Endeavor Document Predicts 70% Sales Growth by 2028, TKO to .8 Blllion

Endeavor Document Predicts 70% Sales Growth by 2028, TKO to $3.8 Blllion

For its short life as a publicly traded company, Endeavor Group Holdings management has consistently felt Wall Street has underappreciated the business’ growth potential. An internal document recently disclosed as part of its going-private transaction with Silver Lake details why.

Endeavor management foresees the business generating $11.4 billion in revenue in 2028, a 70% rise from 2023, versus Wall Street expectations of $10.1 billion in five years’ time. The company sees itself generating adjusted earnings before interest, taxes, depreciation and amortization—EBITDA, a measure of profitability—of $3.1 billion, more than double 2023 and also well ahead of outside analysts’ projections. The figures were compiled by consulting firm Centerview Partners from discussions with Endeavor management as part of the board of directors’ weighing the since-approved buyout by private equity giant Silver Lake. The document, dated March 8, was recently disclosed as an exhibit in Securities & Exchange Commission filings related to the takeover.

The SEC requires companies to disclose some details about the process by which a takeover offer proceeded and how the board of directors came to its decision to approve such offers. In Endeavor’s case, the timeline suggests the company began considering strategic alternatives in July last year when the executive committee “discussed … the quality and growth potential of each of the company’s other business units on a standalone basis [and] potential alternatives with respect to unlocking and maximizing stockholder value across each business unit,” according to a filing last week.

The executive committee consisted of CEO Ari Emanuel, executive chairman Patrick Whitesell and Silver Lake’s Egon Durban and Stephen Evans, according to the document. Based on the disclosed timeline, Silver Lake originally offered $24.50 a share for Endeavor—a mere 50-cent premium to its 2021 IPO—while Endeavor believed $31.50 would be fair. The parties eventually agreed to $27.50 a share and 24 cents of dividend payouts ahead of the close, after Silver Lake made clear it wouldn’t go any higher nor approve any other offer for Endeavor.

The then-confidential Centerview presentation prepared for the Endeavor board embraces a bit of cloak and dagger, referring to Endeavor not by its name but as “Everest”—in case it fell into the hands of a person who wouldn’t read past the first page, apparently. The presentation also incorporates Endeavor’s projections for future performance of TKO Group Holdings—“Kilimanjaro” throughout the report. Codenames weren’t necessary for TKO’s UFC and WWE divisions or other businesses of Endeavor—all of which are referred to by name in the presentation.

The “Project Everest” document analyzes Endeavor’s business in four segments, and shows that management expects two of them—events and representation—will well outperform Wall Street’s expectations in years ahead, while the others—owned sports properties and sports data and technology—will fall short of analyst projections.

The sports properties projections incorporate TKO and its UFC and WWE divisions, since Endeavor controls the majority of TKO equity. Endeavor management sees TKO producing revenue of $2.686 billion this year—$1.309 billion from UFC and $1.377 billion from WWE. Professional Bull Riders will see sales of $158 million and the EuroLeague basketball circuit $9 million. By 2028, management sees TKO at $3.8 billion revenue, with PBR at $271 million and the EuroLeague declining to $5 million revenue. The $4.1 billion total for the owned sports properties—TKO, PBR and EuroLeague —is less than the $4.4 billion the report says Wall Street is projecting.

There are a few caveats with the “Project Everest” report: A spokesperson for Endeavor declined to comment, the presentation is seven months old and Endeavor’s outlook may have shifted. The report cites only one Wall Street analyst’s business segment estimates for the 2028 comparison to management’s expectations. The TKO projections aren’t that company’s figures since it has its own management, although it does share three of four top-level executives with Endeavor. TKO management said in August it expects $2.67 to $2.745 billion in revenue for 2024. There is no public TKO guidance for 2025 or beyond, according to S&P Global Market Intelligence.

Endeavor’s second largest division, events, experience and rights—mainly IMG Media and On Location—should more than double from 2023 to 2028 to $4.1 billion revenue, a billion dollars more than consensus, according to the March presentation. In particular, Endeavor management expects the 2028 LA Olympics will be $1.7 billion of that total, more than the regular operations of IMG Media and On Location combined. The company predicts the Milan Olympics in 2026 will bring in $318 million.

Expectations are strong for its representation arm as well. Endeavor management sees WME revenue rising from $899 million last year to $1.42 billion in 2028, the lion’s share of the $2.5 billion segment sales seen in that year. The reported noted unscripted revenue growth to $349 million in 2028 from $121 million in 2023 is “supported by deals with Asylum and F45.”

Endeavor’s management had the weakest outlook, compared to Wall Street, for its sports data and technology segment. It sees sales improving to $611 million by 2028 from $471 million last year. One equity analyst projects the segment should be at $900 million then. Perhaps not surprisingly, Endeavor said in August it is seeking buyers for OpenBet and IMG Arena, the two businesses of the arm.

The projections are likely the last outsiders will see for Endeavor, outside of TKO, given the Silver Lake takeover is expected to close by the end of the 2025 first quarter.

(This post has been updated to indicate that Patrick Whitesell’s title is executive chairman.)

link

Leave a Reply

Your email address will not be published. Required fields are marked *