In order to move toward its long-awaited IPO, Endeavor has had to reveal a trove of financial information, including the pay packages for Ari Emanuel, Patrick Whitesell and other executives, as well as extensive details about its financial performance.
The 387-page SEC filing dropped late last week by Endeavor Group Holdings offers the first look inside a central — but, until now, highly secretive — component of the entertainment sector.
Perhaps the biggest takeaway from the document is the sense of how far Endeavor has expanded beyond its traditional agency roots. Ten years ago, it pulled off a mega-merger with William Morris, ushering in a new era for talent representation. The decade since has seen it acquire the UFC, IMG, the Professional Bull Riders tour and streaming provider NeuLion, entering fashion, food, fine art, sports and, most controversially in Hollywood circles, the realm of content production.
Endeavor IPO Is "Not For The Faint Of Heart," Wall Street Analyst Concludes
Emanuel, the 58-year-old CEO, and Whitesell, the 54-year-old executive chairman, have been the main drivers of this evolution, and their eventual compensation will reflect it.
In 2018, Emanuel made $5.3 million and Whitesell $5.1 million, according to the filing, with base salaries of $1 million apiece. When the IPO happens, likely in the next couple of months if market conditions permit, each stands to gain handsomely. The offering is targeting a valuation in the range of $10 billion, according to the Wall Street Journal. Because the stock is not yet trading, pinpointing their paydays is difficult, but the prospectus offers figures based on certain statistical models that suggest both executives are in line for $85.1 million based on unvested equity awards.
Those proceeds pale next to what came in 2017, according to a section of the filing labeled “Other Transactions.” Emanuel and Whitesell each sold equity positions in the company for $165 million to WI Investment Holdings, an entity mostly owned by affiliates of Silver Lake and WME Holdco. CFO Jason Lublin pocketed $21 million in a similar equity transaction.
President Mark Shapiro, 49, made $10.3 million in 2018, including a base salary of $3 million. Lublin topped the management team in 2018 with a total pay package of $15.2 million, the majority of which came in the form of an equity award. Chief Legal Officer Seth Krauss collected $5.1 million.
The company reported having $4.6 billion in long-term debt in the quarter ending March 31. Questions about debt obligations and private equity ownership have followed the company in recent years as it has transformed itself. Starting in 2012, Silver Lake Partners has invested $700 million in Endeavor, accruing a large stake described as a “significant minority” position, but not a majority holding. Japan’s Softbank also owns 5%.
Both companies can legally cash out six months after the offering, which could bring them handsome returns. Silver Lake, though, is known for placing longer-term bets.
The contracts of Emanuel and Whitesell were extended in March, and both of their base salaries were boosted to $4 million. Originally set to expire in May 2024, their contracts now run through the end of 2028. Shapiro’s latest contract runs through the end of 2021, and includes a “stay bonus” of $6 million.
The company’s revenue mix has increasingly favored the Entertainment & Sports segment, which includes assets spanning sports, events, food and fashion. Of the company’s $3.6 billion in total 2018 revenue, $2.3 billion comes from Entertainment & Sports. The Representation unit brought in $1.3 billion in revenue in 2018. Endeavor X, the company’s digital portfolio of streaming services and early-stage investments, added $66.5 million.
The current impasse with the Writers Guild of America — acknowledged by the company in the opening pages of the prospectus — hinges on the pushback from clients at the idea of Endeavor essentially negotiating against itself. As a producer, distributor and licensor of content, the company also represents talent.
“Media production, distribution and content” generated some $551 million in revenue, with $200.4 million of that going toward Entertainment & Sports and $284.7 million counting toward Representation. The company did not break out what piece of that is contributed by Endeavor Content, which launched in 2017 to produce as well as offering financing, advisory and sales services.
Net profitability has been achieved, according to the document. The company said it swung from losses of $98.3 million in 2016 and $173.2 million in 2017 to net income of $231.3 million in 2018. EBITDA reached $551 million in 2018. Total revenue last year rose 20%, after a 27% gain from 2016 to 2017. About 70% of revenue is in the U.S., with 93% of it recognized in the U.S. and UK.
The company leases office space in six U.S. cities as well as London and has a head count of 7,000. “We believe that our relations with our employees are good,” the company declares in the prospectus.
Along with the five executive officers of Endeavor, directors of the company will include two Silver Lake executives. Egon Durban will remain Endeavor’s board chairman, as he has been since 2014, and Stephen Evans will sit on the board. The lone independent director as of the offering will be James Kahan, 72, a retired executive who led AT&T’s M&A team as the company rose from the ashes and grew from the former Southwestern Bell into today’s telecom giant. Two more independent directors will be nominated to the board within the first year after the offering.
This wouldn’t be a Hollywood affair without at least a passing reference to a corporate jet. While the cost of personal travel, per the prospectus, is fully reimbursed by officers of the company, they do occasionally fly guests on the company plane and incur “incremental” costs for such travel.
Emanuel’s guests ran up a tab of $187,650, while Whitesell’s came to $74,244. Shapiro’s guest flights amounted to a lunch check in comparison, totaling a mere $6,186.
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