater detail Jason.
Thank you Mark and good afternoon, everyone.
As Mark discussed we are encouraged by the early recovery signs and trends, we are seeing the merger across our businesses.
I believe we're very well positioned to drive continued long term growth.
Let me start by walking you through our first quarter results and then I'll briefly discuss guidance for the year.
For the quarter, we generated approximately $1.1 billion on revenue of 10% decline from the same period last year as COVID-19 continues to have a negative impact across our businesses and geographies.
However, adjusted EBITDA for the quarter was up 13% over the same period last year <unk>.
The increase into $199.5 million, which I will discuss in more detail shortly.
As a reminder, we operate our business in 3 segments.
1 sports properties.
<unk> experienced in rate and representation.
With that in mind I'll walk you through our performance by segment.
Our own towards the property segment is comprised of the unique portfolio of sports properties.
The PBR and Euro League.
This segment performed very well in the quarter with revenues of $283.5 billion.
Up 22, 1% or $51.3 million despite the impact of COVID-19 on LIFO guidance.
The quarter benefited from increased the rent output contractual increases of media rights agreements and higher sponsorship fees as well as the outperformance in other variable revenue streams of our international commercial pay per view.
Adjusted EBITDA for the quarter increased to $43.3 million or 42, 3% to $145.5 million.
Compared to the same period of 2020.
This growth was driven primarily from the higher revenues I. Just described so I fully offset by the increase of operating expenses, which is mostly attributable to travel related to Umc's third bite island periods in the AVO Derby from January.
Our second segment is events experienced on rates or <unk>.
This segment includes our events of experience business media rates on distribution.
The arena.
Of the IMTT Academy.
Given the effect of the COVID-19 has had on either of them. This segment has been highly impacted.
As a result segment revenue for the first quarter decreased $129.2 million or 19, 3% to $539.6 million compared to the same period in 2020.
The event cancellations and attendants restrictions around events like Super Bowl led to event based revenue decline.
However, this was partially offset by the media right fees associated with events that were postponed in 2020 and move to 2021, mainly from the 2020 of European soccer season, moving a number of matches for the first quarter of 2021.
Meanwhile, adjusted EBITDA for the quarter decreased $30.1 million for 43, 5% to $39.1 million compared to the same period in 2020.
This decrease was primarily driven by the revenue decline of just discussed partially offset by the decline in operating expenses.
The impact of COVID-19 has had across the segment is clear, but as Mark mentioned, we are optimistic rest of the recovery of reopening of rates, we're seeing globally.
Moving on to a representation of segment, which includes the all of our client representation of business such as the WMA on.
Our experiential marketing agency 162 of our 90, <unk> licensing and endeavor content.
Revenue declined by $43.8 million or 15% in the quarter.
This was driven primarily by the impact of COVID-19 on advertisers spending negatively impacting our marketing and experiential activation of businesses.
And endeavor contents, the ability to deliver projects in the quarter due to COVID-19 related delays.
Adjusted EBITDA for the quarter decreased $7.1 million or 10, 4% to $61.5 million driven by the revenue declines of just mentioned, partially offset by reduced the operating expenses.
Similar to our outlook for event, we remain encouraged by the sounds of production of contracts ramping up along with increased marketing and experiential spending.
Finally, corporate adjusted EBITDA for the quarter improved $7.9 million or 14, 5%.
The decrease in expenses was due primarily to reduced cost of personnel travel and professional fees.
With Q1 of the backdrop I wanted to take a few minutes now to address our guidance for the full year 2021 predicated on the momentum of you've heard from both the already and Mark.
As we've.
The ongoing pandemic has had a significant impact on our business.
Even though activity has resumed across a number of our businesses and from restrictions have eased urban lifted there still remain the restrictions of impacting some of our businesses in certain geographies.
There is also a lag from when restrictions are lifted to when we're able to generate revenue and resumed our normalized business the cadence.
That said, while we were always expecting a recovery we are witnessing that recovery happening slightly faster than we had anticipated.
With that I do want to remind you that our financial results will vary from quarter to quarter, depending on the timing of events across our portfolio of timing of business transaction on behalf of our clients and timing of content delivery.
As a result, reevaluate our financial performance on an annual basis, and therefore, we will be giving you annual guidance today.
For 2021, we expect to generate revenue between $4.76, and for 83 billion and.
And adjusted EBITDA in the range of $735 million to $745 million.
And we intend to repay $600 million of our outstanding debt in Q3.2021.
With that I'll turn it back over to Ari.
Thanks, Jason for.
Before we open up for questions I want to briefly frame, how we're thinking about our future when it comes down to it there isn't a trend positively impacting the sports and entertainment on landscape that we are currently benefiting from.
To that end, we'll continue leveraging the entire endeavor portfolio to capitalize on each of the trend and extract maximum value out of every deal for our clients partners and owned properties.
We also remain committed to strengthening our balance sheet and deleveraging and we'll continue to look across of the changing global landscape. The unlock opportunities that drive long term growth and value for our shareholders with that I'll hand, it over to the operator.
As a reminder to ask the question you may do for Star 1 on the telephone to withdraw your question for Pat.
On the Husky, please standby, we compile the Q&A roster.
Your first question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.
Hi, good afternoon.
2 questions I'm wondering if you could talk a little bit about the growth drivers that you see and are most excited about at the UFC specifically.
The very focus on that business, obviously, the ESPN deal is up several years out but between now and then what do you think of the areas. We should be focused on that can drive that business from the top line point of view and then I just had a clarification question probably for Jason on the guidance.
Seeing reopening happening as you said quicker, but it certainly varies geographically.
And by events of anything you can tell us in terms of what the assumptions are around returning to live events in the full form that's baked into the guidance is solely the sense for sort of what the underlying assumption is there.
Everybody.
Thanks Ben.
So in the next 24 months I'll hit all of the of.
I'll hit all of the the point that you're asking so first 1 is internationally for the next 24 months.
Several international deals coming up about 20% to 30% of our deals come up every year on the international side I can go into more details, but Brazil, Australia, Canada, the UK, Philippines, South Korea, Germany, and Russia, China, you just heard from Mark.
We made last year, but I'll come back to China also new territories that just got sanctioned or France.
There is possibilities of naphtha sponsorship is another big area and remember in our sponsorship number we've added more products to put sponsorship on pay.
Pay per view fight night.
Contender series.
Ultimate fighter, which we just sold ESPN flight path and also in China. There's of local contenders series of also I'll come back to China.
Also want to remind you our fan base is 90% international and 10% domestic.
International pay per views are outside of our ESPN deal a code of the UFC.
<unk> directly.
We've extended our EAA.
The deal we did in the middle of the year, we have a better split.
Also of micro transaction also the China portion of that whether it be on.
On PC or mobile is outside of the deal again I'll come back to China at the whole entity gambling I am hearing is handling of big aspect of our growth in Ftes Mark talked about our GAAP line last year, we will be the second sport up.
And our.
Our deal with are playing cards, our panini deal, we've outperformed that situation in the significant way, which is a good indicator that our NSP business will be significant.
Mark talked about a little bit on location and our pay per view of events that will be a very big driver and has been the big driver in China.
Just want to say the following we have our performance Institute in China, We have 50, new fighters. Our Mega deal is a very big deal.
Increase from where we were and we.
We now as I said to you we of our mobile our mobile business is available to the marketplace with that sponsorship on the contenders for years with Mega wants us to do so China as we look at it is going to be 1 of our significant drivers inside of it both of the key drivers. We can go into more detail on anything I'll turn it over to Mark to maybe fill in for more stuff that you.
And then I will turn it over to Jason to clarify the opening so Ben just the.
And for everybody else on the call it the risk of being repetitive I do want to underscore some of those buckets that already talked about obviously because the OSP is such an important not only growth driver, but just overall segment of the business I think first it's important to just take a step back if you will.
And look at what we've done with the UFC since we purchased it in 2016 to your point, we did the 7 year deal with ESPN.
We've grown fight pass, which is our over the top platform subscription obviously, a lot of live events that extend beyond the UFC MMA and that's the big growth driver going forward as already mentioned, we grown sponsorship significantly and this has been a banner year for us shockingly with Covid on Monster deal got renewed as we talked about.
The draft Kings, which we mentioned modelo, but we also get a multiyear deal with <unk> 365, and we did a terrific deal with guaranteed rate mortgage and were actually in negotiations on a renewal for that we've been introducing new markets as already mentioned and we're just.
<unk> at the bit to get to get introduced.
Introduced in France, which is soon we've increased our international rights fees really leveraging the endeavor platform all of the IMG media work that Adam Kelley and Samsung and their teams do it gives us huge leverage and it's allowed us to get some good ops as already mentioned on the international rights fee side, we've begun to introduce site feat and it's something we've been asked the.
About a lot given the competitors or other leagues like F..1 get safety. This is really gravy to our model going forward, we don't see the significant or material, but frankly, we saw some site is on.
Dobey during Covid and we expect to see more in bunches as time goes on we've gotten big time into licensing products already mentioned betting that's the way of the world on the half the states right now on the U S are licensed and Thats only going to grow and then on the ancillary side. We opened the performance Institute in China, that's important because.
We're going to follow the MBA top shot although we did our deal before the NDA with the upper left we're going to follow their lead and really score in that area and then all of this gets replicated China, China China.
Kind of where we're going but if you look at it at the end and we're not going to talk about specific numbers, we doubled the EBITDA since we took over the U.
<unk> and when you put all of this in the context all of this in perspective, we are simply in the early stages. We have of young demo we have a strong female fan base. We are global on location is going to be a big driver here in fact, we're 75% sold out for experiences.
<unk> for the Glendale, Arizona match up that's coming up this month and on the Conor Mcgregor huge fight, which is going to be July 10th backend Vegas 2 of sold out show. It T. Mobile WMA is driving all kinds of content opportunities digital opportunities influence of opportunities podcast opportunities all of the same equation of making.
More stars out of our great fighters once the wind and the octagon because you do have to win of the Octagon first and then you've got the Walt Disney Company behind all of this I mean, we are the big driver on ESPN plus they recognize that they are turning on all of their assets to get behind the UFC and the partnership Couldnt be better and I would just say in close.
On the UFC.
Lot of this is done notwithstanding COVID-19, which by the way we're still in the middle up so that just shows you. The Dana wide net truck that locomotive interest keeps powering through and it's really been accelerated its accelerated the sport into the mainstream my son, It's 20 years old comes on from College, all he did during Covid.
On Saturday Night was line up 7 friends outside watching the fist fight the fight card after card and I would add betting small small amounts of course, because allowance of 2 big amounts of debt, but but betting nonetheless for on flight after flight, which of course goes the IMG arena. So that's a lot on the on UFC fight side, but we're on.
I think you can tell we're pretty bullish on your second question, Jason will give you the financial.
I would just remind you that we're in still in the Covid state of mind here right. I mean, we are a global company in the U S. Although we're seeing a lot of doors opening and we're seeing a lot of bright lights as I mentioned.
It is not indicative of the rest of the planet and music is probably the Best example, right we're going to get a few things in the third quarter.
First of all the things popping up from bookings and fourth quarter that will heat up a lot more on the U S, but youre not talking till 2022 until it normalizes for Europe for Pac rim for South America.
We behind year on of course, the the variance it's now traipsing through UK right now the Indian variant that also is going too slow of itself. So I would just say our guidance today is based on the visibility of the business and it contemplates of fourth quarter, where we assume a high degree of delivery both in endeavor.
And some of those projects could get pushed to Q1 and international events.
The only thing I would add from a mark set of from from a GAAP.
Guidance perspective for the UFC.
We have we have forecasted for the pay per view of events, having live audiences throughout Q3 into the Q4 on not for the 5.9 events.
On the client side, having music really end of Q3 going into Q4.
Thank you everybody.
Thank you.
Your next question comes from the line of making the zircon from credit Suisse. Your line is open.
Hey, guys. Thanks for taking the question I think this is for either maybe Mark has comments to you touched on it in your prepared remarks that I wanted to see if you could give us a little more detail on the media consolidation, that's happening and how it might impact of endeavor, maybe some examples on how past deals like Disney buying Fox impacted the business.
And the lease with Warner and discovery might be different from that are similar.
And how aggressive do you expect Amazon to become MGM in the portfolio and then I'll follow.
Flow up.
So I'm wondering has changed so dramatically in the past here can you talk about the protection you are getting in place for your clients of the studio team does distribution strategies on the films.
Last minute in some cases.
Well I think there is.
Alright. Thanks for the question I think the Warner of discovery and the Amazon MGM is just further proof points.
The content is the high demand in the short supply both on the scripted non scripted side movie side and also on the sports side.
I think.
The Warner's discoveries of also going to be in the sports side is kind of on plus has been on a bunch of sports rights too.
And our position in the ecosystem ecosystem, the favorable long term growth.
On investments will continue.
The technique leaders and the incumbent in my opinion.
With powered by.
<unk> and <unk> services.
Phil.
We'll also have to protect.
Protector linear channels.
So demand is increasing it's 1 of the early premises that we started the company out with.
There is a finite number of creators and intellectual properties and IP to meet that demand. Therefore, therefore, increasing the value of talent we represent in the content we own. So all in all prices are going up in every situation.
And that's the way of thinking as it relates to.
The release schedule and the windowing of the issues surrounding that I think that was your second question if I'm correct.
Listen we saw on this happened with Warner Brothers, we've seen this happen with Disney.
We're going to find the floor as they figure out and if we just look at this past weekend.
Disney had the dual window.
On Disney plus and the absolutely Paramount had just the theatrical release.
They're going to have some that go on the parents I just directly the streaming.
We have navigated that whole situation. There is no clear answer right now with how this is kind of happen, but we are.
The big 1 of the big players in that ecosystem and.
And we are negotiating on behalf of our clients on our own properties to make sure that we get the proper economics as we go forward and that's the way we're going to operating until we find the proper floor, which is going to take a little bit of time as COVID-19 kind of.
Moving up.
Megan.
Working backwards from there I think your second question.
The point, we're flexible with the studios right I mean, we're having these conversations upfront and they are paying for that flexibility. So that moves right for the benefit of all of our clients. That's all I'll say on the second question on the first question I would just add already talked about just further proof points that believe it or not content is in short.
Supply.
Think about it.
It's growing but that content has a different definition of these days, it's all forms its audio.
Video gaming right get the live sports television it's films, it's booked the films. It's audio not just podcasts. So this isn't just about representation and you can bet that Amazon didn't by MGM, just leverage the library theres going to be a lot of.
Buying theres going to be a lot of original programming and there is going to be a lot of spending and I think what underscores the entire comp consolidation question and equation is the truthfully. It powers all of our secular tailwind if you think about reopening content.
OSP segment on sports properties.
<unk> already said and everybody knows of the Eurosport ease of major fan of sports and he is going to be of big buyer. There. The reliance on influenced these days to move product to sell tickets to sell movie ticket the sell books sports rights overall and bedding. So all of the wins all of the trends the power the endeavor.
Enterprise, if you will are really going to be fueled by this consolidation.
Okay. Thanks, guys.
Your next question comes from the line of Benjamin Black from Evercore. Your line is open.
Great great. Thanks for taking my questions I have.
The first question.
Questions on live events.
I know, it's been over a year since the acquisition, but it would be great. The here, how you thought about integrating.
On location and how that could potentially kick start the live events business. When the economy is slowly reopening and also relatedly how should we be thinking about the contribution of the Olympics longer term.
Second question is on capital allocation M&A in a relative to curious to hear the <unk>.
<unk> been making potentially any.
Any new M&A opportunities are of previously sort of non available and looking ahead third for the next 12 to 18 months, how will you way paying down debt versus the potential acquisition. Thank you alright.
Alright, Ben side last for.
Yes.
Definitely.
So.
Ben.
By my Count that we've got on location integration, we've got the Olympics and kind of on the financial impact and we will have some expenses, we're going to incur in the first 2 years of adjacent will get at that M&A, which are youll cover and that which obviously, Jason and Ari can both coverages.
Our commitment to that that reduction for.
First of all on on location look I would just say it's already fully integrated we've got a tremendous leadership team and Paul Cain and John Lavalle there.
And the Olympic steel right out of the gate winning these these first 3 Olympics huge wants to them you can't get a better lineup Paris, Milan, Los Angeles, very very excited about it but it's not just the olympics on that opportunity.
For a provider for a lot of major sports on events once we own like UFC like New York fashion week like the Sydney fashion week, which is playing today sold out in Sydney, Australia.
Despite some shutdowns by the way Miami Open professional bull riding, but beyond that we do work with the Masters. We do work with the PGA Championship, which was huge for US 2 weeks ago with with Phil Mickelson and that that offset win and then of course concerts and as they come back fourth quarter first quarter is kind of play right into.
To the fast ball of of on location. So it's full year integrated a lot more opportunity to take our events and blow it out to build more experiences around the events with our clients and partners. That's the differentiator for for endeavor in that architecture is working Super Bowl advanced sales you heard of my my comments.
For the top.
Really tremendous the fact that we're beating Miami, which is the best place to have the Super Bowl is a homerun.
We feel good I'll, let Jason kind of talk about the financial where it is because revenue recognition will be later, but you should know in the first couple of years here, we will be ramping of adding all of our integrated but we now need more firepower to do the Olympics and we'll incur some of those expenses in the next.
The years Jason.
As Mark said, we're really excited about the revenue potential over the life of the deal which occurs 20 for more on 26.2020, a minute Mark mentioned from a revenue perspective will be starting to recognize the revenue. The majority of it in 2024 and then we will certainly have some operating expenses were waiting up for the 2020 for game.
And that is inclusive of the guidance that we put out today.
As of then as it relates to M&A.
We continue to look for strategic M&A and organic growth has been a lot of organic growth whether it be support for on the company.
Gaming.
Arena endeavor content and we're opportunistic.
M&A.
You had 2 buckets for US 1 is that of bolt on to our existing portfolio, which kind of increases our moat around our businesses.
April call draining cash that's really called <unk> S. A.
<unk>, which is for the IMD accounting businesses like the linked in of that business, which fits perfectly into our IMG CAD.
<unk> business and then Mark mentioned also in his comments.
<unk> scope, which is a data capturing.
Technology that fits into our IMT Arena. In addition to that we're constantly looking for our next.
The acquisition that is not a bolt on to our existing portfolio.
Of that we think we can utilize the platform to take out costs drive international use the whole platform to increase the value. We think theres a lot of opportunity out there, but we're also very diligent and has to go through a rigorous process as we look at that so.
That's how we look at it we're.
We are positively inclined as you know we built the company on a lot of M&A and we look at the marketplace and we're feeling very good about it.
But I would say on the deleveraging we're committed to deleveraging that should come in the form of cash flow Paydown music has slowed a bit on data growth low leverage M&A now Republic Republic comfortably off of the public currency to execute on M&A.
In my remarks, we also highlighted.
We expect the $600 million reduction of our outstanding of that from Q3. So we are very committed to our deleveraging profile as well on them and balancing that with M&A.
Your next question comes from the line of Alexa Quadraphony from Jpmorgan. Your line is open.
Thank you and my question really is on the content side on the comments you made earlier about the robot robust demand for content, which we lead that obviously all the time on.
If you can give us some color about how much of sort of catch up given COVID-19 and how much is real.
Really the sustainable growth of demand given the proliferation of the outlet distribution.
On that list in general and I guess, secondly, just sort of staying on that topic. If you can elaborate how you think your share is trending versus the others or your peers.
That really surrounds the fair balance right now because they're just so much growth the demand for content right now for everybody.
So im assuming youre really mainly talking about even though mark mentioned there is a lot of different content. When you think about the podcast audio of theirs gaming Theres a lot of different forms of content.
Gamers that are going into the services.
Thank you thinking about mainly movie television.
Yes exactly.
Exactly on that but.
The entertainment.
When we started this process.
Last time, everybody said, it's got to stop at 1 point in time, it's only increased you'll now have 7 big players that have committed financially the huge economic we now have Netflix I think it was in there last earning call of $17 billion, they're going to do 60 leased because of lot of their libraries are calling for the.
Other services and they've got to build that library Disney's committed you'll now have paramount plus coming into the marketplace committed to for their services. As you just saw a little bit of a consolidation of an Amazon buying.
This is not.
In the linear players that also had asthma services have got to actually still service the or linear channel. They are huge investments.
I would tell you.
There's players that you don't even know.
All of these companies are making large overall deals for writer director actors throughout the system.
And this is not slowing down I said it before I do not believe this is slowing down for 5 years, because they've all committed strategically to this plus day happy the linear players have the vendor old <unk>.
Services also in this mix so.
I don't believe it's slowing down on any capacity.
Thank you.
Your next question comes from the line of David Joyce from Barclays. Your line is open.
Thank you very much could you help us think about the cadence of.
Margins. Many of you gave us some guidance for the year, but the based on the expenses being a little lighter than we thought for the first quarter what are the.
As the normalized.
Margins for these businesses and again, we think that will play out through the course of the year and then secondly kind of related to the the margins.
For the normalized business activities versus meaning.
How should we think about the organic versus inorganic.
Contributions here.
Now with the endeavor content the changing.
Once the <unk> settlement is factored in.
Yes, so I'll take the first question on the margin profile. So look I think if you look at the midpoint of our range where for us.
And I think it's of roughly a 15, 4% margin for the year on record Q1 was higher than that.
Obviously this is a COVID-19 impact of year. So this is a transition year on that is not.
<unk> of of the margin, we see for the long term so.
That's just what the.
What we're what we're projecting for the for the business to be.
This year.
And then David just as it relates to endeavor content, which is in full swing right now as I mentioned at the big deliverables in the fourth quarter and our 2021 guidance assumes endeavor content is status quo for the balance of the year. That's our plan. We will have this in its entirety in its current form through the end of the year.
And then just anything on the.
Inorganic contributions in the quarter or for the year.
I don't know.
Specifically, David I'm sorry.
The slip your the acquisition activity is doing.
Contributing to the revenue and EBITDA for the year, if we could get a sense of what.
What that strategy is doing for your growth.
Yes, all I would say, though.
We are closing on a couple of transfer transaction of which I know which of flight scope.
And the NSE.
But we're not going to break out the split between organic and organic or inorganic growth same goes for endeavor content.
Alright, thank you very much of it.
On an ending note here's what I would say to you as Mark said.
Kind of in his statement.
As I've stated when you think about content when you think about gaming when you think about sports.
We're in every sector of music, whether it be WMA are on location.
Every growth sector when you look at.
Ticketmaster.
We're a huge supplier of them. We also on on location at our own gaining we're 1 of the big players sports ownership sports representation of where in that space you have to come through our doors as it relates to how you want to do content throughout the ecosystem, whether they're at the podcast of whether that be movies and television Werent every growth sector in the.
The media space. So when you think about your media analysis, you have the factor of thing.
Thanks, everybody thanks for joining us.
This concludes today's conference call. Thank you for participating you may now disconnect.
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