Grappling With The UFC
Today I became interested in Endeavor Group Holdings (EDR)
It operates in three segments:
1. Owned Sports Properties,
Events, Experiences &
Rights, and Representation
What intrigues me is what people refer to as Endeavor's “Crown Jewel” that is the UFC or Ultimate Fighting Championship.
I’m sure most people reading have heard of the UFC or have watched one of their events on television. I love their events and content.
The rights to the UFC are more valuable than they’ve ever been in this very competitive streaming environment.
With services like Hulu, Amazon Prime, etc… offering live sports and other similar draws, anything with a dedicated fan base to draw members into a greater ecosystem becomes valuable.
This was a segment of their last earnings call
“…the segment's adjusted EBITDA was $195.7 million, up $61 million or 45%. Growth in this segment was driven by an increase in media rights fees, sponsorships, licensing, commercial pay per-view and event-related revenue at UFC.”
It sounds like their owned sports segment is clearly growing very quickly and it sounds like it owes almost all of that growth to the UFC.
EDR looks to be trading at about 12x Earnings and has high returns on capital.
In addition the CEO owns $31million of stock so his incentives would be aligned with ours as shareholders.
Unfortunately, EDR does have a high debt load… about $5 billion of debt. A large portion of the debt matures relatively soon and is also sensitive to interest rate hikes.
I will have a more in depth update ready for tomorrow!