Endeavor Group Holdings, Inc.

Ladies and gentlemen, thank you for your patience and thank you for attending today's Endeavor Second Quarter 2022 Earnings Conference Call. My name is Amber and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad at any time. It is now my pleasure to hand the conference over to our host, James Marsh, SVP, Head of Investor Relations, James, please proceed.

Good afternoon and welcome to Endeavor's second quarter 2022 earnings call. A short while ago, we issued a press release, which you can view on our investor relations site, investorendeavorco.com. A recording of this call will also be available via that site for at least 30 days. Today, you'll hear from Endeavor's CEO, Ariel Emanuel, and CFO, Jason Loveland, before we open for questions. The purpose of this call is to provide you with information regarding our second quarter 2022 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 well as described in the risk factor section of our filings with the Securities and Exchange Commission, including our 10Qs and 10K. If these risks or uncertainties ever materialize, 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 the reported results can be found in our press release issued today as well as in our reconciliations posted on our IR website. With that, I'll turn it over to Ari.

Thanks, James. This quarter continues to showcase the fact that our company occupies an incredibly unique position within the sports and entertainment landscape. We're benefiting from various secular tailwinds ranging from sports rights to premium content to live events. And we're also built to withstand many of the challenges that other companies are constantly having to overcome. we have a highly diverse but highly complimentary portfolio. We have deep category expertise and a global scale across these secular trends. And as it relates to the content, we sit on the supply side of the equation, allowing us to benefit from growing demand no matter the end user. As a result of our unique position and our continued strong performance across our segments, Second quarter revenue is up 18%, adjusted EBITDA up nearly 82% year over year. Given these results and our line of sight into the remainder of the year, we've raised our adjusted EBITDA guidance for 22. Jason will walk you through the specifics of what drove our second quarter performance, but first I'll spend a few minutes on the secular trends we index against and how Endeavor stands to benefit due to the unique offering we've built. First, as it relates to the growing value and demand for sports rights, there have never been more buyers or greater competition, whether that's Disney paying a high premium to retain F1 or Apple entering into a 10-year deal worth $2.5 billion for MLS. The US market for rights is at an all-time high. This benefits both our own sports portfolio and the hundreds of sports properties we represent. We're also seeing strong rights demand internationally for both our represented and owned properties. On the client side, we continue to broker lucrative deals, like the one for ComnaBall in Latin America, and sign new clients, having recently struck a 12-year deal with the Rugby Football League to completely reimagine the sport. As for the UFC, The aggregate annual average value of our international deals continues to exceed 100% since we started tracking in the second quarter of last year. We previously shared that we would also be opportunistic in evaluating distribution strategies in certain international markets. Brazil is the home to one of UFC's largest fan base outside the US and boasts one of the largest percentage of athletes on the UFC roster. It's a market where prospects of going D to C and partnering with a free to air distributor recently presented an opportunity too strong to pass up. Particularly when you look at the fact that an estimated 96% of UFC fans in Brazil watch TV through streaming services. This week, we announced that we will launch Fight Pass Brazil in January. Beyond the launch of that OTT platform, which will be powered by Endeavor Streaming, we're introducing free-to-air TV partnership with one of the largest TV networks in Brazil, and a comprehensive digital partnership is in the works. For the first time, we're owning the customer relationship in one of UFC's fastest-growing international markets, enabling us to continuously evolve our offering to address what fans want most and to attract new fans. This creates yet another blueprint to consider as we look at all the options available across markets when rights come up for renewal. Beyond the media rights, we continue investing in adjacent businesses to enable us to completely surround live sports experiences. In particular, we're carving out a unique position for ourselves within the growing sports data and betting space. primed to capitalize on more states legalizing online betting and international territories re-regulating. IMG Arena continues to add official data rights to its sports betting client roster, the latest being MLS. And with the upcoming close of the OpenBet acquisition and IMG Arena and OpenBet joining forces, We feel great about where this business is headed, both in the U.S. and internationally. As we recently announced, we also negotiated a $400 million reduction in OpenBet's purchase price, including $250 million in cash savings. Given our enhanced cash position, we plan on paying down $250 million of debt. Now turning to premium experiences and events, We purpose-built Endeavor for the experienced economy, identifying early on where the demands of the consumer were headed and carefully assembling the assets and capabilities necessary to capitalize. On the heels of the NFL flipping into on-location ownership stake into Endeavor and on-location becoming a wholly owned subsidiary of Endeavor, we recently combined our premium experiences and events businesses under singular leadership. This will enable us to foster even greater collaboration between the two businesses and further strengthen our offering for both our clients and our own properties. Across live events more broadly, we saw strong sales from consumers from general admission to the most high-end experiential offerings. At the UFC, we've seen 21 consecutive sell-offs since resuming live events with audiences coming out of the pandemic. And an increasing number of fans are traveling to fight from out of state. On average, about 40% of fans in the quarter, nearly double pre-pandemic figures. It's a great indicator of UFC's growing fandom and helpful to us as we look to secure more site fees in the future. Meanwhile, sales around locations UFC fan experience at our pay-per-view events were up 300% quarter over quarter. At WME, Broadway, concerts, festivals, and comedy tours, which had been slow to rebound, have resumed. We've already booked over 30,000 touring dates this year, putting us 85% of the way to our typical annual total. and our clients represent more than half of music festival headliners in the US. What has also become clear in the event space is that there is no replacement for great IP. We built a strong asset portfolio and have a thorough process of identifying new IP and evaluating its potential when dropped into the Endeavor flywheel. Today we announced that we are expanding into a new event category with the acquisition of the premium collectible car auction and live events company, Barrett-Jackson. It's prime for the experience economy, and there's no better company than Endeavor to create a one-of-a-kind experience for brands and consumers. We're looking to elevate the Barrett-Jackson brand across categories including on-location experiences, content, marketing, and partnerships. Finally, turning to premium content and the enduring value of top talent, we continue to benefit from our unique position as one of the largest talent suppliers. We see no slowdown in demand and spend for all forms of high-quality content. We continue closing major multi-year and multi-faceted deals for our content creators across the streaming spectrum, like the significant deal for filmmakers Shane Black and Robert Downey Jr., to develop a slate of films and television projects for Amazon. Meanwhile, our clients' current projects continue to perform across platforms. Season four of Stranger Things became Netflix's biggest premiere weekend. Obi-Wan Kenobi became Disney Plus' most watched original series to date, and Candy gave Hulu its best debut since 2021 season of The Handmaid's Tale. We also continue to broker major podcast deals, and our clients' podcasts continue topping charts, whether that's David Goyer's Batman Unburied starring Hasan Minhaj hitting number one on Spotify, or Dick Wolf's Dark Woods reaching the top of the Apple fiction charts, leading to it now being developed as a TV series. And lastly, the box office is delivering across genres and age groups. from Marvel's Doctor Strange, Jurassic World, Elvis, and Minions, all films featuring a significant WME client presence, grossing over $2.5 billion worldwide. While we're certainly not immune to macroeconomic conditions, we feel great about the diverse collection of assets and capabilities that we've assembled and continue to grow, enabling us to constantly evolve with the industry and the consumer. Given this quarter's strong performance, our line of sight through the end of the year, and our confidence and our ability to continue driving value to our clients and our own properties, we've raised our adjusted EBITDA guidance for the fifth consecutive quarter and look forward to continuing to deliver strong results.