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.

Thanks, Ari, and good afternoon, everyone. I'll start by walking you through our financial results for the quarter and provide you some additional call around what we're seeing in each of our segments, and then I'll briefly discuss revised guidance for this year. Please note that all comparisons are to the prior year period, which was impacted by COVID. For the quarter ended June 30, 2021, we generated approximately $1.1 billion in revenue, up $648 million, or 140%. Adjusted EBITDA for the quarter was approximately $168 million, up $122 million. Our own sports property segment continued to perform very well, with revenues of $258.9 million, an increase of $106.6 million, or 70%. The increase was primarily driven by higher media rights fees due in part to contractual escalators in our media rights agreements, higher sponsorship fees from the renegotiations of existing deals coupled with new deals, and increased event output. Adjusted EBITDA for the quarter was $132.3 million, double that of the same period in 2020, primarily driven from the higher revenues I just mentioned. UFC had a huge second quarter, helping power it to its biggest first half ever in terms of revenue and adjusted EBITDA. The quarter benefited from three incremental live events, inclusive of one pay-per-view. All three pay-per-view events in the quarter were at full capacity and broke local gate records. Beginning with UFC 261 in Jacksonville, the first sold-out major sporting event with full fan capacity at an indoor arena in the U.S. since early 2020. More recently, our July UFC 264 event in Las Vegas finished at the second highest gate in T-Mobile Arena history and the third highest gate among UFC events of all time. The event had more than 20,000 fans, the highest attendance ever recorded at a sporting event in T-Mobile. Beyond ticket sales for these events, we also saw increases in other event-related revenue streams like international and commercial pay-per-views. U of T continues to have one of the most international, youngest, and most engaged fan bases in all of sports, making it highly attractive to partners. Year over year, we've seen nearly 30% growth in the 18 to 24 demographic, and we're currently ranked third behind the NFL and NBA among millennials. In addition to what Ari shared on the partnership front, we recently closed new deals with Crypto.com and Jose Cuervo, while renewing and expanding our relationship with Monster. Partnership revenues is up over 25% versus 2020. Lastly, as it relates to viewership, U of T events, which are simulcast across the ESPN family, reached 18.3 million viewers on ESPN TV networks alone in the first half of this year, up 10% over last year. Meanwhile, in this segment, PBR is on track to have its best year ever across key categories, including media rights fees, sponsorship, merchandise sales, and licensing. Now turning to our events experience and rights segment. This segment recorded revenue of $528.7 million, an increase of $408.8 million. Media rights and production revenues increased in the quarter due to the return of a full schedule of European soccer matches and the resumption of other events like the Miami Open in addition to newly secured business. Adjusted EBITDA for the quarter was $36.8 million, up $79.5 million compared to Q2 2020 where we recorded a loss. This was primarily due to the increased revenue partially offset by direct operating costs to support increased business activity, as well as costs associated with our continued investment in the business. To give you a little color about what we're seeing in this segment, college football and NFL ticket packages for the upcoming season are experiencing double-digit retail price increases versus 2019. High Park Winter Wonderland, our month-long winter festival that starts in November in London, had its highest grossing revenue week in its history when tickets went on sale earlier this month. Lastly, at IMG Academy, it's been a record summer in terms of number of campers, and at this moment, we have more students enrolled for the fall semester than any prior school year. Moving on to our representation segment. Revenue was $328.2 million, an increase of $135.4 million, or just over 70%. This growth was primarily driven by an increase in client commissions and project deliveries and endeavor content, including episodes of Season 2 of Truth Be Told for Apple TV, The Wall on NBC, and Netflix film Blue Miracle. While we saw higher year-over-year deliveries from Endeavor content, some deliveries we had forecasted to occur in the second quarter have either now been delivered or will be in Q3. That slight timing delay, predominantly from three shows, negatively impacted our revenues in the quarter by approximately $90 million. Adjusted EBITDA for the quarter was $61.7 million, an increase of $9.6 million, or just over 18%, as we realized a higher percentage of revenue growth from Endeavor content versus clients in the quarter. We also had higher operating expenses, as we diligently managed the pace at which we brought back some costs to support increased business activity. As already mentioned, we're pacing ahead as it relates to WME bookings for the second half of the year, and we're booking clients for dates much further into the future. We're also seeing the beginning of a rebound in live music, and country is leading the way with sold-out stores for clients like Garth Brooks and Eric Church. On the brand side, 160 over 90 is gaining steam as companies are doubling down and getting back in front of consumers. We've significantly increased our scope of work with clients including T-Mobile, Capital One, Visa, Lowe's, Audi, Amazon, and AT&T, while continuing to sign new clients. I mentioned Endeavor Content had a strong performance in the quarter. I also want to note that we recently began the sale process for that business. Although we're in the early stages, we've already received a lot of incoming interest. We plan to divest the required portion of the restricted business and retain the non-restricted businesses. When we have more to share, we'll let you know. Meanwhile, the updated guidance I'll share shortly assumes Endeavor Content is status quo for the balance of the year. Finally, corporate adjusted EBITDA for the quarter was a loss of $62.7 million, reflecting an increase in cost brought on to support increased activity and investment in the business, as well as those costs associated with being a new public company. Before I get to annual guidance, I want to briefly discuss our recent debt pay down that I already mentioned. We paid down $600 million of our outstanding debt in Q2, which consisted of the repayment of approximately $163 million under the WME IMG revolving credit facility, which now carries a zero balance, $257 million representing the entirety of the WME IMG term loan issued in May 2020, which was the highest cost paper in our capital structure, and $180 million of the first lien term loan under the UFC facilities. Because of these moves, we will realize $35 million in annual interest savings going forward. On to our updated guidance for the full year 2021. As already mentioned earlier, we have experienced recovery in our business happening slightly faster than we had originally anticipated. And although we continue to closely monitor the Delta variant, bookings, ticket sales, and other indicators remain positive for the balance of the year. We are therefore raising our revenue guidance from a prior a range of 4.76 and 4.83 billion to now between 4.8 and 4.85 billion. And on adjusted EBITDA, we're raising the range from 735 to 745 billion to between 765 and 775 billion. The increase in our annual guidance is based on the strength we saw in our business in Q2 and our continued positive outlook for the business. In sum, Even though we recognize most activity levels are not yet at historical levels, we are very encouraged with business trends and look forward to what's to come for the balance of 2021 and a more normalized level of activity in 2022. With that, I will turn it back over to Sam.

Actually, operator, will you give the instructions on how people can answer questions?

Okay, so as a reminder, to ask a question, you will need to press star one on your telephone. To resolve your question, press the pound key. Again, that is star one on your telephone. Please stand by while we compile the Q&A roster. First question comes from the line of Brett Feldman from Goldman Sachs. Your line is now open.

Hey, thanks. This is Steven on for Brett. Thanks for taking the questions. A few on the UFC, if I could. First, we were hoping if you could explain and expand a little bit more on the viewership and then pay-per-view activities that you saw in some of the more recent UFC fights in late 2Q and early 3Q and sort of what the fight site looks like maybe for the rest of the year and how you expect to compare it to the first half record activity that we saw. Second, now with Conor out for the next few months, what fighters do you expect to step up and lead the league here for the next couple of quarters? And then lastly, could you remind us where you are with some of the longer-term growth initiatives that you're outlining for the UFC, particularly around the timing of international rights contracts being renegotiated? Thank you.

Thanks. This is Ari. So I just wanted before I – there's a bunch there, so I think I'm going to hit them all. I just want to reiterate that the UFC had its biggest first half in the company's history in terms of revenue and adjusted EBITDA. Virtually every P&L and cash flow metric you could consider is at an all-time high in the 26 years of the UFC. So in 25 years, we've developed global stars at every level. You know, Conor McGregor is going to fight again. And I just want to remind everybody, he's only fought three times in the last five years. And, you know, going back all the way in the history, it was Tito Ortiz first. If he didn't have Tito, nothing would happen. Lastly, the last big star was Ronda Rousey, and the same conversation happened. We've got a great roster and a very deep bench. I just want to reiterate, we've got eight of the top champions out of the 11th. are international. On the pay-per-view front, over the last 12 months, we've had a record total pay-per-view rise, and the average pay-per-view buy per event has been at a record level. ESPN, our ESPN deal is, you know, we're three years into a seven-year deal. There's growth built into our, and escalators built into our fees. We continue to to draw huge, strong ratings on ESPN. Most watched cable network on day and time periods. Strong viewership on ESPN. Key growth drivers for the platform. ESPN has ordered new episodes, so they want more, and not only our fights, but also they have now the Contender Series, and they've ordered, as you may have been seeing, the Ultimate Fire that started out on Spike TV. And on the topic of ratings, our social impressions In the three weeks leading up to and including USC 264, we exceeded those of the entire Olympics. And then on sponsorship for growth factors, Q2 was one of the biggest quarters of all time in terms of sponsorship revenue, up more than 25% from last year. We continue to sign and renew large multi-year deals with DraftKings, Crypto.com, and Monster, and we're opening up new categories globally. Internationally, as I've said to you before, the mix is 90% of our fans are international and 10% are the United States. International only represents 10% of the current UFC revenue mix, demonstrating a huge addressable market that we can hit there. And if there's any indication, there's meaningful upside in our international rights. We've mentioned before China and France deals that were up. And our last five renewals, they've yielded greater than 100% increases. Fight pass is up over 25% in the last 12 months. And we just went out with, which I talked about in my opening statement, With Panini, with our NFTs, we had three drops. They sold in 24 months, revenues of 1.4. That bodes very, very well from our perspective on our Dappler Labs deal. And I haven't even mentioned IMG Arena and the gaming aspect of the UFC. So those are some of the – I think I did your whole question, but there you go.

Great. Thanks for that, Guyler.

Next question comes from the line of John Hodlick from UBS. Your line is now open.

Great, thank you.

All right, quick question on the – a couple questions on the representation business. Obviously, a lot of growth in DSC and then the content going into those platforms. You know, how closely tied is that representation business to that spending? Number two, what kind of visibility do you have over the next, you know, several years? And then can you talk a little bit about how you guys get paid, maybe getting paid differently as less of it comes from the box office and more of it comes from these B2C platforms? Thank you. Hey, it's Mark. I'll take that second half. Why don't we answer that and then we'll go back and hit the first part, John, because I'm not sure we followed you there. But, look, I'll tell you this. With regard to our representation and our talent, I mean, frankly we're in a We're in a pretty damn good spot. I mean, I would say we're – one of the reasons why we're so cautiously optimistic for the rest of the year. You know, you kind of look at what's going on, and you hear Bob Chapik's – Ernie's call last week with Disney, and he pointed a lot to seeing production slowing down here and there, nervous about production slowing down. Frankly, we're not really seeing any of that. It's already pointed out in the opening comments. I mean, our bookings for film and TV are up double-digit into teens over this exact point – in 2019. So it's a pretty frenetic pace right now. It's busy, big pipeline, a lot of development, and a lot of platforms actually are starting to stockpile content. So not knowing what's going to happen, whether it's Delta, Epsilon, whatever, they're going to order, they're going to shoot as much as they can, and that's serving to our benefit. As far as, you We're sort of hitting on all corners there as well. I mean, as you know, take your actor or actress, you know, recent news. Obviously, you see what's going on with Scarlett Johansson. And then you see on our side with Emma Stone and the deal we just cut with Disney. It's sort of working in all of our favors right now, given this linear and nonlinear AVOD, SVOD world we're living in. We're getting the front end. for our clients as they go into movies and tv series that we always get but increasingly we're getting the back end bought out the way you see kind of the netflix model and now The studios are kind of coming to the table to discuss how we're going to get compensated for the lifetime value of subs. And they know that conversation is going to come anyway, so they're preemptively having that conversation with us. And those are just beginnings. So take, for example, your Jungle Cruise. You want to watch it on Disney+. Well, you can't watch it, of course, unless you're a Disney Plus subscriber. Yes, it goes into the box office math in terms of how many pay-per-views are bought for Jungle Cruise, but what about the folks that are paying, you know, whatever it is these days, $7.99, $9.99, $11.99, depending on your platform, to become a subscriber? I mean, you heard Chapek say at the same time, a churn is very low if you're a Disney Plus subscriber. So... If we have actors and actresses that are driving you to get the platform in the first place, where is their piece of that? And that part of the competition is now coming to the equation. So it's a very warm market, if you will. And, of course, there's a lot of competition, a lot of streamers, a lot of people buying. And, you know, we're going to play each of them against each other. We sit right in the center of that ecosystem. So we're feeling good about that. What was your first part, John? The first part I was just saying is, you know, how tied are you to the growth of DTC, which I think you guys answered.

But I guess, and you answered the last part about, you know, more of it, you know, how do you guys get the back end when you're less exposed to the box office and more exposed to DTC, you know, with the ScarJo thing.

But I guess the middle part was, Should you guys go faster than the content spend because you're taking market share and there's inflation in product or production values, or should you go slower? How should we think about that relationship?

You have to realize we're platform agnostic, okay? So if... If it's a linear play on USA or if it's Netflix, Apple, Amazon, Pluto, Disney, Peacock, et cetera, we're agnostic. So we sit right in the perfect spot here and are capturing that value. And right now, as Mark just said, on Emma Stone – We have all three categories, whether it goes direct-to-consumer, whether it goes day-and-date, whether it goes theatrical. Warner Brothers, as you heard, they made all their deals with, they said they're direct-to-consumer with all their movies. They paid out $200 million on the back end, so we're capturing that value. And Mark just told you the fourth iteration that's coming. So we think we're in the best spot for that situation.

We're going to go to the speed of the marketplace. I mean, that's the bottom line. And there's a lot of demand. There's folks looking for a lot of supply. And we're going to serve it up. So, you know, it's definitely something to watch. But at the same time, you know, we feel good about the position given that WME is the industry leader. Whether it's revenue, volume, scale, you know, we're there and we'll serve the pipeline.

Thanks, guys.

Next question comes from the line of Katen Meral from RBC Capital Markets. Your line is now open.

Great. Thanks for taking the question. I want to ask about sports betting. Ari, you spoke about it a bit in the prepared remarks, but I was hoping you could expand on that commentary and help us just better understand your exposure to sports betting through your IMG arena business. It seems like a big market that's only going to get bigger, whether it's in the U.S. or abroad. So it would just be great to hear what you're seeing as the trajectory ahead and the overall potential for that business. Thanks.

I'll just go with the following, and then Mark will pick up the second half. The value of global sports betting market is estimated right now to exceed $80 billion by the end of the year. And the addressable market, they estimate by 2025 is $120 billion. So it's a huge market for us to kind of walk into. Mark, what can pick up the fun?

Yeah, look, I'll tell you, Cutgun. We're, you know, this is about as big a growth driver as you can get when it comes to Endeavor. I mean, we've got 21 states that are online and approved to start taking sports wagering. We've got another 10 that are essentially approved through regulation, will come online very soon. Everywhere you turn from Wrigley Field to You know, Fenway Park, somebody's going to build a sports book next to the arena or the field to capture all these folks that are sports fans and looking to place a bet. So IMG Arena, you know, sits in a really good place. You know, we buy rights from leagues and federations. We sell those to the sports books. The territories and the rights are expanding. The pie and our participation of that pie is growing. And right now we sit there as the exclusive data and video provider for majors like PGA, ATP Tour, UFC. And at the same time, you know, we serve up a whole host of soccer federations, snooker, cricket, you know, across the board. So big business for us. Our exposure is relatively low, to answer your question. And here's why. When you see us do a deal for sports betting and get rights. You can just assume that's going to be a profitable deal for us on paper, meaning we are going to sign up and lock up media rights partners or sportsbooks, ensuring our profitability before we make a bid for the deal. And we have line of sight into that because, of course, we're serving up media content. We're selling media rights in 150 different regions with 160 different sports properties. So our visibility is like no other. And when we go in to sell media rights or even bid on media rights, I should say, we're buying the media rights for distribution, the games themselves. and we're hooking into that video and data stream. So we're going in with a bundle proposition, and we can throw one off of the other in order to ensure we don't have exposure. Some of our competitors don't do that. They're only in the betting business. Or other competitors, like in front, are only in the media distribution business. We're in both, and that reduces and really limits our exposure to risk.

That's perfect. Thank you both.

Next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is now open.

Good afternoon. Two questions. One, just thinking about more of the back half of the year. Jason, you talked a little bit about it in your guidance, but can you give us a sense for your expectations around a full reopening? Any events we should be focused on as it relates to Delta or other swing factors that are important? I thought the QQ acquisition was really interesting. I know this is for Ari or Mark, whoever wants to take it. What are you thinking about the opportunity in ticketing? Because I can see how that technology would help on location, but it would seem like it could help a lot of live event businesses. I don't know if that's a business you think you license out to other partners over time, or are you thinking about a bigger play in ticketing? Is there anything you want to talk about on the QQ on location front would be interesting and helpful.

Great question, Mark, on that second one. I mean, you know, we're not going to go too deep there, otherwise we'd have to bring you into our strategic planning team. I'm ready. We think there's a real opportunity as it relates to ticketing for all the reasons you've mentioned. I mean, think of all of our media partners we're in business with. Think of the 800 events that we represent, stage, license, sell. Think of what we do with On Location, to your point. Clearly, this is an avenue that is exploitative, let's put it that way, for us. You've got to be careful. I mean, Ari and I were both on the board of Live Nation. Ticketmaster, we can tell you that sometimes these margins are extremely low, but they lead to a whole ecosystem of business that is, frankly, something we're exploring right now. And, of course, the extra bang for the buck you get is the data that comes with that, the CRM, the Consumer Front to Back End Relationship. So we'll leave it there for now, but as you can see, we clearly have an affinity towards it. Let's put it that way. I think, secondly, you know, it's just a pent-up demand, really. You know, we're looking around and we're seeing a lot of reports. And, of course, we have to stay cautiously optimistic because who knows where this delta goes and epsilon, et cetera. But we're getting a couple of cancellations here and there. You saw the jazz festival in New Orleans was canceled. We don't own it, but we have a lot of our artists in it. You saw we've had a marathon here or there canceled. We have a golf tournament, a big golf tournament in China coming up that's actually been canceled. And we may have an LPGA event that gets canceled. But by and large, stuff is going on, right? The competitions are going on. The sports events are going on. Our Q4, a lot of our stuff like Winter Wonderland is on sale. And frankly... You know, we're beating numbers on EBITDA here, even with the delta, and we're raising guidance on both revenue and EBITDA with the rest of the year, still knowing that that uncertainty exists. And I think one of the reasons why we're bullish and optimistic is, frankly, our business is diversified. Let's remember, last year, in the nine months of the heart of COVID, you know, we still did – two-thirds of our budgeted revenue for the year. So as much as Endeavor was hurting, because we were the target for this pandemic in terms of our business, we still did 70% of our own budgeted revenue. And now going forward, remember, no matter how hard Delta comes back, as long as the events take place, Fans or no fans, we're in good shape. This isn't our first rodeo. It's not the first rodeo for the pandemic for our sports rights partners. They're going to put on these soccer games. They're going to put on these football games. And as long as they do, we're going to get paid in the different revenue streams that we have. And then really on the cost side, when you look at that, even though our costs are climbing up because the business is coming back, and in such a big way. We're still operating in a few areas with a very skeleton staff. In fact, we have a few of our businesses where we still have a hiring freeze that remains. So we can toggle that cost structure to make it reflective of the marketplace. Business slows down. Business is canceled. We stop hiring, you know, and vice versa. It warms up and we get going. You know, I would actually say that's the bigger challenge, hiring folks in this marketplace. You know, we have 400 open positions right now in our 6,000 employees that we have. And, you know, it's tough to get folks to take a job these days, just given that they're kind of reflecting on their place in life. So, you know, bottom line is we've got some good EBITDA beats. We've got revenue and EBITDA guidance going up, and that's really just an all-in indication of events that are taking place, production that's hot right now, a distribution business that's strong, and you heard us talk about representation. And then finally, IMG Academy. I mean, Jason mentioned in the opening comments Hot camp business. I mean, biggest summer camp business we've ever had at IMG Academy. And our bookings for boarding school next year, you know, are at a record high. So, you know, all systems go right now for Endeavor.

I would just say one thing just to kind of, if you want to think about the whole picture. When you look at the other companies that trade in our space, whether it be WWE, Formula One, Live Nation, they're all one-trick ponies. We have multiple facets, which you've heard, whether it be sponsorship, owned sports properties, representation, on location, representation of sports. There are multifaceted aspects of our business, and we have gone through the pandemic. And we're raising EBITDA. We're raising guidance. So we actually understand our business, and I think you guys are going to learn that we're a multifaceted business, that we get to pivot back and forth from. So, I mean, if you just look, you know, at our own sports properties, year-to-date, look, 70% year-to-date. I'm not here in revenue. We have not even talked about how great PBR is doing, right? Another thing inside that space, right, that's doing. We're bigger than 21%. than ever before. So the company has multiple different aspects of our business that protect us against anything in the future.

Thank you both.

Thank you.

Next question comes from the line of Megan Turkin from Credit Suisse. The line is now open.

Hi, guys. I didn't hear you mention it, but have you signed any college athletes since the NCAA approved the name, image, and likeness deals? And how do you expect these types of deals to impact the college sports landscape over time? Maybe is there a way to quantify that profit pool for the NIL deals? And then can you talk about how the UFC pay-per-view revenue is recovering? I think the commercial and the residential mix has been probably changing, but how is that going with the reopenings?

Hey, Megan, it's Mark. I'll start with that and then Jason and Ari will talk about the mix on the pay-per-view. Look, you just hit spot on a real growth, a future growth driver for this company, and that is NIL, name, image, and likeness. And that's going to hit us in a bunch of different places, 160 over 90, with all the brands that they represent who are looking to get behind some of these emerging athletes. It's going to hit us in our sponsorship division and the deals we can bring in there. It's going to hit us and have a great impact with Learfield IMG College as a as these endorsement deals for athletes lead to bigger deals for our colleges. So, for example, I'm sitting with one of the Big Ten athletic directors last week, and he tells me about how they just closed their first big QSR deal for the university, and it came on the heels of this QSR – I will not name it – wanting to do a deal with the quarterback of their Division I football program. And that then led to a big QSR deal with school. So we're going to benefit in that way as well. This is just a real growth opportunity for us because we haven't been able to target college athletes. We haven't been able to target high school athletes. As you know, there's a senior quarterback in Texas, one of the top preps in the nation, who's going to be going to Ohio State and skipping his senior year. So These folks are very, these kids, frankly, are very attractive to so many advertisers out there. It'll allow us to sell them, but at the same time, it'll allow us to develop a relationship so that when they go pro, they end up signing with WME Sports first and foremost. So we'll start to lay out financially what that means as we go forward, but we think it's a real growth engine for us, and look no further than the Olympics. We had 60 athletes competing in the Olympics that brought in 30 medals who are very hot to trot right now and quickly hot to trot with advertisers because advertisers want to get in with them, want to get aligned with them while the halo is still there. And it's something we intend to capitalize on in a big way. And also a growth area because we haven't really been – big when it comes to on-field contracts. Meaning WME Sports and IMG have sold a lot of marketing deals for athletes. But other than golf and tennis, we haven't represented them on-field with their on-field contracts. So we're moving into that space now, and NIL will just accelerate the growth opportunity.

And as I said, you know, it's our second half is the biggest half of the company's history as it relates to UFC. Roughly, We're up in our commercial and residential from 2020. And that's just going to continue to grow. And I just want to say we're up in the second half larger than the company's history without, with only three live events, and our commercial and residential not being where it was in the past. So we're in pretty good shape there, and I think we'll be growing significantly.

Okay, thanks.

I just had three quick easy ones. I think you said Endeavor content might be up for review. I seem to remember that was a reasonably large top-line contributor sort of in the out years in your model. Is that something that you think impinges upon your top-line trajectory if you end up selling it? Can you just spend one second, maybe this is for Jason, just talking about the discrepancy and the diluted shares that you put out versus what I think we all had in our model? And then third, I noticed your deferred revenue balance is really strong on the balance sheet. Can you just remind us what divisions that deferred revenue flows into? Thanks.

Okay, great. Let me hit the EC, and then Jason will comment on your final two questions. As far as Endeavor content goes, we are just actually beginning our sale process. So what's going on there is we have to sell down 80% of VC. Now, remember, this isn't all of Endeavor content. It's just the projects that fall under the jurisdiction of the WGA, so just those restricted projects, if you will. So we've just embarked on the sale process. We've actually had a couple presentations last week. and we're getting the books out to qualified buyers. Look, it's kind of a give and take, if you will, a push-pull. It's a little bittersweet. Frankly, we don't want to sell this business. This is a strong growth business for us, and if you see what Hello Sunshine got, if you believe some of the fuzzy math, $900 million, they primarily sold that, right, on the back of six shows. That's it, three hits. Six total shows and three more in the pipeline. Well, Endeavor Content has 15 hit shows and hundreds of projects, development, greenlit, or actually in casting or production right now. So we're bullish about the price we can command, the management team we have, the residual value we are connected to with these projects, the ownership of these projects moving forward, which is why we seriously don't want to see it go. But at the same time, we'll stay on board. We'll have 20%. You know, we'll retain that. It'll be a great option for our clients. And we'll ultimately pro forma the financials for next year. So there won't be any change for this year. What you see for this year in the guidance will include Endeavor content all the way to the end of the year. It'll be next year where we ultimately pro forma it out. But, you know, we'll see what happens with the process. But clearly we're bullish about the asset.

Yeah, on the deferred revenue piece, I would say that that balance is associated with what Mark just talked about, about our endeavor content business and building up before we make deliveries, and also on the event side of our business and on location side, any pre-sales for events that have not taken place yet.

Perfect. Thank you. Oh, and on shares, do you mind just spending a second on that?

Yeah, well, what's the question on the shares? Sure.

Oh, it's just, you know, the fully diluted share count was, I don't know, a couple hundred million lower than what I think with the consensus we had in our model. And I think it has something to do with the class A equivalents not being converted. I just wanted to confirm that that's what happened in the quarter.

Yeah, let me follow up with you, and then I don't have the model in front of me, and we'll get back to you on that. Very good. You know, $440 million outstanding based on our market cap. Thank you.

Next question comes from the line of David Joyce from Barclays. Your line is now open.

Thank you. A couple more questions on UFC and one on representation, if I can. On UFC, how is the second half of the lineup pacing compared to the second half of 2019? And as part of that, is there sort of a maximum optimal number of pay-per-view events that you would plan to put on to avoid potential dilution of attention or engagement. And then secondly, related to UFC and your comments about how strong your international young demographic is, Are you seeing competition from other MMA sports that are maybe seeking new capital sources or joint ventures to try to bulk up their presence in the MMA world? I'm just wondering how that was impacting you. Thanks.

Hey, David. It's Mark. We'll try and hit all of these. Appreciate the questions. First of all, let's start with the competition. No, the answer is no. We're not looking to, uh, band with anybody. We're not looking at JVs. We don't need any more dry powder. You know, we're in a very strong cash position and frankly, our cash won't be spent on MMA acquisitions. You know, the UFC is, is paramount. Uh, you know, it's, it's the trophy asset and it's going to stay that way. We love the competition, frankly. I mean, it, it, it drives, is it Dana White needed any more, uh, you know, any more octane in his bloodstream. It, it fuels this man. Uh, And a rising tide lifts all boats, you know, whether the USFL and the XFL with the NFL, the Continental Basketball Association with the NBA, Major League Soccer and what's that done, which is none, no impact whatsoever in terms of European soccer, you know, or PFL. Remember, the PFL, Pro Fighters League, is on ESPN. In fact, they use the UFC to promote the PFL. So, you know, come one, come all, anything that grows the MMA sport, the combat sports area, serves to our benefit. So, you know, we look forward to more of that to come. I think in terms of the pay-per-views, we would just mention generally we do one a month. We do one pay-per-view a month. So you can expect on an annual calendar basis we're going to do 12. This year we have 13 pay-per-views scheduled. We were going to do, and it was in our numbers, a 14th event this year, which we have decided to move that event just in order to keep our quality at the level we want to keep it at and also fit the date and also ride out this pandemic a little. We're going to move that 14th pay-per-view to next year to give us 13 for next year. So we're raising guidance on revenue and EBITDA. obviously in the face of this pandemic and where it's going, but also with one less UFC pay-per-view than we had planned.

And if I could, on the representation side, given there are different product types of revenue streams there, how does the timing and revenue mix impact the ultimate margins, since the margins were stronger than expected here this quarter at even with some delays in deliveries that you had mentioned before?

Yeah, so we're going to have margin variability within segments and from quarter to quarter depending on revenue mix and revenue shift. So that's why, you know, we really focus on looking at the business annually and we focus on our annual guidance where at the midpoint, you know, we're pushing 15.9% margin. So it will shift quarter to quarter between segments based on the makeup of the revenue for each business line.

All right. Thank you.

Thanks, David.

All right. With that, thank you, everyone, and we look forward to talking to you next quarter. Thanks. Thank you, Alfredo.

This concludes today's conference call. Thank you for participating. You may now disconnect.