Endeavor Group Holdings, Inc.

Hi, welcome to Endeavor's second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, press star 0. And with that, I will now turn the call over to Samantha Stewart.

Good afternoon, and welcome to Endeavor's second quarter 2021 earnings call. A short while ago, we showed a press release, which you can view on our investor relations site, investors.endeavorco.com. A recording of this call will also be available via that site. Today, you'll hear from Endeavor CEO Ari Emanuel and CFO Jason Loveland. Our president, Mark Shapiro, will join us for the Q&A session. The purpose of the call is to provide you with information regarding our second quarter 2021 performance, in addition to our financial outlook for the balance of the year. I do want to remind everyone that the information discussed will include forward-looking statements and or projections that involve risks, uncertainties, and assumptions as described in the risk factor section of our findings with the Executives and Exchange Commission, including our first quarter 10-Q as updated by our second quarter 10-Q. If this risk or uncertainty is ever materialized or any assumptions proven correct, 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 date 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 Ari.

Thanks, Sam. Continuing last quarter's positive trends, we saw increased demand across our portfolio, from premium content to sports betting, and continued to execute across each of our growth sectors in our own sports properties, EENR, and representation segments. Due to the positive momentum and our continued positive outlook for the balance of the year, we have increased our annual guidance. Jason will discuss this in more detail when he walks you through our financial results for the quarter. But first, I want to spend a few minutes on how our role as owner, operator, and representative of premium sports and entertainment, IP and content, and talent has enabled us to get in front of industry trends and lead new markets, creating new revenue opportunities across the company. Let's start with the underlying trends in sports media and the incremental opportunities we have to drive growth. Data shows that the U.S. remains the most valuable sports rights market in the world with an estimated $19.5 billion of annualized rights value last year. Media companies looking to acquire large D2C audiences continue to aggressively compete for rights, driving fees up to record levels, with some also having to maintain or grow their linear presence. In the second quarter, we renewed our Wimbledon U.S. Media Rights Agreement with ESPN and the Tennis Channel until 2035 for a significant increase over the prior term. And internationally, we guided Football Australia through a landmark domestic media rights deal with ViacomCBS and Paramount Plus in Australia, marking the first time the national team and the SFA Cup rights were sold separately from the leagues. We're also seeing record media rights deals for the UFC in countries like China and France. Our last five renewals have yielded, on average, over 100% increases. Our strength as a curator and distributor of premium sports media rights also allows us to capitalize on new enterprises and consumer businesses, including sports betting and NFTs. The pandemic further accelerates online betting adoption, which has helped fuel IMG Arena's growth beyond video and data streaming into online betting apps for UFC and golf. Meanwhile, we continue to sign top-tier operators like BetMGM while adding marquee properties and events like the Ryder Cup to our offerings. Sports wagering is now legal in 21 states and growing fast. Internationally, the Netherlands and Germany have re-regulated or are in the process of enacting new frameworks that we believe will pave the way for betting markets to open there as early as the fourth quarter of this year. As it relates to NFTs, We've made a deal with Dappler Labs, who we invested in three years ago when we saw the NFT trend happening, to create a UFC NFT platform. We also closed a deal for UFC and Panini to create NFT trading cards, the first release of which sold out in less than 24 hours. And now we're closing countless NFT deals on behalf of clients from Wimbledon to Wayne Gretzky. Now turning to television and film content. The first half of 2021 saw media and telecom M&A deals reach their highest level in years, $83 billion. Whether it's Discovery and Warner Brothers Media or Amazon and MGM, they become super competitors alongside the likes of Netflix and Disney, all making big bets on a D2C strategy. They have deep pockets and need to differentiate their platforms to drive subscriber growth. The competition for content and talent is at its highest level I've seen in 26 years. The number of original series and movies commissioned by streamer platforms grew 48% for the past four quarters as compared to a prior fourth quarter. Netflix alone revealed it will spend $17 billion on content in 2021, up 44% compared to 2020. And remember, we remain platform agnostic and one of the largest representatives of talent and independent suppliers of content to the biggest streamers. These trends are visible in our representation segment where our WME bookings for the second half of 2021 are up double digits over where they were at the same point in 2019, the most recent non-COVID impacted year. We are seeing further evidence of premiums being placed on talent in scale and value of individual deals we've been a part of. Whether it's a multi-year deal for Peyton Manning for Monday Night Football on ESPN+, Guy Fieri with the Food Network, Miley Cyrus with NBCU and Peacock, Michael B. Jordan with Amazon, or a multi-project deal for Charlize Theron with Netflix and Ryan Reynolds with Paramount. The recent Hello Sunshine sale is yet another data point that spotlights the value of premium content. It also demonstrates the potential of marquee talent to emerge as lifestyle brands, building commercial ecosystems around communities of fans. We're seeing this more than ever in our equity deals we're closing for our talent ventures group. The unique value proposition of our company is that it's fueled by our representation segment, which is built on direct access to talent as brands. We work with talent to monetize their brand through our own channels and elsewhere. And that's really why representation is a wealth creation vehicle and the seed planting engine of our entire business. The pandemic has also spurred the growth of new distribution models while creating lasting shifts in consumer behavior, including a surge in demand for formats like podcasts, video games, social, and marketplace apps. Our flexible business model allows us to opportunistically expand into and capitalize on these burgeoning growth verticals. For example, this past quarter alone, we've closed new podcast deals for 40 clients, while four client shows hit number one on the Apple charts. And now I want to provide just a few business highlights. First, we announced during our last earnings call that we expected to pay down $600 million of debt in the third quarter, part of our continued commitment to reduce leverage. We actually paid that amount down in the second quarter. We also shared news of two now-closed acquisitions, Next College Student Athletes, or NCSA, a leading college recruiting business, and Flyscope, a European-based data collection, AV production, and tracking technology specialist. Both acquisitions bolstered our capabilities while creating large moats around our ING Academy and ING Arena businesses worldwide. In July, we announced a series of acquisitions that will further expand our capabilities while opening opportunities in new geographies. These were Mailman Group, a leading digital agency for sports brands and rights holders. Mailman will integrate with our IMG Media and 160 over 90 businesses while bringing new top-tier clients into the fold. Ticket software company, QQ, to elevate our suite of offerings on location, our experiential business. The addition of the dynamic pricing capabilities will enable us to generate more ticketed revenue across our experiential events. And finally, 22, a boutique licensing agency in the Middle East, a region that presents incredible growth opportunity for IMG licensing. expanding our reach in this growing region opens door for further expansion down the road. With that, I'll hand it over to Jason.