Endeavor Group - Q1 2022
May 12, 2022
Transcript
Operator (participant)
Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Endeavor First Quarter 2022 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. James Marsh, Senior Vice President, Investor Relations, you may begin your conference.
Moderator (participant)
Good afternoon, and welcome to Endeavor's First Quarter 2022 Earnings Call. A short while ago, we issued a press release which you can view on our Investor Relations site, investor.endeavorco.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, Ari Emanuel, and CFO, Jason Lublin, before we open for questions. The purpose of this call is to provide you with information regarding our first quarter 2022 performance, in addition to our financial outlook for the balance of the year. I do wanna remind everyone that the information discussed will include forward-looking statements and/or projections that involve risks, uncertainties, and assumptions as described in the Risk Factors section of our filings with the Securities and Exchange Commission, including our 10-Qs and 10-K.
If these risks or uncertainties ever materialize or any assumptions prove incorrect, 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 our reported results can be found in our press release issued today, as well as on our IR site. With that, I'll turn it over to Ari.
Ari Emanuel (CEO)
Thanks, James. Looking back at our first year as a public company, I think a lot about the conversations we had with our various stakeholders at the time of our IPO. We fielded many questions about the future of premium content, the increased value of sports rights, the speed of recovery of live events, and the expansion of sports betting globally and throughout the United States. Since then, we've seen those secular content trends play out, and we've capitalized at every turn. We've continued 2021 strong growth into this first quarter, posting revenues up 38%, Adjusted EBITDA up 58% year-over-year, and raised our guidance for the fourth quarter in a row.
These results were driven by the continued strong performance of our own sports properties, further return to full capacity live events, and our representation business' ability to fulfill the need for content from all legacy and newer platforms. We believe this is a direct result of the unique position Endeavor occupies on the supply side of the content ecosystem. We founded this company 27 years ago in response to the Internet's disruption of the content distribution model. Today, the content business is incredibly dynamic, driven by the expansion of distribution, which drives demand for sports and entertainment content. We've benefited from this dynamic environment as it places a greater premium on talent, brands, and IP.
Whether that's legacy players like Warner Bros. Discovery and NBCUniversal who've expanded their distribution channels or newer entrants like Apple, Roku Channel, and TikTok, their value proposition is defined by the content they put on their services. As you've heard me say before, this presents a tremendous opportunity for us as we're distribution agnostic. As both distribution and the definition of content continues to expand beyond television and films to newer lanes like podcast and digital, it inures to our benefit because of the diversity and global scale of our portfolio. Whether that's through our ownership of sports properties like the UFC and PBR, our representation of more than 7,000 clients, our role as a supplier in the expanding sports betting ecosystem or our portfolio of more than 1,700 annual live events and experiences. On the event side, we've seen outsized demand globally.
UFC sold out every pay-per-view event last year and throughout the first quarter. Frieze LA hosted its largest art fair to date. The Miami Open recorded its greatest attendance in its history. Super Bowl LVI became On Location's single largest hospitality event of all time. The Madrid Open, which we recently acquired, attracted more than 200,000 fans over the 10 days in April and May. We're also responding to the demand for greater fan engagement and complement to live events by way of our sports data business, IMG Arena, which similarly benefits from being on the supply side of the sports betting value chain. Building on its strong roots in basketball, golf, tennis, hockey, and MMA, IMG Arena is now expanding into soccer, adding 19 European leagues to its portfolio in the first quarter.
In addition to the value of having this large and diverse portfolio, we benefit from our long-standing relationships with buyers, which are reinforced by the volume and variety of our businesses. For example, if you look at Warner Bros. Discovery, a William Morris client was the lead actor in the record-breaking The Batman. William Morris was responsible for the popular HBO Max show Euphoria and the Lakers series Winning Time: The Rise of the Lakers Dynasty, while Endeavor Content was the studio behind HBO's Tokyo Vice. Through IMG, we also produce ancillary sports programming for Discovery, and we've done a series of sports rights deals with them, ranging from the U.S. Open, European Cycling, and most recently for discovery+ to become the new home of the UFC in the Netherlands. With that, I'll leave you with our view on the state of the premium content business.
For the past few weeks, there's been a lot of conversation around the future of content following Netflix subscriber performance this quarter. From where Endeavor sits on the supply side of the content ecosystem, we simply do not see content spend reducing. 2022's content spend is set to be the highest on record, with Netflix itself pointing to an increase in spending to $20 billion with its eye towards higher quality programming. We also have the visibility into content spend at least through 2023, in that many productions and orders are locked in. At the end of the day, for platforms to gain and maintain customers, they have to spend on premium content.
Original feature films, docuseries, scripted, non-scripted television all drive subscriber growth, as they have for Netflix for decades, and are currently doing for the likes of Disney+, Paramount+, Roku, HBO Max, and Peacock, which have recently reported adding tens of millions of subscribers. Given where we sit on the supply side of that content, you can think of us as the ultimate proxy for content growth. Beyond premium content, we feel great about where we sit relative to the secular tailwind in all of our businesses. Bottom line is that we had a great performance this quarter. We've continued to beat and raise guidance for the past four quarters, and we're well positioned for strong long-term growth. With that, I'll turn it over to Jason.
Jason Lublin (CFO)
Thanks, Ari, and good afternoon, everyone. I'll start by walking you through our financial results for the first quarter. I'll also provide you some color around what we're seeing in each of our operating segments. All comparisons will be to the COVID-impacted first quarter of 2021. For the quarter ended March 31st, 2022, we generated $1.473 billion in consolidated revenue, up $404 million or 38%. Adjusted EBITDA for the quarter was $314.4 million, up $115 million or 58%. Now I'll briefly walk you through each of our segments.
Our owned sports property segment generated revenue of $296.7 million in the first quarter, up $13.2 million or 5%, while the segment's Adjusted EBITDA for the quarter was $148.7 million, up $3.2 million or 2%. Increase in revenue was driven by a greater number of PBR events without fan restrictions. At UFC, one fewer pay-per-view event scheduled in the current year's quarter, which was solely calendar related, was offset by greater sponsorship, licensing, commercial pay-per-view, and event-related revenue. Year-over-year Adjusted EBITDA growth in this segment was impacted by the UFC calendar shift as well as $8 million of off-season operating costs at Diamond Baseball Holdings.
At UFC, all pay-per-view events sold out, and the first quarter featured several record-breaking events, including the highest grossing fight night in UFC history at London's O2 Arena and the highest grossing U.S. fight night in history in Columbus, Ohio. Commercial pay-per-view also saw significant gains when compared to Q1 2021 as well as Q1 2019. Additionally, we continued our positive trend in international media rights, most notably signing a multi-year deal with discovery+ in the Netherlands and Eurosport in Spain. We also recently announced a deal with CJ ENM in South Korea, which we closed in Q1. In aggregate, the annual average value of all international rights deals closed since Q2 of 2021 is in excess of 100% over prior deals. At PBR, revenue growth more than doubled in the quarter as we broke 10 all-time gross sale records with seven sold-out shows.
Now turning to Events, Experiences, and Rights. The segment recorded revenue of $825.8 million in the quarter, up $286.2 million or 53%, an Adjusted EBITDA of $132.5 million, up $93.4 million or nearly 240%. We saw strong performance from On Location's premium hospitality offerings across events in the quarter. This includes the NFL postseason and Super Bowl LVI, the College Football Bowl Season, and a portion of NCAA March Madness. Our events business also benefited from the strong return to in-person events, including Frieze LA, the Miami Open, which had record-breaking attendance, and the introduction of new events like our inaugural The MINT Collective sports event in Las Vegas.
Moving on to our representation segment, revenue was $357.3 million, an increase of $108.4 million or 44%.
While Adjusted EBITDA was $101.7 million, up $40.2 million or 65%. The representation segments have growth across the board, driven by increased brand marketing spend and continued strong demand for our talent, including the return of live entertainment. More specifically, our core talent representation business, which includes WME Sports, and our fashion talent businesses such as IMG Models and The Wall Group, saw collective revenue increase 24% in the first quarter compared to Q1 2019. As it relates to our capital structure, we ended the quarter with $5.7 billion in long-term debt. Cash balances, including cash from the sale of the restricted portion of Endeavor Content, were approximately $2 billion at quarter end, resulting in $3.6 billion in net debt. We're on track to achieve our sub-4x net leverage target.
Moving on to our outlook for the remainder of 2022. We are raising our revenue range between $5.235 billion-$5.475 billion. In addition, we are raising our Adjusted EBITDA range to between $1.1 billion-$1.15 billion. The midpoint of our updated range represents 28% year-over-year Adjusted EBITDA growth. Our updated guidance reflects the strong underlying fundamentals and diversity of our business, our outperformance year-to-date, and our confidence for the balance of the year given the tailwinds we realized in the first quarter. Despite some macro risk factors, we feel great about our overall position in the sports and entertainment ecosystem and our ability to continue to deliver strong results. With that, I'll turn it back to James.
Moderator (participant)
Thanks, Jason, and thank you all for joining us today. To help make our Q&A session more effective, I'll help direct questions. Please limit yourself to one question so that everyone has the time to ask a question. With that, Emma, we'll take our first question.
Operator (participant)
At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Thank you. Your first question today comes from the line of Ben Swinburne with Morgan Stanley. Your line is now open.
Ben Swinburne (Equity Research Analyst)
Thanks. Good afternoon. James, I'd love to hear from the team a little more on the content spending debate that the market is clearly focused on. Maybe we could hear a little bit about the talent business and how diversified it is across customers or platforms and different parts of the media ecosystem. I think maybe there's some concerns that, you know, half the business is Netflix or half the business is TV. It'd be great to hear more about that business from a breadth point of view. Whether you're seeing platforms like Apple or Amazon, you know, lean in maybe while Netflix may be, you know, revisiting its spending plans. I was just wondering if Jason could update us on cash conversion for the year because that's another hot topic among investors. Thanks.
Moderator (participant)
Great. Thanks, Ben. Ari will take the content trend question, and then I'll have Ari or Jason jump in on diversification as well as the other question.
Ari Emanuel (CEO)
Thanks, Ben. Well, from where we sit, we don't see any reduction in the content spend. Each platform is gonna have their own strategy to drive long-term value and increase their viewership. As we just saw between Disney, Peacock, Paramount, HBO Max, and Discovery, and we're not talking about Amazon and Apple or Netflix, you know, that was over 20 million subs, all driven by content that they have on their systems. Some are talking about SVOD, some are talking about adding AVODs. As I stated before, in that space, we're distribution agnostic. Wherever the spend is going and, you know, we believe the spend is going up, not down, because we believe Apple and Amazon are pushing in, also moving into sports, it's very good.
As Jason mentioned in his opening statement, our revenue in the representation business increased 24%, compared to 2019.
Jason Lublin (CFO)
Yeah.
Ari Emanuel (CEO)
If you think about, you know, we think about the content business in a broader sense than just the streaming business.
Ben Swinburne (Equity Research Analyst)
Mm-hmm.
Ari Emanuel (CEO)
From our perspective, I think the number is on total between broadcast cable, which is basic and premium, we have 372 shows on streaming on a collective basis between scripted and non-scripted. There's over a year basis, 411 shows, a total of 783. We're very diversified there. That being said, you know, our podcasting business is up 3x from 2021.
Ben Swinburne (Equity Research Analyst)
Mm.
Ari Emanuel (CEO)
Our sports betting business is up significantly. You know, we feel good about where we sit in all these businesses. I haven't even mentioned in the content business, our lecture business, our comedy touring business, et cetera. There is no indication across any of the platforms that their content spend is coming. The last thing I would like to say to you, I mean, TV shows take between six months and a year to from start to finish. Movies are 18 months, sometimes two years. They're already locked in through 2023.
Ben Swinburne (Equity Research Analyst)
Right.
Ari Emanuel (CEO)
Sometime into the beginning of 2024. The bottom line is, you know, as I said, we are the proxy for content spend. It isn't decreasing 'cause that's how on the premium side they get subs. They're all in the process of they've made these bets about being in the SVOD services, and they're continuing to spend. They also have to defend the legacy business, and content is spreading out to podcasts and et cetera. With that, I'll turn it over to Jason.
Jason Lublin (CFO)
Yeah, Ben, you know, to just speak to the point on exposure, really, you know, it's about diversification. We're not relying on any one distribution partner. In Q1 2022, our revenue from our three largest SVOD buyers in the aggregate represented less than 2% of our overall company revenue for the quarter.
Ben Swinburne (Equity Research Analyst)
That's helpful.
Jason Lublin (CFO)
Um-
Ben Swinburne (Equity Research Analyst)
Thank you.
Jason Lublin (CFO)
Yeah. On free cash flow, what I would say is, you know, we have targeted to get to a 50% free cash flow conversion. We are well on our way there and expect to generate meaningful cash flow this year.
Ben Swinburne (Equity Research Analyst)
Thanks, guys.
Moderator (participant)
Next question, operator.
Operator (participant)
Your next question comes from the line of Bryan Kraft with Deutsche Bank. Your line is now open.
Bryan Kraft (Lead Equity Research Analyst)
Hi. Good afternoon. I wanted to ask you a UFC question. One of the questions we're asked regularly is how UFC fighter compensation measures up to other sports, and the comparisons tend to be made mostly to major team sports like NFL or NBA. My question is that the right comparison? Have you looked at it relative to other professional sports besides the major team sports? If so, you know, how do you see UFC measuring up? Thank you.
Jason Lublin (CFO)
Yeah, thanks, Bryan. Yeah, look, we agree there has been a lot of comparisons drawn to, you know, team sports such as the NFL and NBA, and we actually don't think that is the right comparison for the UFC. You know, we think the right comparison is to other individual sports such as PGA TOUR, F1, NASCAR, and ATP. If you look at those athletes and what they're paid, as a relative percentage of revenue for those leagues, it's right in line where the UFC is with our athlete compensation. I would also point out that the fighter comp CAGR since 2005 has been 26%, while the revenue CAGR for that period has been 21%. The fighter comp CAGR has been outpacing the CAGR of revenue for the entire company.
That's before we talk about other ancillary ways that our fighters are earning money through sponsorship and other consumer product deals. You know, in summation here, you know, we believe we can continue to invest in our fighters without risk to the margins of our business.
Bryan Kraft (Lead Equity Research Analyst)
Great. Look, very helpful. Thank you.
Moderator (participant)
Thanks, Bryan. Next question, Emma.
Operator (participant)
Your next question comes from the line of Stephen Laszczyk with Goldman Sachs. Your line is now open.
Stephen Laszczyk (VP and Equity Research Analyst)
Great. Thanks for taking the question. There's been a fair amount of concern on the economic front as well, particularly as it relates to the consumer and the live event space. I was curious if you guys have seen any noticeable change in the demand backdrop for live events, either the ones that you host or represent now and then over the last month or so. Then maybe related to that for Jason, you touched on it briefly, but could you talk maybe some more about the macro or reopening assumptions embedded within your updated guidance? Thank you.
Moderator (participant)
Sure. Thanks, Stephen. Ari'll take the first question on consumer, and then Jason will jump in on the guidance.
Ari Emanuel (CEO)
Thanks, Stephen. Well, there's no indication in our business that the consumer is weak. In the first quarter, we sold out every pay-per-view event at the UFC, saw an increase of 40% year-over-year of out-of-town fans actually coming and traveling to our events. If you look at the Miami Open, which just happened, it was the biggest Miami Open we've ever had as it relates to attendance. On Location, which I said before, it was the largest Super Bowl that we've had in that business. We just acquired the Madrid Open. In our 10 days, we had over 200,000 people attend that. Even Live Nation talks about in their earnings report, you know, bookings are up over 40%.
If you just look at this past weekend, Formula One had 85,000 people attend. We sold out our UFC pay-per-view event. Disney had their Marvel movie did over $450 million globally. You had all the NHL and NBA games. We're seeing none of the kind of consumer restrictions happening, and we actually look into the future and where it's going. We feel very positive about where that's going right now. We don't see any weakness.
Jason Lublin (CFO)
I would also add, you know, on the consumer side, you know, for our upcoming events, we see great demand as well in the pipeline. Concert bookings for the fall are pacing way ahead of pre-pandemic levels. Our academy business, which is a consumer-facing business, is at record enrollment levels. Our NCSA recruiting business has the most active users ever. And on the corporate side, we're seeing, you know, equal interest on brand, equal on brand spend. At UFC through Q1 on a contracted basis, we've already surpassed 2021 sponsorship sales. Same at PBR and at 160over90, you know, we're outpacing 2021 through our first quarter. And I think that just underscores the value of having a diversified business and platform.
As far as guidance, what we'd say, look, we updated our guidance, and that's really based on the underlying fundamentals of our business, our outperformance year-to-date and our confidence and visibility into our business for the balance of the year, and we, you know, and the tailwinds we're seeing in the first quarter in the sectors that we operate in.
Stephen Laszczyk (VP and Equity Research Analyst)
Great. Thank you.
Moderator (participant)
Emma, next question, please.
Operator (participant)
Your next question comes from the line of David Karnovsky with JPMorgan. Your line is now open.
David Karnovsky (Senior Research Analyst)
Hi. Thank you. Ari, wanted to see if you could update your outlook for your marketing business in 160over90. I know that was a segment negatively impacted by COVID, especially on the experiential side. Just wondering what type of demand you're seeing there right now from brands.
Ari Emanuel (CEO)
We're seeing, as Jason just went over on our sponsorship side and our 160over90 side, we're seeing great demand from corporations to have experiential moments throughout our events. From our perspective, demand is really high. The 160over90 business is growing substantially. Our sponsorship across the platform is on par or higher than it was in 2021.
David Karnovsky (Senior Research Analyst)
You noted some recent UFC international deals. Wondering if you could provide an update on the rights negotiations in Brazil. I think you've been on with Combate for 10 years. Are you seeing incremental interest as you go to market, and how do you think about potentially launching something like Fight Pass in the region?
Ari Emanuel (CEO)
Well, as I said to you know, I think Jason in his opening statements talked about the CJ deal. We talked about the Netherlands deal. We talked up our percentage above 100%. We're in conversations in Brazil right now with the incumbent and many others, Globo being the incumbent. We do have Fight Pass, and we have optionality down there. When things come clear as it relates to that specific region, we'll give you an update.
David Karnovsky (Senior Research Analyst)
Great. Thank you.
Ari Emanuel (CEO)
Thanks, David.
Operator (participant)
Your next quest-
Moderator (participant)
Next question.
Operator (participant)
Your next question comes from the line of John Hodulik with UBS. Your line is now open.
Moderator (participant)
John.
John Hodulik (Telecom and Cable Analyst)
Great. Thanks for the question. Hey, guys. Thanks for the question. Some real strength in the events business, and I guess, you know, similar to what you've been asked in the past, you know, would you guys say you're up to full strength post-COVID here? It sounds like from, you know, obviously everything we're seeing in the U.S. that this represents a sort of full quarterly run rate. But is there additional upside maybe as we go through the year from further reopening in, you know, in Europe or in Asia and maybe how much exposure you have to that? And then along with that, you know, I know you guys had the Super Bowl and On Location in the quarter.
Did that represent sort of an outsized sort of benefit in the quarter to this EBITDA number you guys posted? Thanks.
Jason Lublin (CFO)
Yeah.
Moderator (participant)
Thanks, John. I'll let Jason take those too.
Jason Lublin (CFO)
Yeah, look, we're certainly seeing as Ari mentioned in Miami Open and Madrid, you know, record attendance at our events. I would definitely say we saw, you know, upside in the events over the balance of the year as they're gonna be returning to full capacity. On exposure, I would say that, you know, the one area we probably have a little bit exposure is China and what's going on in China and some events that we have in Q4 in China. If those materialize, we'll certainly update. That's really where we see some potential exposure on events for the balance of the year.
As far as On Location goes, you know, in 2021 we did not have a full capacity Super Bowl, so this is the first time if you're comparing year-over-year from 2022 to 2021 that, you know, you have a full capacity Super Bowl in the On Location business compared to last year. It is a big increase from the amount of tickets and events that we were able to put on in 2022 versus 2021.
John Hodulik (Telecom and Cable Analyst)
Yeah. I guess, Jason, what I was getting at is, you know, you had a big quarter in that segment and especially at the EBITDA line. I mean, is this a good run rate. You know, there's, I guess, pluses and minuses. The minus might be Super Bowl comes out. Pluses might be that, you know, you have further reopening in Europe and maybe over time in Asia. I mean, but at this level of EBITDA, that's sort of the kind of level we should be using as a base going forward.
Jason Lublin (CFO)
Yeah. I would say two things. You know, as we look at the EE&R segment, I think it's also important to realize that it's not just an events business in that segment, right? We have our media rights business. We have our IMG Arena business. We also have our academy business in that segment. You know, all those businesses are making up that segment. Specifically on the event side, I don't think you can't use Q1 as a run rate, I would say, for events because we have some of our bigger events that happen in that quarter in Q1. There's a lot of seasonality in that business given the timing of events and when they happen.
John Hodulik (Telecom and Cable Analyst)
Got it. Thanks for the call.
Moderator (participant)
Next question, Emma.
Operator (participant)
Your next question comes from the line of Meghan Durkin with Credit Suisse. Your line is now open.
Meghan Durkin (Lead Analyst)
Hi. Thanks, guys. You mentioned TikTok, Ari. I was just wondering if you could talk about their impact on the entertainment landscape in general and your business. As they begin to add new monetization elements, how will that impact your talent business? Jason, I think the last time you gave us the AAV of the deals on the international side, it was around 90%, so it looks like it accelerated. Can you give a little color on what happened there?
Moderator (participant)
Could you repeat the second question, Megan? You were breaking up there slightly.
Meghan Durkin (Lead Analyst)
The AAV on the UFC international deals accelerated between last quarter and this quarter from the comments you've made before. I was just wondering if there was like an underpriced market or what happened there.
Moderator (participant)
Got it. I'll let Ari jump in on the TikTok one, and then Jason could talk about the AAV.
Ari Emanuel (CEO)
Well, on the TikTok one, all I'd say is we have a significant amount of influencers on the representation side. We move them across the platform. Sometimes they do books, sometimes they do sponsorship, et cetera. It's an unbelievable platform to break people, and then we move them across in our architecture across the platform. Addison Rae is a perfect example. She started there. She did a movie on Netflix. That's a very good base of operations to find new talent for us. We have an unbelievable relationship there. We also have a UFC deal with there, and they want more stuff from us, so...
Jason Lublin (CFO)
As far as the AAV goes, some of the new deals we've done, you know, have raised that AAV average up, which, particularly the discovery+ deal in the Netherlands, the Eurosport deal in Spain, and the CJ ENM deal in South Korea. Just, you know, had some great success. Those media rights deals that has brought the AAV up since last time we spoke.
Meghan Durkin (Lead Analyst)
Okay.
Moderator (participant)
All right. Thanks, Meghan.
Operator (participant)
Your next question comes from the line of Tom Champion with Piper Sandler. Your line is now open.
Speaker 12
Hi. This is Jim on for Tom. Thanks for taking the question. So for Jason, I guess if we look at Q1's contribution for revenue and EBITDA as percent of total for 2022 relative to pre-COVID, the business looks to be off to a pretty strong start. I guess, what are the biggest things we should keep in mind in terms of seasonality as we model the rest of the year?
Jason Lublin (CFO)
Great. Thanks for the question, Jim. You know, really probably the biggest thing is the timing of some of our bigger events and when they take place over the course of the year. You know, we look at this business on an annual basis, and that's how we give our guidance, and we do that because of the seasonality we have in our business. We are off to a great start and feel really good about where we're guiding for the year.
Speaker 12
Great. Thanks.
Moderator (participant)
Thanks, Jim. Emma next question, please.
Operator (participant)
Your next question comes from the line of David Joyce with Barclays. Your line is now open.
David Joyce (VP)
Thank you. On the sports betting side, granted you haven't closed on OpenBet yet, but what are the competitive forces that you're seeing for IMG Arena and what you'll have with OpenBet? And how are you addressing them? Are there regions globally that are going to be stronger in providing growth for you? I was just wondering if you'd fill us in on the strategy there. Then secondly, just on the debt question, you know, on that $5.7 billion, you know, how much of that is fixed? What should we be thinking about your leverage in this increasing interest rate environment? Thank you.
Moderator (participant)
Thanks, David. I'll have Jason take those.
Jason Lublin (CFO)
Yeah. I'll start with the debt side of that question. You know, roughly 23% of our debt is fixed, roughly $1.5 billion in interest rate swaps. That's how much is fixed. You know, we continue to evaluate opportunities to further replace a portion of variable rates with fixed rates if it makes sense. Additionally, what I would say on our where we are in debt, you know, we are expecting at year-end, based on what we're expecting for our free cash flow conversion for the year as well as our updated guidance, we are expecting to be sub 4x on a net debt basis by at year-end 2022. As far as OpenBet goes, you know, we're in a regulatory process.
You know, just waiting to get approval. We're extremely excited about the opportunity in that space as, you know, we're a B2B player there. As new regions and new markets open up, it's a great opportunity for us to deploy our technology and content solutions, and then being able to integrate that with IMG Arena and have a full product offering makes us what we believe a one-of-a-kind player in the space. Both of those businesses, you know, are EBITDA positive. We focus on making money in both of those businesses and have been EBITDA positive for quite some time.
Ari Emanuel (CEO)
Here's all I'll say about OpenBet and IMG Arena. The regions that we have a lot of opportunity, U.S., Japan, Brazil. Remember also on that business, we're on the supply side, so we're not having to pay to gather customers. We're a B2B player there. We're the underlying technology across the platform between the 470+ bookies and also the platforms like FanDuel and DraftKings. We don't have their same economics. We're on the supply side of our technology. Those deals are, you know, between three-five years, so we feel very good about where we sit. And there's also, as Jason said in his opening remarks, there's $100 million of revenue synergies between the two businesses. It's a great opportunity for us.
Moderator (participant)
Great. Thanks, David. Next question, Emma.
Operator (participant)
Your last question today comes from the line of Jason Bazinet with Citi. Your line is now open.
Jason Bazinet (Director)
I was just looking at your numbers now. They stacked up against the consensus, and one of the numbers that jumped out was non-controlling interest, $198 million, which is almost, I think 40% of the net income. I know there's a lot of moving parts that have happened on that line with the acquisitions that you guys have done, but do you mind just unpacking that a bit just so we can get our outlook forecast correct and adjust our EV to EBITDA appropriately?
Jason Lublin (CFO)
Yeah. Look, it's due to the Up-C structure, but we're happy to follow up with you offline on that and get into the detail on that with you.
Jason Bazinet (Director)
Okay. Very good.
Ari Emanuel (CEO)
Hey, guys, before we kind of sign off here, I just wanna say one thing to you guys. As I said, across our platform, we're on the supply side of this conversation. We don't see any reduction in content spend. We don't see any reduction in our betting business. The consumer is very strong, and our own sports properties we feel very good about right now. That's why we kind of, you know, great visibility because of our contracted relationship across our platform about our business and the balance of the year, and that's why we've raised guidance for the end of the year. With that, I'll just say thanks for all your questions. We really appreciate it.
Jason Lublin (CFO)
Thanks very much.
Operator (participant)
This concludes today's conference call. Thank you for attending. You may now disconnect.