Endeavor Group Holdings, Inc.    EDR   $23.00-$24.00 21.3 million shares Underwriters: Morgan Stanley, Goldman Sachs, JP Morgan, KKR, Deutsche Bank, Barclays, Citigroup, Credit Suisse, Evercore ISI, HSBC, Jefferies, Moelis & Co., Piper Sandler, RBC Capital Markets, UBS Investment Bank   Co-Managers: CODE Advisors, DBO Partners, LionTree, Academy Securities, R Seelaus & Co., Ramirez & Co., Siebert Cisneros Shank Proposed trade date of 4/29  They are a global entertainment, sports and content company, home to many of the world's most dynamic and engaging storytellers, brands, live events and experiences.

Endeavor Group Holdings, Inc.    EDR

• 21,300,000 shares to be offered between $23.00-$24.00 per share
• Underwriters: Morgan Stanley, Goldman Sachs, JP Morgan, KKR, Deutsche Bank, Barclays, Citigroup, Credit Suisse, Evercore ISI, HSBC, Jefferies, Moelis & Co., Piper Sandler, RBC Capital Markets, UBS Investment Bank Co-Managers: CODE Advisors, DBO Partners, LionTree, Academy Securities, R Seelaus & Co., Ramirez & Co., Siebert Cisneros Shank
• Proposed trade date of 4/29
• Rating = 2

Click here to view the prospectus.

https://www.sec.gov/Archives/edgar/data/1766363/000119312521122043/d67085ds1a.htm

Company Overview

Endeavor is a premium intellectual property, content, events, and experiences company. They own and operate premium sports properties, including the UFC, produce and distribute sports and entertainment content, own and manage exclusive live events and experiences, and represent top sports and entertainment talent, as well as blue chip corporate clients. Founded as a client representation business, they expanded organically and through strategic mergers and acquisitions, investing in new capabilities, including sports operations and advisory, events and experiences management, media production and distribution, brand licensing, and experiential marketing. The addition of these new capabilities and insights transformed their business into an integrated global platform anchored by owned and managed premium intellectual property.

They believe that their unique business model gives them a competitive advantage in the industries in which they operate. Their direct ownership of scarce sports properties positions them to directly benefit from the generally rising value of sports assets, while giving them direct control to make decisions that sustain the long-term value of their properties. Their dual role as an intellectual property owner and as a trusted advisor to clients and rights holders allows them to make connections across their platform, increasing the earnings of their clients and the value of their sports and entertainment properties. They possess category leading capabilities in various industries, each of which contributes to their financial success. The integration of their broad range of capabilities, along with their owned and managed premium sports and entertainment properties, drives network effects across their platform. They measure these effects by evaluating the impact that activity in one business segment has on growth in another. Their management team has successfully executed a mergers and acquisitions and organic-driven growth strategy that has transformed their business from a pure representation model to an integrated global platform. After they founded Endeavor in 1995, they gained scale in representation by merging with the venerable William Morris Agency to form WME in 2009, which was followed by their acquisition of IMG in 2014, adding marketing and licensing, events, media production and distribution, and the sports training institution, IMG Academy. The acquisition of a controlling interest in the UFC in 2016 served as a major step forward in the transformation of their business. They have also built businesses primarily organically that take advantage of their unique role within the sports and entertainment ecosystem.

They operate across three segments: (i) Owned Sports Properties, (ii) Events, Experiences & Rights, and (iii) Representation.

Events & Experiences Management

They own, operate, or represent more than 800 events annually around the globe, including live sports events covering more than 15 sports across more than 25 countries (e.g. Miami Open), international fashion weeks (e.g. New York Fashion Week), art fairs (e.g. Frieze London), and music, culinary, and lifestyle festivals (e.g. Hyde Park Winter Wonderland). In January 2020, they acquired On Location, a leading provider of premium live event experiences across sports and music in North America with more than 900 experiences built around annual events like the Super Bowl, Ryder Cup, NCAA Final Four, and Coachella. They also operate IMG Academy, a sports training institution serving more than 1,200 full-time students and approximately 10,000 camp participants annually, and dozens of professional athletes, teams, leagues, and corporate clients annually.

Media Production & Distribution

They are a full-service content production and distribution platform with experience in development, financing, production, marketing and sales, servicing hundreds of creators, sports leagues and federations, events and other brands, as well as their owned sports intellectual property. Their state-of-the-art studios produce tens of thousands of hours of sports programming annually for leading sports properties, such as the English Premier League, Wimbledon, and Ryder Cup, as well as for their owned assets including UFC and PBR. Endeavor Content provides a premium alternative to traditional studios, offering a range of services including content development, production, financing, sales, and advisory services to creators. The studio has financed and/or sold more than 200 projects, including “La La Land,” “Just Mercy,” “Hamilton,” “Normal People,” and “See.”

They are also one of the largest independent global distributors of sports and entertainment programming and possess deep relationships with a wide variety of broadcasters and media partners around the world. They sell media rights globally on behalf of more than 150 clients such as the NFL, IOC, and NHL and for their owned assets including UFC and PBR. They believe that their collective offering is more important than ever, as premium content is consistently in high demand and in short supply.

Client Representation

They represent many of the world’s greatest creators, performers, influencers, athletes, and models across entertainment, sports, and fashion. In 2019, WME was named music touring agency of the year by Billboard, booking more than 37,000 concert dates, while its clients took home more Grammys than any other agency in 2019 and 2020. For the past several years, WME clients have won more Academy Awards than any other agency and in 2019, WME clients were involved in all of the top 10 domestic grossing films.

Brand Licensing

They are a leading provider of licensing services to entertainment, sports, and consumer products brands, having earned a No. 1 ranking based on total retail sales of $16 billion, according to License Global magazine in 2020. They license their owned intellectual property including the UFC and PBR, and represent third party brands across the automotive, fashion, lifestyle, entertainment, athletics, legends, personalities, corporate, sports league, and event categories. Their clients include Anheuser-Busch InBev, Jeep, Lamborghini, Epic Games (Fortnite), Arnold Palmer, Harvard, the Gap, and the NFL. Through their licensing activities, they source incremental revenue opportunities for their clients, while enhancing their brand with consumers.

Experiential Marketing

Their corporate marketing services are delivered by 160over90, their premium, full-service marketing business that provides experiential, influencer, digital and cultural marketing, and public relations expertise. They work on behalf of some of the world’s largest consumer facing brands that collectively spend over $80 billion in worldwide advertising annually according to AdAge, including Anheuser-Busch InBev, AT&T, and Coca–Cola.

Recent Developments

COVID-19 Pandemic While they believe the long-term value of premium intellectual property, content, and experiences is enduring, the near-term impact to their business as a result of COVID-19 has been significant. They experienced disruption across their business units and geographies given the hiatus of live sports and entertainment events coupled with film and television series production stoppages and the interruption of the school year and sports camp schedule. They navigated the early phase of the crisis by undertaking all appropriate measures to address the safety of their personnel, taking necessary steps to ensure adequate liquidity to fund operations, imposing cost cuts, and reducing and realigning their workforce to best position the business for future success.

As the situation evolved, they stayed in close contact with government and health officials, their clients, sports and media partners, and students. UFC and PBR were among the first professional sports in North America to implement safety protocols and return from the COVID-19 shutdown, in May and April 2020, respectively. Since resuming, UFC has held some of its most watched PPV events in the ESPN+ era, starting in Florida and continuing in Abu Dhabi followed by their owned Apex venue in Las Vegas.

As more sports resumed action, they leveraged their experience with UFC and PBR to provide insights to promote best practices throughout the industry. Similarly, as film and television production resumed, they have been committed to creating a safe work environment for their employees, clients, and partners. While they expect to benefit from the significant pent up global demand for content, the path to full capacity will be gradual.

Acquisitions

On January 14, 2021, they entered into a Membership Interests Purchase Agreement, to acquire the path-to-college business of Reigning Champs, LLC. Pursuant to the Reigning Champs Purchase Agreement, they agreed to acquire all of the issued and outstanding membership interests or other equity securities of all of the subsidiaries within the path-to-college business of Reigning Champs for an aggregate cash purchase price of $200 million. They refer to this proposed acquisition of the Reigning Champs PTC Business as the “Reigning Champs Acquisition.” The Reigning Champs PTC Business consists of companies that offer recruiting and admissions services and related software products to high school student athletes, as well as college athletic departments and admissions officers. They expect the closing of the Reigning Champs Acquisition to take place following the closing of this offering. There is no guarantee that they will close the Reigning Champs Acquisition on the terms described herein or at all.

On April 1, 2021, they entered into a Share Purchase Agreement, to acquire all of the issued and outstanding equity interests of EDH Tennis Limited, the holding company of FlightScope Services sp. z o.o., comprising the services business of FlightScope and simultaneously closed the acquisition.

IPO Detail

This is the initial public offering of Endeavor Group Holdings, Inc. and no public market currently exists for its common stock. Endeavor Group Holdings, Inc. is offering 21,300,000 shares of common stock as described in the prospectus. The company expects the initial public offering price of its common stock to be between $.00 and $.00 per share. The company has applied to list its common stock on the New York Stock Exchange under the symbol “EDR.”

Each share of their Class A common stock entitles its holder to one vote per share, representing an aggregate of 4.9% of the combined voting power of their outstanding common stock upon the completion of this offering, the concurrent private placements and the UFC Buyout and the application of the net proceeds from this offering and the concurrent private placements (or 4.9% if the underwriters exercise their option to purchase additional shares in full).

Shares of their Class B and Class C common stock do not entitle holders to any voting rights (except as required by applicable law).

Each share of their Class X common stock entitles its holder to one vote per share, representing an aggregate of 3.6% of the combined voting power of their outstanding common stock upon the completion of this offering, the concurrent private placements and the UFC Buyout and the application of the net proceeds from this offering and the concurrent private placements (or 3.6% if the underwriters exercise their option to purchase additional shares in full).

Each share of their Class Y common stock entitles its holder to 20 votes per share, representing an aggregate of 91.5% of the combined voting power of their outstanding common stock upon the completion of this offering, the concurrent private placements and the UFC Buyout and the application of the net proceeds from this offering and the concurrent private placements (or 91.5% if the underwriters exercise their option to purchase additional shares in full).

Shares of their Class X common stock have voting but no economic rights (including rights to dividends and distributions upon liquidation) and will be issued in the reorganization transactions and the UFC Buyout to the members of Endeavor Manager (other than Endeavor Group Holdings) in an amount equal to the number of Endeavor Manager Units held by such persons and to other members of Endeavor Operating Company in an amount equal to the number of Endeavor Operating Company Units and Endeavor Operating Company Profits Units held by such persons. When a member of Endeavor Manager exercises its right from time to time to cause Endeavor Manager to redeem any or all of its Endeavor Manager Units as described elsewhere in this prospectus, a corresponding number of shares of their Class X common stock held by such member will be simultaneously cancelled. When a holder of Endeavor Operating Company Units exercises its right from time to time to cause Endeavor Operating Company to redeem any or all of its Endeavor Operating Company Units as described elsewhere in this prospectus, a corresponding number of shares of their Class X common stock held by such member will be simultaneously canceled.

The members of Endeavor Operating Company (other than Endeavor Manager) will have the right from time to time to cause Endeavor Operating Company to redeem any or all of their Endeavor Operating Company Units, (and paired shares of Class X common stock), in exchange for, at their election (subject to certain exceptions), either cash (based on the market price of a share of their Class A common
stock) or shares of their Class A common stock, and if such redemption is made in exchange for shares of Class A common stock, it shall be effected as a direct purchase by Endeavor Group Holdings. Upon the disposition of the Class A common stock received by members of Endeavor Operating Company from the exchange of their Endeavor Operating Company Units (and paired shares of Class X common stock), or a Triggering Event, any paired shares of Class Y common stock will be cancelled/redeemed for no consideration.

They will issue shares of their Class Y common stock to affiliates of certain of their pre-IPO investors, including certain affiliates of Silver Lake, in consideration for Endeavor Operating Company Units acquired by Endeavor Group Holdings from such pre-IPO investors in the reorganization transactions and the UFC Buyout. They will also issue paired shares of their Class Y common stock to certain other holders of Endeavor Operating Company Units and Endeavor Operating Company Profits Units (other than Endeavor Manager), equal to the number of Endeavor Operating Company Units and Endeavor Operating Company Profits Units held. 

Following this offering, Endeavor Group Holdings, Inc. will have five classes of authorized common stock: Class A common stock, Class B common stock, Class C common stock, Class X common stock, and Class Y common stock. The Class A common stock offered hereby and the Class X common stock will have one vote per share. The Class Y common stock will have 20 votes per share. The Class B and Class C common stock will be non-voting. Their Chief Executive Officer, Ariel Emanuel, and their Executive Chairman, Patrick Whitesell, and their affiliates, together with affiliates of Silver Lake, will hold a majority of their issued and outstanding Class Y common stock and Class X common stock after this offering and, as a group, will control more than a majority of the combined voting power of their common stock. As a result, they will be able to control any action requiring the general approval of their stockholders, including the election of their board of directors, the adoption of amendments to their certificate of incorporation and by-laws, and the approval of any merger or sale of substantially all of their assets.

Affiliates of, or certain funds and accounts advised by, each of Capital Research and Management Company, Coatue Management, L.L.C., Dragoneer Investment Group LLC, Elliott Investment Management L.P., Fertitta Capital, Fidelity Management & Research Company LLC, Kraft Group LLC, MSD Capital, L.P., Mubadala Investment Company, Silver Lake, Tako Ventures, LLC, Tencent, Third Point LLC and Zeke Capital Advisors, LLC (the “private placement investors”) have entered into an agreement (the “Subscription Agreement”) with them and affiliates of KKR (as defined herein) to purchase an aggregate of 74,543,080 shares of their common stock which, based on the high point of the public offering price range set forth in the prospectus, they estimate to be 56,336,830 shares of their Class A common stock from them and 18,206,250 shares of Class A common stock from affiliates of KKR, in each case, in a private placement at a price per share equal to $24.00. The aggregate proceeds from this concurrent private placement will be $1,789.0 million, which includes proceeds of $1,352.1 million to them and proceeds of $437.0 million to affiliates of KKR. Their agreement with the private placement investors will also require them, within 60 days following the closing of this offering, to register their shares of Class A common stock on a Form S-1 registration statement. Their agreements with the Private Placement Investors are contingent upon, and are scheduled to close immediately subsequent to, the closing of this offering, as well as the satisfaction of certain conditions to closing.

Use of Proceeds

They estimate that their net proceeds from this offering and the concurrent private placements will be approximately $1,787.2 million (approximately $1,863.8 million of net proceeds if the underwriters exercise their option to purchase additional shares in full.) They intend to (1) use $835.7 million of the net proceeds from this offering and the concurrent private placements to purchase Endeavor Operating Company Units (or interests in UFC Parent) directly from certain of the Other UFC Holders (or their affiliates) at a price per unit (with respect to Endeavor Operating Company Units) equal to the initial public offering price per share of Class A common stock sold in this offering and (2) contribute $951.5 million of the net proceeds from this offering and the concurrent private placements to Endeavor Manager (or $1,028.1 million if the underwriters exercise their option to purchase additional shares in full) in exchange for a number of Endeavor Manager Units equal to the contribution amount divided by the price paid by the underwriters for shares of their Class A common stock in this offering (provided that they may reduce such contribution amount, without reducing the number of Endeavor Manager Units they receive, by the amount of any expenses they pay in connection with this offering, the concurrent private placements and the UFC Buyout (which they estimate will be approximately $76.1 million) that are not otherwise paid or for which they are not otherwise reimbursed by Endeavor Operating Company). Endeavor Manager would then, in turn, contribute such contribution amount to Endeavor Operating Company in exchange for an equal number of Endeavor Operating Company Units.

They intend to cause Endeavor Operating Company to use the remaining net proceeds they contribute to it from this offering and the concurrent private placements for working capital and general corporate purposes. They may also use a portion of the net proceeds from this offering and the concurrent private placements to fund their current or future joint ventures, investments or acquisitions of complementary businesses or other assets, including the Reigning Champs Acquisition.

Competition

Market Opportunity

Global Content Spend (Film & TV) Industry Their client representation business is largely driven by demand for content creators and performers in film and television. Their market constituents for their client representation and media businesses include linear and digital media distributors. The combined spend in both global film and television content was $128 billion in 2019 according to Ampere Analysis. A primary growth driver for global content spend has been the dramatic expansion of the global over-the-top (“OTT”) media industry. To capitalize on this growth and generate revenue, streaming services are both investing in original content and acquiring licensed content.

Global Experiences (Sporting Events, Concerts & Performing Arts Ticket Segments) The sporting events, concerts, and performing arts segments are core to their owned sports properties and experiences operations. Their market constituents primarily include retail consumers, sponsors and corporate customers. The global sporting events, concerts, and performing arts ticket segment was $79 billion in 2019 and is expected to grow at a 5% CAGR to $102 billion by 2024, according to Technavio. According to the Bureau of Economic Analysis, average annual US consumer expenditure growth on experience-related services is 66% higher vs. goods (2014—2019). Additionally, according to data from the OECD collected over a 40-year period from 1979 to 2019, U.S. experiential spend grew 2.2x faster than the real GDP.

Global Sports Media Rights Expenditure Spending on media rights continues to be a significant component of revenues in the sports industry with rights values appreciating consistently over the past decade. Their market constituents include linear and digital distributors, which acquire sports media rights and broadcast sports content. In 2019, global sports media rights spend was $39 billion, having grown at a 9% CAGR since 2017, according to The Business Research Company (via MRDC), and this is expected to grow at an 8% CAGR to $53 billion in 2023. The rise of streaming, increased legalization of sports betting, increased competition from tech entrants, and continued viewership appeal attribute to the projected growth on the rights price tags.

Global Marketing and Licensing They are active in the global marketing and brand licensing industries, which totaled $67 billion in 2019 based on the collective reported revenues of $51 billion from IPG, WPP, Omnicom, and Dentsu, plus $16 billion reflecting the royalty revenue for brand owners per Licensing International’s 2020 Global Licensing Survey. Their market constituents include corporate clients seeking brand marketing or IP owners looking to license their brands. Their licensing work is closely attached to the global brand licensing industry of $16 billion which increased 5% in 2019.

Global Sports Gaming The global sports gaming industry comprised of land-based and interactive sports betting grew at a 10% CAGR from 2017 to 2019 reaching $42 billion (Gross Win) in 2019 and is expected to grow at a 12% CAGR through 2024 to $76 billion, according to H2 Global. As of February 2021, 25 total states across the United States have legalized sports betting, and sports betting is currently operational in 20 states according to the American Gaming Association. Based on current legislative momentum and individual state need for tax revenues, ActionNetwork predicts that 30-33 states will legalize sports betting by the end of 2021.

Unaudited Pro Forma Consolidated Statement of Operations

Year Ended December 31, 2020

Unaudited Pro Forma Consolidated Balance Sheet

As of December 31, 2020

Target Markets

Leverage Their Platform to Expand Globally and Increase Platform Productivity They intend to continue leveraging their integrated global platform to maximize the growth potential of their business. They believe that their integrated capabilities and global reach allow them to deepen relationships with existing clients, attract new clients and partners, and access proprietary acquisition and investment opportunities that contribute to their growth and strengthen their network.

Expand their Experiential Offering The concert, sports, and live entertainment categories have been increasingly prioritized over material goods by younger demographics. With a portfolio of more than 800 owned or managed events across Endeavor and 900 experiences curated by On Location, they believe they are well positioned to take advantage of these continuing secular trends and create new offerings and investment opportunities. IMG Academy, meanwhile, is a sports training institution with the ability to expand its campus footprint as well as its products and offerings, such as the addition of virtual training.

Invest in Adjacent High Growth Industry Segments Their global platform has enabled them to enter new, fast-growing industry segments where they are able to leverage long standing business partnerships and relevant commercial insights to accelerate scale. Their existing footprint helps to facilitate organic investment in new adjacent industry segments. They have successfully executed against these opportunities that have emerged in sports gaming (IMG ARENA), streaming (Endeavor Streaming), podcasting (Endeavor Content), experiential marketing (160over90), and partnerships with their clients (Talent Ventures).

Emphasize Strategic Growth Through Mergers and Acquisitions on Their Unique Platform Their disciplined mergers and acquisitions strategy has been focused on investing in intellectual property and acquiring capabilities for their global platform. They have successfully completed more than 20 mergers and acquisitions since 2014. They will continue to invest in mergers and acquisitions to complement their internal capabilities and enhance the value of their network.

Company's Unique Strengths

Ownership of Intellectual Property They believe that their Company is distinguished by their ownership of intellectual property, including UFC, a global sports property and the premier mixed martial arts sports organization, and PBR, an internationally renowned Western lifestyle competitive series. UFC was founded in 1993 and has grown in popularity after hosting more than 500 events, growing its fan base to approximately 625 million fans, and reaching a global audience of approximately 1 billion households through an increasing array of broadcast license agreements and their owned FIGHT PASS streaming platform. In 2020, FIGHT PASS subscriptions were up over 40%, and UFC set a record for the most global Pay-Per-View buys in its history. Meanwhile, social media followers across platforms increased by more than 65% year-over-year in 2020, and they grew to more than 10 million subscribers on YouTube, second only to the NBA in terms of global sports organizations. PBR, meanwhile, is the world’s premier bull riding circuit with more than 500 bull riders from the United States, Australia, Brazil, Canada, and Mexico, competing in more than 200 bull riding events each year. They also have a strategic partnership with Euroleague, the elite European professional basketball league, which is one of the most popular indoor sports leagues in the world, averaging attendance of over 8,500 per game in the 2019-2020 season.

Perpetual Demand for Premium Content Their platform allows them to participate in industries that are benefitting from increasing demand for content in all forms. They are positioned at the center of this demand through their owned sports properties, media production and distribution, and client representation businesses. They operate across all genres and benefit regardless of how and where the demand for this content is fulfilled. Disruption has increased the value of sports media rights as illustrated in consistent increases in Contract Average Annual Values (AAV) over previous contracts. Additionally, as digital video distribution services such as ESPN+, Disney+, Peacock, HBO Max, and others have proliferated in recent years, demand has surged with more than 500 original shows airing in 2019, compared to 288 in 2012, according to an industry study.

Positioned Where the Consumer is Going in Experiential According to Expedia and The Center for Generational Kinetics (“2018 Expedia and The Center for Generational Kinetics, LLC”), 74% of Americans place more value on experiences than products or things. A University of Texas at Austin research paper published in May 2020 found that consumers were happier when spending on experiences as opposed to material items. This trend has driven them to invest in their portfolio of more than 800 events globally across sports, music, art, fashion, and culinary. Through IMG Academy, they offer an elite academic and athletic experience, with 90% of graduates moving on to play collegiate sports (compared to 7% nationally). On Location, meanwhile, is a leading provider of premium entertainment and travel experiences, offering a large portfolio of events, tours, and hospitality packages.

Creating Asymmetric Risk / Reward Opportunities They believe that the insights that they have gained from their vast network reduce the risk of organic investment and strategic mergers and acquisitions. Their team evaluates potential merger and acquisition opportunities with the benefit of data and industry knowledge that enables them to identify integration synergies and better forecast revenue growth potential. Their role as an industry counterpart often avails them early insights into strategic processes. They also frequently have the opportunity to invest in and support new business ventures that they have negotiated on behalf of their clients, and their commission structure allows them to participate alongside them in their commercial success.

Platform Integration Drives Upside for Their Stakeholders Their commitment to business unit collaboration has allowed them to enhance returns for their owned and managed intellectual property, content and experiences, and for their clients. From 2017 through 2019, they grew revenue at a 23% CAGR, driven by industry tailwinds, geographic expansion, organic reinvestment, and strategic acquisitions. In 2020, their focus turned to realizing further cost efficiencies across the business and identifying complementary business extensions in the virtual/digital space. The practical linkages between their business units manifest themselves in myriad examples that result in maximizing revenue generation opportunities, improved client acquisition and retention, and proprietary acquisition and investment opportunities. Each of their owned assets and capabilities reinforces the others, creating a global platform that is very difficult to replicate. They have executed multi-pronged growth strategies on behalf of many of their clients, and they leverage their network to forge meaningful partnerships between their talent and brands. Additionally, they have realized top line and cost synergies as they have integrated more than 20 acquisitions.

Strong Revenue Visibility Their services are underpinned by highly visible and recurring revenue streams across the platform. A primary example is their seven-year UFC media rights deal with ESPN. They have numerous similarly contracted revenue streams from media rights contracts in their media rights and distribution business. Their work with recurring annual events such as Wimbledon and quadrennial events such as the Rugby World Cup adds to the recurring revenue nature of their business. They also have retainer-based agreements with many of their marketing clients and their representation business benefits from revenue visibility, as measured by industry award recognitions, predictable production volumes, and residual income streams. Finally, their four-year tuition-based IMG Academy provides a high degree of revenue visibility.

Company's Unique Risks

The impact of the COVID-19 global pandemic could continue to materially and adversely affect their business, financial condition and results of operations.  Numerous state and local jurisdictions, including in markets where they operate, imposed “shelter-in-place” orders, quarantines, travel restrictions, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. These measures began to have a significant adverse impact on their business and operations beginning in March 2020, including in the following ways: the inability to hold live ticketed PBR and UFC events and the early cancellation of the 2019-2020 Euroleague season adversely impacted their Owned Sports Properties segment; the postponement or cancellation of live sporting events and other in-person events adversely impacted their Events, Experiences & Rights segment; stoppages of entertainment productions, including film, television shows, and music events, as well as reduced corporate spending on marketing, experiential and activation, adversely impacted their Representation segment. 

While activity has resumed in certain of their businesses and restrictions have been lessened or lifted—for example, major sporting events for which they have media rights have restarted without, or with limited numbers of, fans and have gradually increased permitted fan attendance, film and television productions have begun in certain areas around the world, fashion photo shoots have taken place virtually, and students have returned to IMG Academy—restrictions impacting certain of their businesses remain in effect in locations where they are operating and could in the future be reduced or increased, or removed or reinstated.

Their ability to generate revenue from discretionary and corporate spending on entertainment and sports events, such as corporate sponsorships and advertising, is subject to many factors, including many that are beyond their control, such as general macroeconomic conditions.

They may not be able to adapt to or manage new content distribution platforms or changes in consumer behavior resulting from new technologies.

They depend on key relationships with television and cable networks, satellite providers, digital streaming partners and other distribution partners, as well as corporate sponsors.

Owning and managing certain events for which they sell media and sponsorship rights, ticketing and hospitality exposes them to greater financial risk. If the live events that they own and manage are not financially successful, their business could be adversely affected.

Their recent acquisitions have caused them to grow rapidly, and they will need to continue to make changes to operate at their current size and scale. They may face difficulty in further integrating the operations of the businesses acquired in their recent transactions, and they may never realize the anticipated benefits and cost synergies from all of these transactions. If they are unable to manage their current operations or any future growth effectively, their business could be adversely affected.

As a result of their operations in international markets, they are subject to risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to such markets.

Participants and spectators in connection with their live entertainment and sports events are subject to potential injuries and accidents, which could subject them to personal injury or other claims and increase their expenses, as well as reduce attendance at their live entertainment and sports events, causing a decrease in their revenue.

They are signatory to certain franchise agreements of unions and guilds and are subject to certain licensing requirements of the states in which they operate. They are also signatories to certain collective bargaining agreements and depend upon unionized labor for the provision of some of their services. Their clients are also members of certain unions and guilds that are signatories to collective bargaining agreements. Any expiration, termination, revocation or non-renewal of these franchises, collective bargaining agreements, or licenses and any work stoppages or labor disturbances could adversely affect their business.

They are controlled by Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders, whose interests in their business may be different than yours, and their board of directors has delegated significant authority to an Executive Committee and to Messrs. Emanuel and Whitesell. Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will, as a group, control approximately 89.4% of the combined voting power of their common stock (or 89.5% if the underwriters exercise their option to purchase additional shares in full) after the completion of this offering and the application of the net proceeds from this offering as a result of their ownership of shares of their Class A common stock and Class X common stock, each share of which is entitled to 1 vote on all matters submitted to a vote of their stockholders, and Class Y common stock, each share of which is entitled to 20 votes on all matters submitted to a vote of their stockholders.

Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will collectively have the ability to substantially control their Company, including the ability to control any action requiring the general approval of their stockholders. Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will be able to control their Company as long as they own Class Y common stock representing more than a majority of the total voting power of their issued and outstanding common stock, voting together as a single class. Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will continue to control the outcome of matters submitted to stockholders so long as they collectively hold 123,972,031 shares of Class Y common stock, which represents 18.2% of the outstanding shares of all their common stock outstanding upon the closing of this offering.

They cannot predict the impact their capital structure and the concentrated control by Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders may have on their stock price or their business. They cannot predict whether their multiple share class capital structure, combined with the concentrated control by Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders, will result in a lower trading price or greater fluctuations in the trading price of their Class A common stock, or will result in adverse publicity or other adverse consequences. In addition, some indices are considering whether to exclude companies with multiple share classes from their membership.

They have a substantial amount of indebtedness, which could adversely affect their business. As of December 31, 2020, they had an aggregate of $5.7 billion outstanding indebtedness under their Senior Credit Facilities, with the ability to borrow up to approximately $207.2 million more under revolving credit facilities under their Senior Credit Facilities, consisting primarily of availability under the UFC Credit Facilities. Additionally, as of December 31, 2020, they had certain other revolving line of credit facilities and long-term debt liabilities, primarily related to Endeavor Content, with total committed amounts of $240.0 million, of which $185.4 million was outstanding and $11.7 million was available for borrowing based on the supporting asset base, and similar to their Senior Credit Facilities, these facilities include restrictive covenants that may restrict certain business operations of the respective businesses who have borrowed from these facilities.

They will be required to pay certain of their pre-IPO investors, including certain Other UFC Holders, for certain tax benefits they may claim (or are deemed to realize) in the future, and the amounts they may pay could be significant.

Bottom Line

Their business delivered strong revenue growth prior to the impact of COVID-19. For the year ended December 31, 2019, they generated $4,571.0 million in revenue, net loss of $530.7 million, Adjusted Net Income of $240.9 million and Adjusted EBITDA of $733.5 million. COVID-19 has had a significant impact on their 2020 financial performance. For the year ended December 31, 2020, they generated $3,478.7 million in revenue, net loss of $625.3 million, Adjusted Net Income of $84.8 million and Adjusted EBITDA of $572.5 million.

Endeavor owns and operate premium sports properties, including the UFC, produce and distribute sports and entertainment content, own and manage exclusive live events and experiences, and represent top sports and entertainment talent, as well as blue chip corporate clients. They believe that their unique business model gives them a competitive advantage in the industries in which they operate. Their dual role as an intellectual property owner and as a trusted advisor to clients and rights holders allows them to make connections across their platform, increasing the earnings of their clients and the value of their sports and entertainment properties. The integration of their broad range of capabilities, along with their owned and managed premium sports and entertainment properties, drives network effects across their platform. After they founded Endeavor in 1995, they gained scale in representation by merging with the venerable William Morris Agency to form WME in 2009, which was followed by their acquisition of IMG in 2014, adding marketing and licensing, events, media production and distribution, and the sports training institution, IMG Academy. The acquisition of a controlling interest in the UFC in 2016 served as a major step forward in the transformation of their business. They operate across three segments: (i) Owned Sports Properties, (ii) Events, Experiences & Rights, and (iii) Representation. They own, operate, or represent more than 800 events annually around the globe, including live sports events covering more than 15 sports across more than 25 countries (e.g. Miami Open), international fashion weeks (e.g. New York Fashion Week), art fairs (e.g. Frieze London), and music, culinary, and lifestyle festivals (e.g. Hyde Park Winter Wonderland). In January 2020, they acquired On Location, a leading provider of premium live event experiences across sports and music in North America with more than 900 experiences built around annual events like the Super Bowl, Ryder Cup, NCAA Final Four, and Coachella. They also operate IMG Academy, a sports training institution serving more than 1,200 full-time students and approximately 10,000 camp participants annually, and dozens of professional athletes, teams, leagues, and corporate clients annually. They are a full-service content production and distribution platform with experience in development, financing, production, marketing and sales, servicing hundreds of creators, sports leagues and federations, events and other brands, as well as their owned sports intellectual property. Their state-of-the-art studios produce tens of thousands of hours of sports programming annually for leading sports properties, such as the English Premier League, Wimbledon, and Ryder Cup, as well as for their owned assets including UFC and PBR. They are also one of the largest independent global distributors of sports and entertainment programming and possess deep relationships with a wide variety of broadcasters and media partners around the world. They sell media rights globally on behalf of more than 150 clients such as the NFL, IOC, and NHL and for their owned assets including UFC and PBR. They represent many of the world’s greatest creators, performers, influencers, athletes, and models across entertainment, sports, and fashion. In 2019, WME was named music touring agency of the year by Billboard, booking more than 37,000 concert dates, while its clients took home more Grammys than any other agency in 2019 and 2020. For the past several years, WME clients have won more Academy Awards than any other agency and in 2019, WME clients were involved in all of the top 10 domestic grossing films. They are a leading provider of licensing services to entertainment, sports, and consumer products brands, having earned a No. 1 ranking based on total retail sales of $16 billion, according to License Global magazine in 2020. They license their owned intellectual property including the UFC and PBR, and represent third party brands across the automotive, fashion, lifestyle, entertainment, athletics, legends, personalities, corporate, sports league, and event categories. Their corporate marketing services are delivered by 160over90, their premium, full-service marketing business that provides experiential, influencer, digital and cultural marketing, and public relations expertise. While they believe the long-term value of premium intellectual property, content, and experiences is enduring, the near-term impact to their business as a result of COVID-19 has been significant. As more sports resumed action, they leveraged their experience with UFC and PBR to provide insights to promote best practices throughout the industry. Similarly, as film and television production resumed, they have been committed to creating a safe work environment for their employees, clients, and partners. While they expect to benefit from the significant pent up global demand for content, the path to full capacity will be gradual. On January 14, 2021, they entered into a Membership Interests Purchase Agreement, to acquire the path-to-college business of Reigning Champs, LLC for an aggregate cash purchase price of $200 million.. They expect the closing of the Reigning Champs Acquisition to take place following the closing of this offering. There is no guarantee that they will close the Reigning Champs Acquisition on the terms described herein or at all. On April 1, 2021, they entered into a Share Purchase Agreement, to acquire all of the issued and outstanding equity interests of EDH Tennis Limited, the holding company of FlightScope Services sp. z o.o., comprising the services business of FlightScope and simultaneously closed the acquisition.

The combined spend in both global film and television content was $128 billion in 2019 according to Ampere Analysis. A primary growth driver for global content spend has been the dramatic expansion of the global over-the-top (“OTT”) media industry. The global sporting events, concerts, and performing arts ticket segment was $79 billion in 2019 and is expected to grow at a 5% CAGR to $102 billion by 2024, according to Technavio. According to the Bureau of Economic Analysis, average annual US consumer expenditure growth on experience-related services is 66% higher vs. goods (2014—2019). Additionally, according to data from the OECD collected over a 40-year period from 1979 to 2019, U.S. experiential spend grew 2.2x faster than the real GDP.  In 2019, global sports media rights spend was $39 billion, having grown at a 9% CAGR since 2017, according to The Business Research Company (via MRDC), and this is expected to grow at an 8% CAGR to $53 billion in 2023. The rise of streaming, increased legalization of sports betting, increased competition from tech entrants, and continued viewership appeal attribute to the projected growth on the rights price tags. They are active in the global marketing and brand licensing industries, which totaled $67 billion in 2019 based on the collective reported revenues of $51 billion from IPG, WPP, Omnicom, and Dentsu, plus $16 billion reflecting the royalty revenue for brand owners per Licensing International’s 2020 Global Licensing Survey. Their licensing work is closely attached to the global brand licensing industry of $16 billion which increased 5% in 2019. The global sports gaming industry comprised of land-based and interactive sports betting grew at a 10% CAGR from 2017 to 2019 reaching $42 billion (Gross Win) in 2019 and is expected to grow at a 12% CAGR through 2024 to $76 billion, according to H2 Global. As of February 2021, 25 total states across the United States have legalized sports betting, and sports betting is currently operational in 20 states according to the American Gaming Association. Based on current legislative momentum and individual state need for tax revenues, ActionNetwork predicts that 30-33 states will legalize sports betting by the end of 2021.

They believe that their integrated capabilities and global reach allow them to deepen relationships with existing clients, attract new clients and partners, and access proprietary acquisition and investment opportunities that contribute to their growth and strengthen their network. With a portfolio of more than 800 owned or managed events across Endeavor and 900 experiences curated by On Location, they believe they are well positioned to take advantage of these continuing secular trends and create new offerings and investment opportunities. IMG Academy, meanwhile, is a sports training institution with the ability to expand its campus footprint as well as its products and offerings, such as the addition of virtual training. Their global platform has enabled them to enter new, fast-growing industry segments where they are able to leverage long standing business partnerships and relevant commercial insights to accelerate scale. Their existing footprint helps to facilitate organic investment in new adjacent industry segments. They have successfully completed more than 20 mergers and acquisitions since 2014. They will continue to invest in mergers and acquisitions to complement their internal capabilities and enhance the value of their network.

They believe that their Company is distinguished by their ownership of intellectual property, including UFC, a global sports property and the premier mixed martial arts sports organization, and PBR, an internationally renowned Western lifestyle competitive series. Meanwhile, social media followers across platforms increased by more than 65% year-over-year in 2020, and they grew to more than 10 million subscribers on YouTube, second only to the NBA in terms of global sports organizations. They operate across all genres and benefit regardless of how and where the demand for this content is fulfilled. Additionally, as digital video distribution services such as ESPN+, Disney+, Peacock, HBO Max, and others have proliferated in recent years, demand has surged with more than 500 original shows airing in 2019, compared to 288 in 2012, according to an industry study. . A University of Texas at Austin research paper published in May 2020 found that consumers were happier when spending on experiences as opposed to material items. This trend has driven them to invest in their portfolio of more than 800 events globally across sports, music, art, fashion, and culinary. Their role as an industry counterpart often avails them early insights into strategic processes. They also frequently have the opportunity to invest in and support new business ventures that they have negotiated on behalf of their clients, and their commission structure allows them to participate alongside them in their commercial success. From 2017 through 2019, they grew revenue at a 23% CAGR, driven by industry tailwinds, geographic expansion, organic reinvestment, and strategic acquisitions. In 2020, their focus turned to realizing further cost efficiencies across the business and identifying complementary business extensions in the virtual/digital space. The practical linkages between their business units manifest themselves in myriad examples that result in maximizing revenue generation opportunities, improved client acquisition and retention, and proprietary acquisition and investment opportunities, Their services are underpinned by highly visible and recurring revenue streams across the platform. They also have retainer-based agreements with many of their marketing clients and their representation business benefits from revenue visibility, as measured by industry award recognitions, predictable production volumes, and residual income streams. Finally, their four-year tuition-based IMG Academy provides a high degree of revenue visibility.

The impact of the COVID-19 global pandemic could continue to materially and adversely affect their business, financial condition and results of operations.  While activity has resumed in certain of their businesses and restrictions have been lessened or lifted—for example, major sporting events for which they have media rights have restarted without, or with limited numbers of, fans and have gradually increased permitted fan attendance, film and television productions have begun in certain areas around the world, fashion photo shoots have taken place virtually, and students have returned to IMG Academy—restrictions impacting certain of their businesses remain in effect in locations where they are operating and could in the future be reduced or increased, or removed or reinstated. Their ability to generate revenue from discretionary and corporate spending on entertainment and sports events, such as corporate sponsorships and advertising, is subject to many factors, including many that are beyond their control, such as general macroeconomic conditions. They may not be able to adapt to or manage new content distribution platforms or changes in consumer behavior resulting from new technologies. They depend on key relationships with television and cable networks, satellite providers, digital streaming partners and other distribution partners, as well as corporate sponsors. Owning and managing certain events for which they sell media and sponsorship rights, ticketing and hospitality exposes them to greater financial risk. Their recent acquisitions have caused them to grow rapidly, and they will need to continue to make changes to operate at their current size and scale. As a result of their operations in international markets, they are subject to risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to such markets. Participants and spectators in connection with their live entertainment and sports events are subject to potential injuries and accidents. They are signatory to certain franchise agreements of unions and guilds and are subject to certain licensing requirements of the states in which they operate. Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will, as a group, control approximately 89.4% of the combined voting power of their common stock (or 89.5% if the underwriters exercise their option to purchase additional shares in full) after the completion of this offering and the application of the net proceeds from this offering as a result of their ownership of shares of their Class A common stock and Class X common stock, each share of which is entitled to 1 vote on all matters submitted to a vote of their stockholders, and Class Y common stock, each share of which is entitled to 20 votes on all matters submitted to a vote of their stockholders. Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders will continue to control the outcome of matters submitted to stockholders so long as they collectively hold 123,972,031 shares of Class Y common stock, which represents 18.2% of the outstanding shares of all their common stock outstanding upon the closing of this offering. They cannot predict whether their multiple share class capital structure, combined with the concentrated control by Messrs. Emanuel and Whitesell, Executive Holdcos, and the Silver Lake Equityholders, will result in a lower trading price or greater fluctuations in the trading price of their Class A common stock, or will result in adverse publicity or other adverse consequences. In addition, some indices are considering whether to exclude companies with multiple share classes from their membership. As of December 31, 2020, they had an aggregate of $5.7 billion outstanding indebtedness under their Senior Credit Facilities, with the ability to borrow up to approximately $207.2 million more under revolving credit facilities under their Senior Credit Facilities. Additionally, as of December 31, 2020, they had certain other revolving line of credit facilities and long-term debt liabilities, primarily related to Endeavor Content, with total committed amounts of $240.0 million, of which $185.4 million was outstanding and $11.7 million was available for borrowing. They will be required to pay certain of their pre-IPO investors, including certain Other UFC Holders, for certain tax benefits they may claim (or are deemed to realize) in the future, and the amounts they may pay could be significant.